A.J. Khubani, TeleBrands: My First Million
Ajit "A.J." Khubani has built a career convincing consumers to buy products they never knew they needed. As the founder and CEO of Fairfield, N.J.-based TeleBrands, he considers himself the "Infomercial King" -- a retail monarch who now oversees a reported $1 billion empire.
The son of Indian immigrants, Khubani started out at 23, spending a few thousand dollars on an ad in National Enquirer -- a move that led to his first big hit. Since then, he's sold hundreds of millions of "As Seen on TV" products, including AmberVision sunglasses, the PedEgg and Doggy Steps. He has bolstered the careers of ubiquitous TV pitchmen, including the late Billy Mays, who enthusiastically hawked products now found on the shelves of more than 100,000 retailers. Today, Khubani is the leader in the $20 billion direct consumer marketing industry, turning out more "low-tech" products than ever before.
Khubani knows better than anyone that being successful doesn't mean being bulletproof, however. Having taken the company through bankruptcy and costly litigation with the Federal Trade Commission, he knows just how fragile an empire can be. But TeleBrands is bigger than ever now and seems to have perfected a formula for predicting retail success -- an American Idol-esque search process that allows him to navigate the onslaught of inventors vying to be the next big idea.
Surprisingly soft-spoken for an infomercial impresario, Khubani says the best products all have one thing in common -- they solve everyday problems.
"My father immigrated to the U.S. from India in 1957 by boat. He got his first job as a busboy but eventually started an electronics-importing business. He was a self-made millionaire and a major influence on my life. Growing up, I always thought someday I'd want to follow in his footsteps and become an entrepreneur myself, but when I graduated from Montclair State University, I thought I'd get a job first and get some experience before starting my own business. The economic environment in the early 1980s was very similar to the situation today. We were in the middle of one of the worst recessions ever in the country and unemployment was over 10 percent. So the prospects of finding a job were pretty dim. I was working as a pizza man and tending bar and I didn't want to continue doing that after I graduated. I wanted to take the next step up and use my education to facilitate my income and my personal growth.
"So I thought of this idea of selling products through mail order. I had connections to suppliers of electronics through my father, and I started looking through some trade journals. I found a product -- an AM/FM Walkman-style radio -- that I thought would sell really well. It was 1983, when one of the bestselling products on the marketplace was the Sony Walkman. It was selling for $60, which was a lot of money back then. I found that I could sell this particular AM/FM style radio that looked like a Walkman for about $10, so I spent about $7,000 -- a third of my life's savings when I was 23 -- wrote an ad, put it in the National Enquirer and waited for the orders to come in. I didn't have any employees, so I shipped everything myself, typing all the labels on an IBM typewriter and delivering the goods to the post office. It was very exciting. I broke even, which gave me the encouragement to keep on going. I thought if I could break even my first time out, then the more I learned the business, the better I would get. I continued with a couple more items and nothing really made money. The first two years I didn't make any profit at all -- I just continued to break even.
"By 1985, I came across a product -- massage slippers. They were like beach slippers with bumps on the bottom that massaged your feet as you walked. I sold those for $10 and they were a relatively big success. My profit that year was about a quarter of a million dollars, which was a lot of money back then, at 25 years old. I think that's when I knew I made it. I finally started to make a profit and I said, 'This is going to work. This is something I can actually make a living off of and continue building the business.' I was getting a lot of pressure from family members to go out and get a 'real job,' and they would say, 'What are you doing wasting your time with this?' It was a lot of pressure, but once I made that money, I decided I would continue to pursue it. The following year I really started to figure it out and I came across a few more products -- a folding knife, an ultrasonic pest repellent -- that were making money, and all of a sudden the business got really big. That year, in 1986, the business grew to $11 million, and I made a profit of $3 million. So I made my first million dollars at the age of 26. It was pretty good. It was a very exciting time to break through. In that year, I bought my first house in Wanaque, N.J., for $200,000 and was able to pay in cash.
"Experiencing all this success, I was very ambitious and said, 'How do I take this to the next level? How do I expand?' I thought about going on TV and taking it to another medium. With TV, the best thing you can do is identify a product that the consumer wants. We know from experience the types of products consumers are willing to buy -- things that solve an everyday problem, that are a good value for the money, that are innovative and sometimes things that put a smile on people's faces. Then, you need a good TV commercial, something that gets people's attention. Because it's visual, we like strong demonstrations. The commercials are a little bit campy, but we find that a little bit campy works better than serious commercials. I started experimenting with TV and produced three commercials in 1986. All three were successful. One was for an ultrasonic flea collar, one was for a home bicycle exercise product and the other was for AmberVision sunglasses.
"I was really surprised at how big AmberVision sunglasses became -- we sold 15 million of them. AmberVision became a household name and by 1987, anyone I spoke to had heard of AmberVision because we were advertising so much. It occurred to me that if it became a brand everyone knows, it would probably sell in more places than just off of TV, so I started approaching retail stores. I got turned down one store after another. They had no interest in dealing with a startup company with a line of sunglasses that were just one style. Finally, after about a year of knocking on doors I got my first break from Herman's Sporting Goods in New Jersey, which decided to try 200 pairs. They sold out in one day, so they reordered 20,000 pairs. I was able to take that story around and start knocking on more doors. I went to all the local retailers first in the New York area and got all of them to buy. Our buyer at Jamesway was a guy named Angelo Bianco. He was very skeptical, but we had a connection with his boss. Reluctantly, he bought some of our products, and he was really surprised at how well the products sold. He was so surprised that he decided to join TeleBrands full time, and he's been here ever since. He was instrumental in taking TeleBrands to the next level and building up a retail distribution. Within a couple of years of the Herman Sporting Goods account, we were selling to every major retailer in the country, including Walmart, Target, Walgreens and CVS. We found a business model that worked with launching a product on TV and then taking the product into retail chains and the next step was to take the product internationally, so we now sell our products all over the world.
"We use an American Idol-like setup for our Inventor's Days, with a panel of judges and a time limit. We look for things that solve an everyday problem, that are innovative, that can be fun and that demonstrate well on TV, so people in the company look through thousands of submissions and decide which ones come closest to that criteria. Out of those, we usually select at least a couple of items and we test market them further. The ones that are successful in test marketing are fairly few, because the odds of coming up with a success are pretty slim, which is just the nature of the business. We mostly go through manufacturers and inventors for products, but being in it so long I just -- out of necessity -- started inventing some of the products myself. I would see an opportunity in a particular category like the Doggy Steps. I said, 'There has to be a less expensive Doggy Steps that's portable and lightweight, that we could sell for $19.99 versus these multi-hundred-dollar steps made of wood and carpet.' So we came up with a cost-effective solution to get dogs onto the sofa and bed. That was maybe the first successful item I invented. The most successful product that we ever sold -- the PedEgg -- I invented, which is huge. We've sold over 45 million PedEggs, and it continues to sell well.
"The vast majority of our products has a very high degree of consumer satisfaction. We're very happy with our products, we're very happy with the claims we make, and we actually find that consumer satisfaction is higher if you under promise and over deliver, so that's what we try to do. Our business is not an exact science. We get initial test data and react to that, but not everything has the sales we anticipate. That's why it's a good thing that we launch many products within a year. From a business standpoint, if we launch 10 products in a year and eight are successful and two are not, we're still successful overall.
"We have hit bumps. We had a litigation with the FTC a long time ago, but that has been settled and we haven't had anything since then. Companies don't grow without having growing pains, and we hit a very rough patch in 2000, in which the company actually went through a Chapter 11 filing. We re-emerged out of Chapter 11 in three months and rebuilt the company. I think as a result of going through those bumps, you definitely emerge stronger as a company. I know I'm much stronger as an individual and as a leader of the company for having gone through the rough roads. What's the saying? Whatever doesn't kill you makes you stronger.
"I've worked really hard, so I appreciate everything I have, and I don't take anything for granted. I'm very happy that I can provide my family with security and certain privileges and luxuries. It makes me feel good. I believe that if you work hard and you're successful, you deserve to treat yourself -- after all, why do you work so hard?
"Having your own business is the hardest job you're ever going to have. It's all-consuming and you work harder than you ever imagined you'd have to work, and you'll think about it 24 hours a day, seven days a week. You've got to put that much attention, thought process and work into a business if it's going to succeed. It's not for everybody. Some people don't want to be thinking about work seven days a week. Some people don't want to work 12, 14 hours a day. If that's the case, then you shouldn't be in business. But if you're willing to do that, it's more rewarding than anything you can imagine. I work very hard -- I work harder today than I worked when I was in college starting the business, but for me, it's so rewarding that I never feel I'm working."
The original version of this article appeared on AOL Small Business on 7/26/11.