Join business co-founder and investor Soraya Darabi as she hits the road to get schooled by eight entrepreneurs who’ve graduated from their early start-up days and hit new levels of success. Click below to listen.
LESSON 1: Turning up the heat
Noah Glanville: 00:02 Yeah, so these are some of the prototypes. We were trying to figuring out where are we going to build these things. We knew we had something special. I was even using my neighbor's garage in Denver to build them.
Soraya Darabi: 00:12 This is a real garage start-up.
Noah Glanville: 00:13 Yeah. I didn't even have my own garage, had to borrow the neighbor's, and then it started to grow.
Soraya Darabi: 00:18 Welcome to season two of Business Schooled, a podcast by Synchrony. I'm your host, Soraya Darabi. I've co-founded two businesses and now I'm the general partner of an early stage investment fund, Trail Mix Ventures.
Soraya Darabi: 00:31 Today, we're seeing new businesses succeed more than in the past 30 years. Entrepreneurs aren't just surviving, they're thriving. I wanted to know just how they're pulling it off, so I hit the road to find out. I'm soaking up some essential lessons on business and life from founders who have graduated from their early startup days and hit new levels of success. Hopefully, you'll learn a few things too. This is Business Schooled. A podcast by Synchrony.
Soraya Darabi: 01:03 Here we are. Hi.
Noah Glanville: 01:11 Noah Glanville. Welcome.
Soraya Darabi: 01:12 Noah, I'm so excited to meet you. Soraya.
Noah Glanville: 01:14 Absolutely. Come on in.
Soraya Darabi: 01:15 Thanks for having us. My God, your office smells nice.
Noah Glanville: 01:19 Thank you. Well, we just seasoned up some chickens, so we've got an exciting day ahead.
Soraya Darabi: 01:26 Driven by his love of cooking, Noah Glanville, an Iraq War veteran and ex-military contractor, went through over 20 prototypes before finally perfecting what he calls the Pit Barrel Cooker. It's a rugged, black steel drum that's about two and a half feet tall. Unlike your average backyard grill where you put your food very close to the flame, the Pit Barrel is a vertical cooker that lets you hook and hang your food right in the middle of the action so you cook it from all sides.
Soraya Darabi: 01:52 Noah's homemade invention started to take off when it made waves with a very opinionated group of people, the passionate barbecue enthusiasts on social media who loved the cooker's precise design, its ease-of-use and its mouthwatering results. I was curious to know just how Noah went from being a passionate cook, building a DIY product in Colorado to the owner of a fully-fledged brand in Kentucky with real customer love and buzz that's spreading like wildfire, so I went to visit him at Pit Barrel Cooker HQ in Louisville.
Soraya Darabi: 02:20 It's time to get schooled. The story of Noah's love of cooking, it turns out, starts when he was just a kid.
Noah Glanville: 02:30 Took a field trip to the San Francisco Culinary Academy. And when we went out there, never expected to have that experience. Everybody in their chefs’ outfits looking through these glass windows and stainless steel, and I just thought, “That's one of the most beautiful things I've ever seen. That looks so cool. That's going to be me one day.”
Soraya Darabi: 02:50 You cooking?
Noah Glanville: 02:50 Yeah, I didn't have a lot of money and then realized how expensive it was to go to the San Francisco Culinary Academy, but that really sank deep with me, wanting to get into food in some way. Went to a year of junior college and felt like I was just spinning my wheels. Decided what better than to join the Navy, see the world. I went down to a recruiter; and I was living with my grandparents at the time, and my grandfather, he was a B29 flight engineer in World War II. And so when I told him I was joining the Navy, he said, "Oh my gosh,” you know, “what have you done?"
Soraya Darabi: 03:25 What years were you deployed?
Noah Glanville: 03:27 Let's see, I went in in '98 and got out at the end of 2004. Deployed...gosh, 2003, the kickoff to the war.
Soraya Darabi: 03:36 To Iraq.
Noah Glanville: 03:36 Correct.
Soraya Darabi: 03:37 A big question to ask someone you've just met, but what did that feel like to hear you're going in?
Noah Glanville: 03:42 Very scary. I remember them saying that the 55th Mechanized Division was on the other side of the berm and we would take 50% casualties. That's what we were told.
Soraya Darabi: 03:50 But I'm sure that it really bonded you for life with your fellow veterans?
Noah Glanville: 03:54 For sure. Yeah, and that bond, you get out, and I dealt a lot with PTSD and that was one of, I think, the big reasons for my success: channeling that energy and trying to focus it towards a good thing. What translates over is a lot of the fluff and a lot of the corporate things that can bog you down, allow veteran entrepreneurs to persevere and get through those. Kind of navigating the minefields, for lack of better words, business is one big minefield.
Noah Glanville: 04:24 Sometimes we drive really hard and charge at things in a more military way, and I have to remember this is a civilian world that we're in and business that we're running. But I think that our employees and our team that had never been in the military, no military background, I think they like that kind of structure and that drive, and it resonates with a lot of people.
Soraya Darabi: 04:47 Noah's military service didn't only provide him with skills that would make him a strong leader, it was also a testing ground for perfecting his cooking technique.
Soraya Darabi: 04:58 You tested out recipes on your friends while you were deployed and then you took some of those learnings back with you.
Noah Glanville: 05:05 That's probably a good way to say it. They were guinea pigs trapped in a war zone, so they couldn't go anywhere and I would test things out. That was a great time to test some different things out, different recipes but a style of cooking. And we didn't necessarily have the drums or everything of what the Pit Barrel is today, but was able to figure out how long will ribs stay on on a hanger and can you cook a pork shoulder or a brisket? And at the time, that notion had never been heard of. I mean, people said, "How can you hang ribs or a brisket or a pork shoulder?” And, “As soon as it's ready, it's going to fall off into the coals, right?" And that's where I think we've set a different style and standard to cooking outdoors.
Noah Glanville: 05:48 After Iraq, I got out, wasn't sure what I was going to do and dabbled with kind of the corporate world for a little while. I was not ready for that. What people were worried about in the corporate world, I had a lot of other things I needed to get figured out. I went to work for a couple of different companies doing security contract work in Iraq and Afghanistan, made a lot more money. That was the first time in my life where I can live like a rockstar or I can figure out what the stepping stone's going to be. And I said, I'm either going to go through the culinary school, open up my own restaurant, be a chef, go into business that way. Everybody said that's probably the worst idea you could have, and they were probably right.
Noah Glanville: 06:33 And so it's kind of fun as you walk in the door of this facility, the first thing you see is where we first started, so grassroots. That's our office. I knew we really had something. And even at that point I said, "This could be in the top five cookers sold in the world. I believe in it. I know it's that great of a product." And a very close friend said, "Why don't you come out to the Eastern plains of Colorado?” He's a cattle rancher and he says, "I'll show you around."
Noah Glanville: 07:00 And so we pull up to this place. It was a mess and he says, "What do you think?"
Noah Glanville: 07:03 And I said, "It's perfect. How much do you want?"
Noah Glanville: 07:04 He says, "Nothing. Get your business going."
Noah Glanville: 07:08 I had about $150,000 saved and that took Thanksgiving, Christmas, New Year's, many holidays, raising my hand, volunteering to stay overseas and time away from family. And you'd say, "Okay. Well, a quarter of that's going to be used up for a utilities patent." And I remember looking at my wife saying, "Geez, we think this is a great product and we think everybody will want it, but that's a lot of money."
Noah Glanville: 07:33 And that was probably the first, biggest, hardest decision to make is, do we just go into business and start out or do we put some intellectual property behind it? We filed for a utilities patent. It was very expensive. Patents are only worth what you're willing to spend to protect them. Had reached out to a company and we thought we had found someone that we could trust, and started going down the road of disclosing confidential business information, trade secrets, costs of building, forecasting, time studies, how much you're selling. And I'll never forget the time that - the first time I shared that information, that company deciding that they were going to go do the product themselves.
Soraya Darabi: 08:10 Oh no.
Noah Glanville: 08:11 And so that was our first experience with a lawsuit litigation. Almost three years...
Soraya Darabi: 08:19 Three years.
Noah Glanville: 08:20 ... and hundreds of thousands of dollars to fight that. It ultimately developed into a settlement that I was definitely happy with, but it takes so much time and attention off your business.
Soraya Darabi: 08:32 What a curve ball.
Noah Glanville: 08:33 We have spent hundreds of thousands of dollars on litigation to protect our patents. We have proved we will go to the mat every time over our IP. That's really important. And I say that this isn't a hobby for us and it's how we feed our family, and I take feeding our family seriously.
Soraya Darabi: 08:49 How do you find out if someone is infringing on your patent?
Noah Glanville: 08:51 This industry is so social that it doesn't take long. Someone will send you an email. You'll see it pop up. It happens really fast - and our customer base and fans, there's a lot of eyes out there.
Soraya Darabi: 09:04 Right, imitation is the best form of flattery, except in business.
Noah Glanville: 09:08 There's a fine line between the flattery portion and people actually infringing on your IP and taking money out of your pocket. And that's where you have to take a hard look at that and decide, is this worth a fight or do we just focus on moving forward and kicking butt?
Soraya Darabi: 09:29 Patent litigation is not the kind of thing you want to take lightly. It's so expensive and time consuming that you better know what you're getting into. Noah didn't just make a business call, he was thinking about his family and standing up for his values; and standing up for something has helped Noah make tough calls from day one.
Soraya Darabi: 09:47 You're out in the middle of Colorado with your wife, Amber, forming what we now see today is the beginning of Pit Barrel Cooker.
Noah Glanville: 09:55 We found ourselves out there because it was one of the only places we could afford to start this business. Trying to get people to help was one of our biggest challenges. It was a younger crowd, couldn't afford to pay people a lot of money to be out there and it was one of those things that - barely be able to afford insurance. And all the things that you have to do to be a legitimate business, it's very difficult.
Noah Glanville: 10:15 I remember one of the times that my morals and standards became a roadblock for me and it turned into me having to do a lot of the work. We had about six employees and I remember a tool set that belonged to my grandfather came up missing...
Soraya Darabi: 10:32 Oh no.
Noah Glanville: 10:32 ... and that meant so much to me. And I said, "Guys, listen, we're going out of town. I'll be back in a couple of days and that needs to be returned. And if it's not returned, no one's going to have a job after this." And so I kind of dug myself into a hole and I learned a lesson by that as well, but came back...
Soraya Darabi: 10:54 Oh, I'm on the edge of my seat. What happened?
Noah Glanville: 10:55 Came back and the tool set wasn't there. And I had to make a point and I had given my word, fired six people. That was really tough to do that. I can deal with just about anything, and that's something that coming as a veteran and off the battlefield, you can deal with just about anything, and disasters and mistakes happen. But when people conceal things or lie or cheat, knowing about it, that's when things really feel wrong.
Soraya Darabi: 11:24 Was it hard to trust people after that?
Noah Glanville: 11:26 It was. It wasn't a surprise. I mean, things can happen. But when you go out of your way to treat people really well and someone steals from you, those are early lessons. You'd have to be almost out of your mind to fire six people, your only help. But we probably knew that that wasn't working and we needed a reset. And so that forced us to do that and say, "We need to get real help. Adults, not high school kids." Every tipping point forces you to say, "What are we doing with the business? And how do we need to continue to grow?" And that was a growth point for us.
Noah Glanville: 12:02 Can we get someone to just pop out there and tell someone to take that chicken off?
Speaker 3: 12:06 Yeah, absolutely.
Noah Glanville: 12:06 But no, we better pull that off. It's probably done.
Noah Glanville: 12:13 So, the Pit Barrel Cooker...
Soraya Darabi: 12:15 In action.
Noah Glanville: 12:15 It's in action. Everything is running perfect. No-
Soraya Darabi: 12:19 I can touch this?
Noah Glanville: 12:19 Go ahead and take the lid off and see what you think of that.
Soraya Darabi: 12:21 Smells so good.
Noah Glanville: 12:21 What makes us so unique and amazing is you have the juices that drip directly down onto the coals and it caramelizes off the coals and vaporizes it, and it infuses just this amazing flavor.
Soraya Darabi: 12:34 So just kind of surges back up?
Noah Glanville: 12:35 Yes.
Soraya Darabi: 12:37 And the rub is crystallizing perfectly into the skin. I can't wait to try.
Soraya Darabi: 12:44 If you run a business like Noah, you know how important it is to stay true to what makes you great. Synchrony offers the ingredients to help you make a recipe for business growth that's right for you, including consumer financing solutions, digital technologies, and data insights. Everyday Synchrony is changing what's possible for people and businesses. Learn how we can help change what's possible for you at synchrony.com
Soraya Darabi: 13:05 During his startup days, Noah was able to rely on his strong sense of integrity to make tough decisions, whether it was committing to patent litigation or firing his whole team. But, as any successful entrepreneur will tell you, the need to make tough decisions doesn't stop as you grow.
Soraya Darabi: 13:28 For Noah, one of the toughest decisions he had to face came at a turning point for his business. He was hoping to scale his company with a brand new product, the Pit Barrel Junior, designed to be much more portable than its bigger brother, but he quickly found himself in hot water.
Soraya Darabi: 13:43 Noah, you're a 10-year-old business as of next year, but three years ago the business looked completely different from what it does today.
Noah Glanville: 13:52 From going through third-party logistics to taking that control back, purchasing a large facility that we can scale up, we're sitting in a 66,000 square foot facility that we can scale. And that's probably one of the biggest things with having more control over the customer experience and making sure that the product comes in right.
Noah Glanville: 14:13 One of the things that happened, and it was a good thing that we have the control over it, is we had several thousand units come in on a Pit Barrel Junior that we wanted to launch, and units came in. We had gone through everything, thought everything was perfect and started shipping product out. Within a few days, people started posting on social media that their lids weren't fitting correctly, air was escaping, it was getting too hot. And my heart sank when I saw that first picture in that first email and I knew exactly what the problem was, and I knew that it was not something that we could fix in the field. It meant everything had to come back.
Soraya Darabi: 14:48 Oh man, what did you do?
Noah Glanville: 14:50 It's funny. People will always ask, "What's your policy?" Or what do you... And I always say, "Well, we do the right thing." And the right thing in our mind was return the product immediately, pay for the return shipping, return funds back to the customers. It was extremely costly. It was in the six figures to correct that and that was a really big deal, but our brand and our reputation is 100% worth it. We ended up having the right manufacturer that stepped up to the plate. We shared in that pain, in that cost, shipped it all back overseas, corrected it, shipped it back, and it'll be relaunched in the next couple of weeks. So we're really excited about that.
Soraya Darabi: 15:31 As an entrepreneur, Noah had always been willing to right a wrong, but this turning point was different. Doing the right thing became about reputation and about turning his integrity into his brand.
Noah Glanville: 15:41 It could have very easily gone the other way, and we could have been years into litigation on this. Trying to navigate, learn from those experiences. But trust is always something that when the stakes are higher, that comes into play and it can make you pick the wrong path, if you've had a bad experience. So you’ve got to be able to keep open-minded, but make smart decisions.
Soraya Darabi: 16:05 What do you take away from your customers and their reactions, and how closely are you listening to them?
Noah Glanville: 16:10 We really listen to our customers. I think our finger’s on the pulse with the demand, but also one of the things that's super important to me is the customer service. And there were tens of thousands of units on the market and I still had my cell phone on every single unit. And people said, "You are absolutely crazy for that." And it did develop into absolute craziness. But staying in tune with a customer, and sure, could I afford to have an assistant, and oh, I don't have time to talk, and those kinds of things. I think removing yourself is the biggest mistake you can make and not listening to the customer and not keeping your finger on the pulse.
Soraya Darabi: 16:49 There's even a photo of you framed on a customer call.
Noah Glanville: 16:51 All the things we do I think are common sense: a good quality product at a good value, good customer service, good QC, shipping the product out on time. Those are basic things that we've really tried to level set, always on, grow responsibly. Word travels fast. I mean, people get this product; everybody in their neighborhood ends up buying one. They take it to work. They're so excited about the food and the experience that you want to make sure that the lights on, the doors are open, you provide a place for them to talk about it and take advantage of how social this industry is.
Soraya Darabi: 17:29 Did you have an inkling in the beginning that social media would take off the way it has or is it something you walked backwards into?
Noah Glanville: 17:37 I think it was really a matter of not having a huge budget to go out and we knew that we could take advantage of a product that people wanted to talk about. And if we were able to ship them something that made them happy and changed the way that they did something that they already loved, we knew they would talk about it.
Soraya Darabi: 17:55 I co-led a food startup once and we had eat-ups, not meet-ups. Have you thought about gathering all of these folks from social media, you know, in a big barn and grilling up a feast?
Noah Glanville: 18:09 Absolutely, and that's something... Our lifestyle room that we're creating, breaking ground here in another month and that'll be done prior to Derby, so we're going to do our grand opening.
Soraya Darabi: 18:18 Now that Pit Barrel is more established, far more employees, bigger warehouse, is anything changing or do you still want to keep that grassroots community the way it is?
Noah Glanville: 18:27 Definitely keep that grassroots community the way it is, but there are different things that start to play.
Soraya Darabi: 18:32 Right. It's hard to scale. This is a big year of growth. What does that growth look like? How many employees do you think you'll be hiring in the next couple years?
Noah Glanville: 18:42 At the beginning of this year, we started out and we had about six employees and that included a couple of people that worked from home in different states. And right now when we purchased this building, we're at around 15, 16 people and it really...
Soraya Darabi: 19:00 So you've tripled.
Noah Glanville: 19:00 Absolutely, in a very short amount of time. And I think in 2020, we'll bring on an additional 15 people to the business. For our size and what we do, we're pretty lean.
Soraya Darabi: 19:10 I would say. And that's another big inflection point. When you quite literally triple in size and then double in size again, culture becomes ever so much more important, because it was a mom-and-pop shop quite literally a couple of years ago and now you're becoming a corporation. What's coming around the bend that keeps you up at night?
Noah Glanville: 19:31 For me, what keeps me up at night is relinquishing control. When you start out as an entrepreneur and a self-starter, you have a firm grip on the rope and that feels good. And when you start to reach a certain size, that rope starts to slip and you need to know when to grab the next rope. I'm right in between ropes.
Noah Glanville: 19:53 Now, we have the interest of retailers, which - we first started out, and there was nobody interested in it. It was a different style of cooking. And the mom-and-pop stores, the co-ops do it best. That kind of model that understand it, can demo the product, talk about it and sell it; and that's where we're going into now.
Soraya Darabi: 20:13 And in terms of expansion, will you stick with the Pit Barrel or is there more to come?
Noah Glanville: 20:19 We're coming out with a junior. That'll be out in a couple of weeks. We'll also have a 55, so the large, traditional-style drum that's more going to be for commercial use. That's in the works.
Soraya Darabi: 20:33 Companies have the opportunity every day to decide whom they prioritize and which side they're on. It's not always an easy decision. So when someone asks Noah about a refund policy and he says, "Our policy is we do the right thing," it can feel like a breath of fresh air. In Noah's case though, what first looks like a classic example of good business ethics is actually a case study in taking your business into the next phase of growth.
Soraya Darabi: 20:56 Sometimes in business, doing the right thing can mean everything. When you build your reputation on doing the right thing, you turn your customers into your truth tellers and your all-star marketers. These are the sort of lifelong partners that can take you from a backyard experiment in Eastern Colorado to a thriving six million dollar business.
Soraya Darabi: 21:13 Your brand should never be just your logos and your commercials. To make a brand that scales, make your brand your values and abide by the same code in everything you do. Ultimately, it's our values that help us make tough decisions in our lives. You have to stand by what you value most and what can help you sleep a little more soundly at night.
Soraya Darabi: 21:32 While Noah might be able to plan how his product line will expand, that doesn't mean he can plan how much his business will expand along with it. Just take the giant warehouse facility attached to Pit Barrel Cooker HQ, which is certainly a sign that Noah's business is no longer in the startup days.
Noah Glanville: 21:51 We'll go out into the warehouse. From a military perspective, I want things really orderly because anyone that comes by you get a good feel for how we do things, how our business runs. If someone said that you're going to need a space this big, in the very beginning, I would have said, "I don't know what we're going to put in there." And it already starts to feel small. Sometimes I'm blown away by how much product actually goes out the door.
Noah Glanville: 22:16 I used to be able to nail it on the mark every time with forecasting and all those things, and we still get really close. But even this year, we planned for about 30% growth and will come in over 70%.
Soraya Darabi: 22:29 Congratulations.
Noah Glanville: 22:29 Thank you. Yeah, but it's all great problems to have, but hard to forecast for that.
Soraya Darabi: 22:37 In eCommerce, that's a very hard problem to have because it can be hard to try to capture that tidal wave as it's happening.
Noah Glanville: 22:42 Well, it's funny you bring up wave. I always say there's a huge wave growing; and if we're not all paddling together in sync, we're not going to catch it and we might miss it. A startup to the next chapter, a second phase in the business, is the whole team needs to be paddling.
Noah Glanville: 22:57 We've always been a very simple brand that we're not trying to be everything to everybody. We want to solve a problem, but what are you doing when you solve a problem? You're making people's lives better.
Soraya Darabi: 23:11 That's it for this episode of Business Schooled. Join me for Lesson 2, where we'll hear how Bantam Built tore up their blueprint and found a new market altogether. I'm Soraya Darabi. Thanks for listening. See you next time.
Noah Glanville: 23:26 You getting hungry?
Soraya Darabi: 23:27 Yeah. Already it smells good.
Noah Glanville: 23:29 You're not a vegetarian, are you?
Soraya Darabi: 23:30 I'm not. I'm an equal opportunity food enthusiast.
Noah Glanville: 23:34 That's right. I like that.
LESSON 2: Changing the blueprint
Bob Clarizio: 00:12 These units, there is a loft that goes in as well, so accommodate four people.
Soraya Darabi: 00:20 Four people, it's hard to believe, but I can see it.
Bob Clarizio: 00:23 And we have tiny houses on there and tree houses that are up in the air and stuff like that.
Soraya Darabi: 00:27 You make tree houses?
Bob Clarizio: 00:29 So it's actually a tiny house that we put up on stilts and then we put a faux trunk around.
Soraya Darabi: 00:34 Oh, that's fun.
Soraya Darabi: 00:36 Welcome to Season Two of Business Schooled a podcast by Synchrony. I'm your host Soraya Darabi. I've co-founded two businesses and now I'm the general partner of an early stage investment fund, Trail Mix Ventures. Today we're seeing new businesses succeed more than in the past 30 years. Entrepreneurs aren't just surviving, they're thriving. I wanted to know just how they're pulling it off. So I hit the road to find out. I'm soaking up some essential lessons on business and life from founders who have graduated from their early startup days and hit new levels of success. Hopefully you'll learn a few things too. This is Business Schooled, a podcast by Synchrony.
Soraya Darabi: 01:20 It feels like a museum.
Bob Clarizio: 01:22 Yeah, so this is a collection of various things that we had relocated from the hangers that we took over.
Soraya Darabi: 01:33 One great thing about being a tiny home builder like Bob Clarizio is that you can make tiny homes almost anywhere, like a tiny airport, which is where I first met Bob at Olson Airport, a razor thin air strip that cuts through the cornfields of Elgin, Illinois just outside of Chicago. I was there for a personal tour of the former airplane hanger that he rents for production.
Bob Clarizio: 01:54 A group of these pilots bought farmland throughout the country and created these private little airports that started off for themselves really just to hop through the country on their own private planes. And then as aviation grew and popularity through the 70s and the 80s, at one time there was 80 planes here flying in and out in here all the time. As the economy shifted and went through the several crashes out of the 80s the airports suffered an unsustainable hit. People could barely pay their bills, they weren't looking to fly and have a hobby with airplanes. So the owners of the airport now, he came by one day while we were fixing the place up, I could sense something was off. I said, are you all right? And he got kind of emotional and he said, "I never thought that in my lifetime I would ever see this place so busy again." Sometimes the success of a business has positive effects that we don't even realize and how we affect the people around us.
Soraya Darabi: 02:57 Real people.
Bob Clarizio: 02:57 As I go through town and I talk to different people, everybody's like, Oh, you're at the airport, that's so cool. And just breathing all this life to a place that had for a moment in time been forgotten.
Soraya Darabi: 03:10 That is really touching. I don't say that often. What are these gentlemen building?
Bob Clarizio: 03:17 These are tiny houses or mobile cabins that we build for glamping. Getting away or disconnecting, and also winter camping. So in the Midwest it's a challenge to do any kind of winter camping. I mean it's giving people the opportunity to get out and experience nature in a winter setting is an interesting concept for a lot of people.
Soraya Darabi: 03:45 Measuring on average at under a thousand square feet. Tiny homes have lately received a slew of media attention. Today's tiny home fans as well as builders like Bob love their portability, sustainability, and lower housing costs. Not to mention the feeling they offer of being more connected to the world that's just outside their four tiny walls. A builder at heart and a contractor for many years Bob found himself hooked on tiny homes when he signed on to create one for a television show. Sensing a big opportunity, he threw everything he had into building Bantam Built from scratch. But when the promise of a tiny home revolution met the realities of the market, Bob managed to overcome the odds and pivot Bantam Built into the hospitality business. I wanted to know how Bob outlasted all of the ups and downs of the tiny home game to find himself thriving in a market he never would have expected. So I went to Elgin to find out. It's time to get schooled.
Bob Clarizio: 04:42 I've been a part of construction my whole adult life doing property maintenance management, fix and flipping, general contracting, so home related. And it was just always been a part of me. Whether it's figuring something out, tinkering, wondering how does that work or how does that go together? Just dismantling it in my mind. And to me when this opportunity really showed itself, I was walking out of a property I was touring, office manager calls me, he says, I think this is a prank call, but you might want to follow up on this. So I did follow up on it and it was real. So Tiny House Nation decides to cast us for a show to build the first tiny house.
Soraya Darabi: 05:24 Sorry. Is that a popular TV show?
Bob Clarizio: 05:25 At the time? Yeah, it was the first TV show to ever-
Soraya Darabi: 05:28 Talk about tiny homes.
Bob Clarizio: 05:30 Yeah, talk about tiny homes. I remember seeing it one time I'm like these people are nuts. And then here I am building one. For a contractor, being on TV was a big deal. So we build the first house. I put a Facebook event together for my family members. So here was a piece of work that I could bring my family members to see it. They could see actually what I do and touch and feel it, all that cool stuff. Well, the Saturday morning that we had the little open house, which was supposed to be for like 15-20 people, 200 and something people show up to my shop to see the only tiny house they claimed in Illinois at the time.
Soraya Darabi: 06:02 It's almost like you were a big ball of string or Babe, The Blue Ox statue.
Bob Clarizio: 06:07 Everyone just wanted to see it. For me, it was like I see an opportunity to grow with a very new emerging industry. So I wouldn't recommend this to anybody, but I was doing a fix and flip at the time that I actually refinanced, put the flip on hiatus until the Spring and went gangbusters with whatever bit of money I could. Everyone thought I was nuts because it was so new.
Soraya Darabi: 06:31 Well, that's risky.
Bob Clarizio: 06:32 It was. It was completely reckless.
Soraya Darabi: 06:36 With his house flip on hold and all his money poured into his new tiny home obsession, all Bob needed was for the TV show to air and he'd be in the right place to ride the hype.
Bob Clarizio: 06:47 When we first started in 2015 nobody was really investing money into this, so it wasn't like you could just go out, get seed money and my end game for this company was to develop a product that could be mass produced and sold right next to your run of the mill travel trailer on an RV dealership lot. We built the first house in August. I had now refinanced the fix and flip that I was doing, I closed lease on a 10,000 square foot building and this was all predicated on this fact that when this episode airs, the phone is going to ring. I got a phone call like two weeks after we moved into this big space where we're going to start building all these tiny houses. Yeah, we're pushing the season back to January.
Bob Clarizio: 07:37 So now I realize that my marketing strategy, which was the TV show on the credibility in debuting this premiere tiny house company was now on hiatus. So I had to figure out what I was going to do. So now we have 10,000 square feet, we have a prototype that I built and now it's November and I'm trying to sell these tiny homes over the phone to people that have never seen me, touched or feel the product, or anything. And those that were so excited to come for a tour would show up to a 10,000 square foot vacant warehouse with a tiny house in the middle. And I had done the most irrational thing that anybody I think in my situation would have done, which is liquidate and sacrifice everything on this crazy idea because it spoke to me. In November there was a tiny house show for the very first time in Jacksonville, Florida, and I was 30,000 in the hole.
Bob Clarizio: 08:36 So I knew that it was all or nothing at that moment and all of a sudden instead of feeling bad for myself or cowering under my desk, like I had done a couple of months earlier when I realized I wasn't going to make my truck payment, all of the sudden I was like, I've got everything in this. And I hitched up the only tiny house that we had completed and I drove through the night 27 hours or whatever it took to get to Jacksonville and never been to a show like that. And there was a lot of people, like 50,000 people showed up that weekend. This guy on a golf cart comes up to me and he says, make sure you stick around to the end for the award ceremony because you've won an award. I was like, really? I had a 28 hour drive back to think about it. And I got home and I remember telling my wife, “We won best builder” and I was finally like excited about this and I remember hearing, “Did you sell anything?” And I said, no but - conversation's over like “This is reality Bob”.
Soraya Darabi: 09:36 Bob, how big was your company at that point?
Bob Clarizio: 09:39 At that point, we were probably 10 people strong. Starting a contracting or a service business is one thing. It really doesn't require a whole lot of startup costs or upfront infrastructure. But launching a national brand to manufacture a five to six figure product, I completely underestimated the amount of startup costs and the burn rate and I didn't even know what any of those terms or any of that meant at the time.
Soraya Darabi: 10:04 So you walked into this business not realizing the cost of goods sold, not realizing how much supply chain cost to produce?
Bob Clarizio: 10:11 I could read a balance sheet, I could read a profit loss. I understood the difference between gross profit and net profit. The aha moment for me came when I learned what the number 1.65 meant. When I realized that whatever my raw costs were, if I multiplied them by 1.65 I would get to 40% gross margin. That was the day my life changed.
Soraya Darabi: 10:35 40% margins. I mean those are good margins.
Bob Clarizio: 10:37 From my experience going from hell and back to a successful run right now, you can sustain pretty much any business on 40% gross margin. There'll be earnings at the end of the year. What I didn't know was high level finance projection, cashflow.
Soraya Darabi: 10:56 Like so many entrepreneurs in the early stages, Bob found himself in over his head. He had underestimated his startup costs, his business was in the hole, he needed to get back in the black.
Bob Clarizio: 11:08 So it's now March, 2017 and I found a guy to invest.
Soraya Darabi: 11:14 How?
Bob Clarizio: 11:15 An infobox email came in that was a one liner and it said, I'm interested in tiny houses, could you give me a call? And I called them and I pegged them within like five minutes. And that's always been something that I'm really good at is the selling side of it. Marketing, understanding people and realizing there's different ways to talk to everybody. I always tell people, if you can't sell then don't go into business for yourself, be a number two in line, but find somebody who can sell because you have to sell the vision to your employees. You have to sell the product to your customers and you have to sell the whole concept to investors, banks. This investor came out of left field and I literally said to them, you don't sound like somebody who's going to live in one of these, and he laughed.
Bob Clarizio: 11:57 He said, "Well actually you're right, I'm the third largest private landholder of mobile home parks in the country." And that was a day that really changed everything. He recapitalized the 300,000 in losses that we had and turned it into a debt note. He says, “You need oxygen, so here's some oxygen”. He turned into a really good friend.
Soraya Darabi: 12:16 Wow. Now you're at a place where you can breathe. Oxygen has been infused back into the company. I can only imagine what an amazing relief that must've been for you. Where do you go from there?
Bob Clarizio: 12:28 We failed again.
Soraya Darabi: 12:30 Bob had faced a winding road bringing Bantam Built to life, but now he had reached a turning point that was about to change his business forever. It started with the realization that his market was going dry. There was too much supply and not nearly enough demand, which is not what you want to hear as an entrepreneur. It means you have to find either a way to capture that small demand more efficiently or get out of the market altogether.
Bob Clarizio: 12:54 When I started, I was one of like six maybe 10 manufacturers in the entire country. Most were pretty big companies like there are some juggernauts out there, that was pretty intimidating. It did grow from the 10 or so builders when I started to, I don't know, 70 maybe 75.
Soraya Darabi: 13:14 Wow.
Bob Clarizio: 13:15 There was a whole new set of challenges. We were kind of realizing this plateau with selling factory direct, one-off builds was a challenge. It was a daunting task for a sales team. September of 2017 the gentleman that gave us a loan and recapitalized us at the beginning of the year, had an option, substantial option.
Soraya Darabi: 13:39 Bob's investor had the option to put in three times what he'd already infused into the business and get himself some serious equity. But on the day when Bob and his investor got down to specifics, the investor looked him in the eye and said, I'm out. It was a big blow to Bob and to the team of employees that had stood by him.
Bob Clarizio: 13:57 You're talking about a group of people that paychecks didn't always clear and there was highs and lows, high, low, high, low, high, low. And people stop believing you and crisis after crisis. I was like the only thing that I know was I could do this so much better.
Soraya Darabi: 14:15 So then what did you do?
Bob Clarizio: 14:16 I walked in one day and said, we're going to work through the rest of the week we're going to finish this project and we're going to take a break. I don't know if it's going to be a week or if it's going to be a month, if it's going to be forever. But I needed a new strategy. I cleaned house and I laid everybody off. As far as I was concerned, I now had the opportunity to answer the ultimate question, which is “if you could do it all over again, what would you do?”
Soraya Darabi: 14:42 Bob knows a successful business isn't built overnight. Synchrony's consumer financing solutions, digital technologies and data insights can give you the support you need to give your business a strong foundation and help you reach new stages of growth. Every day, Synchrony is changing what's possible for people and businesses. Learn how we can help change what's possible for you at synchrony.com. It's safe to say that Bob had hit a point of no return. He had let his team go and put his entire business on ice without knowing what his next move was. Then one conversation changed everything.
Bob Clarizio: 15:19 And then one day I was talking to somebody, "Oh, you build tiny houses?" I said, yeah, and I don't know why I heard it a thousand times, but that day it clicked. They said, "Oh, I can never live in that, I'd stay the night though, it's too bad there’s no hotel for that." That was it. That's all I had to hear. I remember running into the office. I said, I'm going after the hospitality industry and we're going to scale through mass production. That's all I know right now and I just started cold calling every hotel company that I could think of.
Soraya Darabi: 15:53 And that clicked.
Bob Clarizio: 15:53 It clicked. You could scale these tiny homes for a third the cost of what any major hotel is going to cost to build and if it doesn't work out in the location that you're in, you move the caravan to a location that's going to work. I got a phone call back a couple of days later and we did the first all natural water park with tiny houses and tree houses and all this fun stuff and then within a couple of weeks we got another hospitality contract. And now we have a very exclusive client that believes in what we're doing and they've grown from three locations at the beginning of this year to nine locations and are on projection for another 11 next year, and we crank out eight of these little tiny houses for them a month. It's been a challenge to scale, but it was the right move.
Bob Clarizio: 16:42 The bottom line is all of us involved, whether it's employees or customers, we were all right, all along. Just we had to figure out a strategy that worked best for us. I can't really appreciate today without thinking about all the things that happened yesterday. In today's light, I'm overwhelmed with gratitude because one, I never gave up and two, I kept moving. It's really hard for failure to hit a moving target. You could take a break, you take a hiatus, but if you quit, regret lasts forever. I never lost sight of where I was going. I just got lost along the way a couple of times.
Soraya Darabi: 17:18 Now you're at a new point in the business, two locations, more polished supply chain. At this point you said you're making what, eight homes a month?
Bob Clarizio: 17:27 Yeah. To think that in March we had no building, no people and now there's 20 people in two locations in six months. By the end of 2019 we'll have done 50.
Soraya Darabi: 17:39 And in your projections for 2020 and beyond, are you doubling year over year?
Bob Clarizio: 17:45 Yes, for the next three for sure. When I think back to the first couple of years of this business, any given month we would do three to four houses maybe. And they were tough because there was so much time and effort put into the fine details and every single one was different and it was like trying to catch snowflakes with a net. It was like impossible to execute. So now to have a process and a system and be able to make projections based on real contracts, real numbers, we can put budgets together, we can plan, we can hire, we can grow. I don't know what the ultimate end and finish line looks like, but I can tell you that we have a process and we have a core group of people and infrastructure now where scaling a manufacturing company like this is possible.
Soraya Darabi: 18:43 The hype cycle in business can take on a life of its own. A new product comes out, there’s a lot of media swirl, customers come knocking but then they vanish as quickly as they appeared. Bob found out why the hard way. It's something that we can all learn from: never confuse the hype for the market. The people who come knocking at your door because of the hype, are never guaranteed to be the same ones who will ultimately buy what you're selling. Your customers, in other words, aren't always who you think they are. It's up to you to find your audience. If a new business relationship turns out to be the wrong fit, it's best to move on and find someone whose needs align with yours, even if it means taking a path you didn't see coming.
Bob Clarizio: 19:25 So we're getting these units ready to ship out. Once they're finished at the airport, they come here for final inspection and then-
Soraya Darabi: 19:32 For the painting, I see different colored panels.
Bob Clarizio: 19:34 Yeah, and any fine tuning that needs to happen. And then from here, transporters come, they hitch up the units and ship them off to where they need to go. These are actually going to LA.
Soraya Darabi: 19:46 How does it feel to be standing here knowing that the future is bright?
Bob Clarizio: 19:49 It's a really cool feeling to know that four years ago we didn't have enough money to even bring a tiny house to a tiny house show. The ability to be as resourceful as we've been gives me the confidence to persevere because that's one thing that we have no lack of, is the ability to be resourceful and think on our feet.
Soraya Darabi: 20:14 That's it for this episode of Business Schooled. Join me for lesson three, where we'll hear how Mi Goldondrina is leaning on old traditions to create new retail trends. I'm Soraya Darabi thanks for listening. See you next time.
Bob Clarizio: 20:32 Yeah, so from watching all this stuff being built, probably makes you want to build something yourself. We set up a little project for you.
Soraya Darabi: 20:39 How kind? It's a bird house. I'm building a miniature tiny home, I took woodshop in junior high.
Bob Clarizio: 20:47 So I want you to just shoot a nail right in-
Soraya Darabi: 20:52 Right here?
Bob Clarizio: 20:53 A little higher, right there.
Soraya Darabi: 20:55 Oh, this is a very powerful tool.
LESSON 3: Dressing the part
Cristina Lynch: 00:03 So what do we say?
Students: 00:04 [Spanish 00:00:00:05].
Cristina Lynch: 00:06 And what is pants?
Students: 00:07 [Spanish 00:00:06].
Cristina Lynch: 00:10 It's a pair, right?
Students: 00:10 [Spanish 00:00:09]?
Cristina Lynch: 00:10 [Spanish 00:00:11].
Students: 00:12 Yep.
Cristina Lynch: 00:12 So this is our production room. Hola!
Students: 00:15 [Spanish 00:00:16].
Soraya Darabi: 00:18 I feel like it's very eclectic, but kind of organized chaos in some way.
Cristina Lynch: 00:23 Thank you.
Soraya Darabi: 00:23 I mean beautiful art that clearly has homage to Texas and Mexico.
Cristina Lynch: 00:29 My parents' home is very Mexican. You walk into the house, and it's like telenovelas are on….. There's Mexican art everywhere. We're cooking beans. I mean, it feels like Mexico in Texas.
Soraya Darabi: 00:42 Welcome to Season Two of Business Schooled. A podcast by Synchrony. I'm your host, Soraya Darabi. I've co-founded two businesses, and now I'm the general partner of an early stage investment fund Trail Mix Ventures.
Soraya Darabi: 00:54 Today we're seeing new businesses succeed more than in the past 30 years. Entrepreneurs aren't just surviving, they're thriving. I wanted to know just how they're pulling it off, so I hit the road to find out. I'm soaking up some essential lessons on business and life from founders who have graduated from their early startup days, and hit new levels of success. Hopefully, you'll learn a few things, too. This is Business Schooled, a podcast by Synchrony.
Cristina Lynch: 01:22 So these pieces are actually from a trip to Puebla I took recently. They're one of a kind. So they're super special.
Soraya Darabi: 01:29 So pretty. Mi Golondrina’s retail store is brimming with so much Mexican art and craftsmanship that I feel like I’m transported. Founder Cristina Lynch hasn’t just made a place to shop for beautiful dresses. She’s built a community space where you can connect with the culture, and where her team does everything together, from early morning English lessons, to lunch at their long communal table. It’s kind of like a world unto itself.
Soraya Darabi: 01:54 Do you have a favorite piece?
Cristina Lynch: 01:55 Right now, I'm really excited... We can kind of walk over here. We were talking about pre-Hispanic clothing and how a lot of these pieces were inspired by the Spanish. These pieces have been around for over 200 years. This is a completely hand-woven fabric. And yeah, they have great pockets. And, this belt is actually from a different community, and this is hand-woven as well. And, I thought they would be fun to style together.
Soraya Darabi: 02:24 They are. You know, I've never really been to a shop where you can actually shop by region.
Cristina Lynch: 02:30 Yeah, so that's really important to me. So this region is Aguas Calientes, and this lace detail they cut on either side, pull the threads, and then weave the threads together to create different designs. What's interesting is this technique is actually the same as this technique. You just have two different communities making it.
Soraya Darabi: 02:52 A graduate of New York's fashion and startup scenes, Cristina Lynch was inspired by her mother's native Mexican culture to start a women's clothing line that would honor its traditional embroidery. Cristina has made a name for her company with handcrafted pieces by artisans in Mexico. Each garment has a story and all these stories add up to some serious brand value. She first sources the carefully handmade pieces from artisans throughout Mexico and then they're altered by her team for sale in Texas.
Soraya Darabi: 03:19 As an entrepreneur, Cristina clearly has a knack for storytelling and building community. I wanted to know how she could keep playing to her strengths while wearing more and more hats as the CEO of a much-loved rising fashion brand. So I went to Dallas, Texas to find out. It's time to get schooled.
Cristina Lynch: 03:39 Nathie is ironing one of our traditional dresses [Spanish 00:03:44].
Nati: 03:44 [Spanish 00:03:45].
Cristina Lynch: 03:45 And one thing that's really important is making sure that we get these pleats. [Spanish 00:03:49].
Nati: 03:50 [Spanish 00:03:52].
Cristina Lynch: 03:54 A lot of our customers actually will come in, and bring in pieces and we will add the pleats back for them. So it's a little free service we give to our customers.
Soraya Darabi: 04:05 I was curious what got Cristina hooked on embroidery in the first place. I always want to know where entrepreneurs get their inspiration from, because the idea for a business can come from anywhere. Sometimes, you're not entirely sure if an idea is right, but sometimes? You just know.
Cristina Lynch: 04:21 I always wanted to start a business and so many founders are scared to write a business plan, because they don't know exactly what it is yet. I knew I was inspired by Mexico and so I would read all these books at my parents' home and one of the books I was reading showed a beautiful floral embroidery. And so, I knew I wanted to start with that, but you can do a lot of things with floral embroidery.
Cristina Lynch: 04:45 My mom has been collecting art from Mexico since she was 18 years old and she has books, upon books, upon books, and this one had this floral, embroidered dress, but it is exquisite. You can see that there's detail within the flower. There's an outline of the bird.
Soraya Darabi: 05:05 It's practically 3-D, like the flowers are coming out of the dress...
Cristina Lynch: 05:07 Yes….
Soraya Darabi: 05:08 ...out of the material, like they're blooming right in front of you.
Cristina Lynch: 05:10 Exactly, and Faustina actually is the artisan who did the piece that was in the book. I'm not sure how old she is, but I visit her every time I go and she takes about a year to make one dress. And when I ask her for one, sometimes it sells before I come back.
Cristina Lynch: 05:28 But the first time I went to Oaxaca, I didn't understand that there are hundreds and hundreds of women who know how to do it. Their grandmothers know how to do it, their daughters. I think also meeting with her made me realize that we needed to have a certain level of quality, so that people would really appreciate how fine this is. These aren't made in a factory. The dress actually goes through three communities before it arrives back to the workshop. So one community does the hand embroidery. One community does hand crochet on the neck line, and then it's all sewn together hand-washed, and sent to our workshop here in Dallas where we press all the pieces, check them, maybe add a sleeve.
Soraya Darabi: 06:08 Cristina's journey to create Mi Golondrina began 2000 miles from Mexico. Her family history had just started to inspire her to look for more craft and authenticity in the world of fashion.
Cristina Lynch: 06:18 I went to school in New York, I went to NYU. While I was in school, I started realizing how much I liked the fashion world, and that's because my mom actually had a clothing business with her sister. My mom just has all these great stories of going in and meeting with the buyer, and the buyer loving it, needing a hundred units. And her running to Mexico and trying to figure out how to produce it. I think it's funny when I've noticed that when your parents do something, you kind of are doing your own thing….
Soraya Darabi: 06:50 ….but you're absorbing it.
Cristina Lynch: 06:51 But you're absorbing it. And so anyway, I have always been very inspired by my mom. And so my junior year of college, I started interning in the fashion industry. So the first job I was very lucky to have was working in sales at Oscar de la Renta.
Soraya Darabi: 07:05 And they're known also for their craftsmanship-
Cristina Lynch: 07:07 Oh my gosh, yes. There was a consultant there at the time who showed us some videos on how the pieces were being embroidered. I think that started kind of playing in my mind and I started thinking about the pieces that I had grown up seeing, and how it's all art. And then I went to go work for an internet travel company. It was a young team. People would skateboard to work. It was totally different, and everyone there wanted to start something. That was really exciting for me, and I think kind of marrying that with fashion, that's when I started to call my brother about wanting to start this business, Mi Golondrina.
Soraya Darabi: 07:44 Beautiful name. What does it mean?
Cristina Lynch: 07:46 So Golondrina is a swallow. It's a bird. Growing up, going to my grandfather's ranch, there were golondrinas all over the ranch and it's a migratory bird. So in my mind, our golondrina flies to all the different communities in Mexico.
Soraya Darabi: 08:00 I liked that you use the word migrate. This bird migrates because you're also talking about a brand that's constructed in two countries.
Cristina Lynch: 08:07 This is 2012, and I know that now you see a lot of things in the home world that are Latin-inspired, but at the time there really weren't. So I started thinking, "You know what? It'd be great to make this luxury line that's Mexican inspired." I definitely could've started the business in New York, but I don't think it would have been the same.
Soraya Darabi: 08:29 It's not as authentic.
Cristina Lynch: 08:30 So, yes. So, I moved home. I moved in with my parents.
Soraya Darabi: 08:34 How old were you at the time?
Cristina Lynch: 08:35 I was 24. It's really scary in the beginning when you're starting something and you don't know exactly what it is. I researched more and we did an initial trip to Mexico, bought a lot of different embroideries. And then, met with my mentor here in Dallas. And I said, "I'd love to do something like this, but on bedding." I was so nervous.
Cristina Lynch: 09:00 And he said, "That's great, let's do it." So that was really the beginning. He loved the idea, and I think that he was very matter of fact, he was like, "Let's do this." And this is our head of production. And through them I really learned more about what it takes to finish something in a luxury way. They have really skilled seamstresses that would really make sure that everything just looked so perfect.
Soraya Darabi: 09:31 So, take me back to the beginning.
Cristina Lynch: 09:33 So, I knew we were going to be launching June 26th, 2013 and I was so nervous. We were launching decorative pillows, euro-shams, duvets. And I mean, I had put so much time into these pieces. It's funny now to think about how few units there were. And so, we set it all up. We send this beautiful invitation. There are mariachis there. And I still feel like this before we have a party or a pop-up, you know, there's this worry of "How many people will come?" And gosh, I was so lucky that everybody wanted to come to a Mexican party with margaritas. Who knew?
Soraya Darabi: 10:13 Who knew? That doesn't sound fun at all.
Cristina Lynch: 10:16 Exactly. We steamed all the pillows, and just made sure everything looked perfect. And then, I had a collection of dresses and tops on racks nearby. We had put ribbon on the ends of the racks and I just remember thinking like, "If those sell, that's great, but really it's just telling the story." They sold out really quickly and people were grabbing them. And a lot of people in Texas have seen dresses that are made in Mexico, but I think it was about the finish and kind of how we treated them, and the light that we put them in. But the excitement around the clothing was fantastic. It was just so cool to see and that's when I knew, "Okay, maybe this is going to be more of a clothing company."
Soraya Darabi: 11:00 Cristina's launch party turned out to be a revelation. It showed her there was a great potential in Mi Golondrina if she was willing to transform her bedding line into a clothing company. Once Cristina made that change, the business grew into that classic early startup phase where you're doing everything from scratch, finding solutions on the fly, and making the best of whatever resources you can get your hands on.
Cristina Lynch: 11:20 We had a lot of dresses and I actually had them all photographed, and put them online, so that whatever didn't sell I would say on Instagram, "Okay, now these dresses are available online."
Soraya Darabi: 11:30 Social media has been an integral part of your brand-building.
Cristina Lynch: 11:33 Yes, and I knew the photo component of the business was a really expensive part. I just thought there had to be a way kind of around it.
Soraya Darabi: 11:41 I think it's expensive because typically you book a studio-
Cristina Lynch: 11:43 Exactly.
Soraya Darabi: 11:43 And a stylist, and maybe a creative director.
Cristina Lynch: 11:46 Totally.
Soraya Darabi: 11:46 And a photographer, and then you retouch the photos later.
Cristina Lynch: 11:48 Yes! I asked my friend who had done our lifestyle photography for us, if she knew way around it. And, it was basically just a white piece of paper that we'd unroll and we had a $400 camera and a little stand in front of the paper. And then, one of our seamstresses would actually take pictures of me. And it was just this little hack that I was like, "Oh, yay! We can do this. This works."
Soraya Darabi: 12:11 That is scrappy.
Cristina Lynch: 12:13 I actually modeled all of our product when we were getting started, and all of our pieces were one of a kind. So we would shoot 60 to 100 dresses in a row, and I would just throw something on as quickly as possible and try to upload it.
Soraya Darabi: 12:27 Mi Golondrina soon came to life in its own retail space where customers could connect with the brand in a way they couldn't online, touching and feeling the craftsmanship, and getting the stories behind each garment straight from Cristina. But that first space in the back of a strip mall wasn't offering the experience that Cristina dreamt of.
Cristina Lynch: 12:45 So we did this whole pre-order business, and then I was receiving dresses at this office that I had found. And, slowly friends told friends that, that's where I was receiving inventory, and so women were coming to shop. It was this slow evolution. Our office space became a store, but it wasn't the store that I had envisioned. We have this gate and they actually had to punch in the key code, which was a little embarrassing and not the customer experience we wanted to have. But, at the same time it was like we are this hidden cool thing to come see.
Cristina Lynch: 13:18 That was when I think I got really excited about this in-store experience, and I love being with our customers. You're making friends and it's just you're starting to create a community. I quickly started to realize that this whole model of receiving things in a box and just selling it to whoever arrives is not going to last forever. Right? You have to turn into a real business, which is really scary in the beginning.
Soraya Darabi: 13:47 When you run a business like Cristina, you want every detail to be crafted just right. Synchrony provides the solutions that can help you grow your business the way you want, including consumer financing, digital technologies, and data insights. Every day Synchrony is changing what's possible for people and businesses. Learn how we can help change what's possible for you at Synchrony.com.
Soraya Darabi: 14:15 Cristina got Mi Golondrina off the ground, but wound up wearing too many hats. When you're a founder and you're stuck in the mode of "I have to do everything myself", then growth can be frightening because it feels like even more responsibility for you to take on. But for Mi Golondrina to grow into a real business, something had to give.
Cristina Lynch: 14:34 I knew that we had something, but that it was very unorganized and that we needed more strategy and if we wanted to grow. I was so excited to turn this into a real company, we would need to make a hire.
Soraya Darabi: 14:48 How many hats were you wearing at that time?
Cristina Lynch: 14:50 Oh, I was wearing a lot of hats, but at the same time, I don't think I was spending as much time on the operations. I was just kind of doing. So, I was selling, I was packaging. I was driving dresses to seamstresses home so that they could finish them. I spent a lot of time in the car. I was checking pieces, making sure that they were right and invoicing people, uploading products. My friend said, "You need to meet with this woman. She's so smart and she's really interested in what you're doing." So, that was Diana.
Cristina Lynch: 15:24 I remember when I walked out of that coffee and she was asking me all these questions about the business. I was kind of making up answers as I went, because we didn't have a real strategy yet. She had gone to Stanford Business School. She had been a consultant, and she was helping this retail business with their strategy as well and was such a good big-picture thinker. I loved that. I knew I needed her help, especially with operations. So that was the first big hire, most thoughtful hire.
Soraya Darabi: 15:56 She'd become your COO?
Cristina Lynch: 15:57 She's our COO. So, she was able to really take a business that is getting started and just turning this into a real company. And she knew how to look at this business from a big picture perspective instead of being in it, surrounded by all of it and not knowing exactly what direction was the best to move in.
Cristina Lynch: 16:19 What Diana really helped with was those big decisions, where if you're not forecasting and really understanding how your business is growing, becomes almost debilitating. She helped organize our books. She helped us come up with processes and we're really able to see like, okay, what will this business look like at the end of the year? You know, when Diana joined we had to be smart, also about the way we were growing and how to keep growing.
Soraya Darabi: 16:46 Hiring Diana brought an entirely new level of structure to the company and allowed Cristina the time and energy to do what she does best, telling stories of craft and heritage everywhere the brand shows up.
Cristina Lynch: 16:59 That's really when we started doing more and more pop-ups and taking the line on the road. And now, our pop-ups have really evolved, so we do extended stays. So, we've done from one month to three months. In San Antonio, we created our own store. We’ve got to a point where we could create a store in a day. I mean it's a very long day. We bring lots of art, we bring racks, rugs, whatever we need to do to really make the space feel homey.
Soraya Darabi: 17:30 When you made the decision to bring Diana on, how big was the company then and what has it evolved into?
Cristina Lynch: 17:36 So it was really small, then. We had one salesperson and about three seamstresses. And now, gosh, we're a team of about 24 and our production team is around 15, and then we have the front office.
Soraya Darabi: 17:58 When people walk into your shop, they immediately grasp the story. It's so visceral, but talk to me about how you try to replicate that experience online.
Cristina Lynch: 18:08 I think it's more important, like you say, than ever to really tell stories. All of our pieces have really strong stories behind them and also they represent communities. So it's really, it's not just something that we'd like to do as a company. It's, in my mind, what we have to do, and we have to do it right. I knew it was important to tell these stories and really tell the significance behind each of the pieces.
Soraya Darabi: 18:36 With attention spans so low when people are browsing websites online, is it challenging at all to communicate that authenticity using digital mediums versus a conversation like the one you and I are having now?
Cristina Lynch: 18:48 Definitely. And I think... And, we talk about that a lot is, "How do we show the artisan who made a piece fast enough that the time that went behind the piece is understood?" We're redeveloping our website right now, and a big part of it is telling the artisan's story, and you know, how many hands touched this piece. We just hired our e-commerce team within the last year and a half, and I think that they can really grow the site in a way that we weren't capable of before. So, we'll be able to invest in marketing and really test things. So, I think the next five years we'll really push, obviously for growth, but not in scaling too quickly.
Cristina Lynch: 19:26 I think we've been really fortunate in that when we started we were a very unique product. I definitely don't want our mission to be to try to have the lowest price. We're trying to connect with customers who understand the value of this. So far, from what I've seen, when somebody tries to make something we're making by machine, it just can't get close to our quality. It just... It really can't.
Soraya Darabi: 19:50 Your quality has to be handmade.
Cristina Lynch: 19:51 I think you can really feel it and I'm not scared of looking at competition. I'll study it, understand, "Okay, how do we make sure that our customer knows we're different, and that a lot of love went into making this piece?" And to me, if you just touch two pieces, you can feel it right away. It's creating a product that people love, you're focusing on your customer, but then a lot of that competition is not thinking like you. And they're trying to scale. And so I feel like if we can grow strong and smart, it's just so much better than growing too fast. And, you see it when people grow too fast, the product gets hurt.
Soraya Darabi: 20:30 Thinking that you have to do it all is a classic founder mistake. Stories of founder flameout make headlines all the time. There's plenty of cautionary tales about leaders who learn the hard way why the recipe for long term success often means giving up control. The wearing of many hats can become second nature to entrepreneurs, but ultimately you wind up hitting the same kind of turning point that Cristina did. Enter Diana, the new hire with the right experience, who let Cristina devote her strengths toward growing the business.
Soraya Darabi: 20:58 If you want to scale your business, scale your impact, and you can't scale your impact if your attention is divided. It means learning to delegate. Have the self awareness to know what you don't know and the courage to say, "I don't need to know everything. What I need to do is double down on what I'm really good at." Don't focus on doing it all. Focus on doing it right.
Soraya Darabi: 21:25 After my visit to the store, Cristina took me to her family home to meet a big piece of her own story, her mom. With Cristina expecting her first child any day, family becomes even more important to her business because it means being able to let someone else take care of your baby. And in this case, that's Mi Golondrina. As Cristina's mother volunteered to keep making the trips to Mexico that sustain the business while Cristina is pregnant. And when mom steps in during those crucial Mexico trips, it's another great example of Cristina being able to succeed by delegating responsibility to someone she trusts.
Soraya Darabi: 22:02 Hi, mama! How are you?
Cristina Lynch: 22:05 This is Soraya.
Soraya Darabi: 22:05 I'm Soraya. So nice to meet you.
Mrs. Lynch: 22:08 So nice to meet you!
Soraya Darabi: 22:10 This art is stunning. I've never seen this many colors in my life, in one place.
Mrs. Lynch: 22:15 Yeah. The art came from... Well, living in Mexico, but also from my mother. My mother... We would go to a market where they had flowers and all...they would have beautiful pots, and I believe that's where it all started.
Cristina Lynch: 22:35 I know that Mi Golondrina is in such good hands. I mean, her going to Mexico means so much to the artisans that we work with. They've known her since we started, and they love her. She's a creative perfectionist. That's what I think Mi Golondrina really needs. And especially as we're developing more and more product inflections and really staying current. But like you say, really making sure that we're still always knowing how important the artisans’ styles are. There's no one more perfect to do that than my mom.
Soraya Darabi: 23:06 That's it for this episode of Business School. Join me for lesson four, where we'll hear how With Clarity is disrupting a traditional industry in a few surprising ways. I'm Soraya Darabi. Thanks for listening. See you next time.
Mrs. Lynch: 23:22 So I started designing clothes in Torreón, and I came to visit here, and they were doing shoulder pads. So, I go back to Torreón, and I start putting shoulder pads on my blouses. Everybody thought I had invented shoulder pads. But, so I didn't say anything. Isn't that terrifying?
Cristina Lynch: 23:45 So great.
Soraya Darabi: 23:45 That’s funny.
LESSON 4: Polishing a gem
New York, New York
Soraya Darabi: 00:08 Oh my God, this is secure.
Anubh Shah: 00:11 Sorry. The first door has to close before the second one can open.
Soraya Darabi: 00:13 Hi.
Anubh Shah: 00:13 So nice to meet you.
Soraya Darabi: 00:23 Anubh, I'm Soraya.
Anubh Shah: 00:23 Very nice to meet you, Anubh. We're so sorry for trapping you in the corridor.
Soraya Darabi: 00:27 Not at all. That's extra secure.
Anubh Shah: 00:29 Yeah, a security feature. So, welcome to Fort Knox.
Soraya Darabi: 00:32 Welcome to Season Two of Business Schooled, a podcast by Synchrony. I'm your host, Soraya Darabi. I've cofounded two businesses and now I'm the general partner of an early stage investment fund, Trail Mix Ventures. Today, we're seeing new businesses succeed more than in the past 30 years. Entrepreneurs aren't just surviving, they're thriving. I wanted to know just how they're pulling it off, so I hit the road to find out. I'm soaking up some essential lessons on business and life from founders who have graduated from their early startup days and hit new levels of success. Hopefully, you'll learn a few things too. This is Business Schooled, a podcast by Synchrony.
Anubh Shah: 01:18 So, where we're taking you now is basically a couple of areas where we do 3D scanning and 3D printing. This is pretty unique, you're going to see models that, literally, we can take our rings and put them on, scan them and create 3D versions of them as fully digitized and they use basically different infrared lasers and other things to do that.
Soraya Darabi: 01:35 Did you know anything about infrared lasers or 3D printers before this?
Anubh Shah: 01:38 Not a thing.
Soraya Darabi: 01:41 As an investor, I get a lot of pitches from startups trying to disrupt a traditional industry with a new piece of technology. With Clarity is one of the few companies doing it in the engagement ring space. Founders Slisha Kankariya and Anubh Shah have taken a highly intimidating product and made the customer experience more flexible, more personalized and more transparent. Customers learn how to choose the right diamond and design their own setting online. Then, With Clarity sends them a 3D printed prototype of their ring that sparkles just like the real thing so they can try it out at home before they decide to buy. Once the customer is happy, With Clarity ships them the real thing. What intrigues me about their story is not only how they're disrupting a traditional category, but how they've managed to use a better customer experience to cut through the competition and grow their business over 9,000% in the last three years. To find out how, I paid Slisha and a Anubh a visit in New York City's Diamond District. It's time to get schooled.
Anubh Shah: 02:41 So, we'd love to show you where some of the production work happens. Right this way, please.
Soraya Darabi: 02:45 Please.
Anubh Shah: 02:48 Everyone is here because we think it's very important for our groups to be cross functional, so that way they can ask each other questions. For example, this is Claudia, our head gemologist.
Soraya Darabi: 02:57 Hi Claudia.
Claudia: 02:59 This company has grown so fast that it's really nice to be on the boat, riding the waves, and being part of the growth.
Soraya Darabi: 03:06 Did you always love gems growing up?
Claudia: 03:09 When I was a kid, I was playing with marbles. As I got older, I was collecting rocks and pebbles off the beach. I've been obsessed my whole life. When I go home, I watch the jewelry channel. I stick my nose up against the glass of jewelry stores. I'm like a kid in a candy store.
Anubh Shah: 03:28 So, now we're going to show you some printers in action so you can actually see how jewelry is getting made. Don't forget we have to ... we're trapped so we have to physically get out. Here we go.
Anubh Shah: 03:41 I actually have experience of cutting diamonds. I learned it when I went overseas to India to make a transition from my prior career to this one.
Soraya Darabi: 03:47 So you left finance, and you went to India, and you learned how to cut and analyze diamonds?
Anubh Shah: 03:53 It was wild. Yeah. So I just ... one day I thought if I was going to get into this business, I would just immerse myself and start from the ground up and... so dropped everything, went to a remote part of the world where I didn't speak the language.
Anubh Shah: 04:07 Just walk through. Now you are an expert at this with the interlocking door system.
Soraya Darabi: 04:14 The space where With Clarity does its 3D scanning and printing is a fascinating blend of old school diamond district workshop and 21st century tech. As we come in, there are multicolored rubber molds for jewelry mockups lining the shelves and safes filled with precious metals tucked into every available corner. Anubh introduces me to one of the technicians, Greg, who happens to sport a pretty spectacular waxed mustache. First, Greg shows me the 3D scanner, which is used to scan objects like engagement rings to make digital renderings. It's basically a metal arm that whizzes around an object snapping photos and sending the data to a computer.
Greg: 04:50 This is part of the technology that's really changed everything for us. So, up until very recently, you had to have your item done in the material that would cast. It had to be made out of preferably wax. Now we can essentially take a scan of just about anything, a piece of wood, an acorn, whatever you've got, we can then make this into a digital file that can go on the machine. So, that's kind of a big deal. I'm just going to give you an example of how that looks when it's working. So it moves the piece around and sort of takes different snapshots of it, building as it goes, a complete profile of the whole piece.
Soraya Darabi: 05:32 This is really cinematic.
Greg: 05:33 You see every time it moves it picks up more parts as it goes.
Anubh Shah: 05:36 And what's amazing is the amount of detailing, you'll see that it's spinning in every which direction you can think of. It's fully up, down, north, south, east, west, side to side, upside down and the goal is to capture all the details.
Soraya Darabi: 05:50 After the scanner, we check out the 3D printers. The printers look like, well, like a printer you'd see in any office except they're shooting wax instead of ink.
Greg: 06:02 Okay, so you're looking at a plate, which is about the size of a legal pad. That's an aluminum plate. The wax is essentially sprayed down on there like you would an inkjet printer and it just kind of goes out of a couple of different nozzles. There's hundreds of different jets inside of there and they spray it out .... every time it passes over it is spraying wax out. There is no mold for any of this.
Anubh Shah: 06:30 So what's amazing about this is sort of the customization. If somebody, for example, wanted a completely different shape or a completely different design on the top versus the bottom, both can be done. You just have to kind of manipulate the file, change it, tweak it, design it the way that they want to see it, that customer, and you just combine them that way.
Soraya Darabi: 06:47 It's easy to see why 3D printing was such a game changer for With Clarity, because it brought the customer into the process in a whole new way. I wanted to know how they came to see this technology as the key to breaking into the business. So Anubh and I made our way across the diamond district to meet up with Slisha.
Soraya Darabi: 07:05 This is where the magic happens?
Anubh Shah: 07:07 Yeah. Well, this is more of a conference room setting.
Slisha: 07:11 Hi, Soraya, Slisha, so nice to meet you.
Soraya Darabi: 07:14 Slisha, so nice to meet you.
Slisha: 07:14 Welcome to With Clarity.
Soraya Darabi: 07:15 As well as being business partners, Slisha and Anubh are married and though Anubh's family has been in the jewelry trade for generations, he got his start in finance. Slisha knew a thing or two about weddings and the online customer experience, having spent time in the world of wedding startups before she and Anubh decided to strike out on their own.
Soraya Darabi: 07:35 Every startup is a roller coaster and every roller coaster is unique and so take me back to the beginning.
Slisha: 07:40 The story begins on a little bit more of a personal note, I guess. When I met Anubh he was in the finance industry, he had no inclinations of being a part of the jewelry industry and I was working in the marketing field at a wedding industry related kind of company. But then the entrepreneurship bug kind of bit both of us, and this was an idea formulating in our heads right around the time that we got engaged. And by the time this idea came into fruition of forming With Clarity, we were just newlyweds and we sat in this tiny little office corner sharing a single desk because that's all the space we had and decided that we wanted to kind of disrupt the diamond engagement ring buying process by blending the best of online and offline and starting a company that not only we could feel like we resonated with, but could also feel like it was an inspirational brand, not something that was aspirational, like many of the other jewelers you might encounter in your jewelry buying journey.
Slisha: 08:41 At the very beginning we, you know, were really scrappy and we didn't want to spend money or time getting things that we felt were unnecessary. So I had my little laptop and I would sit on top of the safe right next to Anubh, so we could see and hear and be with each other every minute of the day, working on this business. We'd constantly be sharing ideas, feedback, you know sometimes differences of opinion. Of course that happens.
Soraya Darabi: 09:04 How did you hear over and over and over again in entrepreneurship is that a co-founding relationship is like a marriage but it's very different in practicality to what a marriage looks like in real life. So how do you two strike the right balance and how do you complement one another?
Slisha: 09:20 We were lucky in that we got married and started the business at the same time, and by that I mean there were no gaps in terms of adjusting to each other, in terms of adjusting to working together because this is what we've been doing since the beginning and so everything we do in life, we kind of approach it like a partnership where we can both contribute different skill sets, values, thought processes, organizational skills, et cetera.
Slisha: 09:44 We found there was kind of a gap in between the really high level jewelers and then the ones that are like kind of discount jewelers or not so refined, I would say. And in that middle layer there was a couple of retailers, maybe two or three that exist, but they weren't able to carve out a personality for themselves or a unique method of shopping or address any doubts for the customer beyond just showing them pictures, prices, products, and becoming this kind of marketplace. So what makes With Clarity different is our home preview, which is customers having the ability to select two of their favorite rings styles from our catalog, which are then 3D printed, computer modeled and customized for their preferences based on metal color, diamond carat and size. I think for us, sending out this home preview is kind of like the gloves come off, play with the ring, touch it, feel it, try it on, take it for a test drive, go get a cup of coffee with it on, see how it fits into your life, not just how it looks to you in a showcase.
Slisha: 10:44 Engagement rings are such a special and unique buying journey, so for us it's a unique challenge to win over both members of the audience.
Soraya Darabi: 10:54 From the beginning, With Clarity was focused on selling to some pretty tough customers, namely the happy couples who are going to be scrutinizing their purchase from every angle, and a different type of tough customer was at the center of one of the biggest turning points the business would ever face.
Anubh Shah: 11:10 Yeah, I'll tell you, so right around the time that we had gotten married we had launched the company and we didn't have enough money to do all the other things that you need to do to get customers. We were naive. We had the, “if you build it, they will come” attitude.
Anubh Shah: 11:23 We had a lot of failures along the way. We had a lot of life lessons. We learned a ton of things. You know, I remember one incident where now as we were starting to corporatize the company, we were establishing board of directors, other things that we never even knew existed or were required. We were about one hour, one and a half hours into the board meeting where a very strong investor in the company, he gets up and he just says, "This is not a business." And if you can imagine the pit in my stomach, the ball in the throat where I was like, I just spent an hour and a half telling you about how amazing we're doing and how much growth we're achieving and you just told me that this is not a business. And of course I asked why, and he said, well, look at your unit economics. Where does this land you in 12 months? In 18 months? What happens then?
Slisha: 12:05 I remember it was in their offices, so it was kind of on their home turf, and which is right down here a couple blocks away. So on our walk over to this meeting, we would always psych ourselves up and say we're doing great and we have to be confident and showcase our vision. And on our way back from that meeting that day, it was all about, oh my God, what are we doing?Soraya Darabi: If you run a business like Anubh and Slisha, you know it’s important to offer a customer experience that truly shines. Synchrony offers the consumer financing solutions, digital technologies and data insights to help businesses make customer relationships that last a lifetime. Everyday, Synchrony is changing what’s possible for people and businesses, like our partner, With Clarity. Learn how we can help change what’s possible for you at synchrony.com.
Soraya Darabi: 12:56 Welcome back to Business Schooled. Anubh and Slisha had seen the opportunity to change things in the diamond engagement ring business, but then they hit a turning point and faced a tough decision, were they prepared to rethink what With Clarity was all about. After all, technology might get them headlines, but it was going to take more than hype to scale their business. I wanted to find out how they recovered from their brutally honest investor meeting and succeeded in taking With Clarity to the next level.
Soraya Darabi: 13:24 When your board member said that and you were recoiling and trying to figure out what to do next with the business, how did you psych yourself back up and how did you start to redefine the business?
Slisha: 13:35 I think it was not focusing on the emotional elements of it, but the practical elements of dissecting each and everything that we do at the office. Originally we were using a lot of traditional marketing mediums, paying for our traffic and feeling like that was kind of the only way to get people in the door theoretically onto our site. And we found that, obviously we don't have the big budgets of our competitors, larger retailers, we don't have the manpower that they might have. So we needed to be creative and think of other ways to really stand out without losing a lot of money and losing a lot of time and effort in the process. And I think what we tapped into was our collective expertise in writing and knowing the product more intimately and the process and the journey of shopping more intimately than other retailers.
Slisha: 14:21 So we ... you know, over the course of maybe two weeks, one holiday season where nothing else was really going on, we sat down with our computers at home and we just ... day to night, we just sat there for like two weeks and we wrote 270 pages of content on our site just so that we could get a boost to get more and more traffic onto the site. So those are the kinds of moments I remember where we realized we were failing on understanding what are the correct marketing channels to use. We sat down and we said two weeks we're dedicating to this experiment, we're going to do it, and if it takes us somewhere, great, if not at least we'll have spent a small window of time to really aggressively work towards something and figure it out. And luckily that took off for us and we worked our way up from zero to a hundred thousand organic sessions in the span of a couple months.
Soraya Darabi: 15:10 SEO or search engine optimization isn't often regarded as a crucial part of the customer experience, but it's critical. And in With Clarity's case, it really paid off.
Soraya Darabi: 15:19 So you SEO site mapped your own site based on creating 260 plus pages of content, knowing what your customer was shopping for. I've never heard any entrepreneur say that before and it's brilliant.
Anubh Shah: 15:31 Yeah. The content we were producing was getting consumed by customers and they were turning into actual customers. Our biggest time of year is the holiday season, right before Q4, October, November, December. A lot of proposals take place then because everyone wants to bring their significant other to meet family-
Soraya Darabi: 15:46 So more so than summer it's always the Chrismukkah era?
Anubh Shah: 15:50 Yeah, because you want to meet family, you want to show that there's a flashy ring on your finger, that sort of thing. So, but I remember our merchant account got flagged for risk. There was mass quantities of transactions coming in for high dollar values, because our average transaction is almost $7,000. And I remember that being one of the scariest times in my life where this is where I lost sleep. Every proposal is time-sensitive. We're coming up on the holidays. We didn't have enough capital in the bank to pay the vendors. We couldn't figure out how to then procure the items to make the rings in time and get everything shipped.
Soraya Darabi: 16:23 And what did you do?
Anubh Shah: 16:24 Just imagine a situation where if you had been the reason that was spoiled, how that would feel. And so we said that that can't be us.
Soraya Darabi: 16:31 Right, it's this young upstart that you entrusted with a mega life moment.
Anubh Shah: 16:36 Yeah, and that couldn't be us and we just knew that we had to convince more of our investors to basically service as a loan, service these payments to vendors so that we can make sure no customer had a hiccup in their experience.
Soraya Darabi: 16:47 What did you learn from all of that?
Slisha: 16:49 I think we learned, no matter what frustrations we're experiencing or what hardships are going through in our business that should never reflect to the customer. They should always come away with a positive, happy experience, feeling like they were number one for us, regardless of how many orders we had or how hard we had to work to fulfill them.
Soraya Darabi: 17:08 You know, reflecting on a big curve ball and coming out of it unscathed, thankfully, how did you apply these lessons to the next phase of the business?
Slisha: 17:18 So, in 2018 we took the company from two to 20 million by the end of the year in terms of revenue. And a lot of that had to do with just understanding and rebranding the company into what With Clarity is today. So, the previous iteration of the site, we looked very different in terms of branding, look and feel, and shopping process, which we've been trying to perfect for the last several years.
Soraya Darabi: 17:40 How did you come up with the new name and why the switcheroo?
Anubh Shah: 17:43 We actually decided to change the name in October of last year. I think it was time for us. I want to use the word grow up, but actually develop into who we are, to figure out who our customer is and what it is that they value, what it is that we value, and ultimately make sure that what is the alignment across all of those things. So what we were doing was basically looking for what is it that we can offer that's so unique and different and it was really built on this concept of transparency and trust.
Slisha: 18:07 It also speaks to the technical elements of a diamond that are so desirable. Clarity is one of the four main C's. So, it had that double meaning.
Soraya Darabi: 18:17 Walk me through the four C's.
Slisha: 18:18 The four C's of diamonds are cut, which is the, how much fire and sparkle the diamond has based on how well its facets are cut. Clarity is how many inclusions a natural diamond might have. Inclusions are basically small imperfections that grow within the diamond. So the more inclusions, the less valuable the diamond because it prevents it from sparkling with such life. So, that's cut and clarity, and color is where it falls on the range of white to yellow. Diamonds that are a little bit more yellow, have that slightly yellowish tinge to them. Most people, for engagement rings prefer a more white diamond that showcases all the different colors of the rainbow when it sparkles. And the final one is carat, which is the size of the diamond. So, we wanted a name that encompassed the technical elements, the emotional elements, and what we stand for as a company, in terms of our values for transparency.
Anubh Shah: 19:11 What you're building is creating transparency. It's allowing couples to shop together. It's empowering women in the decision process. It's allowing them to be part of it.
Soraya Darabi: 19:19 Let me ask you something. How important is it to you to build a better customer experience in the long run?
Slisha: 19:36 We're wanting to be involved in a couple's life story, not just that one proposal moment and everything we've set up in the company is building towards that, building that trust, that recognition and that credibility in the quality of our product. And once they fall in love with the way we work and what we make, we're confident that they're going to come back again and again and think of us for all these happy occasions. Whether it's your wedding, anniversary, the birth of a child.
Anubh Shah: 20:04 The brand has over 10,000 happy couples to date now. And so I think that that's a very important foundation as brand ambassadors, folks who trusted us with one of the biggest occasions of their life so far.
Slisha: 20:17 As we scale up, we go further down the road of becoming a lifetime jeweler and I want to make sure that since we've understood the psyche and the mentality of the person who's getting engaged, we do as well of a job of understanding someone who's going through getting a push present for their wife when she delivers a child. So, we want to make sure that we're there for that moment and we're understanding what they're going through and providing them with that same great shopping experience we do for the engagement ring.
Soraya Darabi: 20:44 When they started out, Slisha and Anubh wanted to disrupt the engagement ring space by using a cutting edge piece of technology. Turns out that flipping a traditional category took more than the latest tech. It took polishing the customer experience until it was flawless. Slisha and Anubh walked out of a very tough investor meeting with the need to basically redefine what their company was all about. They realized that what they were really selling wasn't a product, they were selling an experience from start to finish, and after they committed themselves to perfecting every moment of the customer journey, they wound up growing 9,000% in three years. I can only imagine what that investor is thinking now.
Soraya Darabi: 21:23 More and more in the business world, there's a growing disillusion with the idea that tech is a magic wand and that a new innovation is all a business needs to succeed. While new tech may get you buzz, it's a better customer experience that builds a business. Creating better experiences is much more than a smart business tactic. It's how we get others on our side and make connections that last.
Soraya Darabi: 21:46 After we left With Clarity's offices, Anubh walked me down through the center of New York's Diamond District where he grew up watching his father working in the business.
Anubh Shah: 21:54 So everyone always says this to me, they say oh, you could be anywhere, you don't really have to be here, and the answer is well but if we were anywhere it would be here because this is where the product is. This is where my family started in this business. Jewelry is one of those industries that is very, very much rooted in old family businesses. Where we're walking by is literally where I grew up and yeah, my father was in this business for 40 years. When I was five, six, seven years old, I was coming to his office every day during the summers and sitting there kind of on the carpet, scraping up little ... those little accent diamonds you find for fun. It would keep you busy for hours and it was a way for him to distract me as well while he could work.
Soraya Darabi: 22:36 And little did he know he was setting the pavement for what you've now built.
Soraya Darabi: 22:42 That's it for this episode of Business Schooled. Join me for lesson five, where we'll hear how a wild idea pushed HousePaws ahead of the pack. I'm Soraya Darabi, thanks for listening. See you next time.
LESSON 5: Barking up the right tree
Mount Laurel, New Jersey
Lisa Aumiller: 00:03 So they're very prickly when they're... like she just woke up. So she's kind of in her like...
Soraya Darabi: 00:07 Prickly mode.
Lisa Aumiller: 00:08 She'll calm down in one second and then she actually has very soft quills, and most people don't get to touch them when their quills are soft, but she's actually a great hedgie. Do you want to hold her?
Soraya Darabi: 00:18 Sure.
Lisa Aumiller: 00:18 Belly's really soft too.
Soraya Darabi: 00:19 Aw, hi little one. Hi. I feel like I'm a late show talk show host.
Lisa Aumiller: 00:26 Right? Except we don't have any weird animal tricks.
Soraya Darabi: 00:30 Welcome to season two of Business Schooled, a podcast by Synchrony. I'm your host, Soraya Darabi. I've co-founded two businesses and now I'm the general partner of an early stage investment fund, Trail Mix Ventures. Today we're seeing new businesses succeed more than in the past 30 years. Entrepreneurs aren't just surviving, they're thriving. I wanted to know just how they're pulling it off, so I hit the road to find out. I'm soaking up some essential lessons on business and life from founders who have graduated from their early startup days and hit new levels of success. Hopefully you'll learn a few things too. This is Business Schooled, a podcast by Synchrony.
Soraya Darabi: 01:14 Out in Mount Laurel, New Jersey, Dr. Lisa Aumiller is doing veterinary medicine a little differently, by meeting her patients where they live. I got in the van with her to see what the house call life is like for a mobile vet.
Lisa Aumiller: 01:27 Hop on in. It's an adventure.
Soraya Darabi: 01:29 The best kind.
Lisa Aumiller: 01:33 So everything in the van is either the equipment, the pharmacy, like all the stuff that we carry into the exam. Usually we have a technician that rolls with us on the road as well. We can do a lot from the house. We have a mobile x-ray machine. It looks like a Ghostbuster pack, and that's always fun because the pet can sit on our lap as we show them the x-rays.
Soraya Darabi: 01:56 Pets in America are living the good life. A new generation of pet owners are treating their animal companions more like full members of the family. And as a result, they're willing to spend more on their pets than ever. This trend has helped boost the U.S. veterinary industry into a 19 billion dollar sleeping giant, and it's allowed HousePaws Mobile Veterinary Clinic to balloon into a rich network of vet services with more than 100 employees and over 25,000 clients. But it wasn't just changing trends that drove HousePaws’ success. It was just as much about how Dr. Lisa took some big risks that paid off. I wanted to know how she succeeded in turning a one woman, one van startup into a thriving business that's redefining veterinary medicine. It's time to get schooled.
Soraya Darabi: 02:41 Is it common to have a mobile vet?
Lisa Aumiller: 02:43 It's becoming more common. I would say 10 years ago it was less common. I remember when we first started the business, I would turn my ID around if I was at a conference because it said mobile vet and I was kind of like, "I don't want people to think I'm a mobile vet," but now I'm loud and proud mobile.
Soraya Darabi: 02:57 Wait why would there be a stigma?
Lisa Aumiller: 02:58 In the beginning, mobile vets used to be vets that kind of left traditional practice because they wanted to just be the lone vet, and because they were alone without a technician, there's a lot that they couldn't do. We've kind of beat that stigma. I mean, we bring in all the same equipment that would be in a hospital. We have a technician with us. We're able to do not only exams and blood work and emergency care stuff, but we're also able to do X rays and ultrasound and acupuncture and cold laser and rehab stuff and behavior stuff. The cool thing about being a veterinarian in someone's home is we get to literally see everything. We can pick up problems earlier and we can also see problems that probably would have never come up in the middle of the 15 minute talking exam in the hospital.
Lisa Aumiller: 03:37 In a house call, people feel like part of the show and when they feel more integrated in it, they understand it more and I think the trust is there. So when people say your dog has this issue and needs to have this special procedure done, they trust you.
Soraya Darabi: 03:51 What do you do if somebody needs surgery, but it's difficult for them? They can't afford it.
Lisa Aumiller: 03:56 Yeah, we do have that happen a lot because people plan to have pets, but they don't always plan for the medical issues that come up and things like surgery - leukemia or back surgery - it can cost tens of thousands of dollars. Kidney disease, they can get dialysis. All that stuff exists for animals just like it does people, so we do offer CareCredit. CareCredit is a really nice option. People use it too for eyecare, or dental care, or nontraditional health care things. It makes it a lot easier for people to budget in this procedure to help them get through that financial struggle.
Soraya Darabi: 04:27 As an investor, the most exciting pitches I often get are those that want to challenge a stereotype in the business world, much in the same way that Dr. Lisa rejected the stigma around mobile vet clinics. I wanted to know where she got her drive to go against the grain.
Lisa Aumiller: 04:43 I always wanted to be a vet. Actually, my parents have a recording of me when I was four and they said, "What do you want to be when you grow up?" And I said, "Dr. Lisa." So I was the kid that would bring home the toads and salamanders and ask if I could keep them, and they'd say, "No, put it back." My dad always said, "When you grow up you can have as many pets as you want."
Soraya Darabi: 04:59 You took that very literally.
Lisa Aumiller: 05:00 We have four dogs, four cats, a micro mini donkey, and two horses.
Soraya Darabi: 05:04 Donkey. Alright, we're coming back to that. What was it like to start off your career as a vet and then pivot into becoming an entrepreneur?
Lisa Aumiller: 05:12 It was definitely nothing that I expected to happen. I pretty much expected to be a veterinarian working as an associate. My first job, I worked with the vet that I loved, the company that I loved. I decided to go to a smaller company. It was really close to home and they were thinking of possibly selling the business in a couple of years, and I would have been able to purchase it. That company turned out to be a lot more corporate feeling and I was used to working in an environment where I could practice medicine the way I wanted to practice it.
Lisa Aumiller: 05:42 Medicine's like an art. There's 10 ways to solve every problem and every animal is different. It was hard for me to be in a protocol based environment where someone was always looking over my shoulder. When you come from an environment where everybody trusts you and I found myself getting in trouble for not following protocols.
Lisa Aumiller: 05:58 We got into a little beef over not vaccinating a Pomeranian for Lyme disease and the pet didn't go outside and they're like, "That's the protocol." And I was like, "Well the pet doesn't need it." And I made the comment, which is what got me in trouble saying that, "You're not my boss, the pet owner's my boss." I'm one of those people that if you tell me no, I'm going to show you that it can be done. I had never been fired before in my life. So for me it was like, "Oh, you're going to fire me. Game on." It actually fueled the fire, not in an angry way, but in a way of like, "Okay, I actually didn't know I was fired until the next day," and he was nice enough to give me a month's notice. So, that was cool. Immediately I was like, "Well, what am I going to do?
Lisa Aumiller: 06:37 Try to find like the perfect job somewhere else or create the perfect job?” And at the time I had my third child and I came to my husband. I said, "Why don't we just start a mobile clinic? I have lots of clients in the area and I think it will work out great because I'll be able to go to the kids' soccer games and they'll have plenty of time.” I was trying to sell him on this perfect job and he said, "Lisa, you're going to be busier than you'd ever imagine." I was like, "No, that'll never happen." And sure enough, within six months it was insane.
Soraya Darabi: 07:05 How was it insane?
Lisa Aumiller: 07:06 We started off having one or two appointments a day, so it was really easy, but by six months, we were full time rolling. I'd be out 12 hour shifts answering my own phone, scheduling my own appointments, doing my own computer work, doing my own follow-up work, doing everything to run a business while being a full time vet.
Soraya Darabi: 07:24 What do you credit that kind of immediate success to?
Lisa Aumiller: 07:27 So I think one is, I did have a following. So people liked me and the thought of me coming to their house and knowing that I was a good vet was a great idea. Two, it was novel, and I think people are always looking for that new thing.
Soraya Darabi: 07:40 So, in the beginning you were wearing many hats and you had a lot of clients, but it was just you. At what point could you afford to hire others?
Lisa Aumiller: 07:47 I almost immediately hired someone to do just a couple hours a week of paperwork for me. Same thing with technicians. I would hire technicians to help with aggressive animals. Wednesday night was angry cat night. I would have the technicians meet me out on that night and it would keep the animals safe and me safe and we'd get the job done. I would say about six months is when we hired our first full-time employee and that was a really hard thing because I didn't have anything to offer them.
Lisa Aumiller: 08:13 I remember making a list of what do I want people to have down the road, like health insurance. But in the beginning I didn't have any of that to offer anybody. My dad's a salesman and I really felt like in the beginning I was selling people. I'm like, "This is going to be amazing." I was selling people magic beans in the beginning. People have their comfort zone and some people want to be outside that comfort zone and I was just lucky to find them in the beginning.
Lisa Aumiller: 08:34 We started off just using my family vehicle, so I had developed a system of stocking it and I'd move out the baby seats and move in the equipment and do house calls. We bought our first mobile vehicle, was actually an ambulance and that was about six months into the business. And we did that basically because I needed some way to get attention. So we got an old ambulance and wrote pet ambulance on it and that was neat because when we'd show up in people's front yards, people would be calling down the street, "What's going on? Why is there an ambulance in your yard?"
Soraya Darabi: 09:06 As a mobile vet, you can only do so much on the go. So Dr. Lisa expanded her business with a hospital space she could rent from a former boss. But soon enough renting was eating into her margins and she faced a tough decision. Should she keep renting or take a leap and buy a building? Buying would be a huge commitment, but it could also be the next step of fulfilling her vision for providing truly customized pet care.
Lisa Aumiller: 09:30 We almost immediately rented my first boss's practice and I paid him a percentage of whatever I did in the building. About a year and a half, I was starting to pay like $7,000 a month based on what we were producing and at some point I was just like, "I think a building would cost less than that." So we were looking at renting a facility and we came up that I should just buy a building. But then it was like, "How do I buy a building with no money?" We went to about ten banks with a business plan. We went everywhere. We went to big banks, small banks, nobody was interested, and then we had a neighbor who connected us with his banker. His banker got in the car with us, drove with us the whole day and at the end of the day was like, "I love your business."
Lisa Aumiller: 10:07 Sure enough, we got approved and it helped us get the building right away, which was a big turning point because if we had been renting, we would have definitely been delayed in our growth. I did realize that we had a problem with growth and that was really hard and that was a conscious decision. Do we stop? I remember saying to my husband, "Do we buy that building or do we stop?" Because if we don't buy that building, we can get out anytime we want.
Soraya Darabi: 10:31 Dr. Lisa wants to make sure her patients get the treatment they deserve. If you or your pet needs some tender love and care, the CareCredit credit card can help. CareCredit, a Synchrony solution, helps make possible the health, wellness, and personal care that's right for you without having to delay treatment or appointments due to cost. The CareCredit card is accepted for co-pays, deductibles, or to pay for procedures not covered by insurance at thousands of locations nationwide, including HousePaws. Visit us at CareCredit.com where we're making care possible today.
Soraya Darabi: 11:04 When Dr. Lisa took the leap and signed a lease so that HousePaws had its own building, she got more than space. She got proof that convinced people she was for real.
Lisa Aumiller: 11:14 That was a big turning point for us because the people that weren't believers became believers. Now we had the building.
Soraya Darabi: 11:20 So you moved into the space and how many were there of you at that point?
Lisa Aumiller: 11:25 I think when we moved into this space there maybe were 10 or 15 employees?
Soraya Darabi: 11:30 And then once you decided to own a building, did you want to do things differently? I mean, you weren't just taking over someone's space.
Lisa Aumiller: 11:36 We wanted to make the hospital feel more like a home. And in the beginning, we really just needed it for my surgery days or for our office staff because now we had people answering the phones and stuff. So it was kind of a big space for the few employees that we had. All of our hospitals are made to be very open. You can almost see from the front to the back and there's glass everywhere, so that people can see what's happening. I think 80% of pets do better with their owners there, just like kids do.
Soraya Darabi: 12:03 HousePaws started to hit their stride and take advantage of the opportunities that came with owning their own building. It was time to expand the team. The question was whether Dr. Lisa could scale a company culture that stayed true to her vision of redefining animal care.
Lisa Aumiller: 12:16 That's definitely a challenge. Making sure whoever's in charge of hiring understands the type of person you're looking for. But the other part of it is finding people with similar passions. We do tend to hire a lot of people that know our reputation and they want to be part of us. And then we make sure they go through the whole process. They go on the road and see what a house call is. I usually tell people on an interview, you're dating me to see if you like us, and I'm dating you to see if I can stand you for a whole day in the car. And when we have our interviews, we talk about, "Do you like change?" If they say, "I don't like change." We're like, "This is not the place for you" cause it's constantly changing, we're constantly trying to improve. We also look for people that have strong ideas. I know a lot of places shy away from that, but the stronger ideas they have, the more leadership comes out of them and the more new ideas come out of them on how to solve problems.
Soraya Darabi: 13:05 So I can't help but laugh because the strong ideas that you encourage in your employees are also what may have gotten you into trouble with that first job.
Lisa Aumiller: 13:14 That is true and it's funny, at one point I think we had four or five people in a row that had all been fired, and I was like people that are passionate, they push their ideas and that makes employers scared, but I think if employers encouraged their employees to bring forward ideas and have that open door policy of like, "We want you to be part of our growth. You're why we're special. If you have an idea, bring it to us." And sometimes we shelve them because we're not really sure how to do it. But I feel like almost every idea that's been brought to us has helped us scale to another level.
Lisa Aumiller: 13:44 We started buying the transits, which we have now, instead of using my personal truck. We let the clients pick the colors, pick the names, so they own that - the Pink Panther, the Grateful Dog, like Green Hornet. When we started, someone said, "When you actually get multiple vehicles, everything should look the same. Branded all the same." We went with the other colors just because it was fun for the clients, but it turns out that they realize how many they see. Now that we have 12 trucks, they think that we're everywhere, which I don't know if they would have if they were the same color. Our first year we made about $60,000, and then when we opened the building we went from $60,000 to $600,000 to $1.2 [million].
Soraya Darabi: 14:24 And would this be in revenue or profit?
Lisa Aumiller: 14:27 Revenue. I don't think there was any profits. I wasn't a good business person, I was just a good vet, so I was driven by that passion. The business schooling has come later. From everything that I've learned, it's very common for new businesses not to be making money up to five years. So I didn't think that we weren't succeeding.
Soraya Darabi: 14:45 As an entrepreneur, Dr. Lisa is nothing if not open-minded. As HousePaws continued to grow, her nose for new opportunity led the way.
Lisa Aumiller: 14:54 Two years after we had the Mount Laurel office, we started to see clients coming from a vet who people weren't normally leaving. When we called to see why people were leaving, it turned out that the vet had died suddenly. His wife was still working in the clinic and trying to manage the charts and everything. We'd worked out a situation with her where we could buy his charts, rent their space, and we were probably in that facility maybe like a year, year and a half before we outgrew it. Because the same thing happened. We added on the house calls to a small mom and pop and then word just spread like wildfire, so our second location is actually double the size of our first location.
Soraya Darabi: 15:33 You needed that extra space to house how many employees at this point?
Lisa Aumiller: 15:37 I think by year five we probably had 45-50 people.
Soraya Darabi: 15:41 That's growing substantially every year.
Lisa Aumiller: 15:42 Yes. And I always think that we're at our ceiling. I'm always like, "Oh, we'll never have more than this. We'll never have a hundred employees. We'll never have this income."
Soraya Darabi: 15:51 HousePaws didn't just grew up. It grew out. It kept diversifying to provide its customers with comprehensive care. I asked Dr. Lisa how she was able to keep spinning her web of services.
Lisa Aumiller: 16:03 It wasn't as conscious of a decision as it should have been. I'm way more impulsive than I should be. So it really was that opportunities came up and then it just was like, "Yeah, let's do it." A client of ours, who is also a friend, he had a grooming business that was popular, had been around for 15 years and his family needed to relocate and he came to us with the idea of if we'd have interest in buying his business. And at that time we had a little fleet. One, I felt really happy that he had the confidence in us that he would give us his clients. Two, it seemed like a logical thing. They're grooming pets and we are doing the healthcare part. So I thought that if the worst thing that could happen is if it failed, we still had a client list, but the best thing that could happen is that we would have groomers that could be educated to help pet owners recognize issues to bring to veterinarians.
Lisa Aumiller: 16:53 The company doesn't have the HousePaw's name on it because our grooming department can't service our 25,000 clients.
Soraya Darabi: 16:58 25,000? That's what your list has grown to?
Lisa Aumiller: 17:00 Yes. HousePaws has 27-28,000 clients. The transport service came from a client's idea. We would go to a house and the cat’s eye would be ruptured and I'd say, "You have to go to the ophthalmologist." "Well, can you take it there for me?" People don't like putting their pets into a box and having them meow or bark or puke in the car and some people are just busy people with families. It's so disruptive to a family situation to go see the vet.
Soraya Darabi: 17:26 But once you have a call center in place, you're creating a system. I'm calling one line, but I might be able to get a mobile grooming company, a vet, an ambulance to pick up my dog, or I can book an appointment to take my dog in to see a vet. So there's four reasons to be calling the call center and once you start to create processes to help your business scale, I'm sure it's difficult for any entrepreneur to turn off the light switch of, “What else could we do with this system?”
Lisa Aumiller: 17:52 Yeah, it really does get to the point where it becomes hard to turn it off. One, because of the demand of your clients and then two, the more you have people coming in, the more you have more ideas coming in. It’s a tough bug to get out of your system.
Soraya Darabi: 18:05 By expanding her business with new services, Dr. Lisa was working toward her vision of high-touch animal care. Instead of seeing them just once or twice a year for a checkup, she created more and more points of contact with her customers. They can now call HousePaws for grooming, emergency situations, transport, and even for her wildly successful Vets in Training program, which helps spread the love of animal care to the next generation.
Lisa Aumiller: 18:30 We added it officially about three years ago, and it was created to solve a couple problems. One, we were getting an increased demand to go to schools and talk to children, which we love. All the vets love that, the technicians love it, everybody loves that. Education's kind of a core to our philosophy. We needed to make sure that we were having the space paid for and I think we figured out we need 20 kids a month to make ends meet. But it turned out to be such a good program and we started to utilize rescue pets.
Lisa Aumiller: 19:04 One of the things we always teach them is that every pet you want is available. You don't need to purchase anything. We have all these animals and they're all available.
Soraya Darabi: 19:11 Adopt, don't buy.
Lisa Aumiller: 19:12 Yeah, adopt, don't shop. So we always had different animals and the kids loved to meet the different animals. So once we had the location and we started the classes, it was again word of mouth, just caught fire. They were interacting with something live and I think we just hired our eighth teacher.
Soraya Darabi: 19:27 So nine years later, how big is the business today?
Lisa Aumiller: 19:28 Today we have three land locations, four territory locations. We have the three auxiliary businesses, the Vets in Training, the transport, and the grooming. And we have over 100 employees, I think we have 102 employees now. So we're nine years in and this is the first year, actually probably five months ago is the first time I haven't been working 60 hours as a vet.
Soraya Darabi: 19:53 So you're Chairman Vet now. You could go back in if you wanted to.
Lisa Aumiller: 19:56 Yes.
Soraya Darabi: 19:57 But you're able to switch over to a different skill set, which is management and leadership. Can you continue to grow?
Lisa Aumiller: 20:05 So it's definitely a dream that one day there will be a mobile vet that will become a national brand, whether it's us or someone else. I think the way that veterinary medicine is going, that's what people want. They want high tech and high touch and I think that's what's going to happen. My lawyer had said everything should be about money and I disagreed because I was like, "For me, it's about having the potential to change veterinary medicine, having the potential to make veterinary medicine better."
Soraya Darabi: 20:30 Before she had a business, Dr. Lisa had a vision for practicing animal care differently. A mobile vet service was just the first step. As HousePaws grew, Dr. Lisa's vision helped her make decisions about diversifying her services. When you have a vision for what you want to achieve in the long run, you have a powerful tool for making business decisions. When opportunities knock, you have a filter for evaluating the right way forward. For Dr. Lisa, these opportunities came to her in the form of customer needs, employee ideas, and changes in the competitive landscape. Her ability to see the potential in places where she could realize her vision has made HousePaws the success it is today. Sticking to your vision isn't always easy. It can be scary when there's a big decision to make and everything is on the line. But the vision you have for what you want can give you the permission to take a risk and bet on yourself. And when you bet on yourself, you do more than take a chance. You prove to others that you mean business.
Lisa Aumiller: 21:31 Hello Wilbur.
Soraya Darabi: 21:33 I must've asked my father every day for two years straight to have a pig, and he always said no.
Lisa Aumiller: 21:38 We have lots of clients that have pigs and they enjoy them, but a lot of people do get them on an impulse and then after they leave the cute stage, they end up kind of neglected. But people that love their pigs, love their pigs. They lay on the couches with them.
Soraya Darabi: 21:51 They're just part of the family.
Lisa Aumiller: 21:52 Like a three year old.
Soraya Darabi: 21:54 Perpetual three year old.
Lisa Aumiller: 21:55 Who knows how to open up cabinets and get food out and do other mischievous things.
Soraya Darabi: 22:02 That's it for this episode of Business Schooled. Join me for Lesson Six where we'll hear how reinventing the wheel put Vanderhall Motor Works into high gear. I'm Soraya Darabi. Thanks for listening. See you next time.
Producer: 22:20 Not clown guy, but our sound guy.
Lisa Aumiller: 22:24 I was more excited when there was a clown guy jumping in the back. I thought they said clown guy, but-
Sound Tech: 22:28 I mean, I can be a clown guy.
LESSON 6: Reinventing the wheel
Soraya Darabi: 00:03 How fast can this rev up?
Steve Hall: 00:06 It'll go to 138 miles per hour, and that is limited. It'll rev to 6,800. And then you'll hear the blow off valve when the turbo hits.
Soraya Darabi: 00:18 Is this your favorite one to drive?
Steve Hall: 00:19 Yeah. You ready?
Soraya Darabi: 00:21 Woo!
Soraya Darabi: 00:33 Welcome to Season Two of Business Schooled, a podcast by Synchrony. I'm your host, Soraya Darabi. I've co-founded two businesses and now I'm the general partner of an early stage investment fund, Trail Mix Ventures. Today we're seeing new businesses succeed more than in the past 30 years. Entrepreneurs aren't just surviving, they're thriving. I wanted to know just how they're pulling it off, so I hit the road to find out. I'm soaking up some essential lessons on business and life from founders who have graduated from their early startup days and hit new levels of success. Hopefully, you'll learn a few things too. This is Business Schooled, a podcast by Synchrony.
Soraya Darabi: 01:19 What a gorgeous ride.
Soraya Darabi: 01:26 It's got a very vintage vibe, which I can appreciate.
Soraya Darabi: 01:32 Hello. Soraya.
Steve Hall: 01:34 Steve Hall. Welcome to Vanderhall.
Soraya Darabi: 01:36 Thank you for having us.
Steve Hall: 01:37 This is just a little history museum we've got.
Soraya Darabi: 01:40 Are we looking at all of the different models and prototypes?
Steve Hall: 01:43 A lot of the prototypes we ended up destroying, but most of these are “first of.” We started with the Laguna. We named pretty much everything after California beach towns, so we have the Laguna and the Venice and the Carmel, and we lucked out with the Edison for our electric. It happens to be a small town in California.
Soraya Darabi: 02:02 It's notoriously difficult to break into the U.S. auto industry, but times are changing and tech is letting a new wave of innovators knock on the door of a club that's been pretty exclusive for a long time. As the founder of Vanderhall Motor Works, Steve Hall has created a unique design process that allows him to build sleek, ultra sporty roadsters with only three wheels, two in the front and just one in the back. It's less of a day-to-day vehicle and more of the ultimate joy ride machine. I wanted to know how Vanderhall's focus on innovation has fueled some pretty impressive business growth as well as product development not often seen in the automotive world. So I went to Provo, Utah to find out. It's time to get schooled. To get to Vanderhall HQ, I had to drive about 45 minutes south from Salt Lake City to a nondescript building nestled at the foot of the mountains. After a quick tour of Steve's roadster museum, we sat down in his office. I was curious to know how often he gets behind the wheel.
Steve Hall: 03:01 I have a Carmel GT, and then nighttime and the weekends, I like to just drive.
Soraya Darabi: 03:06 Is it like meditation for you?
Steve Hall: 03:08 I do a lot of thinking while I'm driving. After a while when you're building the same thing over and over again and you're coming up with new products, you got to, every once in a while, just go drive and remember why you started and what you're doing.
Soraya Darabi: 03:21 What about your family? Do you go driving with them?
Steve Hall: 03:23 My oldest drives a lot. Wrecked a couple too, so he likes to drive. My daughter loves going out, doesn't like driving as much, but she loves going out in it. But my wife rarely goes out in one because she doesn't like the attention.
Soraya Darabi: 03:37 You certainly don't invent a three-wheeled car if you don't like attention, especially one that's bullet shaped and low to the ground, like a classic European sports car. I wanted to know just how Steve arrived at the three wheel design in the first place.
Steve Hall: 03:50 Originally, I wanted to go into supercar territory, to build supercars, and then realized that barrier to entry is so high. The three wheel category, I knew that the barrier to entry is a lot lower than if you went into automobiles.
Soraya Darabi: 04:05 Take me through each of your prototypes.
Steve Hall: 04:07 Our P1 was really small. We built that in about three months. Really fun to drive. Little awkward because you had to ride the clutch a little to get going. The next, P2, was slightly wider, but only by about four inches. We added some features. Now we're running into problems where we don't have enough electricity, so you would turn the fan on and the stereo and one would switch off or blow a fuse. So that scared us a little. So we decided this is really not going to work. So we went and bought a GM 1.4 turbo with a transmission and decided the weight increase would be worth the amenities we were getting.
Steve Hall: 04:47 And then you get into P4 and P5, that's starting to look more like a car. P5 was this really cool roadster with this fiberglass flame red body with gold wheels, and we were in heaven. We took the essence of the P5, which was this front engine, open-wheel, two seater, that was super fun to drive, and turned that into P7 and redesigned it on a new chassis and added doors.
Soraya Darabi: 05:15 What's a chassis?
Steve Hall: 05:17 Chassis is just a fancy word for frame. So it's the backbone of the auto-cycle.
Soraya Darabi: 05:23 At any point in time did you start to feel impatient?
Steve Hall: 05:26 The whole time.
Soraya Darabi: 05:27 You might say that Steve's impatience started when he was running a car dealership outside of Salt Lake City. He knew he wanted to combine his love of sports cars and his ability to innovate and create something original. But to get where he is now took a lot of trips back to the drawing board.
Steve Hall: 05:41 Both my parents were entrepreneurs. I already had a different view than most people. I see that as a slight competitive advantage to where I kind of had a path on entrepreneurship.
Soraya Darabi: 05:55 2010, you come up with this idea, and you're still working at your day job.
Steve Hall: 06:00 In 2010 I was in just south of Salt Lake City, in Salt Lake Metro. Right off the freeway, I had bought a building and had a dealership. We sold automobiles and we had a service shop in the back. It was just something that I wanted to transition out of. It kind of felt like Groundhog's Day. I wake up every day and it was the same thing, because it was very operational. We had a fairly large shop, so I would grab some of my mechanics and just say, hey do this. If it got slow, we’d just work on it. And then naturally when you're on a business, you start thinking, why am I messing with this? I should focus on my business.
Steve Hall: 06:37 So I'd scrap it and then focus on my core business and then it would creep up again. I had to do something creative, so I'd built it again. So I'd start building a frame and had some wheels and buy some engines, just rough, you know, creating. I had a skilled mechanic who could also weld. He had some fabrication experience. I'd already been exposed to automotive tech through the dealership. So we just decided to go for it and got to the point where we had a working prototype. I think it took 12 years in the business to realize that operations is not necessarily my passion. So I decided I'll make a go at it and it kind of took over. I was able to sell off the dealership and go full time. Most people around me thought I was crazy. They're like, why don't you just keep running your dealership?
Soraya Darabi: 07:32 But you knew you weren't.
Steve Hall: 07:33 Well, I just wanted to be creative and I didn't really care what people thought, so-
Soraya Darabi: 07:39 So at the end of the day, this could have been a very expensive hobby.
Steve Hall: 07:45 Well, I never did it as a hobby. I always did it as a business because I knew if I kept iterating, I would get something.
Soraya Darabi: 07:54 It was your way out of Groundhog Day.
Steve Hall: 07:54 Exactly. I did not want to go back to Groundhog Day.
Soraya Darabi: 07:59 From the very beginning, Steve's design inspiration was classic sports cars, and you can really see it in the Vanderhall line. Each one has a highly stylized look with a clear nod to the past.
Steve Hall: 08:09 A lot of the design cues are very similar to what you would see back in the 1960s with some popular sports cars, mainly coming out of Germany.
Soraya Darabi: 08:22 So your passion as an enthused hobbyist growing up led to your subject matter expertise as a designer, but you're definitely not trained as a designer.
Steve Hall: 08:29 I'm not trained as a designer, no.
Soraya Darabi: 08:31 So, outside we looked at many images of prototypes. I think you had about 20 different photos that you showed me. What made each one individual?
Steve Hall: 08:43 We start building it, and as soon as we find too many problems with that particular design, and this is why it's very important, don’t put a budget on a prototype or you'll finish it when shouldn't. We would start and some prototypes we never finished because we weren't confident that that was the right direction to go. So we'd scrap it. In fact, I wouldn't even keep the designs. I would erase the designs and move forward. I had some really talented engineers that, before we even made it to market, were frustrated and would not move on to the next. So we, I don't have anybody here from the beginning.
Soraya Darabi: 09:24 What's the main difference from going from these prototypes, an R&D shop basically, to being out in the world, and you're now a manufacturer and a dealer?
Steve Hall: 09:34 My goal was always to go to market, so I'm pushing development but allowing lots of pivots. I always say if you left it in development, it will stay in development forever. It takes a strong leader to pull it out of development and actually execute and take it to market. We debuted it at SEMA in 2015. SEMA is the Specialty Equipment Market Association. It's the largest aftermarket show in Vegas. Basically if you're going to put a roof rack or wheels or stereo equipment, that is where they debut all the stuff. We went there, debuted it, picked up some dealers. People were interested. Now you've got remember you're going to an automotive show and this is a three wheeler. You go to a motorcycle show, everybody gets it, because they're like, "Wow, why not?"
Soraya Darabi: 10:30 Right.
Steve Hall: 10:30 We're used to two wheels. Three wheels is better. Weird logic but... so we started going to more motorcycle shows and picking up more dealers and it kind of dominoed from there.
Soraya Darabi: 10:40 What did it feel like to get your first dealer on board? Probably pretty validating, huh?
Steve Hall: 10:45 It was, but keep in mind we're selling expensive trikes. They were starting at $70,000. We knew that our dealer network would be limited because of the price point and we kept hearing, "Hey, it'd be great if you guys came out with something under $30,000."
Soraya Darabi: 11:04 It’s not so easy to hear feedback that you need to slash your price in half to be consumer friendly.Business owners like Steve Hall know it's always important to move their business forward. Synchrony's consumer financing solutions, digital technologies, and data insights can help drive new customers so you can go the distance. Every day, Synchrony is changing what's possible for people in businesses, like our partner Vanderhall Motor Works. Learn how we can help change what's possible for you at Synchrony.com.
Soraya Darabi: 11:37 Taking your first product to market is a huge step. But for Steve, it came with an unexpected speed bump. And while he had found a unique way in with a motorcycle audience, the cost of their ultra-premium Laguna model roadster was a big turn off for dealers. The road forward meant pivoting his plan in a big way, killing a design he had worked hard to perfect, and starting over from scratch.
Steve Hall: 12:00 Everybody wants the most expensive and exotic sports car in their price range. That's what we were running into. People loved it, but it was out of reach. We did not start this to build an expensive trike, so we went back to the drawing board and our intentions were to keep the Laguna and go ahead and produce the Venice at the same time. We found a way to build something lighter than the Laguna, and it was more manufacturable, something that we could take to higher sales and a higher volume, where the Laguna could never do that. The Laguna is labor intensive, and we're restricted on production and we're also restricted on sales because we're so expensive, that that leads into the next pivot.
Soraya Darabi: 12:46 And what was that?
Steve Hall: 12:47 To actually shut down Laguna.
Soraya Darabi: 12:49 Wow.
Steve Hall: 12:50 And only go in the Venice direction because the production methods were completely different.
Soraya Darabi: 12:55 Did I hear that correctly? You completely shut down the Laguna that you'd been working on for the past two years?
Steve Hall: 13:00 After we saw the new product and we knew this was the direction we were going to go, we transitioned into a new facility, and it could produce anywhere from 75 or 100 a year. Production thought that they were going to be building Lagunas for the next five years. So we had no intentions of killing Laguna until we realized we needed a larger facility, and we were getting rid of the skills that we didn't need anymore. So then when we announced that we're going to move and we're going to shut down Laguna, pretty much the whole company looked at me like, "Why are we doing this?" But we knew it was the right direction because I can see where we're going to go and this is going to scale. You could scale it all the way to 100,000 units.
Soraya Darabi: 13:46 So it's a pretty big difference going from R&D mode for multiple years into launching a product in the wild and having feedback that you have to discern, and then actually figuring out, “is this the product that scales?” What was that like?
Steve Hall: 14:03 I think we knew what we needed to do when we built the Venice, because we knew the price point—that needed to be under $30,000. But we knew we didn't want to price it too low. That's when we switched from carbon fiber. We got rid of painting, so we use a paint film. So all of these technologies allowed us to bring the cost of goods down to get to where the customer would buy in volume. So Laguna, you're talking 100 units a year and then you go into Venice, first year you're about 600 or 700 units. Second year, you're above 1,000. And then, like this facility we're in right now, should easily do 2,000 to 3,000 units next year.
Soraya Darabi: 14:46 So we're talking about many millions of dollars in scale in a relatively short period of time.
Steve Hall: 14:53 But we've got to remember at this time a large competitor had entered the market around the same time we did, with a lower price than we did.
Steve Hall: 15:04 Troubling, but it also helped us because they gave us a category. You're in a category, so there's competition. We believe we're a different brand that are catering to different people. So then we get more validation that people are buying this, but they're also saying, "Okay, we want it a little wider". That's where you can listen to the customer, but you have to stay true to your brand. And I know if I make that cockpit too wide, it's going to look weird and that's where I hold the line. And that's tough because you have marketing saying, “we need a bigger seat.” And I'm saying we can't do it. It's okay to listen to customers, but if you listened to everything the customer wanted, you might end up with a rental car.
Soraya Darabi: 15:52 What made this huge overhaul possible was something built into Vanderhall from the beginning, something that gave Steve a real advantage over his more traditional competitor: his patented design and production model. It makes Vanderhall incredibly nimble and able to iterate cheaply on a moment's notice.It sounds like an expensive experiment in terms of time, bandwidth, and capital. What did it feel like to kill your darling?
Steve Hall: 16:17 I didn't have any hesitation to do it because of our intellectual property. If we were building with typical construction methods, you would never do this. Because the volume was higher, we didn't lay anybody off. We actually grew. Typically when you build something in, say the automotive industry, there's these expensive tools that are specific to a model. Generally, they amortize the tool costs over a long period of time. That's why typically a refresh rate for say automobiles are seven years; on trucks they're 14 years. All we do is change what's called a DXF file, which is just a file that's sent to the fiber laser. So we could do prototype chassis and do four or five different prototype frames in the span of two weeks. Therefore, if we have a dud, we can kill it fast.
Soraya Darabi: 17:17 It's during this conversation on the fairly technical subject of tooling that the secrets of Vanderhall’s success started to dawn on me. Most car manufacturers have a lengthy and expensive tooling process, meaning they actually have to create the very tools they use to build each model. Vanderhall's process, which is a bit more like 3D printing, means it's cheap to keep innovating and iterating whenever they need to.You don't have to reinvent the wheel every single time and you found a short way to get around that.
Steve Hall: 17:47 It is our competitive advantage. So if we make a mistake, you could say that Laguna was a mistake on where we wanted to go, so we could switch really quick. It’s kind of like 3D printing. If you 3D print something, you don't scrap any tooling. Typically you would have to have tooling to mold something, to look at something and see, “is this what we want?” and show people. So it basically cuts out the whole tooling process so you can iterate quicker, and that's what we've created is a simple way to iterate on a frame.
Soraya Darabi: 18:25 But I don't understand why your competitors wouldn't do exactly the same thing.
Steve Hall: 18:30 They may adopt something similar to this in the future, but also the way they design is different. If you've invested millions and millions of dollars on this certain method, changing is really hard.
Steve Hall: 18:49 The patents we have enable us to mass produce, and then we have other things that we're going to do in the future that we've patented now. We try to do at least 10 patents a year.
Soraya Darabi: 19:02 You want to break the mold.
Steve Hall: 19:03 We want to be flexible in creativity and sometimes even stuff that's not directly relate it to Vanderhall. We want the freedom to patent in those areas. A good example is a patent we have on electrification of exchangeable batteries that we came up with two years ago, not thinking that we were even going to go into electrification of any Vanderhall product and now we are. We have the Edison line.
Soraya Darabi: 19:29 Being an entrepreneur committed to innovation isn't for the faint of heart, and Steve certainly isn't afraid of ripping everything up and starting over.
Steve Hall: 19:37 It's not just confidence in one product or confidence in certain – if you do it this way, you'll succeed, it's learning from mistakes and being able to pivot. You're dead, if you don't pivot.
Soraya Darabi: 19:51 Perseverance and resilience are two of the most underrated values when it comes to entrepreneurism. At least I've seen that from startups we've backed.
Steve Hall: 20:00 The way I view it is when you are an entrepreneur, you go into your own business, you're sacrificing a career because you're not building relationships out there as you as a reliable employee to somebody else. So you're kind of backing yourself against the wall and you have to succeed. That was something I learned a long time ago.
Soraya Darabi: 20:26 Now that Steve has proven that his design process can let him innovate quickly, he can afford to take a look five years down the road.What do you envision a 2025 model will look like?
Steve Hall: 20:37 You're going to see full electric in the Edison platform, so we don't know what that looks like, but there's definitely demand. There's lots of opportunities in that space that's not automotive. We have a lot of new products in the pipeline and probably we have too many products, so we have to be careful because production has to catch up with development. And sometimes if you have too many products and too many SKUs, you confuse customers. I never thought that demand would exceed production capability. I always thought that production is more predictable and demand is not quite as predictable, but we're set up for success. We could potentially, in this building, get up to anywhere from 50,000 to 75,000 units a year. We're optimizing for growth and scale. We will be profitable, but we're putting all of our efforts into scale right now.
Soraya Darabi: 21:42 It's easy to see that a belief in innovation is at the heart of everything Steve Hall does. But let's stop and think about how innovation actually helped him grow his business. If we had asked ourselves, was it one particular design that did the trick? And the answer would be, well, not exactly. Vanderhall's success didn't come from one design change. It came from the ability to keep changing. Steve's competitive edge comes from his process, his IP. His patented production model was installed at the core of Vanderhall from day one. And it allowed him to break into the industry by lowering his production costs.
Soraya Darabi: 22:18 His process also helped him through a big turning point, that moment when he realized that the first product he launched wasn't going to let him scale. When Vanderhall hits its next turning point in the future, there's every reason to believe that Steve can trust his process to push through once more. As an entrepreneur, when you've built a process you can trust, you'll never fear going back to the drawing board because you know you can always come up with something better. Every new creation becomes more like a stepping stone to greater things.
Soraya Darabi: 23:03 Steve gave me a tour of the factory so I could see where his design process comes to life. It's buzzing with activity, but is somehow still very clean and orderly. We passed row after row of colorful car parts. Sparks are flying, and a line of shiny, bullet shaped roadsters keeps growing.
Soraya Darabi: 23:21 Sounds like a factory, that's for damn sure.
Steve Hall: 23:23 Yeah.
Soraya Darabi: 23:25 I'm looking around at this massive room and I'm curious what your end game is.
Steve Hall: 23:29 We're looking at in the next couple of years, doubling production each year and then we'll probably do some kind of IPO. I think we could easily get to 20,000 units in the next couple of years.
Soraya Darabi: 23:41 I feel like I'm looking at hundreds of different parts. There's so much to keep track of.
Steve Hall: 23:46 This is where they do the body, so what she's doing is she's using the steamer to get out some of the wrinkles in the leather.
Soraya Darabi: 23:53 Can I help you steam? All right, let's make sure I'm doing this right.
Steve Hall: 23:56 Just don't hold it in a certain area too long. There you go.
Soraya Darabi: 23:59 Okay.
Steve Hall: 24:00 You got it.
Soraya Darabi: 24:02 Not bad, right?
Steve Hall: 24:04 You are certified now.
Soraya Darabi: 24:06 Oh, you'll hire me?
Steve Hall: 24:07 Yeah I’ll hire you.
Soraya Darabi: 24:07 Cool. I need a job.
Soraya Darabi: 24:09 That's it for this episode of Business Schooled. Join me for Lesson Seven where we'll hear how Home Zone Furniture redesigned its entire company culture and became one of the top furniture retailers in the country. I'm Soraya Darabi. Thanks for listening. See you next time.
Soraya Darabi: 24:27 I think it's okay if I drive the way I was taught to drive. I learned how to drive in a New York City taxi cab.
Steve Hall: 24:33 Oh, there you go. This one you can beat up.
Soraya Darabi: 24:38 No, I'm not going to beat anything up. I speed and I cut people off. But when you learn how to drive in a taxi, the one thing you can absolutely do is parallel park.
LESSON 7: Rolling out the red carpet
Grand Prairie, Texas
Jason Adams: 00:04 All this photography was done in our studio.
Soraya Darabi: 00:06 Texas born, family owned. See.. I like that. I like any story that makes me feel as though there's a real story behind it. I like also the use of dogs.
Jason Adams: 00:15 That's our dog.
Soraya Darabi: 00:16 That's a real dog?
Jason Adams: 00:17 No, that's not our dog.
Soraya Darabi: 00:18 That's a pretty cute dog. You’re tugging at my heartstrings right now. I’m in the market for a doggy bed.
Jason Adams: 00:25 Are you?
Soraya Darabi: 00:25 Mm-hmm.
Jason Adams: 00:26 That's a big business. We had doggy beds one time. We ran them for Black Friday.
Soraya Darabi: 00:31 Welcome to Season Two of Business Schooled, a podcast by Synchrony. I'm your host, Soraya Darabi. I've co-founded two businesses and now I'm the general partner of an early stage investment fund, Trail Mix Ventures. Today we're seeing new businesses succeed more than in the past 30 years. Entrepreneurs aren't just surviving, they're thriving. I wanted to know just how they're pulling it off, so I hit the road to find out. I'm soaking up some essential lessons on business and life from founders who have graduated from their early startup days and hit new levels of success. Hopefully you'll learn a few things too. This is Business Schooled, a podcast by Synchrony.
Jason Adams: 01:10 This is one of our newer stores. We've been here about 18 months. We came in and did a new remodel on the building. Every one of our stores is a little bit different. Arlington's right between Dallas and Fort Worth, it's one of the older cities here. A lot of the more trendy places are now North of here, but it's still a good family place. And maybe you notice the scent, we put a scent in the buildings.
Soraya Darabi: 01:39 What I notice is it smells really nice in here. It sort of smells like that first day of Fall.
Jason Adams: 01:46 This is a new dining set. The neat thing about this is it comes with an adjustment, you can move it up six inches and make it counter height. Since we build our own furniture, everything has a built-in power port because-
Soraya Darabi: 01:57 Oh that’s smart.
Jason Adams: 01:57 ... we’re ready to charge your phone at night. We're always trying to innovate and build function and features in our furniture, so it's not just beautiful.
Soraya Darabi: 02:04 As soon as you walk into a Home Zone store, you notice something is different. It's all in the little details, the scents, the warm hellos, the patient attention, even the free ice cream. It's such a people-first environment, you'd never know that Home Zone's company culture used to be completely different. In a crowded industry that's been around for decades, I wanted to know how founder, Jason Adams, was able to take the idea of being in a relationship business, and turn Home Zone into one of the top furniture retailers in the U.S. So, I went down to Grand Prairie, Texas to find out. It's time to get schooled.
Jason Adams: 02:39 Let me introduce you to Robert, he's the store manager here.
Soraya Darabi: 02:42 So nice to meet you Robert.
Jason Adams: 02:42 Tell her a little bit about your history.
Robert: 02:44 I've been about 17 years in the business. Came to work at Home Zone about four years ago. Really enjoy the family atmosphere that we have here, Jason's made me a much better manager.
Jason Adams: 02:52 I paid him to say that. Robert so real quick. In all honesty, what would you say are a couple of key points that are different about us than the furniture stores you worked for in the past?
Robert: 03:01 The way we're able to bring people up. We’re really invested in the people, it’s the best way to go, and we treat our customers better than the people across the street. We know with the Internet and such like that these days, people coming in the store are our greatest asset.
Jason Adams: 03:12 What I try to teach our people is that when it comes to service, it's very subjective. If my father, if he walks in here and nobody talked to him as he came by and said, "Hi", after five or six minutes, he'd think, "This is the greatest place on earth". If my mother walked in and nobody greeted her in 30 seconds, she would be mad, turn around, and walk out. So, what I tell our people is, "I don't know if my mother's walking in or my father. So we better be prepared. We need to treat everyone like they're my mother". So back here we keep our ice cream and water. Our salesperson would have offered you free ice cream if you came in. We got a selection down here.
Soraya Darabi: 03:39 Who doesn't like ice cream?
Soraya Darabi: 03:43 Some things about Jason's business have stayed the same since day one. The operation is still family owned, and he’s stayed true to his Texas roots, but as I learned when we sat down in his office, Home Zone wasn't always so laser focused on the customer.
Jason Adams: 03:57 I grew up in North Texas, very middle class family. Dad was a manufacturer's rep for a clothing company. He had half of Texas, which is a gigantic territory, and in the summers I would travel with him. So, we'd head out on Monday, come back Friday, and we would meet with the owner. My father's a type-A personality. He'd light up the room, just a terrific guy... never met a stranger, and so he would be in the meeting with him and he'd start asking the guy about his business philosophy, and we get in the car and my dad would just start off with, "What did we learn? What do you think about his philosophy compared to this guy's philosophy"? I tell people, I got my MBA running around with my father during the summers at about age 10 to 12. It was just an incredible experience. I headed to LSU, and being a middle class family, I needed to work my way through college. So I found a job selling waterbeds.
Soraya Darabi: 04:43 I'm trying to think of when waterbeds were huge.
Jason Adams: 04:45 They were huge in the early eighties, by the early nineties they were definitely on a decline. So, I was in a declining industry, it was straight commission. You had to kill it and drag it home if you were going to eat, and that's what I did five days a week, so I could go to school. And I was with this company and at the time they had stores all over the country. They call me up one day, and they say, "We've got a job for you in New York to be an Assistant Manager in Binghamton, New York". They call me on a Friday, they said, "We need to know by Monday". So I said, "Okay, I'll go". So I put everything I own in a U-Haul, I get on the road, I drive to Binghamton, New York three days.
Soraya Darabi: 05:15 Wait, crucial question, did you sleep on a waterbed at this time?
Jason Adams: 05:18 Yes, I did. I did sleep on a waterbed.
Soraya Darabi: 05:22 I had to ask.
Jason Adams: 05:22 I tell people that when I pulled into Binghamton, New York, it was snowing. A year and a half later when I left, I think it was still snowing, coldest place on earth if you've never been there. I'm still going to try to stay with the college thing, because my parents are crushed if I drop out of college. And I've got about 75 credits and I decide, "You know what? I'm just going to enter the business world", and I walked away from it. And I stayed on with this company, ended up going to Thailand for a year on a business adventure with them, and just kind of climbed up the corporate ladder. And about 12 years ago I just decided, I just want to do something different. I'm a little cynical when it comes to school. I really believe in the hands on. I tell my kids, "You want to get into business, study two things. Study math and accounting because you've got to know how to read the books. And study psychology because every business is a people business. Understand how people think, you'll be successful".
Soraya Darabi: 06:08 Jason got Home Zone going by using business connections he had made in Asia. In the beginning, his highest priority as an entrepreneur was keeping his prices low no matter what.
Jason Adams: 06:18 I came back to Texas and I started a wholesale business. Our industry was moving to Asia, by the late 1990's, early 2000's we were pretty much an Asian industry.
Soraya Darabi: 06:28 Because it's less expensive to manufacture there.
Jason Adams: 06:30 And the raw materials are there. You've got a huge labor force. You got an inexpensive labor force. They grow a lot of rubber trees.
Soraya Darabi: 06:36 Mm-hmm (affirmative).
Jason Adams: 06:36 They're plantation grown, they're good for the environment, they make great furniture. I knew Asia very well having lived there, and I thought, "I want to get in the wholesale business". '08, '09, you know what's going on.
Soraya Darabi: 06:47 The recession.
Jason Adams: 06:48 I'm selling to different retailers across the country and when those checks bounce, they're kind of big. And the wholesale business is just low margin.
Soraya Darabi: 06:54 And to be clear, those are your clients’ checks bouncing?
Jason Adams: 06:57 Yeah. When they're paying me, their checks are bouncing. When you get into a recession, any of us can live with our furniture for another year, another two years. We don't sell milk. So I'm wholesaling furniture and I need to put in a showroom for my customers to come see. So, I go up to Denton, it's north of Dallas, and I rent a 17,000 square foot warehouse, not a very big warehouse. And I bring in some furniture from Asia. I set it up. I'm always trying to do everything on a shoestring. So, I set up this showroom and I’m thinking to myself, “You know what? I'm going to have my customers come in Monday through Thursday, Friday, Saturday, Sunday I'll just open it up to the public. Maybe I can sell enough furniture to the public to pay the rent”.
Soraya Darabi: 07:30 Mm-hmm (affirmative).
Jason Adams: 07:30 If I can offset the rent, I've got a free showroom. I negotiated a deal where I could have the whole side of the building for advertising facing the street. So when people pulled in, they thought it was 100,000 feet. My father's got this old white pickup truck. He builds me a big white wooden sign to go in the back of it. We put a generator out there, and so it lights up at night. Said, "Furniture come this way", and you know what? People remembered it and it worked. We had no air conditioning. In the summer, it was brutal. We would have candles, we would try to merchandise it where it looked nice. They would just melt in the summer. We took the money and we reinvested it, "Thought, let's just grow the retail. We're going to be the low overhead guy". So shorter hours, bigger savings.
Soraya Darabi: 08:07 Was that an official slogan?
Jason Adams: 08:09 That was kind of what we would tell people. And Friday, Saturday, Sunday, 55%, 60% of the furniture's bought on those three days anyway. We would just constantly roll our profits back in.
Soraya Darabi: 08:17 When Jason grew the business from wholesale to retail, he kept his vision of wanting to be known for his low prices. But by focusing so much on what he was selling, he was failing to think about how it was being sold and finally realized that Home Zone's customer service had hit rock bottom.
Jason Adams: 08:33 We were making a lot of people mad because if you bought from us and everything went right, you were fine, but when something went wrong, we were terrible. We used to say, this is how naive we were, we used to say, "We've got the best customer service in the business because we have none.'' We came to this epiphany, so we've got a good product, we got a great price, we've got the best value in the industry, but our service kind of stinks. I can tell you a crazy story.
Soraya Darabi: 08:54 Tell me.
Jason Adams: 08:55 We've got some guys out there delivering furniture. They get to the customer's house, the customer is not home. So, they peek over the fence and they realize the back door is open. So the customer's pulling up as our guys are pushing a sofa over the fence. We had to really rethink everything. This is not going to work.
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Soraya Darabi: 09:38 Jason hit a turning point in how he was leading his business. He had decided to pivot from being all about price, to all about service. If my work with entrepreneurs has taught me anything, it's that there's no one way to be a leader. The key is to know what kind of leader you are. Jason is a very take charge, top-down sort of guy. So when he decided to make a pivot to better service, he took it on himself to face customer feedback directly.
Jason Adams: 10:04 The first thing we had to do was we had to give our customer a voice. We had to confront the brutal facts. So, we created this thing called a Bree-Mail, which was, my wife was Bree, the spokesperson. So we created Bree-Mail. We said, "Please send us an email. It will go right to my inbox, as the President of the company". You know, what happened was we started getting this feedback and I didn't delegate it. I started calling customers and it was ugly. Customer may not always be right, but they're never wrong. And one of our core values was a customer changes you, you don't change your customer.
Soraya Darabi: 10:32 Did you always hire the right people for the job?
Jason Adams: 10:34 Yeah, I wish. Not even close. When you're growing fast, and we were going fast, the wheels were coming off the bus. Whether you know it or not, we were kind of using the warm body theory and we made some crucial mistakes. I mean, we literally hired a person convicted for murder.
Soraya Darabi: 10:50 Oh my God. Because you weren't doing background checks.
Jason Adams: 10:52 We weren't doing background checks. We weren't getting to know them before we hired them.
Soraya Darabi: 10:56 How do you even find out?
Jason Adams: 10:58 Well, they were arrested. They didn't come to work.
Soraya Darabi: 11:00 No.
Jason Adams: 11:01 Yeah. It was a dark moment. I said, "This ends today. We have to know who we're bringing in to the company".
Soraya Darabi: 11:07 What kind of questions do you ask now, that stemmed from the learnings of hiring the wrong people?
Jason Adams: 11:13 Today we want to know a little bit more about them as a person. I don't really care about their career history. Who are they? To be successful in this company, you got to share our values, which is, if in doubt the customer's right. If we get to a point where we screwed up or the customer screwed up, if there's any doubt at all, we take it, it's on us. What scares me to death is to mistreat the one customer that was right.
Soraya Darabi: 11:32 When you changed the philosophy of the company, which is what it sounds like, who was in place and what roles did they take on?
Jason Adams: 11:42 When we really tried to turn things upside down, what really worked was our regional managers, Vice President, that's what made it work. We lost a lot of people at the store level. We lost a lot of store managers, but our key people bought in. We had a time when we walked in and removed the entire staff from a store. They were doing some things that was really wrong, and the only way to do it was in one fell swoop. There wasn't any of them worth keeping. And then we went in and we hired really well. And what's really neat is years later, I think 8 out of the 10 people are still there. Wow, that was worth it.
Soraya Darabi: 12:10 Redefining customer service turned out to be only the first step in how Jason was going to overhaul his company culture with a new focus on relationships.
Jason Adams: 12:18 And I tell my people, "When the experience is terrible, the Internet will always win". But the Internet can never say to you, "Hey, how you doing today? How are your kids? Can I get you some ice cream? Can I call you on the phone and check on you? Can I check on your product?” The Internet will never be able to do that. So, the biggest thing we did, we did something counter to the industry. We went a hundred percent non-commission. Is our average ticket maybe a little lower than a high pressure atmosphere? Yeah. But it works on so many different levels. The bottom line is, that when you walk into one of our stores, the only interest that salesperson has is your interest in mind. Because whether you buy today or buy tomorrow or don't buy or buy a lot or buy a little, they get paid the same. So, we want to develop a culture where you as the customer were the center of the equation. It was the hardest thing we ever did. The hardest thing you will ever do in business is to change your culture.
Soraya Darabi: 13:08 I'm always curious when I meet people like yourself that have franchise businesses or big brick and mortar businesses that are scaling, how do you begin to even choose the geographies?
Jason Adams: 13:18 I wish we were a little more calculated, I'm a little embarrassed. And yeah, historically we've looked for cheap leases that would give us the best location we could. Our second store went into Lawton, Oklahoma, which is really off the radar. The idea was, let's go somewhere where we can get a presence quickly and we couldn't do that in major metropolitan areas. And then we went to Abilene, Texas and we went to these smaller towns where we could at least get a presence real quick and start to get an identity in that town. And we grew that way till we had 10 stores. We kind of slipped into Dallas-Fort Worth on a good lease deal. And it kind of surprised us. And so, since then we've been adding stores in Dallas-Fort Worth.
Jason Adams: 13:54 I could change just about anything about the company. If we need to be stronger on the internet, we could do that. If we needed to sell handbags tomorrow, we could sell handbags. What I can't change is that lease. Once I signed it, I'm on hook for it for 5, 10 years. So, you go very cautiously right there. Because the town could change, the road can change, a lot can change.
Soraya Darabi: 14:12 Jason took me out to take a closer look at one of Home Zone's massive distribution facilities. It's overwhelming, with seemingly mile after mile of huge stacks of wooden crates and plastic wrapped furniture. It was here that I got a clear sense that Jason's obsession with creating a relationship-first company culture really extended to every part of the business.
Jason Adams: 14:32 So, this is one of our three facilities. Here we do a tremendous amount of shipping and receiving. And in any given time there could be as many as time of year 50 to 80 trucks queued up to be weighed and unloaded.
Soraya Darabi: 14:43 50 to 80. A COO of an e-commerce company told me once that, when you're in e-commerce and you're operating at the level that you're operating at Jason, ultimately you're a trucking business and you shouldn't forget it because you have to know how to deal with truckers.
Jason Adams: 14:57 Yeah, but for us as shippers, we're overseas. So, a lot of it is dealing with the shipping. And yeah, I didn't have gray hair till I got in the shipping business. On any given day, whatever we're bringing in can be virtually from anywhere in the world.
Soraya Darabi: 15:08 Yeah, so talk to me about your relationship with some major overseas players. I mean you've got China, Vietnam, and Malaysia.
Jason Adams: 15:17 And India, and different parts of the world. What we've been real successful doing, is that we value those relationships, and we've built those relationships since the conception. One of our core philosophies is that nobody will ever get hurt doing business with us. So, if there's ever a problem, and there is, sometimes that we get a shipment and the product's not performing like it should, our goal is to work together so that they don't get hurt and we don't get hurt. And it's really paid us in dividends because we have a terrific reputation throughout these parts of the world and people want to do business with us.
Soraya Darabi: 15:44 You've got your end customer, the people that live with the furniture in their homes, but you also have factories.
Jason Adams: 15:51 That's right. It's not a one-sided relationship. Just because we're paying the money, doesn't mean that they're not important.
Soraya Darabi: 15:56 Right.
Jason Adams: 15:56 And we can't have our factories dead. We've got to have them healthy. And so, it's an important relationship. So, I was telling someone the other day that there's times when factories will come to us and say, "Hey, we're short for orders in June. Can you help us out?" And maybe we don't need product, but that's okay, let's help them out. Because when it gets to September and they're booked, we're going to ask them to move us to the top of the line.
Soraya Darabi: 16:15 Right.
Jason Adams: 16:15 And it's that give and take relationship that I think is so important. Every business is personal. There's people in these companies, they have feelings, they have families, they have lives. Every business is personal.
Soraya Darabi: 16:28 It's a pretty tall ceiling.
Jason Adams: 16:29 Yeah, so you try to stack it where you can to maximize the space.
Soraya Darabi: 16:33 For instance, all the sofas are standing vertically upright.
Jason Adams: 16:36 Mm-hmm. This is where the magic happens. We do all our own studio shots, videos, commercials, right here.
Soraya Darabi: 16:42 Oh my gosh, I'm on a Hollywood set.
Jason Adams: 16:43 Yeah, so this bedroom set just arrived. We'll be able to photograph it for the Internet. We'll also do a video for the Internet, and we can go right on TV with a commercial if we want. There is a new thing we do, we get a report that says when you ran a commercial within three minutes, how many people went to your website. So it gives us some real time feedback.
Soraya Darabi: 16:59 Mm-hmm.
Jason Adams: 16:59 Because your front door today is your website, and if you pass that test, maybe they'll visit your store.
Soraya Darabi: 17:05 There we go. That's omnichannel marketing. To me, 18 stores, three busy shipping facilities, and an in-house commercial studio seems to add up to a pretty solid picture of success. I asked Jason if he saw things the same way.
Jason Adams: 17:18 Well, I don't want to give any impression that we've arrived. We're on a journey, but we're well on our way.
Soraya Darabi: 17:23 So, are you comfortable saying how successful in terms of revenue?
Jason Adams: 17:25 I would tell you that if we published, we would be in the top hundred furniture companies in the nation.
Soraya Darabi: 17:29 Which is impressive, because for some, having revenue in the high tens of millions, they would think, "I have arrived". So do you think it's the underdog in you that won't ever feel like he has arrived, or is it really the culture of the company?
Jason Adams: 17:43 I think it's both, because if I've done it right, I am the culture. I set the tone as any good founder or president does. That's why business works for me. It's simple. I tell people, "I'm a simple minded person" and they think that's belittling. I say, "No, business is simple. It's when you convolute it that people fail".
Soraya Darabi: 17:59 There's two schools of thought when it comes to changing your company culture. Top-down and bottom-up. Recently there's been a lot of support for the bottom-up theory, where change starts with the employees. But Jason is an extremely successful example of changing your culture by starting at the top. He's got that rare blend of vision and humility that inspires his employees to take his lead. Jason led Home Zone through a big change and overhauled the culture by redefining what it means to provide good service. The result is a company that's grown to 18 locations. In part, because it treats every business relationship as never just business, something Jason is clearly very proud of.
Soraya Darabi: 18:36 Good service doesn't have to mean something you only do for customers. If you take service to truly mean serving others, you can put it at the heart of every relationship in your business. And while in our lives it's so easy to compartmentalize our relationships, it doesn't have to be that way. Every relationship is personal, and the more you invest in each one, the greater the dividends you reap in return. With Home Zone showing no signs of slowing down, Jason is able to keep upping his customer experience in ways his competition will have a hard time matching.
Jason Adams: 19:08 We're in a basement in Bangkok, and we're walking around looking at things and we come up against this guy who's got this beautiful flower shop. He'll make you a custom bouquet, but they're all artificial. So they lasted forever. And we went, "This is so cool". And I started talking to the guy. This guy selling a ton of flowers in a basement in Bangkok. I mean he was doing $45,000 a month. We thought, "Let's put one of these in our store and let's just try it". We're at a point where we can try some of these risks. Now, you can't forget the plates you got in the air, you’ve got to keep them spinning. But then you start to ask yourself, "Well, beyond the flower shop, could I put in a cappuccino bar"? That might be cool.
Soraya Darabi: 19:39 What's changed?
Jason Adams: 19:40 What's changed is we can afford it.
Soraya Darabi: 19:43 That's it for this episode of Business Schooled. Join me for Lesson Eight, where we'll hear how Society Nine is fighting to become sportswear's next cult brand. I'm Soraya Darabi, thanks for listening. See you next time.
LESSON 8: Beating the odds
Lynn Le: 00:03 The first time I threw a punch was a total spiritual awakening. I’d never felt my body do something like that before and the first breath or growl or whatever, it's like, "Whoa, where did that emotion or that feeling come from?"
Soraya Darabi: 00:17 I mean, you just gave me chills.
Soraya Darabi: 00:21 Welcome to season two of Business Schooled, a podcast by Synchrony. I'm your host, Soraya Darabi. I've cofounded two businesses and now I'm the general partner of an early stage investment fund, Trail Mix Ventures.
Soraya Darabi: 00:33 Today we're seeing new businesses succeed more than in the past 30 years. Entrepreneurs aren't just surviving, they're thriving. I wanted to know just how they're pulling it off, so I hit the road to find out. I'm soaking up some essential lessons on business and life from founders who have graduated from their early startup days and hit new levels of success. Hopefully, you'll learn a few things too. This is Business Schooled, a podcast by Synchrony.
Lynn Le: 01:03 At this point, I've been doing martial arts for almost 10 years. It just never gets old. I could have the worst day ever and I've hit a bag a bajillion times and it just literally never gets old because it's a release. It's a literal physical release.
Soraya Darabi: 01:15 Lynn, you got to give the bag a chance. Do you want me to hold the bag for you?
Lynn Le: 01:19 Sure. That'd be awesome.
Soraya Darabi: 01:21 Got it.
Lynn Le: 01:22 Thank you. Helps me go harder actually.
Soraya Darabi: 01:26 Go as hard as you want. Wow. Okay. This is a knockout.
Lynn Le: 01:34 I'm glad you stopped me, because I was starting to think about pizza.
Lynn Le: 01:39 Our gloves are our most well known product. It's what we came out saying that we wanted to fix. There weren't gloves on the market for women, so this is our true first baby, if you will. We started developing other products like headgear and shin guards, strategically because we were getting asked for it all the time by customers because anatomically there was a lot of equipment on the market that literally didn't fit women.
Soraya Darabi: 02:06 The rise of Society Nine and its founder, Lynn Le, has all the makings of a classic underdog story. Sure, boxing has been male-dominated for over a century. Sure, sports apparel is ruled by some pretty major players and sure, Lynn has never run a business in her life, but none of that was going to stop her. Inspired by the needs of her female kickboxing students, Lynn designed a boxing glove, especially for women, not just to exercise better, but to help them unlock more of their fighting spirit. She's built Society Nine from nothing and received some impressive accolades in a short amount of time.
Soraya Darabi: 02:41 I wanted to know how Lynn went from a local kickboxing instructor to the founder of a rising cult brand that has the potential to take on some of the heaviest hitters in sportswear. To find out, I went to Portland, Oregon and met up with Lynn at McConnell's Boxing Academy run by two-time world champ, Molly "fearless" McConnell. It's time to get schooled.
Soraya Darabi: 03:02 How long have women been allowed to box professionally?
Lynn Le: 03:05 Oh, well, there's been professional fighters since even the early 1900's.
Soraya Darabi: 03:09 I'm wondering if the gear that was made for the first women to enter into the ring professionally was just off, like were they in danger because they were wearing the wrong stuff?
Lynn Le: 03:20 Oh yeah, definitely. We launched a company to really understand patterns biologically with height, weight, and hand measurements. The dimensions of the glove, where we placed the thumb, where we placed the thickest part of the padding because for instance, when women close their fist inside a unisex glove, our knuckles sit way further back because our hands are so small and the thickest part of those gloves sat too far up so it didn't protect you at all.
Lynn Le: 03:44 Molly, she lived through it. When we first came out with our product, she was one of the first people I asked for advice. Her feedback has been really crucial for a lot of things that we've developed.
Soraya Darabi: 03:53 Let's meet her.
Lynn Le: 03:54 I think she's in her office.
Soraya Darabi: 03:58 Are you Molly?
Molly O'Connell: 03:58 Yes.
Soraya Darabi: 03:59 It's such a pleasure to meet you.
Molly O'Connell: 04:00 Nice to meet you.
Soraya Darabi: 04:01 Wow, your gym is fantastic.
Molly O'Connell: 04:02 Thank you.
Soraya Darabi: 04:02 Thank you for having us.
Molly O'Connell: 04:03 Of course.
Soraya Darabi: 04:04 So Lynn was telling me about how a lot of this gear was unsafe for women because everything was sort of designed for a man's body. When you first got into the sport, what was it like?
Molly O'Connell: 04:13 In terms of gear, I'm not a smaller person, especially in my hands for gloves and so forth, but I know there are other women that that was definitely an issue.
Molly O'Connell: 04:32 Yeah, she's pretty good. I wish she'd come in more, but she's busy.
Lynn Le: 04:36 I know.
Molly O'Connell: 04:38 Running and building an empire takes a lot of time. You know. It's the one, two, three.
Soraya Darabi: 04:43 But it also kind of looks like Molly's just standing there calm as can be, and if she wanted to knock you out, she’d just flick a finger.
Lynn Le: 04:50 I totally believe that.
Soraya Darabi: 04:52 As good as you are.
Soraya Darabi: 04:55 So what made you start Society Nine?
Lynn Le: 04:57 I started Society Nine, first off from personal passion, kickboxing teacher and student in Krav Maga. Seeing how transformative it was for me on a spiritual, mental, emotional level. And seeing how it also changed the lives of the women that I was teaching and training with. And then seeing that at a very fundamental level, they did not have equipment that protected them.
Soraya Darabi: 05:20 It's a pretty intense form of martial arts, right? Krav Maga.
Lynn Le: 05:23 Oh yeah, definitely. But I give credit to all combat sports, all martial arts.
Soraya Darabi: 05:26 Right.
Lynn Le: 05:27 I mean they're all brutal in their own way. For sure.
Soraya Darabi: 05:29 Did you just feel at home right away?
Lynn Le: 05:31 Yes, because I thrive in a teacher-student environment. When you're being corrected and groomed for every jab, every cross, straighten out your arm a little bit more, position your foot. I thrive in those environments as a student.
Soraya Darabi: 05:45 You said that the equipment that women were wearing wasn't protecting them. What did you notice first?
Lynn Le: 05:50 The women who would end up being my customers, they were the ones who presented the problem to me. Every single class, there was always at least one or two women who would come up to me, 'Where can I find good gloves?'. It's a question that any fitness instructor gets asked all the time. "Where can I find good shoes for this? A good gym bag?" So being the instructor, I was obviously a trusted resource and I didn't have an answer for them.
Lynn Le: 06:10 I realized how frequently I was getting asked this question. How when you Google women's boxing gloves, there was literally no other options other than bubblegum pink, ginormal gloves that were poor quality, until we came along.
Soraya Darabi: 06:21 You notice there's something missing in the market that's growing because more women were coming into your class?
Lynn Le: 06:26 Oh yeah. Our gym at the time could fit anywhere between 30 to 40 students a class and at least half were women and that's a lot. This was around 2013, 2012.
Soraya Darabi: 06:37 I love how your entrepreneurial story began. You were passionate about a sport. You didn't have the equipment you needed to make your sport as good as it could be for you and the women that you were teaching. So you just said to yourself, I'm going to do it myself.
Lynn Le: 06:52 The passion certainly came from my soul, but I was also very fortunate to just be living in a city where there is so much talent and friendly enough people who are...
Soraya Darabi: 07:00 Portland, Oregon.
Lynn Le: 07:01 Portland, Oregon. It's such a collaborative city. I think that natural community aspect of Portland lends itself well when it comes to ideating new ideas.
Soraya Darabi: 07:11 So you grew up in the Pacific Northwest. How did your childhood affect the business that you ended up building?
Lynn Le: 07:18 That's a deep question. I grew up a daughter of Vietnam war refugees. We grew up not having a lot; grew up a janitor's daughter. I learned at a very early age though that the idea of being rich is self-defined, not through financial but through your own spirit. I was raised Buddhist, so a lot of my views on life, as high-strung and type A I may seem, I lend a lot of my inspiration to how I was raised, the lack of financial wealth, but then so much wealth in other things. The perspective as a woman of color, as a Vietnamese-American woman, I think it put me in a position now as an adult to just really have a very clearly defined idea of what I feel empathy means, especially after teaching kickboxing where people bare their souls to you. As the instructor you're their therapist too.
Soraya Darabi: 08:09 Of course.
Lynn Le: 08:10 I had students who were survivors of domestic violence. I had students who were survivors of assault. I had students who were in difficult marriages, difficult career paths, hating life.
Soraya Darabi: 08:25 Wanting to punch it out.
Lynn Le: 08:26 The one hour that they get with me, they just feel freakin’ invincible. I don't take providing that space lightly. Now that I've expanded that space, if you will, with Society Nine, we get emails from customers who share these same stories. “I started boxing a few months ago and it changed my life”, “I just survived stage three breast cancer and now I'm getting back in the gym and I love your gloves. Every time I put them on, I just feel like I'm back at it again.”
Lynn Le: 08:54 I always have to pause when I tell these stories because it's like...
Soraya Darabi: 08:57 It makes me teary.
Lynn Le: 08:58 That's why going back to that empathy point, when I started the business, that was what do you want this to be about. If you’re going to sacrifice everything? I mean literally until two years ago, I owned no furniture. I got rid of everything because I was like, I don't know where my life is going to lead. If this goes down the tubes, are you ready to sleep in your car?
Soraya Darabi: 09:18 Once you realized you had an opportunity, how did you start the business?
Lynn Le: 09:22 It was not a quick and sudden transition. I worked in digital marketing at one of the many amazing agencies in town. Went into venture capital at one of the only institutional funds in Portland, and that's really where I got my entrepreneur in residence experience. So I learned about what term sheets are, I learned about what not to do with your cap tables. I think that's the only reason why I've been able to even remotely understand venture economics.
Soraya Darabi: 09:47 I wish that everyone who had an entrepreneurial idea went through just a two week crash course on how to craft a cap table, that you probably gained invaluable experience.
Lynn Le: 09:56 I started networking to find the right people to help me ideate, literally, physically the product, ideate the brand because to me it's not enough to just have a beautiful product. Every dollar anyone spends these days has to have a reason. For me having the beautiful product and a reason to exist, that to me is brand. That's narrative. That's something that is actually in a lot of ways more tangible than the physical product itself.
Lynn Le: 10:20 So we spent at least four months developing just the name, iconography of our logo, the story behind all of that. That was just the three to four month process in 2014.
Soraya Darabi: 10:31 What came out of those meetings?
Lynn Le: 10:32 What came out of it was the name Society Nine, paying homage to Title 9, that piece of legislation and being the catalyst for a lot of the cataclysmic shifts that happened in women's sports, but also just women in media and culture.
Lynn Le: 10:46 When you open that gateway for women, that's what Title 9 did.
Soraya Darabi: 10:50 The majority of your team are women.
Lynn Le: 10:51 Like 90%.
Soraya Darabi: 10:53 For a boxing apparel company, that's really cool. What was it like telling your parents you wanted to be an entrepreneur?
Lynn Le: 10:58 My mom was terrified when she realized I had already like quit my job and sold all my things and I was like, “Oh hey, by the way, you know that graduation gift that you gave, she gave me like a $5,000 like it was a big deal,” it was like this is to start your path to a down payment on a home, “Well, I transferred that into the company checking that.”
Soraya Darabi: 11:16 You started your LLC.
Lynn Le: 11:18 My goal was to launch on Kickstarter that following year 2015, so August 2015, we raised $60,000 our goal is 50 so we surpassed that, did that on a 30-day campaign and it was one of the hardest things I'd ever done.
Lynn Le: 11:34 Just the begging, pitching, emailing relatives of relatives of relatives and second cousins and the friend who lives in Denmark, but why not? Just emailing anyone. I probably sent like 5,000 emails or something. Once we close that, it was a really important month for me because it made me realize that I wasn't that crazy. That over 700 people believed that a women's boxing company should exist and that was matched with dollars and I'm like, “I launched the company with zero funding other than my own and some credit cards and zero following.” I made $60,000 in 30 days. I think that says something.
Soraya Darabi: 12:13 Did you ever think when you became the founder of a company that really you'd become a full time sales person?
Lynn Le: 12:18 I knew that going in. I credit my experience working for that micro-VC fund in town. Working with them and really learning what it actually means to be a founder, which is you're constantly selling.
Lynn Le: 12:30 If you're not comfortable asking for money, you're sure as heck never going to raise money from an investor. You're sure as heck never going to be able to get money from a customer.
Lynn Le: 12:38 Whenever people ask me, “I have this idea, I'm trying to decide if I really want to go all in,” and I'm like, “If you're already sitting there asking me if you should go all in, you shouldn't go all in.”
Soraya Darabi: 12:45 Lynn's hustle paid off because she knew her customer. When it came time to start building her team, Lynn faced a tough choice that every entrepreneur encounters in the early days, where to put your limited budget so that it flexes the hardest.
Soraya Darabi: 12:58 So you've leveled up. When does a team join you?
Lynn Le: 13:02 I made my first hire in 2016. She just believed in the business so much. She was a Kickstarter backer, moved to Portland to join Society Nine, and it was just the two of us for a good two years.
Lynn Le: 13:14 At that point, the business was growing. I was literally like doggy paddling. I was scared to hire an employee, that costs money. At the same time, I've got to pay for product. I don't want to be sold out, so do I pay for product or pay for employee? I'm going to pay for product and just bite the bullet, get up at 5:00AM, get to the office at 6:00, make sure all the orders get fulfilled, then do any other fundraising. Sales marketing. I built our website. Just figure it out.
Lynn Le: 13:40 From a brass tax standpoint, we always need to be productized in order to make money, so we'll always prioritize product and innovation first, but that comes at a cost too. It's like...
Soraya Darabi: 13:50 Investing in R&D, investing in new samples, investing in prototypes.
Lynn Le: 13:55 However, we're very fortunate that our crowd funding campaign built a really, really healthy following of community that believes in what we're doing.
Lynn Le: 14:04 After our Kickstarter campaign was complete, Fast Company wrote an article about us. They talked about how we were challenging a gender stereotype in what we were doing, which, thank you, that article still gets us great referral traffic because it hit on exactly why we existed. We were just so much more beyond the gloves and that was always my objective as the founder. Please, world, I hope you see why we're here. It's so much bigger than this. For every time I doubt myself, I get an email from a customer telling her story.
Lynn Le: 14:36 I have a folder in our company inbox called “morale.” I save those for investor pitches because every single time I get that same question of “Really? Boxing gloves? Women?”.
Soraya Darabi: 14:48 Okay, so you must be feeling pretty good when things start to hit a groove.
Lynn Le: 14:51 Yeah. I feel like that groove really started to hit mid-2018, through a series of relationships being built over time. I saw that it was clear that 2018 was going to be a bigger year of growth financially than 2017. That is where I realized that we're hitting our stride.
Soraya Darabi: 15:08 What kind of growth are we talking about?
Lynn Le: 15:10 We're talking like 53% growth.
Soraya Darabi: 15:13 So your story really began to resonate around this time, 2018. I read about you in the 30 under 30 issue of Forbes.
Lynn Le: 15:20 Well, funny enough, the list came out like the week before Black Friday, so it was like, “Oh yay, great,” and then heads back down, you know. I was really proud of it. I mean obviously for multitude of reasons both selfishly as well as just like what it means for the business it's like, I felt seen. I've literally defied odds of making this business survive, make money and reasonably thrive.
Soraya Darabi: 15:43 To succeed at growing your business. You need the right partner in your corner. Synchrony has your back with consumer financing solutions, digital technologies, and data insights that can help your business rack up more wins and come out on top. Every day, Synchrony is changing what's possible for people and businesses.
Soraya Darabi: 16:00 Learn how we can help change what's possible for you at Synchrony.com.
Soraya Darabi: 16:08 Hitting her stride gave Lynn the confidence to face the biggest challenge of her business career since starting the company. Her community online was thrilled to rep her brand, but I wanted to know if she was prepared to scale Society Nine into a whole lifestyle.
Lynn Le: 16:23 We're well known as a glove company. I wanted to make sure that women who loved our brand so much has something that they could wear 24-7 because they literally were like, “How do we rep your brand?”
Soraya Darabi: 16:32 From the gym to a lifestyle brand? Athleisure is one of the fastest growing markets in apparel.
Lynn Le: 16:37 We sell a spirit and an emotion that can't be replicated in other activities. It's just different. Now, tricky thing with the apparel: you're dealing with so many body types, you've got curves and silhouettes and things that drape better on certain body types and drape terribly on others. But I chose to take the apparel route because we had enough customers being like, “I want to wear more of you. How do we do that?” Time to take the gamble. And so we launched our first full collection. Now on our Instagram we see customers that are tagging our tanks and our hoodies.
Lynn Le: 17:17 Now all of a sudden, Society Nine is truly with them in their day to day life beyond just the one moment they're in the gym. So it was a worthy investment and one that's really paid off and that's led to our next exciting endeavor, which is shoes.
Soraya Darabi: 17:31 Why shoes?
Lynn Le: 17:32 When you look at the activewear landscape in the last three to five years, especially with startups, no one has dared to make a shoe. I watched this space obviously pretty deliberately since it's our space.
Soraya Darabi: 17:43 There's an E-Comm myth that shoes get returned more than any other type of product. Is that one of the hurdles do you think?
Lynn Le: 17:49 It's actually the development costs. I can't speak for any E-Comm businesses or brands that are specifically shoe-only, but when I used to be in the sports industry, you know, working with one of the legacy brands and learning about the industry as a whole, there's something really tangible to a shoe that literally cannot be replicated by a hoodie, by a tee shirt, whatever.
Lynn Le: 18:13 Shoes are an expression of emotion, your personality. So much of shoes connects to who you are as an individual.
Soraya Darabi: 18:25 They signal a lot. Uptown, downtown, are they street? Are they conservative, are they preppy, are they cool?
Lynn Le: 18:33 Are they punk? Which makes it really fun and a lot of ways. They're risky because of the development costs. So being in this town, I was very fortunate in hustling my butt off and networking with the right people, that I was able to unlock a development opportunity to take the risk.
Soraya Darabi: 19:16 It must've been pretty hard to design and make this shoe to...
Lynn Le: 19:20 It took us almost two years and nine prototype rounds.
Soraya Darabi: 19:23 Two years. With the green light from her community to start building a lifestyle brand, Lynn reached a turning point from here on, she would have to face multiple new challenges, like mastering the complex process it takes to design a shoe and proving to new partners that she had what it took to lead a business.
Soraya Darabi: 19:40 They're launching soon.
Lynn Le: 19:41 They're launching January, 2020. I'm incredibly excited, incredibly proud. I've shown them to a couple of sneakerhead communities and they're like, “Ooh, those are fire.” And if there's anything that you know about the sneakerhead community, they are very particular.
Lynn Le: 19:56 I can fully attest that this is performance worthy, but also, I know that it can be stylized with some jeans and a motorcycle jacket if you're hoppin’ from gym to brunch or whatever. And that was a really deliberate design decision.
Soraya Darabi: 20:12 So you said you made nine prototypes. How did you go from prototype to final product?
Lynn Le: 20:17 I am basically getting an MBA on steroids right now. You just figure it out. It's – I look at all these things just like a puzzle. If you walk in curious, you'll be pleasantly surprised with what you can do. Every little detail from the shoe lace to the eyelet to the freakin’ rubbery material that they use. I touch and feel everything. That's also why I took nine rounds to prototype. That's what developing a shoe is like. If you don't have that ability to do that, you're going to miss the tiniest details that guaranteed someone else is going to see, and the worst part is it would be your customer.
Soraya Darabi: 21:06 How do you know when your consumers like it? I mean you said the sneaker heads really resonate with the new shoe, but do you do official tests or is it more informal?
Lynn Le: 21:13 It's informal. I think the tricky thing with being a consumer product business, there's a certain point where you literally kind of can't perfect it anymore. You just let it out into the wolves and see how they eat it. We actually track every piece of customer feedback that we get. We color code it so that we can see patterns of what issues keep recurring and if they recur enough from a percentage or ratio basis, then we're like, okay, we need to make that change, like right now. It allows us to iterate a lot quicker and it's actually rooted in the people who've already put their dollars to us.
Soraya Darabi: 21:43 Where did you make the shoes?
Lynn Le: 21:44 We are manufacturing the shoes in China. I went to China in July, for my first time ever, in my life. I had been working on this with our team over there remotely. I had not gone to meet the actual team itself that was doing the prototyping. It was a really important, symbolic gesture. You're going out every night for dinner, singing karaoke, you're drinking. There's a lot of pomp and circumstance, all of which are important because there are cultural gestures of saying, “I'm ready for this long term partnership. I appreciate you and all the work that you're doing. Like I'm not just an email in some other continent.” I think it was really important for them to see me as a young woman making deliberate decisions for the business. Showing that I knew what I was talking about. I feel like with the shoe it's like my magnum opus.
Soraya Darabi: 22:37 So are you prepared to kill your darlings? What if the shoe takes off 10, 20 times at the rate of the gloves, for instance. Could you pivot your business if you had massive product market fit in one category or do you want to always remain holistic, an athletic brand?
Lynn Le: 22:52 I never say never to anything. That's one thing I've learned about being a founder. You have to be ready to pivot and adapt to what the market wants and still not lose your soul. I'm going to let the market decide on that.
Soraya Darabi: 23:02 What happens to the business if everything succeeds as planned?
Lynn Le: 23:08 I take a deep breath, not because I'm stressed out. It's more like I have like a smile on my face. It's going to be a really emotional and exciting shift for the business. I'm hungry for it. We were made for that chapter. When I think about long term vision, when we are creating our own retail spaces – I don't really look at them as retail spaces, I look at them as like clubhouses. So, whether it's a seminar that we host exclusively for women's self-defense or we have a professional boxer come in to teach boxing fundamentals. We could even have conversations about women leadership, women in business. As a brand, we're focused on creating tools to empower them in their journey no matter where they are, whether it's in or out of the ring.
Lynn Le: 23:51 I'm excited to make the translation of Society Nine from women's boxing brand to the brand for the fight in every woman.
Soraya Darabi: 24:00 Lynn's story is a case study in building a cult brand. I meet entrepreneurs all the time, who would love to create a cult brand, but the truth is not every business can pull that off, because it isn't entirely up to you. Achieving cult status depends on the community you build. They have to be the ones who give you that permission. It can be a big turning point when your customers go from buying, to buying in and give you that green light that says we connect with the larger purpose behind what you're trying to do and it's a lifestyle we want to be a part of.
Soraya Darabi: 24:28 When it comes to making an impact, often what we do isn't as meaningful to people as why we do it. If you can share the greater purpose at the core of what you do, you'll inspire bonds that are built to last.
Soraya Darabi: 24:42 What would make Society Nine like the ultimate success?
Lynn Le: 24:45 Legacy. Legacy to me means something both very personal as well as something bigger. One example, my dream is to have a scholarship fund in my name to support young women of color who are interested in pursuing entrepreneurial endeavors. But on a larger level, the idea of legacy to me means that 10 years from now, I want 12 year old girls, younger than that, being like, “Mom, when can I get a pair of Society Nine gloves?” Because when that day happens, that's because things like boxing, or any other sport quite frankly, are fair game to all young women.
Soraya Darabi: 25:22 That's it for this season of Business Schooled. We've been all over the country to soak up some essential lessons on business and life and find out why more new businesses are thriving. I think more new businesses are going the distance, because there's more ways than ever to succeed on your own terms. Every entrepreneur we met this season had their own strategy for embracing change, rising to new challenges, and taking smart risks. And that to me is the final takeaway. That you have to write the rules of business for yourself.
Soraya Darabi: 25:52 If you missed season one, now's the perfect time to check it out and hear what today's business owners can learn from some OG entrepreneurs.
Soraya Darabi: 25:59 I'm Soraya Darabi and I'm glad you've been along for the ride. Thanks for listening.
Soraya Darabi: 26:06 All right, so how do I take this glove off? I just kind of kind of-
Lynn Le: 26:09 Yeah, you just peel-
Soraya Darabi: 26:09 Just kind of peel it with one hand.
Lynn Le: 26:10 Yeah, there you go.
Soraya Darabi: 26:11 Look, my fingers are red. I must have had a good workout.
Lynn Le: 26:15 It's a, it's a sign of a brutality, that's for sure.
LISTEN TO THE FIRST SEASON OF BUSINESS SCHOOLED HERE.