Time and again I am amazed at the resilience of many successful business people who overcome major failures. Warren Buffett summed it up when he said, to paraphrase, “Success is the process of overcoming failure.”
Shakil Prasla made a huge mistake recently. Prasla, a smart e-commerce operator and owner, bought Covid-related protective gloves in late 2020 for about double the final retail price. His company Gloves.com lost $ 6 million.
He told me, “It took three months for our products to arrive. By then, vaccines were out and demand was falling. We panicked. We conducted a fire sale with a 50% discount on our purchase price. We lost about $ 6 million. It sucks.”
I first interviewed Prasla for this podcast in 2019. Then as now, he was transparent and shared his experiences to help others. He did this again recently when he and I were discussing his glove fault and getting on.
What follows is our entire audio conversation and a transcript, edited for length and clarity.
Eric Bandholz: You and I first spoke on this podcast two years ago. They have built an impressive portfolio of e-commerce companies with borrowed money. But you experienced a setback earlier this year.
Shakil Prasla: Yes. The path I have chosen has advantages and disadvantages. It’s risky. Taking on debt requires cash flow in order to repay it. When the cash flow isn’t there, you have to move somewhere or borrow even more money. Most of my decisions have worked out. But some don’t. I’m currently in a crisis that didn’t work out. But I learned a lot about myself. I would do it again.
Band wood: What happened?
Prasla: Last year during the pandemic, we received inquiries about masks, smocks and gloves. We didn’t stock these products, but our manufacturers in China told us they could make them. So we started importing masks and gowns and researching personal protective equipment.
We didn’t do it on a large scale, but we did build some good relationships. And in summer the prices for masks and gowns fell. So we focused on gloves. I saw long-term potential for this business. Dentists, doctors, nurses, tattooists, hairdressers – everyone will wear gloves even after Covid.
So I bought Gloves.com, the domain name. I believe in these very same domain match keywords for search engine optimization and branding credibility. So I bought Gloves.com for seven-figure sums. I had never spent so much on a domain before. And separately, we bought a lot of inventory.
Everything went well in the fourth quarter of 2020 when we bought Gloves.com. We achieved a profit margin of 30% with high volume. I decided to focus on scaling to get even more clients. I went all in. We bought over $ 10 million in inventory. Coordinating all of this – manufacturing, containers – resulted in a production delay. Manufacturers like to say: “It will be shipped in a week or two.” That is never the case. You have to double it. For us the delay was great. And by the time the container was shipped, the port of Long Beach, California was already congested.
It took three months for our products to arrive. By then, vaccines were out and demand was falling. We panicked. We conducted a fire sale with a 50% discount on our purchase price. We lost about $ 6 million. It sucks. It wasn’t investor money. There were two partners and me.
Band wood: Why didn’t you keep the inventory?
Prasla: Covid has driven up the price of PPE products. Before Covid, a box of gloves was $ 3 to $ 4. During Covid, it rose to $ 15. We paid $ 10 a box. As demand fell, prices returned to pre-Covid levels. We knew this was going to happen, but we didn’t think it was going to happen anytime soon.
So after paying $ 10 a box, our gloves were now being sold in the US for $ 5. We ended up selling a good portion of inventory to non-US customers in regions where vaccines were short.
I’ve broken the most important investment rule: don’t put all your eggs in one basket.
Band wood: Are you bankrupt now?
Prasla: No, but I don’t have any cash flow.
My partners and I have had a lot of lows, a lot of emotional breakdowns. It carries over to our other businesses, our relationships. It affects our health, sleep, and other aspects of our lifestyle. I’m the heaviest I’ve ever had. But I accepted it. I’m a lot happier now than I was a few months ago.
We live in a culture where people share the good stories but not the bad ones. But we learn from these bad ones. I’ve learned that quick money can lead to quick losses. I have to stick to what I know best, which is predictable cash flow.
Band wood: How long will it take to dig your way out?
Prasla: 2 years. I will methodically concentrate on my companies that have the best long-term prospects. And Gloves.com will be a sustainable business. We are starting to see an upward trend. Our goal is to expand this company and sell it in two years. We sold much of the expensive inventory and topped it up with cheaper alternatives.
Band wood: Did you have to sell your house or your cars?
Prasla: No, I kept the house and the cars. I still have the same personal debt. I changed one mindset: I’m no longer a brand whore. I still need nice clothes and things. I want to spoil my wife. But I spoke to my family and said, “We are going to pause on wasteful expenses such as travel. We’re cutting expenses to survive that. “
Band wood: So that experience didn’t convince you to live debt free?
Prasla: I get a thrill when I’m in debt. It creates a boost of energy as I know I have to keep making these payments. In addition, it is the return on investment aspect. Your dollar goes much further by borrowing, even buying businesses.
Here is an example. For example, let’s say I buy an ecommerce brand for $ 1 million, which is roughly three times its annual profit of $ 333,000. Without debt, my ROI on the $ 1 million is 33%. But when I borrow money – usually the US Small Business Administration finances 10 to 20% less – the return on my money is much higher.
With that million dollar I can buy several companies. It’s a lot riskier, but I’m fine with that.
Band wood: But you don’t buy anything for two years. Did i hear that right?
Prasla: It’s correct. I won’t buy anything. I need to focus on growing my existing brands. Plus, buying brands usually means expanding our team. All of this takes money that I don’t have now.
Band wood: We are all grateful for coming on the show and enlightening us about what happened to Gloves.com. I know you. You are a great person, a pillar of the community. And now you have, so to speak, another link in the chain of knowledge. How can people reach each other?
Prasla: My website is ShakilPrasla.com. My email address is on this page. I’m also on Twitter and LinkedIn.