Lean Startup Methodology - Or why we will never be Kraken Dice
Those outside the tech sector (our day jobs) may have not heard of the Lean Startup Methodology. It is an extremely popular approach to starting a business and influences pretty much everything we do a LibrisArcana so we thought we'd explain it quickly to give you a sense of why we make the decisions we do as compared to other similar businesses (like KrakenDice et. al.) that do things very differently.
We should note that Kraken has been transcendently successful and obviously we watch what they do and try to learn from them but we bring a different set of skills to the table and apply them in different ways. Or to put it more directly if we could do what Kraken does we'd be doing it but we can't so we're doing things our own way. That note out of the way what is the Lean Startup Methodology?
Lean startup methodology is based around the notion of a rapid 'build-measure-learn' feedback loop. You start with an idea, you put it into action with as few bells and whistles as possible and you measure the output. If it looks promising you take what you've learned and try to make the idea better and repeat the process. This approach is really evident in how we do product launches and differs dramatically from a company like Kraken which goes to market with an incredibly polished offering.
Since starting LibrisArcana a couple of years ago (and launching the site 5 months ago) we've tried and discarded a number of ideas. We don't waste a ton of time on marketing or writing copy or even planning everything out we just launch ("Fuck it, ship it" is the mantra of a very successful Vancouver startup founder) . The thing is a lot of the time an idea that seems just awesome crashes and burns for reasons you would have never expected and sometimes once you launch you're able to find ways to work around problems that you thought would be an absolute show stopper. The value of Lean Startup Methodology is in the fact that you don't waste a ton of time on ideas that are never going to work anyway. You just launch them watch them fail, go have lunch then come back and launch something new.
As an example look at our dice subscription. As we've previously discussed our subscription model came from our frustration with inventory and staffing costs in the book business. Once we got it up and running we thought hey what about a dice subscription? The economics of the idea seemed pretty questionable with shipping being so expensive but we decided to launch it and see what the demand was. Our dice subscription was launched in less then a few hours with a couple sets of dice we had in the shop and a package of 250 small brown envelopes we bought from Staples for ~$10. We threw together a listing, posted some stuff on Twitter and got our first couple of orders within the day (Thanks Val - We'll always remember you). Once we'd proven there was demand for the service we started iterating.
The first problem to solve was where to get dice. We found a few suppliers from AliExpress and put in a rush order for some inventory to meet the demand and then started really negotiating for a better price. Within a few days we had multiple suppliers locked down and enough inventory in the pipeline to keep us moving forward (or so we thought).
The next problem to solve was shipping and the way it got solved demonstrates exactly why you need to 'get out of the building' (another tech industry term) and actually talk to people. We ship a lot of material and early on we'd negotiated a volume discount with a local postal office so we bring all our shipping to them (Business protip - Always ask for a discount). While we were shipping the first few orders of dice our friendly postal office employee pointed out what a shame it was that the package was just a hair too thick to ship as a regular envelope as that would cut almost $6 off the shipping price. The thing we didn't understand when we launched is that RPG dice come in a few sizes 25mm (big) and 20mm or 18mm (standard). We were shipping 20mm dice early on which when combined with the brown envelope was literally a hair thicker then the 20mm Canada Post envelope limit. We quickly changed our dice order to 18mm dice, dropped our price and bumped our profit margin from terrible idea into the hey this is interesting range.
The price drop had another effect in that it opened up more demand. People will think twice about spending $20/month but once you get things down into the $10/month range they start to view it as a fun thing to do and sign up in much bigger numbers. Our initial plan had been to launch a new dice theme each month and we had ordered six months worth of dice assuming about a 10% MoM growth rate. We very quickly blew past those estimates and found ourselves shipping a month of dice in nine days. Solving this problem has been way easier we just keep placing ever larger orders with our dice suppliers and asking for ever larger volume discounts with our orders.
The increase in volume did expose new issues however. In the beginning as we mentioned we were shipping in hand addressed brown envelopes. Besides looking incredibly unprofessional hand addressing envelopes takes time and is error prone. Having no experience in this area we tried to copy Kraken and spent a bunch of time designing a really cool shipping box and trying to find a designer. The result was a dismal failure. Not only did the box cost almost 50% as much as the dice at any thing less than 10k/month volume but when we tried it out we discovered packing time (box assembly) was way slower then we had thought. Undeterred we continued on with the brown envelopes and looked for a new solution. As it happened I'd ordered some clothing online which was delivered in a plastic envelope thing. We realize that what we needed was smaller plastic envelopes and a printed labelling system. After an embarrassingly long time Googling trying to figure out what those plastic envelopes are called (Poly Mailers - You're Welcome) we had an order placed for a few boxes of envelopes and a machine to seal them (our first piece of equipment). The end result is our shipping cost is $0.02/item cheaper then even the brown envelopes and the package looks significantly more professional but still nowhere near as good as some other shops.
As we will continue to develop and iterate in this way and we thank you for putting up with our growing pains. If you want to be part of the growth process you can sign up for our dice subscription. We've got some cool things planned in the next few months.
Our experience has provided a few lessons that I think would be of value to anyone looking to start a business so I'll share those in summary.
1. Just start it - You're smart you'll figure out solutions to the problems as they come.
2. Not all the problems need solved - We still don't have a fancy logo, or business cards to send with the orders, or extra swag or any of the dozens of things people have suggested we need. We're still doing fine.
3. Ask for a discount - You would be shocked how many 5% discounts exist once you ask. If you knock 5% off the price of everything that goes into your product you can take an idea from pretty bad to pretty reasonable.
4. Don't invest money until you are making money. We didn't buy any equipment until we could pay for it with profit from the business. Others might want to take a more aggressive approach but this works for us.