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Chat Ep 7_Full | Otter.ai

Chat Ep 7_Full

Accountfully29min

Brad Ebenhoeh

00:08

All right, welcome to the Accountfully Chat. Today we have Max Berry from Allegiance Flag Supply. How you doing today? Max

Max Berry

00:15

Doing great. Brad, thanks for having me.

Brad Ebenhoeh

00:17

Yeah. I'm looking forward to chatting about this cool business that's headquartered here in Charleston, South Carolina. So there's not a ton of businesses here. I guess there's a lot of small businesses, but successful small businesses is always cool to connect so excited to learn more. Um, so maybe, why don't you kind of tell us a little about Allegiance and how long you guys have been in business and the journey since, since 2018 to today.

Max Berry

00:44

Yeah. So we started Allegiance. I started it with two partners, Wes and Katie Lyon, who are a married couple. We started it in 2018 it was a side business. We started in Wes and Katie's garage in West Ashley and Avondale. We all had other jobs at the time, and we just kind of cranked away at it for really, the first couple of years. It was very quiet, a lot of crickets, not a lot of sales. And then around 2020 it really started to take off. We were able to all three go full time on Allegiance, and it's just kind of been growing like rapid fire ever since. And we've been lucky enough to continue to scale every year now we've got about 60, a little over 60 employees. We do all of our own manufacturing in house. Obviously, we sell American flags as the main kind of core part of the business, and we've got a marketing team, and we've got an accounting team and a product dev team and a lot of manufacturing and HR as well. And yeah, it's we're six years in. We just turned six years old the other day, which is wild to think about, and it's been a wild ride. One thing that I think might be relevant to this conversation is we're really proud to be a bootstrapped business, and we started the business with, really a little less than $5,000 of our own money, and we've, we've scaled it, you know, obviously way past that, but it's been really an exciting ride, and it's, it's almost hard to believe sometimes.

Brad Ebenhoeh

02:29

Yeah, well, first off, Happy belated birthday to the business. And yeah, I definitely want to touch base on that aspect. So number one, just that kind of that that minimal, or that low dollar amount of funding that helped you start the business, propel the business, and then I think having, you know, three business partners that were probably all brought into what's going on and doing everything. So how did you guys go from starting with minimal money to kind of just moving forward selling just kind of go through the first couple years of that business and what it was like,

Max Berry

03:03

Yeah, kind of like I said before it was so quiet, Brad, we're not one of those businesses that you hear a lot about. I feel like that's, oh, yeah, we built the business, and it was just we were sold out immediately and we couldn't keep in stock. That was our story later on. But it took years to get to that point when we started in 2018 we had no idea what we were doing. You know, we had the idea about flags, and there was just so much. It was almost like the first two years for us were R&D, in a way, even though we were technically launched and we had products and we had a website, we we had a lot of pivots to make in order to reach a point where we could scale the business. So from 2018 to 2020 it was, it was just, you know, a sporadic sale here or there. And then, really, what allowed us to scale in 2020 was a we figured out the digital marketing aspect of the business, and we're really able to scale Facebook and Facebook ads. But the real reason was we got we figured out the product. When we first started, we were selling an American flag for $225 so I would call that. It's like the Rolls Royce of flags, and it was just it was too much. The process, the way that we made the flag, it was too labor intensive. It would take like, eight hours to make each flag, and we figured out a way to cut it down and still make what we consider the best made flag in the world, but at a just a much more efficiently way, much more efficient way to make it so we were able to lower the price, I think, at the time, we were selling it for like $75 and I think that really allowed us, with the product, to be at a price point that allowed us to scale the business as well.

Brad Ebenhoeh

04:58

So then. And that's a great point, but then how? I guess, before we step back, like selling American flags, sounds pretty basic, but where did that idea come from?

Max Berry

05:15

Really, all three of us kind of bought houses at the same time, and we all purchased American flags for our front porches, and it was just kind of one of those things. It was like a weird personal experience, like I bought mine on Amazon. I didn't know what to buy, what size to buy. Ended up getting the flag from Amazon and said, like, made in China on it. Wes, and Katie had a very similar experience where, I think they were, like gifted a flag when they bought their house, and it was like a flag made in China. And like our thing was, if anything deserves to be made in America, it should start with the American flag. And there were other brands or companies making American flags in America, and there are, but the way that they kind of their, their distribution channels are really through big box stores or other flag retailers. There was no really direct to consumer e commerce, Digitally Native American flag brand and company. So we were, you know, just ignorance is bliss sometimes. And we figured, why not do that? Why not try that and give it a shot? And that's kind of where the idea started from. And how, how we really started in 2018

Brad Ebenhoeh

06:35

Gotcha. I love it. Yeah. And back to, like, 2020, 2021, timeframe. I actually saw you guys pop up on one of the social media channels, and I bought one, and I bought a flag from my brother and my neighbor, and they love it. High quality product. Highly recommend. It's great. So then going back to what you're saying about reducing your process, or the time spent of creating a high quality flag, was that new machinery, like, how did you make that happen? In that realm,

Max Berry

07:07

it was a lot of cold calling to suppliers, because at the time, we weren't manufacturing in house. So we were so small that it was hard to get some of the bigger suppliers to take us seriously, and we didn't have the money again being bootstrapped to be able to commit huge POs, we just didn't. We didn't have the money to risk. We just didn't have it. So it was just kind of figuring out if we could be squeezed into some production runs and and figure out more efficient ways to be able to make the flag, to really reach what I would say is product market fit and $225 we couldn't get product market fit for our flag. $75 it's still by far the most expensive flag in the market, but it did allow us to reach that product market fit, which, at the same time was when COVID was going on, and you had, if you remember, like, a lot of the retail stores closing down. E-commerce in general, was kind of skyrocketing during that time. And then we really were able to figure out Facebook ads, which really propelled the company and in 2020 and that's when we were able to kind of quit our jobs, go all in. We got this little 400 square foot tornado shelter that we rented from Smithy Ironwear, who was on the Navy base, and they were nice enough to rent it to us. And it was just a small little concrete 400 square foot room. And it was like me, Wes, Katie. Our first employee was actually my, my little cousin, and we just cranked away packaging flags for all day, every day in all of 2020, so it was, it was kind of a crazy time.

Brad Ebenhoeh

08:56

Yeah, crazy time in general, then specific to your business. But, I mean, I, you know, my take on business is, you know, they're a lot of successful businesses, maybe at the wrong time, the wrong place, but it sounds like you guys are at the perfect time and place where everything kind of, you know, converge to, you know, moving to the next level. And that sounds like when you guys were in 2020, like, what was that one decision, or that one thing that you guys all saw to say, All right, let's all jump in. Because, like, going from part time and having a stable income and doing different things to like, alright, we're all in now. Was there a specific, you know, you saw your Ecomm sales, you know, skyrocket one day, or kind of, what was it that that helped, helped lead to that actual decision to jump in full, you know, with both both feet. I

Max Berry

09:47

think it was just the volume of sales we were getting. And I think you're right. It's all about timing, right? It's like relationships are about timing. Like how I met my wife was all about timing, the business. Yes, it was a little the business is different, I think a little bit because we had worked for two years to get to that point. And it's not like we were really doing much in sales, but because we're bootstrapped, and because we had been profitable since day one, we were first order profitable forever. We've never, not like made money on it, on a transaction, so we could afford to stay in business for two years without quitting our jobs, because there's no reason not to. We were enjoying it, and although we weren't crushing it for those first two years, we weren't losing any money. So when the time finally came where we could achieve product market fit, it was kind of an easy decision. Where we weren't. We didn't have any kids at the time either. So it wasn't like we were risking our kids futures by any means, like, let's try this. Let's jump in and let's do it. And we grew. I think it was like 4, 500% in 2020 so it was just like, if we didn't go all in the business wasn't going to work, because we were the ones doing all the work. We were doing, all the fulfillment, all the ordering, all the customer service, all the marketing, all the product development, everything was being done by us. And like that was our moment. That's what we had kind of spent the last two years on. So it just seemed like an easy transition for us at the time, even though it was scary still, because we all had real jobs and, like insurance and stuff like that that we had to walk away from.

Brad Ebenhoeh

11:35

So first order, profitability. So great term. Clearly, it's, it's what everybody wants as an ecom business or as an inventory based company, right, like but number one, I guess my question to you is, clearly, you're factoring in everything and into that, your cost of your product, your labor, your marketing, the whole aspect you're talking about when you started at that small at the small phase, I'm assuming you may not have had a ton of inventory built up. Or how did you manage inventory when it was slower, and then as you started growing, I'm assuming it started to stockpile more and more inventory, more and more finished flags. But how did that all work?

Max Berry

12:23

Yeah, I think the thing that's different about us from a lot of E comm brands, is like, we don't have some like, contact in China that we can call up and say, Hey, we need 10,000 more, or now we need 100,000 more, or a million more. Like, we can't get containers in the ocean, and that's just goes against all of our core values, like we're 100% Made in America, sourced in America all the way. So we've had a unique issue where we've consistently been out of inventory for years. We finally got a handle on it. Hits the 60 employees that we have this year where we didn't run I think this was like the first year we didn't run out of inventory, at least for our main core product, the three by five American flag. So that was it's a blessing and a curse. It's a blessing from a cash flow standpoint, because always being out of inventory is great for your cash flow, but it's bad for your ability to continue to grow. Luckily, we've managed to grow considerably every single year that we've been in business since 2020, 2018, 2019, not so much so we've we've had to make our own inventory. We we since, I think, in 2021 is the year that we started to bring manufacturing in house. And until that point, we also work with Co-manufacturers, because we couldn't do everything ourselves. And this is the first year we've actually been able to to make all of our inventory by ourselves, and how So does that answer the question?

Brad Ebenhoeh

14:03

It sure does. And then I guess, while we're talking about that, how do you, you know, maintain quality control your products. How do you, you know, hire good people to do, do the work. Like, um, you know, like, it's funny, you go from 2018, to to, you know, small business, shooting everything to this business. There's always issues and risk and pain points as a business owner, but you know, just from a quality control of your product and and making sure that you guys have your supply chain internally, like, in house, up to par. How, like, how is that went? What challenges went along the way of that?

Max Berry

14:40

Yeah. I mean, honestly, we just had to figure it out. There's no easy answer for it, because when we decided in 2021 we have to make our flags in house, it wasn't really what we wanted to do. We had to do it because nobody else could give us enough inventory, and they weren't able to make it the American flag, and like the way that we wanted to make it. So even to go back on your previous question, in 2020 there was a lot of sleepless nights from us, because we had 1000s of orders in Shopify that were unfulfilled, and we had suppliers that literally wouldn't call me back. It's like, when are we going to get the flags that these people have already bought? Because we were exploding at the time, and it was really, really stressful, and what we had to do, like, was to just send it on us email to all of our customers that have bought, like, hey, and this was, like, right in the middle of COVID, I don't know when we're going to be able to get you the flag, but I promise you, we are either going to get you a flag or we are going to refund your money. And the amazing thing was, like, 99% of the customers were like, Fine, you know, I don't care. It's not like, it's medicine or food or something. Like, get me the flag when you get me the flag in. And we did deliver on all those, but it was really stressful, and I'm glad not to have to, like, live in that moment anymore. But yeah, in terms of, like, figuring we just had to figure it out there. We didn't know how to make flags in 2021 we were still buying them. Like, we didn't know the sewing process and the cutting process and the quality control, but what we have done is figure it out, and we've become experts in the field, and I don't know that there's really another way to do it other than just figure it out, and that's kind of the whole that's kind of been the theme of our business since day one. Just figure it out, because we don't know. We didn't know e-comm. We didn't know marketing, finance. I knew a little bit about, but I didn't know like accrual accounting and how to to model some of these things and quality control, like we figured all this stuff out on our own.

Brad Ebenhoeh

16:55

Love it. One of Accountfully's core values is solution or solutions oriented. So it's very similar to that. You just gotta figure it out and find a solution for the for the pain point that you're having. So three business partners, you all started, you're doing everything now. You're 60 people, you know, blowing up. Like, how have you all divided and conquered different functions and departments of the company, as well as, How do y'all keep focused, just as business partners, and making sure going from here to here, that you're also moving forward in the direction, and you know, in terms of where you guys want to take this, yeah,

Max Berry

17:34

Luckily, like, Wes Katie and I have a very, just a unique, great relationship. I mean, they're married, so that already brings in a unique kind of factor to it, and they do a great job of kind of keeping work life and home life separate, I think, for their own sanity. But all three of us have really different strengths, which is really nice Wes is great at ops, great at product Dev, really. He comes from a sales background. He's a relationships guy. I am definitely more of like the introverted numbers guy. And then Katie is very much like the brand tone. How do we look? How do we feel? So each of us could not do what each other person could. And I think we all really respect each other's like what we each bring to the table, and we just get along really, really well. And I think I know that we're very lucky to have that, because I've heard horror stories of, you know, other people that don't like agree and always kind of go into bat with each other, and that's just never really been our relationship or the case. So I really am thankful for them and how we've been able to kind of grow it all together at the same speed, in the same direction. Yeah,

Brad Ebenhoeh

18:59

no, it's, it's definitely, you know, I guess I don't know if rare is the issue. Maybe, you know, Yeah, you won the lottery of business partners. You know, it's just, I think, from the experience of at accountably, specifically with my wife and the company, but also seeing a bunch of other small business over time. It's, you know, making sure you have sufficient alignment of where you're at today and where you want to go. I think that's a big part of it. And as complexities and dynamics arise with business partners, specifically around families or different situations that happen to pop up a lot of times, it kind of gets in in front of the business, which is a lot of times, very fair situations. But, you know, happy that it's all worked out for you all and, and that's super cool. So from just a day to day basis, you're an analytical brain. We're talking about accounting, finance, you know, inventory, kind of, what are some of your kind of reports or KPIs that you look out, kind of look at throughout the week, or, you know, on a daily basis. It's just to make sure everything's kind of moving forward in the direction you want.

Max Berry

20:03

Yeah, we've got an incredibly well built out model that is day to day with it's probably got 50 different KPIs in it, and that rolls up to weekly, and that rolls up to monthly, and that rolls up to annually. So we've got our eyes on everything that happens in the business with this model. And really what we're looking at from a marketing standpoint is, you know, obviously top line revenue, but then what are we spending on marketing, and what is our contribution margin, and what is our customer acquisition costs, and our in our M er, and then ultimately, what is our net profit? And we were able to track profit every single day, which is really nice, and we built OPEX in there as well. So, you know, we're looking at everything, but really, what, what I care about is, is what's on the bottom line. You know, I the top line growth is fine, but, and we have that, but it's pointless if it's not growing on the bottom line and as a bootstrap business. And, you know, that's, that's all we really care about is how, you know, how are we going to fund the growth of the business? It has to be from our own selves and and if you don't have that bottom life, bottom line growth, and then you're not going to be able to do that. So it's, it's always been the most important thing for us.

Brad Ebenhoeh

21:33

Yeah, I definitely feel like that was not the norm, um, for the last kind of decade of especially kind of inventory based companies, and even tech, you know, companies, especially in the world of Shark Tank and different things that have come up, you know, to fruition the last kind of 15 to 20 years, where everybody thinks top line, top line, top line, more money. Top line, more money. Top line. It's like, yeah, you can grow up to a 30 minute company. But if, literally, every dollar you're making you're losing money because you're spending x number dollars on marketing, and it doesn't matter. So, yeah, the bottom line is super clearly, now what though I would have my purview the last couple of years with the economy and interest rates and kind of the capital markets, kind of pausing a little bit, you know, to help small businesses, it's refocus people to cash flow, profits, just the basic fundamentals of business, which we're talking about here. So it's kind of, it's a shift, but it's kind of nice of like, Alright, let's get back to just making money and funding your business with the the profits and the earnings of your company.

Max Berry

22:39

Brad, I cringe, man, I cringe when I hear this stuff. Like, yeah, I watch Shark Tank and I see some of those founders talk about, like, Oh, we're not profitable, but, and here's why, and I those are, like, things that make me cringe when people talk about raising money and like, bragging about how much money they raised. I don't get it like, Look at, look at the D to C darlings that are public companies now, like all birds, all birds is down 99% from when they IPO. Look at all of like, look at pretty much all of them, Casper, Warby, Parker, figs, even figs who had, like, a pretty good business, like, they're they're not profitable, they're losing money. What's, what is the point of the business? You know, like, if you're not making money, then why do you exist? And and for these consumer brands to think that they're Tech brands, because it is different for a tech brand, a SaaS company that can scale, you can't do that in inventory based businesses. You always need to buy more inventory and like, that's the major difference. Not to mention that, like, the assumption that your customer acquisition cost is going to get lower as you continue to scale. That doesn't make any sense, either. So when I see other brands that are maybe a little smaller or even bigger, talking about they're not profitable and they need to raise money, especially as like a finance guy, that kind of stuff really just makes me cringe, because I know 99% of the time what the future holds for business like that. Yep,

Brad Ebenhoeh

24:26

100% are you guys, and what is your your sales channel mix like, how much percent is e com?

Max Berry

24:33

We're about 98% e com, so we're very much direct to consumer.

Brad Ebenhoeh

24:40

Yeah, I feel like, you know, I've seen a lot of companies that are spread across 10 different sales platforms or channels, and it's like, you know, is it going to be wide or deep? It's like, until you figure out, I think, one or two, and you really have the numbers and understand the metrics and the KPIs, it's really hard to go too wide. Unless you have unlimited cash, which is kind of clearly the you guys focusing on e com and really honing that in, it has helped you, helped you kind of be, stay profitable, be profitable from the start, um, from an aspect of just the business, what else do you have? Any other kind of things moving forward, new products, new everything going for, uh, moving forward.

Max Berry

25:21

Yeah, we actually just launched a really cool, patriotic kind of leather works line. It's got a there's a wallet, there's a key ring, and it basically takes the material that otherwise would have been discarded from our flags and incorporates them into 100% American source, American made leather. So we're really excited about that. And just continuing to obviously, flags is our number one kind of core product, but echoing the patriotic theme, and, you know, displaying patriotism and other things other than flags is something that we're going to continue to explore here in the future.

Brad Ebenhoeh

26:03

Also me, I was just thinking of kind of seasonality as clearly econ business heading to as we head into the holiday season here. But also for you guys, I'm assuming you still have some kind of bump ups with Memorial Day and late or and July 4 of the different things. So it's not just like a ke for aspect. Is that true?

Max Berry

26:21

Yeah, we're kind of the opposite, I think, of most e com brands. Or you'll see most e com brands probably do 50% or more of their revenue in Q4 uh, we're the complete opposite. We're like you said. You hit it dead on. It's Memorial Day. All the way up through July 4 is our biggest peak. We do get a peak in Q4 but not like the traditional e com brand would where, like, that's their bread and butter for gifting season.

Brad Ebenhoeh

26:50

Yep, yeah. Well, good. Well, Max, this was awesome interview. As we kind of head out here, we typically have kind of a couple just questions that we answer or that we ask our guests. So the first question is, just, what is one small business owner do?

Max Berry

27:08

What Wait?

Brad Ebenhoeh

27:11

What is one small business owner to do? A fellow founder? What is one do and one don't?

Max Berry

27:18

Okay, so a do for me is know your numbers, know your unit economics, know what you can sell something for and what will like, what will be left over after you account for the COGS, any of your overhead, the marketing, all of that. Know your numbers, because you're not going to be profitable by guessing, or, you know, hoping so. That's, that's my absolute do for someone that's in the consumer space.

Brad Ebenhoeh

27:50

What about a Don't?

Max Berry

27:54

Don't be okay not being profitable in the consumer space. Do not be okay with that. Because there is, there is a very unlikely avenue of you continuing to scale and then making up that profitability. Somehow.

Brad Ebenhoeh

28:09

I love it. I knew those, those questions or those answers were coming. So alright, as we wrap up our episode here, where can people find you and where can they buy your products?

Max Berry

28:23

They can buy our products at showallegiance com. That's our website. You can find me on LinkedIn. I think it's Max Barry seven. And yeah, I'm around, and I'm also here, like, if, if anyone sees this, and if I can help you in any way, if you're starting out of business, or you have a business, and I can help answer a question or two, always happy to help, because I've had a lot of help from others that have helped me along the way.

Brad Ebenhoeh

28:52

Love it. Love it. Well, Max congrats on you and your business partners. Growth of Allegiance Flag Supply to date. I love, love just kind of successful, profitable businesses. And they're not always the sexiest or the most promoted out there in the world, as we kind of discuss, but kudos to you. And just keep up. Keep up the basics and the fundamentals, and we're here to support the business moving forward.

Max Berry

29:18

Thanks for having me, Brad. Appreciate it, for sure,

Brad Ebenhoeh

29:21

it was great. Take care. Max. Bye. You.

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