When serial entrepreneur Sam Prochazka went shopping for a new mattress back in 2004, he was so provoked that, together with his twin brother Andy, he incorporated a mattress company the very next day.
"It was the quintessential mattress buying experience that we've all been through," says Mr. Prochazka, 34, CEO of Novosbed, an Edmonton-based online company that sells luxury memory foam beds direct to consumers across North America. "There was fluorescent lighting, the coffee breath pitch, the commission-fueled salesperson hovering, nonsense science, ludicrous prices and ludicrous price breaks. It was the antithesis of what you want."
Joined by their sister Helenka, the Prochazka siblings developed the product and retail branding of the business, launching in 2009 on a combined $50,000 investment, determined to disrupt how mattresses are sold. Renowned for achieving a 10-out-of-10 rating on ResellerRatings.com, the company offers high-quality mattresses at reasonable prices with a four-month sleep trial, 25-year warranty and money-back guarantee, including free return shipping.
The privately held company has eight employees and earned over $5-million in revenue in 2014. Mr. Prochazka projects sales for 2015 at between $7-million to $10-million.
The Prochazkas have two other family-run Edmonton-based businesses, Realpagemaker, providing websites for realtors, and Hometelemed, a medical devices company for patients recovering from stroke and spinal cord injuries. As well, Sam Prochazka is an investor in Vancouver-based Bryght.com, an online direct to consumer company selling modern furniture.
Q: Did people say you were crazy to try and sell mattresses online? You can't try them out.
A: You're right. You can't try them out like in a store but who wants to do that?
From day one, we offered an in-home trial. That was the big risk. We thought that this would make or break us. If people returned these mattresses on masse, then the business model wouldn't work. But they haven't. Our return rate is extremely low – about three to three and and a half per cent. Each mattress is made from high quality materials which we can do because we don't have to pay commission, showroom rent, distribution and all these other costs in the chain of traditional bricks and mortar. We can put all that money into the mattress.
Q: How did you go from idea to reality?
A: We tried to get domestic suppliers for the mattresses but couldn't because our volume was non-existent, so we started with Chinese suppliers who worked with us. Luckily, we had good relationships with suppliers in China through our medical devices company. Andy flew over and negotiated good terms for importing memory foam mattresses based on our designs at a contract manufacturer. The key turned when we sent a bunch of money to China and a container was purportedly put on a boat for us. It was a nail biter until it all arrived. It felt very risky, but the business seemed to resonate right away.
The first four or five containers were all from China. They would come to us here in Edmonton. Our warehouse was essentially a self-storage container on the south side of town. We'd unload them ourselves – and that's heavy lifting. Every day one of us would drive down and do that day's shipment.
Q: Why did you switch to North American manufacturing?
A: We moved manufacturing to Pennsylvania two years ago basically because it was safer in terms of the product and making of the product. Things like water-based glues and workplace hazards matter to us. The environmental impact is much lower. In China they don't disclose how they get rid of their waste products but in North America they do. Also, as our volumes increased, the supply chain was easier to manage. Because the lead time from China was three months or more, we found ourselves way behind in inventory all the time. So that was the solution to the problem. Market perception and trust came into it as well. The prices are comparable now. The cost of manufacturing the mattresses in the U.S. isn't much higher.
Q: How critical is your website?
A: It's huge. That's a whole science we were completely oblivious to at the outset. None of us were e-commerce people. We've learned over the years that one word on the front page can change bounce rates so you have to be super careful about how you construct the website. We actually have a gentleman in house whose position is analytics and optimization. He measures the response to different ways of phrasing things. But the core message in every experiment we conduct is 'risk-free trial'.
Q: What's the biggest lesson you've learned about selling online?
A: It's all about customer service. The phones need to be answered, the live chat needs to be monitored, you need to go above and beyond. When somebody needs to speak to you, you have to be there. And the product has to be great.
Q: Is having too many good reviews still an issue? That caused some credibility problems.
A: Now we thank people for their good reviews and having that conversation seems to add a lot of credibility to the review. There are also a lot more real time reviews coming through Twitter and on Facebook, so the question about the validity of the reviews is starting to be reduced which is great.
Q: What's the key to running a business with your twin brother?
A: We've been working together for 12 years, but I'd say to be fully transparent at all times. It's one thing to say it but another to do it. When you're frustrated with the other person or you don't really agree, that can snowball quickly and needs to be addressed. So we frequently have lunch together to get out of the office and just shoot the breeze to make sure we're well aligned on everything. If we're not aligned, we talk it out.
Q: Who's the leader?
A: One thing we decided years ago was that one person has to have the final vote and that's the CEO. That's the label of CEO. Luckily it's rare that I have to pull that card. But it's mutually understood that if we're at an impasse, then my decision goes. It has happened.
Q: Do you have any mentors?
A: These days, quite a few. The most formative in my life was my grandfather, a refugee to Australia after the Second World War. He built up a business there importing fish from Scandinavia.
More recently, we're in touch with all kinds of people, including the CEOs of several Canadian and U.S. companies. I can call them up when I have questions about things like fraud detection or how to structure something.
The company I liaise with the most is Bryght.com in Vancouver. I'm an investor and I meet with them once a week to exchange ideas and compare notes.
Q: What do you do for fun?
A: I take the kids skiing. There's nothing like watching my three-year-old snowplow down the hill and my 18-month-old is starting now too. I try to do one jungle trip a year, down in Central America. I just like jungles.
Q: What's your advice to other entrepreneurs?
A: Fail fast. Don't be afraid to put your business through its paces as quickly as you can. Don't give it any slack or spare it the cold realities of the marketplace. Just push it out there and if it performs, run with it. If it doesn't, drop it. Things that fail slowly will just kill you. They'll kill the entrepreneurial spirit.
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