Episode 183: The New Acquisition Model with Tom Rauen

Welcome to Skucast, the podcast for entrepreneurs in the promotional products industry. Skucast shines a light on our industry's best work, features maverick personalities, and discusses what's really involved in running a modern promotional products business. Skewcast is the official podcast of Common Skew.

I say anyone that's trained to run a marathon can run 100 miles. You really run probably the first 30 or 40 miles based on physical, like, ability or how physically fit you are. The last 60 or 70 is all It's all mental.

Tom Rowan is an entrepreneur with a passion for community marketing and innovation. Tom is the founder and CEO of 1-800-T-Shirts and Envision Custom Screen Printing and Embroidery, an Ink 5000 company. Tom is also the co-founder of Dimensional Brewing Company, a microbrewery in Dubuque, Iowa, and he served on so many notable boards and nonprofits, including a foundation Tom and his wife Amanda started, the Rowan Family Foundation, with a mission to give back to the community.

Tom's a fascinating guy.

He's an ultra runner, having ran a 100-mile race not just once, but 4 times. Recognized worldwide for his marketing stunts, most notably breaking the Guinness World Record for wearing the most t-shirts at once. That's 247 t-shirts. He's also someone who seems to look at everything differently, from running a business to acquiring businesses. He's acquired 6 companies in the past 7 years, which is one of the many reasons why I wanted to chat with him. We talk today about a new type of acquisition that's been happening all around us, but rarely in the apparel and promo world until now. We also talk about using your B2B resources to create a direct-to-consumer brand and how that can benefit your B2B sales too. It's a great idea. How running 100 miles equates to business, not living your life on repeat, and a whole lot more. Hi friends, I'm Bobby LeHew, the Chief Content Officer at Common Skew. Recently, many of you attended our wonderful conversation with Brian Papé, founder of Mere.

It was truly one of the richest interview experiences I've had.

It was a great conversation. You can find at community.commonsq.com. But I'm mentioning it because we're having another great conversation on June 25th at 2 PM ET on the Mastering the Art of Creative Kitting. We're going to talk about the merch, the packaging, the kitting, the shipping, the unboxing, the ROE, the return on emotion engagement and experience, and a whole lot more. The webinar features Stefan Baer of S&S, Lee Fine with Juice Marketing, Yvonne Lingus-Ziemann with Monarch. I hope you can join us and bring your team. You can register at commonsq.com/ss- ssactivewearwebinar.com. I know that's a mouthful, but that's commonscue.com/ssactivewearwebinar.com, or you can find the link in the show notes from today's episode. This episode is brought to you by CommonsCue, the work-from-anywhere platform that powers your connected workflow, enabling you to process more orders and dramatically grow your sales. To learn more or to begin your free trial now, visit commonscue.com. Now here's my chat with the singular Tom Rowland.

Tom, you've built a few successful companies, and what I find fascinating is that you are rethinking acquisitions, but with a very creative perspective. So you've acquired 6 companies in the last 7 years, but you didn't buy all these companies for the companies per se. Tell us how you're rethinking the acquisition process.

Yes, definitely. So most people think of an acquisition as, you know, the competitor down the street is either going out of business or looking to retire. And sell his business, so you want to acquire that company, or maybe it's a larger company and you're looking to merge together to create an even bigger company. And so that would be like your traditional acquisition of another business or like the assets of that business. Maybe it's equipment, inventory, and their customer list, or just you want to acquire the customer list only type of thing. So we're looking at it as what else can we acquire? Is it intellectual property? Is it traffic? Is it media that's gonna ultimately bring traffic to you? So that would be acquiring like a podcast or a blog or a Facebook group. So if you look at who your ideal customer avatar is, whether it's a trucking company or accounting businesses or sports teams or whatever, where are all those customers hanging out? If there's already a blog that's ranking in the first page of Google that all those customers are already going to, instead of trying to recreate the wheel and build that blog, why don't you just try to acquire it and buy that blog? Same goes with Facebook groups. So, again, I'll refer back to, I'll say construction, if construction companies are your niche and you Google search like construction company owners and all the owners of construction companies are hanging out in this Facebook group and that's where they're exchanging ideas and everything else, most likely the person that built that group is another construction company owner. And so they're not even making money off it. They just started this group because they like, they wanted a place to hang out with their buddies and ask questions and kind of talk shop and all that., but at the end of the day, they're not really even monetizing that group. So let's just say there's 5,000 or maybe 10,000 people in that group. Now, how valuable would that be to your business to have a group of engaged people that are construction business owners that then you can market and sell your stuff to?

Yeah. In a sense, you're not buying, as you said, you're not buying the business. You're just looking at assets. And one of the things I think that's fascinating that you're pointing out is assets no longer just apply to physical equipment. For example, it can apply to audience, comply to marketing, it can apply. Are you buying? Are you— do you have an example of how you've gone into a business and instead of like buying the company and all the assets, you've hived off a particular part like media or something like it?

Yeah, we've bought in different Facebook groups. We've purchased customer lists. That's probably the most common in our industry. If we see a business that's that's, uh, going out of business, a lot of times the first thing a small screen print shop thinks is, okay, I have to have an auction, I have to sell my equipment. So they sell their equipment and then their customer lists and their art files. So they might have hundreds or thousands of art files plus digitized embroidery files. Like, think of the value in that. If you, if you're paying, let's just say, an average $30 or something to digitize a file and that customer has 1,000 digitized files, I mean, that's worth $30,000 if you were going to get those customers. So if you can acquire that for, let's say, $5,000, it's an easy campaign to reach out then to all those customers and say, listen, we've got your file on hand ready to go, blah, blah, blah. Here's, you know, we can do hats, polos, whatever it is, and create some sort of offer for them. So, you know, I think buying that, you know, right now I think the, on a bigger scale where we're seeing that is with music. So we're seeing big companies buy music catalogs and then, you know, they're getting the distribution, they're getting paid royalties and stuff through Spotify and all the streaming music apps. And it's like, wow, this is kind of wild. They're buying these big music catalogs. So if you think of it in the same way in our industry is, How do we buy art catalogs from, you know, whether it's people going out of business or competitors or whatever? Um, and you start building that because the biggest— the bigger that is, like, that's just intellectual property, more assets that your business owns, and it increases the value of your business.

I have a really dumb question, and that's my job is to ask the dumb questions, but you've— buying a Facebook group obviously you're buying eyeballs in the sense of advertising, but is that hard to put a value on?

Yes, it is. Because like I said, with the construction company guy that started this Facebook group and there's now 10,000 people and he's never actually sold anything. So for him to value it, it's like, well, how much revenue do you make a year? And he says zero. Okay, well, I will offer you $1,000. Okay, well, that's more than he had last year, right? Or, right, you can do, you know, a commission type of thing. Say, you know what, my offer is $5,000, like make it really sweet deal. Say, all right, $5,000, it's 50— is that 50 cents per user on there or something like that? And then, but you don't get paid until I recoup the $5,000 off the first 3 offers I make to the group. So that's how you can go in with zero cash plus zero risk because you can go to that group then and say, all right, here's an offer for the group. Hey, construction company owners, want to do an online store or you want hats for your construction company, blah, blah, blah, 144 hats at whatever the price is, $7 each. Yeah. So if you convert out of the 10,000 people in that group, if you get 100 orders, and you make 10 grand, it's like, okay, sweet, here's your 5 grand for the group. I'm buying the group. And now you own that group and you own those eyeballs essentially going forward. So yeah, it's hard to put value. Most time the seller, the owner of the group doesn't really know what to value because they've never made revenue off it. So to them it's not really worth anything. Um, so an offer of 1,000, like we bought groups of 10,000, 20,000 people for like $1,000.

Is this the same thing as acquiring intellectual property?

Yeah, similarly. I mean, it's hard to probably put a Facebook group on the balance sheet, right? Yeah. But if I was going to go, if I was going to sell our company tomorrow, I would list and say, all right, here's what we've got. We've got 5,000 followers on Facebook. We have this Facebook group that's 20,000 engaged customers. We have this Facebook group that's 5,000 engaged customers. It's because what a buyer is looking for is how many— what is your customer list? So how many active customers do you have? So that's your email list and whatever list you're pulling from your CRM. So really, the Facebook group and your Facebook account and your all your other social media, LinkedIn, Twitter, Instagram, all that are extensions of your customer list because what a buyer's looking for is like, okay, how can I contact and how can we continually market and present offers to this list? So yeah, I mean, it is intellectual property because it's, you know, you're adding that to your existing, you know, list. We've acquired some companies where they didn't have a CRM, they didn't have a customer list, and/or their customer list was like missing an email address or they didn't have phone numbers or their addresses, or it wasn't actually, you know, on a computer. Their customer list was essentially like a file cabinet full of all their paper invoices. And like, that's not a customer list. So like that value of that company was very low. So the more like customers and contacts and all that, like that is the value because that is where you're getting your business from.

Yeah, when you're selling your company too, I know the buyer is looking for amplification value and that's really what you're talking about. You've got this audience that has a potential for greater amplification that isn't out, that's outside of the physical assets and everything else. Are there any pitfalls?

There's always pitfalls. Right. I think the biggest pitfall with any of our acquisition has been anytime the, the culture and values of the, the company and the owner and stuff didn't align with ours, because then like the customer base didn't align with ours as well. So we acquired a couple smaller ones where definitely just totally demographic. And, you know, once we acquired those customers, like those customers just We just weren't on the same wavelength. And you definitely know that when, you know, you've been in the business long enough. It's like there's customers, they're attracted to you for a reason and they stay with you for a reason because you're playing on the same wavelength. You understand them, they understand you. And when you get customers that aren't a fit to those same valuable values and things like that, it just really changes it.

Did you learn something new over the past year or two in terms of these acquisitions and, in terms of lessons learned through the negotiation process?

You want to make it a win-win. And, you know, the hard part with the acquisitions is I should say win-win-win because you want to make it a win for yourself and your company. There's a lot of risk involved, especially the higher the price comes. You want to make it a win for the seller because, I mean, they're obviously looking to, you know, get whatever value they can out of the business that they built., but you also want to make it a win for the customer. And the better that you can convey and portray that you're going to make it a win for the customer, the easier it is to make it a win for the seller. Because ultimately, as a seller, if this is your baby that you grew and you've built all these relationships with the customer, you don't want those relationships severed. So you want to know that, you know, Mike down the street that you've been working with for the last 10 years, selling him t-shirts and mugs and pens or whatever it is, and you've been like working day and night to take care of him, make sure that he's getting the first-class service all the way. You want to make sure he's getting that first-class service for the next 10 years. So, you know, because I think even the seller's reputation is on the line even after they hand it off because you know, they're putting the faith in the buyer to be able to carry on that standard of delivery and customer service and everything else that goes with it.

What buying experience exceeded your expectations? Acquisition experience, I should say. Was there one particular that really exceeded your expectations?

I think probably our recent one with 1-800-T-Shirts. So I reached out. This acquisition was probably different than any that we've done. And the reason was it was a 5-year process. So we, we really— I was really interested in the phone number 1-800-T-Shirts. Like, that is prime real estate as far as marketing goes, and 1-800-T-Shirts.com. And so I reached out to Frank Newton, the owner, 5 years ago, 2015, and said, Frank, I'm interested in buying your phone number or your domain or your business or whatever combination, however that works out. I just really love this and can do a lot of things on the marketing side with it. And I think it'd be a lot of fun. And I've got some bigger vision plans to do with it right now. We're kind of in the formulation of that as well. So Frank said, you know what, I'm not ready to retire yet, but I'm going to be ready to retire in 2020. And I was like, oh my gosh, like I can't wait 5 years for this, right? Like I want this right now. I've got some plans I want to put into place. And so the one thing it taught me was one, be patient, but two, start to form the relationship and, you know, see where it leads to. So from 2015 until 2020, you know, I kept in contact through email, Through some phone calls, I flew out, met with Frank, and we started to build this relationship where we knew that our values aligned. A lot of the things we do on the community side of things, on the customer service side of things, all that stuff aligned. I feel like our customer base aligned as well. So then when 2020 got here, you know, there was, I believe, another buyer at the table as well. But we create this relationship and all these synergies and stuff together that everything just flowed together. So even though it was probably the worst time ever to be acquiring a company in the middle of a pandemic, we planned this out for 5 years, everything else was aligning. And we knew like, even though the timing was probably a little bit crazy in the middle of pandemic, we just knew like everything else was lined up, ready to go.

Yeah. Did any of these acquisitions not integrate as well as you'd hoped?

Yes. I think the ones where we had, where we were bringing in a lot of employees or a second location and where their equipment didn't align with ours. So right now, like, there's a lot of moving parts there. So right now, like any future acquisitions, we're trying to look and keep it as simple as possible. So right, right now, if I'm looking at a company and their equipment is not the exact same brand— embroidery machine is not the same brand, screen printing equipment— I'm not— I'm taking it completely off the table because, wow, yeah, just that misalignment, it's just too much.

You mentioned the Country Authentic brand. I was really intrigued by something you said. Can you share that story, what you've learned through creating your own brand versus selling other brands?

Yes, so I kind of got this idea of looking, how do we create an entire ecosphere to bring people into our world? And one was like creating a niche brand within one of the niche markets that we work with. And instead of just continually being direct business to business, going more direct to consumer. So what I've— what I was seeing was a couple of these larger brands were really building up a big brand. And that was all direct to consumer. An example would be, let's just say, Patagonia, right? Really great brand. They have a huge following, everything else. But like, you're not ordering a custom product from them, right? Until the last couple years, they started getting into that a little bit more, started figuring out the promo world and, you know, getting that distributed just like on kind of an exclusive scale. But by starting off going direct to consumer right away, they commanded the retail price that they wanted. So then when you go, when you're starting at the retail side, going direct to consumer, the value is established at a certain level. So then when you go back to the wholesale side, you can still elevate everything at the wholesale side to that same value. Yeah. So the example would be like, you know, on our in-house brand, we're doing the t-shirts at $25 a shirt. So what makes— I'll just use an example— a Bella Canvas shirt with the tag ripped off and our label print on inside and a hang tag go from being, you know, a shirt that we bought for $3. Typically, you know, if we're doing them in bulk to a company, we're selling them at, you know, anywhere from $7 to $10 depending on quantity and design, all that. But it's now a $25 to $30 shirt in retail. Right. And it's because of the value perception, the hang tag, the neck label, you know, all that sort of thing. So now when someone comes to us and says, hey, we want the Country Authentic brand, but we want our farm logo on it, or we want our egg company on it because we love Country Authentic. So now they say, well, how much are these? Because, you know, the shirts on your website are $25 each. Well, now I'm not selling those for $8 or $10 anymore, right? Okay. 'For your logo on the Country Althing brand, we can get them to you at $20 each.' Oh my gosh, that's a great deal. Yeah. Right? Because it elevated that brand perception. So when I'm seeing that, I'm like, oh my gosh, it's all about building that brand, building the value and the perception of that brand. And then you create like the ecosphere of the direct-to-consumer with the retail line of prints that, you know, go and speak directly to that audience. So they're buying those up and then they want the custom stuff to go with it, or they get the custom stuff. Everything's labeled, everything's got the hang tag, the whole nine yards. They're getting the custom thing. They're like, wow, I really like this brand. They go to the website, they see the one-off retail shirts, and they're buying from there. So it keeps the customer kind of flipping back and forth between the wholesale side and the retail side.

Yeah. A couple of personal questions. You grew up on a farm, right?

My grandparents did right down the street from us. But all my family, my parents grew up on farms, my brothers and sister, they're all involved either on a farm or in the ag industry.

Yeah, you— FFA is a big part of your business too, right? Did you, did you grow up in FFA?

I actually was not. So I'm the only one in our family that is not— that was not in FFA. But I've got a brother that was— that's an FFA teacher. Yeah, brothers that own farms, and they're all in the ag industry. And I am the non-ag industry person because I'm the creative where— right, I want to start a t-shirt company.

I'm like you, I grew up on a ranch and I watched FFA, and all my friends are in FFA. Everybody's in FFA. Uh, did you have— I watched Green Hand Day. I don't know if they have Green Candace, where you're at, the whole, uh, hazing ritual around all that. No one knows what you and I are talking about right now except for people where you live and I live. That's about it.

But yeah, and I was in 4-H and, uh, went to county fairs and the state fair and all this stuff. Um, but I can relate, right? Like, so that's where the niche comes in, where I can relate and I can walk the walk and talk the talk with anyone in that customer base. Yeah, so that's where it's, it's been a really good niche for I know you're an avid runner and athlete.

What has that taught you about running a business?

It's definitely taught me, um, just perseverance and commitment. So there's a lot of correlations between a 100-mile race and running a business. There's a lot of ups and downs. There's a lot of times you think you've got the plan in place and then you hit a major roadblock or you hit something happens that's unknown. And I know that at the beginning of every 100-mile race, like, all right, I don't know what is going to happen over the next 24 hours, but something's going to go wrong. Something is going to throw me completely off my game and I don't know what it is yet. So having the— and I feel the same way at business, like any day you're going to deal with that challenge or that hiccup or whatever happens. You just don't know when you're coming into it. So we try to plan as best we can, whether it's in business or training and everything else. And it's just being ready for when those moments come and then knowing how to handle them when they happen.

I forgot you were an ultra runner of all things. And, and I can't fathom as somebody who did one marathon and quit and was done with running forever. I can't fathom doing 100 miles. What I can't fathom is the fact that you're very present in the moment of running, right?

There's nothing—

there's not a lot going on outside of your head. A lot of people think, well, I'd probably get a lot done in my head, a lot of planning and things. Maybe you do, but 100 miles, I mean, what is that experience like?

It's really hard to describe. Um, I've done, I've done Heart Mile Race 4 times now. And I remember the first couple was you have the feeling of, I could stop at any point. I could quit. I want to quit. I want to stop running. Go through your head about a million times. Right. And the last couple, I didn't have that feeling anymore. Like it completely erased. So So, you know, relating that back to business is you have, you can have like these doubts and everything else that happens and it's all mindset. So on the 100-mile race, I say anyone that's trained to run a marathon can run 100 miles. You really run probably the first 30 or 40 miles based on physical ability or how physically fit you are. The last 60 or 70 is all mental. And so, I say the same thing in business. Like, the difference between successful businesses and ones that, you know, probably stumble or just, or maybe just stumbling along is really the mindset that you have of being able to push past those roadblocks, get over those hurdles,. And I think a lot of business owners were tested to the fullest with the pandemic. Yeah. And, you know, the strong ones that came out were, you know, whoever had the better mindset, I guess.

Yeah.

Fortitude and perseverance.

That's, that's huge. You also put on events and run an education company. You got your hands involved in so many different things.

What's the most rewarding aspect of that? I love seeing other people make an impact and do stuff out of the ordinary. So I'm all about creating like really cool experiences because I believe that experiences that we have are what shapes us and what shapes everything that happens, you know, in life. So I always look and say like, one of my big things, I'm huge on bucket list and I, we're crossing off the bucket list or adding new things to it. And I never want to live life on repeat. So an example would be every year for the 4th of July, we go to this one spot and here's where we watch the fireworks. And after like 5 or 10 years of that exact same spot of watching the fireworks, you probably couldn't tell me the difference between you know, what the fireworks were like in 2015 or 2017 or 2018. It's all the same. So every year of your life is like a blur because it was all the same, right? It was repeated every year. Now I understand there's some family traditions and different things where you do stuff the same every year, but we try not to repeat vacations. We try not to repeat different things like that. And I feel like the same thing in business. Like you want to innovate, you want to keep moving forward. And you don't want, whether it's days, weeks, months, or years, to feel repetitive where you can't look back and say, wow, it all was a big blur. Nothing really stood out and was different. Yeah. So I'm looking at, you know, big wins are people are pushing the envelope and trying new things, are pushing themselves to do something different, to stand out. Really just our creative sides, how we can get our customers to win and stand out and do things differently. So, that's what really drives me and gets me fired up.

I love that. The reason I really love that is I've talked to so many people, you can have 10 or 20 years' experience in the same business, but you could have the same— you could have 1 year's experience 10 or 20 times versus that new challenge in that new— and I can see now how running and everything else sort of coalesces into this incredible ambition that you have and drive. And Tom, it's been an an honor talking with you today.

Awesome, thank you. Thanks so much for tuning in to this episode of SKUcast. Be sure to keep up with our latest content by subscribing to SKUcast on iTunes or to our blog at community.commsku.com. Until next time, friends, thanks so much for listening.

Mm-hmm.