Patent Earth

I had wanted to "Go Big or Go Home", and now Going Big wasn't working out. We'd spent the past 10 months building our sales up, only to see all of our progress wiped out by a Google search update.

The timing couldn't be worse. Our traffic was dramatically reduced just a month before the holiday shopping season. Desperate to get that traffic back as quickly as possible, I ramped up our ad spend. This got us a few more sales, but not at a profitable CPA. Our burn rate only increased.

With cash dwindling and credit card balances growing, we were now losing thousands of dollars each month. Nothing we tried seemed to move the needle on sales. One sleepless night, the full weight of the situation finally hit me, and I had my first ever panic attack.

I realized that I needed to focus on 2 things at this point: immediate damage control, and scaling back down. I cut expenses where I could, dropped pay rates for my partner and I, and reduced hours for our part time employee. I also told them that we would likely have to let them go after the holiday season. This was arguably a risky move, but I felt it was important to be honest and give them the opportunity to plan ahead.

The next thing I did was notify our landlord that I would not be renewing our lease. If there was one thing I did right with this expansion attempt, it was negotiating a shorter term for the lease. We had 6 months left and barely enough money to survive that long - if I had been on the hook for another 2 years of rent, I probably would have gone bankrupt.

Although it felt sad and defeating to let my employee go and move the business back into my house, it was also a tremendous relief. Our lease ended in March 2020, just as the COVID-19 pandemic was going global and the economy was sliding into recession. I was almost out of cash and had racked up a lot of debt, but the bleeding had finally stopped. Without the overhead of rent, utilities, extra labor and everything else, Patent Earth was once again a profitable enterprise.

Humbled, and with a new found appreciation for having a home based business, I began the work of rebuilding our sales and paying down the debt that had piled up.

Things were going fairly well with the expansion effort. Sales weren't growing as fast as I had hoped but were growing steadily none the less, and we ended August with about $19,900 in sales - just a few hundred dollars shy of our breakeven mark. We were finally on the cusp of profitability!

But September started a bit slow. And then it got slower... and slower... and slower. Instead of celebrating the $20k/month benchmark and the return to profitability, we ended September puzzled as to why we had barely managed to clear $16k. Our sales come from a variety of sources - Amazon, Ebay, Etsy, as well as our website - and they were down across the board. Of course sales on each marketplace tend to fluctuate, and I was used to that ebb and flow. But this was different.

It didn't take long to figure out that Google had rolled out a major update for their search algorithm. I had always thought that we were insulated from Google's updates, since most of our sales were coming from 3rd party marketplaces. But apparently, a lot of those marketplace sales were themselves coming from Google searches.

By the time the decline leveled out, we had lost over 25% of our revenue. It's hard to convey the emotional impact of this setback. After 10 months of working our asses off and nervously watching our cash burn away, we were finally turning the corner to sustainability - only to get knocked back to square 1 practically overnight.

Once I got past the malaise that the 2017 holiday season had left me with, I was ready to come back with a vengeance. Our sales were running about $12-13k a month at this point, and I was certain that if we went all out we could double that figure within a year. Thanks to the success of the past year, we had a modest amount of cash and credit to work with, and I was eager to put that money to work.

One constraint that was bothering me a lot at this point was that the business was still home based. My house is pretty small, and by now the business was occupying 2 of my 3 bedrooms. It was limiting me personally, and I felt it was limiting the business as well.

So I found an office/warehouse unit not too far from home, and negotiated a 16 month lease. Commercial leases usually run 3+ years, but I wanted to keep our commitments limited in case things didn't work out. In October 2018, we moved into the new location which more than doubled our workspace & let me have my house back. My next step was to hire a part time employee to handle printing & packing, so that my partner and I could focus on adding new designs and marketing and stuff to drive more sales. It was a great feeling!

It was also a huge risk. It would take a little over $20k per month in sales cover the cost of the new office and 3 paychecks, but I was confident we would hit that mark soon. The future was looking bright!

Our first full calendar year in business was 2017 and we ended it with about $130,000 in sales. Super exciting!

But this success came at a high price. A large portion of those sales came during the 6 weeks or so of Christmas holiday shopping, and by the end of it I was seriously burned out.

Now that we were printing and shipping posters in-house, I had to keep up with inventory, production & shipping as well as the dramatic increase in customer service emails. Not to mention the stress of managing cash flow when you have to ship an unusually high volume of orders now, but get paid later (with little capital to spare).

Even with my partners help, it was more than I had been prepared to handle. As a result, I started 2018 in a semi-depressive funk that took months to shake off. During this time I struggled to stay motivated and did very little to grow the business.

My goal starting out with this project was to develop a fairly hands-off side hustle, and to that end I was using print-on-demand services like Printful and Scalable Press to fulfill all of my orders.

But once it became my full time job my priorities shifted. I was now prepared to put in more time and effort, and after some exploratory research and back-of-an-envelope number crunching I decided that our best move was to start printing posters in-house.

I opted not to do t-shirts in house as the process was a bit more complicated that my never-printed-a-thing self was ready to take on, and even the cheapest equipment and most minimal starting inventory would have cost several thousand dollars.

But posters were much more straightforward, less expensive to get started, and had much better margins than print-on-demand. In June 2017 we ordered a Canon IPF-6400 printer and a couple rolls of paper, and by the end of the month we were in the poster printing business. The initial cost for the printer, paper, ink & shipping supplies was less than $3k (we found a good deal on the printer, paid less than half the retail price).

We continued using POD fulfillment providers for t-shirts, and are still successfully using this mixed fulfillment business model today.

I really didn't know anything about photoshop or graphic design when I started this project. I'm a functional minded programmer and have little sense of visual design. Fortunately I had a good friend and co-worker who is wise in the ways of graphic design, and he helped me navigate that learning curve.

Around May of 2017, he began working with me on a limited part time basis to help me improve my automation processes and grow the design catalog.

Over the next few months this arrangement evolved into a full blown partnership which is still going strong today. I consider myself very lucky to have a solid partner to work with.

The first year of my new side hustle went better than expected, pulling in roughly $40k in sales in the first 12 months.

Meanwhile at my day job, things were going sideways. I was the e-commerce manager for a computer resale company, and had spent the last few months migrating their webstore from a custom shop platform to BigCommerce. It was the smart move on their part and the transition went smoothly, but it also outsourced a lot of my own work and didn't leave me with much to do.

By April of 2017, it had become clear that it was time to move on. I left the company on good terms (and am still friends with the owner), and have been working for myself ever since.

Patent Earth grew slowly for most of 2016 but did surprisingly well during the Christmas holiday season. December 2016 was it's first 5 figure month with about $10,600 in sales.

I knew that the niche I had broken into was good for gifts, but I was still happily amazed at how much sales had increased during the holidays.

December and November respectively have been my first and second best months by a wide margin every year since I started this business.

By the 6 month mark I was averaging a little over $500 a week in sales. Not enough to leave the day job, but enough to feel like it was worth expanding.

I started by setting up an Etsy account and cloning my listings to the new Etsy shop. I received my first order from Etsy in September of 2016.

After a surprisingly busy Christmas shopping season I made my next move by expanding to Amazon, receiving my first order from that marketplace in February of 2017. Amazon quickly became my #1 revenue stream.

Once I finished coding tools to scrape patents, generate graphics and create product listings, I built a website & set up an Ebay shop and began listing products early March 2016.

I received my first order from a friend who wanted to support my new business, and my first legit from-a-stranger order came a few days later. Orders began trickling in after that, mostly through Ebay.