Currently, I run two rapidly growing businesses; one business is fairly well known in the exotic car industry, and the other is a larger business in the trailer industry. The latter of the two came with a less-than-direct route to profitability and success. When entering the trailer industry some years back, I thought success would come easy as it was an industry that largely hadn’t been overhauled since the early 90’s. If nothing else, it seemed to show solid potential for newcomers.
I jumped in and quickly learned that I was going to have difficulty competing against the major players as their large bankroll allowed for larger orders with less burden of freight per unit. That allowed for extremely slim margins and a volume dealer sales model. So, the most obvious approach of entering with similar product at a better price point was now off the table. I had about $5,000 for my initial trailer inventory order. That figure seems laughable now as I currently have a 6-figure order being built literally as I type this.
In any case, I don’t come from old money, so that’s all I had to work with at the time. I signed on as a dealer and ordered a small enclosed cargo trailer, an open motorcycle trailer, a car trailer, and a landscape trailer. It took months to sell them. The last to go was the car hauler, and it was sold at a price that barely broke even just to get the money back. If you’re wondering how I didn’t go out of business when taking that long to barely make money, that’s a fair question.
While I wasn’t a seasoned entrepreneur at the time, I was aware that excessive overhead regularly kills new businesses. I was working a full time job and was allowed to keep the few trailers there in an unused area of the fenced in back lot. So, there was no payroll burden since I didn’t need a check, no rent, nothing. Whatever I made initially was just going back into scaling up the capital necessary for buying new inventory.
So that was my plan. Only, by the time I sold all the trailers, I realized that my plan sucked. This was going to be a flop. I stopped at this point, took a step back, and re-evaluated everything. There were several fundamental questions to consider, and the determining factor for whether the business would thrive or fail came in my ability to successfully navigate the obstacles posed by the answers to these questions:
What observations could I make about the industry as a whole?
It began to dawn on me that there are a lot of trailer manufacturers in this country – literally hundreds upon hundreds. The majority makes some version of car hauler, the majority makes some version of dump trailer, the majority makes some version of landscape trailer, etc. This means, my product wasn’t going to be unique. It may be a different brand, but it does the same thing as everyone else’s. So there isn’t an angle to justify a higher price point to achieve the margin I needed for my model to turn a good profit.
In my time of working around construction equipment, I came across a type of trailer that served a specific niche in that industry. It was used for one primary purpose but had potential to be used for many other things if only more people knew such a thing existed. Not only that, but there seemed to be far more demand than there was units being supplied – worn out used models still brought ridiculously high prices on the secondary market. As it turned out, there was ONE manufacturer of this type of trailer, and they were located in California.
Is there a void in the industry?
At this point, I knew selling a variety of trailer types at comparatively lower price points wasn’t going to be the answer. Rather, my route to success with this business was going to come by fixing a problem in a particular niche. I’m in Georgia, and that competitor-to-be is in California. The way I figured it, we could bring a similar product to the market at the same price point and already have half of the US for potential sales.
Generally, shipping a trailer across several states is a deal-killer. When there is no other option though, it goes from being cost-prohibitive to just being the price of doing business. But Barry, don’t they have dealers on your side of the coast that could serve those same potential customers? Sure, there are a few, and those dealers have to pay that freight from the west coast plant so they still could be ruled out for competing with my final delivered price to the customer.
So I had a single manufacturing competitor turning out what had been observed to be an inadequate supply of product. Additionally, it was a flawed structural design, and the lead times for orders from them could stretch six months and beyond. Hopefully after having read this far in, you’re seeing the void pretty clearly.
What is the solution?
We worked together with the Georgia-based trailer manufacturer I had built a good relationship with to ultimately bring this line of trailer to the market. The final product was a modular style build that allows an assembly line production but with ability to customize each individual unit towards user needs. It is not only built to do the same job as the competitor’s, but our version is tailored specifically to address major design flaws that still plague the competitor’s model, and it’s all completed in a small fraction of the time they build theirs. Within three years, that solution was patented and not only did we earn business of the half of the US closest to us, we now ship these trailers to customers all over North America and beyond.
Is there an untapped part of the market that could make use of said solution?
The product we ultimately brought to market addressed a major design flaw that saves end users money, but the most exciting part is that there have been a lot of other industries able to benefit now that they know such a product exists and that it can help them work more efficiently. This untapped section of the market allowed this business to establish itself as an industry leader, to operate at a solid margin, and virtually ensure future success. It hasn’t just been limited to use primarily in the field of construction. It has begun to change the face of industries ranging from safe/vault transport, material handling, and many more.
This past year, we finished #4 in volume of sales among nearly 150 dealers. We did that moving a single line of product and at a profit margin nearly double that of general trailer dealers. So, for the same volume of sales, we net twice the amount of money to the bottom line. Further, we are currently on track this year to more than double our sales figures from last year.
The lesson to be learned in all of this is the importance of adaptability in entrepreneurship. When the best case scenario was just being a middle of the road business that pays bills and has nothing left at the bottom line, and the worst case scenario was completely failing, it became necessary to go back to the drawing board. I needed to step back and examine why my business model wasn’t working.
Instead of giving up after the incredibly slow start and dismal return, I looked for my angle to exploit and ways to clear the obstacles standing in my way. What observations could I make about the industry? Is there a way to create a solution related to any existing part of the industry? Is there a section of the market unfamiliar a solution exists?
There were answers to all of these questions, and taking the proper action allowed for a solid success instead of a missed opportunity.