You're listening to cubicle to CEO episode 267, we've had a few guests on the show who have sold their businesses, but this case study is the first time we've explored what it looks like to buy your business back post exit after building Best Self Co to $45 million in sales, Cathryn Lavery sold her company to private equity in 2022 for seven figures.
She remained involved in the company as a brand ambassador, but watched as they made big changes that did little to grow the business. Then last year, she was given the once in a lifetime opportunity to buy the business back for pennies on the dollar, a six figure sum when the private equity firm decided to close down now with the second chance to rebuild more sustainably. Cathryn is applying what she learned from her first go around and taking notes on what the private equity firm did well and where they fell short to fix the mistakes she's inherited. Was it worth it? Here's the full scoop.
Welcome to cubicle, to CEO, the podcast where we ask successful founders and CEOs the business questions you can't google. I'm your host. Ellen Yin, every Monday, go behind the business in a case study style interview with a leading entrepreneur who shares one specific growth strategy they've tested in their own business, exactly how they implemented it and what the results and revenue were. You'll also hear financially transparent insights from my own journey bootstrapping our media company from a $300 freelance project into millions in revenue.
Hey, everyone, welcome back to the show today. I have with me, Cathryn Lavery, and I'm so excited to dig into this case study, because it's the first time we've ever had this particular situation come across our show, someone selling their company, exiting and then actually buying it back. And in my personal life, Cathryn, actually, I only know one other person that's done this, so I'm super fascinated by your journey there and back. So anyways, welcome.
Thanks so much for having me. I also didn't know anyone that did this before, and I have since met like five people that have done this. So there's a bigger group than you would think.
Yeah. I mean, I'm sure that would be interesting to gather everybody someday, maybe for a panel, and see this other side of entrepreneurship. But before we get into all that, I always ask our guests what their cubicle to CEO story is. So what was that catalyst that made you leap into entrepreneurship?
So I studied architecture and moved to New York to be an architect, and I worked in it actually, when I first moved to New York. I was supposed to start two weeks after I moved, and I took two weeks to, like, get to know the city, get an apartment, and one week into that, my job that had already lowered my pay, I'd interned there already, so they knew me, but they were like, hey, we don't have a lot of work on so we were thinking, instead of starting next week, you would start in six weeks.
And I had like, $780 ish to my name so I was really counting on that paycheck, and so I ended up starting that job, and I worked in it for two years, but I started a Shopify store on the side of that job, probably after six to seven months. And that was sort of what I call my freedom vehicle, entrepreneurship, where it was enough to get me out of my job, but it wasn't something I was going to do forever.
And so I think figuring out, like, the business that you leave your cubicle for doesn't have to be the one that you do forever, but it just is enough to, like, give you a little freedom to figure out what you really want to do.
I love that you named it freedom vehicle, so I'm assuming that side hustle, if you will, wasn't best self co
I had no idea what I was doing. I just came more from the artist's point of view. But I learned a lot about e-commerce and copywriting and selling, and so whenever, you know, I tried a couple of different businesses, and then when best self came along and I started that, I already had all these skills that I developed over the years that it was much easier than starting from scratch.
I love when past ventures you can use that to build upon you know what you're doing next. And obviously best self co was a massive success, and that's the company we're focused on here today. So just for our listeners who are unfamiliar, bestself co, you have journals, you have conversation card decks. And over your seven years building it, originally, you scaled it all the way up to $45 million in sales, which is such a huge feat, and then you ended up selling it to a private equity firm in 2022 and then bought it back 14 months later. So that was a more a more recent development.
I would love to know why, in 2022 why did you originally choose to sell? It was this something that you had put out on the marketplace, and it just happened that the PE firm, you know, was the right fit, or was this something where you weren't even planning to sell, but they approached you and you just couldn't pass up the opportunity.
It was. Kind of a mix of both. I had a baby in 2022 in March, and I didn't really take a lot of time off. In fact, I learned that babies do not come on the time that their schedules. And so I actually got a PayPal commercial that we had been like in discussions about when we were going to do it, and I'm like, nine months pregnant, and they're like, Okay, what about this day? I'm like, well, that's my due date, so it's that's my due date, so it's probably not going to be that day.
So I'm like, okay, I'll put it like two weeks out because and then I'll just do that, and then I'll go back to work for like four hours, and then my daughter was eight days overdue, and then I ended up having an emergency C-section. So I'm basically, like, five days postpartum, and that's kind of what my life was been. And so I was approached by a couple of people to buy the business. The first people gave me an offer, and I wasn't that excited about it, but I was ready to take a break.
And so I read this book, and it was just talking about decisions, and a lot of people is very binary, like, yes or no to this offer, and then I won't sell. But I was like, okay, I don't like this offer, but I do like the idea of selling and sort of taking a break and figuring out what I want to do next. Because I was also saying, like, are we going to be into a recession? Like, I pretty much have been investing in the company for years and years, and not really, like, taking any chips off the table.
So I was like, you know, not, I have a literal human being that's dependent on me. Maybe I should take a break figure out what I want to do next, and then all the mistakes and learnings that I made with this business, I'll apply to the next one. And so then I mentioned in a couple of groups I was in that I'd gotten this offer, but I wasn't excited about, and I just kind of planted a few seeds, as far as, like, let me just have conversations and see if anything comes of it.
And so the company that ended up buying us, they were, like a new private equity company. They had this sort of thesis, and a friend, ha actually wasn't even a friend at that point. He was just a guy in a Slack group I was in. He's now a friend, and he also lives in Austin, but he had mentioned to them that our products fit their thesis. And so then we started having conversations, and to be honest, like I was just saying yes to any conversations, I didn't really have a lot of expectations that it would go anywhere. I was just saying yes.
And so it ended up that's the deal I ended up going with, and they sort of had this vision of what they were trying to create, and a few brands that they wanted to buy. So we were the first brand that they bought, and they shared with me their thesis, so that if I knew anyone else that wanted to sell, I could reach out to them. And so that's kind of how the whole thing came together.
And to be honest, like, I've never sold a company before. So it was very much like, you know, my wife was like, okay, is it today? You close? I'm like, I think so, but I don't know, because I keep hearing that this stuff can fall apart at the last minute. I had a friend who thought he sold his company, signed the paperwork, and then the money just never came through, and he got ghosted. So I literally was not sure what to expect?
Yeah, I mean, it's such a I don't want to say rare. Maybe it's not the right word, but it is. It is a more limited experience that not a lot of entrepreneurs actually get to sell their businesses. So there isn't always a lot of resources out there that kind of walk you through what to expect. And so interesting, of course, and it's always this way, I feel like the most random connections end up playing such a huge, huge role in our lives. I do want to know, because you intrigued me with this idea of a thesis.
What was their thesis for their PE firm, and what was the vision for how best self was going to fit into that? And for you, on your side, did you have an emotional attachment to what would happen to best self after you sold it, or were you kind of like at peace with just walking away and saying, you know, whatever thesis you guys have, I'll let you run with it, and it can just go however it's going to go.
So the thesis they had, I forget in detail, because it morphed and changed, as I'll get into but I think at the beginning it was small products that people are passionate about or like that serves a passion that sells on multiple channels. And I forget all the things, but it's funny because that I know one other brand they bought and doesn't fit into that. So it's just funny that that was the initial thesis, but I think, yeah, it adapted with the weeks that passed,
Right? And for you, when you sold it, did you continue to have any sort of role or any small piece of equity in the company? Or were you fully exited, and you know, you were, you were at peace with just letting it become whatever it was going to become.
Yeah, so I my team stayed on, and I hadn't been working in the day to day as much, which is one of the reasons I was able to sort of leave. And so I was kind of at peace with moving on and figuring out the next thing was, of course, like it's always my. Baby. But I think having an actual baby was like, okay, this is a company. But had I not had my daughter, I might have been, like, way more attached to it.
And then I believe I was just so tired I was ready for a break. And I think a lot of entrepreneurs, when it comes to selling their business, it's almost like we just need a brick from things, and there was an earn out piece. So a lot of times when you structure a deal, you get the money up front, and then you also get some money tied to a goal that they have to hit. And a lot of times you have to go along with it, and you're sort of attached to this goal as well. What was weird for me is just like, there's a goal, but I really have no control over whether they hit it or not.
And so while I didn't have any attachment, I definitely was like, okay, are they gonna hit their goal? Spoiler alert, they did not hit their goal for a few different reasons. But I think at the time I would have there's like an ego piece of sure you get the deal size. And a friend of mine was like, you know, you could try to figure out how you get more money up front and lasted an earn out. And the goal was just we were growing. And I was like, This is gonna be fine to hit. It's, it's like, not even a stretch. They don't even have to grow. They just don't have to shrink too much.
Yeah.
And so I was sort of naive. I've since learned that a lot of times people don't get there or not. My or not was tied to gross revenue. I've also seen deals, and I was offered a deal where it was tied to profit, like EBITDA, which is not I wouldn't tell. I would never advise anyone to sign a deal based on profit, because that's just something that you can like, you can buy more inventory and there's no more profit. You know what I mean. So that's easily fudged, but this one was pretty straightforward, and they didn't hit it. So I think I was naive in assuming like, oh yeah, it's a done deal.
Now, one thing is my team stayed on board for six months, and then they let me know that they were going to move to a more agency model. And so I heard it from my old team members, and so I kind of helped them find new positions elsewhere. And then I was even less attached because my team wasn't there. I was kind of seeing the writing on the wall. So I was like, I don't think the earn out is going to happen. And so that had me, like, more detached than I otherwise would have been right.
No, that makes a lot of sense for you during that 14 month window when you were basically removed from the business. I mean, you sold it for seven figures, which is incredible. What did that money allow you to personally do in your life during that time that you know, looking back, you're you're grateful for that that you know, maybe kind of affirms that that was the the right decision at the time for you personally.
So for me, I think the biggest part was just, you know, paying off some debt that I have we bought at highs. I just, like felt more stable. Well, it's funny, I felt more stable than I had. And if you were looking at the books, I should have felt more stable. I was more stable. But what was happening is, you go from having cash flow and an asset that you can sell to having more money than you've ever had, but there's no cash flow and there's no asset, and you're like, oh my goodness, what am I going to do next?
And so I thought I was going to be like, I thought the selling process would be more of a exciting thing, of course, like you sign NDAs, and you can only share so much. And then there's also just the actual selling. I don't know if you ever bought a house or a remortgage or anything, and you have to go to this office and sign all this paperwork. And when you sell your company on, buy it back, it's like, okay, I Docusign. Click this twice, and that's it.
And so there was, like, things that were more of a oh, wow. That was it. You know, this thing that I built for seven and a half years is just no longer mine, and it was, like, two clicks. And so this is weird things like that, and are also just the scarcity of and I've heard this from people who sold their company for way more than I did, where you're just like, oh, my God, it's gonna run. I and it doesn't make sense. It's just very strange. It's also strange to not have a project to be working on.
So for me, I was always like, since I, you know, left architecture, I was always I had something going on in any business I started was on the side of another thing. So then I had all this time and no constraints over my like, what I could do. So I was like, Oh my goodness. So it was almost like, weirdly more stressful than I had before, because at least then I had something to work on. And I think that was just like something I had to work through in therapy context.
No, it's, I mean, it's definitely an adjustment, right? Like you said, you viewed that business as your baby until you had your actual baby, your daughter, but still, in many ways, it is such a huge part of your growing up and almost a decade of your life. And I feel like too it's interesting. You know, talking to founders who have sold their businesses because please feel free to jump in and correct me. I'm wrong about this applying to your situation, but from my understanding, oftentimes when founders sell their businesses to a private equity firm, the goal of that private equity firm, obviously, is to make money for their investors, so they're planning to scale the business and then sell it again to the next level.
And so I don't know if that was part of the conversations that you had with this particular PE firm. But if it was, was that in your purview at all, thinking about that second sale, and, and, and how you might be involved or not involved in that process?
Yeah, so I was a brand ambassador for the year, and we sort of talked about, you know, they had their company that potentially in the future, if things went well, you would have equity in but it was very like loose terms. And I that probably wasn't going to happen, especially now I know what I know, but so for me, I was, I didn't have a second bite of the pie. I do know I have a friend that sold to private equity. She sold 70% of her business.
And so the 30% this was maybe 2019 she sold. They haven't done the second sale yet, but the 30% is probably gonna be a lot more than the initial 70% but for me, it was like, what I done, their deal was like 100% and I think that was, I mean, good, because I know what happened, but I also would have struggled like, how do you start something new when you're still, you know, 40% I'm very like, all or nothing type of thing, I would have a struggle like, Okay, I own 30% but what's my responsibility with that?
Right. Right. No, that makes a lot of sense. So now that you have all the benefit of hindsight, right? What did the private equity firm and you already gave the spoiler alert, things did not go as planned, obviously, because you bought it back. But what did the private equity firm do that was good, that made things better?
Can you talk a little bit about that, and then we'll kind of look at the flip side of the coin, you know what? What didn't go according to plan?
Yeah. So, I mean, I think at the time when we sold, we actually had a warehouse in the UK that we had product there for a while, and it was one of those, like, sunk costs things where, like, this is not worth it to be there, but, you know, destroying or getting rid of the inventory, I'm like, Oh, I'm not ready to do that either. So essentially, it was just like losing money for no reason.
And so one of the things when we closed was just like, Okay, we don't want this inventory so you can, like, figure out what you want to do with it. And so that was, like a forcing function to do something I should have done a long time ago. I ended up donating a bunch to my old university and my old school because I was like, I don't want to destroy this. And then I, like, sent a bunch to people because I was like, I don't want to destroy it, so.
And then there was other things where putting systems in place, you know, these are a bunch of MBAs coming into your business, essentially, like consultants coming in to set things up within your business that, you know, I didn't even know some of the spreadsheets that they have, I'm like, that is wild. And so it's almost like, I pay these consultants to come in and, like, clean things up, yeah. And then, while I was sad that they were getting rid of the team, because that was a lot of institutional knowledge, kind of, like leaving, I also think the team could have been leaner, and I didn't. I knew when I sold it that, like I could see, like Mark, you know, channels are changing. Amazon fees are going up. There's just a lot the margins are getting slimmer.
And so we were gonna have to adapt. And they made some hard decisions that I was not ready to make at that point. And so it was like, when I bought it back, there was no team left, which is both stressful, but it's also okay. How do I rebuild this in a way that I wouldn't have had the opportunity to do if I'd done it before? Because you kind of get into habits in a business, and you have bad habits. You have, like, we had a good team culture, but there's things that I would do differently if I started it over, because I didn't know what I was doing.
You know, I'd never had a team before, and so I'm just like, learning as I go. So I had this inexperienced debt that was building up. And so when I sold the company, I was able to, like, wipe that, slay it, clean, and be like, okay, when I start my next company, I can do this differently and not make the same mistakes. I didn't know it was gonna be the same company, but that was in my mind. And being able to buy the foundation back and then sort of recreate it is like a once in a lifetime opportunity.
Oh, 100% Yeah, because you you now have, like you said, all the experience that you didn't have before, but you get that clean slate, that fresh start, and I totally get what you mean, like so many times. I was actually just on a call with a peer mastermind earlier this morning, before we hopped on this one, and we were talking about exactly that, how when you're an object in motion, right, and you are in your daily, weekly, monthly routines, it's very hard to stop that momentum, even if it's not in a necessarily leading you in the right direction, but, you know, you're already in it.
And so for you to completely hit pause and kill it, and then have to restart when you're already in the motion of it is extremely hard. It's much easier to be re handed a, you know, a very slimmed down version of what, of what you once had, and then rebuild, if you will. From there you mentioned, you know, some of the best things they did was making some hard decisions for you that you had been delaying, like shutting down that UK warehouse, but you had my curiosity peaked at these cool spreadsheets that you didn't even realize could exist.
I know it's probably difficult to describe this in an audio format, but is there any specific spreadsheet that you could maybe high level describe to us that you feel like, oh, man, more small business owners should know that such a function even exists. Like, can you just briefly describe, like, one such spreadsheet that maybe they implemented that you thought was really impactful to bettering the business?
I think when I think back of the history of the company, there was always it was either like, because we were physical products, which is difficult in itself, because you have what's the most efficient way to get this from your manufacturer into your customers hands? And so the things like we would go, I would call like, feast or famine mode. So we'd either have too little inventory, and if you don't have inventory, like, good luck sales and marketing, but if you have too much inventory, then you basically are paying a bunch in storage. You've to all your caches in your inventory, and you can't move it.
And then if you want to make the product better, it's like, well, I can't make it better yet, because I have this, all this product in the warehouse, so it's automatically going to be a worse product if I make it better. So it's these, it's like weird thing where they put into place some like supply, forecasting, modeling, is what I would call it.
And I I'm pretty like, mediocre at Excel. Actually, I've since gotten Excel previously, I was just Google Sheets, and someone on my old team would make fun of me because they would be like, Excel so much better. And better. And now I am like, Oh, it is actually better if you can do all this, like, interlinking.
That's what my husband says all the time.
Yeah, I still love Google Sheets, but now I can see like, oh, basically you update one thing one place, and it will, like, fix everything else. And so I could see them putting in po tracking and just having, like, a tighter control over all the costs for the most part. And again, when someone comes into your business, they can see, like, all the duct tape that you've been messing with for years. And can put in something when you're in it, it's very difficult to, like, step outside and see that.
And also yours, you're often like running to keep up, so if it's worked so far, but it doesn't scale over time. And having like experts come in, I also find a investment memo that they put together for their investors right after they they bought us. I don't know if I was supposed to see it, but it was really interesting because, you know, I'm like looking at it and having someone objectively that you're not paying, yeah, look at your business and be like, okay, this could be better. This could be better. And then I actually pulled that into, like, chatgpt. I'm like, okay, can you, like, put projects together according to, like, what they were going to do?
And so it's things like that where I don't assume that I know everything or was the best at running the company. I think in the memo I did a, I think I forget the word, like, I did a fine job or something like that, which I was like, that's great, because these people know what they're doing. Yeah? MBA, so, um, yeah. I mean, I learned a lot just having someone come in and seeing, like, what they didn't change versus what they did.
And to your point, forecasting is a very, very difficult skill. I think not enough entrepreneurs a do it well or even understand its importance. It's definitely a weak area for me, and so I can definitely resonate with that. Now, looking to the flip side of the coin, you know, things didn't work out for a reason in terms of what they were hoping to do with the business originally.
So what were some of those key mistakes that you saw when you repurchased it, that they did not, you know, did not do well. And I know a key one of the many things was their shift in focus from direct to consumer to the Amazon channel. So I believe when you owned the business, it was 60% direct to consumer, so people buying directly from your website, and then 40% of your sales were coming through Amazon, and then now it's sitting at 75% Amazon.
So tell us a little bit about that process and what they were trying to achieve by shifting over to Amazon.
So I believe that a lot of the people that worked for that private equity firm came from Amazon aggregators. And so if it's a hammer, everything's a nail. So they're thinking like Amazon's, you know, you don't need an email marketer or a paid ads. You just you. If it's on Amazon, they'll give you the traffic. And so they sent all of our products to FBA, and sort of focused on that channel as the main one. But the problem with that is you don't own the customer, and Amazon just keeps increasing its fees.
So like, it was less profitable before, and it's even less profitable because they keep increasing fees and they can do and so it's really squeezing the sellers, and it's hard once you've sort of moved that way to go back. And so I think the investment of like, you know, they had my team, and a lot of them were just, we had an agency that would run the Amazon, and the rest of the team were merely focused on Shopify. And I think they thought, okay, we'll just hire a couple agencies to run the Shopify and the Amazon, and then if more of it goes to Amazon, then it's fine, because we don't need all these people, but it just means that, again, you don't own the customer.
And so yes, you might get that first sale, but then Amazon's gonna increase. You have to pay Amazon, essentially, to keep reaching the same people, unless you're doing something offline with your marketing with these people. But I don't even think that fits with Amazon in terms of service. So there was just a lot of things that weren't like thought through. And I think that was the biggest piece. And I believe another thing was they were also so I had my team, and I think when they came on board, they were like a new private equity firm. And when I say new, they were still hiring their people, so that you're kind of like building the plan as you're trying to fly it somewhere else and run another company.
And so they came in, they sort of took autonomy away from the team to make decisions that were needed to be made. So it was like approving purchase orders that would be delayed six weeks. And, you know, they came in end of October of 2022 luckily we had, like, q4 we were up 20% year over year because we had everything prepped. But they, you know, we had sold more than they planned, and they were supposed to put a purchase order in, but that was got delayed, and because, I don't know if they hadn't hired their CFO.
And so if you don't have, like I said, if you don't have product to sell in q1 which q4 and q1 are our biggest quarters. In fact, q1 is a bigger quarter. And so I was like, Well, if you don't have our best selling products in stock, then there's just no way you're gonna hit your numbers. And so things like that, or just things that don't fit into a spreadsheet, there's also, there's like a science to business, but then there's also like an art that is somewhere in between of, like, not everything should be a spreadsheet.
Sometimes you have to just, like, roll up your sleeves and just handle things. And I think that obviously I wasn't in the room, but like I was supposed to be on meetings every week or month. I forget. I agree to a certain number of meetings, but they said, you know, if we don't schedule them, like, we're not going to penalize you for them. So they didn't schedule them. So I just send emails into the void of things that I would recommend. So I'd see things like, people would comment on our Facebook ads, and they're just like, no responding to it, right?
And what we used to do with the brand is like, we would always respond, because that actually increases your organic reach on somewhere like Facebook or Instagram, because people are commenting and if you're commenting back, it's just like, more engagement. And so they wouldn't do that. I'm like, Hey, this is, like, an easy win. It takes like, five minutes a day just to do this one thing. So I would just like, see things online, and I would send it over, but for the most part, like, they didn't, and I I get it, like, a lot of times they're like, oh, the founder is crazy. They're too, you know, involved.
So I kind of like, you know, you want to figure it out for yourself, that's totally fine. So I would just and then chatgpt had actually just come out, so I would just send them experiments. I like, here's how I would do it for this reason. And again, deaf ears. But I just was like, Okay, how do I make sure that I feel like I'm being a good brand ambassador by sharing some things that if I was still running the company I would do, and then at least I have some sort of track record of trying to help.
Absolutely. And I mean, it was their missed opportunity for not taking you up on those like you said, very easy wins, low hanging fruit. I think another thing you had mentioned in your, you know, documents that you had submitted prior to our interview, was that there just wasn't enough human oversight into some of the things they were trying to automate. So I believe that the example you gave was like aI written, let's say, ad copy, and it was unprofitable, but no one was, you know, no one was monitoring that.
So can you, can you talk a little bit more about that specific thing, just because I feel like it's relevant to our current state, where more and more business owners are adopting AI. And AI is instrumental and game changing for so many businesses, but there is still that level of human involvement or that element that needs to be included. So what are some of the lessons we can take from, you know, where that went wrong?
Yeah, so I. Think one of the big like, I use AI every single day. Love it helps me leverage my time better. But I think the great things about AI is it helps us leverage and do more menial tasks, but we want to review what what it's doing. And one thing I noticed was they would run these AI ads specifically on Amazon, where, like, not all products should be treated equally.
And by that, I mean there's like tier a products, and these are things that like people search on and find you for, and they should be on Amazon, but maybe like tier B products, which are accessories you would just sell in your store to increase the average order value. And then you have tier C products that are like your brand, or people have to know you and like you to even buy the products in the first place, so like your brand on a hat or a t shirt if you're not if you're not an apparel company, nobody's buying that unless they already know and like you.
And so they sent everything to Amazon FBA, and they're not thinking of like, how does a human being on Amazon search for things and buy things? Because not every product should be on Amazon or makes sense. So they starved out the D to C, and then they were running these ads on Amazon that an AI was just running, and nobody was like, checking, like, okay, is this profitable? Does it even make sense to, like, advertise for this product? Because search intent is really what Amazon's point in. And this, I forget exactly what it was. It was just like, This doesn't make any sense.
And so AI is really efficient if you're thinking like a human being, of like, how people should be looking and thinking about products, and applying that like a lens over what it is you're doing and like, I really get into okay, how is someone gonna find this and buy this and some products, again, just don't put it on channels where it just doesn't make sense, because you're just splitting your energy and focus, and then there wouldn't be the products in our storage. And so if people wanted to buy it, we're like, okay, you have to go buy it on Amazon.
So yeah, it's things like that, where it's like, not thinking through, just thinking like, Okay, first stage of facts, or whatever it's called, is, we'll just send everything to Amazon, but you're not thinking of like, third order, like, what happens when this happens? And I usually go through that and then, like, okay, either we have to tweak that or just not do it at all. And I think a lot of people, it's like, oh, that's a quick win. We'll get all these products. I remember actually one of the emails, they were like, they told me, like, oh yeah, we realized that all of your products weren't on Amazon. I was so confused. I'm like, all of our products are on Amazon, like the main ones. I didn't realize they meant, like, literally every product in our warehouse.
So which I'm like, yeah, obviously, because what happened is they sent a bunch of stuff that just they're paying for storage in Amazon, which is way more expensive, and then it's not moving, so you get, like, long term storage. So there's just a lot of fundamental things where, if you thought it through, you wouldn't have done in the first place.
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That was really, really helpful, and I actually super enjoyed you walking through the first tier, second tier, third tier products, even for our listeners who may not have product based businesses. I think that principle still applies, because you walked us through it beautifully. Like, first tier products, what are the things that people are actively searching for that they're going to like, essentially discover your brand through right? And then you said, like, what are B in the second tier?
What are the complementary products that would aid their success or satisfaction, whatever you want to call it, with the first tier products, and then that third tier being like your loyal community, your brand enthusiasts, like those are the people who are buying that tier. That was really helpful. I hadn't heard it framed that way before. And another quick point of clarification, I realized I should have asked this earlier. I'm not an Amazon expert in any sense, and I'm sure a lot of our listeners are new to this term. And. Technology as well, FBA. Can you just quickly? What does that stand for? Sorry,
That means Fulfilled by Amazon. So that's Amazon's warehouse. You send your goods on a few pallets, and then they will ship it out from there. So a lot of times when you buy from Amazon, you're actually buying from a third party who sent their stuff into Amazon warehouses, and then Amazon will ship them out to you. So like, the seller doesn't get your information. You're like, Amazon's customer, and you cannot reach out to them separately to try to get them on your store unless you have something in the product.
And sometimes you see this, because I know Amazon Terms of Service. Sometimes I'll get stuff from Amazon, and it's like this, like, cheesy thing, like, Oh, do you want a free product five star review? And then you see the product that has like, 10,000 reviews. I'm like, oh, okay, so this is how you're, like, gaming the review system. But you have to be pretty careful. I wouldn't do that, because not only did I like, is this product good, I don't feel like I can trust the reviews anymore. And then if Amazon cuts you, you'll, you'll get your listing pulled.
Right? No, that makes sense. And actually that kind of brings me up to a follow up question to an earlier point, when I was saying, or when we were discussing how the private equity firm really shifted, you know, the majority of the sales to Amazon, whereas before, it was more heavily leaned towards direct to consumer.
Now that you've taken back over the reins, are you trying to redirect the ship back into the DTC field so that you can own your customer data? Or you kind of just letting it ride? Because, you know, 75% of your sales are now on Amazon.
I mean, I'm not turning off Amazon. I think what we have done is we recently updated a lot of the products to make them better, and then I added a QR like, a custom, unique QR code to every single product to give, like, Okay, how do we make this product better, or give people more ways to use it, or ideas or content around it, so we could potentially get them back to our site in a way that, like, adds value and is not spammy and is like, on the actual product, and then potentially win them as a customer for ourselves.
I love that. Can you give an example of that?
So we have these card games, and we have one coming out where it's basically these activities. And so I forget there's one, like ad libs or something. And so it's like, if you want, almost like a template or ideas or a quiz or something. I forget exactly which one it was. Then you go to this QR code and we'll give you a bunch of bonuses to like, you can play it without doing that, but you can also go there and get more information, or more ways to use it.
Or in some card decks we have, we might ask a question based on, like, okay, love languages, you know. And then on the other side of the card we have a QR code, because if you don't know what love languages are, you can go to our site and we'll, like, break down how you would find that out, or send you to a quiz, or whatever it is. It's literally about to come out.
So this is maybe, like three, four months ago, but we're basically, how do we make the product better and more in depth? So if you want to find out more information, you can, but it doesn't make the product last by not going there, because then if people are really interested, they'll come and find us, and then we can give them a lot more information and market them more with more products.
Yeah, and you're kind of almost inadvertently filtering out your very best customers, anyways, like the people who are willing to go that extra step or extra mile to get the most comprehensive experience out of your product. And now that you're saying that, I realized this is making a lot of sense to me now when I buy books from self published authors on Amazon, honestly, even traditionally published sometimes authors on Amazon.
I notice a lot when I'm reading the books that there's like, a QR code where they're sending me to download additional resources. And I always just thought, Oh, they're, you know, utilizing that for marketing purposes. But I never thought about the fact that they may not even have visibility to who I am as their customer, and that's their only way to gain that information. So I'm like, oh, that's brilliant. So thank you for giving me that roundabout.
Because you know, you can make these. I mean, the biggest thing that came from covid Was everyone knows how to use a QR code nine. And so there's ways to, like, add QR codes in a way to make a product either more engaging or fun, and people actually know how to use it. And then you're also, if you do make it in such a way, you're like, Okay, this came from the icebreaker deck on the outside of the box. So maybe this person hasn't bought it, but they see it in retail.
So how we talk about what the product is like, different ways to use it? And then if it's inside of the deck, or if it's on one of the cards, then we know exactly where they're coming from. It's and it's different. Intent on how it is that we put that, and that's just something that we implemented recently, because, actually, I find a QR code on an existing product that's like in print, and it goes nowhere. There's no wasn't even a link attached to it.
And so that was, there's like, skeletons I'm finding where I'm like, Oh, well, there's nothing we can do about it. Now I like it's in production right print with the right info on it, right and before, we just make QR codes online. But now it's like, I have a platform where we own everything. So if you wanted to change the link later, we could, and we don't have to change the whole code.
Oh, that's so cool. Okay, what is that platform, by the way, if you don't mind sharing with if you know you are joy, okay, that's super convenient, because that happens to me all the time, where I print these cards for a specific event, and then I've leftovers, and I'm like, Ah, what a waste. Because I can't re hand them out, because it's like, if I'm not using the same link, it's a defunct but if I could just go in the back end and change the link, but keep the physical QR code. That's brilliant.
Okay, listeners, write that down. Go check it out. And going back though to, you know, the things that they did wrong or that didn't go as as hoped for that you're learning from the last you know, big thing that I remember reading about was the copycat counterfeits. How many you know, just third party sellers were basically creating dupes of your your card deck specifically and and selling them as yours when when it wasn't an original.
So from what I understand, they were just letting these counterfeits kind of run amok without any sort of repercussion, until you stepped in and actually started ordering these fakes and documenting these fake sellers yourself, when you were doing this process of starting to track the fakes, was this just something you did of your own volition because you just, you know, cared about your brand enough that you wanted to stop the copycats? Or was this something the company asked you to step in and help take care of once you pointed out the issue.
It wasn't until I came back and owned the company again, they had brought up this idea that we were dealing with these counterfeits. Now we have trademarks on everything. You know, best self, the logo, the word intimacy. So we have trademarks everything. But the thing about trademarks is you have to protect them and, like, do stuff about it. And so what I think I don't understand why they weren't doing anything. I think it's one of these things where it can't be solved in a spreadsheet.
So for me, another thing, if you're listening to this and you've never sold on Amazon, is you will think you're buying from the company, but it might be a completely fake product, because I started best elf, I created the products, but on Amazon, you don't own the listing. And so it's like if someone wanted to sell Tide Pods on Amazon, they might have gone to the dollar store and bought a bunch of Tide Pods, and either selling it on Amazon. And Amazon is all about the customer getting the best possible price, right?
And so they don't want counterfeits, but they also don't want to limit competition. And so with products, you're supposed to sell the real thing, and what people will do is like, Oh, I also have this, and they'll ship in their fake product, and then it's really just someone ordering it, and then I think they put in two violations in like, the last six months. You don't only see six months worth of data of how much was done, but this was like a problem.
And I think in the first three or four weeks of me owning the company, I put in like 30 complaints you were on top of it. Yeah, it probably took maybe five hours of my time for two weeks to like you. Just every time it comes in, I order it, like, fastest shipping, I would come in, I would take a picture of it, put it in a spreadsheet, and then I had a people that were, like, reporting it, who knew how to do this sort of thing. But it really was not that much. It's very easy to do. And the picture, like, literally, you know, like my daughter's in the back of it. I'm just, it's not, like, a perfect and like, okay, how do we, like, create this document to, like, submit to Amazon. I'm literally, like, take a picture with my phone.
Super basic. You're really just showing, like, here's the real one, here's the fake one. And then you'll get into a program where, if they see enough reports and you have the trademarks, they'll let you essentially remove people off of your brand that you weren't permitted to sell. And so I think it took us about two weeks to get that so then we could remove people and again, so that was probably, I don't know, a day and a half of work, right? But then I solved that problem. And so what they were doing is they someone would come on the listing selling a fake and they would just lower the price of their product so that they got the buy box, because on Amazon, it's whoever's the cheapest.
But then you have another problem, because then you're selling things much cheaper and your profit. So there was just a lot of like, third order effects, of like, yeah, you solved the problem for today, or they'd wait for them to sell. I, you know, oh, they only have 10 units, so we'll let them sell an eye. But it's like, well, the customer is getting, like, not a good product, not a best self product, and they think they're getting a best self product, because sometimes people would share it on social media, yeah? And I'm like, That's not ours.
Shoot, yeah.
Because, you know, it's this, like, cheap, thin box, ours. I can tell from a mile away people would share. Share it, and then I'd be like, sorry, that's not our product, but I'll send you our product if they were in the US so that they could have the real thing. And they're like, actually, this is much better. And there's like, spelling mistakes as well, so it just makes your brand look bad. And then they're putting, you know, they might put reviews of a fake product on your listing, and then people think your listing is bad.
So again, I think thinking of like, okay, they're solving the problem for the day. And then there's like, how do I actually solve this? And it started with, let me just get in a routine of anytime someone comes on the listing, creating a system so that it didn't actually take that much time to be like, Okay, I take a picture on my phone, I upload it to this Google form, and then it gets reported, and I don't have to do anything else, and then the problem gets solved.
And so now another thing we've implemented is we have these Amazon's kind of like the mob. They don't let you, like, solve the problem. They're like, actually, you have to pay us, like, five cents a unit for this little QR code looking thing, yeah, where the only people you put that on every single one of your products. So if someone is trying to sell a fake one, they won't have that on there, and so FBA won't let them sell it.
So is that their transparency program that you're talking about?
Yeah, okay, I didn't know about whenever I first got the company back, and I'm like, Okay, this is, I mean, to be honest, I was like, oh, that's probably going to be expensive, and it's basically, like a 10 cent per unit cost, but that essentially got rid of the problem as well. And that's been like for a while.
And again, they're paying these Amazon agencies a ton of money, and no one's like delving into like, how do we solve this actual problem? And so that's one of the things where they probably came up in at meetings and spreadsheets, but, like, nobody sat down and was like, okay, how do we solve this thing for good, right?
How do we get to the root of it so it doesn't occur again? Great to know, though, for any one of our listeners who may sell on Amazon or may be interested in selling their product on Amazon in the future, to know that this transparency program exists so they can kind of hopefully ward off the copycats from the get go.
And then also, you mentioned that you, like, brought on an AI tool to automatically do IP enforcement for you globally, which I think is so cool. I would love to know what this tool is. I've never heard of such a thing, so if anything you can share there would be super helpful.
So we were using like agency, they ended up not being very good. So I won't name them, but I think actually, one of the things I realized there was, there was a lot of fires when I came on board, and one of the things a guy reached out to me. So in the UK, there's a scam going on where US brands that have not got their trademarks. In the UK, these sellers will basically buy counterfeits, and then they'll file for trademarks in the UK for your brand.
Oh, wow.
And if you ever try to come over to the UK, you won't be able to sell on Amazon there. And so a couple people reached out to me because someone was trying to do that in the UK, and I've actually taken like, six months to, like, get rid of them, but that was one thing where I've learned a lot about just IP and IP enforcement and how to do it. And there's some things you can do with AI, like, I think a lot of times it's just taking the time to fill in the DMCA reports.
And so once I was like, okay, here's the three or four products that we're getting these counterfeit issues with. Or people were just like, putting up a site and selling fakes. And instead of having my lawyer deal with it, because I don't want to pay every time he writes a letter, a lot of times, it's just like filling out a form with Google or Shopify to pull down the store. We've reported a bunch, and they pull it down within hours. And what I did was, like, we created a IP GPT, so you put all your like, IP information of your products.
Okay?
So, like, okay, the intimacy deck. This is the trademark. This is the format of the complaint, and then it will just spit out what you should write, and then you just copy paste it in there.
That is so cool. And is this a tool that, like our listeners, can access, or is this just something you created internally for yourself?
I just created internally. It's very easy. You just go on to chatgpt, and you would just create it for your products, if you're dealing with this, and you can create it for anything. So if you find yourself doing something over and over again, one thing that I'm working on right now is like a GPT merchandiser, so we have these, like, different product bundles, and how to bundle things in a way that it's like in context to our customer. And so I was like, okay, coming up to Black Friday, how do we create these bundles?
And so I'm like, okay, how do we just put all of our products into one place? And, like, you know, brief summary of what it is in the category. And then, if we're talking about, okay, we have a mom who's 35 and it's November, she's getting ready for Thanksgiving. Oh, here's a road trip bundle of like, things you could play with your kids on a road trip. Of our products, things like that, where I'm like it and it oftentimes just sparks an idea of like, okay, we could pivot how we say something this way, and I'll just make you think differently in a way that you're not starting from scratch.
So smart. I love all these I mean, I know. This. This episode wasn't about AI, but now I feel like I've gotten all these great AI hacks from you. So thank you, Catherine, for sharing so willingly now that you've purchased this company back. Well, first, how did the conversation of repurchase come about?
Is this something they approached you with? And to my understanding, you bought this company back for pennies on the dollar compared to what you sold it to them originally for. Was there much negotiation in the price, or did they come to you already having sliced the price significantly so you were able to just make it an easy buyback.
They essentially called me to tell me I wasn't going to get my earn out, which I had already mentally said goodbye to, and we'd had a couple of discussions. But in that conversation, they were like, look, the boards, you know, it was kind of an all or nothing deal. So even though they were only 11% off the goal, it was just like, you don't get it at all.
So I had been trying to chance my arm to see if I could get any of it. And when he called me, he was like, yeah, the board's not going to go for that. And actually, like, the private equity company is closing down and we're all moving on. So do you want to buy it back? Is pretty much how the conversation went. And to be honest, when he first brought it up, I was like, I acted interested, but my first thought was like, oh no, I don't know if I want that only because I was like, am I going back, like, taking a step back in life?
And then also, you know, I didn't have the team anymore, and so there was a lot of things that were different than before, but I wanted to keep the conversation going. And so I sort of took the time. They didn't have a price in mind, they were like, throwing numbers higher than I would have wanted. I'm like, I just was like, Yeah, I'm not going to be doing that. And the good thing about the deal was, by the time they knew they were going to be closed on they were running like a skeleton crew of the company.
So I believe they bought three brands, and they needed to get rid of the three brands so that they could all sort of move on. And so when I offered them, I lowballed them pretty good the first time. And was my offer was essentially like, look, I'm, this is the inventory you have in place. This is what I'm going to offer. And what's great about me is, like, you don't, there's no transition needed, just like, give me the one password, and not like, you can be on your way, because otherwise they would have to almost rehire some people for the transition.
And then at that point it was, you know, it's q4 so their numbers are not going to be very good for q4 and then we're in q1 you know, they told me at the beginning of December of 23 and, you know, leading up to Christmas, by the time we're like, I gave them an offer, they weren't going to present it to the board, and then I came up a little bit, and then they presented it. And so you're basically losing q4 and q1 of another year. So it's not only the last 22 q4 had been really good. Then q1 was terrible because they didn't have inventory.
And then you another trailing 12 months, where it looks like a dawn year, because nobody's focused on it. And then another q1 and so it would have been difficult for them to go to market. They would have had to hire people for the transition and also explain this story. Now, had they gone to market, they would have definitely got more than what I gave them. But these are hired guns. They're just ready to go on to their next project. And that was a benefit for me, because none of them lost any money in the deal, personally, right? Yeah, they didn't put any money into it.
So for them, it wasn't this loss aversion, where they were, like, mentally struggling with it. It was very much like, oh yeah, we're gonna go and totally be fine after this. And so that helped me as well. And also, I think there was a few moments where in the negotiation even up to, like, a few days from close, there was, you know, because they're closing Dawn, so there's no coming back later if something goes wrong. So we're really, like, nailing down the numbers. And so some of the numbers that they'd given me before weren't quite accurate.
And I was like, well, that's your problem. And I'm like, totally fine walking away at that point, because the person that can walk away is usually the stronger one negotiation I was. I like, oh god, I hope I don't lose it over 50k or something. But I'm talking to a few friends, and they're like, you have all the leverage these people you're supposed to close tomorrow, and they're the ones that didn't have their numbers correct.
And so I think having a few people in my corner said that. I was like, oh, yeah, that makes sense, but I'm always too nice, so I probably would have given in, had I not had these people being like, no, like, you've been like, the same the whole time, and they've been the one messing like, not knowing their numbers correctly. So I'm like, okay, cool, cool, cool.
Yeah, you need those advisors who have your back and who can kind of be your wall when you're feeling yourself wobble a little bit. But I think it's an excellent point that you made. Everything in life really is opportunity cost, right? And time is money. So to your point, yeah, maybe they could have gotten a higher asking price if they went to market.
But like you said, all of the time and investment they. Had to pour into that to make that realistic is probably it just wouldn't have been worth it, probably to the people who you know, like you said, they were hired to run this thing, and now they want to move on to their next venture. So I think that's an excellent reminder for all of us when we're thinking about negotiations. Is, you know, who is the person that can walk away? And also, what can you do to make a deal more attractive to someone through opportunity costs, not always just through lowering or increasing the price.
To wrap up today's case study, then, as you're looking towards the future, what is the number one thing you are doing differently this time in rebuilding best self that you didn't do the first time? And then also, would you ever consider selling it again is, are you building it to sell again at a future point? Or have you kind of decided this is going to be a business that kind of stays with you until you're ready to just have its completion?
Yeah, I think whenever I first thought about buying it back, I was like, I could just sell it again. And that was kind of always the not always that was like, if I decide I don't like to do it, I can just sell it again. How I'm doing it differently is I'm building in a way where I'm not building myself into a prison, which is how I kind of felt before, of like, you get to a point where you have people on payroll, you're responsible for people's livelihoods, and it's very difficult to like, move and pivot and change things when people are dependent on you.
And so I think I felt constricted with what I could do. I also could see the writing on the wall as far as like margins and what people were willing to spend on and it was just getting a little more risky, because I wasn't sure. I knew I was going to have to make hard decisions. I knew I had this baby, and I didn't know that I had the energy to do it again. And so when I'm rebuilding an eye, I'm building a way, like, how do I run super lean so I can pivot and move if I want, and I'm not again, building a team where I'm like, oh god, I can't make any mistakes, or people's lives are on the line.
And then when I sold, Chat GPT hadn't come away, and now I'm back. I use it constantly for like, different and I actually, I spent the 14 months where I did hive off, like exploring it and like learning how to code and program and write great prompts and things like that that I've been using, and also showing my team how to leverage it so it's like, you're not starting from zero. You can get something like 70% done, yeah, and then you're starting with something you're editing and tweaking, rather than, like, starting with a blank pH and so that helps me a lot.
Also, I have ADHD, so a lot of things that I otherwise would have either ignored and pay tax on later, literal or figuratively, I cannot just have feels like a $20 a month intern that's on 24/7 that helps me, just like, figure things out, and I get a lot more done with less people and less energy. And, yeah, it's great. So AI leaner team and then building in a way where I could sell it because it's profitable and it's systemized, but because I'm actually having fun doing it, I don't need to sell it either. Yeah, that makes sense.
So basically, businesses that people want to buy, you build in that way, and then if the right partner came along where it was like, Okay, this made sense, I would also be interested in potential like partnering with someone who wanted to buy part of it, or something like that. So I'm not sure how I'm gonna do in the future, but I'm just gonna build it in a way where I could sell it tomorrow, because someone's looking at it like, Okay, this is a great asset.
That's so smart too, because again, you're just putting yourself in that position again, of being able to be the one in the negotiation to walk away if you needed to, because they want it, and you could sell it, but you also don't have to. So that's brilliant.
Where can our listeners continue to connect with you, Cathryn, and also, of course, with Best Self.
So you can find me at bestself.co all the products that I mentioned, the real versions, are on bestself.co and I'll set up a code called cubicleceo, and then you'll get a discount if you buy anything. And then anything I talk about business wise, I share on littlemight.com which is just a blog that I've had for like, 10 years. And I just share, like, what's working, what's not working, why I bought it back, and then random experiments I'm doing.
I love that. Well, we'll include all of those links below, and just to make things easier on your end and for our listeners too, Cathryn, if you don't mind, the discount code, if you just make it ceo, it's probably easiest for everyone to remember.
So yeah, definitely if you're listening or watching on YouTube, make sure you go check out bestself.co and use that code to shop. I'm a huge pen and paper gal. I also love card games and anything that initiates great conversation, so I'm super excited to check out the products as well, and just thank you so much for coming on here and being really honest about your story, because it's really interesting, and I think a lot of people can relate to different elements of what you've gone through over the last two years.
Awesome. Thanks so much for having me.
Thank you.
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