Sramana Mitra: How many people do you have?
OJ Whatley: We currently have 20 employees.
Sramana Mitra: That’s very good – 20 employees, $20 million in revenue.
OJ Whatley: Half of those are sales associates.
Sramana Mitra: That is my next question. What is the composition? Half are sales associates, what is the other half composed of?
OJ Whatley: I just want to clarify because our business is about buying watches. We’ll sell the watches we buy but we’ve to get the watches in first. About 70% of our efforts are focused on getting watches and 30% are focused on selling.
Sramana Mitra: When you say sales associates, it’s actually the buyers and sellers?
OJ Whatley: Correct. In addition to those 10 sales associates, I’ve a full time professional photographer on staff who brings to life all of our watches. I’ve a full-time controller and bookkeeper because we have a lot of transactions and we have a lot of documentations. I’ve an operations manager who handles all of the incoming and the outgoing. I’ve a full time professional master watchmaker on staff. I’ve got a full-time refinisher and an assistant watchmaker on staff. I got a President who oversees all daily operations. I also have an eBay manager and a posting manager.
Sramana Mitra: Nonetheless, it’s a relatively small team. $20 million in revenue being managed by a headcount of 20 people, it’s a very light team. From a business model point of view, the beauty with what you built is it’s, in a sense, an ultra-light startup.
OJ Whatley: We’ve been growing and shrinking. It’s definitely an evolving process and one that you just can’t stand to chance. You have to be constantly asking yourself, “Is this the right structure?”
Sramana Mitra: I have one last set of questions. In the realm of optimization, it sounds like you have an ad hoc process of figuring out what price to sell something at. If you applied some more systematic optimization here, you could make a lot more money.
OJ Whatley: I think you’re very perceptive in that. In fact, we do have a lot of systemization. In terms of identifying the watches we buy and the watches we sell, that’s where we’ve taken a really hard look and not left it up to chance. We have metrics where we can measure if we’re doing a better job at buying or a better job at selling. We have metrics to dictate what we should pay for that watch, what we should ask for that watch, or how we can optimize the turnover on that watch.
For example, for us to buy a watch and sell it the first day we have it, is to me leaving money on the table. If the watch is here for two weeks and is reduced in price and is then sold, that tells me that we’re optimizing and being the true market maker we want to be. That tells me that we are making the market for our watches as opposed to taking orders. Just because we buy right doesn’t mean we can squeeze more profit out of each watch we sell. Again, trying to translate that to multiple layers is a big challenge, but we do have internal processes and systems that are unparalleled by any other company. They are all homegrown that are allowing us to scale and optimize internally so we don’t make the same recurring mistakes.
Sramana Mitra: This might be something that you want to run by a Mathematician or an Operations Research person. You can see if they can model and help you come up with a process that allows you to do more. It sounds like that market of buyers has a lot of elasticity. They are tolerant of price. They will want the product. There’s a lot of passion and desire to own the product. That’s the kind of buyer with whom you have lots of negotiating leverage.
OJ Whatley: We have more leverage with the seller than the buyer. The seller of the watch only has a few different alternatives where he can turn around and sell his watch. We get our customers more money for their watches than anyone else because we know what watches sell. We know what makes a watch more saleable. We understand what’s important to our customers when they’re selling a $20,000 watch. It’s not about the price at that point. It’s about the relationship, credibility, reputation, the process, and the experience. That’s where I believe we’re unparalleled at. That’s where our differential advantage is. We understand that we are the best way to sell that watch for that customer if it’s the right watch for us.
Sramana Mitra: Very interesting story, OJ. Congratulations on what you’ve built here.