By Daniel Meurer WG’17, Founder of Laguna Beach Towel Company
In 2015, a few weeks before starting my MBA at Wharton, I launched a direct-to-consumer e-commerce business, Laguna Beach Towel Company, an outdoor textile brand. The seed was planted a few months earlier, when a good friend from college told me about some people he knew who were selling a variety of products online and generating millions in revenue. What was incredible about these companies is that they only had one employee: the founder.
I was intrigued, decided to take a shot, and founded my own company. I drew inspiration for my company from a product I had never been satisfied with: the beach towel. I grew up near the beach in Los Angeles and had spent a summer working as a cabana boy at a luxury beach hotel, but had never been able to find quality beach towels at a reasonable price. They were either thin and cheap or were nice but vastly overpriced, and nearly all of them lacked elegant colors. With that, Laguna Beach Towel Company was born.
Many of us have aspirations of entrepreneurship, but taking the first step feels like the hardest and most overwhelming challenge. Shouldn’t 2017 be the year you finally launch your own company?
Thanks to a connected world, never before have the barriers, risk, and time investment required to start a business been so low. Here are some of the tools I used to launch mine:
Steps such as business formation, supplier sourcing, importing goods from overseas, branding, and setting up a website can seem overwhelming, but there are so many tools to help with these today. LegalZoom allows you to form a business with a few clicks. Alibaba aggregates global manufacturers that are only one email away. A brand logo and identity can be created for only a few hundred dollars using 99Designs.
My sourcing and product development processes were exhaustive and I ended up communicating with over 30 manufacturers before choosing one, but even so, I’ve purchased thousands of towels from textile mills I’ve never visited thanks to Alibaba.
Traditional businesses often have major financial risk and career risk in their early stages. Financial risk in that they typically require substantial capital to hire employees, rent office space, and build a product or service—and that’s all before knowing if the business is viable. Furthermore, there is career risk in the opportunity cost of giving up a stable job for a job that could disappear in six months’ time. Consumer product e-commerce businesses require a few thousand dollars of fixed start-up costs and the inventory cost of an initial order, the risk of which can be mitigated by placing a small, test order. The all-in, average initial risk is about $10,000 with variation based on the product. But even that value is not fully at risk because, if necessary, you’d likely be able to eventually liquidate your inventory at cost or slightly below cost and recover much of your inventory investment.
The reward for that small amount of risk is quite high, with many businesses netting six, and in rare cases, seven figures in annual income for owners who develop successful businesses.
In order to limit my risk, I placed an initial order of 600 beach towels that arrived in the U.S. in July 2015. My total initial investment, inventory included, was approximately $15,000. Those 600 towels sold out in 19 days, so I knew the business would be viable.
An online consumer retail business, compared to a traditional business, requires much less time. However, time required can be high in starting and growing the business. For example, if you’re expanding to a new online site or adding products to your portfolio it can be time-intensive, but the businesses operating at steady state can run nearly autonomously. Services like Fulfillment by Amazon (FBA) and Shipwire offer inventory fulfillment, Shopify makes creating a website a breeze, and automated email services, such as MailChimp, make business processes much less time-intensive.
I never physically handle the products. They go from the textile mills abroad, to the port of Los Angeles, to the custom broker’s warehouse and finally, Amazon’s distribution centers, then on to my customers’ homes.
So if you have a product idea, my unsolicited advice for a (slightly belated) New Year’s resolution is just do it! If you fail, you’ll lose a little money but even then, you’ll gain a ton of knowledge and have a great story to tell. If you succeed, you could gain a new source of income and freedom.
Bio: Danny Meurer is a second year MBA student. He is the Founder and President of Laguna Beach Towel Company. You can find his products at lagunabeachtowelco.com, Amazon, Wayfair, and Jet. He just started a blog DannyMeurer.com where he writes about e-commerce, books, and other random thoughts.