We Built A $17 Million Business In Less Than Five Years: Here’s How We Spent Our Money
Call it a meet cute with a lot of layers.
When Lee Thompson and Radha Vyas went on their first date (courtesy of Match.com) in 2012, they were attracted to each other. But not just romantically. Thompson says that they spent a good part of their time together that night discussing Vyas’s idea for a travel tours business.
“Over the next few weeks,” Thompson says, “our dates were spent researching the market and starting to think about setting up our own business together.” The idea was to create group tours that catered to solo travelers in their 30s and 40s–which both of them were.
Not long after, the couple pooled their resources and each plunked down every dollar they had–which amounted to $19,600 each. It would take roughly half of that joint fund of $39,200 to get a website made, says Thompson, noting the necessity of filling it with the kind of stunning imagery designed to lure potential travelers. The rest they earmarked to spend for marketing in various channels, he says, and Flash Pack was born.
But Thompson admits there were times they weren’t sure they’d make it. This isn’t surprising. Twenty percent of startups fail in their first year, 30% fail in their second year, and 50% fail after five years in business, according to data from Fundera. Even venture-backed startups struggle. For example, 70% of upstart tech companies fail–usually around 20 months after first raising financing (with around $1.3 million in total funding closed), according to CB Insights.
However, Flash Pack has since fared better than most. The couple’s combination of careful bootstrapping with loans and credit cards, and taking a small amount of angel investment, has turned their initial $39,200 into a burgeoning business that has more than tripled revenue year over year, reporting $17 million in revenue for the fiscal year 2018. Flash Pack’s U.S. audience has jumped 38% in the past year.
How did Thompson and Vyas make their numbers work, not to mention how they dealt with the risk to start a business together after only knowing each other for less than a year?
First-year investment and spending breakdown (March 2014-March 2015)
Initial personal savings: $39,200
Portion of salaries from day jobs: $78,500
Cost to build website: $19,600
Marketing: $9,000 was spent on Google ads, $4,000 spent on Facebook ads
Office space: $0 (used spare bedroom in their home)
**Salaries for two interns: **$23,500
Cash flow positive: $171,600
“We had a lot of shared values about what we wanted out of our lives,” maintains Thompson, one of which was an adventurous streak. “Setting up a business together is the most adventurous thing you could ever do. We knew we had a strong-enough connection and trust to be able to do this really early on,” he says. However, Thompson says, to be absolutely sure before they took the plunge and signed away their life savings, they did two things to test for it.
The two went on a largely unplanned trip to Sierra Leone, which Thompson says is one of the most difficult places he’s ever traveled to because the aftermath of the civil war has left the country economically depleted. Poor infrastructure and petty crime were common, but Thompson and Vyas got a 4×4 and drove across the country to see if their bond could withstand the stress of that kind of travel. Additionally, the couple bought a house in 2013 to demonstrate their commitment to each other. The house’s back bedroom would serve as their first office.
Once they determined they had all the pieces in place, Flash Pack launched in January of 2014. And then . . . crickets. “We didn’t book a single tour for the first six months,” he says. “We wasted a lot of money on Google ads.” Thompson says they quickly realized it wasn’t an effective way to get the word out, especially since they didn’t have any reviews from existing customers, so they pivoted to placing ads on Facebook.
The two continued to work their day jobs, he as a photojournalist and she as a fundraising consultant for nonprofits. That year they spent their earnings on housing, food, and other living expenses while pouring the rest into the business. They also took out a Virgin personal loan and spent part of that to hire an intern to help out. They hired another intern six months later. Both interns were each paid minimum wage.
Six months in, though, Thompson says they had burned through most of the money they had and only received one booking, which they had to refund, because you need a minimum of four people to round out a tour. Disconsolate, the two went on the cheapest holiday adventure they could, to Egypt, to discuss whether they should shut down.
Neither wanted to stop, and then serendipity stepped in. Thompson says he saw an article about the renovations being done to the Christ the Redeemer statue that looms above Rio. As a photojournalist, he was keen to take a daring selfie at the top of the crown. No one had been let into the statue to date, but Thompson says he convinced the archdiocese to give him access to take the photo and promised that it would be an excellent way to promote tourism, particularly as the FIFA World Cup approached.
With the very last $1,000 they had, Thompson took the selfie and released it two weeks before the first kickoff. His “First-Ever Selfie with Jesus” went viral. Thompson says he gave his image away for free to every journalist in the world in exchange for a backlink to flashpack.com. This resulted in 1.4 million hits to the site in the first two days (which crashed it initially). But the buzz it generated turned into bookings and consistent monthly revenue from then on.
Second-year investment and spending (March 2015-March 2016)
Personal loan: $32,687
Credit cards: $72,000
Portion of salaries from day jobs: $124,250
Office space: $8,000
Cash flow positive: $588,937
At this point, they took out 30 credit cards for a revolving debt load. Thompson says over the next two years, they got very good at transferring the balances from card to card in order not to incur exorbitant interest rates. They ended 2014 by making about $110,000 in revenue.
Still, things were tight. Vyas was able to cut her hours to part-time (and her salary in half), while Thompson continued to work full-time, and support Flash Pack on nights and weekends to continue to pay for their house. Their backup plan was to sell their house if Flash Pack failed so they would have some money to regroup.
This wasn’t to be. The couple took angel investment money (in exchange for 25% equity in the company) and in 2016, Thompson was able to quit his day job and focus on Flash Pack. That cash flow helped to pay suppliers and also allowed them to bring on two full-time employees.
Thompson points out that they had to up their marketing spend at this point, as well as invest in outside office space, as their back bedroom could no longer hold all of them.
Thompson and Vyas continued to grow the business from there, not taking in any more outside investment. In 2017, revenue reached $1.46 million, but marketing, salaries, office space, and other expenses also continued to climb. Still, Thompson maintains that Flash Pack continued to be profitable.
Third-year investment and spending (March 2016-March 2017)
Angel investment: $327,000
Office space and salaries: $319,000
Revenue: $1.46 million
Cash flow positive: $1.4 million
The cash flow positive helped them pay down debts and continue to add staff and expand to different markets. Now, at $17.1 million in revenue from 20 different countries, Flash Pack is getting ready to open an office in New York, as nearly half of its business comes from the U.S.
Although he declined to parse out his expenses for the current year, Thompson does admit that there is a bit more breathing room in the budget, which is good for a change. “Nothing will ever be as difficult as those first two years,” he confesses. The stresses and strains of money worry notwithstanding, they also got married in 2016 and had a baby. Through it all, Thompson says one thing was clear: “We have never taken our eyes off the focus [of that niche market of traveler], even though people were telling us we were crazy.”