Sean Frank - E-Commerce Masterclass: How to Build, Scale & Win in 2026

You're starting off as a brand, don't spend money on advertising, just get really good at short-form content. That should be able to take you to at least $10 million in sales. Sean Frank is the founder of Rich, a nine-figure brand that has mastered direct-to-consumer growth. The modern digital era is an attention economy you have to win attention. More people search Ridge Wallet than Men's Wallet every year. We're bigger than the category. And with Rich, it's like, we're still in the marketing phase. We can't forget that. That is our secret sauce. But here's what shocked me most. Sean admits Ridge's biggest weakness, and it's the one unfair advantage smaller brands have today. We're playing life on hard mode, and it makes the business good. Company I'm close with. I think they have four employees, and I'll do $100 million this year. If you played life on easy mode, being lucy-goosey about margins, never having the tough conversations, never getting lean as a company, you'll just fail way faster. This conversation is a master class in direct-to-consumer. From content strategy to exact frameworks, Rich uses the drive hundreds of millions of dollars. Look, Ridge is a great business. We're going to run this thing forever, and we make great prox people love. Awesome. Whatever one screwed up is like, no, we should have just been focused on. What's up guys? It's Mark Quick Break. Over 80% of you guys listening are not subscribers. The more subscribers we get, the bigger and better we can make this show. It would mean the world to me if you got value from this episode or any of the past episodes to hit the subscribe button below. Thanks for watching. [Music] So what is Ridge's actual marketing mix today? It's still very meta-heavy. Meta is the king of advertising for a reason, right? If you look at their revenue growth over time, I think they have their first billion dollar year in like 2014. Now they'll do $130 billion, right? They've taken over all that ad spend from TV and whatever else. So half of my money is always going to go to meta. Some years, it's 75%, but like this year is probably the lowest it's been. At 50%, YouTube has gotten a lot better since they rolled out shorts. So now, the biggest problem with YouTube used to be that they just had one placement, right? And they also sell their best audience a way to skip those ad placements, which, you know, through YouTube Premium, you don't have to watch YouTube ads, right? So if you're an advertising company, you don't want to take your most premium audience and remove them out of there. But they've done a lot of things in the back end to change it. They've united more of the Google ad ecosystem. So Google has a whole 20%. You know, search even be five and then YouTube's that other 15. Wow, only five. It's pretty surprising. Yeah, I think most brands are overspending on branded search. Like we've done a lot of increment, incrementality holdouts. And you could probably, whatever you're spending on branded search right now, you can cut down. It should be sub one percent of your marketing spend. And then shopping is actually not very incremental. This is what we found out. Most people are just wasting money on Google shopping. Now, non-branded, there's, there's some world there. But Ridge in particular, we have a lot of brand awareness. So it's very hard for us to go win men's wallet searches. Those people probably know about Ridge already. But that's those are like the two big buckets. There's a duopoly on advertising in America for a reason. It's either going to meta or it's going to Google, depending on your business. And then we have influencer is a big piece. You know, MKBHD co owns our brand. So we get a lot of good YouTube escrocher through there. And we were like a very early YouTube sponsor, right? I watched a lot of YouTube. So I wanted to work directly with creators before that was like a thing, right? So like 2016 we started sponsoring YouTubers directly. It was like us in square space for like the only people really doing it. We've scaled that up a lot. So we've worked with like 5,000 YouTube creators in total. That has shrunken since like, you know, 2021 crypto got into it. And they just messed up the entire YouTube sponsorship ecosystem. We were typically give somebody like $10 CPMs. We're getting quotes that like, you know, people like FTS were giving them $3,000 CPMs. It's like, yeah, okay, we can't compete in that market. That's mostly normalized. We're spending a lot more money there. Inside of that, there's like I also include podcasts, whatever else. Then there's like all the tertiary channels. So let's just take a step real quick. So about 50 on meta, 20 on Google Slash YouTube. How much on influencer? Probably 10. Yeah. And then that last 20 is what I call tertiary channels, right? So it is Snapchat. It is TikTok. It is Reddit. It is X. It is Apple. Then it's all of these channels that they're smaller. So they typically like they have 100 million daily users, right? Maybe a little bit more, maybe a little bit less. They don't have as to physically as an ad product as like a meta. But you should spend some money there, right? You put Pinterest in that back bucket. So it ends up being five to seven different channels, right? Like you put linear TV in there, right? Where we don't have a dedicated media buyer doing it. And they just kind of roll into either the meta buying team or the Google buying team. And then those, we spend somewhere between $1,000 to $10,000 a day across all those channels, right? And they just kind of ebb and flow depending on the business. What do you think is the most underpriced attention as far as those tertiary goes? The linear TV, the TikToks of the world? Well, I mean, underpriced means you're buying it. And there's free attention to be had. I think if you're starting off as a brand, you should get really good ad organic content. A short form video can go so many different places. You can put an Instagram reel. So you can put it on YouTube shorts. You can put it on TikTok. You put it on snaps. Stamp as a discovery feature. Everybody built a TikTok clone. Pinterest has a TikTok clone, right? So if you're starting off as a brand, don't spend any money until you figure out how to make a good video. And then those videos can get you views. Views will get you sales, right? Spending money on advertising is just like a, it's a shortcut to get attention, right? So I can give meta $10 for a thousand views. Or I can get really good at making content. I can get a free $10 every time I make a good video. I think it's a thousand views. It's like the way to think about it. So underpriced attention is probably YouTube shorts. So if you're going to start spending money, not a lot of people spend money on YouTube shorts as an advertiser. But I think the starting off don't spend money on advertising. Just get really good at short-form content. That should be able to take you to at least $10 million in sales, right? So annually doing $10 million a year without spending any money on advertising. That'll give you a better business, because it'll give you the chops to actually start spending money. Before we get back into the marketing mix, I actually want to jump forward to content. Because I can put the agree first. I think content marketing should be part of that marketing mix. And people just underestimate from a CPM perspective, like how much more asymmetric reach you can get by just building brand through really, really good organic content. So I just want to know about the Ridge content machine. What does that look like? Let's dive underneath the hood. What does that kind of accountability chart and team look like to then build out all of this organic and paid content? So we're super weak on organic content, right? I mean, we're like a more of a legacy brand in that stance, where we missed the muscle building of 2020 to 2024 getting really good at organic content. Like our socials, we get a banger would be 50,000 views, right, which is like nothing. So all of our muscles were built around getting really good paid performance content. And luckily, we have the bank role where we can make that work. Now, we're a multi-hundred million dollar year brand. So if you're listening to this and you're not, get really good at organic content, because that is an unfair advantage you have that like bigger brands just don't, right? And that's a weakness in Ridge that I know and I'll own. But our paid content team is, it all flows out from my CMO. So CMO is Connor, he's my partner. We've been running this business for like 10 years together. He has a VP of paid performance. And then we have creative strategists, right? So the paid team is like, hey, this is what we are seeing working. We're using, you know, a North beam for analytics. We're seeing click-through rates. We're seeing what's actually driving sales. We have five plus years of historical data of what's actually been working in the ad account that we keep, we look at every single day, right? And so we're taking all that data and then we're like figuring out what type of ads to actually shoot. That goes to a creative strategist. So we have four creative strategists on the team. And what that person does is actually look at the ads, look at the requests coming in, look at the new products, and then come up with the scripts, right? Like, hey, here's the angle we want to try. Here's the hook we want to try. Oh, let's take this type of content but cut it a different way. And so then they'll go out in the source of a bunch of UGC professionals, right? Or agencies or whatever else. If we need a high production shoot, they have six agencies on retainer they can go to. They have 50 different UGC people they pull from. If okay, we need a mom and a daughter. Oh, we need a couple. They have all these people tagged and organized. We send them product, we get shots, they come back. And then we have a bunch of footage and that's when like it all comes together in the editing room, right? I always tell people, you know, you go see a movie and it's two hours. There's like 200,000 hours of footage or whatever across all the cameras and they cut it down to 2000 hours and they cut it down to what you actually end up seeing. So much gets left on the floor that actually makes a good movie. And it's the same thing with ads. Like, it all comes together in editing. We have so much content that gets shot. You have to put it all together. And then we have, you know, two in-house editors that make every piece of content for us. So a direct question directly in relation to that, which I think you with the amount of money that you're spending will have an interesting answer on is you mentioned internal content creators, UGC content creators. I'm sure you have an army and or high production. What have you seen that has worked the best in ridges add account? Is it super high production, low five, UGC or internal people or you guys really, really control the narrative? So the answer is you need all of it, right? So we spend over $100,000 every day on ads. So this is on meta directly spending $100,000. And if you want that level of scale, the only answer is more creative, right? Like the biggest best spending ad in account probably taps out at $100,000, right? So you basically need a bang or ad every single day. But to do that, you need 50 ads every single day. So like we literally launch hundreds of ads a week because that's what it takes to feed the beast. So inside of there, we always have like we have an in-house studio that does a lot of like high end production. And then we use all these agency partners. And you need to have four of those going at any given time. And then you need a bunch of the UGC stuff, right? You need all of it in the funnel. It just fill the bucket completely. And then meta will figure out what works and put spend on it. So for the people out there listening that are just starting, you're just saying ironically, kind of go wide and shallow to start with all different types of content. See what works, kind of double down what works more. But ultimately they have to be holistic and just throw as much stuff as possible at the wall. Yeah, well, if you're getting started by advices, you make all your own ads, right? It's like we are we are just marketing companies. Every company has like a superpower, right? You know, Apple doesn't outsource any software design. That is something they do internally. Manufacturing, they don't give a fuck. They're like, yeah, here, throw just some partners. You know, Amazon owns logistics like nobody's business. They would never outsource so they're logistics. They're actually replacing USPS with their own services because they're so good at logistics. So if you're not your superpower is, if you're in consumer, it is marketing. Like we are just marketing companies. And you cannot outsource it to an agency. You can't have someone do your paid media. You shouldn't have people shoot your own ads. If you're getting started, you're not going to be successful unless you shoot a really good ad yourself. So I still look upon the camera. My wife gets behind the camera, right? Make really good ads. In the modern era, they should work on organic, right? If you're starting out, there's a free gift from the Metagods, which is organic distribution. Like you just want to get as many views as possible for free. But if you're getting views for free, they will work in ads. That's what you do getting started. But as you scale up the ad account, you'll just need different types of ads for different people. It's so funny that you said that. You said something very interesting. And I say it all the time. People think I'm absolutely crazy. Is I think so many companies actually think they're brands when they're actually a marketing company. I feel like with you, someone that's done a couple hundred million dollars a year in revenue, at what point do you think that you guys cross the chasm to become a brand versus a marketing company? Or do you think you guys still are a marketing company? Oh, we're still a marketing company. Like if we stop marketing sales go down. It takes a really long time to become a brand. And I think brand is just like a Lindy effect, which means you have to be in market for a really long time before people start perceiving was a brand. All brand is is like a familiarity, right? I bring up Shark Ninja. Shark Ninja was like a shitty knockoff company for a really long time. But it's been a long time. Now that the number one product in TikTok shop, the Republic company worth 10 billion dollars and they're killing it. And they have whatever you want to buy if it's a microwave or a cooler or a water bottle, Shark Ninja has a version of it. I mean, they're in women's hair products. They're in everything, right? And it's just because they've been in market for so long. They just continue to launch new things. And eventually you build a brand out of it, right? So yeah, brand is just a shorthand code for familiarity, right? And familiarity just comes from exposure. The more you see something, the more familiar you become with it. And with Ridge, it's like, we're still in the marketing phase. If I cut my ads in 50%, revenue falls 50%. So it's like, we're very much a marketing company. That's why we're so special. For the people out there that are doing under 200 million dollars, I agree with Sean. And I mean, there's people that are literally doing 50 million dollars and they're like, why I need to be doing more organic brand content. Yet, they could put all of their ducks on the paid side and win strictly on the paid side. So I agree with you. Well, everyone, everyone always was like, oh, I want to be Nike or Apple. I'm like, okay, well, wait 50 years. It's like, it's like Nike took that long, right? Apple's been making awesome products for 40 years at this point. It's like, they earn the right to do that. They're worth a trillion dollars. We're not them, right? We can, we could want to be them. New balance is a good example. New balance is a great brand. Family owned, been crushing it for 40 years. It's like, I don't even know what their marketing budget look like, but they just, they've had so much exposure, right? That like, they can just be familiar. In the modern digital era, it's an attention economy. You have to win attention. And it's either good ads and money, or it's being really good storytelling, organic content. One of those two things, you have to get the attention. With that being said, what do you guys as a marketing company? Do you believe in top of the funnel marketing? Or does everything have to have attribution? Well, I believe that the tools we use to deliver ads, which is the ad platforms, break sometimes, right? You know, everything needs attribution. That's totally true. I think, I think everything should. You should be able to draw a line to something, but we're talking about like a very messy world where it's like, you know, what ads somebody see on their phone, they made them Google something. And if we had perfect attribution, you'd only spend money on the ads that worked, right? But because of Apple fighting with meta over privacy, and it's really because they wanted to take a cut of meta's ad revenue and like the whole thing just kind of exploded in 2021, that sometimes the best ads are just top of funnel ads. And it's not because you're actually, you know, reaching the top of funnel, it's because meta's ad ecosystem kind of circles the drains on people that think that are interested, and eventually you'll exhaust that funnel. And it's not because you need to run more brand marketing. It's because that ad tool is kind of broken, right? So we spend a lot of money on top of funnel. That's what I'm trying to say. YouTube influencer is top of funnel, podcast is top of funnel. You know, a lot of our meta campaigns, 40% of our meta spend sometimes goes to just top of funnel, you know, video view campaigns or upper funnel conversion optimizations, not getting him to purchase, but add to card or even view the product page. We're doing that right now, but it's not because we believe top of funnel is a strategy. It's because the tools we have are limited, and you have to go top of funnel to actually make it work. Makes a lot of sense. I want to go back into creative a bit, and just give some people some tangible advice on the creative side. You know, you guys are basically like just as much a marketing company. I'd say that you guys are like a media machine. Is there specific tools or naming conventions or anything out there from a content perspective that somebody early or even late in the game that you would recommend? What type of tools do you guys use from a content perspective? Yeah, look, there's a lot of really awesome tools. I mean, four plays, like a great, you know, ads library basically. Right, it brings in all the best ads from everybody. Facebook has ads library, which is free. So if you want to see anybody's ads, you just go on ads library, but four play gives you a little more insight into that. Motions and other great tools, right? We'll give you more creative insights into what's happening. And then we measure everything in like an MTA solution. So we use north beam, but there's a bunch of other MTA solutions out there. That's a multi-touch attribution tool. All it's doing is you want to build your ads in a way where you can compare apples to apples across everything, right? So how do I make a comparison from a TikTok ad to a meta ad to decide who gets more of my spend, right? And how do I compare inside of meta 50 static ads versus 50 video ads? What is the actual best one? So we have everything named in a certain way. And then inside the name and convention, we actually tag it to what we're testing on the creative side. So it's like, here's the concept. It'll be in the name. Then it's like, here's the hook name. And then here's like the different edits we did. So like inside of there, you could just very quickly see, oh, this hook is working across all these different platforms. You should go more on this hook. Or, hey, TikTok really likes, you know, when videos are 15 seconds or whatever, right? So we have all of these different things all named inside of the North Beam, the type of the way we actually measure it. And yeah, it's just how do we make something that's very messy, which is creative production and attribution and make it as clean as possible, so that everyone of the team can know where to spend the next best dollar? Because the best way to scale up is figuring out this concept called next best dollar, right? So why do I spend money on every goddamn ad channel on Earth? It's because every channel has the perfect level of spend. And your job is like a holistic marketer is to get to the perfect level of spend on every channel possible. So it's like, should your brand spend money on TV, maybe? But only if your next best dollar isn't spent on the current channel you're on, right? So spend meta all the way out to tell your next best dollar is better spend some place else. And then figure out what the perfect level of spend there is, right? And it always changes. It's a very messy, messy mix. But that's how you figure out how to get to the highest level of spend possible. And still be profitable. Guys, quick 60 second break. I am so excited to announce our first partnership. It is the perfect fit for me and what I believe in. And more importantly, you, the audience. I have personally spent tens of millions of dollars on meta ads. At one point, it made up 95% of my entire marketing budget. That kind of platform dependency is a real risk. One algorithm shift and your whole entire business can stall. This is why I partnered with Universal Ads. The CTV ad platform, powered by the biggest names in TV, built for any size business. And under five minutes, you can advertise across the best shows on NBC, Paramount, Roku, and more. You can reach up to 90% of the households in the US at social media CPMs. And the platform gives you full control. You can target by viewership, behavior, income, geography, custom audiences, and more, just like you guys are used to seeing on social. I'm giving out $500 in ad credits with my referral code to the first 50 people who fill out the form below. First come, first serve, it's going to go fast. And if you're spending over 300K a month on paid, I have something special for you. Everything's in the description below. Go diversify now and appreciate the support. For people out there listening, you went very, very deep. Very, very fast. And I would imagine you guys have 6, 7, 8, 9, even 10 different naming conventions. Something very, very simple to take. An example is like with Icomic. Is just take a photo video or animation. Is it sports or is it motivation? And then what's the hook? And that's obviously three levels deep. I would imagine that you guys take it 5, 7, 10, 15 levels deep. But I do think the naming convention, that will just get you so much raw data. And then from there, from a measurement perspective, what are you guys doing? Are you guys exporting CSVs and the chat GPT? Are you guys using a third party tool? How are you analyzing all of this kind of granularity and naming conventions? Yeah, so this is what Northpeave does. Right, so you have great naming conventions. What we'd go further is like, we'd have all those tags. And then we'd additionally be like, we'd have head to head, you know, the intro of a video is a hook, right? That's what it's called. So we would have 10 different hooks going A, B, C versus each other, right? So it's like, okay, this wallet is smart. You can't lose it because that is the air tag tracking. That's a good hook, right? Or, oh, this is a perfect gift for the husband in your life. That's a hook, right? So these are different hooks or concepts that will test versus each other. With all of the things consistent, so it's a good split test. Totally, yeah. So, and we put all of that stuff in there. So like, we'll have literally hundreds of ads running because we'll have 10 different concepts you want to try. Each concept might have three different hooks. And we're, you know, we're breaking down an ad into its actual unit. So it's like, what is the thumb stop? What's the first image, right? So that's something we're going to test. And it'll, in the name of convention, there'll be what the thumb stop is. And then instead of Northbeam, we will see, okay, this thumb stop across everything is working 30% better than this other thumb stop we're testing. And when you said working better, you're talking about click through your radar, you're talking about conversion, are you talking about actual, how the duration of the video? Dude, it's a great question. And we'll look at all of that, right? So it's like, we'll look at, okay, this one's getting, you know, you know, more watch time is one thing we'll end up measuring. Like, okay, this thumb stop is getting people to watch the three-second mark, we'll add 80% or whatever. And that'd be a win for that particular thumb stop. And then we'll end up looking as like, okay, if people get too far into the video, they end up seeing the end card. That's actually a bad thing. It means that like, the middle message, the actual CTA called action is not as effective if people are watching too much of the ad. So it's like, there's a drop off there. And we're going to measure all of that inside of Northbeam and we'll show you all of that data. To dive deeper into the content, are you saying there that you're doing a loose CTA in the middle and also at the end? Is that your guys' fault? Oh, yeah, for sure. Like, we're trying to get to the click to the platform, right? But then another thing is we'll test this. Like, sometimes we'll be like, okay, actually if they watch the full video, and then click at the end, the ending CTA, if it's a 60 second video, there might be two or three CTAs in there, they'll have a better conversion rate on site. So this is a massive job. They're like, we have a lot of people in the team spending time on as creative analysis to figure out what gets the best spend at the best results. What's absolutely crazy for people out there listening is just you're going to have, you're going to have just one weird outlier that's completely different than everything else. That's why it's just, I would only stay recently. I would say probably you tell me in the last nine months through a year, like meta is just all about contrast and volume. The big thing is the contrast. People don't understand that you need to feed it completely different creative, like completely different, because everybody's used to doing what you're talking about right now, is you found the body and the ending, and they're just going crazy and just split testing that hook. But they need to do that a million different which ways to Sunday and all different types of body and general concepts. I don't think people understand how much different stuff you have to throw in there. Yeah, so more and different is what you need. Yeah, so you know, meta says creative is the new targeting. And what they mean by that is like, you know, there's and dramas the new ad engine inside of meta, right? It's a drama in drama. Oh, a drama. There's a drama. I was like, it's interesting. Yeah, yeah, yeah. And inside of and drama, they've shown us what the AI system thinks is the same, right? So if you have a static image and the background's blue and then you go to a pink one, and drama knows it's the same image. They're like, that's the same thing. It's not creatively diverse enough, right? If you take a static image of the wallet, you know, front-on, and then you change it, you know, a different angle in the background is like trees now. It still knows it's the same image. You need like radically different static images and video concepts. That's what you're talking about. And so it's like, you can't just change. It's it's most important in the beginning part of the video because you because it has to serve to people who are different and new. And that's why we test so much different creative. So the thumbs up is most important. Then the hooks the most important. But with when we get to the middle of the end, it doesn't matter as much, but it's like really getting new people to see and have attention on that. But like, you need to have different, like it has to be super, super wild. Like you have to make ads with just guys, with just girls, with different selling points, different pain points. Your static images, you have to have one that's, you know, on fire and you have to have one that's like, you know, pretty people holding it. You have to do like an actual 180 degree, like a completely different difference. Guys, we talked about a little bit in the Shackford episode about this. I'm going to put a little mini link to a white paper on best practices in relation to this. I think it'll help people a lot. I would love to know your thoughts, because it's a very, very interesting conundrum on my side with my company. We have a very, very high AOV. And let's just say we want to do a creative test. And there's the same body, the same kind of core CTAs. And we want to iterate across 10 different hooks. But our AOV is so high, we can't spend enough to get kind of true testing. So for people out there, if they understand and know their AOV, how do you look at testing as a percent of budget, a percent of AOV, a percent of revenue? How much dollars should they be allocating on a per-created perspective? Yeah, so this is the hardest thing about, you know, giving advice to different businesses, right? The other problem with a high AOV product is you probably just want to have a lot of purchase signal. Even if you're crushing it, if your products $1,000, you will have 10X less creative volume or purchase signal than I would at 100 AOV, right? So like, you can't actually test as much. That's what's the next one. You're in a business like mine, and we're good at media, and we can't lean into it because we have a higher AOV. Yeah, yeah. And this is where I can go organics your best friend, right? Because you should. Everything that you. And this is what I would do if I had a high AOV brand, I would make a bunch of different TikTok accounts or a bunch of different Instagram accounts that aren't necessarily focused with your brand and use those as like a creative testing field for all of your ad comp sets to be organic, right? And so I would make, you know, if you make a high AOV sports thing, I would make one that's. I'd make a new TikTok account called Best Sports Highlights, right? And I have a partner account that you can run on your meta account, right? They're pushing partnerships really aggressively. So like, make a new handle. So a new Instagram, it's called, you know, Best Sport Highlights, whatever. And then post all your organic content there, right? And just see what ends up working before actually pushing it into the paid performance gauntlet that you'll have to end up going through. The other thing is take all of your awesome ad concepts and then just set them at a higher. Or I was gonna say a higher. Instead of, you know, purchase conversion, go add to cart conversion or just page view conversion or something else. So you can get more signal flowing to it. 'Cause yeah, the hiring of you kind of like, you know, cripples you in a lot of different ways. But in terms of, you know, actually, if you have, it's called a $100 million budget, you just spend 1% of your budget on tools, right? So, I know that sounds crazy, but like, if the tools make you 5% better, they pay for themselves, right? So 1% should go to either attribution tools or MMMs or incrementality testing something, right? 1% should just go to some sort of tools. Then I would say like. - I went on pack that a little bit right there. Everyone kind of knows like the North Beams of the world, the triple whales of the world. What are those secondary tools that you're talking about? - So an MMM is mix media modeling. - Oh, good. - And it's an old school way to figure out where you should be spending money, right? So it looks at all of your different spend and then it runs, you know, different algorithms to figure out like if you spent money correctly, or it's like, oh, more money should go to TV or Snapchat or whatever else, right? - And this is like tools like Iris, where it's like it can do mix modeling mixes into different cohort analysis. It's kind of just analyze any and all of the metrics in relation to your spend, correct? - Iris does something very similar. You know, MMMs are mostly sold by an orthopedium has one, a company called Measured has one, right? It's kind of falling out of favor, but it's one of the gold standards of actual paid media spend, right? The other one is incrementality. So an incrementality test is a holdout test. So let's say you want to figure out if meta's working or not. It's like, hey, should actually spend money on meta. So what they'll do is they'll build sales. And what a sell is is they'll be like, okay, we'll do North Carolina versus South Carolina. And South Carolina won't get any meta spent. Okay, we're going to totally exclude them. And then we're going to see the effect on your business if you didn't spend any money in a geo. I'm simplifying this, they end up doing way better sales than just state versus state, but like they do three sales tests where they end up taking the population and they break into these different things and then they hold out spend to figure out, okay, you spent money on meta. It was this increment, it drove this level of incrementality in your revenue, right? More revenue showed up than you expected because you spent money on meta. - How much revenue do you think a company needs to do to start investing in incrementality? - I've never done incrementality tools to give you context. I'm just curious what you think. - 15 million, 20 million? - As soon as you start spending money on multiple channels, that's what it comes down to, right? So I think if you just spend money on meta, you can get $15 million a year, right? But some brands cap out, they can only get to $15 million a year spending on meta. But where to figure out to spend your next dollar? That's where incrementality really comes in, right? So we use house, it's like, they end up doing all the whole test for us, but a lot of people do this 'cause it's like, it's just a try and true science. It's what meta is pushing really aggressively. Metal will actually do free incrementality test for you because they're so confident that meta is the best place to spend money. But as you get bigger, you have to spend money in more places. You have to validate where to spend that money, right? It's very easy to piss money away on tabula ads or critio ads or whatever else, right? - I just shouted out tabula and critio. We going back to 2009 with those. The fact that you know that is, you got some black hat marketing and your deep darkness in Washington. - Tabula is making a comeback. They're trying to not be shit. - Tabula is, they were like, weird fake looking listicles at the bottom of like ESPN saying, this is Kim Kardashian's 20 favorite makeup brand. That's crazy that you just mentioned that. - Yeah, well dude, and you know, a lot of display ads. I mean, there's so much ad fraud, right? So as you start spending more money in these places, like PMAX, it's very easy. And PMAX is Google's ad tool, right? - Performance Max, guys. - Yeah, and PMAX is so easy at wasting money, right? 'Cause like, it'll just take, you know, branded spend and display and email placements and everything just rolling together and just give you one pretty number. But if you don't measure that really, like really, really closely, you just waste money. So income mentality just helps you as you expand channels out. So maybe 15 million, maybe 15 million. Dude, if you're bringing it to $100 million just on meta, fuck it, just spend money on meta. Like, just spend that million dollars on creative tools instead, right? - I want to put a pen on the content for the people listening. Sean is a unicorn from another planet and doesn't go organic to paid. He just does paid and organic kind of, it seems as though it kind of does what it does. If you are doing organic, something that Orrin talked about, that has been amazing. And I'm sure you agree with this. Take your best performing organic, throw them in meta, throw them in ASC campaign. Dude, our two best, he told us to do this, our two best ads right now by a long shot are just our best performing Instagram posts. And now we just have a flywheel every single week, best performing on organic goes into paid. That's undefeated. That's 70% of our best paid ads are organic best performing ads. - Yeah, if it wasn't clear earlier, organic is just a proving round to get stuff into paid. If people like it, they'll like it as an ad, right? So the number one best practice is taking everything from your organic page and just pushing it into paid, right? And that's why you should have multiple Instagram accounts to test more organic stuff. 'Cause if you find a winner, it's a winner. All of your ads should actually go through a gauntlet of organic before justifying being paid. Now, because of unicorn, it's just 'cause I'm old. It's, you know, if any brand started before 2021, is not good at organic content. And it's super, super true. Go through any of like the D to C darlings, go through the AWAs, the glossier, the all birds, put origin there, it's 'cause we grew up where ads were the most important thing, right? Like organic feeds were very like precious and there wasn't short form video to really get good distribution. But yeah, modern day brands, like it'd be stupid to start with paid, like only start with organic and tell you it's $10 million. - Makes sense. I wanna dive back into the measurement side. I know you're very interesting, 'cause I feel like you're deep in the weeds, but also you take a step back and you're seeing the macro perspective. When you're looking at numbers on from e-commerce specifically, what are those like two or three metrics that you're obsessing over, that you're looking at kind of daily or weekly? - Well, yeah, our business is in the middle of a transition, so it's different than some people. But like what I hear the most about is like product mix on our sales, right? So, you know, I'll bring up Yeti as an example. You think about Yeti, you might think about coolers, right? Like Yeti had a very famous cooler when they came out and like that kind of built the brand. The cooler is less than 20% of the revenue today. Like 70% of the revenue was actually water bottles, right? They were successfully able to go from a high ALV product with low LTV to like a gift giving product that has way more mass market appeal. So Rich is doing the same thing right now. So our wallet business is very strong. It's $100 million a year. But over half the business now is all the other stuff we made, right? So what I care about the most about is percentage of revenue coming from these new product categories, right? How's the phone case is doing? How's rings doing? And that product mix because the future of our brand is having way more different product lines that all can stand on their own and acquire new customers. So one of my existing members, how many ring customers do I acquire today? How many ring customers in the UK did I acquire today? Because my ring UK business is bigger than my wallet business, right? Those different things. And then the next one is just returning customer revenue. That's been the biggest weakness of my business. If you have a high ALV product, you probably have the same problem where, you know, 70 to 90% of your sales are new customers, right? Because once they buy something, are they gonna come back and buy another thing, right? With the wallet, people loved it. We had to, like our MPS is 97% or whatever. People love this fucking. - That's high, baby. - Yeah, that's high score. - I mean, we have hundreds of thousands, five store of views. But most of them were like, yeah, I love the wallet. And I sent them an email, hey, do you want to buy another one? They're like, of course not. Why the hell would I want to buy another wallet? I only need one, right? So we've lost all these new products to solve that problem. And so now I look at returning customer revenue as, you know, our gold star. Can we ever get that to 50%, that's what we're looking for. - Makes sense. We're gonna go super deep into product and product assortment. Because you definitely have done a lot of things that are unconventional. The fact that I definitely think you were labeled as a wallet company and now you have, I mean, I saw that the rings did like eight figures for the first years. I want to dive super deep into that. I want to go back into just more from a CEO perspective that obviously has marketing and analytics chops. What are you looking for holistically? I know you're obviously looking in platform. Are you looking at like ROAS in platform or MER holistically? What is that one big number that you're looking at from an efficiency perspective for the business? - Yeah, so I think the more rungs you move down in the organization, the more they care about channel specific ROAS, right? So for ruin my team runs everything for U.S. meta, right? And he cares a lot about individual ad ROAS, right? And then when you go up a level to Jimmy my VP of paid, he cares really about Facebook ROAS in particular, right? And then if you look at my CMO, he cares about digital channel MER, right? I care about a holistic business MER, right? I look at all those other metrics, they're totally fine. But like what I'm looking at is how's the whole business growing, right? So I'm including wholesale and Amazon international markets. And then what is the whole business MER? And is that hitting their targets? Because I've been pretty open about this, rich as a business will spend half of our revenue on marketing sometimes, love it. - Wow. - Yeah, well, the 2X MER, right? And it's because we have the margins to support it and we understand that like we're an attention economy, right? I have to spend all of my money on marketing if I want this thing to grow, because that's the lever we have right now. - I mean, I gotta ask you right there, if looking at a percent of revenue, you're saying you're saying 50% on marketing, what's your human capital is a percent of marketing? It's gotta be like 10%, 15%. You have to have a super lean team, correct? - Yeah, we have 45 full-time US employees or something. So it's like by the human payroll, 7% of revenue or something. - 7%. - Yeah. - Everybody out there is a percent of revenue. That is astronomically low. I feel like in consumer, I mean, I've been ballooned up to 25 before. I feel like people are at 25, 30. Where do you think you need to be to win? You have to be what? At 15 probably, to win? - No, 10 or less. Dude, the modern market. You hear about these companies. You know, there's a company I'm close with they're in the hydration space. I think they have four employees who'll do $100 million, right? You know, dime, beauty ended up selling and they had, I think, six employees and they were doing $65 million or something, right? I think we've kind of missed it like the leverages there, right? Shopify has built the best website thing ever. I don't need web developers, right? Instead of rich, we do have a couple web developers. We end up having three people on the team. But like, think about the most bare-boats teams possible, right? You can just use out-of-the-box Shopify. Facebook gives you all your customers. So that's the most important thing. Yes, you need CX, but AI is really helping with that. And you need product dev. So it's maybe you need four, maybe you need six, maybe you need eight people. And you could be doing $10, $20, $40 million. Dan from Create, I think, was four employees doing $40 million a year, right? - You're a team company. - Yeah, yeah. So you asked the question, what do you need to win? - I think it's so obvious, what wins right now? - Let's go one to one. You go one, I'll go one, you go one, I go one. You go first, what do you think? - Okay, I think consumable is the most important thing possible in winning. - Let's do a one A, one B. One B will be, you need a good LTV in conjunction with the consumables. Now you go. - Okay. - You need very small skew counts. - Yeah, A, G1, I agree with that. I think you need a massive tam. - Totally. - Massive tam is super important. And then you need the ability to get into mass market retail. And mass market retail, there's only three that matter. Target Wal-Mart Costco, there's only three that matter. - I agree with you. I would say, and this number has changed for me. I once thought of a 70 point margins. I would now say 75 point margins. - Yeah. - I think that's a good one. And let's even stop there. Because let's talk about what we just described. So a consumable with strong LTV, that could be sold in mass market with a large tam with good margins. And then groons comes to mind. Okay, groons is gummies. Okay, so they have one flavor. Anybody can eat them. They made them gummies because they're good for kids and moms and everybody. And they taste good, right? They help with immunity and vitamin support. And you can buy them in Target and Wal-Mart and Costco eventually, right? They're in sprouts right now. - Layer on the vanity or health element of something. And then I think you, let's talk about it right now, the health element. - And what did everybody fuck up previously? It's like, look, rich is a great business. I make a lot of money. We're gonna run this thing forever and we make great prox people love. Awesome. I love this thing. What everyone screwed up is like, no, we should have just been focused on, the internet let's just go as wide as we want. The best thing is a hyper focused, awesome product with a large tam that could eventually be sold in mass market retail. And this is why fashion's such a bad category to be in, right? - Where's the category? Even worse than art. - Yeah, yeah. So we talk about fashion. If you want to be selling high-end women's apparel, there are no wholesale accounts. You're like, okay, what about North Streams? They just got taken private and they're going through a whole restructuring. What about SACs? They're not paying people. They actively aren't paying their vendors right now, right? - All the money's in the bottom for apparel and then there's just everyone is trying to get to the bottom. There's still money in the middle at mall, but at the top and the North Streams, the Bloomingdale's, those businesses, I mean, Barney's went out. Those are tiny businesses. If your strategy is like to win in North Streams or Bloomingdale's, you're gonna have like a $2 million business. Like you're not gonna have anything in there. - And they might not pay you, dude. - Yeah, and anything that's cool is bad to be in because people will do it for free, right? It's the reason why being an actor sucks and being a dentist makes you a ton of money, right? It's 'cause if it's cool, a lot of people do fashion brands for free or they have rich parents they'll pay them to do fashion brands, right? So like, fashion's the worst category of being. Going back to drones, it's like they have one skew to manage, right? It's on subscription every single month. I think you can only buy it as subscription or it's like subscription first, right? It gives them predictable supply chains, right? They have a supply chain domestically, right? They don't have to worry about tariffs or anything else. It's like they're just taking gummies. - They don't know that. - Yeah, yeah, so it is the perfect business and that's where everyone was just wrong for 15 years, right? Like a way, I love the team over there, they're fantastic. Lugage is the horrible category to be in because Sam's tonight is the only people, they're the strategic, right? And they have 50 points of margin because shipping a suitcase places is really expensive. - I know, I let this with art. It's over 39.5 inches on one side. You get absolutely smashed on the shipping, especially internationally. Yeah, I mean, to further reflect on what you're saying, I mean, you're, I know that you've already thought this and definitely said it. You're on hard mode, right? Now with these wallets, it's literally, it's a want. It's not a need. And if you get something that's a need with LTV, it just becomes, it's just such an easier game. The big thing is just picking the right game. And I think so many people just get into the game. Okay, a perfect example. And then kind of it is what it is. But there is way easier games to play. Like what we're going back and forth on these, the seven point checklist, there is an incredible amount of opportunity out there. I mean, I just spoke to Helium 10 and we did this little exercise in the back end of Amazon and we went super granular in all the fields, looking at how much, this is gonna blow your mind, bro. How many creatine companies last month did over $10,000 in revenue? - Oh. - Bro, go. - Oh, we're gonna say $5,000. - $230,000. But $10,000 and some of them had like two pictures on the PDP things. Like they're literally, and of those two 32, I would imagine two 19 of them have fake creatine or two percent of the amount of creatinine. So I think picking the right game for everybody out there listening we've talked about in the past episodes is quite frankly more important than how hard you work or even who you work with, it's picking the right game. And going through this checklist that we're talking about right now. - Yeah, so Peter Tiel said this. 'Cause Peter Tiel, I mean, did PayPal, made a ton of fucking money and then he opened a restaurant. And he's like, if you wanna work really, really hard in a nice fight and super competitive and make no money, open a restaurant. - And that's when he ended up building this whole thing. He made it up running a book about how monopolies are good. He's like, no, you wanna build a monopoly. He's like, whatever-- - Have additions for losers. - Yeah, exactly. And he's like, that's what running a restaurant. That's what I taught him. Now, the advantage of doing something on hard mode is that we're both really young and that it teaches you a ton of skills to then go, like, as soon as we got into a category that's easier, beat that rings or whatever else, anything even slightly easier than wallet, immediately took over the whole market and made a ton of money, right? And it's because trying to sell the 10th million wallets to somebody, everyone in America's already seen it. They already heard about it. Like, getting them to get that purchase is so difficult that once you learn that skill, we can go into something slightly easier and make a ton of money. So that's what we've been doing. - I agree with you. I'm excited for that day. I wanna go back into partner ads. You mentioned it briefly. I know, I've looked at your guy's ad account and I know that you guys are heavy on partner ads. For some people, a lot of people be included. Partner ads are actually performing better than standard ads. So I'd love to know how are you guys utilizing partner ads? What percent of your ads are partner ads are for standard ads? Just tell me a bit about what you guys are doing there. - Yeah, it always changes, but no, partner ads are working better for everyone I talk to and it's because the single handle really, really helps. And then also a meta is prioritizing partner ads. Like, they have said internally that it's a big goal for them. I mean, it's been public. Why are they pushing this out so hard? And it's because they get better signal when there's two handles on it. They get better targeted when there's two handles on it. The AI algorithm prefers it. So, I mean, you know, it depends. Some ads don't make sense to run as partner ads, but it wouldn't surprise me if in queue for half of our money is going on partner ads. - 50% of your money. - Yeah. That's incredible. For people listening just to give you full context, you basically connect with any other account on the backend systems and then you can run creative through both and per what you just said, they're going to take audience data from both, which obviously makes the algorithm smarter 'cause they're getting fed more data. How do you guys set up your way listening system? Are you guys paying people flat for the content, a percent of spend, a percent of revenue? I'll tell you how I'm doing it too. I'd love to hear how you're doing it. - Yeah, we don't give anyone a percent of revenue. So, like, it is all just-- - I'm a nice guy for those people out there listening that I'm paying on the top, but keep going. - Yeah, yeah. I mean, everything is, 'cause the other thing is, what we found in our testing is the account doesn't matter that much. So, like, we have done deals with celebrities. So, like, we've run ads from, you know, more 'cause it's an honor in the business. So, we run ads from his account all the time, but we've done John Daley, famous golfers. We've done, you know, famous actors, famous musicians, and they don't perform that much better or statistically, like, you can't really draw a correlation between like the name on the account and just a random account you create known, right? - It's a take it as that further, the amount of followers completely irrelevant. - Yeah, yeah. - So, we have a bunch of accounts we own, right? Like I said, you should make a bunch of Instagram accounts, right? You can just do that, make it just be partner ads for you. - Daley Wallart is me, don't worry. - Yeah, there you go. And, you end up running from the founder account, you end up running, they can run it from my account. I think I want my wife's account, whoever. And then if we do end up using with UGC people or influencers, it's always just a flat fee. I'm not gonna get into the math of trying to figure out how much I spend on your account and then you audit me and I send it over. I'm not doing that. It's just, I'm not, I'm theory I'm not against it. But I'm not, it's not worth the two, three, four emails that's gonna happen. - So you're just paying, here's the SOPI, I want this type of content, I want these hooks, these bodies, and then you're doing all the editing, or are they giving you finished content? - A lot of times we will send them stuff just to post on there and run. Like they might even be featured in the ad or not, right? - Interesting, so you're giving them the content and you're just using their account to run it. - Yeah. - Wow, I like that, that's rare. Anything else that you see big for the people listening on the whitelisting side that you would recommend? How are you finding people to whitelist weather? Are you guys using a tool? Are you guys using Superfiller using social snowball? What are you guys using to find those people? - Yeah, I'm a big fan of Superfiliate. We also do a lot of gifting. So we'll gift out, you know, arc, no, to re-funnel. So we'll gift out with re-funnel, right? I won't get a bunch of people coming back in. And if somebody makes good content, 'cause like you're getting a free wallet, no money, and if they still make good content, oh, that person's now in our UGC funnel, right, we're gonna pay them to make content. And if we give out 100 free wallets, maybe two people make good content, or like content worthy of spending add dollars on. So that's like a way how we source new people. But you only need a roster of like, at a brand R size, 30 to 50, if you get to 100, that's a ton of UGC people. 'Cause you wanna give them consistent work all the time, right? So, re-funnel is a name of an app or a tool that you use to find the people. You're gifting them for free. You're seeing the content. If they're good, you engage and you bring them into your kind of internal UGC machine. - Yeah, yeah. But yeah, a lot of people do TikTok shops just for this reason, right? You do a bunch of gifting. You find who makes good content. Now they're part of your UGC team, right? Super filling has a bunch of great people in there. They have a partnership with Meta to get that going. So, we use all those different tools and softwares. And then yeah, we just have a roster of like, probably 50 people, and we'll use, and then part of the paying for UGC will also get access to their white listing. - Love that. I would say for people out there listening, something that we've done that's been very, very successful. I took it from other brands that are crushing the game, is giving a long PDF and SOP, and literally saying, these are the 50 hooks. These are the three or four B-rolls of bodies. You get all of that raw content, and then our internal editing team can do all of those split testing that you talked about earlier in the conversation. They just have more malleability on the creative, because they go back and forth to get somebody and ask somebody to do something, is a lot. - Yeah, you never want to be delivered finished assets, because you're gonna want to cut up and change it. The other thing is, you guys are under the game. I talk to so many brands who don't have internal editors. It's like, that is the biggest unlock you possibly have. I talk to a lot of brands, I'm like, you don't even need more content right now. You have a bunch of content that just edited like shit. It's like, we can make something really good out of this. - It's so funny. We use pics.io, PICS.io, and it's like a, it stores all of our content, and it's an interface. And like, when one of our new guys came in, he, that's the first thing he said. He's like, no more new content. We have 10 years. We could all this stuff from 2019 and why we not using it. So, to give you context, it's overseas, but we just hired another two. We have six editors. And remember, my company is a bit smaller than yours. Obviously, it's overseas. But I don't think you can overindex enough on editors. - Totally, dude. And, you know, you say overseas, Latin America has some of the best editors on earth. So it's like, you should go to Argentina and Brazil and hire people from there, because they're really fucking good at editing. - Philippines. - I'm actually the mayor of the Philippines. My business partner lives in the Philippines. Nice. Philippines is nice on the creative side. I wanna dive into influencer. I, to give you context. I jump-started iconic through. We've sent out 7,500 free pieces of art and for the first five years of the company. No attribution, just top of the funnel. Look that blended mirror and it worked well for us. You guys, I know, are a systematized machine. So I would love to understand and know what is the influencer strategy for Ridge? What is the SGA, the team underneath it? How are you guys attacking and going after influencer? - Yeah, it's changed a lot. So like in the early days, we were spending money on meta. The business, like 2016, we're probably doing $10 million a year. And I just watched a ton of YouTube. Like, I'm a fucking computer nerd, right? So I was just spending a lot of time watching YouTube. And I started thinking, I'm like, look at square spaces getting these people to talk about it. We should do the same thing, right? And we started sponsoring probably 50 accounts that year. The next year, we probably did 500 accounts. And what does that mean, sponsoring? - So we would find their email, right? Or we find their Twitter or we find their Instagram. Shoot 'em DM and say, hey, we'll give you $500 to talk about Ridge wallet on as a 30-second mid-roll read, right? So this was so early that a lot of these terms weren't defined. But a lot of people, when they started about sponsoring YouTube videos, they wanted dedicated videos, right? So like, I go to a gaming channel, hey, make a 30-minute video about why you love Ridge wallet. Nobody wants to do that, right? You're often going to super low. We want integrated ads inside your content, just like a mid-roll ad on YouTube. YouTube pays you an RPM for showing ads on your content. So you know organic, or basically, it's looking like an ad within it. - I mean, what if people said, "Hey, this video is brought to you by Ridge wallet," right? And they talk about it for 30 seconds. And we were really early to that. And so we would just, we had, you know, we probably had two people internally who would just find a bunch of YouTubers. So they would either pay scraping services or they would. There's like a couple like databases of YouTubers. Now there's a bunch of social tools, they all fucking suck. So I don't know if they're going to sponsor your podcast, you can blew them out, but Grinsox, Creator IQ sucks. Like they all suck because all of the data is just so old. And those lists have just been destroyed and abandoned. YouTube's a dynamic thing, right? Like an account that's big this year wasn't big last year. So if somebody did create a database from three years ago, they're not even on that fucking list. You want to be on like the best accounts. And their best accounts typically are rising right now, right? So we would try to find new YouTube accounts that we wanted to be everybody's first sponsor. That was like the goal of the company, right? So if you had 10,000 subscribers and you've never done a brand deal before, we'll give you $50 and teach you how to work with brands, right? So you could get good pricing. Yeah, we got good pricing. We were early on that we built those relationships. We were a fiovon as like a super famous podcaster. We were the second person to sponsor his podcast. The first person was a local pizza place. So like I did the deal with him on the phone, right? Now these adorates are probably whatever, six figures to work with him, but back then it was a couple hundred bucks, right? So we wanted to be super early with sponsoring all these accounts and build a good relationship over time. We ended up working with, you know, Anthony Fontano for five years or whatever, right? We ended up working with, you know, Marques back in the early days. So is this going specifically after people that influence your specific ICP or with something like Wallace, where you're just going kind of like super broad? We were sure, so YouTube's a male dominated platform. So we thought we could just reach anybody on the platform. So we were agnostic and we were not brand safe. So like, oh boy. So we were able to get really, really cheap CPMs 'cause I'm like, I don't care when you post. I don't care what you say. Just tell people to buy the wallet. So we would work for a fishing channels and music channels and comedy podcasts and, you know, everything. A lot of brands come into it being like, I just want to work with this one awesome account, right? I just want to work with Mr. Beast. I just want to work with this like very prestigious like female influencer. That's really hard and really expensive. We were like, we want to work with anybody at this price and we were getting five to $10 CPMs to sponsor all these YouTubers with really, really good ad units. Where you tracking with UTMs where you're just looking at like Google Analytics. It was just coupon code and they all had banded URLs. So we could see click coming through direct revenue and then coupon code usage. And the idea was that like Facebook cost, you know, $15 through 2000 people. I can get a better, longer ad read with a creator talking directly to a camera for $5 or whatever, right? And the thing that everyone, everyone misunderstands on that platform. It's evergreen. I have, I mean, who knows? I've got leaked on coupon sites, but I mean, we have stuff from a long time ago that we still get sales from. It's crazy. Yeah, totally, dude. I mean, the event from episodes from 2017 still driving sales, right? So yeah, we have, you know, we've worked over 5,000 YouTubers at this point. Our peak year was probably 2020. As soon as the world shut down, you know, they, there's a lot of people who needed revenue. So we just ended up selling long deals with everybody and ended up, a lot of people were watching YouTube. So we ended up having a huge year. So those years just based off YouTube influencer. So that was the original strategy. Really small team, two full-time US people working with VA's or contractors or data scrapers to get us a bunch of lists, cold blast all those lists with very clear instructions. We'll give you a free wallet. We'll pay you this price. $5 CPM is to talk about us. So we did that at scale. And that worked really, really well. We got to 5,000 YouTubers or whatever. 2021 rolls around. And that's when things got crazy because crypto got into the space, right? So like I said earlier, crypto literally was spending a thousand times what we would spend. And it didn't make any sense to us. Obviously they don't have any cogs. But I'm like, they're mathematically, they can't give you $3 per view on this YouTube video. Doesn't make any fucking sense. Now that was a scam, right? FTS sold a bunch of money. They burned it. And then 2022 happens. There's a big crash and like around 2023, then all these YouTubers actually need to, they need money again, right? Like all the money got washed out of the system. It was a big boom, then it was a big bust. So we ended up getting back into sponsoring a lot of YouTubers. But there was still a lot of price memory. People like, I used to get $1,000 of CPMs. I'm like, yeah, but you're of use of grown down and also no one would ever give you a $1,000 of CPM. That's crazy. So 2023 and 2024 was hard navigating that. It's like influencer was in flux across the board. And the strategy now is, we're actually trying to do less YouTuber deals and be way more involved in the YouTuber deals. So like MKBHJ is a good example where, you know, we'll get, we'll be on 20 of his videos this year. And they're all very high touch. They're all really, really integrated. We get add rights to that content. We get to whitelist that content. And we're picking the content that has the biggest cultural impact. So we're trying to do fewer better deals. So this year we might only work with 300 YouTubers, but we're trying to make those videos like as standard as possible. So we used to, we used to spray and pray work with everybody, going up to this big boom, then there was a massive bust. Then like we took us a year or two to figure out our footing and now we're trying to get like really deep integrated deals. - I would recommend that sequencing for anybody to spray and pray, see what works before you go deep and narrow. You just like casually glossed over a guy with 20 million plus subs. This Marcus Brownly deal. Tell us about how that came about and what does that actually look like as much as little as you want to tell us. - Yeah, so we, I said this earlier, our biggest weakness is that like we're not good at organic, right? And we saw the boom of creator led brands. And it makes so much sense that like in the future, there'd be more creator brands. People buy from people, right? We talked about, you know, the all birds of the world or whatever. Like, brand is just a short form for familiarity. We talked about that. And all birds had to like raise hundreds of millions of dollars to spend money on ads to get you to be familiar. We're in the future, the people you already watch every day and like them getting into products just makes more and more sense. So like festivals is crushing it, joy rides crushing it. But there's also like a bunch of creator apparel brands and like there's a bunch of brands you've never heard of that'll do 50 million dollars this year but like have no marketing spend. They are just creators who are making cool stuff and people that buy at them. And it's every little pocket of e-commerce. And so we saw that happening and we're like, we need to get ahead of this wave. How does Ridge become a creator brand? - So in the context, what year was this when this epiphany happened? - Like 2022 maybe. And I put a tweet out and I was just like, maybe this is 2023 and I put out a tweet and I'm like, "Hey, we want to bring on a chief creative partner. We want to give them a million dollars a year." And the tweet probably got 500 likes or whatever. And I said like, "Hey, our dream get is Marcos Brownlee, but if he's too busy apply here." And we had a bunch of applications, like 1,000 people came in. I offered it to Colin and Samir at one point. They were too busy. And you know, but we ended up going through this list and we worked with Marcos in the past, we had a really good relationship. But I'm like, "Hey, I'm gonna make sure he saw this." Right, so I just sent it to him like, "Hey, are you interested in this?" And he's like, "Yeah, totally." He's like, "Let's get on the phone, let's handle the details." So I ended up that he ended up coming and being an equity member of the business. So Ridge is still bootstrapped. We've never raised any money. Six people on it. So me, partner, Connor, the three original founders and Marcos Brownlee. So there's six of us on the cap table. And in exchange for that, he helps us plan our product launches, right? So we have new products, he gives us feedback on them. We create products together with him. We use his image and likeness, you know, in Best Buy. If you go to Best Buy right now, there's a big picture of Marcos Brownlee. And then there's our phone cases and our powerbecks and our cables and our wallets, all right there. So it's like legitimizing in wholesale. And then we get distribution on all of his channels, right? So, you know, we get, we're gonna be on 20 plus videos this year, a bunch of social posts, all of the other stuff. We do, you know, creative shoots together so like we're getting him and ads and everything else. And it's just helped us be better at storytelling and like more of a, you know, Gen Z brand. Like I think Gen Z creators are fucking crushing it, being creator brands, TikTok shops, whatever. This is our learning to get in that direction. - So for context, I mean, this wasn't a sweat deal. You're paying him and he's tied to different marketing deliverables and things he's has to do. - Yeah, wow. That's a great gig for him too. And he's got equity upside. - Yeah, dude, I think it's a great gig all around, right? Because he brings us just like a ton of legitimacy. Like we're getting into tech products for the first time, right, like our phone cases. A million brands do phone cases, right? If you ask anybody like, oh, what a saturated market? People say the same thing about rings and wallets and whatever else, but we'll do age figures the first year in phone cases, right? And it's because we have wholesale distribution that he kind of brought on board, right? We'll be in all the Verizon stores, all the AT&T stores, all the best buys, right? And also being able to use his credibility on our ad challenge, everything else. - If you had to tie one thing, what is that one fundamental thing that he brings to the table that you get that asymmetric benefit? Is it trust? Is it distribution? What do you think it is? - Yeah, and the asymmetric side is distribution. I mean, we're talking about, what would a brand pay for 500 million long form YouTube views, right? We probably won't be in 500 this year, but of course the deal would be over a billion views in his content with our products and our ads. That's just like worth a ton of fucking money, right? I mean, tens of millions of dollars, just the distribution piece alone. - One piece of this that I think for people out there listening to, and I just spoke to somebody yesterday about this, understanding and knowing. There's a word called strike press. We'll probably go into a whole episode. You had the same lawyers me, by the way. Goodie? - Yeah, yeah, yeah. - But he is the greatest lawyer of all time. Goodie I got, he shout out. - Did he better be a penny for this? Do you know how much lawyers make? - He's the greatest. I love him with all my heart, goodie. Understanding and knowing strike price, strike price is the valuation of your company when you issue equity. And if you issue equity at let's just say $20 million, you only participate in the pro-rata equity that you have in the overage. So you doing that deal with Marquez, that's a great win-win deal because he doesn't participate in all of the value that you guys built up until, I don't know, hundreds of millions of dollars. But at the same time, he's obviously taking the bet that you guys get to a billion dollars, which quite frankly, he's got a hedge 'cause you're also giving him a million dollars a year. So this is like a win and win and win and win. So for people out there listening, when you get to a little bit of escape velocity, I'd say even like a $10 million valuation, you can bring in people that only participate in the upset. And people don't understand and know that. That's a huge win for you that way. - Yeah, yeah, we should break that down. So you could give people options, you could give people a warrant, you could do something called the profit interest units, right? All this is is people get really scared about giving away equity. 'Cause we're like, I built this whole thing, right? Well, let's say your business is worth $50 million, you can't actually give someone one percent of your business because they would have to pay taxes on that, right? It's like to them, to the IRS, it's a material gain, right? Maybe this is way too in the weeds for everybody. - It's not. - But that's why you give PIU units, which are not taxed. They're only taxed on a change of control. - Yeah, and it locks in that first 50 million. That's still yours. You own that completely, right? But everything from 50 million and up, I will participate in whatever that percentage is, right? So it's a way to bring more people in the equity pool without giving up what some of you've already built. 'Cause we both agree, it's only worth $50 million today. Wouldn't you give up half if somebody could double your business, right? 'Cause it's only worth $50 million. - And what it also does too is it really incentivize people to take early bets when the company is valued lower. 'Cause you get a bigger upside with the company. That's why people, you know, do seed investing or early investing 'cause they're getting at a low strike price. We're even if you get in at five and you sell for 50, you still tend extra money. So I think people need to understand strike price. I love that deal that you did. - What about any other channels? Anybody else you wanna call out? The guys mentioned this Linus Tech Tips. I'm not a big tech YouTube guy, but is there any other big partnerships that you wanna touch on that have had a big, big benefit in your company? And why? - Yeah, well look, there's probably like 10 names to come to mind. You know, we worked with Theo Vaughn really, really, really early. And he definitely drove millions of dollars in value when we were just getting into the whole podcast space. So I think working with him opened up doors like more comedy podcasts and everything else. So that was a really good one. We worked with Anthony Fantana from the Needle Drop for years and ended up being like a meme in his own community. And you wanna work with the channel long enough that you end up being a part of the community, right? And we also found that there's like unique alpha in like very funny sponsorships, right? It's like Squarespace sponsors everybody with the same exact ad read, right? I'll pick on them or I'll pick on Hello, Fresh or whatever. It was funny for the, you know, number one music critic on earth to be talking about why you should buy a wallet. And for him, it's a, it's a non-competitive deal, right? When I bring up a lot of tech tips is a great example. We were a lot of tech tips for seven years at this point. We'll be in 50 videos this year, right? Something like that. They can only work with so many tech sponsors, right? Because, you know, if they start working with too many GPUs or too many monitors or whatever, right? It ends up calling their credibility in the question, right? If Mark has, if you did a review of an iPhone, but then he took money from Apple, wouldn't that make him people like, oh, well, you're actually reviewing it? Or are you protecting your bag or whatever? So it's, these are called non-indemic sponsorships, right? So endemic sponsorships is if you're a tech review and you take money from Apple, that's pretty bad. Nobody really likes to do that. So that people look for non-indemic sponsorships. So I would never sponsor a wallet account who talks about wallets all day long, but I'll sponsor anybody else. And it's going to be pretty impressed as well too there, as well because that's how they make their money. Totally, so like, you know, we work with a, you know, strad man, he's a, he's a big car YouTuber, right? Now, if I sold, if I was a car auction website, and I try to sponsor him, I would have to pay out the teeth or he wouldn't even like that deal, right? He's like, fucking wallets, who cares? Yeah, man, this is my car. I drive lambo's, I have a fucking McLaren, and then here's my Ridge Wallet next video, right? So there's non-indemic sponsorships who are really crucial to that growth. - So funny you say that because that's one of the reasons why we win so big in licensing is it's just, we've turned on examples like monopoly, like they were not making money in the art category. And then like, we have a seven figure, you're a business with them, we just turned the lights on, and we were just net new money. So for people out there, if you want to go sponsor an athlete, and you're in the apparel space, probably not a good space to be in because they're getting paid a shit ton of money from companies like Nike and Adidas. So being niche actually can help in getting really, really good priced deals. - Yeah, so on that one point, we try to do a wallet deal with Harley, and then they wanted a crazy amount of money because Harley sells a lot of wallets. They're like, hey, you're coming into our space, like we price that really high, but we do an adieu with the NFL. And they're like, there's no other wallets in the NFL. So they're like, yeah, sure, we'll give it to you for cheaper. The Harley deal was more expensive than the NFL deal, which is crazy. - That is wild. I want to tie a bow on e-commerce just a bunch of random questions that just fire off from you. I guess let's just first start with Twitter X. Under use platform or e-commerce storytelling, how do you use Twitter? Because obviously, I see you posting on there a lot. What's your personal thesis on Twitter? - Well, if you're a brand, it makes almost no sense to build there, right? Like, the reason to build on Twitter is it's where the smartest people on earth are hanging out, but also you have to put up with like a lot of bullshit. It's probably like the, it's the least controlled platform. It's the only platform where they still have pornography and Nazis and everything else going on. But with that, you just have like, the largest breath of the smartest people. So like if you want a tweet to be seen by Mark and Dresan, it's like, look, he's not going on Instagram. It's like, so like the highest level conversations are actually happening there. And if you really care about one trickler subject, there is 50 to 100 people in there who are sharing a cutting edge research, right? Like if you care about economics or like you care about like China relations, like the experts are on there talking to each other, right? And you can go on there and actually figure it out. So think about it like a, like, you know, I think Reddit kind of has that same sort of thing where there's smart people having, you know, niche sub conversations, but like this is real time and like in the flow with everything else, reacting to news. So I think it's a great platform. I think it's underused by the average person but makes no sense for brands to be there, right? I started building there because also it's the easiest thing. I don't have to film a video. I can just fucking any stupid idea I have I can send off and then who knows what's going to happen? Guys, this episode is sponsored by many chats. The tool that is quietly powering all those common to DM posts that you guys are seeing across Instagram. I am personally a power user of many chat. I absolutely love it. I use it for my personal brand, the podcast and iconic. When we started using it, iconic was doing 8.5 million impressions a month. We're now doing over 20 million impressions a month. It boosts engagement, it drives more reach. It allows you to collect emails and segment them with crazy precision. In short, you create a customized experience and you can collect data. They're met as a official business partner, trusted by over a million accounts. And it's free for your first 1,000 contacts. The links below in the description start turning your comments into conversations. What's one thing you used to believe about e-commerce that you no longer do? You know, I've probably been I've been very dogmatic in my approach that like, you know, you have to do things x, y or z and the more businesses I learn about, the more people I see do things different ways. And I'm like, oh, there's a million different ways to win this game. If anyone ever tells you you have to do x, y, or z, there's about five different caveats in there that they're not telling you, right? I'll bring up two good examples. Do you know, do you know dude wipes? - Of course. - Sure. - Okay. In 2012, they did $100,000. By 2018, they went into a million dollars that year. So it's like, we're talking about slow, slow growth. And they'll do over $300 million this year, right? I would have called that business dad all along the way. I'd be like, you know this for four years. You're doing a million dollars to make any fucking money. I mean, even in 2020, I think we did $10 million that year, right? And I still would have been like, this is too, Richard was bigger. I'm like, this is too small of a business. You've been doing this for too long. But like, time and market builds brand, right? It's just about familiarity. It's just a short code for that. And then they end up just having a couple crusher years and now they're, but the end of the decade, they'll do a billion dollars a year in sales, right? It's like, fucking awesome. So I would have, in the past, believed that business was dead on arrival, that they missed their growth window or opportunity, that you're not going like this. And you're going like, this for too long, you're going to die. But just sometimes something happens. The other one I was talking about is baseball lifestyle. Do you know that brand? I have known Josh for five or six years. I know Josh and Bill were trying to get them on as well, too. They're moving warehouses right now to Denver. So it's been a bit busy. But I've known Josh since he was, I don't know, 19, 18. The guy was posting five times a day on Instagram as like a seventh grader. Yeah, crazy, crazy story. Yeah, and it's the same thing. It's like that business made no money up until 2020. When I say no money, like maybe a million dollars a year, maybe two million dollars a year, then they have a couple crazy growth years. They'll do over 150 million dollars this year, right? And to give everybody context, I mean, we're talking about, I don't know the exact numbers. I can't remember, but it's like one, it's like one, one, one, one, one, one, one, one, five, 25, 60, and then like 150. Like it's the most insane retail. They're smashing it right now. Yeah, and so taking a step back, there's a lot of different ways to win. A lot of people try to think consumer is tech, right? And it's like, we're so different. Things take way longer. Trend is really important. Cultures really important. This is why raising money is bad. I'm gonna raise money to grow. It's like your business will grow when it's ready to grow. It's way more like water on a plant, right? It's like, eventually you'll get apples out of it. And you could, you could be in the fucking desert for 10 years, the wasteland for 10 years. Then all of a sudden you get hell of rich. So yeah, man, just like, they're all, every business is a different, beautiful creature. And just, they all take their own time. Last question for E-Com. What do you think has been the most critical factor in Rich's E-Com success over the last? Let's call it almost a decade now. Never raising money. Yeah, I know like you probably could feel like a good tactic or something. But like, if we were to raise money, we would have died. We tried to raise money. You know, we're bootstrapped and people say that proudly now been like, oh yeah, we bootstrapped this thing. Well, I was in Comcast Venture's office in 2017. You'd be like, will you please give me money? You just gave away money. And they know and no one believed in the vision at all. 'Cause if we would have raised money, we would have done stupid stuff, right? The fact that we've had to be profitable every single time. The fact that I don't make money unless my business makes money has just made us to be way more conservative, make like way tighter bets and cut things that are failing, right? If I'm not making money on something, I don't have a big VC back. So I make sure I can just keep bleeding this thing 'cause eventually it'll work. We've just had to be so ruthless and pivoting. And I fail all the time. Someone the biggest fail is you've ever known, dude. We try a bunch of different stuff, fails whatever I throw it away. But like we try so much stuff and we do it all very profitably, very constrained that we can find a winner, right? Like next year, probably probably next year. By 2027, half of my revenue will be a new product that came out this year. So we're talking about hundreds of millions of dollars in sales, that much the same amount in enterprise value created just 'cause I took a bunch of random chances and we're gonna keep doing that. - So why and when should someone raise money? What do you think? - If you're a consumer, you should raise the smallest amount of money you possibly can, the fewest number of times. Because just like we said, we're playing life on hard mode. That makes the business good, right? If you played life on easy mode with being lucy, you see about margins never making the tough conversation, never cutting things that are like never getting lean as a company, you'll just fail way faster. So it's like, look, we raised 200% off a Kickstarter, right? So like pre-orders basically. And that was the only money that's ever came in this business. No equity was ever sold in this business, right? So if you don't have a bank hold to get your thing started, I actually, we're probably gonna skip ahead to like tips for entrepreneurs out there, right? - Go. - Don't just start being an entrepreneur. Get a job someplace and learn what that job is, learn what those people need, and do that for a while. Before Rage, I had an agency business. Before my own agency business, I worked at an agency. You have to learn something before we actually just got there and it's like, I'm gonna fucking start a business. It's like you have to really have to like be in the grind first. So my advice is be in the grind first, figure what you're gonna do, save up money, then do it. And if you have to raise money, the smallest amount of money possible. - What about debt? Do you guys use like debt for POs? You can kind of look at debt as kind of separate than raising money. Do you guys use debt or not? - So we, every business should have a revolver of debt. And we start, there's debt a couple different ways, right? So things you can do with debt. You can do a debt recap. So let's say you have a business, it's been running for a while, it's profitable, but you haven't really made any money. Just for everyone in the audience to understand, your business can do $5 million a year in profit and you can make 300 grand a year. And people on Twitter or drop shippers never tell you that, but it really takes to tell about eight figures in profit, $10 million a year in profit, before you can actually start making a million dollars a year yourself, right? - Actually taking chips off the table because it doesn't affect the cash flow. - Yeah, because if you're growing, more money has to go back in the business. And if it's not coming from business operations, it has to come from investors, it has to come from debt, it has to come from somewhere. So a lot of times when a business is like at that stage, they'll do a debt recap. A bank will come in, they'll give you money that you have to pay back, but you can take it off today right now in your pocket. And the debt is secured by the business, not by you personally. So it's one way to de-risk the business, take some chips off the table. The other thing you can do with debt is, just have a revolver open, right? Throughout the year, sometimes your business will have too much cash and you'll put it in treasuries or will have not enough cash and you'll need to take in debt. If you place a big PO, right? You'll end up having to use debt to fuel normal business operations because that money just went to go pay for a PO or whatever else, right? The other way you can use debt is factoring. So this is, you get a, you know, someone tries to order you from you like a target or whatever else. They give you this big PO and you need money today to fulfill that, you can go to a bank and then they'll give you a line of credit versus that PO. So there's a bunch of different ways to use debt as a business. We have an open retainer. We never use money on it. It's empty right now. - And forgive people context as well on that last part with a retailer, you'll have like net terms, like a net 13 at 60 and net 90 under the assumption that you're gonna pay the person back once the retailer pays you back. - Yeah, and the more blue chip the retailer the cheaper that debt is, right? If target gives you a PO, target's gonna pay you but they're like, hey, give me my inventory today. I'll pay you in 90 days or 120 days or whatever. And if it's a big order, you don't have the money to go actually get that made. You use a factoring bank to get that done. - And then you're negotiating better terms lower interest rates with the factoring people per the strengths of the retailer. - Yeah, totally. If you get one from Costco or Walmart, like you're gonna pay almost no interest but if you get one from the container store, they might not wanna give it to you 'cause they're bankrupt or whatever. - So I wanna go deeper into kind of like exit strategy, tam, what kind of long term opportunity went to raise money. What's your framework for thinking about an exit strategy? Like how early should founders be planning for that? - It depends on if they have any money or not. So like you should as quickly as possible get to $1 to $5 million in personal net worth, right? And that's just because then you can't be taken off the table. Like that's what it comes down to. I grew up like broke, like I had no fucking money. When I started like me and my CMO corner, we lived in one bedroom apartment in Koreatown. We took his like hand me down shitty Honda Civic to agency meetings. Like if you said Sean gunned your head, give me $1,000. I could figure out how to get $1,000. You said $10,000, I'd be dead. I couldn't not figure out how to get $1,000. And I was like 20, dude, I had no fucking money. So life gets way easier as soon as you secure $1 to $5 million in just personal net worth. So whatever it takes, I don't care if you're selling your business or early, I don't care if you have a bad deal. If someone, as soon as you can get that, your life, your stress level goes down completely. Life gets so much easier. So that's a life tip number one. And I'll actually, I'll never talk my friends at a deals if there's $1 to $5 million. Like if they have no money and they can actually get something off the table, 'cause we have a lot of friends in e-commerce. They'll get deals. And unless the deal is like fraudulent or they're trying to fuck them over like in some way, I'm like, look, yes, your business is probably worth slightly more, but if you're broke right now and this guy's gonna give you money, you should just take some money, right? You could always build another business. You're still gonna have a big chunk of your company, just whatever it takes to get to $1 to $5 million. So that's the real tip number one. Then we can start talking about exits, right? The best consumer brands are privately held for long periods of time, right? So the Europeans have this figured out way more than Americans, right? The Europeans have awesome, great luxury brands that like be cared for and hand it down generation to generation where they don't think about the quarterly performance, they really care about like, what are we building for like the legacy, right? These are hold codes with multiple brands underneath them. - Yeah, totally. And like, Elvy matches the best job of this because brands can't be hot forever. We'll talk about Stanley real quick. Stanley did $75 million a year forever. Like we're talking 30 years. They were at $75 million a year. And then they had one year where they got to $300 million. Then they had one and they went to $750 million. The Stanley Tumblr blew up. Now they're back at $300 million, right? And that's because things can't stay hot forever. Why does Brad Pitt only do one movie a year, right? It's because if you saw Brad Pitt and every goddamn commercial, you'd be sick of seeing Brad Pitt. There's overexposure risk, right? So what Elvy and Mitch does is they have a portfolio of brands and then they just slowly start rotating them through. So there's always one hot brand. And as soon as that brand starts to die, they put another hot brand in there. Now, they've been able to keep, you know, the namesake brand Louis Vuitton like very hot for a very long time. But Gucci has it. Curings and other hold co and they're super screwed right now because they have Gucci, they have Balenciaga, they have YSL, they have all these different brands, but all of them are kind of screwed right now. They don't have the next hot thing, right? So anyway, the point I'm trying to make is European brands are really good at like understanding the legacy of consumer in a way that Western or American brands aren't. There's a couple of American brands who do it really, really well, right? So New Balance brought them up earlier, probably held family owned profitable business that'll be, I think they'll be great forever because they don't, they have no reason to hurt their brand right now, right? Another brand I really love is James Purse. I wear a ton of James Purse. And James Purse is privately held on the thing for 35 years at this point. And he's able to, if the business shrinks, who cares? If the business grows, who cares? He can open hotels, he can open stores. The, every year he takes $40 million out of that business. That's a fucking fantastic business to own forever, right? So if you can own it forever and be profitable, you should just do that. Now, and if you, that's a privileged position and then we can talk about like the actual sales process maybe if we were to go into that. - Yeah, I definitely do want to go on that because I think people certainly underestimate the amount of touch points and the length of time you need to be engaged with someone to actually get a deal across. Like people don't understand like even in 19, we raised a million dollars and that took six months and they were a pre-existing partner with us. I think people just certainly underestimate that. So yeah, I'd love to just have you walk through the timeline of just understanding and knowing how long it takes to actually get a sale. - Yeah, well, there's a market for businesses under $5 million and those sales happened pretty quick. And those are like the micro acquires of the world, those smaller kind of aggregate websites. - Yeah, like you can go on flippa or quiet later whatever. These are searcher funds basically. So it's a guy who has some money and he gets an SBA loan and he's gonna buy your business and he's gonna run it better than you. That's the whole idea. He's a- - For four to 12 times the EBITDA pending on. - Bro, if you're getting- - If you're getting 12, I'm not taking any of that. - Yeah, yeah, yeah. - Maybe a little subscription or something behind that. - There's something good in that. - But like the current market's like one to two, right? Like it's- - One to two? - Yeah, the market has collapsed because Thrasio's not buying anything, right? So there was a big moment in time where Amazon aggregators are buying every business on earth driving up the multiples. - I don't wanna talk about Thrasio 'cause I knew from the start that wasn't gonna work and I could go down a whole entire rabbit hole why that makes no sense. - Yeah. - All of those made no sense. That's a different episode. - Yeah, so anyway, the current market is one, two, three act multiples and we're gonna buy some businesses here. We on some FBA brands we've bought there, but if it's under $5 million, it's pretty fast to get a deal done. But once you have a real business, it's a time kills all deals. Things just take a really long time to get them done 'cause they have to know you, they have to trust you, they're gonna look for fraud, they wanna see accounting statements. And also they wanna prolong the deal to make sure that like you're not inflating the numbers, right? If I start talking to you on the first of the year, we've probably closed in October. That's simply how long this stuff takes. And it's because they wanna see that you hit your productions. You say you're gonna do this, let's make sure you're gonna do it, right? They don't wanna buy something that you're propping up from being hot and then they buy it if false apart, right? So we were saying they, who buys businesses? It's mostly private equity funds, right? So private equity is a whole asset class of capital where they raise money from institutional investors or retail investors, whoever. And their whole business model is to buy your company, run it better than you and take that profit and eventually sell the brand for more money someplace else. They think I can get better returns doing that than in the stock market, right? So private equity buys almost all brands, right? The other class of buyer is strategic acquirer, right? That's typically a larger company or a publicly traded company who wants to buy you for some special magic reason, right? So good friend of the brand, Dr. Squatch, they got bought by Unilever, fantastic deal. That was a strategic acquirer. But before that, they actually were owned by some capital. So they were owned by a private equity group and that's typically the transaction. It's very hard to go from privately held, I own everything brand straight to strategic acquirer. That almost never happens. You simply have to stop through a private equity group. A good kind of a two guys just to understand and know on the PE side. There's something also called like a roll up where maybe PE buys a company and for them to get the multiple that they want, they're going to have to buy multiple companies to jack up the revenue to get the multiple. So be on the lookout when there is roll ups because if someone buys you guys and wants to and PE wants to roll it up, they might buy a wallet company doing five million dollars in revenue, 10 million dollars in revenue to just get more market share to blow it up. - Yeah, and so they often call these platform plays, right? The other, there's a very big one right now called mammoth brands. They have Harry's Razors and they just bought a diaper company because they're doing a roll up to go public, right? So they'll see they're trying to become a strategic. So there's a bunch of different ways to get this done, but you should do whatever it takes to get your first five million dollars. And then it's like only take money that'll change your life. I think you should own your brand first long as you possibly can, as long as you love doing it, as long as you love running it. And even if you don't love running it, hire a CEO, you know what I mean? Try to keep staying control for as long as possible. But if you really reach a point where you're like, I can't do this anymore, only take deals that'll change your life because if your life's not gonna change, why the fuck are you gonna sell your thing, right? Multiple's are compressed right now until good brands are being sold for eight to 10X multiples and it's like, wouldn't your father just own your company for 10 years? Get all the money anyway. And then at the end, still own your company, right? So multiples are not very frothy right now. Maybe they get frothy or in the future. - They wear frothy for everybody. The last thing we've talked about it in 20, 21, 22 and people like crazy, crazy valuations, crazy, crazy multiples. - Yeah, Rich got offered $300 million when we were doing like $100 million a year. I should have taken that deal. It fell apart because the market fell apart. If the market was hotter for another six or eight months, I would have, I would have sold my brand because it made no sense for someone to buy that business at that price, right? But there was a public trade company that company ended up getting punched in the face. - What do you think are the key reasons why someone would buy a company outside of obviously the PE and the strategic? Is it margin profile? Is it your product mix? Is it having meat left on the bone and retail? Like what are the big reasons why you think someone buys a company? - Yeah, so let's put strategic in a bucket because strategic can do whatever they want for whatever reason that they internally see, right? There's somebody internally who has an idea and then that's their prognosis they can do whatever, right? I also think, like I say, strategic for buyers for magical reasons, it's very much, you have no idea what their strategy is. I'm closer with like the Hershey's head of M&A and he's like, yeah, you know, we went to get a chocolate so we thought popcorn was good and they bought three popcorn brands for a billion dollars, right? And then they're like, you know, we think pretzels was good so they'll just do whatever the fuck they want. But then what probably I was really looking for is a sustainable business, right? You'll hear a private equity get scared if revenue's growing too fast 'cause they're like, I don't know what's going on here. What they're looking for is they have a playbook, right? These are, these are, everyone in private equity is old, they're all with the business school, like they are all, like they have gray hair and they've never actually ran a business before. They're gonna buy your business and then they're gonna hire someone to run your business and they want it to match a playbook. So they want really strong EBITDA. They want really strong cash flow because they're typically gonna buy you with debt and maybe we'll talk about that after this. So they want really strong business, really strong cash flow. - And on the EBITDA side, what do you think? What's strong to you on the consumer side? 15% plus? - Yeah, yeah, look, if you're getting EBITDA at 15, that's great, 15 to 20. I mean, if you're above 20, they start being like, what's going on here, right? You're probably not spending the correct, and you won't get credit for it. The big thing when you sell your brand is you're like, make sure you get credit for it. If you're like, yeah, we have no team or EBITDA's 40%, they're like, well, I can't run your business with no team. I'm gonna have to hire a team. So your EBITDA's really 30%. And they'll, there's add back and subtractions that they'll do to tell you what your EBITDA is, right? It's all a negotiation, it's all a dance. But 20% EBITDA growing 20%, they would love to see that. They're like, okay, this, and if you're growing 20% every year for five years or 10 years, you're like, oh, it's sustainable. There's some sort of mode tied to it. Maybe it's IP, maybe it's relationship with retailers. Maybe there's some sort of special thing happening in your business, right? So they want some sort of mode. And then they would love if there's meat on the bone, and they won't tell you about it. Maybe you have to tell them what the meat on the bone is. But like, internally, they're like, oh, we can do X, Y, or Z and make this business better. They'll have to see the meat on the bone. If you don't want to be like, hey, this business is doing 20% EBITDA, it's growing 20%, and it's perfectly optimized. There's nothing you can do to grow this business. It's the best. - I always give that advice to everybody from meat on the bone for people listening. I would say the two core meat on the bones, I would say is product and distribution. Like, hey, we haven't gone to retail yet. Hey, we haven't gone on Amazon yet. And the product said, hey, we're a clothing company. And men's clothing company, we haven't done women's yet to leave them room to go make that, make that multiple that you're talking about. - Yeah, and to close the deal, be like, but we're going to do that next, and here's all the designs, right? So that they can see the vision coming together, right? So they want to buy it before you do that thing. It's the X-Factor on that. If you're like, hey, look, we haven't been in retail yet, but we have this offer from Target, and I think we're thinking about taking it for Q1 next year. That'll rush them to get to the deal to that. - Looking, having been in this kind of D to C and X for, I don't know, now, including your agency, probably like a decade, what is the biggest thing you've learned from all of these exits? - You, most people don't understand deal terms. They get fucked on deal terms. You should read about the draft king's deal, okay? And you need to learn about what participation means, and you have to learn about the second butt of the apple probably never happens, right? So, for a lot of different reasons, and I did a Twitter thread on this, and it's not very intuitive, but everyone knows that when product equity buys brands get worse, or when they buy anything, it gets worse, right? I think that is the case a thousand percent of the time. I know hindsight's 2020, but some of these people that buy, especially these D to C brands, and the 2020-2021, I just don't know in what world they thought that they were gonna take this company for 100 to even 500, but continue, I'm sorry. - Right, so, and look, there's a lot of really good product equity groups, and they do really, really good work. There's some that I'm close with, and I think they're awesome, and there's a lot of brands who own a product equity, and they're still crushing it, they're doing a great job. But like, when you ever hear about a brand blowing up, it's probably because product equity put that on it, right? To explain that, even if a brand goes bankrupt, it can still be a good transaction for private equity, right? 'Cause all private equity cares about is return on invested capital, right? How much money did they put in, and what is my return over whatever time horizon? They're just looking to make the fund 20% on that capital every year, and if they can do that, it doesn't fucking matter, right? So, let's talk about how product equity buys things with that. So they're called leveraged buyouts. I have a company that's worth $100 million. You're of a private equity group. You agree to buy my thing for $100 million, right? We agree on the price. You go to a bank, and let's say my business has $20 million in EBITDA, so it's a 5x multiple. I know it's a lot of numbers for everybody, it's annoying, but $20 million in EBITDA, 5x multiple, I'm business with $100 million, you're giving me $100 million. I get $100 million today, okay? Well, that private equity group doesn't have $100 million. What they have is, we'll be generous, so they have $50 million. They're gonna give me their $50 million. Then they're gonna have a bank, give them $50 million for the asset of Rich. It's secured by my company Rich. Then they give me their $50 million. I now own 0% of Rich, and it only costs the private equity group $50 million. Yeah, they have to pay this loan down eventually, right? But they were able to buy $100 million as $50 million bucks, that's a good deal. That's a leveraged buyout, right? Now, we saw in peak syrup, people doing buyout deals with six or seven turns of EBITDA. What that means is if you had $10 million in EBITDA, they would get $70 million in debt, right? That's very, very bad. Like two to three is a conservative number. They say lever, you're levered up too high. Yeah, yeah. So with too much debt, so anyway, how does this end up being good for the private equity group? So they have a $100 million asset. They spent $15 million on it. They want to turn that $15 million into $100 million eventually. They just have to get this debt out of the way. So let's say two years go by, the business grows a little bit, and they're able to refinance that debt, and then they're able to take their $50 million off the table. Now, they own Rich, they have all this debt on it, but they had $50 million put in, and now they're at a net zero return, but they still own this asset. The other two years go by, then they do another recap on that debt. They find another bank to give them more money, then they let's say they're able to pull out another $50 million. Now they've doubled their money. So in four or five years, they took $50 million, and they've taken out $100 million in debt. They don't give a fuck of rich with bankrupt anymore, because they've hit their core objective is not to run good brands. You start to grow the brands. It's just to get return on invested capital. It ends up being a diversion. As a brand owner and operator, your goal is to build the best possible brand that serves your customers and makes money for you and everybody, and it's like a beautiful happy ending. Private equity can do the same thing, but their actual ultimate goal is just return on invested capital. That's the only thing they actually care about. So that's why you can have a really good business, go bankrupt and still be a good outcome for private equity. And then that happens all the time. So anyway, that's leverage buyouts. Maybe this gets edited out 'cause it's too fucking boring. - No, no, no, I love this. There's not many people on here that can talk about that. I do wanna talk about product of product and supply chain, 'cause like I said earlier, you guys were definitely known as a quote unquote wallet company, and you've really kind of reformed into a whole on accessory company. I guess let's just dive into what is that internal framework for evaluating new categories? Is it TAM, is it margin, is it cross sell? Like what does that look like? - Yeah, so it's three steps. I mean, they've changed a lot over time. The first thing is is it a CAC or an LTV product? Can I acquire customers on this or is this to sell to our existing customers? That's the first tree, right? How do you figure out what is your thought process and how that works? - Yeah, so a CAC product has certain characters that work with performance marketing. So it has to be over $50 in price point, right? It has to have a big enough TAM, like it can't be a compliment to something we already do, right? So you know, we sell a wallet. If I make an attachment for a wallet, it's an obvious LTV item, right? Where it has to not plug into the ecosystem perfectly already. - So CAC isn't that new and then LTV is just your current base? - Yeah, totally. So like rings, I can go out there and acquire new customers for rings who've never heard of the wallet business at all, right? I can go out there and acquire new customers who've never heard about this before, right? We sell a key case, which is like a thing that goes with your wallet. It's like you put your keys in it kind of looks like your wallet. I cannot acquire any key case customers. Like I can't run ads for it, right? So that can only be sold to existing people. So this is the first split is CAC versus LTV. The next is there some sort of LTV play here, right? Is it going to overall, you know, if it's a CAC product, you wanna be able to add $10, $20, $30, $40, $50 million in net revenue off of this. And if we're doing that, how does it fuel LTV for the rest of the business, right? So like it passed the first thing, which is CAC. So that gets a check mark, then it's okay. But what is the LTV ramifications? So what we found out is that luggage customers are very likely to buy wallets from us, right? So like it ends up feeding into the rest of the LTV thing. - And is that something based off intuition or was that like a focus group? Because common intuition, I would not think that. Maybe it's like the aluminum and the aluminum and like my wallet looks like the luggage. Like how did you guys come to that? - We saw that, you know, we're known for carrying stuff and this kind of carry stuff. And a lot of this is like it has, we've learned over time, right? It's like when we, we launched a bunch of different shit and these are the things that have worked and now we've learned what to work from those, right? And the last one is there's some sort of distribution play, right? So it's, it'll either work on Amazon or it'll work in wholesale or something like that, right? So it's more than just D to C, right? We want a CAC product that influences LTV that can also have some sort of, you know, distribution X factor tied to it. So like phone cases are a good example. So phone cases, you're like, okay, is it really a CAC product? It's, you know, it's between 40 and 75 bucks and it's, you know, we think there's companies out there acquiring customers for phone cases and we can compete in that action and win, right? So we ended up launching it. Then what we see is, holy shit, the LTV is awesome, right? People who are buying our wallet loved to buy the phone case, you only buy the phone case loved to buy the wallet, there's a lot of cross sell right there, kind of de-rest the whole thing? And then with the phone cases, they work great on Amazon, they work great in Best Buy. So like, we would do it just for those reasons alone. If Best Buy asks or something, we'll make it for them, right? And that like little checklist is like really pushed us into getting all of these new product categories. And yeah, it's totally changed the business. Guys, Sean is out here just giving straight codes. That's, that's an amazing code, an amazing thought process. Yeah, conventional wisdom, like, I always think of phone cases in a licensing world that we call it like a Chatchkey business and they kind of come and go. Yeah, I would look at it as LTV, like someone that has, you know, a red aluminum wallet, they're gonna want that to match with their phone case. So I can see how that makes sense. Throughout the whole entire years, all these years, is there an example of a bad launch where you failed? And if so, why? Yeah, we've done a bunch of bad ones. Like, I often say that like product launches are lottery tickets, or it's like, you're like, if you're in the music business, you're making a hit single, right? So like an album comes out, there's 12 songs on it. One of them is the single. Like, how come they're not all singles? Like, people at the company are saying this all the time. It's like, we'll make a bunch of products. Some of them work some of them down and they're like, well, why don't we try them with the other ones work, right? So some bad launches where we did watches, we did mini knives, we did a parallel at one point, right? Mini, yeah, like a mini, like a little Victorian ox competitor. They just didn't fucking work, right? And people are like, well, we should go back we tried different marketing, try to make it work. And it's like, no, the song isn't a hit. It's like, it's fine. Not every song is a hit. We found winners. Let's take those all the way, right? And it's like lottery tickets. You know, you think you have lucky numbers. Like you're like, oh, I'm gonna pick seven, whatever, 11, like all these different numbers. It's totally fucking random when it's a working, right? So you can have the system with your lucky numbers. You can think you know what's gonna work. You have no idea. We did the watch launch first and it was a massive flop. If flopped so hard, we thought the website was broken. We're like, we had a thing in Zapier looked up that like every time a watch sold, like it would ping and slack. And we didn't get any pings. We're like, oh, it must be broken. Like everyone should log in and make sure they can actually buy the watch. Nobody bought them. Like it was a disaster, right? - Those are the worst days, why not? You think the website isn't working? - Yeah. - It's like, no, it's a slow time right now. - Yeah, and that was the first product launch we did. I thought of wallets. We were like, oh my, like we're dead. We're dead on the water. Two weeks later, we launched rings, exact opposite. Immediately people start buying it. And internally, no one thought rings were gonna work. Everyone thought watches were gonna work. But I'm like, hey, we're trying a bunch of stuff. The engine is like we're trying stuff, right? It's okay to fail. We're just gonna try a bunch of stuff. Luckily, rings totally worked. Saved the whole business, right? 'Cause like if we were just a wallets, we would have fired everybody and just been a tiny little wallet company. So rings ended up working, ended up scaling that. But then we tried a bunch of different stuff. We do an apparel launch. We tried selling belts, trial selling all this stuff. A lot of it didn't work. But then we find luggage and luggage did work, right? And then earlier this year, we tried, you know, all these different tech products. And then we tried like a bunch of different knives or whatever. And the tech product just ended up crushing. So you have to like go through your own discovery period, what works with your brand. But then what we forget out is like, it has to have a high enough price point to work on D to C 'cause that's what we're experts in, right? Then like, it has to like be relevant enough to our audience that there is some cross-sell potential. That's that LTV question. And then there has to be the X factor. Can this work on Amazon as a standalone thing or kind of work in wholesale? Will Target give me a PO for this? And if it will, fuck it, we're doing it. - For people out there that want, you know, Sean has mentioned clearly the watch was just a dud and or these other products that's smashed. Like for us, we have a lot of skews. Like we have like kind of this mini test where we'll hit a new piece of our two art email list and we'll say, hey, if it gets over X sales, this thing has legs. B, how does it perform on organic? 'Cause usually organic directly ties into how to perform on paid. And then C will spend X amount of money on paid. And if it doesn't perform there, if it doesn't win on email, doesn't win on organic and doesn't win on paid, then we know it's a dutter. So that's a good kind of a mental model for people to do if you wanted like a smaller kind of test. - Yeah, and try to never bet the farm. That's where we end up doing. 'Cause I really think it is, it is, you are playing roulette. You have no idea what's gonna come up and you have to keep a bank role because you have to be able to hit winners, right? So we limit like the cost of a new product launched to under $500,000. I don't care what the minimum quantities are. I don't care. It's just, we are only doing something if we can do it for less than $500,000. And I talked to some brands. They're like, we're going all in on X. We're gonna spend $5 million on a big fucking chip auto shoot, roll it out into the world 'cause I think that raises the chance of success. You actually have no idea what's gonna work. Like, none of us have any idea what's gonna be a hit product. And it's just giving yourself the room to fail and try it again. Just try a bunch of different stuff. - How do you know if a product category is not too saturated versus still having wide space? I know that you have kind of your original rubric, but at what point are you just like, there's too many players in the space right now? - Well, it ends up being if it's a trend or not, right? So like, I think actually there's, you could enter any category, you feel good about. Like, I don't think there's any category that's too overexposed. We sell wallets, dude. Like, you can buy wallets at Walmart for $10. You can buy wallets at LVMH for $400. There's price points all throughout there. It's the oldest, it's an old stupid stuffy category. Same thing with men's wedding bands, dude. You can buy them everywhere. And we're able to build an awesome business out of it. So I don't believe in things being too crowded. It's like somebody out there is doing a shitty and you can do it better than them. But you want to avoid is a trend that can just go away overnight, right? I would avoid collagen right now, because health trends have this natural thing where collagen was really hot for like five or six years and then it kind of starts falling apart. And then you see creatines on the rise. We probably have two to four more years of creatine peaking and then I'll go down. Protein has been on a ripper. - Ender. - Yeah, for a long time. But like, it probably goes down. So like, you don't avoid those type of trends. - Do you want to know what's next? - Fiber. Fiber's a new protein. - I may or may not spoke to a guy yesterday that's starting a fiber company with massive distrail. You want to get it on this one too. I'm not going to say his name. You want it on this one. He's good. - Yeah, we're good. This guy gets it. - We're looking at the space too, man. It makes so much sense. - Yeah, I think what's really, really scary is, again, if it's evergreen and kind of has been tried and true for the test of time, then you're fine. But like, if you make your brand identity embedded in that single product, this creatine thing is this create, I get it, they're winning right now, but that's dangerous. 'Cause they don't have the ability to be malleable and iterate off of it, having some sort of core identity about like, I'm a health company. And I can go into this, this, and this. Because that fat game, I think a lot of people are playing with fire there. - I agree completely. Will from IQ bar, do you know IQ bar? - He is, I'm talking to him on Twitter right now. I want him on. - Yeah, he's fantastic. I'm stealing this from him. He's going to talk about it in the episode. You have to bring this out. It's called Trends Surface Area, right? So he chose IQ bar specifically, because he can be if like low fats, and he's low fat. If gluten freeze in, he gluten free. If protein's in, he's got protein. - He know, he's in all of them. - Yeah, so whatever the trend is, he creates packaging and messaging for that trend, right? You compare that to kettle and fire. I always talk about being bone broth. You don't want to be bone broth. Bone broth has this massive spike. They got huge revenue. But then people don't want it anymore, and it falls off like a cliff. Because people like trends, right? And that's what you're talking about. It's like, create cannot be anything else besides a create company, right? A create team company. So it's good for them when it's working, but there is the rest that like, you're tied into the trend too much. - I should probably sell that company on the way up. That's, that's, I don't know. When I saw with Helium 10 that back, and that was absolutely crazy to me that like, you have to see some of these PDP pitch as a people making 10K plus on Amazon with creatine. Like literally one or two pictures. It looks like a fake Amazon PDP pitch, and that's over $10,000. You can't see on how much they've spent on ads against it with this tool. - Really, really interesting tool. But yeah, I couldn't believe what I saw. - Yeah, and I got angry about what I was doing. I was like, why am I doing this? - Yeah, people are testing that almost none of them have creatine. And it's, and it's, it's mostly because creatine's actually very hard to put into gummies. It's like, it's not, it's not the natural state of it. Anyway, that's like this for, for a different podcast for a different day. - This episode is sponsored by Lindy, the AI platform that builds and runs powerful agents for both work and life. We set up agents to answer support emails and resolve common issues without anybody touching them. Where it really shines is handling all of those repetitive tasks. You can set guard rails too, so it never oversteps. Like escalate any refund over $500, or auto loop in this human for this type of request. And it does a million other things, like automating sales follow-ups, managing workflows, even building internal apps without code. Get $20 in free credits at go.lindi.ai/openresidency or click the link in the description. Now back to the full episode. - I want to dive deeper into product. What do you think are the biggest kind of profit margin killers? What are the things that people overlook when they're looking at profit margin? - It always comes down to shipping. So the gross margin number was talking about earlier, right? You said you want to gross margins at least at 75%. And then the big question I asked people is are you including shipping to customers, right? Because a lot of people don't include shipping to customers in that. And it's like, okay, then your business is fucked up. Because every public-traded company that gross margin number you see is science-yield-delivered cost to customers' door, right? So it includes Amazon fees, it includes payment processing, it includes everything. - It includes 3PL, pick, pack, ship. - They're charging you 15 cents to do a branded insert. All that little small minutia. - Whatever costs to get the sale, right? So like, you know, Hermes will even go so far as to include like the manufacturing of the good because they do all their own manufacturing. All their machines, right? So like, you have to really dive in company by company to see what people are including in their gross margin. Yeti has their gross margin of 51% because they have wholesale distribution. They have all these shipping costs to whatever. And a lot of people just don't factor that in, right? So they'll be like, I have 80% margins. So they're talking about product margin, not gross margin, right? They're like, no, my cogs are 20 bucks. They sell it for 100 bucks. I'm like, that's a different thing, right? So like, you have to completely irrelevant thing. That's literally irrelevant to the business. - Yeah. - What is a cost to get it to the person's door, right? And anyway, that's like the biggest mistake I see people make in all the fucking time. - Yeah, I think also another thing too. We've had great success with this. Is there's also margins to be made on shipping. Understanding and knowing you can get your product to someone's door for X in six days and charge them rush shipping for four or five. Stuff like that. I think that there's a huge game where people overlook analyzing how they can make net new dollars on actually the shipping rates. - Yeah. And for 10 years, like the rule of thumb is just do free shipping. I think that actually changed during COVID where you can actually start charging people for shipping. I bring up James Perse. Every fucking James Perse order costs $7 to ship to your door. I'm like, bro, I'm spending four grand. You can't give me free shipping and they just don't do it. - Yeah, we use free shipping. That's an offer for us. - Yeah, totally. - There you go. - With the big AOV. When you're launching all these new products, are you looking at them as basically like a new business unit or are they blended across the whole entire to kind of company ecosystem? - That's a good question. We talk about them as business units. So like we have separate ad accounts, separate media buyers, separate, like everything we do for everything else, we duplicate over for these new business units. Now of course, it's blend over. Like email is gonna talk about the same shit to everybody, offers are gonna be for everybody. So there's some organic revenue spillover. But no, we're trying to acquire ring customers profitably. We're trying to require a phone case customers profitably, right? And we look at that totally separate from everything else. - So mostly on the marketing side. - Yeah. I don't know. I think product development organizations are unique to every company. But like we have PMs of product managers who manage specific lines of business. They don't talk about wallets or whatever else. They're just doing travel. - Makes sense. Tying a bow on the physical product, are you more a speed guy or a perfection guy? - Oh, speed all the way dude. There's other people on the team who are perfection guys, but I am the speed guy. - Just get it out, get data, come back and optimize it. - Totally. - I like that. I could see that. Last block before we go into the last block. I want to talk about international expansion. I think we've had some people that I've talked about but very, very lightly. I want to go as deep as we can into there. I guess I'll just first start with what has been the biggest kind of learning lesson from scaling a ridge internationally? - So section 321 has gone away. Okay, and for everyone listening, so the 321 was the ability to ship cross border into America from other countries, right? Now, can't have the same thing. So you could have a U.S. warehouse and ship to Canada. You could have a Canadian warehouse and ship to the U.S. All duty and terror free pretty seamlessly. And it built Timo and Shien. Like their whole business models were built on this one thing, right? For various reasons, it's gone. The term administration banned it. So it's gone. With that being said, if you went into international now, that means you have to have localized warehouses serving those markets. So what does that look like? If you're in a peril brand, you're kind of fucked. It's really hard to have a peril. If you're doing seasonal drops, available in all these different markets, or you're charging a ton for international shipping and do these in tariffs and everything else, right? So I would, you should come up with a business that has limited skews. Let's go on back to Grooons. Why do I think they're the fucking darling of all darlings, they're gonna totally crush it. Chads, the amazing operator for a bunch of different reasons. But Grooons can take their package, their container, and they can move it over to the UK. They can import it there, have a localized warehouse and ship it out. And then all they have to do is just keep that one's queue and stock, like clockwork, right? As many elements of possible of the production process moved over, so they probably, yeah, I'm sure it's easy to send over and like big jugs the product, but then are you saying like the actual packaging and such is done locally? Or it's just it's cheap to get it over there and then just the 3PO. What I'm, what I'm saying, so for actually their setback, here's, here's where Rich does. Rich has localized warehouses. So we have a US warehouse, a Canadian warehouse, a UK warehouse, an Australian warehouse, an EU warehouse, a Hong Kong warehouse. So we have, and instead of those markets, we're gonna have more within one warehouse, let's look at how there's seven different warehouses. So if you're in the UK and you place an order on rich.rig.uk.co.uk, that order will only ship from the UK. So like we have a separate Shopify, we have a separate, you know, everything built out around UK customers. Why do we do that? It's, we did it in 2020 or 2019 because we wanted the fastest, most localized experience possible. So you can check out in pounds, you can only see inventory that's gonna show up to you next door the next day, and we did that for two reasons. Payment processing rates are way cheaper. So, yeah, it's a pain in the ass having seven different Shopify stores, but payment processing rates in the UK are 0.5 versus 2.5 in the US or whatever. - Wow, I didn't know that. - Yeah, so really, really cheap payment processing rates and then the cost to ship inside the UK is really cheap, right? So you can get next day shipping in the UK anywhere for like four bucks, okay? You know, to ship the cheapest, you could possibly ship in America as five bucks, right? And that's like the smallest package going wherever. So really, really cheap shipping rates, really, really low payment processing rates. So when you knew the math, my UK store runs totally independently, right? Different website, different Shopify, different everything, and I can acquire those customers and I can, they can have different price points. They can have all this type of localization can happen, right? So we're only able to do that because of the small nature of the products. So if you go in the UK, you can't buy luggage from rich, right? It's just too, it's too hard to get luggage over there, right? But you can buy a ring business and a wallet business and a phone case business. So anyway, that's how we end up doing it. And the lesson from that is, if you want to do it the way rich does it, a couple of things to consider. Since that's just happened, Shopify has launched, Shopify Markets Pro, I think they changed the name of it, but like the whatever their premium international thing is, the payment processing rate on that is at least 5%, it could be 7%. So you could have a localized Shopify store at a 0.5%, or you do payments pro, have one Shopify store do everywhere at 7%. So at a certain, do the math, at a certain percent, yeah, $100,000 in revenue or whatever, it's cheaper to have the localized store, right? So think about your business, think about that. Then think about if you have a business that can support an entire market with limited inventory, right? So if you guys are doing art, probably not. You probably just need too many prints, right? - We do licensing deals too. So we can license out the art and they have local production and they just run the business and we just get-- - Oh, so yeah, that's for da. - Like a distributor models a good way to do it. But let's say, you know, going back to Grooons, Grooons has one flavor. So it doesn't matter where they fucking actually even make it. Let's say they make it in America, they export it to the UK. Well, they don't do any seasonal drops. So like you did often manage fucking shorts inventory and jacket inventory, whatever else. Every month, it's the same thing. So it's very, very easy to run, right? - And there's no marketing narrative. It's just the same product over and over and over. It's just maybe sales, Black Friday Cyber Monday, how it is. - Dude, and the whole world's globalized at this point. Dude, China does Black Friday Cyber Monday. Do you think they have Thanksgiving? Sucking out, dude. The whole world's globalized, man. Anyway, so the first market I would start with, it used to be Canada because section 321, your US warehouse could fulfill Canada or vice versa. That's gone now. So I think the first markets to the UK, they speak English, they have enough money to buy stuff and the shipping is super, super cheap, okay? Then the next market I'd go to is Canada. Then I'd look at doing the EU as a whole. The EU's hard because if you're our website's only in English, so we can get all of Belgium, get all the Netherlands, we get all the Nordics, we can get Switzerland. But then as soon as you get to France, Germany, Spain, Italy, you have a 60% English penetration for dot com shopping. So you have to start doing more localization, right? They have to start doing ads and localization, right? So am I gonna run German language while it adds? It's like maybe AI makes this a lot easier, but the order of operation is UK, then Canada, then you go to the EU. Australia, maybe you end up doing, maybe you just serve that from Hong Kong, just air shipping, but anyway. - So operational simplicity over demand in GA. So you're just even saying like you have crazy demand in India. You just say leave that alone 'cause it's gonna be too much of a pin in the ass. - Dude, I have never met a brand who successfully went to a market like India. Like I know people who've tried, but like it's really, really hard, right? And tell you get to the billions of dollars in scale, like it's just, you're not gonna make any goddamn money. And that's the other thing is people love these big international businesses. Why am I so focused on localization? Do you even go take a step back further? Why don't I just ship all these orders from America, right? And it's because you were probably losing so much goddamn money on shipping and you're not even paying attention to it. Yeah, you have orders coming in from the UK. Did you just air a pair of shoes to the UK? Do you have any fucking idea how expensive that is? Like it's $40, right? I've watched brands lose, you know, they're like we're doing $5 million in international markets, spending $3 million on shipping. You're not gonna make any money, dude. So it's why I think it's smarter for brands to actually shut off shipping the international markets until they really understand the costs. It's great advice. When do you think is the right time to start shipping outside the US? What is that inflection point for a brand? Is it total revenue? Is it traffic? Under the notion that sequentially they should go in the countries that you mentioned? Yeah, it comes down to just total revenue, right? And you'll see it in GA because you have orders coming in and then you have to determine if they're profitable or not. But probably it also like when can your business support it, right? Okay, let's say you have one skew and it's working and you know it's gonna work over there. I would probably have $15 million set up at the UK warehouse, right? And then maybe, you know, $20 million except the Canadian warehouse, right? Then maybe $50 million set up the EU warehouse. Just because the UK will do as much money as Canada. I'm sorry, as California. That's the way to look at it. Canada will do as much money as California. So just go in GA, it just comes down to GDP, right? Have you heard the whole set that like California is the fourth largest GDP? Yeah. Yeah, it's bigger in those countries. So there's more people in California than Canada. It's not like there's a big honey pot of revenue in any one of these markets. So like start thinking what would you do to have another California? And is it worth all of the complexity? You can just look in GA, what's your California revenue? And then that determines going over there. I like the blend of GA and a little chat GBT for GDP. I like that nice little formula you have there. As far as fulfillment centers for people out there, how would they even just go about finding those fulfillment centers and those partners? How did you go about doing that? Did you have inbound and people wanted to partner with you? Did you just go on the internet and find random people? Like what was that process to actually lock in those partnerships? Well, your domestic 3PL probably has what they call a 4PL relationship people abroad. So some of the big 3PLs in America. There's ShipMonk, there's ShipBob, there's Seaco, there's Flexport, just launched one. They took over Shopify's old one. So like those are four big ones. There's probably another four really, really big ones, right? And if you're with any of the big ones, they'll have what they call a fourth party of a relationship. So they will manage a relationship with a local warehouse in every market you want to go into. So if you want to go to Canada, they'll be like, okay, we have a 4PL there. They'll even present it like it's the round. It's not the round. I'm telling you right now, like it's not the round. It's some of the local warehouse provider and they'll manage their relationship for you. So those tend to be pretty shitty. We ended up actually going international through a company called Brand Access. It just got bought by Passport. So like their experts, if you want to talk to Passport, they'll help you with whatever. - Great advice. I've never heard of 4PL. Last block we're going to get to do is just QuickStrike. I'm just going to fire off a ton of questions and then we'll end with three or four questions. I ask everybody. I guess first is, is D to C dead? - Well, consumer brands are not dead. And selling consumer brands directly to consumers is not dead. But the whole D to C is, here's what I'll say. D to C 1.0 was pets.com, okay? D to C 2.0 was albers.com. D to C 3.0 is brands who just fucking get it. So they're like Gen Z killers on TikTok. They are people who door supplement brands, they have high subscription, they have low-sq count, they have really small teams and they're just ninjas out there executing and making money. So D to C 2.0 is totally dead, right? Like D to C 3.0 is actively thriving and it's just, everything else it just changes. - I just bumped into Dollar Shave Club. I'm trying to get him on. That's the OG from 2.0. - Totally, yeah, and an amazing exit. And, you know, here's the thing. The founder Dollar Shave Club made a ton of fucking money and totally killed it. Then it was owned by Unilever for a while. Then they told it to a PE group. It still exists, but it's a shell of its former self or whatever and they're trying to figure out like how to make this thing keep going. But it's like, that is the path of most brands. All these things just get kind of up and down and up and down. That's why you guys got to sell on the way up. The first year you have that's plateaued on the way down, you just shot yourself on the leg. - As soon as you can get life changing money, you deserve it to change your life. Like, imagine being like you having it almost in your hand and then you fucking it up and fumbling it. Dude, if you can get life changing money, don't be greedy. If you can get $5 million in like, you can take your kids to school every single day and then you like, no, but I want 15 'cause I want a bigger house and you fuck that up. It's like, dude, just take the fucking money. - Couple more, four types of businesses, service, product, SaaS and content. You're starting over today. Which do you pick and why? - Content. Because content is, you say that we're leverage, but it's like, yeah, it's like it's the only thing that it's a flywheel built on itself, right? Like, you shouldn't launch a consumer brand unless people know who you are, right? You have some sort of credibility, some sort of audience to sell into. Same thing with services, same thing with everything else. If you're young, one, go get a job, learn something, become an expert at it, then talk to people about it. People want to hear about stuff, right? And then you make a service based on that or you make a product based on that. You make a SaaS based on that. But like, content is the first and best business. - Do you think the window to create content and build distribution and trust is shrinking? Or do you think that's gonna be forever? Obviously with AI. - I think it is shrinking, but slowly. But here's what he'll say. You couldn't build MrBeast today, right? This multi-hundred million subscriber thing, right? You couldn't build that today, but you could build an awesome podcast that gets five thousand listeners and like, make a living off of that. And like, that's what you should be shooting to do. The future is like a bunch of more micro creators all being experts in their own thing. And you can make a ton of money doing that, dude. Imagine a podcast about high-frequency trading, right? Would you listen to that? Probably not, super fucking boring. But like, the sponsor you'd get would give you five million dollars because nobody else is making content about that. - Yeah, understanding and knowing the niche that you're serving and then who are the people that are gonna pay for those ears and eyes is huge. And you've understood that with your podcast as I do with mine is just knowing who you're talking to. And are you going down market to the masses, low-ticket, or are you going to B2B SaaS that have unlimited cash, hacked LTV is through the roof? And then yeah, I just think on the content side people just give up. And I've been up and down and up and down and up and down where I was on an 18 months in a row filming every day and then I stopped and in a podcast and I stopped. And I completely agree for me. I think that content and media not necessarily as the business, but I think content and media as the top of the pyramid flywheel is what gives you the leverage to drive any and all the things below, which we spoke about. That's how I see it. - 100% I think about it correctly. And then on the burnout, it's super true. But it's like going to the gym, finding something that you can do consistently beats everything else. It's like, if you're like, I'm one of the gym hard and like, like, do it for three days, you get sore then you skip through three weeks. It's like, you're not helping anybody, right? It's like, that's why I think Twitter, more people should post on Twitter because it's so easy. It gets you in the creating content in a very, very low, easy form. - It's the lowest of all low. You could do anything. If you want to be consistently consistent, go on Twitter and you can just spit out random six words. I should probably do that more, but that's a different conversation. But also it lets you test ideas, right? Before you do a podcast, before you do whatever, hey, here's the concept, put it out there in the world and it took you no effort to actually start getting feedback. That's why I think it's a good platform. - Oh man, I'm just not on there. I gotta do it. What do you think the keys are to winning on TikTok shop today? Well dude, it's changing. I mean, what I would say is S.P. impulse price point. So under 29 bucks, maybe 39 bucks, but really has to be a good value for what it is, right? The shark ninja has the number one product right now in TikTok shop. We don't know the economics. Maybe they're spending a ton of money super unprofitably, but it has to be impulse-ish. Then it has to be female first. So it doesn't have to be a female only product, but it has to be like, women are going to buy it, either for somebody or for themselves. And you have to have spill over distribution. So like TikTok shop will only capture 5% of the value it creates. It'll be on Amazon and Walmart.com and your own website. So if you go through that checklist, do you know Hudson from Comfort? Of course. You got to get him on here, dude, because he's a crazy person. Yeah, he's the number one, right? But he does it perfectly. He has an awesome value product. He has, you know, very strong female audience. And then his, all of his sales are happening on his website. Yeah, he does okay on TikTok shops, but like, he does hundreds of millions on all of his other channels. So like that's the pyramid for TikTok shops. Really, really interesting episode was the first episode that really went off his Kent from narrow gum. They were the number one fastest growing TikTok shop in 2024. And the marriage between Amazon spend and TikTok spend, talk about like incrementality, exactly what you're saying. He just turned off the spend on one and the revenue didn't change, because it was just the leakage, which is going, going elsewhere. We're going to do dive deeper into that incrementality another time, because I feel like a lot of people are just spending to spend probably. I think that that's a bigger problem than people probably think that they have. It's the classic Ogle the Quote. Half the marketing doesn't work. I just don't know which half. With incrementality, you try to figure out the half that doesn't work. Like that one. Dude, I love this, man. I Googled you and I found this. You've set a ridge only as two types of people, those who sell wallets and those who save money. What is that and how is that implemented in your company and your hiring and your systems? Is that just in theory or is that how you hire? Is it this person or that person? Yeah, well, yeah. It's team make money, team lose or save money. It's like, there's only two teams. We had at 1.75 employees. Revenue has gone up every single year and I've been able to reduce head count. A lot of that's AI. But also it's just reducing bloat in the business. It's like, you end up having people who their whole job is just reporting back what other person said. And I'm like, I can just post and psych all read it, right? So it's removing all that bloat out and just getting into a core business where it's like very, very easy to understand. Do you help us make more money via wholesale sales or performance marketing or making creative for whatever, or are you on ops, finance, product, whatever, helping us save money? Are you cutting costs? Are you finding cogs to be removed through whatever else? So for an evaluation perspective, are you looking at a human and saying you're this person or that person or is it more kind of? It's, yeah, it's people know exactly what team they're on. Wow, I love that. How is your org chart? Is it semi flat? Like how many different layers are there to it? Well, a new thing about our businesses, everybody can talk to me, right? I think maybe it doesn't shock the audience, but a lot of companies that look to CEOs get to really far removed from the people doing the work. We have a daily standup where every single day, every person in the company is on for an hour and either they're talking or I'm talking and it's an incredibly transparent about what's happening in this organization, right? So like they'll know marketing performance or sales performance or big priorities coming out and I'm saying it and they're giving me feedback and it's very, very flat in that way. Before this, we had daily standup, I had to come here for a first from that. It happens an hour every single day and then it's me, the executives and there's five or six of us. Then there's five or six VPs and then there's everybody else. So that's how many layers there are. I love that. I love that transparency and the cadence there. What are the key things that you look to get across in that first meeting where it's company wide? Is it just, this is our sprint for the week, the month, how we're pacing towards the quarterly goals? Is it like, here are the big updates in the comment deck? What are those big things that you always want to touch on? Well, I have a VP of AI, his name's Adam, and he can stand up to his baby. He runs the whole thing, right? So Tuesdays, we do sales performance. So what happened in the past seven days, right? What worked, what didn't work? Wednesday, we do ops and fulfillment and product updates. What's on order, what's at risk, whatever else? Thursdays is typically a product thing and then Friday is me sharing like a company vision or we have a guest speaker come in or we talk about AI and then Mondays, it's just, you know, we went over, we're launching a new brand internally. So like today, I had like, explain it to everybody. What it is, when we're launching, what's it going to look like, all that stuff? I love that. So just one big category in the company. Every single day, basically. Yeah. Love that. How far ahead are you from our product perspective? Just curious. We have 20, by the end of this month, we'll have all of 2026 planned. So we have Q2, 2026 ordered. We have Q3, 2026 planned, and then we have to just finish Q4, 2026. I don't know about that inventory life, you have fun. All right, last three questions. Favorite book or podcast and why? You know, I'm not, I'm not a big book guy. I mean, it probably is zero to one. Like anything Peter Teal's written. I just bought "Bagman" by the guy who made coach. So I'm going to read that. Coach is an amazing story. Like tapestry is an amazing hold co. Podcast BG squared. So, which is. Oh, yeah, that's who guys. Yeah, early in. Gershner. All right. Isn't Gershner the other one? Yeah. So Brad Gershner. But Gurly just left. He left the podcast. Oh, wow. Anyway. But that's a fantastic one. And then dude, I listened to the operators podcast. I knew he was going to do it. Sean has a podcast, guys. It's very, very good. It's very, very granular on the e-commerce side. I mean, I've listened to it before. I highly recommend to anybody. And I know you guys have a bunch of different offsuits happening. I think you guys are doing God's work for the e-commerce community. I don't think there's many resources out there, period. I think in aggregate, all the people that you have speaking, it's just, you guys are doing so much revenue and you guys are so big that anybody can learn about e-commerce with your podcast. And it's niche e-commerce content. There's a lot of people doing, you know, how to get started or whatever, but it's okay. We have Hexlet on there and Hexlet will do almost a billion dollars this year. And it's okay. What's your org structure? Stuff like that. But yeah, it's good. I love it. This is a big one. You can take your time on this entrepreneur or brand that you want to get flowers to and why? Well, dude, I mean, there's so many good brands. The thing that the thing people don't know about me is, I'm actually like a brand door. I spend so much goddamn money on brands and shopping. Brands, I think they're doing really well, but like, I think Keith has been on top for a really long time. I was just going to say that that I saw you rock on a bunch of kids. I didn't take years to kick a hype guy. Yeah. So like, I just, you know, credit work credits, dude, they just do fantastic collections that are very thoughtful. At the same point, like, I mean, ALD doing the same fucking stuff, totally crushing it. I mean, like, the hype's tied down a little bit on them, but they're doing great. I said earlier that I'm a huge James Burst fan. I think they're doing better than anybody else. Jeremy and Cassandra have a company called Kitch, they do like women's hair accessories. So methodical about product expansion. You could learn a ton from these people, right? What about an entrepreneur brand that's doing under 15 million? Anybody on your radar that you kind of see starting to bubble that you think has big upside? So there's a lot of, I mean, there's a lot of good operators. I don't know if they want their brand's public or not because it's been so much that people want to build in silence right now. But look, I'll say Isaac, his company called Mini Katana, a huge YouTube channel. He kind of just built an agency. He has a candy brand that was crushed for a long time. So I think Isaac's doing fantastic. You know, David Herman is a behind the scenes ad guy. He's like pretty pretty. I just kind of introduced him. Herman Digital. Yeah. Yeah. But he's actually a partner in a brand that's doing incredible right now. And then Zach stuck has three or four brands that are all doing fantastic. Yeah, man. Look, I mean, on there's a lot of these brands you'll meet in the 10 to 15 million, then very quickly they'll explode. They're coming called Turtle Box. They do, you know, outdoor speakers. And when I met them, they were probably doing 15. I think they'll do 300 this year and it's like they're killing it. So all those are great brands. Love it. How big do you think Rich can be? There's a very clear path to a billion dollars here in sales probably by the end of the decade. There's, you know, tapestry, coach, coach does six billion dollars a year in sales. They do a billion a year in men's. I often say internally, I'm like, there's no reason mentioned by coach products, right? I never met a guy stoked about getting a coach product. So I think that's like a clear place that we're moving into. I agree with you on that. I don't know. One male that has a coach product, dude. I had an amazing time. I work and they find you on the internet. Just find my Twitter, dude. They're, find me a LinkedIn and I'll be back on this podcast soon. So we'll do it again. Oh, man. Appreciate you. If you guys got this far in the episode, I would assume that you enjoyed it. If you got any value, it would mean the world. If you hit the subscribe button, give it a like, post a comment, tell a friend. We could keep going bigger, bigger guests, bigger locations, more value. See you in the next episode.