E135: Operators X Baseball Lifestyle

24:39But I think on balance, it's actually really helped me. So Danny and I knew each other for 10 years. And there was another partner at X-Pad, one of the co-founders who I knew even longer. And I brought the big corporate business sense, whereas they were like really good at selling they really understand the cookware products and the markets when when this thing was like around 20 million or even before when it was like 10 million in revenue i was like wow you guys have a real business and then when it got to 20 i was like you guys have an extraordinary the potential to be an extraordinary business and i and i'm ready to quit investing banking and come and come do this with you guys and and they were pretty shocked but but bill saw you know something special in josh i assume and just josh's tenacity and this is just this is just such an incredible story to do to do what you've done and i love how it all started with just like content you know just because that's what we've been saying for years now on the pod and internally here at hex cloud it's like content is the driver of brands now because it's just so easy to get content out there.

25:51It's got to be good, but like all good brands are going to be content companies at some point if you are a good brand. Well, all good brands are connection companies. Content is just a great way to do that. Like social is a great way to do that. You're 100 % right. Yeah, I think like the takeaway for me is there's no, there is no one way to do business partners, like to attack how that forms. Cause you will hear that Jason, you're right. Like we hear this common advice all the time that like, you shouldn't be friends with your coworkers. Like you should never be in business with your family. Like I built my first company with my brother.

26:29He was my CFO and we had a business partner, Dimitri was great. My current business partner and I do a lot of life together. Like Bill and Josh, like very similar to you guys. Like we, we, we mountain bike together. I literally live next door to the guy. My wife and his wife are friends. My daughter runs over to their house all the time to go see his wife because she loves her. And I think that for me, it's always the business part of the thing is like, it's kind of like marriage. And I know this is stupid to say when people hear this, but you are going to spend more time with this person than possibly your wife or husband.

27:03You really will. And you should invest in the relationship almost to the same degree. You should treat it like that, right? It's going to be an incredibly important relationship in your life. And I think the business partners that don't work, like those partnerships, are probably because it's like marriages that don't work. It just comes from neglect, poor communication, misalignment of expectations from reality, all of those things that relationship dynamics are just what they are. We're all human beings. So it's very cool to see another example of completely breaking the mold on what would be common advice.

27:40It is really a great analogy. I think the marriage one is perfect for a number of reasons. One of the reasons why I think it holds up really well is that like in my wife and I's relationship on a personality profile, we're opposites actually in Myers-Briggs. And you would think like, oh, man, you guys must be at each other's throats. And it's actually just the opposite. It's like, man, she compliments my weaknesses so well and I compliment her weaknesses so well. And the reality is that the number of different abilities and talents you have to have to run a business, no one person has all of them.

28:13Like and usually your biggest strengths are also your biggest weaknesses. So especially when you have a visionary that's like out in front and like, let's go take that hill. Let's go. There's a lot of corresponding weaknesses that if you don't have a compliment that can take care of those, then you're just going to have a glaring weakness as a company. It is also interesting to me, Brian and I have very similar relationship to the ones that have been described here. Brian, I knew Brian as a college student. Then he worked for me at a company with my brother. And basically we've worked together every single day for about 16 years.

28:46He is in the same community group in our church. He lives in the same neighborhood. We're extremely close. We've only gotten closer through being business partners. You look at Sean, Sean and Connor, I think have a really special relationship that goes back to their agency days. Yeah. So it is interesting, you know, you wonder, is that actually kind of a hidden characteristic sometimes about performing companies? Is this really deep level of partnership at the very top? I don't know. there's a lot of different ways, you know, to run a business. But clearly, we've got several different examples just through this pod of being able to do it pretty effectively.

29:26So, I've always thought the, hey, don't do business with your friends or with close relationships. I just think it's higher upside, higher risk is the way that I think about it. When it works, it's amazing. And when it doesn't work, there's a lot of, you know, personal fallout that comes from it not working. And so it's really important to choose wisely if you're going to do it. So to go back to the baseball lifestyle scaling story, you guys mentioned you're basically a bootstrapped brand, right? What did that look like? How'd you finance the growing of the company? Yeah. So I would say in the early years, because we were content and products, we were taking money as like advertising dollars, right?

30:08So individual posts, individual things. And that's kind of where we also recognize that like, you know, if Adidas is paying all this money for all these posts, we're probably selling a couple of shoes and cleats and things. So let's sell some more stuff. And that's kind of how we were able to supplement. So the first year, Josh and Melissa, our CMO, they were the only employees did about$800 ,000 between sales and advertising dollars. And that money was then just reinvested. Right. So there's only two employees, almost a million dollar company. Everything was a reinvestment. And those things allowed us to again stay bootstrapped.

30:46And like we talked a little bit earlier, because Josh and I had some other things kind of going on, like myself, I owned other companies, there was a financial responsibility on the business. We were able to stay tight. But through the advertising dollars, there was never really a need for investment. There wasn't like a seed round. There wasn't like, hey, let's put$50 ,000 into this business. it's just like, hey, we're going to sell advertising. We sold$10 ,000 in advertising. Let's buy clothes. But it was always built truly from a bootstrap. No money was ever really, really put in outside of probably, and Josh, you can tell me if I'm wrong, getting an LLC set up is probably the investment that really had to happen outside of anything else so that a bank account could get set and start getting payments from all these people.

31:31But yeah, it was PayPal accounts and stuff in the beginning. And that's how we got the money to do it. And that's where Baseball Lifestyles content side, we have YouTube channels where we do 20-minute episodes where we do behind the scenes with high-level athletes, a little bit deeper focus. We have our own other content that we make. We do a ton of micro content. We've just been doing this now for a decade almost of making content. So that was a financial benefit then. And now it's a top funnel benefit for us today. Big unlock really for us was, and we met our CFO in 2022, Bill, right? Summer of 22.

32:10And for those 2018 to 2022 years, you're like, why do we have no cash? Why are we bigger this month? But yeah, there's no cash or we're trying to finance growth and just didn't understand. I think that's every operator ever. It's like, wait, I'm selling a bunch of stuff. Where's all the money? Where's the Lambo? Literally. So that's pretty much what was going on. And then we met our CFO, who funny enough, again, ties back to a whole story where Bill trained our CFO's parents when they were growing up. I'm sorry, when they were on Long Island, and they said, our son is a CFO for this company called Shinesty, and you guys should probably connect.

32:48And that's how we got connected to him and that whole story. But he really helped teach us what our numbers are, right? Our MERs and our finances and all those metrics and said, hey guys, you're profitable, but you need to learn how to finance your inventory so you could scale. And when we got that unlock and it wasn't sexy in the beginning, right? It was through the kick furthers and the other things that were definitely expensive money, but it really helped us scale our inventory, which helped us scale our marketing, which helped us. And then just the profitability and the growth just started to take off.

33:21And it was just like, oh, we have inventory. We could sell a lot more of it. We could scale everything. And then the cashflow started coming and the flywheel really just started to happen really like 22, 23 and into where we are now. So like that finance unlock with our CFO in 22 was really a big turning point for us as well. Okay, so just for context, let's give some numbers. 18 revenue. Million dollars. 19. 1-3. 20. 1-7. 21. 2.1. 2.3. 22. So that year was 2.5. 2.5 or 2.7. Yeah, somewhere in there. So one thing just like to emphasize here is like you're bootstrapping, but the growth is maybe on a percentage basis isn't small, but just nominally, it's not very big growth.

34:10Okay. Correct. 23. So you're at 2.5 and 22, 23. So 22, like Josh says, we get the CFO. He unlocks that I can spend a lot more money on acquisition because we're super profitable. So we go from$100 ,000 months to, we do$550 ,000 in November. We then do another almost$500 ,000 in December. So now we've just done a million dollars in 45 days. And we're like, okay, we can unlock this. The following year, we double. So we do a little bit under five. So this is right around, I think, the time that you and I started to talk to Josh. But it's really amazing. I think one of the things about your business that's amazing and is just worth calling out here is that really amazing businesses, it's not necessarily always there from a monetization perspective right off the bat.

35:04It took you several years to really figure out the funnel and the monetization strategy. Okay. So we're at 2023, you're at 5 million. 2024? That's 35. So 7X. 2025, you think? Over 150. So somewhere around 4 to 5X. after September, we'll pass over$100 million for the year. I mean, going 28x in 24 months is crazy. So we've got this background of bootstrapping, and I want to hear from Jason here as well. Jason, I mean, you guys, I don't know how the numbers kind of correspond to Hexclad, but there's a similar just insane growth curve in here. How did you guys manage financing that with Hexclad? Because I think you guys had some bootstrapping background but then at some point you started using other financing options.

35:54How did you handle all of that? It was super tough. It was super tough. We got to the point where, and I think you guys probably have the same thing, we were profitable enough to get a line of credit from a real bank. We also did a little other stuff. There were times where things were just super tight and we did work with Wayflyer a couple of times and they were good to work with, I thought. But once we had enough EBITDA to say, all right, let's get a$3 million line. And then let's see if we can up it to 10. And so we got our line up to 10. And then I think when we were in like the 300 million in sales range, or maybe even more, we got that line up again, a little bit to 12.

36:34But yeah, just being able to do that and being really smart about timing of purchases and stuff. But yeah, I think once you show profitability, you should start getting audited financials and talking to real banks. You guys should audit your financials for 24 right now if you haven't already done it. And real audit, spend the money, and then definitely 25. Yeah, so this is, I think, something we've talked about before, but it's worth highlighting again here. One of the things that's not sexy, but is actually a huge accomplishment in a business life cycle is just being bankable. Like once you're bankable, the world opens up in terms of access to capital.

37:17And so, Josh and Bill, you guys have basically made that transition over the last 12 months. What's that look like? How have you gone from, you know, piecing it together with a lot of different kind of, you know, I don't know, holding it together with duct tape, basically, to actually having kind of a cohesive strategy in terms of how you're financing the business? What have you guys done? So we've done all the different financing options I think you can list. For anybody listening, we've done Shopify Capital, right? We've done PayPal Capital in the early days. And I think where some brands go wrong and what Josh and I, we understood was because we were profitable on first purchase, we could do revenue-based financing because we were stealing our future profit, not just future revenue.

38:04So while other people get cash strapped into that, what me and Josh just recognized even in the early days was only borrow enough based off of what we think we're going to be profitable over the payback period. So we would only borrow what we thought our profits were going to be anyway so that we can reinvest them early, get into what we needed to. So it never got us into a spot where, hey, we're in a really sticky situation. And up until probably 18 months ago, really probably even less than that, but we only had about$300 ,000 in total debt. And that was from back during COVID or$400 ,000 in total debt.

38:36That was back during COVID, getting the PVP stuff and all those things. That's the only debt we really had on our books, moving in for a couple of years. and then we went out and we were like, okay, let's talk to a Wayflyer. So we have our CFO and his team. They did a whole audit, ran through a bunch of different options. What's the best rate? What's the actual percentage that we're paying back? Because when you do this process, what most people also don't understand is these little tiny things they add in that give you the actual effective rate that you're paying back. So he kind of broke it out.

39:07What are the effective rates? We ended up getting a deal with Wayflyer. I think Wayflyer was for like one and a half, was the first deal they ever gave us. Then the one and a half very quickly, I think, became three. Right now we have assembled brands. So we went through, like Jason's saying, we contemplated doing for ourselves. Do we get the audited financials, go to a real bank? Shout out. I made a joke the other day, JP Morgan. We've talked to them and we've talked to a few other banks. We just didn't feel like infrastructure-wise, we were ready for the audit every year for what you would have to do for a bank, the diligence that's required and some of the things that are, if you're going to do that, when they're counting your inventory, they're doing some other things.

39:45So what we did, we went with a company called Assemble Brands, a little bit easier on some of the backend financial aspects. We got six to an accordion to 10, and that just allows us the capital. But again, like Josh and I would tell you guys, from an EBITDA standpoint, we're probably 25 % profitable. We have enough cash every month that we could pay off all of the debt, really. So we're not tapping into that outside of our AR, has exploded. So our biggest thing is just trying to get through the AR periods. Yeah, that's pretty crazy. Like when you really start selling into wholesale, that you can be carrying 10,$20 million,$30 million in AR.

40:24It's kind of like in Dumb and Dumber where he's like, that one's an IOU for a Lambo. Is that what it is? He's like, you're going to want to hang on to that one. But you start getting these AR amounts that are like, Wow, that's crazy. In the last 90 days, my brands, Pila and Lomi, have doubled our support capacity without adding a single new hire. And that is because we moved to RichPanel. Our CSATs are at an all-time high. I think we're in the 90s now. 50 % of our tickets are fully automated, which means the team can basically handle two times the volume without burning out or adding more people.

40:58And with their Trustpilot integration, both brands went from a two-star to a four-star plus, actually, I think four and a half, in like 90 days. and the migration was probably the easiest part. I was surprised. Rich Panel handled everything, data migration, automation setup, training. We were live in just 14 days. That's insane. And the guarantee you'll cut at least 30 % of your tickets in the first 60 days or you get your money back. Not bad. So if you want to be ready for Black Friday without scrambling to add extra agents, because you know, I'm recording this and Black Friday's around the corner, you should just head to richpanel.com slash demo, tell them Matt from operators or Sean or anybody, We all use this thing.

41:36That's why we're promoting it. Tell them that we sent you and they will take very good care of you. That's it. Let's get back to the show. Okay. So one of the things you guys mentioned I thought was good. We've heard this a lot. Grunz, when Chad was on the show, he mentioned they have real discipline around LTV to CAC. You guys mentioned making sure that your first order profitable, that that makes your financial flywheel work. I'm curious, Matt, Jason, do either of you have kind of like a key metric that you really have high discipline around in the business? Like a financial North Star that, hey, we are always going to make sure we're on the right side of this number.

42:17Contribution dollars. Like total contribution dollars is the only number I actually look at every day. Yeah. How does that break down to like a user acquisition for you guys, Matt? We spend so much, like we spend so much in advertising, right? We sort of have like what Sean does, like this like MER death clock, like the death calculator. So it's like, I know, we know it, like what MER targets produce what kind of profitability in the business. So, you know, when we're, when we're in a big sale moment, we'll push MER down, but total contribution dollars up. It took us a while to get to this place where we weren't looking at margin percentages.

42:56And a part of our problem was like, we have proper investors and a proper board and like, you know, we are audited and we've been audited for eight years. And like, everybody likes to moan about percentages. So like when they get their P &L at the end of a month or a quarter, they're like, man, you spend so much money on marketing. And I'm like, yeah, but that's not how you pay paychecks. Could you please look at the contribution dollars? Like, how about you stop obsessing over stupid percentages? But it took years to get sort of like all stakeholders, external and internal aligned around this, even to the day now, where like most of our reporting, Mike, like if you look at all the, like our, everything, like most companies of our size, like everything goes into a data warehouse.

43:37But then when we visualize the data, Northstar is like daily, what are we doing for contribution dollars? How are we tracking to target on track or off track? And like, what are we doing to move it if we're not? It's such a great point, Matt. But it's such a great point because there are times where you can focus on percentages or ratios. And then you're like, OK, this ratio looks good. This metric looks good. This percentage looks good. Wait a minute. We making money for the month? Like you can still get to a place you don't want to be. But if you're like at the end of the day, it's about nominal contribution profit dollars because that's what pays dividends.

44:10That's what, you know, is going to pay paychecks. And we are going to maximize for that. It's hard to get yourself into too much trouble. Jason, what about you? What we call the bit. Yeah, I'll definitely have a bunch, but the bit that Matt's talking about, the contribution dollars. This is like, we call this the sweet spot. And this is something that we started BFCM of 22, which was like a monster breakout year. We went from like 50 to 180. When Jason posted a couple screenshots from that BFCM, that's when I realized that I don't know as much about business as I thought I knew. Like that was when I was like, wow, that is what an amazing business looks like.

44:52It was it was like breathtaking. The scaling you guys. Thank you. Thank you. We did a lot of things well that year. But but that sweet spot is like what dollars are dropping to the bottom line based on on new spend. Right. What is the incremental profit of that spend? It's going to take down your overall margin. But if at the end of the day, if it's more cash money in the bank, you want the cash money in the bank, right? Up to a certain level. We could probably be spending more right now in this environment and growing more. And each incremental dollar will be less profitable. But we could probably get up to that level where we're within a margin of safety and still being profitable.

45:30We're probably spending a little less than that right now because I have kind of basic EBITDA margins that I like to keep as a business. And I would like, you know, that's sort of the Alamo. And I would sacrifice a little bit of growth, even though I could probably grow more and have a little more absolute dollar profit. Like the discipline of saying like, we're going to operate to this EBITDA margin, especially because we have banks in the mix. But more like North Star stuff is we're always looking at our CAC. We're always looking at our customer acquisition cost. And in our view, AOV to CAC is the measure.

46:08Like you talk about being first order profitable. We're starting to create a nice LTV as well. But unlike other like apparel brands, and it's interesting what you guys talked about. I think Bill just said it about, or Mike said, repeated it, that you guys are first order profitable, right? And I know big apparel companies that I would be surprised if they really were first order profitable. So I think in that world, depending on your views on LTV, you don't have to be first order profitable necessarily, but I'm so glad you guys are. So congratulations. And then so AOV to CAC, LTV to CAC, and then MER is like the flip side of CAC, right?

46:54But it's sort of a good, another checkpoint. I think you have to have multiple checkpoints, data checkpoints, numbers that you care about. We basically have, you know, we just have MER targets. And you also have, you know, you got a wholesale distribution, right? You're in retail. You're not just a D2C company. So there's other like overall, so overall marketing metrics, Mer. And then like, don't forget about going up the lines to COGS. Obviously that's huge for you guys. It's huge for everyone. I see a lot of people don't have their COGS situation under control from the beginning and think that they can just get it better.

47:38And we all got a hard lesson in that this year too, Jason. Yeah. I mean, it all sounds like whams. It's pretty good to like know going in, hey, I'm going to make, I'm not doing this deal. I'm not doing this business unless I'm like able to make money on every purchase. So you guys have done so many things, so many things, right. I guess the only thing you've done wrong is not investing in an audit. And you can absolutely have you, there's, there's, you could absolutely have the infrastructure. You should have seen our first audit in 2020. Okay. I have one staff accountant and me, And we were like, please sign off on our inventory.

48:15You know, we had no idea and we got it done. You guys do it, please. Well, and this is actually a good point to say, like it fulfills a sponsor of the pod. Having an ERP is a particularly unsexy way to spend money. But this is a good example of why that's so helpful. Like an ERP allows you to really track your inventory, which allows you to pass an audit, which allows you to be bankable. And being bankable is a very important thing for your business. And so sometimes in business, you pay money for things, you do things that are very unsexy, that are arduous, because it unlocks another thing. You need to be able to pass an audit once you get to a certain point, because it opens up the world from a capital perspective.

48:57And certain things like having an ERP like FulfillHelp. The one thing worth mentioning here that I thought was really good, we all have this kind of bootstrap background, Jason and baseball lifestyle, simple, modern. I think that when you have a bootstrap background, you just think about the business differently because you're like, if I'm going to make any money, the business has to be profitable. And when you have an investor background, like you've raised money, I think that sometimes that can get you more focused on percentages or more focused on metrics that you think will make the business sellable than it is on having dollars fall out of the bottom of the business.

49:35And so this is one of the subtle ways, this isn't always true. Matt, I know that you've raised money and you just said, hey, contribution profit dollars, but also you had to kind of convince your investors like this is the right way to think about it. So I'm just kind of convinced it's one of the subtle ways that being bootstrapped is helpful is it makes you focus on contribution profit dollars in a way that sometimes people that have gone and raised financing are less focused. So I wanna go back, Josh, Bill, You just, like we said, X in 24 months or some kind of crazy number like that. That is just wild, by the way.

50:09Okay. If you're going to go to X, 23X in 24 months, how? Like, what are the tactics that have actually powered this? Like, where are you selling? What are the different things you're doing? Because that's insane growth. I'm sure people want to know what you figured out. Yeah. So, Josh, and I think that there's two sides to this because I kind of want to go back to how we've structured, how we think about the spend and some of the things that are going in there. So we use contribution margin to set those MER targets so that we know from a seasonality function, how hard can we push? And like I say to Josh all the time, a lot of people want to be linear every day.

50:44The number has to be X. And I talk internally about asymmetrical returns. And it's not always about that every single day is the perfect day. It's about, are you seeding appropriately? And are you going to reap in the future? So even in the last 365 days, like I just checked through our triple well side, we're still at a 4.2 MER and we're at a 196 new customer. So we have not done this by spending per se. There's a lot of room left for us to lean into that. We only are just starting to get into how do we press those MER targets down, those new customer acquisition targets down during a moment like now, right?

51:19September and October, super opportunity for you to invest in awareness because you want to reap those people when you get to the holidays. And if you're not spending now, you're not going to have filled yourself up to take advantage of that. So back in 2022, when we brought in our CFO, that was the strategy that I wanted to kind of execute on. So we brought him in in August. He had finished our financial models, all of our things in August, September, October, I was able to then press the button, push hard. And then that led to that success in Q4, where in November, December, we had all of this hopper to kind of go in.

51:51Separate from that, we have a massive LTV, right? Our 12-month LTV on a customer right now, their average order value, probably around $118,$120 is our AOV. But inside of 12 months, that'll be closer to about$270,$280 for every new customer. So those cohorts are super large. That's why when we talk to other bankers, other people, they're like, hey, it's just you have people from five years ago who are still spending$5 ,000 every year. So, but your more recent cohorts are continuing to climb. So as we get a growth - Bill, do you think that's because of the content piece that the business is more sticky?

52:28I mean, like having older cohorts continue to spend that much money and appreciate, that's pretty rare. Why? Why is that happening? Yeah, I think that goes to - Yeah, I think the big thing on my side of things is the product development side. So So since COVID 2020, we've been dropping product pretty much every single Friday since then. And all that was for me is I like consistency, right? So I like our emails going out on a Monday being X and by Friday, it's Y. And then by Saturday, it's another thing. So it was good consistency of a cadence of revenue coming in. But it was a lot of testing, right?

53:03So we had our first product that I remember went crazy. It was a ghost windbreaker in 2020 and right before COVID. and so we dropped product and massive collections now every single Friday like this past Friday we dropped I don't know 14 hoodies 14 sweatpants um and so like every day every Friday's people are coming back from different themes right like the ice cream theme has gotten pretty viral if you guys haven't seen it like the ice cream shorts we did for national ice cream day and then we followed that up with you know a donut collection and a taco collection and we just started to understand what our demographic was kind of leaning towards.

53:36But the LTV and all that comes back to just, you know, the drops that we do. And also, again, speaks to genuinely, you can't just just can't just drop things and people get in. They hate it. The product quality is really, really incredible. Right. So like for the parents that are buying for their kids, you know, you get the short and they wire and they wear it every day and they wash it every day. And the thing still holds up, you know, six months later. So they just know that their kids are going to wear that product and they could trust in the quality. So it's just, again, that flywheel of, you know, new drops time after time, which has also put us, you know, sometimes operationally in a hole because sometimes, you know, they're uber successful.

54:12And then we're stuck with like, wow, we're having back to back million dollar Fridays. And that hurts on the other side as we do our own self-fulfillment as well throughout this process. But yeah, so that's what really brings all these people back is the content along with the product drops, along with great quality and the marketing that Bill does to get these people into the hopper. All right. Operators, real talk. If your dashboards are a week old, they're not insights, they're history. You probably heard me talk about cleaning up our data. Well, we finally have it dialed and it's because of Sarah's Pulse.

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56:44And there are going to be a lot of AI tools coming out from Microsoft, Shopify, et cetera, but they can only be as good as your underlying data infrastructure. That's the thing. Having your data infrastructure set up properly is everything. That's why we started with Saris and then they keep building more on top of it. But no matter what, you know, in the AI world, you need to have a data infrastructure that works. And I don't think there's any better place to do it than Saris. So you can also take an assessment and understand your business's AI readiness with Saris at sarisanalytics.com. So get AI ready the right way, get your data in the right place, go check out Saris Analytics.

57:21So, okay, I want to talk about that. I know, Josh, Bill, you guys are somewhat fresh on a pretty challenging stretch. I actually wrote on X about this last night, but I kind of likened growing a company at over 100 % to driving a car over 100 miles per hour. That little things that wouldn't be a big deal if you were driving a normal speed can now wreck you. It's not just running into another car like you could hit a rock and think that's not a big deal, but it could flip your car. It's kind of similar when you're growing a company as fast as you are. You can get into danger really, really quickly because the numbers are growing so rapidly and it's difficult to kind of prepare for that.

58:00So tell us a little bit about like the last two months, the challenges you've run into and how you addressed it. So I'll talk about it because it's really the last three months. So speaking of ERPs and WMSs, we had an implementation and a launch that went out, you know, on May 30th, we transitioned over. And then the implementation, data wasn't transferring, things weren't going, stuff wasn't communicating the way it had previous. So we then end up having a drop that does$1.5 million on a Friday. We now have a bunch of orders that we can't see in the hopper that are lost because the system tracked it improperly.

58:41It wasn't just that we didn't implement, there was actual data issues, right? The software itself failed a little. And that then cascaded that after that, we then had another million dollar Friday. And that's kind of what Josh is alluding to. And then every time we kept feeling like we had gotten ourselves out of this tunnel that we had figured out the data issue, we had our back to school sale. And on our back to school sale, we did$5.1 million on that Friday. And we had a ton of orders, probably about 14 ,000 orders in total through the course of that time just get completely botched internally.

59:16And that took us a long time to get out of operationally and to solve. Additionally, it took a long time from a customer experience standpoint. We pride ourselves on how we over deliver from a customer experience side, but we were being inundated. Josh and I, we know that last month in July, we closed 22 ,000 tickets. In August, we closed close to 50 ,000 tickets. from our CX team. So 22 ,000 was our all-time high. And then we followed that up with 50 ,000 in August. And that's not necessarily the kind of records you're trying to break. You're not trying to break raw numbers of customer support tickets.

59:52Correct. But that then required, again, scale, new systems, new things. And I think for Josh and I, this goes to everybody. We knew that there was going to be a hard moment. And we always say, what's the paddle? What's the thing that's going to come and spank us? Because we're always looking for it, we're never really shocked. And like you said before, because we bootstrapped this, we're resilient. It's not like, oh, we're suffering. And now we have some failure in a company that's been doing so well. And like, we're going to fold it up and go away. You just, you, you put your head down every day.

1:00:22You grind away. I started getting about 100, 150 DMs a day from customers, moms, parents, kid for back to school doesn't have their backpack. This doesn't happen. I was two o 'clock in the morning, you know, solving people's problems because I was awake because I had, I had during this, you know, my son was eight months old and now he's 11 months old through this whole process. I'm feeding him in the middle of the night. I'm answering people's questions. I'm commenting on social. I think we just, we dove in and we solved it. And I think we're now back to the other side. Josh can talk about it.

1:00:52We had our first drop last week, a lot of different things, and those people came back. And now it's an opportunity for us to win back some of the goodwill. We've been implementing this since, and you guys know this, right? Like six months prior, seven months, eight months prior, we've been setting the table here. I think, like you said, Mike, a lot of those things are somewhat out of our control where we go to back to school and we didn't ask Dick's Sporting Goods to put TV commercials of our stuff on there, but Dick's Sporting Goods is promoting BL with Nike and Adidas. And the Ice Cream Shorts is the most popular product on Dick's Sporting Goods website.

1:01:24And so these things are just snowballing, right? When you're going into it and you're like, oh, we're going to go into this year with 20 ,000 square feet in New York and another 20 ,000 in Denver. Yeah, we're going to do X amount of rev. And then the spiral starts to happen of how big this thing is coming. And you can only scale infrastructure as fast as you could possibly can. And yeah, the day happened and we couldn't fit all of our inventory in New York. It was split. And what was 30 ,000 orders was like 50 ,000 packages. And what we thought would take 10 days took 20, like that kind of thing.

1:01:51And it wasn't a lack of caring. It wasn't a lack of not trying. I mean, Bill and I, you know, again, Mike, you know better than any of a lot of these people, like I was going through it, you know, just trying to figure it out. Like you said, we got to this point with not having these challenges. But yeah, we're, you know, something you brought up earlier and something that was always written on my baseball hat was perseverance and passion. And like I was trying to be resilient and get through it. And like Bill said, we dropped our product, our first product drop because we started turning them off for four weeks because we didn't want to, you know, not deliver on what we said we could.

1:02:21We dropped it on last Wednesday and people got their stuff delivered to their house by the fight. It would have been on Monday, but there was Labor Day, but by yesterday. This stuff is just going to happen, guys. there's going to be another one and then another one because it's just the way it goes. Perfection is the enemy of good. What you're talking about, we've had so many of these. At this point, I feel like I have one a month now. There's just so many. It's whack-a-mole. And if this just like we almost ran out of money in 2021 while being very profitable. We ran out of space. We had a Christmas one year.

1:02:59We just like, we sold to so many of our 13 piece sets. And we realized that it's a seven piece and a six piece. And the six piece bit, like there was issues at the port. And we sold to all these people. And we were all like Danny and I and Cole. We were labeling UPS boxes in our warehouse. And it was, the other year was COVID and half of our warehouse went down. And like, there's a problem with this system. And so just like at some point you got like, yeah, here's the next problem. We expected this. You expect, you know, expect the unexpected because it's going to keep happening. It's the price of success.

1:03:35And like, these are high class problems. You have a customer service thing. Something happens. You get some bad press somewhere. It's going to happen. But people have a really short memory. The new cycle is really fast these days. Just keep expecting more like this. And I think that's important, honestly, for not just myself here, but the prior of myself, the people that like genuinely listen, because I was like for you guys and Mike knows like I've listened to you and so is Bill and so is our team to every single episode you guys have put out for reasons like this, right? Especially for how fast we're growing.

1:04:08Sometimes you feel like you're alone, right? You're like, this is this is only my problem, right? But hearing you say that Bill knows I'm smiling because this is something that probably if I would have heard this three weeks ago, I would have felt significantly better and not the stress that I've been feeling. Right. So it's good to hear that. And like, again, for everybody that's also listening to that, you know, I was always looking for those same nuggets. That's when I was talking to Mike, right? How do you scale? How do you grow? What are the problems you're running into? And yeah, those are the challenges of also scaling a brand at a rapid pace.

1:04:37Matt, I'm curious, do you have a story like this of like, we're scaling just blew you up for a short period of time? Dude, right now, like I'm a week behind on fulfillment because I had like two people get sick, a printer go down, a part on an injection molding machine break. Like it's, it's always a thing. Jason's right. Like my, my COO came in my office last week. She's like, August P &L is going to look a little shitty because we're going to have like 600 grand in fulfillment that needs to push into September from a rev rec perspective. And that's simply because I have like machines and people issues that I wasn't expecting.

1:05:12And it's our challenge, Mike, and we've talked about this, is for me to be super profitable, I have to manage utilization of factory because we own it, right? So we want to be near maximum utilization. But then the problem is when s*** goes sideways, there's not a lot of slack. And the difficult thing for us is that winds up kind of impacting the customer a bit. We tend to get around it by just setting really s***y expectations in the beginning. Everything is made to order, it's going to take a while. But people still don't like it and people don't read. Not everybody reads. So even right now, like I, yeah, I'm pissy this week because my fulfillment's backed up.

1:05:53Yeah. If your surface area gets big enough, there's always something that's on fire. I think about a friend of mine, Brent B. Shores, one of his quotes that every business is a loosely functioning disaster. Some just happen to make money. And one of the things that we've learned, which is kind of unfortunate, but it's just the reality, is that your systems get better by breaking them. You would like to think that the way you get your systems leveled up and you get them where you want them to be is by planning ahead and investing and having foresight. And my experience is it just doesn't work like that generally.

1:06:24I mean, you can do those things, but that generally you have to force your systems to get better by breaking them and by applying pressure, just like it sounds like you guys are going through right now with all baseball lifestyle systems. And, you know, business fundamentally, it's about problem solving. And when your business is successful, you have a better problem set than when your business is unsuccessful. But it's like there's still problems to be solved. And I think that that's one thing that gets lost sometimes, like when people listen to the pod or kind of aspire to having a really big business.

1:06:55Hey, there's still plenty of problems. There's still plenty of stuff that's on fire. And in fact, it's just more public. the number of people affected is bigger. It feels more intense. So it is good to remind, like no matter how big your business is, no matter how successful, I mean, I'm sure Doug McMillan over at Walmart, I'm sure there's things that he's just like, yep, that's a dumpster fire. That's a dumpster fire. I mean, he probably feels it even more than I do because he's got a much bigger business than I do. So there's more surface area. So I want to go back. You mentioned these product launches that are, you know, you kind of were trying to get up off the mat and then it's like another one and you kind of get slammed back down on the mat.

1:07:31what has made your product launches so explosive? We're talking multimillion dollar days. You guys will send me screenshots and I'm like, you know, that's crazy. So like, what is it? What have you figured out that really helps fuel the explosiveness? I think it's a combination of consistency, right? So I said to Josh, and I believe you guys might've said the same thing on one of the podcast episodes that, you know, the more years you are in business, the natural that you're just going to make more money because there's been a consistency of being around. And I used to say to other gym owners when I was in that area, you get more people every year because your name and your reputation grows.

1:08:14And your name and your reputation grows. And what I think happened with Baseball Lifestyle is a combination of a number of things. We had 500 ,000 followers on our social media and on our Instagram, when we were still only doing$1.7 million. So we were a much bigger brand to our consumer than we were selling products because we just couldn't invest as much into the acquisition wheels, the other things. As we continued to make that, we got more sophisticated in pulling people in. The one thing I always said to Josh was the email list is the thing that matters the most because social media, Instagram might die, right?

1:08:49And it might be the next thing and the next thing and the next thing. But if you have their email, you can always talk to this person, right? You can go right into their inbox. So it was always about how do we have less circles that we have to travel to get into somebody's pocket and have them buy. And that was always kind of that point. So our email list actually is huge. We have somewhere in the ballpark like 2.5 million, 3 million emails. And then on top of that, our active 90 list is close to a quarter million people. And when you combine the return customer rate with the quality of the product and the fact that we culturally just fit in a good bubble, all of these things kind of tie together.

1:09:24One of the strategic things that's ended up happening that wasn't our intent, but it's where it's just gotten, there's not really a lot of opportunities for young boys to have good clothes. You go into Target, you go into anywhere, their clothes stink for the boys. Girls have everything. Even if you think about Aeropostale, they have boys and women's clothes right there for you to buy. But their next door they open is Aerie, serving that same female population, but there's nobody thinking, hey, boys is where. You go into Abercrombie today, you're going to pass by all of the women's clothing, ends their women's workout attire.

1:10:02Then in the back of the store, you're going to find men's clothing. So at Baseball Lifestyle, because we serve the young boy only, and we serve them well with high quality product, but there's some of the products that I would argue were just as good or better than Lululemon, Nike, everybody else. So when somebody gets that and we're priced appropriately, we're serving them content and community and in a voice that matches what the consumer wants. The customer is excited because mom's been wanting to dress her kid well, but the kid won't wear anything because they hate it. But then they see our stuff and they're like, I'll wear that.

1:10:32And that's just kind of all stacked itself on top over years and years and years that now we're just, like Josh was saying, Dick's Sporting Goods is running commercials on TBS and it's for our backpack. And we launched our backpacks last year and then we expanded it this year. And backpacks are an eight figure business for us now. And that's something that it's a product that we didn't even have last year. And now we're sold out nationwide. Everybody has it. Everybody carries it. So all of those things have just combined. And then as Josh alluded to before, the product quality. He and I sit in our conversations together and it's always, how do we get better?

1:11:07How do we get better? How do we get better? How do we get better? Because I want to have a product that Kith would sell for$300 and I want to sell it to somebody for a hundred. because we know in fashion what margins can be, right? And we know where some of the bloat is. I think because Josh and I are always customer first, our pricing structures, some of the things that we choose to do is always with the customer. Like, will this be the best thing we can do for the customer? It's just become part of the lore. And now every boy, every young boy in the country from six to 18 knows who we are. when you probably sell five or 10x as many backpacks at 100 as you do at 300 like yeah the margins are better at 300 but the contribution profit dollars are still probably better at 100 matt what about you guys do a bunch of like drops with pila and using tons designs and stuff like what have you guys learned in this area like principles that really make a drop effective i mean so for us we use drops so we don't have the repeat that these guys do right like our product category is not a high repeat category in a short period of time.

1:12:14We have incredible retention over long periods of time. Like our LTV over like a three or four year period, like we get so many people back. It's actually rare in our category that we would see that. And I think that speaks to like a values alignment, product quality, customer experience, like just us taking care of them. But drops for us, like we just drop eight to 12 designs a week. Now the benefit is we don't have inventory, so we can do that. I could drop a hundred a day. It doesn't really matter if like Meta could take it. So we use it as an acquisition tool. And I don't think I've explained this well on the show, but like the way our machine works is we create like sort of top of funnel brand awareness videos that are not design oriented.

1:12:53So they're more around like, this is why you're going to care about us. Like, let us meet you where you are. And then we use, so we go super wide in our messaging and like, we try to spend a lot of money and a lot of variety and content at the top. and then designs for us is just meeting a customer, like whatever identity they're in at that moment in time. Right? So like it could be seasonal, it could be super niche stuff. Like we did fishing cases this year, guys, and like all the fishing people were super into it. And that would have been like never, that's not like core to us, but it's just a way to meet the customer where they are.

1:13:27And it feeds, it works well with like, with ad platforms right now, I guess is how we treat it. I think Mike, the big thing though, is like when you're going to make as many products as we do, the actual process, like start to finish, it's 146 steps to go from like an idea to we're now live selling on the site. We've got every step mapped out. We know exactly who's accountable, who's responsible, who needs to be informed. It's all in one giant, like Google sheet with links to each playbook. You can follow it along. So like that machine has taken a long time to dial. And now we're trying to, and we're always trying to rip it apart.

1:14:07Like the whole be better thing. Like we are always looking at every step of the process and say, can we get more efficient? Can we create more assets, better assets? Like where do we want now? It's where do we want humans involved? Where do we want AI involved? There's so many questions that we're constantly asking around the process to drop new product at the volume that we do. Yeah. I think we're very similar that we've experimented with a lot of different things with how we do it. We've done domestic printing. We recently did one where we shipped it from China with Portless. And that was really interesting because it allows you to kind of handle your logistics piece a little bit different.

1:14:45I mean, there's not the tariff avoidance, but you can handle logistics differently than you would. And it was surprisingly competitive rate-wise with shipping it domestically. But similarly, we've got a pretty elaborate playbook, and this is a competency we've built out over time. I think that drops have been one of the most consistent things that generate interest and generate pops in revenue for us. So not surprised that that's really a big part of the playbook for all of us. All right, operators, quick break. This episode is brought to you by Northbeam, the marketing attribution platform that we use every day.

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1:18:12Join the club. All right, guys. Just had a couple more thoughts, questions that I wanted to hear you speak on. You mentioned this earlier. You were featured. You were one of the two or three, I'd say, most heavily featured brands in Dick's summer commercial. Dick's Sporting Goods is a huge outlet retailer. You guys have been very successful there. What have you learned from trying to balance wholesale distribution with e-commerce? Obviously, e-commerce is going really well. You're more digitally native. You've got this content background, but you've actually made the transition into wholesale physical retail pretty effectively.

1:18:51And you're doing it against massive incumbent brands, the Nikes and the Under Armors, the world, you're going head to head with them. So what have you learned through that process? Any advice you'd give to everybody listening to the episode? I think Josh and I will come from two different sides because I think Josh will talk about the operational side and I'll talk a little bit about maybe the marketing sales and positioning side. So getting into the doors was also about making sure that we didn't bite off more than we could chew too early. We spent a couple of years inside of Shields and we were in a good position with them.

1:19:22And then when we got to the point that wholesale for us was a six-figure business, we were like, we can invest in a person who can drive this. Found the right salesperson who had contacts, had everything else. And then that got us and opened some of the doors for us for the Academy Sports, the DSGs, everybody else in the U.S. And what we've learned is, again, all of the marketing and all of the effort and all the time that we had put in content, social media and growing that ecosystem directly tied itself into success of sell for rate. So since we've launched in DSG, so we have not, we are still 45 days away from our one year anniversary inside of our test for DSG.

1:20:03So when we went into DSG, we were in only 50 doors in October 15th of 2024. We're now in all 750 doors. And we average better than an 18 % blended weekly sell-through for the entire time we've been in the doors. So we crush for them. And that's why we've been positioned with the Nikes and the Under Armors and the Adidas. But the benefit that we've also had is because we came in through the baseball section, we kind of Trojan-horsed our way into the apparel side. because the baseball section was where we were having our buying. But now we've crossed over that there's apparel sales and things that are happening at a high level that are going to every kid.

1:20:41So we've stepped outside of that. Now we're being kind of split focused inside of doors where you might walk right in. And the first thing you see is a mannequin with our product on it. And that's unique. And that goes back to visual merchandising and how it's positioned in store. We end caps and whether or not we're investing in placement. you know offline marketing things that we're doing like trucks driving around we have a pretty cool way of doing that where the trucks actually have devices inside of them that we're getting set up they can then pick up people's cell phone data inside 50 feet of the truck that way as the truck is driving through a city or driving through an area we can then retarget we also have worked as a good partner with a lot of these people so one of the areas that we haven't gotten as deep into our marketing dollars has been like Snapchat, but that's an area that DSG has said they've seen a lot of success.

1:21:30So kind of as like a good partner, we've stepped out of the way there. Instead of me putting more dollars into that platform and competing for that, it's kind of allowed them to do it. And that's then given them the want and the desire to spend money on higher level production for us and push our brand in a place that we don't normally push it. So now for people on Snapchat, at some point in time, it'll make sense for us to go over there and and start to spend dollars. But right now, DSG is spending them for us alongside all of these high-end brands. And then Josh can talk about what we've learned from the operational side.

1:22:04Yeah, I mean, really the first thing is, I think it's the coolest thing you can experience as a founder is getting into those doors to some degree. Like I grew up, you know, going to Dick's Sporting Goods and the one that I grew up in Melville, like when you walk into that Melville store, Baseball Lifestyle is the first thing you see. And I remember having literally like visions about that, of like, I'm going to one day have my brand there. So I think, A, it brings a lot of just awareness. It brings a lot of legitimacy to a lot of the consumers, right? So even if you run into one of these problems that we're having online, they could still go and shop DSG and they can go shop our mall locations and they can get our product other places and experience the brand in a different light.

1:22:42On the operations side, I mean, yeah, I mean, it's obviously got its challenges, but again, it just all goes back to the same semblance of scale. We've learned how to, you know, again, we do all this ourselves. So we've learned how to be compliant, how to deal with all the ASNs. There's been a lot of trial and error there. But the other thing is just balancing out products, right? They see us drop new product, they want new product. And it's just about balancing who gets what, how do we spread the love between our e-commerce side and what DSG and also Academy and Shields and all these guys want.

1:23:13But I mean, it also creates a massive snowball effect. Like I said, it's a back to school. I was not expecting to see BL on TBS. And here we are. And it creates more awareness, which creates more brand love. And the brand becomes bigger and bigger and the snowball keeps happening. Yeah, it's one of the ways where when you're in an upswing, the upswing is even bigger than you think. And sometimes when you're in a downswing, it can be more dramatic than you think is that you get these kind of tailwinds that you're not necessarily anticipating. And obviously having DSG spend a bunch of money behind your brand is a huge tailwind.

1:23:41One last question for you guys, because I know this is something that you focused on. And I'd really actually be curious to hear this from the entire group. as the brand has been more successful. I've seen a real commitment, Josh, Bill, from you guys to say, hey, how can we be generous with the people in the company? And how can we be generous with the success of the company? Can you maybe share for a minute about how you've done that and why? Yeah, so we've opened up with some of the people who are a long time standing people inside the company. We've offered profit sharing interests. We've gotten a way for them to get access to, if we're doing well, they're doing well with substantial upsides.

1:24:17We've also, for top performers, opened up that there's more incentive if we're doing well and they're contributing to that, that there's a lot more bonus and upside. But we're also trying to get to the point that we are the top of the scale on pay scales so that, hey, you look it up and it's like the average person in your area makes this much money. We're trying to not be the person right in the middle. We're actually trying to say, how do we take the people who have been excellent, top performers, real A players, and give them no reason to ever want to leave by investing into them. Beyond that, like for my marketing team, even recently, we brought in a person to do a copywriting clinic, right?

1:24:55Nate Lagos, right? We had him come into a copywriting clinic with the team. I was just talking with Nick Shackelford about him coming and doing some stuff. Jordan Rogers, who is the brand father's podcast, a different podcast. He was a creative director at Nike. How do I pay for him to come in and teach my creative team what he's done and where it's going? So we're investing in our people through education, opportunity, some fun events that we can do, things that we can kind of give back to them day-to-day life, lunches, half-day Fridays, you know, all of these ways that we can make quality of life more substantially better that Josh and I can afford.

1:25:27And then, you know, I think there's other ways we plan on doing it moving forward. Yeah, I can give it quick. I think for me, it's what Jason said earlier about like when things are hitting the fan, you're back there packing, you know, UPS boxes. I think people see that, you know, Bill and I, like, we've been out in the rain, we've been out through the mud, we've been packing boxes, like, we're there through people and we show like, an empathy of and also like a care level to the employees, right? So like, I just think we just try to create a culture of that, like, yeah, this thing is not for everybody.

1:25:56Don't get me wrong, right? Like this culture, this how fast we're growing, but like, Bill and I are very understanding there's real human beings that are helping build this with us. And we just try to treat everybody, you know, with a ton of respect. And I know 90 % of the warehouse team's names and like, I know about their lives and like, it's just, it's not like, you know, special parking spots and the CEO. And this is like who I am. Like it's this, I wouldn't be here without any of them. And I make sure I just treat others the way that, you know, I understand that. And that's just literally the basis I think of being a good person, you know?

1:26:26Yeah. That's good leadership. Jason. I mean, it reminds me of you. You've, I think you've logged a lot of hours in the warehouse over the last few years. Yeah. That's a battle scars, man. I'm proud to have done all that work. And, you know, we brought us like a hundred new people last year. And like none of them were in the container with me in 21 and 22. But guys, this is an awesome story. I'm so grateful that you joined the pod. I had no idea. I'd seen your brand before, but I had no idea how the story, the backstory. It's incredible. It's an inspiration to everyone who cares about our pod. So thank you for coming on.

1:27:01Appreciate you guys having us. Absolutely. Guys, congrats on all the success. Looking forward to seeing what's ahead. All right. I think that's the pod. Thanks for joining us. Glad to have everybody with us. Thanks again to all of our sponsors and we'll see you next week. All right. Thanks for making it all the way to the end of this episode. Wherever you are in the world, it is awesome to have you here. If you do not already subscribe to this show, that is my one ask. is please go to whatever platform you are watching or listening to this on. It could be YouTube. It could be Spotify, Apple. I don't care.

1:27:32Just go hit the subscribe button. Please pump our egos up. It helps. And before we go, one more thank you to the sponsors, Fulfill, Postscript, Northbeam, Saris, and Rich Panel. Awesome guys running these companies. We all use them. These are our vendors. That's the only using their sponsors of the show. So thanks again to those people.

1:27:56you