When shit hits the fan

We're getting a lot of messages asking for headphones at the moment (and rightly so). I'm sure we'll soon get someone out there saying "is this the headphone guy?". Fortunately, the government hasn't taken anything, and we haven't gone bankrupt (yet), but the long-awaited headphones are currently being mailed to customers :D

We've tried to answer everyone, but with the crisis with our country's corona funds, the writing has started to take a more aggressive tone after someone found us on the published support lists.

We have been targets of blackmail with negative social media attention and the suspicion that we have some special motivation to hide headphones and not deliver them to customers.

Something about the amount of feedback we received is that our company's first employee was hired to handle customer service after owners didn't have time to answer everyone.

At this point, it is probably best to just be upfront and let everyone judge for themselves.

Background

Last year, we developed a set of noise-cancelling headphones that went on sale at the end of the year. The development work and the first orders were done personally with loan money, as business was not very big in 2018. The headphones (and vacuum cleaners and robotic lawn mowers etc.) sold quite well last year and in the end we made a profit of a whopping €71k - while having no expenses at all.

The shareholders didn't get any salary, our own home was our warehouse, and there were no expenses other than product development. We wanted the company to have at least a little money left over to develop the business. The dream was that maybe in the future this would be a job and a living for us.

Since all the money we made in 2019 would be tied up in the spring in headset orders, we decided to keep our sales channels open and allow pre-orders. In hindsight, it probably wouldn't have been worth it, because this is where it all started to go wrong.

Surprise surprise

First it was Chinese New Year, during which the whole of Communist China is closed. In Finland, there was no such closure even during the state of emergency. We agreed on the deal and the price, but the actual order could only be placed after the New Year.

Well, the Chinese promised the headphones by the end of February. After that, the shit started hitting the fan at the same time as people ordered more and more headsets. China unexpectedly closed and there was no definite word on deliveries. The manufacturer promised deliveries (originally for February) for March.

We emailed and Facebooked customers about the delays caused by the coronavirus for the first time on 3 February.more headphones will be available for ordering on 9 February at the earliest, with a delivery time of one month if we are lucky, and more if we are unlucky.”.

The second time we announced the delays was on 11 February, when it was not yet possible to order, but "we will not be able to deliver more until the end of March at the earliest, depending on how quickly China can get back to normal.”.

The third time, on 15 February, we announced that more headsets would be available at the end of March at the earliest. This information was based on what the manufacturer told us about delivery times. In the past, they have kept to the schedule, but in this situation they were overly optimistic - and we believed them.

Hardly anyone in the whole world would have guessed how much corona would affect everything.

Schedules live

With the opening of the Chinese factories, production finally started at the beginning of March and we reported on 19 March how "production is running at full steam". At that point, products were expected to arrive in the week of April, i.e. early April. Here too, there were delays to the norm, as all components had to wait - naturally, our factory's subcontractors and the country's component manufacturers were also put on hold in February.

Normally, all ordered headsets are delivered at once. Because we were in a hurry and panic, we asked the Chinese to send us the headphones that were ready then and then send us more as soon as they got more done - no matter what it cost. On March 26 we announced this and predicted that the first batch would arrive in early April and the second at the end of April.

By 8 April, we discovered that manufacturing was not the only challenge. With scheduled flights cancelled and the world ordering head-to-toe red masks, we were now having trouble getting shipments. The headphones were waiting for a free seat on a cargo plane at the end of March to be shipped to Finland.

As a bonus, the transport companies made a little windfall and doubled the price of transport with a unilateral announcement. We informed customers about all this on April 8.

The first batch finally reached us on Friday April 17 and the headphones for those who had been waiting the longest were posted on Monday. The rest of the first batch should be delivered this week as fast as they can be packed and shipped. This batch should cover orders there for the second half of March.

More headsets should be coming to us next week, after which the stock situation will be such that they will be shipped directly from the warehouse. You can also be assured that in the future these headsets will only be sold from stock..

Corona money

Because a company's business cannot (or should not) be based on a single product in the long term, we are constantly developing new products and services - just like any young company.

We have sought funding from investors, financial institutions and banks. Ultimately, we had to finance our previous product development costs ourselves with a loan, the repayment of which was unknown (and worthwhile).

Investors think it is stupid to go into competition with JBL, Sony and similar giants, and there is nothing sexy about our business. From the bank's point of view, the only way to make money is to sell our children into slavery, mortgage our houses and sign a paper in blood guaranteeing us eternal debt-free status if things go wrong. Despite this, bank loans have been taken out on our own.

In March, BusinessFinland's so-called corona subsidies were offered, which have now caused a great deal of fuss. We do not wish to comment on whether the subsidies have been misused or applied for on the wrong grounds, but our conscience is clear. When the state started to pour, we put the bucket under.

BusinessFinland announced that it would offer grants of up to €100 000 for development projects costing up to €125 000. The criteria was that the corona crisis must have had a material impact on the company's activities and the aim is to develop new business or operating models that 'improve the firm's prospects during and after the shock. The measures should aim at new product or production-related solutions for the firm'.

Made from Finland

As described above, our business has been very vulnerable. We are practically dependent on China, whose closure due to the corona has almost pissed off the whole business - not to mention the transport problems caused by corona.

Valco's project is to bring products to the market that are not dependent on the same supply channels and to try to start production in Finland. Just as BusinessFinland had intended the funding.

Exactly. Our aim has been to all alongthat we can be proud to be a Finnish manufacturer. We have not had the opportunity to do so - and we are still not alone, but we have already opened discussions with several potential partners. Finland just does not yet have the right infrastructure to do this. Together with other companies, however, we can do it.

Our goal is that in the future we will have our own Valco products, designed in Finland and (depending on the model) manufactured here or elsewhere, which are of high quality, but still available for anyone to buy.It may be a crazy idea, but it's ours.

BusinessFinland has enabled us to buy Finnish design for our future model and has allowed us to hire two product development people and a third long-term employee we would not have dared to hire otherwise.

It is not even a question of fear of corona, but of not wanting to hire someone if there is no certainty of payment. The entrepreneur is always responsible for the welfare of his employees.

The entrepreneurs themselves still get most of their livelihood from elsewhere because we are focusing on the long run. Besides, we have first-hand experience of people who have started a job and then suddenly found themselves out of work when the company had nothing to pay with. Valco Ltd will never be that kind of employer.

In addition to domestic (and non-Chinese) production, BusinessFinland funding will be used to develop a completely different kind of business, 100% export business. Also, the fact that this project has progressed so quickly is entirely due to BusinessFinland. We will certainly tell you more about this later.

Is it worth doing anything in Finland?

For some reason, all the reactions that businesses have received from a small but vocal minority of people do not really encourage them to develop any business here in Finland. Maybe we should just quit and sell it all. 

Fortunately, most of our customers and followers are smart and realize how difficult a situation almost every business is in in a world like this.

We are living in what may be a once in a lifetime very exceptional situation. The corona is probably the most significant experience of our generation.

The whole world (excluding Sweden) is in a state of emergency and the price of air freight is doubling every week, even though the price of oil is negative today for the first time in its history!

Despite our fears, we are grateful that this is not a military crisis, but a civil crisis.

In any case, we like you and wish you were with us on this adventure. We are trying to stabilise Valco, hire more people and develop something as strange as headphone manufacturing in Finland.

ps. if none of the previous newsletters have reached you, you should follow our email list.

pps. I will sell this company as soon as someone buys it, but no one will buy it anyway as this business makes no sense.