The aftermath of the death spiral (how the company didn't go bust after all)

As many of you who have followed Valco know, last year (2021) we had a really bad setback.

Not only did corona increase our costs and we suffered delivery problems, but a large number of the headphones had a latent component failure.

A small component failure caused thousands of headphones to be recalled, customers were outraged (probably including you), and we were threatened with a death spiral:

Customers get angry, sales stop, and we run out of money.

We wrote a long blog post on the subject at the end of last year. In case you're not familiar with the text, you can find it here. In the blog, we went through what happened, why it happened and what we intend to do about it. Now, more than six months later, it's good to look back at our previous plans and see how well they have been implemented.

At the end of last year, we had three goals:

• Every single pair of defective headphones will be repaired
• Customer service will be upgraded
• Improve communication

Headphone repair

The first thing we tackled was headphone repair. Before the component failure, we had always just replaced broken headphones with new ones, because there were so few faulty ones. Over the summer and autumn, we had to replace a truckload of headphones before we realized that this wasn't going to work - we were out of stock, even the warranty ones broke and there was no money to be made.

Furthermore, when we could only get replacement chipsets from the chipset manufacturer to make up for the mistake, the only sensible move was to start our own headphone service.

My dear little brother Hannes had already helped us before, including handling warranty returns, so we hired him full-time to repair the headphones. Hannes is an engineer and is talented enough to fix anything from a circuit board to a wheel loader.

Hannes was the perfect match for the job. He has done the job as only a little brother can do. Since he was a child, he is used to being told what to do by his big brother. During the spring he has repaired ALL the headsets returned to us and delivered them to the customers. Hannes has been helped by his wife Aino, who helps us part-time through her own business.

In the worst of the rush, Hanne was helped by several "subcontractors" around Finland, to whom we sent headphones to be repaired by the box. Without their help, Hannes would still be shivering in the middle of a headset.

Upgrading customer service and improving communication

I don't know if we managed to improve the communication enough - there's always room for improvement, but we created (i.e. I coded) a few automations that should send a reminder to the customer when a service has arrived or a delivery has been delayed. After that, the number of "where are my headphones" messages from customer service dropped significantly.

We also introduced an application called Gorgias, which allows our customer service agents to work efficiently and respond quickly to messages. It's basically a system that collects messages from different channels in one place, so they shouldn't be wasted, at least in theory. Indeed, the previous email-based system started to delete messages as spam when thousands of customers tried to reach us at the same time, which made the customers even more annoyed.

When the service queue was several months long, there were also delays in replying to emails. We did it sweating, but still we were constantly delayed by about a week or more, which of course was not much consolation to the owner of the broken headphones. So there were thousands of messages in a short space of time and from all over Europe.

We quickly hired three new minions whose sole job was to respond to customers as quickly as possible. Now the only time there's a one-week delay is if someone texts me and ADHD kicks in and I can't remember the whole thing. Most messages can be answered in near real time. Our minions have complete freedom to work when and where they like, which is why replies can come at odd hours.

In addition, we have opened up Discord server where customers can chat with our minions. It is not an official customer service channel, but most problems have been answered there.

It was easy

So the plans came to fruition and succeeded, but not without some pain. At the beginning of the year, it became clear very quickly that the Death Star money was not going to be enough. The first thing my partner and I did was put our asses on the line and pledge our lives. We had to take out a loan to break the death spiral. If the company fails, our family will move under the bridge.

Secondly, our expenses have increased. It's not just staff costs, but also transport costs and all the other costs have gone up. This is where we should raise the price of the headphones, but we don't want to. We would rather bring in a new model at some point. It would seem unfair to customers to raise prices.

Of course, a reduced margin would require more sales. Since the products themselves ascend above competition, the reputation of defective headphones must still be haunted somewhere. There is no point in spending extra money on mega-massive marketing campaigns, and it would not really make sense, given that the delivery problems have been going on all spring.

Overall, however, I'm quite pleased with myself (and Jani). As an entrepreneur, it's easy to gloat when everything goes right and tell an interviewer how a startup that has raised 10 million in funding is revolutionising the IT and Internet markets. I would argue that fewer people have survived almost certain bankruptcy, and even then by increasing costs and telling the public how badly everything has gone wrong.

What's next?

There is light at the end of the tunnel now, because, for the first time in two years, we have pretty much every model in stock and there is no queue for warranty service.

We've been working hard to get the next model of headphones ready, which we're calling "gaming headphones".

They will not replace the current VMK20, but will come alongside it as a different alternative. The gaming headphones will not only have a headphone with back noise and BT connection, but also a 2.4 ghz connection with a separate headset to a computer or a pleikart, for example. For office use, the headset even has a detachable boom microphone.

It's too early to say when the new model will be available.

But the best thing about all this is that we now have our own headphone service. Unlike other manufacturers, we can repair broken headphones even after the warranty period. This is not only good for the customer, but it's also good for the environment as it reduces the amount of electronic waste.

As I mentioned earlier, last summer we replaced a truckload of headphones with new ones. There is no point in disposing of them, of course, as they are virtually unused headphones that, by replacing the circuitry and perhaps the ear pads, become practically new.

As the headphones now come in for warranty service only infrequently, Hannes has had time to slowly repair the ones that have been replaced in the past. In the future, you can make an eco-saving in the online shop, and order from us at a very favourable discounted price, new and under warranty headphones with a one-year warranty..

They will be on sale as soon as Hannes has time to repair them, so if they are sold out right now, you should check back in a few days.