BTSB: James Morin of Flowfold
Below are some excerpts from our conversation with James Morin, co-owner and COO of Flowfold, an outdoor company that makes minimalist gear for everyday adventures. James admits to initially selling wallets for beer money for almost five years while he and his partners prototyped their designs and raised some seed money, before going full time three years ago. Since that time, they have been near doubling sales annually, thanks in part to collaborations with companies like LL Bean and entering international markets as far away as Japan. Now, with revenues in the low 7-figures, James and his co-owners have their sights set on hitting $10 million in the next five years.
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How times (may) have changed
I look back now and I don’t know if I was graduating now, in 2018, if I could take the same route–if Flowfold could take the same route–that we did back then. Because in 2010, Amazon was the Wild West. Shopify didn’t necessarily exist as well as it does now, so in many ways, you could effectively grow slow. You could make 10 wallets at a time and sell them and build up some reviews and get some user-generated content and you could create a sustainable business model without the worry of feeling like you’re not catching up with your competitors, or you’re going to become irrelevant. Now with companies raising VC money just to get a prototype out, I don’t know if you can grow slow anymore. I don’t know if you can do the route that we did, which was five years of testing and prototyping and making income on the side and then raise money and go full bore.
For Flowfold, authenticity = voice
The big thing for us is voice. There are so many different touch points when we’re communicating to our customers. There’s obviously social media; there’s email; there’s point-of-purchase graphics at our retail shops. We as a brand have a platform and we need to be consistent because there’s no way that your customers [will] remember every single thing about you. They won’t be able to because they have too many things to worry about. The average person gets about 300 notifications per day on their phone. The thought that my ad is going to break through all those notifications and be the one thing that they pay attention to, well, it’s foolish for me to think that and it’s actually bad business practice. So if I know they’re not going to hear everything, then what I say always has to be consistent, always has to be on brand and in our authentic voice. That way they don’t need to hear all of it. They can feel like they’re still part of the brand, still understand what we’re doing, clearly [and] concisely, and can feel like they’re part of it.
The hard part is the best part
There is nothing more fulfilling than growing a small business. I mean, that’s just the bottom line. It is really quite an interesting juxtaposition because you sit there some days and you’re like, “This is challenging. This is the hardest thing that you can do.” But the things that make it difficult, the things that make it really, really physically and emotionally challenging are also the same things that make it worthwhile. I don’t have kids, and I’m sure anyone that’s listening to this podcast would probably say “James you don’t know what you’re talking about”, but I can imagine that that’s what having a kid is like. I can imagine when my dad came home to play tennis with me before high school practice to warm up after working all day. I’m sure there were times he didn’t want to do that. I’m sure he was tired and all he wanted to do was just sit on the couch and watch whatever game was on and have a beer or something.
But you don’t. You get out there, you go on the tennis court, you help your kid out. And I feel like, in many ways, that’s what running small businesses and being an entrepreneur is. It is extremely difficult, but there’s nothing as fulfilling as seeing your small business grow. I’ve been part of some larger corporations, Fortune 500 companies, and it’s different victories there, but nothing compares.
The entrepreneur’s cash conversion nightmare
You can sell yourself out of business because what ends up happening is you can get a big customer that has 60-day terms. They give you a huge lead time, and now you’re completely drained of cash. You have no other time to make any other products–to make any other revenue–and then, all of a sudden, they don’t pay on time and then you either have to go raise money to pay paychecks or you have to default. You can literally sell yourself out of business even though there’s nothing wrong with your books.
It’s important to have somebody on your team always thinking about [that], looking ahead and being like, “All right, we’re going to end the year profitable, but in June we will be out of money.” Those two things can happen. The worst thing that could possibly happen is you get caught off guard by it because everything’s going well. You have all your POs, but sometime in June or July, you have $150,000 in accounts receivable, and you are out of money. And it doesn’t matter if the money is going to come in August because you still have to pay the bills.
On management teams
I think in any small business–in any sort of entrepreneurial endeavor–the success of that business is going to depend on the success of the management team and that relationship. In my opinion, it’s one of the things that’s not discussed enough about. You can talk about margin, you can talk about prospecting, and sales, and your funnels and everything, but you need to make sure that your management team is aligned on your key initiatives and goals, and that you have good communication. And I really believe that you need to have siloed responsibilities.
Three of me would be a horrible business. I’d be running around with ADHD all the time, like [a] chicken with its head cut off. It would be horrible. We wouldn’t get anything done. It’d be fun. It’d be a great culture…until we ran out of money. So, you need that balance. And if you look at what Devin, Charlie, and I do on a day-to-day basis, we’re incredibly siloed. We have complete trust in one another to put Flowfold first, to do what’s best for the company, and to keep all of us in check.
A non-technical explanation of capital allocation
At this stage in our game, it’s never a matter of is this money well spent in this particular situation? Any money you spend at our stage is good money spent. If I want to take all my money and spend it on SEO or Google AdWords or Instagram marketing or Instagram influencers, it would more likely than not be an effective use of that money. We could use that money and I could spend 120 days on the road, and I could probably develop some more international players that would be good for our business. But is there a better use of the money? That’s always the question–not whether or not this money can be used here effectively.
I mean, a really good example for that is outdoor retail, the trade show that we used to go to every single year [is held] twice a year. There’s a Summer show and Winter show, [and] then all of a sudden they went to three shows and each show on average cost us around $10,000 to $15,000 to go to. Is it a good idea to go to that show? The answer is unequivocally, 100% yes. However, I could probably take $3,000 of that money [and] fly to my key accounts quarterly and then I could spend another $10,000 to $12,000 and I could put it all towards Google AdWords and SEO and marketing and building out our e-commerce platform. Or [I could] not go to two trade shows, have extra 20 grand on my plate, and pay for half of a production employee.
So, it’s always about where the better use of the money is and you always have to factor that in and not just be caught up in, “I think it’s a really good idea. It’s a good use of money. The ROI will be there.” Could the ROI be better somewhere else? Have somebody that’s challenging you on that.
P.U.N.Y is the new Big
Matt Powell is a leading expert in data collection in the industry [and] he says small is the new big, which is really good for a company like Flowfold because we’re small compared to the Patagonia’s of the world, the North Face’s of the world. And he says that the companies that are succeeding right now are going to be what he calls P.U.N.Y., which is an acronym for Premium, Unique, New, or Youthful. That is going to have to be where Flowfold plays and that’s going to have to be where Flowfold wins.
You look at which companies are doing well right now specifically in retail [are] either on the bottom of the curve where it comes to your Amazon Basics, your Dollar Tree, your Marshalls, your TJ Maxx’s, your Goodwill’s are doing well right now. Your very inexpensive products are doing well. And then your premium products are doing very well. If you’re somewhere in the middle, that’s where you struggle. So Flowfold is not going to be–we can’t be; we don’t want to be; we have no desire to be–your Dollar Tree, your Amazon Basics product.
We’re going to have to become premium. Our quality is premium. Our materials are premium. Our price points are going to have to be premium and that is going to have to be where we win. We did a consumer study that showed that our consumers, about 70% of them, would like the opportunity to be able to pick their colors on our Flowfold bag, and of that 70%, another 70% would be willing to pay up to a 30% premium for the bag and wait four to six weeks in a time of two day free shipping on Amazon Prime. That was extremely interesting.
Have a great week,
Your Chenmark Team