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Feeding the Flywheel and How to Get it Started in the First Place with Steven Borrelli, CEO & Founder of CUTS

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Stop me if you’ve heard this before: in business, you always need to keep the flywheel spinning. Okay, wait, don’t actually stop the podcast! I know it sounds cliche, but it’s true — to have a successful business, you need to be constantly churning out products, bringing in customers, making sales, lather, rinse, repeat. That’s the part we all know. What so many founders and business owners can’t quite figure out is how to actually get that wheel spinning at all, let alone keep it rolling. 

On this episode of Up Next in Commerce, I talked with Steven Borrelli, the CEO & Founder of CUTS, a lifestyle ecommerce fashion brand that celebrities, entrepreneurs, athletes, and everyday folks love. Steven has firsthand experience in the struggles of getting his company off the ground and into the hands of consumers — and his story includes an early $20,000 loss and a nine-hour journey through China. But he also has some of the answers that brands are looking for when it comes to building an efficient and sustainable growing business. What is his secret sauce? And how do testing, YouTube, and NFTs play a role? We got into all of that and more in this episode. Enjoy!

Main Takeaways:

  • Getting the Flywheel Spinning: Every company wants to have a flywheel spinning that brings in customers consistently and keeps the business running. But actually achieving that end is difficult. It takes getting the right people in the right roles, creating organizational efficiency, and spending money wisely. And, at the end of the day, knowing your numbers and trusting that math matters is always the most important thing.
  • Top-Down, With a Twist: Leadership has to stem from the top, and those in charge have to set a course and be clear on their vision for the company. But if you want your employees to succeed, they have to be able to set some of their own goals and determine for themselves how they think they can best help the company meet the mission set by the leader.
  • Fertile Soil: Having a good method to test ideas and gather feedback will yield a much more efficient product and marketing strategy. Don’t be afraid to test out new ideas in unique ways that invite customers and potential customers to engage with you in new ways. With enough good data, you can make bigger yet safer bets and grow your company much faster.

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

Key Quotes:

 

“Those first two years were really just learning the process of getting the flywheel working. At the time, we didn’t have fundraising or anything, I was taking out 20 K, zero APR for 12 months credit cards to fund this stuff. So it had to work. And so we funded it with our profit. We didn’t pay ourselves until we got to about a $10 million business. None of us worked full time, all the money went back into the business because that’s the only way we could do it without raising money.”

“There’s always different seasons of life, where you’re going to have to adjust to the times and, and the early days, that’s what we had to do because we didn’t have lines of credit. Now, tons of banks want to give us money. We’ve been in business for five years and, when you hit that four year mark, people realize you’re not a fad, you’ll be around for a while. So then you can start leveraging debt and things like that.”

“We used to just give people manager titles, but now they actually have to be in a strategy role to be a manager. So if you’re a manager, the OKRs are going to be a little bit more important where you’re going to have to lead that and you’re the one to do strategy as well, because that’s why you’re a manager. And I think just even saying that statement to the managers that unlocked a lot of how they work versus just giving them the title and having people under them.”

“If you only spend on one channel, that would be tough. You’d be at the mercy of the algorithm. I always tell our growth teams, we can’t be at the mercy of the algorithm. In the early days, we were, but after it’s a self fulfilling prophecy. You use it as the way to get your start, but you need good word of mouth. And how do you have good word of mouth? Do you have great products? Do you have a great program and the customers feel taken care of? They can return stuff? If you just have a good business, then that should allow you to decrease your percent of spend on your revenue year over year, because the flywheel is working. Now if you have loyalty and you’re profitable on your first order, but people never come back, that’s not a good business. So you’ve got to have a good business.”

Bio

Steven Borrelli is the CEO & Founder of CUTS, a lifestyle ecommerce fashion brand. Steven created CUTS in 2016 when he found himself struggling to find the perfect t-shirt that had enough quality to be worn professionally at work yet also enough style for a night out. He and his team of four have grown to a nine-figure business that has 50 employees.


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Transcript:

Steven:

My name is Steven Borelli. I’m the CEO and founder at cuts clothing. And we were founded in 2016. We’ve grown to an close to a nine figure business, and we ha we have 50 employees

Stephanie:

Thinking the audio. All right, welcome back to up next in commerce. I’m your host, Stephanie postals CEO at mission today on the show we have Steven Borelli. Who’s a CEO and founder at cuts clothing. Stephen, welcome to the show.

Steven:

Welcome. Happy to be here. Yeah. Heard a lot about the show and excited to, you know, just talk and chat.

Stephanie:

Yes. I cannot wait to hear all the details. I was looking into your company, seeing your growth story, and I feel like everyone listening is going to have a lot to learn. So with that, tell me a bit about cuts clothing. How did you start it? When did you start it? Why

Steven:

Awesome. So I was, I started the company back in 20 15, 20 16 when I was working at an advertising agency. And, but that’s not gonna work, you know, go put something else on. And at that moment I realized there wasn’t something that was comfortable, but also professional enough to where in the modern day work force, I was lucky enough to be in a arena, so to speak that was going more casual. And at that point I knew, Hey, you know, there was going to be a casualization of the workforce and there wasn’t a work dress up t-shirt that you could wear to work. And at the same time, I had a huge interest in e-commerce and wanted to sell things online. And I really wanted to be my own boss. So I moved home from 2015 to 2017 at, I call it like year zeros where I just focused on learning e-commerce and manufacturing teams up with four guys and accountant, a, a marketing guy in a business intelligence, you know, person.

Steven:

And we created this nucleus of four guys that were, you know, very ambitious and we wanted to create the next billion dollar brand. And so we, we all had separate jobs at the time. And we actually in four different locations, Carter was in Washington when actually I was in LA Shawn, who was our, was in Seattle and Brendan was in San Diego and we all were doing separate things. And we did that for a while for, for three years. And when we put all the money back into the business and our whole focused, as we launched the business, which is do one thing really great. And that was the t-shirt.

Stephanie:

That’s awesome. Okay. You’re going to hate me, but Hillary is saying, and I saw you freeze too. You froze right. When I say, what is cuts? And one, how has your, or do you have a bunch of tabs open or is there anything you can do to maybe make sure the internet looks a okay.

Steven:

Yeah, that me,

Stephanie:

I was like steadily closing all my tabs. Like, is it me? I don’t know. And Hillary was like, no, he froze.

Steven:

Yeah. I’m getting rid of pretty much everything. All right. That should be better. All of the, pretty much, I just don’t know. Can I, quick, quick, Google Chrome will zoom Stan.

Stephanie:

Yeah.

Speaker 3:

This shouldn’t have any effect on zoom, as long as you’re not running zoom through Google, you know, you’re not on like the

Steven:

Cool that should be better. I mean, I see these all the time. I see, I see full bars. Okay.

Stephanie:

The only thing I’d have you do is maybe just, I think it was just the beginning. I heard like partway through it. So I think if you’re just like cuts as this and then we’ll splice them together and make it sound good because we got, I got a lot the ending part.

Steven:

Cool. What is cuts? Go from the top.

Stephanie:

Yeah. Yeah. You just, but not the whole thing. You can just say like, what is, you know, just what you did in the very beginning where I was like, what is guts? Tell me a bit about it. And you were like, we started in 2015, like, you know, like the first two sentences basically. Got it. Yep. Go for it.

Steven:

Cuts. Right. Let me get in bad back of my afloat. All right. Yeah. Cuts is a lifestyle e-commerce fashion brand that was launched on a premise of doing one thing really great, which is the t-shirt we’ve six since expanded into being a lifestyle brand, having joggers t-shirts polos Sherpa. And our goal is to outfit the world’s most ambitious people. And we do that through our, our great community that we built.

Stephanie:

Awesome. Okay, perfect. They’ll put that. There it’ll be great. You did great. Okay. So when you started cuts, tell me about some of the early stories. I mean, you’ve got these other guys you’re working with, like, what did it look like in the early days?

Steven:

The early days was, was a lot of, and I hate using that word, fake it till you make it. Cause that’s kinda like, you know, we weren’t working hard, but it was a lot of, I call it blind faith. We had to have a lot of blind faith in things we weren’t experts in to push through. What one example of that was we were working with this new manufacturing and China, we had just left our LA factory because it was just too expensive. And they said, Hey, you need to be doing 10,000 units a month to really be working with us. And that was a lot of units at the time. You know, we were a small business, you know, we, we haven’t raised money. So it was a, it was a enormous amount of units that we, you know, we were over promising essentially.

Steven:

And we just sat down, I sat down with the factory and said, Hey, we’re going to be the biggest brand that you’ve you’ve ever talked to because we’re selling shirts online. And no one’s doing that right now. And you know, they believed me, you know, we put this big presentation together, how we’re going to be this next great business. And that presentation was for them. But I think even more so was, it was for us to be like, okay, it was one of those things. We had to put a flag in the ground and say, we’re getting to do this. And, and it really, you know, gave us the blueprint and the confidence. Then we put it out there and then we manifested in and ended up coming true. So that, that was one of the early days. Things that I think has really helped us. And now we, we plan that way and we vision out and it’s been a good thing for us to, to, to help us see the future.

Stephanie:

Yep. So when you were early days, you know, switching from LA, where there any interesting stories when you were going out and trying to find new suppliers and, you know, manufacturers and factories and whatnot, like anything interesting happening there? Because I feel like every founder I talked to is always like, like one of them was like, we went to the factory and there was like smoke everywhere. And we kept wondering why all of our garments smelled like smoke and the other ones that we just didn’t get a delivery and anything interesting happened in the early days when you were going out and seeking someone new.

Steven:

Totally. So we first, we flew to Hong Kong and we were, we, we met with this agent guy. And so the first night is he takes us out and we go in Hong Kong. We’d never been there. And we thought, you know, we’re international businessmen. You know, we were, it was such a cool feeling. We landed in Hong Kong. They picked us up in a Tesla and they drove a start place, Mr. Borelli on the signs. And it was so like, it felt like we were doing it. And it was just one of those moments that was really cool. But on the downside is they took us out and then they kind of took us to like all the worst places we could go to. But we didn’t know that at the time, like our first place was in this town in China called Yiwu and like, you know, very little Americans like will ever go there.

Steven:

It’s just, there’s not a real reason to go. And we show up and we had sent the, our fabric from the Philippines all the way to you will China, which costs us 20 grand to do. And we were like, this is going to be our place where that gets it manufactured. We get there and there’s, we get to the factory and it’s like really bad factory, like just not good conditions for the workers. And it was just like, not a good situation. There wasn’t even a table for us to like talk and me, we were like, kind of like, they put up boxes and it was just, and we’re like, well, we just lost $20,000. So we, we realized that they’re like, we just lost our full Christmas order in 2015 or 2016. And at that moment, we, we, we, we honestly thought the business might be over, over.

Steven:

So we went from being international businessmen in Hong Kong to our Christmas orders. Weren’t going to get there. So, so that was like the high and low of the trip. But then at the end of the trip, I was, or, you know, quick backstory on my way there, this guy calls me. He’s like, Hey, I hear you’re going to be in China. I really think you should go to this, this factory. But before you leave, it’s a great resource, but the guy would not stop calling me. So I kind of thought he was like, like a telemarketer. And I Sean, who was our director of operations. I said, Hey, Sean, you’re just take this call. And so at the end, when we were leaving that factory, that was just, we were down the dunks. We just realized we lost $20,000 with the fabric. Cause there’s no, like we couldn’t have these people do to cost us.

Steven:

It was better to just let that cost be than try to make it work. Cause it was such a bad place I think. And it costs us $20,000 to ship it there. So there’s like a $40,000 mistake in the beginning. That’s an enormous amount of money then. So then we go to this other town, which is nine hours away. They stick us on a car and the guy doesn’t know English. So we’re just in a car in China going somewhere. We have no clue. And it’s not like you can see, like when you’re in like Mexico, you can kind of make out where you’re going, because you can understand the letters and you can kind of look it up. And China is just symbols. And you’re just like, well, I guess he could be taking us and get kicked out. We have no clue. So then we get to this factory and like, wow, this is actually pretty nice, really like quaint, nice town in China.

Steven:

Like, you know, good conditions. People looked like they were having fun. And so we’re like, all right, there’s reasons to be optimistic. We’d go into this building. And the guy just really likes to see, you know, he says not a lot of people when they start a business or out in China. And he was like, you guys are way below our minimums, but because you’re here, we’ll give you a shot. And then they gave us good terms. They gave us like 90 days. So we didn’t have to pay money because we had, we just had this sunk cost happen. And it was one of those moments. Like if we didn’t connect the dots and drive nine hours and take that phone call and then get this guy that believed in us, that was like, Hey, I believe in your idea. We had this deck ready.

Steven:

It really like spun our business and got the flywheel moving my in a way, like it would have been so many other factories would have had us put 40 grand down and we didn’t have that money. It was just a huge opportunity for us to kind of build momentum. And so I always tell people like, you know, if you can muster up the money, go to China. I know now it’s, you can’t really go. But back then, you know, go meet with the people, share your vision with them because when tough times come like that’s, you’re really gonna need a lean on that. And something about like, they really just respected us for being young guys out there. We had, we had this plan of how we’re going to go from 2000 units to 10,000 units by the end of the year. And we, it wasn’t fake it till you make it, but it was like, here’s our vision.

Steven:

We want you to believe in it too. And it ended up being a great resource for us. We were with them for three years before we outgrew them. But you know, it’s just funny how business is. That was like one, it was like a rollercoaster of rich Hong Kong, international businessmen were in like the sweatshops of China. And then we’re in like a real, we’ve kind of got to our place. Meanwhile, we’re driving like nine hours away with no translator. So it was really just, you know, all like just kind of lucky in some ways. And that was one of the stories I always tell. But you know, when we left for like, you know, five days in China, we were ready to get home, but we found our supplier and we’re ready to rock.

Stephanie:

Wow. That’s a great story. I’m very glad you shared that one. So, I mean, was this supplier to fulfill orders from, I know you had a Kickstarter campaign or is this like way past the Kickstarter campaign when you guys were already like off to the races after?

Steven:

So our first Kickstarter year was 2016 and we did like 40 K on Kickstarter. Then that year we finished out like 180 K is next year. We didn’t really sell until August. So it was like probably January of 2017. We were doing this because we fulfilled the orders in LA, but they were like, we can’t make money in LA. We got it. So we really didn’t get units back in the store until August of 2017. So it took a while. So those first two years were very like, you know, you really just learning the process of getting the flywheel working. And I think the illustration of a flywheel moving like that first two years, a lot of people just can’t get it moving consistently. And then their business just can’t can’t get going and can’t move. And you know, we, at the time we didn’t know fundraising or anything, I was taking out 20 K, zero APR for 12 months credit cards to fund this stuff. So it had to work. And so we, we fund it with our profit. We didn’t pay ourselves until we got to about a $10 million business. We, none of us work full time, all the money went back into the business. Cause that’s the only way we could do it without raising money. So, you know, but, but you know, that one trip was kind of how it all kick started.

Stephanie:

That’s great. So, I mean, when thinking about building a flywheel today, like how would you advise, you know, new business owners who are thinking about this? I’m sure everyone is like, I want to fly wheel. How do I get one? How do we think about that? Well, what would you say or how would you guide them to start kind of thinking about their own internal flywheel for their specific company? Like what are the most important levers? What were you guys looking into the most?

Steven:

I think getting the rat role defined internally is the biggest part. We, you know, I, I had, I came from a branding agency and I, I, I had a decent understanding of what consumers wanted. So I handled like product design and guides in the beginning. Then we brought on someone to shoot our content, which was Brennan. Then my CPA at the time I was at the gym working out and I was like, man, I got all these Kickstarter orders. Can you help me? And he was just financial excellence. Like I said, Hey, let me push it as much as we can. You just make sure you tell me when to stop and I’ll always listen to you. And then we found a really good operations guy that kind of make all of us like to all of us marriage and those four guys, we never questioned each other of like, I would never question Carter cause I wasn’t in finance of like whether we should spend money or not, but he wouldn’t question me of like how to spend money on mine, on marketing.

Steven:

So that was the first step. But like we just had a good organization set up from day one and then we just didn’t spend money inefficiently. We spent money on, on products and marketing and, and we all, we always make sure our math works. I think a lot of times founders don’t understand math, the math of the business. So, you know, I always tell this story. I sold barbecue gloves on Amazon and I, I bought 5,000 of them. They were 15 cents and I was like, oh, I can sell them for five bucks. And I’m gonna make so much money. The cost advertisers more than the, the, the cost of the gloves. So I was going to lose money on every order. And I ended up just losing five K I didn’t understand e-commerce but that lesson really taught me, like, you got to understand your CPA costs and you know, your cost of goods and your overhead, that equation has to work from the get-go. If you’re not going to raise money or else you’re not going to have profits, we were profitable on every order. So we could, we’ve always had a little bit more inventory to buy every PO. And then all of a sudden the fly will start working. You’re able to get good lines of credit and boom, where were we where we are, where we are today, because of that.

Stephanie:

Yeah. That’s great. I mean, that’s what, essentially everyone in every interview I’ve had says hire the right people. And then like, you’re saying, give them their lane, let them go. Don’t micromanage them. And so that’s great. How are you guys looking at right now with all the craziness happening around supply chain? What are you all doing? Cause it seems like you’ve, you know, in the past now you’ve really been, you know, ground level. You’ve learned exactly how it works. Like what are y’all doing now to maybe stay ahead for the holiday season coming up? What are you looking into?

Steven:

Well for next holiday season, we just finished cyber Monday and w the, the supply chain is going to be difficult next year. So we used to, which was a competitive advantage for us to work on a 90 day schedule, which was done herder for fashion. You would order things, get them in and sell them. That helps in two ways, one, it helps us take less riskier bets because we, we would get data from customers, what colors they want. 90 days later, we would be able to order it and be in our store. And then it also helps us on the back end because we could, all we needed was 90 days of line of credit. And then we could sell this stuff before we had to pay it. So, but once in the early days of just a competitive advantage, it became a massive, you know, deterrent this year because raw materials needed to be, you know, booked out further and you just got to plan way higher. So now we’re all, all of next year’s PO is already planned. Some deposits are paid because, you know, things are taking longer. The ports are taking long times to clear through. And so just better planning and more like we’ve extended. Our timelines is one where, how we’re gonna avoid, you know, not having product to sell. So that’s probably the biggest thing I think we’re, we’re focusing on.

Stephanie:

Got it. Okay. So now you’re just planning much farther in advance for before you like doing it. Like the three three-month timeframe, because you’re able to move quickly. And a lot of other people weren’t doing that at the time. Now you’re trying to catch up. Got it. Okay. Yep.

Steven:

So, you know, and that’s the thing about business. There’s always different seasons of life, where you’re going to have to adjust to the times and, and the early days, that’s what we had to do, because we didn’t have lines of credit. Now, you know, tons of banks want to give us money. We’ve been in business for five years and, you know, right. When you hit that four year mark, you know, people realize you’re not a fad, you’ll be around for a while. So then you can start leveraging debt and things like that. So we’ve been fortunate that we’ll have that going into next year, but yeah. Things change. You gotta adjust.

Stephanie:

Yep. Yeah. I agree. So I want to hear a bit about, you know, as your company has grown kind of, what has that looked like? I know you went from, you know, just four guys doing everything, working part-time to now, 50 employees. What does that transition look like for you in the company?

Steven:

That transition has been the hardest for me as the, as a leader. I think because, you know, in the beginning, I’m, I’m a, I’m a jeweler and I, you know, I want to have my hands in everything and I want to see how the product is or how our ads finances are we good? Like, you know, you know, understanding and cause it means so much to me, you know, is it a photo shoot? Is that image not what I envisioned? So scrap it, there’s all these things that I wanted to have my thumbprint on. But as we’ve grown, we’ve really had to set up one trust your trust, the people you hire, which is important. And also to just put it in the right organizational structure structure. So you can lead from the top. And everyone has a clear vision. I think during the pandemic we had, you know, the start of the pandemic.

Steven:

We had nine employees now after, you know, two years of pandemic time, we, you know, we’re, we’re close to 50. And you know, we went through a phase where we hired a bunch of people and they didn’t necessarily know what to do, so we didn’t get good value out of them. And we really had to learn how to set a clear vision and we use OKR objectives and key results, which a lot of big businesses use, but that’s been huge for us. So each, each department has their own OKR, is that lead up to the vision of the business. And without having learned that system, I think we would have not grown the way we’ve done because you end up hiring people. And if you, if you don’t have that system, you’re kind of reliant on the employee alone. So you found employees that were just great doers and they could figure it out.

Steven:

And then those departments were good. Then there’s other employees that are still great, like workers. They just need a little bit more clarity on what they’re doing. And then, but if you don’t have that system, we found those, those departments didn’t do as well. Even though that might be the right employee, they just need to be led in a different way. So understanding that has been key for, for growth. And especially when I was working from home, you know, we were nine months work from home and with, with clothing, as you make things like the product, it wasn’t just the product team that needed to be there. It was also the, the marketing team needs to touch and feel it cause they’re the ones selling it. And so we recently went back full time and a lot of people say, Hey, see what? You can do a hybrid model.

Steven:

What’s, what’s your policy. Everyone wants to work from home. We’ve kind of cut the bandaid off. It’s a no everyone’s back in the office. You know, full-time nine to five because we just find it to be so much more efficient when people can, can look and look you in the eyes and need, and know what happened with work from home was everyone, would, everything became a 30 minute meeting instead of just at the water cooler being like, Hey, what’s your take on this? You know, you had to set a meeting set in an agenda and you know, that, that, that brought structure. And that can be good sometimes, but it just was lacking rhythm and the rhythm of our business. And as a founder, you can kind of see when your, your teams offer them. And so that was one of the things that we just said as a leadership team, Hey right. I think we want to, everyone needs to come back. We lost two employees, but for the most part, everyone else wanted to everyone else was like, Hey, I want to be there. We create a fun environment. And if people want to work from home on occasion, we allow that. But for the most part, we want people to be in here ready to go.

Stephanie:

Yeah. Being in person, I think, you know, after all this has gone down now realizing how important it is to be face-to-face and how much more quickly people can absorb things when they’re just like in the environment, listening, overhearing conversations, having lunch together, it’s such a different vibe when thinking about OKR. So my thing is always like, how do you make it where it’s actually helpful to the employee? Cause I always think back to my days at Google and we’re doing okay, ours, and it just felt like a process where I was like, oh yeah, sure. Here’s my to be my two friends that review me. Yeah, sure. I’m meeting up to my goals and it felt like extra work and it always, and I feel like they should be, they are probably like the pristine company to look to of how they’re doing okay. Ours. And I always, you know, even thinking about my company, I’m like, how do I do it in a way that’s not just more burden and overhead for the employees to do something, just to kind of tick the boxes and actually do it in a way that helps both of us. What do you think? How did you decide it to be,

Steven:

That’s funny that you say that this our first year doing it, we kind of, it became more work. And then by Q4, we just, we stopped talking about it and we just, everyone was working the next year when we did it. I think the big unlock was it. Wasn’t just coming from the top every quarter, the employee, we would say, Hey, what’s important for you here. Here’s the vision of the business of the old cars. Here are the five things we want to do, but we kind of broke it down by departments and let the employees create their own based on, you know, within reason. And I think that was, was key. And then we did tie it to, to, to bonuses and things like that. So there was a little bit more of an incentive to, to stay on it. But I think it gave them the ability to say, Hey, look, this is actually what I’m doing because without it, you can kind of get in the rhythm of just doing more.

Steven:

And then it’s kind of hard from their point of view to show the leadership team what you’re doing. Cause you’re just kind of doing more and it’s, it may be good, but it’s, it can be difficult to see what the impact is. So, I mean, let, putting it in their hands was it was a key unlock to make it effective and to not over-complicate it too. There’s certain roles that it, you know, it’s not as like our, our, our content team, like they’re in the do mode. So we don’t want them to just do paperwork all day, you know, but then like the analytics team, it’s a little bit more and the Facebook marketing and our growth team, those are a little bit easier to manage. So having been able to put on the hat of saying certain teams, is it, is it as effective than other teams know?

Steven:

So let’s just tailor it to them. And maybe their objectives are a little more vague, but then making it very detailed for the teams that need to be so not having a, like a one overbearing way to do it. And I think it comes down to the managers really like having a good cadence with it. Cause if you don’t, if you just look at it once a month and it’s a ton of work at the end of the month, and it’s not really that effective is just something, but if you’re kind of going through it every day, I think it can, it can provide a lot of clarity for the people to say, am I doing what I should be doing? And is, are these the results that we want? So I think, but I, I agree with what you said at Google, if it can be that, and it can just be something you do, unless it’s, you know, it’s truly comes from the people in those departments.

Stephanie:

Yeah. Yeah. I agree. I recently started doing three months plans for new hires of just like, here’s what your first three months should look like month one. You’re, you know, you’re doing this month two, it’s looking like this. You’re feeling like this. And by month three, it should be this. And that’s been the best way for me to kind of, you know, audit employees and then be like, oh yeah, I forgot what I told you three months ago. But if I look at our plan, you’re actually on track or you’re not at all, how can we get you back on track? And that’s been helpful. And then they of course add things to it of like, and now I’m doing this and this and this too. And kind of also putting in their hands to show them like, well, what other things are you doing that I just don’t know that you’re doing or you’re getting tasks. It’s been a good new hire thing.

Steven:

Oh, one more note on that. I think managers, we used to just give people manager titles, but now they actually have to be in like a strategy role to be a manager. So if you’re a manager, the OKR is, are going to be a little bit more important where you’re going to have to lead that. And you’re the ones to do to do strategy as well, because that’s why you’re a manager. And I think like, just even just saying that statement to the managers that like unlocked a lot of how they, how they work versus just giving them the title and having people under them. Now you’re in a strategy role. You’re gonna, you’re gonna lead this team that, you know, whether it’s an ambassador’s schedule where, you know, for women, we’re going to do this and men, we’re going to just, you need to be guiding them and just telling them that they’re going to be doing that unlocks a lot within that within the program versus before not having that. And a lot of times it can be one sentence that you can get so much and then a light bulb goes off and they realize, alright, here’s what I can do. So, or here’s what I’m supposed to be doing. And both the on the manager and the worker level.

Stephanie:

Yep. Yeah. I love that. So before we started recording, we were talking about this kind of founder mentality. How, you know, when you start a company you’re going in, you’ve got these big ideas, you know, you’re being the visionary. And then oftentimes you have seen the kind of founders can lose that as the business actually starts working. I want to touch on that a bit more in here kind of, you know, how you’ve been came to that idea and what you do day to day to keep you, you know, visionary.

Steven:

Totally. You know, we did start the business just as t-shirts we just sold t-shirts through four years and you know, we all, a lot of outside advisors and people we would talk to would say, you know, just stay in your lane, do one thing, really great. And w and we believe that to be, to, to get known for something we believe you got to do one thing really great to start, but as a brand matures, the connection’s unstable one sec. Yep.

Stephanie:

Started a little bit. I still could see you thankfully, but I could tell, I was like, oh, is he going to have to go?

Steven:

So I’ll just start. So how to be visited. Yeah. So as a brand matures, I think it’s important that the founder continues to have interests that he wants and things that are important to him. And one of those for us was we wanted to do other things outside of shirts, mainly because I wanted to be proud and walk around in a colder climate with, with our brand, with rocket, our brand on our chest, sort of, sort of so to speak. So we said, Hey, you know, it was all really derived from things that I wore every day, whether it bomber jacket, a vest, a Sherpa piece outside looking in your, you would say, does that make sense for you as a brand? But it was something that I had a lot of passion towards. I felt like I, you know, I was our customer and we could get our community to get behind it.

Steven:

And it’s been a huge success for us. And I think, you know, you look at businesses and when I meet so many founders now, and you can totally see the founder when you meet the founder and then you can see their imprint on the business. And that’s so unique, that’s unique to who they are. And I think it’s super important to not forget that as you get older, not just looking at charts and doing things that, you know, maybe your investors tell you what you need to do, or some of the other people, but keep it unique to who you are and, you know, within reason. And it has to fit the community and the brand, but you see it all the time. Like Elon Musk puts games and it’s come in his cars and, and makes it fun because he’s into that stuff. And that’s what makes Tessa so unique.

Steven:

And that’s a story that people can tell, you know, one of our visions for the businesses to do Encore MBA shoes, but we don’t want to be an athletic brand because we look at MBA shoes as being more of like a, for the MBA guys. They’re, they’re on-court shoes, but people wear Jordans all that time with jeans and stuff. And it’s kind of a culturally relevant shoe. We want to do that one day. And does that make sense? We started as a t-shirt brand outside looking in, but we see that vision that that could be a huge thing for us. And we’re going to be the brand that ties it in, in a way that no one else has before. So being able to seat, like we see that we see that we can do that as in, you know, if I told someone, you know, you might be saying, Hey, Steve, I don’t see how that connects, but it’s up to us as a brand. And as a visionary is to let the, to show the customer how we’re going to do that. You know, there is a lot of analytics and business, and we rely on analytics more than anything, but also as a brand owner, part of your job as can telling someone why they need it. And so it’s a very young and year you got to do both great, but that’s, that’s kinda my approach towards all that stuff. Envision.

Stephanie:

Yeah. Got it. Were there any unique ideas that you all maybe put out into the world that you actually weren’t sure if they were going to work, but they became like a big success or a big part of your business and were maybe just kind of like a test project?

Steven:

Totally. We have a Friday projects launched that we launched one product every Friday at 9 27, 16. Yeah. 55 products in the it’s it’s east, but we launch it 9 27 16 because that’s when our Kickstarter went live September 9th, 2016 on the 27th of September. So kind of a cool little, we did it, but our goal with the program was to use our hunches and put them to the test. So, and do it in a way we could learn quick. So a lot of times it’s colors that we normally want to do it certain products that we didn’t want to do, but our goal was to find the next big winner, but also have an area of our business that we could take a shot and be okay if it failed. Now that did put a lot of pressure on our product teams and our planning teams, but, you know, we, we did it and it was a real struggle in the beginning just getting products.

Steven:

But now we’re in season two of it and it found us joggers, which, you know, joggers is a huge part of our business. Now, almost as much as our t-shirts was when we launched it, got us into, you know, different cuts of, of like longer versus t-shirts. And a lot, we realized that a lot of customers that also our shirts were more slender. We, we will at least a more wider cut and that was a huge success. And so that was one program. We were like, all right, it’s going to be a lot of work. We’re going to have to hire for it. And it might just be like, just doing too much. And it, you know, that might be one of the most reasons why we’ve been able to scale so much because we have such good data and we can take such big bets.

Steven:

Now, once we find something on site 500 units, now we can go deep in it and we can maximize that launch so much better because we feel confident about it. And it also helps us from not making huge mistakes ones that were like, we had that punch. We had that vision and we’re like, no one bought it, but it was only 500 units. So it’s okay. So that’s been something that, that we’re super pumped on, and then you never know how the life it can take on a life of its own. We have about 10, five to 10,000 people in our VIP community. And now when we launch stuff on Friday projects, it sells out in minutes, we had a coast bomber jacket and it sold out Shopify. We sold every unit within like one minute because wow. And it was just a cool moment for us.

Steven:

We didn’t, we didn’t think it would, we were just blown away of how quickly, you know, our community was buying those units and now with the whole NF T and, and, and how to, cause we’re thinking, all right, we don’t have enough units for all the people that want these on Fridays. Let’s create a new program where if you buy the NFT, you get access to fire projects early, and then you can trade that NFC to, you know, other people in line who, you know, maybe you’re good with Friday projects, then you can sell it. So it’s, it’s, it’s, you know, and when we started the program that wasn’t even really a thing. And now it is a thing. And that program is launching at the beginning of the year. We think it’s going to be like newsworthy. It’s going to be custom would have one.

Steven:

But if we wouldn’t have had Friday projects a year in, we couldn’t have done this NFC thing that we’re really pumped on because we wouldn’t have had something that it made sense to have. Like, why would you buy that? It’s only for people that really want those items that can’t always get them on Friday. And so, you know, take it taking a swing at something that’s kind of hard to do, or you’re not really sure about, you know, a lot of things we’ve done that haven’t panned out, but that’s been one of them that has now taken on a life of its own. We have a whole Friday projects team and you know, it, and it creates so much good for the community hype. It brings our LTV and our AOV up and are just, it really compliments our business in a way that we wouldn’t have anticipated.

Stephanie:

Wow. That’s awesome. Really cool here. And how you’re thinking about like NFTs. I mean, how do you keep that community engaged? How did you get them to come there, to begin with, and then stay engaged where they’re waiting for every Friday drop and, you know, potentially me getting these NFTs and trading them, like, what are you doing to keep everyone in their kind of, you know, happy and talking and yeah. Actually feeling like a community

Steven:

We do. Well, one, I would say the first thing is we’re consistent with it every Friday at 9 27 16. They weren’t always, it took a while. It took like a, you know, a year to really get the program up where, you know, people knew about it, you know, and then we, we had good products that people couldn’t buy and that actually helped the program. So consistency was, was, was key then, you know, we’re, we’re big and clustering our customer base. So, you know, if you order our VIP’s, our VIP’s are people who have ordered over a thousand dollars within the first 90 days and then 502 50. And then we create different email lists and flows. And, you know, even Facebook groups for each of those tiers, we, you know, eat one tier gets, you know, the VIP of the VIP is get a phone call where they can talk to someone at any time about their order.

Steven:

They get free shipping. But now the NFT ones, the kind of like the highest tier, we actually charge you for the NFT. And then, but you you’re like one of a hundred people that have access to Friday projects and you’ll be guaranteed to get one. We’ll make enough units where the first 10 minutes, the 10 minutes is you’ll have access to buy. So just, just clustering our customers based on their, how their purchase behaviors is huge. And our loyalty and our lifecycle teams have been a great job of segmenting your customers because you know, someone that buys a lot of money, they’ll get. If, if like someone with one order gets access to it. So just treating our customers on their journey, where they are is super important.

Stephanie:

Wow. That’s, that’s a cool way to think about like how to keep people engaged at different levels and the different expectations they have, depending on kind of what you sold them. You know, what’s important to them and you’re telling them like, this is a very important team. The NFT is a very important piece to this. So that’s also, how are you looking into acquiring customers now? Because I look at, you know, your industry and it seems like it’s very competitive now when it comes to, you know, shirts and men’s clothes, and they’re always advertising to me thinking like, oh, I’ll buy this for my partner. So how are you guys finding your customers right now in a way that’s not kind of competing with the noise around you?

Steven:

So I think in the early days, we really did compete with everyone in terms of, you know, spending all that. And it was funny. You deleted it up to black Friday this year. If you’re on Twitter, everyone’s saying how this year is, you’re going to be horrible. Last year was the COVID bump, you know, gear up for battle. And I always laugh at those where black Friday and spend isn’t, if you just focus in on those months, you’re going to have, you’re not going to be successful, but black Friday success really starts in January. How do you, how are your 90 day cohorts? Are you running sales all the time? So now black Friday, it’s not as valuable. If you have a great brand, you can really maximize that impulse buy part of the year where people feel like they need to buy something because everyone around them is buy, but you should do your job where your community knows that’s your, like, you make it special for them.

Steven:

And you live within your, our cuts ecosphere. We always stay like what happens like in the world, doesn’t always affect, you know, our customers lack, it does other brands. And that was true this year. We had our best black Friday and it wasn’t even close because we’re getting better at our customer journey. And so it kind of goes to the point before, you know, we’re really paying attention to the first 90 days of the customer. Are they treated in a way where they know, Hey, the size isn’t work and get a new item, or, you know, the, the shipping was delayed. Are we making up for it or whatever, the, whatever the thing we need to do, are we doing that? Because that is so important to getting them back later in the year, are the products great that we’re coming out with, that they feel special, that they feel like they need to buy during that period of time.

Steven:

So there’s a lot of things. It’s never one thing that makes advertising your, how to lower attack. But, you know, it’s, I would say it’s products, community and customer clustering, clustering, which is so important. You know, we, we also, you know, we’re not also not one of those brands. That’s like a hundred percent on Facebook or Instagram spend. You have a pretty healthy media mix. We do spend a lot of money on like influencers, TV, we’re on CB Ron podcasts. So we have a healthy diet. You don’t want going into Q4. If you only spend on one channel, that would be tough. You’d be at the mercy of the algorithm. I always tell the, our growth teams, we can’t, can’t be at the mercy of the algorithm you need the early days we were. But after, after it’s kind of a self fulfilling prophecy. You use it as like the way to kind of get your start, but you need good word of mouth.

Steven:

And how do you have good word of mouth? Do you have great products? You have a great program and the customers feel taken care of. They can return stuff. You just have a good business. And then that should allow you to decrease your percent of spend on your revenue year over year, because the, the flywheel is working. Now. If, if, if you have loyalty and you you’re, you’re profitable on your first order, but people never come back. That’s not a good business. So you’ve gotta have you gotta have a good business. And it, one thing that’s really helped me as I was looking at S ones that come out publicly traded companies, and you look at their hit and everything’s public. It’s such a great roadmap for young businesses. And you see, in the early days, their percent of marketing spend was high. But as, as you go, like Lulu is like, you know, 12 to 18% versus a lot of businesses on Facebook are like 50% over time. They’ve needed to relying on advertising less because they just have great product and a great community. So if you, if you focus on those two areas as a young business over time, you should be able to lean off of it. If you’re actually producing a healthy business.

Stephanie:

Got it. That’s a good, that’s a good take. And I’ll have to check out more S ones. I haven’t done that for a while. Bring me back to my finance days.

Steven:

Yeah. And they’re great. I mean, we have a employee, his name is chance and he loved doing it and it allows us to, to stack, stack your business up to it too. It gives you a, a scale of, you know, for us, we’ve always, we’ve always scaled really good and we’ve had good growth, but keeps us humble. You know, there’s these brands that are doing a billion dollars in revenue, you know, a couple billion dollars in revenue and, you know, for us, we’re like, oh, well, we’re just getting started even though we’re, we’re, we’re a pretty sizeable business now.

Stephanie:

Yeah. Yeah. Very cool. So earlier you mentioned influencers and I want to hear how you’re kind of playing in that arena. I know you’ve done some cool things on YouTube. I think you have something called always on the YouTube channel where you’re talking to and celebrities. So I want to hear, you know, what was the vision behind that? And how’s it working?

Steven:

Awesome. So we have like a three-pronged approach towards community. We have a top down bottoms up in an organic content strategy. So that’s top down as we work with like guys behind the board, like, you know, MLB players, country, singers, rappers, guys that, you know, are the world’s most ambitious people. And that’s what we focus on. And we, we never asked for anything from them. We don’t pay them. We just to say, Hey, we got to shirt with your name on it. You know, let me know if you, if you like it, if you want more, a lot of times, you know, influencer marketing, if you go straight to payment, you’re not going to have success. So if we’re doing our job, finding people that actually are our community, but just influencers and athletes, they should want the product more than just once. So our, our arbitrage is that we have a great product that they want over and over, and then therefore our relationships built.

Steven:

And that’s our approach with like the top tier celebrities. Cause we’re, we’re a startup. We don’t have millions of dollars to pay them. And we have a bottoms up approach. We work with like really micro guys, people with not a ton of followers that just are, are really are like almost like VIP, a VIP customers, like people who are just so passionate about cuts in our brand. And we tasked them to, you know, for our Sherpa piece, they have to do X, Y, and Z and there’s campaigns every month. And having both of that is just a healthy diet of community. And then our content marketing strategy is how we showcase to both of those areas, kind of what we’re doing. And we use the top-down approach to get a fee. It’s a feeder system into doing always on. We demo with Marianna Barbera, which is like a great closer, and he’s become a brand friend, actually talked to him, you know, a couple of days ago and just doing things in, in the business that show people that we’re always on. It’s, it’s a slogan we say at cuts, you’re always on whether you’re at a, a movie theater on, on a day party, not going to be one of those guys that’s over at too drunk or any of that, you’re going to, you’re going to be a good representation of your family and your community and cuts, and we always want you wearing. So it’s kind of, it kind of goes both ways and we try to find professional athletes or, or people that are, are, are also, always on.

Stephanie:

Wow. I love that. That’s a good way to think about like the all encompassing brand strategy and how to kind of get everyone to also be showcasing that wherever they’re going and that mindset that’s really cool. Are there any new platforms or platforms or advertising strategies that you guys are trying out right now that you’re not really certain if it’s going to work out maybe as well as like TV or Instagram, but you’re putting some bets there,

Steven:

Tik TOK, their native ad platform are spending a ton of money. And the conversion cycle is a little like wishy washy to understand the attribution’s there. If it’s actually making diversions that the impressions are great, but you know, so it’s a little bit of a, you know, it’s, it’s not as black and white as some of the other platforms. One thing that’s really helped us as we’ve scaled out Facebook and started putting our budgets elsewhere. It’s just post post-purchase surveys of where are you found us? It sounds like a basic thing to do. And every brand, I just, like I say it and they’re like, oh, I I’ve never thought of doing that. It’s like the old school way of doing marketing, but it actually makes a huge difference. And it helps you with attribution. Cause GA is not always going to be perfect. You know, people like to double count, but that’s like your customers telling you if you do it consistently and that’s not going to be perfect, but it’ll give you a good indication if spend is like completely wasted. And so w we’ve done that and Tik TOK has shown to be, you know, not crazy great results yet, but we believe in that they’ve, they’ve had updates quarter over quarter. So I feel like the audiences is there and it’s kind of one of these things. We just gotta push it through as long and kind of let them catch up. And I, I have faith that they’ll get it there.

Stephanie:

Yeah. Are there any secondary platforms that people are saying they’re coming from that you were surprised by

Steven:

Snapchat actually. So interesting. We, but I actually read something the other day for audiences, 18 to 25. It’s the number one platform. You know, when I started the business, I was 25, but now I’m 31. So that’s another thing brands do get older. And so you have to, this is like the first year we’re actually thinking, Hey, we, we actually got to make sure we meet customers where they are, that are younger. So we’ve recently upped our spend. And again, not the great greatest attribution in platform, but that when you do post-purchase surveys, you know, another thing that shows it could be a great way to onboard customers. I think that’s a, a big thing too, is in platform data, even for Facebook, the new pro privacy stuff has been so bad. You need a good internal way to look at all of your ads, spend and revenue.

Steven:

And with those post-purchase post-purchase surveys that can, that can lead you to understanding what’s being effective. And you might realize like, you know, Facebook ad spend level is really efficient, but as we go to this one, it becomes less, you can actually find some low hanging fruit on some of these other channels that can actually make your overall, we would call it our Mer overall marketing spend versus revenue actually decrease. So you just got to have a good growth lead that understands levers. And then, you know, he’s kinda like planned like authentic GM, you know, one month trying this and he’ll have, if he’s there long enough, you’ll have a good flow of understanding when to take certain bets.

Stephanie:

Very cool. So, all right, last question. Where do you all want to be in the next one to two years? Like, what are you headed right now?

Steven:

So we, I think then this next phase of cuts, we’ve done our first five years, and now we’re going into a full lifestyle brand with, you know, head to toe products. I think more than anything really want to connect on a physical standpoint with our customers. And, you know, we want to inspire them to, to live ambitiously and to, to get up and believe that they can do things that they put their mind to. You know, our story is, you know, for guys that haven’t raised money from small time when actually Washington and, you know, we use cuts as our vehicle to live at our dream. And we want to provide that opportunity with our audience and to start the year with coming out with our first challenge where it’s called cuts, Carpe diem. And we’re really excited that it’s going to be a way to engage our community and to, to think of new ways to, to get up off the couch and to maybe start that business that they want to, or, you know, ask that girl out there that they, they had been, you know, seen at the grocery store every week.

Steven:

We want to motivate them. And I think with the pandemic, we haven’t been as physical to this point we should have been much more physical, but we’ve kind of been forced not to be, you know, w we have four pop-ups going on next year, one in LA, New York, Seattle, and Chicago. And I think those will be great areas that we get to finally connect with our audience, to get a by emerge. We get, bring our top influencers and athletes there, and that’s going to be something that I think is really missing. So that’s going to be super important for us to, to really connect. So that that’s the, that’s our real big focus because that’s, how are we going to live on more than just five years?

Stephanie:

Yeah. Wow. There’s definitely a lot of pent up demand for all of that. So it’ll be fun watching how you guys do that and what it looks like. Very exciting. Okay. Steven, thank you so much for coming on the show today. It was really fun getting to hear about what you all are doing right now at cuts and where you’re headed. Where can people find out more about cuts?

Steven:

It may be cuts that come when this comes out, but cuts clothing will redirect that we’re we’re on the final deadline of buying it, but, and then at cuts UTS on Instagram at cuts on Tik TOK at pets clothing on Twitter. So either one of those will work and yeah, I would just say, whoever’s listening that, you know, my mom always used to say this every day, but it’s so true. Whatever you put your mind to you can accomplish. I, I think that, that slogan’s almost been lost with that as moms, I have a biggest voice, but she used to say, my mom used to say to me every day when I left for school in the morning, and I felt like it became my magic, like juice that I had on everyone else that no one else had, because simply just cause she told me that. And so, you know, that, that, those, just those words and really believing that, like, I didn’t really believe it when I was young, but as I started having the littlest wins, I started really thinking it. And then that led to a lot of success. So hopefully that’s some last words of encouragement.

Stephanie:

I love that. That’s great. Go mom. All right. Well thanks so much Stephen. And until next time, this is great. Thank

Steven:

You. Awesome. Thank you.

Episode 171