Apr 23, 2019
Can a plush slipper put you in a happier mood? Today’s guest and Shark Tank dealmaker have been banking on that since buying the existing Happy Feet business in 2002. He is with us today talking about the wild ride that his kiosk, retail, and e-commerce business has been on with a single brand that now has licensing agreements with the likes of Disney, Marvel, and the NFL.
Pat Yates is another serial entrepreneur and e-commerce success story. Pat has the broadest experience in physical product of almost anyone we’ve talked with here at Quiet Light. From his early start in a retail golf shop, to selling coffee out of a truck in a one-man distribution venture, on to kiosk retail with Happy Feet which now has a booming e-commerce presence, Pat has done it all. He walks us through the Shark Tank process, the deal he struck, the risks he took in his first licensing deal with a celebrity face, and how he managed the rapid growth and cash flow challenges his business faced.
Episode Highlights:
- When the website for Happy Feet went live and Pat’s vision to merge kiosk to e-commerce.
- The Snooki Story and how he took a chance on licensing for the first time when no one around him thought it was a good idea.
- His decision to apply to be on Shark Tank, the process he went through, and what his appearance did for the growth of his business.
- Rapid growth cash-flow challenges and how Pat overcame them.
- The importance of having good people around when growing.
- Ways to scale and grow creatively for success.
- Mistakes Pat made or was perceived as making in scaling the business.
- How kiosk business works and Pat’s thoughts on the current kiosk climate.
- Pat’s advice for those beginning as entrepreneurs and his key tips to being prepared to succeed.
Transcription
Mark: Joe, Pat Yates is somebody that has been a friend of Quiet Light Brokerage for a long time and might have one of the broadest experiences in the world of physical products of people that I know. He sold everything from licensing products on retail, a whole kiosk business, e-commerce, and he was also on Shark Tank and you finally had him on the podcast where he can talk about some of the experiences that he’s had and what it’s like to grow a business that’s as popular as Happy Feet.
Joe: Yeah I know. Over the last six or seven years I’ve probably talked to maybe a dozen people that have been on Shark Tank and Pat I think has had probably the most success. He got a deal with Robert. He talks about the process, the presentation, preparing for it, a little bit … he goes back into how he started in Happy Feet in malls, in kiosks; really his father bought the business and he tells some great stories about Jersey Shore and meeting Snooki and how he took a risk and did a licensing deal with her. And then really talks about the success after Shark Tank and how to manage cash flows. And then we dipped a little bit into the back side of it because I was at a Blue Ribbon Mastermind last summer and somebody that has e-commerce product talked to somebody that does retail up on stage and whether they should try mall kiosks and things of that nature. And because Pat has a great deal of experience there we talked about that a little bit at the end in terms of how to go from e-commerce to retail and whether he thought the kiosk business was a good option.
Mark: I know every time I walked through a mall … a few years ago when I was walking through a mall I’d always come across one of his kiosks and his giant stuffed slippers which is what Happy Feet is right?
Joe: Yeah.
Mark: They’re these ridiculously oversized slippers and they’re super fun and I know people bought them for Christmas presents and everything else. So I’ve always been fascinated with what he’s doing. I do have to ask you real quick just changing topics, do you have any idea what the movie quote was on today’s intro?
Joe: Not at all. No idea whatsoever so if anybody knows what it is rewind, listen to it again, put it down in the show notes, we’ll give you a shout out and a thanks in the next episode.
Mark: All right why don’t we get to Pat and listen to what he has to say about growing an e-commerce business and also the chaos side of things too.
Joe: Hey folks it’s Joe from Quiet Light Brokerage and today I’ve got a Shark Tank alumni and we’ve had some on the past before but this one actually got a deal and has a great deal of entrepreneurial experience; Pat Yates from Happy Feet. Pat welcome to the podcast.
Pat: I appreciate you having me on and I’m looking forward to it.
Joe: Good man, all right so we don’t do big introductions here. We want to hear a little bit of background on your story. Tell us about your entrepreneurial life, how you got started, and where you are today.
Pat: Well it’s kind of funny. I started my first business pretty much directly out of college. I was actually working for a gentleman in a … when I got to college I started working in a retail golf shop. It’s where I’ve worked in summers and they put me on as the manager in that location which sounded like a really important job at the time. When I got at a college I thought I was going to change the retail golf industry. But in an event when I was working there I had an opportunity through one of the customers I had to get involved in a business in Columbus, Ohio and I lived in Louisville, Kentucky at the time and he basically told me about it and I decided right on the spot to buy into this franchise deal that he had for a coffee company in Columbus. I went home and my wife of three or four months I told her we were moving to Columbus and she’d never been there. So it was kind of an interesting conversation. My first ever business was basically a one man, one truck. I would get up in the morning and I would sell coffee accounts to restaurants and offices and put in vending and just go out and hump it and it was me and that was it. I did everything.
Joe: Let me interrupt for just a sec for just a sec for those husbands out there that are newlyweds and still within that first year of that honeymoon, are you still married to the same woman and do you have children now? She actually wanted to go on it?
Pat: Amazingly it’d be 29 years this June and yeah [inaudible 00:04:57.3]. So yeah I was pretty lucky and she just had an interesting ride. You should have her on the podcast to talk about me. That would be probably better. But yeah we started … I started that business and 2 ½ years later I sold it back to the company that was a long … it was a long story about a father and son in federal court over their ownership and it was out in the press and we sold ours back. We had a contract. It was exciting. I moved out to Tennessee and started my own company. I basically have a 200 mile non-compete and I looked at the map 200 miles away and my mom lived in Nashville; I’ve lived in Nashville. We moved over there and started the same kind of company right after I sold it. So at that point, I started working a little bit also in the winner’s pawn specialty retail so I would use carts and kiosks for a couple of months and make extra income whilst I was building that company and that’s what led me to e-commerce which led me to Happy Feet. So the short synopsis is my father and his wife are trying to work and sell on kiosk too and they were trying to find products. So when they went to a trade show in Atlanta, the Atlanta Gift Mart one time and ran across a guy who had these slippers and he had a patent on them and designed them and he really wasn’t selling any so they agreed to buy a container of them. A small container of 4,000 units and put them in a mall here in Louisville. They sold out that season really quickly. It was a great beginning and then we went out and started sending … giving off 24 people to get kiosks across the country. And in 2002 I bought it out from my family and started going in a little different direction, a trajectory on retail that aren’t kiosks that turned out to be really big but then really catastrophic with relation to the growth pattern and then started to concentrate more on e-commerce. And that’s obviously led me to a Snooki deal which I’m sure you’re probably going to end up asking about which is the funny part of the conversation typically. And then it led me to Shark Tank and it has led us to every late night show, morning show, TV show you can imagine. So the press around the company was incredible and obviously, I’m still here doing it basically 20 years later.
Joe: That’s an incredible story. So if you’re focusing specifically on the e-commerce side of it when did you first open up the first web site for Happy Feet?
Pat: Well the first one was actually opened up by my dad when they had the business in 1988. They were … they started in doing very little stuff. I mean I’m talking like we packed two orders in the basement one day.
Joe: How much [crosstalk 00:07:08.6] 1998 is a lot of having, I think my first site was 50 bucks probably 1998.
Pat: I could guarantee that my dad would not have spent $50 on a website. So I don’t know how much he spent but it probably was somewhere south of $50. They really weren’t doing anything. I think when I bought the company they were doing $22,000 in web sales. They just … it hadn’t translated but what happened was I had a little different vision. And my vision was that if I can get it out to people in kiosks and grow that funnel sale it would get the brand recognized by people and then they would continue to buy it online. And since our business was seasonal, two months a year they were coming to me. Two months a year they were going to the kiosks. So if the kiosks can say osh kosh wherever or from like Milwaukee, Wisconsin closed down and someone went back to buy and they didn’t have them they see the name on the back of the slipper and all it did was that distribution funnel continued to grow. So my thing was to try to get it to a lot of places for me to market very quickly and try to build the e-com via that. And we went from 22,000 to about 100,000 to about 400 and we capped a million and now we’re well over three million and it just shows no signs of slowing down. It’s a fun product.
Joe: You know the way that you went about it is actually hard work and hustle. And that hard work and hustle got you in the right place at the right time which is not necessarily luck. It’s because of the hard work and hustle but being at that trade show in Georgia where your dad was and meeting these folks and taking the risk in buying that half container load so good for you. But then there’s a lot of work to do since then. And as we’ve talked and I’ve had a lot of people on the podcast and what I’ve experienced over the last seven years in the brokering side of it is that everybody has problems with cash flows. So I want to talk about that with you. I want to … first I want to hear the Snooki story and I want to hear a little bit of the Shark Tank experience but then I want to talk about how you’ve solved the problem of cash flow with a company that is growing so rapidly because everybody that’s in the first 12 to 36 months of a business that’s growing rapidly faces that challenge especially with the Amazon growth these days. But talk to us about the Snooki story did she just happened to have—
Pat: Well it’s kind of interesting. It’s actually my most fun story of all these and actually from many standpoints; number one from a standpoint of growth, second of all from a standpoint of trusting my judgment. I’ve had done many podcasts before and I’ve talked to a lot of people about the biggest thing with me is if I always trusted my judgment on what I first had an inclination on I typically had success. Now it’s not always that way. Not everybody gets it right the first time but the 80-20 every time I trusted myself it was good. Every time I didn’t trust myself it was the same 80-20 but the 80-20 was the other direction. Well, I’m sitting in my house one night and this is 2009 maybe. I’m guessing. I have to go back and look. But my son comes into my bedroom and I’ve said this many times so I’m sure people have heard it and he said dad your slippers are on Jersey Shore. Snooki is wearing your slippers on Jersey Shore. I said I only have two questions: who’s Snooki and what the hell is Jersey Shore? I really had no idea. I had no idea what it was. I’ve heard of the show but I didn’t pay any attention to it and this was the second season on Miami so [inaudible 00:10:13.8] rewind it and I look and she’s bent down cleaning something up with our pink slippers on. It turns out she was just a fan of the product. She bought them and took them down there and thought it’d be cool to wear in the house. So we get all these emails and orders immediately as soon as it starts hitting the air. And we sold out of those pink slippers in like three days. So at that point, I knew I had something. So I being a ford motion guy; that’s one of the words I use a lot being a ford motion guy, I picked up the phone and I called her agent and it turns out one of the guys is selling license agreements for her because they figured they could capitalize on her fame at the time. It was in Chicago so I got my car and I drove to Chicago four hours the very next day and I sat down and had dinner with her agent and we offered her a license agreement to design her own slippers. I can tell you that there was not one person including my current partner at that time that wanted me to do it. Every person said this will be a complete travesty. Why in the world would you put her in front of your product? I said well there are several reasons: number one, I saw what it did when we got the press and second of all you can always deal with those things. I mean there’s no bad press. What you want to do is get it out there. So to make the long story short we sound this license agreement, we launched our product. Her leopard slippers is still probably all-time the greatest selling product we’ve ever had. The first time she tweeted out about it with only a million followers she crashed our site. So we got to learn really quickly how we needed to scale.
Joe: Wow.
Pat: Then she took us to trade shows. We went … she was on Jimmy Fallon playing slipper golf which is one of the coolest. If you ever get the chance you can Google it. It was really fun. I was there for it in New York. We were on Good Morning America, on the Today show, so all that stuff came from it and it turned out it was one of the best decisions I’ve ever made because of the way that it helped to get the notoriety around the product. And I just trusted my judgment because not one person really believed it was ever going to be something good for us. And it was exciting and since then I’m still in touch with her regularly and her management. We still do a lot of things together. So it’s been a great relationship for eight or nine years now.
Joe: Wow that’s fantastic. A fun story too. Is there any chance of Jersey Shore coming back on the air? Have you got any inside information?
Pat: They did a rewind this year but I don’t know how it did. I know that she has got some other things she’s working on so she’s always … I mean the thing is people just … really it’s amazing in our society how people sort of make quick determinations on small snippets of someone. She’s actually a really sweet girl. Some people look at her and think she’s this hard core partier; she really isn’t. When we were in Vegas is a great example, we went out … everything she gets she gets for free. We went to a restaurant, she took a picture for Instagram, probably a $7,000 bill and with all these people. We went up to this nightclub and it was roped off area, bottles, service, everything she wanted for free. Her life at that time was just immeasurable with relation to the benefits and things she got. But what we ended up finding out was is that she was just this really calm, young girl. We went out to dinner and out to a club and she never had a drink. It wasn’t the Snooki they sell on Jersey Shore; it was Nicole Polizzi which is her name. She’s an adopted girl from Colombia and she has a great family and she does … she has great young kids now. She’s actually a tremendous person. That’s the one thing people would really be surprised at next door.
Joe: I believe it. Well, I know that you got connected with Quiet Light back in 2010, 2011 or ’12. I know you had some conversations with Mark about doing a valuation for Happy Feet. And as Mark often did he probably gave you some good information and suggested you go and fix that or if you want X amount of money you got to build the business more. Not high pressure at all he did the same for me in 2000. I forgot, no it was 2010, maybe we called him about the same time. But at some point, you said okay this Shark Tank thing looks interesting I’m going to give it a go. Can you talk about your decision to apply to Shark Tank, what it was like being on the show, and what it’s done for Happy Feet since?
Pat: Well I applied on season two originally and it was … I mean if people hadn’t done the Shark Tank applications, it’s like 50 or 60 pages of disclosures. It’s all handwritten. You can’t type it. It’s so non-technical, you can imagine. And I got turned down that first year. I went to the interview process. We submitted videos and got turned down and I hadn’t really thought much of it after that. I watched the show and I was a fan but I remember it they were getting ready to finish casting for season five and I get a phone call. And believe it or not I was actually on a golf course and I picked up the phone and they said look we’d like to revisit your application. We’re scaling so fast. We’re doing so many new things. We’d like to revisit it would you want to resubmit this application? I said well it took me days to be able to do the application and videos and stuff and I said like okay if you feel like there might be some fruit from it let me know. So I resubmitted the application, did the videos, it comes right down to the end. This is like in September of 2013 they called and said Pat look we have four or five slots left and about 18 or 20 companies where we got it narrowed down to. We want to tape so what we’re going to do is we’re going to bring you out to LA and we’re going to let you tape in front of the producers. If they like you they’ll keep you if they don’t they’ll send you home. And I’m like alright. So I flew out to LA and actually it’s interesting because Snooki was sort of involved in this in a pseudo way. I went out and I taped my test and I went that night to Dancing with the Stars and I sat with her family and her agent at Dancing with the Stars live which was really cool by the way and [inaudible 00:15:25.0] I was done I got a call and they said look we’re going to tape you tomorrow so be ready. We’re keeping you, we are going to go ahead and tape it. So we taped in September of 2013. It aired in April of 2014. And I was also told that probably 30% of people they tape don’t get on air. I’ve heard the number is less than that but there was no guarantee I was even going to get on TV. And then in April of 2014 obviously it aired and it was an exciting episode. It did not go well for a long time in there. And the way that the production was set up and the way they showed it, it turned out to be what I think is one of the better endings and exciting. So it was a lot of fun and obviously, it was a real whirlwind and since then there’s just been nothing but great things that have come from it.
Joe: Well you got a deal from it. You’re one of the first guys I’ve ever talked to that’s gotten a deal from it. I’ve probably had conversations with five or six people over the last three years that had been on Shark Tank but you got a deal. Actually, I’ve got somebody else that got an offer but he didn’t accept it which in hindsight he should have. But what was the whirlwind part? You were there for a long time it didn’t go the way that you wanted it to but you did end up with a deal, how did it go?
Pat: Well you’re in there … I’m just going to estimate, I’m going to say I was in there probably an hour and ten to an hour and 20 roughly. You get no break rights. There is no break. If you have to go to the bathroom or you have to get a drink forget about it. You’re standing on your spot and you’re answering questions and they’re grilling you. And probably for the first 15 minutes to an hour, it just wasn’t going well. Barbara didn’t like me which most women don’t like me when they meet me the first time. Then I don’t know how it went, then Robert—
Joe: We’ll do another podcast on that and again we’ll have your wife on in that podcast.
Pat: Anyway it just … everything seemed to be going negatively and then I got an offer from Kevin which was one of his royalty deals which wasn’t going to help me. And then Lori I really thought was going to do something then she hitched her wagon to Kevin which was really tough for me because I did not want to deal with that royalty agreement and that was really all I had on the table. And then about an hour and five minutes in I decided because Mark had made comments I asked him if I could tell him a story versus you know asking him. And I talk about my mom who had passed away and I talked about my passion as an entrepreneur and how this is a single product and some people don’t do that as a company but I was going to get up every day to make sure it grew. And he made a quick comment which I’m glad they didn’t cut out and he said you’re the real deal and you have a great business but it isn’t a fit for me. At the time I wasn’t sure why I mean obviously he has an NBA franchise, we had NBA licensing, I don’t know if that got anything to do with it or he just didn’t want that kind of product. But either way what happened was it changed more of them because at the end of the day Mark controls more money than most of those people put together. And you’re in a situation where if he is saying something like that it makes people view it different. And I think my plea is exactly who I was as an entrepreneur; passion, excitement, and getting people engaged where they feel excited about what they’re going to do. Then all of a sudden Robert came back in and made an offer and then Lori and those guys wanted to counter. I gave him a maximum we wanted and understand we only took at our web addition we weren’t a consolidated company with relation to wholesale and then all of a sudden Robert said I’ll take that deal and I wasn’t going to hesitate. I didn’t even allow Lori and Kevin to react to it. I just said done and it was over. And the deal changed after the fact. It wasn’t exactly the same on the show. It really wasn’t anything near that.
Joe: There’s lots of due diligence after you shake the hand I assume. A lot of verification and it takes process.
Pat: For us, it wasn’t even that. Robert and I talked and he said you told me you didn’t necessarily need the money and he says why do you want to do this? Well I said, first of all, I could use some money but it isn’t that important now but I really need the connections and I’d like you to help me grow this company. That’s really what I wanted. He said look let’s just do a small deal without the money. If you need something in the future I’ll try to help you but I want you to work with my Shark Tank group. We signed a deal and we’ve been working with him ever since. And they’re fantastic. They have a Shark Tank division that’s run by a really dynamic young lady and she’s really good and anytime I need him I can get him. I talk to Robert occasionally. I was in his office four to six months ago before the launch of the Disney line and we went over some stuff but he’s just a great guy and it’s a great group of people. And honestly, I’m happy it didn’t close at what it was before because it would have changed for both of us. There had been a lot more expectations on both sides and other than that Robert has helped me with anything I need from soup to nuts with business including we have so much press. Obviously, it led us to DreamWorks it led us to basically every license we want in the United States and the world for that matter. So it’s really a blessing for me and it was exciting, it was stressful, it was fun, it was really scary to watch because I couldn’t see the episode. I wasn’t allowed to see it. I had to watch it like everyone else. And I swear to goodness I had no idea how it was going to look. And I honestly [inaudible 00:20:12.4] and I don’t really get nervous. I’ve played basketball in a small college, in high school and I’ve been an athlete. I’m a very competent high playing individual but that one I was sitting there to win. I just don’t know how this is going to look. But it was great. And then the one interesting thing that most people don’t realize they will usher you off to an airport immediately. As soon as you get off sound stage they take you out of the sound stage into another stage. You do your post interview. They have to sit with a counselor which is required for an hour because they’re afraid that some people would be suicidal. So you’ll sit with a counsel when they feel like you’re in good shape to leave they walk you out the door. This is not a joke. They put you in a van. They drive you to a hotel. You should have your bags packed and they will not put anyone that takes in the same hotel. They don’t want you talking. We were originally in the same hotel before we pitched and afterwards they spread you out and then you fly back the very next day. So it was a real whirlwind and it was exciting but it was stressful. But everything that’s come out of it has just been fantastic and it made for good television.
Joe: Okay I just have to comment on the counselor part and then we’ll move on to your growth and then the cash flow challenges that everybody in the audience that’s an entrepreneur faces, but does Mr. Wonderful have to pay for the majority of the counselor because he says you’re dead to me more than anyone else?
Pat: Probably Barbara would be. She has I don’t know … it was … again that part was a little odd for me. I didn’t know they were going to do that but then they just bring it on me. So I’m like no, I’m in a great mood what do we need to do to get out of here now? They make you stay for an hour.
Joe: That’s fascinating. Alright so how did it turn out and what kind of growth have you seen since 2014? And then we’ll talk about how you dealt with that in terms of financial cash flow challenges.
Pat: Yeah I mean we jumped up 40 to 50% over the period of time from where we were in the baseline during at the time. It led us to get passed by DreamWorks to do a license which at the time was a very good thing but it was my first foray into a big license and it was a little challenging. You couple the fact that they were sold in the middle of it in DC universal which became very difficult because they were moving those assets in and they get people assigned, people to work with me. So the DreamWorks thing was an interesting lesson in licensing and how implemented and I didn’t do a great job at it but it was a good license and now obviously we’re working with Disney and Marvel and all those things came from Shark Tank so it’s a great thing for us.
Joe: So when it comes to a business that’s growing rapidly as many of the folks that I talked to on a regular basis are dealing with a lot of the physical product e-commerce businesses that we’re selling, actually I’d say the majority of them are probably less than three years old. And the reason that I see that people exit, you know buyers always say well it’s so great why are you selling? It’s because for that three year period they’re hardly taking any money out of the business. They bootstrapped it, they put it together, and then every penny that comes from the revenue of the business goes back into buying more inventory and trying to stay ahead of it and not have stock outs. What have you done in your business to overcome some of those challenges and what advice can you give to entrepreneurs that are eventually going to be in your position?
Pat: Some of it is … there’s an easy answer and there’s difficult answers. So the easy answer is I think anytime that you’re facing cash challenges you should address that either one of two ways. Obviously, they jump off the paper to anyone. Obviously, there’s banking that you get involved in but I believe that is really important to find someone who can add value to your company if you decide to do a strategic partner. Some people believe don’t believe in partners but if you can find the right strategic partner that not only gives you a leg up in some of the systems and other things that you’re going to encounter as you grow but also can help in the financial thing that’s premium. What I did as we started to try to grow it is I partnered with someone that could afford to help scale that growth and make sure that we had a position to where we would have the product. But I also started to get creative with vendor relationships. For instance, there’s a manufacturer that I work with on licenses that is one of the biggest manufacturers of plush in the country if not the biggest. And I went to them because their margins were really low when we talked about and I said what if we could raise your margins by you going ahead and using your scale and your manufacturing abilities. You send the product in, we have the ability to pay for it as we sell it almost like a consignment deal but we can help you develop a division where your margins grow if it’s not capitally intense then it would make sense for both parties. So what I tried to do is be very passionate with people I could put around me in vendor partnerships to try to get them to help me with the initial product I needed to do anything. We developed a brand new credit slipper called zlipperz; Z-L-I-P-P-E-R-Z. That was a collaboration with a company on being able to develop the actual design and to make the product and then we didn’t have to put a lot of money on the pocket because we’re putting a lot into the system side. I think you just have to talk to everyone you can possibly think of. It doesn’t have to be an investor, it doesn’t have to be a bank, it could sometimes be your vendors, it could sometimes be family, it could sometimes be a warehousing and distribution company. I mean I almost … I talked to a warehouse and distribution company one time and said look if you could bring your distribution to us we’ll help invest in some of the product and we’ll mark that back up to be able to help get the distribution business. So there’s a lot of ways that people can scale businesses if you put the right people around you. And I think you just have to be willing to have those conversations and think creatively on how to grow your business.
Joe: I think you’re absolutely right. The more I’ve talked to different entrepreneurs in this situation it’s being likable and it’s working hard and it’s getting lucky back to the reason you are in the business here and now. And again I don’t mean to make light of being lucky because it only came from your hard work and dedication and being willing to take some risks by hopping in a car and drive four hours to Chicago just to meet with the agent of Snooki when you didn’t really know. You didn’t know what she was all about. So you got to do those things. Well, we had people on the podcast that sort of break the mold in terms of being able to buy internet based businesses because they use local banks because they’ve built relationships with them. They go and they talk to them, they shake their hands, they see them face to face, and they instill confidence in the bankers, other types of lenders, investors, family funds, family members, warehouse owners, shippers, whatever it might be their goal is to stay in business and to grow. And if you can do what you’re talking about and make it mutually beneficial then they’re going to help your business grow as well. We do that every day. It’s not just brokering and trying to sell a business for the absolute maximum price, it’s trying to achieve the goal of the seller. Sometimes they’re trying to get it sold very quickly with a better set up and transaction. Maybe all cash close in 30 days other times they want to max it out. They’re willing to take a small note on something and hold the business and deal with that emotional stuff you go through for a little longer in order to reach the goal. So I like the fact that you’re talking about bringing in other people and talking to as many people as possible to make something mutually beneficial. Well, what would you say has been the biggest challenge and maybe the biggest mistake you’ve had to have made in terms of finances in cash flow and things of that nature? Just pull on out of your hat to—
Pat: Well it’s interesting because I can tell you I’ve made hundreds of mistakes but as I’ve talked about before there’s … let’s just say there’s a hundred there’s less than three that I would regret because the other 97 led me to something that is always better for business. So I’ll give you a great example when I was growing the kiosk business my father and his wife Sharon who started it basically had … I don’t think they had more than 25 kiosks at one point in any seasons which is still a lot if you’re talking season November, December. When I bought it and started doing distribution I changed it up. I brought them into the warehouse because they use to sell only containers. They bring them in to container loads, they bring them in to Seattle or LA Portland and they’d send it to customers. They never touched a product. They didn’t have a warehouse; didn’t touch it. It was basically just an order company. It’s like an FOB order. What I decided to do was get a warehouse and bring the product in, get the warehouse to scale, put people in there, break the containers and ship whatever they needed. So if they didn’t get in the 4,000 or 8,000 pair of containers I could still sell. So we went from 30 to about 300 kiosks in about four or five years. So we were one of the bigger kiosk programs seasonally in the United States. We had them from every state. You know I had one guy that ran 20 of them. So what I couldn’t see at that time were two things: one, how good that would be and two, how catastrophic it would be. And it’s interesting that they’re both. And the reason they were both is I started to get so much product and we were so seasonal that I was taking chances on buying product in case we added a few kiosks late or someone needed more or whatever and that was just that all that was doing was rolling the dice and eventually figuring out what year it was going to come up craps. That you ended up a year where you had a million dollars in products sitting on the floor for nine months to a year that you didn’t have money to pay for. So I was sort of in a position to where I was betting on to come a little bit more than I needed to be with the kiosk business so it became catastrophic with relation to cash flow. And I ended up having to partner with someone to be able to make sure that I could hedge it and grow. But at the same time, it was the biggest blessing I did because as we put the slippers out there and our name and buy HappyFeet.com was on the back people learned about our brand and we started to build that same funnel I talked about. It’s funny how my hands are always down here than they appear but—
Joe: And if you had the video I can see that funnel, that visual that you’re doing.
Pat: I just let everybody know I move my hands we’re not even on video. Anyway, my point in this is that it helped grow what we … the scope of the business. It looked bigger. It looked like a company. It looked like something you’d want to be involved with. So all these people started taking notice and we did NBA license, we did NCAA, we did NFL, we did all these different things and we really expanded the base of the product. And it’s something that … you know the first container they bought was four styles in three sizes or four sizes, there were 16 SKUs and now we have over 5,000.
Joe: Wow, incredible.
Pat: So it was catastrophic to our cash flow because it nearly broke me and it should have and still trail the business for years after that because I made the decision. But it’s hard to be upset about it because we were in a position to where we decided that we couldn’t continue on that trajectory. So we cut the kiosk business back, we concentrated on the .com and what we found out was people were conditioned to buying a product and if the kiosk wasn’t there that year they bought it from us for Christmas. So those leap years and those difficult things it’s almost hard to be upset about it because it was almost like the lost that you would have taken or the aggravation tax. It was something that you really needed to be able to grow the company overall. So it’s really hard to regret that. Every decision that I made that’s been bad I always look at something and that thing could be better. The DreamWorks thing, I was terrible at it. I didn’t understand any licenses but now I have learned some things about it that going into the Disney/Marvel deal that helps me really understand it better. So I don’t regret a lot of those things. I just try to learn from them to get better and back to the point you talked about with relationship on scaling the cash, be passionate like I was. When I talked to people they get excited about building products, they’re excited about doing businesses and doing all these things. If you go in and find people that have capital that don’t operate businesses and you’re passionate they’ll put you in place to make you successful because at the end of the day that’s what you’re going to do for them. It’s all going to come around and that’s why I have to maneuver so I have to jump up every day and say I want to be passionate. Sometimes it’s been hard for me to do that because it’s tough but that’s what I’m always trying to do.
Joe: Yeah it can be exhausting for sure. Let me just pivot here, you’ve talked about kiosks a lot, it’s what you know. You know very well. You’re in the ecommerce world now and licensing and so on and so forth. I’ve been in a few events, Mastermind events where people have stood up and said hey what are your thoughts about me taking my brand and starting in the kiosk business and expanding in retail that way instead of a retail store? What are your quick thoughts on that for folks that are out there thinking of that now? Is it a pain in the ass? Is it worth it? Is it challenging? Is it too much, too late? What are your thoughts?
Pat: Let’s say … let me answer two ways: number one, for our product as big as it is and needing storage for a couple of months a year it’s a very difficult sale. Because I think it’s challenging, it’s tough, it’s a big investment, they want too much per square foot. I personally think that the kiosk and especially retail business is terrible. That’s just my opinion. I just think retail, in general, is bad so when it falls down to that and what you see malls do is go away from branded products and good looking kiosks in the past to getting anything they can get in there. It’s now like a flea market. So I really don’t think it’s a very good business unless malls turn around and change it. As far as retail goes you’re making a huge commitment to what you’re getting in front of customers. Right now I think it’s very difficult to get in to retail and be able to scale. But if your product is small enough and you have the ability that you can get people to run them independently then yes I would not sign a lease all over the country as an independent company and then try to make it work for one hug and then have 25 or 30 locations. It’s not a good business plan. I think some people have to go to retail. Luckily I’m right now knock on wood I’m not in that position to have to do that. It’s not a tremendous business but it’s not a bad place to start if you have to.
Joe: Okay I got you. Alright Pat you’ve been an entrepreneur for 30 years, there a lot of folks out there that are just starting off on their entrepreneurial journey some of them are 20 years old, some of them are 50 years old and are quitting the corporate world any last minute advice for those that are just beginning that you can share?
Pat: Yeah don’t quit your job until you have a built business. I mean I talk to my sons, my sons don’t work in my business because we know that I can … first of all, I need them to go and find their own way. And I want them to be able to go out and understand what it takes day to day to be able to work at this job and bride. If they were working for me then I know that they would get a little bit of a sense of complacency. But I tell them if you want to start a business start it while you have a job. Something that is not taking you away from a job, not like you’re living and working for someone all day and then taking some of those money. See if you can make a run in whatever product or business you want to do, keep your income so you don’t add that stress. There’s a stress to starting a business you need to make sure you have an income. If you can figure out how to make that and navigate that as a new entrepreneur, then I think that you have an ability to have a good balance. Either way, you have to be ultra-excited about it and willing to do anything. I’ll give you a great story and I know that some people may have heard some of the podcasts, I had a guy that was an entrepreneur here in Louisville that I work for at that golf shop and I told him I said I’m going to go start a business I think I’m going to leave this job is there any advice you can give me? And he said well you’re moving from a meal ticket to a suit lot and understand that’s not going to be easy. There’re going to be days when you’re going to worry if you can even have food on the table or whatever it’s going to be and you’re not going to have a fall back. You’re not going to have that check coming on Friday and you better hope it shows up in the mail paying some of your receivables so you’re not going to have anything. And it’s stressful and some people look at the excitement of taking a product and taking it to market and say hey I can do this so I could really make this work but they don’t understand the other intricacies to running a business and stress that comes with that. It’s not easy so the biggest thing is just to make sure you’re prepared for that. Number two, I’d like you to keep the job and then I would find some mentors to put around you. A board that is a pseudo-board; it may not have to be a board of directors, it’s not that sophisticated but people that can help you understand and navigate the problems that you’re going to go through. You’re going to find them.
Joe: Awesome, that’s great advice. Pat Yates, HappyFeet.com thanks for coming on the show we’ll talk to you soon.
Pat: BuyHappyFeet, B-U-Y HappyFeet.
Joe: There you go BuyHappyFeet.com I’m going to go buy some. Thanks, man.
Pat: Thank you Joe.
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