I’m often asked why I started FringeSport. People inquire, “Of all the things to do, why sell barbells?” I tell them that if I wanted only to make money, I would have tried banking or oil. I have an M.B.A., after all.
But I took the path less traveled. I started a barbell company. I considered:
- Passion,
- Margin,
- A niche growing market,
- A passionate customer base,
- Repeat customers,
- The potential to build a brand,
- Defensibility against the Amazon.
In this post, I’ll examine each of those factors. I’ll share my thoughts from eight years ago, when I launched FringeSport, and how those thoughts have evolved.
Passion. I once told a friend in business school that I wanted to work for an industry that I was passionate about. He responded to me, “That’s terrible. I would hate to work in that type of business.”
I was shocked, and I asked him why. He said, “What if I ended up hating my business? Then I would hate my passion.”
That’s a good critique, but it does not apply to me. Another solid critique is that you can become passionate about anything that makes you money. But to be the best in the world at my profession, I needed to be passionate about it.
I still think that way today.
Margin. Before launching FringeSport, I worked for an ecommerce company that earned 20 to 30 percent in gross margin. Anything better than that, I thought, would be terrific. Thus I looked for a business wherein gross margins would be at least 35 percent. The barbell industry, I surmised, could do that.
I have changed my views. If I were starting a business today, I would look for a much larger markup. I would buy something for $1 and sell it for $4. Or possibly a distributor sells it for $4, and I sell it to the distributor for $2. Both would produce gross margins much higher than 35 percent.
Simply put, it cost much time and money to build a brand. I now prefer a product with high gross margins to afford to build that brand.
Niche but growing market. I could see a trend with functional fitness, such as CrossFit. I thought it would grow. The barbell market was initially very niche. The competition was low, and the market would become viable as it grew.
I still agree with this approach. If I were starting over, I would again look for a niche that’s growing. Examples are obstacle course racing and Ninja Warrior competitions. That sort of racing and training will likely grow in the next five years.
Passionate customers. In launching FringeSport, I wanted to sell to customers who cared about the products and the brand.
I still feel that way. Although with the rise of Amazon, it’s easier — although not better, arguably — to create products and brands that have less passionate customers.
Repeat customers. I did not anticipate the rise of subscription box companies. If I were starting over, I would try a product to sell via subscriptions. It would provide a high lifetime customer value because the business model assumes repeat sales at regular intervals.
Branding potential. This one is ironic. While I think I chose a good niche with much branding potential, I’ve learned that I’m not the greatest brand-builder in the world. (Eric Bandholz of Beardbrand, by contrast, is a wizard at building his brand.)
But I choose a niche where the brand matters to customers. I would do it again and choose a niche with a high branding potential.
Defensible against Amazon. Eight years ago I was paranoid about Amazon taking away my business. It turns out that I was right to be paranoid — but not paranoid enough! These days I think of Amazon as both a sales channel and a competitor.
What do you think? What factors did you consider when you started your business? Let us know in the comments below.