This post originally appeared on Forbes.com.
When I was in high school, I learned two important lessons about business and life.
First, if it’s too good to be true it probably is and second, know who your business partners are. Unfortunately, it was only after receiving death threats from an anonymous Russian, that I came to understand these valuable principles.
About five months earlier my friend and I were sitting in the back room of history class. As a 10th grader, the back room is prime time real estate. It’s where you can get most of your note passing, whispering, and sleeping done. We had been talking about different ways we can make money. This was a hot topic because just a few weeks earlier I was making some spare change by selling bouncy balls to my friends. I’d buy them wholesale on eBayand then sell them for $0.25 to $1.00 per ball depending on the size and color. It was my first lesson in wholesale economics and my friend took notice.
I sold these like hot cakes in high school.
The teacher continued on with the lesson and my friend leaned over, “I know a guy that sells urban clothing at wholesale prices. We should take a drive down there and see what kind of clothes we can buy. We could even resell them to our friends.” There wasn’t really much to think about. I already knew the answer. “Done” I said. “Let’s go after school.” I should of however asked, “how do you know this guy?” I would learn later that the wholesaler was involved with scams before.
After a brief drive we arrived at some worn down residential home. We walked inside and immediately noticed that the interior was far from residential. It looked more like a warehouse. There were folding tables set up everywhere and the entire space was filled with piles upon piles of brand new clothes.
Jeans, shirts, shorts, blouses, skirts, you name it. It was all there. We sat down with the owner and peppered him with questions.
“Where did this stuff come from?”
“What kind of business is this?”
“Who are these other people in the warehouse?”
All of his answers seemed very legitimate and before we knew it, we were developing our business plan. We would pay someone to build us an e-commerce website, we would do the marketing, sales and advertising, and he would do our fulfillment and drop shipping right from the warehouse.
And that’s exactly what we did.
Within a month we had a fully functioning website and a full time client services representative taking and processing credit card orders. Each morning I would set up our Google and Yahoo ad campaigns and then my mom, aka client representative, would handle all client email correspondences and orders throughout the day. Slowly but surely the orders came in. First New York, then California, and soon enough, we were taking orders from all over the world. Including Russia. But as the orders and sales grew, so did the complaints.
“What did you send me? I want my money back.”
“Theses clothes have been worn. Is this a joke?”
We thought it was a joke, so we took another trip down to see our wholesaler. “What is going on?” And so his responses began. “We just had some issues with our shipment company. It’s being resolved now, and we’ll be able to replace and take care of those bad orders.” He continued with more of the same and again, the answers all seemed legitimate. In hindsight, my BS detector should have been ringing a whole lot louder, but what did I know? I was just some bouncy ball businessman.
We went through a few more rounds of bad orders and even worse complaints until we got the very descriptive email that said people were going to come after us. And so with a hit on my back and a dysfunctional business, we shut down the operation and returned whatever funds we could to the very unhappy customers.
I learned two very important lessons that day.
- If it’s too good to be true, it probably is.
- Know who your business partners are.
The wholesaler was eventually arrested, and I eventually bought more bouncy balls.