I don’t recall how old I was when I came to the realization that we only had to be 60 percent right to get a passing grade in school. It seems that our education system says that 60 percent is good enough and from there, you can probably get some kind of job and function reasonably well in society.

When making business decisions, I suppose the same applies. You just have to be mostly right to be on the winning side. The challenge of course comes down to predicting the outcome.

The company I founded, Radial Engineering, started out as Cabletek. We manufactured cable assemblies concentrating primarily on larger concert touring snake systems and splitters. Once we got the Canadian distribution rights for Mogami studio cable, we added more affordable generic Radial-branded assemblies to the mix and pushed pre-packaged guitar and mic cables into retail music stores.

Based in Vancouver in the Pacific Northwest, we began to see some local interest due to our proximity to the market and lack of local competition, while sales in the east were lacking. Our sales rep in Montreal insisted that the only way we could break into the more populous eastern markets (Toronto and Montreal), would be to open up a regional distribution center.

We did so – twice – first in Montreal and then after abysmal results, tried it again in Toronto with the same disappointing outcome. Why? Simply put, the established players were doing a good job and the dealers had no reason to change. The only product we could get into the stores were high-end Mogami recording studio cable assemblies as they provided a differentiator: low capacitance that would yield a higher quality sound.

Here’s what we really should have asked ourselves before trying to expand:

• What is the best-case scenario or best possible outcome?

• What would be the worst case?

• What would be the most probable case?

The market was already well served and that our generic cable had nothing special to bring to market. In fact, our competitors were not only established, but one had the distribution rights to Neutrik connectors, which gave them a huge price and market advantage.

Thinking It Through

I recall coming into the office one morning and immediately organized a meeting with our team. I asked them why we chose to open in Toronto – why not London, Tokyo, Los Angeles or New York City?
In other words: With the advent of the internet, was the location of the office and warehouse still critical?

It seemed clear: if you’re selling a generic product, then location and better customer service plays a significant role. But if you’re selling a unique product or brand, the location has very little impact on sales.
This was a “go-big or go-home ah-ha moment” that sparked the development of the Radial direct box. What it came down to was creating a demand for a product, building the brand and then delivering it to global markets.

Another mistake I made during this time was believing that doing a good job was a sure path to success. In this case, we were distributing PreSonus, a range of affordable studio preamps and processors. Having discovered the brand in a modest 10 by 10-foot booth at NAMM, we took it to the Canadian market and I believe we did a very good job at getting it established, with sales increasing each year.

One day, we received a note that PreSonus had decided to move the distribution to Erikson – JAM Industries, the largest distributor in Canada – and what has become the biggest player in North America. I was devastated… yet after about a week of sulking, I came to the realization that “business is business” and I would have probably done the same if I were them. JAM is a great company and I’m still friends with Jim Odom, the former CEO of PreSonus (recently acquired by Fender).

The mistake I made was assuming things would go on forever. The outcome was a greater resolve to make Radial happen and take control of my own destiny. What looked like the worst case actually ended up being the best case!

Diverging Signals

While listening to the news this past week, I heard that there’s been a recent spike in bankruptcies. Why now? What caused the breakdown?

The government had provided programs that sheltered companies during the pandemic without actually considering if these companies were sustainable. Add challenges such as higher interest rates, rent increases, higher wages, lack of employees and inflation to the equation and all of a sudden, there was simply nothing left at the end of the day. They were forced to close their doors.

Oddly enough, the most recent news about record employment in the U.S. and Canada seems to fly in the face of this. Upon greater reflection, most of the jobs created have been in the service industry while high-tech jobs are being slashed by the thousands by the likes of Amazon, Google, Microsoft and so on.

Additional staff was hired during the pandemic to fill the demand for home-based activities, thus creating a short-term bubble. As folks went back to work, job cutting was inevitable. We are merely returning to pre-pandemic levels.

No one seems to know what is really going on. Some say a recession is on the way, others believe there will be modest growth. No one can predict the future… there are simply too many diverging signals for one to make a truly informed decision.

Does this mean that there are no opportunities out there right now? Of course not. In fact, with so many businesses going belly-up, now may actually be a great time to enter into a new business venture. All you have to do is go in with eyes wide open by asking yourself the same three questions:

• What’s the best outcome that I can expect?

• What’s the worst outcome and can I make my way through it?

• What’s the most probable outcome and is it truly attainable?

If you;re honest with yourself, start by asking if what you are bringing to market is viable. Do you have a differentiator? Then do a SWOT (strengths, weaknesses, opportunities, and threats) analysis, create a realistic financial budget and a solid marketing plan. Then ask yourself if you have the finances and people resources to pull it off – you may well be able to do just about anything if you put your mind to it!