I Sold My $5,000,000 Business… Here’s How | 045

When I'm old, what's a cool story I could tell my kids? Oh, I sold my business and then I bought it back again.

I'm Nathan Barry. I'm the CEO of Kit, and I've thought about selling my business.

Who's going to want to buy the business? How much are they going to give it? What if I regret it the next day and I can't go back?

Are you wondering what that process might be like and what you should know, what mistakes you should avoid?

I was pretty tired the last 2 and a half years. It's just been hard mode. Let me take this deal and then start over again. So often people don't get their earnout, make sure the earnout's in something that they can't like pull an accounting trick and suddenly it doesn't exist.

Anything that you wish you'd done differently?

One thing I would say is whenever you're negotiating is like, it's only afterwards you're like, damn it, I probably could have got more.

What were some of the biggest things as you were scaling by self?

If you haven't been embezzled from yet, you've either not been in business very long or you haven't fined it yet.

How much money did you have stolen from you?

$230,000. Wow.

So Catherine, a little while ago, I guess the beginning of this year, Michael Gerdley, who's a friend of both of ours, posted a tweet about hanging around the hoop. Can you explain? He says basically a good way for entrepreneurs to get rich is to hang around the hoop. What did he mean by that? And yeah, just start there.

So I'm not a sports person, so I don't know any of the references for that, but it was basically talking about business owners who sell their business to private equity and then they hang around long enough for them to screw it up, and then they buy it back for pennies on the dollar.

So yeah, in the basketball reference, it would be, uh, someone else takes a shot and you're right there for the rebound when the shot doesn't work. And so in this case, you know, you often think about private equity coming in and you ran your business a certain way, and then now the experts are going to come in and the professionals, and they're going to buy it, scale it, bring in all this capital and and further experts and go from there. The reality is most of the time we see these buyouts, the company tanks and the founder watches from the sidelines as like, oh, that's not the decision I would make, or oh well.

Yeah.

But if you hang around the hoop, sometimes there's this opportunity to come back into the business. Yeah.

And I didn't realize this was a thing until I did it. And then a lot of people were like, oh, this other person bought their business back. And so there's this like weird club of people that you have like chapter 1 of your business and then chapter 2, right, of what do you do when you come back? And honestly, one of the first things that came to me when I was like trying to make the decision if I wanted to buy it back was like, this would be a really good story. And if I'm thinking of like when I'm old, like what's a cool story I could tell my kids? It's like, oh, I sold my business and then I bought it back again. And it's funny when you're talking about like PE coming in and they're the experts and the MBAs and everything, and it's this thing going on on Twitter, like founder mode, manager mode, founder mode. And there is a lot just in like bootstrapping and starting, you know how to do a lot of the things where PE will come in and they think that everything's supposed to be on a spreadsheet. And there's just a lot in a small business, especially in our business that was like, Nuanced.

There's so many things in there. One, you said something about, it's really a framework for decision-making. And this is, I think I first heard it from my brother-in-law when it's like, when you're faced with two options and you're trying to decide, should I go with option A or option B? Go with the one that makes the better story as like just this fun way to live your life. Like, ah, it's 10:00 PM. Should I go to bed or should I like go catch up with those friends that, you know, catching up with the friends has the option for the better story. So let's go with that, you know? And so I like that that was a factor in your decision to buy the company back.

Actually, one of the— I was talking to someone the other day about like the decision to sell it in the first place was I was like 3 months postpartum when I was approached, like, so I wasn't going to people to sell, but someone came to me and the offer they gave me was like, oh, and I read this book and I was talking about decisions and usually people are like, okay, well, I sell to this person or not. And that's kind of like the binary decision. And it's like, well, there's a third decision of like, let's open the conversation up and just talk to other people.

Right.

And so my whole thing was like, I'm just going to say yes to conversations because I don't want to get to the end of this thing and be like, I'm not going to do a deal. I'm not that excited about it because like, what's the point? And so I'm literally in a crypto group, in a Slack group, and I mentioned in a chat, like, these are people I've been in this chat with for like years. I've been through the gauntlet together. And so I just mentioned like, oh, I got this offer to buy my business and I'm interested in selling, but like, this isn't a great deal. And so one of the guys that I'd never met in real life, he was like a cartoon figure who now is a friend and I know him and he's in Austin. He connected me. He's like, oh, I have these guys that are wanting to— they're basically— they're a new private equity firm, but they're well-funded and your products kind of fit their analysis of what they're looking for. do you want to get on a call? And I was like, sure. And I literally didn't take it seriously. I just got on a bunch of calls and had conversations and I kept doing it not knowing it was going to go anywhere. And then they were like, they gave me an LOI and I was like, okay, cool.

So we should back up a little bit and Best Self, the business that we're talking about.

Yeah.

Uh, what is it? What kind of products do you sell?

So Best Self, we sell a bunch of different tools around relationships, productivity. We started in productivity with a journal. So I, grew up, always felt disorganized, left behind, and realized much later in life that I had like ADHD and I didn't know it. And so I'd always come up with these like systems to just do everyday things. And I came up with this goal journal in 2015. It was basically like I'd read all these books, but I'm like, I need like an actual framework. I'll just forget. I just— what's the system that I need to use? And so launched on Kickstarter and it did really well. Best Self, I think in like 2018, we pivoted— not pivoted, but we just were like, actually, let's look at how we help people with different parts of their lives. So it was relationships with your friends, with your partner, with your kids, productivity. And it's kind of like, what does your best self mean for you?

I like that you, you chose a brand that had a very specific meaning to it, but then you realize like, oh wait, no, this can expand in so many things. And one of my favorite products that you have is the, the conversation cards, particularly I think it's— they're called Little Talk. Yeah, the ones for kids. And we use them all the time. You know, and it's just, you know, I've got 3 boys and, you know, they love it. They're like, hey, when are we going to—

Well, a lot of times with these cards, with your kids or with your partner, it removes a lot of defenses when the card's asking you the question. It's not like your parents, like, when was the last time you lied? If I'm a kid, I'm like, why is he asking? What does he know?

What's the question behind this? Yeah.

And so just having like almost like a third party removes a lot of the defensiveness that would otherwise come up.

What were some of the biggest things as you were scaling BestSelf that like drove the success of, uh, you know, from a marketing and sales perspective?

I mean, I think one of the first things was like the first product was a journal and it was a 13-week journal. It was like the first one that you set a goal, we show you kind of a system so you're not working in a year, you're You're working in like 3-month chunks. I'm like, okay, if we want this to become a business, people have to come back and rebuy. So it's like, how do we—

Repeat purchases are really, really important.

Yeah. And that was like the whole, it's like, yeah, getting people in, but how do we keep them in? So we put a lot of effort into creating a community, like giving people like, what's the first 10 minutes when someone gets our product, putting out content, giving people like, oh, is this your goal? Here's what worked for these 4 people. I was actually undiagnosed ADHD when we came out with the self journal. It was only like a year and a half later, but we got a lot of comments of like, this works for me. And I'm like, that's pretty cool. And then it was, you know, a year and a half later where I actually got diagnosed and I told my parents and then my mom's like, that makes a lot of sense now.

Yeah.

So I basically, with any business or product I've had, it's always what do I want to exist in the world? And it starts from there.

Yeah, I like that. Okay. And so then how long did you run it? Because when did you sell the company?

So I started in 2015 and then I sold it in 2022.

Okay.

In October. And then I bought it back in end of January 2024. So it was like 15, 14, 15 months later.

Yeah. Oh, that's fascinating. What, what effects did COVID have on the business? Because you ran into all the supply chain issues.

Oh yeah, 2020 was just like, we're hearing about this thing called COVID or we're running out of inventory. Our factory is closed down. 2021, like supply chain, you go from spending $4K a container to $24K. And if you have like 10 containers of product coming in.

Yeah. And to be clear, that's not the cost of the product in the container. No, that's just getting it across the ocean.

So imagine like when you're planning out your business, you plan out what you think the margins are going to be and it's like it's going to be $4K to get this container and then it's 6 times. I don't like doing public math, but 6 times plus it sits on the port for 6 weeks. So we ended up moving our facility or our production to Colombia.

Okay.

So I find a manufacturer there and we still actually work with them. There's a couple of products that I'm moving back to our original production just because I don't like the quality of the paper as much in Colombia. But a lot of our product, we found a really good partner in Colombia. And so that helped us. Like, I don't know that I would have been able to sell the business if I hadn't made that move. So it was just like thinking strategically, like, I don't want to take 6 months to get new inventory in. We can get inventory from there in, you know, a month if they ship it to Miami. So we're not sitting at L.A. Port for a while. And then another thing we did was we moved to another 3PL because we had literally years of issues. We had a good first year, right? And then we were there for 3 years. And then the second you're like, no, we're putting all this investment in and you see they're getting all this funding and they keep promising it's going to get better. And then at some point it's just like, we have to cut bait. And the new 3PL was much better. We like saved so much money. And that was another thing where if we hadn't have done that, it also would have been very difficult to sell.

Yeah, that makes sense. Okay, so when it came time to sell, I think that's another conversation that a lot of listeners have thought about with their business of like, Okay, should I keep running it for a very long time? Is it time to sell? This is a good offer. What's happening in the market broadly? What was it that made you think like, okay, I'm actually going to really entertain offers and then ultimately take this deal?

I think at the time, I mean, I was pretty tired by 2022. I felt like the last, I don't know, 2.5 years, it had just been very like hard.

It's just been hard mode, nonstop putting out fires.

Yeah. And, you know, I, I bought out a business partner 2 and a half years before, and so I took on some personal debt to deal with that. And then e-com is just a very capital-intensive business. So it was always— and then, you know, I had a big team and it was like, okay, people are— I'm responsible for their livelihoods. And when a deal came along, they were going to keep on the team for at least 6 months. And I paid what's it called, like a retention bonus. And then they matched it. I paid a 3-month one, they paid a 6-month one. And so I'm thinking like, because I can see almost the writing on the wall as far as like margins are getting smaller, you have to kind of pivot and figure out different things in your business. But when you have people's livelihoods depending on it, it's really difficult to like make a hard switch. So I could see that there was like difficult conversations and decisions coming up. I also had a 3-month-old baby when I first started making these and I hadn't taken much time off. So I was like, it'd be really nice to just take some money off the table and like feel secure and then take some time off. I loved like the business and the products and I still believed in it, but it was almost like I'd built a business by just trying to figure out as I went and I'd gathered what I call like inexperienced debt. So where I, you know, you just like build things because that's what you know at the time, but it's not ideal. And you keep building on it. It's like technical debt, but it's like inexperience. And then when you sell, I was like, I cleared the slate. I can go and start something else and I can like take the learnings that I have from that and do it differently the next time.

Right. Without carrying all the baggage. You can leave the baggage behind and just bring the knowledge and experience.

That's kind of what I was planning for. I was like, okay. And it's a cool idea or it's a cool feeling to start something from nothing and be able to sell it, like someone wanted to buy it. Like, that was cool. And it was also very much like an ego thing where you're like, oh, I exited my business. And then after you're like, oh God, what do I do now?

Yeah, so I think a lot of people get into that feeling as well. I've, you know, in the past when I've thought about selling ConvertKit was like wrestling with a lot of those things. Our friends who run the Tropical MBA wrote the book Before the Exit, I think. That talks about like as they sold one of their businesses and then their thoughts on it.

And I read that after the exit.

It's in the title, Before the Exit. You're supposed to read it first.

Yeah, I should have done that. But I mean, I'm still— I'm glad everything worked out how it did, but there's definitely— and I don't think that someone has to sell their business and buy it back in order to make the changes. Yeah, but I think at the— I could see what was coming up. It was almost like you have to turn the ship and it's gonna be really difficult. And I don't think I had the personal bandwidth at the time to do that. And so it was just kind of like, let me take this deal and then start over again with something else where I don't, I just do it better next time 'cause I know better. And so that's kind of how I framed it. But then after, so weird, you go from like a business that makes money, so you have an asset you can sell sometime. And then you also have cash flow coming in, and then you sell it and you have no asset and you have no cash flow, but you have more money than you've ever had. But it's like, this is going to run out.

So for the first time you're noticing it as like a fixed pie instead of a, you know, renewing cash flow every month.

Yeah, which is like, I've been less stressed when I like—

Less money.

Yeah. And so my wife would be like, you know, she's like, you can take time off because I'd never had just time to just explore and learn things and do whatever. And I was doing that, but I wasn't enjoying it because, you know, she would come home. I like built this like cold, you know, I had a whole personality of like a cold plunge in my yard. I'm like, I want an inground one. So I like designed it. I used all— and I'm like learning electrical and plumbing. And she would come home and, you know, she's seeing all this progress and she's like, how was your day? And she's expecting me like, oh, it was really good. And I'm like, it's terrible. Nothing I did made money today. And so, like, detaching your worth from— yeah, that was difficult. Yeah.

Yeah. What helped in, in actually doing that? Or do you think that— did you just put that journey on hold, or is— I mean, do you feel like you actually made progress?

And I made progress for sure, because I think I was just— yeah, just in a scare because I was like, what am I going to do next? Because I like working on projects and I don't have because everything I've started was started on the side of something else. I've never had just the time to just do whatever. And I think not having the constraints was not a great thing for me. It's also maybe the ADHD because I would just be all over the place. And so I think having a project to work on because a business is just like, what problems are you solving? And so when I sold it, it was like I didn't have that many problems anymore. And so one thing I started doing is like a problem log. So I'm like, okay, if I start another business, what problem am I going to solve? So I started just writing down all the problems I had in the last few years. I'm like, how painful was it? Like, would I be interested in it? And so I was kind of like exploring what I would want to do. I like test drove a couple of things. I'm like, I don't like this at all. Like, I like creating and building something, but I wouldn't want to— like, I don't want to run like a service business. I realized I tried that. I'm like, I don't like having a boss.

And so the clients Yeah. Yeah.

And so there was— I think it was good. A friend of mine, Mike, I was talking to him. He's like, I think the idea is good. I don't think you should like marry it until you know you like it. So just test drive it. And if you decide you don't like it, don't do it. And so that actually gave me the permission to be like, because sometimes I'm stubborn and I'm like, I'll just stick with something even if it's hard. And I was like, actually, no, I don't like this. So I'm— and I had like a couple of clients and I was like, yeah, no.

What was that business?

It was going to be like some sort of mix between chief of staff, house manager, like type thing, but where you like have someone locally and people remotely because I was very into like optimizing your life and I'm like, that's— I don't want to like manage people like that.

Yeah, that's— you got to have just the right people because it's closely integrated.

And it's also like that business is actually just hiring people, right? It's, it's like a— what's the word? You're just constantly having to hire people all the time, and that's actually the business you're in. You're not in like— you're not creating, right? Prod— like, you're not— like, that's not my skill set.

Yeah, that makes sense. Okay, so when you sold the business, any lessons learned? If someone is in that position of they're about to exit their business, they're in those final negotiations, anything that you wish you'd done differently or that you'd want to flag for someone who is about to exit?

Yeah, I think there was a couple. There was like, I would have had someone on my side helping with a negotiation piece because I probably could have got more.

Okay.

But I think I was honestly tired, which I hear is pretty common. It's just like, let's just go. But I was much better negotiating on the way back in. But on the way out, I definitely because the deal was actually much better than the other deal. So I was also anchored to the other deal offer that I'd gotten before. So I'm like, oh, this is way better. And so I probably could have got more. But what else would I have done differently? I mean, there's like funny stuff, like use your business email for anything personal, right? Or talking to your lawyers that they might sometimes— not that anything ever came up from that, but it's one of these things where it doesn't It's only afterwards you're like, oh, damn it.

Yeah, because it's not yours anymore.

Yeah.

And so, yeah, I've seen people negotiate like, hey, as part of this deal, I get 1 year access to my email address on this domain or—

Yeah, I got like 6. Well, because I was still a brand ambassador, but I didn't negotiate those small points of like, I remember one of my teams like, oh, okay, we're going to remove you off Slack now. Makes sense. But in the moment I'm like, and it's weird because you start this business and you are around these people for like 7 years. Like the longest person that was with me was 7 years and like 2 years was like the shortest of the team. And so it's like, oh, okay, bye. And like I understood that I'm selling the company, but then it's like, oh, I'm an ambassador, but I kind of have an email and I also am not in Slack. And we were supposed to have these like meetings, but they were like, oh, if we don't schedule them, like, don't worry about it. And so, but there was an ambassador payout, so I'm just like sending emails into the void. I'm like, because I remember ChatGPT came out like a month after I sold it, and then I'm like, here's all these ways you should use it. Like, I think I'm literally just talking to no one.

You're sending ideas of how to continue to run the company well.

Yeah, I was just like, here's how you could pull this stuff from, from reviews for this thing. And, um, again Nobody would respond. So, yeah. And I wasn't sending it to like my old team cuz I, I do understand that they wanna have their own way of like managing people, which is fine. It was more of, um, I'm like, you guys are paying me, so let me just like send you ideas. Also, there's an earnout tied to it. So like selfishly I wanted them to do a good job.

Right. Yeah. Are there any, so the, the earnout's a big thing.

Are you, oh, also one thing I would say is whenever you're negotiating is like, sometimes our ego wants the deal size to be bigger, but it's better to get the more money upfront than the deal size to be bigger. And a friend told me it was like, oh, why don't you ask? Almost like the 9th hour or whatever, the deal changed from like the earnout being, you know, 10% to like 25%. And that was because of an Amazon change that they made.

Okay.

And I did see like there was more risk, Well, I'll not get into it, but it wasn't our fault and it wasn't their fault. It was just something that happened like a week before close. And that— so they didn't change the numbers. They just changed like when I was going to get paid. And so I went from like not really caring that much to like, okay. And so then I saw the— you know, I ended up not getting that earnout, spoiler, because of how things were run. But I mentally, I think, Q2 of 2023, I was like, because Q1 numbers were so bad, they were like they had never been that low since like 2018 because they just didn't order inventory in time and they didn't have anything. And that's like our biggest quarter. So it was like, okay, it's impossible. And so mentally that was another scarcity thing. I'm like, oh my God, I have even less money than I thought.

Right? Because they're not going to get this earnout.

Right. So I like have to figure out what I'm going to do next. Even if it's not based in reality, like that was what I was thinking.

So using like made up numbers, you're basically saying, okay, if it's a $5 million deal, then 20% of it is an earnout. So that means $4 million upfront, $1 million is held back. And you're saying even like really you should think of that as a $4 million deal with the potential for additional bonus.

So often people don't get their earnout and I've talked to so many people where Now it's kind of a known thing where I'd be like, oh yeah, of course you didn't.

Well, I bet it's known within—

yeah, yeah, yeah. Well, actually, because sometimes my initial offer that I was given was, uh, earnout based on EBITDA, which I was like, that's dumb because like you can easily fudge those numbers so easily. Um, and then this one was based on gross revenue, so I was like, whatever, that seemed fair, but That's another thing is make sure the earnouts in something that they can't pull an accounting trick and suddenly it doesn't exist.

Yeah, EBITDA is one of those metrics that on one hand is standardized and everybody uses it, and then on the other hand can be changed wildly in various ways.

Yeah, you buy or you invest in something, it's like, oh, sorry, there's no profit.

Yeah. Well, and especially in e-commerce where it's so cash intensive, that you're like, oh hey, you know, we got a better deal with this factory if we pre-ordered 2 years of inventory. And so then you're like, yeah, it changed it entirely. Okay, so that was the process of selling. Uh, and then you had this 15-month period or so of, you know, doing things on your own, exploring, uh, feeling bad about yourself that you're no longer making money, which I can deeply relate to. But how did it come back?

What was the first time that you had an inkling of like, "Oh wait, I might have an opportunity to rebound this business." I mean, the inkling was they called me because they'd sent me the 12-month numbers, and I think they were like 11% off, and it was kind of like an all or nothing. That was the way the contract was written. But I'm like, "Maybe I can chance my arm here and see if I can get some sort of prorated thing." Yeah. So he's like, "We can talk about it." I think he was playing good cop, but he's like, "Let me talk to the board." So then maybe 3, 4 weeks later, he's like, the CEO of the private equity company, he'd always be like, "Let's get on a call," and then never schedule it. And so maybe 3, 4 weeks later, he calls me up and he's like, "Oh, board's not going to do that any of the year now. It's pretty much done." And also we're closing down and if you want to buy the business back, we could talk about that. So it was an inkling more than them being like, do you want it?

You had an open question and then you're like, hey, can I get some of my earnout? And they're like, no, but you can buy the business.

And to be honest, when he first asked me, my first reaction was like, oh God, no. Because I was thinking of putting myself back in the place that I was before of like all this pressure and payroll and stress and e-com's hard. And what I realized, I kind of like journaled on it for a couple of days. I actually, I told him I was open to the conversation.

Yeah, it's a good— always a good move.

Yeah. So I wanted to like keep my options open. But to be honest, I was like, no, I also felt like, oh, am I going to be going back, like, because I closed that chapter and I'm going back. Is that like weakness to do that?

Yeah.

And so there was a— I'm like, why would I do that? And so, because it's almost like I played that game, why go back and do it again? Um, and at that point there's no team anymore. And my old team, I'd gotten them, like, I think one friend of mine who has an e-com company has 4 old best self people and I.

So you like help people find roles and all of that.

And so when I was thinking, I'm like, well, I— they have roles and I also don't want to do— it's like I don't want to do the same thing again. It's like do the same thing and expect different results. So I was just kind of thinking like, and then the, the time off when I wasn't, you know, scared about money, I was like learning programming and learning AI and playing around and just like exploring. And so I was like, okay, how do I frame this question differently? It's like, how do I buy it back in a way that's not risky and also buy it back in a way that I'm going to inherit a bunch of problems?

Right.

So it's like, if I want to, because I'm like, I could buy this thing back, figure out how to run it differently, or like maybe find another problem that I could solve somewhere else. But right now I am just kind of treading water and I don't know what I want to do. If I had something else, I'd leave all that baggage behind. Yeah.

And I don't want to buy that baggage back and like at any price.

I'm basically buying the brand, the products, the trademarks. The people aren't coming and I can kind of like start over and see how I do it again. And it was funny because my time off, I would think like, oh, I love that. Like, I love that brand. I love working on those products and I love the team and I would love to have something like that again. Where I could do it better.

Right.

And so it was this thing of like, I love that and I hope I can do it again next time, not expecting it to be the same company. And, and so that's kind of how I was like, okay, let me see how I would do it differently. And then it got more exciting because I'm like, okay, I'm— one of my challenges was, is like, I'm going to buy this back and I'm not putting a dollar into the business. It has to run constraints on it. Yeah, I'm like, I'm buying the business back and the image, the deal that I negotiated is basically like a percentage of the inventory. So I'm like, even if I sold the inventory and it's, you know, let's say half COGS. So it's like if I sell it at retail, then I'm going to make my money back. So it's kind of like it might take a very safe— Yeah.

Transaction. Your downside was, was capped.

Yeah. So and I, and I again, I was like, I'm not putting money in, so I have to use revenue to do it, hire people, do whatever. And so I haven't had to put any money in since that, and I've taken money out of it and it's been great.

So I want to talk about how the deal came about because you kind of glossed over it in what the deal actually was.

Okay.

And it's like, I understand it because we've talked about this a lot, right? You know, but in that when it was that you're open to the conversation And then did they come back and say, hey, you could buy it back for this, or did they ask you, what do you want to buy it for?

I mean, they threw out some numbers which were too high, and I was like, and it was over Chris. So the good thing about negotiating with these people is like none of them put their own money into it, right?

Right.

So it was like they don't have that loss aversion that I would have.

They're all about to walk away.

And they're all waiting. They basically have to get rid of these things off their books so that they can move on to their next thing. And so I think I sent them an offer around like the 2 days after Christmas or something like that. And they're like, it's too low. And it was low.

You're like, yeah, I know, but—

Yeah. And I like was running some numbers and discounting a lot.

Yeah.

But then it was like, okay, this is the— and to be honest, like, it was basically I knew everything coming in and if they had to sell it on the market, they have to like transition and do it. And by that point there's a skeleton crew running it, right? So there's not even like when I came back, there was like 25 credit card disputes that just hadn't been responded to. So like things weren't going well, right? And it would be hard for them to take it to market because they have to now pay more salaries to transition it. And so it was just— and they just wanted to move on. Right. And so there was a lot of— part of my offer was like, look, you can give me the one passable and just leave. Like, I don't need anything apart from that. And that was like a big benefit to them because they don't need me to do anything. The transition was like a 2-hour call. Where there was like so much disorganization at that point because everyone was kind of like one foot out the door. So the negotiation when one foot's out the door is much easier. And so it was things like that where— and I use like ChatGPT to help me negotiate, you know, the way you used to send emails to your— like I had some friends that would be like, okay, how do I say this? Yeah. And I do have a couple of like really good negotiator friends, like at the end of the deal. So my offer was based on an inventory number and we have really good terms with our supplier. And when I was giving the deal, I was like, okay, so all this inventory has been paid for. And they're like, yeah, they like told me on a call and they also told me on the phone like it's been paid for. And I'm like, okay, because my offer was based on it being paid for. But I was like, I don't know why they would have paid for it because we have like 120-day terms. It wasn't so But they kept telling me it was paid for. So I'm like, okay. And then because they're closing down, there wasn't a like, oh, I can go back to them in a month if something goes wrong. It's like we have to figure out all the numbers. And so the lawyers are going over the numbers. And so I'd agree to take on, let's just say like $150K of liabilities or something like that, which I knew about. It was like stuff in production and everything else was paid for. So I'm like, okay, cool. And so then a couple of days before close, we're like finalizing the numbers and it's like, oh, here's $250K of liabilities or something like that. And I was like, what?

The inventory that was on terms, basically.

Yeah, there was things that hadn't been paid for. And then basically the inventory, like, oh, was invoiced for, it just wasn't paid. And I'm like, that's not my problem.

The check's in the mail. Don't worry. Yeah, there's no money to back up the check, but don't worry about it.

And so I was like, look, I made this offer based on this being paid. Here's an email that you said it was paid for. And now I like, I don't want to retrade this deal. You know, we're supposed to close in 48 hours. So what are we going to do? And at the time, like, I was talking to my friend Dave about it and he's just like, you have all the leverage here, right? But I'm like shitting it because I'm like, am I going to really walk away from this deal? Because then they're like, oh, we'll pay off this stuff, but it's like a $60K delta, something like that. And I'm like, 2 years of daycare. And so I'm like, am I really going to walk away over this? But they end up— the CEO called me. He's like, look, we're not trying to retrade the deal. Like, we just didn't understand. Like, it was invoiced, just wasn't paid for. And then it was like he said something like— and he was like a nice guy, but he said something like, I just don't understand these this manufacturer, like why they would have like 4-month terms. It just— why would they not want to get paid earlier? And I was like, I— those are really good terms. Like I negotiated those terms.

That's a great thing for the business.

That's like— and it was almost like, that's the business you're in of like managing—

cash conversion cycle, all of those things.

Yeah. So it's just this funny like last thing where I'm like, yeah. And so they ended up coming down on the number and Paid off the inventory that I was going to get.

So you ended up what you mentioned earlier is that you bought the business back for half the cost of the inventory.

Right.

And yeah, that's, that's wild. Like, that's a fantastic deal.

Yeah, it was. It was. And I was like, oh, this is risky. And so I'm sending it like all the numbers. I had a friend who bought an e-com company out of I think it was— what's a distressed e-com company? And it didn't go well. He ended up taking a loss on it. And so I'm just like, am I— this is— he's like, no, you're doing it completely right. I wish I'd— because he, you know, the valuation was all wrong and things went, you know, Facebook changed and their whole like business model changed. But he's like, no, you're doing it right. Like you basically sell through the inventory. And that's kind of what I was thinking of. Like, even if I want to pivot or do something else, then I still own all the assets.

Yeah.

And configure something else. And so I was really looking for like capping the downside because I didn't want to again get myself in trouble. And I was trying to push them to close ASAP because like the number was the number and the longer they had the business, the less inventory I had, the more money they had. And so I was pushing because Valentine's Day is, you know, obviously mid-February and they wanted to close after the next Amazon Pay cycle. And I'm like, no, it's got to be sooner. Yeah. I was like, I want it like Friday. Let's do it Friday. And it was like the 26th of January. And so I'm like, because I'm like, I need to go all systems go to make the most out of the next 2 and a half weeks so that I can get rid of inventory and have money to like buy more inventory and do everything from there. Yeah.

So you— I think so many founders run their business and they think, okay, if I were doing it over again, I would do this. Or, um, you know, if I could start from scratch, here's how I would do it. And then they look at their own business or even this line that I've said before of like, oh man, if I could make the decision here, this is what I would do. You sort of stop and be like, you can do that. I, I can, but it's really hard to see beyond like 10% improvements or changes where you're like, okay, maybe this was the wrong hire, so we're gonna go a little bit in this direction, or we're gonna change the way the culture is a little bit in this way. We don't really think that we can ever do blank slate changes. And so you got an opportunity to do—

I mean, you can't, it's so, you can't really do blank slate unless you fire everyone.

Yeah. And, and, and even that's like not really, there's all kinds of challenges in that. And then any, any big change is gonna take you months to execute on. Like, I mean, I made a big change in November where, uh, I changed a substantial amount of my management leadership team. Where in a single week I let 6 people go and it took us 5, it took us 6 months to replace all of those key roles. And so that was as close to a blank slate change as you ever get. And, you know, that was a 10% change in the team actually, even though it felt like this giant thing. But you got to, to come in, maybe just—

Well, actually it's funny because they were like, oh, you know, when we we did the deal, and it's funny because we did the deal on a Friday. I didn't get access to stuff till the Monday because the person was on vacation.

Um, I feel like some— like, that says so much about how the company was run, you know, just in general. But yeah, I mean, manager mode versus founder mode.

Yeah, exactly. And it's funny, I came back and it's— I still am finding like these golden nuggets in the Google Drive of like, oh, this— they did a whole photo shoot, sick. Because I'm like, that's creative that now I don't have to pay for, right? Um, so it was like a big— highly recommend this. Don't know how you make it happen. I never would have like pictured it happening, but, um, it's been a like fun journey. But one thing I look at differently now is like before, I think you can get into just bad habits in general in your business of like buying things that you don't really need. And so now that I've sold the business, I look at every expense as like Okay, is this thing worth 4 to 5x what I would pay for it? Because that's what's going to cost me if I ever sold the business again.

Because you're selling on a multiple of EBITDA.

And a lot of things is like, no. And so I'm just like more— and I'm not building in a way that I have to sell it, but I want to build it as like, if I wanted to sell it, I could because I built it in a way that's sellable. But I also don't want to build myself this prison that I did before of like feeling trapped.

Yeah.

And so by being more intentional with spending and having less pressure, I have more freedom to do what I actually wanna do.

Yeah, that makes a lot of sense. So what are some of the big differences in how you're running the business now, systems, team, all of that compared to a few years ago?

I mean, even AI, I mean, I have a team, But I also teach them how to use AI. I'm like, don't— like, for example, an SOP, don't ever start from scratch with— like, it's just a waste of your time. Record a Loom video just walking through it, and you can get 80% of the work just from— I mean, now they even have it built into their program, but you can just create a prompt and you get 80% of the work done just from that. And so I'm trying to teach them how to, like, think and do things differently. I also— there's a tool called Finiloop, which I love. It's just e-com accounting and inventory. So we used to pay like a CFO company type thing and we wouldn't get our books to the end of the— the middle of the month. And it was in some Excel thing that I don't know how to do what they're doing. But Finiloop, you can see your live P&L any time. And because it's so integrated into all of your systems, like I don't even need a bookkeeper. I have like a finance guy that we go through and I can see my profit margin on everything and I'm like dialing everything in. So I know exactly where I am. And I didn't have that before. Like I kind of knew the numbers, but it almost— because I had people on it, I wasn't as on top of it as I am now. And it's things like that of just like measure what matters. If you're looking at it, you're going to pay more attention to it.

So before those things were abstracted away and the pain around it was abstracted away because there was a person who handled it.

Yeah.

Which on one hand is a great thing about entrepreneurship is you're like, okay, I can pay someone else money to solve that problem. But then you might not realize that they're spending 10 hours a week doing some part of it that's a total waste of time, but they think is important to you or that's the way they've always done it. And so then when you come back in, that pain is now your pain and you can decide.

But I'm also starting from scratch as far as like, like I said, I'm not putting any more money into it, so I'm just much more intentional. Yeah. And I'm the one that's categorizing the expenses the first time. So I'm seeing everything and then it auto does everything. But there's just so many systems that are so smart that you don't actually need a person. It's not even that I'm taking on like I probably spend 10 minutes a month doing the little thing. I kind of like it. It's a podcast and I'll just do it and it just keeps me thinking of like, because there's so much time in my old business where it's so cash flow intensive and we had a big team and you're like, oh, let's pay this credit card here. And it feels like a struggle because, you know, one thing goes wrong, you're like, oh my God, how are we going to, like, pay for this? There was a time where it's like, oh, We have all these expenses coming up. I don't know what's gonna happen. And, uh, I mean, we, I always figured it out, but it was just like, I don't wanna get into that. So if I be more mindful, like going into it, I don't have that problem.

Yeah, that makes sense. Okay. So you've implemented a lot of tech, you know, and, and really just software's gotten so much better the last, you know, 5 years, but you're probably using systems that you chose, you know, 6, 7, 8 years ago.

What you're doing.

Yeah. And then talk about more implementations of AI. So you had the one example of like creating an SOP.

Yeah.

Don't sit down and be like, all right, now I'm gonna go write a 5-page SOP from scratch. I think what you're saying is record a Loom.

Yeah.

Feed the transcript of the Loom into ChatGPT.

Yeah, I mean, pretty much. So a lot of, I mean, creators and running a business, there's a lot of like minutia you don't know is happening until you're sitting and you're like, what did I do today? And you're like, oh, I spent 30 minutes writing this email. And some of them are important. Like before, if I would deal, you know, sales tax thing comes in, I'm like, I don't know how to deal with this because there's stuff that happens. You're like, your team be like, what should we do with this? I'm like, I have no idea. And that's hard to say. It's like, I literally don't know. And I just ask. I am like, I got this letter and this is what I think's going on. And I find dealing with like government agencies, if you're at least if you're not doing anything wrong, you just explain. You have them explain it and then you fax it over to their number and you get a response and it's done. What I would have to do before is I would hand it off to one of my teams. So their time's wasted or I just wouldn't deal with it. And I pay, I pay a penalty later by not like whatever tax I'm going to pay by not dealing with it. And so much of business is just like, and now with AI, I can run through stuff that would have taken me months in literally like 30 minutes. Hiring people. Like writing a job description, writing a test for the job description. Once you have people forecasting inventory, so like you can give it all the information. And then what we do right now is we have it forecast what we think it's going to do based on like trends and historical data. And then it's— we'll keep checking back on like, was that correct? So we'll have our number and we'll have it what they tell us. And then we keep going back, like, how close? And it's been pretty close because of how we're feeding it. And even like product creation, before we used to have like, you know, we had these conversation cards, we'd be working with experts. Then you have to like come up with 300 cards to get 150, and then you're working on grammar. Oh, is these all in the same tense or perspective? And someone manually is going through all that and then checking for errors. Now you can just like have AI do all that. Oh, this question similar to this one, maybe we could tweak that. And so you can literally go from an idea of something to going into production so much faster.

So getting really specific on that, are you using tools that have this baked in or is this like you have a Claude window open and you're interacting with that or ChatGPT?

Mostly it's Claude and ChatGPT, and I just have very long prompts for specific things.

You keep coming back to the same prompt and you fed it more and more information over time.

And I keep the same modal window.

Yeah.

Like I dealt with this like terrible vendor and unfortunately we signed like a year-long contract with them and they just were costing us money. Not even, they were just so I just gave ChatGPT the contract. I'm like, I need to get out of this. This is what's going on. Like, help, help me.

Okay.

And they're like, okay, here's the clause where you get out of it. And so I'm like, okay, write me an email. And this would either— I wouldn't deal with it and I would just take the cost, or it would take me way too much time and it would take my time away from something else. And so you've basically taken what would otherwise not be dealt with And now it takes 10 minutes of my time because then I'll respond. They're like, oh, you have a contract with us. And then I'm like, this is what they said. What do I say? And then I, you know, obviously I'm not verbatim copying it, but it's 90% of the way there and it's actually much more thoughtful than I would have put in. And also just like writing, even sometimes delivering news in a more thoughtful way. So there's a tool I use called SuperWhisper. And you just talk into your mic and it's like, oh, I want to write an email to Nathan Barry about this thing and it will write the email. I actually showed a friend yesterday. I'm like, yeah, I'm not really interested in this opportunity. Like, how do I tell Mitchell about that? And it just wrote it and he's like, holy hell. And so sometimes it's not perfect, but what you can do is you can take your transcription of what you're trying to do and you can say this is the first draft and then it can tweak it.

So now write it more in my voice if it's this long thread that we have. So it has context or say, That's great, but now soften it to let them down gently, you know, or something else.

Yeah. So it's just— and then using it for brainstorming. Yeah. Forecasting, brainstorming, KPIs. Like I've been trying to set goals for my team that's both like fair based on where we're at and not based on historical data for Q4. Like if I was like, okay, because I want to— I'm focused on more profit instead of just revenue. So I'm like, trying to figure it out. And so I'm literally just— I mean, Claude keeps telling me like, oh, you're close to your limit now because it's so long and I'm feeding it like spreadsheets and data. And then it's telling me based on that and where I want to go, like what I should set goals at.

That's awesome.

Which I literally would. Oh yeah. And then another thing I did, so because I had such— one thing like that's been a little more difficult is I don't have this team that's been there for years. So it's like when you don't have to explain why something is the way it is. And I realized that I was kind of throwing the new people I hired in the deep end because they don't know why things.

Yeah.

And I'm bottlenecked because I don't have like— I have a toddler, so I have to like condense my day because I'm, I'm trying to have like more boundaries than I did when I first started it. And so one of the things I did that I would just never have been able to do before was just start talking to you. I'm like, look, I started the business and I just went through and I just talked through major decisions, why it was made, why we made this product, inflection points in the business. And it turned into this 40-page document of different parts of the business. So they have something if they're curious about why we did it the way we did it or why we moved to Colombia or this manufacturer used to work with, why did we stop working there? Or this legal issue we had, what happened? So it's just like historical things that we don't really document, but we should. And this is a way where I'm not going to be the bottleneck of like them being able to find out the answer.

I think what's so important about that is when you join your— and, you know, you join a team or company, you're getting all this, all these little bits of information and you don't have any scaffolding to hang it on. You're like, okay, that's interesting. I don't know what to Yeah, there's no context. Yeah. And so what you're doing is providing all of that context. Uh, I was talking to a friend and he reminded me of a quote from Steve Jobs where Steve talks about how his favorite product that he ever created at Apple was Apple University, not the Mac or anything else, but Apple University because it taught people how to think the Apple way. And I was thinking about that cuz I realized like I spend very little time creating the types of historical context and, and that sort of thing that, uh, that you're talking about. And so actually last week, uh, I was here in the studio with, uh, Haley, who's on our team, who's been leading like sales and creator partnerships for a long time. And we got up here on the board and we just recorded in the studio entirely internally for the team and said, okay, here's what, if you're joining the team at Kit, here's what you need to know. About the creator economy. Here's the types of creators. Here's how the different industries are different. It's like a 40-minute video.

Yeah.

And now it'll live and everyone who works in sales, account management, partnerships, all of that, they can watch that video. And I'm just like, I've been running this business for 11 years now and I'm just now starting to do those things. But it makes a huge difference.

Yeah. And it also, you're, yeah, you're teaching people how to think because I learned this with my old team. I was like, when I'm working on product, instead of just like sending them something, I'll like just open up Loom and I'm like talking through why I do the things that I do. And even now with the new team, I'm like, I'll make a decision and then I'll give them context about why I'm making the decision.

What's interesting about that is now you can, the way you can store this information, you're training not only your team, but an AI on it because you could say, Okay, every decision that I make, I'm going to record a 2-minute Loom explaining why I made that decision. And then at some point, either continually or at some point, you could feed those 50 decisions and the little Loom snippets into an AI and then be like, hey, what are the principles that I use to make decisions? And it's like, well, well, Kat, as the way that, you know.

And like, you don't know the through line of how you do things. Yeah. It's wild what even, even like personal things like my wife and I will like do therapy twice a month. I remember once we got into this argument the day before, and so we have this call coming up the next day and I had just started talking to AI. I'm like, we got into this fight last night. This is what happened. This is like what happened on my side. And then it's almost like homework for therapy. I'm like, can you frame like what she might have been going through so that I could better understand her perspective? Right. And so that was helpful. So then I'm like going into therapy with like, okay, now I have a better idea of like where we could have— it's just like I would never have— it's just being able to talk to someone all the time that— and it's not taking away from any personal things, almost like saving you energy and like you can show up better once you do like a little homework with your little robot friend.

What I'm thinking about is Uh, today's Friday, so on Wednesday I was at therapy with, uh, Hillary, my wife, and we're forgetting what we talked about the month before, and we're like, oh yeah, what was that thing? And so the first benefit of what we're talking about is even just logging and note-taking and having that. And then when you layer on that, you get to give this context to your team or to your future self, or— and then The next layer is you get to have that context to your little robot friend that you can talk to at any time who will tell you those things. And you can say something like, okay, what's the, what's the biggest argument against this?

Yeah.

What am I missing here? Those things are so powerful.

Yeah, I think like seeing your blind spots. And I think honestly, I'm more excited working on the business line because I can do, I'm interested in exploring that stuff. And it just wasn't possible before. And I would sometimes get caught, like I have certain, I like figuring out new things and exploring, but sometimes you just get caught up in the minutia of like the day-to-day and getting in the weeds. And so it's been fun 'cause I still am in the weeds, but I'm also having fun with it. Yeah.

So what are some of the other big differences in how you're running the company and team now compared to a couple years ago?

I mean, I think I'm just— my team is lean, so it's like I also have half my team in Latin America and we have Spanish products coming out. They're out already. And so I hired them and then I also had this idea to come up with Spanish products. And so it's actually been really good hiring consultants. Like, I almost think like fractional people that are experts at their job. Like, I had this finance person that was referred to me and he's been like amusing, like way more helpful than the $6,500 CFO company that were not very good. And I dealt with so much like problems with them after selling because they just didn't do things right. And so it's like fixing their mistakes. And so I like because a lot of times like bookkeeping is I don't really need that, right? As in like that's not a big lever for me, but someone coming in and teaching me about like marketing efficiency rate. So I'm like looking at different channels. Like I wasn't doing that before. Not really. Like I look at ROAS or whatever and now I just have a much more— I'm just like better at the game of business because I understand it in a way that I wasn't before. Not because I mean, the tools weren't out there yet. And I also didn't have the capacity to, to like get in the weeds with everything because I had so much going on and a baby.

There's always all those, those other factors. The way you're talking about bringing in outside experts, it seems like you're doing it in a really different way than the PE firm was doing it. They were outsourcing the entire problem, it sounded like, to an agency and saying, oh, they're going to run all the Facebook ads. This company is going to do this other thing.

But yeah, it's like a Frankenstein because nobody knows what each other is doing.

Yeah, no one's responsible for it. So then what you're talking about, the other version that people like, the other extreme would be bringing it all in-house. But it sounds like what you're doing is you're trying to automate as many things as possible, have a really lean team, uh, and then bring in these fractional experts as needed. Is that what you're doing to then consult on?

The finance person is one of the few people that's on monthly, cuz we'll get on calls like once a week. But everyone else is as needed. I also— sometimes we think we need to hire someone as a position when actually we just need to hire a contractor to do a project. And I find when I got the business back, one of the things was like the site was so slow and it was this like Frankenstein Shopify theme that was a theme, but it was just— and then to do anything you need to hire developers. I was like, we needed to like go to a really good theme. But before that, before I like did a whole redesign, like I need to speed the site up. And so I'm talking to these people, it's like developer, oh, like $5K and it'll take like 30 days. I'm like, okay, let me just go on Fiverr.

Yeah.

And I literally went on Fiverr. I paid $120 to this guy that I've gone back, I've like referred him to so many people. He got it done in like 3 days and way like did everything that the other people. And it's just like, oh, if I would've burned $120 I would have figured it out faster. And I think the feedback loop where I'm just like impatient with like getting, you know, I'll like jump in and handle something myself, which I guess like founder mode or whatever. And I think the, the PE firm was like, oh, they weren't doing that. So stuff like we dealt with this counterfeit issue on Amazon and they told me about it and how they were dealing with it is like, oh, they were just lowering the price so that they had the buy box. but it was like creating this bigger problem where you like the profit margins dying and we have like trademarks. It was just, it just takes time to— so I was the first, I think in March I just like anytime it came on the listing, I order it to come to my house and I would like set a system. I'd take a picture of it, I create a spreadsheet. Took me probably like 5 hours a week for the first 2 weeks and then it was solved.

And you're basically documenting, you're buying the counterfeit product, documenting that it's counterfeit.

Then you report it. You just create a system to report it. And again, this is something they were dealing with for months because they weren't actually dealing with the real problem, where I was just like, okay, let me just grind for like— again, it's not really grind. I would take a picture on my iPhone when a box arrived at my house. It's not very difficult, but it was just like the thought of nobody on the team like doing that and just creating like— and it was solved in again like 2 and a half weeks. We got access to this Amazon thing that allowed us to like throw people off, but it's just something that they hadn't explored or dealt with. And it's just things like that where cutting the feedback loop and just, just handling stuff instead of like trying to like hire an agency or just like do it yourself, literally. And that's another thing is like ChatGPT, you don't like a developer of Shopify. I wanted to write a script to do something specific. Took me like 20 minutes. I'm like, you're a Shopify developer. This is what I'm trying to do. I had to like run through some errors. and then it worked and then it's like, okay, that's done. Whereas what you would do is like, I have to find a Shopify developer. I'll talk to a couple, then they'll send me a quote and then it's just like, I'm exhausted.

Oh, I love that. Okay. I wanna wrap up with 3 topics that we haven't gotten to yet. Uh, the first one is, uh, talking about hiring overseas. Second one is all of these systems and AI things and all that we've talked in the business context. I wanna get into it if you have any like hacks or little things you do on the personal side.

Okay.

And then the third thing is I want to talk, if you're up for it, about embezzlement as a topic.

Just a casual?

Just a casual.

Have you been embezzled from?

I have not.

Okay. Not that you know of.

Correct.

That's another Gertler quote, actually. He put something out. I think it was him. It was like, basically, if you haven't been embezzled from yet, you've either not been in business very long or you haven't fined it yet.

Okay, so let's go there right now and then we'll come back to the overseas hiring and, and we'll end on like the fun life hack kind of systems things.

Yeah. So 2020 was a— I like dealt with a business partner buyout that had been like years in the making and it was just like torture and that it was actually part of how the embezzlement thing happened because it was like the founders are distracted.

Yeah.

And we had this inventory manager who was selling inventory on the side essentially and fudging the numbers. And basically wholesale customers think they're paying us, but he has his own business bank or his own personal bank account set up to Stripe. And so they're paying to his Alejandra at bestsolved.co, but it's actually going to him. And then he's just— at the time we were running our inventory off our spreadsheets and then he was doing this weird thing where like the 3PL was shipping. He would go into an existing order from the 3PL and he would edit all of the information, like the product, where it's going. So it looks like a reshipment because it doesn't come up as a new order because it's— it was just like this hack, right?

Yeah.

And so this one day we have this person selling against us on Amazon and I ordered the product. I was like, okay, either it's a fake product someone stealing inventory or our manufacturer is like selling against us.

Competing with you. Yeah.

But we'd been with our manufacturer for years and it wasn't our top products. I'm like, if they're going to screw us, like they would go for like the better product. So I order and it seemed real. And so then I kind of went down the rabbit hole like, hey, we need to do like audits of this is how many orders, how many have we got? And so then it starts coming back like he the numbers are just like all over the place. And to be honest, at first I thought it was like just negligence because I assumed positive intent. Like, I just never would have thought that I would get into the situation. So I, I got on a call with him and I fired him for negligence. And then I went into his email and he deleted all of his emails and I restored them. And so then I realized what was actually going on is he was selling product, fudging all the numbers, taking the money, and then the customer thinks they really bought it from us, but they hadn't. And what had happened is someone he sold to third party started selling on Amazon. He's emailing them like, dude, like, you have to, you know, and they also don't know that they're not properly buying from us.

Right.

So he's trying to be like, cool.

Oh, against our terms, you actually can't sell on Amazon. That's not—

Right.

Instead he's like, Freaking out.

And it was like between actually taking revenue, selling product, and then there was these expenses on my ex-business partner. He'd set up like a credit card because he wanted the points or whatever, and I didn't have access to it, but it would be coming from the business bank account and there was charges going on there from this guy and he'd gone to him and be like, what are these charges? And he just made something up. And because my partner never checked, it just kind of like went by the wayside. And I think if we didn't have that stuff going on, it wouldn't— it was just a perfect storm of everything.

It was like running yourself on spreadsheets, which someone's going to notice and then be able to like take advantage of it.

And like the— we didn't have a proper like inventory, like doing checks and all that. So I fixed all that. So it showed a lot of— issues that we had in the business tech. Like, it's our responsibility to do that. You just don't expect to deal with that. So that was tough because also I hung out with this person. It wasn't like, even though we were remote team, he was in New York when I was in New York and I would like, he came out to think he like met my family. It was like, so of all the remote people I hired, he actually was one that I hung out with in real life. But there was like, you know, these people that you meet them and you feel like you don't know them at all. Because they never give up personal information. He was one of these people where it's like, in my gut, I think I knew like something wasn't right, but I didn't know what it was. Anyway, so I ended up, because I was like, he's going to go and do this. I actually think he had a second job as well as doing that. And so I— and he was based in Denver and I reached out because I was like, I don't know what to do here. He also didn't know that we knew what the full story was. And so how he found out is he got a call from a detective who called him was like, oh, you know, wanting a statement. And then he was like, oh, I had my identity stolen. And I'm like, I would love to have my identity stolen. They put money into my account instead of taking it out. And so because he kind of like made that statement and I'd get like I gave all the proof, he didn't really have to do much work. They actually went and arrested him. So he spent one night in jail and then he pled to a felony. And that was another thing I like didn't expect to deal with in business.

But how much money did you have stolen from you?

$230,000.

Wow.

Oh, so my brother— so my family are all like not entrepreneurs at all.

Yeah.

So I put this video out because I'm like, I'm going to tell this story because I also, oh, you know, there's been a lot of like cool things we've done with the company and it's like really nice to be like, oh, everything's wonderful, right? But there's also been like real shit. And you deal with that. And I think a lot of times people don't talk about the negative stuff of like, and even the embezzlement. Some of my team are like, should we talk about this? I'm like, I think it's interesting. I was like, I watched the video, but also it's just when I, when I shared that, other people came to me in my DMs like, oh, that happened to us. And they like never talked about it publicly, but it happens way more than you think. And so I put this video out and my, my brother is a doctor. He He just sees the headline, like the $230,000, and he's in Belfast. He calls me, he's like, Catherine, I saw your video. That guy stole all that money from you. God, that's awful. How much money did you make anyway? That was like the actual conversation. And I'm like, he didn't take it from my bank account. Like, it was— Yeah, like I would notice that anyway.

So that Because now he's imagining how much money do you have to make personally to not notice a quarter million dollars missing? You're like, well, it's over a long period of time. It's—

Yeah. And it was like inventory is— Yeah.

Yeah. So you gotta love the family question.

Like, what is wrong with you?

So if, you know, going back to the, the, the Girdley quote about embezzlement of, you know, either you haven't been in business that long or you haven't noticed it yet. What are the things that are like advice you'd give someone if they're digging in, setting up better systems and just making sure that, you know, their finances are safe?

I mean, I think just like checks and balances of like we have one person that's managing the inventory and we're not doing like check. It was just like we would— I would just assume people are doing what they say because that's what I do. And so that's gotten me in trouble. In general of just trust but verify, kind of like, yeah, trust that someone's going to do something. But like contracts, those are smart and like really protecting the downside, which now I do because I have gotten, you know, hurt not handling that because I just assume if you say you're going to do something, you do it. And that is actually a big assumption. So I think just sitting down and being like, okay, I mean, using AI, like, here's what I'm doing. What are the weak spots here that someone could take advantage? And that could be stealing inventory, having a second job, like whatever that looks like. Just put things in place that like not one thing is under one person's jurisdiction that could get you in trouble later.

Yeah. A common thing is that, you know, in accounting or finance, like someone who never takes vacation. Because they're the one to always do that system and maybe their, their embezzlement isn't very sophisticated. And so as soon as they take a vacation, show someone else how to, you know, how to do it for the week that I'm out, someone else is like, well, none of this adds up. But if one person only ever does it, then, yeah, you know, it doesn't get caught.

I mean, I would— when you're again, when you're not running things on spreadsheets and there's a like this Finiloop thing I use, it goes into your bank account, so it like ties everything together.

Yeah, the verification.

So there's not even, you know, we were with the sale and stuff, you know, like changing bank accounts. There's like a couple of payouts that went to the old, to the people I bought from, and they're still like, where is this money? And I'm like, this is— we're just never going to see this again.

It's like, you're like, how do I write this off?

Yeah, I'm just like, This is just, this is gone. How do we say? And it's still like showing up on my thing of like, we still don't know where this is. So it does make it much more difficult to like do weird things.

Mm-hmm. Yeah, that makes sense. Well, it's a good thing for anyone running a business at, you know, as you get into this, probably, yeah, $500,000 in revenue and above to like really think about those systems, not just because of, you know, the peace of mind or the like, how the operations work for yourself, but also because it really insulates you against, you know, fraud or embezzlement from whether it's a vendor or an employee or someone else.

And also I would say to people like, if you're working with a new vendor, getting references and also doing a background check, never would have thought I dealt with this vendor in 2021 and we were trying to move to South America. This was our take one that didn't work out. So I had this guy that came from a referral from like two different people. It was in a community I was part of and I'm like, okay. And it's weird. Now I listen to my gut when I wouldn't trust it before.

Yeah.

And there's— when I look back at like ways I've lost money, it's always like, oh, you had that gut feeling and you just ignored it. So like, not trust it. And your gut, it's taking information from a bunch of places. You don't know why you have that gut feeling, but it means something. And I do listen to it. But this vendor basically said he was going to make product and we, we paid 50% upfront for like basically $105K and then he never delivered it. And the referrals that I had that he was also making stuff for them didn't deliver it to them. And we had a contract, so I'm like, okay, do we sue him? So our lawyer does a background check. Turns out this guy has like $600K of judgments against him already. And this was in 2021. I later since found out he's screwed so many more people. And had I done that background check— because if you have a gut feeling, like, don't do a background check on everyone. If you have a gut feeling about someone, do a background check because it's probably coming from somewhere. And If they have other things against them, just like, no.

Yeah, that makes sense. Okay. So one thing that you did coming back is that, you know, you're hiring overseas more, right? Hiring the team in Latin America. Any advice for someone who, for someone who's thinking about like augmenting their team or expanding, uh, overseas or outside of like the US and Europe?

Yeah. So I have two people in the Philippines and then Now I'm hiring more Latin America, even though I love my people in the Philippines and I love them on my team. One thing I struggle with is because, like, my company is called Best Self and I'm asking people to stay up all night to work on my time. So health-wise, I don't think it's a great long-term health thing and I want long-term people. And so I've used— what did I use? I use this thing called Sagan Passport. It's like a membership and they will find you. That's where I find a production person in Colombia who's like 20 minutes from our factory. I have someone in Mexico City and what they have is like they can recruit people for you, but they also have a talent pool that you can just pull from if you happen to need someone. You see that someone in there and that doesn't get taken away from your credits. And then I've used another one where I find my ops person from the Philippines and he's called Quick Hire VA. It's like $300 and he'll just find you 3 people and you can hire Honestly, it's too cheap. I told him that after I hired him.

Yeah.

But so, and then there's also like online jobs, there's, you know, somewhere. So there's a bunch of different options.

Yeah, a cubers firm somewhere.

Yeah. But I think the biggest thing is like figuring out who you need and like really defining the job. Sometimes we like start hiring because we're like feeling frantic, but it's like, what does success look like in the job? And how do you give them the systems that they need? I'm not the best at that. Sometimes I just throw people in the deep end and hope that they swim, but I'm generally getting better as far as setting up the systems. But now with all the tools, we were already remote when I had a US team. And now I hire, I have a few US contractors I hire for specific specialized tasks. And then otherwise, I'm again trying to stay really lean.

Yeah, well, because with that constraint of all of the money to grow the business has to come from—

Yeah, like I don't want to have to— Yeah, I just don't want to get myself— It's also like a fun challenge of just seeing where I can take it. So yeah, I'm like, we're— our revenue is lower than significantly, maybe like 30% lower than it was when I sold, maybe 35, but the profit's higher.

Like profit percentages, what was it when you sold versus what it is now?

It was like 7%.

Okay.

And I'm trying to keep it at 20.

Nice. It's a big difference.

Yeah.

Even with lower revenue.

Yeah.

Like, yeah, that's awesome to run that way. Okay, so you talked a lot about systems in the business. Do you have any habits or systems, things that you've set up at home that, you know, or how you run your personal life that other people could benefit from?

What do I do? What do you do?

I'm trying to remember this one. You were telling me, what do you do with Amazon packages? Do you have a system for returns?

Oh, yeah, I have this because so my ADHD, I basically like, how do I set up tools for myself?

Yeah.

So I don't have keys in my life at all. Like I put smart locks on all of my doors because I lose keys.

Okay.

And it just happens.

And so everything is to your phone or.

Yeah, my phone or my fingerprint.

Yeah.

And, or code. Um, and so anything that like basically adds friction, one thing is like, I'm really bad at returns. So what I do is like, now I have a system where if I'm not gonna keep it, I will put it back in the box and then I put it in my car and then I drive it around for a week. Cause like that's the first step is done. And then I have this thing set up, what's it called? Like, um, it's like an alert.

Okay.

So when I drop my daughter at daycare, if I go to like H-E-B, there's a UPS right there and it will alert me and it'll just ping my phone, be like, do you need to return anything. And because if I'm like right there, I'm like, yeah, I do need to return something.

So it's a geofence around.

And it actually, my assistant will put the return codes into a notes form, and if it's empty, it doesn't pop up. But if it's not empty, it will. So it's stuff. And then like my wife and I will have a, we'll do like a weekly meeting on Monday to like go through a week of like who's doing what. And then we have a like a shared note of like grocery things that we need. Also, a lot of times parenting, I find that one person is in charge of getting all the notifications and stuff and then they have to relay the information. But if you can create a Gmail account for your kid.

Okay.

Have everything sent there and then it's forwarded to both emails. So like both, so not one person's like the bottleneck of like, oh, I have to like communicate this thing.

I put my email down for daycare and now you know nothing about daycare.

And I have to tell you everything. And it's like, uh.

And so, yeah, it puts the burden on one person. And then also, you know, if one of you is out of town, then it's like half this information is just gone.

Right, exactly. So things like, so basically I'm always looking at like, okay, where is there friction? And then reducing it as much as I can. And stuff like, oh, I live in Austin, it's hot as shit in the summer and our gym is in the garage and we don't have AC. And this summer I was like, fuck it, I gotta, I gotta, I'm just gonna get like a window unit because I want to work out more, but I cannot do it in this heat if I don't do it before 10 AM. I'm like, you know, like toddlers in the morning, it's just mayhem. And so, um, yeah, so I'm trying to think if I have any like cooler systems, but it's just stuff like that.

I think the Amazon one is great of like, I think there's a lot of things that you could automate in that way. And then just even thinking about, I think you're pretty aware of like your habits or what causes friction for you. And so even just saying like, oh, I do not have keys in my life and you can make that rule. And it's like, well, but that one thing, it's like, no, for $100 you could replace that, you know, that one random lock with a smart lock as well.

And even when I first— so I have like a— we have a little casita where my office is. And when I first put the smart lock in, in our other locks, it was like a key thing, but it was like $100 more. And I'm like, I can just type in the code. And then a day I was like, no, this is going to save me like a minute 4 times a day to just have a key thing or a fingerprint. Fingerprint. And so it's stuff like that where it compounds over time. The more you do something. I also have a like an Alexa thing because I'll just— I'll forget things. I'm like, can you set a timer for like 30 minutes or remind me to do something? And she— and it's kind of like your robot friend of like, add this to my calendar. So like any friction where you're like, I have to like pick up my phone and like do something between like Superwhisper where it can write emails for you and you just like tweak a little bit to setting up automations on your phone. Yeah, it's really good.

Those are awesome. Well, thanks for sharing so much great stuff. Like, first, the story of buying back the business, the rebound that most people don't get, uh, but then all the way through to lessons learned, how you run your team now and everything else. It's been really fun having you on.

Yeah, I am excited for the next chapter, whatever it looks like.

Yeah, where should people go if they want to follow more of your content or buy products from Best Self?

Go to bestself.co. And if you want to hear about my embezzlement stories or any behind-the-scenes stuff, you can go to littlemite.com or follow me on Twitter.

Sounds good. Thanks for coming on.

Thanks.

If you enjoyed this episode, go to the YouTube channel, just search Billion Dollar Creator and go ahead and subscribe. Make sure to like the video and drop a comment. I'd love to hear what some of your favorite parts of the video were and also who else we should have on the show.