Friday, January 12, 2007

Lessons He's Learned?

He’s back. Shawn Nelson is on the cover of this month’s Utah Business Magazine – but as the top story of “The Lessons They Learned.” Here’s what Shawn supposed learned, though it doesn’t seem like he’s learned much at all:

The story: For the better part of a decade, Shawn Nelson served as a poster child of small business success. Not only did he ride the wave as a successful Utah entrepreneur, but he pushed it to the extremes, taking giant leaps—quite literally in the case of his skydiving stunt for Richard Branson’s reality TV series “Rebel Billionaire”—before the wave came crashing in around him.

In October 2005, LoveSac, the company Nelson started in his basement, was named Utah’s fastest growing company. Three months later, Nelson and his admittedly young team were in the middle of a Chapter 11 reorganization, trying to make sense of faltering franchisees and creditors who were expecting payment.

“At that point the company’s finances are the concern of a lot of people, including the people that we owed money to,” Nelson says. “So the people that owe money to us, for instance our franchisees, all come under fire, and a lot of them had to close because they themselves didn’t pay their bills.”

The million dollars Nelson won on television went right back into the company to help during the reorganization, he says, and LoveSac is now alive and well. Sales were expected to reach nearly $10 million in 2006, a sobering statistic considering the same figures the previous year were expected to be around $30 million.

The lesson: Reorganization at LoveSac also meant a big move across the country. “We had to eliminate most of the employees and start over, and the biggest bummer of it all for Utah is that LoveSac is no longer a Utah company,” Nelson says.

The self-named “ChiefSac” acknowledges that the fast growth of the company was a little too much for him and his inexperienced staff to handle. The former corporate staff of 60 has completely changed, with about a dozen retail veterans running the company from its new home in Connecticut.

“Being an entrepreneur and business leader doesn’t require any specific experience, but in functional and operational management positions, experience is everything…” Nelson says. “I had a lot of people with great attitudes and great spirit and with a lot of great work ethic, but they didn’t necessarily have the right experience, and that is my fault as a business leader as I gathered them around me.”

I can’t believe that Shawn actually admitted that hiring his family, his fraternity buddies and his ex-girlfriends was a bad idea. I though that bad hiring policy was the foundation upon which the foam-filled empire was built? But, in usual fashion, he still points the blame at the franchisees – “they didn’t pay their bills.” Poor Chief Sac.

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