479: These Founders Failed. Learn How They Bounced Back.

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2:42Hey guys, and welcome to a very special episode of The Founder Podcast. Today, instead of listening to one guest, you're going to hear from multiple renowned founders about a specific challenge that we all face on our entrepreneurship journey. These guests will share their stories, solutions, and how you can learn to build your business better. In this episode, we're focusing on the challenge of overcoming failure, featuring Amy Porterfield, founder and author and host of Online Marketing Made Easy podcast, Jessica Rolfe, co-founder and CEO of Love Every, Adrian Grenier, co-founder of Ducontra Ventures and Earthspeed Media, Mary Ruth Guillaume, founder of Mary Ruth Organics, Evan Goldberg, who's the founder of NetSuite, Kendra Scott, founder of Kendra Scott Jewelry, and Jordi and Julia Kay, founders of Great Rap.

3:39To get started, we're going to jump right into my conversation with Amy Porterfield as we discuss how she's almost lost her business named after her. I was in a mastermind with my peers and there was this guy in the mastermind that I really liked and he was doing big things in his own business. And I presented an idea like, what if you help me do that in my business and you take a little cut? And he came back with, what if I become a partner in your business and we blow it up and I do what I'm doing here, but on a bigger level with you, we could do amazing things. Now, I'd like to tell you that it took me weeks and weeks and lots of consulting with my mentors to make the decision to take him into my business as a 50-50 partner.

4:22But what I did is I took one night's sleep and I said yes the next day. And we were off to the races. And the reason, looking back now and a lot of therapy later, the reason I said yes is I was scared to do it on my own. Things were starting to happen. I was really going. It was building. And what if I mess it up? What if it all is taken away from me? What if I can't do it on my own? And it kind of goes back to my days of wanting a boss or doing well having a boss. My business partner that I took on in a business I'd created, he became my boss. This is not his fault. I did this to myself. All my fears were just right there at the surface.

5:00And I let him treat me like he was my boss. And all of a sudden, I became a yes girl again. And for years, my business did explode. We did amazing things together. He was a great guy. But I lost myself in that. And one day I woke up and I realized this is not what I want. I don't want a business partner. I'm not even showing up as my true self. I don't want to answer to someone else. This is not working. And when I went to him to tell him I want out of this, it became a disaster. We didn't really have enough things in place to make it easy to get out. And we started to kind of battle on how this was going to happen.

5:34And a year into battling how we're going to break up, I almost lost my entire business that I started on my own. We almost had to dissolve the whole thing because I made a decision based on fear and feeling I wasn't enough to do it on my own. And I also wasn't savvy enough to put the legal things in place to protect myself. And so that happened. I was miserable for an entire year. And then finally, we came together through mediation and I got my business back. And it feels like yesterday, I remember calling my husband after hours of mediation and I said, the business is mine again. and everything changed.

6:12I went from$5 million to$16 million in about 18 months because I finally stepped into being my own boss and owning it. But the embarrassing part of that story is it took me a long time to believe that I could actually run this business on my own. And so I'm dedicated to helping other people realize they have what it takes to do it on their own, even when it gets hard. Yeah, that's an incredible story. Thank you for sharing, Amy. I got to delve a bit deeper. So how would have that worked? Because you are the brand, like you don't really have a business if it was dissolved and you could just start again, like that's bizarre.

6:53So yeah, so it was an interesting partnership because in many ways he was a silent partner. A lot of people didn't even know I had a partner and for sure my students didn't know it wasn't something we advertised and I was the face of the business. And so when we started to talk about how we're going to break this up because we weren't agreeing with the dollar amount. I have to buy him out. And so we weren't agreeing with that or how it might look, what he could take, what I could take, even though it was my brand and my business and my content. This is why I really struggled with it. And I haven't talked about this anywhere else.

7:30This was my baby. I created the formulas, the models, the content, the products. That all came from me, my own experiences and my own knowledge. But I agreed to bring him in as a 50-50 partner, and he was a machine that absolutely helped us grow our business. So I did that. So there was a lot of shame that I got myself into this place. But legally, because we were a 50-50 partner, if we didn't agree, that business had to go down. But here's where the part of the story I didn't tell you. One morning, I woke up in the midst of a year of us battling it out, trying to figure out what was going to happen.

8:09And when I say battle it out, we weren't mean to each other. We just weren't agreeing with each other. And when that year was happening, I woke up probably nine months into that year and I said, I will burn it down and build it back better. If that's what it's going to take, I will burn this down and build it back better. And in that moment, that is where I realized, wait a second, I finally believe in myself. I finally feel that I can do this. And I, What I look at it now is I had a very high capacity for zero. And this is something I teach my students. The higher or stronger your capacity for zero, you cannot lose.

8:46And what I mean by that is even though many people listening right now, they're really good at what they do. They've got knowledge and skill sets and trades that they're doing really well, likely maybe in a nine to five job. But when you start your own business, you start with zero social media following, zero people on your email list, likely zero in your bank account, and also no one knows who you are. Are you willing to put down your ego and have a high capacity for zero starting over in order to get you into the life and the business you truly want? And when I realized, oh, my capacity for zero after all this agony has just shot up to the highest, I will start over.

9:26I couldn't lose. I was literally in the driver's seat. And I think that's what got me to where I am today. Your first product won't always be your best seller. Jessica Rolfe's organic baby food business, Happy Family Organics, failed twice before finding product market fit and scaling from zero to 63 million in sales. Here's how. At what point in time did you realize you guys had to pivot? Talk us through kind of that transition because it sounds like you guys were going through that kind of trough of sorrow. You've launched, it's exciting, but it's hard to get momentum. I think it was the sales data and really trying to survive and be able to build a sustainable business.

10:11We knew that we couldn't do it in the freezer. And so we started putting little tags on in the jar section, think outside the jar, look inside the freezer. We tried to do some cross marketing, but we thought the best way to do this is to have a product in the dry aisle that would then have a coupon for the frozen baby food. So what product do we think we could create in the dry baby food aisle that was differentiated? And at the time, all the baby cereals, all the infant cereals, didn't include nutrients that were really important for brain development, like DHA, or for digestion, like probiotics.

10:46And so we blended a cereal with added DHA and probiotics, and it was more of a premium approach to the cereals that were on the market. and we launched those cereals on shelf. The big break, I will say, the true transformation, I would say, for the early stages of the business was again, for some reason, the main cereal competitor, Earth's Best, which was all the cereal lined up, so many boxes of Earth's Best cereal, they had some supply issue. And so for some reason, for like three or four months, we were the only cereal on shelf and they just stocked us. I remember a picture of just all of our little cans lined up.

11:27We couldn't believe it. And so that was really the break that we got to be able to scale to the next level. And how much money had you raised at that point? So we first raised$550 ,000 in our first round of financing. That was a rolling raise. So we were really good at taking in money and spending it as soon as we could. Took us about nine months to raise that$550 ,000. I would say that the later stage, it was a convertible note. So there was some interest being paid before it converted to equity. So the earliest stage investors got an advantage, but I don't think it was as much of an advantage as they deserved, given the transformation that the business went through in those early rounds of financing.

12:09So raised$550 ,000, and then we were just constantly fundraising. So we were always rolling into a next funding round. And the funding rounds did get easier over time as we started getting some traction. Got you. And when did you, was it when you launched the serial that you kind of knew you'd be okay? Or was there other difficult times where you were like, wow, is this going to work? It's a great question. I think probably the answer is, is that I didn't let myself think, am I going to be okay? Very often. I just sort of kept going. We did hit a transformational point when we launched these puff cereal products.

12:52So we made an organic version of this cereal that was a finger food. It was a little puff in a container. And our ability to, we stripped out all of the kind of fake flavors, the fake colors, the things that the other competitors had and made a natural version. And those puffs truly had product market fit. So customers wanted them. They loved our natural approach. And that's what started getting us momentum. And so it was surprising because we started the company wanting to make fresh baby food, pivoting to frozen peas, frozen carrots, frozen foods. And then we started to scale really with a snack product.

13:32After that, we then had enough momentum to launch the pouch, which really scaled our business. That convenient format was so recognizable for parents. It was so convenient. They loved the fact that children could self-feed and hold it in their hands. And we included nutrients like chia, a version of chia. We mixed fruits and vegetables into those pouches. And so parents really felt like we were giving them a gift of healthy food inside of a package that was really fun for their children and toddlers to to eat.

14:33they spend, which is an insanely good return on investment. And because you're part of the founder community, you get 50 % off your first three months with the code founder50. Just head to omnisend.com forward slash founder without the E to get started. All right, now let's jump back into the show. Okay, so you probably recognize Adrian Grenier from his acting roles in Entourage, devil res prada and clickbait but now he's an entrepreneur investor activist and co-founder of do contra ventures here you can learn how one of his passion projects led him to investing better in businesses that do more for the planet what one that was my favorite that didn't work out was Church Key Beer.

15:24I started a beer company and man, that was a good time. And tell us about that, man. Yeah, I had high hopes for that. And in fact, I remember my agent called me and he's like, oh, you bastard, like you're going to be a, you're going to be a billionaire from beer not acting like this is everyone loved this company and it was great we actually brought back the flat top can so these are the old cans the way our great grandparents used to drink beer so before they had the pull tab or the like so the cans today if you're if you're watching have the tab that stays on and it pops a little hole before back in the day our grandparents used to have to use a tool kind of like a can opener but it cracks a little triangle on the top of the can and so we brought that back and we were making beer in those old school tin cans so they were like basically oil cans that were tough you couldn't squeeze them and you had to crack them open it was it was awesome and so we had this old hipster sort of nostalgia and we had a craft beer.

16:41It was micro craft, all the things. And, you know, who would have thought that starting a business is hard? And not only that, the beverage business, not only that, the beer beverage business, which is a pennies game. Like you got to sell a lot of this swill to make any money. And we were doing a premium product. We had like the fanciest cans. It was all the things. And, you know, people want cheap beer. I mean, that's the bottom line is they want to really – they want to spend six bucks for a 24-pack, not six bucks for a six-pack. So it just ultimately didn't work. The real fundamental reason why it didn't work was we had some canning problems because we were essentially reinventing the can because the whole of the beverage industry had moved towards standardization around aluminum stay tabs, which is what I just pointed out.

17:45And we had to retool and recreate a whole canning line to accommodate this can. And it just was cost prohibitive considering our margins and the beer industry. We were number one in Whole Foods for a while. We were very promising. And then you look at the numbers and party's over. Yeah, interesting. Why was it so much fun though?

18:17Well, I was really proud of the concept. I was really proud of our premise. And yeah, our slogan was worth the effort. You know, the idea is like, that which you put effort into is, you know, worth it, you know, ultimately, and then you get the reward. and um yeah i mean just i mean look i love i love beer right i love craft beer in particular and we had a great uh triple uh triple treated uh what was it i don't remember um hops a triple hops treated pill uh check style pilsner which was really really tasty we i think i'd lost 10 pounds when that business went under so that's how much fun weight i had gained and and when you're when you're out selling the beer like you gotta drink it you gotta you gotta be sure to be seen drinking your own product so it was just a good time i was a lot younger and i had a lot more energy so and how was it like you know from all your other success in in other areas uh it was film and and music and all sorts of things like how how was that that failure like did it was it tough to work through or you just kind of kept going because that's your nature you know the biggest the biggest thing the hardest thing to resist it's one thing to fail you know they say fail fast because when you fail fast you learn and then you you adapt yeah but it's those of us that refuse to fail we don't want to fail so we hold on to failure so you're basically like hitting rock bottom and then sliding scraping your face across the stone as you hit rock bottom as opposed to just getting it over with.

20:17So it took us like two years to finally accept that it was over. And so I did not take it well. I did not want to fail. I wanted, it was like, okay, we got to believe in ourselves because we're going to be that one success story that we get to tell the war stories about how we almost failed, but we're going to like resurrect. It's really hard to know when, no, no, no, this is, you're not going to be one of those resurrection stories. It's over. And you could keep pouring money into it and borrowing money and trying to save face, salvage a dream, but you could prolong agony and it's a huge opportunity cost if you don't know when it's over, when the party's over.

21:03It's like when you go out and you're club and the lights come on, you've probably overstayed your welcome. So you got to know when it's over and it's probably not at the very end. So Mary Ruth Guillaume had$700 ,000 in debt when she started her organic supplements brand, Mary Ruth Organics. Eight years later, her brand now earns over a hundred million in revenue and employs over a hundred people. Here's how she clawed her way back to financial security. It's so amazing. You have such an amazing podcast with so many people listening who I know are doing very much the same thing, maybe starting from zero, starting from a deficit.

21:50And something important for everyone to know about that$700 ,000 in debt is that was the most painful type of debt possible, which is that was money. And I'll explain where it came from that I owed to my friends and to my family and credit card debt. And I was able, it took me seven years to get out of debt, but I was able to pay each of those people back with about eight or 9 % interest. And I was in a debt management program for credit cards. But where that money came from was I grew up very spoiled. My dad and my seven-year-old brother, Daniel, passed away suddenly. And then my mom, who's so amazing, she was actually the CFO of our company for eight years, but we just hired a new CFO in November.

22:41It was so amazing that she took over my dad's business, but there were some things that weren't in alignment, meaning she was running this business at the time. It was a lumber business that had 300 employees, $89 million in revenue and six locations. And then the housing market crashed. So Lehman Brothers crashed. And that whole thing kind of left us in after she had to shut down that business and sell those locations, left us in personal debt of$700 ,000. So just my mom and I, and a couple of years went by and I started this new business, which I have today. And what's important to know is that before we had product line, I had to pay about$60 ,000,$40 ,000.

23:39It was anywhere, each month was anywhere between$40 ,000 and$60 ,000 to pay for my apartment, my mom's apartment in New York City, my office apartment, which was Regis, which is very similar to WeWorks. So to pay two apartments, an office building, and all of my debt management program, plus the money that I had to pay monthly payments to each person that I owed money to. and I was able to make about$40 ,000 a month through signing up people one-on-one for my private 12 sessions of nutrition. So I still remember Nathan, the magic number was 12 sessions, 12 session package for$2 ,860 a month. And I would sign up like 20 people a month and I would keep going.

24:36And I had this business model that is not truly sustainable when you're in that kind of debt where, and I, and I was making it work. I got married in 2013. That's the year that I launched that private practice and I really was making it work. And I was paying off all of that debt, but it was, I mean, I didn't really see how I could get any leverage. And so it was kind of like the perfect storm. My husband said to me, and maybe later on, I'll tell you the story that I think a lot of founders would like about a choice I had to make, whether I was going to marry my husband or not, that had a lot to do with a financial decision.

25:16But I said, okay, I'm going to make a product. And this product is going to be the liquid morning multivitamin. and for six months I called all the manufacturers and no one is going to take a run for a custom blend product for 90 bottles no one right if you're going to do a custom blend with a manufacturer you've got to have at least like twenty thousand dollars yeah because like moqs like a few thousand right at least yes at least at the very least and I told this one manufacturer so I'm in New York and she's in California. I said, I promise if you make this liquid morning raspberry multivitamin, remember the first product, now we have 130 products, but that's still our best seller.

26:06I said, I promise you someday we'll be your biggest account. And someday we became so big that we had to leave them, but we obviously parted on good terms. Um, but, but the point is that she shipped those 90 bottles to my 580 square foot apartment in New York City. And I took, I think 60 of those bottles to my office. And my husband had made the label on his laptop and printed it out and send it to the, to the manufacturing facility. And I shipped like 20 of them to Amazon. And that was before Amazon was cool, Nathan. So that was way before, I mean, we were on an airplane once and my husband said some guy was like oh what do you do i'm like oh we sell vitamins on amazon and my husband elbowed me and said shh don't tell people you sell products on amazon um because at the time it was furniture and books and a few other things and um and so what happened was my private clients reviewed the product like 20 people without me even asking and it went into the algorithm of Amazon.

27:18It went to the first page and there was no sugar in this vitamin. That's what made it different than the other liquid vitamins. It's just glycerin makes it sweet, the raspberry flavors. And we started selling. I remember crying the first Saturday, we sold like$250 worth of vitamins. And I honestly could see a path of like getting to do what I love, getting to help people deliver this amazing product. And I saw that I would not be the only one digging us out of this$700 ,000 in debt. And honestly, there's so much to unpack here. I can't wait to share with you how much we grew each year, but we grew it to over a hundred million in revenue with zero outside funding.

28:10And we were profitable from day one. And I'm sure, as you know, it usually takes companies about two years to turn a profit. And there were things that we did that were extremely strategic that I believe in very much. And we did them by ourself, my mom and I, and then eventually my husband started to help us as well. Hey guys, I hope you're enjoying this episode and learning a ton. As you know, in this series, we interview some of the greatest founders of our generation to find out how they did it. However, if you're thinking of starting your own business and you want to hear from some incredible stories from everyday people like you or I who are actually in the trenches, only been building their business for maybe one year or two years, like they're building right now and they're really in the early stages, but they're getting success.

28:58You should come and check out our new podcast, From Zero to Founder, hosted by our community manager, Molly Flynn. These are in the trenches stories from our very own successful students that have gone through some of our programs. People just like you who are deep within the process of building their very own successful business. These are the founders of tomorrow. You can find the From Zero to Founder podcast on all platforms. And remember, it's founder without the E. All right. now let's jump in the show after his failed attempt at a tech startup evan goldberg invested two thousand dollars into building a cloud accounting software that eventually transformed into the world's leading cloud-based business management software i asked him how he's gone through challenging economic seasons in the past 25 years well certainly economically it's a time where we don't have a lot of certainty and nobody knows exactly what the next couple years or few years is going to bring.

30:04And that's a challenge for things like just the prosaic needs of getting funding and hiring and the cost of various services that you need to use going up rapidly in a lot of cases, it's a lot of uncertainty and it's challenging. And so it still requires the same thing though, is making sure you don't get distracted, keeping the focus on your vision and just plowing through this and this too shall pass. And it might mean that you have to, can't be as aggressive about hiring as you would when there's more certainty. There's various things you may need to do that are different, but the main focus of your energies should be the same as it would under any economic circumstances, which is developing your technology, testing it with users, improving it, or whatever it is, your product or your service, testing it with users improving it uh you know promoting it getting out there and and and scaling it um in any which way that you can and staying staying very very focused on that mission yeah agree and i guess um because you've been through multiple recessions now um have you have you seen coming out the other end like if you can ride the storm and survive it yeah like it it's the you You know, that saying, never let a crisis go to waste.

31:43I mean, you make some great changes under necessity. I mean, there's a reason that the cliche necessity is the mother of invention exists. And we saw, for example, in the financial crisis of the early 2000s, that we weren't focused enough on our existing customers. When the orders were coming in so easily, when the economics cycle was in the boom phase, you didn't have to worry that much about your existing customers. So you might lose some, so they may not be flourishing with your product. Orders are coming in. I mean, that's an exaggeration. But when times get tough, first of all, obviously, you need just to bake your numbers.

32:28You need to be selling more to your existing customers. Most businesses give short shrift to just selling more to their existing customers. It's not as sexy as getting new customers and getting that increased customer count. But during those times where new customers are harder to find, that's when you can double down. And we really did double down on looking at how we could help our existing customers use the product more effectively, help them get through their trials and tribulations of the economic crisis and come out the other end. So because if they come out the other end, they're still going to be paying you.