Boring B2B Beats a Sexy Consumer Brand — Transcript

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1. 0:00Hey, Alex.
2. 0:01>> Hello.
3. 0:02>> My name is Maddox.
4. 0:03Uh I sell optical frames to independent
5. 0:06opticians and a couple big box stores.
6. 0:09>> Cool. [snorts]
7. 0:10>> Um last year we did just over 4 and 1/2
8. 0:14and the problem that I'm facing is a
9. 0:17growing market but a shrinking channel.
10. 0:19>> Okay.
11. 0:20>> Uh so
12. 0:21>> it's consolidating?
13. 0:22>> Yeah, private equity has been rolling up
14. 0:24for the last couple years. We've gone
15. 0:26from
16. 0:2713,000 independent opticians to 12 in
17. 0:30like 24 months.
18. 0:33And also competitors have their own
19. 0:36branches that are doing this in-house.
20. 0:39Um
21. 0:40So, you know, we're selling a commodity
22. 0:41product. Margins aren't great. Kind of
23. 0:44been built on relationships and road
24. 0:45warriors and I'm trying to figure out if
25. 0:49I continue to ignore the end customer or
26. 0:51if I
27. 0:53look at, you know, building a
28. 0:54consumer-facing brand that has a little
29. 0:56bit more leverage, has some inbound
30. 0:57demand.
31. 0:59That's the
32. 1:02kind of crossroads.
33. 1:02>> Did your revenue go down?
34. 1:04>> It's been flatlined for a couple years.
35. 1:07A few years.
36. 1:08>> Okay.
37. 1:09Has it been flatlined because
38. 1:12people are not reordering?
39. 1:14>> No, we have
40. 1:15pretty good um
41. 1:17retention.
42. 1:18And it's built on, you know, personal
43. 1:20relationships with the reps.
44. 1:22>> issue?
45. 1:23>> No, it's not that it's an acquisition
46. 1:25issue.
47. 1:25>> But you can handle more customers,
48. 1:26correct?
49. 1:27>> Yes.
50. 1:27>> Okay.
51. 1:28>> So, then
52. 1:29this would be a demand problem.
53. 1:33>> Our reps need to service local accounts,
54. 1:36so they go and, you know,
55. 1:38it's not a one-time sale. They need to
56. 1:40be ongoing service. They they want to
57. 1:42see them every month or so.
58. 1:43>> Okay.
59. 1:44>> Um so, we want to make sure that we're
60. 1:46able to
61. 1:47expand geographically
62. 1:50but it's also low ticket and long cycle.
63. 1:52>> Mhm.
64. 1:53>> Um
65. 1:54So,
66. 1:55>> but like they're buying many frames at a
67. 1:56time, correct? So I mean it's just B2B,
68. 1:58it's wholesaling, right?
69. 2:00Um
70. 2:01So
71. 2:02I want to make sure
72. 2:04that you don't kill a good thing because
73. 2:07of something that hasn't happened yet.
74. 2:09Because starting the direct-to-consumer
75. 2:11business is an entirely different
76. 2:12monster. It's a new brand, there's
77. 2:14there's a bunch of stuff there, right?
78. 2:17Um
79. 2:18Cuz if you were to think of all the
80. 2:19e-commerce brands that I would start
81. 2:20would be would frames be the first one
82. 2:21you'd start?
83. 2:23>> So frames is kind of limited by the
84. 2:25prescription complexity. Um this would
85. 2:27be just establishing consumer awareness
86. 2:29around a brand, but you could sell
87. 2:31peripheral products on glasses, that
88. 2:32kind of thing, right?
89. 2:33>> Yeah.
90. 2:33>> Uh and then
91. 2:34>> company that you would start fresh?
92. 2:36>> Yeah.
93. 2:36>> If you were to
94. 2:37like start any company?
95. 2:39>> Probably because the sales velocity is a
96. 2:40lot faster. You don't have to build
97. 2:42relationships and you know, um
98. 2:45take years to open an account that does
99. 2:46maybe
100. 2:47$1,000 a year.
101. 2:49>> Do you want my blessing to do that?
102. 2:53Or [snorts]
103. 2:55>> Uh yeah, that's honestly kind of the the
104. 2:57inflection point is like [laughter] do I
105. 2:59do I invest in in in more reps or do I
106. 3:02kind of pursue this this other channel?
107. 3:04>> Well, I think that what I'm trying to
108. 3:06get to is like
109. 3:07is the consolidation of the industry
110. 3:09actually something that is limiting your
111. 3:10business? That is what I'm trying to get
112. 3:12to. I mean I think it's obviously a big
113. 3:13boogeyman, but like
114. 3:15is it actually changing like are they
115. 3:18now cutting you out and finding somebody
116. 3:19else? Okay, [snorts] this is why I
117. 3:20asked. Um okay, cuz you said retention's
118. 3:23really good. So if they're cutting you
119. 3:24out and retention wouldn't be as good.
120. 3:26>> For for non-acquired accounts, yeah,
121. 3:28retention is good. If an account gets
122. 3:30acquired, they usually go to a a larger
123. 3:32supplier or the supplier themselves is
124. 3:34the one that acquires the the practice.
125. 3:36>> Got it. So I would say I I would
126. 3:39probably run down one door really hard.
127. 3:42Um which is I would approach the private
128. 3:44equity groups and say, "Let me do your
129. 3:48whole portfolio and you get a super for
130. 3:50deal." cuz that's all they're doing,
131. 3:52right? They're just one level up the
132. 3:53food chain from you, but they still need
133. 3:54frames.
134. 3:55And so, that would be my like cuz that's
135. 3:57the that's the smallest change to your
136. 3:59existing business, and I'd rather go
137. 4:01attack that. Now, if for whatever reason
138. 4:03you're like, I really don't want to do
139. 4:04that, then
140. 4:08you can jump from this boat to the next
141. 4:10boat. I I hate to kill businesses when
142. 4:13like they're not actually dead, you're
143. 4:15just flat.
144. 4:16Um
145. 4:17and so, it's just it's a totally
146. 4:19different game. Again, there's nothing
147. 4:20wrong. There's people here who are doing
148. 4:21direct to consumer. Like it's a just a
149. 4:23different different game and and from
150. 4:25how many how you're how many years
151. 4:26you've been doing this?
152. 4:27>> This has been around for 7 years.
153. 4:29>> Okay. So, this is what you've been doing
154. 4:30for a while and you've never really sold
155. 4:32direct to consumer.
156. 4:34>> Right.
157. 4:35>> So, that is why like there's a smaller
158. 4:37skill gap for you to learn how to sell
159. 4:39to private equity, and those are bigger
160. 4:40bigger tickets, and still keeps the
161. 4:42existing company you have more and more
162. 4:44valuable cuz you close a handful of
163. 4:45those deals, and your business goes from
164. 4:474 million to 20 million. And then, if
165. 4:49you want Do you want to sell the
166. 4:50business someday or not?
167. 4:51>> Yeah.
168. 4:51>> Yeah, and like
169. 4:53guess who would love to also buy it? The
170. 4:55customers.
171. 4:56And so, you kind of get a two birds one
172. 4:57stone effect there where you're going to
173. 4:59your potential acquirers and just
174. 5:00saying, "Hey, let's work out a deal."
175. 5:01They might also just say like, "We'll do
176. 5:03this thing if we can get an option in
177. 5:05the business to buy it later." Great,
178. 5:06then at least you have an elegant exit
179. 5:07that you can work out there
180. 5:09because they're going to want to
181. 5:09vertically integrate and that's their
182. 5:10whole story. So, I would rather like
183. 5:13maybe do that, and then you get a nice
184. 5:15little payday,
185. 5:16worst case scenario, and then you'll
186. 5:18have cash and you can do the next thing.
187. 5:19I just I'm very hesitant to kill
188. 5:21something that you spent 7 years
189. 5:22building when you can take the same
190. 5:24skill set, level up a level, potentially
191. 5:26also get an acquirer, and worst case
192. 5:29just keep making more money.
193. 5:31>> I would say this is less killing
194. 5:32something. This is and I understand
195. 5:34that's a completely different animal. Um
196. 5:36I would say that the the goal would be
197. 5:38to generate inbound in a way that we're
198. 5:40not currently doing because the reps are
199. 5:43serving local accounts.
200. 5:44>> from optometrists?
201. 5:45>> Mhm.
202. 5:45>> [clears throat]
203. 5:46>> Oh, I think that's going to be
204. 5:48not the most likely. I think you'll just
205. 5:50sell people sunglasses.
206. 5:51>> Yeah.
207. 5:52>> I don't think you're just going to all
208. 5:53of a sudden get optometrists inbound.
209. 5:55>> If the unit economics work a lot better
210. 5:58for that than they would for selling to
211. 6:00private equity, you know, it'd be more
212. 6:02I'd rather you just run ads to
213. 6:04optometrists and say want to get better
214. 6:05prices on frames.
215. 6:08If you want to get inbound from
216. 6:09optometrists, let's just go get inbound
217. 6:10from optometrists.
218. 6:12But if that's the case, then the private
219. 6:13equity boogeyman is not actually an
220. 6:14issue.
221. 6:19>> Uh
222. 6:19Yeah.
223. 6:20>> Right?
224. 6:20>> Yeah.
225. 6:21>> So this is why is this a demand problem?
226. 6:23Right? So if it's just a demand problem
227. 6:25and your existing channel doesn't work,
228. 6:26but you think you can just go sell ads
229. 6:28direct to get optometrists to come buy
230. 6:31stuff from you,
231. 6:32then we can do that. You can go to
232. 6:33private equity. Like either of these are
233. 6:35expanding your existing business, which
234. 6:36I much prefer to starting a
235. 6:38direct-to-consumer line.
236. 6:39So if you think that sounds better to
237. 6:41you, it's just like cool, let's just run
238. 6:42ads to optometrists and have them fill
239. 6:43out forms and then then we can sell them
240. 6:45frames. Hunky-dory.
241. 6:48>> We would be supply constrained in that
242. 6:49case and that we wouldn't have a a
243. 6:51physical rep in that area to service
244. 6:53that account on an ongoing basis.
245. 6:55>> Well, when you think that people are
246. 6:56going to be reaching out inbound, how do
247. 6:57you think you're going to sell them?
248. 6:59>> Yeah, that's true.
249. 7:00>> All right.
250. 7:01>> Yeah.
251. 7:01>> [laughter]
252. 7:02>> All right, I think you can just do a
253. 7:03phone sale.
254. 7:03>> Yeah.
255. 7:04Okay.
256. 7:05>> And show them the frames and it's like,
257. 7:06oh yeah, they're like, oh, can you have
258. 7:07somebody in person? It's like honestly,
259. 7:08that's actually not how most people do
260. 7:09it.
261. 7:10Um
262. 7:12So, you want to buy them?
263. 7:13>> [laughter]
264. 7:14>> So on the more better new, you would
265. 7:16just say better.
266. 7:17>> Yeah, I would rather you you have two
267. 7:19things that we went over that you could
268. 7:21do alternative to killing the business
269. 7:22in cuz
270. 7:23all of the objections you had on this
271. 7:25side will still be present in the
272. 7:26alternative scenario with more risk
273. 7:29and more distraction. So if you want to
274. 7:31have an inbound channel, which means we
275. 7:32just need to increase demand, we either
276. 7:34go to the top of the food chain, have
277. 7:36them sell super wholesale, and then also
278. 7:38potentially have an acquirer who knows
279. 7:39who you are who definitely will want to
280. 7:40vertically integrate. Or alternatively,
281. 7:42and you're also at the size that they
282. 7:43would love to buy you.
283. 7:44Um Um or alternatively, you run ads to
284. 7:46optometrist and all you have to do is
285. 7:48learn a remote sales motion.
286. 7:50Learn the PE sales motion, learn the
287. 7:52inbound sales motion remotely. Which one
288. 7:53would you rather do? That's probably the
289. 7:55much lower risk next step to I'm going
290. 7:58to start a consumer brand and then hope
291. 7:59optometrists uh respond to it.
292. 8:03>> Does the sales velocity in a consumer
293. 8:04brand versus
294. 8:06a
295. 8:07you know, ongoing contractual thing with
296. 8:09an account make that any more
297. 8:11attractive, you know?
298. 8:12>> No, not at all.
299. 8:13>> Okay.
300. 8:13>> It's the opposite.
301. 8:14>> Yeah.
302. 8:15>> A B2B business that has super high
303. 8:17revenue retention is significantly more
304. 8:18valuable than a one-time transactional
305. 8:20consumer brand.
306. 8:21Unless you have a monster brand, in
307. 8:23which case then they basically see the
308. 8:24brand as a distribution base they can
309. 8:25create new products and sell through it.
310. 8:27>> Okay. Awesome. Thank you. I appreciate
311. 8:29it.
312. 8:29>> Yep.
313. 8:30>> [applause]
314. 8:34>> That was actually a really fun one.
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