The Hairagami© Story - And the Golden Rule
Barbara Carey, Founder, hairagami company
Hairagami® is my most successful product to date. It is a hair accessory you fold into your hair to create instant and amazing hairstyles. With more than $80 million in retail sales worldwide, I have invested less than $800 in the Hairagami Company, and it is a completely self-funded company.
It is the perfect example of applying my golden rule: Get the order first. In addition this item is a perfect product to launch because it has an extremely low unit cost, high sales margins, virtually no tooling costs, and a much higher perceived value than a hair clip because it styles the hair.
My golden rule for bootstrapping a company is to first get a larger order for my product from a large retailer. Then I find a manufacturer that is willing to get paid with the funds from the sale.
The hook of having a large order in hand is often enticing enough for many manufacturers that they are willing to hold off getting paid until you do just to get your ongoing business. In fact it is amazing what happens once you get an order. Orders get people's attention. When you have an order for your item all of sudden everyone wants to talk to you and doors magically open. Suddenly bankers begin to compete for your business and so does everyone else. I cannot express the importance of this enough.
In the case of Hairagami I sold a large order to CVS. I found out who the hair accessory buyer was at CVS and gave him a call and said, "Hi, Gary, this is Barbara, you and I need to know each other." I heard a soft chuckle and he said. "Okay, why's that?" I said, "Because I have the next latest, greatest item for hair, and it will instantly snap a woman's hair up into a bun. I'd like to come see you so I can present to you a meaningful program that makes sense."
He told me that sounded good and granted me an appointment. I worked very closely with Gary and CVS as the product idea came to fruition. The deal points that I worked out with CVS, based on giving them exclusivity were extremely favorable. Here's the key point: I gave them limited time exclusivity, and my terms with them were final (meaning no returns). I wouldn't be obligated to extend our agreement beyond that or give them right of first refusal on any subsequent item. Most importantly CVS agreed to pay me in ten days.
The person most important to after getting an order is the manufacturer. Orders get manufactures excited. Orders with ten-day terms get manufacturers even more excited. I recommend entering into parallel negotiations under a confidentiality agreement with at least three outstanding manufacturers. The terms needed are: "You get paid when I do." First, negotiate to get thirty day or less terms from your customer and ninety day terms from your manufacturer for the first manufacturing run. Again your order from your customer is the carrot. I have been able to negotiate these terms for every product that I launch.
Raising money for a startup is depressing. Imagine having the dream of being an entrepreneur and having VC money come in and take most of your company. You now work for someone else.
You report to them just like you would for any company that employed you. Plus most of the time they have the ability to fire you and your dream goes away instantly.
Why not fund your company yourself and keep all the equity. Selling equity in a startup is the most expensive option. Get the order first and self-fund your company. You keep your company and reap all the reward.
© 2007 Barbara Carey. All rights reserved.