Our most chalenging year so far
Only 27% of start-ups survive the first 5 years because there are so many challenges to overcome. If you add a pandemic that lasts for several years on top of it all, the conditions start to get more than extreme. We have felt that this year.
Establishing a business from scratch is demanding, and the statistics tell us that only 27.7% of start-up companies are still alive after 5 years. KAOS is now in its 6th year of operation. KAOS is no longer a startup, KAOS is now a growth company on a global growth journey. But it has never been harder to grow; Covid not only provides headwinds, but it’s also the perfect storm. The black swan. We owe a big thank you to all our customers who have been so patient this year and waited a long time for goods.
From 2015-2020, we were two employees who doubled the annual turnover. In 2019, we did a share issue to raise fresh capital to build a new, global e-commerce platform. In 2020, we got both a new platform that made it easier for us to sell to customers abroad, and we hired a third person to handle all customer dialogue. In addition, we employ a large network of manufacturers in Asia, Europe, and the Nordic countries; one factory works for KAOS in Vietnam, one factory in India, 3 factories in Europe produce our furniture, and when we now start production of a newborn set and tray for KAOS Klapp high chair, we will also employ a factory in Sweden. Our warehouse is also located in Sweden, by the way, and from here all orders are sent, to the whole world.
We are thus few permanent employees in our small office in Oslo, but we have established a large network and work with all continents. Everything is connected, and we depend on processes going smoothly to be able to perform optimally, not least to make the logistics work.
What is the problem?
The big problem with Covid is that an otherwise small problem creates chain reactions and bottlenecks throughout the value chain. Let’s take an example of chain reactions we’ve faced repeatedly this year:
The supplier of wood products is unable to supply enough because “everyone” is experiencing increased demand. Despite delayed deliveries from the subcontractor, bidding rounds occur for the raw materials, and raw material prices skyrocket. We have to join in for the bidding round to ensure that we get goods in at all, because we have to keep sales going. No turnover, no KAOS.
Once the overpriced raw materials arrive at the factory, the factory experiences a national lockdown. Everything stops while the raw materials are there. Delays accumulate further. When the lockdown is finally over and the factory opens, they themselves experience outbreaks of Covid and have to send workers in quarantine and isolation. They operate with 20% capacity. The raw materials we have paid so much for are there, but no one can work. It takes up to 5 times as long to complete the production, and it costs us 40% more than before. But screw that, finally, we can ship the batch to our warehouse in Sweden! However, this freight stage now costs 5 times more than before. And while all the delays have managed to build up, we have managed to pre-sell the products. So when the batch arrives at the warehouse, everything will be sent out again the next day, to all pre-orders. And then we move back to the start and order more, overprized raw materials, and have to wait for the production that takes an infinitely long time to complete and pay uncomfortably high prices to repeat the process.
So yes. We have learned that it is demanding to lead a small business that grows through the growth phase. And we’ve experienced that it is extremely demanding to do so when a pandemic surrounds us.
Nothing without our customers
In 2021, we will get about 30% of all the goods we had budgeted to distribute this year. This of course means that we are not able to reach the budgets we set for ourselves last year. But despite the lack of deliveries of goods and all the other challenges we have experienced, KAOS’s turnover is increasing this year as well. And that’s absurd. It has been our toughest year so far, we have never experienced more adversity. But the fact that our customers are willing to wait up to 5 months to receive the item from KAOS is the most important feedback we could get this year. And it’s important that our customers understand how important it is to support small brands.
Our customers give us the confidence we need to dare to invest everything for next year – too. We are eternally grateful for that.
The way forward
2021 has taught us an incredible a lot, and it is precisely these lessons that we are now focusing on. It is said that the pandemic will last for another 12-18 months, so we must also plan for the same.
- We must increase our efforts and place larger purchase orders with our manufacturers, and be prepared to get less in return.
- We need more manufacturers to spread risk.
- We can not be on the lazy side, we must continue to work with innovation and R&D.
- We have learned that it is super important for us to have several legs to stand on, so we can not cut any of the products from the collection. Although it would have been much easier to increase volume in fewer categories, financially.
- We need to become more employees. There are hardly any other companies in Norway with as few employees as KAOS, with the same turnover that KAOS now has.
To equip ourselves, we are raising fresh capital in a share issue. And when we get back to work in January 2022, it is with a new employee on the team, better liquidity, and a solid network of plural manufacturers. 2022 could not be off to a better start, and after all, we are happy to have gone through a year like 2021. Because we have become so much better at dealing with adversity.
We want to thank everyone who has supported us by shopping from KAOS this year. Thanks to everyone who has been so patient and waited for pre-orders to be delivered. We are ready for a new year, and we are ready to overcome new challenges! We look much forward to next year.
Gineline and Mette