Ava DeMarco | Crain's Pittsburgh

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Ava DeMarco

Background:  

Little Earth Productions designs and manufactures licensed apparel and accessories for the fashion-conscious sports fan and their pets. The company carries lines for more than 180 teams, including the National Football League, Major League Baseball and the National Basketball Association, as well as 70 different colleges. The firm also makes the official Terrible Towel for Pittsburgh Steelers.

The Mistake:

The biggest mistake that I made was going into a business that was inventory-intensive without having an understanding of how to manage inventory and cash flow and respond to the marketplace.

My husband and I went into business together 24 years ago. My background was in graphic design and his was in marketing. Neither of us knew anything about finance. In the beginning, we made recycled products like bottle cap belts and handbags out of license plates and rubber. The materials were inexpensive and we found most of it in junkyards. As the business started growing, we began buying rubber from other companies or purchasing license plates from other places.

Eventually, we transitioned out of this business and into the licensed sports business, which required a different kind of inventory. We went from making everything in-house to outsourcing the manufacturing. We would order 100 or 200 of every item for every team. For example, if the Steelers or some other team had a good year, the items would sell. If they didn’t, the inventory would sit there. It took us a long time to realize that the inventory was tying up our cash flow. Our sales were strong, but we ran out of cash because we weren’t turning over enough of our inventory.

That’s when I went back to school to the Institute for Entrepreneurial Excellence at [the University of Pittsburgh] and began applying the new principles that I was learning. We reached out to everyone we knew and sought advice on how to better manage our inventory and cash – and worked with our bank, too.

Accept that not everything will sell. That’s not a bad thing.

The Lesson:

Don’t get too attached to your inventory. We would hang on to things we liked. Instead of worrying or rationalizing about why a product isn’t working, focus on what else you could be doing with that money. That made me feel better about getting rid of the inventory that wasn’t selling. In bringing a large range of creative designs to market, accept that not everything will sell. That’s not a bad thing. Accepting this frees you up to get rid of what isn’t working, take risks and try something else.

We also learned to adjust the line quickly to what was happening in the sports marketplace. Many of our items are “domestically decorated,” which means we carry one item in several colors and put transfers, patches and emblems on them. That enables us to increase the flexibility of our inventory and reduce the in-house inventory. We recently invested in on-demand products so that we could make 1,000 purses right away for our Cubs fans. It’s helped with inventory and brings in customers.

Follow Ava DeMarco on Twitter at @LittleEarthProd.

Image courtesy of Little Earth Productions

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