How a small busi­ness bit off more than it could chew

The Commercial Appeal - - Business - Cas­san­dra Stephen­son Jack­son Sun USA TO­DAY NET­WORK - TEN­NESSEE

JACK­SON, Tenn. – Army vet­eran Justin Scott started his busi­ness in a Ten­nessee garage in 2014 with the in­tent to sell de­tailed, hand-crafted wooden flags and em­ploy fel­low vet­er­ans.

Within three years, the Rus­tic Flag Com­pany was pulling in $8 mil­lion in sales from around the na­tion and em­ploy­ing 54 peo­ple, mostly vet­er­ans and fam­ily mem­bers of vet­er­ans. The busi­ness ex­panded at a rapid rate – too fast, Scott now says.

Soon, those 54 em­ploy­ees were work­ing 84-hour weeks, and costs sky­rock­eted due to over­time and pay­roll taxes. Scott found his com­pany strug­gling to keep up with or­ders, and late de­liv­ery com­plaints mounted. Even­tu­ally, he stopped ac­cept­ing new pur­chases so he and a bare­bones team could fo­cus on fill­ing all the out­stand­ing or­ders.

“I was at a point where I said, you know, I can keep this big shovel dig­ging, and keep sell­ing or­ders and be fine for an­other cou­ple of years, and keep deal­ing with be­ing be­hind, but I don’t want to be that way,” Scott said. “Even­tu­ally, it gets to a point where I’m go­ing to be sell­ing a flag that I know I can’t send out. And I didn’t want to do that.”

The Rus­tic Flag Com­pany has shipped about 112,000 or­ders since it opened for busi­ness in 2014. They’ve sold about 135,000 flags. Scott said he and his team cur­rently have about 10,000 or­ders be­hind on pro­duc­tion and an­other 10,000 that are not late – yet.

With no more cap­i­tal com­ing in to off­set mount­ing pro­duc­tion and ship­ping costs, Scott has pared back his team to about eight peo­ple. They are now work­ing as fast as they can to fill as many or­ders as pos­si­ble, he said, or pro­vide re­funds to those who don’t want to wait.

“I’m go­ing to do ev­ery­thing I can to float it for as long as I can, to be an hon­est per­son and get ev­ery­body’s or­ders out, (and) not worry about try­ing to take in any more money,” Scott said.

The wait­ing game

Even when the Rus­tic Flag Com­pany was at peak pro­duc­tion with a full staff, hand-crafted wooden flags take time to make. The com­pany’s web­site, which now bears a large mes­sage on its home­page ex­plain­ing that no new or­ders will be ac­cepted, also states that its hand­made prod­ucts have a lead-time of sev­eral weeks for pro­duc­tion.

All items sold have a lead-time of 10 to 12 weeks, the web­site states, and cus­tom items, mil­i­tary art­work and the com­pany’s trade­marked “split flags” take as long as 14 weeks to cre­ate and ship.

But with the over­whelm­ing de­mand and now-short staff, these wait times have stretched from weeks to months, and Scott said he’s re­luc­tant to guar­an­tee cus­tomers an ex­act de­liv­ery date for fear of dis­ap­point­ing them again.

In the mean­time, cus­tomers are get­ting wor­ried. Scott said his in­box is full of thou­sands of emails. Thou­sands more com­ment on the com­pany’s Face­book page. The Rus­tic Flag Com­pany’s Bet­ter Busi­ness Bureau page now shows an “F” rat­ing due to more than 300 com­plaints about late de­liv­ery.

Scott says he does read his emails and fre­quently goes through all the com­ments on Face­book, but re­spond­ing to all the inquiries while try­ing to fill all the or­ders has be­come nearly im­pos­si­ble.

At first, he tried to re­spond to Face­book posts, but his replies drove an in­creased frenzy of com­ments, mis­in­for­ma­tion, com­plaints and re­quests, he said.

“From the out­side look­ing in, I look like some­body who is at­tempt­ing to ig­nore peo­ple, and I’m ab­so­lutely not,” Scott said.

Rob Scarpa, a cus­tomer from New Jersey, is one of hun­dreds who com­mented on a post Scott made in Oc­to­ber at­tempt­ing to ex­plain the de­lay in or­ders. Like sev­eral other com­menters, Scarpa wrote he had to wait for the flag he or­dered but that he was elated with the prod­uct when it ar­rived.

Scarpa told The Jack­son Sun he or­dered a large Amer­i­can flag and re­ceived it about six months ago, a few weeks later than the ex­pected de­liv­ery date. It now hangs in his of­fice, and he said he couldn’t be hap­pier.

“It’s gor­geous,” Scarpa said. “It’s well worth the wait. It’s prob­a­bly the best crafts­man­ship that I’ve seen in terms of any­thing that I’ve or­dered cus­tom­made.”

Scarpa said he rec­om­mended the com­pany to at least 10 of his friends and fam­ily, who also re­ceived their prod­ucts up to six weeks late but were very pleased with their qual­ity once they ar­rived. While Scarpa said he un­der­stands why peo­ple are con­cerned, he noted that all his friends and fam­ily who or­dered from Rus­tic Flag Com­pany have re­ceived their pur­chases within the last six months, and he still holds the com­pany in high es­teem.

“It’s won­der­ful,” Scarpa said. “I mean, it’s a vet­eran-owned com­pany. I’m proud to be a cus­tomer of theirs.”

Ed Clark, an­other cus­tomer from Colorado, said he has not heard back from any­one at the com­pany since Au­gust. A vet­eran him­self, he or­dered a flag with a Mil­i­tary Po­lice reg­i­men­tal crest to com­mem­o­rate the ser­vice of both him and his son. He said the flag cost him about $250, and the com­pany was up-front about pro­duc­tion tak­ing up to 15 weeks. But when they stopped re­spond­ing to his phone calls and took down the phone num­ber on the web­site, Clark said he started to get ner­vous.

“I’m a re­tired cop, so I got ner­vous that my money was just gone,” Clark said.

Scott said he un­der­stands that some cus­tomers might not want to wait to re­ceive their prod­ucts, and said he’s do­ing his best to give full re­funds to any cus­tomers that re­quest them. So far, the Rus­tic Flag Com­pany has is­sued close to 3,000 full re­funds.

Clark said he would rather have the flag he or­dered than get his money back be­cause of the sig­nif­i­cance of the me­mento for him and his son.

“I don’t mind, I would re­ally like a flag more than I would like to make life tough on them,” Clark said. “But it has been a long time.”

A per­fect storm

Scott did not ex­pect any of this, he said.

He served in the Army and paid his wife’s way through nurs­ing school. His wife worked as a nurse once she grad­u­ated to pay his way through school to be an engi­neer. When he grad­u­ated, he made his first flag in his garage, which was pur­chased by a friend. More friends were in­ter­ested and Scott’s flags quickly grew a fol­low­ing on Face­book. He sud­denly had a full-fledged busi­ness on his hands and a fam­ily with four young chil­dren.

The busi­ness quickly be­gan pulling in or­ders and money. In its sec­ond year, they took in $5.5 mil­lion in sales. Scott took some of that revenue and bought a new build­ing, along with new ma­chines, to make pro­duc­tion of some of their prod­ucts eas­ier.

Sud­denly, with an in­flux of or­ders, Scott’s staff was work­ing over­time to meet de­mand.

“The bud­get com­pletely flipped up­side down on its head,” Scott said.

He paid out of pocket for ad­di­tional over­time costs and pay­roll taxes.

Scott cut his staff down to bare bones and they kept pro­duc­ing flags. At one point, he and his team were cre­at­ing 1,000 flags each week, which cost about $25,000 per week in ship­ping charges, Scott said. They weren’t tak­ing any more or­ders, so they weren’t bring­ing in money to pay for that.

Scott has been us­ing any money he can find to keep the op­er­a­tion go­ing, in­clud­ing bor­row­ing from RFC Tac­ti­cal, his other busi­ness.

At one point, he said, he was forced to con­sider his op­tions, in­clud­ing declar­ing bank­ruptcy.

“I kept com­ing back to, I owe peo­ple a prod­uct that I know they love and I’m go­ing to put ev­ery­thing I have into it ... and that’s what I’ve been do­ing,” Scott said. “And it hurts.”

Scott said he’s de­ter­mined to try to fill all the out­stand­ing or­ders Rus­tic Flag Com­pany has but he doesn’t plan to take any more or­ders af­ter that.

Scott said he could have thrown in the towel long ago.

“I want to do the right thing, and this is what I keep com­ing back to. That’s what I’m go­ing to keep do­ing.”

PHO­TOS BY RUS­TIC FLAG COM­PANY

The Rus­tic Flag Com­pany, which makes wooden flags, grew a lit­tle too fast for its owner.

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