← The Foundr Podcast with Nathan Chan
The Foundr Podcast with Nathan Chan
649: We Had 3 Weeks Left… This Saved My $35M/Year Company
00:52:58
Christina Stembel built Farmgirl Flowers into a $55 million bootstrapped business by 2021, betting on simplicity, direct-to-consumer, and zero VC money. Then as Covid vaccines became widely available, sales crashed 50% overnight. To save the business, she had just 36 hours to test a radical pivot or go bankrupt in three weeks...
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- [00:02]
A
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. Founder 50 just head to omnisend.com founder without the e to get started. All right, now let's jump back into the show. What happens when your 55 million dollar bootstrap business collapses 50% overnight and you have 36 hours to test a radical pivot or go bankrupt in three weeks? Well, today's guest, Christina Stembel, founder of Farm Girl Flowers, who's back for her second appearance on the show with completely different philosophy. After launching in 2010 with $49,000 in personal savings, Christina built Farm Girl Flowers into a massive business in the floral industry, hitting 55 million in revenue by betting on simplicity, direct to consumer and zero VC money. But when Covid vaccines became available in 2021, sales collapsed, forcing her to take out a $3.5 million loan and rebuild the business model in less than a week. Now she's abandoned the growth at all cost mentality entirely. It in this raw and honest conversation, you're going to discover why she turned down acquisition offers because the industry multiples were actually insulting, and why founders need to research exit comms before they start. Her controversial pivot from chasing $100 million to optimizing for double digit profit and slow growth. And the brutal lesson she learned hiring an entire C suite because that's what you're supposed to do, then firing them all a year later. This is an unfiltered conversation about what happens when you stop chasing the Silicon Valley narrative and start building the business you actually want to run with freedom and peace of mind at the front and center.
- [02:11]
B
Hear the stories, learn the proven methods, and accelerate your growth and future through entrepreneurship.
- [02:19]
A
Welcome to the Founder Podcast with Nathan Chan. So Christina, welcome back. So you launched Farm girl flowers in 2010, aiming to disrupt an industry characterized by confusion and waste. And 15 years later, how did your initial choice to offer just one daily arrangement solve key customer pain points? And how's that focus evolved to just to justify the highest ticket price in the market today.
- [02:53]
B
Yeah, I was super naive back then. I mean, I wish I could still do one daily arrangement. I still think it solves a huge pain point of too many choices. You know, choice fatigue, being able to minimize waste without all the complexity of having, you know, hundreds of SKUs. However, consumers want more choice is what I learned from that. So starting with one daily arrangement was a great idea, and it worked at the time. It was a very interesting time in 2010 where companies were scaling back and you saw a lot of this, like, daily deals going on the daily deal sites. And so consumer behavior was shifting. But I do think in the last five years, especially, consumer behavior has shifted all the way back. Plus some that pendulum has swung even further on the other side with consumers wanting as much choice as possible. We see that in, you know, what people write about as having the highest average order value in the industry, which is questionable, but we can come back to that too. And, you know, while we do have a lot of expensive products, having one daily arrangement just didn't appeal to, you know, consumers at all levels of what they wanted to purchase, what type of products they wanted. And so we had to listen to that and adjust accordingly.
- [04:06]
A
Yeah, so you started the brand 2010, $49,000 in personal savings. You hit a low point of $411. One and a half. Can you tell me about that time, like, you know, bootstrapping and that superpower that you believe is what made Farm Girl flowers today and why that's so important to you?
- [04:30]
B
Yeah, it's funny, because that $411 you just reminded me of, but that wasn't even the scariest moment, because back then it was just me working at Farm Girl. You know, I would pretend that I had lots of people and I'd use the, you know, universal we when I would respond to people. And I even changed my name when I was doing customer service or events, you know, so it sounded like there were like three or four people here. Um, but if it didn't work at that point, it was okay because I could live in my car if I needed to. I didn't have anybody else's livelihoods, you know, on my. My head or my, you know, my thoughts. So I think the scariest part for me or the most challenging part was I think right around when we spoke last mid 2021, was we had more money in the bank, but we had a much higher, you know, we were on a $55 million, I think revenue year with a lot of people working for me. And we had just built an infrastructure for, you know, a 60 plus million dollar company that we thought would be more like a $75 million company that year. And we missed forecasts immediately. We had a, a hockey stick down which you never went to have for the first time in 11 years. We'd never had a month that didn't have increase year over year ever in the history of Farm Girl. And then as soon as the COVID vaccines became readily available, people started traveling to see their loved ones and stopped buying gifts. And we had just built this infrastructure for double the sales from you know, 2019 to 2020. And we expected similar from 2020 to 2021 and then started to see that immediately in April. As soon as vaccines became readily available that changed dramatically. But more so than what all of my, you know, sos forecasting could, could, could save us from, I think I went down to 30% decrease. But when, when we down, went down 50 plus percent almost overnight, it was, that was, that was my $411 moment all over again, but at a much bigger scale. And I didn't think we would actually get past that one. I had to take out a three and a half million dollars loan, um, that, you know, I, that's really hard. I was, you know, I lived in a one bedroom apartment. I don't, didn't have any personal assets. I was paying myself $60,000 a year. It wasn't like I had, you know, massive, massive bank account that could, could pull us out of this. So that was, that was the scariest time. And I think the thing that kept us alive and kind of our superpower is the fact that we're able to, to move very, very quickly. Because all of those 104 nos I talked about last time, not having investors, not having a board, not having to run everything up a chain and get you know, 27 different opinions on what we should be doing. I literally did whiteboarding. I didn't sleep, I just for two days straight I whiteboarded ideas of how to like save the company. And one of them looked like it would work. And I ran it by a CEO group that I'm in some other CEOs and thought they would give me really valuable information. And they were just like, yeah, you always seem to seem to make it work so we trust you. And I was like, I was really hoping for more than that, you know, but my modeling with that idea was if we had, you know, we would, we would try a new distribution model and change our entire product lineup. And if our sales went down, we knew they'd go down with this different distribution model. If they went down less than 12%, it was worth doing. And if they went down more than 12%, we'd be out of business. And we ran a fake scenario on our website. We modeled it to look like that was what our distribution would be and changed our products, ran the test for just a day and a half. Cause that's all the time we had. I literally was going to be out of business about three weeks. And it went down 11.6%, which was right under the 12%.
- [08:21]
A
Oh, my God.
- [08:22]
B
Yeah. And so that was a Friday night we ended the test, and Monday we laid off a facility, and Tuesday we laid off a facility, which is what we needed to do in order to make this work. And we changed our entire product lineup and our distribution model in a week. And thankfully it worked, which is why we're still here. But had we had a board and all these investors that would want to weigh in, I. There's no way we'd still be here. So I think our superpower is our agility and our ability to move fast and to think creatively outside of the box. Things that no one would do. You know, they're really hard things. It's not fun to lay off hundreds of people. It's really hard. It's horrible. And needing to do it that fast and being able to, you know, thankfully I had and still have a team that will roll with the punches with me and do the hard things when we need to. And that's why we're still here. That's our superpower. I don't think it has anything to do with what model we have because we've changed it so many times. I don't think it has anything to do with anything that makes us special other than the fact that we adapt, pivot, and move quickly.
- [09:31]
A
Yeah. Wow. So, yeah, what a crazy experience. Because when I interviewed you, yeah. Four or five years ago, as I said offline, you were kind of like fu to Silicon Valley. Still are. You had 104 investors reject you, and you're like, nathan, I'm gonna build a billion dollar company. Like, this is gonna be massive. And you were kind of growth, growth, growth, growth, growth. And it was super impressive. And we talked about offline. That interview did really, really well. A lot of people reached out to you. And now you have a different philosophy. Because back then as well, like from a bootstrapping standpoint, you could only Alloc allocated per unit for your marketing. So you're pretty good with numbers, right? Like that.
- [10:19]
B
That's a test really naive at times,
- [10:22]
A
but I've never heard anyone say like I can only allocate $0.24 per unit to my marketing. So you're obviously really good with numbers. So what, what let's talk about like I guess that change that pivot and your new philosophy there because you're still pro bootstrapping but you have a different philosophy around building a business. Talk me through that.
- [10:48]
B
Yeah, I remember like I started Farm Girl to compete with the big guys with 1-800-Flowers FTD. I wanted to be a billion dollar company or bust. Like you said, like it was like straight to the top and a huge chip on my shoulder, like huge. All those 104. I was going to have my Pretty Woman moment and I was going to be like, what you work on commission, you know, big mistake, you know, and send them flower hours to thank them after, you know, we got to a billion dollars. And what I've realized is it's all ego. It's 100% ego. It's wanting to get on the COVID of Inc. Magazine or Entrepreneur magazine and you know, show all those people that said that I couldn't do it and then invested in all of our strikingly similar is the legal word you can use. Companies that were able to raise, you know, 100 plus million dollars with a very similar concept to ours after us. I wanted to show them that, you know, you all didn't believe in me. But look, you know, look what we did. And honestly that starts from a very young age with me, like I've had a chip on my shoulder my whole life. You know, being raised in a very evangelical Christian household that was almost cult like with you know, men being the head and women just being, you know, help mates or, you know, not important and wanting to show everybody I grew up with that I could do it. And being the kid everybody made fun of in school because I made my own clothes and like there's definitely a trend here and there's definitely a lot that could be unpacked in a, in a psychologist office probably. But what I realized with that billion dollar bust goal was it was all my ego. And in order to get there, especially with the, you know, cost of customer acquisition just climb, you know, climbing so quickly and seeing what our competitors were having to spend to acquire customers where we couldn't afford to because we didn't have that 100/4 million dollars of investment that we could just Pour into to marketing, you know, we could, you know, that 24 cents grew and you know, we were spending eight to ten dollars. I think when I spoke with you last. It's gone up in the last five years by a lot. I mean, ours now is, you know, around 20, $25, depending on time of year. And you know, that is very low. And in order to keep it there, we need to be a smaller company. We could spend 60, 70, $80 to acquire a customer to spend 100. You know, 115 was our AOV for Valentine's Day. You know, with flowers in the US being, we have the highest. So we do have high prices. We aren't higher priced than some, a lot of our competitors, but because we don't have, you know, a thousand options and a lot of them starting at lower prices, people have this assumption that we're, we're higher. We actually think we're the best value out there for what you're going to spend. But we don't offer $30 arrangements. You know, it's not worth shipping in a box for that since the shipping price is going to be more than that. So, you know, we make wise decisions and we stay the size we need to be. So if we can, if the LTV on, on a customer, you know, we have the highest LTV and I think it's about 1.75. You know, that's low. Flowers have a low LTV. So deciding to spend, you know, up to $100 to acquire a customer just so our top line rises so we can raise another round that might have to be a down round is just a really scary, risky place to be as a company. And that's how you have a fast track to, you know, having to sell for nothing and walk away with nothing. And so once I got my ego out of it and I was like, okay, what do I really want? Like, I like what I'm doing. You know, it's tough. It's really tough. You know, I tell my team all the time, if we can do this, we can go do anything after it. We can go sell sweaters to our heart's desire. Which is the analogy I always use. Like, oh my gosh, wouldn't it be great if you could sell a sweater on clearance in June and not have it be in a compost bin six months earlier? You know, it's really tough what we do, but it's interesting and fun and we get to, you know, be creative and figure out how to solve problems daily. So I like it. You Know, and so if I take the, the end goal of needing to sell for a big number or get on the COVID of a magazine, you know, what is the end goal then? Like, what are we working towards? And what every entrepreneur wants is to make money with what they're doing. Right. I've never heard anybody, you know, a lot of people will be like, oh, it's not about the money, blah, blah, blah. But they're not, you know, they're not happy when they walk away with zero, you know, so, you know, you don't want to work for 15, 20 years. I know my trajectory is much longer than what a lot of entrepreneurs want, but even five to seven years, you don't want to work doing the grind, you know, a hundred hours a week for that long to walk away with nothing. So I do want this to be financially worth the amount of effort I've put into it and the amount of sleepless nights that, that I've had and stress that I've had and probably 20 years of ulcers in my future. So we can do that. We just work on profitability instead of growth. And so that's what we did. We went from 2019, right before COVID you know, being a company that was $34 million in profit or $34 million in revenue with 36, 000 in profit without high executive compensation. So, you know, that's not a goal anybody has to, you know, that little margin is, means every, every unplanned expense is causing you not to sleep and to worry and to wonder if you can get a loan to pay it, you know, So I just really thought about it, like, what do I want? I want, I want this to be worth the time I've put into it. I want to not have to start another company after this, after what I've learned from this. I used to think I was going to be a serial entrepreneur. I've decided I don't want to do that. I'll be happy with this being a long term build to keep model. And like most companies are, they're just not the sexy, cool ones that people talk about, right. That have been around forever. So that's what we're doing. We're staying smaller, we're around the same size as we were every, you know, we're growing this year. You know, we, what we did is we stabilized, we changed our distribution again probably twice since I've talked to you. We've got a model that works financially for the company. It's not the company I wanted to Be. It's not as fun as I. You know, like, we used to make every bouquet in house. And I loved that. I love that that differentiated us from everyone else in the industry. That also meant we made no money and we had constant lawsuits and constant headaches and like, why do I want this? You know? So we found a model that works financially for us and we focused on the profit and we got it to double digit, digit profit levels. So now we can reinvest that into our growth. And we're doing really fun projects like farming. You know, we planted 40,000 peony plants. We're just doing fun things that we want to do that there's no way any board would allow us to do because it doesn't make any sense to put, you know, a million dollars into something that you're not going to get out for five years. Right. But it's fun and interesting and so I'm really excited about where we're going now. And, and it's a much more fun way to do a business. Get to think long term instead of very short term and build it slower and more thoughtfully and more healthily financially. So I don't have to worry about laying people off anymore because we've built a big enough nest egg that we can have five big unplanned expenses come our way and still be okay. And I can sleep much better. I sleep more hours than I've ever slept more peacefully. And if I never make the COVID of Entrepreneur magazine or Inc. Magazine, that's fine. You know, I'm fine with that because I'll have a bank account that is much better than I would have with that cover. So, yeah, that's where I'm at.
- [18:23]
A
So I really respect that. So I was saying, in many ways, as a founder, you've got this concept in your head or even as humans that it's never enough. And I think subconsciously that's something that drives us to get to where we are. But. And to, to, to have the success that we do. And the realization that you've had around it is enough, is such a powerful one. And to feel at peace with where the company's at and not feeling so uneasy. Well, maybe you still feel uneasy. You still feel uneasy if certain things aren't working right?
- [19:02]
B
Absolutely. I mean, you want to, because that, that's what makes you change them. You know, if something is not working, you know, because we run the way we do, we know immediately that it's not working and we can, we can fix it. And that that gut which I truly believe is just experience that we call gut. It's just your experience knows something's not right here and you don't move forward with it or you change it. So I'm still uneasy at times and I'm still not happy when things don't work. You know, it's a lot of work and it's. It's disappointing that I'm like, oh, why didn't I catch that? Or why did I do that? Or, you know, a good example of that is, you know, usually it's when you listen to other people instead of what you think you should do. I think, you know, the more you grow, the more people want to tell you what they think you should do. Right? And it's always, you know, it's with good heart and it's good intention. Everyone's like, you know, they want to see, you know, you're working so hard. Like, everyone's like, you're working so hard. Like, it should be easier than this. And so all my friends that of companies are like, you need to hire a C suite. Like, this is ridiculous that you're this size company and you have no C suite. And so then I hire a whole C suite and it's the worst time I've ever had at the company. I mean, worst time, like, not fun, like dreading, dreading work and having team members that just don't understand. What makes Farm Girl special is the fact that we are our customers. We're close, we're connected to our customers, we understand what they want. We're constantly iterating and being creative, doing things that just don't fit a playbook that is learned in business school or at a giant company with so many layers. And so that didn't work. And so then you're like, wow, I just wasted a year, basically, like a year of onboarding and then offboarding. And that was a year that I could have been spending more time understanding AI tools for, you know, for marketing and things that could be helping us or that's something that's on our brain right now. So I'm just using as an example, like, there's so many things that require so much time, and that's the thing that we have the least amount of. So figuring out how to prioritize and use that wisely is, I think, one of the most important jobs I have. And so to waste time is the most disappointing and the most unease that I have is when I made a decision that caused us to waste time
- [21:15]
A
when it comes to the business now you guys are still growing, right? But you're optimizing for profitability?
- [21:21]
B
Absolutely. We're growing single digits instead of, you know, 50% year over year like we were. I think some of that is just marketing's gotten very expensive and we won't spend it. Like I mentioned, you know, I think this year we're, I think 8 or 9% up, you know, we'll take more steady small growth that we can do while being very smart about our unit economics. And that's the thing, you know, that you touched on earlier. I don't think people know their numbers well enough and that's when they get in trouble. You know, I probably am on this side of the pendulum. Like, I probably know them too much, you know, and I'm in them too much. But that's why we're here today, because I know immediately what did we spend this on? What did we spend this on? And my team was, you know, used to getting those emails from me at 11:30 or 12 at night. You know, it's not that way anymore. But when you don't have a buffer, you worry about every penny then, so, so, but a lot of founders don't know the important numbers. They don't know their cac ltv. They don't know, I mean, they don't know what's working and not working. And then they're just throwing money into the wind. I'm like, you might as well light on fire. We've actually done things where we've turned off marketing at times, like all performance marketing because, you know, we didn't have the money and I didn't, it wasn't working. So I'm like, until we figure out how to make it work. And I don't think that was the wisest thing because there is, you know, that when you turn it off takes a lot, a lot of ramp up time to get it back going. But when you need to do that and then figure out where you should be spending your money and doing it more wisely instead of, you know, you can't afford to just light things, you know, light money on fire, especially when you're bootstrapped and you shouldn't, anytime you, you shouldn't be using the dollars that you raised of other people's money that way when you don't know your numbers.
- [23:08]
A
Yeah, I agree. So right now the business is growing slowly, controllably, and you're optimizing for profit, but you still have pretty high revenues. Right? Like, like I think you said you, you guys will do at least 30 million, 40 million this year, right? In top line.
- [23:26]
B
Yeah, we'll do about 35 this year. A little over 35.
- [23:29]
A
So still big business. But you don't have a C suite.
- [23:32]
B
We have a head of suite which are doers. Um, and we keep it that way. We don't hire people that their impact is simply strategy. With all the tools out there, you don't need that anymore anyway. But we need people that do have strategy and strategic vision and creative vision, but they also are the doers as well.
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A
Yeah, I love that. So talk me through that transition because you said you modeled for one and a half days and it needed to be, it needed to make a difference of 12 and you got to 11.6, right?
- [24:13]
B
Yeah. I wouldn't recommend this for anyone, Nathan, by the way. I would not recommend this for anyone.
- [24:18]
A
I know, I understand. Because the thought that goes to to mind for me was just like, oh my God. Like I was feeling when you tell that story, I was feeling it. I'm like, oh my God. Like that is so risky because how do you know you had enough traffic and data to get statistical significance over a one and a half day period?
- [24:35]
B
We absolutely didn't, absolutely did not. Like we should not have run that for. I just didn't have any money, I didn't have any time. So I was like, if we ran this for 30 days, like 30 days would be a short test of this, right? To change your entire model, that would be a short test. And I'm like, I've got a day. And the only reason it went a day and a half is cuz we didn't have it set up properly. So we had four hours till we got it set up properly. So it was really like 24 hours was all the time I allocated to that test because it's all the time we had. I was like, if we had paid off all the bill, like I said, I had three weeks of money, I had three weeks of operating money, but not to pay all the bills. It would have been bankruptcy and you know, not a good scenario.
- [25:14]
A
Yep, yep, yep. So to get the loan you had to, to do that.
- [25:19]
B
Personally, I was very fortunate that I have built great relationships with people and someone really helped me out in the. And the founder, I'm not going to get her in trouble by saying who it was, but access to a bank and used numbers that were true, but weren't the most current numbers in order to help me get that loan. Just with somebody that I was on a panel with the year before. So I had to call in, like, a personal favor, and I didn't have anything to personally guarantee the loan. I'm like, do you want a car that has 150,000 miles on it? Like, I don't like renting an apartment. You know, I didn't own any homes. It wasn't this. This is not like I. I'm a different founder than what people imagine a lot of times. Right. So people think that founders of companies are just rolling in money. And like I said, I'm doing better now than I was then. But, you know, if I had had the personal money, I would have just put it in. I mean, that's what you do for your company. I didn't, so. But having over three years, like, $3.3 million loan was it. It took me a year and a half to pay it off. And it was. Every day that year and a half was stressful to try to pay back that loan and make sure that I didn't let her down because she helped us out. You know, there's a lot of companies during that time that were defaulting on loans and just. I was like, I will pay this off. Whether. If I eat ramen for the rest of my life, I'll pay every penny of this off. And did.
- [26:48]
A
Yeah, well done. Yeah, even. Even one and a half years. That's. That's pretty fast. So. So the. It sounds like the pivot that you made with the business was the right one. I'd love to talk about how you worked it out, because I think sometimes, like, you know, you'd think, you know, you're doing $60 million a year. Most people would think, okay, you're set for life. Like, you just got to keep running the same playbook and then maybe get a decent exit. We talked about that, and I'd love to hear. Because you said, we'll talk about that as well. Like, you said that you've had many offers to buy the company, but you're not interested in selling anymore. You're building a business to keep. That's a very, very. I'd say these days more than ever, people are talking about this concept, but it's a. It's more of a new one. I love the guys from Basecamp and their philosophies around building business. So tell me, through how, during that time, how did you work this out? You said you didn't sleep. You were doing whiteboarding sessions. Like, what was it? Did you look at other companies? Because oftentimes that's a good source of inspiration. Did you look at other models of competitors, exactly what they were doing in the market. Like, how did you work it out? Because I assume what the model was what you were saying, you, you guys did all of your own fulfillment, so you controlled the whole supply chain. So it was very expensive, but bespoke. And it gave you a unique differentiator in the marketplace and you kind of flipped it on its head and went back to a 3 PL type arrangement where you, you don't wear as much risk. Is that kind of the model change?
- [28:34]
B
Yeah, I mean, we had started shifting, you know, when we were shut down in San Francisco in March. March 16, 2020, we were making 90% of our bouquets at that one facility. And we had just opened a second facility in Ecuador two months before, and they were doing 8 to 10% at that facility, but they were all our team members. And so what I learned in that moment was, oh, crap. What I thought differentiated us is actually our biggest risk. So every other company in our industry did things differently. They did things using three PLs, using delivery, you know, bouquet makers, delivery partners, everything from co packing to bouquet makers to cross stocking, you know, all kinds of, you know, the things that same as, you know, very similar to like grocery models. And what made us different was I'm like, you know, and I was basically, it was the hill I was going to die on, I thought, where I was just like, we're better than everybody else because we make everything in house. And that's why ours is so much better than everybody else's. And I was haughty about it. Even I would say, like looking back on it, you know, hindsight. And you know, that day I was like, oh no, what did I do to us? You know. And so we'd already started shifting the model a bit where we were doing what we call consumer bunches, like single stem, single variety stems of like, you know, 20 stems of tulips coming from you know, a farm that would drop ship them directly to the consumer and you know, spreading out, you know, to diversify our risk a bit. But we still made most of our bouquets in house with our own team members, all of our designed higher designed. So we were like, we were still pretty adamant and I was, I should say, I shouldn't blame anybody else but myself. I was adamant that there was nobody that can make our bouquets as well as us. So that's why everybody else sucked. And we were amazing. And that is not true. So, you know, I think being a good leader is realizing that basically, you make mistakes all the time and you need to learn from them and not get stuck in this. Like I'm right. Dig my heels in. That was really dumb. There are other people that can make your bouquets just as well as you can. It's about training, quality assurance and testing and things like that. Right. So we put those things in motion. But we, you know, the, the distribution model change that I did was in that moment was, okay, can I get over myself enough to say I'm going to go teach other people to make our bouquets? But I wasn't ready at that time to say they can do high design. I was like, I created a different segment of what we call our burlap wrap bouquets. That's our main product line. Where I was like, okay, we'll call them burlap lights. And they will be, you know, five or less types of materials of flowers and greens. And it's going to be a layer cake design method instead of the normal, you know, it did the. This was, this was probably. It might be going into too much detail, but this was the change. I was like, I'm going to create a different product type. Will people buy that product type when it looks different than our typical bouquets and you know, if it's a different price point, slightly less, am I going to blow up our average order value? And so we'll have the same amount of orders, but then we won't make enough revenue. So I had to model that out because people I didn't think would, would spend as much on a, you know, small, not smaller, but like a less designy looking bouquet. And so this was the idea that that stuck where I was like, when I modeled it out, it still was financially viable for us. We had enough profit margin, our gross margins were high enough that we could make it with this. And you know, we did a test with a farm and we're like, that day, literally our design manager went to the farm, drove to the farm, did test, can you make this layer cake style of design? They made it look our, our bench. You know, we're like, if it's 80%, then that's good enough. And so it was. I was like, I'd give that an 80 to 90%. So that was good enough. So we created six bouquets like that that day and then photographed them that day. Like, this is how fast we move at Farm Grill. We hold them up to a wall at whatever facility where we're at, or take a picture with a cell phone. That's our picture for our Website. That's how we move. Then when I talk about being able to move fast, being our superpower, that's how fast we can get a product. At that point, we could get a product created, designed, sourced, photographed on our site in about two hours. So it was very quick process. It's not like that anymore with this distribution model that we have now. Really missed that. Those days were great that way. But like I said, this is more financially viable for us. But that's what we changed. So we're like, we'll take away these higher design bouquets because we'll shut down our facilities and will. Like, how will consumers buy that? Will they? We knew people less people would buy it because if they're coming looking for a 1:25 bouquet that looks very high design in a vase. We have these like 360 degree vase arrangements. Those were going away. Would they buy this? And so that's when I was like, if 12% or less buy, it's still modeled out Even at the $10 less, you know, I think it was 10 to $12 less average order value. It still modeled out where we'd still make it. And the margins were okay. And that's with the 11.6%. We, you know, put that up on our site for about a day and a half correctly for a day, and ran that, that test. And then I ran the numbers, and it was close. And I was like, really wishing that I had at least 2 or 3%, you know, margin there. So that was just a really. But to me, I was sitting there thinking, if this doesn't work, we're going out of business anyway. So I feel like that's always my, like, you know, on March 16, 2020, when I was sitting on my couch crying after furloughing 200 employees, I was like, okay, well, we're gonna have to declare bankruptcy anyway and close down, so I might as well go give it everything I've got. And so it was the same on that day. I was like, this is gonna suck. It's gonna be horrible. And I don't know if it's gonna work. I don't know if my modeling's correct. I'm pretty tired right now. Um, but it. The alternative is I'm out of business anyway, so I might as well give it everything I've got. Try again. It's always try again. See if it works. And then if it does, that's great. And if it doesn't, I'm no worse off than I was last week.
- [34:48]
A
You brought up something that's always interesting to me. So we're going through a process where we're launching a new community for D2C founders and it's, it's more of an advanced community where you've got to be doing, you know, like, kind of like, you know, er. I think we had a conversation. I think you were an ER or ypr, right? I've been ypr, yeah, I've been a member of both. So similar type. You've got to have a certain. Your business has got to be doing a certain amount of revenue. You've got to have product market fit, traction and. And we really help you with Facebook ads, like really scaling your brand with ads now while cost of customer seek, customer acquisition is increasing, like you said, and I agree there is still so much you can do from a leverage standpoint from paid advertising. And we've partnered with somebody the products called founder operators and we've partnered with somebody who's operating residency is a master of scaling brands with. With ads. And oftentimes his whole philosophy and framework which we, you know, help our members with is it's not just ads, it's. It could be the creative, it could be the offer or it could be your business unit economics being able to scale or it could be your mix of products or what you're going to market with or your bundles or all these different things. And it's so interesting to me that the fundamental shift that you made to save your company was changing the product and tweaking the numbers so you get the right margins because you wouldn't think that usually that people would have that level of detail at your scale can make such a difference, but it can't, right? It's a different like. And if you can acquire a customer at a certain number with a certain margin with this and you've got to have enough room with your A, then you could build like you could, you could change the whole entire business in a big way.
- [36:35]
B
Again, why you have to know your numbers too. And then, you know, knowing how you can blend them, you know, we know that, you know, certain consumers that are very price sensitive, you know, while we won't give up a certain threshold of margin, we will pad other products where we can. So that way we can not do it, you know, we know the person's going for a small burlap wrap, okay, has a lot more, you know, it's knowing the pricing elasticity, right? It's knowing like, you know, we know that they're going to want to use a discount code. You Know, we just recently even changed it so that that product is discountable. Because seeing the psychology of consumers on purchasing, you know, they, if they want the small bouquet, they still want to deal on that versus the extra large bouquet. They don't care. Right. Like, if you're buying 150 product, you care a lot less than a $59 product. Right. But you need to know your numbers enough to know that you have to blend that properly. Like, how many of those extra larges are you going to sell that's going to make up for the, the smalls? Like, you know, there's holidays where we limit the smalls to like, we'll only let a thousand of the. We'll only sell a thousand because we're like, if we sell 1500, that's going to affect our AOV too much, you know, because people will opt for that instead of the medium. So we push them to a medium. We give of preference to people that plan early. You know, but you need to know your numbers enough. And know, and this is, I think where most founders fail is when they just don't know their numbers when you ask them questions and they have no clue. Yeah.
- [38:02]
A
And it's so key. It's so key. So, you know, a founder that is a mentor of mine once said to me, you know, Nathan, when it comes to scaling a business, you've got like three or four dials. And you realize if you turn one dial up, you like, you go, oh, it blows up this thing. And then you've got to turn this other dial to turn the other way. And like it's just correlating the dials to get things in line. So that, that story that you shared is, is so fascinating to me, but so, so important and powerful because at a certain scale, yes, ideally you know your numbers from the start, but at a certain scale, yes, you, you have to know your numbers, otherwise you can't scale. And if you do, you can make some big, big, big problems happen.
- [38:47]
B
Absolutely.
- [38:48]
A
So do you think you didn't know your numbers and that's how you got into the challenges that you did, or was it more ego driven?
- [38:58]
B
That's a great question. There are moments, many moments actually, where I didn't know my numbers well enough. Early on. I had no clue. Like, I had no clue. Like, I look back and I look at my original financial model that was probably 30 lines. Like, I had no clue what anything was going to cost. Nor, you know, now I think that same model would be like 18 pages. You know, like, it's like printed. It's. You know, you just have no clue what you don't know, what you don't know. And so that's totally understandable. You have that excuse when you first start. You don't have that excuse later on. I would say the one that I'm most embarrassed about, the time that I didn't know my numbers well enough was 2020. My 2020. I made so many mistakes that I look back on still to this day, and I'm like, I would have $5 million more in the bank right now if I had just known my numbers in 2020. Like, we had a boon year. We went from. You know, we went from 30. What was it, 34 million to 61 million or something in one year. And that's with COVID happening and shutting us down, where we just. We could have done over a hundred that year. I'm confident if we'd had the ability to do 100 million, if we had, like, we turned off marketing for a time just because we couldn't keep up with the demand. Like, we didn't have performance marketing. I shouldn't say all marketing. We were still posting on social and stuff like that. But, like, I mean, like, performance marketing, we turned off. We just couldn't keep up with the demand. So if we had had everything, if we had had our ducks in a row, that would have been a very wonderful year for us. But I did not have my ducks in a row. In fact, I did everything to sabotage myself that I possibly could, and that was mostly not knowing my number. So when we were shut down, our facility in San Francisco was shut down. We went to this, like, just run as fast as we can and open as many as we can. I drove to Miami twice that year to open facilities. Like, it was just like, run as fast as we can, open as many as we can, get as much product as we can. And I still had one, like, just one P and L. I didn't know, like, every facility is ordering flowers. People that shouldn't be ordering flowers. Ordering flowers. I'm trying to figure out where the bleed is happening. Like, when we're like, why is, you know, why is our flower cost gone up 10? You know, like, you know, all the. In all these numbers are increasing. Outbound transportation was increasing, like, to the tune of, like, 42% of revenue instead of it being about 22% of revenue, you know, Hue. I knew there was problems, but I couldn't slow down. Well, I could have slowed down. Should have slowed down. Did. Chose not to because my ego is saying, take every order. We can get more set up. Have this be the boon that it, you know, that it can be like, wow, you're so amazing. Everybody wants farm girl. No, it wasn't amazing. I was horrible that year. And, you know, we about lost our shirts. We should have had so much more money. And I wouldn't have needed that loan in 2021 had I been responsible and known my numbers in 2020 and had, you know, location specific P Ls and responsible procurement and, you know, better negotiations with transportation companies and figuring out how, how to do that better. I mean, there were so many things that I should have done that I wish I had done in 2020 that I didn't that led me to losing a lot of money that we should have kept in the company.
- [42:08]
A
Yeah, look, I really appreciate your openness, honesty and transparency. And, and I've been there too. Right. Like during COVID it was a really big time for founder. The company was just growing so fast, like for our education arm and similar. Maybe not the exact same story, but that time where, you know, we were just generating so much profit, we could, I could, I couldn't hire people fast enough. And, and, and like, I had a. Such a strong bull run with founder since I started it. So, you know, I started in 2013, built it up, left my job after a year, went all in, and then basically the company was growing exceptionally fast every year from 2014 since I went full time to 2020, 2021. And so people used to write like, everything you touch turns to gold, Nathan. And that is like, you know, a dangerous, dangerous, dangerous thing when you start to believe that. So, yeah, I, I can really resonate with your story. And I think, you know, I've been in a privileged position that I've interviewed so many successful founders. It's 600 plus at this stage. And this is a constant through line that I see in, in so many founders stories that the moment you think it won't happen or you're unstoppable or you're invincible is that time you have to be like really, really, really, really conscious that you could get yourself into hot water.
- [43:46]
B
Yep. You'll get humbled.
- [43:47]
A
Correct? You will get humbled 100%. So you, you know, you're a ypoer so you, you know, Amongst, you know, CEOs, high level CEOs and founders, and this is a common story.
- [43:59]
B
Yes, absolutely.
- [44:01]
A
A couple last questions before we wrap. One, you talked about founders need to be thinking about multiples and comps when it comes to exits. You've had, you know, you said offline, you've had many offers to buy farm girl flowers, and you're respectfully declining them. Talk me through that realization that you would like to share with people around this.
- [44:25]
B
So I've had one offer, but I've had so many offers for capital now, like, so every time I say that we had 104 no's, now I'll get us, like so many more, they're like, we want to give you money. We want to give. And I'm like, because when you're profitable, then people want to give you money, right? So it's such a funny juxtaposition, but the, the offer we had was the one that I thought I wanted. You know, in industry, it was, you know, strategic. And I was like, this could be amazing. And the offer came through and it was not what we wanted. Not even close to what we wanted. Like, like gut wrenchingly far from where we were wanted. But then I really dug in.
- [45:06]
A
Were you insulted? Was. Was it insulting?
- [45:08]
B
I was pretty insulted, yeah. Like, again, it was like, let me get my ego out of it, but I'm insulted. Yeah, I'm, it's, you know, it helped to hear the banker say it was the worst offer they'd seen too. So I was like, thank you. You know, so it's not just me. It's a horrible offer. But when I get my ego out of it and I did some, you know, did a lot of research, I'm like, why did I think it was going to be different? Because there's no comps that are in, like, where we thought we should be. You know, like, there's always ways that you can justify what your wants are by, you know, they're like, well, there's never been a company that has the brands that we have and all these things that I'm like, okay, but, you know, maybe we've done things a little differently, but that's a pretty haughty thing to, you know, to say about yourself anyway, when there's been such amazing, huge companies out there that might have had other selling points for them. And, you know, the, the biggest comp that we had in recent years was 0.5x revenue. And so I'm like, our offer wasn't that far off. It was still worse than that, I will say, but it wasn't that far off from what, you know, what others have gotten. So when I was talking to friends in ypo and one friend that's just had an amazing exit Just an amazing exit. And she was, she said something really, really telling to me and like made me understand it better and think about it differently. She was like, you know, I just lucked out. Going into an industry where the exits are this high multiples of ebitda, you know, I had no clue going into it. Like, nobody ever thinks about that. Like, when they go into what they're, you know, what they're building, they don't think, what can I get from this? We all say we're going to build it to sell, right? And I shouldn't say all. Many people say they're building their company to sell. But when you look at comps, you somehow justify that yours is going to be better somehow for some reason, right? If you do look at it. I didn't look at comps. I had no idea. I was just like reading all the magazines, seeing all these other companies, but I didn't think I should look industry specific. Specific. What do, what do companies sell for? What's the even metrics for it? You know, now EBIT is kind of like a newer, trendier thing, right? But, you know, back then when I started in 2010, it was all revenue and there hadn't been one that was, there's been a lots of investment based on these valuations that are all, you know, we talked about this offline too. Like, you know, I had no clue. I thought like, if somebody had a billion dollar valuation, that meant they were doing a billion dollars in revenue. And I'm like, wait a Second, they're doing $16 million in revenue but have a billion dollar, how does that even work? You know, now I understand it, but so many people don't, you know, and you know, it's the same thing with exits. It's like if the best comp you have is 0.5x revenue, assume that's going to be yours. And are you happy with that? And if you're not happy with that, don't start the company, if that's what really what you want to do, or change your mindset around what you want from this company. If you want it to build the sell. And you're like, I'm on the Silicon Valley path of I'm going to sell this within seven years. That's the sweet spot. And I'm going to get, you know, 12x EBITDA. Has anybody ever done that before? And if they haven't, you might want to adjust your expectations and change your plan. That's what I think.
- [48:27]
A
Okay, so final question. Words of wisdom to our community building, growing D2C brands. You've built an incredible brand. And, you know, you. You've learned all of these lessons. You've. You've really pushed things. What would you say to our. Our community? Final words of wisdom?
- [48:49]
B
Yeah, I think we've talked a lot about knowing your number, so I think that's a pretty relevant one. I also, something that I didn't put enough value in is the people. You talked about this as well. Finding the right people is really important and trusting your gut on that, which is really experience, if you've been at it for a while. So I think it's. You can't underestimate how important the right people around you are going to be, especially if you're bootstrapping and you're gonna need to move as fast as you may need to in bootstrapping. You're gonna need a really solid team around you to do that. Even if it's only a couple people. You don't need to roll super deep. I'd also say don't spend what you want to spend. You know, don't fall prey to the, you know, if I need to spend to make. Know your numbers and, you know, stay within them, you know, really don't spend more than you have. Don't spend more than maybe half of what you think you should on it and save money for a rainy day because you're going to need it because there's a lot of unplanned expenses coming your way.
- [49:55]
A
Love it. Well, look, Christina, congrats on all of your success, and I can. I'm excited to continue to watch your journey, and thank you so much for coming back again and running this back a second time was fantastic.
- [50:08]
B
Awesome. Thank you for having me, Nathan. It's truly an honor.
- [50:10]
A
Hey, founder fam. Thank you so much for tuning in today. And if you enjoyed this episode, please take the time to leave us a review and let us know what you think. This podcast is a hundred percent free. We work so hard to go out and find the most successful founders and entrepreneurs all around the globe. So your feedback helps us grow, improve, and even bring on more incredible guests and insights. So if you have a second, please take a moment and leave us a review. It really means a lot to me, me and the founder team. It makes so much of a difference. Thank you again for listening and I'll catch you on the next episode.