When I was reading about the company to write my previous post, Lot18 reportedly had about 500,000 members; now there are almost 1,000,000, according to online reports! Things seemed to be going so well! As it turns out, the wealth of cash the company was able to raise might have also made it easier to lose sight of its core business. As founder Philip James told Betabeat, “One of the perils of having a lot of money is, it’s easy to launch a lot of things.” We can all understand how a company flush with cash might be more apt to take risks on premature expansion than one that needs to watch every dollar just to keep the lights on.
While the decision to wind down the company’s short-lived food and travel businesses is unfortunate for the employees who lost their jobs, it should help Lot18 refocus on building its wine business for long-term sustainability. Luckily for Lot18, the nature of its business is such that its investment in those complementary businesses probably was “just” those people and maybe a few other ancillary services, marketing expenses, etc. One can imagine many other types of businesses where expansion into ancillary businesses would require huge capital outlays at the beginning for things like equipment and regulatory approvals, which are not easily recouped. This reminds us of the important life lessons we can take from Lot18 so far:
- Drink good wine.
- Do not expand so quickly into new businesses that doing so jeopardizes the long-term success of your core business.
A Post by Alyssa Hirschfeld, Guest Blogger