How to Recover From a Near-Death Experience

What Dig It Apparel learned from a disaster that left the company on the brink of failure. The second instalment of a special Voice of Entrepreneurs panel.

Written by Robert Gold

Claudia Harvey had a major order to fill, the spring quota of a big-box retailer. But when the co-founder of Dig It Apparel examined the inventory delivered by the outsourcer manufacturing her merchandise, she realized she had a major problem. “I opened the boxes, and the quality of our product was horrific,” she recalls.

Dig It’s signature product is a gardening glove designed to protect the wearer’s hands and nails from damage. Many of the mitts in this particular batch were unusable. “We had 10,000 units—20,000 gloves—and I had to go through and check what could be sellable and what couldn’t be sellable,” Harvey remembers.

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It took Harvey a month to sort through all the inventory and work out what she could salvage. “We had to discard what we couldn’t [sell], but we had already paid for it,” she said. “That really killed our cash flow that year.”

The write-down left the company perilously close to the edge. “We were very close that season to failing as a business—it was probably a thousand dollars away from closing up shop,” estimates Harvey.

No one would blame the Dig It team for quitting at that point, having seen their investment and effort destroyed by somebody else’s shoddy work. But Harvey saw it as a gauntlet thrown down, an opportunity to improve. The company decided to abandon their outsourcing strategy and relocate their production process closer to home.

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“We just squeezed by, but that [turned out to be] a good thing,” Harvey asserts. “It allowed us to take control and go to a manufacturing partner that could meet our needs.”

Understanding the logistics of manufacturing is key to the success of a product-producing business, according to Harvey. “You make ensure that all the pieces in the logistics pipeline meet what your profitability needs are,” she advises. “You have to walk a very fine line to do all that.”

Harvey was speaking at a special Voice of Entrepreneurs for Entrepreneurs panel alongside Phil Hogg, President of the Toronto chapter of the Association of Strategic Alliance Professionals, and Derek Szeto, co-founder of Dossiya and CEO of Wirk’n. This stellar line up came together to mark the launch of CPA Canada’s new book, Business Insights, which Andrew Brown and I co-authored based on our conversations with BusinessCast guests.

To hear what Szeto and Hogg had to say, and to hear more from Harvey, listen to the second instalment of this special two-part panel. You can find part one here.

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For more BusinessCast podcasts, click here.

Originally appeared on PROFITguide.com