Advice Line with Mark Ramadan of Sir Kensington's (June 2024)

0:08 Hey everyone, just want to let you know that this week our team is taking a much needed break. So we chose one of our favorite episodes from the archives. Here it is, and hope you enjoy it. Hello and welcome to the advice line on how I built this lab. I'm Guy Roz. This is the place where we help try to solve your business challenges. Each week, I'm joined by a legendary founder, a former guest on the show who will attempt with me. to help you.

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1:19 My guest today is Mark Ramadan, the co founder of Sir Kensington's. It's a condiment brand that he launched with a college buddy and with no prior food or business experience, they took on the giants of the food industry like Hein? Mark, welcome to the advice line. Thank you, Kai. Great to be here.

1:39 And it's great to have you back on the show. Um, we had you on the show back in the fall of twenty twenty three. Um And you and your co founder, Scott, uh told the awesome story of How when you're in college at Brown you decide to invent a fake British aristocrat, you called him Sir Kensington. And you made them the face of your ketchup brand and and you basically started making small batches of ketchup.

2:02 uh in your apartment for for friends, for college friends, right? Absolutely. He started as a fake character, but he but he became very real to us. It was quite the journey. Yeah, and and you know, I remember

2:13 Mr. Kensington started out as a specialty catch up, right? But but actually the business didn't really start to take off until you went he branched out, you went to mayonnaise. Um and then and then a bunch of other condiments. Um and actually c crazily enough, I mean the the the catch up was eventually discontinued in twenty twenty three'cause the mayonnaise and the other What what kind of lesson did you learn from that, you know, being sort of being willing to pivot or or to really branch out from the original

2:41 Product. Yeah, we spent three hard years doing nothing but making and selling catch up. And there were many times where we felt like the business would would die that way because the traction on the catch up was not as fast as we wanted it to be or You know, the adoption was not where we expected.

2:58 And getting into mayonnaise was partly because we felt like we had to do something to try and pivot and save the company. Also because we were getting requests from it from retailers. And as soon as we launched it, it really took off on its own. I mean, we were selling more mayonnaise within six months than we were selling after three years of selling catch up. And one one of the things I think we learned from that is maybe the most obvious lesson, you don't know what your best selling product is gonna be until after you make it. Yeah, it's such a good point. I mean, especially with something like mayonnaise. You know, we had Mark Sisson on of Primal Kitchen and they were making a compet a competing product and they also had a lot of success in Nana's, right? And and you guys were using

3:35 avocado oils and really like you were Making a product that wasn't available. I mean it's just I mean mayonnaise was, but not the kind of mayonnaise you were making. Yeah, and I think the other thing is you you sort of form opinions about the category and about the competitors in the category that are sometimes informed by fact, but often they're informed by emotion. So for example, we had this expectation that people were

3:58 More just as or more brand loyal to Helmans. And best foods mayo as they are to Heinz. Simply because it's just as dominant from a market share position. But it turns out that wasn't the case, that people were not as emotionally connected to Mayonnaise as they were to catch up. Catch up is associated with all of these like childhood memories for people, whereas Mayonnaise is is just not. And so that was just a big learning that we had, which is really forget about all the assumptions that you formed in the category. And price was a big one, too. Avocado oil mayonnaise, like you're talking about, ended up becoming ours and and primal kitchens and others' biggest products.

4:32 But that was ten, eleven, twelve dollars a jar. Which would have been unheard of at the time that we started the company. So you just, you know, you never really know what boundaries you're able to push and what's gonna resonate with with your consumers. I know that you're not gonna hold this against me because you're not part of the company anymore. But you know, I have a you I think you know this. I have this thing about buying mayonnaise. I think everyone should just make it. Just get the food processor and just, you know, pour the oil into the egg.

4:56 Going with the processor. I'm with you, guy. I mean, for those who have the the courage and the time, you should do it. It's so delicious. I I can eat it. I know this is gonna sound disgusting. I can eat it. My homemade mayonnaise by the spoonful. It's delicious. Oh, I I've done there. It's delicious. Yeah. I just made some the other day. You would have been a welcome guest at the Sir Kensington's Mayo tasting parties, of which we had. Yeah, just dipped artichokes in there. Mark, I am so excited and happy that you're here because we've got

5:26 Some really, I think, complex questions heading our way. Let's take should we take the first call? Would love to. All right. Uh you are on the line. Hello.

5:35 Is it Pat? Hello, yeah, Pat Early and Helena Montana. Pat, welcome. Tell us a little bit about your business. Yeah, so my business is Stripsy LLC. We manufacture the Dripsy kitchen sink strainer. I'm the co founder and inventor of that product.

5:51 And we feel it works. significantly better than pretty much any other sink strainer on the market. I don't know if many businesses have put a lot of thought into sink strainers in the past. And I put a heck of a lot of thought into it. Um So yeah, we sell mostly online and also on QVC. And uh we actually just surpassed our one millionth happy sink that has been supplied with the Dripsey. Yeah. And what and what uh what's your question? So my question is, you know, we

6:17 We've had good success online and on QBC and those platforms, but we have You know, we've been trying our hardest to get into retailers for some time now, and we have gotten into quite a few smaller, you know, mom and pop ace hardware true value, that kind of

6:35 Store. Pretty much every buyer we talk to You know, at the store level, that kind of buyer, they like our product. Um But they say, you know, y y you have to pass it through the regional buyer or it has to get on the ace truck.

6:48 Right. So they don't want to have to order from us. They want to be able to order it out of the catalog. And whenever we reach out to Those higher level Corporate buyers. You know, they they don't really give us the time of day and I don't know if that's something that I'm doing on my end, or if it's something about our brand. Um, and I guess I'm just looking for advice on how we could

7:08 Have some more success with buyers to get into retail stores. All right, so we'll get to your question in a moment. Um What what's different about your product than than the metal strainer that comes with the garbage disposal? Yeah, so This all started, you know, to take it back a little bit, I guess. I was in a house that was on septic, so we didn't have a garbage disposal. Right. Uh we had a

7:30 metal strainer that broke and I I had to go to the store to get a new one and it was Nine or ten bucks and it broke after two weeks and I got You know, I guess it it annoyed me enough. That I decided to

7:43 You know, I was like, I think I could probably do a better job at this. But You know, my idea behind the design to get to your question was I wanted it to fit below the rim of the sink. So food and Things don't get caught or go under it.

7:55 And I wanted it to not clog. So you don't have to empty it out five times while you're doing the dishes. Um And we yeah, we we achieved that. It it fits inside the drain nice and snug. Nothing sneaks past it. And it actually, you know, it can fill up completely because the hollow Central stem drains water if the basket's full. And it just it just keeps, man, and it's non stick, so it empties into the trash can no problem. And

8:19 It's it's significantly different than any other strainer. I don't know of any fully flexible sink strainers out there. Yeah. And are you are you like an industrial designer? Is that How did you how did you design it? No, I'm an emergency medicine PA. I have no experience um with anything. So this is not your fault, this is your side hustle. Yeah, no, I wish it was my full time job. But no, I just learned how to use three D design software over the course of You know, six months and we prototyped it.

8:48 And then found a manufacturer here in the US to make it for us. Do d are there I think this is maybe related to your bigger question, but do you have other products in your innovation pipeline that you're working on, like other problems in the kitchen you're trying to solve, or not right now? No, we do, and That's that's part of the feedback we've heard from buyers is that they want somebody that has a line.

9:10 They don't wanna just have to pick one product to bring into their store. They want somebody to come in that has twenty products that they can just hang on their shelves and it works out. Um, and we don't have that. And I you know, I've gone threw it in my head and thought, Hm, maybe I should just bring out products that are You know, status quo, they're not anything special, but

9:28 There are just more products to have in a line. But I don't know if that I I don't I don't know if I want to branch out into be a Into being a you know, kitchen utensil brand, right?

9:39 I think we wanna be an innovative kitchen and Plumbing brand. So I'm Designing right now a a hair catcher for a bathroom sink. We do have a stopper. Um

9:50 Yeah, I mean I've Gosh, it's it's hard because I don't want to dilute our brand'cause I think what makes us so special is that the product is actually better, you know, it's a better mouse trap, if you will. And I don't wanna come out with a spatula that's the same as every other spatula'cause I feel like it doesn't you know, it's not really what our brand is about, but maybe that's what we have to do to be able to break into retailers.

10:12 Well Take a quick step back. If you think about how do retailers make money? What's the retail business model? And why might they be frustrated with a single single skew. Brand.

10:23 Ultimately, they're not really in the business of solving consumer problems. They're in the business of making money. And so for every vendor that they work with, there is some amount of fixed costs associated with that, right? Communication time, invoicing, chargebacks, and so on. And so The easiest thing for Ace or for true hardware to have is like three vendors to only work with OXO and two other ones, right? A good, better, best model, which is why like if you take the catch up category circa fifteen years ago.

10:52 There was a good, better, best brand. That's it. There was the value brand, there was hinds, and maybe an expensive one because the fewer brands you have in the same amount of space, the less work it is to manage your shelf and to make money from your shelf. So from a retailer's perspective, it's always easier to have fewer, bigger Providers. So that's probably why you're getting pushed in that direction. For your specific brand, I mean, I I looked at it online, I think it's beautiful. I love that you're solving a specific problem in a in a different way. So it's not obvious to me that there's anything wrong with your brand.

11:22 And I would strongly recommend you don't breach your own brand values there. Right. I'm one hundred percent in agreement with you that if your brand is about solving problems in a way no one solved it before. Then you have to stay true to that. grand commitment that you've made. Yeah. And not to make it all about Condiments. But You know, when we launched mayonnaise, it would have been really easy to just say, Well, let's just launch like a mayonnaise that looks like every mayonnaise in Whole Foods, but we didn't.

11:46 took us a long time to say, Well, how would Sir Kensington's Make a mayonnaise. keeping with the quality of the ketchup and that was by creating a supply chain for certified humane free range eggs. We were the first company in the country to use free range eggs. And that took longer, it was harder, but it was a unique solution that suited us.

12:03 So I think the equivalent here is true. Don't just come out with ten things and be like A slightly more expensive Oxo,'cause they already have Oxo. Right. As you're thinking about product development.

12:12 One encouragement I would have for you is As much as you are focused on solving a real problem, and that should be your starting point. There's lots of different sizes of categories in the general store that you're playing in, right? And I don't know what the relative size of a sink catcher is versus a hair catcher for the bathroom. versus XYZ product that I could go buy from Ace.

12:33 But as much as you can figure out What are the category sizes? What is the depth of competition? What is the turn rate on these items? What's the margin that the manufacturers andor the retailers are making those should all be factors as you're going through the process of figuring out what do we make next. Yeah. And you know, Sir Kensington's was no less brutal and ruthless about going through that qualification. There's a million things we could make. we ended up in Mayonnaise for lots of reasons, not just because it seemed like an obvious adjacency, but also because it was bigger than catch up and the turn rate was faster and the margin structure was better and our co packers could make it.

13:06 And so, you know, I would go through that same check create the checklist and if you don't have any money to buy data, which I I I assume you wouldn't necessarily be buying data here. You can go to your local stores. You know, whoever you're selling Tripsy two today. Just

13:20 Bag Barrow. you know, plead with the store managers and say, Help me out. Like what sells well? You know, what would what would do you think your customers would be excited to see a new version of and cross-reference that with your own problem solving. Interests and that should land you somewhere that is both a good idea and is a good business.

13:38 Yeah, yeah. Yeah, that that's great advice. I wanna see that like I wanna see a commercial an advertisement of like The garbage disposal guy repair guy just like Borg f swatting flies.

13:52 Waiting for the phone to ring. And and then you know Tripsy. Keeping your drain. Clog free since two thousand nineteen.

14:00 We're the company that makes water flow. You make the water flow. Yeah. You make the water flow. I like that. That's it. I like it too. We just been a think group. I like it. All right. Cool. Parally, the brand is called Dripsy. Um good luck. Thanks for calling in.

14:16 Thank you so much. All right. Take care. Pay. Cool. I like that.

14:23 Yeah, right. I mean, you've had to call a plumber. Before. Yeah. I've had my s I've I have had that exact issue. I've had a a bad sit catch. Yeah. Yeah. I'm the one I don't do the cooking in the house, so therefore I do all the dishes in the house. And I've definitely

14:38 I'm the one who's cleaning out that sink trap three times during a wash. And I have n it's not this is not about pl I love plum. My grandfather was a plumber. So I love plumbers and I wanna give you guys business, but I'm just saying, you know, it's the call, it's the wait, it's the being at the house between, you know, noon and eight PM and then You're like, I'm at the house from noon until eight, and then it's seven forty five, and then he arrives and he's like, Yeah, I gave you an eight hour window. Yeah. Are you kidding me?

15:06 And you're like I'm in the middle of making my mayonnaise. I can't stop it. So I'm just saying all I had to do was put in the dripsy And that would never have happened. I see a short firm video. It's not just an ad, this is a whole series of content. It's a whole it's a whole uh bunch content. All right. Yeah. Okay, Mark, we're gonna take a quick break, but when we come back A taco shop owner who's about to get

15:29 A very competitive neighbor. Chipotle. Stay with us, I'm Guy Raz and you're listening to the advice line right here on how I built this lab. Welcome back to the advice line on how I built this lab. My guest today is Mark Ramadan, co founder of Sir Kensington's. So Mark, let's go ahead and take another call.

15:58 Yeah. Hello, hello, Lucas, welcome. Hello Mar guy, I'm honestly uh honor. To be here, I've been listening to your podcast for like ever. Thank you so much. Tell me what uh where are you calling from and and uh w and your business. What's the name of your business?

16:16 So my name is Lucas Manteca, I'm originally from Argentina. I've been living in K May Courhouse, South Jersey, and a small seashore community. Right by the beach. As a chef and entrepreneur, I'm the proud owner of Taco Shop, the quick service restaurant with focus On made from scratch, tacos and plus.

16:38 Got it. Okay. And and um tell me what question you brought for us today. So what are your thoughts on tackling Chipotle um As a competitor. Like should I uh try to attract some investors to scale my business? You know, to piggyback on Chipotle's strategy.

16:56 uh to establish locations that capitalize on their customer base and market influence. Got it. Okay, we're gonna get your question in a minute. So so right now you've got one taco location, one taco shop, which is in Cape May Courthouse, New Jersey, is that right? Correct. That's that's correct. And you open this in twenty twenty two, from what I understand. And uh and tell me about uh how it came about. How how that restaurant came about.

17:21 So I've been in the food industry for about um thirty years pretty much. I've been a chef. I opened multiple restaurants. I started uh you know, hot dog stands, I own a sea salt farm, so I'm a naturally like entrepreneur and chef. Right. So after the pandemic. We kind of like

17:43 shrink our businesses, keep the things that they made sense for us financially and concept wise. And uh we decided to put, you know, um all our games pretty much into one concept that That was Taco Shop. Yep.

17:59 So we open this concept as You know, the idea of a QSR. Um Quick service restaurant and we are doing great. You know, we serve in a small community, a very seasonal community. K May's right up yeah. We we're about five minutes from K May.

18:18 Um And our concern, you know, with the With the price increase in in in food and you know, restaurant industry as as tough as it is right now. Our concern really is having a competitor as Chipotle coming into town which is Chipotle in town? Are they near you?

18:36 They are about a hundred and fifty feet. They're supposed to open this summer about a hundred and fifty feet from Wow. Okay. It's a one off and Chipotle is about to open up there. And so

18:51 What b besides tacos, it means tacos, burritos Um just you know, what you would find similar to what you would find at Chipotle. So You know, from an starting point, me being a chef, I did like a huge market study before I started this concept and I wanted to differentiate ourselves from any competitor, including Chipotle. So We thought

19:14 uh focusing on tacos was the smart thing to do. We don't have an assembly line. We do like um Kind of a cook to order. But we're really fast, right? So everything it's it's been designed. To be out within five minutes. And I'm looking at your website and so you do like quesaburillas and you're doing uh fish tacos and fried chicken tacos and

19:37 So you're you're really doing different kinds of tacos here. I mean things that Chipotle would not offer. Correct. And and as well, you know I'm so passionate about food that I keep up with the trend. So ramen it's pretty big right now within the market. So we have a Mexi Ramen and the same with poke. So we have a variety of items to add on to our mix of tacos. And as well what the other competitors You know, they do.

20:03 Mark, you faced a giant competitor Heinz with your catch up with Sir Kensington's and of course Lucas is facing the Um impending arrival of Chipotle a hundred and fifty feet From his taco shop, um which is a

20:18 Obviously a massive multi billion dollar You know, empire. Um Any any initial thoughts before we dive into his question? Well, first of all

20:29 I'm happy to hear that you made it out of the pandemic and you have a concept that's working. So congratulations because a lot of restaurateurs and chefs did not. So you should feel at least proud of where you've gotten to. I think the, you know, at the highest level, like competing with a monolith, like any m major company. You just have to recognize there are some things that they do very well. And some things that they would just never do. You know, and the things that they do very well are

20:55 Systems. Routine, predictability. dependability and usually cost and price, right? So that means they're very good. Chipotle's an excellent example of a restaurant that has managed to maintain The expected level of quality at significant scale.

21:10 But no one would call it their local taco spot. Right. I mean what Tropoli is not good at is They're not good at creating a local integrated community feel in any of their stores. And so You know, my initial instinct is

21:24 Don't compete with Chipotle doing what Chipotle does. Chipotle's gonna out Chipotle you ten days out of ten, right? They've they've built the machine to do that. But When you go into a local restaurant you expect to have a local feel there, whether that's you know local performers or musicians. local additions to the menu or even a a little local market there. These are just random examples of how do you make your store not feel like a competitor to the chain restaurant next door, but actually its own completely

21:51 New thing. And One part of that equation is you. It's the personalities behind the counter, right? It's the people. Cause what is a hospitality experience if not People.

22:02 And then the second is the environment. I mean the food, you maybe you both serve tacos, but that's almost incidental to the emotional experience delivering. Right. And To be honest, it's uh the idea behind Taco Shop as well. It's like trust the chef behind the scene. you know, that is going to offer you the best experience that

22:21 That we can and fast. And you know, going back to the atmosphere is My wife, she's a designer and we take a lot of pride as well about the atmosphere. You know, it's like we make sure that we didn't copy absolutely anything. that it was already, you know, within, you know, our competitors or marketplace. We created a very, very unique um concept.

22:44 You know, Lucas, I'm looking at the your website and you just mentioned this ide this this idea that like, hey, trust a chef and and all stuff. I I I I know this'cause I just look I was looking at your bio, which is not on your website or might it's not easy to find. You're a nominee, you're a James Beard nominee. I mean like I mean you have this incredible Pedig and I wonder if it's a little bit more.

23:05 Why on the website it doesn't say tacos from a James Beard nominee, or you know, or chef driven. I mean Um, Steve Ells, who started um Chipotle, was a trained chef. He did go to culinary school and his dream we did him on the show many years ago, his dream was to build A Michelin three star restaurant. That's why he started Chipotle to finance it. It never never built a Michelin restaurant, but Chipotle was a result. But it was chef driven. I feel like Just from

23:32 the entry point, you know, whether it's a website or coming into the restaurant. You need to tell me this is driven by a chef, a a James Beer nominee. Right, right. And and and you're correct. I just you know, I It's really hard. The perception of tacos is always going to be Taco sort.

23:50 Cheap food. Correct. So Um The fact that I'm a chef, I'm I'm always afraid that we're gonna scare people away thinking that, you know, we're too upscale or even over the core, you know. We we made it as simple as we can because we are concerned that, you know, people are not gonna be feel comfortable when they walk in the door and feeling like

24:12 they're gonna pay a higher price that they can right around the corner. And you know, we stand behind our quality, but The first perception really for a guest. to walk in through the door is so important. That

24:27 You know, it it's tough. It's uh it's all these elements that we try to balance uh to make sure that we can cater to everyone. Am I I mean this is maybe a contrarian opinion, but I think that the word to focus on in terms of the your guess is maybe less price or cost and more value.

24:48 Right. Value is like price meets expectations. That's just one definition. But You could raise your price and also raise the experience that you're delivering or raise the ante on expectation, and people may well be willing to pay that. My fear for you

25:04 Again, I I haven't been to your restaurant, so I you know, I don't know if this is the case, but my fear is If you engage in a price war with Chipotle, you will definitely lose. You will never have the cheapest, most profitable tacos, right? And so that's a losing fight from day one. What you really want to do is figure out what what is the community center that your guests are looking for.

25:25 During the summer season. In Cape May. Right. Right. And I can think of so many little beautiful seasonal shops out in the North Fork of Long Island or in the Hamptons or you know all the beach communities around the US. And they're all sort of like multi factor places. They serve coffee in the mornings and then they have delightful sandwiches in the afternoon. And there's also a bookstore. And maybe they also sell toys for kids because People want to buy toys in the summer and there's probably also ice cream in the afternoon. And I'm not saying you should do

25:52 Any of those necessarily. But if you shift your thinking from we are a taco restaurant competing with Chipotle to we are a community destination for summers in Cape May. serving great food, which happens to be Mexican food. I think you can really change the value expectation people have of your restaurant. If I go in and, you know, I'm faced with

26:12 beautiful design objects. And you have comfy chairs and Nominee behind the counter. And you say, Well, the tacos aren't eight bucks, they're twelve bucks or thirteen bucks, maybe it's a very different story.

26:25 Right. Right. Right. For sure. You know, uh Mark, I I think that you're on to something really important here, which is 'Cause I know, Lucas, you're wondering, should I bring on investors? How do I you know, how do I cr sort of grow this?'Ca d ultimately your idea is to grow this and to scale this, right? But initially the immediate threat is this

26:43 Chipotle coming. And Let's be honest, Chipotle is a great chain. It makes high quality food. But here's where Chipotle underperforms. And here's where I think, Mark, you're exactly right about the community thing. Here's where you can really differentiate, and that is Hatz.

27:00 If you go to Chipotle, there's Tabasco and there's Tabasco Chipotle. Th you could create, you could just get a wall, like right now. You could Just have a wall of uh two hundred hot sauces. A taco shop, right? I mean there's gotta be

27:16 People in New Jersey making hot sauce. I know there are people all over the country. That's me, guy. That's uh we we have four four different sauces. We have Holy Camoli, chimichimi Jesus Mary's heart. J J M J we actually make our own hot sauces and that's

27:35 The only hot sauce. That we serve at the restaurant. You know, it's You know, and again it's uh it We we never thought that we were gonna

27:45 uh be put on the field to compete. in such a big league and w we didn't choose this. It happened and Uh now Chipotle coming in place, you know, we know that they're gonna take thirty percent our bottom margin. You know, and that is our concern because

28:02 being a seasonal business where You know, our summer months are incredible, and our winter months are disaster. You know. twenty percent will really damage the business. So it's we're in front of a situation that we need to take action and that's our concern. I would just say on the fundraising side.

28:24 I would not recommend raising funds until you have a concept that you feel confident. That is working. Not only because I think it puts you in a position where you now are suddenly owing people money. And you don't necessarily have the

28:40 the runway ahead of you to pay them back, either through scaling or through selling the business. Uh, but it I think it distracts you from what should be your core mission now, which is how do you deliver something that's valuable to your community. Rather than how do you pay back your debility or pay back your investors. I work with a lot of restaurants and Those that are loaded up with debt. Can't focus on operations and those loaded up with

29:02 Equity investors. Also were distracted from finding opportunities with our operations. So I would definitely focus on I mean, I'm not saying don't raise money in the future, but typically you would want to wa wait to do that until you have the concept that's humming and buzzing and you feel like I can't help but open a second location. And I think you get there by creating a cult following. Right. I mean Chipotle scaled, sweet green scaled, all of these businesses scaled because they first had a home base that had a cult following. Yours will look different than Chipotle's.

29:30 But again, not not to repeat myself, but I'd encourage you to really think about How do you deliver a service? that is not tacos to your guests. You may serve tacos, but what's the service? What is the environment they're walking into? Why are they coming there?

29:44 And if the answer is because your tacos are better, I don't think that's a a long term sustainable differentiation from Chipotle. Not to say yours aren't delicious, but it's tenuous if they're a hundred feet away. Right. But how do you create something that's more? That's ac that's that's emotional, that's that's cathartic for people, you know? That's the beauty of local small businesses. Right. And I think you can do that through products, like Guy was saying with a hot sauce. I think you can do it through menu integrations, whatever's fresh from the farmers market. Chipotle will never do that.

30:12 And I think you can do it in ways that are cheap or free to you, like I mentioned this earlier, but invite a local musician to perform every Thursday. Yes. You know? Have a band there. A local band. You go in there to hear great music. And uh and have great food.

30:29 Yeah, that's a great idea. Trop Lade's never gonna compete with that, ever. Right. And the other thing is The quality of what you're producing, the quality of your ingredients, your pedigree, you're making the hot sauces. I didn't know that until you told me that. Yeah, we make our hot sauces, we make uh fresh tortillas every morning. In house. I mean this is not this is I I don't see this on your website. Maybe you're advertising that in the restaurant.

30:55 But man, I mean, I feel like Is part of your brand Bible. We make everything in house, you make your tortillas? I'm I'm eating that. You make your hot sauce? Like you g you

31:07 Steep the chilies in vinegar and and you're making it? I wanna try that. But you have to tell me that. Yeah, that's a good point. Mark, any any final words of wisdom? For Lucas.

31:18 I I guess I would only say Do whatever you can. the community that you're building and stay in touch with them. You know, whether you have a newsletter which costs you nothing. Right, or even just like some sort of way to keep track of who's coming in and out, to actually stay in touch, to let them know the events that are coming up, to let them know what kind of specials you're doing.

31:38 Again, these are like the super low cost ways to stay close to that community and remind them that you're still there. Right. Right. All right. Lucas

31:47 Um, thank you so much for calling in. Thank you so much, guys. I appreciate it. It's Taco Shop. Good luck. Thank you so much. I mean

31:55 Homemade hot sauce? Sounds great. And four different kinds, you know that one of those is gonna be really Fiery. And I'm like the one who's I'm always like I'm going from the mile to all the

32:07 Crazy Dragon fire breathing one. He's making it. You know, though, your idea of the wall of hot sauces was great. There used to be a restaurant in Hudson, New York, up in the Hudson Valley. It was a Mexican restaurant and they had

32:21 Like a literally a hundred hot sauces that you could pick from. And it was so fun because every meal was completely different. I remember there's a barbecue joint in Washington D C that has the same thing and it's so Done.

32:34 Yeah. Um Mark. W you you launched, of course, into this incredibly competitive space. Not not crowded, because ketchup's not crowded, but it's very competitive. Um, obviously dominated by, you know, and and managed too, by big multinational brands.

32:51 How how did you guys think about competing with those brands. Or did you think that we're not even competing with them at all? We're not going after the same customer. We definitely recognized that there was competition. But I don't think we saw Heinz as the big scary competitor, if that makes sense. If anything, we saw inertia as the competitor. People are on, you know, they're not impulse buying different catch ups every week. And so the real competitor was habit. And so we thought about how do we break a habit rather than how do we switch people away from Heims.

33:24 And so most of what we did at the very beginning was get in front of people so they could taste it. So that was doing demos and stores, most of which at the beginning, Scott and I did ourselves. Or we would be on restaurant tables or hotel room service trays because those are opportunities for people to actually taste it. Cause at the end of the day, what we were really trying to build was a taste, an emotional taste experience. And if it's just sitting on a shelf and it's one jar out of fifty and people are on autopilot anyway. That's no way to get someone's attention. We really had to cut through the noise. And so everything we did was about how do we cut through the noise.

34:01 Alright, Mark, we're gonna go ahead and take another quick break, but when we come back How to keep your baby from freaking out at dinner? a new kind of placemat. Stay with us, I'm Guy Raz, and you're listening to the advice line right here on how I built this lab. Welcome back to the advice line on how I built this lab. Today I'm taking calls with Sir Kensington's co-founder, Mark Ramadan. Let's take our next caller. Isabet.

34:41 I'm here, I'm here, and oh my gosh. I've been a fan of the show since the very first Week I had my business. Welcome. Thank you for listening to the show. Beth, tell us where you're calling from and just a little bit about your business. Yeah, my name is Beth Benicke. I am from a little town outside of Rochester, Minnesota, and my business is Busy Baby. We have the first ever interchangeable system of food grade placemats, tethers, and accessories that keep baby's things within reach and off the floor at home and on the go.

35:10 All right, so tell me the question you brought for us. What guidance would you have to offer a company that's navigating the messy middle phase where you're outgrowing the startup tactics, but you're not quite ready for, you know, big brand strategies yet? All right. Cool. Um, I believe, Beth You were on

35:31 how you built that this segment that we used to do back in the day where we would have, you know, two minutes about a a small brand. You were on our show back back in the day, right? Busy baby was. I was. I was. Tell us a little bit. Uh it's like a

35:44 Placemat. that you put on like a high chair, right, for a baby. But it it's got a bunch of strings or Things that you attach to baby toys? Yeah, it's it's really simple. It's a it's a silicone placemat with suction cups on the bottom, so you can stick it to any smooth, clean surface. And then it has a tether system of silicone kind of bungees. We call them toy straps, tethers, that you can hook to the mat and then you can loop'em through or around pretty much any toy you've already got for your baby.

36:11 All right, I can only imagine how this started as I'cause I remember even though I've got a fifteen and a thirteen year old, but I remember losing my mind when they just throw things off the high chair like Carrots and banana peel. Now that you can't tether, but but but everything, like the rattles and the bottle and w it was just all g all over the place. It used to drive me nuts. I eventually learned how to cope with it. I have to imagine that's how it started for you. Yeah, I mean it it starts out innocent enough. It's a lack of fine motor skills. Babies just can't hold on to things, they drop them, but then when they they learn quickly, it can be a very fun game of fetch with mom and dad. And this is is this what was going on with you? You were a parent and And you saw this happening? Yeah, um kind of. I um I had my first child when I was forty, so it was a little bit later in life and I was working a corporate job. And when I went back to work after maternity leave

37:01 Um, I went out to lunch with a couple of my stay at home mom friends and they brought their daughters with them. And while they were super cute, um they were very distracting. And we couldn't honestly finish a conversation. So while while we were sitting at the table, I went on Amazon to buy something so that when my son was big enough, he wouldn't be that distraction at the table. And there was nothing. Nothing, there was, you know, there's pacifier clips, there's always been the hook a pacifier to their shirt, but there needed to be a place to put food. And a way to Keep the toys off the ground.

37:30 Okay, so now you're at a point where you're Not a startup. But you're not Massive. Do you mind sharing roughly what your your revenue is? Yeah, I mean in the five years we've been in business now, we've done just over fourteen million dollars in sales.

37:43 Wow. So this is pr pretty great. And are you still growing or is the growth slowed down? Well, that's kinda the sticky spot right now is, you know, along the road I grew very fast. I was on Shark Tank, um, in my third year. And Also during the pandemic, we saw a ton of growth because everybody, you know, I that's when I started marketing on Facebook and Google and Everybody was stuck at home and everyone needed something to keep the baby busy while they were homeschooling the other kids or taking a Zoom call for their job. So anything that was like keeping the baby occupied, even just for twenty minutes, so you could get through these things, it just blew up.

38:20 And so at the time I was still working my full time job. I didn't have many expenses other than the inventory, really. And and then the Facebook ads. Um, so at that time I convinced my brother to quit his very stable full-time job to join me in this very unstable roller coaster of entrepreneurship. And, you know, it took on his salary. And then I ended up quitting my job and took on my salary. And then we needed health benefits. So the company paid for health benefits. And before I knew it, operating expenses just kept creeping up and up. And the more you sell, the more general liability insurance costs, and the more all these other things cost. And

38:56 Cash flow was never an issue in the first few years. And so I didn't pay close enough attention. And now cash flow is an issue. But we have a several large opportunities this year. We're um we just launched on target.com and we are onboarding right now with Walmart. And Walmart really loves our products and they love our innovation and It's an amazing opportunity that's going to cost a lot of money and just Scares me to death. So that's another big part of the story that

39:24 is where I'm kinda stuck in this messy middle. Yeah. So getting to the messy middle is still an accomplishment, by the way. So you that so congratulations. Um you know, 14 million of sales means there's real product market fit. There's something, there are families that love this. So you you that that is an important part to not get lost in the question. Um One sort of high level point is that

39:46 Retail is a blessing and a curse. It can be a blessing because large customers can mean large orders and large orders can give you certainty and predictability. It can give you leverage with a bank facility, which I'll get to. But The downside is that they are more expensive to work with and you get your cash much less quickly. So when someone buys online, you get their credit card payment right away. When Walmart buys, it might be thirty, sixty, ninety, a hundred and twenty days. And so you get paid.

40:13 And you often don't get paid for a hundred percent of what you ship because in retail there's all sorts of markdowns and deductions. So one thing to just keep in mind is Almost inevitably if you launch at retail, things will get messier before they get better. In terms of your cash and inventory position. One question I had is do you have I heard that you have a home equity line credit.

40:32 Separately for inventory financing. Have you ever spoken with a local bank or debt provider to help finance your inventory? Yes, we have actually a fantastic hometown bank. So I've since closed the home equity line of credit and we've opened inventory lines of credit with the hometown bank. They're currently maxed out. Last year, Q one was the biggest quarter we ever had, and so we ordered a lot of inventory to support that growth for the rest of the year. And then You know.

40:56 Facebook and Google Ads started underperforming and the year kind of fell apart. And so we ended up being stuck with a lot of inventory and not being able to pay down those lines of credit yet. Understood. And your inventory doesn't have a shelf life to it, right? You can Right. Okay. Um

41:13 And then another question is from a gross margin perspective. Do you feel like you are covering In a normal world, is your gross margin high enough to cover your costs on an ongoing basis? Yes, in a normal world our gross margins are are fantastic. Um I think we took a lot of missteps with marketing in the last year. um that helped put us in this position. We're correcting that this year. And and that's kind of how I'm looking at the retail opportunities. It's not only is it, you know, a

41:39 maybe some bigger orders, but we're getting in front of more faces because people are going back to stores and the online marketing is not working as well as it used to. So I I also look at Walmart as a and Target as, you know, just sitting there on the shelf or being in the baby section is is marketing. Mm. Certainly true. It's It's marketing and and obviously it broadens your exposure to a a huge audience. What about all of the little retailers in between on online and Walmart and Target? Have you spoken to like local retailers? I don't know who your big one would be in where you live, but

42:13 What about all the smaller ones? We're in about four hundred independent retailers right now. And that's just mom and pop shops that have reached out to us saying, you know, we love your products, we'd love to sell them in our shop. I'm actually sitting right now in a in a VRBO in Vegas because we're at the Baby Expo. It's the big retail event of the year for baby stores. Great. Well, so I would say no silver bullet. Because what you're describing is a very common issue when you're

42:39 If you're growing quickly and you don't have a pile of investor capital, then financing your inventory growth will always be a challenge that you face, right? Unless your gross margins are You know, seventy, eighty, ninety percent. And even then, depending on how quickly you're growing, you're always gonna have needs that outstrip your current cash, right? So Yeah there's no silver bullet answer. I would I would say that one thing that you can explore, depending on how excited the buyers are for your products at these various stores.

43:07 is negotiate an agreement so that you can get your first few payments sooner than normal. So you know if you have set payment terms of net thirty or net sixty, whatever it might be. You could ask for exceptions for the first couple of payments to finance the large initial order. You know, that that's one thing you could do. You could negotiate some of the discounts they take a little bit more aggressively. I'd also say Uh

43:29 Almost every brand that I I work with, including the ones I used to run. dramatically reduced investment in e commerce, meta and and Others. Because it's the problem you're facing is the same problem everyone's facing. It's just not efficient. And so a lot of people move those funds out of online into point of sale marketing. So

43:48 Making sure that people are aware that it's in Walmart, for example, or Target. Um, when you get into those stores, really focusing on Services like Instacart. I've seen that have a much higher I'm talking like two to three times higher ROI than spending on meta.

44:04 Wow. Yeah. So not just maintaining your dollars, uh but actually shifting your dollars into more profitable retail marketing. I do want I do I'm seeing a commercial. I know you ha on your website you've got Um a video of a baby, you know. just kinda playing with it. But I I I have this vision of like a row of babies of like ten babies and some of'em are just quietly playing and some of'em are screaming and crying and s freaking out and throwing things and some of them are

44:33 Doing other things it's just like a A line of babies in high chairs. And that's just a static shot of it's like Just watching babies Play with this and and just chaos.

44:45 I invite you to go to that photo shoot and last more than twenty minutes. It just sounds so funny. It's like it's like a bunch of monkeys at the zoo just looking at babies. For you know, just it would be anyway. Maybe I can find a daycare center that'll let me come in and do that. Yeah. Yeah. Promise the parents a free met. You know. Yeah. Lifetime supply of baby products. Don't make kids. Do you think have you thought of also making I know you sell accessories, but but also making The toys that k you know, the tactile things. I know you make a couple things, like a spoon and a

45:23 But but uh other things like like n noisemakers or things that you guys make that you would attach to the to the Trey. Yeah, I mean we've we've done some teethers, we've done our training spoon is is like really, really popular with the feeding specialists. Um one thing we've learned is the safety considerations when you're making baby products are just really painful. And so you want to wait stay away from moving parts and magnets and and too much of that stuff. while we are still so small. Um, but we're hoping to find some new items at this event we're at that we could maybe just private label, find something that already exists that complements our product line that we can just Put our brand on.

46:01 Yeah. W one other this is uh maybe just going back to the OpEx for a second. One other I just wanted to share a perspective on this, which is just that In the in the messy process of building a business. Sometimes you have to invest before growth, and sometimes you invest too much before growth. And I in both businesses I've run

46:21 multiple times. Have we been faced with the reality that we have invested too much. in anticipation of sales that never came or came, but came much later. And I've been through incredibly painful moments where we've had to let

46:34 members of the team go. Because You know, my fault. in hiring too quickly or putting too much fixed cost on the business. It's not always people, sometimes it's software and services, whatever. And we had to retrench, you know, and in a world where money is limited.

46:49 And you aren't taking investor capital and debt is scary because You have covenants and you have restrictions. Something's gotta give. And so I would just make sure you know it's It's it's something that everyone's had to go through.

47:04 in right sizing opex as revenue catches up. And it's hard, but it's often the thing that you must do to get through to that next phase of business in conjunction with other things. So it's often not let's cut OpEx and lose people and therefore everything will be saved or But Let's invest over here and we won't have to cut people. Sometimes it's both. And sometimes it's not about cutting, it's about, you know, reducing the raises or reducing the health care. There's all sorts of

47:28 F you can do this with a fine tooth comb and it's very hard and it's very depressing, but it is very normal. Thank you for saying that because it is very hard. And that's a lot of the things we're doing right now. And it is very depressing. And it feels like I should be such a success story right now with the numbers that we have and the journey we've been on, but it doesn't feel that way in this moment. And so I'm hoping that all the efforts we're making night right now will soon come out on the other side of that. And it Yeah. Feels good to know I'm not failing that it is something that companies go through.

47:59 I mean, I know it's it seems scary, but you've come a long way and it's awesome to see the progress um that that you know that you've achieved so far. Beth Benicke, Baby Congrats. We're gonna be we're gonna be following you. Thank you guys. Good to meet you.

48:14 Thank you. Right. Wow. I Mark I mean Some serious

48:21 Weighty questions. Yes. You know? Big ones. I mean all of these are classic business issues, right? How do you compete with the uh incumbent, how do you make it through a period of high cost? How do you think about product development and innovation? How do you get retailers to listen to you? How do you build awareness for something that's brand new? These are all the challenges of virtually every business worth building. So yeah, absolutely. It all felt

48:45 All the categories were different, but all the problems were very familiar. Uh some I think I th I forget who said this, but someone more famous than me said, every time your business doubles, it breaks. And so running into these issues is something that everyone has to deal with. And being open and vulnerable to talk about it and get feedback is also okay. I felt like I was constantly putting on some sort of suit of armor every day, like pretending things were great. pretending that everything was going well.

49:11 Including with investors even when they could have helped. And so I think being aware that problems are constant and that people are Are desperate to help you if you ask for help. That would have been helpful to me.

49:23 Yeah. For sure. Makes a lot of sense. Um Mark Ramadan. Thank you so much for coming onto the advice line, coming back onto how I built this? Thanks, guy. This was great. And and by the by the way, if you haven't heard Mark's episode of of how he and Scott built Sir Kensingtons, go back and check it out. Um it's an incredible story. You can find it in the podcast key will also put a link

49:45 uh in the podcast description. Um and also don't forget to sign up for my newsletter. at guyros.com, we put a lot of great ideas and advice from the world's greatest entrepreneurs who put a lot of work into it. It's really, really worth your time. If you are working on a business and you would like to be on This show Send us a one minute message that tells us about your business and the issues or questions that you'd like help with, and please make sure to tell us how to reach you. Uh you can send us a voice memo at hibt at id.wondery.com

50:16 Or call one eight hundred four three three one two nine eight and leave a message there and we will put all this In the podcast description on your smartphone. Thanks again, we'll see you next week. This episode was produced by Sam Paulsen with music composed by Ramteen Arablui. It was edit by John Isabella, and our audio engineer was Cena Lafredo. Our production team at How I Built This also includes Alex Chung, Carla Estevez, Casey Herman, Chris Massini, Elaine Coates, JC Howard, Catherine Cypher, Carrie Thompson, and Neva Grant.

50:48 I'm Guy Raz and you've been listening to the advice line. on how I built this lab.

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