It is with a bit of sadness that I write this post, as I am closing my business… but this is where I am at today.
If you've been following me for a while, you may remember that in July 2013 I launched a new soap company, Soaps to Live By (you can read about it here). This company has been years in the making – it's actually one of the first ideas that I got when I thought about starting a business over 10 years ago, but for various reasons I decided to launch other companies instead. So when I had some “downtime” last summer, I decided that this was going to be the year that I launch my soap business.
It has been my most successful launch yet! It's the business that I am most excited about – I absolutely LOVE my branding, packaging, the product, my website and everything that the soaps stand for. And not to mention, this launch was so fun! I knew what I was doing because I had previously launched a product and it all felt amazing!
I launched with features in top magazines and by the time the holiday season rolled around, I was already sold out of my first batch of over 3,000 soaps, got another 3,000 soaps made, was featured on TV, got my soaps in almost 50 stores, worked with an awesome sales rep and had lots of raves from fans who fell in love with Soaps to Live By. Many said that these soaps had become their favorite soaps of all time and they couldn't get enough of them. So why am I closing it down?
My big plan for my soap business
When I started my soap business, here's what I had imagined my business would look like in a few years: I would buy a piece of land, buy a yurt and some goats to get milk and make goat milk soap, hire local soap makers to make the soaps, work out of the yurt every day and set up a shop on pedestrian-friendly Pearl St. in Boulder, CO where I live. I would attend major tradeshows like NY Now, Atlanta Gift Market, International Home & Housewares Show, ACRE Las Vegas, San Francisco International Gift Show, ISPA Show, and a few others. It would give me a chance to travel, meet people face to face and grow my brand. This sounded so exciting!
The warning signs
Before I started this business, I spoke with a few people in the industry who flat out told me that while they like the idea behind the soaps, a soap business alone wouldn't be viable as a major source of income. I would have to have other products. They also advised me to raise my prices from the $8 per bar that I calculated to at least $10 or $12 per bar if I wanted to see any real profits. I ignored their signs because, after using a cost calculator, $8 per bar would still give me a good profit if I sold the soaps on my website. And yes, I wouldn't have as high margins if I sold to retailers, but I would still be selling at a profit. So I went ahead and priced my soaps at $8. People bought them… lots of people!
I was so excited about the success that the business was having! And I was having so much fun with it.
So why am I closing my business?
As you may remember from a previous video, one of my goals was to sell to Whole Foods. I got invited to submit my products to them for consideration, but only if I could lower my price to less than $6 per bar. “Yes, of course!” was my reply. I called my manufacturer and told them the good news. I asked them what is the lowest price that they could give me if I ordered an additional 20,000 bars of soaps or more. They said that I was already at their lowest price level, so it couldn't go any lower. I researched other manufacturers and found that there would be no way to get my prices lowered unless I moved production to China, which I didn't want to do because one of my major selling points was that the soaps were handcrafted here in the USA.
I felt stuck and the only way to truly lower my costs was to bring production in-house, set up a facility and hire a few people. So I started looking for spaces, put out ads on Craigslist for soap makers and did more research into what it would take to set this up. After calculating the numbers, I realized that this would be a HUGE investment for me and my business model would have to change completely. I would have to go from my current situation where it was me working with a fulfillment house and a few freelancers, to being an employer, signing a five-year lease for space and buying tens of thousands of dollars of soap-making equipment and set up shop. My yurt idea was a bit premature because it would take a long time to find land (which is so scarce here in Boulder, get permits, set up a yurt, learn how to tend goats and everything else involved with that). So after months of seeing spaces and doing research, I realized that I don't want to be an employer – I am happy being an entrepreneur, working with freelancers and having a small office space.
So I let go of my dream to sell to Whole Foods and to major retailers and focused more on selling online and to independent retailers.
So why didn't that work?
After selling out of my soaps again and really sitting down with my numbers, I realize that profits on my soaps were almost non-existent because shipping charges were so high. Because my soaps are about 4 ounces each, it would cost a few dollars to ship each bar and people weren't willing to pay $2-3 additional per bar in shipping charges. So I had to take a loss on shipping charges, which increased to an even bigger loss once shipping rates went up a few months ago. Plus, I had to pay my fulfillment house to ship all of the soaps, which also cut into my profits. Yes, I could have shipped all of the soaps myself and saved some money, but I get excited about marketing and selling, not shipping. So I knew that it wasn't an option to ship the soaps myself.
So my only option, if I wanted to make this work, was to increase my prices to $12 per bar. However, that puts me in a totally different market with a brand new audience and I'm just not as excited about selling to this audience as I am selling to my current audience. And I have to be super excited about what I am doing – otherwise, why do it? Another option was to take out a loan and invest in launching other products – like mugs, journals, candles, magnets, etc., which have much higher margins than the soaps. In other words, the higher margins on these products would make up for the lower margins on my soaps and, in the end, it would all even out at a healthy profit margin.
After taking a few months to think about this, I decided that I didn't want to take out a big loan and launch more products. I'm just not in a place where I want to take on that added responsibility and work RIGHT NOW. So I had to make the tough decision to let this business go.
You might be wondering why not sell the business instead of closing it down, especially since I love the products that I have created. Well, to be honest, I've thought about it, but I love this brand so much that I'm not ready to let go of it yet.
So what's next?
Maybe when I'm at a different point in my life when my kids get older or when I have more time to travel, I might get that loan, launch more products and do all of the trade shows that I was so excited about. And I might even get that land and yurt that I dreamed about! But now is not the time for that for me. Yes, I can justify any decision that I want to make, whether it's a $50,000 loan or to close my business. This decision feels right for me right now and I'm definitely ok with that! I've been known to change my mind (a lot!), so who knows?
Ultimately, I think that being an entrepreneur takes a lot of courage, but so does creating a business that fits in with your lifestyle. And if something doesn't work for you, you have to change it. This is why I am closing down this business, even though I still get emails on a daily basis from stores that want to carry my soaps or from people who want to buy them.
Have you felt this way in your business? Or thought about either closing it down or going all out and expanding? I'd love to know about it. Leave a comment below and let me know!