“I think the role of the entrepreneur in the world is to find ways to do things better or more efficiently and then try to do that as many times over with the help of other people.” — Santiago Nestares Benedict Dohmen and Santiago Nestares of
Published: 27.12.2018 | Description ist written by The Blog of Author Tim Ferriss
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Hello, ladies and germs, this is Tim Ferriss and welcome to another episode of the Tim Ferriss show.
And this episode is a case study episode the most requested type of episode that I've been somewhat negligent in providing.
And today we have three folks with me two co-founders and then Elaine pofeldt and Elaine.
It's nice to have you back on the show and could you perhaps just described for a moment aside from being very accomplished journalist.
You are an author and what what what book of yours is most relevant to the conversation.
We're going to be having more.
It's the million-dollar one-person business and what it looks at is how non-employer businesses those with no employees except for the owners are scaling to 1 million dollars in revenue and Beyond and it's great to be here Tim.
It's it's a subject that is endlessly fascinating to me and to many of my listeners one.
They wish I would explore more.
So here we are and the exact two young gentlemen across from me.
I don't know them that well, so they may not be gentleman, but I suspect they are very well behaved so far we have we have Benedict almond and Santiago in the status of 21 is that currently the case great 21, so well aged silver foxes.
They met as computer science students at Dartmouth College.
I've heard of that school very good.
Very good addition and they work very long hours in library.
Both of them suffering from back pain.
This has this is relevant because they began collaborating on a prototype for product the end up being called the supportiback and in the process of developing of gathered a lot of feedback from members of the Darwin Community, including a local hospital president and professors will students study.
Engineering and medicine.
So we will revisit a lot of what we're discussing in this little interest last summary.
They also experimented with pay-per-click marketing set up a system for testing a tracking key words using Excel spreadsheets are spreadsheets.
They launch the product first on Amazon in the UK and Benedict been who's from Germany this point he's courting this right now, which is Austin, Texas and when it seemed to their first small order was in danger of selling out this I definitely want to talk about they arranged financing from their supplier and we're off and running distance enter the US market on Amazon and this year they're on track for 8 figure Revenue.
That means this year 2018 next year on track for 9 figure revenue and they are in the process of introducing more than a hundred and twenty consumer products, which range across many many different categories including Beauty skincare pets.
Why is Baby Spice food and nutrition and in a sense? I hope we won't have time to get to this? Maybe I'll be around 2, but I think we can get into it.
They are hoping to become an alternative to very large consumer products companies through a strategy of applying their scale of strategies that they have tested set themselves to Brands.
They acquire such a mouthful but I think it gives it a nice overview of the landscape then and Asante.
Welcome to the show.
Thank you.
Thank you for having us and I thought maybe I'd let you kick this one off Spin and Sunday.
What are the things I loved about your story so much with the wonderful friendship that you have tell us how that came to be.
So we met arrhythmia Dartmouth College.
We are studying computer science kind of nerdy coders up until the library during our labs are classes.
We met we are one of the last few guys in the library and it so happens that there was ours you do eventually approach the other people around and then see what they working on what their struggles are also helping each other out.
So that's originally how we got the clothes and yet just add really kicked off from their head back pain.
You need my help a bit in the laughs.
I was always helping him out and that's why you don't have the best posture and and we started getting a bit of the developed over time, especially when it gets to 3:40 a.
m.
So it's we took the really nerdy opposed to trying to figure out Why is this happening to us back into likes me but only happened to the old people so we start digging out and reading research.
Luckily.
We had access to the Dartmouth Hitchcock hospital was renowned and back pain start learning more about it and then discovered that pasta was a core driver for back pain, and it's something that a lot of Americans are suffering with people around the world because our bodies are simply not designed to be sitting down special hundred over computer all day, especially given the new phrase sitting is the new smoking that was kind of the the guideline there could start at what degree he may have even come up with that phrase.
I'm not sure where it originated.
How did you guys then go from complaining about a common problem in doing some homework on it and a research to considering Creating products or starting a company because I'm sure especially in this day and age you guys been how long ago.
2 years ago now on two and a half two and a half years ago for about three years ago that.
There are lots of folks now hoping to learn to code or hoping to learn computer science because it has been become very clear that is a normal printer ship something there more interest than ever with in CS department.
But at what point did you guys decide that this is something you might consider as a business.
We we initially developed the product mostly for for ourselves.
We start looking at what products were out there that were already working big believer that you don't have to reinvent the wheel to make it slightly better.
So we took us out there started treating with them and actually just for our own use, so we were we were not trying to make it a commercial but was not in our heads.
I'm off the shelf than modifying them.
The combination of many things.
Just do increase our our Passat perception of physical awareness of a fact bit of poor posture that was leading to back pain and made our two versus one for Ben and one for myself.
And with time we start seeing that are friends with who are also young Witchwood did not expect to also have a bit of back pain.
I'm darasa coming to us and said hey and I'm pulling an all-nighter tonight.
Can I use your your product or hey, I'm going to go on a trip to New York.
Can I take the product with me? So that's when we took a step back and said look, there's clearly a need for it.
We don't know how we going to sell it or commercialize it but that's just that's just sort of like the burn the ships approach.
Send Alyssa's make an order and then we'll fit what we will figure out how we going to sell it once they'll and store.
It came about as a bit of a story behind it.
I think that's also where what you just mentioned the computer science back.
Especially is a hotbed or breeding ground for a lot of modern-day entrepreneurs.
Now this is a physical product.
Right? So it's not a software around here signs as a as a tool.
Tool kits are tool sets that enables us to enhance our product per se in the physical products does definitely very we seen a lot of value inn and in having that is our background.
You said there's a bit of a story behind that first order of let's talk about it said how much money did you see? How much money do you guys spend on that first order? And where did it come from? Why did you have the confidence to thousand dollars? Those are all our whole budget.
We would put together our savings here and there as college students.
And so we had no idea.
I know the main player especially when it comes to physical products and start learning how Alibaba was a catalog for a lot of suppliers.
But You Could See Thru by seeing other similar products who were the key manufacturers out there in China, but obviously with $2,000 you can get really far like I'm still really big order but I refused with be refused to take the approach of take that as an excuse not to not to move forward.
So we we met up this whole story that we were massive company out of Boston and we had a big water board meeting coming up and we had over a hundred board members that we wanted it straight distribute samples still so that they would decide together every going to place a big order and the big order was going to be like Million plus dollars, but bear with me we only have 2,000 right now for this, so they know that I'm sure the margins were great for them for that for those two thousand for the Pats are the first 100 units came about they put it on the ship and send it and then we said we have 30 days to figure out how we going to sell it for that was the story of the reason you have 30 days because it was Net 30 Terms for payment or did you set that for yourselves as a deadline? So It's the first one that wasn't there was no there was no terms.
Yes that's over.
It was just 30 days that it took to ship VSC to go to get it over all the containers or whatever.
It was going to take you guys.
What were you hatching at that time? So then maybe takes Tabitha said you were but I'm sure starting to think about how you might sell these things.
Were there any resources websites books or anything that you guys were using to try to educate yourselves on a cruise ship Marketing sales anything at all? Absolutely and at that point we suite at the time when over around 30 days to figure out how would we sell these first Quorum Court sample units we delved into Festival researching what distribution channels were out there looking at retail on an especially online e-commerce distribution channels such as Amazon Shopify Walmart.
I mean there's a whole range.
We are big Believers in focus to finding one solution and then sticking with that Until It Breaks even though they might be Roblox on the way.
And so what we did was we spoke to some people some exit some friends of ours with solder resold a product on Amazon and I think eBay before they showed us some basic Basic Marketing approaches.
Our tactics are irrelevant to Amazon and eBay and we decided to go with Amazon and then test that out and see if it works for our product because obviously there's also a certain dependency some Channels with pedophile the product.
With that as a starting ground, we then had to figure out okay, let's use this as a base.
But how do we actually Market our products specifically on Amazon now that entailed multiple Parts.
I'm just Basic Marketing principles essentially part of that Force figure out the copy writing so we read I personally right around fall books on copywriting within those 30 days.
I took around at 2 day Deep dive in copywriting 101 Top by myself.
That was reading the bar on ntreis bite by a barn.
How do you spell it? B o r o n the Boron letters born that is very good.
In other books you remember there is another one called cashvertising cashvertising gifts, which was very helpful recommended multiple.
And then I synthesized all the tactics are all the learning from those books into one big notes document that came up as soon as she with a 20 step sales letter formula synthesizing the different advices from the different books and also blocks on top of that your copy algorithm and then try to apply that to the Amazon.
Do you recall what some of the steps were at this point? That's been a long time ago? I can tell you that the key principles which have benefitted as most in terms of copywriting an end and sales have been focusing on the benefits rather than the features a lot of mistakes.
We see being made or an incorrect approaches people often take as they focus on the features of the products that consumers are actually care about is what what benefits them ultimately so constantly focusing on that is kind of the 80/20 or like the one thing to copy writing doesn't mean guiding principle makes me think of the iPod which for for those of you weren't born in the dinosaur ages the iPod is this device that the size of brick initially that played songs no telephone and it was not the first MP3 player that you can put in your pocket, but it was arguably the first two instead of Describing and selling the product in terms of the number of gigabytes.
I could hold and I'll technical specs said something and it again this was slightly off put a thousand songs in your pocket and making the connection much more clear between the purchase and the benefits that you derive from it.
Okay.
See you guys are are figuring out a copyright.
How are you at this point at all? And in the beginning separating responsibilities or investigating different things.
Are you guys all doing everything at that point you have 30 days for these are quotes sample products arrived.
How are you thinking of a partner on this cuz you don't want to duplicate each other's effort, because that's redundant with would seem to be particularly important to computer science students.
How are you thinking about working together? I wish we would have planted I have it was it was more like what we're all in the same boat together.
Let's see how we can get there faster now.
I think it's more we we've divided that complement last that'll be better.
I did gravitate a bit more towards the key word of science behind it and and then was more around the copyrighting and sales science behind everything is how can we make a formula for it to work every time right? So I took a bit more than a pay-per-click a coach to it.
So start understanding.
How did Ickey Woods based algorithms work on top from Psych Amazon, why were certain parts displayed? How did you figure that up or if someone came in and said I want to figure that out.
What would your advice be? The first thing I would say is do understand the basics because it actually takes a while it took me it took a while for me to understand what a keyword-based Agra like water keyword-based search.
Now long tail keywords are different than short tail keywords on different types of matches.
I looked at of course by Brian Johnson.
It's really starts on the basics.
And it's Deep dive into what PPC is specifically on Amazon under stand that but we realize is a lot of those people are really had no statistical backing to a lot of the methods that they were using talk to my thumbs, but they were not necessarily the best way to get an edge on that market and to get an engine on the key was that we're bidding and to understand what truly are the keywords.
Are you want to go after that are most likely to convert to our product.
You started developing an algorithm a simple formula last.
What was the right bit for that specific keyword and I was all based on when is it statistically significant discarded keyword? What is to keep hitting or to adjust updated? Because I hang out of the name a lot of things that I was out on an Excel sheets.
And then that's what he said.
Look I needed I think we got a big kick start organic Leon de Su these these hundred units arrived but this describe the day so you guys are doing all this homework describe the day when this stuff lands we didn't even see it.
So it went straight from from from China to wear for formal Network.
We leveraged Amazon Fulfillment FBA fulfillment Partners, most efficient.
We found him yet to this day.
We still use them.
And we we never saw that the parts that we would get some samples to do some quality control, but we'd really didn't see the whole shipment to his very abstract to us think about a hundred units and you actually don't even know how it looks way better for you guys.
And I think that was also back in in Germany with his family and be I just looked up in the phone from from an hour to the next time.
We saw we sold the first day of quarter of our inventory.
Colors of guard and that's when we we said okay, we're on to something we've done something right then let's figure out what is it that we did right so we can do it over and over completely fill the orders Winnie Winnie Winnie the Pooh was nothing compared to the excitement or overwhelm from actually having Just found a formal Affair for some sort of success in in that Marketplace.
What did you do? Right when you look back of what I'm going to try to do in this interview there certain things that people have trouble replicating if they don't have certain types of training not replicating in the right word learning from and then there are other principles and so on that they can borrow it apply and learn from that you guys have used so I'll try to separate those two a different points just because not everyone coming in is going to have the technical capabilities that you guys have for the statistical familiarity say but what was looking back like what you guys do, right? So you sold at a quarter of your inventory from one hour connection like on 100 like high five awesome in the other Henrico shit.
Okay.
This is this is turning out differently than maybe we would have expected good news.
What did you do? Right.
What did you guys do? I think what we did right after after reflecting he still reflect on it today.
Every every time we do a big movie go back and think what did we do right and wrong when concert or learn from our experience? I think what we did right then was take computer science approach a developing the product it all starts in the pride you have amazing copying you need to have amazing copy and have amazing keyword strategy.
You need to have it but it all boils down to the product as you have a good part of that will convert the best and you really can outfit any competitor in any keyword or any sort ranking.
Also, it's due return customer service is all of that.
All of that will take care of itself.
If you start off with having something good to offer, but obviously we're not back pain experts you still aren't experts in in the pet industry experts in the beauty industry while we did really well with take the customer as the expert.
Don't take anyone else or anything else is an expert would take the customer and How can we apply what we've learned like The Lean Startup methodology Wise Owl method that a lot of software companies use startup methodology Eric Ries that that's cool.
Really really important of fire.
Skip guy that was so common in the software to the product development is my only goal at that point was let's hear what's working out there and see what isn't it's for those two things together and it was for us eventually for the market and then it was how can you get those parts on the ship as quickly as we can so that we can start selling cuz it's learning days start getting feedback and the times for people are not familiar for Tuesday the MVP with I think it's minimal or minimally viable product.
How do you ship in in the context of Lean Startup very often software, which is very easy tater eight physical product a little more challenging.
But how can you get something out into the real world with real people who are not? Friends trying to tell you what you want to hear so you can get feedback that can form better decisions vs feedback and failure.
So usually what a lot of people react say, they ship out a product being a software as a physical Park whatever into the market and they get zero sales are they get very disappointed with very very few sales a lot of people see that as failure and decide to give up if you take the MVP approach.
You see that as feedback with that feedback in hand.
You can then Crosstrek the next you identify the the triggers of the variables that cost to the bill of sales that cost your missive expectations and then work on those and treat them and then it's rate again and ship out of the next version of the next product and see how that compares to the previous version.
So, I think that that's for us that was very crucial to understand.
Distance from between feedback and failure failure is when you give up feedback is positive because it allows you to x-ray to get better and just having that mindset create a lens through which you look at things very differently and it affects the questions that you ask my dad.
So before we start recording we were chatting up Podcast in a little bit and the like the first or second question you guys wanted on the stick.
How do you learn was working or not in the world the podcast it was turned out to be somewhat challenging from a technical perspective given the lack of really deep and specific analytics, but that was one of your very first questions and It's it's if you do not have that feedback oriented mindset.
It's very easy, whether something works or fails or somewhere in between two just decide what you're going to do next without looking at what happened right at bit like really spending time on the post-game analysis and figuring out like ours is this one off.
Is it a problem that kid? Can we replicate the problem? If do we think it's because the website taking too long to load, I mean obviously some slightly different with Amazon, but do we think it's because the price is too high, you know, is there a way not a Stirling on Amazon where we can offer say in exit pop-up that gives people a discount to to test that hypothesis northern Europe your approach because very very different.
Okay, so you guys are launching your MVP You've taken a Lean Startup / Agile development approach to product development.
You've now figured out what was the name of that book Cash Passport Isaac good.
So terrible so bad.
It's good a shape using to track your sales at this point is an Amazon Dash for the use to track that or what do you watching we used so Amazon has internal dashboards just in the Seller Central which is the approach.
We took the way you can make an easy basic reporting on neck sessions conversion rates the overall sales as we grew.
We then also expanded into third-party Software System that give more and more clear picture more organized more structured because I Especially in the beginning Amazon's internal reports and then their structure can be very confusing and you can for pretty cheap.
Are you get a third-party software that shows the all the key metrics you actually care about and it very clear instructions for Matt.
What are some of those options? So we use one called Selleck's Selleck's e s e l l e x s e l l i c s who is cast of her at one point Cash Cow Pro Cash Cow title like Cash Cow business cash out the really really affordable in the metric system on your magic is really important to someone who is not sold anything on Amazon and looked at the UI.
What are the options for testing? Let's just a split testing is it pauses more for my personal curiosity? I'm sure there's somebody out there wondering the same thing on Amazon.
Can you test different price points automatically serve like 2999 to 30% of the audience and 1999 230 another 3% on its and so on and so forth It's Tricky overall from a high-level.
There are many different variables.
Like there might be a good deal of the day running or a lightning deal or there's so many variables very hard to control for sale price or for the images.
There are certain tools out there who try to give in some type of testing.
There's one called split Lee that's What they do is they subsequently tests a image won against image to our price point one against price point to you can't do it simultaneously so you can't do normal a b testing a closer approximation even within that.
The price range is very toxic Lyon Amazon.
You can jump the price from say 1999 to 999 or especially the anniversary conscious drastically raise the price because i'm as on Amazon will then this allow you to own the buy box, which is a crucial part to your conversion rate.
So they're sitting intricacies but some approximation zaz to get some rough idea and some rough testing.
What you guys decide on on Amazon vs.
Was it primarily to simplify the fulfilled by Amazon component of the entire process or were there other reasons me Amazon's of course Behemoth outside of outside of China certainly in in the United States highly dominant, but we're there were there other reasons you guys chose Amazon is your as your primary platform.
So what we discovered it's really easy to get caught up on reasons are are complicating things and making it as hard as possible to get to the ultimate goal was to get to a customer we were trying to get simplify everything down to how can we get this part in front of the right customer as quickly as we can Amazon offered the Fulfillment side, which would be much we moved all the operation intricacies are for us and also enabled us to go to the whole European market as well.
What's up with the flip of a switch or to say and then additionally it also simplified all the marketing.
There's already active people going into Amazon trying to find solutions for their problem.
People that are problem with our product where the people going out there.
So I need a cushion for my back.
I need a pillow to sleep better cuz I have back pain and there's going to be looking to buy as opposed to find information to have really high point intend to say instead of figuring out.
How do we create awareness? How do we create part of the eventually get those down the funnel which which is a big game or signs and of itself.
We would like all we have to figure out is how do you convince those that already going to Amazon that look we are the best solution for them and we truly believe in our products.
We think there are better than the ones out there.
So all we have to do is demonstrate that so that allowed us to do it really really easy and Amazon additionally Scrolls Online is going over retail.
So it made the most sense to us and still today rely on Amazon.
Summit Partners, how do you coming back to the MVP and customer feedback get actionable feedback as part of the reason I use Amazon as much as I do is to very deliberately avoid interaction with many Merchants.
I do not want to get email.
I do not want to get questionnaire.
I do not want to have any more interaction than absolutely necessary.
So how do you guys get feedback on products? We aggregate a whole bunch of data and that data comes from within Amazon, but also off Amazon with an Amazon some of the main sections relocator reviews feedbacks competitors reviews competitors feedbacks.
Products in the same industry or category the reviews their feedback feedback and then reviews from my spouse questions to let me hear the other questions and another another way and then we scrape all of that.
We have bought that aggregate that and put them into a Google sheet, essentially.
Analyze it by keyword frequency are some search query frequency.
And then we try to see some statistical Trends us to all right, this complaint say it with a memory from this complaint has, pics many times over potentially.
Many purchases.
It's roughly is statistically significant.
This is something we should add to our list to then implementing on our product development on the sourcing in manufacturing site and then off Amazon as well as looking at social media engagement in social media postings ecetera and then combining that incentivizing with the on Amazon data to come up with a list of features.
We can Implement on the starting side.
And the way that works is we have this list of features for every product that we would like to implement which we will we see from the real customers that they crave or in some way desire that cuz it's a different story if people say This pillow if you have two people saying this is It's too firm for me and two other people saying it's too soft that is in no way is statistically significant.
So we have this list of suggestions then we speak with our manufacturers in China depending on where the practice our summer sausage to use some us all over we speak with them to evaluate the feasibility of this feature of incorporating that the costs of is how fast can they turn it around will it affect the lead times as to how fast are going to even produced and all the subsequent patches and a whole bunch of smaller smaller decisions if we decide to go ahead and it makes sense from a cost-benefit perspective.
We Implement that into the next cycle.
So the next order we already have version and + 1 If we decided this point, it doesn't make sense to implement that then we keep it on a on a whole list and we revisit in Ste.
369 orders down the line.
We revisit.
Okay, does it make sense now do they compliment any of the other features? We've just Incorporated in the past orders ecetera are the secret sauce discussion but not let you decide is are the when you say Bots are this is a word that gets thrown a lot into media that people have seen in its I think generally poorly understood by the the term scraping in Boston.
So on.
Are you guys using off that have you used off the shelf? Programs or services for that are these things that you guys have coded yourselves but has what it what does that look like to answer your question? We've that it's a great question.
By the way, we leave we have computer science backgrounds.
So we created ourselves in a python and some libraries that are out there.
Anyone can use.
It's just a way to automate it.
To automate the process anyone can do this.
It's just it will then require more manual work, which would otherwise be done by a buyer by script.
So anyone can go into 50 listings of competitor competitor's product.
Look at the reviews put them into an Excel sheet and then look over and count the number of words or the number of queries and then designed the queers.
We had 45 of them over all these reviews osetra display as many as possible than control laugh and search for whichever term rental.
Have you found that the information you gathered in that European market was directly relevant to the US market are there are there differences in terms of the types of A bag that comes in did you watch initially in Europe between consumers in Europe and the US based on what we've seen obviously our data set has very limited based on on a run around products as well as our own personal experience to give an example German consumers.
I'm I'm driving myself tend to focus more heavily on technical technical aspects of the product Shocker the American direct response free pudding.
And similarly across even within Europe you have the Germans of the French Spanish Italian, very different British.
They're all they all have very different consumer Behavior innocent until you have to cater say the copy and adjusted slightly to teach welding keywords are independent of that because the keyword pillow Vincent's then why did you choose to launch in outside of the US first? In the US would be more uniform than in the sentence where it's like, okay.
Yes people in New York are different from people in Louisiana or different people in Nebraska kind of but culturally they're probably going to be closer or more similar than Italians versus Germans.
I would think so.
It's a back then it would have made more sense to launch in the US been had German background the we believe that we would have an edge at least with a German market place and I probably must have been in some econ class and taking some actual parallels do it, but nowadays I just laugh at myself for it cuz it doesn't really make a difference but that it was mostly Serendipity we decided to go Europe.
We've discovered some advantages in terms of structure and terms of Regulation forced us to to put our products through regulatory processes that then I really easy to go through once we bring them into the u.
s.
The market is considerably smaller.
It's about Three types of small in terms of Amazon sizes to the loudest also tube experiment and get that feedback on a smaller sort of sandbox.
And then once we got to the point where they were very successful and most people are really happy with them.
We can flip them over to the US that is a very common practice for a lot of big companies in the sense that I believe Nike is one of them that does a good amount of their testing in New Zealand as they want to test on a native English-speaking Market, but if it is a catastrophic flop, they don't want it to be in Times Square or necessarily in the larger playground or sandbox the US let's say so they do a good amount of their research and initial Testing iteration in place like New Zealand.
So let's backtrack for a second.
Look at the phone.
OMG.
We sold Cordova inventory some coming back to what I said.
I would definitely come back to you.
And here's the line when it seemed their first small order was in danger of selling out quickly.
I would say that the story qualifies they are arranged financing from their supplier, and we're off and running.
Walk us through that arranged financing from their supplier.
This is really important.
I think because not even know the story but most people think and I will this is this is particularly true.
I think in startup land or people hear the word startup and if I think particularly for a lot of people who are 20 22 year-old, however, the old CS students who go out Venture Capital Sand Hill Road Silicon Valley raise a bunch of money and they they have that particular narrative when they think of Finance.
This is something that is not that uncommon but it's something very few people know about so can you walk us through this? Yeah.
So from the get-go night we went in with the mentality of removing obstacles rather than coming up with obstacles and be working for you mean by that.
Do you need an investor to put you second order? Otherwise, I run on a stock that is that is an obstacle that you might actually be put in there by yourself.
So we had this problem which was we need to make a way bigger order.
Now.
We did have the profits from the initial order.
We had a clear proof of concept and we we we had heard this narrative or you need investors to scale but we said the must be a better way out there this month.
They must be quicker way out there.
So who do we went to a biggest partner so far company that would thought we were massive company out of Boston and sit look we're going to places to go order but as we are becoming expect good terms I'm to convince them to give us a good parent.
What a good payment terms in this situation.
Did you ask for specific terms or did you say what are the best terms you can offer? What was the what was the approach? Replacing a bigger order profit or not pursuing an investor and have a tank and spend that money then figure out what we're going to do.
So at all points were like, we we knew that we needed to be profitable the biggest issue with physical parts companies does today you have to put the order they going to sound three months you'll save your sales are up today and you expect them to be even bigger and that's probably still in town.
Are we going to have to put in more Capital today? Hopefully they come for the sales tomorrow.
So we said okay to eat bacon be our biggest partner came up to them and said big companies like Walmart expects add a credit * 100 net and they were like, no that's not happy.
That means it is after you get at you pay for it was the second part of the terms.
So you said something at 100% So any Penny up front and they send the whole thing and we pay them 6 days after I understood both of us as that are scaling after the after that point.
They started.
Don't drive but they understood that be where I keep player and their scale is scalability.
They were going to grow with us as the same way.
There are big player and scalability and help each other and usually the objections to have to give you credit terms is not because I don't want to because they have risk of Jackson's they also might be cashed wrapped.
So you want to sit down with them and have that on his conversation as he look what guarantees going to give me over this inventory or what things can I do to ease your Castle? How can I guarantee that? I'm going to pay this back in 30 days.
So I think we managed to get somewhere near 50/50 or or maybe it was it was 70.
It was 70.
Need to be paid by the time the lack of the other 3083 paid 60 days after every time we go back to the table and we always ask for better terms as we continue to scale every time you have a bigger but can we get better payment terms to highlight something which is you didn't assume what movie did but you didn't stop at the know you investigated the fears behind the know.
This is really important because there may be other ways to address fears that do not include paying for everything up front.
There may be other ways that you can address it and that can range from not necessarily in this case, but getting a cosigner for a particular deal so that worst case scenario.
They have someone to hold financially accountable who is not you write or A b c d rate right committing to the next four orders and some type of contractual way so that they may mitigate the risk of getting burned on one particular deal, right? There are many different ways or maybe they say no because I don't know who you are.
Can you provide them with references of some type pool allowed them to sell their supervisor on improving this because they've only been on the job for 30 days and they're not comfortable yet taking the risk to approve that particular what I feel there's a there's a great book.
I would recommend the folks called getting past know which I think is the more practical cousin of getting to yes.
It's actually it's actually a written that I think's authored by one of the Cooperative of getting to yes.
Did you guys figure out a negotiating on the flyer? Did you read anything related to that or mostly on the flying still trying to put ourselves in the other party shoes and then making our decision based on that I guess principles from Siri whatever took a class on at school that helps a lot.
Alright, so feel free to jump, you know, you were certainly more familiar with their story then I am but you you are then able to achieve what you set out to achieve in a sentence which is to get favorable enough terms that you can get more inventory.
All right, what happens then see if more product on the way what what were some of the best decisions that you guys made from that point on like what were some of the critical because a lot of people try to sell products online weather there physical or digital and most of them go into it unprepared most of them do not learn from their mistakes.
Not many of them do not play any type of rigor to their analytics or mining a very basic things and that's good.
Keep in mind coming from me and I am about as Innumerate as you can possibly be I mean I watched show is my University based on the lack of math requirements, or I'm not I'm not I'm not exactly a Quant but very Basics like simple arithmetic and not fooling yourself that like to customer reviews that say X's cool means that definitively across-the-board.
Everyone thinks I saw you guys have done very, well.
You have a very steep trajectory on sales or launching new products at this point.
You have sportback right and you have more units coming in.
What were some of the smartest decisions that you guys made or Worse decisions.
They're both both are important and so the months that followed one of the key decisions and then someday you can answer that out there into the first one was to focus and we're big Believers in the Pareto Principle in honing in on what's working and keeping I'm not in getting better at that and not getting distracted removing distractions had mentioned to me your fans of the 4-Hour Work week.
Was that what made you think along those lines? Absolutely.
I mean time you mention it in the 4-Hour workweek focus and removing distractions is definitely one of the key decisions, even if it was an unknown decision some unseen so to say because you neglect something new in this particular case was we have many options to expand into different Channel say walmart.
com jet.
com even eBay way we could figure it out.
One of the key decisions we did was to focusing and hone in on Amazon in growing both of our expertise as well as our sales on that platform and One of these texts that hat is the way Amazon works from a very high-level is the Marseilles you have the more sales yet.
So it's a snowball or cumulative distribution.
However, you want to call it in that Amazon ultimately cares about transactions on their side.
So the more transactions you have on their site.
The more they like you and what the more they like humans as they rank you higher they give you access to advertisement ecetera to a whole bunch of other benefits based off of that defied those other sites then as distractions.
It sounds like Warren Buffett and Charlie Munger a big Isles of ours and Warren Buffett's at one of his concerts in in in distractions and focus is there are 20 things you want to do right now we're eating burning to do say France that was expanding to other channels like Walmart.
Do you have to scrap them all and focus on the one thing that ultimately will push you forward? And real distractions are things you're dying to do.
So, we applied that in our casing and kept on focusing on Amazon.
I think that was crucial in the media art is one of you better at narrowing Focus, or do you both do that for each other? It's both for each other.
And I think there's a lot of value in a partnership in particular that point because one can easily lose tracking and get distracted oneself.
But having can you get a second pair of eyes is definitely where two plus two is way greater than 4 and that's it.
You mentioned you guys have mentioned before we start recording and also now Warren Buffett and Munger.
Why are aside from yes, they're very successful investors.
That's that's great.
And they're certainly among the best the world has ever seen but beyond that or maybe in addition to that like why are these two so stingy Gus and when you say we idolize them, that's great, but does that mean you study them? And if you study them, how do you study them? That's a good question.
We I think we admire the most of them is the ability to or the constant Pursuit Of Truth and rationality this how do we how do we really understand the reality and keep emotion and rationality out of it as much as possible to even admit.
There's no such thing as perfection in that but they're always striving to do that.
So the most did the most studying we do is both on on what they have to say.
I think my favorite my favorite pieces of Charlie Munger speeches in Harvard, I think 19 on YouTube Charlie Munger Harvard look up Charlie Munger commencement commence.
I think it's also in poor Charlie's almanack the MLB in the new or additions.
what they have to say pretty much any insight into their lies out of the really pretty private, but there's this plenty of condoms out there for free that you can you can you can see is that pursuit of being rational and say no interest in keeping emotions out of things that help pass out those both in and put in our personal lives and in our relationship has school Founders as in our ability to dissect the business and focus on the few things that actually move the needle I've been worried about you and did this relates to the that dynamic duo are there any resources that you would recommend or it is definitely there? I think there's another book from Darwin to Munger Peter bevelin seeking wisdom from Darwin to Munger is also really good collection the speeches on YouTube and my think Monger has won at USC Commencement speech which is very valuable.
I also would recommend the folks who may not explicitly have an interest in what you think of is investing which is picking stocks.
Let's just stay to read the annual letter words to Berkshire Hathaway shareholders by Buffett.
There are collections of these letters and it will help you to own or at the very least test your own thinking so that Can you become clearer or more clear? But how you are reaching your conclusions which translates to better investment of time energy attention Capital which is certainly transfers to just about everything.
All right.
So getting back to the main story of the storyline that we've been we've been traveling along here.
When did you begin to expand outside of your first product? And how do you make how did you make that decision? So back to when I when I mentioned that be stupid time paused understand what a fart be understood again.
It was the approach product development how we took care of Arceus background to developing the Best Buy skin product and because I'm being a jerk but also because I want to we are going to be definitely going to get to the expansion of product line, but I realize may we skip a chapter a really early which Before you order your product, you're getting feedback from people at Dartmouth.
What did that look like? This is really Hands-On.
It's something people can do.
With communities around them.
How did you elicit feedback in the very early days because you guys are systems thinker is Right soon.
I can do the code you like it and let's go buy a container.
No, you're not going to do that.
So what did you do limited feedback is better than no feedback.
We took it with a grain of salt.
Do you went through four lined up a bunch of people and say you look withdraw yourself from the front as much as you can and say what do you think of is used for a few hours? We did a couple of different tests.
I'm one of those like use it for a few hours and and right before I would ask him.
How much pain are you in right now? And then how much pain are you in after Hauser disagrees again? If you move out of your house isn't very valid, but then we reached out to the CEO of the Dartmouth Hitchcock.
She's nice enough.
He always has been nice enough to meet with us and and give its opinion on on his best practices.
But again, that was that was not the pillar or the core of how the product was developed because ultimately, Make a stop for an expert is the customer and their behavior the consumer Behavior.
So we took that with a bit of a grain of salt took it as a guiding reference, but it was how can we get to the market as quickly as we can and that's when the true learning started what were things that you modified in the product? I don't think we touch upon this yet Flags in support of a crime that was like you were undergrad and master's degrees setting you up for the later products.
I would assume in a lot of respects, right? So what were some of the early changes that you made to the product that were important in retrospect and why Don on three parts initially did they launch in a bit of a different timing for the three wear the brace the the pillow and the lumbar support all of those were supportive.
I'ma give you the example of the of the pillow cuz it's the most substantial or I clear change that we did.
So we start looking at it again puts what it what do other pills are doing when you left.
Let me backtrack.
So there's no point in your life for your you when you have back pain.
I'm well, you're not moving and when you're in Port patch, that's when you sleeping you do when you're in charge of the people in the US and when you are sitting at work, so I kept coming back to us for this kind of 3pi.
So what we we set up we set off to do a pillow and we understood start looking at different types of pill is understood that memory foam.
What's the best material again looking at the trends? What what material has gotten the best feedback in terms of solving the issue which is that was by far memory foam.
I'm going to be different densities of it.
So that's when Ben came in and he was like some people take to hard to soft.
What is the how can you pinpoint the gold tomorrow.
How can we? Look up Vita memory from a scrape but if we cancel out heat and it's making my face is really itchy.
How can you make this cooler solve this issue that there was literally Hitler and how high from pause before I try to solve the issue a possible found that the two had a little thin layer of cool gel on top and then even pinpoint it down to what bowl did what was the the width of that later.
Baby? Do you want to make it and added that specific player? To the park made that change and it was then as soon as I find hit the market it became the best selling pillow in all of the UK Marketplace actually became the best hello in all of home and kitchen as a category for a few days.
I just stopped in to most of us an ignorant person has to take the right of protein is taking the customer as the ultimate desire.
So we said look, we don't know what a memory foam is.
So let's buy all the memory foam pillows and let's see which ones have the best feedback on on a specific memory foam as the the enable to solve the problem and off Amazon again, same approaches to the rating on the same thing every time I eat and then we literally took a sample.
This is the color of this is exactly how we going to do it.
It was very systematic for us.
If we if we couldn't do it again with any product.
We will need them do it.
Even if we thought that we could and put our own opinions into it and make a different we said that is not iterable.
That's not do it that way question on manufacture don't think I asked so there are a million and one manufacturer is out there.
And for everyone good story I here I here 20 office for Ace.
How did you end up and go to mention these specific manufacturer? How do you pick them? And did you have to did you make mistakes in the beginning and have to replace your manufacturer? How did you go about wedding and selecting who you end up selecting? So over all the approach we took was let's put in The Upfront work in the wedding because that will make our lives down the lane way easier instead of having to deal with a lot of issues.
Call the insurance osetra.
Sol Santiago already mentioned we initially reached out via Alibaba to round again read numeric driven approach to defining a supplier reach out to her.
I think around Thirty or forty different suppliers all within the categories of the products through Alibaba.
I think we also looked at 1688.
com which is another comparable site Alibaba.
You also have certain metrics.
There's a gold star rating.
There's metrics on how long they've been on the platform for and even Alibaba, I guess given to bed own history has instituted quality checks from within of their own people are employees going to the factory is taking photos verifying all the specification to Accurate ecetera.
So, That was a good a good ground basis to work off.
A lot of dividing came from speaking with the the manufacturers themselves in how professional they were.
behave and how effectively they would communicate what companies Under non-disclosure, but what type of company is what size of companies that work with in the past example products they were thin and produce themselves in the past too many different variables.
We looked at them and where they had to take off different different boxes.
What were some of the questions you asked on the phone and at 6:30 to 43 tattoo.
How many of those would you say? You guys called what we contacted all of them and it's like it in marketing final drop out and then we obviously cut off a certain percentage cuz it's a huge time investment on our end to speak the 50 different people simultaneously.
Select we had an initial cut off injured reserve.
Poor communication and that was indicated by its a poor English.
There are some certifications they could not hold up a Citra meaning they couldn't provide certificates to show you exactly and then that was a big cut off then another step in the sauna was actually having a lawyer go over the certifications and kind of checking them that they were accurate and are fake.
There's basic services are or basic lawyers who can do that for a hundred 200 box.
That was another state.
How did you find a lawyer's Google search and those were based in the US or based organizations Global.
Did they say, what do you search on Google for someone like that? What might you search category of product Manufacturing? a general get certification to have his good manufacturing practice DMV.
So you can look up for a GMP certificate lawyer approval verification.
Saturnio.
Get a whole bunch and very practical again.
Were you going to your classes at this time? Had you actually find time to do all of the back to farm work week? That's another point where that was very influential to us because we had limited time we obviously that was attendance at class me to do Labs etcetera, which took up a lot of time should the time we had available we had to use soap sleep.
Again Pareto Principle focusing on the few things that matter saporito principle of people who are not familiar with that term is often also called the 80/20 principle and in very very simple terms that a lot of nuance to it, but The idea or the premise being a conceptual framework ends up manifesting at pretty accurately in a lot of different areas, whether it's agriculture or looking at a profit per customer or any no headache for supplier that 80% of say in the case of probably 80% of the prophecy generator will be produced by 20% of your products 20% of your customers and doing that type of analysis to identify the really really good and also the really really bad so you can make more informed decisions an 80/20.
It doesn't mean it doesn't have to add up to a hundred but it could be the 95 5 principal where 5% reduce 95% of your headache with your accounts receivable could be any number of things like that, but that's that's the name of Bill Fredo peredo.
I'm so sorry to interrupt.
Yeah, so you got your Labs you got your classes you have limited time.
So you're really having to focus on the things that that matter exact in a funny notes.
We've actually seen instances where people who dedicate full-time say to a to a business owner to the entry.
Pursuits end up being less effective than people who are only doing it part-time just because they get distracted they get lost.
They don't use their time effectively and ultimately the people who say have a full-time job or iron College can use their the limited time they have available on the things that matter again parallel distribution.
And also use them effectively focused not being on the phone and seeing all the messages from from the wire from the partner from from work you said so I think again that we use that from the 4-Hour workweek the concept of focusing in the matter is systematizing the rest and that's been very very influential.
Yeah.
It's it's true Forum in a lot of folks which is but then Hart Wyatt the weather today for our Quaker outside of that.
I often talked about the 80/20 principle or principal thing used in tandem with Parkinson's law is a semi it was initially written about in more about the humerus satire like contact but the applications really practical so they be id'd the purpose of the Parkinson's law is that a task will will swell in complexity fill the time that you will That's the more time you have for something.
The more complicated you will be inclined to make it and this is also not just with an entrepreneurship but even in writing me if someone like I think probably the sainya, I don't know his name correctly, but who wrote The Kite Runner who is a I believe a full-time position at the time.
So he had to use tiny chunks of time here and there to really focus.
It was not an option not to focus because his time is so limited so it can be very useful forcing function.
And the reason I mention that is that a lot of people there are many people myself included I do this all the time too.
So it's it's a matter of Conditioning yourself to use this lens but it's it's very easy to look at a perceived lack of time as a weakness.
But if you view it instead as a forcing function to wear when you focus you have to focus you cannot get away with checking social media every 5 minutes and get anything done that I can be a real asset.
So you guys were using what nights weekends.
When were you when were you actually finding time or was it be in separate chunks to reset his let's buy that 28 into the classes.
What are the things that we actually have to do to get in a still get a good grades, but but not necessarily spent a hundred percent of the time that normally people would spend on the time that was opened by that then say now we have this little bit of time.
What can we do for the business that 20 to produce the 80% of the results on the 28th is sometimes so it's really easy to identify say when you are not doing the 20 of the 80s.
Social media or with wasting your time, but often is even harder to identify when you're doing things that seem productive and you're saying okay.
I'm going to spend you spent four hours trying to get the the image perfect.
That often is just as bad as spending those four hours on social media.
So it's harder to identify that and always be be aware of like a concert but stepdad has helped us fight through that has been the the the one thing by Gary, he's actually remodels and another local it's huge real estate Empire for people who don't know the name gigantic.
So we use that concept and we can buy in the carving out of the classes versus The Carving out of the business, Not that 80%.
Doesn't make much of a difference and that's why we made time for it and we had we had time we would do work hard.
We work pretty much all day all day of the week every day of the week, but I we we do have Refer for leisure to in a space at the mind and do things that we also find fun and then we're going to come back to introducing new products.
So I wanted to hit the manufacturing and then we we've we've taken a slight Side Road not a not a not a Divergence cuz it's all convergence.
But the two things I want to mention our number one.
That's a bus was really just one thing and that is that the less people are thinking on themselves.
Wait a second.
This is the 4-Hour workweek guy and these two just said they work all the time in the key studies within the book even are very very very different and the objective is to maximize your practical output per hour.
And then if you want to build say a business that covers your expenses and helps you put your kids through school.
And then you spend the rest of your time exploring other passions.
That's one path.
If you want to build like you got to do right now at 8 figure 9 figure business that is another path myopathy tool.
Do you use 80/20 Fredo Etc are all it's the same toolkit apply to project to products you started not with one you started with three and how did you then go from the initial 3 to expanding and was that always the plan? Initially the finalists cell phone issue than it was getting this this product into the market for what happened is those people kept coming back to us and saying I have these parts what else? I'm still getting back in this in this other area.
I'm in my life or do you have a solution for this or this solves my lower back and pulled up on my upper back pain? So start listening to that as much as we could I started seeing how can we help our customers for longer than an M4 with more things again, really see us and started understanding researching a lot of the keyword.
What are the best selling products into how can we add value created a list of lunch and said we going to launch another 22 on to the market how to do a cat's ear data-driven.
How do you decide on 22? Originally made its we're reinvesting 100% of everything.
And so for growth purposes, you could have the max number you could afford to launch right Stone the assumptions you had which were grounded in your data you had thus far is 2230.
You were really kind of playing more Russian roulette with potent