← The Foundr Podcast with Nathan Chan
The Foundr Podcast with Nathan Chan
571: No Funding, 104 Rejections & $411 Left in the Bank - How She made $65M+ on Flowers
00:42:23
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- [00:02]
Nathan Chan
Hey, founder fam. I want to talk to you about something super exciting. We're officially partnered with Omnisend, the email marketing and SMS platform built specifically for e commerce founders. We've been recommending Omnisend to founder students for a while now because it just works. Whether you're launching your first store or you're scaling to seven figures, it really helps you automate your marketing and get real results. Did you know, on average, OMNISEND customers make $68 for every $1 they spend, which is an insanely good return. And because you're part of the founder community, you get 50% off your first three months with the code FOUNDER50. Just head to omnisend.com founder without the e to get started. All right, now let's jump back into the show. Hey, founder fam. Nathan Chan here. Welcome back to another episode. Today we're revisiting our interview with Christina Stembel. She's the founder behind Farm Girl Flowers. This was an amazing interview. What started in her dining room with $49,000 in savings, zero floral experience, has grown into a $60 million a year business fully bootstrapped, disrupting an entire industry. This is a massive business, guys. She built it out of San Francisco and she talks about all of these investor rejections. 104. 104 investors rejected her and she still kept going. She built this massive business and she really shares, like, the real unfair, filtered story of building a standout brand in her own way. So I hope you enjoy this episode. Now let's jump in the show, hear.
- [01:38]
Christina Stembel
The stories, learn the proven methods, and accelerate your growth and future through entrepreneurship. Welcome to the founder podcast with Nathan Chan.
- [01:51]
Nathan Chan
The first question I ask everyone that comes on is, how did you get your job?
- [01:56]
Christina Stembel
Yeah, so I got my job by just doing the hard work. I mean, my job was every job, so I wore all the hats. And so just being willing to do every single job gave me the job.
- [02:12]
Nathan Chan
Okay. Yeah, that's usually how it is when you first start. So how'd you find yourself doing the work you're doing today? How did Farm Girlfriend start?
- [02:21]
Christina Stembel
Yeah, so it's not the story that most people think. Everybody kind of wants this romanticized version of, you know, I must have grown up, like, frolicking in my grandmother's garden or loving flowers. And it wasn't that at all. I just wanted to start a business, and I wanted it to be able to check some boxes. Mainly, I wanted to be able to grow really big. I wanted to actually do something different. I didn't just Want to take somebody else's idea and, like, slightly tweak it. I wanted to actually, like, go in, and I hate to use the word disrupt because it's so overused, but I wanted to actually disrupt an industry. I wanted to, like, do something different in an industry. And so flowers was the first idea. Farmer was the first idea I had that checked all the boxes. Um, another big one was I knew it needed to be bootstrapped. I knew there was no way that I was going to be able to go down to Sandhill Road here and get, you know, one of the big, you know, Anderson Horowitz to invest, you know, millions of dollars into me. Because I didn't have a tech pedigree. I don't have a college education. I have a very untraditional, you know, backstory. Um, so it wasn't possible. So this was the first idea that I knew that I could bootstrap. Um, and so that's. That's why I went for it. Um, and it did check all the boxes. But the one that I didn't know back then that I wish I would have is how hard perishability would be. Because if I was going to start a business now, I would definitely have a checkbox that says, is it perishable? Yes or no? And if it's yes, I would, like, go on to the next idea. But, um, that wasn't the case. So it was. It was the best idea I had out of probably 4,000 ideas. I thought that. That I could do.
- [03:56]
Nathan Chan
Okay, Interesting. And what were you doing before that? Like, what is your background is marketing, pr, products, tech?
- [04:04]
Christina Stembel
Like, yeah, you're giving me a lot of credit. So my background before was just. I did a lot of jobs. I was in hospitality. My last job before starting Farmer Flowers was at Stanford University, which is ironic since I didn't go to college. I ran a ca, Like a catering company within the university that was owned by the university to start, which I learned a lot from. That helps me now today. And it also was great because I was able to kind of start a company within a company without the risk. I had a paycheck. And then after that I became the Director of Alumni Relations. So I did a lot of programs and events, and we used flowers at those events, which is why I started researching the flower industry, because we would buy a lot of flowers. I couldn't understand why they cost so much, which led me down this rabbit hole of research on why flowers cost so much, only to find out very quickly that it, you know, I understood why they cost so much. And I thought, you know, I switch switched very quickly from the event space to the E commerce space because that was where most of the opportunity and the white space was that I could go into and start something in. Um, so it was just my background was varied. I've worked lots of wage level jobs, coffee shops, hospitality, hotels that I worked my way up because I didn't go to college. I always had to start at the bottom. And I'd worked my way up to, you know, until I was running the hotels and then going and working for the university. But I knew for at least 10 years that I wanted to start a business and it was just trying to figure out which one that I could start and that I thought would actually be able to. To scale.
- [05:37]
Nathan Chan
Amazing. Well, look, you've done really well for your first business. So how long ago was it when.
- [05:42]
Christina Stembel
You launched back in 2010 and everybody thought it was crazy then to leave, you know, pretty stable job. Stanford's not going anywhere, even though it's considered itself a nonprofit, you know, so, you know, but still, the economic downturn in 2010, people are like, wait, you're quitting your stable job at Stanford to start a flower shop? And I'm like, no. How many times? I'd be like, it's not a flower shop, it's an e commerce flower company. You know, and. But people thought I was crazy. But now all the research I do has shown that companies that start during bad economic times are actually the ones that tend to do better. So I'm always telling people, even right now, when people are scared about the recession that's probably looming in front of us, it's the perfect time to start a business. There's a lot of pros for it.
- [06:26]
Nathan Chan
Yeah, I agree. So talk me through how you got the business up and running. You said proudly you're bootstrapped, which is incredible. So did you start with the Shopify store? Was Shopify. I think Shopify was still early days. Or they weren't around.
- [06:45]
Christina Stembel
They weren't around then. At least they weren't around in a way that I knew about them.
- [06:48]
Nathan Chan
Yeah, okay.
- [06:50]
Christina Stembel
Yeah. So a friend of mine. So 2010, I quit my job in June. I gave myself until August to get a website up. That didn't happen. It took till November. But a good friend of mine, his company built it for me for only a few thousand dollars back then. I mean, what I spend in one week of development work now, less than one week at development work now. So, you know, it was just very Scrappy, you know, I had $49,000 of savings. I was like, I'm going to start this with $49,000. I gave myself two years or until I ran out of money. But that was to live on too. It was like one account. You know, I'm like, I need to live on this and I need to start this company. And so everything was very bare bones, very like grassroots. You know, it cost me about 5,000 to start the website. You know, I had to go teach myself how to make flower arrangements. I knew nothing about flowers, so I would go buy flowers and practice and watch YouTube videos and how to process flowers or anything like that and just did everything myself too. I did it from my dining room for the first two years.
- [07:51]
Nathan Chan
Yep. Wow.
- [07:51]
Christina Stembel
Very close to running out of money at year one and a half. I got down to $411 at one point. Thankfully, I just paid rent, so I still had a couple weeks birthday rent again. And then at the two year mark, my corporate attorney landlord found out I was running an illegal business from my dining room and then gave me the pink slip that either I had to get out or the business had to get out. So I moved the business out before I would have actually, because I still wasn't financially stable. I mean, the first year we did we. I say we because it made me sound, you know, like we were big time. It was just me and my dining room, $56,000. And the second year did 276,000. So I thought, wow, 5x growth. That's amazing. You know, um, and then between the second and third years when it started to get some traction, but I had zero marketing dollars to spend. When I look back at my first financial model, it's hilarious because I think I had $0.24 per unit in there for marketing.
- [08:49]
Nathan Chan
Wow.
- [08:49]
Christina Stembel
I'd always been in operations, working hospitality and everything. So I just like marketing. This is like a waste of money. I could like hire people for this, you know, and like, you know, instead of putting it into marketing spend. But for the first probably two and a half years, maybe three, all of my marketing was going to coffee shops around San Francisco and putting out a flower arrangement with these little marketing cards that I made that cost like 3 cents a piece. And every week I would go back to each coffee shop in different neighborhoods. I did them all over the city, and I would count how many cards were taken. And if like 40 or 50 cards were taken every week or more, that I would deem it a worthy expense to put another bouquet there for the next week, only 10 or 20 were taken. I was like, I don't think that's worth the $20 it cost to do this flower arrangement. So that was it. And it was going to a lot of networking events at night and taking flower arrangements there. I would always, like, put them on the registration tables everywhere, you know, even though people didn't. I didn't ask. I just put them out with cards. And that was all of my marketing spend. And that's. It worked. So people picked up those cards, and that's how they found out about us and about me at that point. And, you know, between the second and third years, when it really started to get some traction, I hired my first employee. We went from 2, 276,000 to 920 that year, so almost broke a million. But really, from the start, I thought I was going to be able to prove out the concept and then go get funding. Like, that was always the plan. I was like, I just need to prove, you know, it was a very different model. It was, you know, less is more. In the early days, we only had one bouquet option. That's it on our site. Everybody else had a minimum of 169 on their website. And so the education was really challenging because this was way before. The less is more that everybody has now, you know, the fewer, better. Less is more. Everything that you know, from anything from clothing to shoes to anything, now there's lots of companies that do that, but this was very early in 2010, and so trying to, you know, educate consumers and they couldn't call us and order red roses and baby's breath that they just had to take Our daily bouquet was challenging to do, and it took. It took a couple of years to do that. And to my dismay, I was never able to go raise capital. I've gotten 104 no's. I've tried many times, and this is now the first time I could honestly say that. I'm so glad that happened, though, because we are in such a better place, and we're, you know, very, you know, doing really well with profit right now. And. And to own your company and be able to do whatever you want with it and to be able to make the decisions that you want is. It's amazing.
- [11:28]
Nathan Chan
Yeah, that's incredible. So I'm curious. I'd love to delve. I definitely want to go from year three all the way up to 10 and really talk about that journey. But if we could rewind for a second, I'd love to know about finding the stock. Like for your first order to fulfill and how you got your first customer and how you even got, like in your first year, that $50,000 in revenue, like, that's customers. That's like, where and when you consider product market fit somewhere around, you know, probably in between one and two, you've kind of like, gone, okay, we're onto something here. How did you know to keep going even though, you know, you were struggling the first.
- [12:09]
Christina Stembel
I mean, when you asked about stock, like, when I. When I had the like, product. You mean to like. Because it's not an inventory heavy business to start now. It's inventory heavy because, you know, I have to order. We can't order off the shelf anymore. Like, back then I could order off the shelf. And we were really, you know, I was very fortunate that we had a very robust flower market in San Francisco. There's very few cities. There's only really two cities in the United States I could have done that in if I was in the middle of the country or, you know, if I was in Chicago still or back in Indiana, where I grew up, I couldn't have started this company because I didn't have the accessibility to small quantities of flowers. Because I had a flower market in San Francisco, I could go and buy like one bunch of this and one bunch of this. All I needed was a wholesale license to do that. And so, you know, I remember telling my dad, we still talk about it to this day. Like, I just need to get 11 orders a day so I can break even on the flowers that I'm buying, because I have to buy so many different types of flowers to make this bouquet that I needed 11 orders. And it took a while to get to 11 orders a day. A long while. And so that's how I came up with the idea for the coffee shops, though, was I had extra flowers that I didn't have orders for. And so instead of throwing them away because they're highly perishable, you have about three days before you can't use them anymore. I would need something to do with them. Like, how can I turn this into marketing? You know? And so that's why I took them to coffee shops, the excess ones. And then to get customers, really, it was just the. I mean, my first customer, of course, was. Was friends and family. So, like in 2010, when I started November and December, I don't even count that as revenue because those were just friends and family. Right.
- [13:41]
Nathan Chan
So, okay.
- [13:43]
Christina Stembel
But really the first real pain, I mean, they were paying my friends and family, my people that didn't know me. My first customers, I remember being like giddy when I would like look in the back end of the site and be like, I don't know this person. This is someone I don't know. You know when they're ordering flowers from me. That was from the coffee shops. It really was. Or it was friends of friends. You know, I sent out emails to my friends being like, can you send this out? I'd make like a little marketing flyer. Can you send this to your email list and stuff. It was just very much that. It was anything I could do that didn't cost money I did for marketing. And you know, I even like did a few illegal things like papering people's cars with just like, you know, like I'd make like fires and be like, Valentine's Day is coming. Farm real flowers and put it on people's windshields and stuff. So. And that was very cheap because I would just print it myself and cut them at home. So it was things like that. And that's where the customers came from. I had no digital spend at all until probably 2013. Let's say I started doing digital spend and I got really lucky with that. And I just can't, I can't take credit for how well we were able to build our digital presence because the timing of when we started, you couldn't do that. Now like we were acquiring customers in 2013 and 14 for under a dollar. Like it was 90. Yeah. To acquire a customer because this was before. And my ex husband worked in marketing at Facebook too. So I also had that, that benefit. But you know, it was really, it was great timing because it was before all of the big companies, they hadn't transitioned from, you know, Nordstrom. The big companies are all looking for 25, four year old female consumers. We're all fighting for the same people, right? And it was before they had like, were savvy enough to have like switched over all their traditional channels because they all are huge companies and have tons of red tape right to digital channels. And so they hadn't done that yet. And so now, you know, there are certain times like Black Friday, we don't even try to market, we just turn off our ads. You know, it's not even worth trying to do that to acquire that customer when you know those companies are spending so much money to do it. But it's, it's being smart about when you're going to spend it. But back then it was easy. To be honest, I don't. Nothing was easy. I shouldn't say it's easy, but it was cheap. It was, you know, to acquire a customer under a dollar is phenomenal. I wish we could do that now. We still are well under $10. We've never really exceeded $10 at customer acquisition. This year we turned off marketing when Covid hit in March to conserve every dollar we could. And then we found we didn't need to turn it back on because we didn't have the supply for the demand even because we're over 100% year over year growth right now.
- [16:20]
Nathan Chan
That's fascinating. So in the early days, you basically just, you know, did things that don't scale, as Paul Graham would say, and you kind of kept going. What? Why did you keep going even though it was so tough?
- [16:35]
Christina Stembel
Yeah, because it was sweating. It just, you have to really build a very authentic brand. And that's what I was doing. So I put in a lot of work to build. Like we're now benefiting from that work that I did from the first five years of building a really authentic brand that people love it. It's just. It takes a lot longer to do it. A lot longer to do it. So, you know, even though I don't have experience explosive growth. I mean, it is funny that everybody thinks we're an overnight success, and when I tell them we're 10 years old, they're like, oh, my gosh, I just heard about you a couple years ago, though. And I'm like, yeah, because I was in my dining, you know. So, yeah, it's like, I think Larry or Sergio from Google said, yeah, like after five years or after eight years, we were an overnight success, you know, and that's how it feels for farm girl. And it did scale, but it just took a lot longer. Ten years is a long grind. And I think the reason I kept going is because I think I, like most entrepreneurs, have a really big fear of failure. And I don't quit much. And so I just needed to prove that I could make this work. And it was working from the standpoint of, I mean, we're doubling every year at least, you know, and so that's, that's, you know, we've never had a 20% growth year. That would be horrible, I would consider. But to most companies, that's a good year. Right? So, you know, we were always doubling or tripling. The lowest year we ever had was 50% growth or 49% growth. And that was somewhat intentional because we needed to fix some. Some problems that we're having. Supply chain distribution and also some culture issues internally. So because we'd grown so fast, so we've put the brakes on sometimes intentionally. But it's, it, it's hard. Like it, like, I think that most people just gloss over how hard it is. And you know, I think we get this over glamorized viewpoint of venture capital and we think that companies are supposed to become unicorns in three years and that's like the norm and that's not normal. That's the exception. And, you know, we like to call ourselves the workhorse in a sea of unicorns. You know, like in Silicon Valley, everybody's focused on being a unicorn and we're, we're focused on being the workforce. Like, we're going to win at the end. We're going to build a really good company that's profitable. Like to say we kick it old school, we spend less than we make. We're a healthy company, we treat our team right, we have great benefits for our team, and we worry about more than just the bottom line. And we're able to do that because we don't have to answer to investors that are looking for that 3 to 5 year, 10x turnaround, you know, return on their investment. And so it's funny because half the people I Talked to think 10 years is so fast to have built a $65 million company. And half of people are like, oh my gosh, 10 years. How have you been doing it for 10? And depends on what day you talk to me on which, which camp I'm in. So. But usually 10 years is a long time.
- [19:27]
Nathan Chan
Yeah, look, I know what you mean. Especially if you're in, you know, San Fran and like, it's, yeah, like it's crazy, like the growth and all sorts of things, but you're making that conscious choice to grow controllably, which gives you all the power and, you know, like, it is a really great alternative path. And I think there is a big bootstrapping movement. You look at like the guys at Basecamp, there's many other founders that are now choosing, um, to go down this pathway so that, you know, it. It's not just a one side fits all.
- [20:00]
Christina Stembel
Yep. I think we need to talk about it more because it's, you know, it's something, you know, the most freeing moment probably for me was when I finally realized that success does not equal funding. Like, I can be successful without funding and I can stop chasing it and stop spending. You know, I was spending 30 to 40% of my time pitching to people.
- [20:22]
Nathan Chan
Wow.
- [20:22]
Christina Stembel
Yeah. A lot of time I have spent Thousands of hours pitching in the.
- [20:27]
Nathan Chan
Really? Wow.
- [20:28]
Christina Stembel
Oh my gosh. So many, so many. And every single time it was a no or a couple times we got yeses but horrible offers. And you know, I did a lot of research and I got very bitter for a long time. And you know, then I realized, look, I have less than a 2% chance of raising capital. As a solo female founder, I have less than a 2% chance. You take like tech, like software companies out of that. I have less than a 1% chance of raising capital. Why in the world am I spending 30 to 40% of my time pitching to a bunch of guys who have never actually built a company and they're telling me what I should be doing differently And I'm sitting there thinking that, oh my gosh, at first I was thinking, they're so smart, they're so much smarter than me. I didn't, I didn't even go to college. And then probably like the third year pitching, I was like, no, I know what I'm doing. Look, I'm building a. Look how fast we're growing. We've not run out of money. The fact that we haven't run out of money should give me enough accolades and enough like, you know, just proof is in the pudding basically to say, you know, how many companies can grow a perishable product company where even the big guys do less than 10% margins, most are 6 to 7%. And that's billion dollar flower companies. The margins are tiny, they're scarce. And what we're doing and the fact that I'm able to bootstrap without running out of money is the accomplishment that I'm most proud of in my entire life. And the fact that VCs and private equity individuals don't see the value in that to me shows me that they're not the smartest people in the room. Because if I saw that in front of me, and when I have enough money to invest in lots of female owned businesses, which I can't wait to do one day, I will give so many points to people that can do that because it's the hardest thing in the world to do. It absolutely is. So. And not having to spend 30 or 40% of my time felt like a gift I was given back. And it also seemed like the wisest decision because if I have like a 1 to 2% chance max, then I should be giving it 1 to 2% of my time.
- [22:25]
Nathan Chan
Yeah. Wow, that's crazy. So how many no's do you reckon you got in those first five years of trying to raise VC104.
- [22:33]
Christina Stembel
I have a spreadsheet, I'm gonna send them all. I'm gonna have my Pretty Woman moment and I'm gonna send them my check and I'm gonna be like, big mistake, huge mistake.
- [22:43]
Nathan Chan
So 104.
- [22:45]
Christina Stembel
104 no's.
- [22:47]
Nathan Chan
104 no's. Wow, what a story. So let's go back a little. So first three years, broke a million dollars, obviously probably had a couple of employees. Were you still just servicing the local San Fran market or are you starting to service other states too?
- [23:07]
Christina Stembel
Only San Francisco. So my intention was always to get national shipping going within two years. And I was so wrong. That was not possible to do that. The subsidies on shipping were huge and I had no idea how big they were. So I couldn't afford it until year five and a half. At 2015, mid year we started with just some not national shipping. We started just doing some other Bay Area areas. So like we were only in San Francisco, which is seven miles by seven miles. It's a very small 49 mile squared radius. It was very tiny for five and a half years. And so we were able to build it. We have pretty market saturation in San Francisco and we should have launched national shipping much sooner than we did. But I just couldn't afford it. Our subsidies started at $19 per box that we had to subsidize. And that's. I mean if we just done rack rates before I had enough buying power, it was almost $200 to ship a box. And you can't charge consumers that. So I did all kinds of focus groups to find out how much we could charge. All of our customers said basically $15 was the sweet spot. Eight, you know, I had it like tiered. You know, if we did 15, 92% of people in my focus group would buy. If it was 18, it was like 80 something percent, 81 or 82%. And then when I went up to 25, which was the highest tier, which is what we launched national shipping with, 2% of people cold said that they would buy. You know how much we still charge for national shipping? $25. We have not been able to get shipping rates down because even once we launched national shipping, what I could afford to, which was in 2016 we did, you know, some local areas, additional local areas. In 2015 and then 2016 we started doing California shipping. Then mid year we started doing national shipping. And those subsidies instead of going down, they increased very quickly. And I hadn't anticipated that because, you know, when I was doing my modeling on it. I anticipated that the entire United States would grow at the same rate, all of the zones. And that's not what happens. You know, major metro areas on the coasts grow faster. And so New York City grew very fast, and that's the furthest zone away from San Francisco. Florida grew very fast. Texas grew very fast. Those are still our biggest states outside of California. And our subsidies grew at one point to almost $40 a box.
- [25:22]
Nathan Chan
Wow.
- [25:23]
Christina Stembel
Yeah. And so knowing your numbers is really important. Otherwise you run out of money super quick. So, you know, I would have to control how many we could even ship. So the first Mother's Day that we were shipping nationally, we sold out in four minutes. I could only afford to do 200 boxes.
- [25:38]
Nathan Chan
Crazy.
- [25:39]
Christina Stembel
Yeah. And after 200, I ran out of money for subsidies. And so then it just gradually I would be able to open up more and more. And then in 2017, about a year later, we had, you know, enough margin in other areas that we were able to negotiate, you know, better supply chain costs and things like that that then I could put that towards. And we. I always took from my marketing buckets, which is why my marketing is often two or three dollars for my CAC. You know, like when I tell people our ROAS is 27, they're like, that's not right. You're not doing the math right. I show them and they're like, no, it's 27. I'm like, yeah, because I never have enough money to spend on marketing because that's the first bucket I take it from for shipping subsidies. You know, so 2017, and you were able to open it up without selling out except for holidays.
- [26:20]
Nathan Chan
How come you didn't set up, like, supply chains in the different cities or in like. Like a traditional E commerce business? You know, if you, you know, you. Let's just say start in Australia, you see most of the. A lot of customers coming from us. So you set up probably something in, you know, like, middle of middle of the US or maybe you just do east coast or west coast, and you can control Canada and US and then you set up something in Europe. Like, why. Why didn't you do that? Is it because of the flowers?
- [26:52]
Christina Stembel
It takes a lot of money to set those up. And bootstrapped. We've never had a million dollars or half a million to set one up, which is. It took about $680,000 to set one up. So now we have. So we have in Miami. We're opening other ones. We're doing a hybrid model with fulfillment centers and distribution centers. But the other reason I don't just do what all the other flower companies do and they have bouquet makers and farms ship for them all their product is because we're a high design bouquet. So we actually, the thing that sets us apart is we are a designed bouquet. We are not just a bunch of flowers. And so that's why we have a devout following that is willing to spend $25 to ship their flowers to them instead of free shipping like everybody else too have a better product in our opinion. And so, you know, I tested seven different companies to see if we could use that three PL type model and we couldn't and keep the design where it needed to be. And so I knew we needed to open our own facilities then. And also, you know, high, highly perishable by the way. So the flowers we use, we use a lot more specialized varieties of flowers than a lot of our competitors because they don't last as long, which is why they don't use them. They can't sit on a pallet in a cooler for two weeks until those button mums are used. When you're using garden roses that have like a one week shelf life, you have to use them within 24 hours or the customer's not going to get a week out of them. You know, so we have, we use higher quality, more expensive flowers, a higher design designed bouquet and everything's highly perishable, both inbound and outbound. It adds a lot of complexity that you can't just. I wish we could use three PLs that are just boxing and shipping like you know, you know, sweaters for us. But unfortunately that's not the case. So we have to open up our own which is, we've done now, but we have to do it more slowly than we'd like to because we just don't have millions of dollars to do that at once because we're bootstrapped.
- [28:43]
Nathan Chan
Yeah, no, that makes sense and I totally understand. So one of my friends, he runs one of the largest hamper companies in Australia. So I understand the challenges around perishability and I also understand the challenges around seasonality and being able to model how much stock to pre purchase. I'd love to, to know because one thing I did notice is even when you first started you said, oh you know, I've got to sell 11 to break even. Like I think that's a really good takeaway for people. Like I'm not an, I'm not a mathematics person. I was hopeless at maths, but I'M not bad on my numbers and I really got to know those numbers. Like, I think I can really see that, you know, your numbers. So tell me about kind of modeling that out, especially around seasonality. You know, Mother's Day would be a big time for you, obviously. Christmas, like. Yeah, because it's. Would you say you guys are a seasonal business or because you've gone the per. You've gone kind of the more personalized premium approach. It is less seasonality. There's less seasonality in, in. In your model or.
- [29:52]
Christina Stembel
Yeah, I mean, so we're lumpy. I think every company is lumpy in some ways. So we're lumpy like every company, but it's less than what people think. So, you know, from October through end of May is our busy season. So that's a long busy season. You know, um, and then June through September is our slow season. We go down about 30% during those months. So we're lumpy. Like everything else. And everything is planned. And when I talk to, you know, I'm in YPO and some other entrepreneur groups and when I talk to other CEOs, have a big network of friends, our CEOs, and they're just like dismayed by like how much risk there is at what we do. What you just said, you know, if we over buy for a major holiday, we'll go out of business. We literally will go out of business because we're buying millions of dollars of flowers well before and we're now, we're so, you know, big that we are custom growing with a lot of farms. So we're guaranteeing that every stem that they grow for us, if it meets our quality standards, we will buy. And that is a year before any of the orders come in. So an or a recession happens this next year. Like there's a lot of things that go into that and planning for it. And you know, we have some really positives to our model that help with that where, you know, with our mixed bouquets, our signature burlap wrap bouquets, our bases, you don't get to pick what the flowers are at all. Like we have some varieties that you do get a pick, but with our mixed bouquets, you don't get to. So if I have to sub things later on because of quality or I need, you know, this single stem product we have didn't sell, I can move those stems into one of our mixed bouquets and do a new recipe for it. So there is some flexibility that our model, you know, this novel, you know, concept that I came up with that was different than everybody else allowed us. Some, some pros with that, that helped with supply chain management. But it's so risky. Like when we were shut down for the shelter in place in San Francisco, they gave us 12 hours to shut down. They gave everybody 12 hours notice. That's it. And we had hundreds of thousands of dollars of flowers already on their way to us. We had to throw out a lot of flowers. $150,000 throw out. If we had to do that often, we would go out of business and you know, if we over order by more than, you know, a couple percent, we could go out of business. You know, so it's, it's really risky and we have to know our numbers. And this is why, you know, people get very upset when we sell out. And I'm like, I would rather sell out all day long than over buy and go out of business because I just had to throw away, you know, half a million dollars worth of flowers because I overbought that week, you know, so it's challenging. I'm very lucky that I have an amazing team. I have somebody on my team who her projections are, I mean, crazy. Like a year from now she'll tell me how many medium burlap wrap, okay, we're going to sell this week, next year, like, and she's within like 1.3%. I mean, it's crazy. Like so on it. She's been with me for many years. And it's interesting how, you know, things stay the same. You know, like, you know, the same percentage are buying mediums now that are buying later. So it's interesting to see that the psychology of purchasing is really interesting to see that. But it's risky. It's really, really risky. I have no, nothing, there's nothing I can say that takes away the risk because it's, it's, it's a big risk.
- [33:04]
Nathan Chan
Yeah, no, that's, that's really interesting to hear because yeah, like I said, my friend, he has a similar type model to you and I was quite close. I actually met him through EO and yeah, like, I hear you. Like, I really do because like, you know, it's Christmas time. You got those three months for him where it's just crazy. So I'm curious, coming back to year three, broke the million dollar mark. Sounds like you're really starting to get traction now. What do you think that was? Was it just compounding of just building the brand grassroots style and really starting to ramp up on the digital side?
- [33:47]
Christina Stembel
Honestly, it was. This may sound I mean, marketing people would not agree with me at all on this, but I will stand behind it. It was having a better product. It was really being focused on our products and our customer experience, because word of mouth, I cannot stress enough how important it is. And so women loved us. And the other thing is, everybody assumes that men are the ones that buy flowers. They're not. 80% of people that buy flowers are women buying for women. You buy for your mom and your sister and your girlfriends. And the reason is because you know how it feels to get flowers. And so you want to give all the, you know, your loved ones in your life that feeling. And, you know, Valentine's Day is the only time that flips. It becomes 90% men. I hate that holiday. But the rest of the year, it's women buying for women. And when women love something, they love it, and they tell all of their girlfriends about it. And so that's what happened with us. You know, we have this, you know, we told the story about who we are, what we do. You know, we have these little pins that go in each. You know, each of our boss have a little pin that has a story on it that's about grit, resilience, or, you know, we've done a lot with the unboxing experience to make it like a great, like this wonderful thing, you know, instead of it being, oh, I got our excited to get a farm roll box, and they're like, Instagramming it and stuff. So, you know, those women told all of their girlfriends, oh, my gosh, this is the most amazing flower company. You have to try them. And that there's no other reason that we grew other than we made a better product, better mousetrap, basically. And we really stuck with that and we made, you know, a better customer experience. We solve all of our customer service that's in house, and we make sure that we take care of every customer. And, you know, all of the review sites, I mean, they rave about us. And it's not about our product, it's about our customer experience. It's about our customer service. And, you know, people don't put enough value into that, you know, and everybody talks about, like, if somebody has a bad experience, they're going to tell 10 people and somebody has a good experience, you're gonna tell one person. I don't agree with that. I do think people tell 10 people they don't like it, but if women really love it, like last weekend, all my girlfriends are, like, talking about all my clothes. They love them. When I saw them And I was like, okay, well you know, they're like, where'd you get it? And so send me all their referral codes. And all I was doing was sending referral codes to my girlfriends of where they can buy their clothes. So if you really love company, a brand and a product, you're going to share it. And that's what happened. And that's how we were able to, to grow without any money.
- [36:07]
Nathan Chan
That's awesome. Yeah, look, I, I do agree with your sentiment there that like when you can find a product that just flies off the shelves, that's when you know you're onto something. And it is so much easier to market, it is so much easier to sell versus a subpar product and you need next level marketing. So, yeah, no, look, and that, that's really pushed from, you know, San Francis, Silicon Valley. Those like, they are obsessed with the product. They're really product people down there. So it sounds like maybe a bit of that has rubbed off on you.
- [36:43]
Christina Stembel
I mean, definitely. But it's interesting to me that there's many other Silicon Valley flower companies that started after us that look strikingly similar.
- [36:51]
Nathan Chan
Oh, really?
- [36:52]
Christina Stembel
Yes, absolutely. And the thing, you know, they took a lot of inspiration from farmer flowers and almost everything. The one thing they didn't was making the product in house because it cost a lot more. Right. But that's the only way to keep the quality where you, where you want it to have a design bouquet. You can't have the same people making Safeway or the big grocery stores bouquets as making yours. Expect them to look different. Right. And so it's interesting to me because they, you know, and I try, would I try to explain this in those, the pitches, those 104 pitches that, that turned me down. You know, try to, you know, when they'd be like, yeah, but you know, it's not Sustainable to have $10 customer acquisition costs. I'm like, I get it, it's not sustainable. But I don't think I'll ever have to have $80 customer acquisition cost like our competitors do. And the reason I won't have to is because people always come back to farm real flowers because I make sure that we have a better product and we have a better customer experience. So if the average American consumer buys flowers four times a year, they come back to farm real four times a year. And so I don't need to spend $80. So the other companies that like, aren't putting the emphasis on the product, you're going to have to keep spending them marketing because you have to acquire new customers all the time. Because when people come, they don't like what they get. You know, when I would go buy from those companies, I felt ripped off. I felt like I got a grocery store bouquet that I spent $100 on. And that's what's happening because they're not focusing on the customer and the product. They're focusing. They're really great marketers, they're great technology companies, they have great marketing departments. But until you fix the problem, which is that flowers should not be ugly, you should have a beautiful bouquet and you should take care of your customer. If those flowers sat on a porch at 100 degree heat and died, you should send them a new one really quickly and make sure they're taken care of. And that's what we do.
- [38:40]
Nathan Chan
Yeah. No, I love it. A lot of respect. So you said you would Turn over like 60. Over 60 million this year. Like, and you're profitable. Like, are you able to share kind of like, like roundabouts for the margins or.
- [38:59]
Christina Stembel
Yeah. So until this year, we had, we ran it as close to zero as possible. It's the only thing that we were like Amazon on. Right. We try to run it. I would budget 2%. Prof. And then everything. Then I could afford to do some marketing if I had more than 2% profit. So.
- [39:14]
Nathan Chan
Wow.
- [39:14]
Christina Stembel
Yeah, we ran it close to zero as possible in order to be able to grow it. And then, you know, because everything is how much marketing you spend, how much, like all the things require a lot. How much subsidies you can do on shipping. You know, we've had to turn off certain areas that the subsidies were too high in. And so it's very controlled like you said earlier. But everything was controlled down to the profit.
- [39:36]
Nathan Chan
Yeah. Wow, that's fascinating. So you're running it like a VC based model where like you're not. Yeah. Like you could be profitable but you're, you're extremely aggressive on growth.
- [39:48]
Christina Stembel
Yes. Yes. We could make a lot more money. If I had done things differently and not tried to get 100% growth numbers, you know, if I had tried to do this at a 10 to 20% growth and stayed, you know what that would mean is I wouldn't do national shipping. The subsidies are far too great. I never started this company to be a small business. I wanted, I want to grow it to a billion dollars. And so that's what I'm doing.
- [40:09]
Nathan Chan
Billion in revenue or billion valuation?
- [40:12]
Christina Stembel
Billion in revenue.
- [40:13]
Nathan Chan
I'd love to know what have been your biggest lessons that. Yeah, you've really learned from during this time for a point of reflection.
- [40:21]
Christina Stembel
How I set up the company was. All of it was choices. You know, like, everything is a choice. And so I can either make the choice to walk away now. And I thought about it because, you know, I. I don't pay myself a whole lot of money. I'm not the CEO that makes a half a million dollars a year. You know, I was paying myself $60,000 a year putting everything back into the company. This was like my baby, you know, And I didn't set myself up well either, because when I sat there feeling sorry for myself and thinking, oh, my gosh, I would have made more money if I just stayed at Stanford, like, literally, you know, and I just worked 120 hours a week for 10 years, you know, that's not smart either. So, you know, it sounds like a weird thing to say, but, like, making sure that you're setting yourself up well, that you're setting your company up well, and not like, you know, I was, like, putting every dime back into the company because this was so important to me, and it could be gone tomorrow. You know, it could really be gone tomorrow. So there's that learning. We've had everything from, you know, with that we had to redo our whole distribution. I mean, it has definitely shown a very bright light, and I always knew this, but to see it so clearly on the importance of your team and, you know, I can't do this myself, and so it's just making sure that we're taking. That I'm taking care of my team because they're so important.
- [41:39]
Nathan Chan
Awesome. Well, look, that was an amazing interview. Thank you so much for your time and congratulations on your success.
- [41:44]
Christina Stembel
Thank you, Nathan. Thanks for having me.
- [41:45]
Nathan Chan
If you love this episode, make sure to check out my interview with Emma Greed on how solving a problem she was so passionate about led to the creation of Skims and Good American.
- [41:55]
Christina Stembel
And so I do think it's. So much of it starts with, like.
- [41:58]
Nathan Chan
Addressing things that bother you that you.
- [42:02]
Christina Stembel
Find, you know, you've got to create.
- [42:03]
Nathan Chan
A solution for, because, you know, at.
- [42:05]
Christina Stembel
The end of the day, you've got to be passionate enough and sometimes crazy enough to go round and round and round to actually solve a problem.