RedWhite Apparel started in May 2014. 

Everything was exponentially harder back then. The first version of the RedWhite website only had 1 page, had no e-commerce functionality and took 7 seconds to load. 

The first 300 pairs of RedWhite bibshorts took almost a year to sell. Finding customers who'd be interested in purchasing bibshorts from a small, unknown Singapore-based company was a monumental challenge. To generate cash flow, we worked with a small network of dealers who'd buy our bibshorts at wholesale pricing and resell them. Margins were thin, but the cash flow enabled us to keep producing more bibshorts and pay ourselves a small living wage. 

We made the decision to get into e-commerce sometime in 2015. It was baptism by fire. Finding customers on the internet is incredibly difficult without a marketing budget. We got lucky now and then when kind journalists reviewed our bibshorts, driving customers to our dinky old website (that took 7 seconds to load).

Customers were sent bibshorts by the postal system and delivery took 2-3 weeks. Because the company's financials were tight, we didn't have a generous return and refund policy. Customers certainly didn't experience the best of RedWhite in the early days thanks to a lack of experience, lack of a budget and our green-ness.

But, things did get better over the years.

The Compounding Tailwind

RedWhite today is different business.

• The website doesn't take 7 seconds to load.
• Customers enjoy fast, free shipping.
• We have a healthy marketing budget (you probably saw one of our ads)
• Demand outpaces our working capital, causing inventory to run out now and then (in the process of being fixed)
• There are now over 1500 reviews on the website (Thank you for writing one if you did!)
• Customers enjoy a more generous Returns Policy and a Crash Replacement Programme. (Made possible by a strong balance sheet).
• Product quality has increased keeping return rates low relative to scale.

I occasionally reflect on RedWhite's history and look at what put this business on a path to where it is today. Everything good at RedWhite today is the result of the slow grind upward from compounding.

I call this The Compounding Tailwind.

Here's how it works :

1. A customer buys a pair of RedWhites. 
2. The customer either likes or doesn't like it.
3. If the customer likes the bibshort he/she tells their friends or buys more. Good, but not what the Compounding Tailwind needs. What it needs to work are unhappy customers.
4. If an unhappy customer doesn't like the bibshort, he/she tells me why and I look for systemic problems that I can fix. Not every unhappy customer can be satisfied, hence the focus on systemic problems that addresses multiple customers' problems.
5. Systemic problems that get fixed improves the business. 
6. The improved business earns more customers and a wider audience
7. The wider audience brings in more happy and unhappy customers
8. I once again focus on solving systemic problems for unhappy customers.
9. This cycle repeats and is self-reinforcing, pushing the business to improve over time.
10. Improvements = more customers = more happy & unhappy customers = more improvements to make. You can see where this is going.

The Compounding Tailwind only works if the business survives.

The Compounding Tailwind blows gently, pushing the business along faster and faster in tiny increments. It takes years to see meaningful benefits. 

RedWhite is only able to enjoy the position it's at because it has survived. If the business had been leveraged in the early days, some of the mistakes we made would have undoubtedly bankrupted us.

To allow this business to continue enjoying success in 10 years time, my task is a simple one - ensure maximum survivability. Here's a list of some simple principles I use to ensure RedWhite survives in the coming years :

• Run a strong balance sheet - The business is un-levered (to some short term disadvantage), but having zero debt and plenty of cash on hand means the business can take on unexpected liabilities. One recent example was a 5-figure refund scheme I ran between March - June 2020 for customers affected by COVID-19 shipping delays and lost packages as postal service flights were cancelled and postal offices were slammed by the pandemic.
• Keep a firm finger on the customer's pulse - Product quality deterioration can happen at random and it has happened in the past. The only way for me to know is for customers to tell me when something goes wrong. This is why I keep sending so many follow up emails after you purchase a bibshort from me.
• Be Patient - I do want RedWhite to do 10x the business it is doing today. However, this sort of growth cannot happen in a short period of time without creating company-destroying problems. I should be patient and have a long time-horizon.
• Do Less - There was a time in RedWhite's history when we sold more items than just bibshorts. This was value-destructive. Businesses are often advised to grow by making and selling more stuff. However, I argue that businesses should strive to do less when possible. Doing less allows concentration of resources and prevents over-stretching of balance sheets. I talk about this here. And also here.
• Don't Spend Unnecessarily - RedWhite operates of a small apartment and inventory is stored at a relatively cheap 3rd party warehouse. Bibshorts are shipped worldwide in low-cost tough polymer mailer bags (custom bags cost a lot and get thrown anyway). This website runs on Shopify's cheapest plan and I watch all tech stack expenses like a hawk, only investing where necessary and trimming the fat whenever I can.
• Avoiding Stupidity than Seeking Brilliance - Charlie Munger said this and it stuck with me. It is far easier to avoid making stupid decisions than seeking brilliant ones in my journey to grow RedWhite Apparel. And to be frank - in my own life as well.

What does The Compounding Tailwind mean for Customers?

As RedWhite Apparel improves over time, customers will enjoy better products and after sales service. Small changes and improvements every year will compound.

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I hope you enjoyed this read and gave you insight into how I run RedWhite. Have a good weekend :)