My biggest mistake: Ammar Issa, founder of AMR Hair and Beauty

Ammar Issa has entrepreneurial spirit running through his veins.

At 11-years-old he was already working in the beauty industry, packing boxes out the back of a local shop. He took to reselling products at school, and, after realising he would have to build his own brands to make a name for himself, Issa started his own company at 14-years-old — although he couldn’t register the business name until he turned 16.

The business name registered was AMR Hair and Beauty, and it’s a company that now earns more than $100 million in revenue a year.

All of these years in business — especially at such a young age — mean Issa is no stranger to making mistakes. And there’s one that sticks out the most.

The mistake

For Issa, partnering with a third-party logistics company was not only his biggest business mistake, “it was the start of the biggest mistake of my life,” he says.

Off the bat, the partnership with CS Logistics — a company that has since become insolvent — saw AMR’s rent go from $150,000 per year to $500,000 per month.

“We were in a huge losing battle, but we were in a contract,” Issa tells SmartCompany Plus.

“I had signed the contract, just under the pretense of the owner. It was a billion dollar business,” he explains.

Issa loved the other companies that CS Logistics was working with at the time (Sass and Bide and TUMI Bags, to name a few) and admits that’s why he “jumped to it”.

But the rose-coloured glasses quickly wore off, and by then and with the contract signed, there was no easy way out.

“Every time we told the third-party logistics company, ‘hey, we want out of this’, they would say, ‘Okay, well we’ve got your stock and we’ve got your warehouse, so we’ll lock it all up,” Issa recalls.

“It was like we were drowning constantly.”

Of the whole experience, Issa says he “needed it as a wake-up call”.

“I wish it was a smaller mistake, not as big as [what it was], but I got my wake up call one way or another.”

The context

In 2015, AMR went from $9 million dollars to $16 million in turnover. But with rapid growth comes rapid responsibility, and the company was still only in its tween-aged years.

“We were young and, excuse my language, [we were] idiots,” Issa says.

“We were just running around trying to make do with every order we got, trying to impress that customer.”

The growth meant AMR needed to upgrade from the 1500 square metre warehouse it was operating out of, so Issa began looking for a larger building in the area.

“Every single real estate institution I sat down with, well they’d love the story,” he says.

“But the minute you walk out, they’ll send you an email and say, ‘hey we need, you know, 12 months of bank guarantee’. That was about $1.8 million to $2.5 million.”

A lot of big companies don’t have to get a bank guarantee, due to their reputation or ASX listing.

But AMR was not — and is still not — listed, so Issa realised he wouldn’t be able to get a big warehouse on his own. And he knew he needed a big warehouse to keep up with the company’s growth.

“The only method I found was to partner up with a third-party logistics (3PL) company,” Issa explains.

CS Logistics came in, looked at what AMR was doing — and what Issa was paying — and told him “this is crazy. You’ve got 14 staff. We could do this many orders for you with only three or four staff”.

The impact

Financially, Issa says AMR lost $5 million dollars before he could get out of the contract, which happened after “a very dark 12 months”.

Issa emphasises that the $5 million figure is just in costs paid. It doesn’t include the business AMR potentially lost while customers were waiting for their orders, or the business it could have gained from new customers.

But it’s not just the revenue loss that affected the business. Currently, AMR doesn’t have any investors — and Issa is the sole owner.

When asked if he is considering getting investors on board, Issa says he’s not completely shying away from the idea, although he is “super, super cautious”.

That’s because while Issa’s mistake was playing out in real-time, AMR did have an investor interested.

The potential investor saw the problem with the 3PL company early, and told Issa in the beginning that they didn’t think it was a good idea. When the contract was signed and the deal commenced, the investor decided not to go through with the funding.

“I think it was best for both of us,” Issa admits.

The lesson

For Issa, there wasn’t really a ‘fix’ to this mistake; AMR was able to leave the contract after 12 months and things got better from there. But there are three key lessons that Issa learnt along the way.

First, he says he doesn’t believe he’ll “make another mistake as big as this one”.

Second, he’s realised stronger due diligence is necessary when it comes to contracts.

“I’ve now put things in place where, for a contract like that, even if it’s the most important person in the company, they can’t sign anything without proper mechanisms going forward,” Issa explains.

These mechanisms include proper service-level agreements and key performance indicators, and making sure they are all clearly stated in the contract.

“That means if a month goes by and that’s not done, we could raise that as a concern and adapt the contract,” Issa says. If he could turn back the clock, these mechanisms are something he “absolutely” would have done.

The final — perhaps most enlightening lesson — was understanding that AMR’s products need their own warehouse, because they’re “very, very complicated” in terms of customers, as hairdressers often want to order specific brands.

“If Sophie loves L’Oréal, she will only use L’Oréal,” Issa says as an example.

“But with 3PL companies, they base it on the highest sellers to the lowest sellers, and they base your warehouse across that. So then you would have to walk down every single aisle for one L’Oréal order.”

Issa says that in his business (or for any business the size of AMR, which has around 11,000 stock keeping units), “you have got to do your own warehousing”.

“In order to take care of your customers, and to love your customers just as much as they love you to give you your business, you’ve got to be able to take care of the order yourself.”