‘We were inches away from running out of cash.’

Ken Tomita, co-founder of Portland-based Grovemade, shares his company’s huge successes, epic fails and all the lessons he learned along the way.

‘We were inches away from running out of cash.’

‘We were inches away from running out of cash.’

We spoke to Ken for the Courier Weekly podcast. Listen to the full interview here.

‘We both saw that we were riding on the shoulders of Apple, and this business model was really flawed as we were tied to somebody else's product. So the whole time, the business plan was not to become a phone case company, it was: “Hey, let's use this to catapult us to some sort of scale where we can do whatever we want and make cool stuff.” 

‘It turned out to be much harder to do that than we thought, but that was the vision. We already knew that we weren't gonna stay in cases. [From] 2012 to 2014, the case business had really taken off worldwide. Everybody was jumping in. Everybody was telling us: “Why aren't you on android? You should be doing Android.” Instead, we started playing around with other vertical markets. So, in 2014, we made a huge pivot: instead of a company that's all about iPhone cases with artwork on them, we got rid of the artwork – which was 85% of our sales – completely one day and then pivoted to, “Hey, we're going to become a product company.” It was a really exciting moment. 

‘If you looked at our Facebook page, you’d think we're going out of business. Everybody was really angry, all our current customers, because we were completely shifting identity. But it was the right move. The case business became really commoditised and you can buy wood iPhone cases that are laser engraved in the mall now. We made a very good move to get ahead in pivoting. 

‘For a couple of years, we just threw mud on the wall and tried a bunch of different product genres. The first thing we did was our desk collection. We designed a monitor stand and a collection to put on it. We put it online and it blew up. We did an everyday carry, we did home products, like furniture. We did tabletop: plates, bowls, dishes, cups, that kind of thing.’ 

And you were just making these products because you thought that people wanted them or were people asking for these things? 

‘It really started from realising our business model was flawed and we were desperate to get out of it. Well, not quite desperate, because the money was still coming in, but we knew we had to get out of it. So we didn't really check to see if people wanted these things, which is a huge mistake. This whole time Joe and I were still in [sole entrepreneur] mode – we were making stuff that we liked, which is really simple, pure, and it has some good merits. That's our business. We make some things we like. And you can build a business around your personality. 

‘However, reality hit us in the face because we made all these beautiful products that we loved – Like tabletop, which is amazing – I still use it at my house. Total failure. There was no market for it. It was too much of a leap for our customer base. Things that are really obvious to me now, and anybody that has any business knowledge knows that jumping into these other products is almost like starting a new business. There is very little advantage to having this existing customer base if it wasn't aligned.

‘So a lot of those failed. And basically the next three or four years was this race against time: our iPhone case sales were declining and some of the new things we tried were working and growing. But they're really small, because they're just starting. So we're trying to start these other things and trying to get them to grow fast enough to overcome the really speedy decline of the iPhone. There were some painful years in there where the timing wasn't quite right. We knew we had a future, but our revenue was just diving from iPhone case sales. We almost lost the business in 2016 – we were inches away from running out of cash.’ 

Did you take out a last-minute loan or something like that, or you just managed to make enough sales to survive? 

‘Well, it was really painful – we were losing gob-loads of money and cash went to zero. But I had about $165,000 credit-card credit that we could borrow from. So we were borrowing from that and we had a line of credit, that was $200,000 or so. So we are borrowing against all that and got to very little liquidity left. 

‘The way we turned the company around, unfortunately, was to cut costs. The reason we lost so much money was that we were really hell-bent on not laying people off. We were trying to grow out of it with more sales and we blew a ton of money on marketing, almost panicking. Let's do this. Let's do this. Let's do this. Let's increase our sales. Most of it failed. And it made us bleed even faster. I eventually got to the point where I got some really good advice from a mentor who said: ‘You've got to stop losing money. When you're losing that much money, it's almost impossible to think strategically and to make good decisions. You’ve got to just get the company stable.’ That's what we did. We had to lay off half the team. That was a big surprise for everyone, which is a huge failure on my part. I think it's inevitable in business sometimes, but there's a way to do it. Being rookies, we didn’t really do that well. So that was a rough time both on the people side and financially. 

‘But we got the company to where it wasn't losing money. We just shrank and then slowly we rebuilt. Last year, we became a pretty close size to what we used to be, but with very little iPhone cases. And then this year, about four months ago, we sold our last iPhone. We just cut it off. It was an amazing feeling to completely pivot our business to workspace, which is what we're focused on now.’

Find out the latest from Ken at grovemade.com.

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