As far as I know, the Suez Canal blockage has not impacted Project Cedrus. However this year has taught me that the global logistics and supply chain world has become so complex and fragile that I’m not confident to say the blockage won’t impact me in some way until the cargo on Ever Given has been unloaded and insurance claims paid, which is probably months if not years away given the number of people and companies who were financially impacted by this event. I have been battling my own challenges with Project Cedrus, and wanted to take a moment to update my customers publicly and thank them for their patience and support during these challenging times.
A year ago there was approximately $400 in my business checking account. My manufacturing partner was forced to abondon Project Cedrus due to the financial and staffing impacts of COVID-19, after 4 years of working with me to produce a high-quality piece of sporting equipment domestically in a sea of imports from Asia. For the second time in my life (first being grad school), I was borrowing against my credit card and asking my machinists (also small family-owned businesses) for NET 30 billing terms. I honestly thought Project Cedrus was done. I just couldn’t handle the stress, but the bigger reality was that the business simply was not profitable. I was investing so much in new tooling and molds to improve the quality of the mast with a new manufacturing partner that I couldn’t afford to buy adapters and machine the parts that get bonded inside the mast. I told my wife I was ready to shut it down, that I gave it a good go for 4 years and learned some of the hardest lessons of my life. Lesson 1: Building a profiltable business from scratch is hell of a lot harder than collecting a paycheck from a company. I was not going to move any more money from our family savings account into my bussiness checking, because at the height of the COVID lockdowns and stock market crash I could not stomach losing any more money. Especially with a 1 year old to feed and a mortgage to pay.
Turns out the lockdowns gave people some quality time outside, and a few orders came in and with those deposits I was able to order batches of mounts and adapters and produce some masts. In case you ever wondered why I charge a non-refundable deposit, that is why. When you order custom adapters or mounts or ask me to kick off production, there are costs associated with those activities that as a lean business I had been unable to cover with my own working capital. In short, Project Cedrus survived the summer, and fall, and in December with production stable and quality high, I felt it was time to invest a little in marketing and advertising and send a mast to Gunnar for a review.
Some businesses invest 25%+ of their revenue into sales and marketing. For Project Cedrus, I had invested approximately 0% in sales in marketing and 100% in R&D since the inception of the mast 5 years ago. Note that also means 0% in profits to me. Like many engineers, I had the attitude that the best product wins. Turns out in today’s world of social media and heavy marketing spending, that is not the case. Those nice videos you watch of girls pumping up kites on the beaches of Mauritius are not cheap. I bet most kite companies spend more on one of those videos than I spent on the patent for Project Cedrus. But I digress. Anyway, I sent Gunnar a mast with no strings attached and asked him to kite, windsurf, SUP, surf, and prone foil. The unboxing video alone initiated a jump in web traffic by 500%, and since then my average daily traffic has more than doubled. That investment (FedEx international shipping, customs, the mast and all the adapters for his many wings) paid off. By the time he launched is review video, in which he stated that every one of his wingsets performed better with a stiffer mast, I was already backordered.
I have now learned more painful lessons about running a business. Lesson 2: If you can’t deliver product, your working capital is frozen and you lose customers. My office is stacked full of masts right now, which I can’t ship because I have no adapters. The global aerospace slowdown and staffing reductions due to COVID-19 have shuttered anodizing facilities. Aluminum prices are up 50% and my machinists are slammed with work right now as many companies transition from overseas manufacturing because they’re tired of their containers full of product falling off ships. For the most part, my customers have been amazing and understanding as I keep them apprised of these developments. That being said, in this Amazon world of next day delivery, I’ve lost a number of customers who are frustrated that I can’t give them a custom mast and adapter within a couple days.
Then came the freeze in Texas. Like many of you, plastic waste is pretty depressing for me and it would be easy to rejoice when the chemical plants are forced to shut down and stop their massive greenhouse gas emissions and production of forever chemicals. But the reality is, these chemicals are in everything we use, including carbon foil masts made from primarily recycled materials. The plants in TX produce the monomers and polymers for various epoxies and urethanes used in Project Cedrus, which resulted in a severe shortage that affected a lot of businesses. These materials are used heavily in the aerospace industry, which again has slowed. Many vendors do not want to stock them due to a 1-year shelf life. They don’t want to take the risk of the product expiring which has made it harder for me to find a supply. Fortunately, we found a few gallons somewhere and mast assembly has resumed.
Fortunately I don’t have to worry too much about the cost of shipping a container full of foils from Asia, which has increased 4x, but a lot of kite companies do. And I hope they can navigate these challenges, because ultimately my mast needs their wings:) Domestically, I have rising FedEx costs as I move material between WA and OR, and want to thanks these companies (UPS, FedEx, USPS) for working their butt of during this time and helping small businesses like mine survive.
Lesson 3: Consistency and volume are critical to the success of a business. It’s easy to say Project Cedrus was not profitable until recently because volumes were not high enough. But it’s not really so simple, at least in the world of manufacturing. I technically had positive margins on each mast, but at the end of the year I was barely breaking even. With more consistent orders for masts, my technician and I are able to invest in tooling and equipment which further aide production and reduces costs. Quality has gone up, because we’re making more, and simply getting better at it. Machining adapters and mounts is so much more economical at scale, for example a 1-off part with my machinist is approximately $200, or I can order 10 adapters at $60/each. Even simple things like shipping and order fulfillment get easier with higher quantities, as I can buy a pallet of 36″ long boxes from U-Line instead of scraping through the recycling bin at work. In all seriosness, this has been a fascinating lesson that I did not comrehend having worked at companies like Apple and Boeing. Seeing first hand the importance of consistent volume makes it clear white kite companies can’t and won’t do direct-to-consumer sales. You can’t run a business with unpredictable consumer behavior… at least with the amount of overhead at a typical foil company. With Cedrus, I have been able to operate direct-to-consumer, and plan to stay that way, but am beginning to explore a push into retail to fill slow periods with production orders when consumers aren’t buying direct or to increase order quantites of adapters which brings my average cost down quite a bit.
In closing, it is absolutely crazy to think where we were only a year ago and the changes that have occured in this world since then. This year alone has been incredibly difficult, and I could not have survived it without the positive feedback from my customers. Looking back even further, I’m more proud of what we’ve accomplished with Project Cedrus. From being laughed at on the beach at Crissy back in 2016, to recent death threats for not making an adapter to a 5 year old Liquid Force mast (I am not kidding); starting my own business has been the biggest challenge of my life. As I’ve told many of you, this has never been about the money. But unfortunately, without positive cash flow, a business cannot exist. *unless of course, you are one of the many unproftiable startups who have recently gone public via a SPAC, which is another post entirely…
Thank you to my customers who continue to be patient with me as we work through these challenges, and thank you to my past customers who believed in this 3 years ago and took a risk on me. Nothing makes me happier than the hear you continue to ride your mast and love it, with wings that didn’t even exist back then. I don’t think even I knew at the time where this project would take me, and I couldn’t have done it without you.