Starting a Home Audio Business

Interview with Ethan Siegel, Founder of Orb Audio

Orb Audio was at the forefront of selling electronics direct to consumers on the internet. Learn how Ethan Siegel and his partner manufacture and market their home audio systems.

Ethan Siegel joined forces with an old friend to form Orb Audio, a consumer audio manufacturer in 2002.

Tell me about your current business. What are you doing exactly?

We build small, high performance home audio speakers and sell them online at www.orbaudio.com.

What were you doing before this, and is this your first business?

I was an attorney, first in a large law firm and then as a partner in smaller law firm that I started with several other attorneys.

Wow, lawyer to audio dude. How do that happen?

My current partner and I always wanted to do something together; this business combined his audio design and marketing skills with my business experience.

Did you write a business plan?

We did not write a formal business plan, but we did do a lot of economic modeling such as base, best and worst case scenarios for different business models and ideas. One primary example of this was deciding whether we wanted to sell direct to consumers online, or through traditional brick and mortar retail distribution. Although it would have been easier to start a traditional business, our instincts and our modeling suggested that we should take a shot at being one of the early adopters of the online-only business model and it has worked out very well, both for us and our customers. By selling direct, we can have a very efficient, lean operation, and we can also avoid retail markups of at least 100%. So, our customers get a product that costs about half the price of similar quality equipment sold in audio stores. We chose this business model because our modeling suggested we would have to sell fewer speakers to become cash flow positive and ultimately profitable.

Who did you hire to help you? Bookkeeper, Accountants, Lawyers ...? Would you suggest others do the same?

We did it mostly ourselves, with some assistance from our accountant. My partner and I had both started successful businesses before, so we were pretty aware of the type of data we needed to make our decisions. I'd recommend that people starting their first business seek some help or guidance, based on the complexities of what they are trying to accomplish.

Did you operate your business from your home? What were the challenges and benefits to this strategy?

Initially, we operated from my home in New York City and a storage space at my partner's apartment. We also enlisted vendors to lend us spare space when available. Within a year, we had "graduated" to a garage, so this business actually started out smaller than a "garage" business! The benefits to working at home are great, since you can spend time with your family and avoid wasting time with a long commute. On the downside, it is sometimes difficult to juggle family and business obligations when you don't have a separate place for each.

Did you have a partner when you started your business? How did you select a partner?

Yes. We had known each other for almost 20 years. We thought we had a great combination of skills, and things have worked out well for us.

Have you hired additional staff? What is your greatest human resources challenge?

We are about 10-12 employees strong right now. Getting all of the employment tax and other regulations straight was one of our biggest challenges. Finding responsible, hard working employees is also hit or miss, although we've been incredibly lucky in this department.

Green business is all the rage right now. Has it really been practical for you as an entrepreneur to incorporate green business practices?

It has been practical for us to incorporate green practices. Since we manufacture our own products, we choose environmentally friendly vendors and manufacturing processes, and also try to limit waste as much as possible. By choosing manufacturing processes that don't use lead, for example, we are doing our small part to make sure that dangerous substances don't ultimately wind up in the environment.

With the current economy in a slump, what cost saving tips would you have for a new entrepreneur?

Don't spend too much on rent and overhead, and try to manage your expenses by looking out at least 6 months and hopefully more

Social marketing is consistently being written about in the small business space. Has it worked generating business for you?

It has not worked yet, but we are trying to make it work. I am not sure most of our customers are looking for audio equipment recommendations through social media yet, but it will probably become increasingly more common and we would like to be prepared.

Temporary labor can be a great asset to an entrepreneur. Have you ever hired temps or contractors? Would you suggest this as a strategy for new business owners?

This can work great for basic needs, especially when you need less than a full time person, but still need someone with skills. For example, we do not need a full time Information Technology employee, but we do use a consultant that I've worked with for more than ten years, first at my law firm and now with Orb.

What have you done that has been very effective in helping to grow the business?

We have embraced Google Adwords and have developed an expertise at online marketing. We have also made extraordinary efforts to provide service and products that blow away people's expectations, and this has been a big part of our growth. At a time when the level of service in electronics stores is near the lowest it's ever been, we are providing over the top white glove service, and people know that. If you take care of your customers, they will become your best advertising.

Is there anything you wish you had done differently?

I wish we had hammered out things like inventory management and accounting software earlier than we did. Things took off so quickly for us, that our infrastructure took a little while to catch up.

What advice would you give to somebody else who wanted to start a similar business?

Before you start, carefully plan out your expected cash flow and make sure you can make it past the first few hurdles to success. Make sure you will have enough cash to pay bills each month for the initial startup period of your business and beyond. There are challenges to every new business, and having appropriate financing before you start, and achieving cash flow targets after you start, are both critical. Also, pick something you love, because you are going to eat, drink and breath your new business for a long time if you want to succeed.

That is great advice, Ethan. Thank you for taking the time to share your experiences with the entrepreneurs at Gaebler.com.

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