Podcast Transcript

[00:00:00] Welcome to the ScaleUps Podcast, where each week you get to hear Sean Steele, professional CEO, growth mentor and advisory board chair unpack the strategies that successful Founders have used to achieve scale of their businesses. Stay tuned as he interviews the entrepreneurs who've made it learns from industry experts and follows a group of Founders still striving to scale.  

[00:00:27] Sean: G’day and welcome to the ScaleUps Podcast where we help first time Founders learn the secrets of scaling so they can fulfill the potential of their business, make bigger decisions with greater confidence and maximise the value that they can create in the world. I'm your host, Sean Steele and I am joined today by Owen Franklin, CEO of Blue Summit Supplies. Owen, this is definitely the first podcast that I've done with, not somebody who's at home, pretty much everyone's at home. But somebody who's at home with COVID but feels well enough to do a podcast. So, I think we should start there because you've had a vaccination and you've got COVID, but you're at home, you would normally have in the office.  

[00:01:07] Owen: Yeah. We have a podcast studio at my office and we have a great team there that sets all that up. And I was planning on doing that there, even though it is later, our central time on the U S but I'm trying to be a responsible adult. I got exposed a little over a week ago now and the individual texted me, so I went and got a PCR test and a rapid test. And the rapid test was negative but the PCR test was positive and actually got up the next morning and ran four miles in 85 degrees, which I think is like, I don't know, like 35 Celsius, 32, something like that. I mean, it's hot, really hot and felt great. And the last couple days I've had like a vertigo, but I don't know if that's anything to do with COVID and just maybe a coincidence. Like that's happened a couple of times in the last year. But no, I mean, I don't feel a hundred percent, but I like talking about this stuff, so, you know, pain is all here, so I'll probably forget about it until the podcast is over and I'll start feeling bad again, but at least you've removed my pain for an hour. How about that? But I mean, me having COVID, I'm sure that’s part of the discussion, it's pretty fitting, right? I mean, that word is unfortunately been a big part of our lives last 18 months.  

[00:02:20] Sean: Big time and actually just a huge part of business and the changing nature of how we've had to get things done and the way people think and what people are willing to accept and what they won't accept anymore. And yeah, I think it's changed a lot. Well, before we get into COVID, like I can't wait to dig in together today. You and I had a great chat offline a couple of weeks ago, and our listeners will understand why in a moment. For those who don't know, Blue Summit Supplies or yourself, your background was, you're a thermal engineer from Alabama. You founded this company only five years ago, which is 2016, right? You're an e-commerce company, manufacturing and distributing office supplies, private label items on Amazon and other platforms and on your own site. But wait for it, you're already the largest third party seller of office supplies on Amazon. Your first employee, other than you was only three years ago in 2018 and in the last three and a half years, you've grown to, I've lost count what? 35 staff and $30 million in revenues? Is that right?  

[00:03:21] Owen: Yeah, I have a hard time keeping track of it for those numbers now. They're both about the same. I think we had like 38 employees. And we just got done through some 2022 projections and we're probably looking at like 38 to 42 million next year. Just trying to kind of figure out where we're, like this year where, and we'll talk about that. I'm sure it's all about scaling. It's like, we're doing some like seriously detailed forecasting, like on a SKU level. And then we're tying forecasting thing to budget increases to each department. That's kind of cool, like this is all new. Like, yeah, let's just grow as fast as we can. And now we are like, literally detailing forecasting by SKU by month with a complicated model with the inputs but yeah, that’s where we are today.  

[00:04:07] Sean: Well, that doesn’t surprise me given your engineering background, you can imagine the level of forecast.

[00:04:14] Owen: Well, this is new. I mean, we did not do this before. We did it for other things. We did it with cash. We were very detailed about cashflow forecasting. But now we're doing it from a revenue and profit.  

[00:04:26] Sean: Awesome. Well, there's just so many places that you and I can go today. So just maybe as a starting point, can you give us a bit of an overview of the business, maybe through the lens of who's a typical customer, what are their problems and how you solving those?

[00:04:38] Owen: Sure, so the business started on Amazon and a lot of the revenue still comes from there and we've expanded and we have our own channel BlueSummitSupplies.com, we sell on their competitor, Walmart. We sell a little bit internationally on Amazon’s marketplaces and generally, the buyers are small companies. We actually started selling QuickBooks envelopes. QuickBooks owns like 80% of market, and I actually designed the envelope like the windows to make sure it fit in a certain orientation to like the address showed, but like it didn't show the check amount or anything like that. And that's where it started with 500 boxes of envelopes. And it's a funny story about how we had to find the supplier. I mean, we could go into that, but you have to be curious, you have to kind of hold me on target here, but I mean, so the end-users…  

[00:05:32] Sean: So, the biggest end-user is actually small companies rather than…  

[00:05:36] Owen: Small companies. Generally, it's very much the long tail, the internet, where it's a lot of transactions, not very high dollar value, probably 25 to 35, depending on the season. And the stuff that people use and we buy it direct from the most efficient factories in the world. And we are building a lean supply chain and we sell inexpensively. We sell some of the slowest priced office supplies on the internet. We are very economic against, I mean, very cost competitive against, especially something like price in envelopes and folders against office depot and staples. But we work in a lot of the same factors. A lot of the same products. We just have a pretty intense focus to make sure that quality is consistent. I mean, folded piece of paper, it's kind of hard to mess it up, but like, it can be, and it's kind of one thing that like, you don't really notice until you notice, and then it's very annoying, you know? But I think we've done a very good job of building really good relationships with global factories with good economics. And so, our customers, would they consistently get a good product that is inexpensive. Well, that's how it began.

[00:06:44] Sean: So, let me take you back a step, because I want to talk to you about things that have happened along the way that have helped you scale. And also of course, mistakes that have happened along the way that have been, because you had some challenges along the way as we all have. So, I just wanted to jump back to a couple of things that you said, first of all, you said that you've got, sounds like you've got quite a strong price advantage in a lot of areas. How is it that you've generated a price advantage? What is it that you're doing differently that allows you to offer that to customers?  

[00:07:15] Owen: I mean, Amazon has been a big part of that. Amazon is unbelievably efficient from a backend perspective. What's funny is they have this, I think it did like 600 billion trailing T3, like trailing, trailing 12 months, and they’re great website, but they're like, this is just one website. Right. But their infrastructure is just remarkable. So, we use a lot of the economic advantage we've got is using being a third-party seller there. And then two, we've met some really good factories and worked very hard to build factory relationships and we’ve build relationships and kind of sold them on the fact that we're going to grow and we're going to aggressively pursue growth and we're going to aggressively pursue getting customers and growing SKU count. And the way it kind of works is, you got to think about it. Let's say an item has a 70% gross margin. So, that means that the cost of good sold makes up 30% of the product’s price. And let's say that obviously there was a behemoth company, let's say they have a 10% cost advantage on us, which is pretty large, actually like, the way economics work with mass production is, is like if you produce one box in envelopes, it costs way up here. If you produce a hundred, it costs here, if you produce a thousand, it costs here, f you produce a billion, it's something like here. At some point you reach diminishing marginal returns and you don't get any better. Through scale, you don't really say that much, and we're kind of playing in that area and they'd probably sell more than we do, but we still play in that area. And so like, even if they were 10% from cost of good sold perspective, that's only 10% of 30% of the actual cost or revenue. So, with that math is, they would only have a 3% cost advantage to us to revenue. And it's not a lot of money on a $25 item. And so like, it may be that, we're buying stuff at 25% more expensive than they are for a box, but they sell that box like 60 bucks, and it really doesn't make a difference. And there's a lot of inefficiency with overhead and with the retail stores or, what is it they do, whether it's obviously where someone else is. We're working very good factories and we have a pretty similar scale to the big boys. And so, we're able to buy it similar prices. We don't have a lot of overheads where those kind of make it work. It's worked so far, we can see, can we continue to scale? That is the question, you know, because we have to add overhead. We have to add centralised employees and product managers and engineers. Can we make all that work and still keep this call structure? We're going to have to figure it out.  

[00:09:58] Sean: Back to the reason that you started the business. So, I mean that, you talked about the fact that you started with the envelopes, but then at what point did you go, actually, there's something really big here. Like there's something that I can really go after. I'm seeing a sort of bigger opportunity. What was the sort of the moment that led you to that?  

[00:10:16] Owen: I don't think it was a moment. I think it was like stages of a moment. And I think you have to…I mean, I started the business trying, I started the business by Googling how to make money on the internet, and then, I read a couple books and then Googling that, I read like Rich Dad, Poor Dad, it’s famous book. I don't know if you're familiar with that book, super famous, like introduction to entrepreneurship, we'll call it. And that's how it kind…  

[00:10:43] Sean: … when I was 21 and it changed my life.  

[00:10:47] Owen: I mean, that book began at all, man, that book and book called, for those of you who are thinking about beginning of an entrepreneur journey, Millionaire Fast Lane, it's a very similar book. I would call it like a modern version of, and that book changed my life. It really did well that book is the reason why I Googled how to make money internet, honestly. So, I'm trying to make like five grand a month was my goal, like in profit. And so you see I think about like my mindset there to mindset now where my objective is to build a billion-dollar revenue business by 2031 is my objective. Like that's a big mindset shift in five years. And I think it was very tiered, but it was kind of like…when I found the category and I saw the economics that existed in economics we could buy and what was being sold, like, dude, this is going to get big. And back then I thought big like 5 million revenue or 2 million revenue, like this is going to get big. And then I kind of started to get comfortable spending real money, like the first purchase order was like10 grand. It was a lot of money. Like I remember being stressed… I still remember the moment when I sent the email. I still remember the moment talking about wife about it. It was her and I were a big part of making the decision together to do this. We started to spend real money. We found other categories like we're big in the folder space. And so, we found a good factory there and we're able to kind of grow there. And then I sort of kind of interact with these retailers like office depot and staples and interact with Amazon and Amazon was nice enough to invite me out to Seattle. And I began to see this B2B space that exists. It's kind of a very, there's a lot of revenue coming from a lot of different places. And to me it needed, there needs to be some consolidation and organisation and district. And like Amazon is doing a lot of this online, but it's a little bit different than how we're proud to proceed forward. But to me, the opportunity was just too big. The business consumable market in the United States is gigantic, probably 80,000, several hundred, probably over a hundred billion revenue. I mean, just anything you name from toner to toilet paper to water, or coffee, it's a huge market. So, I mean, it's like, dude, I'm going to like meet local companies that operate here in Huntsville and interact with other people. And just I'm like, these people need to advance technologically, and I need to embrace scale. They need to embrace efficiency. They need to build better systems. They're not going to survive. And I was like, I think I can do this a lot better. And I think that, the whole vision of the business is to kind of bring this full circle, like our core vision is to improve the lives of our sphere of influence.

So, that like that is…  

[00:13:40] Sean: Yeah, unpack that for me. I know that we chatted about it briefly, just unpack it, what do you mean by that?  

[00:13:43] Owen: So, we define that as everyone, our operations touch. And that's important to me because our suppliers, our employees, our customers, our owners, our consultants, people like you, Sean, people we meet online, people who interact with, the goal of the businesses to optimise for the whole. And I believe if we do that, let's take a supplier example. If we marginalise our supplier, he's not going to help us long-term, he probably might fire us long-term, but if we work together as a team and sometimes we give, as long as we take, it building a much more sustainable long-term business. And so, to me is like, what's cool about distribution, especially something as big as this industry is it's complicated. Look what Amazon has built. Look at Walmart’s built. Look what these retail have, they're huge complicated machines. You have to merge a human organisation with a technology organisation together. And to me is the way, the stuff that we sell is distributed in the United States is inefficient, and I think we can do it more efficiently and we can offer our customers similar to better pricing with better service, with less work, to get the product. Because I remember, buying a product has to do one is you have to go get it. And two, you have to pay for it. Both of those have costs. One is monetary. One is time. That's something that Amazon has done so well with the app for consumers. And so, our kind of vision there is, it's kind of grown from 5,000 a month to like, man, this might be a couple million-dollar business. Like I think this is a seriously great opportunity to make small businesses more efficient. As I like to say is, I want to change a small-businesses consume products and services in this country. And to me, it was kind of morphed into this thing like, they're consuming this and they're buying that and they're doing this from all these different places. Like we need to pack that together, build a better system and make it more organised, and make it more efficient for them. It's kind of this bigger vision that's kind of snowballed  

[00:15:39] Sean: And you mentioned to me that, one of the issues around and part of the driver for this sort of opportunity to kind of optimise for the whole and within the sphere of influence was that you could see that actually there were other players in the industry not doing that, or the kind of unintended or intended negative consequences with sort of power imbalances, which of course naturally occurs when you end up with some big players. But that was part of genesis for that.  

[00:16:05] Owen: That was where it came from. I mean, Jeff Bezos says we start with a customer and work backwards. Those are his words. And dude, he has done one hell of a job. That guy, I mean, it gives me chill bumps thinking about what he's built. I mean, just the vision and the tactical ability to execute what he's built is how much he's… I mean, this iPad is sitting on an Amazon box right now. I mean, it's crazy what he's done. And what's funny is I think in his last shareholder letter, he made a comment like we're going to be the best employer in the world or the best employee supportive company in the world now too. And so like, I think he's embracing that, but I felt like that's where he started to me, it just didn't sit right with me. Everybody chooses how to run their own business, but that's kind of where that came from is like, I'm not just going to optimise for them. I want to optimise for all. But I think if we think very long-term, we're …

[00:16:59] Sean: What I like about it is, it can also take, when you think about building an organisation, you're also trying to find great people, right. And fundamentally, people are motivated by emotions and it allows you to take a business that may not be sort of sexy on the outside. It's like, okay, well it's office consumables and office supplies. And it's like, well, how excited I getting about the folder or the stapler or whatever, but this actually has a real impact on people in the world. When you take this philosophy and you embedded in the culture of the organisation and the people involved can see the impact that that's having on others. All of a sudden, they have the opportunity to get excited about the business model, regardless of the product, because they're thinking about how do we create value in these human interactions, leveraging the efficiency of the system, the systemization that we can build in this company to bring it together.

[00:17:49] Owen: Yeah. I mean, I think that I was discussing with my colleagues and they said, Owen, it's just office supplies. All we sell is office supplies and you're very foolish. If you think we always sell office supplies. And then I said, remember the book we just read. Simon Sinek says, people don't buy what you sell, they buy why you sell it. I think that's very, very important. Because the reality is isn't it, people need this stuff….  

[00:18:11] Sean: Sorry, we just lost you for a second. Then you said, the Simon Sinek book, we don’t buy what you sell.  

[00:18:17] Owen: Oh, so he said, start with why. It's such a famous book. And he says, people don't buy what you sell, they buy why you sell it. I think that was paraphrasing, but it's about why. And to me, it's very much, I'm a human and I'm selling it and a human is buying it. And our job is to make a connection with that buyer and build a relationship. And the more we understand about them, the more we understand about their operations and their needs, we can do a better job for them. Also for us, to me, it's a lot of fun. Like we have a party here, we call it our back-to-school party, and we're supposed to have it like in a month and I probably aren't going to be able to do it because of COVID because the cases are moving so quickly. But like we have an opportunity where one of our factory partners in China, he came here with his whole family. And you have an opportunity to meet actual customers in United States that he says his product is sold too. Like, to me, that's kind of what this is about. Like building this big system and then connecting human beings between the pieces. Like that's our job. Like we're the guy in the middle connecting the best factories in the world and users. And we want to do it like in a very human way.  

[00:19:30] Sean: Well, I think that's the whole point of automation and systemisation, it's not making the job and the business less human, it's creating the opportunity for it to be more human, because then the humans that you have, like I'm not spending time on low value, manual tasks, things that could be done better by a machine or a system or a process that actually got greater capacity to bring creativity, to create connections, to great relationships, to serve customers, to create opportunities because they've actually got spiced to do so. So, let me dig into a couple of the key moments, we've talked about. And I asked you the question, what was some of the kind of key moments or the key decisions that you made that you feel like really have helped sort of enable this rapid scaling of the business, take me through some of those.

[00:20:21] Owen: Yeah. I mean, to me, it was very subtle, like slowly… it's kind of like if you throw a frog in a boiling water, so he'll jump out. But if you put them in there and you pull it, he never notices. Like, to me, that's kind of what happened between 5,000 a month and now, my vision today. But there were some like times I can look back and be like, there were big, like stretch moments we'll call them, like big stressors that I had to get over. I had to let this get out of this out of the way. And one of them was beginning. I mean, paying $88,554 or something, like that was a big moment, that was a big risk and people thought I was a nut job. It was the first product for the first set of goods, the first 500 envelopes to begin, like that was the business. You have to buy something and resell it. And I don't know if I can get a resell it, you know, so that was a big step. And then, getting comfortable spending,10, 20, 30, 40,000 in a purchase order, that was a big step. And then quitting my job. That was a huge step. It was that, I've been told my entire life, this is why I'm such a dude. I was to get a good job and have good benefits. And then all of a sudden said, I think I'm going to add more value to the world and do bigger things by not doing that. And it was a mindset that I had to… and that happened like an eight months-nine months. And so, my wife and I decided, I'm going to quit my job. And then I started working with the Chinese. That was a big step. I remember when I was sitting at my family's condo at the beach, and I sent my first PO to a Chinese vendor named Robin, who I ended up having an awesome dinner with in Penang China three months later, but making that mental job of I'm going to expand the horizons of outside the United States and work with an outside vendor who I can't even speak out the same… you know, we didn't even speak language very well. And that changed things, that is really what took it to a whole new level. And so I went over there in November of 2017 and began, and I had never been to China. I went by myself, and it was one of the greatest experience in my life. I'm so proud of the relationships we've built there, really built all over the world, but there was just a lot of fun. And I travel all through China that first trip and the second trip I went in December and I have some pretty crazy stories from that, but like that, that trip, I got mezz debt that I wasn't for sure I was going to get, but I was told it was coming. And so, I got on a plane in two days to China. And flew to China and committed like 250,300,000 of the POS. When I didn't have the money to pay for it. I was like, whatever, I'll figure it out. On the way there, I figured out what I was going to buy. And I travelled around. I was Ningbo, Hong Joe, Shanghai, and back in Ningbo. And those POS took the business from 5 million to 15 in six months. That’s annualised, not from like a monthly times 12 and maybe seven months. I mean, it's probably like more like 8 million to 15 to 18. But you know, that range, that PO changed the business and those POs, plural. And then we met to two factories that both came to the United States in Huntsville from Shanghai and Ningbo. Two years later to my house for my party, that was that trip where we met for the first time. And one of them was a very big factory and incredible strategic partner, incredible guy, incredible family. We had to kind of convince them to world-class and they were pretty big company and we were not a big company. And so that was a huge deal. And then on the way back, I was so exhausted. Oh, I got swindled out of money. Well, we probably wouldn't use…

[00:24:19] Sean: I was going to say, I usually come back from trips to China like that, exhausted because it's taken an absolute baiting from too many, lots of rice.

[00:24:26] Owen: Yeah, and on the way to the airport, I had to change airports from Ningbo to Pudong airport and the cab broke down the side of the road. And I didn't know, a cop came and there was a story that we can talk over Australia and beers one day when I visit. And so I ended up, the cop helped me get another cab, made it, got on a plane and flew home. And I blackout on a plane, I don't remember getting up from my seat. I woke up in the back gallery, it was 777’s. And I had those flight attendants’ seats back there, and I woke up on the seat and I got an oxygen mask on me and this Chinese doctor, like giving me like pressure point stuff, and I was like, what is going on? And the lady was like, are you like drunk? And the other flight was like, no, he's been working for nine hours, like that's no. And I think it was just exhaustion from that trip. But anyway, so that wasn't a crazy trip, but that really, really took the business to that. Those orders took the business to do enough to hire. And when I began to hire, I began to interact with people with my own employees and like trying to watch them grow. It changed. It didn't happen like well, I hired him and it started. But like over like between 3 to 8 to 9 to 10 months, a year of that beginning to build a relationship with my employees and watching us grow together and the opportunity that we saw and the potential for us, person to grow, for them to grow together. That was it. It was over after that, I got the bug and there was no going back. Does that answer your question? Like, it's kind of a lot of….  

[00:26:20] Sean: Oh, yeah. You know, well, one of the things I really like about what you said, and I was reflecting on a podcast that we've done with Esha Oberoi, who runs this business called AFEA Care Services, essentially, home and disability and aged care provider, and she'd scaled massively from zero to 350 FTE over the last 13-14 years. And one of the things that was really interesting when she said, essentially to grow the business, you've got to grow yourself. If you're a first-time Founder, it's actually your development, your willingness to take risks, your willingness to step into those next challenges that you're uncomfortable about. But in the absence of taking those, the business can't grow with you because it's going to be limited value, and especially in those early stages. And that sounds like exactly what you've done and you've kind of gone; okay, took a risk, got a bit of confidence. On to the next risk. That looks that looks like I should do that, but I'm uncomfortable about it, but I can do it anyway. And then each time, you build a bit more confidence, take the next risk. Something works out. Some things don't work out, but then you keep leveling up.

[00:27:27] Owen: I talk a lot about it. Like to me, what's so exciting about this and why I don't have a lot of interest in selling a business is like to me, let's see how good I can get at this. Like, to me, this is a great experience. One to, I hope that we can seriously improve our sphere of influence and hopefully we're going to get big as possible, but like, let's see, like this gives me opportunity to like really get good at this. And we'll see where it goes. Maybe I peak tomorrow. Maybe I peak in 40 years. Like our first core value is relentlessly pursued better. And that's my objective, is I want to get better and better and better every day. And we'll see where it goes.  

[00:28:01] Sean: I love that. Yeah, that's beautiful. So, tell me about, you had some challenging moments as well. And are there was a site launch recently, when you sort of reflect back on some of the most difficult moments along this journey, what's the first one that comes to mind?  

[00:28:16] Owen: I mean, I think that each phase of the business had a difficult and a different problem and they all had different problems, but I think the first problem that strikes in this cash flow, is the nightmare of cashflow and the fear of cashflow. I remember when I was issuing my second PO and we added like a line on a PO that my wife was like, you got to add this, you got to add this rule. And it was like, if we can cancel a PO to a week before production, because we didn't want to get stuck with this inventory that we couldn't sell, because you're always behind, and so you're outlaying this money out like this risk. So, I had to get over that. That was really, really scary. And then we had situations, we call it the white. So, that thing that changed the business, those POs, I bought 30 or $40,000 of stuff that was wrong and I had to basically throw it away  

[00:29:11] Sean: Just to go back one step. Just to help people, there's probably many people who are in services, businesses, and their cash conversion cycle is very different from the time they spend a dollar to get a customer to the time they received money from the customer to enable the cost of delivery. It can be a very different profile. What does that look like for you? So, how does this sort of cash, what's the timeframe of basically spending a dollar to be able to make one, and then actually receiving that dollar from a customer?

[00:29:37] Owen: It's a funny thing. It depends on where you're buying it, and depending on your payment terms and depending on your lead time. So, in the US, we'll issue something, we issue a PO, we don't have to pay for it till it ships. And we can sell it and get the money back pretty close within 30 days of when we get it. But if we bought it from overseas, especially right now with how bad the world supply chain is, we will outlay cash. It may be six months before we get it back right now. I mean, it's crazy. Now, normally that's maybe three and a half, four months but it's a huge. So, you have to fund, and I remember it, we were running negative cashflow projections, trying to figure how much money I was going to borrow at mezz debt. And it basically, you start here at zero and you get to see the debt just pile up because the inventory lands, you got buy more where you get paid for the first order. And so just keeps trickling down. It was like degenerate… I don't remember the numbers, but it was like, I needed like 10 grand per SKU to buy it. And it would like peak at like four or five months. And it was sort of pay itself back, but it takes 6, 7, 8, 9 months to kind of go cashflow positive on an item that you buy overseas in our business, something like that. So, it's a big problem. And I didn't really understand that. I don't have a business education. Like, I just watched the money not come back and I was like, I want to keep growing. Okay. How do I do that? And I'll begin…  

[00:31:17] Sean: And so, how did you figure out what your financing options were?

[00:31:22] Owen: People, man. I mean, it goes back to people. It was like, I learned within a month I was interviewing accountants and I met a guy named Tom Albright who I've become great friends with and I’m building this little group of people like, so we go get drinks once a month. And now we have my accountant, my lawyer, my financial advisor and my banker, but I just met with started going and getting drinks with him. And he taught me accounting. He taught me what a balance sheet was, what an income statement was, what a cashflow statement was, how they connect. And he introduced me. We had a couple of connections and we had a private banker that we just met. My mother-in-law used them and we met them. And so, they help us a little bit, but the money was very small. But I mean, when you are running into a problem, you just beat the hell out of it till you get the answer. And that was kind of my solution is, Googling it, calling people, just ask questions until you get the answer. It was kind of my… and that was where that was. And that was probably the biggest problem, but that's not necessarily like a problem, like, oh, we made a big mistake because it's something that we had to deal with it. But the cost of that problem is, is you buy stuff before you can sell it before you know it works.

And so we had in that big PO that we issue, those POs, plural, in December of 2017, that changed the business. We bought about 40,000 of stuff. It was bad. I mean, I made it throw away. It came into the United States. We call it the white board award because we want to embrace mistakes because we have to move. When you move quickly, you screw stuff up, that's how it goes. As Elon Musk says; mistakes are required here. But we bought some whiteboards and we didn't have very good packaging on them. And so, when they were shipped UPS, they showed up broken. I mean, you should have seen these things. I mean, they were like mangled. Some of them got delivered fine, but we had to throw them away. And that was one of several, couple hundred thousand dollar mistakes of buying inventory that we couldn't really sell. But that's part of it, and it's just…I say that now after it's over.  

[00:33:32] Sean: Easy in hindsight, it was part of the learnings at the time, it's a huge issue, right.  

[00:33:37] Owen: It’s painful. And so that was some of the big mistakes there. And then I think as I began to hire, it opens us this Pandora's box of just screw-ups. And I think the funniest one that you can get kick out off is that, I don't know if you use disc personality. And so, I'm 100 D natural, and then adapt that I'm like 93, 94. And so I started hiring, I had seen… I used to work for Lockheed Martin, which is a huge defence contractor, the biggest defence contractor in the world. There's a lot of like ex generals that they're leaders there. And so, when I worked professionally, one of the first times I had was as an intern for this high-level executive there, and I was around that general. So, I watched him manage. So, what I learned about management was kind of from him and this Colonel that I worked for, ex Colonel. And so, when I hired employees, I was like, you know what, we're going to do it my way. Your way isn’t wrong, we’re going to do it my way. And I learned very quickly that is not effective, like very quickly. It is stupid. And it's funny that I'm sitting here, this book helped me learn that. And I recommend this book to anybody trying to scale a business. This is Ray Dalio's Principles, and other than millionaire fast lane that began the idea to begin this, this book has changed that problem, it talks...  

[00:35:14] Sean: What’s a couple of things you've taken from that book that you've implemented that have really made a big impact in the way that you've built your business?

[00:35:20] Owen: I mean, so dealing with that problem is owning that you know very little, and I thought I knew a lot and all I learned is I know almost nothing. It's when you have a disagreement with someone, instead of getting mad at, you have to control your emotions and you have to understand why are they disagreeing with me. That's true power, not the other way around. True power is being able to control your emotions and get what you want from a situation, not letting your emotions control you. And this book talks so much about like psychology and about….And I hired an organisational psychologist who is an executive coach and she coaches me a lot about; Owen, stand up above yourself and watch yourself. How are you interacting as individual? How do they want to be interacted with? So a lot of it was like, like, it taught me a lot about thinking about my interactions with others and how I influence others. And it wasn't a… well, we're going to do it my way. It was, what works for them? How do I understand what works for them, and I'm going to do that because that's what's going to help me get what I want. That was probably one of the biggest lessons I've ever had. And then the second one in a very, very, very hard one, and he preaches this radical transparency. When you have a problem, say it. Doesn't do you any good, and doesn't do me any good, hold it down. Just because it's hard, doesn't mean it's right. You need to say it. Dude, I don't like how your attitude was in that meeting, I think that your response to Karen was inappropriate and I think it was demoralising to her and you are not able to get what you wanted at that meeting because of how you reacted with her. And this behaviour has been consistent the last three months, and it's not okay here. You can't do that here anymore. How about you and I work together and I'll help coach you. We're not going to do that anymore. And I'll give you feedback as we do that. Having those kinds of conversations were unimaginable to me two and a half years ago. And now I try to have them. I mean, I have them every week, every day, you have to, because everyone does a bad job at that. And it's very difficult for you to understand your impact to others. And so I hired an EA eight months ago and it's one of the things I have her do is, I asked her to do is like, well, how did I do in that meeting? Was I positive, was I negative? How did you feel that so-and-so interact with me? Was it negative or positive? So, I think those are the biggest things, man, is that like Melinda says, Melinda worked…she came from the Pentagon, her last job was with a three-star general and she was like, Owen you must remember that as a leader, everyone sees what you do. And she constantly hammers out into me and like how you interact with others and being honest, even though it's hard, I think maybe the biggest management lesson I've learned so far, and one more, understanding that if you don't communicate clear and continue to communicate clear, they don't understand, they don't. You think may do. I think something and Sean thinks something, but we've decided that we've interpret our own ways and the different disagreement creates tension until we get in sync. That's the way it is.  

[00:38:35] Sean: I like that their concept that the purpose of communication is actually to transfer the intention and the meaning, not just the words. So, you might hear the same words and have it mean something entirely different to you. I'm going; Hey, he's got it.  

[00:38:48] Owen: But dude, in my experience, and honestly I've begun to… so we met through YPO, and so I'd begun to interact with other YPO members. And I’m consistently hearing the same thing as a, like, I think one of the biggest assumptions I made as a manager when I say something I understood it. I could not have been more wrong. And so now I have read the book ‘measure what matters’ and I'm implementing OKRs. And I'm like hammering, I mean, like I am haggling over wording of an OKR, because I know that if we get on the same page, then we don't have to talk about it anymore. And then it's all digital on a platform we can go look at. But dude, that's transparency, communication, and how you influence others and like, understanding that you have negative behaviours. And if you don't want to admit that, then you're not going to be a good leader. I'm sorry. You're just not going to.  

[00:39:41] Sean: I love that because when you're trained, if you think about your background and your training, like engineers fundamentally are taught that they're sort of the smartest people in the room. They're supposed to know everything and you've had to come in and just completely undo all of your conditioning and go, you know what? I don't know anything, and I'm going to have to be super vulnerable here and I'm going to have to be a massive learner and I'm going to have to implement constantly and constantly seek feedback and constantly seek input, so I can get better, so that my business can get better. And I think it's a hallmark of a great leader. I interviewed another guest on the podcast recently and I received an email from her two days later saying, how did I go on the podcast? Do you think I could have done anything differently? What else did you notice about it? And this is a Founder who has built a very successful business, really significant scale, still learning, still looking for feedback, still trying to improve. To you point, full commitment to getting better all the time.

[00:40:36] Owen: It's funny as an engineer, one of the things I learned about in school was control systems. So, how a machine can interact with its environment? What we can do is remarkable. The fact that we have eyes and I can see this, this iPad I can touch. Well, that's an incredibly complicated to make a machine do that. So how does it do it? It has a mechanism. It has something that it can move and do things and it has sensors. So, it has feedback. That's how a machine learns and gets better. Humans are the same way. Like we have to get out in the world and go screw up and mess things up and listen and watch. And to me, the people that listen and watch the best and learn from it, are probably the most successful people on the planet. Like I think that I'll never forget what Andy Jassy said, the new CEO of Amazon, just recently two weeks, three week now, I guess about a month now he's been CEO. He said, Jeff is the best learner I've ever met in my life. I don't think that's a coincidence that Jeff is also the richest man in the world.  

[00:41:41] Sean: Yeah, I think that's so true. I know that you and I could speak for hours, but I'm conscious that we're going to end up running out of time. I want to ask you, when you think back on the last five years, or particularly last three and a half where things have just been accelerating, what are you proudest of?  

[00:42:07] Owen: The people I've hired and the team I've built, without question. I mean, it's almost like I get like an emotional response. When I think about that. Like the people that I have in my big office, and my office is in Chicago, I mean words can't describe, I'm so proud. Like some of them have become like best friends. Like that's what I'm proud of. Like if this thing crashes and burns tomorrow, we never reached a billionaire goal. That doesn't matter. Like, what matters is, is that the people that we touch, because like at the end it’s like, what's the point? Like again, why are you in business? And it's not to make money. And if it's making money then, I think that… Henry Ford said, if you're in a business to make money, it's not a very good business. There's not a very good business I want to be involved in. And then like, I remember Phill Knights said something like, one of his quotes was like, this is not meant to make money, but we're getting a lot of money to get there. It's like money is such a huge piece of it, but it's not the purpose. And so, I just loved hiring people and work with people. And right now, I'm really excited about, I think I can start hiring again because the businesses is starting to throw off some more money and we're building these forecasts. I'm like, yes, I can add this people in, this people. And I'm getting excited again. And then I learned from them like I'm hiring these smart people and they're teaching me all this stuff and I'm getting better. But I mean, I could talk about that, but no doubt about it. The team I built and building are by far I’m proudest of from a business perspective.  

[00:43:39] Sean: So, if you had your time over again, what's one thing that you would do differently, knowing what you know now?  

[00:43:49] Owen: From a zero or…?  

[00:43:51] Sean: From five years ago.  

[00:43:53] Owen: I read this book a year earlier… for starters. We thought bigger faster, and this book, was it kind of the impetus of that as like, it's ironic. So, I played golf in college. Golf is all here. I mean, you got to be at a shoot par, but shoot par, not that hard, but to go from par to on tour is all here and I couldn't do it. I couldn't, I played golf with guys and I just go in college that play on tour, guy in my high school was played on tour, guys are beat and played with. No one play quite as good as them, but I can play like serious golf, but I was weak here. Businesses the same way. It's no different is that you have to get out of your own way. I think that when you're 7 or 8 years old or 10 years old, you think anything is possible. And then you become a high school student and they beat you down to get a good job. And becoming someone like Jeff Bezos is not possible, becoming a famous entrepreneur is not possible, becoming a famous athlete is not possible. And that's how I felt. And then all of a sudden, I woke up three years ago and said, this shit as possible. Now, becoming Jeff Bezos, I mean, that guy is unreal. Like I'm not saying that, but like you can build a serious enduring enterprise that actually infects thousands or hundreds or millions of people, that's possible. But the second you don't realise as possible, it's not possible. And I think it took me too long to realise that, and luckily I'm only 32 and I got, hopefully a long time, but I've talked to this, this young man named Philip who was 21 years old, he understands that and I'm trying to help him understand it. I met him and he told me I'm going to do a hundred million dollars in revenue before this summer. I said, why a hundred million, you're not going to be happy with a hundred million, dude, you're 21. He's got like 3 or 4 million business ago. Hundred million is nothing, man. Why not hundred billion, like what why? And so, that kind of clicked about a year and a half ago, two years ago that I think that your brain just gets in your way and you got to get out of your way, and go. I think one of the thing is you need to think about objective for what you want in life and what you want to work and your family and whatever it is you're doing and focus on that. And then it goes back to like, you know, we talk about a machine, and that's, what's funny, we're starting to build a lot of software in my company and you cannot program unless you tell the machine what you want to do. It's subtly brilliant and clear thing that is now applying to a bit the business as a whole in my life. It's like, do you need to be deliberate as hell about what you want to get out of this situation? Like I'm talking about beat that goal to death until you know exactly.  

[00:47:06] Sean: And that’s usually the hardest thing to figure it out on is actually why…  

[00:47:09] Owen: It is hard. What do you want in life?  

[00:47:14] Sean: Sounds so easy, but…  

[00:47:22] Owen: Dude, I've given like 50 copies of this book to people. Literally. Like anytime I interact with anybody, I give them a copy. I write them a note and give him a copy, but he says you can have almost anything in life, but you cannot have everything. So, thinking big earlier and thinking really, really, really, really hard.

[00:47:39] Sean: That's amazing. Well, I'm now going to ask you a really challenging question because you've just given me some really amazing reflections and nuggets. I have a little segment that I do with every guest called Above All Else. And so, I want you to now kind of go out into the future. So, you're only 32, you got a long way to go to get to your yearning years. So, I want you to go ride out imagining to you're at the stage where you've actually achieved from a business perspective, probably all the things that you hoped that you'd achieve or that you wanted to achieve. You started all the businesses, you've had the impact on people that you wanted to. And the CEO of the world's largest global community of first time Founders, most of them stills of sub, 5, 10 million businesses who are just hungry to figure out how they can scale. She asks you and gives you a once in a lifetime opportunity to share your wisdom with this group of people. And she says, I want you to finish this sentence, above all else, the three things that Founders have to get right if they want to scale are…? What would be your three above all else?

[00:48:42] Owen: Relentless pursuit for knowledge, build systems, because you have to build systems and standards because you cannot automate things that are not standardised. And if you can't automate, you can't scale. The third thing believe in people, empower people. Believe in the people that were for you, or you're not going to go anywhere. I mean, that's the truth. We kind of look back at like, one of the, some of the biggest things I've learned is like, when I quit my job, I said, I'm never hiring. I don't want to deal with that. Think about that change. And I just told you the greatest thing I've done so far as the team I've built. Like, you have to learn to work through people if you want to scale. So I mean, relentlessly learning because you can't do either the second two things if you don't really want to learn it. Two, build systems and relentlessly pursued them, improve them. And three, believe in people  

[00:49:46] Sean: That is beautiful. Thank you so much, Owen. And look, I'd really like to acknowledge you for the way that you've tackled this journey. And as I alluded to before, I think it's so refreshing for people to hear, Founders who are scaling. And sometimes you put these guys and girls, you see them in the media, some of them are just ultra-confident and you just imagine that they just monitoring everything. They’re not people who've got any vulnerabilities and not having to learn much along. They've already figured it out, but first-time Founders who are scaling businesses, because they're vulnerable, because they learning machines, because they're trying to figure out how to do it better and then taking risks and then making it happen. That is an exceptional example of the value of humility and the value of personal progress and its impact on business and to be able to bring together a business that on the outside can look relatively uninteresting because it's e-commerce and office supplies and so on. But actually the heart of this business is like a pulsating beast that's capturing the hearts and minds of your people and having real impact on your entire sphere of influence. I think that's a beautiful example of how business can be done. So, thank you so much for sharing your wisdom.  

[00:50:57] Owen: It's really cool that I just got into YPO and it's so cool to meet people like you, who knows, I think that, my strategy is just putting myself out there and just see what happens. I'll respond to your message. I have no idea what was going to happen and we got to meet and hear going to hear your story, maybe I'll meet some of the people that listen to this and you never know what's going to happen. But you glad to be there and thank you so much, taking the time to hear my crazy story and the crazy dream and that we're trying to make happen.

[00:51:26] Sean: I'll look forward to hearing some of the other stories from your trips to China on a few beers. How do people get in contact with you or follow along with what you're doing?  

[00:51:35] Owen: Sure. I mean, just bluesummitsupplies.com. Our newsletter is, we have a thing called ‘behind the blue’ where we talked about our cultural messages, and I'm on LinkedIn, and you can always message me there. But I don't use Twitter, probably should. But yeah, blusummitsupplies.com and just messaged me on LinkedIn. If you have any questions or anything I can help with, like, as you can tell, I like talking about that stuff. I have a hell of a lot to learn, and my opinion is what it's worth, which is free. But if you want to reach out, please do.  

[00:52:16] Sean: Much appreciated. Well, thank you so much. Folks, I hope you enjoy the show today. Huge thanks to Owen Franklin. A couple of things before you go, if you got value from the learnings that you got from Owen today, of course, please go to Apple Podcast, subscribe, leave a review, that just helps other people find it, but it also really gives a big kick to the team behind the scenes who put this whole thing together for you. If you'd like to know when new episodes are going to drop or free tools and resources from some of our guests are made available, just jump on the website, scaleupspodcast.com, and you can register your email there, or you can find us on any of the socials on @Scaleupspodcast.com. And unfortunately, the only one we're not on is Twitter because it's not big for our audience. But remember, that the only thing that can guarantee that you won't scale is actually giving up in the first place. And you can hear it through Owen story today. Lots of periods where stuff was tough. He could have jumped off the bus because it seemed a bit hard or seemed a bit too risky, but he kept going. So, you got to stay unshakable in your faith that you are going to get there, but you have to remain flexible in your approach. You've been listening to the ScaleUps Podcast. I'm Sean Steele. Look forward to speaking with you next week. Thanks very much, Owen.

[00:53:26] G’day everyone, just a couple of quick things before you go. If you have questions that you'd love myself or an upcoming guest to tackle about challenges that you're facing in scaling your business, please just jump straight on the website. www.Scaleupspodcast.com. You can record your message straight from your mobile by hitting the button on the right-hand side of the page, or you can just email them the old-fashioned way [email protected]. And just a quick reminder, nothing we spoke about today constitutes financial or business advice. If you are considering making big decisions in your business, seek out a professional who can look at your situation in detail and make sure you're getting sound personalised advice. Thanks for listening. Look forward to being back in your podcast feed next week.

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