Episode 332: You Can’t Allow Failure to Be an Option with Roberto Milk CEO of NOVICA

Welcome to this episode of the Million Dollar Mastermind. I'm Larry Weddell. And before we get started, if you want to know exactly how to win again and again, go to Wydell on winning.com webinar now to watch something I've put together for you. Now let's get going into this episode of Million Dollar Mastermind.

I'm here with Roberto Milk and we're having fun talking about winning in business and Roberto sharing his lessons from his experience as the CEO and co founder of Novicka. And been at it a long time. 22 years and they're a big deal. 66 million in global net sales have paid their passed on to their artisans. Over $100 million in income for artisans around the world. 150 employees, 15,000 artisans that the company is really given hope to, for them to have an income and be able to have the kind of life and do what they want to do. So I'm sure there's some incredible success stories there. But Roberto, talk about the logistics of making this thing work. And like, let's just say you got 150 employees. What do they do? You know, how many are working on the website, you know, which is your big global virtual store, and how many, how many. Do you have locations around the world? Do you have retail outlets?

So we have locations to find artisans and to ship product. So it's a global kind of hub and spoke infrastructure. So we've got eight different artisan empowerment hubs and they're located around Africa, Asia and Latin America. And so we work, the folks that are working for us in those offices, they're focused on either sourcing or fulfillment. So either they're working with artisans, helping them come up with new stuff and doing quality control and capacity building and all that, or they're working on fulfillment. So if you buy something, if you go to our website and go to Thailand and buy something from Thailand, that's coming to you from our office in Thailand, it's already been quality checked and certified by our local office. And then we're shipping it. You can choose either fast, the fastest shipping, you get it within a week, or the slower shipping is two to three weeks. But that's all coming to you from one of our offices. Yeah.

Okay. You brought up Thailand. I was going to accuse you of being having an anti Pacific Rim bias. You squashed that before I had the chance, before I had a chance to do it to, to maintain the quality. I guess that's really important since it's their product. But it goes through you. So you have your name attached to it. So you don't want, you know, you got to have some degree of quality control, you know, because you got, again, you built up a fantastic reputation around the world. And so you have all of the products that are shipped go through your. One of your hubs somewhere. Is that the way it works?

Yeah, that's right. So that's. We're definitely getting involved in that area, and that's how we can work with the smallest and most talented artisans. These aren't large factories of stuff that might be supplying other brick and mortar stores in the US Or Europe or whatever. These are individual, small artisan groups. And so sometimes at the beginning, I mean, right now, we accept one in three. And our staff, we have local art experts on staff. And so for those that we don't accept artisans that we don't, we tell them, oh, look, this is what you can do, you know, improve these materials, get better at this, get better at that. We want to work with the master artists in every category and then come back in a year and you can get another shot at it. And the ones that we do accept them were like, okay, we're going to be really tough with quality. You get to. To put in your own prices, and we encourage you to charge more than what you would charge locally. But the quality has to be your very best of the best quality. And so, and this for the first time, for a lot of our artists, they sometimes sell to tourists or to art shops, and, you know, for the first time, they're actually selling to someone that can buy from them again. Right? So I'm like, this person that's buying from you isn't gone in a trip and never coming back. You know, this is a person that can then, you know, buy from you the next week if they like what they see and recommend you to their friends. And so you got to give them the very best of the best. The best. And so that's kind of how we position ourselves in the industry. As, you know, the prices are not that high, but the quality is the very, very highest, you know, and everything is certified, quality checked. We're doing all that. And then we guarantee the items and the artisans, if they pass our quality check, then we're guaranteeing that item. The artist gets paid no matter what. But we take returns no matter what. Like, we make sure the customer is happy, you know, and the return rates are really, really low because the. The stuff is really great.

So when you have this each, you know, your staffing do you have salespeople or these are basically fulfillment shipping type? Well, you also said you had some art art experts who do.

Yeah, they're more. We have a lot of art art folks, you know, people that are strong in merchandising and design style, you know, so they're, they're giving feedback and they're checking quality.

And do you find, you know, do you find like, like if you're in the gardening or the nursery business, you know, you have to call a certain amount every year and then bring in new things. Are you finding that certain people you just have to let fade away, they don't meet minimum type standards of sales, that you replace them with somebody else? I mean, are they accepted for life or how does that work?

Yeah, they are, but if they're not selling, then they lose interest. So that kind of naturally happens with our system. And so we have probably a third of our artists become highly successful. Whether it's been. It's life changing, you know, it's completely life changing. You know, where they're.

That's a pretty good ratio.

Yeah, it's good. Yeah, we're very proud of that. You know, there's so many artisans who have been able to basically get comfortable in their situation from, you know, very challenging beginnings, you know, where, where, you know, where the.

Give me one of those stories.

Well, Serapio Vallejo, I was just thinking about him just because, because he was around from the, almost the very beginning. And the story with Serapio was that we were trying to find him and he was, and we were buying from this store in Lima and just how can we find this guy, this artist? And finally we found him and he just gave a huge hug to the person that found him. Eduardo was my cousin and gave him and cried and said, I've just been hoping to see you guys because you guys basically saved my life. You know, I just thought I was living on dirt floors and we were, my family, we were in a really tough situation. We were thinking about moving back to our hometown home village. You know, they just moved to Lima to try to make it. And, and he said, look, you guys really have done, done everything. And, and then fast forward and he's put both of his kids through college. He thanks, he thanks Navica for that. And he's been very successful. He's hired about, he has about seven, eight people working for him.

And what does he make? What does he make?

He makes rugs, these beautiful hand, hand woven rugs. So they're, they're really special. If you go to the rugs category on our site, you'll see them from Peru. They're called Ayacucho Tapestries.

How do you spell that?

A Y, A C, U C H, O and then tapestries. Ayacucho.

Thank you for the compliment that I would know how to spell that, but I think that confidence was misplaced. First of all, I would start it with I rather than yeah, right now. You have now. Well, let's just say he has. He makes rugs now. Will he do these people, their technique, they're Internet savvy enough to create their own space on your website because you're going around the world. I mean, not everybody's like in the United States, you know, so especially if they're dirt poor, they probably don't have a stack of Apple computers and high speed Internet in their house. So, you know, getting their website set up and you know, how does that happen? And then does he take the rugs and ship them over? Like, is he, before he puts it online, does he make sure it's already at your fulfillment house, one of your seven centers there, ready to be shipped out or.

Yeah, order, come in, order, come in.

And he says, okay, I'm going to send it to Thailand or, you know, Peru, wherever. And the nearest hub is. Let them inspect it and forward it on. How does that work?

Well, originally we wanted to do it so that the artisans would take more of a role in that. And then what we realized is that the more small scale artisans we went, which was really our focus, the harder it was to do that part of it. So, you know, in the end we just said, you know what, we're gonna do all that. So the artist basically just has to make good items, you know, and so we tell the artists, look, focus on the creation process. You're making the best items you possibly can make. Then bring it and you bring it into our office, bring them in every two weeks or so, we'll give you a report of what more to bring. And so they get, they get to get all their ratings. They see which ones are the most popular, which ones aren't, and the popular ones, they make more items kind of like those. And so they'll, they basically all they have to do is just bring in good quality items. And then so they don't have to. There's no web design or, or customer service or shipping or any of that. They don't have to worry about any of that. We take care of all that stuff. And that stuff was hard because there's customs, duties and all kinds of stuff, you know, to deal with. So we actually plug in all that stuff. All the.

Hence the 22 years it took you to get this. But really bodes well for your future now because once you get those details down, I'm sure they change somewhat. But your foundation, it seems like a big part of you heading to that, from the hundred million to the billion, is the foundation you've already put in place by having the structure and know the details of customs and shipping and all of these different countries.

Yeah, I know that's right. There's a lot of investment there in terms of the global infrastructure. And we're there now.

Yeah, but figuring things out, I mean, that's the same thing Bezos did with Amazon. He was not a moneymaker for a long period of time because he did have a model. So explain to people how you think in terms of. You said it earlier, build a system, not a business. And I know part of it is building a platform for sales where it can be available online. They can have a bigger percentage of the profits. You know, that's part of the platform. But what do you mean when you say building a system and not a business?

Yeah, so the. So some of that was also a way to counter a lot of the negative thoughts early on, because we got a lot of people saying this will never work. And they would say, look, you gotta. You just can't do it this way. You gotta bring things into a big warehouse in the US and have buyers that travel around and, and you'll be bulk shipping stuff by ocean freight because it's too expensive to send things by air. And you'll bring them into this warehouse. I mean, that's the way it's always been done. This way you guys should do it. And so we would say, look, we're not thinking about it that way. Like, almost like a retail effort. We're really thinking about what's the problem that artisans have. How come there's so many talented individual artists all over the world that are really in a. In a bad spot, you know, that are not making money. And there's culture around the world that's getting lost. Like, UNESCO has a list of all this intangible cultural heritage that's just dying. And so. But there must be money in it. There's interest in it. There has to be a way to people to. For artists to live, you know, so how can we, instead of thinking about it as how do we create a retail business, instead let's think about how do we create a platform, a System that really works for customers and also, I mean for artists and also for customers. And so that's kind of what we thought about a lot. It was like, let's think about this as a system. We're building this system and how would we best. So artists need to be in control of pricing, they need to feel like they're in control of design, they need to be accessed capital. So we have 0% interest micro credit that we get them. And that's also in partnership with kiva, which is this great organization that's done over a billion in microcredit loans through all their many online donors and lenders. And so we're able to create this system for artisans the way we really felt like it should be built. And that's been what's. I mean, that's the big idea. That's where I think that it's like a really big thing. That's how we're going to get a billion dollars to artisans.

Well, you've listened to several of podcasts, episodes we've had with other people and all. And you know that people on the way up, our people are interested in transferable techniques, ideas, things, you know, people are wondering, like they're looking for fresh ideas on things they can do. And so let's just talk about what are some transferable things that you have, some ideas of how you go about business that would be transferable to other people. In fact, let me give you what dawns to me is like you have figured out and accepted that you've got to have new artists coming in and you've got to be on the lookout for new artists to keep things fresh. Because the natural evolution things, people will fade out. You don't terminate them, but they fade off the end of the line, you know, and lack of sales, lack of effort or whatever, they'll kind of differ it disappear off the back of the train. But you got to be putting fresh blood, fresh a new artist in your system. And you, you gotta have a system for making that happen. As you figure that out, every business has got that. How soon did you realize that was gonna be a key for you?

You know what? Almost from the beginning that's so key, having that fresh, having new arrivals constantly, that is so important. And then it's not just new arrival, it's not just new artists, it's having our artists constantly come up with new stuff. And also it's kind of because the limited edition nature of what we sell, the customers just love that stuff. And I think if thinking about transferable kind of mantras for other companies that are startups or entrepreneurial companies, I think that's something. I think you hit it right there. It's basically constantly fresh products, fresh ideas, the newness. And having a system built to get that flow is really key. I think that's the key thing.

Yeah, you have to have a system for making that happen. Rather than we're on a blitz, we're gonna. We have a campaign. There's a difference between a campaign and a system. A campaign is something you do for a period of time as a fun item that. That's important. It's gotta be. You gotta build it in your system so you don't forget about doing it. Plus, if you got seven locations around the globe, you got to make sure you don't have to call and remind and tap them on the shoulder. Oh, by the way, we need to do this. If it's built into the system, the system automatically will drive it. So how does your. How did. How have you put this into your system?

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Well, you know, I think part of it is that we said, let's let the customers dictate what they like and more than having a bunch of merchants on our side dictate what's going to get purchased. And so that system was key because if you think about it the old way, where you have the buyers traveling the world and buying 500 pieces of one item, you know, to bring in in bulk. Our system is more around let's have a merchant, you know, one of our art experts, determine whether that artist is qualified or not. Right. Do they hit the quality? Is the quality good enough? Right. Not thinking so much about design and colors, Is the quality good enough? And if the quality is good enough, then we kind of want to let the artist, their inspiration, you know, bring the items. So we'd rather have 500 of different items of one deep than 500 of the same item. And so having a lot of breadth and then the Customers, they get to see tons of new items and some of them they won't be interested in. And the ones that they are interested in, then the customer's deciding, not. Not someone else. So we encourage artists and we're encouraging, oh yeah, bring more stuff. One to a quantity, that's fine, bring it in. We'll take the picture, we'll spend the time, we'll invest the money in the photograph and the description and all that stuff, even if it's one or two. Because we're getting data and we're getting items that are. That's data for the artisan to try out stuff. And it's great stuff for us to determine what's, what's good and what's not.

How do you keep everybody connected? Because I imagine, you know, I know that Sam Walton did this with Walmart. Stores in one part of the country would run campaigns or, you know, they'd have ways they did things and then something really caught on fire. Then they would put. Try it in other parts of the country, you know. But they, you know, he kind of used not only just competition, but used the different locations as places to experiment and try things, you know. And so how are you taking that type thing where and using your seven different locations to learn things in one location and you can spread it to the others?

Well, I mean, the data is in a shared platform so that the regional teams can see what's working in other regional areas and artisans also see what's working, what's working with other artisans. And there's a whole bit where people can maximize based on some of that stuff. And definitely that's done. But also, you know, it's different than the Walmart situation in that there's not seven different websites, right? Or eight different. We have eight different international offices. So there's not eight different websites. It's one shared website. And sometimes we call it the World cup of Arts and Crafts. You know, it's like, it's almost like soccer tournament, you know, the World cup where it's the best of the best artisans from these various countries and we're onboarding new countries. And so there is a little bit of a friendly competition.

A little bit of a friendly competition, yeah. And so how do you use your time? Like what, how do you organize your week and month in terms of communication? Because you've got all these moving parts geographically, they're spread out there. But usually I find in a company, it's either all the time or no time. You've got people either one way or Another, you have to be in constant communication, have your finger on the pulse of what's happening. And I'm sure, how did you get that system built and did you make any mistakes in putting your central distribution data center together?

Yeah, you know that. So we have a shared platform that everyone uses and because of that we can all be on the same page. And then we do, we have a variety of weekly meetings where we can go over different, you know, whether it's sales or marketing or, or technology, you know, different, different aspects of that. But everyone's working on the same platform, which is really helpful.

How big of a deal is, how big of a deal is it that you let your artists look behind the scenes and see what's selling, what's hot, what, you know, stay informed. I'm sure they don't have access to all the information, but that seems like, you know, I know if you get on art space or any of these, you know, artsy or things like that, they're not letting you know what's selling. Yeah, yeah, you know, what, what's selling? Red fashion portraits selling, you know, like, or green, you know, horses.

Yeah, yeah, exactly.

Yeah, yeah, everybody, you know, then you're gonna get a flood of that, you know, so how do you, how much access do you give them to how, you know, to the sales and what's moving and what's hot, what's not?

Well, you know, they get, they get full access of course to their own sales with all kinds of reports. So they get that they won't get sales information of the, of the other artisans that, with numbers and values. But they can see who's selling and what their best selling items are. And they see that either through the front end website or they see that through the local office insights. So they'll have meetings with their various merchant relations people at the regional offices and that's where they'll get some of those insights. But we tend to want to provide as much information as we can to the artists because some of the artists are not entrepreneurial at all. They're artistic and that's, that's it. You know, they're, they're, they're, they're like, I don't want to get any kind of outside inspiration. I just want to, I want my own inspiration to come for myself. And, and I make art because, because of, because of what, the reason why they make art, you know, so they don't want to, you know, and then, but some of the artists are entrepreneurial and they're like, yeah, I'm in art and it's as a business too, and I'm trying to provide for my family. And so I want. I want to figure out, you know, if. If brown leather is selling better than. Than on red leather, then yeah, then I want to basically use the brown leather, you know, so. So they're, they're into that and, and we find a good mix of artists and give them the information and let them, let them do what they want with it, basically.

Well, look, looking behind the scenes, you seem like you're well funded from the beginning, but have there been times where you were. It was touch and go about whether or not you guys were going to survive or not, you know, because the main thing is to keep the mothership alive even during the tough times, you know, and because if the mothership goes down, there's a lot of people hurting. So how do you. Has there been times where you've been really concerned about making payroll, keeping this enterprise going?

Yeah, we had. We've had three different. I mean, every year we've increased in sales, you know, over the many years. And you know, there's been three times when it's. When it was really, really tough, you know, and one, the first time was after 9 11. You know, there was the dot com bust and it was 911 and it was real. That year was really tough and we had to raise some additional financing at that point. And then there was a time which was about four years after that, which was also really, we were struggling to get to break even. And then it was taking longer and it was harder than we ever imagined. And it was financially really tough at that moment. And then most recently we did this really great deal where we acquired the National Geographic catalog. And in that deal we overextended ourselves a bit in terms of the need for financing. And we had a really rough patch there and were able to work through it. But all three times were a test to my sanity. High anxiety with heroic. We're talking about heroic saves in the end. And I think that we.

Where did the saves come from?

They came each from different places, but one of the saves was from a customer, not a customer that came through and really became an angel to us.

What was your pitch to the people when you went out fundraising and say, 2015, I understand. Yeah. Or anytime you've had to go out and make. Would you just start with your mission and show your track record and show, like, explain to them that this was a bump in the road or whatever like that. How. What was your pitch on that because your pitch came from how after you had your heart attack and you got yourself back under control. I've never forgotten a friend of mine said if all of my guys quit, he said six months, he said, I'd be back just as big as I am now, he said, except for recovering from my heart attack. And so once you recovered from your heart attack and you know, the anxiety of that thing and you're now like evaluating the situation in your own mind because you got to sell yourself first before you can go out and sell other people. Like this is going to work. This can, this is, you know, I still believe in this thing. You know, we, we're for real. And then you can go out and sell that to other people. Right. So how did you get yourself.

How.

Did you wind up looking at it as like, because you're, you know, the point where it's not working, you know, it's just like it's not working. And why is it not working? Because you don't, even when you're in a slump, even left to 9 11, you don't know how it's going to last, how long it's going to last. And so we're always operating off faith and taking risk. But how did you look at it? Explain that to yourself.

Well, you know, you hit on so many points there, Larry. I mean, geez, it is you, you, I, that's that. I mean, I know, I'm talking to, I, I know you've had a lot of success. I could tell you've also had some challenges. I know, you know, so yes, that's.

Coming from, I've lived it. Yeah.

Being, being in business for so long and success you've had. And you know, if, like I have never stopped believing, never in our toughest moments, you know, I, and you know, one of the things is that we have, I think this is hard for socially driven companies, like social impact companies that are like, we're almost like a hybrid non profit because it's like we're a for profit company, but we have a mission that's, that's, that's precious to the company. Right. And so I think it's even more stressful sometimes because we don't have, we don't have an option to not succeed. We have to succeed. There are too many people with their lives on the line with us. Like I couldn't, some of the toughest times in my life were like post 911 when we had to shut down an office in El Salvador, an office in Morocco, an office in Zimbabwe, you Know, we, like those are some of the hardest times and I never wanted to go back there again, like, like for artisans to be. And it was so hard, you know, because people's life. And so there basically is no, there is no failure, you know, because I'll work for free, you know. You know, like, basically like there, there's no taking down. So I like, okay, so coming from that perspective and then also luckily, like, I don't, I also don't feel like I had the golden handcuffs that some people that I know do where they're like, hey, if I got to get my kids out of private school and I don't know what I would do or if I have to downsize and like my family, like we, we have a nice home right now. We've lived in small apartments, we've like public school. Like, we can downsize, we can. You know what I'm saying? Like, we don't want to, but we can. Like, I'm not scared of that. And I think the fear, I think taking that fear off the table, like for people that are in tough situations, when you really think about those like the like, worst case scenarios and getting comfortable with that worst case scenario, like, okay, this is my worst case scenario. I am, I'm going to be in this situation and just getting comfortable with that, that gives you a lot of, I would say, confidence and power to go in and ask someone for $5 million and say, because we're going to grow it and we're not going to go down, you know, and we've been in situations like that. And I think it is, it's from this hardcore belief that what we're doing is very worthy, is needed by so many artisans. It deserves to be there. The customers love it. You know, any of your listeners, they go on the site, they buy one thing, they're gonna buy again because it's gonna be an incredible experience for them. And I promise, you know, and so, and so this, so that, that's kind of where, where we come from. But I mean, each of those three moments, whoa, they were really tough. I mean, they're tough. I mean, like, hard to make payroll, tough kind of things, you know.

And how long do they last?

Well, luckily not super long, but you know, each of the three times is different circumstances and they would last, you know, maybe up to a year of like hard stress, you know.

Yeah, it's important to keep your perspective and it's easier to do it if you believe in your mission and, and you have the system in place and it's easy to, easier to keep yourself controlled by the emotion of the moment. You know, it's like, no, we're, you know, we're, we're in a hole. And you say to yourself, what company has not gone through stuff like this? And you know, you have to get things where it's like you say to yourself, if this is the worst it ever gets, we're going to have, you know, it's going to be a dream ride, this company. You know, you just got to, you know, you got to have things. You say to yourself, we used to, we had a guy run our company, his name was Art Williams. And I remember, you know, we were in the financial services and we go through a time like in a certain state, like you said, San Antonio, you're out of San Antonio. I remember we had a guy in San Antonio and like everything had gone wrong. The state had shut down licensing. They shut this, they turned this off. It was like he had no way he could make money. And they were writing bad articles about him in the paper. All made up, of course, and his world was caving in. And so he gets on the phone to Art Williams and his name was Bob White. And he says, Art, well, he just vented, you know, and these are all, you know, it's almost like, you know, my kids have been ax murdered, my wife hung herself in the bedroom, someone came and stole my car. Right now my house is on fire. You know, it couldn't be any worse. And Art had this ability. He said, wow. He said, unbelievable. He said, but other than that, how's things going?

That's so true.

At some point, you know, you just have to shake yourself out of it and say, well, other than that, things, things are great.

It's so true. It's so true.

Yeah. Well, I'm proud of you, Roberto, and you have. I appreciate your time and wish you the best. And we're going to stay in touch and be big friends for a long time. And so what would you parting shot? What would you pass on to our up and coming entrepreneurs who really want to do something big or something new big?

You know, I gotta say, balance is really key and entrepreneurs were never off the clock. You know, I was working 100 hour weeks in investment banking. I work a long, long week still. But I tend to, to feel like I got a really good balance and we've talked about coaching and soccer and all that stuff. You know, I feel like if there's anything you can do that, Even if it's 10 minutes to break a sweat every day, do it, you know, because like if it just there's nothing like a little bit of exercise to balance you out and so and take care of those relationships, you know. Take care, take care, take care of those kids if you got them, you know, and you know, make sure your priorities are straight and then, and then all that said, go, go kick some butt. Make it happen, you know.

Absolutely.

Think big, you know, and make it happen.

Absolutely. Well, thanks so much, Roberto.

If you enjoyed what you've heard and are dead serious about finding out for yourself exactly how this works in the real world. I've taken the most valuable business lessons I've learned over 40 years and put them into something for you to watch. Go to widelawinning. Com Webinar now in order to move up as fast as possible. I'm Larry Widell and I run the Million Dollar Mastermind. Go, Go.