Too Small to Scale?

Not too Big to Fail, but maybe too Small to Scale

Despite Hobby Businesses’ Success on Platforms like Etsy, Some have Cut Off More than They can Chew

Megan Sirras, MBA Class of 2017

Last month I got into an internet flame war. Not because I posted something about the election on Facebook; it was about yarn. Yarn I didn’t receive when it was supposed to arrive despite repeated, public assurances to the contrary. This has happened before, and it usually ends in someone faking their own death.

Yarn is a billion-dollar industry and has been growing since the early 2000s; knitters started blogs and then, as the maker movement gained steam, hit Etsy, which is where this story starts to get interesting. My beef, you see, wasn’t with a major corporation, but with one woman in Michigan. Her name is Kelly [name changed] and she started dyeing yarn in her kitchen in 2007.

Hobby businesses, like most Etsy storefronts, generally work out fine as long as they stay a hobby; but the dirty secret is that many of these businesses are victims of their own success. The issue is scale: it’s difficult to take a relatively labor-intensive process and speed it up without sacrificing quality and, more critically, without funding to pay for additional labor.

Once these businesses reach the point where they need a few thousand dollars for growth, they often fall apart. And, in at least three times of which I am aware, these businesses have ended with the proprietor faking their death to get out from under business obligations they just can’t meet (“Goth Socks club” is worth a Google).

From her start on Etsy, my nemesis Kelly has taken her hobby business and grown it—she has at least 4 employees, an offsite location, and a couple hundred grand in sales.  Years ago, she moved to a pre-order model with short lead times to manage production schedules and inventory, but hadn’t missed deadlines or gone underground, typically part of the downward spiral.

When I received that email telling me my yarn would be delayed a further month, I spoke up on the company’s forum (their primary form of brand-building), saying Kelly had created false expectations, that I wished she had spoken up when she knew the raw materials would cause delays, and that this had damaged her reputation with me.  Things got so heated they had to suspend posting; I simultaneously got a flood of corroborative messages listing previous incidents of unmet obligations.

Despite having “made it,” she’s been using her rabid fans as a shield against public criticism of her frequent business failings.  Even having made the transition to a full-scale business, it’s evidently still a constant challenge to manage the level beyond basic operations, to juggle increasingly complex inventory and do real marketing, build a reputation and a brand beyond your 200 or even 2000 biggest fans.

Etsy and the maker movement have enabled a lot of new ventures, but also many ventures unprepared for the realities and challenges of success, with sometimes devastating results. While easy to dismiss as “just yarn, after all,” it’s not; it’s also really bad business.

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