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Episode 27: Scaling Big on a Bootstrap Budget
593 Plays7 years ago
What does it take to scale a business from a $2,000 initial investment to one that serves customers in tens of thousands of venues all over the Midwest? Let’s dig into that.
On Episode 27 of the podcast, we talk with Dereck Lewis about how he took his grandma’s cookie recipes and turned them into a business that has had a 100% growth rate each year since it started in 2012. For one thing, it takes the right mentors. It might take a little bit of “this is my last best chance” kind of mental motivation. And it takes a ton of hard work.
Dereck Lewis is the owner of Thelma’s Treats, makers of handmade ice cream sandwiches that are, well, delicious. Dereck started this venture after sticking a toe into the worlds of insurance and real estate.
This is a fascinating conversation – it’s kind of the podcast equivalent of a buddy movie for start-up nerds. Dereck digs into the challenges he faced early on, talks about two great mentors that helped immensely and also provided some tough love.
If you are looking for an engaging, fine-grain look at how to scale up a business, this will be time very well spent.
What You Will Learn in this Episode:- How to scale a business starting with a bootstrap and a prayer
- Lessons from growing up in a family business
- How to build in resilience in an up or down economy
- How to pivot to the segment of the business that is working best
- The role of faith and principles in the way you run your business
- Knowing when to level off growth in a business
- Building a track record that will attract lenders
- Finding the right mentors who will tell you the truth and help you grow
- How to scale a physical infrastructure-heavy business
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Transcript
What is an uncommon life?
00:00:02
Speaker
Everyone dreams about living an uncommon life, but how we define that dream is very different for each of us. And for most, it's a lifelong pursuit.
Introduction to the podcast
00:00:11
Speaker
Welcome to the Uncommon Life Project podcast. We're going to introduce you to people who are living that life or enjoying the journey to get there. We're going to also give you some tools, tricks, and tips for starting or accelerating your own efforts to live an uncommon life.
Meet the hosts: Brian and Philip
00:00:27
Speaker
A life worth celebrating and savoring. Please welcome your hosts, Brian Dewhurst and Philip Ramsey. Hello and welcome to the show. You are listening to the Uncommon Life Project. My name is Philip Ramsey. And I am Brian Dewhurst. Thank you so much, Lisa, for that amazing intro. Always consistent, always there.
00:00:47
Speaker
Never changing. Ever present, Lisa, everyone.
Passion for work and guest excitement
00:00:50
Speaker
So we got a great show for you today, but before we jump into it, I just wanted to reiterate how much we love our job. We love to sit down with people, see where they're at, where they're going, and I totally lost my train of thought, actually. Well, the thing I think I would say is it's the beginning of the year. It's the last year of the decade. What do you want to accomplish? Who's going to help you get there?
00:01:17
Speaker
And we hope this show enhances your ability to focus and just go on that path. And we're back. Welcome back, Philip.
Podcast's mission: From unhappiness to uncommon lives
00:01:26
Speaker
Here's what I wanted to say. The reason for this podcast is we are highlighting people that are doing uncommon things in their life.
00:01:33
Speaker
mainly that they are enjoying it. They love to wake up in the morning and, but they haven't always necessarily been there. So the transition of where they figured out like, Hey, I'm not really happy to, I want to try something different. This is what we're trying to highlight in the show. Uh, we hope that you get inspired and encouraged with this. If you do leave us a message, tell us that you guys are listening. We just, or ladies or folks always should say folks. Oh, we should say folks.
00:01:58
Speaker
Wow. Anyway, so let's get into the show.
Who is Derek Lewis?
00:02:02
Speaker
We have an amazing show with Derek Lewis. I want to hear the bio. Deep train. So Derek is, this is just a great episode. He is married, has two daughters, lives here in Ankeny, Iowa, is a graduate from Iowa State. He is a cyclone and he is the founder, co-creator and chief, chief recipe.
00:02:27
Speaker
I don't know, I'm just making stuff up. But anyways, he owns Thelma's Ice Cream Sandwiches. If your mouth just started watering, you know what we're talking about. If you haven't, look it up. You may get hungry listening to this episode. It's an amazing show. Derek, thank you for your time. We hope you enjoy it. Again, we hope you're encouraged. Let's get into the show. Thanks. Welcome to the show, Mr. Derek Lewis. Hey, thanks for having me, guys.
00:02:53
Speaker
Yeah, I can't wait to just hear and unpack your story. A lot of people have not only heard of Thelma's, they've had Thelma's in their mouth. So we're excited to see where it's been, where it's going, where it's come from, all that. And we have that for you in this show.
Derek's early life and entrepreneurial spirit
00:03:11
Speaker
And so I'm so excited just to hear more about Thelma's. Let's first just take just kind of a detour here and talk about your life before Thelma's.
00:03:22
Speaker
What was that like? What were you doing? Who are you doing it with? How long have you been married? Give us all the details, buddy.
00:03:30
Speaker
Let's see, so all my family is from the Prairie City, Monroe area, east of Des Moines. Both my parents are farm kids and didn't go to college, which never really stopped them from their careers. My dad has been a farm for a long time and then did insurance, and my mom did some real estate stuff. I graduated from high school in North Central Iowa.
00:03:53
Speaker
And then went to Iowa State for business management cycle. Yeah, there we go During college I was not a very good student. Can I get a man? So I
00:04:17
Speaker
I skipped class a bunch mostly to start little micro businesses. My college roommate and I were always doing stuff.
00:04:26
Speaker
Oh, we sold glow necklaces at Visha a couple of years. So we'd buy like a case of glow necklaces and then go sell them for two or four bucks or whatever. Then one time there's this huge ice storm in Ames and all these tree limbs were down. So we drove to Lowe's like right when I opened and bought a chainsaw and used my pickup and we cut tree limbs.
00:04:48
Speaker
for almost a month. We put flyers out and whoever had a limb that we thought we could handle, we put a flyer in their door and then they just called our cell phones. I still got calls like up until maybe four or five years ago. Unbelievable. I can't remember how much we made, but we both made enough that we could go buy a brand new set of golf clubs. That was our goal because we thought professional development, we should have a nice set of golf clubs.
00:05:10
Speaker
You know, it's funny. I'm just going to say, yeah, straight hustlers. But here at the end of the day, like if I was an employer and you were an employee that I wanted to hire and you told me that story, I'd be like, done sign still and delivered. Like, I don't care about what your college degree says. You know? And I think that's why I got bored at school. Um, you know, a lot of the, the, I, I felt like the
00:05:32
Speaker
the classes that I was taking, entrepreneurship wasn't quite cool enough in 2008. They have a whole program for it now and I've talked on campus and they're really embracing it now. I still have some misgivings of whether you can teach that in a college environment, but I think they're making a run at it. Anyway, so they really were teaching people how to be middle managers at big corporations and that was the skill set that I was getting at school.
Lessons from Alaska: Business insights
00:06:00
Speaker
But during school,
00:06:02
Speaker
Uh, let's see, there's kind of a, this kind of merges, this kind of starts the interest in entrepreneurial ventures, but I was working at Sportsman Warehouse in Ankeny, the sporting goods store, cashier, just cause I like hunting and fishing and stuff. And this guy, yeah.
00:06:20
Speaker
This guy came through my line and he had a bush plane on his shirt and he was a booking agent for premium hunts and he was in Iowa looking for a white tail for a client. Which I thought sounded like the coolest job I could imagine. Yeah, so I said, so how do I get into that? And I don't know why I asked this guy anything. It was so weird that I even engaged him in my line because he was just buying like a Gatorade or something.
00:06:49
Speaker
He said, well, you need to work for an outfitter if you're going to work in this business. Here's a guy's name. Why don't you give him a call? And it was a guy in Alaska who specialized in doll sheep hunting. And so I called him and I said, Hey, I want to work for you. And he said, cool.
00:07:05
Speaker
meet me in Fairbanks and July, whatever, 20th. And if you're not in great shape and have the right stuff, then I'll just send you back home. If you look like you're going to be able to hack it, then we'll go out to camp. And so I went to Alaska. Um, so that happened. Yeah. So showed up in Fairbanks. I did as much studying as I could on sheep hunting. I've never left. I mean, I never hunted outside Iowa really, maybe in Colorado once for elk or whatever, but, um,
00:07:33
Speaker
So we took off and then I worked under him for a couple of years as an assistant guide and we did doll sheep, brown bear, moose, pretty much if you can hunt it in Alaska, I hunted it. But the unique part that I didn't really foresee was the guys who booked those hunts, you know, those hunts are anywhere from at the time there were 15 to 25,000 bucks or something. So yeah, these were, these were guys that what I found out was everybody who showed up at the camp, they didn't work for anybody.
00:08:01
Speaker
They all owned something. And so they all told their story of what they owned. And it was really cool because the first day of camp, they were still a CEO. And then by day three or day four of being in the tent, they were just some guy. And so they just totally got soft and would just kind of share their story with me. Derek the sponge. Derek the sponge. Doking it in. And everybody, you know, somebody, a mentor of mine told me, a professional I knew a long time ago, is everybody likes talking about themselves, which is kind of why podcasts exist, I guess.
00:08:30
Speaker
Welcome to the show, Derek. Right. So I just let them talk about themselves and quiz them how they start, you know, what that first idea was. And one guy started a hunting company out of his garage and quit his job at the bank and then moved to China to source stuff, all kinds of cool stuff.
The entrepreneurial leap with Thelma's
00:08:50
Speaker
So that's really where I saw, like, OK, I see this group of people and I want to be making the I want to have the kind of choices that they have. And living an uncommon life.
00:09:00
Speaker
Yeah, kind of a whole group of uncommon guys. Yeah. It would have been a cool podcast in the tent, like in the bush. Season four. And then shooting stuff, and Philip, we're going to Alaska. I know. Sounds good. I remember these one guys showed up, and they're like, you kind of stink. And I was like, well, I haven't showered in September yet. And it was like, it was the end of the month. It's November. Yeah. That's funny.
00:09:28
Speaker
Anyway, it was an incredible experience. So, Iowa State had a study abroad internship program where I could basically leave for a semester, keep my same student status, and then write a paper on my experience. So, I learned how the guide ran his operation, which was very much like, all right, here's the set of challenges we have. We're going to figure this out.
00:09:48
Speaker
And then also the client side of just getting to know those guys and having starting to build those relationships. Sure. Okay. So let's, let's kind of tailor this. At what point did you think, okay, wait a second. I've been eating these ice cream sandwiches my whole life. I'm going to scale that thing. When did that start coming into your.
00:10:06
Speaker
Uh, that happened more by accident. So I'd not been eating them my whole life. Um, let's tell our listeners real quick what Thelma's is for those people. Cause we kind of have people all over the country. So sure. So through what Thelma's is and how now is, uh, um,
00:10:25
Speaker
an ice cream sandwich company more than anything. So we do a handmade ice cream sandwich. It's individually packaged and sold for anywhere from like $3 to $4 at grocery stores. And they come in up to 10 different flavor combinations, different cookies with different ice creams. They're all handmade in Des Moines and then they're sold through about 1400 retailers kind of in the Midwest.
00:10:50
Speaker
Very cool. Thanks. That's kind of a summary we're at. Yeah. So how did it come to fruition? Sure. So at a college, I did real estate. I tried to sell farms for hunting property, people that wanted to go hunting because I had that interest. It was 2008. So all the people who were building houses ran out of money and stopped buying farms.
00:11:13
Speaker
Then I tried to sell insurance because my dad had done insurance and I thought that was gonna go and I was not good at that just too many systems and too many rules and And then literally my college roommate called me. He's like, hey, there's this cookie company and they're franchising they're based in Twin Cities and they're franchising and you should buy the one for Des Moines and just total whim like back of the napkin thing and I was so tired of insurance so I Looked at it. I was like cool. Let's do that
00:11:40
Speaker
Literally, my brother-in-law had a commercial kitchen I could use and we just kind of scrapped it together. Once we hit the first summer, it was a warm cookie delivery franchise and people weren't buying them because it's too hot. A friend of mine owns an ice cream store in Monroe called Jersey Freeze. We were selling my grandma Thelma's to the franchise, actually, her snickerdoodle recipe.
00:12:06
Speaker
Some of those cookies down there and made some ice cream sandwiches did the friends and family route everybody went crazy for him He started selling a meta store, but I took that idea back to the franchise owners and I said hey Here's something we should add to the the deal and all menu. Yeah Yeah, you can hire me to roll this out to the other franchisees and they weren't interested in adding an ice cream piece like that In that big of a way and it really just got me thinking like I think this is a really good idea
00:12:32
Speaker
And I think I'm going to go all in and I'm just going to build a brand around it because I'm already calling it my grandma Thelma's cookie. Why don't we just call it Thelma's ice cream sandwiches? So I had had breakfast club with a guy named Brian Sauer who owns a Saturday manufacturing. They're a small marketing firm in town, sat down with him and we kind of built a plan around how to build a brand. And then we launched Thelma's in spring of 2012. Wow.
00:12:59
Speaker
And walk our listeners through like what you mean by launch. Cause I think, I think there's a lot of people listening that are in that vein of like where you were and they want to take that first step. So like walk our listeners through that launch. So, oh man, we did a bunch of kind of bootstrappy hustle things at the
Launching Thelma's at the farmer's market
00:13:19
Speaker
beginning. So, um,
00:13:21
Speaker
when I say launch. So we got into the downtown Des Moines farmer's market. Um, there was a pretty big, yeah. And the application process is tough for that. So very few people can get in. There's, I don't think you can get in with prepared items forever. Um, but you can, there was a bakery opening. And so we got in as a baked good cause we're baking the cookies.
00:13:39
Speaker
And so we got into the downtown farmer's market. So that was kind of locked up. We also had designed, we decided to keep doing the warm cookie delivery component only under the Thelma's name with the Thelma's recipes. And so we designed a box that looks like a, a vintage oven. Yes. I wanted to ask you about that, but keep going. Yeah. So, uh, which was a crazy spend for us at the time. Um, that was way fancier than our budget allowed. But my brilliant, but thanks. Yeah, it was, uh,
00:14:08
Speaker
We're sitting in a meeting one day and they're like, well, they're warm cookies. Wouldn't it be cool if they came out of an oven? And I kind of laughed like, yeah, that would be cool. But like, we can't afford to do something. Yeah. And we had built our projections around putting a dozen cookies in a box. And I was like, well, if you could put two dozen cookies in that box, I could take that budget and double it. Can we do it for that?
00:14:28
Speaker
And the math worked and it worked fine. Um, and then that box went on to win a national Addie award and then was featured in entrepreneur magazine and it kind of went crazy. It's interesting. I got to answer a little thing here. So I'm actually fascinated with product packaging design, which sounds really weird, but like that Addie award. And, uh, I'm on Pinterest the other day. Uh, and that Thelma's box was on my Pinterest search and I was like, no, we're talking.
00:14:56
Speaker
in a few days and so I was like, oh my gosh, that is so cool. Yeah, it's gotten a ton of attention and people have wanted to buy it or do different things with it. We'll probably find some long-term home for the box in the future or something. What's interesting is that part of our business is now a really small piece of the cookie delivery part is really small compared to the ice cream sandwich side. Sure. Can I ask you this? Because at that point, you were in a position
00:15:24
Speaker
It sounded like it was a scary position where you were ready to take that risk. In business owning, sometimes you have to take a risk. You have to double down on an idea. This box sounds like that. How did you know you were ready to take that risk? What was your thought process and what was your community that you ask or mentors that you ask to actually make you feel comfortable about the risk that you're going to take or the investments you're going to put in your business?
00:15:50
Speaker
Man, I think a little bit was naivete or whatever. I just didn't know that I didn't know. My wife was in law school. We already didn't have any money. We're negative. Might as well just throw it at her. Let's go.
00:16:06
Speaker
I didn't have much to lose. I didn't have any kids. I was like, I guess we could move back in with my parent. My worst case scenario is we're already really close to that. I wasn't risking much. My brother-in-law is a big mentor of mine. His name's Jake Christensen. He does a bunch of real estate development in Des Moines. He's completely self-made, just a farm kid from Northeast Iowa who moved to Des Moines on a whim and
00:16:35
Speaker
Built his career but so he he really he really is instrumental throughout my entire story of as far as helping build business plans and stuff like that. I think initially it was just he didn't like the cookie delivery piece cuz it didn't scale like well you can't make that big you can only deliver so many cookies a day so he never really like that side of the business.
00:16:59
Speaker
Yeah, only because of that point. He thought it was cool. Like, yeah, you're going to be, people will love you, but like, you can't ever get to the novelty. Yeah. You know what? Like, I just didn't speak to it. Jake, that was brilliant advice because there's so many people that jump into a business because they have a good idea, but it's not scalable. And because of the unscalable, you've just basically just created a job for you for the rest of your life that you can't get out of.
00:17:23
Speaker
Yeah. And people do that all the time. There's people that are good at making items and especially small food producers come to me all the time and said, okay, I make this really good potato salad. How can I scale it up or sell it all over the place? I'm like, well, there's limitations. There's only certain products that really let you do that. Once he had an ice cream sandwich, he's like, this is it. This is the thing you need to scale. So he said, tell me how you're going to
00:17:48
Speaker
you know, tell me how you're going to make these ice cream sandwiches and where are we going to sell them?
Growth ambitions and distribution goals
00:17:51
Speaker
Um, so I made my master business plan, um, which was really ambitious. Um, and I remember, I think the gross sales number was like a million dollars, which sounded like a hundred million at the time. And so like how pretentious am I to put a million dollars on the sheet? And, um, and he goes, okay, cool. Uh, now I'm, and he was in strategic coach at the time. I don't know if you guys have been through that program, but, um, we haven't been, but we know.
00:18:17
Speaker
Yeah. So that's actually one of my 2019 goals is to be able to enroll into a strategic coach because they're kind of expensive. Yeah. It's its own thing, but it's an investment. Yeah, exactly. But he said, let's take the, let's do the 10 times drill. So take your, I want to take your goal times 10. So then let's make it 10 million. Now I want you to back into,
00:18:38
Speaker
How many retailers do you need? How many units do you need to make? What equipment do you need to do? And I spent a long time building that out. So really, it just stretched my mind to say, wow, could I build it to that? It just puts it into achievable pieces that you say, well, yeah, that would mean I need 3,000 grocery stores. Are there 3,000 grocery stores? Well, yeah, there's 40,000 grocery stores in the country and well over 3,000 in the Midwest. So I think this is reasonable.
00:19:09
Speaker
So those are the kind of questions and people that were in my life at the time. And then another good friend of mine is Cherise Flynn.
00:19:17
Speaker
She was the COO of Dwalla. I don't know if you guys know Dwalla. She started at Dwalla when it was just Ben and the programmer. It was just the three of them. Ben and the guy. Yes. And Charisse actually worked for Jake when I was an intern with Jake. So the three of us had worked together professionally when I was an intern in college. And Charisse has always been a critical advisor too. She actually told me,
00:19:45
Speaker
the cookie business was stupid because I was doing it. But my business plan led me to still have an income below the poverty level. Whoops, I remember it. That's Candor right there.
00:19:58
Speaker
I just remember we were having lunch and she wrote it down. She's like, so you're telling me if you do this and you do this and this, you'll still have a, you know, income of $22,000 that you can take home at the end of the day. I was like, yeah, it's like, you know, that really doesn't make sense. Does it? She goes, no, you need to make a new plan. Then let's talk about it. And just really kind of.
00:20:17
Speaker
people that, yeah, they just ask the hard questions and then make the hard answers and then, and then go from there. So, um, yeah, that's, those are my two really, really critical mentors starting out. So I think, I think it's interesting because when you look, I was in the grocery store last night doing some grocery shopping ahead of this podcast and I saw
00:20:36
Speaker
somebody's, you know, custom salsa on the shelf. And I was just thinking about you and in this podcast and it's like, I don't think people realize how hard it is to get not only food distribution, but then to be able to scale it because every time you get a bigger order, you kind of have to double down on, you know, the freezers, the equipment, the packaging, like you're always chasing that next order and then forcing the scale and invest to support it. And so,
00:21:05
Speaker
Walk us through that for you and your story. Yeah. So it's a, man, it's a cart in the horse problem. So there's a lot of food businesses. So if you make a really good barbecue sauce, for example, there are co-packers all over the country. You give them the recipe, they'll send you
00:21:20
Speaker
a pallet of your barbecue sauce, you go sell it to Fairway, like easy peasy. That doesn't exist for a handmade ice cream sandwich. Part of the reason we have the value proposition we have is because they're each handmade, they look a certain way. There's really only one other company that's making them like we do. And their minimum order was one semi-load. And I hadn't sold the semi-load the whole year, so that was just completely unfeasible. And it would have all had to have been one flavor. They wouldn't let us do it how we do it.
00:21:51
Speaker
So, we started with two KitchenAid mixers and a countertop ice cream machine and a shared kitchen space. And you said you got that off Craigslist, right? Yeah. Yeah. And we bought our first push cart from a guy on the south side on Craigslist. We didn't know about push carts or anything. So, maybe all in. We maybe had
00:22:13
Speaker
let's say 1500 bucks, 2000 bucks maybe in the whole bit. So really money you can scrap together and finding kind of weaselly ways around the big obstacles. No, I didn't go lease a nice bay with a hood and all this stuff. I scrolled in and then I built and then I went and sold stuff. And then we let that revenue make the decision for the next thing. So it's really that the hardest hurdle is probably that first little
00:22:38
Speaker
Are you going to carve it out? Right. And then once you have a little sales history, then you can have data to make a better decision for the next step. Then we built out a commercial kitchen in the lower level of the shops at Roosevelt on 42nd Street. Oh, I love that. Come on. I think we looked at that space. We did look at that space. You did? Can you not?
00:23:00
Speaker
They're like, yeah, somebody just moved out of here and they were showing us that space because we were looking for a place to rent. And I did you not. We looked at that space. You're like, no, we're not running an underground gambling club. We actually are going to run a speakeasy now. So perfect.
00:23:18
Speaker
So when I released that when I originally found that space they it wasn't for lease There is just a door on the back of the building. We're walking by like, where's that? Your head off that door
00:23:33
Speaker
Yeah. All right. Sorry. Keep going. That's funny. So we, that was completely full of old, um, there was an old Taylor that used to be in that building. I can't remember his name, a classic Des Moines Taylor, but it was all full of buttons and moldy clothes and stuff. And I spent about two months of my own time cleaning it at night and building out that space myself. So I got like free rent for the first year in order to build out the space.
00:23:55
Speaker
And then we ran that until I had a walk-in freezer down there. All of our ingredients went down those steps and stuff back up those steps. We were saying holy cow because we've been down those steps. Yeah, we've been there. Yeah. And it kind of turned and like it was, yeah, steep. Let's just see. And that's what I guess the part that I was okay with. I said, wow, I have 1500 square feet to myself. Like I can hassle. I know I'm going to have to put up with some inconveniences because I don't have money to do it.
00:24:23
Speaker
And I don't want to I don't want to risk that much to have an upstairs and I it's like loading that stuff so it was kind of our bootstrappy way to do that. After that we outgrew that space and so so once we had that space I could go sell more Hy-Vee's.
00:24:39
Speaker
We had some great success in early heavy. Hy-Vee's really cool that you can pitch individual stores. Then we pitched some fairways and Gateway Market in Des Moines was our first retailer. That's really where we learned how to sell stuff wholesale.
00:24:55
Speaker
And so then we pitched a bunch more IVs Then it was gonna be too much for that production facility Then we actually started
Scaling production at Thelma's
00:25:04
Speaker
making our sandwiches out at the Brick Street Market in Bondurant Brian and Mary Losi built a really fancy grocery store in Bondurant and They had a beautiful like state-of-the-art bakery But didn't use it all the time. So we came in there and made our ice cream sandwiches there typically in the afternoons and
00:25:23
Speaker
Towards the end we were kind of using it the whole time and that's when it was time to get out of there too because we were gonna outgrow that space and And you guys just stopped me whenever I'm just kind of rambling to this How do you have at this point Derek, um, I have It just depends on the season today. I have 14. Okay in the summer will be We can get up to 25. Okay, somewhere in the US flavors. Is that what you're saying Philip?
00:25:52
Speaker
No, I ask how many employees. Oh, employees. Sorry. Okay. He's getting hungry. It's time for a nice group sandwich. You're talking about scaling. Keep going. Yeah. So we, um, so we went to the Burke street market. We kind of outgrew that space. And then I was trying to, I got some land under contract to build a facility. So I was trying to build like a maybe 5,000 square foot building, um, to do production and warehousing and all of the stuff. Um,
00:26:21
Speaker
Then my brother-in-law Jake called me and said, hey, I just toured this facility that has a food grade building in it. It's way bigger than what you need, but I think you can buy it for the same money you budgeted to build the other building. Let's make a run at it. It's just a cool deal. That's really how his brain works is he just puts people together at the right time. Connected. His friend was buying the whole big property.
00:26:48
Speaker
And then we were buying our building as part of that transaction on the same, you know within a week of when he closed So he wanted the big building and didn't want our building. So Wow made a lot of sense for him and we got to buy 17,000 square foot building for the same money. So Wow It was a huge win for our company and and we got to buy into an own real estate instead of leasing something. Yeah. Yes Good for you
00:27:14
Speaker
We were just big enough and had enough track record that we could have a bank come in and loan us money to buy the building. Which is a huge deal to get a bank to buy in to the numbers that have happened. They obviously see huge potential.
00:27:29
Speaker
Yeah. And they, they're looking at, okay, well we saw, you know, banks and accountants only look backwards, which is a crappy part of there. And you're trying to get them to, cause you're making decisions looking forward. I can't look backwards and make this. So, you know, it's, it's always like the rub that I've figured out.
00:27:45
Speaker
Or learn the hard way I guess so so we got in the building and originally we had 7,000 square feet of office space in there that was Not class a but class B office space with cubicles and stuff and I was trying to lease it and then slowly that like we just kept storing stuff in there and storing stuff in there and then I demoed out a little bit of it could have a little more warehouse space and really by The start of last really by last spring we occupied the whole building
00:28:13
Speaker
Wow. And then we had to build a mezzanine for storage of stuff because we not only occupied it, but everything has a spot now. There's no extra things. Wow. Cause you kind of have that bulk space for a long time. Sure. So like you, I'm just going to ask this. You can leave for six months and this, this company, this business could still be running. Now I probably wouldn't be running as efficiently. I'd get that, but it still would be running, right? Yeah.
00:28:40
Speaker
Yeah, so I have a plant manager. My dad is actually the plant manager. He stopped his insurance career because I called him one day. I was like, I need you to come run the plant.
00:28:50
Speaker
Wow. And he's like, and we just work really well together. I think it's just the farming culture of family businesses and stuff. And my family doesn't, didn't do a lot of like super fun stuff when you're a little, we just worked. And so we, we work well together. So like, Hey, what are we doing this weekend? I don't know. We're going to like clean up the yard and do the chores. Yeah, just chores. There's no like, we're not going to adventure land. So let's make it fun. Do you have your ice cream sandwiches at adventure land yet?
00:29:18
Speaker
No, they have a weird blue bunny contract madness come on Adventureland
00:29:25
Speaker
Blue Bunny has enough distribution. We did just pitch the largest water park in the country or in the Midwest at the Wisconsin Dells yesterday. Oh, take that Adventureland. Yeah, so Philip and I know the entrepreneurial path and you don't go it alone.
Family support in business
00:29:41
Speaker
And you've done a great job, I think, edifying these mentors and things. But walk us through what it's been like for you and your wife.
00:29:49
Speaker
how you've kind of stayed married, how that relationship works. And then is Thelma still in the picture? Kind of walk us through that support side. Sure. So when I started Thelma's, we kind of had like a meeting at our house where Jenny's like, okay, you're doing real estate, you're doing insurance, this is your last thing. We don't have any money and... Final straw.
00:30:12
Speaker
Yeah, I want you to run with this and go for it, but we're not going to do four or five more of these ideas. So if this one doesn't work, I don't want you to go get a regular job. And not so much an ultimatum, just like that's the right thing to do for our family and that's responsible. And you're probably there too, right? I was there too. I was like, you know what? You're right. If this doesn't work, I need to start making money because I'm going to be too far behind if I waste time on this for 10 more years.
00:30:36
Speaker
We got a Hail Mary. We know what we need to run. Let's go. I think it put a little pressure on it too of like, okay, this has to work. So I'm going to just, what's the most I can do to make it work? So that was, so our first year of marriage was, I was still doing real estate. It was awful. I was gone all the time. I was spending money. I didn't have, I was just like making a bunch of terrible decisions. So I think,
00:31:02
Speaker
And then my first daughter was born the same summer we launched Thelma. So August of 2012 is when my daughter was born. So there's a lot of stuff going on and I didn't really compartmentalize it. We just did it all at the same time.
00:31:18
Speaker
So marriage got much better after that. Um, I got a little bit smarter on what to do. Um, when did you realize like, I think I got it. I think we're good. Like let's go, you know, instead of, Oh, I don't know.
00:31:33
Speaker
Well, I go through phases of that. So when we took on the building or when we launched in the Twin Cities and we leased a warehouse up there and hired two full-time drivers, each time you take on, I think you have to go on that path of
00:31:52
Speaker
of even right now. So this season that we're in right now is a very key stony phrase. Um, we're, um, uh, we took on age, we sold H-E-B, uh, which is the Hy-Vee of Texas. Um, and they launched in the spring. Um, that just adding that huge accounts, 340 stores, um, even just adding that account is a big decision for us. I'm moving one of my sales reps to Austin. He's going to run points on it. It's just another round of risk. So, um,
00:32:22
Speaker
I struggle with that question of where do you plateau? Because you don't really make money in growth mode. You really make money once you flatten out for a couple of years. My experience has been it's really been difficult to hold onto a lot of cash during growth mode. We've maintained almost a 100% growth rate since 2012. So it just goes back in.
00:32:51
Speaker
Well, we tell people it's like they're taking a rock and a slingshot and you just keep pulling it back, pulling it back, pulling it back. But the further you pull it back, the further that rock's going to go. But I would say too, the thing that I think I appreciate about what you just said was that at the end of the day, it was at the beginning when you said, I need to be all in. And I think there is some people out there that started business and they have one foot in, one foot out. I know I did in this business that I'm in now.
00:33:18
Speaker
And I remember at one point, I remember going all in thinking to myself like, yeah, this might be tough. And it might, we might have to suffer a little bit or sacrifice some things financially, but this is the right career for me. Does that make sense? And it was then when all of a sudden I was like, and things started getting more successful. And what I'm hearing from you is like, yeah, that happens once. But then over time, you feel like you have a little bit more of like, this is scary.
00:33:47
Speaker
This is, we're growing. This is scary, but to be able to bounce that ideas off of other people is insurmountable. So keep going. Sorry. And one thing that Jake always emphasizes is, um, he never, he just wants me to not be scared of the zeros because we're making the same decision you made at the shops at Roosevelt. There's just another comma.
00:34:04
Speaker
So I don't want you to freak out about that. Let's just break it down. And I remember one time we were going to buy a $90,000 truck and he's like, okay. He goes, I don't care for the $900,000 truck. Show me the numbers because it's just, they just have to line up together. Take the emotion out of it. Yeah. Let's just make a decision. Like if you said every time I spend $90,000, I get $200,000 a year out of it. Cool. I'll do that as many times as I can. And so some of that
00:34:30
Speaker
it's really hard not to be scared of the numbers because when you come, when you didn't have anything and now you're talking about, you know, asking a bank for a million dollars or something, like that's a, that's a deal. Yeah, it's just a big deal. But, um, that's just part of the, part of the process, I guess. So I get scared like that at different times. Yeah. And what about Thelma? Is she still,
00:34:53
Speaker
No, my grandma passed away several years ago. She actually lived to be 109 years old. Wow. Wow. Great cookies. Yeah. If you ever hear anything, eat a lot of cookies. This whole diet I'm in is just rubbish.
00:35:12
Speaker
And she lived in Monroe her whole life. I don't know that she ever even left the state her whole life. And then both sides of my family are from the Monroe area and farmers. So a lot of people actually, I'll be at events and people walk up to me and say, Oh, I was neighbor down, lived down the street from Thelma and I knew Thelma. And I think that's really cool. Did she get to see it launch it at least?
00:35:34
Speaker
Yes. So she, uh, we have some photos of her eating some of the snickerdoodles that we made. And, um, I don't think she really understood what we were doing and really what it was. That is not what it is now anyway, but, um, a lot of my extended family still lives in the area and they get to be part of it and my other grandparents. So that's cool. That's pretty special to me. So let's talk about your faith in this whole thing. How has that played a role in where you're at today?
00:36:00
Speaker
Well, that's an interesting question. Welcome to the Uncommon Life podcast, everyone. I was not active in any kind of church involvement during college.
00:36:15
Speaker
And I grew up in a pretty conservative garb church. I wonder if you're from Central Iowa, you know what garb Baptist churches are. And I think I had some resistance to that of just all the rules of that. And so I think once I got to college and I could make my own decision, then I just kind of backed off and said, I'm just not going to go. It wasn't like I was talking to someone the other day. I was just, it was just kind of like I was dormant.
The evolving role of faith in business
00:36:46
Speaker
Yeah, so really, nothing in my faith really changed from that until we started going to Keystone, really a couple years ago. And I would say even closer than that, even maybe like a year ago.
00:37:00
Speaker
Oh, wow. So yeah, it's been a really interesting, I never had any kind of faith component as part of my business. And I'm just kind of been putting it through a different lens lately. So do you introduce that? Or what do you what's your thoughts process on that? I'm not trying to lead you one way or the other.
00:37:20
Speaker
Are you trying to interject some of the faith that you've what obviously brought you to where you're at now into the business? Are you trying to kind of separate that? How does that work through yourself? It hasn't ever been part of our brand statement. So I think bringing it in now is a little disingenuous. I think the things I can do
00:37:41
Speaker
because I own the business is going to be fun. So like the other night we took the concession trailer up and handed out ice cream sandwiches to all the salt kids in the middle of the night and names and like, um, we can do fun stuff like that. Um, the principles you live by and the way you treat people and your employees, all those different things. Yeah. I think you can be more of an example like that and less on the face of the actual brand. Cause it doesn't really have much to do with that. But, um, it's, uh,
00:38:09
Speaker
having kind of a different vision of that. And I mean, my early financial goals were lofty and just based on stuff. And so it was, I want to own 2000 acres of farmland for hunting and I want to have a hundred thousand dollars a month in annual income. I remember writing that down very clearly in college. And my wife now, who was my girlfriend in college was just like, almost mad that I wrote that down. How can you write this down? Like this, we have zero dollars. And, um, but I clearly, I still have that sheet and, um,
00:38:37
Speaker
And I think I've had, I've been pretty aggressively pushing towards that. I mean, that's, those are lofty things. Um, and that's going to take me years to do, but, um, I think just in the last year, I've kind of, um, maybe changed, um, or what I'm going to do with that. So yeah, I don't have a lot of answers. I guess. You're doing great. You're doing great. What, um, no, go ahead, buddy.
00:39:01
Speaker
What are you most excited about and looking forward for the next three to five years? I think we know macroeconomically, the economy in the stock market, everything's been kind of straight up since oh nine. You know, what are you seeing? What are you excited about? Two things or Leary, a profit. I hope I have real pay. So we, um, you know, our, um,
00:39:26
Speaker
our facility is running at about 20% of capacity right now.
Maximizing capacity and exploring new markets
00:39:30
Speaker
And so, um, we, we invested a ton of money in 2017 upgrading the capacity mostly so we could go hunt for these new accounts, Texas, Texas. And then, uh, and we pitched target this year. Uh, we got about a hundred targets that will be in the kind of using it as like a regional sample. And then we're hoping that maybe we can pitch the larger, the rest of it the next year.
00:39:53
Speaker
But once we have success at HEB, we think it'll lead to a bunch more change will be on their radar. And so really hunkering down in our facility and maxing out that asset and seeing how many units we can really run through that and hoarding some cash. That's our business plan for the next two years.
00:40:13
Speaker
I like to think that we have a little bit of a lipstick effect with our item in a down economy. So I think there's people who are going to Cold Stone and Dairy Queen right now who when the economy goes down, they'll buy our stuff at the grocery store. Yeah. And we'll have some people who are buying our stuff at the grocery store now who will fall off and they'll go buy a low end, really terrible blue bunny product. Yeah.
00:40:40
Speaker
If I was the buddy all the time, I'm like a fleck on the radar like they can't care about right now Wait for it
00:40:49
Speaker
Give me five years. Right. So I like to think that we're somewhat resilient in a down economy. I mean, I think interest rates going up like they are, like they're just very likely we'll experience some, you know, everybody's talking about that in the future. I'm sure you guys are acutely aware of that. But I think if people really engage with our brand,
00:41:13
Speaker
we can keep pricing relatively flat because we don't need to fund another huge scale up. Um, I think we can build enough brand awareness in the next couple of years that we can be resilient for that. But so I, um, it's funny. Some person from entrepreneur magazine called me the other day to ask me how Trump's tax rules are going to affect my decision making for 2019. I'm sorry. I was like, dude, I don't,
00:41:39
Speaker
I don't care about the tax. Yeah, I have a 100% growth rate. I'm trying to maintain if they change the game and I get, you know, an extra 1% or 5% or whatever, like it really doesn't matter. It's just a rounding area in the goal. So, um, that's been our focus of how do we, how do we maximize our facility? And it's those people who are focused on what Trump is doing are like, you're missing the boat, like focus on what you can control and keep maximizing that.
Adapting to changes in business
00:42:07
Speaker
And I think that's what I learned from Alaska. And it's like, here's the set of things I can, yeah, I can see and I can, I can move and I can control. I can't, I can't change the game with, I mean, I can vote whatever, but like, I can't move that. So yeah. All right. Let me ask you, cause we only have a couple more minutes, but I want to ask you, Derek now is talking to Derek in college. What would you say to him? Stop going.
00:42:30
Speaker
Wow. He went there. Okay. I love it. I love it. Keep going. So I struggle with this because am I going to let my girls go to college? That's the question that I ask all the time. I think I will, if I can make sure that they're major cash flows, they're definitely not going as history majors or something.
00:42:52
Speaker
Oh, or I would have engaged the process differently. So I would have found the entrepreneurial groups and built my network. I graduated from college. I was 30,000 kids on campus and I know two kids and I talked to one guy from college. Like I'm just a private person and I only engage with the people who are doing the same thing. And he's a partner in our business now. So like that's the,
00:43:16
Speaker
So, engage in the process, build a network, you know, the average of the five people you keep closest to you, choose carefully, kind of thing. And find the right classes to go to, don't just skip class. Yeah. I think I echo that too back at my college experience. And it's like the one word that I guess I would insert would be mentorship. And, you know, I had good friends, took good classes,
00:43:43
Speaker
But it's the people that are 10, 20, 30 years older than you helping you pave a path and make less mistakes, I think.
00:43:52
Speaker
And it's easy to think for us to look back now because we have that degree and that piece of paper and we can say, oh, we own our own business. We don't need it. But, you know, I think it's tough to look at our kids and say, oh, you don't need that. I'm struggling with, I guess, with my kids, but it's, I'm 50, 50 on it of life. But I don't think it's good to be like, Hey, you don't know what you're doing. Go to college. Like, right. Yeah. Don't go find yourself and find a hundred thousand dollars in debt either. Yep. So there's, I think you have to balance between those two things. So if I was,
00:44:20
Speaker
if they weren't sure, then we're going to do some gap year internship program or you're going to take some classes and you're going to work and, you know, go work in the industry. You think you're interested in and push a broom for a little bit, see if you like any of that. You know, I think it's just a little bit more, my parents didn't go to college. And so they said, if you go to college, you'll have a job and you'll be able to pay your student loans. And we graduated in 2008. That just wasn't a reality. Yeah. Like I, I, they just didn't know that they didn't know and it's not their fault. Um, it's just,
00:44:49
Speaker
Yeah, I just have that. So kind of a cautious approach to it, I guess. What's your go-to flavor? I'm just going to ask it. Probably still the snickerdoodle. I know that sounds really lame. Thank you. Just go back to it, Derek. That is the best one. I'll do the snickerdoodle or the strawberry. Our strawberry has just real strawberries.
00:45:13
Speaker
stirred up in it. And I built that recipe myself. Gotcha. Near and dear, but come on, Thalmas, snickerdoodles. Yeah. I tell people, and you're sitting at the stand and people say, well, what's the best one? And they think you don't know. I'm saying, snickerdoodle, just try it. Yeah. Yeah. It's like, what did you say, my kid? Snickerdoodle. Yeah. I was going to say, are you Thalma? Yeah. Great. Real original.
00:45:36
Speaker
Yeah, they think they're the first guy that comes up that, but I also think I'm the guy who says that. And so I didn't have to laugh. Okay. Okay. How do people, how do our listeners reach out to you or hear more about you? Tell them how they get in contact or you can say, please don't contact me. That's just buyer product. You can, uh, you can, I mean, you can engage with us on social media at the almost treats on instant and Twitter and Facebook. Um,
00:46:05
Speaker
And just info at Thelma Streets. I get requests all the time to talk to food companies or startups or people who need some help. I talked with a granola company last week and then a little bakery and then a salsa company. Because we're all on different paths and we're all doing things differently. And I always kind of qualify my comments with that too. This might not fit for you, but here's what we did. Yeah.
00:46:29
Speaker
And then I'm also out and about all the time. So I'm usually in the grain bin. I built a concession trailer out of a grain bin. Um, and so alternate packaging, don't you? Yeah, I do. I was driving, I, these concession trailer companies are like, Oh, you can't build a round one. I was like, well, I want it to look like a giant stack of ice cream sandwiches on the ends. No, you can't do that. I was driving across the country side and I kept seeing these grain bins everywhere. I was like, dude, I used to be neighbors with Eugene suicup. I'm just going to call suicup and see if they can build me a grain bin.
00:46:59
Speaker
Then I called my buddy, who's a fabricator in the winter. He's a farmer, but he's got a really nice fabrication shop at his place. And I said, can you build me a trailer that sets on the ground and has like, I don't know how you lift it with hydraulics or air or something? He goes, ah, I think so. And so I sketched it to him and he just built it for me.
00:47:19
Speaker
Where's that at? Let's see, the grain bins at our plant right now and then it will probably take its Texas in January and start because we set it in front of the stores and hand out samples and promote with it. Actually, I had somebody yesterday said they wanted to buy one for their part.
00:47:39
Speaker
Anyway, so there might be more grain bins. I don't know. Very cool. Thank you so much for your time, Derek. This has been so insightful and this has been wisdom galore. So we can't thank you enough for being on the show. Keep living the uncommon life. And yeah, let's just stay in touch. Yeah. Everybody go eat a Thelma's ice cream sandwich. They are delicious. The snickerdoodles. Well, thanks a lot for having me guys. Yeah. Thank you. Absolutely.
00:48:08
Speaker
That's all for this episode of the Uncommon Life Project, brought to you by Uncommon Wealth Partners. Be sure to visit uncommonwealth.com to learn more about our services. Don't miss an episode as we introduce you to inspiring people who are actively pursuing an uncommon life.