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The Agility Advantage: How Startups Outpace Big Logistics · Speaking of Supply Chain

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Speaker 1: You're listening to Speaking of Supply Chain, a meeboch podcast.
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Speaker 1: This is a show for logistics professionals looking to learn
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Speaker 1: more about the latest innovations in supply chain. Each episode
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Speaker 1: will feature a conversation on topics such as mitigating supply
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Speaker 1: chain disruption and reducing risk, current automation trends, sustainability initiatives,
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Speaker 1: and more. Let's dive right in.
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Speaker 2: Hello, and welcome to Speaking of Supply Chain, where we
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Speaker 2: explore trends, current events, and innovations impacting the logistics and
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Speaker 2: supply chain industries. I'm your host, Ellen Wood. In an
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Speaker 2: era where economic headwinds, tariffs, supply chain constraints, and rising
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Speaker 2: costs are reshaping how companies operate. One thing has become
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Speaker 2: clear agility wins, but what does that really look like
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Speaker 2: in practice? Today we're talking with Adam Callanan, serial entrepreneur
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Speaker 2: and CEO Pentaine about the real world strategies startups are
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Speaker 2: using to out maneuver enterprises and why profitability isn't optional anymore.
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Speaker 3: Welcome Adam, Hi Ellen, thanks for having me excited to
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Speaker 3: be here.
1:12
Speaker 2: So tell us a little bit about your your initial startup, Bottlekeeper.
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Speaker 3: Bottle Keeper was a classic scratch your own itch product company.
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Speaker 3: And it was not my itch to be scratched. It
1:27
Speaker 3: was my cousins. My cousin Matt was drinking a beer
1:30
Speaker 3: out of a red party cup on the beach in
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Speaker 3: twenty twelve, and he's a bit of a maniac and
1:36
Speaker 3: requires that a when he has a beer, that it's
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Speaker 3: out of a corona bottle bottle out of a very specific temperature,
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Speaker 3: and so this warm, you know, in five minutes problem
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Speaker 3: was a problem. And he looks around and he sees
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Speaker 3: people drinking, you know, out of water bottles, just stainless
1:52
Speaker 3: steerwater bottles, and has this idea of taking one of
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Speaker 3: those bottles, cutting it in half, stuffing it with neoprene
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Speaker 3: or like wetsuit material so that his perfectly chilled corona
2:01
Speaker 3: bottle could fit inside of this thing, and invented this product,
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Speaker 3: this sort of super coozy that keeps a beer lock
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Speaker 3: colder for way longer than you needed to and protects
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Speaker 3: the glass and makes it, you know, where it's not
2:13
Speaker 3: going to explode on your foot in places where we
2:15
Speaker 3: have bare feet. And at that time, I had just
2:18
Speaker 3: sold out of a medical tech company that I was
2:22
Speaker 3: a partner in, so we decided to come together, turning
2:25
Speaker 3: a very long story into a very short story. We
2:27
Speaker 3: tested some things. I was not convinced that this would
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Speaker 3: be a real product that people would actually pay money
2:32
Speaker 3: for it. I thought it was cool and interesting and
2:34
Speaker 3: it would end up on a shelf at Spencer's Gifts,
2:36
Speaker 3: which you know for bachelor parties, which is not is
2:39
Speaker 3: not a company that seemed like a company to me,
2:42
Speaker 3: So we did a lot of testing. We were both
2:43
Speaker 3: very scientifically minded. We both have crazy Zionce degrees, so
2:47
Speaker 3: the scientific method is a very valuable tool when you
2:50
Speaker 3: get into into the startup and business world. So we
2:53
Speaker 3: put a bunch of tests in place over the series
2:55
Speaker 3: of months to see if we could get interest and
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Speaker 3: if we could get people that weren't our mom and
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Speaker 3: dads and aunts and uncles to swipe credit cards and
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Speaker 3: buy the product at a real price before we spent
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Speaker 3: any time or money on it. And we did that
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Speaker 3: with crowdfunding. It's the perfect place to do that. Go
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Speaker 3: and test concepts and make sure you have a thing
3:13
Speaker 3: before you go and invest in the thing. And that
3:15
Speaker 3: worked really well. I was like, holy cow, this is okay.
3:18
Speaker 3: People actually well I wanted. So we sold a bunch
3:21
Speaker 3: of them, and before we even spent any time or
3:23
Speaker 3: money making it is then we had to go figure
3:25
Speaker 3: out to make it, which is a whole other deal.
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Speaker 3: But yeah, we created this product. My company. Before that,
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Speaker 3: we had a lot of people in a lot of states,
3:31
Speaker 3: and it was big and heavy, and I vowed to
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Speaker 3: not do that again. So I was very adamant with
3:35
Speaker 3: Matt that we build the company in a way that
3:37
Speaker 3: had no employees, and we did that very successfully. For
3:41
Speaker 3: we kicked that company off in twenty thirteen and twenty sixteen,
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Speaker 3: we did eight million in sales, all direct consumer, with
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Speaker 3: no employees, no investors, super lean, It was super profitable.
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Speaker 3: We grew from there and tens of millions ended up
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Speaker 3: on Shark Tank when we were way too big to
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Speaker 3: be on Shark Tank. Super fun though, and got acquired
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Speaker 3: in twenty twenty one by private equity group called win
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Speaker 3: Point Partners and Arctic out Doors and there were still
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Speaker 3: there was only four team members. So that was really
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Speaker 3: really really lean, really profitable, super fun awesome.
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Speaker 2: So what are small startups doing today that enterprise level
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Speaker 2: companies simply can't or won't do fast enough? Because when
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Speaker 2: you've when you're talking about that small startup company and
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Speaker 2: you said it a couple of times. It was super
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Speaker 2: lean and super agile. That's not something that big enterprise
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Speaker 2: company can do. But is that a differentiator? Is that
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Speaker 2: a plus or is it a minus?
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Speaker 3: It is the differentiator. It is the number one value
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Speaker 3: point that exists in early stage businesses is your capacity
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Speaker 3: to break things and move fast and change them quickly.
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Speaker 3: Where there aren't real consequences like you're not you're not.
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Speaker 3: You get to try things super fast and change your
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Speaker 3: mind and ideally again we're listening to the data that
5:02
Speaker 3: is telling us that the answers to the questions. That's
5:04
Speaker 3: where where early stage companies do get in trouble is
5:07
Speaker 3: they end up using emotion to make decisions and not
5:10
Speaker 3: numbers in math and science to make decisions. But it
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Speaker 3: is number It is the you know, the huge lever
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Speaker 3: that early stage businesses have as the capacity to move
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Speaker 3: extremely fast, make decisions quickly. It's okay, if it breaks,
5:23
Speaker 3: we know what's going to break. We expect it to break.
5:25
Speaker 3: It's actually part of the plan is that it breaks
5:27
Speaker 3: and you learn from those breaks and move and over
5:29
Speaker 3: time that develops into something.
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Speaker 2: Okay and I can agree with that, because I've worked
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Speaker 2: in large companies, large corporations, I've worked in smaller private companies,
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Speaker 2: and the smaller the team, the more quickly things can
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Speaker 2: get done and the more quickly you can react to
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Speaker 2: a change. Unfortunately, we do have, you know, enterprise level
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Speaker 2: companies out there that are now really having to make
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Speaker 2: these adaptive changes on the fly, and it's very very
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Speaker 2: difficult for them. Like when resources are limited, costs arising,
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Speaker 2: this is what we're seeing in the economy today. Those
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Speaker 2: startups can adapt so much faster than those larger competitors.
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Speaker 2: So what are some creative ways that you've seen either
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Speaker 2: your company or smaller companies completely rewire and redo their
6:20
Speaker 2: supply chains or other cost structures that could inspire some
6:24
Speaker 2: of those larger firms or be a key learning for
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Speaker 2: even larger companies. You know.
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Speaker 3: One of the areas that I imagine this to be true
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Speaker 3: in larger scale companies as well, and actually got to
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Speaker 3: see that firsthand when we did get acquired and then
6:38
Speaker 3: became part of a much larger company. You know, one
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Speaker 3: of the areas that early stage, mid stage brands get
6:45
Speaker 3: into trouble is have a tendency to solve problems with payroll.
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Speaker 3: And what I mean is that you have what you
6:53
Speaker 3: think as an opportunity or a thing that needs to
6:56
Speaker 3: be fixed or a process that has broken, and we
7:00
Speaker 3: have a tendency to go and hire people that have
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Speaker 3: some domain expertise in that thing to solve that problem.
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Speaker 3: The challenge is that when that's the first line of
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Speaker 3: defense against solving that problem, is that every nickel that
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Speaker 3: you spend on adding that into the business adds lead
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Speaker 3: weight to that company. I don't care how big the
7:19
Speaker 3: company is, big, small, it doesn't matter. It adds weight
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Speaker 3: to the business. And if that if that weight is
7:25
Speaker 3: also not producing, if it's not productive weight, it's really
7:28
Speaker 3: difficult to recognize how how the revenue in the business
7:32
Speaker 3: and how the revenue performance in the business needs to
7:35
Speaker 3: change in order to pay for that new weight, in
7:37
Speaker 3: order to cover the cost of that new weight. So
7:40
Speaker 3: in an early stage company, when it's generating a million
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Speaker 3: dollars a year or one hundred thousand dollars year, worth
7:44
Speaker 3: even ten million dollars a year, like little bits of
7:47
Speaker 3: weight are really really impactful on the business. They are
7:50
Speaker 3: they really drag the business down, you know, as you
7:52
Speaker 3: get into and that's just a purely financial challenge at
7:57
Speaker 3: Bottle Keeper. One of the things that we did really
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Speaker 3: well is we first solved those problems with tech and
8:03
Speaker 3: got really really creative with automation. And this is in
8:07
Speaker 3: the mid you know, twenty tens. Now in the world
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Speaker 3: of AI, like, that's a whole different bag of tricks
8:12
Speaker 3: that that we're just at the very tip of. That's
8:15
Speaker 3: really interesting, but we solved. That's how we got to
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Speaker 3: eight million in sales with no employees. Like I put
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Speaker 3: a guardrail on the company that we are not going
8:23
Speaker 3: to hire a person until it becomes absolutely critical. So
8:26
Speaker 3: we said no to a lot of opportunity like retail expansion,
8:29
Speaker 3: like you know, all sorts of stuff we said no
8:31
Speaker 3: to because it violated that principle, and that allowed us
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Speaker 3: to stay really really focused on the one thing that
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Speaker 3: we wanted to do was this one product to a
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Speaker 3: one type of D two C customer, and we just
8:41
Speaker 3: got really good at that, and I automated everything the
8:44
Speaker 3: customer didn't know what a lot of the time, because
8:46
Speaker 3: it can still be personal. It has to be personal,
8:48
Speaker 3: especially now in the world of AI. Authenticity really matters. Yeah,
8:52
Speaker 3: sol solving problems with people and humans is can be
8:58
Speaker 3: really really damaging to a company particular if you don't
9:01
Speaker 3: know how you're going to pay for it well.
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Speaker 2: And I think that that's something that a lot of
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Speaker 2: companies are facing, especially in their supply chains right now anyway.
9:08
Speaker 2: I mean, we're we're still in trade show season right
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Speaker 2: now in the logistics and supply chain industry, and it's
9:16
Speaker 2: all about, you know, automation and how can we automate
9:18
Speaker 2: these processes. The labor pool is shrinking and people aren't
9:22
Speaker 2: looking for these types of jobs. We can't we can't
9:24
Speaker 2: hire enough people. There just isn't enough to get the
9:28
Speaker 2: work done, and so automation has to step in or
9:31
Speaker 2: it's too expensive to have the people. To your point,
9:34
Speaker 2: and the automation is going to you know, eventually pay
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Speaker 2: for itself. Do you find that then, those limitations that
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Speaker 2: you put on your business of not expanding into you know,
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Speaker 2: additional products or not going into that retail sector, did
9:50
Speaker 2: you ever question that decision of you know, am I
9:53
Speaker 2: still really on the right track or were you just
9:57
Speaker 2: convinced and absolutely certain that was the way you wanted
10:01
Speaker 2: to run your business because no one else has to
10:03
Speaker 2: say it's your business.
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Speaker 3: You're absolutely right. I question things constantly. I mean I literally,
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Speaker 3: I don't know if you could see this. I literally
10:09
Speaker 3: have a sign here this says question everything in my office.
10:12
Speaker 3: It's been in my office for fifteen years, in various offices.
10:15
Speaker 3: The reason for that is because I can only make
10:18
Speaker 3: as the operator of the business, all of us, anybody
10:20
Speaker 3: that's operating a business, operating a role in a business,
10:23
Speaker 3: You can only make a decision based on the information
10:25
Speaker 3: that's available to you. Then, so it's critical that we
10:28
Speaker 3: are constantly looking at the decisions that we're making and
10:31
Speaker 3: the data that we have available in real time to
10:33
Speaker 3: ensure that they are still valid, and constantly pushing and
10:36
Speaker 3: prodding and poking those So I questioned it all the time.
10:39
Speaker 3: I didn't, you know? And then there was a point
10:43
Speaker 3: at which that question became nope, Now I am bottlenecking
10:46
Speaker 3: the company by my lack of will or desire to
10:52
Speaker 3: build a team, to hire a team. And so I
10:55
Speaker 3: took a dry erase board and I literally wrote on
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Speaker 3: this dry race Bard. It was the end of that
10:58
Speaker 3: two thousand and eight twenty sixteen eight million dollar year.
11:02
Speaker 3: I drove on a dry erase word all the things
11:03
Speaker 3: I was doing in the company that I was responsible
11:06
Speaker 3: for and started circling the things that I should not
11:08
Speaker 3: be doing, like I should not be running customer service.
11:11
Speaker 3: I should not be spending I mean at that point
11:14
Speaker 3: we were spending two million dollars a year on paid ads.
11:16
Speaker 3: I should not be managing that. There's these things that
11:18
Speaker 3: there are other people that have deep domain expertise in
11:22
Speaker 3: and bringing them in adds revenue to the business or
11:25
Speaker 3: it allows me to go and focus on the things
11:27
Speaker 3: that can add revenue to the business. So we did
11:30
Speaker 3: that and it was like, I need to not do that.
11:31
Speaker 3: Hired hired a director of customer service. She started in
11:34
Speaker 3: January of two thousand and seventeen, and it was game
11:37
Speaker 3: changing because it a lot. It freed up my time
11:39
Speaker 3: to go and do that. But you know, we had
11:41
Speaker 3: to get to the point where the wheels were sort
11:42
Speaker 3: of falling off the wagon to get there.
11:45
Speaker 2: Well, and not just that the wheels were falling off
11:47
Speaker 2: the wagon, but you had the momentum to push you
11:49
Speaker 2: through it. It wasn't an early in the in the
11:53
Speaker 2: business where you were not certain if this was going
11:57
Speaker 2: this was a move that was going to pay off,
11:58
Speaker 2: if this was an investment that is going to have
12:00
Speaker 2: a return, so you waited until, like you said, there
12:04
Speaker 2: was there was no other option, but also that was
12:08
Speaker 2: one of the biggest years and it was the time
12:11
Speaker 2: to do it. Did you really focus on only staying
12:16
Speaker 2: lean within your organization? Did you utilize outside, you know,
12:20
Speaker 2: outsourced help. You were talking about the Facebook ads or
12:25
Speaker 2: the online advertising, and there are plenty of companies out
12:29
Speaker 2: there that really focus on that, and that can certainly
12:32
Speaker 2: be a way to take advantage of those those deep
12:36
Speaker 2: skill sets and have someone that is just a contracted
12:40
Speaker 2: employee for that one role. Or do you feel that
12:43
Speaker 2: it's better to have someone as part of the company
12:46
Speaker 2: that has really a stake in the game.
12:48
Speaker 3: I think it entirely depends on the situation, which I
12:52
Speaker 3: know is a terrible answer to that question. It's not
12:55
Speaker 3: for us, yeah, I mean, you know, every situation is
12:57
Speaker 3: different for us. At the beginning, we I literally did everything. Matt.
13:01
Speaker 3: We split the company in half. He was responsible for
13:04
Speaker 3: our manufacturing or inventory, you know, our books. I was
13:07
Speaker 3: responsible for everything on the front end of the business.
13:10
Speaker 3: So I built a website, I wrote the copy, I
13:12
Speaker 3: wrote the emails, I took the picture, shot the videos,
13:15
Speaker 3: spent the money on bade media, did the customer service
13:18
Speaker 3: like I did literally everything. Now that's not typical. I
13:21
Speaker 3: fully appreciate that, but what it did is it forced
13:25
Speaker 3: me to learn how to do those roles, so that
13:28
Speaker 3: by the time I went and decided that email marketing
13:31
Speaker 3: I should not be doing that and I hired a
13:34
Speaker 3: contractor through a marketing agency to help take over that
13:38
Speaker 3: part of the business. By the time we did that,
13:40
Speaker 3: I knew exactly what that person needed to be doing.
13:42
Speaker 3: I knew what success looked like in that role because
13:45
Speaker 3: I ran it. I played that game, and that played
13:48
Speaker 3: throughout the history of the company. Like when we went
13:51
Speaker 3: and you know, hired a full marketing person, I knew
13:55
Speaker 3: exactly what I needed that person to do customer service.
13:57
Speaker 3: When we hired a director of customer service, I knew
13:59
Speaker 3: what good look like in that position, and I knew
14:03
Speaker 3: what bringing somebody into it that I wanted to elevate
14:06
Speaker 3: that position. I had a baseline for what that meant
14:08
Speaker 3: because I ran that role. So there was a lot
14:09
Speaker 3: of value in understanding the way that the things work.
14:12
Speaker 3: When they broke, I knew how to fix them because
14:14
Speaker 3: I built them. Whether or not you choose to use
14:18
Speaker 3: a third party provider is a really important and risky
14:24
Speaker 3: decision to make really early on when you're really in
14:26
Speaker 3: the startup, like figuring out your model, figuring out your revenue.
14:30
Speaker 3: And a good example of that happened at Bottle Keeper
14:32
Speaker 3: at the very beginning of the company. We did the
14:34
Speaker 3: crowdfunding thing. We sold a bunch of product, We went
14:37
Speaker 3: right into a third party fulfillment provider, into a three
14:39
Speaker 3: pl but we were literally a startup. We were doing
14:42
Speaker 3: like a thousand dollars a month in sales that company.
14:45
Speaker 3: We were not a priority to that company. How could
14:47
Speaker 3: we be? We were literally nobody. A third of our
14:50
Speaker 3: like twenty five percent of our product vanished overnight where
14:53
Speaker 3: to go. Nobody knows. Twenty five percent of our product
14:55
Speaker 3: got shipped to the wrong people. So then we had
14:57
Speaker 3: to take twenty five percent of our product reship to
15:00
Speaker 3: the right people. I mean it literally like on day one,
15:03
Speaker 3: this is in January of twenty thirteen or twenty fourteen,
15:07
Speaker 3: we had just shipped our first orders and we were
15:09
Speaker 3: almost out of money because all of our product basically
15:12
Speaker 3: just vanished. Like that's dangerous, so early on, doing that
15:15
Speaker 3: stuff yourself when you can control it is the advice
15:18
Speaker 3: that I give through super early stage startups, and then
15:22
Speaker 3: go into that three pl when you have a little
15:24
Speaker 3: bit of scale. Don't pick the biggest one in the
15:26
Speaker 3: country where you're a teeny tiny fish. Pick one that
15:28
Speaker 3: you fit in the middle of their pond. So I
15:31
Speaker 3: think there's a time and a place to do that,
15:33
Speaker 3: to do all of those things, whether they're internal or external.
15:36
Speaker 2: Yeah, wherever in the life cycle of the business, it's
15:40
Speaker 2: going to come up. Well. And when you left or
15:45
Speaker 2: when you sold Bottle Keeper, then you started another company,
15:51
Speaker 2: and this one is a little a lot different. It's
15:55
Speaker 2: certainly not Bottles, So I imagine this one was a
15:58
Speaker 2: little bit more of your thought process of your cousins,
16:02
Speaker 2: but it was from what I've read, it was trying
16:05
Speaker 2: to understand where the money's going within a business and
16:08
Speaker 2: really following those pennies. We're in a volatile landscape right now.
16:13
Speaker 2: The political scene is rife with contention. It's a global
16:18
Speaker 2: issue with the tariffs, and so many businesses, small businesses
16:24
Speaker 2: and large enterprises are struggling to figure out how they're
16:27
Speaker 2: going to maneuver and completely adapt their their supply chain,
16:32
Speaker 2: their structure, their production, their distribution to work within these
16:37
Speaker 2: constraints and maintain profitability, so super volatile. What financial blind
16:44
Speaker 2: spots are out there that small businesses or even a
16:48
Speaker 2: CFO at a major firm might be looking for.
16:50
Speaker 3: Two different problems. I think we should talk through this
16:53
Speaker 3: because maybe I'm wrong. Okay, in the early stage, Let's
16:57
Speaker 3: say sub fifty million in revenue, Okay, in that business.
17:02
Speaker 3: You know, in the ten million dollar year company, that
17:04
Speaker 3: business is already at a financial deficit in the fact
17:09
Speaker 3: that they don't generally know. There's like two silos that
17:12
Speaker 3: exist inside of a company. You have the how you
17:15
Speaker 3: spend money, how the business spends money silo generally controlled
17:19
Speaker 3: by a CFO in bigger companies, and you have the
17:21
Speaker 3: how the business makes money silo generally controlled by a
17:24
Speaker 3: CMO CRO in bigger businesses. In smaller companies, a lot
17:27
Speaker 3: of times that's like the same three people. The language
17:30
Speaker 3: that the CFO speaks is different than the language that
17:33
Speaker 3: the CMO speaks. Yet what the CMO does and the
17:37
Speaker 3: decisions that they make and how they define their budgets
17:40
Speaker 3: are completely dependent on the information in the CFO role.
17:45
Speaker 3: But they don't look at the things the same because
17:47
Speaker 3: they don't understand each other's roles fully. So when you
17:49
Speaker 3: when you pull that down to early stage companies, they
17:52
Speaker 3: have no idea of that. They don't even know that
17:54
Speaker 3: that's a problem. So it's like they go and they hire.
17:57
Speaker 3: They don't know how the revenue needs to respond or
17:59
Speaker 3: how they turn on their ad spends need to respond
18:01
Speaker 3: to pay for that person, and so they just kind
18:03
Speaker 3: of look three months from now, they look backwards at
18:05
Speaker 3: their p and ls which are now not relevant because
18:07
Speaker 3: they were from six weeks ago, and go, shoot, we
18:10
Speaker 3: lost money, how did that happen? And so then add
18:14
Speaker 3: into that tariffs and like moving gross margins. I mean
18:19
Speaker 3: that's that is they know what's going to be a problem,
18:21
Speaker 3: but they don't know how to get to the solution.
18:23
Speaker 3: Penttain is a software product that was built from my
18:26
Speaker 3: experience at bottle Keeper doing all of that stuff for them,
18:29
Speaker 3: So it tells them the answers to those questions. As
18:32
Speaker 3: you get much much bigger, you know, a lot of
18:34
Speaker 3: times these decisions aren't just made by a singular CFO
18:38
Speaker 3: and a CML, like you have teams of people in
18:40
Speaker 3: these organizations, which just adds a whole other level of complexity.
18:44
Speaker 3: So I think I think it's it's equally important that
18:49
Speaker 3: that there is some connection between the information on that
18:53
Speaker 3: marketing side, how they how they make money side, and
18:56
Speaker 3: the CFO side how they spend money, because how the
18:59
Speaker 3: CFO defines ad budget may not be real based on
19:02
Speaker 3: an expense they see on a book may not be realistic,
19:06
Speaker 3: may not be realistic for the CMO to be successful.
19:09
Speaker 3: And that's not because the CMO is bad at their job.
19:11
Speaker 3: It's because literally they don't have enough fuel to fuel
19:14
Speaker 3: the engine that is the business because they don't have
19:16
Speaker 3: the right information from the CFO.
19:18
Speaker 2: Now I can relate to that, I can relate to
19:20
Speaker 2: that big a marketing manager myself. It's all about the
19:24
Speaker 2: return on investment and making sure that the CFO is
19:29
Speaker 2: happy with the amount that we're spending. And sometimes, you know,
19:32
Speaker 2: when you go into you know, online advertising, you have
19:35
Speaker 2: to spend money to make money. And I get that
19:38
Speaker 2: a lot of times that the CFO doesn't feel that way,
19:41
Speaker 2: especially in a small company when they're literally counting pennies,
19:44
Speaker 2: not dollars, not millions of dollars, but pennies. Just to
19:47
Speaker 2: make sure that everything, you know, balances, there's profit at
19:51
Speaker 2: the end of the day. So it's it's understandable that
19:54
Speaker 2: there would be that. I don't know that it's necessarily
19:57
Speaker 2: a miscommunication, but a misunderstanding of of the different effects
20:02
Speaker 2: that money has on those roles that the investment has
20:06
Speaker 2: on those roles. Because you know, the marketing is an investment,
20:10
Speaker 2: you do have to have sales because if you're marketing
20:13
Speaker 2: your product and you're not selling it, then you're going
20:15
Speaker 2: to go out of business very fast. But at the
20:17
Speaker 2: same time, if you have a great product and you're
20:20
Speaker 2: not marketing it effectively, you're also not going to sell it.
20:23
Speaker 2: So there is definitely a balance there where the two
20:28
Speaker 2: as you said, the silos need to have that bridge
20:32
Speaker 2: to make that communication happen so that both sides are
20:36
Speaker 2: working toward the same goal, which is profitability. I mean,
20:40
Speaker 2: everybody in the business has to be concerned about that.
20:42
Speaker 2: It goes from you know, the CEO down to the
20:45
Speaker 2: person who cleans the office at the end of the night.
20:48
Speaker 2: Everything goes into that business's profitability. So whether people are
20:54
Speaker 2: running a business in Berlin, Bangalore or Boston, what universal
20:59
Speaker 2: t have you seen emerged for some of these founders
21:03
Speaker 2: trying to build a profitable company when times are unpredictable
21:07
Speaker 2: like they are right now.
21:08
Speaker 3: You know, maybe it's the nerd in me. Profitability is
21:12
Speaker 3: a math problem. I mean, bottom line, it is now
21:16
Speaker 3: what you just mentioned, which is really important, not all
21:19
Speaker 3: of it. Not Running a business is not just a
21:21
Speaker 3: math problem. There's a lot involved in running a business,
21:23
Speaker 3: big or small. Right, There's the combination of art and
21:26
Speaker 3: science that lives throughout that whole massive puzzle that is
21:30
Speaker 3: made of a thousand pieces. Pieces aren't all weighted the same.
21:33
Speaker 3: But that's what operating a business is like, big or small.
21:35
Speaker 3: So there are components to that that are the creative
21:38
Speaker 3: parts that are much more art than science obviously, but
21:41
Speaker 3: at the end of the day, if we distill it
21:43
Speaker 3: down math, the profitability inside of a business is just
21:47
Speaker 3: purely a math problem. And at the risk of sounding flippant,
21:51
Speaker 3: at the if you were losing money, the reason you
21:53
Speaker 3: were losing money is because you are spending more than
21:55
Speaker 3: you're making. It's quite literally that simple. And now the
21:59
Speaker 3: next verse of that is you're spending on fixed expenses
22:03
Speaker 3: more than the contribution margin that the business is earning.
22:06
Speaker 3: And if you know what contribution margin is, you know
22:08
Speaker 3: what is inside of pretty much every business on the
22:10
Speaker 3: planet is the answer to the question is it working
22:12
Speaker 3: or not. Growing contribution margin dollars over time means whatever
22:16
Speaker 3: you are doing is working. And as long as you're
22:18
Speaker 3: not growing your fixed expenses at the same rate as
22:20
Speaker 3: your contribution margin, that equals net profit, you were making
22:23
Speaker 3: more net profit. So I think helping you know at
22:27
Speaker 3: the higher stage, a CFO at a big company knows
22:30
Speaker 3: exactly what I just said. A CEO founder of a
22:34
Speaker 3: three million dollar a business, three million dollar per year business,
22:37
Speaker 3: I just spoke French to him or her like, they
22:40
Speaker 3: don't understand that, and that's okay. That's again, that's like
22:44
Speaker 3: the whole part of this of Pentana as a product
22:47
Speaker 3: is to simplify that. That is the common truth to
22:49
Speaker 3: me inside of business is that most of the problems
22:55
Speaker 3: that come up and arise within profitability can be solved
23:00
Speaker 3: with math. As long as we set a destination, we
23:02
Speaker 3: pick that endpoint, we say we want to get to
23:04
Speaker 3: break even, we want to generate a ten percent net
23:06
Speaker 3: margin or a twenty two percent or whatever that is.
23:08
Speaker 3: We can use math and some really simple conditional logic
23:12
Speaker 3: to work back from that and define a mathematically driven
23:15
Speaker 3: plan that doesn't rely on like slinging spaghetti against the wall,
23:19
Speaker 3: which is what an awful lot of companies do, and
23:21
Speaker 3: just hope that it works, which is not obviously not
23:23
Speaker 3: a great strategy.
23:24
Speaker 2: Yeah, hoping is not a plan. No, witching is not
23:28
Speaker 2: a plan, not even praying as a plan. But so
23:32
Speaker 2: you're talking about, you know, your math acumen. What is
23:39
Speaker 2: what would be your most interesting or most successful customer
23:43
Speaker 2: story with pen pain and the platform, Like, where have
23:47
Speaker 2: you been able to really drive profitability for a business?
23:52
Speaker 2: Can you tell us about a particular client or a situation.
23:56
Speaker 3: Yeah, I'll give you an example, and it's an interesting
23:59
Speaker 3: one because it's the solution is counterintuitive, which is why
24:03
Speaker 3: again math is becomes important when we're making decisions about
24:06
Speaker 3: this stuff. There was a business that is a consumer
24:09
Speaker 3: product company selling a really high end travel bag. The
24:12
Speaker 3: founder brilliant product designer and this is the way these
24:16
Speaker 3: things happened, created a product, people started buying it, and
24:18
Speaker 3: he's like great of CEO and he's the CEO of company.
24:21
Speaker 3: But he doesn't have a heavy financial background. It's not
24:23
Speaker 3: his expertise. And that's okay. Most startup founders, you know,
24:26
Speaker 3: early stage founders don't. That's why they eventually go and
24:29
Speaker 3: hire those people. They got to a point they were
24:32
Speaker 3: doing two million dollars a year and they were completely
24:35
Speaker 3: upside down. They were losing one hundred thousand dollars a
24:37
Speaker 3: month a month and a two million dollar year business. Obviously,
24:41
Speaker 3: that's not good. You only have a couple of months,
24:43
Speaker 3: you know, unless you have deep, deep piggybank pockets and
24:45
Speaker 3: you love spending it, you only have a couple of
24:47
Speaker 3: months of life at that rate. So what we did,
24:51
Speaker 3: we got them into Pentane and what it told them
24:56
Speaker 3: was two things. Technically, it told them that their fixed
24:59
Speaker 3: expense base for the sized company they were was really high.
25:03
Speaker 3: Important note number one. The more important note is it
25:06
Speaker 3: told them that they were underspending on their advertising. But
25:10
Speaker 3: they effectively they needed to increase their ad budget by
25:13
Speaker 3: three hundred percent. That's a crazy thing. Like you see
25:15
Speaker 3: that as the founder who's losing money, losing money, and
25:19
Speaker 3: you're telling me, I got it, I got a three
25:21
Speaker 3: x my AD spend. No way. The problem in a
25:25
Speaker 3: business in that business, and it's a little bit different
25:27
Speaker 3: in every business, but the problem in that business is
25:30
Speaker 3: that they had their return on AdSpend, their ROI was nine.
25:33
Speaker 3: That's crazy, like amazingly high. But the business wasn't driving
25:38
Speaker 3: enough revenue to drive enough contribution margin to pay for
25:41
Speaker 3: their fixed expenses. So the combination of not enough revenue
25:44
Speaker 3: and two high fixed expenses created this like perfect storm
25:47
Speaker 3: of debt spiral. And so they got in the system.
25:50
Speaker 3: They got to see, if we increase our AD budget
25:52
Speaker 3: by three hundred percent, which is insane, their return on
25:55
Speaker 3: ads spend needed to get to break even will come
25:57
Speaker 3: down to like three point five, which is much more reasonable,
26:00
Speaker 3: particularly because their products were expensive. And because they got
26:03
Speaker 3: to see that and we got to then they didn't
26:05
Speaker 3: just increase that three hundred percent overnight like that happened
26:07
Speaker 3: over the course of a month, and they got to
26:09
Speaker 3: see that happened in a controlled fashion. It completely changed
26:13
Speaker 3: the company. Three months later they were profitable. Now a
26:16
Speaker 3: year and a half later, they're up seven hundred percent
26:19
Speaker 3: and profitable because it just clarified this like mess inside
26:23
Speaker 3: the company that they didn't they didn't know was there,
26:26
Speaker 3: they didn't know how to solve it. The founder of
26:28
Speaker 3: that company says that before the before I mean pentane,
26:32
Speaker 3: before the mouth inside of pentanine, he felt like he
26:34
Speaker 3: was walking through the forest at night, hammering, just bumping
26:37
Speaker 3: into trees NonStop again. Yeah, yeah, and Pentane turned on
26:40
Speaker 3: the lights. It didn't make it so the trees aren't there,
26:42
Speaker 3: but it gave him the ability to see them coming
26:44
Speaker 3: so they could plan and strategize around them.
26:46
Speaker 2: I think that that is a huge, huge asset for
26:49
Speaker 2: small businesses, for startups. Does it also provide insight for
26:55
Speaker 2: some of those medium sized businesses that are making that
26:58
Speaker 2: you know, one hundred million?
27:00
Speaker 3: Yeah, you know, that's a funny question. I've had a
27:03
Speaker 3: lot more discussions around that recently. I was always under
27:08
Speaker 3: an incorrect, possibly incorrect assumption that once you got to
27:11
Speaker 3: the point you got above fifty million in revenue ish,
27:15
Speaker 3: you generally have like a full suite of really talented people,
27:20
Speaker 3: you know, doing CMO things, doing cro things, doing CFO things,
27:23
Speaker 3: and that that would sort of inherently solve the problem.
27:27
Speaker 3: And I have I am learning that the problem still
27:30
Speaker 3: exists even in much larger firms like that, where you
27:33
Speaker 3: have this you know, you have this vacuum of data
27:36
Speaker 3: that doesn't cross in between sort of the financial side
27:39
Speaker 3: and the customer acquisition side of the business. We are
27:42
Speaker 3: focused on the smaller brand as a company just because
27:46
Speaker 3: it's where I think we can be the most helpful.
27:48
Speaker 3: And as we get bigger, we tend to see companies
27:51
Speaker 3: that want really custom things, which we can do, but
27:53
Speaker 3: they take money and time and whatever. But I do
27:57
Speaker 3: think that it is a problem that is a lot
27:58
Speaker 3: more pervasive than I had originally assumed, even in larger
28:02
Speaker 3: companies like that.
28:03
Speaker 2: Well, that would be amazing if the tool also helps
28:07
Speaker 2: illuminate those issues within the financial structures of the business
28:12
Speaker 2: in order to help them achieve that profitability, especially now
28:15
Speaker 2: that we're we're facing a situation, especially here in the US,
28:19
Speaker 2: where you know, we're going to have to encourage those
28:23
Speaker 2: entrepreneurs to do something. We're the political situation is just
28:28
Speaker 2: making it perfect, the perfect breeding ground for these small
28:31
Speaker 2: businesses to start up, to get off the ground, because
28:35
Speaker 2: that's that's what the current administration wants. They want to
28:38
Speaker 2: bring that ingenuity, that that innovation back to the US shores.
28:43
Speaker 2: And that's great, but we are a global economy, and
28:48
Speaker 2: you know, while the enterprise level businesses are having to
28:51
Speaker 2: adjust things and they have that bandwidth, they have that space,
28:56
Speaker 2: they have that size, you know, behind them, they're still
28:58
Speaker 2: trying to be profitable too. I mean, that's that's an
29:01
Speaker 2: issue for them as well. But it's one of those
29:04
Speaker 2: things where you know, you kind of think of, you know,
29:06
Speaker 2: rich people don't have problems. You know, big businesses don't
29:08
Speaker 2: have problems. Well, of course they do. They're just different,
29:11
Speaker 2: they're different size, but they're still problems. And I think
29:14
Speaker 2: with the the interest in building up the infrastructure of
29:18
Speaker 2: you know, smaller businesses and bringing a lot of that
29:22
Speaker 2: production onto US shores is going to I have a
29:26
Speaker 2: feeling you're going to be really busy in the next
29:28
Speaker 2: few years helping these startups because there's they're trying to
29:33
Speaker 2: solve a problem which is caused by you know, the
29:36
Speaker 2: tariffs and trade agreements that they had no control over,
29:39
Speaker 2: and now we're just trying to have product, we're trying
29:41
Speaker 2: to have you know, commerce. And to your point, these
29:45
Speaker 2: people don't know they're they're the innovator. They thought up
29:48
Speaker 2: a solution to a problem and a business case to
29:51
Speaker 2: make it happen. But they're not a CEO or a CFO.
29:54
Speaker 2: They don't understand what it is that it's going to
29:56
Speaker 2: take to make that business profitable and long lasting. They're
30:00
Speaker 2: just trying to get through this year.
30:03
Speaker 3: Yeah, it's a real it's a real challenge. I mean,
30:06
Speaker 3: the math inside of Pentain is the same whether it's
30:08
Speaker 3: for Exonmobile or the dry cleaner down the street. So
30:11
Speaker 3: it is very universal that challenge of early stage business
30:16
Speaker 3: is trying to navigate that. I mean, this is actually
30:18
Speaker 3: a perfect example of the benefit of being a smaller company.
30:22
Speaker 3: In Pentain. We know that that's a challenge. So I
30:25
Speaker 3: can snap my fingers and have our development team create
30:29
Speaker 3: a tool inside of our guidance system that accounts for tariffs,
30:31
Speaker 3: so they can go in and say, what happens to
30:33
Speaker 3: my company if I add twenty seven percent to my
30:35
Speaker 3: cost of goods to adjust my micross margin and see
30:40
Speaker 3: how that impacts how they have to acquire customers and
30:42
Speaker 3: what they can afford to spend, and how their conversion
30:44
Speaker 3: rates on their websites needs to change, and all these
30:46
Speaker 3: things where it might take a big legacy SaaS company
30:50
Speaker 3: six months to do it or a year to do
30:51
Speaker 3: something like that. I mean, we can do that in
30:53
Speaker 3: four days. We can move fast, break things move quickly.
30:56
Speaker 2: Where can our listeners find more information about this this
31:01
Speaker 2: tool that you have that can help illuminate some of
31:04
Speaker 2: those those issues or even just you know, completely missed
31:09
Speaker 2: opportunities within their their financial situation.
31:12
Speaker 3: With your business, Yeah, you can find Pentain at pentain
31:15
Speaker 3: dot com, p E n t A n e dot
31:18
Speaker 3: com me on LinkedIn. That's about the only place I
31:20
Speaker 3: spending any time right now.
31:21
Speaker 2: So all right, Well, make sure to put those two
31:25
Speaker 2: links in the in the description here for all of
31:28
Speaker 2: our listeners to be able to reach out to you
31:31
Speaker 2: if this sounds like something that would help them in
31:34
Speaker 2: their current role at their current job or with their company,
31:39
Speaker 2: or if they have an idea that they want to
31:41
Speaker 2: try to get off the ground. You know, you might
31:43
Speaker 2: get a whole lot of interest in people just saying, Hey,
31:46
Speaker 2: you've been there, done that. How can I make this work?
31:49
Speaker 3: I'm happy to help.
31:52
Speaker 2: In a world where everything feels uncertain, from logistics to legislation,
31:56
Speaker 2: the companies that survive aren't necessarily the biggest. They're the
31:59
Speaker 2: ones that the fastest, understand their numbers and make the
32:03
Speaker 2: smart bets early. Thank you Adam for showing us what
32:06
Speaker 2: this looks like in real life. If any of our
32:08
Speaker 2: listeners have a suggestion for a topic or would like
32:11
Speaker 2: to be a guest on the show, we'd love to
32:12
Speaker 2: hear from you. You can contact us at podcast at
32:15
Speaker 2: meebok dot com at any time. As always, thanks for
32:18
Speaker 2: listening to Speaking of Supply Chain. If you've enjoyed our show,
32:21
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