Once upon time, Robert L. Strauss had a Eureka moment.
There was no doubt about it: I had discovered The Next Big Thing. Like Edison and the light bulb, like Gates and the PC operating system, I would launch a revolution that would transform society while bringing me wealth and fame. I was about to become the first person in America to sell condom key chains.
Strauss first encountered the condom key chain while working in Bangkok. The clever Thai community development organisation turned a warehouse full of soon-to-be-expired condoms into a business model. The prophylactics were sealed in plastic, attached with a key chain, and slapped with a funny moniker: “In Case of Emergency, Break Glass”. The merchandise was a hit.
Strauss was inspired and exported the idea to the US. However, the MBA graduate, armed with more enthusiasm than business sense, soon discovered that his condom key chain is no Pet Rock. The start-up didn't have a happy million-dollar ending that its founder hoped for.
Here are the key lessons that you can learn from the condom key chain king.
Back to Basics
Though I had a Stanford MBA and regularly consulted on multimillion-dollar projects, I didn’t know the first thing about starting a business.
Lesson #1: It's easy to come up with an idea, but execution is an entirely different ball game. Running a business comes with a myriad of details. The Australian government has a checklist for entrepreneurs to help you get started.
Test your Market
My belief that the condom key chain would quickly eclipse the legendary success of the Pet Rock was confirmed by a simple market survey. I showed one to my mother. “Robert,” she said, “these are the funniest things I’ve ever seen! Get me 50. I’m going to give them to all my friends.”
Lesson #2: Getting people's attention is different from drawing money out of their pockets. Check if there's a market for your minimum viable product.
Assess your Supply Chain
"Customs clearance?" I said. "I've got 10,000 condom key chains to get to the Gift Show by tomorrow."
"Well, Mr. Strauss, I guess this is where the rubber meets the road," he said, breaking himself up.
This was the first in a series of mishaps. Hours later he finally got the papers, but noticed that the bottom of the boxes had large greasy stains. With less 24 hours until the gift show Strauss had no time to complain about mishandling.
I reached into the boxes [10,000 key chains shipped from Thailand] to fondle these jewels of schlock merchandising. My hands came away covered with light, clear oil. The key chains were all stuck together; my entire shipment was covered with goo.
The lubricant of the outdated condoms seeped out of their individual sealed plastics because of a change in air pressure during shipment.
The replacement arrived slime-free (after a single female friend returned to Thailand with 10,000 condoms) but retailers said the customers wanted usable condoms. Strauss got new key chains but condom manufacturers are not used to getting orders from a single individual.
After being turned down by every supplier in the country, I began to have nightmares: I was endlessly in line at Walgreen's buying hundreds of Trojan "family packs." I would wake up wishing that I had followed my classmates into something simple and easy, like investment banking.
Eventually though, he was able to put the product together after one small scale manufacturer agreed to sell him the condoms.
Lesson #3: If you're selling an idea from a different country, make sure that you can get the resources for it. Shipping, handling, and customs clearance need to be considered.
Get Coverage
According to the Food and Drug Administration, I needed to include a “how to use” guide with each key chain. I realised I needed insurance in case some fool inadvertently Bobbittized himself with my product during a drunken tryst.
Lesson #4: Small businesses can held liable for any product they put out for the consuming public. You need to secure a Product Liability Insurance to protect you from getting sued by negligent consumers.
Do the Math
I learned that a mark-up of 150 percent doesn’t mean much when you’re only making 75 cents per item. It took a lot of key chains bought at 50 cents and sold for $1.25 just to pay the phone bill. After selling more than 50,000 pieces, I was $10,000 poorer than when I began.
Lesson#5: It's tough to make money from a single item even if it's cheap to make. Big companies can do it because they have the money to cover overhead costs and other things that may go wrong.
Even if Strauss became successful it would have been short-lived. Condom manufacturers would have copied him right off the bat. He won't be able to sue because you can't patent a novelty item.
In the end, Strauss gave the reminder of his products to a local advocacy group for prostitutes.
"Do you think you could use these?" Strauss said to the receptionist named Dark Star.
"Sure, baby," she said. "These are hilarious. You gonna give these to us? I bet you could sell thousands of them."
Get rich quick schemes rarely succeed, but Strauss definitely got a priceless experience.
Strauss’ story first appeared in Stanford Magazine.
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