Many of you already know that I ran this business in the past called Walkamole (“Walking Guacamole”). What you might not know is why we have decided to shut it down at the end of September 2015 when we had been in operation only for half a year.
Today, I decided to write this the story of my first startup failure because I deeply believe the lessons you take from mistakes are absolutely more insightful than those you take from successes. And, besides, it is also fulfilling to write the story of your first business ever, right?
So, yeah, we’ve had revenues above 80k€ in less than 6 months, and in two of those months, our profit margins surpassed the 30% mark.
It is easy to align the dots when everything runs smoothly, right? But it is not that easy to understand what one did wrong.
Hopefully, my experience will help you guys avoiding the same mistakes. At least, be sure to be creative and explore new ways of self-sabotage, as the richness lies in the diversity. 😉
So, let’s get going. This is our agenda for today’s story:
- Introduction: Walkamole’s brief story
- The two killer decisions
- The main lessons
- Key takeaways
Walkamole’s Brief Story
After almost one year developing Walkamole, we opened for the first time in the European Street Food Festival in the Estoril’s Casino, Portugal.
Yes, Walkamole was originally a Street Food concept that sold Mexican Burritos only. We started with one type of Burrito – the Carnitas – and then we added two more to the menu – the Chilli and the Frijoles.
Everything in the concept was thought to detail. The name, the colors, the strategic positioning, and the entire concept – from the salsa music in background, to the nachos within the burritos for a crunchy taste, and the way we talked with customers.
Have a look at the Walkamole experience:
We’ve decided that we should focus our efforts on a single product strategy as it would guarantee that we would have enough room to learn, and it was also a way of being easily understood by the market.
It was much easier to tell our story to your friends if you knew that we were selling only Burritos, instead of all the Mexican (Tex-Mex) types of dishes.
Well, I guess it is now time to tell you that the entire business was a tremendous success!
When we started in our first event, we had enough stock to serve 88 burritos. I even remember thinking that because it was the European Street Food Festival – the first in Portugal, by the way, and in April – it wouldn’t attract that many people; it would be more like an exhibition.
Only that wasn’t the case. In fact, during the 1-week festival, more than one hundred thousand people visited the garden – if I’m not mistaken. And that led to an over-demand effect: almost each concept had queues averaging from 15 mins to 60 mins.
Ours wasn’t an exception. I still remember walking around the garden and wondering if people would actually buy our product. But right before we opened, we’d already lost 13 customers because our meat was warming up!
In that moment I was like “#$%#$%#$#%!!! WE JUST LOST OUR FIRST 13 CUSTOMERS!”.
Well, no worries, guys.
Because in 1 hour and a half our 88 burritos stock was over, and we had to shut down our little Burra (our green friendly vehicle and point of sale) sending a 30mins queue away. More than 30 customers were on that queue, for sure, standing still and burning at the 15h00 sun. And yes, we had to send them away.
If you don’t know Zomato, it is a mobile platform that allows anyone to vote and comment on any type of food businesses. Because we ran out of stock, we immediately received 3 terrible evaluations. People were absolutely pissed off because we had no stock! – the so-called “good problem” that is still a problem.
And we get that, but at that point, we were doing everything manually. So, after having sold our first 350€, we didn’t even lunch and went straight back to our place to prepare more food.
Yes, we were the ones chopping the tomatoes, onions, avocados, you name it.
So we spend the whole afternoon in a flat apartment preparing stock for 100 more burritos, which we eventually sold out again in more or less 1 hour and a half at night. Below you can see the queue that we had in that evening and that was also the queue we had to send away, once more, when we got out of stock for the second time.
Can you imagine? We had the largest queue in the event, by far. And we had to send them all away. It still hurts me to this day.
So, long story short, we’ve been in more than 20 events in those 6 months and we were also selling in a street fixed spot. Everything was going great, even though the physical fatigue level was absolutely insane.
If you never had a food business, I dare you to imagine how tough it is outside the opening hours, when it’s all about managing stock and cleaning. And now imagine a street food business in a small Piaggio APE 50. To give you an idea, every day we had to bring home the food recipients so we could wash them. Every. Day.
Also, we knew at that time that the Street Food business would be outstanding during the summer, but it would be extremely hard to sell during the winter. So, I was focused on finding a sustainable solution for the winter.
Because, you know, the winter was literally coming.
The two killer decisions
After many successful events in which Walkamole was literally the center of the attention – I think it is fair to say so, given our vivid green color – we started looking intensively for ways to remain in business during the winter.
And, for the large majority of scenarios, that would mean opening a fixed spot in a food court. But the investment needed was too high and the rents were unbearable, so we had to wait for the right opportunity.
#1 Killer Decision: Algés Market
One day I received a phone call from one guy that had seen us in several street food events. He was renovating the Algés Traditional Food Market and transforming it in a food court.
So, we had this opportunity of finally entering a food court, that was showing signs that could attract a lot of people – because for some years in Portugal you had this trend of renovating old food markets – and Algés was a place with a lot of purchasing power.
Even though we knew it was a calculated risk, we had a contract only for 3 months, and because we could invest with the profits of our own operation – we didn’t need to invest anymore – we’ve decided to take this chance.
You see, here’s the interesting part. When you think about a food business, we often say that you ought to pick 2 of the following 3 things: Fast, Good, or Cheap.
And, actually, it is quite fascinating that Walkamole had all those three! We were cheap, absolutely tasteful, and also fast.
So, it seems we have everything to create a huge success, right?
Well, the only problem is that people in Algés didn’t care about any of those points.
We didn’t realize, before entering this food court, that as a matter of fact, people from Algés didn’t care at all about Good, Cheap, and Fast.
Side note: Algés is an aged town where you can find people with some purchasing power but most of them are already retired.
Here’s why our value proposition was low in Algés Market:
- Good: All our competitors were as good or even better than us, so we couldn’t differentiate by the food quality.
- Cheap: Algés people have a lot of purchasing power, they don’t care if they spend 6€ or 15€ in a meal. In fact, spending only 6€ was actually anchoring our product in a low-quality level for these folks.
- Fast: No one in Algés was in a rush. Come on, these guys were retired, why would they be in a rush?
This was our first major killer decision.
You see, I was in a rush to scale and to find a way to grow during the winter. We hired a lot of people during this period. We had employed more than 20 people, from the street food team, the Algés Market team, to the suppliers working directly with us, etc.
And even though we knew it was a calculated risk, we seriously didn’t expect the demand wouldn’t care about our value proposition.
#2 Killer Decision: Alegro Setúbal – A Shopping Mall
But the second and ultimate killer decision was still to come.
At the end of August, Algés Market was already presenting itself as a poor choice, we knew we had to try something different to sustain our operation in the winter.
After all, Algés Market sales were far from exciting and we knew that after 3 months we’d leave. The costs were too high for the operational margins.
This is the time I start reaching out to shopping malls to evaluate whether we can place our Street Food vehicle – Burra – inside their doors.
The plan was: if our Burra makes such a success of events, it is possible that people will love it in a shopping mall as well. It definitely represents the Walkamole concept as a whole, and in a shopping mall people value Fast, Good, and Cheap. So, I was really expecting it to work.
Only it didn’t.
Soon, we found one organization that wanted to try our concept inside their mall’s doors, and from the moment we opened our operation there, we understood that it would take a tremendous amount of time to have people seeing a Piaggio APE 50 as a viable option for lunch within a shopping mall.
It might make sense nowadays, but in that time we really thought it could represent a tremendous breakthrough in the industry of food courts.
You see, the problem with most businesses is that we’re always looking for ways to be truly disruptive. It seems that we hope that no one has our idea. The only problem with that is that you’ll have to change people’s habits, educate the society, and transform paradigms. Well, guess what, that takes ages!
A startup doesn’t have the financial muscle to invest for the long term. And when I mean a startup, I mean any kind of entrepreneur, for that matter.
You have two types of businesses: those who can sell from the start (large majority), and those who only work when a lot of people are already using them (a tiny minority).
Well, if you’re building something that only works when EVERYONE is using it, then you’ll definitely need the help of Venture Capital because you don’t have any profits until the mass is using it.
But for all the other types of businesses, that’s not the case. You can make money right from the start, and you should do it, otherwise, you won’t have the liquidity to run and grow your business.
Back to the Shopping Mall point, I wanted to tell you one more mistake that I did.
When I was negotiating with these guys, I told them that because Algés Market operation was down due to the vacation time – 30% of Portuguese guys go to Algarve – we couldn’t have any kind of upfront investment in this new operation.
And the guy with whom I’ve talked agreed with me. I told him that the best I could offer was a 3-month bail check, as a guarantee of our good behavior.
What does this mean? It means that they should never cash-in that check as long as we would behave correctly.
I know this is very naïve, but that’s the way we’d negotiated with Algés Market too, and they respected the deal.
However, these Shopping Mall guys didn’t respect the deal. And, mostly, they didn’t respect our trust.
They cashed the check and we didn’t have enough money on our bank account to afford that payment.
And then, it all comes down to a terribly hard and never-ending negotiation with this firm, which ultimately got us completely burned out. They were the corporate guys, while we were the small ones – the entrepreneurs trying to make a change. While they still had their paychecks at the end of the month and their fancy offices, we had a problem to solve with our bank and couldn’t sleep at night.
And that’s it, guys. 😉
Let us now dwell into the major lessons.
The main lessons
#1 You should really do something you love
Sorry to everyone who thinks this is cliché. It really isn’t.
When things go well, it doesn’t matter what you’re doing. But when times get tough, if you aren’t passionate about what you do, you won’t be able to handle all the pressure.
Giving up will seem too appealing to you.
I know this from my own experience. Why would I even start a food business when I have no passion whatsoever for the food industry? Back in 2014, I was naïve. I really believed that I could make any business work. And, even if Walkamole was a huge success for the large part of its history, ultimately I didn’t know that when things get really tough, it doesn’t matter if you’re a good strategist or if you love management – it all comes down to grit and passion.
It will require a lot more than management know-how, it will require that you take pleasure from what you’re doing every single day.
#2 Managing people will be your biggest challenge
Sometimes we discuss what’s the hardest thing about managing your own business.
And, IMHO, mistakes you do when hiring people will stop you from sleeping at night. So, make sure you take twice the time to find the right people and do not settle easily, even if you’re in a hurry to hire someone.
Also, this will mostly depend on how emotionally cold you are and what are the main values of your business.
But assuming that you care about your employee’s wellbeing and motivation, I truly believe your toughest challenge will be managing, hiring, and inspiring the right folks to walk alongside with you.
#3 Do not trust blindly in people
I believe in genuineness and transparency. I believe in empowering people and delegating. And, definitely, I believe in trusting.
So, please don’t get me wrong when I say that you must not trust people blindly. It’s just because the entrepreneurial reality is not a fancy corporate office.
You see, in the corporate landscape, we’re used to finding very ethical and well-behaved people. After all, it doesn’t suit you well if you’re having a major argument with someone in the middle of the corridor, right?
But in the entrepreneurial world, sometimes it really feels like a jungle.
And trusting the wrong guy can be enough to throw you down. As you’ve seen by my own example, we faced financial difficulties because I trusted someone with a paycheck that he shouldn’t cash-in, but he still did.
And, at the end of the day, it doesn’t matter how idiot (and a little bit of a criminal too) this guy was, it is still my responsibility.
#4 There’s no rush to scale up
This is another major lesson.
It is such a common belief to think that you have to scale fast to capitalize on your success.
Just imagine your business is going way better than you ever imagined. A lot of us – and, perhaps, you too – will think “Wow! I better not waste this opportunity!”, right?
Now, it doesn’t mean you will screw up your expansion, ok? But I want you to know that when we rush to scale up, usually what happens is that if you face demand volatility (ups and downs spikes), you won’t have the financial muscle (cash flow) to face the sudden increase of burn rate (monthly fixed costs, salaries, rents, etc.).
Pardon the expressions, I just wanted to introduce you to some management verbiage as well.
Trust me, it is way better to give small but solid steps, and work for the long term. Do not rush in expanding.
As a good friend of mine once said: “Think big, start small, and check the details”.
#5 It is a lot of bureaucracy!
I definitely don’t want to scare you, but we must face the facts.
A company is a legal entity, and you have thousands of laws with which you have to comply.
One of the major mistakes I’ve done was neglecting the importance of laws and contracts. At a certain point, it almost seemed like it didn’t matter if we were signing a contract or not, at any time we could just cancel it and find another option – we sadly believed.
I think some of us have too much confidence in our own capability to overcome challenges and find innovative solutions.
The problem with legal stuff is that you don’t manage to solve them with creativity and determination, ever. That doesn’t matter in that world. When you have to deal with a legal negotiation, you’ll definitely need a lawyer. Besides being expensive, a legal process can literally take months, or even years!
And they’re focusing you on something that doesn’t matter at all for your business.
It is crucial that you are extremely structured and cautious about bureaucracy. In case you’re not a very organized person, I’d recommend that sooner or later you find a partner or an assistant that is great at dealing with all that stuff, namely taxes, contracts, payments, and receivables.
Finally, I also wanted to share with you that a business is composed of three types of tasks:
Future, Present and Past tasks.
And, as a founder, you should try to maximize the time you spend on planning, strategy, selling, developing products – Future-oriented tasks. Even if you can’t do this because you have to attend to some Present tasks, what you definitely want to avoid are the Past tasks!
Things like accounting or legal, once neglected, will force you to stay in the past and will be a major bottleneck to your business’ growth.
After sharing with you this story, I hope you feel much more confident about your own venture because now you know the mistakes I’ve done and what I’ve learned.
And, besides, it doesn’t pay to be too concerned about eventual mistakes because shit is going to happen anyway.
It all comes down to the way you learn with your mistakes and the way you grow as an individual. Entrepreneurship is, above anything else, a matter of character and discipline.
And don’t think for a second that learning, means that you’re behind all those corporate folks who never get to create anything new. Don’t believe that learning means you’ve “failed” and that you’re a “loser”.
Nope. Learning is the PROCESS. Learning is the WAY to achieve whatever you’ll achieve later in life. And who doesn’t expose himself to this type of learning, will likely never go beyond a miserable professional emptiness.
Some say that you got to fail fast! Go ahead, get yourself exposed to challenges and fail fast, so you can meet your goals as soon as possible.
Well, candidly, failing sucks. Being wrong sucks. And yes, you feel bad; so bad that often you won’t even sleep at night.
But that’s what it is like to be an entrepreneur.
Don’t get me wrong. I’m the first person to encourage you to create your own path. Because while it sucks to fail, it is also what makes you feel ALIVE as you’ve never been before – living on the edge. When you’re making your own calls, impacting people, and seeing the smiles on your customers’ faces, then you’ll see what fulfillment really is.
That’s what life’s all about, by the way.
Because as it seems, the moments in which we deeply feel alive are the ones in which we’re climbing a mountain and a giant abyss lies right at our side, but we don’t feel like stopping, and we continue going up.
And, trust me, it doesn’t matter how dumb, stupid, and naïve your mistakes might be, you must still learn to respect the decisions that you made because they are part of who you are now. And, mostly, these mistakes are part of who you’ll later become. And you can’t put a price tag on them.
And many years from now, when you look back at your life, then you’ll be able to connect the dots. Then, you’ll be able to see how the moments of despair, difficulty, and frustration led to something huge, something that you would never exchange for anything.
Because that is the way of greatness.