How I Failed as a Math Business Entrepreneur – Part 1
Failing in math is something I never did. Failing as a math business entrepreneur is something I know well.
This story isn’t one of those, “I failed, now I’m uber successful, this is what I know now and here’s how you do it.” This one is about how it was, what happened and how it is today.
A Man with a Gift for Math and a Love of Teaching Using Games
In December of 2004, my dad, brother, sister and I acquired a small math game and activity publishing company called White Bear Publishing. We purchased the business, and it came with a bunch of inventory, a list of distributors, no historical financial data, old printing methods and content that was in need of updating.
Charles Lund is the former Director of Math Curriculum for the St. Paul Public Schools; he formed and built White Bear Publishing. Charles developed all of the math games and activities contained in his publications with the goal to help kids like math and teachers teach math concepts with fun, engaging math games and activities.
Mr. Lund had a gift for developing these math games, began publishing his growing collections and sold the books via workshops at teacher related events. Charles convinced educational distributors to sell his products to their clients, and then he donated the profits from his efforts to the St. Paul Public Schools Foundation.
Tragically, Mr. Lund died unexpectedly in 2001, and the duties of the running the viable enterprise passed to his wife, Sharon. Sharon also worked in the St. Paul public school system and successfully continued Charles’ pursuit as a means to keep his legacy alive. Soon, the burden became too much for her.
A Reluctant Math Evangelist and Entrepreneur
What does all of this have to do with my story of failure in the math business? A good question, indeed!
My dad holds a Ph.D. in mathematics education and throughout his career enjoyed helping kids learn to love math as much as he does. He instilled in his children a foundational appreciation of the power of mathematics with subtle reminders like, “When you distil anything down, it is just math.” Or, “If you understand the theory, you can solve the problem. Quit wasting your time just doing problems and looking at the answers. Understand the theory!”
A meta-story about how my dad thinks – As I was planning for college at the University of Minnesota in the Spring of 1984, my father and I began discussing majors.
Bill: “Joel, you may major in anything you want….as long as it’s math or science.”
Me: “What gives? What if I want to go into business or something like that?”
Bill: “That’s okay. Math and science teach you how to think. You’ll learn to look at a problem to isolate variables, develop hypotheses and then creatively explore solutions. See, a platform for anything.”
I earned a degree in Biochemistry from the University of Minnesota in 1989, and I am grateful for my dad’s advice because he’s right, math and science taught me how to think. I don’t know that I’ve ever properly thanked my dad for that advice, and since he’s still alive, I am doing that now, “thanks, Bill!” (And, yes, for those of you keeping track, I managed to squeeze four years into five at the University as I worked my way towards my degree. My routes in life are rarely linear.)
Failing in the Math Business
My brother, Marty, followed in our dad’s footsteps, got a bunch of math education degrees from the University of Minnesota and is a successful High School math teacher in St. Paul public schools. He worked with both Charles and Sharon Lund in various roles over the years in the district.
After Charles had died, and Sharon was ready to move on from running the business he so dearly loved, she asked Marty if he was interested in buying the business. Here’s where I come in, and the story starts picking up some steam.
Marty called my dad and me and asked us to meet him for lunch in St. Paul to talk about a business opportunity. At this time, my dad had retired, and I was enjoying a successful career in the Medical Device industry in various selling and marketing roles. (See, I ended up in business after all!)
The three of us talked about buying White Bear Publishing from Sharon Lund. There was not a prospectus or “book” on what the business did, financials or anything one could use to perform even basic due diligence. Sharon proposed a price for the business and planned for the proceeds to go to the St. Paul Public Schools Foundation in Charles’s name.
Given the lack of available data, I refused to fund the buyout. I suggested there may be another way we may enter into a transaction, what if Sharon financed the amount over five years and required an annual payment per year funded by profits? This way, if there’s nothing there, no one is at risk.
Sharon agreed to serve as the bank, we drew up a simple transaction terms sheet, set-up an LLC called, “The Gaslin Group dba White Bear Publishing” and all were excited.
If you like Sophoclean tragedies, now is the point where you’re looking for the ceiling to cave in, right? Everyone’s happy; things seem Daisy and what could go wrong? Well, lots.
If you’re the horror movie genre type, this is where you say, “Don’t go into the barn, it’s dark in there you idiot, and the guy with the mask just went in there!” Yes, we got into business with family, in an industry none of us knew anything about, and none of us had put up any money to fund the transaction.
Our actions were the business equivalent of opening the proverbial door in the movie, and everyone knows you’re in for the unexpected.
With all of my gray hair, I’ve learned when I get into things without all of the facts, hope as the strategy and “We’ll figure it out” as the plan, all isn’t well that ends well. So it was with The Gaslin Group, LLC dba White Bear Publishing.
As I look back, the first thing that happened was my dad suggesting that we let our sister, Patty, in on the deal, too. At the time, my dad had his heart in the right place and wanted to create something all his kids could work on together and build for future generations. We all were filled with thoughts of easy money and discussed how big the business could get. My Dad is a “glass half full” devotee; I love him for thinking as he does and for passing that trait on to me.
At the time all of this was taking place, I was 38, Marty was 39 and Patty was 24. Bill said it was the right thing to let her into the group, Marty and I agreed and all of a sudden we were one, big happy family business.
In reality, the business wasn’t that big which was another problem you’ll read more about soon.
As I wrote earlier, none of us knew anything about the publishing business. We all had careers that were more than full-time jobs and believed we could do this “on-the-side.”
You read a lot about “side-gigs” these days. I believe they’re an excellent way to scratch an entrepreneurial itch before you take the leap, yet I recommend a more simple business than we bit off and stick with something in alignment with what you do for your career.
Running a Math Business is Work
Ok, so what happened next? Remember, this is a book business. We suddenly owned cases and cases of math game and activity books, stored them in a garage and shipped them to distributors around the US. The orders we received from the merchants were not significant but were steady and received by fax.
Since the first step to solving a word problem is to read it entirely, we faced trouble. The primary variables we discovered were: Where do the faxes come in, where will the books be stored and who is going to handle all of the shipments?
Initially, Marty was going to the current storage site, shipping the books and doing all of the work. Understandably, he didn’t feel that was fair. Bill stepped in and did it some days, and I think Patty may have helped out a bit, too. I, on the other hand, refused to ship books.
We set-up a fax line in our mom and dad’s house so the orders would come in, Bill would fill them, invoice the distributor, Marty would ship them out and we’d all collect the proceeds. Remember, I was too proud to send books…..
That worked pretty well until summer, and our folks went to their lake cabin, and no one was at their house to collect the faxes. Orders began to pile-up, distributors got a little frustrated, and it was evident we needed a better way.
Running a Business Where No One is Responsible
Around this same time, several other things were going on, too. As we received orders, cash was coming in, and Bill and Marty decided they needed Laptops to do their work for the company. We were flush with cash so we bought them what they needed and they believed we could just “write it off.”
It was here I pointed out to Bill and Marty that “writing off” in your company meant you were paying for it yourself, one way or another at some point. It was okay, they were doing the work and needed the devices for reasons that seemed important to them. It was, however, indicative of a lack of resource allocation discipline.
Meanwhile, back at Gaslin Group dba White Bear Publishing, inventory was running low, and no one was informed enough to care much about it. The business was wildly profitable up to this point because we had no cost of goods sold!
You may recall, the transaction included a warehouse full of books, most of which were worthless because, as it turns out, Mr. Lund subscribed to the theory of buying ten year’s inventory of a product to get a lower per unit printing charge. I am not, however, casting aspersions because our group later fell victim to the same mistake because it just made so much sense. After all, it was in the math!
When the inventory situation became acute, I enlisted the services of a friend of mine, Bob, from my golf club who was a printing broker because none of us had a clue how to get these books reprinted. Bob agreed to negotiate our printing for us and, because of the method we use to print off of films, determined our best option was the printer Mr. Lund had employed in Chicago.
“What does that mean,” I asked? Bob explained to us how the printing business worked and gave us ideas of how we might drive cost out of the printing. Also, he suggested updating some of the book covers, using his team to fill orders and agreed to ship books from his warehouse.
Contract Fulfillment Services Becomes a Bone of Contention
We knew nothing about how all of this worked and when we started using Bob’s services in late 2004, I thought it was a great solution to our problems. Unbeknownst to me, my lack of book shipping efforts was a tempest-in-the-making and was gathering steam amongst the other three partners.
With the benefit of hindsight, there were a lot of mistakes made in these early days of our venture. Bob’s company wasn’t a fulfillment company, his warehouse was the parking garage in his office building, our orders were not being shipped or invoiced promptly, and the whole situation was a powder keg for everyone involved.
Bob was my friend, trying to do me a favor, my partners resented the mistakes, and the effect they were having on our business. As a group, we decided a change was necessary, and I agreed to be the one to figure things out since I had created the situation.
I talked to Bob, and I’ll never forget the look on his face when I delivered the news that we were taking our business elsewhere. It was a look that said, “I am doing all of this as a favor to you, and now you’re firing me?” He didn’t deserve that, and I am grateful we are still friends to this day.
Market Trends We Could Not Ignore
Unfortunately for all of us, there were some trends in the printing business that had the potential to impact our little enterprise. Digital printing and the rise of free content on the internet were gaining momentum.
My solution to leaving Bob’s services was to rent a warehouse in Eden Prairie, Minnesota near the homes of our mom and dad and me. Patty lived about 10 miles away in another suburb of Minneapolis and Marty lived about 35 miles away in a suburb of St. Paul. He had done his time on book shipping, so I hired my high school aged kids to help us do the shipping.
Throughout my career and life, I remain curious, forward-thinking and willing to take risks. Admittedly, I’ve crashed and burned more than a few times.
Once, I curiously explored investing in a political t-shirt business. At the time, my kids were little; I was a young medical device product manager and my family needed the money that I invested in the venture – it failed.
I wrote earlier about trends in the publishing business. I was studying our business, talking with people in the industry and looking to build to the next level. I had a vision for the future of our business, and it required a significant investment. An investment I could make but knew no one else would, or could.
One of the Greatest Mistakes of my Life
In a meeting, I outlined my vision of a website selling pdf’s of math games like iTunes and developing interactive games, too. The group seemed excited by the prospects for the growth of our family enterprise, and we all agreed that the strategy was sound.
Next, I outlined what I believed to be the investment required and suggested I will put up the capital in exchange for an increase in equity. The responses from my father, brother, and sister were incredulous looks and stone silence.
Some of you who are reading this story, understand that what I describe is a fork-in-the-road faced by many small businesses. Growth requires fuel and if the company isn’t producing the profits to fund a strategy or initiative, you input capital, borrow money or accept an equity dilution in some way, shape or form.
What happened next drove a wedge into my family that still separates us to this day. Not overtly, but it’s always there.
Remember, my dad and brother dedicated their careers to helping kids get better at math and believed, “this business was supposed to be a fun venture for us all to work on together and maybe make a little money.” At least, that