My first business in college was selling old edition textbooks online. It was great, I made a lot of money because I was one of the first people selling textbooks online. Then my contracted bookstores all realized they could sell the books themselves and effectively discontinued my relationships with them.
In an attempt to diversify online, I expanded into drop-shipping electronic items from Sharper Image, Wal-Mart, Target, Amazon, and Overstock. I was foolish enough to try and do it all myself, so I worked my a*s off. I didn’t sleep. I disappeared from Thanksgiving until New Years because the number of orders coming in was insane.
The revenue was great, but that didn’t mean great profits because the profit margin per order was razor thin. It’s a unmerciful business model. Also, part of the drop-shipping game is that commission checks on sales don’t get released until 90 days after an item is bought and sold. For me, it was a brutal game of shifting money around fast enough to make sure everything was paid on time. I had to max out credit cards to keep the ball rolling. My financial situation would swing drastically up and down as I waited up to 90 days for $40,000 commission checks from the big retailers.
On top of my cash flow buffering, the whole business was sketchy because it was based on a loophole where I’d get an amazing deal on the product by stacking a click-through discount, with a coupon, with a sale pricing, with a credit card cash-back, and with a discounted gift card. The retailers picked up on my loop-hole and re-adjusted their terms of service to make it illegal for anyone to stack discounts with a click-through account. I didn’t pay attention to the change and kept on going. 90 days later, none of my revenue checks came in. The client customer service people happily referred me to their terms of service that stated, in bold, that I was acting illegally and that they had the right to withhold my payout. I contacted a lawyer and tried to fight, but I got nowhere. There was nothing I could do to get my commission checks without hiring a lawyer full time and spending even more on legal fees. Amazon owed me $35,000, Sharper Image owed me $8,000, and Wal-Mart owed me $5,000. I didn’t see any of it. I officially closed down the business in 2008 and walked away $99,876 in debt.
If you are in a similar situation of overbearing debt, here are some key ideas that helped me dig out of the hole and back on my feet.
I still review my personal finances every month and it’s amazing to look at the chart above from 2008 verses this chart from last month and see how far I’ve come.