Drive and Convert

Announcer:
You're listening to Drive and Convert, a podcast about helping online brands to build a better eCommerce growth engine, with Jon McDonald and Ryan Garrow.

Jon:
All right, Ryan. I think you have some exciting news today based on the notes you shared with me and the updates I've been getting. So I'm really excited for you and I'm very excited to chat about this today, mainly because you're doing something I haven't done before and I would love to learn more about that.

Garrow:
It is exciting.

Jon:
The ups and downs that come with it and all of the fun. And in short, Ryan's a billionaire now, so we'll just leave it at that. We'll just call him.

Garrow:
Yeah, don't come ask for money.

Jon:
Ryan must be over here.

Garrow:
Yeah, it's exciting. We exited Joyful Dirt. So something we started. Oh, man. I think the initial idea was 2015 in my break. I had a gap quarter between TQE and Logical position. And so I was like, "Well, there's got to be a way to start some businesses." So I think I started three and Joyful Dirt [inaudible 00:01:11] -

Jon:
And typical Ryan Fashion, can't just do one thing. We got to do multiple things.

Garrow:
No, yeah. So we started selling forklifts online that failed quick. We had a lead generation for a mortgage business that lasted longer but didn't do great. And then Joyful Dirt became an idea. We had the idea, we iterated on it for a while, me and my two partners. And then I think we started testing product and actual fertilizer logo naming and all of that in '16, refined in '17, started trying to sell in '18. And then got on Amazon in '19. Started scaling and then COVID took us to stratospheric levels very quickly.

Jon:
Sounds like a good time to exit. So tell me, how did this all come about? If we're talking about exiting a business today, I want to know the story. What led to this?

Garrow:
Yeah, I wasn't really thinking about exiting. So far, I haven't gone into businesses with a plan that, all right, do it in this timeframe and then we're going to get to this point. Then it's an exit. Right or wrong, that's just not been what I've done yet. And there be maybe some other times where it's going into a business specifically to exit a certain point.

Jon:
But I'm also a fan of the philosophy that you should always be running your business as if you are going to sell it eventually, 'cause you just run a better business.

Garrow:
Agreed. There's probably some things that would change historically on this one, and maybe we'll talk about some of that as well. But in this one it was constant head down, what's next? It was always about how do we grow it and get it to the next stage? And in Joyful Dirt, we were three partners and none of us were full-time in the business. We all had other businesses going while we were running this and had employees doing certain things and certain roles. And obviously, we mentioned COVID took it to a great level and opened up lots of great wholesale channels. People were opening up stores for plants. We got into Whole Foods. Just a lot of really cool stuff.
And then we entered another phase without even realizing it in '22 when one of my business partners exited the business he was spending 90% of his time on. And he's like, "Nah, I'm going to get involved in Joyful Dirt." And I'm like, "Thank goodness. We've needed this person for a while." And now because you have free time and you don't need to make money at this point, you're now our free CEO. This is great. In that process, the focus, rightly so, COVID slowed down, e-comm slows down less people taking care of plants, more people focusing on how to pay their normal bills, we did slow down slightly. And that change against, hey, push, push, push, push for marketing and growth, was more about how do we really look at this as a business? But how do we put processes and strategies in place for manufacturing, because none of us have [inaudible 00:03:49] in manufacturing. So it's like, well, we make it as we need it, but how do we hold an inventory and how do we plan cash flow?
And all of these business processes we should have had a while ago, are now coming into place. And so really it came about because that business partner gets involved more and more and is like, "I want this to be my business, my baby, and what if we took your shares? We're not doing as much marketing now, so you're probably not as involved or excited. What do you think?" So my wife and I we're like, "Well, let's think about this." And he's becoming more passionate and we're neither here nor there. We have a lot of other businesses we're involved in as well. And we decided, Hey, we enjoy the growth phases of a business and there's going to be another growth phase of Joyful Dirt coming for sure. But it's like, Hey, for us, it's a phase that we're not going to be as involved or as excited. And if you put me in front of a P&L and you want me to help optimize all the lines in that, and I'm like, "My eyes cross."

Jon:
Why does that A, not surprise me? But also, because I know you personally, but I bet people listening to this would think he's in the numbers all the time. You probably love numbers, but I do think it's different. Running a business, having to manage all the costs, do all of that stuff, it can get old pretty quick if you're not really passionate about the business.

Garrow:
And I'm passionate about marketing, and that's where I'm in the data and looking at numbers and analytics. But what are we paying for boxes? Let's go optimize the box cost. Just no, they work. One of my good friends is a CFO of a pretty big organization here in Portland. He lives in P&L and just loves it. I'm on a text chain with a bunch of business owners in Portland. They're talking about an issue within some of their finances. Can I put it together an Excel spreadsheet for you and help you forecast? I've got an hour this afternoon, I would just love to do it. And I'm like, "Well, we'll pay." He's like, "No, I just want to play an Excel with that. That'd be great." I'm like, "That does not sound like fun." So in realizing that and the ebbs and flows of business, it's just like, okay, this is a good time to exit. We've got an opportunity to offer on the table. Let's go. Let's see what this looks like.

Jon:
Yeah, all well. Always want to exit on the upswing, so it seems like a good time.

Announcer:
You're listening to Drive and Convert, a podcast focused on eCommerce growth. Your hosts are Jon McDonald, founder of the Good, a conversion rate optimization agency that works with eCommerce brands to help convert more of their visitors into buyers, and Ryan Garrow of Logical Position, the digital marketing agency offering pay-per-click management, search engine optimization, and website design services to brands of all sizes. If you find this podcast helpful, please help us out by leaving a review on Apple Podcasts and sharing it with a friend or colleague. Thank you.

Jon:
Okay, so every exit's a little different. So I'm interested, tell me some of the good things, the bad things about exiting, especially an eCommerce brand, because obviously that's the majority of listeners here and where I play most of my time. So I'm interested to hear about this.

Garrow:
And I don't know if there's ever a perfect time to exit a business. If there is, it's always in hindsight, I think it's all about emotionally, is it time? And does that make sense? And the numbers will find a way to work itself out, because every opportunity you're participating now means you're probably not participating in another opportunity.

Jon:
Wait, you mean you sometimes say no?

Garrow:
Well, I got married, so I have tight strings attached, which is a very good thing for my personality, 'cause I'm like, "Ah, everything's exciting and fun when it's new and fresh and I get to come up with ideas and strategize on it." But my wife gets to shoot those down and be like, "Nope, you've committed to these ones. These are your opportunities." And so exiting one now says, "Hey, I do have a hole in my quiver now. What are we going to fill that with?"

Jon:
Can I make a suggestion?

Garrow:
No, not yet.

Jon:
All right. Nevermind. You didn't need to pause. You weren't even like, "Eh." You're just like, "No."

Garrow:
No, my wife is like, "It's not happening yet." I don't care what I ... Somebody's going to offer you a Ferrari for a dollar? Maybe, because you're going to sell it immediately. But you're not getting involved in another business yet until you take a break.

Jon:
This is a problem. We have too many good ideas.

Garrow:
I know. And that's for me, I love the idea piece. So at least the fact that it's a potential now means that my brain can start looking and thinking about things. I also have other business I'm involved in so they get more time. And so that is a good thing because one thing I have that's limited is my time. I wish I had more, but so does every business owner. If you had more time or even parents ... I have four kids, and so I need five times as much time for each kid. So the good thing for me is potential for new opportunities. I also learned a really valuable lesson for me personally. Lawyers are a good thing, and that's also a bad thing. Lawyers, I hate paying for them out of default. So it's just annoying that those bills come through because lawyers get phenomenally high hourly rates.

Jon:
Pretty quick. They should-

Garrow:
It adds up.

Jon:
Give you a return on that. But-

Garrow:
Yeah, they should be like, "Hey, how much more did I get?" Because I pay you an extra 10% if you get me an extra 30%. But the good thing I learned in this is no matter how amicable a exit is, there's always emotions and challenges. And so in hindsight, if I had been negotiating face-to-face with the partners, that creates a lot of tension and emotions because there's emotions on both sides, because they're trying to negotiate low. You're trying to negotiate high. So there's always going to be that tension and emotions.
Where if you put lawyers in between and they're the ones talking without emotion, things actually move much quicker. You don't have the ability to just say something angry because they said this thing needs to happen. You're like, "No, that's terrible. You're a horrible human." But the lawyer's like, "Okay, yes. They said that, but I think we're going to do this and this.' I'm like, "Oh, okay." Lawyers are very helpful, especially if you have good ones. I assume there's some bad ones out there that probably would not help things. But we both had phenomenal lawyers that really helped the process. I think go quicker and end on a positive note at the end of the day.

Jon:
Well, those relationships matter?

Garrow:
They do. You never want to ... Especially a city the size of Portland, it's technically a larger city. But you and I both know that it is a very small city when it comes to industry it feels like. If you're going to know people, you're going to come across people that you do business with again. So if you burn bridges, it's just not going to be great. And so having the lawyers keep the emotions out of it and make sure that the relationship or what's happening outside of just the transaction is positive. One thing I didn't think through before an exit, is the relationships with employees. When there's an exit, you don't get to keep having those same relationships because most of your relationship was based around business conversations, which you no longer get to have because of wonderful agreements. That's good.
But I didn't expect like, "Oh, I can't call person X, Y, Z or text them and just be like ...", because I'm not supposed to. But also because I also have a lot of businesses, and I have companies that interact with multiple businesses or individuals that we hire as contractors, default wording in exit contracts, would it put me out of compliance immediately if we didn't think through that? 'Cause I read it and the lawyer's like, "Yeah, it looks good." And I'm like, "Well, this particular contractor works for me personally and works for these other businesses of mine, and that's okay in this, right?" He's like, "Oh, if you had not brought that up, you would've been liable to be sued because you would be in breach of the contract." So we had to put extra clauses in to make sure that I could still work with that contractor in other businesses, because what most businesses want to do is protect the business from a partner that exited, that they don't want you to take the ideas or the contractors and compete with them again.

Jon:
Oh, the team is an asset?

Garrow:
Yep.

Jon:
And it's part of the value. So definitely makes sense.

Garrow:
Yeah. So just the nuances and have, again, the lawyers, I can't say enough about having quality lawyers, which five year ago Ryan would've been like, "No, let's just do this ourselves. We don't need lawyers. Let's just save the money. We don't need to pay thousands of dollars in legal fees."

Jon:
Ryan has gone corporate, is what I'm saying.

Garrow:
There's a lot of mistakes I can make if I don't have somebody smarter than me checking it and checking my work.

Jon:
Always seek legal advice. I will second that for sure. Okay, so relationships matter. Definitely makes sense. Lawyers good and bad, but mostly good I'm hearing. Expensive is the negative, but on the positive, hopefully they've given you return. So if I'm doing my math right, it was about six years of your life, maybe seven? You said 15. So 20?

Garrow:
15 was the idea. So there's some ideating and-

Jon:
Okay. So let's say pushing seven, six.

Garrow:
Probably six. Yeah.

Jon:
Obviously, you have a lot of businesses, more than we talk about on this podcast. Obviously, there is a lot of time involved, a lot of missed stuff with family, et cetera to try to get this business. So there's definitely some ups and some downs. What would you do different looking back on this?

Garrow:
I probably would not have started a manufacturing hard goods product as a side hustle, or I would have said, "We need to have somebody full-time owning this business from a responsibility perspective", because when you have three business partners ... We're all really good in business, and we came together because we have very unique skill sets that I think together make a really solid business. But the problem is we all had other businesses that were making the money that funded this entity, and none of us necessarily owned everything within the business, like P&L, responsibility, employee, HR. And there was a lot of things going on on a business when you start having employees that I think had we taken the jump and just said, "Hey, we're going to hire a business manager to run this full-time. It's going to be their responsibility. We'll be more of a board advising them and checking their work type thing", I think it would've probably grown quicker, been more profitable and overall more successful.
And maybe we would've exited as a group years ago. Who knows? I think just the manufacturing complexity entails that it successfully long term can't just be a side hustle, because we put somebody responsible for the business over the last few months, you really started to see the value of that inside the business and in the results. And so I think side hustles are more about service-based businesses or hobbies that maybe someday could go big, someday win maybe. That was a big learning I would've done.

Jon:
Or even as you did here, get it off the ground and then hand it off? That's an option, always an option.

Garrow:
Yeah. If we just had that goal like, "Hey, we're going to build it up and then just sell it early on", and it's a side hustle for us, not a major money maker.

Jon:
And you make your yearly salary up and it's just a quick sale like that, so could be worth it.

Garrow:
Another thing I would've done different, I would've probably done more research into the fertilizer space on legal requirements, and all that goes into getting legally certified to self fertilizer in every state. And knowing that that is a very large expense, because the first couple of years we're like, "La-la-la-la-la. This is so easy, so great." California's like, "Hey, are you registered?" "What do you mean?" Yeah.

Jon:
Another reason to have a business manager?

Garrow:
Yeah. I would've done more research going into it going, "Hey guys, we definitely should have a business manager", because we have to fill out all these certifications in all 50 states because they're all different. Oh, that would've been important.

Jon:
It's interesting what product lines you don't really think are as regulated as they end up being. And fertilizer's one of those where you can do a lot of nefarious stuff with components of fertilizer. And so governments want to keep track of that stuff to some degree.

Garrow:
Yeah, and it does create a protection or moat against competition to a degree. But it also means that if there's a high barrier to entry that we didn't realize initially going in like, oh, there's a lot of our profit that is going to go to just maintaining a legal business entity, in competing with the Miracle Grows and the Joe B's and all those large brands that have obviously gone through what we went through, but have a lot of scale to make it that easy.

Jon:
I have a friend who only invests in highly regulated areas of business. And I think that's an interesting approach because it is a huge moat. If you're already in, then nobody's going to do that as a side hustle, unless you're-

Garrow:
No it's true.

Jon:
Ryan Garrow.

Garrow:
Dumb enough to not know better.

Jon:
You have a dozen businesses and you're like, "Let's just try this one and then realize it later." But most people aren't going to even get that far, so that is a great moat to see. It increases value as well, especially if you do it right. Thank you for being open and sharing today, and I want to know what's next for you. I have my hopes of what's next for you. It involves you doubling down your wine business, but that's a different story, maybe.

Garrow:
Well, we're growing wine grapes. We're buying another .., Oh gosh, I think we have 220 pinot grapes. We're buying another two or 300 pinot grapes and another two, 300 Chardonnay grapes to plant out back. And then next year, we're doing Merlot. So there will be wine that we're growing, wine grapes, and we still do have the wine business. It's private client stuff. But right now it is that free time to a degree. So I don't have to ... On the weekends, I'm not packing orders. I'm not thinking about what calls do I have next week to try to get into another retailer. So it is free time for kids. We just started club soccer, and if you play club soccer in third grade, there's a lot of time. A lot of games on weekends and traveling. So that's fun. And I do get to put some time into the other businesses that would've been going to the Joyful Dirt business.
And so I've already seen some fruit from that and had some doors open just locally with some really influential people within those spaces that has been like, "Wow, put those people into this business and help grow it." And the other businesses, by the way, do have full-time managers on them, which is so helpful. So it's not just me trying to grow. It's me that I get to focus on connections and marketing and top line things. And I'm taking the family to Hawaii next month.

Jon:
Nice.

Garrow:
So when you're flying six humans to Hawaii for a week, that's fun. Also, chaotic.

Jon:
Yes.

Garrow:
On a plane.

Jon:
And expensive, Hawaii.

Garrow:
Expensive. Yep. Hey, there was an exit. We're good.

Jon:
Yeah, there you go.

Garrow:
For this one. And my wife and I have been talking through what does the next step look like? Is it getting another e-com business? Is it buying e-com business? Is it help start another one? And I said, "Well, maybe it's completely different." And we look at ... What if we get involved in a local business that doesn't have an e-com component? Maybe we add one, but maybe it's just local that we can have an impact in our community and the people right around us, which is something that since my wife's store closed on our farm at the beginning of COVID, we haven't had that. And so that's something that we both are considering. What does that look like? And thinking through it.

Jon:
Okay. Well, that would be exciting. I think especially where you live on the outskirts of the city, there's a lot of local stuff out there, and that's a local economy that does well, and it's always fun to see. And I'm partial, as I've already talked about, to all the vineyards that are right out where you live, but in terms of supporting local economy. But there's a lot of great stuff out there, so it's always good to see.

Garrow:
Yeah, so who knows? There's a lot there. We are having a meeting in couple weeks that we're going to talk to a family that started a 501(c)(3) to further some of their charitable stuff. And so we've thought about that because we're attached to quite a few charities within the region that maybe there's something that can tie them together within a family unit that we can all get behind. In fact, this last holiday season, my son, fourth grader, raised a bunch of money for Doernbecher and toys and took him 'em up there and delivered them.

Jon:
Awesome.

Garrow:
So he's pretty passionate about that. So it's like, "Okay, could we build the charity around that to help drive more value to locally to some of these businesses that are doing really cool things?"

Jon:
Yeah. That's great. Well, that would be fun to see as well. There's a business aspect to that that requires a lot of the same thinking and exercise that. But it ends up being for wider good than just your family. So that's awesome. It's a noble cause. I'm glad to hear you're thinking about that. You've been really open and I really appreciate that. I'm excited for you. I think it's a huge win. Something I haven't been through personally. I have no intention of selling the Good at any point right now or any of the other things that I'm invested in. But I love when people do it and I get to see it, and especially when friends like yourself do it because they can cheer you on and it's always good to learn about it. So congrats on that.

Garrow:
Yeah, thank you. And looking back, it'll be like either it was a great idea or bad idea. But nonetheless, it was a for sure learning experience and going through it. And there's plenty of other businesses to start and exit.

Jon:
There you go.

Garrow:
Fail and grow all the things. I'm definitely not done. So I'm sure we'll have more of these conversations, and maybe somebody's going to offer you enough zeros that the Good is like, "Ah, I'm done."

Jon:
Well, one day it may happen. Who knows? But again, running a business as if you're going to sell it makes sense. And when it happens, then you're in a better position. So that's great. Well, awesome. Thank you, Ryan. I appreciate you sharing today. Onto the next business so we have more examples of your stuff to share and talk about as we move on with the podcast.

Garrow:
Yeah. Thanks, Jon.

Announcer:
Thanks for listening to Drive and Convert with Jon McDonald and Ryan Garrow. Keep up to date with new episodes. You can subscribe at driveandconvert.com.