Part 2 - The $65M Growth Secret: Why He Shares His Personal Phone Number

Welcome to this edition of the million Dollar Mastermind podcast. This is where we pick the brains of high achievers from all walks of life and get their hard earned real world insights on winning. I'm your host, Larry Wydell.

What have you learned about your product line and how big and because I'm sure everybody's got like the basketball people you've got, it's a shame Caitlin Clark got her Nike deal, but she'd probably be wearing these off the court anyway. Okay.

All right.

I noticed that one of those players you mentioned was on the fever. So anyway.

Or center.

Yeah. So how do you reign in those? Come up with your product line and keep it fine tuned.

It's a combination of a number of things. We've been very lucky. Or actually it's not true. We very deliberately wanted to be very actively engaged with our customers. So we're very active on social media. We're very active via email. I give out my personal phone number to everyone who buys a pair of our shoes. Interestingly, a fraction of a percent. Take me up on the offer to call me, but three times a week I have conversations that go like this. Hi, this is Stephen. Oh my God. So that's fun. But so part of it is that our customers have been telling us since day one. I mean, we started out, we with a do it yourself sandal making kit. And people would say, that's cool, but I'm not going to make my own. So I racked my brain to figure out a way to do a ready to wear version of that basic sandal, which I have a patent on the lacing system. And let's just say there's a very large Italian company that has infringed on that patent. And all I can say is daddy needs a new Mercedes. So anyway, be that as it may, then people said, cool, I love your sandals, but what about when it's winter or when I have to go to work? So we made our first close toe shoe. That was in the end of 2016. And then they said, that's great. It's a casual shoe. I need a performance shoe. So that came out in 2017. They said, that's great, but I need a performance shoe for trails. That came at the end of 2017. So a lot of it has been people saying, I love what you're doing and here's what I need. It's like an improv game. It's a yes. And the other part is that between myself and our former product chief product officer and our current product team. We can kind of see holes in the line or things that we know we should do that people haven't asked for. And we're not 100% on that. I think we're probably. We're like 80% right on those. We've launched a few that have not done as well as we thought, but we launched many that have done way better than we thought. So that's the. The second part is just figuring out what people haven't asked for that we know we need, or how to expand the line. So as an example, there's a shoe that we have. I mentioned before, the one that Jimmy Butler plays into Dylan. So we started out it was a knit shoe. Then we came up with a leather version and there's going to be a canvas version. And I know that sounds silly, like that's just the same shoe, variations on a theme. But there are people for whom a leather is more appropriate in certain situations, people who like the canvas better. I mean, it's. So there is a balancing act. I mean, right now we have almost 60 different styles of casual and performance shoes, boots and sandals. And some people go, ooh, it's too many. It's like they're selling. The only thing that would make it too many is if we didn't have the warehouse space for it. Yeah, but as long as we have the space, we know these things are going to sell. We just have to buy better instead of buying too much and having it sitting around. And it takes a season to learn how to do that.

It helps when, you know, big picture type things. And now you're in how many countries?

How many?

Oh, gosh.

Well, we have sold into 102 countries. We have our. 0shoes.com handles. Well, I'll do it the other way around. 0shoes, EU handles all of the European Union. 0shoes.co.uk handles the United Kingdom. 0shoes.com handles everything else. But then we have distributors in, I think, nine countries right now and we have retail outlets in, oh, gosh, I don't even know. Probably about 40 or 50. And that's all growing every season that grows significantly. The wholesale side of our business is what's growing the fastest.

The wholesale?

Yeah, because it's just. It's obviously individuals buy individual pairs or they'll buy multiple pairs. Half of our orders come from existing customers. Many of our existing customers own more than five or ten pairs of our shoes. But when you pick up a wholesale account, they will buy. There's one wholesale account. They have a thousand different. A thousand Stores, or if you want to know the cool lingo, it's one store with a thousand doors anyway, so keep that in the back of your brain when you're at a dinner party and want people to think you're obnoxious. So if they're ordering just three styles in every size and every color for a thousand doors, that's a lot of money. I mean, that really just the percentage between direct to consumer and wholesale goes up. So wholesale is where things can scale very quickly, in part because they're also dealing with their customers who are already coming in, who wouldn't necessarily find us online. So it's a balancing act of sorts.

Well, the thing is that their problems created from that, too. And how did you figure out, like, okay, we've got to fill this order. I guess it's buying in advance. I mean, your timetables and schedules and we. How much of that. How do you do work the financing and all of the. The deliverable on just one monster order like that? Because an order like that kills those kind of orders that kill companies.

Well, again, two things. One, remember, I have bad aim. Yeah. So that's one thing that's kept me going through that. The other thing is that we're not dealing with orders that are so big that they're a giant percentage of our business. So again, last year, we did just drive $65 million. And by the way, that's public information, which is why I'm able to say it. And the wholesale side, there was not one order that was big enough that would have really hurt the business just because of the overall size. So the problem. What's happened over the last number of years is. And Covid accelerated and worsened. This is. Is in the. When we started this, we would get an order from a store, and they would say, this is about 80% of what we expect to sell. And we expect you to have the other 20%, just in case. Now it's gone the other way around. They're ordering 20%, but they don't even tell us it's 20%. They literally don't tell us what percent it is. But we can kind of do the math. It's like, here's what we sold with you last year. You're ordering a fraction of that, even though you're telling us you're putting us in more doors with more styles and more colors.

Yeah.

So we know you're ordering this much and. And requiring us to have the inventory burden. So we said to a number of these accounts, just tell us what you're actually projecting to make sure we can help you. We want to be a good partner.

Right.

We're more than happy to buy it. We're more than happy to store it. Just throw us a bone and they won't do it.

Really?

Nope.

Yeah. Because whoever's in that position is an employee, does not want to have things reverse course on decision made above the them and have them eat it. Because they said, you know, well, buyers don't put their name on a thing.

Like, no. Buyers are incredibly risk averse. And at the same time, if there are any buyers listening and I say something that you think is obnoxious, I'm definitely not talking about you. I'm talking about everybody else.

Yeah.

So the number of times someone has said, well, we love that shoe. We want this color. And we say, well, that's our third best selling color way after number one and two. And they go, well, this is what our clients want. And I go, I don't think so. And then we end up being correct in that situation. And they don't want to fess up that we knew what we were talking about because we have so much data from what we've done online. But they want to be right. Everyone wants to go be right when. And take the credit when they're right and be able to dodge it when they're wrong. And so we try to help, but it's challenging. I mean, there's an old lawyer joke that is true about buyers as well. I'll do it for lawyers. You can interpret or you can do the translation. The joke is, how do you know when a lawyer is lying? The answer when his lips are moving. Right. And so how do you know when a buyer's lying? When their lips are moving and they say, oh, yeah, we want all of these. And I'm not trying to be mean to buyers. I mean, they have a very stressful, tricky job because they are subject to the whims of macroeconomic things and taste and changing stuff as much as everybody else. I would never want that job because I can see how the urge is just gonna just take that in black and just one of those. Because that's safe. And so it's. Yeah, it's a very. It's a tricky relationship where, in short, as a brand, we have to do more to help them than what it used to be, where they were doing more to help us.

Yeah. And so how does it work now? In a typical situation, you get a. And there are no typical situations.

No.

But how do you navigate that? You Just make your best call and throw the dice.

Yeah. Early on, Lena, when she was handling inventory management was just very frustrated about how we were never right. And I said, no one's ever right. That's why TJ Marshall, Ross. What are the other ones? Marshalls, TJ Maxx, Ross. All those stores exist because no one ever gets it right. And so sometimes you're getting it wrong where you don't have enough, which is horrible. So sometimes you're getting it wrong where you have too much, which is frankly not quite. Well, they're both horrible. I mean, people, when you run out of inventory because it sells too fast, people say, ooh, that's a good problem to have. I go, not being able to take people's money and give them something that would help them, that's more painful than having too much inventory that you close out and just break even on the end of it.

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It just seems like in business you can't get away from risk. I remember asking, oh God, no. Lee at a performance ski in Aspen about because they're buying trips, they go to Italy and this, that, the other, she said, I remember the first time we were over there and we looked at, I looked at my husband before we got. He said, we're getting ready to commit to a million dollars. They go like, here we go. And I said, when do you get comfortable with the risk? She said, never.

No, I'll tell you. Well, there's two things. First of all, you're absolutely right. It's all about risk management. I used to. Every business book is basically asking someone after they've been seemingly successful how they got there and they will tell you how they did it. Right. It's all about them. If you ask somebody how they went from making a bunch of money to being bankrupt, they will usually blame everything else. But if you ask someone a question that I started asking people where I knew that their personal or business finances went way up, then way down, then way up and way down. Said if you were teaching a college course on how to go from $100,000 a day to zero, what would you teach? And they all said the same kind of things, like, I was over leveraged. I didn't pay attention to my competition. I had money that was too expensive. I didn't know where to find money. I mean, they're all very usable lessons, but you would never hear those. So mitigating risk is the number one thing. When people call me with some new marketing initiative that they say is going to make me a bajillion dollars, I go, I just want to know how quickly and cheaply I can find out. After you have your head up your butt. Yeah, because maybe you're batting a thousand now, but I might be the first one where I hit it over the fence in a bad way. So I just need to know how much risk I have because that's all I can control. And when it comes to spending my money, the other part about risk and when you can get comfortable with it is Lane and I, we got a small business loan and we had to personally guarantee that one was I think $2.3 million. At a certain point we had personally guaranteed $5 million in debt. Once we got past a million, my wife and I, we own nothing. So we're going, we're personally guaranteeing, but we could never pay it off. So once, you know, she was pretty anxious until we got over a million that we had personally guaranteed, she goes, we're going to be bankrupt no matter what. So here we go, who cares? So that's how you get over it.

Well, more than anybody that I've talked to, you have been aware and you made very clear that there's no such thing as systems that work. Every time or I know how to do this because every day, every situation, you did, by the way, more than anybody else. You stated that case, which is the reality, which life is complex, business is complex. I mean, you can't even raise. You don't even know what your kids are going to do.

I'm very well aware that at any given moment an innumerable collection of things could happen that could put us out of business by tomorrow. The odds are not high, but rare events have ultra large impact, right? And so, yeah, they just had a.

Thousand year floods and all through Spain, right? Yeah, yeah.

So rare things happen and they have disproportionate impact. So I'm very well aware of that. And we have, you know, Bernard Burke was asked how he made so much money, and his answer was, I sold too soon. And the point is, if you can de risk your position, and de risk is a phrase I never used until I started doing this stuff. But de risking your position is just like putting some money away so that if all things go bad, you're okay, you're going to do it. You'll be fine. You might be okay, you might be great. However much you want to de risk. The more you de risk, the lower your potential upside is. But you have lived a much less stressful life by doing it right? So.

Yeah. And so there comes a time where, you know, early on, you just have to put up with the stress to start it.

Wait, hold on. Are you going to suggest that that ever stops? Are you crazy?

But you. I know. What I was going to say is the longer you put up with that, the more the desire grows to lessen that threshold, you know?

No, I'll tell you. I'll tell you something really personal.

Yeah.

So I'm 62. A little just shy of two years ago, I got diagnosed with cancer in my retina. Who knew what, suffice it to say to make a very long story very short. Went from diagnosis to being cured or being rid of cancer very quickly. It was the greatest thing that ever happened to me because I realized that I've had a lifelong habit of postponing enjoyment. So I'm 62 years old. I had cancer. I realized that I've been putting off enjoyment for a long time. And this is a very stressful thing that we're getting into, and more so because it's going way past my skill set and Lena's skill set. We're smart people. We can learn things, but not fast enough for what we're doing. Put all that together and. Yeah, our desire to find a way to reduce the stress and de risk is much, much higher than it was five years ago, 10 years ago, or if I was 40, I'd want to ride this. To be a $5 billion company at 62, with all those other things. I'm looking to find the right people who can do this. And as long as we end up okay, that's great. Can we get a little bit at the. A second bite of the apple they refer to? Maybe so. But we are mostly rearranging our business and our personal lives so the business doesn't need us so that we can enjoy the remainder of our life. My mom actually just died from complications from Alzheimer's. I don't know if I'm going to get that. So I got a limited window and I'm not looking to be working 70 hour weeks until I die.

Yeah, well, let me just tell you and your wife take this with a grain of salt, but this is smart. This is incredibly smart. And you need to take that instinct and run with it because what it allows you to do as the founder, you now have more and will continue every day you get more and more insight, knowledge, experience about running that particular business at this particular time in history. And, and nobody is ever going to know what you know because by the time they would catch up, it's too late. And so the longer you can keep yourself fresh and engaged and stay in control of your time and your schedule and stay inspired, the more you'll stay and have your impact and not let the minute to minute, what you look for is offloading the minute to minute type things where you have time to breathe. That's what happens. You gotta breathe.

No, you're right. And I've, I have twice made the joke of shooting myself in the head. But the reality is that what gets me out of bed in the morning is two things. The thing that would want to keep me in bed is how difficult this can be on a daily basis. What gets me out of the bed is hearing every day from people who say, what you've done has changed my life. And I mean, I've literally had people walk up to me in airports crying to say thank you, which is amazing. And also there are really exciting things that happen. The basketball project is one of them. But we have other things just as interesting as that are coming down the pike. And so those are very exciting. And my role, I'm the most. I hate saying this, it sounds really self aggrandizing, but it is factual. In the whole sort of barefoot shoe, minimalist shoe, natural moving thing. I'm the most recognizable face in the world.

Yeah.

Because I've just put out more content for more time. And, and so there's an advantage to that because when people approach the company and they talk to me, they have a certain kind of. I don't even like using this word, respect or something where it's like it's a big deal, right, that they're talking with me. I find that very silly. I treat everyone like they're friends of mine. So when they're clearly doing a little bit of this, it strikes me as kind of comical. But there's a value in it. People and what I can. Then I'm good at engaging people and getting them on board with what we're doing. So that's the value that I bring. Somebody said to me a while ago, a company, they were thinking about buying us out and they said, what would you do if we wrote you a big check? I said, well, it depends if you want me to stick around and do what I like and what I'm really good at. And I can do it kind of part time. Happy to help. But if you don't think you need me, it's going to be your company. No harm, no foul. Just come visit me on the island. I bought with your money. And they said, God, that's a smart answer. I said, what's a stupid answer, right? They said, oh, it's my baby, I've got a vision. And I go, oh, let's be clear. It's my baby and I have a vision. But I've got a side hustle selling vision impaired babies. So this will be your company. I know how it works. You're not going to want me around anyway because founders don't play well with others.

So the thing is that they'll buy it, they'll run the thing into the ground. Probably like most of the time they do, but maybe not. But it will not, I'll tell you this, it will not have the success I predict that would have if you're around for another five or five or 10 years.

Well, again, it depends on what I'm doing. I know what I'm good at. I know what my role is and what I should be doing, and I know where I'm not. So look, I was at an event. There was a trade show in Munich, and our lawyers put on a dinner, which was very upsetting because it was one of the greatest meals I've ever had. And I would have much rather had five grand taken off my legal bill. But either way, everyone else in the room was the CEO of a multibillion dollar outdoor brand. And at one point, the lawyers were having people say a few words. And I'm thinking, well, they're not going to talk to me because, I mean, I'm this tiny little. I think at that point we were like a $12 million company. And so I was the last one. They said, and here's the only founder in the room. And I don't know what. I said something. But afterwards, every one of those guys came up to me and said, we're so proud of you because we can't do what you have done. And I said, well, here's the flip side, I don't even know what you do, but I know I need one of you in about five years.

Yeah, right. And so the future out there is unlimited, but you have to take it one step at a time. And so what does that mean for you?

Well, that means something that my brain doesn't understand. I don't do prioritization. My skill set is that I can think of a lot of ideas and my natural inclination is to try to go after all of them simultaneously because they didn't have Ritalin when I was a kid. And so the next step is really bringing on the people who can do the prioritization, but simultaneously bringing on additional capital so that we can do more than they would do with the limited resources that we currently have. So, for example, our CFO said to me the other day about a project we don't have, if we're going to do that, we have to reapportion how we're slicing the pie. And I said, no, we need to get a bigger pie.

Right.

And so that's the way I think. I mean, I've always had that. It's like, for whatever reason, I know that if there's something I'm trying to make happen and I don't have the money to do it, if I keep working, the money's going to show up somehow. And that's just happened. I don't know why or how. And it's not like magic, it's like busting my butt. I'm talking to everyone I can think of, et cetera. But suffice it to say, it's that combination of someone who knows how to prioritize, given what we're trying to do, and see where the biggest bang for the buck is, which may be an immediate hit, or it might be something that's not going to pan out for a year and a half, two years, but that's going to be make a bigger difference at the end of that two year mark and again, bring in enough human and financial capital to be able to, like I mentioned, take advantage of some of the opportunities that are showing up. I got a call from about, from a very, very big deal pop band and they're doing a music video and they wanted us to be part of it, but they also wanted us to put up a bunch of money. And I said, we don't have the cash. I mean, yes, your videos get 50 million views, one of them got 500 million views, but I have no way of knowing if that's going to turn into sales for us. We literally just don't have the money that you need as fast as you need it to even give it a whirl. If we had more cash, the amount of money they're asking for wouldn't have been a big deal. I mean, I could do the math and even if things were just okay, we would have broken even. But we don't have the cash, so we have to pass on that opportunity.

Yeah, but they'll come again.

Something else. Yeah.

Fans will be making videos for a long time.

Yeah, it's true. I mean, I don't worry about the. Everybody has a story about the thing that they missed out on, the opportunity that. Look, one of my biggest ones to your point about what Lena and I have learned is we know this industry really well now, which gives us insider knowledge that we could use if we wanted to invest both in or against other companies. Second biggest business mistake of my life was when one of our kind of competitors had an ipo and I said to all my friends, short the out of this stock. And every time they have two updates in a row, short it again. And had I followed my own advice, I could have turned 10 grand into 10 million. Wow. Yeah, because I just. Because I knew the company, I knew the problems they were having that no one else knew.

Right. I'd like to thank you for listening.

To part two of this episode of.

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