Building Resilience in Business: The Second Gear Story with Russ Towers

0:02Hi, and welcome to this week's episode of the Epic Entrepreneurs podcast where we are all about helping business owners just like you achieve success. So we don't do fancy smancy. We don't do flashing lights. We don't do a lot of things that a lot of podcasts will do. These are just real stories about real people and their entrepreneurial and business experiences. We go into their wins, their challenges, and their learnings. So we hope you enjoy it.

0:36hi there welcome to this week's episode of epic entrepreneurs i'm here with my friend russ towers from second gear how's it going russ what's going well bill uh we've had a pretty pretty amazing last few months coming out of the flood and and relocating and reopening and we just went through the holiday season in a new location so it feels good to be kind of back in business We never worked totally out of business, but yeah, it's a relief to kind of be somewhat back to normal in business. Yeah, let's come back to the flood, but let's back up first. I do want to talk about that because I do think it's an interesting story and your response to it.

1:16I think there's some lessons in there. But tell us a little bit about Second Gear and how you got involved in Second Gear and all that. Sure. Yeah. Okay. Well, like a lot of small businesses, Second Gear was started kind of out of a personal experience that I had shortly after moving to Asheville. My wife and I moved here in 2000. I worked in corporate real estate in Charlotte and Atlanta, but we had family here. So anyway, we moved here in 2000. She already had family here. So we had some familiarity with Asheville. and early on I was looking for a road bike and I also was interested in buying we moved here a big draw was for the outdoor experiences here the outdoor opportunities as well as being in a smaller city so anyway I was looking for a road bike I was also interested in buying other equipment you know whether it was a kayak or other things I wanted to try some outdoor endeavors that I had never done before, but I didn't have the gear.

2:22At the same time, I was also, I went from working in salaried commercial and investment real estate to being a real estate broker all commission. So I didn't have a blank check to spend on gear. And, you know, so I was looking for a road bike. I was looking for a used road bike, but that was hard to find. This is back in early 2000, like we moved here in 2000. And so I eventually found a used road bike and through one of the stores here, they don't typically carry road bikes. That was back before Craigslist and, you know, other other platforms where you could find things online. So I bought this used bike and a little bit later, it kind of occurred to me that a lot of people in Nashville were on a budget.

3:11This is before remote work and, you know, people were moving here for lifestyle, but they weren't earning a lot. So a lot of people were on a budget like me. And at the same time, I was doing a lot of real estate brokerage activity, particularly on Haywood Road in West Asheville. This is like 2002, 2003. And so I had this idea, you know, like, wow, why isn't there a place in Asheville where you can buy used gear and some technical wear? We weren't really thinking about clothing. And so that was kind of the spark for the idea coming from a personal experience and then just also, you know, connecting with other friends here in the area that I was making that were kind of in that same boat of, you know, wanting to save but also wanting to get out and experience the outdoors affordably.

3:56So, you know, we started the business and we were kind of putting it together in 2003. We started in a really small space on Haywood Road at 415 Haywood in the same building that now houses Harvest Records. And so we started out with just 1 ,200 square feet, very, very low key, very bootstrap. At the time when I started, I'll just add and kind of take a pause. I mentioned I was working in commercial and investment real estate. By 2004, when we opened, I had gotten fairly established here in the brokerage community. And so I wasn't looking to open second gear as a launch point for my career to move into something else.

4:43I was looking more. I was more interested in just kind of this opera, this entrepreneurial opportunity. Haywood Road was really up and coming at the time with a lot of new businesses. And it just seemed like that would be a good place and a good fit for a business like this in Asheville. So and not knowing where I would go from there, it was just kind of starting very small scale, very manageable. I didn't have retail experience. I didn't have I wasn't a gear expert. So I was exceedingly underqualified to run the business. But I figured it was small enough that I could kind of we could kind of figure it out because it was only twelve hundred square feet.

5:23It was consignment based. We weren't investing tens and hundreds of thousands of dollars into a business. So that was kind of the launch point in 2004. Very small scale. Just kind of to see where it would go as as an entrepreneurial endeavor. ever. Yeah. And so then what happened? I mean, how did you? Yeah. So early on, what happened? So I partnered initially with three other guys that all three of those guys were former outward bound instructors and outward, you know, so they had outdoor experience. And one of the three, we opened the store together, Buffalo McMurray. And Buffalo is still with the business.

6:08He's 84 years old. So that was 20 years ago. He was in his early 60s. So Buffalo and those guys had the gear knowledge and I had some business knowledge and kind of the behind the scenes. And so, you know, like I said, we started out really small, 1 ,200 square feet, thinking it was going to be mostly the product mostly would be hard gear and technical apparel, but quickly it became apparent that people have a lot more clothing that they wanted to move and get and move on from than they did hard gear or in addition to hard gear. So we outgrew that space really quickly. You know, all these, all these outdoor brands have technical wear, but they also have a lot of just lifestyle wear.

6:56And that's like a lot of people in Asheville are wearing, you know, back then and still, whether it's Patagonia or Columbia or L.L. Bean or whoever, that's just kind of the Asheville look. And the same with a lot of other outdoor communities, outdoor towns. So we really outgrew that space very quickly. We were there for four years. We outgrew it within about two. We moved across the street to 444 Haywood Road in 2008. We went from 1 ,200 square feet to about 2 ,000 square feet, one bay there. We expanded in 2011 to another bay that was in that space. So we went to about 2 ,000 square feet. When we moved across the street, the first four years in 1200 square feet, you know, it put us on the map, people found us, but it just was not big enough to financially be viable.

7:52We just couldn't sell enough in that small of a space. When we moved across the street in 2008 into 2000 square feet and later 4000 square feet, that's when we really kind of, I guess, got settled in or became financially viable, became profitable. And in In 2012, I was still involved with real estate all during this time. I was still doing brokerage, really up until about 2012. In 2011, like I said, we expanded into a second bay. And the owner of that building was a real estate client of mine by name of Bruce Smith. And that building from 1973 to 2008, Bruce's family operated Ace Appliance, not Ace Hardware, but Ace Appliance.

8:41It was an independently owned store. And Bruce was a real estate client of mine. He closed and retired in 2008. And the property went on the market for sale. It's a mercantile building built in the 20s. Upstairs was boarding house apartments that had not been occupied for years. Well, that property was on the market for a couple of years. I was not representing him because I wanted to own. I wanted to buy the building. So it would have been a conflict. So in late 2012, some partners and I bought the property, including the building behind that was Ace Appliance's parts and service department. We did an 18-month historic renovation to the property, reestablished 10 apartments upstairs.

9:26We redid all the four retail bays, including second gear. We operated while we were still renovating during that time, operating one half at one bay at a time and then renovated the building behind us that had been their parts and service department. And that became CrossFit Asheville. We have 10 apartments upstairs. We had a restaurant, King Daddy's Chicken and Waffles. We had a retail next to us that's now occupied by Wist. And then we had the two bays and we kind of, you know, we brought the whole business back to or the whole building back to that 20s look. And that was that. So that was 2012 through early 14.

10:08And that was really where the business took off was in 2014. After we did the renovations, several other businesses opened, several restaurants opened up on Haywood Road in 2014. And that's when West Asher really became from being kind of a tourist destination to a big tourist destination, particularly for a younger audience that was into food and beverage and quirky shops and things like that. So just one last thing during that kind of to that point of our development or our growth, we had a downtown store briefly from well, for three years from 2012, 13 and 14 to try to tap into the tourist market.

10:52But after we bought the building, the property in West Asheville and renovated it and tourists started coming over to West Asheville, we determined we really didn't need to be downtown. And that downtown store was not profitable for us. So we closed that store in the end of 2014, beginning of 2015 and really focused in West Asheville. So we were there up and up and up through early on in 2020. 20, we started looking at moving to the River Arts District because we had outgrown the space in West Asheville. And that was kind of all during COVID and all that craziness and, you know, kind of unknown of what was going to happen next.

11:33Yeah. So, I mean, it sounds cool and all this growth and everything and maybe a misstep or whatever going downtown, but there had to be challenges along the way with this growth. So what are some of the challenges and maybe what are some of the things you learned? Yeah. Well, first and foremost, you know, early on, this is no breaking news for anybody that started a business from scratch and, you know, having to build that up was, you know, just cashflow challenges early on, you know, felt like kind of month to month, check to check, you know, we were a consignment business, which was great. we weren't having to buy all of our product up front, but we also had vendors and we had some new product.

12:17But, you know, each month at the beginning of the month, we had to pay rent. We had to pay all the consignors for everything that, you know, sold the prior month. We had payroll. We had, you know, other overhead. So, you know, the first few years were really challenging. And, you know, until we moved across the street from our original location, it was really tenuous of, you know, could we continue to be in business? But when we moved across the street, got a little bit more space and a little better exposure on Haywood, then we really, you know, kind of felt established financially and established as a business.

12:56You know, early on, there were some challenges with, you know, I was operating, I was kind of juggling both my brokerage career and trying to run behind the scenes second gear and, you know, not having really a full-time manager. One of my other partners in the business who was, who started out as one of our first employees, she wasn't one of the original owners. She was going to do the same thing, kind of operating second gear on the side. So we really weren't to a point where we were a hundred percent committed, where we had a manager who was an owner. And so in 2009, that partner, she moved out, She and her family moved out to Utah, to Salt Lake City, and we brought on a manager who was full time, who then eventually became an owner.

13:44And that also was that was part of the growing pains of having somebody there that was kind of day, you know, 40 hours a week or so, day in and day out, managing vested interest. I continue to do real estate, but it was also as second gear was growing, being more and more involved in the business. us. So, yeah, those were some of those early challenges of just having that focus and kind of digging out or not digging out, but just getting financially healthy without having to take on a whole lot of debt. You know, we, as I said, in 2012, we went downtown. That was not financially, it didn't work out.

14:24We were losing money down there while making money in West Asheville. So we'd work the whole year and then break even. That just felt like, you know, pounding your head against the wall. You're working all year for, you know, just to be at par. So, yeah, then, and then when we bought the building and went through the whole renovation process, like I said, we closed down one site, one of the bays while we operated in the other bay and then flip-flopped. And that was about a year and a half of having to live through, you know, all that renovation work upstairs next to us, behind us. So there were some challenges, but it was well worth it when that was all done come mid 2014.

15:05Also during that time, kind of operating the business early on, it was really a lot of the tasks were just kind of done by committee where every kind of everybody did everything. There was not a whole lot of, well, you're the HR guy or you're the marketing person or you're the buyer. It was just, we weren't big enough to have that specialization. So it was, you know, it was okay to operate like that. But, you know, in hindsight, that made it challenging because there was, you know, just kind of everybody doing everything. And so it could get a little disjointed sometimes and feel a little unstructured.

15:40But that was kind of the nature of a small business back then. Yeah. When do you, I mean, it's an interesting question. Like you were, I mean, you were doing what you financially could and you had a whole bunch of people more or less working part-time, a few full-time people, but the people running it seems like we're more or less part-time. Like how, you know, what was the decision? Was it scary to go with a full-time manager or was that just like a natural progression? No, no, that wasn't scary. It was kind of like, we really need this. That's what the business is missing because Lissa and I were both, like I said, working kind of part-time with second year, part-time with our other endeavors.

16:17And and no, we felt like at that time I was taking very little or no compensation. So, no, it didn't feel scary. It just felt like, gosh, this is what we really need to do. The business has grown to that where it needs that focus and somebody that is there, you know, every day or full time. And then we started adding and that person had some background. He had worked in REI. He had some good business experience. And we started adding other people to the team that it went from kind of went from when we first opened up, we were hiring people that had outdoor gear knowledge and kind of generalist.

16:57And as we've grown through the years and particularly in those kind of in that 2008, 9, 10, as we were really getting established, then we started to be a little more focused and better at hiring people who not only had some outdoor experience, Maybe they had retail experience, whether it was in the outdoor retailing or other retail where they had some other skills that we needed at that point. You couldn't just get by on just knowing, having done some camping and doing some kayaking. You had to have some other skills at that point because this business was growing and the clientele coming in, you know, they needed to know more and want to know more.

17:33We were selling more new product to go along with used product. And, you know, we brought somebody on the team who's still on the team, who's one of the owners, had also worked at REI. And he had really good experience with retailing and retail sets and ordering. So we were ordering more and Chris was doing, you know, taking on more of that role and one of the other partners. So we started then divvying up and having a little bit more people having their own silos that they were working within, but still kind of all working together in this small, small business. That was, you know, we were seeing like 20 percent annual growth in revenue every year.

18:07So it was a lot of it was just kind of trying to keep up with that growth and how to manage that and how to how to grow in managing the business during that time. So in some respect, the demand was just there. And oh, yeah. Yeah. And so you were you were just responding to what the market was telling you. Absolutely. You know, some of our best growth was during the recession era, like 2008, 9, 10, when people still wanted to get outside, but were, you know, maybe they couldn't spend as much. So we were a good alternative for that because people were willing to buy things used or, you know, along with some new accessories.

18:50And so, yeah, that was a really good period for us. Yeah, it was. So and then when times after the recession, when particularly tourism was really taking off in Asheville and all these people are coming into Asheville to visit friends and family or whether or they're just coming to visit in general, they would find us particularly after 2014. They were coming to West Asheville or they found us downtown when we were downtown and had both stores going. so it seemed to also thrive when when the economy was really good and when tourism was was really good as well so we were really fortunate from from that standpoint yeah yeah when you started moving to new gear as well then you have new and great used stuff so because you're not putting the junk out there so it's yeah i mean it yeah yeah people have a choice and they choose you You know, they can make a good decision.

19:43I mean, it's like, yeah, it makes a lot of sense. All right. So how did you decide to go full time? Like, when did that become an option? That was a pretty easy decision. Well, not easy decision. That was a pretty clear cut decision in my mind. And so, as I mentioned before, we opened a downtown store in March of 2012. And, you know, that was a few months leading up to negotiating the lease, prepping the space. We opened that store while we also had the shop in West Asheville. And at that point, I was doing brokerage. I'm coming out of the recession. So, you know, the commercial real estate market wasn't awesome.

20:24I'd been doing brokerage for about, I guess, at that point, a little over about 12 years. And I felt like, well, and that was all commission. And I felt like I wasn't really doing either one of them well, Bill. I felt like when I was at Second Gear and focused on Second Gear, I really, you know, there were real estate clients I should have been attending to or properties I should be focused on or finding new real estate business. And then when I was doing that, I felt like, well, there was stuff at Second Gear. Second Gear is thriving, growing, and there's really things I should be focused on.

20:56I felt like, you know, I really need to commit to one or the other. And so I committed to second gear and paid myself a basic, very modest hourly rate and thought, you know, this business is growing. I've birthed it and, you know, it's got a life of its own and I really want to see this through. I think it has potential. I'm going to I'm going to put my cards, my chips on second gear. I still kept my real estate license. And then fortunately, later that year is when I had the opportunity to buy the property with some partners on Haywood Road. So I really went from doing brokerage and being, you know, having a client base of real estate clients to really focused on my own properties.

21:41And then ended up managing that property on Haywood and managing all those apartments because I was right underneath that second. Yeah, yeah, yeah. Really, really lent itself well. So I was really fortunate to be able to shift to have really still be in both of those industries, but not not being not letting a bunch of real estate clients down and being able to really focus on on my own business. Yeah, I really get out. I mean, sort of get out of the sales of real estate and get into the investment. Yeah. And I love doing it. It was great. You know, the 12 years I was in brokerage here, I'd moved to Asheville, not knowing really anybody much in this market.

22:19And I really wanted to be involved with work in a city. I'd worked in real estate, but regionally out of Charlotte. And part of the draw here was I wanted to be in a smaller market and really be connected to a city or to a town. And I really got that opportunity over 12 years to help businesses find locations, to help people sell or lease their properties and really was dialed into what was going on in Asheville. And that was really satisfying to have that opportunity. And I'm still involved, you know, in the real estate community and the business community here because of those early connections that I had the opportunity to be involved with.

22:56You can't know enough good people, right? Yeah. And that was a big attraction to Asheville was how interconnected everybody was and supportive of. And, you know, you couldn't, you know, in Atlanta or Charlotte or bigger cities, it's hard. I think it would be hard or maybe impossible to start small businesses from scratch, you know. But Asheville was a great market, a great opportunity for that. Yeah, and I like the way you did it. I mean, you started small and you just grew it as the market was telling you, hey, you're doing some stuff right. Yeah, I mean, you're doing, you got to do some things wrong to learn, but, you know, along the way.

23:34But you were doing a lot more right, or at least enough right to continue to grow. So that's awesome. Well, let's divert a little bit. Let's talk a little bit about the hurricane and the flood and your response to that and what that looked like to you. Because I think, I mean, it's an unprecedented disaster. But, you know, every business is going to go through something. It may not be on the scale of this, but it's something. It's just there's something that I call them an oops. It's an oops. You know, it may not. It's likely not your fault. It's likely just something that happens. So, yeah. So let's talk about overcoming an oops.

24:20Yeah. That's a very PG way to say it as opposed to what I saw the flood. But let me give you a little background about how we got there and how we drew upon past experience that I think helped me and helped Second Gear get through Hurricane Helene. So in late 2019, early 2020, it was really evident that we had outgrown our space on Haywood Road. We were in 4 ,000 square feet. We had been in that footprint really for 10 years, just about 10 years since 2011. So eight, nine years at that point. All the while, sales are just growing and the space is getting more and more jammed up with product and less shoppable.

25:08But we're still successful. But we really needed to find a bigger space. So we started looking in the River Arts District because that's where we felt like we could find a big enough space and with enough parking. And at that time, also, all that infrastructure was being done, was underway down in the River Arts District. And it just seemed like, you know, it was up and coming, much like Haywood Road had been when we opened up in 2003, 2004. It was not, we weren't pioneering, but we were definitely catching the early part of the upswing. So we started looking at the space on Riverside Drive back in April of 2020, right in the early stages of COVID.

25:55So, you know, during those early stages of COVID, when we reopened in May, you know, we kind of like a lot of businesses, there was no playbook for how to operate during a pandemic. And we were closed for nine weeks or something like that from mid-March to May. when we reopened, it was just blowing up. Everybody wanted to get outside. You had to be separate, had to be distanced, all that stuff. So we lived through that. So in 2020, so we ended up getting the financing. It was really hard to get the financing to renovate the space down on Riverside. And then the connection to where we were on Haywood Road, The building we moved to at 99 Riverside up until 2008 had been Ace Appliance's warehouse.

26:47And that Ace Appliance was, again, the client that I had as a real estate client, Bruce Smith. And Bruce hired me back in 2009 after he closed Ace Appliance to sell or lease his warehouse at Riverside. And we sold it to Darren Green here in Asheville. And Darren had Old Wood Company and he had operated Old Wood Company and they're making furniture from 2010 until 2019. And so that building went, he closed that up and was investing in other real estate, kind of focused on other things. And so in early 2020, that property was on the market. I knew Darren and it looked like it would just be a great fit for what we wanted to do.

27:29So we worked out a lease agreement. We worked out the financing that was really challenging during COVID. And I am going to get to Helene, but this all kind of ties back together. Of course. So we signed the lease at the end of 2020. And beginning of 2021, we're still coming out of COVID. We started renovating that space for our use. And so it was great. We had basically a blank canvas. We were going to bring in two other businesses with us to share the space. We brought in Sugar and Snow. a gelato cafe, an Asheville adventure company, and they ran their electric bike tour. They were going to run their electric bike tours and their whitewater trips out of there.

28:13And then we would have the bulk of the space, 10 ,000 square foot building. Second gear was going to occupy about 8 ,000 of the 10. We had some shared common spaces, but we were able to design that space exactly to fit our needs. You know, we were basically doubling our footprint and we were going to have room to grow. And we had control of that space for 15 years, three five-year options we put in. So we renovated the space basically from February of 21. We opened up in September of 21 while we were still operating up on Haywood Road. And we invested about$500 ,000 into the upfit of that building and that property.