Bootstrapping a Niche E-Commerce Business to Exit: Dara Greaney, CEO of BuyAutoParts.com (Part 3)

Sramana Mitra: What was the inventory strategy at that point?

Dara Greaney: We had inventory as much as we could because we weren’t really getting a lot of traction with people drop-shipping. If you placed a PO, a month later, you get the parts. Nobody really kept a ton of stuff on stock. It was just the nature of parts back then. We were constantly building our inventory out and extend our working capital, and trying to convince the banks to give us a bigger line of credit.

Sramana Mitra: Was bank line of credit your primary inventory financing strategy all along?

Dara Greaney: Yes. Auto parts are seasonal. They’re real big in the spring and summer. The automotive season is Q2 and Q3. We would stock a bunch of inventory and draw down our line in February, and try to sell it all in Spring and Summer. Then pay off the line in the Fall.

Sramana Mitra: What was the threshold of activity that you had to get to before the bank was willing to work with you, or were there personal guarantees involved? How did you get the bank line relationship going?

Dara Greaney: There were some personal guarantees, and they were also guaranteeing that it had to be used for inventory. They had to see that we were using it for inventory. They also had some liens on general business. There were a lot f rules and restrictions and personal guarantees to make sure that they were good. Every year, we’d have to go back and ask for more. We’d say, “Look at what we did last year. Now we did a million.” We had to show them that we were mostly profitable. We ended pushing banks about three of four times.

Sramana Mitra: These were all local San Diego banks?

Dara Greaney: Yes, they were all local San Diego banks. We went to slightly bigger ones. That was the entire financing of it.

Sramana Mitra: This period of from 2001 to 2005 when you were growing really fast and you were using bank financing to get your inventory going, what was the structure of the organisation? Did you have offices? Did you work from home? How many people were involved?

Dara Greaney: When I started, I was employee five. It was a tiny office with a mini-warehouse. As we grew, the phones rang. We added a couple of people for sales. We had to add more people to the warehouse. We were in one of these complexes where there was a giant building but they are divided into 50 suites. Each suite was a thousand square feet. We just kept acquiring suites next to us. We went form 404 to 405. Then we added 403. We were stocking parts across the street.

Sramana Mitra: So you didn’t have a warehouse. You were stocking in a regular office.

Dara Greaney: This building was one of these buildings where you have a mini-office in front and then a little mini-warehouse at the back. It wasn’t really built for distribution. It was built for small workshops. We had no inventory systems. Everything was done on spreadsheets back then. There was no organisation. When we re-ordered, we count how many we sold and ordered that way. We spent so much time doing stuff that systems could do.

This segment is part 3 in the series : Bootstrapping a Niche E-Commerce Business to Exit: Dara Greaney, CEO of BuyAutoParts.com
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