20/20 Hindsight - My Biggest Startup Mistakes By Jim Spinney, Spinney and Huber LLC

In 1986 my partners and I started a records storage business as a diversification for a moving & storage company. Like all startups it was a struggle and a discouragingly slow process. We stuck with it and fourteen years latter had developed sixteen records centers in eight states with annual storage and service revenues exceeding twenty million dollars.

By most industry benchmarks and measurements we had built a pretty successful business. Now, looking back, I can recognize some of the startup mistakes that we made and I wonder just how much we could have grown without these costly errors. So this is my confession of our biggest mistakes. Hopefully, you can avoid these with your startup and reach your level of success even faster. Here are my top five.

1. Software and Technology Our first decision was one of our biggest mistakes. We decided to create our own software. Not some excel spreadsheet program, but a full blown records center program developed by outsourced programmers. Of course, the first program didn't have everything we needed so a second version was created. As we added customers they wanted some customization so we went on to the next version of development, and the next, and the next. I estimate that over the first five years of our company we invested over $200,000 in software technology and still didn't have a program that was equal to or better than our competition.
   

Today, there are great commercial software products from the vendors servicing our industry. Do not even think about trying to develop your own.

2. Shelving Layout and Purchasing Like everyone in the warehousing business, we had several racking and shelving vendors from whom we purchased warehouse racks. We contacted these vendors for their input on the starting layout of our records centers. No thought was given as to their experience in the records business because after all, rack is rack, right? So, our first warehouses were designed with single row pallet rack with an aisle after every row. This was very accessible, but, as we learned, it produced terrible density as compared to back to back rows which eliminate every other aisle. Or, better yet, catwalk systems which eliminate almost all aisles.
   
   All shelving vendors are not experienced with records centers. Work with the vendors represented in our industry and let them layout your facility for the best density, operational efficiency, and safety.
   
   
3. Box Stacking and Locater System This turned out to be another one of those costly mistakes for us. We started out with a stacking configuration of two standard records cartons high, two deep. Our thought process was that we wanted easy access to the boxes for retrieval and refile purposes. This stacking meant that we only had to move a maximum of three boxes to get at any back box. What we didn't consider was that this increased the number of shelves required, increasing our racking cost. Also, since 80-90% of the boxes were never accessed, we did not need this easy access setup. We eventually went to using a three high, three deep configuration which gave us excellent density and reduced our overall shelving cost dramatically.
   
   Our original locater system was based on a permanent address, or static location for each box. When a box was retrieved, its position remained empty until that box was returned and it was placed back in its assigned location. We thought there was less chance of misplacing a box if it had a permanently assigned location. While this has some merit, believe me if a box can be put away wrong, it will be. The problems with this system are the following; a: 10-20% of the boxes are out of the facility at any one time. With permanent address systems, you can't reuse this inventory space; it just sits empty. b: with new box processing, you cannot move the boxes to the shelves as quickly because you are waiting for the new permanent address location to be assigned.
   
   When we started using dynamic locater systems, where the boxes can be placed and scanned randomly into any empty space, the labor efficiency improvements were dramatic. Boxes moved faster to the shelves. We re-used the 10-20% of empty rack spaces over and over and, the older less active boxes in our three high three deep configurations were pushed to the back as the active boxes were placed in front positions.
   
   
   
4. Material Handling Equipment We needed to find equipment that would access the height of our facilities while using the narrowest aisle space. We initially selected scissor lift trucks. We thought these were a great choice. The lifts were mobile; electric powered, had a working platform, and could be elevated to the working height needed. At first this equipment worked great. Then we started to experience several problems. First, the mobility of a scissor is slow-slow-slow. In our 100,000 SF warehouse it took forever to get from one end to the other. Second, they didn't hold up under heavy and frequent work use. The batteries needed constant charging, even during the work day. Third, maintenance issues became frequent and costly. Fourth, we constantly had to rent replacement lifts while the units were repaired.
   
   Eventually we went to order pickers as the replacements for scissor lifts. Order pickers are made for the kind of work demands we placed on this equipment. They are fast, efficient, and under normal use the batteries can hold up for a week without charging, reducing equipment down time considerably.
   
5. Sales Effort We really underestimated the direct sales effort required to get this business going. With the existing moving & storage client base and sales force, we thought it would just be a matter of introducing this new service line. Wrong. Records storage is a very unique service that requires a face to face, consulting sales process. You must find the person who has the records responsibility, discuss the storage and service problems and needs, introduce your solutions, and prepare cost proposals based on their needs. This sales process may require several visits and scheduled follow-up procedures.

We found out pretty early on that we had to use a dedicated sales force and strong direct marketing techniques to get this business going. Telemarketing and targeted advertising are necessary to build the prospect pool and create a strong presence in the market place. Eventually we got it, but our sales process was significantly delayed by our trial and error attempts.

It's kind of like high school, I wish I knew then what I know now about life. It was still a lot of fun building our business, and we don't spend time pondering what could have been. But maybe this confession will help you with your business, and your mistakes will be fewer and less costly.