“Uni makes you risk averse”: Why the founder of $6 million furniture retailer Lounge Lovers regrets he didn’t strike out on his own sooner

It’s been a steep learning curve for the team at Lounge Lovers, but what started as an online-only furniture sales portal in 2011 is now a $6 million business looking to bring (fully formed) designer furniture to the Australian masses.

For many staff members, the company is their first ever experience working in the world of furniture. But that hasn’t stopped plans for national expansion from a business that started with one guy in a warehouse, and has since grown to an engaged team of employees who have traded the world of big corporate for something completely different.

The company’s website highlights to low-cost designer offerings with showrooms in Melbourne and Sydney, while sites are also planned for Queensland and Western Australia in the next 12 months. SmartCompany spoke with founder Derek Kerr, 36, about how the business takes the fight to giants like Ikea, and how startups can actually make more room for free time. 

When I first started up, the overheads were zero. I had a full-time job, I was unloading containers, I was warehousing them. I had a Honda Excel and I used to deliver items from the back of my car.

Before this, I was doing corporate finance in London in a banking role and I enjoyed furniture, but I was just very frustrated with the price it. Australia was also way behind the times, and all of the stuff was generally very ugly.

The boutiques were very overpriced and exclusive as well. We see Lounge Lovers as trying to bring designer furniture to the masses – not only the price – but also the design.

Initially it was a purely online business – that was a big mistake.

I was stuck in the whole concept of completely reducing costs. I quickly learned the internet is great, but you certainly need to back that up with a traditional business model.

I’ve learned that sometimes if you spend a bit more, it speeds up the learning process. In retrospect, if I had thrown more mud at the wall a lot sooner, we would have made progress a lot faster.

We’ve got no head office, and we’ve got no head office costs. We will only take on further costs if we think it’s important for the customer. For exmaple, we have sofas that we can loan to customers. If a someone wants a pink sofa, we’ll do it for them and lend floor stock [until it arrives].

We want to respect the design and make our own design ourselves. We’ve got Janet, a Danish designer, who works with us because she loves the concept and the flexibility.

On the design side, she brings in a lot of attainable designs. She sees what Australians are used to and will add a fresh twist. She designs what she wants and works with our suppliers.

With a [competitor] company like Ikea, I love their business concept. They provide decent design and a very, very low cost model, where price is the leading advantage.

They are cheaper than us, and the reason is that we’ve gone for a more customer-centric model. We import things that are fully constructed. If the dining furniture requires assembly, we do that and also take away the rubbish. We think that generates value.

We don’t want a customer to be sitting on the floor for five hours putting something together.

There’s a lot of do-it-yourself [out there], but we do the construction and tell customers: “These guys do 50 of these today. It will take ten minutes, not two hours”.

Trying to explain this to customers is the thing. We don’t spend a cent on print advertising; all of our advertising is online.

The internet now gives us an even playing field. Most people will search online, and if you see the price in the top right hand corner, it really levels the playing field. Then it’s just word-of-mouth.

People love talking about new designs and if you give them great designs, people will take it home and share it on Instagram. There’s a lot of free social media we’ve got just by giving people what they want.

I myself am selling on the floor five days a week. Our biggest responsibility is selling to the customer, and I love it. We all love it as a job.

The culture of the people that work here is the most important – we’re all really similar. We’ve generally come from professional backgrounds. It’s strange, how many people want to come and work for a small startup. When your company is very young, it’s more difficult, then once you’ve hit that medium size, it becomes something people want for flexibility.

People just generally want job satisfaction and the big companies have hierarchies. It’s hard to make a difference.

Every month the whole team gets together, we go out for dinner, it’s very relaxed and open.

In a big company, if you give someone three-months holiday, you have to offer it up for everyone. But with a smaller company, you have more flexibility, and can also say: “I’m going to work 14 days straight here and then take five days off.”

My biggest regret is that I didn’t do this 10 years ago; all my friends are in the same boat. I always wanted to be an entrepreneur growing up, I think a lot of people [reading this] will understand.

Everyone in my family, my school advisers, said: “Go to uni, get a degree, get some experience, then do it”.

At uni you learn to analyse risks and in this business you just have to have a punt sometimes; university teaches you to be risk-averse.

The problem with that is that you go to uni, learn to analyse risk, make a lot of money, and it’s harder to get out of it once you’re in it.

The best time to start is always yesterday. And now, I’ve just had a two-month holiday, and I’m training 20 hours a week for an event [next year].

You think it’s a risk, but it really frees up your time.