Build A $100M Business with ONE Product... | Bryan Guadagno

I think there's a viable path in the next three to four years for this business being over $100 million in revenue and us having a nice nine figure exit. We are going to push that envelope as much as we can to grow as fast as we can. Like if I could go back and do it all over again, I don't know, I would do it the same way really. Ultimately you've got to play the game the way it's supposed to be played. Why do most companies fail in consumer goods? They take the wrong approach to pricing strategy. The way you really win is by.

Saying that is wild to me.

Yeah, we believe it deserves to exist. There's not even a question in my mind the business is going to succeed. Every single data point that we course to business succeeding. But if you're not contingency planning, you're absolutely.

Can you build $100 million business with just one product? My formula for building $1 million business is four products at 25 sales a day. At a $30 price point, that's a million dollar business. But the person that I'm chatting with today flies in the face of that. Instead of having several different products and getting to a million dollars, he has just one core product that does over $10 million in sales and he's pursuing $100 million valuation. A year and a half ago I invested in a company called it Skinny Pasta. And I wanted to invest in this company because I genuinely loved the product. I thought that they were doing something very unique and novel in a space that hadn't been changed in a long time. However they sell Pasta, you know, it's 12 bucks. It's really hard to build a multimillion dollar business selling products that are 10, 12 or $15. But Brian has found a way to sustainably create a great product in a space that hasn't been changed in many, many years. Brian's really honest in this interview that it has not been an easy road. At one point he had $300,000 in debt that he didn't know how he was going to pay. He was worried that the business would was going to go under. And they found a way to make it through. And today they have sales that are over $10 million with a very healthy valuation. And now he's pursuing $100 million exit. That requires a different type of mindset. It requires a different type of strategy and Brian shares how he's approaching it in this interview.

Brian, the way that I like to start these is by asking how did.

You make your money well, it's still a continuous journey. I'm still, of course, still accumulating. No, but I started my career in wealth planning, did a little bit in investment banking, and then went out on my own, did more investment banking, did some operation stuff.

Could you explain what you did in investment banking? Because that's like a big term. Yeah, it could be a number of things.

So my job was as. I was a dual research analyst and investment banking analyst. So basically, anytime we had a deal that we were working, I would put together the financial model for it. And we also had hedge fund and private equity clientele who we would create scenarios for. So we would come up with a thesis like, we think a bond is undervalued and there might be a play to sell a preferred security and buy the bond. And I would put together the analysis.

On why.

That sounds like some days must be really exciting, and other days you just want to call your eyes out.

Yeah, Yeah.

I actually found it to be fascinating. I did it in the maritime ministry, and it's a. It's one massive exercise in, in economics and. Super fascinating.

Did you also analyze businesses?

Yeah, well, the, The. The businesses that were. That were trading in maritime assets. So we.

Maritime, like marine. Yeah, so ocean stuff.

Oil tankers and container ships and drywall carriers. And then what's really interesting is those are commodities in and of themselves. And then the things that they trap, that they carry are commodities. Commodities as well. So you're, You're. You're evaluating the supply and demand of the commodity the ships carry and then the supply and demand of the ships themselves.

So pasta is just a natural extension of that, then?

Well, believe it or not, the, The. The international freight of the pasta is, Is an important factor, especially going through Covid.

Okay.

Yeah.

And so what was the transition there? I mean, you, you go from trading oil, securities or whatever the heck that is to selling pasta?

Well, it was mostly. So, look, there are some times when products scale or translate, and there's sometimes when processes translate. So I'm very analytical by nature. So the process is something that translated. I realized that I was very good. It was the same thing when I was a wealth planner. One thing I was very good at was when we get a new client.

You'D intake them. Right. And so you'd have to understand everything that was going on with that individual, from top to bottom, from their investment accounts to their insurance to their taxes to really everything. So you're tearing through tax returns and investment statements and trying to figure out what's going on Here you're seeing where.

They made their money too. Yeah.

And that's kind of what got me really interested in. So seeing that got me really interested in transactions. And then that, that's what got me.

Into investment banking transactions. Like businesses exiting. Is that what you mean by transactions.

Exiting or funding some kind of capital?

You started to see where the big money was flowing. So you're working with high net worth individuals in a lot of cases, and you're seeing where money is made and transacted. And now you're saying I want to build an asset.

Yeah, it was cool to experience because we had a group of clientele who were just doing real estate deals together and, and aggregating a lot of wealth. And there was one guy that did the debt and then other guys that brought the equity and everyone had a little stake in it and they were doing, they just did it over and over.

It's a fun game like that. That's the game I like to play. And it's, it's kind of how we met. I mean we, we met because we were introduced by a mutual friend. And I have a fund that invests in e commerce companies. I love the food space. And the thing that drew me to your company was your main ingredient is cognac and no one's doing cognac. Well, there's like the, the, the zero calorie noodles that sit at the bottom of the shelf at a lot of grocery stores, but nobody's doing it well. And I always thought there was a play to be made there. So would you tell me how you saw the opportunity to get into Skinny?

Yeah. So I was working in investment banking in consumer goods. I did some stuff in distress. What I mean by that is I worked on some bankruptcy transactions for consumer goods companies and other food and beverage concepts. So like franchisor and franchisee models. And I had always, ever since I was a wealth planner, I wanted to be on the other side of the table, meaning I wanted to be an operator. And I was always keeping my eyes and my ears peeled for something that would make sense. And I. And when I got into consumer goods.

I'll kind of backtrack. Like the reason I got into consumer goods is back when I was working in maritime, had a really bad gut issue and I went paleo for a year. And when I went through that, I remember just walking through Whole Foods and going down the grocery store aisle and like looking at the back of a label and something would say Paleo on the front, but on the back I would See, I would see preservatives or I would see things that. That strictly weren't paleo.

Yeah.

And I used to get really upset. I actually went through a phase of being, like, super angry about the state of the consumer goods industry. And I'd go to the. I go to the hot Meals bar over in Whole Foods, and. And everything was, like, loaded in canola oil. And I just. I thought it was absolute bullshit. Right. So I developed a good amount of anger. But I also learned a lot about the state of consumer goods industry.

And I knew if I did something that I wanted to really believe in what I was doing. So fast forward, I'm working in investment banking, and I was brought in to advise on another Konjac noodle business to raise them debt and equity. And we had them multiple term sheets on. On both debt and equity, and without really throwing them under the bus. They were just bad stewards of capital.

So.

I know what you mean.

Yeah. Deals didn't close, and. And, you know, I didn't get paid unless. Unless the deal's closed.

Yeah.

My son was just born. I remember.

So we. We had a. We had a term sheet for them to sell the whole business.

So this. This is a food company.

It was another Konjac noodle company. Oh, it was another. Yeah. And when I got into it, I realized how, how. I mean, the margins were just great. Like, the margins were stellar. The product was good, but could use some improvement. It just. It just was the. The stewardship at the top.

And when you say stewardship, do you mean the. The actual company?

I mean the. The owner of the US Distributor. To give you an example.

When we had this $4 million term sheet.

We were like a week away from close. And I told him, hey, any transactions outside of the ordinary course of business need to be approved. We need to know what's in that account when we close.

So this is a business that's coming to the organization that you're working for to get capital, and you've got term sheets on the table for $4 million. And. And you're telling him, hey, you know, anything that comes out of ordinary business obviously needs to be disclosed. We need to know about it, because we're about to put $4 million into this business.

And I have access to, like, I can see the. The account, so I know, I know if things are happening, next day, I get pinged. So the guy lived in Israel, and I can see that he made a series of $400 withdrawals.

$400 withdrawals.

So like to the tune of maybe a thousand withdrawals. Like he, he like went from ATM to ATM to ATM just withdrawing the max. I mean he withdrew a crazy amount of money over a 24 hour period.

That's, that's, that's a, that's a hustle right there. I mean that's $400 from different ATMs and I, you gotta be really working for that.

And it didn't really make sense either. I, you know, why are you doing that? We're about to. I think he thought that it was his money until it wasn't.

Yeah.

And the deal obviously didn't go through. And that was the, that was the, you know something, this is, we can do this on our own without these guys. This is a good product. It deserves to have a good leader or leaders who are going on and, and actually bring it to market. It deserves to exist in a bigger way.

So that's, that's interesting. So you saw this product exist in the world, but you saw horrible execution or maybe even dishonest execution. Yeah. And you said this deserves to exist in the world. So I'm going to put on my operator hat, I'm going to do something about this.

Well, also, you know, when you're, when you're coming up in the world, there's, there's a lot of times when at least I experienced this. A lot of times when I felt like, and maybe this was ego and I was dead, dead wrong. I don't think I was. But you would see things being done and you knew you could do them better.

Yeah.

But you couldn't do anything about it because you weren't calling the shots.

And I, and I, I, I experienced that on, on multiple occasions, especially going through it like advising on multiple bankruptcy transactions.

You see, you see good things being messed up for stupid reasons.

Right.

Like, you know, I've, I've witnessed, I've witnessed guys just play chicken and, and destroy hundreds of millions of dollars of value for no reason other than to get a five million dollar edge. And in exchange you lose hundreds of millions of dollars in market value.

Yeah. I have a friend who calls it the bladder rule of finance. The more pressure in the system, the bigger the temptation to piss it all away. Yeah, it's like you've got, when you're playing with big numbers, it can be tempting to just round out the edges and like take risks you shouldn't take or do things that are dumb for the business. It's kind of one of the advantages that I think startup bootstrapper Entrepreneurs have is they don't have any wiggle room to mess up on a grand scale.

Yeah.

And so you have to focus on the things that matter.

Also, cooler heads prevailing is the absolute best way to preserve value.

What, what term did you use?

Cooler heads prevailing?

What in the world is that? Just, just means, oh, cooler heads prevailing. Yeah. I thought you said hedge prevailing. I'm like, this is an investment bankman. I don't know.

Cooler heads prevailing, just not, not losing your shit.

So you're, you're actually seeing how big business goes wrong and you're saying, I think that we can do this differently. I have this opportunity that I want to bring to the marketplace and you have these very interesting connections with people who play in the big game of business, which is what a lot of new entrepreneurs don't have. So you coming at this from a very unique perspective from a first time founder, you know, going into a, a, the food space, which is already hard, and you've got these big relationships, how do you then go out on your own and say, okay, I'm going to do this differently.

One of my goals for this year is to grow this YouTube channel by creating content that has no ask, that has no call to action, that has no result associated with it for selling courses or programs, just creating amazing content that my community needs. The one ask that I do have is that if you're getting value out of this show, would you hit the subscribe button on whatever platform you're listening or watching this episode? It helps me go out and have leverage with the people that I know can serve you. I like bringing the entrepreneurs to you that are getting their fingernails dirty and don't have huge platforms so that you can learn from them first. It helps me do that if you hit the subscribe button on your favorite podcast player or on YouTube and that helps us go out and get the guests that I know create the most value for you on your road to 1 million.

Yeah. So keep in mind there were other transactions I worked on in consumer goods and bankruptcy. I, I, I felt like I knew the business really well and I had worked with my current co founder before on another, on another transaction and, and she did, she does retail sales. So I felt like I had a really good, I had a really good team around me and that you had.

Worked with in investment banking specifically, correct?

Well, no. So, so Barb I worked with, she was in retail sales for, for 30 years. We brought her into to advise on a transaction called Original Soup Man. She worked for Campbell Soup for a Decade. So we brought her in to advise on the retail distribution front post acquisition out of bankruptcy. And, and so her and I managed the retail business. I looked at the economic side and she looked at the distribution side and we did that for about a year and a half and then once we turned away from that business, that's when I was brought into the noodle business that she was working with.

This is the conjecture.

Yeah, she was the one who brought me in, so I already knew. And I'd also been working from a banking standpoint. I've been working on other consumer goods businesses. So I had a really good view of why, why they were succeeding and failing, what margin profile they had to have the win singular focus that it needed to scale in retail.

Just from a supply chain standpoint, driving simplicity.

So you have, you have a unique eye for this space. You have some good connection in this space. But that doesn't always translate over into the startup world.

Right.

And you're, and you were absolutely a startup when you start skinny.

We were 100% a startup.

Yeah.

And, and I think what I, what I also knew earlier on is I didn't, I didn't have, well, I had these, I had like large like venture and private equity relationships and I had a lot of good people around me who could give me great advice, but I didn't have.

I didn't have the capital, like high net worth capital relations. Like I didn't have relationships to go to people and get 50 to $100,000 checks to do something that was much higher risk and much higher return, something that wasn't necessarily bankable from a venture capital standpoint. Because this is really unique. Like what we were initially trying to do was buy that when we, when that term sheet fell through, I wanted an entry into the marketplace. The idea that I had was why don't we just go buy the same business from the term sheet that just fell through. Like we can succeed where they failed. And, and that wasn't at all the case which led us down a, a crazy road which I can get into if you want. But ultimately we ended up just starting our own business with the capital that was raised and, and sort of take taking the brand in a way. Like that business was called Skinny Pasta. Our business is called. It's Skinny Pasta.

I didn't know that.

Yeah, yeah.

So the business that you were working on was actually called Skinny Pasta. And so you, you basically said we're going to take over this market share and this branding.

It wasn't for, we didn't want to do it that way. We wanted to, you know, before, because, because I, I immediately jumped to, wow, that shows an extreme lack of integrity. But they, they definitely earned what they got. So basically what happened was we, we put together a term sheet to buy this business and we partnered with the CEO of that business, who is currently still with us as a, as a partner of our business. He was a minority shareholder in Skinny in the old business, and.

The majority shareholder of that business did not really care to grow it. He didn't care to make it something worthwhile. And so like, to me, that's bullshit, right? If you have something good and you have a, have a path to, to building a business, then you should do it. Especially because I really care about this. Like we get into my, my Italian heritage and how much I actually really like the product, how much I deserve. I believe it deserves to be in market, especially given my dietary restriction that I had and everything that I had gone through with within my, my learnings on the consumer goods industry. I just felt like this deserved to have life and deserved to be done the right way. So we put together a term sheet to buy that company. I brought in another partner to, to help us raise capital from, from individuals.

And I want to hear more about that process because you're used to dealing with really big institutions and large transactions and now you're raising for a startup.

Yeah.

So what was that process like? How much did you raise? How did you even calculate what you thought you needed in order to get the business off the ground?

Just modeled it out. You know, you, a lot of people use models to try and tell people what they're supposed to generate in revenue. And I use models to figure out what my inputs are. You know, you start with an assumption on inputs and assumptions and then you build out the financials and I do everything bottom up. So starting from the littlest input, like, like.

I mean, there's hundreds of inputs that go into it, but, but anything that you could think of that would go into, into solving for what kind of revenue would do. Like the amount of. Amount of units in a, in a, in a case, the amount of cases in a master case, the amount of master cases in a container, the cost of that container, inbound variability around that cost, like literally everything that goes into getting that product from a supplier to your warehouse, all the cost of the warehouse, all the cost of the trucking.

Everything from that point to the, to the consumer, like all the intermediaries in between, just. I modeled out everything.

So how much inventory Are we going to need to order? How much is it going to cost to bring to market? How much am I going to need to pay my team? Yeah, I need some buffer in there in order to make sure that things don't go.

Yeah. And then, and then you also. What I realized from, from becoming entrepreneurs, you know, first and foremost, like, you don't live, you don't live like year to year. You live day to day. Right. So. Oh, yeah, like this, this amount of capital that we're bringing in is going to last us a finite amount of time. And then we need to have a plan for what comes after that. And you can contribute fully to the plan within that finite amount of time. It kind of gets wonky when here's, here's another little, another little, like, crazy piece of the business is we had the, the guy who I brought in who helped raise a lot of the money.

He, he ended up taking a lot of the money.

So it, you know, the, the numbers kind of broke down when we got into that math. So it, it was, it was a challenge. Like the first, the first year of the business, we were not only trying to build a business, but we also dealt with intellectual property litigation because we kind of like forcibly took over another name that was similar to ours.

And we dealt with some nefarious business activities.

Yeah, you got put through the wringer that first year or so.

Yeah, we did.

And you still somehow pushed through, which was what makes your story so interesting. Because first of all, you chose a tough mountain to climb. Like, we're gonna go into pasta, or we're gonna go after the konjac noodle space. We're gonna raise seat. We're gonna do a startup, and we're going to do it in a space that doesn't have a margin in terms of per unit. Right. You're not, you're not making 100 bucks an order. You're making a few bucks an order. Like food space is hard.

Yeah, but, but it's important to differentiate. It's not hard because the dollar value of the sale price is not there. It's hard because. Well, that's partially because it's harder to get to scale when you're selling things for lower dollar values. It's harder to get customer acquisition cost to make sense. But if the product makes sense, then it becomes a lot easier as you get a little bit bigger.

And why is that the case?

Well, because if the product makes sense and you're focused on consumer, then they continue to buy and it becomes a lot Easier to acquire new customers as they're, as brand awareness builds.

At the beginning, it's really expensive to get customers, especially when you're doing something that's kind of new and you've got to get people to try it. But if the product has legs and it solves a real problem in the marketplace, then theoretically those customers are going to come back and hopefully they're going to talk about it and they're going to use it for a really long time and you build a brand.

Yeah. It's also challenging because you come out with a thesis.

Right.

Like our thesis was the low glycemic pasta market needs to exist. And then you look at the actual demographic market, or I would say the, the size of the market within pasta in general. And it's, let's say retail pasta in the United States is 2 1/2 to 3 billion, something like that. And you look at the size of the low glycemic pasta market and it's like at the time it was like 10 million. And you're like, well, that market size fucking sucks. So.

But, but, but then, but then you, you kind of look at like comp. So like when Bonza came to market with this high, high protein.

Yeah.

Like gluten free alternative, that market didn't exist either. But we knew that there was demand for that kind of market because we also know that people don't want to eat regular pasta all the time. Why don't people eat pasta all the time? Well, they stop eating it because they don't want to feel heavy and bloated after they eat it. They stop eating it because they need a gluten free option. They, they stop eating it because sometimes they just don't know. Maybe they, they have some sensitivity to enrich wheat flour and they don't know why. Right. Like there could be a lot of reasons people stop eating pasta, but what we recognize was that almost 20% of the population eats some kind of low glycemic diet or is craving lower carbs in their foods. And why can't that be prevalent in pasta as well? And now we're the fastest growing subset of pasta in the market.

Are you? Yeah. So can you share how much capital you raise at the beginning in order to get it off the ground?

Yeah, we raised a million dollars.

Okay, and how did you deploy that? Where was that reserved for?

Primarily inventory. I would say 40% of that went to inventory. Good portion of it went to legal, unfortunately.

Yeah.

And then just general working capital.

Everything. Right.

Team. Team and logistics and and promotion.

And how did, how did you launch it when it's first getting going? Because the thing I like about the food space is as a consumer I always want to try new things, especially things that meet like my, my target of what I eat. Skinny being one of them. Like, like a low calorie pasta. Like that's interesting, I'll try it. But you still got to make people aware of it. You still have to fulfill that product and that can be an uphill battle. So what was your go to market launch strategy?

Yeah, so we, we knew that. So first after, like we established the thesis like low glycemic pasta deserves to be here and here's why. Uh, then it was more about, you know, we, we developed a thesis about who our consumer was. And candidly that thesis was not totally accurate. But we kind of knew. Like sometimes you don't know if you're, you're running like northwest, northeast or due north, but as long as you're moving generally in the right direction, you feel okay with it. We realized that we weren't going to be making perfect decisions, but we just need to make sure that we were moving generally in the right direction and we felt like we were.

So we did a lot. We actually credit to the individual who, I won't say his name, but the individual who I think.

Did us pretty dirty within the business by taking a lot of money out and operating it the wrong way. But.

He did a really good job with the branding of it Skinny. He worked with a group called, they're called lrxt, they're now called Common Good. And they developed our packaging and, and the, the brand script and the overall direction that we were going to run in. And I think they did a awesome job, candidly.

So we, we first started marketing it on Amazon and, and in retail. Like if I could go back and do it all over again, I don't know, I would do it the same way.

Really?

Yeah, because it was a very capital intensive path. Like what we realize about Amazon, like even currently Amazon is a profitable channel for us.

But it's not profitable purely on ad spend. It's profitable when combined with the organic sales that we do.

Correct.

But it is the lowest customer acquisition cost that we have. The reason it's not profitable on pure ad spend is because what we were talking about earlier, the penny profit on the product is pretty low.

And that means what you make like three bucks a pack or less.

Less on AM for a six pack. Depending on the pack that we're selling. We're selling a 24 pack, we make money. If we're selling a six pack, we're not really making money because it's a, it's a heavier product. We're getting hit with selling fees, Amazon FBA fees, and then everything that goes into getting it to the Amazon FBA center. So we want to make sure that we're profitable on, on the total business. But, but even though it's not profitable on just the ad driven business, it's kind of weird because the ad driven business is still the cheapest cost of capital because it's such a captive audience who's looking to shop.

What I'm hearing you say, and correct me if I'm wrong, is that as a channel, Amazon is profitable for you.

Correct.

But when you're running ads, the per transaction, like the direct response approach of you spend this much to acquire a customer, you're losing money or breaking even on that.

We're losing money on that.

But globally, people come back on the.

Channel as a whole.

Yeah, they come back, you rank for organic keywords. They come back and buy, buy bigger orders. Somebody clicks on an ad and they buy, they buy three of the biggest one. And so overall it's, it's profitable.

And that's largely because we have a very high repeat purchase rate too. Yeah. So the lifetime value is worth it. So. But it does, it took a lot of investment to get off the ground on Amazon.

Yeah. Well, I mean, especially when you're in a space like pasta where you don't like, you don't have a ton of search volume of people looking for new types of pasta. In fact, I was, I was doing a coaching call inside of the 1% a couple of weeks ago and somebody's in the food space and they're selling soup and it's a paleo soup. It actually be a great contact for. He's here in Austin. Hi, John, if you're listening. And he was talking about, hey, we do about 100,000amonth on Amazon. How do we scale this? And, and what we were talking about was the fact that Amazon is not often a discovery platform for new foods. It's where people come back and buy again. And so the discovery platform for new foods is often cold advertising and people will see an ad and then go buy on Amazon. But it's, it's, it's not impossible, but it's an uphill battle, at least our experience.

It's more expensive. Yeah. Target keywords.

Exactly. To get in front of new people on Amazon in the food space specifically, it's different in other spaces. But it sounds like you're saying that you, you sort of wish you had launched in a different way, but still Amazon is the most profitable channel for the least. The lowest cost customer acquisition channel.

Yeah. Just knowing what I know, I think there are much more capital efficient ways to start your business.

How would you do it now?

I would, I would put together offers and I would work direct response through our own web.

Tell me more about that.

Okay, so our mutual contact, Josh, who put us in touch, you know, when, before we invested in the company, that's his bread and butter.

Yeah.

Is, is that kind of acquisition. So, so is that influenced by him or have you seen other brands do that?

It's. I mean, he, he definitely opened the door for us. Him and. Him and his partner Joel and a couple other folks who are within that network for sure have opened that door.

What, what? Like I, I try to be a student of companies that work. I'm very fascinated by business in general and one of the stories that just captivated me was Magic Spoon story. You're familiar with Magic Spoon?

Yeah, yeah.

Have you interviewed him?

I have, yeah.

Okay, cool. I'd love to chat with him. I don't know him personally. I've just heard stories. So anyway, my understanding of how they scaled is by having a negative cash conversion cycle and being profitable on the first transaction.

Could you say that in English?

Yeah. So negative cash conversion cycle means being able to order product, receive it, sell it, and get paid on it before you have to pay for it.

Yeah. So you have like net terms with your supplier.

Yeah.

You can sell it ahead of time.

You basically don't need cash to make money. It's beautiful. Right? So. And if you can. And if you can be profitable on the first transaction after your customer acquisition cost, it's even better because really you're just fronting the spend and then you're getting paid on it within a week or so, depending on how long your cash is, is with your, with your payment gateway or payment processor. And it's just a cash build. So how would you keep doubling down?

How would you do that within a pasta company?

So the first step is having payment terms that allow you to do that. So working with your co packer. That's why when I walked in, Ryan and I were supposed to have this interview a different time. We didn't because I was either in China or I was recovering from being in China, but I was out there negotiating our payment terms. So we now have up to net 120 payment terms on our inventory upon departure from.

That's one of the first levers we pull in the fund is if we can extend the time in which the cash stays in the business. You obviously have better cash flow.

You materially reduce your need for cash.

That's right.

So it allows you to scale a lot quicker without going out and raising a lot of money. So it's, it's, it's not super dilutive. Right. Which as you're starting a business earlier on, the most dilutive time is the early phase.

That's right.

Right. You can raise, I mean guys raise 15, 20 million dollars at when they're later stage businesses and only sell 10% of the business. Right. Or less because they, they exchange some secondary transactions or something along those lines.

So the first thing you would do is try to extend your terms and be protective of cash flow.

That's number one. And then number two, we talked about why do people, why do most companies fail in consumer goods? And it's because they take the wrong approach to pricing strategy. They look at the set and they say this is what I think it needs to be to succeed in retail. And then they try to back into a cost and whatever the margin is, they take it.

Right.

Or margin takers. The way you really win is by saying here's everything that I need to make this product. I'm going to assume that it never is going to get better than this. And here's the margin I need to win in retail and this is what my price is. And if I can't sell this price, I can't sell this value into market, then this production exist.

Makes sense that you answer that differently than I expected because you started saying that you went Amazon and retail to start, but you wouldn't do that now or you kind of wish that you had done it differently.

Well, because the first thing you would.

Have done is all about pricing strategy.

Pricing strategies first. No doubt. Pricing strategy is first. And then, you know, we were, we were lucky too. I mean having having a lot who came from the other company who already had the supply chain managed. Like we have a very simple supply chain. We didn't have to do any negotiating. The relationship was already there. We had to do negotiating to get the payment terms kicked out further. But we were so, so much farther along than a traditional startup company because we had the entire supply chain in check. And then, you know, when Covid hit, it was actually a huge competitive strength because coming from the maritime sector, I know it's notoriously volatile and I know that the bull markets don't last more than a year. Like going back 30, 40 years. Like, I spent years just analyzing shipping trends and there was never a bull market that lasted more than like 18 months. So we had competitors who were scared of bringing product. And one of the best lessons I learned when I was in the maritime space, we used to share an office with a group called Euronav, which is the largest tanker company in the world. Like the local, largest oil tanker owning company in the world. And when I went to visit their, their office in the uk, I sat with their cfo and it was during a period of time called Contango. Contango is when there's an inverted curve. So you could basically buy oil forward, hold it, or you could, you could buy oil today, you could hold it, and then you can like sell it upon delivery and collect a spread. And it's basically, it was an arbitrage. Like you could guarantee profit just by holding oil for a certain period of time. And I asked him why they didn't do that, and he said, because we're in the business of shipping oil, not holding it. And I, it was so simple, but it was actually super profound for me. So when we were going through that, I was just like, we're in the business of selling pasta, keep bringing in product. I think, I think a lot of, a lot of folks that I observed anyway, started holding back a little bit. We're going to grind this out. We're not going to bring in a bunch of inventory. We had a ton of inventory. We were fully stocked. And then whenever we would have problems getting product out, because the challenge wasn't just, wasn't just, you know, the cost of the product. The challenge was getting it out of China. It was, it was congestion at port. And just being a student of that industry, we, you know, we were able to ask some smart people who manage that industry, how do we avoid getting bumped? And fortunately having some connections at the booking desk to make sure that they don't get pumped.

What I mean by that is like if you're, if your container was on a ship, they would, they would, if it was too heavy and they could, because you could, you could either like wait out or you could cube out. And if containers were, were heavy, then they would count for two containers. But a cargo carrier would prefer to have two containers for twice the price and half the weight if they could support that. So they'd bump the, the heavier container in exchange for two lighter containers or something along those lines. So after that happened like three times. I was like, all right, come on, you're not bumping our containers anymore. And they stopped bumping our containers. So that was really productive. And then we also knew going into certain ports that didn't have congestion, we just opened a new warehouse in Charleston, South Carolina.

I'm really interested to hear you complete this. Thought about if you were to start the business again and launch it, you.

Would have put together offers. Still not there. Yeah. Okay.

Okay. So.

Right now.

We have an average order value of 50 bucks. It costs us on Facebook about $20 to acquire a customer.

Is that if you're sending them to a landing page?

No, right now we send them just to a regular shopping page, which is why I'm so optimistic about the ability to do this. When we initially started, we were as low as $8 on customer acquisition costs on Facebook.

Basically we profit between 5 and 10 bucks on the first purchase. Right now with AOV of 50 bucks and a customer acquisition cost of 20 and sending people just to a regular checkout page or shopping page.

If we use landing pages, if we have custom offers, we have a few more items on our webpage to drive car sizes higher. There's no doubt in my mind we can get that first purchase profit to 20 bucks or more. There's no doubt in my mind that we can continue to scale ad spend to a point where we can leverage that negative cash conversion cycle to scale infinitely.

So, so if, if you were, if you were launching Skinny today, you would put more emphasis into your offer pages and you would have Amazon almost as like the spillover. Yeah, like the. Where people come back and buy again. Is that a fair summary?

It just comes back to capital efficiency. There are so many ways to do it. If, if I wanted to do. Look, the, the biggest play in retail is in, is in retail. You have to be in retail to really win on a brand level. In order to truly build consumer affinity and have longevity in consumers minds, you need to be on store shelves. There's no doubt about it. But there is a shortcut to capital efficiency and that is playing the direct response game digitally.

Well, the, the example that I'm thinking of is Catalina Crunch. You know that company, the high protein, low carb cereal that came right out on the heels of Magic Spoon and they just went ham with Instagram ads when Instagram ads were new and they were the high protein cereal and they were one of the only ones available at the time. And this is I think 2019, 2020. And they did so well with the customer acquisition side with Instagram ads that they could kind of bully their way into retail. Yeah, because they had the customers, they had the demand. They were first to market and now they're at every Whole Foods, they're at some Kroger's. Like they're everywhere. And that seems to be the play in food.

Yeah, the long, the long term play is to reallocate that digital spend into driving in store purchase.

Why do you say that you have to be in retail in order to create that brand.

You want to be where consumers are. Ultimately 10% of of grocery is done online.

That is wild to me.

So you can, you can, you can get to scale and sort of have the, have that, have that balance tipped in your favor for some period of time. But I mean you know this. In finance everything reverts to the mean. Ultimately you've got to play the game the way it's supposed to be played.

Well, especially if you're going for what you are which is to build a real established brand that has serious enterprise value that can sell for a whack ton of money.

You have to be in retail.

You've got, you've got to go where the consumers are there. Which is different than if you were playing to have a $5 million business.

Yeah, if I was, if I was just playing the cash flow game and this was a legacy business for my family and I just wanted to print cash and I wanted no headache. Yeah, you stay digital. But if you're trying to build a brand that has longevity, that's going to be here for a really long time and, and, and.

And is pervasive in consumers minds as a brand. You need to be in retail.

Would you tell me how big the company is revenue wise now we'll do about 10 million. 10 million. And you're how old?

We're four years old.

Four years old. So I mean that's impressive on, on this type of a business. Getting, getting to 10 million in the food space.

It's no easy right now.

Yeah, yeah, that's, that's a, that's a, it's a tall mountain to climb. And the breakdown of where people spend money with you is consolidated around like a couple products and a couple flavors. Is that right?

We, well we only have four main varieties.

Okay. So, so I'm going somewhere here. So would you just, would you just share where, like where the money is spent in the business, like what your best selling products or varieties are?

Yeah. So on Amazon we only advertise on the variety pack that sells 65% of.

Our volume on right here, this variety pack.

Yeah. That does 65% of our volume. Amazon, it's about. About the same. On our webpage. In retail, there's no variety pack.

It's.

It's all by variety. So.

And so our advertising variety is like the fettuccine, the. The. The rice pasta. Actually, let me just. Let me just skip, like, the preamble here. Where I'm going with this is, in my world, like, the way I analyze business, you have one product with different variations, correct?

Yeah.

You know, you've got. You got different styles of the pasta, but you don't really have different skus in the way I look at this.

Yeah, it's the. It's the exact same ingredient statement. It is literally the exact same production process, the exact same supply chain. It's. Everything is exactly the same except for the shape of it and that and that.

In, again, in my analysis, that makes things even harder because you're essentially trying to scale one product.

Oh, it makes it so much easier.

And now it's. It's taken a while for you guys to develop a new product, like years to develop this new product, which is. We can talk about it, right?

Yeah, yeah, we can talk about which.

Is the Mac and cheese and that.

And that was intentional. You know, we.

Tell me about that because that's. That. That doesn't fit my model.

Like, why is it intentional?

Yeah. Why do you intentionally hold back on new product delivery?

First, just because we didn't bring out new products doesn't mean we didn't innovate. So, like, this. This product, this is like a. We're on a V3 of the core product. So, I mean, we knew. We knew that the core product needed to be better. Right. That was the whole reason. There's a reason that consumers in the Konjac noodle space prefer our brand over every other brands. Because we have the best Konjac noodle on the market. If you're looking for a true pasta alternative, it's not even. It's not even close. And the reason that is, is because we. We invested time, energy, and money into. Into making it better.

Right.

And just because we didn't advertise it doesn't mean we're not consistently making it better. And we wanted to make that as good as we can get it, and we'll still continue to make it a little bit better.

But.

That was our first priority. That's number one. Number two.

There'S something to be said for opportunity, cost of our time and Our focus and our dollars in terms of. I mean, it's pervasive across the whole business. If we're rolling out new SKUs, it makes the supply chain more difficult. If we're rolling out new SKUs, it makes the sales cycle more difficult. We might not be talking to different buyers. We might be in different areas of the grocery store, which means our ad dollars might be less effective. If we're in the pasta aisle and we're allocating all of our dollars to that pasta aisle and someone's walking down it and they discover it and everything's right there on the shelf next to each other, they might buy multiple items. If we're advertising in the pasta aisle and we have a Mac and cheese in a separate aisle and we introduce them to the Mac and they don't know that the other products there, or vice versa, then we're not getting a multiplier effect on the dollar spend.

You're splitting your focus there. That's. That's interesting, Ryan, because where, you know, I work, I work with entrepreneurs where $10 million would be the end point for a lot of them. And one of the things that I see them. Where I see them failing, is they're trying to launch way too many products at the same time, and they don't have the focus and energy to get the first product to 25 sales a day or 100 sales a day. So they never have the momentum. It's split among multiple products. And then when that doesn't work, they'll throw another product at it and just see. See if that one takes. This is a different level of commitment where you're just saying, we're going to improve this product, get to 10 million on the strength of this one product alone, and then we'll release what I think is probably going to be the hero product.

It's a fucking awesome product.

Tell us about it.

So the Mac and cheese is the lowest carb Mac and cheese ever created. It's made with. With real cheese and our very low carb noodles. And. And actually, that product is not even meant for retail. That product is purely meant for digital for the time being. And it goes back to everything that we were just talking about. The only way we'll put in retail is if it goes on the shelf next to our core line. The place where that makes the most sense is in a set where we're in just the better for you set. Talking to the same buyer.

I see.

We don't want it to be a legacy single. Like it can't Just be a single sku. It's. Because then it's not discoverable. It'll get lost in the sauce. It's also at a premium price point. We know there's a precedent for our shopper to buy that on our webpage, but then you, you get to standing on retail. Look, we're in, we're in. When we measure, we're in about 300,000 households, maybe 350,000 households across the United States. There's over 100 million households in the United States. There is so much more legwork to do in getting the core product into households. And then once you're in the household, there are other ways to cross sell into that house.

So we're, we're much more interested in, in building our consumer base with our core line and, and also within the distribution that we're already in. Like, there's a reason that, that if you go national really fast, like if we were to roll out and just get full distribution, we're now splitting our dollars spent across like many multiples of the, of the same doors that we're in. And it's already hard enough to get somebody's attention in one store.

Sure.

So if you can prove out a model around winning a really loyal shopper in a particular store and then kind of scale, that way you have a much more solid foundation. So anyway, like going back to the Mac and cheese, we think it's a great product, but we also think it's a great product for consumers who already know our product, not necessarily for new to market.

Yeah, it's, it's interesting to me that level of commitment to one product because you're seeing this as something that is going to grow and scale for many, many years.

Yeah.

So you're not in a rush. Not in a rush to like.

Well, we're, well, we're in a rush, but we're in a rush to build real brand affinity with our core product. Like, if I, if I walk down the street and I talk to 20 people and said, hey, have you ever heard of it, Skinny? And every single one of them said, yes.

And we knew for the most part the number of like the percentage of people who are aware of it who were actually shoppers of the product, then we'd be in a position to roll out additional products. But right now, if I walk down the street and ask 20 people if they had ever heard of the product, probably one of them would say, yeah.

The interesting thing to me about that process is that means your product has to be great. Yeah. You know, if, if you, if you're going to commit that long to one product, it's, it's got to work. And that means that you don't really have margin for error.

If we didn't believe in that though, we should be in business in the first place. Yeah, we believe it deserves to exist. We believe this is the best local. I say low calorie, really low carb pasta alternative on the market is the best alternative if you are trying to consume a low glycemic diet.

Your approach to building a business is different than most people in my audience, which is that you accept the fact that you're not going to be cash flow positive from day one. You're raising capital to go aggressive. You're committing to one product until it wins, and then you're going to roll out multiple products. So what does the cash flow situation of the business look like now that you're four years in, you're at $10 million. Some businesses would be printing money at $10 million. But this is a different business.

We're a high growth business. Our, our job is to grow and our stakeholders want us to grow. Right. I mean, you, you'd rather us have a, rather have us double every year and get to a great three to four years than, than us pull back on growth.

And so when you say high growth, that means that you're investing pretty much every dollar back into the business to create more growth.

That's right, yeah. The most important thing for us is not having existential risk. We're not going to over invest to the point that we're going to put ourselves out of business, but we are going to push that envelope as much as we can to grow as fast as we can.

What does that mean for you personally as the leader of the business? You're not like, you're not scraping a million dollars out of that $10 million every year to sit pretty like you're, you've got to be all in on this thing. So you, and you've also got.

I live, I live month to month. Your first question was, do I, how do I, you know, how did I make my money? I didn't make my money.

And you have right now, is that right?

I have three kids.

You have three kids. And when you, when you came on the stage at capcon, you were like a week from have the third one coming. So it's like you are, you, you haven't had your big payday yet. You're aggressively growing this business and you have three kids. So what Is your mindset as your like role in everything into this thing?

My, my interests are aligned with yours?

Well, of course, but like, I mean does, does that, does that mean that you're scared shitless or does that mean that you are just bought in?

Like, tell me more about how, how.

You'Re thinking about it.

Yeah, part of this is developing a resilience first and foremost. Like the shit that I went through when we started this business, if I could go through that, I'm not really intimidated by anything else. I also know the business is going to succeed. There's not even a question in my mind the business is going to succeed. Every single data point that we have supports the business succeeding. Until I get data points that support consumers not wanting this product. Like if I was looking at the data and the repeat purchase rate wasn't good, or if I was looking at the data and we were losing shoppers and if I was looking at the data, like if we were losing grocery stores left and right and people were like, ah, it's just not selling, like if I, then I would feel differently. But everything, every data point that I have, the fact that we've almost doubled every single year since we've been in existence, I know this product is worth it. I've known it since I first, when I first like saw that it was a Konjac product that was not doing well. When back in my banking days when I looked at the margin, it's like, holy shit, this product deserves to exist. This is incredible.

And like I know the product is worth existing and I know what we've invested into being it being a best in class product. I don't think anything's going to take it down. And so this year we invested heavily in data. We invested heavily in.

Protecting our variable unit economics so that we didn't have existential risk. And so am I scared? Yeah, I always live in a little bit of fear around the unknown because you just never know what can happen in business. We also spend a lot of money, but we, we spend it strategically. Like everything that we do is data driven. You ask me about almost any decision that I'm making. I can point to some data as to why we're making that decision.

Most entrepreneurs who are in your situation are waking up every day saying, how do I sell more? Like, how do I sell more? How do I make the business profitable so that I'm not freaking out about the growth of the business. We're, what do you, what do you think about every day?

Yeah, I mean, I Think about the same things. I just, maybe I'm not as intimidated by where we are today. I think that's really the difference. I know that it's a path and a process and I gotten, I've kind of been forced to embrace the moment in a way.

You know, and it comes down to planning, right? Like if I, if I wasn't planning to have, like we have a certain amount of money, this money is going to last us till we get here. When we get here, we're going to start capital planning. We have this number of options within that capital planning. We have all these great people who are, who believe in what we're doing. We believe in what we're doing. If, if the absolute worst case scenario happens, here's the path. Like, I mean I, like there are a lot of people that say, hey, you can't have, you only, only have plan A because then you know, if you have plan B, then you're counting on plan A to fail. I think that's bullshit. Like, I understand the value of committing to a plan and having a really positive mindset, but if, if you're not contingency planning, then you're fucked. You're absolutely fucked.

And in that case, what I'm sort of hearing you process through is that your plan and your thesis has a long time horizon meaning like in terms of it winning out in the business. Maybe not from a cash perspective, but from the business winning out. You're thinking about this in terms of years, maybe even decades, whereas a lot of entrepreneurs are thinking. You're looking at me like, no, no.

I wouldn't, I wouldn't say decades. Like this is, I'm looking at this in the next three to four years. I think there's a viable path in the next three to four years for this business being over $100 million in revenue and us having a nice nine figure exit. That's, that's my goal. And I have, I've put enough thought into the path to getting there and I have stressed the data enough to know that that path is viable. It's not a pie in the sky path. Like, I can see how it can happen. I can see how it can happen through distribution growth. I can see how it can happen through velocity growth. We have benchmarks and data to support the velocity growth that we're trying to achieve in banners already.

I, I can see the growth in the category supporting that trend. I can see how the team can, can execute on that vision. You know, there's, I, I.

I don't I know that there's a lot of, there's a lot of risk in the process. But I also can see one of, one of my, one of my mentors talks about the difference between optimism and positivity. He's fucking awesome.

Who's this guy?

His name is Gary Chupik. But.

He talks about how if you're positive, you go in with a positive mindset. You have really no reason to be positive. You're just being positive for the sake of being positive and that's how bad things can happen. But if you go in optimistic, you have data to support being optimistic. You read the book, you did the homework. You have reasonable that you're have a positive outcome. That's powerful. So we try to stay optimistic because we have reasons to be optimistic.

That makes sense. I really like that distinction between optimism and positivity that lands.

It's powerful, right?

Yeah. When you, you said several times that you're really confident in your team and that you've brought on some really amazing people.

Yeah.

In a business that is investing into growth and in a business at the beginning does not have a long Runway in order to just burn through cash. How do you attract top tier talent knowing that you may not have a deep Runway in order to keep them on if the business doesn't pan out?

Well, I'm very transparent. Like when we were making our earlier hires, I was convincing people not to, not to join. Like I was saying, hey, look, like there are going to be times when we have no money in the checking account. This is not the reality today. But when we were, when we were going through this, when I made some of my earlier hires, I was very transparent. Like this is the state of the business.

If, if that's going to be a problem, then we probably shouldn't do this. So I need you to let me know today.

That's bold.

But what I did tell them was, look, you will always get paid. I don't care if it has to come out of my pocket or if I have to go beg somebody. You will get your money. I will make sure you get paid. It might come a couple days late, it won't come a month late, it won't come a payment cycle late, maybe a couple days late. But I will make sure that you get paid. And just made sure that that was the fact. That was the reality. I prioritized my team over everything.

I would guess that that brings a lot the only people who really bought in to what you're doing.

Yeah. And it also breeds a lot of loyalty, like, for, for me too. Like, from my side of the coin when I was going through some of my hardest times.

My.

One of my earliest team members, she. I mean, I remember being on calls, like, when I was at, When I was at, at the conference, the. The capitalism conference. I. I spoke about a time when we had $300,000 of payables due in a week and we had no money in the checking account. I. I, like, sat at my desk and I cried. Melissa was next to me and she was like, brian, you're gonna get through it. I know you will. Like, and she was. I mean, she was a rock. She supported me in that, you know, and so, like, the loyalty that we have because of that, like, going through that moment together. And it was the same thing with my co founders. You know, they did a really good job of making sure that the business continued to grow while I was focusing on the big problems. And.

That'S why I say, like, am I, you know, you asked if. If I, If I get, If I get worried? Well, sure, I get worried. But having gone through, you know, those really, really challenging times and figuring out how to work through it and realizing that there's a path to, to working through capital constraints and also that this is, this is something I wish I, like, was able to know in my body when I was younger. And it's obviously not the best business practice, but the reality is you don't have to pay people. Not, not your, not your people on your team. But, like, if you have vendors and you can't pay them and you call them and you tell them that you can't pay them, I mean, it's not like, it's not like you're going to go to jail. Right? You're not going to just, hey, I can't pay you right now. I'm going to work to get you paid. Here's my path to getting you paid. I'm sorry. It's not the end of the world. As long as you believe in what you're doing and you feel like you can get to the other end of it and even you can't. Like, the worst case scenario is the business goes bankrupt.

Which you saw.

Which I saw.

Investment banking world.

Yeah, which I saw. Obviously, I didn't want to.

That's a really interesting point. So I think, like, I've experienced this myself. Like, you think the nightmare scenario is that you run out of money and you declare bankruptcy. I know people with multiple bankruptcies. Yeah. You know, and we're still friends. Well, it Might.

Yeah. Am I. This is.

Before we move on. It's just like I have learned that that's not the end of the world.

It's not the end of the world.

And you saw it in the investment banking world is like, if a business doesn't work out, the business doesn't work out. And when you can accept that as a reality now, you can play.

Exactly.

I think most people are not willing to accept the worst case scenario. And so therefore they don't play well.

A lot of times they need to just talk through it and recognize that it's not as bad as they might think. Right. Like, why is, why is the business going bankrupt such a bad thing? Right. And I had to talk through this with my therapist. Like, why is it such a bad thing? Well, because I'm letting down all my shareholders. Well, why is that a bad thing? Because they invested all this money in me. Well, why is that a bad thing? Because then they're not going to trust me anymore. Well, why is that a bad thing? Because then.

I won't be able to start another business. I don't know. Like, well, why is that a bad thing? Because then I won't be able to make money. And, but then you, you go through that and you, you say, well, is that really. Are, Are all those answers really true? Like, are they really the truth? Right. And like, will they really not trust me? I called, I think I told you this, like when I was going through this, I called one of my really good friends who invested money in the, in the business. And, and he said, brian, I care more about your mental well being than I do about the money.

Absolutely.

It's a beautiful thing.

I, I have those conversations with brands that we invest in that like they, they're so afraid of letting us down.

Yeah.

Like, like the best investment. Like if you're in a good place, the business is going to be fine.

Yeah.

And also I accept that I'm an investor with big boy pants on.

Yeah.

And not every single one is going to work out.

That's a perfect reality. That, so that was another conversation I had with another one of my investors. Like, this is a high risk, high reward proposition. We knew that going in. We are adults who are investing money to earn money. And this is part of the investment thesis that some of these are going to fail.

Yeah.

Right. So now you kind of get comfortable with that, that reality. And now you can not operate with a reckless abandon, but it kind of liberates you to make decisions.

I love this because.

I once calculated That I had spent like $300,000 getting to know Gary Vee, like speaker fees and like buying wine to just getting into his network. And we've now met maybe six or seven times. I was with him a couple weeks ago and it just struck me in a way that I hadn't seen before that the reason why he's able to be so energized and tenacious is because he's not afraid to lose. Like genuinely so just like if he loses, he loses, no big deal. And it was his loss and he owns it and he moves on. Yep. And I think about my own approach to business and I think about like micro loses can set me into a, like a, like a head trash tailspin of just like I am a worthless. It's like, wow, hold on, let's. If, if I can really accept the fact that we're playing a game of business and there's inherent risk and it might go to zero and I can be okay with that scenario. Now I'm liberated to play big. But when I am afraid of things dipping temporarily, it's like investing in the stock market. If you're afraid that it's going to dip temporarily, you're never going to invest. But if you are comfortable with the risk and you're playing a long term game, you're probably going to be fine.

Yeah, spot on.

It's so bizarre how much that affects how we approach the day to day business.

Well, it's why we look at people that come from wealth and I'm guilty of doing this and you say, oh, somebody's doing well because they have a safety net.

Right.

And there's a reality to that because they're liberated to play big without a risk of failure. And there's also a non reality to that and it's us looking in and wishing that we had that.

Yeah.

Because we're projecting onto that.

Yeah.

But then when you realize. Yeah. When you, when you just take a step back and realize that everything's good. The worst case scenario is not as bad as you think it's going to be. Tomorrow you're going to wake up and you're going to still be breathing.

It's all good.

Tell me how you climbed out of the three hundred thousand dollar nightmare.

So I, I.

Got a, I got a loan through a group called Kick Further who was, who was really good to us at the time. Part of the concern around doing that was it, it was a trigger of default for our primary lender, Circle Up. But I called Circle up and I asked them if they would extend us the cash and they said no. So I did what I had to do on that front and ultimately we did have to finance out of the Circle up loan, but it bridged me for six months or so.

And then I, I had to get extensions on, on certain payables and.

You know, it was tight and it wasn't, it was uncomfortable. But we worked through it just one thing at a time.

So you had to have some uncomfortable conversations. In the short term, yeah. In the long term, did those vendors and partners, like, did those stick around? Did that play out?

Yeah, with the exception of Circle up, everyone. Everyone stuck around. Yeah. Because we were very communicative. You know, I wasn't out there trying to manipulate anyone. And it's not like we didn't have cash coming in in the future, we just didn't have it today.

Yeah.

And part of the reason we needed the cash for was to pay our supplier because we had a massive order that we needed to fill. For me, I thought that would have been a no brainer for Circle up the fund. If I was just funding it for payroll or some just general outflow, then it would have been different. But I knew that I had cash coming in, I knew the timeline with which I thought I was going to get paid and I communicated that and I set aside the cash to make sure that I made good on my word when, when, when it happened.

It seems like a lot of your focus as the leader of this company is in managing cash and that your perspective from your investment banking background gives you a different approach than a lot of bootstrap or startup entrepreneurs where you're thinking about, oh, in six months we might run into a cash crunch. How are we going to navigate that? And if things go well, we'll have these options. If things don't go well, we have these options. Whereas most people are just thinking about were this profitable, maybe we can invest this much. So would you walk through a little bit how you're thinking about cash management and the different options that you have when things are going well or poorly?

Yeah, well, I think, I think I'm very fortunate in that what I consider to be my superpower within the business is, is my ability to take the, all the inputs within the business and understand how they all interplay with each other. And part of that is through the financial modeling work that I've done. You know, I know if I change one input, how that inputs other, how that impacts other things. So, so yeah, when we talk about levers to pull, we can, we can decrease are the rate at which we're spending on Amazon, like that's the first place to look to because it's not profitable on a one for one basis. Right.

That's purely, we're less aggressive with customer acquisition.

Yeah, that's purely a customer acquisition spend. Right. So if I pull back on that, how does that impact my sales? How does that impact my profit? And is that a positive push towards being more capital efficient if I need to be? Same thing with our Facebook ad spend. Same thing with anything that we're spending in retail, which by the way, we're not, we're not pulling back on like we don't want to pull back on retail because that's a, that's a key area of focus.

A lot of people look to general overhead. I think. Yeah, that's, that's, that's kind of folly. You know, we're building a team to, to be able to support ourselves at scale. So that's why, that's why when I talk about capital efficiency, I talk about variable unit economics. If my variable unit economics are good and I'm at it and I'm at enough of a place where I can support my team as it stands today without pulling back on anything too tangible like just pulling back on my ad spend or. One thing that we talked about earlier is just managing the cash conversion cycle. If my cash conversion cycle on my inventory is pushed out now, I can float all that cash for a much longer period of time. I've bought myself some time. I bought myself three months, I bought myself six months.

I mean, right now we turn our payables in about 17 days. We don't have to pay everything in 17 days. If I were to have some conversations with people and explain the state of where we're at, can I push that out to 30 days? Can I push that out to 45 days? What does that now do for my cash? So we stress all that.

It's really fascinating to hear you talk about that because it's just so different than how most people operate. My last question for you though is at what point can you calculate that this can be a nine figure exit? Because right now you're still in like cash management mode.

Yeah.

How, how then does that. Well, look, one, two, skip a few 99, a hundred million, just, just to use round numbers.

Right, so.

And these are not our numbers. I'm just using round numbers. But if you're, if your variable margin is 30% and you're burning a hundred grand a month and so 100 grand a month would be 1.2 million a year. And 30% of that being your variable margin, that means that 1.2 million divided by 30% is about 3.6 million. That means I only have to grow about 3.6 million in top line in order to not be burning at that same rate of spend. So.

I'm considering how quickly do I expect I'm going to grow into that capital efficiency. And if I feel really confident that I can do that, which I do, by the way, if I feel really confident I can do that in a not so long period of time, if I feel really confident about where I'm allocating dollars to drive brand awareness and growth, which I do, if all the data is pointing towards that growth being, being real, then now I can liberate myself from worrying about the cash burn. Because I like, look, as long as I have enough levers to pull right, like, here's what I do in this situation. Here's what I do in this situation. Everything's fluid, everything's breathing and living. But as long as we still continue to have a pulse on the business as we evolve and don't get too far down the road of not having enough cash to operate, then now we can just focus on the growth factor. And for me.

I know that 50% of our sales every month is new customers on Amazon, more or less. That's wonderful. I mean, those are a lot of consumers. So let's keep banging that drum. I know that we're opening up this opportunity to really scale on our website through raising AOV and having custom landing pages to drive up conversion rates and drive down customer acquisition costs. Well, that's great. Let's open that up. I know that if I get end caps and displays in retail, then that drives brand awareness. It's different across different stores. But that's great. Let's keep doing that. What are the costs of all these things? How do we balance that with our capital planning strategy? So while we're, while it is long term, we're very much living moment to moment and we're putting money to work and we're measuring it and we're just rinse and repeat.

Well, Brian, I'm rooting for you, man.

Thanks.

I'm really, I'm really proud to be part of it. I mean, I know I'm a relatively small investor, but I'm really excited about what you guys.

You're big in our hearts.

Thanks, Brian. Good to see you, man.

It's good to see you too. I appreciate it. At the time.

Ryan Something I have Learned after almost 20 years as an entrepreneur is that you can have a great idea and you can have great execution, but if you don't have a great entrepreneur at the helm, the business is likely to fail. A great entrepreneur is somebody who is willing to bleed for the business. They have a vision that genuinely compels them rather than just something to sell. That's why I was excited to back Brian when he was raising capital for this business. This is the type of mindset that I look for when we're backing an Entrepreneur and the capitalism.com fund. I used to think that you bet on ideas or potential marketplace valuation, but now I know that when you bet on the entrepreneur who has a real vision and mission to do something great, even if you lose, you make a dent in your corner of the universe. If you want help crafting your vision, getting off the ground and building a million dollar business, we do that inside of our mentoring community called the 1%. And if you want to find out how we do that and how we can help you, go over to capitalism.com1 and fill out the form. I'm Ryan Daniel Merrian with capitalism.com I help entrepreneurs build million dollar businesses, have multimillion dollar exits, and sometimes I make.

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Thanks for watching and I'll see you.

On the next video episode.