My Three Biggest Lessons (From My Three Biggest Mistakes)

As I've reflected on the countless mistakes I've made as a cofounder of Chubbies, a brand that was ultimately acquired for > more than $100M, I've realized there are three big mistakes that rise above the others in terms of their broad-reaching reverberations, largely influencing most of the other mistakes I ended up making. Call them keystone mistakes, if you will.

The best lessons are learned from mistakes. So, to turn lemons into lemonade, here are the three biggest lessons I've learned about building brands that can grow profitably for a long time. If I had thought about these things in the right way, I believe we could have grown faster and more profitably earlier on without having to almost go out of business about halfway through the 10-year journey to acquisition.

So you don't have to go through the pain of making the same mistakes I did, here are the three lessons, closed out with three actions you can take today, right now, regardless of the age or stage of your Brand.

I hope this helps. Without further ado, let's dive in.

Lesson 1: Keep fixed costs lower for longer.

What does this mean?

Fight the perceived need to hire and get more office space too soon.

Challenges

Sure, it would have made things more demanding, especially when you feel like you can't get everything done and things fall through the cracks. You and your team would likely be overworked and und under-resourced.

But that's a solvable problem. If a leader can effectively teach the team the importance of keeping fixed costs low and how to ruthlessly prioritize (a.k.a. how to say no to most things, even if they feel urgent), knowing that everything isn't going to get done.

Saying no is not a bad thing. With a consumer brand, and as a person who tends to approach solving problems by simply doing more, I learned it's more effective to do fewer things exceptionally.

This does not mean you don't have a constant urgency to create as much great short-form video content that meets your high standards as possible because that can be done with a very small number of people. However, it could mean not taking on a new marketing channel.

Benefits

More cash buffer to delay (or prevent?) the inevitable cycle most brands get into, where they require an immediate return from marketing dollars to fund working capital needs.

Lesson 2: Keep inventory buys lower for longer

What does this mean?

Even if you think you can sell a certain amount, buy materially less and know you'll sell out.

Challenges

This is also very hard. Just like not being able to hire and potentially feeling overwhelmed with too much to do, it's a mental and morale double whammy of difficulty when you limit short-term revenue growth by knowingly limiting your growth by buying materially less inventory than you can sell.

Yes, you will have lower revenue in the short term.

Yes, customers will complain that they want to get X product but can't.

And yes, some customers will even say they'll go to other brands because your Brand is always sold out.

Benefits

The most significant benefit is not having to sell your soul to turn your inventory into cash when you get over-confident and assume a trend that doesn't materialize.

Selling a brand's soul normally takes the form of more frequent discounting or promotional activity, which can very easily go from "once in a blue moon" to "always on" faster than you can say "whoops."??

When we are forced to move through inventory, especially our good inventory, we negatively impact our Brand's desirability, lowering the perceived value and all the other profit-killing things that go along with it.

Of course, there are realities, and there is a balance. I'm not saying buy 1/10th of what you know you can sell, but do a historical analysis of your buys and your 2, 4, 8, and 12-week sell-through and see what tweaks you need to make.

Lesson 3: Shift more focus to retail earlier--as soon as I sense slowing on Ecom:

For most brands, even if you're doing everything mostly right, there is a ceiling to the size of the ecom channel if you only have the ecom channel. That ceiling is different for every Brand.

I would have acknowledged the natural friction of growing e-commerce only past a certain point earlier and shifted more focus to doing the things that can drive the retail business better.

I learned that this transition would have three parts:

1) Correctly diagnose the problem

2) Reframe beliefs about wholesale

3) Reframe beliefs about "Brand Marketing" and figure out how to do it

Before diving in, I'll summarize:

My big lesson here is rather than pushing to find growth on e-commerce via discounts and more investment in trying to get back to strong performance in our 'performance' marketing, I would have gone the other direction with my marketing earlier - going harder in the paint on broad-reach marketing, shifting away from 100% of marketing evaluated by how it drives short-term revenue, but more on how it drives longer-term baseline revenue, which we found is a imperfect, but operational, way to take the amorphous idea of Brand and make it somewhat more concrete and therefore, actionable.

Now let's get into the three parts:

Part 1) Diagnosis.

I misdiagnosed the problem.

I thought it was due to our DR ads not being effective enough or our website not converting enough. Therefore, I dove into auditing our targeting, running more tests, and generating way more asset variants. I also spent countless hours auditing the website, spending tons of money on site development to launch more features, run more AB tests, use tools that predict what product people want to see, etc.

None of these things are bad. I just learned they were not the highest-value uses of time. And when you're trying to be scrappy and keep costs low, ruthlessly protecting our time to strictly spend it on the highest-value initiatives, projects, and tactics is about as important as it gets.

While the DR ads and the website could always be better, fixing those two problems wouldn't fix the core problem.

The most humbling realization is that the things we did to try to fix the surface-level problems of diminishing ad and website performance actually made the macro problem worse.

How? Our ads changed as we were on a quest to drive more revenue and ROAS with our performance marketing. The ad became more about the offer and the urgency and less about the Brand and the feeling.

To make the website conversion rate and AOV go up, the all-to-easy-lever to pull, which I definitely did, was the discount one, and while those myopic metrics went up, we were making the overall problem worse.

As we took these actions, trying our hardest to find ways to increase these metrics we were tracking, I only later realized that we were making our overall goal of becoming a massive, super profitable brand more difficult.

Why? These tactics decreased the desirability of the Brand, both to the consumer and to the retail buyer. The fundamental perceived value of our Brand and our product kept dropping as we continued these tactics, even though we had the best intentions.

Ultimately, we realized we needed to reach more people with brand-building content and make our product more physically available through wholesale.

But before we could do that, we had to make significant changes in our thinking about these two huge issues.

Part 2) Reframe beliefs about wholesale.

I used to wholeheartedly believe, even to a religious extent, that a brand only went wholesale when it fully gave up on its Brand.

Who would want to give up control of their Brand and put it in the hands of some legacy retailer?

And, even worse, who would knowingly give up the ability to get a purchaser's email address?

And, even worsest (definitely not a word), why would any brand abandon the most profitable sales channel? It is the most profitable channel, right? I mean, it's DIRECT to consumer, after all.

Wholesale seemed absolutely insane to me early on.

Clearly, I was wrong.

And clearly, I needed to learn the truth, which is that:

• Retail partners know a thing or two about building and scaling brands in a physical environment...probably way more than we ecom DTC'ers.
• Not getting that email is a bummer, but the reality is you probably wouldn't have gotten that purchase in the first place, given that wholesale opens you up to the remaining 85% of retail sales that are not e-commerce.
• And, yes, contrary to popular belief, wholesale will likely be your most significant contribution dollar dollar-driving channel

Finally, Part 3) Reframe beliefs about "Brand Marketing" and figure out how to do it

We learned that to maximize our success in retail, we needed to build inbound interest from retail buyers so they'd come to us and give us as much leverage as possible in any conversation.

I assumed that our relatively funny DR ads, which were hyper "product, offer, and urgency" centric, would do the trick, but spoiler alert: I was wrong.

We realized we had to start the dirty deed of Brand building.

How? Pretty simple, really (it certainly didn't seem simple at the time). There are infinite ways to do it, but the one that worked for us was the dynamic duo of creating lots of video content and spending money to distribute it far and wide.

How? An internal content machine of exceptional people who could take a video from concept through actually running the media, where the output was high volume, low cost, memorable, engaging content that told you about the Brand, its products, and its distinctive characteristics that create a category of one in the consumer's mind.

And rather than having a media buying team who would 'brief the creatives,' the same people who created the content were the same people who ran the media—making the actual media buys.

This helped address one of the biggest problems brands can run into when they commit to building Brand: the operational and organizational mess that siloed teams can create: a lack of context, learning, and accountability.

When the same people responsible for the media performance are making that day's video, you can bet your biscuits they will have context, have learned something, and feel accountable for the results.

Note: what was missing from the content description I just talked about was that it drove immediate short-term clicks and purchases. Some of the content did, but the biggest lesson was spending as much or more money distributing the content that did the things I mentioned above, even if it didn't drive short-term, easily-attributable revenue.

We learned that even if a funny video didn't drive short-term revenue, it could massively drive the overall business. It just wouldn't happen today.

We just needed to get more sophisticated with our measurement so we could make our intuition concrete and pass muster with the CFO, which we ended up doing in a few different ways.

Creating a machine that generated this content, learned how to distribute the right content in the right places, and hit 10-100x more people than we were used to reaching helped drive that inbound and provided that leverage in negotiations (sell-through helps, too).

Conclusion

These were the big transitions -- transitions I hope you can skip and go to the part where you've learned these lessons without having to learn them the hard way.

I truly believe that if a brand can get these three things right (assuming product market fit, of course), it will be in a position to grow sustainably and profitably for the long term.

This is my wish for everyone who is reading this.

Thank you for your time. Let me know if you have any thoughts or questions, and we'll talk soon.