Whisker/Litter-Robot: Brad Baxter

0:12 realized that even though the volumes were growing, I wasn't really able to make money because it was just so expensive to produce the product. And so At about five years in come to Jesus moment because I was

0:27 At that time, I think I had dumped about three hundred to three hundred fifty thousand dollars into the business just to keep it alive and I was taking a very minimal salary. And My wife put up. With that for

0:39 five years and then it kinda came to a head. Like what are you doing? Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements. They built.

1:02 Guy Roz and on the show today, how Brad Baxter sidelined his promising career in the car business. to build the Cadillac of Cat litter boxes. Litter Robot. Now a multi-million dollar brand. Patsy.

1:20 Are divisive, I'll admit that. I happen to have two cats and a dog, and I love them all, but there is no question that the cats You don't have to walk them, they clean themselves, they don't demand our undying affection and love like our dog does. But the one area, the one department where the cats are a much bigger pain?

1:43 Is the litter box. Litterboxes are just gross, and you have to clean them out every day, or the cats will revolt and start peeing outside the box. Cats love clean litterboxes. And for millions of cat owners, scooping out the clumps of poop and pee on a daily basis is a huge pain. This was a pain for Brad Baxter as well. Brad is a mechanical engineer by training, who spent much of his life working in the automotive industry.

2:13 One of his jobs was designing the plastic knobs and buttons that were used in car radios. Anyway, back in the late nineteen nineties. Brad bought an automated litter box. It had a mechanical rake that would scoop through the litter and deposit the dirty bits into a box. The problem is that that system just didn't work very well. And so he got to thinking, could I design a better mousetrap? In this case, a better mechanical litterbox. So he did, at nights and on weekends, whenever he found time.

2:46 Brad started working on an invention that would be more efficient. with a relatively small loan from his dad. Brad managed to build a prototype and launch a product called the Litter Robot. And with no marketing budget, he started to sell them. But it was a very, very slow rise. For nearly twenty years,

3:06 Brad sold Little Robots part time, and worked as a consultant part time in order to keep a salary. But as you will hear, with a combination of tenacity, luck, and smart strategy, Brad was able to turn Little Robot into a pretty significant brand. Today, his company has been rebranded as Whisker, and in 2024, it did more than$300 million in sales. And at times along that journey, The little robot almost went belly up. For now, what you need to know is that Brad Baxter grew up in the 60s and 70s in rural Dane County, Wisconsin. His father was an entrepreneur, but struggled to make ends meet. Brad went to the University of Wisconsin in Madison where he was passionate about cars and dreamed of working for one of the big three auto companies.

3:58 As a teenager I spent a lot of my time Drawing. Cars. Fixing cars. uh fantasizing about cars and so I was a real car guy and I I

4:08 Really wanted to get into designing vehicles and I had an artistic streak, so I I thought that might be a really interesting path, but I knew that I'd probably want to get an engineering degree as well. So um That was kind of the path I took. And once I

4:24 I figured out that you actually had to study in college and that you couldn't just uh kind of breeze on by like I did in high school. Um You know, I started to do okay, but I I would say the first First year and a half were pretty rough. So you go you study mechanical engineering with the goal of getting a job for one of the big three.

4:41 And indeed. You did. You got a job with Ford, um after graduating. And and I guess Your dream was to be, as you say, car designer. But that's not where you ended up at Ford. You I'm sure a lot of people wanted to go to Ford and become car designers. This is nineteen eighty nine. You joined Ford. What what what did you do there? What what was your job?

5:01 It was interesting because At the time Ford was Moving from what were Analog. displays like for the instrument clusters to digital. So there was this big conversion going on and you had to package all this electronics and plastics.

5:16 So they were looking for engineers to to work in that area within electronics division. So this This ended up being Um actually a great foundational start for me because

5:27 That's ultimately what I've ended up doing over my career is working with plastics and electronics. Yeah. And I At first I thought well It's not exactly what I want it to do, but You know what? I'm in Ford. I'm thrilled that I even got the job.

5:42 And I'm gonna make the best of it. All right, so you get this job working on these component parts that are eventually gonna, you know, replace the analog um you know uh the all the analog components in the car, including probably the radio and the speedometer and everything in the car. How long did you stay it for? Um I was at Fort about

6:03 Two and a half, three years and Coming into the by other people that you gotta be careful about the golden handcuffs at Ford. The benefits, the pay.

6:14 Um all that Becomes so good. that you you just can't leave if even if you thought you might want to try something else. So I knew that that was something kind of hanging over my head and I I realized if I'm

6:28 gonna do something different. I better do it now before I really get those golden handcuffs. It's amazing, I mean to to have learned or to have realized that at twenty five. Because by that point you were probably making a Good salary. And if you w if you did everything right, it's a job for life.

6:43 Yeah, and that's that's what scared me. Um I uh yeah, talking about salary, I remember my salary. It was thirty two thousand dollars and I thought that was the most money in the world. I mean U in nineteen eighty nine, that's a lot of money. Yeah. Well. What happened even with the salary and all the benefits is I realized that I kind of

7:02 had some self introspection and I realized that I'm not really the kind of person that wants to be a manager. at Ford Motor Company and although I respected my managers and I thought they you know they did a great job and I learned a lot from them I I saw what they were doing and I knew you know what this really isn't for me this is moving too slowly for me And I think in larger companies, a lot of times you end up being frustrated because a lot of times you can see the answer, or at least I feel that that I could see the answer and it was a fairly common sense thing, but sometimes common sense is not not the primary factor in a larger company. And so I

7:37 There's a lot that I'd like to do and a lot that I'd like to learn and I'm not going to probably be able to do that as quickly as I'd like here at Fort Motor Company. Yeah, yeah. Alright, so you leave Ford and for for a few years, I guess, you you went on to work for like a few different like European auto parts companies. But eventually, you sort of spin that kind of specialty into your own.

8:02 consulting business, I guess, where you're you're kind of like a the liaison in Detroit for some of these European suppliers like kinda helping out with engineering and and logistical help and and stuff like that. Yeah. It wasn't really. The path that I'd wanted to take, but it was

8:18 It provided a something that allowed me to be independent, to do something on my own and which I I would have taken that any day. Over Working for someone else, you know. Yeah.

8:29 It could have been anything. As long as I'm independent and I'm working for myself, I'm setting the You know, I I'm I'm charting the course of the business, where I want to go. That was the most important thing for me. It wasn't always that important about exactly what it was. And once you'd started that, you could probably could never go back. Yeah, you ca I mean I couldn't.

8:48 I mean I would I would die. I would shrivel up and die. Yeah. Yeah. So you so yeah, you're running your own business. Um it's not exactly what you want to do, but It's entrepreneurial. Sort of just r roughly like how much

9:03 money, you know, could you were you were you able to make uh uh from from that business. I think at the time I was I I would have been able to bring home probably eighty to a hundred thousand dollars a year. So is it Good job. You could raise a family on it. Yeah.

9:18 But I I based on what I've read about you, your mind is constantly looking around for something else something that might I don't know. You might

9:30 develop more of a passion around like a product. Like you were really thinking about being a product entrepreneur. Is that Is it right? Yeah, that's that's absolutely right. I mean I had had this dream Two Develop a product.

9:43 To be an inventor. Um for many years and I had dabbled in a number of different things, but never really hit on the one thing that I thought I could take to uh to a business model.

9:54 And product design was really my One of my core skill sets too is Being able to Take some kind of a functional requirement and then create it either through pen and paper and then on to CAD and then um and then the other aspect was

10:09 It's one thing to design a product, but it's another to make it manufacturable. inexpensive. Um, all those things are integrated into the process of product development. And I had a I think I had a knack for all of that and kind of integrating it all into a package. So you had and just I think most people know this cat is computer assisted design, you basically had the skill set because you'd studied mechanical engineering and you'd been doing some of this work.

10:35 Um, and when you say you had like kind of dabbled in some ideas. What were some of the ideas you dabbled in or or thought about? Uh I think you know, one comes to mind. We had kids at uh young kids at the time and so one of the ideas was a um Basically a a stand that you would put your You know the bottles that have the bags.

10:54 In them with the with the formula. Mm-hmm. You know I just had to push the air out, so I I I designed a stand that you would push The baby bottle and the stand was just a simple

11:06 stand to do that that fit inside the bottle and then it had like a hexagonal shape on the bottom of it so that if it tipped over it wouldn't roll off the table and just simple stuff like that. Um But The truth of the matter was is I had a lot of things kind of floating around in the back of my mind, but I was so busy running the business. I mean it was a It was a much more than a even a full time.

11:27 Uh that business up and running. Um supporting these these uh European suppliers so

11:35 There wasn't a lot of extra time. to experiment with that stuff. Alright, so you have the and and you know, I'm thinking like this is the late nineties, uh who who was like a famous and Dean Kamen, right? The guy who made the segue. He was I remember he was all over the news and he's invented a bunch of stuff and so Yeah, I mean you're

11:54 You're just Kind of Keeping your eyes open. And And and one day

12:02 You You start to think about Cats and litter litter tummy. How What what what happened? How how that sort of idea starts to percolate in your mind?

12:13 Well I I had had a couple of cats and I Had been having some trouble with them, they were Actually not going in their litter box. They were

12:23 Mm. And the reason for that is I wasn't getting down there quick enough to or often enough to clean the litter box. I was going down maybe every other day. And that was not enough for my cats, and so

12:35 they would protest by peeing outside the box. And so one day I'm down there and I'm cleaning up the mess. I've got a bucket of water and bleach water I'm on my hands and knees. I'm wiping up this This urine and this is not a fun task. And I'm thinking, man, I've I've got to figure out a way to keep this box clean all the time because this is just driving me nuts. So That got me thinking about well How can I automate this? And it was more really about just solving my own problem at the time.

13:02 And the more I thought about it. The more I thought, wow, this is this could really be an interesting opportunity because there's really nothing out there that addresses this concern. um fully. There there was at the time There was another automatic litter box on the market and it just come out recently. It was litter made. And

13:19 It was Okay, but it was I ended up getting it to check it out and it really did not work well with my cats and that e that even um prompted me to to look into this even further. So just to kind of f and I think people who have cats know this, is I'm a cat lover and a dog lover. I've got a dog and two cats. They cats are super clean. They do not like mess. And if the litter box is not clean, they do not like it.

13:44 And by the way, I I can totally Relate to this because Around that time, maybe a couple years later, maybe like two thousand three, My wife and I Bought a litter maid and it was like a

13:57 With like teeth. in it. Like imagine a bunch of like metal teeth at the bottom and then when the cat would leave, it would go z and it would sort of the teeth would kind of sweep through the clumping litter and then it would open up a box at the end of the litter And it would be a Dump the stuff in there and then the box would close. And the box was a

14:19 disposable plastic container. But in fact it didn't work well and the box would constantly leak and be messy and gross and they were. you had to throw them away. They were just like these big pieces of plastic You you were constantly throwing away and refilling Yeah, that's that's a great description. Um you got it right.

14:40 Yeah the The Littermaid was and again, not to to trash them or anything, but it was a very literal approach to the problem. But It doesn't really break down into its functions and, you know, how can we best solve this problem? And that's what I tried to do. I tried to step away and look at it from a different perspective and say, Hey, what am I really trying to do here? What I'm trying to separate.

15:01 these clumps from this layer. What's the best way to do that? And so that that's how I came up with the The little robot idea was was through sifting, not through raking. Right, because the human hand actually is is s is is an incredibly efficient tool, right? The wrist and the hand, and so when you're just scooping up the litter and you're shaking it and you can do a great job.

15:23 But to have a rake just do that, it's it's it's gonna be it's like a sledgehammer. It's just not gonna it's not It's not gonna be an elegant fix, right? And so you're looking at this and you're thinking, well, all this is trying to do is automate the human hand, right? Or a version of the hand, a rake system. But

15:40 It might be better if there's like a Sifting system rather than a rake system. Yeah. You are absolutely right. I mean the dexterity that a human has using a scoop like that is so complicated. Compared to

15:55 Just moving a rake laterally through the litter. I mean ultimately you're just pushing a clump which is like a snow plow and it pushes all kinds of clean litter into the tray at the end as well as the waist and so it's very wasteful. J just a lot of things like going against it that don't work very well. So again, there may be an easier way, a more convenient way. And a better way for you and a better way for your pet.

16:18 Alright, so before you actually went to your computer assisted design to design this, which we'll talk about in a moment. You start to think okay, this liter made thing, this rake system is not working. Maybe there's maybe the litter box should be more like a drum. that rotates and then sifts out. The clumps of litter. A drum like in a cement mixer.

16:39 Yeah. Do its thing. jump out and then the cement mixer would rotate and filter out the The the dirty litter.

16:49 Yep. I was trying to think of ways to to gently separate the clump from the clean litter because one of the things that happens with the rake mechanism is that it breaks up the clump and once the clump breaks up, you're leaving behind all these little muggets that are They're gonna smell. Yeah, it's nasty.

17:05 So just by turning the globe, you lift that litter bed up. And then it starts cascading down, and then if you keep rotating, you can bring a screen around that starts passing into that litter that's cascading down very gently. It's kinda magical to watch it. I mean, this is a litter box, but okay, it it is kinda magical to watch that screen just kinda rise up through the litter. The clump has been floating in there, the litter is cascading through the screen and then Within a couple of seconds The comp is all of a sudden just sitting on top of the screen. It's not like the screen pushed it.

17:38 Yeah. And if it's gonna break up. It breaks up on a solid surface and then it goes through the wasteboard. So everything is removed. Okay, so you have this idea, cool. I um but you are also a mechanical engineer and you know that

17:51 there's a possibility that somebody might have already thought about this. And'cause you must have gotten pretty excited about this possibility'cause you ran a a patent check. You you looked to see if somebody had had patented this idea. Yeah, that's right. I I I did get excited about the idea and I thought, Well, if I'm if I'm going to pursue this, I better See if there's anything out there.

18:11 that I might bump into and sure enough I found a patent that was very similar to Um And at first I was really kinda disappointed because I thought that was the end of it, but I thought more about it and I thought well you know what, I'm not really

18:27 It's not really that important to me. who owns or who has the patent. I mean That really wasn't The driving force here it was I wanted to build a business around a great product idea and and if I could license this patent, that would allow me to do it. So that was really the path then that I took.

18:44 Okay, so The pattern that you came across, it was not developed. It was just somebody had put the patent down. So but it was not Ever realized.

18:55 Right. I mean it was He had done some prototyping. Which was helpful. And I contacted him and I said, Look, I've I've got an idea for a business and I'd like to take your idea Um

19:08 to production. This was uh just to clarify, this was a guy named Don Wrights, I believe. That's right. Yep. He was Actually very happy with um The fact that there was interest and

19:20 It was relatively low risk for him because If I succeeded, he succeeded. If I didn't, it wasn't any skin off his nose, so I think he was He was happy that there was a chance. So you guys come to an agreement.

19:32 And you start trying to design something. How how long did you did you begin to work on something before you felt like okay This could be a prototype. Well, Don had developed a few prototypes and so I brought those home with me and I started modifying his prototypes because they were

19:49 There were a few things that had to be worked out. So I was modifying his prototypes and once I got those things figured out, I kinda moved then into the CAD design. And I think the CAD design took me I don't know, maybe th three, four months, something like that in my s I was doing it in the evenings. I was still working The other job, of course. All right, so you come up with something that uh that you know, you think is is pretty good or or good enough

20:14 Yeah. Uh, and it's gonna require a lot of plastic. But you're like an expert in plastic manufacturing. You have you have all of these connections. From the automotive industry. That's right. And and I think if if I understand this correctly

20:28 Um to make this thing. you you decide to use a technique called vacuum molding, where I guess the the plastic sheets are heated and then it's kind of sucked onto a shape. Yeah. It's it's It's wasteful and expensive in the long run, but in the short term it's better because the alternative, I guess, would be injection molding, which means you have to like cast all of these different, you know, shapes and precision tooling and that's really expensive at the beginning.

20:54 Is that right? Yes, injection molding is really expensive. Um and you wanna make sure that you've got the design right. uh because if you have to change it, it's very expensive. Um and I just I didn't have that kind of capital at the time. And Even though I was making okay money, I was

21:12 funneling a lot of that money back into the the business to grow the business. So I think at the time actually I was taking a salary of about fifty thousand. And the rest was being poured back into the business. Did you did you go out and raise any money? Did you ask people To help you out?

21:29 Well, the first person I went to was my dad. Yeah. And um I said, Dad, I've got this crazy idea. I wanna I wanna develop this litter box and I think I need about

21:42 thirty thousand dollars to invest in the initial set of tooling, are you interested Yeah. providing a loan for that and He said that he was and that he would actually um If I was interested he would be interested in

21:58 becoming a partner, taking some equity in the company And so for thirty five thousand dollars Um which they actually had to um refinance their home to get the cash. Um for that thirty five thousand dollars, he got thirty five percent of the business.

22:14 So so it was a big risk. I mean thirty five grand it will refinance his home. I don't think your your parents But he I mean it's your dad. Yeah. These are very modest investments, I mean thirty five grand even in in nineteen ninety nine, ninety eight.

22:32 But given your financial situation, he is huge and risky and scary, and you're also a dad at this point, you have three three kids? Let's see, our first was born in ninety five. We had two kids at that point. Mm-hmm. Okay. But you're again mid forties, you're not a twenty five year old kid with no mortgage and no responsibility like

22:55 You are um you are going to put some considerable money into this thing. Um your wife's got a job so you could depend on her income. And then you've got your consulting job. So There's a lot going on. You're you're you're you're basically signing up to be a very busy person. Yeah, it was. Um

23:15 I think When you talk about the risk standpoint, I think my dad figured that Look. My kid's not gonna stiff me. on this loan.

23:23 Um So I think there was that. And then yeah, my my wife was a big part of The support. mechanism that allowed me to do a lot of this because without her

23:35 Um, it would have been a lot more difficult for me if I was the sole provider for the family, for sure. Okay, so you have a plastics manufacturer that can make you the the the sort of the outer walls, but there's still other components in there. I mean they're electronics and they're and they're sensors, right? Because it has to sense when the cat leaves the box. This is a complex piece of machinery already in in in the late nineties, ninety eight. Where did you get all of the different parts and and

24:03 And how did you start to put them together? 'Cause you weren't I mean, you didn't have a factor um s were you doing this in your garage at home? Yeah, I working in automotive I had contacts that were back at Ford Motor Company working at electronics division. I had contacts that knew how to make circuit boards. I I was able to tap into that. Um

24:23 As far as You know, the building the product. Um we did that in Pontiac, Michigan for a while and I was actually the sole assembler for probably the first three or four months. Doing it where in Pontiac, Michigan? At a like a warehouse you rented? Yeah, the the building we were in actually was an old automotive factory. It was the original Oakland automotive company and uh which eventually became Pontiac. And so we were in this

24:48 I think it's like a Nineteen ten. structure and um it's a concrete building four stories tall And it was on that fourth floor that we started building litter robots. And it was in the summertime, and I can re remember it being very hot up there because Again, it was a concrete building. It didn't have any

25:06 central air conditioning or anything like that. We had a window air conditioner, but that barely kept up because the concrete would heat up in the sun and it would just bake. Uh and and just again, when you You're a respected guy in a very respected industry, automotive. Many you know, supply chain. Um you know, uh th this is like

25:28 you know, people are the sort of country club set people, obviously the executives. When you went to some of your contacts and you said, Hey um I I've got a side project. I wanna make a litter box Can I work with you guys on Unlike the Did any of those people say

25:44 What? W uh what? Yeah, there were there were times when people kinda gave me a strange look, but I look I think they They were happy to help me out. They may they may have thought whatever they thought, but as long as I was willing to pay them for their time and their effort

26:01 Um I think they didn't really mind or care what it was for and I have to admit, there were times when I when I did feel a little embarrassed around it. And but I was just so driven to do it. And I thought it was, you know, it The concept worked so well and I knew that there was a a place for it, so I was driven to make it work. Um My kids were also very embarrassed.

26:24 Um They never really wanted to say what their dad did. Yeah. They didn't really understand the other business, but they knew that I had something to do with cat boxes. and they didn't want to say that my dad made cat boxes.

26:37 when we come back in just a moment. how a tough conversation with his wife leads Brad to completely retool. The Little Robot. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

26:58 Hey, welcome back to How I Built This. I'm Guy Raz. So it's the spring of 2000 and Brad is splitting his time between his day job in consulting and his daily obsession, making a better cat letter box. He hand assembles a few of them at an old car factory. And eventually brings one of them. To a trade show. So in April of two thousand we went to a uh a pet show out in California. I think it was in um

27:27 Yeah, it would be Anaheim Convention Center, probably. The convention center there. And we took the little robot there and it was the first time the Little Robot had ever been out in public and that show was really interesting. Because people would come by and say, What is that? And I would tell them and then they would immediately say, Oh, my cat would never go in there. So it wasn't very in some ways very positive and uplifting because I was getting a lot of pushback on how weird it looked and But there were a few people that would come by and wanna see how it worked and as they watched it work, you could just see their eyes light up when

28:02 the unit cycled and they saw exactly how it worked and how simple it was. So You know, I was getting kind of a mix of positive Positive feedback as well as sort of the Um my cat would never use that kind of feedback. But also just curiosity'cause it was so different and and kinda weird.

28:19 And and big too. It's just quite large compared to what the they were typically used to. And and uh do you didn't have a like a live cat on scene? To like To demonstrate.

28:30 No, we were re s we were recycling clumps made with uh coffee or whatever we had. Um and And just to c just to get a sense of like the technology The cat had to go in there, right? And and it it to

28:44 make sure it wasn't gonna rotate with the cat inside like a laundry m machine. So was the w were the sensors like light sensors kinda like when you walk past a closing garage door it stops? 'Cause the sensors is it that similar kind of technology? Well, we have that technology today, but at the time, no. At the time it was just weight. Oh, it was weight activated. So it would feel the weight of the cat when it jumped out, it would rotate. Right. Uh wait activated trigger switch.

29:11 And that was it. Yeah. Got it. Okay. So you're go to this trade show and do you sell any Any units there? I think we came away with about five orders and so I came home and uh immediately started making those five units.

29:25 And it was shortly thereafter that we had um launched our website, which is a complete home grown type thing. Um there weren't any out of the box. Options at the time. Um I think we work with uh

29:38 We worked with a friend. A neighbor down the road. That helped us with our very first website. And so we were into e commerce very early, just kinda by necessity due to the size of the product and we didn't have a lot of margin in the product either. This is two thousand one, I think. I'm by the way, I went to the Wayback Machine and my team Got me. your original website. It is janky. Like I would look at this and think, this is a scam. This is not it's so funny to see it because it's

30:06 E commerce was so weird and different even in two thousand. two thousand one. You know Not a lot of people. still trust in putting their website their credit card into a website.

30:18 And And Amazon was around. You could and I think you also started to sell on Amazon initially, right? I think Amazon came a bit later, but um. But you're right. I mean The websites at the time were all basically homegrown. They all look different. There were no standards.

30:34 And We certainly fell into that category and a lot of people would look at the website, but then they would call us. They wouldn't want to place an order on the website. They would want to call in. So we took a lot of phone orders during those days. And I think the early models were like Three hundred bucks, right. So

30:51 Uh, not a cheap product, certainly more expensive than a litter pan. Um How I mean I can't imagine you were selling that many. At in two thousand, two thousand one.

31:02 We weren't and it and it was in some ways by design because like I mentioned before, we were trying to refine the product, trying to understand exactly how it would work the best, how the cats would use it. I mean we would have certainly taken more volume if we could have gotten it, but it was kind of a a blessing that the volumes were low because it allowed us to kinda take our time and learn and to adjust some things about the product. There's certainly quite a few things that we learned early on. um about cat behavior, how the cats would use it and

31:31 lot of those changes got incorporated into the early models. How much time, Brad, do you estimate you spent on the litter robot at the beginning and on your consulting business for your income to to to Support your family. Well, my wife will tell you that at the time I was spending very little time at home. Um I was probably Spending twelve to fourteen, maybe s sometimes more hours a day.

31:54 Working on both jobs. Um I can recall sometimes Spending time in Pontiac. late into the night and then realizing how late it was and Instead of going home, I just

32:05 I actually just slept on the floor. Wow. So you're working crazy hours cre and and trying to sort of you know, grow this business. Um

32:18 But you weren't making any money. So how are you financing the business? How are you How are you paying for anything? Well it was the other business that that helped keep it alive. Um I mean without that other business it would have died very quickly because we would have run out of cash and there just wasn't enough

32:35 There was no profit. um for the first five years. And because of the manufacturing method that I chose the There wasn't a real strong possibility that I was gonna be able to make a lot of profit on it going forward. Plus it wasn't very scalable. Um'cause you were hand you were hand assembling each one.

32:53 Yeah, it was hand assembly. It was each one was kind of an individual project because of the inconsistencies of the parts from the vacuum forming. So It was kinda by design in the beginning, but then as the volume started to to grow, I realized that even though the volumes were growing, I wasn't really able to make money because it was just so expensive to produce the product. And so at about five years in Um I had kind of a come to Jesus moment with with my wife about

33:20 You know, what am I doing? Because I was At that time, I think I had dumped about three hundred to three hundred fifty thousand dollars into the business just to keep it alive. And that was all coming from the other business. And I was taking a very minimal salary so that I could dump everything back into the automated pet care business. And keep that alive and My wife put up with that for five years and then it kinda came to a head and like what are you doing? W you know, why where's all this money going and what's what's the end game?

33:49 Yeah. I mean you could have been putting that money in an index fund. Finger. For your financial future, right? So From like a

33:56 Fiscal responsibility per and by the way, m no entrepreneurs fisc like this is what you have to do, but but from that perspective, right? From like a risk mitigation perspective, you were not doing a responsible thing because at this point You're now getting into your fifties and you're not taking the money that you could save and putting it into a retirement fund, you're putting into a business that could die. That could be worth nothing. Yeah, it was starting to feel irresponsible, especially

34:24 you know, to her I think and uh I certainly recognized it and knew that I had to do something fairly quickly. And And I did. I

34:35 I managed to work through some of my previous contacts. And Without any kind of financing. Um without a bank loan, without

34:45 You know. Investors. I was actually able to retool the product. by amortizing the cost of the tooling with one supplier that I worked with and then I was able to take out a loan. uh a two year loan at twelve percent interest with another supplier that I had worked with, and through those connections I was able to retool the product. Essentially to create the

35:04 The molds that would make it. More cost effective. Right. Yeah, that was the big expense. Your wife is saying Oh, what's your wife's name, by the way?

35:14 Margaret. Margaret saying. Bread, you know. We've put all this money into this business. I I don't know whether this is the right thing to keep doing. And your response was

35:26 Hang on, actually let me see if we can retool the manufacturing process and I'll take a twelve percent loan out and uh and I think that could do it. It wasn't you know what you're right. We'll just you know. Pack it in here. I don't think it ever really crossed my mind to do that, to fold.

35:44 Uh. I Yeah, I got pushed a little bit. And I think that helped because Once I got pushed and I kinda went over the edge and decided, you know, I gotta I've really gotta do this, I was super motivated to get it done. So I retooled that thing.

35:58 I designed it and retooled it. In the course of about twelve to eighteen months, so I essentially took what was the previous design and just converted it to injection molding with a few things that I knew that I could add, but it was all about a race to getting it done as quickly as possible so that I could start making money on the product and keep the business alive. So Yeah, these are the

36:21 the choices and the balance balancing act that you have to make as an entrepreneur. You know, what am I gonna do here? Am I gonna take some extra time and improve the design, or do I take what is a you know, a good design and just sort of replicate it. So that I can at least start making money and move on from there. Basically, this thing was costing you two hundred ninety nine dollars. You were selling it for two hundred ninety-nine dollars before this change. It w it cost you

36:45 A roughly two hundred ninety nine dollars just to build or or more. It wasn't that bad, but Um With overhead and you know, I guess. When you boil it all down and y you include everything, yeah, we were not making

36:58 We're not making anything. You are subsidizing the consumer. Yep. And so you knew that that was not sustainable. So you you s you decide to shift to this more efficient, cost effective

37:12 Um which of course makes sense, but still that's not guaranteed. Even if you could reduce the price by You know I don't know, twenty, thirty percent or you know, your costs or forty percent.

37:26 I you still weren't like selling these things like gangbusters, right? No, the volumes were s were still pretty low. But we were growing it organically and I could see the trajectory was was moving in the right direction and when we retooled the product

37:41 Came out looking like a more refined product. I mean when I look at it today it looks pretty pretty clunky compared to what we're producing today, but At that time it was It was a refinement over what we had been producing. So we got a bump in sales from that. Right.

37:55 Right. Roughly do you remember what What were your sales like in two thousand five? Like Were you were you more than ten million, less? More than five? We were one just under one point five million for the year.

38:09 Right. Six years into the business. Yeah. Mm. Yeah, two thousand four was the first year that we hit a million dollars and that was a a huge milestone for us.

38:20 Um Prior to that, you know the The numbers were pretty small. Did you at any point During this time, think about it.

38:28 Maybe we sh you know,'cause direct to consumer was so new. It was so niche. I mean, I'm sure a lot of people that you knew in Wisconsin were like, would say, Oh, where can I buy it? and you would say, Oh, we're selling it on the internet and they'd say, The internet Well what about in stores? Did you Did you ever try and pursue that?

38:48 That path at the time? We did. W I mean we were trying to get into the stores all the time and and at the time I thought that was our our path to success was to get into retail because then we'd have all these eyeballs looking at the product and all these retail stores out there that would You know if they had two thousand stores and you supply them each with two units, you know, that's pretty high volume. And so that was really what I was

39:11 Focused on but We really didn't have the margin in the product and most of the retailers wanted fifty points. on the product and there just wasn't a way that we could Provide that we were maybe making thirty points. at most on the product at the time.

39:27 So there's no way really to make it attractive to the retailer. Plus the unit was quite large. Big, yeah. Shelf space would be tricky. And so When push came to shove, when you really looked at it, it was actually quite ideal for direct to consumer because the product was quite large. And does the consumer really want to drag it home from the store or would they prefer to have it show up on their doorstep? I guess

39:50 Mm. by two thousand five, w with the relaunch and and th the robot two, the Little Box Two. Um You Uh

39:59 you start to hit profitability and I imagine very small amount of profits. I mean one and a half million dollars. You m you you have five or six employees, you're running a really tight ship and I imagine you're still Far away from paying yourself. Anything at all.

40:17 Um, I wonder whether At this point you start to think Yeah. Maybe the to sort of supercharge our growth.

40:25 I should see if there's anyone willing to put money into this thing. Did you did you start to do that or have conversations with people? Or s even seek that out? You know, we we really didn't. Um, I wasn't see I wasn't looking for investors, I wasn't looking to supercharge The business. Uh I was kinda going for the long

40:43 the long game on this and I had a couple of offers to buy the business early on. What do people offer you? Uh one was from our the competitor Littermaid. Um and if I recall, I think it was a number

40:59 Around two hundred thousand to buy the patents and uh I got the impression that they essentially wanted to just buy it and shut it down and not Not pursue it. And It really wasn't attractive to me because I thought it could be way Uh so much more than that in the future. And so I really didn't consider that.

41:16 Wow. Because they were much bigger than you. Yeah, they were they were huge compared to us at the time. I mean it it's crazy'cause it doesn't exist anymore, but They offer you two hundred grand. And forget it. I mean you've already pour all this money into it.

41:29 Um But you you were comfortable with a sort of a slow growth model. You weren't worried at any point that somebody might come in and try and compete with your with what you're doing, like Create something that was

41:43 diff differentiated enough where they weren't violating any patents. Certainly there was a worry. About that. Not a strong worry and I knew how hard it was to do what we were doing.

41:55 The other thing that I understood too is that with this kind of a product and something that's new like this You have to have a very strong customer service presence. And from from day one, whatever we could provide for customer service, we were doing it. It was a major pillar. of our business and part of the whole process. So and I knew that that would be difficult to replicate. for somebody trying to come in and compete with us. I mean, sure, it could have happened.

42:20 But I just kinda stuck to my guns and I knew what What was gonna make it work long term. How are you doing customer service with six people? Was everybody like answering calls? Were you answering calls?

42:32 Yeah, I was answering calls. I had eventually I had a person dedicated to answering calls, but um I've answered hundreds, if not thousands, of customer service calls over the years. How are you balancing your life by twenty ten, you know, to I think two thousand twelve is when you you're still selling the l the Little Robot Two. Um and starting to think about

42:55 maybe the next iteration, but how are you Again, you're living in Michigan. And you're also doing consulting, you're still running the consulting business. Um working with European auto parts makers.

43:09 Was it just that was your life? It was twelve, fourteen hour days. even ten, twelve years into the business? Yeah. Yeah, it was It was

43:19 Really a grind for a while. But You know, going back to what I said earlier. I'd rather die than not be independent. So that's what it took to remain independent. And I had this dream of

43:32 Building a great business around a great product idea and if I wanted to do that I had to keep the other business going. I think I think over those years I've one of the things I was able to do is compartmentalize things. So I'm I can focus and that's maybe a problem I have is I get really f I can focus on something and I won't hear anything else going on around me. And So the you know the house can be burning down over here.

43:54 And I'm focusing on this to get it done, even though this is happening over here. And I think you had to do some of that during those years where there were a lot of things happening and you just had to it would be overwhelming if you thought about them all together. But by breaking them down and focusing on things, knocking them out one at a time, just focusing on it, finishing it, and going on to the next thing. Over time that starts to build some momentum. Where you can really get

44:21 and trouble is if you start trying to do too much all at once and you start thinking about all the things you have to do. It can just bury you. All right, so you've got you're growing slowly. But growing every year, right? There's there's growth Now from two thousand five onward

44:39 And it w it was it was moderate growth, right? So we're not talking about like Yeah. a hundred, two hundred percent growth, maybe what, five, ten, twenty percent growth? Year over year. Um yeah, like from two thousand five through two thousand ten, I think on average about twenty five to thirty percent per year.

44:55 Okay, so so So great. I mean it's pretty good. Um, can you estimate how many of these things you'd sold by two thousand ten? Like more than ten thousand? Um

45:06 By two thousand and ten we had sold Probably about Forty to fifty thousand units. All right. Okay. So that's pretty great, right? But still.

45:17 You're ten years in. And um Did you see this as a In any way is a Just a multi

45:26 million, maybe billion dollar company. In the way you thought about the potential for this business? I definitely thought of it as a multi million dollar business. I can remember at the time sort of a The number that we were shooting for, you know, the h the pie in the sky number was was twenty million. That's where he wanted to take the business.

45:48 But that was That was the long shot. When we come back in just a moment. How Brad takes that long shot number. And grows the business.

45:59 Ten times bigger. Stay with us, I'm Guy Roz, and you're listening to how I built this. Welcome back to How I Built This, I'm Guy Raz. So it's 2015 and Brad's business, Autopets, is doing about$7.5 million a year. Not bad, but he knows that in order to grow it.

46:35 He needs someone who's better at marketing than he is. So he hires a guy named Jacob Zubke to help. Mm. And you know, I've looked at your website. uh that h how it looked over many many years and the comparison between what it looked like

46:50 The year before you brought in Jacob Zebke and then the year after is dramatic. Yeah, I think, you know, revamping the website was one of the first big steps that we had to take. We had sort of a a retro look to our website prior to that, I believe. Yeah, it very is it like the the cartoon of like the Judy Jetson kind of w woman on there, yeah. Yeah, and so it it definitely needed some help. And you're right, I was I'm not a good marketing guy and

47:18 the percent of revenue that you have to spend on marketing is is usually more than you would imagine. And I think at the time when Jacob came on board, we were spending about eight percent of our revenue on marketing, which I thought was just Crazy. And then Jacob was coming to me and saying, Well, can we can we bump it up to ten? Can we bump it up to twelve? Can we bump it up to fifteen? And

47:41 And every time we did that, we were seeing results because we were We're applying it in the right way. Then in combination with a brand new product that we were launching. Yeah. combination of those two at the time really were very impactful for the company. Yeah, the little robot three is more sleek. It it it looks more like a futuristic

47:59 kind of um product. And so he was pushing you to spend more on marketing. Which is nerve wracking, but you started s you would see results pretty quickly. Yeah, um I think one of the breakout moments for us was really that Christmas holiday season. And this was kind of a unique idea that that Jacob had and Um, it was called the uh twenty five days of of Christmas. And what we did is we were sending litter robots to what you would call today as influencers. And

48:28 Every day we would have an event where we would the influencer would talk about the little robot, how they're using it, and then we would be doing a giveaway as well. They would talk about it where Um YouTube, Instagram. Okay, yeah. So they would promote it.

48:42 And then we would do a giveaway and this proved to be very successful. I think coming into that promotion. We had about thirty thousand visitors to our site. Um per month. And then I think we bumped that up to three over three hundred thousand due to that promotion. So it's just a huge increase in visitation to our site. Did that also did you start to just see the growth of the business supercharged like within a year or within less time than that?

49:07 Yeah, we definitely did. I mean, we doubled our sales from twenty fifteen to twenty sixteen. Wow. And we maintained profitability. So Um really started to understand the importance of marketing. Um and doing it the right way. Yeah.

49:22 targeted, focused, as well as sort of high funnel marketing, which is bringing people in that, you know, are unsure about the product and it might take Uh six months, six to nine months to get that person to convert. But You've got to be spending money on that as well. You can't just be spending all your money on the conversions. You know, I I'm I'm curious about something. You And I think to his day.

49:44 They're uh designed and assembled in the US. I think many of the components are made in the US. I'm assuming some of them are imported. But Given so much of the component parts, the plastics are made in like Wisconsin to this day. Was there ever a a point, you know, uh when you're doubling sales and you're s where you were and somebody approached you, you thought, you know, maybe we should just move all this overseas. I mean, this is when so much offshoreing was happening.

50:13 You could have I imagine just found a factory in China? Found a broker own agent there and and uh really uh increased your margins. If you did everything in China.

50:25 That's right. There w there was a lot of pressure at the time. And I remember this even in automotive for automotive suppliers to move a lot of their production offshore and We We studied this and we've We found out that what it would cost us to ship the product from from overseas to our warehouse.

50:43 is what it would cost us to assemble it locally. Um, so it was kind of a wash. in that regard and then just having more control over the supply chain where we could be, you know, a little bit more just in time with our suppliers being local. And we had to have a warehouse anyway. for fulfillment. So it just kinda made sense to be vertically integrated for a lot of reasons.

51:06 Yeah, I mean I wanna go back to your consulting business because I I think you Step down. running your consulting business in, if I'm not mistaken, twenty seventeen? I think it was actually twenty nineteen, but Twenty nineteen. The last the last three or four years were Um

51:23 A bit slower and kind of winding some things down. Right. I mean you were the CEO. When when could you start paying yourself more money than you were making as a consultant? That was probably

51:35 Twenty Sixteen, twenty seventeen. So seventeen years into the business. Well, I you know, it's it's a matter of priorities. I mean I could have paid myself more, but I I opted, I chose to

51:47 turn everything back into the business as much as I could. And you owned I mean your dad owned thirty five percent. And you own the rest. So You had that. Um

51:58 And but still no No outside investors until Two thousand nineteen, the same year You shut her consulting business. It's amazing. Twenty nineteen, December of that year. An investor comes in

52:11 Pandera holdings. They uh put in thirty one million dollars. You kept about forty, forty three percent. Your dad

52:21 was able to cash out. 'Cause he had thirty five percent. So his initial thirty five thousand probably turned into, if I'm I'm just doing back of the envelope math, maybe nine million? Eight million? Yeah, it was a bit more than that. Wow, a bit more or or a lot more.

52:36 Well, the business at the time was valued at fifty five million. Wow. That thirty five thousand That was one of the b greatest investments in modern times. Yeah, it wasn't too bad.

52:48 But through that deal we We're able to get my dad cashed out. I took a few chips off the table. Um But nothing was put on the balance sheet of the company. The company was was operating profitably and it didn't need outside

53:02 funding necessarily, so Just kind of an interesting point to make is that none of that None of those funds were put on the balance sheet of the company. And just to clarify too, it wasn't a majority. Um ownership share. They actually uh bought fifty percent exactly.

53:17 Right. of the company. And then Jacob and I own the other fifty. Alright, so now but with this new involvement. Um you guys I think could Start to reinvest profits.

53:30 back into the growth of the business, right? a new building in Auburn Hills and and and you could really start to Accelerate. the manufacturing process. Bringing bringing on Pandera, our partners, um

53:47 Kinda helped us. I would say mature a little bit and having another set of eyes on the business that are looking at it from a purely business standpoint and you know, some uh being a little bit outside of the day to day stuff because when you're in the business, I mean you sometimes you don't see Some of the things you need to see. So I think it was helpful to have them as partners and it and to this day it's been helpful to have them as partners. And one of the things that they they helped us w with was to see that the trajectory of the business was going to outgrow the building that we were in. I mean we already saw that, but it was more a fact it was more around, you know, how big are we gonna go. And so we ended up adding another hundred and sixty thousand

54:26 Square feet. And I think that also coincided or the at that time or after that time with the to lay this to Little Robot Four and and also I mean Now it's a I mean it's a high tech product. It's connected to an app, you can see the cat's weight, you can track their

54:45 usage, you can track, you know, the cleanliness of the the whole box. Like there's a bunch of things that you can do now. And I mean It's not you're not just a litter robot. company, if you're like a data collection, you can collect data on animals and And you sell a bunch of other things too, but but that It seems to me like the data side really became

55:05 An important focus. Yes, it certainly has. So it's It's getting even more difficult now because it used to be just provide a great piece of hardware. Okay, that's that's great, but now you have to provide a great piece of hardware And match it with a great

55:20 Digital experience as well. And and also, I mean, it I guess i it makes sense, right? You focus on brand and then you focus on product innovation and and And you you expanded what you sell. It wasn't just these automated litter boxes, but but a fee automated feeders. And then you got into the business of uh litter.

55:40 sprays, wipes, you know, all all these things. Um, and you did it just in time for COVID. Yeah. Not knowing. that would happen, but but COVID actually

55:52 turned into uh a a blessing in disguise for a lot of companies, including yours, because all of a sudden pet ownership begins to spike during COVID. It was a very interesting time. Um There were a lot of things that we had to do to to keep to keep the lines running and I think

56:10 If I recall, we were considered an essential business because we provided pet supplies so we could keep our business running. Um sales did dip for a while, but That was only for maybe a month and then after that they started coming back up again and then through the whole pandemic they just spiked. Um it was it was quite a

56:29 Quite a crazy time. Um you and of course that I mean it's it just to put this into perspective Between twenty fifteen and twenty twenty one. The business grew from seven and a half million dollars in revenue to over a hundred and fifty million. in revenue during that time.

56:47 So we're talking uh twenty five employees to three hundred. Right. And and the other thing that's amazing is The vast majority of your sales are direct to consumer. So you don't even have like retail mill I mean you have some, but It's

57:01 It's you're not Uh dealing with middlemen here. You're able pr probably able to maximise Your margins. Yeah, I think I think we're doing about eighty percent direct to consumer.

57:13 And International was maybe five to eight percent, something like that. And the rest was Yeah, we the small amount of retail that we had at the time. So yeah, direct consumer is a huge part of our business. Still is today.

57:26 Yeah. Alright, twenty two years after launching this business. You decide to step down as CEO. Um and Jacob. become CEO, he's now the CEO of the company.

57:38 Tell me a little bit about that decision. Did you feel like Y sort of I mean you. Grinded. for most of those twenty two years.

57:48 Maybe all of them really. Did you just feel like I I did everything I wanted to do and now I just kinda wanna I don't know. Chill out a little bit.

57:59 No, it wasn't really about About that. Recognizing that the business was changing. My Skill set was

58:08 being able to do a lot of different things fairly well. and wear a lot of different hats in the business and that was how I was able to survive for so long without having to hire a lot of people is because I was able to do a lot of different things and kinda fill the gaps and just you know, do everything and I I will say that there's probably nothing in the business that I haven't done, including cleaning the toilets. And When the company gets larger.

58:32 It's it's more about building teams, it's more about hiring the right people, it's not about that one individual person that can do it all. It's it's you know, how do we bring in the right people, how do we collaborate more effectively. And I felt like, you know, Jacob really He really wanted this and he had proven himself as the operations

58:51 Officer. And I always kind of described him as the glue that kinda held everybody together as we were growing. And you know, I'm still there. I'm still here today. I'm in my office. And I'm s you know, I'm still active in product development and I still have my opinion about things, you know, that the hills that I need to die on, I'm I'm still gonna die on those hills. But there's a lot of hills that I used to wanna die on that I You know, it's okay, I'm gonna let somebody else figure that out. Yeah.

59:18 So it For me it was just recognizing that I'm not the guy that probably is the best person to take the business from You know, a hundred and fifty million. Forward.

59:29 Right, it's a it's a sensitive question, but I think it's worth asking'cause a lot of people who listen to the shows, you know, are starting their own businesses or in the middle of it, the thick of it, and I meet them all the time. Yeah. Given what happened has and and how this business has really become extremely successful, Would you would you've done it the same way? Would you have

59:51 If you could go back and and do it again. Is there anything you would change or modify? I think one of the things that maybe we could have done differently is Uh You know, I never actively went out and looked for funding to help accelerate the business.

1:00:06 You know, maybe I could have Brought it to to uh the level that it's at now more quickly. Especially when there's competition around the corner.

1:00:17 Oh sometimes speed is m is is is important. You've got to come to market Quickly and if you're you know, taking your time and you're doing it organically. You can get

1:00:29 beat out of the market pretty quickly if you're not careful. Yeah. You know, Brad I I can imagine With all with all the time that you've you've had to

1:00:39 into building this business, right? um there was obviously a lot of sacrifice, right? And and I'm I'm thinking Probably You know

1:00:48 Margaret your wife, um She she really picked up a lot of the slack. when when you were running everything and travelling and and not able to be at home. Yeah, she did and I Again, I'll say that

1:01:00 This would not have been possible without her and and not from the standpoint of Uh You know. I don't wanna give the wrong impression because she had a full time job. I mean she was she was working, she's always worked full time And on top of that, she was

1:01:15 partying the kids around to the various schools and picking up after dance and And I wa I was too when I could, but Um she definitely filled a lot of the lot of the gaps while maintaining a professional career herself. And um so I have a lot of respect for her and being able to do that and supporting my dream to build this business. Um, because without her I you know, it would have been a lot tougher.

1:01:43 Yeah. When you think about This journey that you took. How crazy it was to start a litter box company when you had this you know, all this experience in the automotive industry, you could really have gone in that direction. It was such a risk. It was so

1:01:58 This weird Idea. And look look what it is today. How much of Of of what happened do you attribute to the to the

1:02:07 Of the success do you think had to do with just luck and timing and I don't know, just just just Being there, waiting it out. When you talk about luck, we mean there's

1:02:20 We've certainly had our our share of of what I would say, you know, some bad luck things happened and you know, there's some good luck things that have happened and I think all those kinda balance out The timing part of it, I think, was kind of essential because We kind of grew up with our business during the time that e commerce was was coming into play and

1:02:42 Yeah, without e commerce, this business would not have existed. And as far as luck is concerned, I think you generate your own luck just from the hard work and trying to do things the right way and and good luck follows you when you're trying to do the right thing and you're you're trying to Um do what matters. versus just hoping that something's gonna land in your lap.

1:03:04 That's Brad Baxter. Founder of the Little Robot? And whisker. By the way, last year he had kind of a cool side hustle. Brad served as the mayor of Bloomfield Hills, Michigan. Population.

1:03:17 Around forty five hundred. The position only lasts a year, so right now Brad is back to his regular side hustle of being a city commissioner. Annual pay? Sixty bucks a year. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And sign up for my newsletter at guyros.com or on Substack. This episode was produced by Sam Paulson with music composed by Ramti Narablui.

1:03:48 It was edited by Neva Grant with research help from Carla Estevez. Our audio engineers were Patrick Murray and Quasey Lee. Our production staff also includes Catherine Cypher, Alex Chung, JC Howard, Imon Maani, Casey Herman, Chris Massini, Carrie Thompson, John Isabella, and Elaine Coates. I'm Guy Raz, and you've been listening. To how I built this.

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