TSP012 | Brian Smith – Transcription
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John Livesay:
Today’s guest on The Successful Pitch is Brian Smith. You may not know who he is, but I bet you know his company, UGG footwear. Yes, the comfortable sheepskin boots that are so popular around the world for both women and men. All started from him figuring out the right message to have in an ad to appeal to surfers who would wear their UGG boots to dry their feet, because the sheep skin inside would dry their feet after they were surfing and from there, it just grew and grew. He started the company with literally $500, took it to $15 million and sold it to Deckers and now the brand is worth over a billion dollars.
He has a book out called The Birth of a Brand and Brian says no brand is born an adult and you have to realize that it’s born and it’s an infant and you can’t give up on it just because it hasn’t learned or walk yet. He has so many incredible stories that he shares with us today about how he lost control of the company and then got it back. His whole premise on passion plus innovation makes you a catalyst for change. You’re going to enjoy and be inspired by Brian as much as I was. Thanks.
Hi and welcome to the successful pitch. Today’s guest is Brian Smith also known as Mr. UGG, thanks right everybody, the UGG footwear that is reowned around the world with the most comfortable sheepskin that you could ever slip your foot into whether you are a woman or a man. Brian has an amazing story of starting UGG from just $500 to growing it in 17 years to a $15 million dollar company that he then sold to Deckers and today UGG is a one billion dollar brand. So, when it comes to startup, Brian is the expert. Brian, welcome to the show.
Brian Smith:
John, thanks for having me!
John:
Brian, I just gave a snippet of your background, but there’s obviously a lot to dig into. I know you’re from Australia as our listeners would soon hear from your wonderful accent.
Brian:
Right.
John:
Can you share with us how you took your passion for surfing and how did the UGG idea even come to you?
Brian:
Well, I was an accountant in Australia and hated it. Should have never of been one, but I never give up and it took me ten years to graduate and the day I graduated is the day I quit and I was sitting around wondering what I should do and it hit me that all the cool trends are coming out of California. So, I’m going to go California to find the next big thing to bring back to Australia.
So, I got my airfare and landed in Santa Monica and I was there for one month, two months, three months. Still hadn’t found it and my buddy was down to surfing, we were going to go up to Malibu and he brought the latest issue of surfer magazine and I’m flicking through it while I was waiting for him and I just stopped dead on one page and I just got goosebumps and it was a photograph of these legs up in a fire place wearing sheepskin boots and I went, oh my God! There’s no sheepskin boots in America and at that time, one in two Australians had some sort of sheepskin footwear. So, I said to Doug, hey buddy, we’re going to go into business. We’re going to be instant millionaires!
John:
AHA! Instant.
Brian:
Yeah, what a joke. So, after we got from Malibu, we called up the little factory down in Australia, in Western Australia and we convinced them to let us the distributors, so we had to borrow that first $500, neither of us had it, and we sent it down to Australia and got six pairs of boots back and thought we were just going to rip, but what I didn’t realize is that Americans don’t get sheepskin like Australians do. They think it’s hot and sweaty and delicate, you can’t wash it, you have mud and slush, it’ll never work we are, sweaty, and in Australia you know that’s not right, that’s actually wrong. So, I think for every entrepreneur starting out, you have to have some level of ignorance, because if you didn’t have that ignorance and you knew all the obstacles ahead, you’d never start.
John:
That’s so true, Brian. Sometimes what we don’t know, we have to be unreasonably optimistic almost.
Brian:
Exactly.
John:
You run this marathon of becoming a successful entrepreneur and there’s many obstacles that you have to overcome, but I love what you said earlier about just even becoming an accountant even though you didn’t like it, you still have a mantra of I never give up and that’s what it takes to make your dream come true like you did of sheepskin boots for America. Literally you started with $500. Where did the $500 come from?
Brian:
We borrowed it from a couple of friends.
John:
What are some of the obstacles you faced to get UGG to $15 million dollars?
Brian:
When we started I thought everyone would naturally buy them in America, but it turned out that we went on the road to all the shoe stores and they just thought it was crazy trying to sell sheepskin in California. We tried a shoe show in New York and they didn’t get it either and it was on the plane coming back from New York that I thought, well, all my friends think this is the coolest idea and it struck me that they were all surfer and so, all the surfers had been down to Australia in the 60s and brought sheepskin boots back to their buddies, so within that community it was pretty well known. So, Doug and I decided to focus on surf shops and our first sales out of the gate was 28 pairs for the first season, you know, $1,000. In saying that, there’s no billion dollar company existed that didn’t start with a $1,000.
John:
I love that line. We’re going to use that as one of the Tweets from the show. There’s no billion dollar company that didn’t start with a small amount of money. Now, you think it’s almost counter intuitive, like, if you are a surfer, you’re wet, what do you need sheepskin boots for? I mean, I’m assuming because you’re cold after getting out of the water and that’s why?
Brian:
Yeah, in California the water is generally pretty cold and the sheepskin has this amazing property, it wicks moisture, so you can put them on with wet feet and in ten minutes your feet are warm and dry. So, that’s why it was such a practical product, but you know, we were doing the first year sales as about $30,000 and I couldn’t seem to grow it past that. We were doing swap meets and weekend shows. I had the back of the van open at Malibu beach. Had an amazing business going on there.
So, we started advertising with these models, putting them on the rocks at Windansea beach and the perfect hair and shoes and sunset and next year sales $30,000 and so the following year we got better looking models and more expensive photographers, poise these models on the beach, $30,000. It just wasn’t doing anything and I remember – I was in Montgomery Ward, which is a big shoe retailer in California, but their office was in Chicago and I made my best sales pitch to this guy and he just looked at me and said, “Brian, why are you here?” And I said, because I want to get an order for the California stories and he just crossed his arms and he looked at me, he said, “Brian, don’t you get it? We’re the elephants, we don’t move until the mice are running around under our feet.”
John:
What a great quote!
Brian:
I instantly knew what he got. They were not going to touch it until all the specialty stores were ripping, you know, so when I went back to California, I was having a beer with one of my surf shop buddies and telling my problems and he just called out to the back of the room, “Hey you guys, come out here.” And all these little, you know, 12-13 year old surfers came out and he said, “What do you guys think of UGGs?” And every one of them just went, oh man, those things are so fake. Have you seen those ads? Those models, they can’t surf!
John:
Ohh.
Brian:
I instantly realized for two or three years I’ve been sending the wrong image to my target market and so the next day I called up a buddy of mine who ran the Scholastic Surfing Association in Orange County and I told him, Pete, any of these kids going to go pro soon? Because I didn’t have any money. He gave me a couple of names and Mike Carson and Ted Robinson, I just followed them to the beach to Trestles and Blacks beach.
All these famous beach walks with my own camera and did photographs of them and ran them in the surf magazine and the sales went to $400,000 in two months and all the moms are walking the malls, you know, to Kinney’s, do you have UGG boots? No? What are UGGs? Nordstrom, what are UGG boots? So, that one stroke of understanding the message you send to the target market was so critical and that was the big breakthrough that got UGG started.
John:
That’s a huge takeaway from our listeners, because your messaging and your marketing. So, they both have to be correct and if one of those two elements is wrong, you won’t grow and the way you figured it out was talking to the target market directly and getting feedback and when they said it wasn’t authentic, then you figured out how to shift your messaging so you were authentic and then you got the smaller retailers. I love that quote that the Montgomery Ward gave you.
Brian:
Yeah, he was great.
John:
We’re the elephant and we don’t move until the mice are running around our feet. So, the mice can be consumers, can be specialty stores, but they have to see a lot of demand and activity and the same thing can be true when you’re trying to craft your successful pitch for investors is before you’re going to get a big investment from someone, they want to see a lot of mice running around, they want to see some traction with consumers and they want to know that you’ve pretty much got an idea that’s a good fit for the market and you thought things through and figured out what you just figured out before they step in with a big investment. I love it. That’s a fantastic information.
Brian:
It is. It’s like one of the rules of the universe, right?
John:
Yes, now Brian you have a great book out and I love your formula, which is passionate plus innovation = catalyst for change. Can you tell us about what inspired you to write your book and tell us how you came up with that formula.
Brian:
Yeah. The book is the result of an evolution of thought, you know, about five or six years in the business, I just couldn’t help realizing how much like a little kid, like I just had little babies, how much like children a business is and so I wrote up this piece of paper that said, you can’t give birth to adults and I stuck it in the front of three ring binder, you know, a big fat one, and for years I’d go, ugh, that’ll be good in a book one day and I would just throw this stuff into this binder and, you know, 15-20 years later, I sold the company and then I got involved in other businesses and at one point I said, okay, I’m going to go write that book and I pulled it out and the thing had not changed in the next 15 years that every business starts with someone conceived the idea and they take the first action. For me and UGG, the first action was buying samples.
Now, I’ve given birth. And then the problem is every business goes into this infancy. It just lies there and there’s no amount of feeding or jiggling the cradle. It can not get up and go to college, because it has to be an infant.
John:
Wow.
Brian:
Then it’ll start toddling and that’s a pretty cool stage for your business, because small orders are coming in and people are writing blogs and articles about you and that’s a pretty cool stage and you’ll get through that to the youth where it’s the best phase of every business where you’ve got consistent orders, consistent production, sales team working, accounting administration, that’s the best phase for every business, but if it’s a really good product or a really good service that you have that’ll hit the teenage phase and it wants to be everywhere at once, everyone from all across the country or the world wants to have a piece of it and that’s a really dangerous stage.
I almost lost control about three different times during that phase and then the administrators come in and put on all the rules, the restraints, and then it becomes a mature company. So, that theme is what I wrote about in my book and when I speak from the stage, it’s amazing how many people come up to me, oh, thank you, I was about to give up my business, but now I realize I’m in X stage and they know where they’re at and they have confidence.
John:
Right, so, you wouldn’t give up on an baby, right? If you’re upset that the baby is not running because it hasn’t learned to walk yet. I mean, your book, The Birth of a Brand is such a great title. I love anything with the iterations like that and when you say that no brand is born an adult in your book, it’s such a great analogy and that – no amount of, as you said, coddling can get you to move from infancy to youth before it’s time and just like a chicken coming out of an egg, it’s got to take that time to mature and don’t give up is helpful.
Brian:
You just have to keep doing what you believe is the right thing everyday and, you know, may not see the results for ages and ages, but as long as you’re doing the right thing, what you believe is the right thing, eventually the movement will start and that’ll give you a new direction.
John:
It’s almost like the tipping point or the 212 degrees. It’s consistency and progress as a opposed to seeing action as really what gets it to go. Now, this formula, passion + plus innovation = what I’m fascinated by is the world catalyst for change as oppose to just change. Can you explain a little bit about what you mean by being the catalyst for change when you have passion and innovation?
Brian:
Yeah, well, that came from a study, a woman called Sally Hogshead has developed this matrix and if you do one of her little tests, she puts the indicators of what your personality is and mine just happened to be passion and innovation, right, they collided on this grid. Passion and innovation and those people are the catalysts for change. If you do have passion for anything and this urge for innovation, then you can’t help but change things and so right now my book is designed to be a catalyst for change for anyone who reads it who is on the entrepreneurial path, because I list – it’s very philosophical.
I’ve got a lot of truths in there that I’ve learned both myself and from my reading and from my experience, so I’m trying to be a catalyst for every potential entrepreneur to read my book and show them the path of how to get to where you’re going to get. It’s never easier, but here’s all the tips to overcome the challenges you’re going to find.
John:
That’s fantastic. You know, so many of our listeners, you know, have the dream of a company and having it grow as big as UGG became and then having some potential exist, either going public or getting bought by another big company like Deckers buying UGG. Can you take us back to that day of what made you decide to sell in general and how did you decide to Deckers and was it hard to let it go?
Brian:
Great story, yeah. I got the business up to about $15 million in sales and my problem was always that I grew so fast and I never started with any serious capital. I was at the whim of investors to bank roll the production and we were staring down the face of a $20 million seasons and I’m thinking, oh my God, I have no idea where I’m going to get the money to finance this year’s production.
So, that’s one part of it. Let’s flashback, remember I told you I opened up the bank of my van at Malibu in the 70s or the early 80s? Well, three or four cars up, there was another van with the doors open and the guy was selling triple decker shoes. They were pink, yellow, and pink neoprene with the little, what do you call them over here, flip flops, and they were triple deckers and that was the guy that started Deckers. His name is Doug Otto and we used to see each other on the road all the time. We’d be out trying to pitch all the same retailers.
Well, he eventually grew his company to a – he did a lot of licensing and he eventually bought the license for Teva sandals, Teva. When the outdoor market took off, he took his company public. So, last fast forward back to 95 and I’m going to a trade show in Atlanta and I’m at the Atlanta airport and I look way down the other end of the baggage claim and there’s Doug Otto and I just immediately got goosebumps again and for me goosebumps is my inner spirit telling me you’re on the right path, you know.
John:
Trusting your gut, almost, yes?
Brian:
Exactly that, yeah. So, I walked down, you know, we saw each other and we high-fived and I said, you know, Doug, if we’re ever going to do it, now is the time, and the reason was that his company was dying every winter, my company died ever summer.
John:
Oh, what a great fit.
Brian:
And so, by putting the two together, we had year around stuff, year around cash flow and that was what was crippling both of us and so we had the accountants talking to each other that afternoon. So, selling out for cash. So, it was like going public without having to go public.
John:
Yes, there are so many great little messages inside of that story, Brian. The first one is you knew him for years and respected each other and you were both in the same market and then the complimentary non-competitive element of what he was doing, which was all summer oriented, and what you were doing was typically winter oriented, was such a great fit that it was a logical think for Deckers to buy UGG, but everyone doesn’t know that behind the scenes story.
They just think, oh, it just sort of happened and now we know the story of – it didn’t just sort of happen, there was a relationship and mutual respect for years and why those two brands were so complimentary seasonally that it was such a great purchase for him and clearly it’s been a fantastic success. What a great, great story. I love that on so many different levels. The goosebumps element and the year round synergy that you now have makes it for a great, great stuff. Is there any story in your book, you and I were chatting before the show about two women that you’re interested that – I think you said was in chapter four. Do you want to tell us a little bit about the takeaway of what’s going on in their story?
Brian:
Yes, they have a fantastic product. It’s a very high quality lambskin product. Instead of having a big bulky purse that women carry on their shoulders, it’s a sash and it looks like a piece of clothing and it has two pouches, so it doesn’t sit on the hip. One is in front, one is in the back of the hip. So, it’s beautiful looking piece and it has all these pockets inside for organizing phones, keys, credit cards, and cash and all the stuff that women carry.
So, when they’re at a bar, they don’t have to look around and worry about their purse. When they’re out shopping with a baby, they can just have everything out, so I told you they’re like in chapter four or five of my book. When I was really starting to get traction and as much as the sales were getting so easy, you know, this is after that little hard moment, you know, the sales was so easy that I couldn’t finance the production right from the very early stage and these girls are in exactly the same situation. They took their product offline, because the sales from the online store were just so overwhelming, they couldn’t – they knew they couldn’t get the product.
So, it’s one of those things that, had I looked back, well, if I do look back now on the whole UGG thing and think what did I do wrong? Well, I did a ton of things wrong, but what should I have fixed as the most important thing and I would have gotten a really good finacial partner in. I’m not saying equity partner, but somebody who was on my team that really understood finance, because I can see down the road the problem these girls are going to have, the more they grow, but they can’t see that yet.
They’re just worried about how do I get product this season, but because I’ve been down that road for year after year after year, I foresee what’s going and I know that if I can help them get a really good financial partner right now, they will just rip and take ten years off the growth that I had to go through.
John:
Wow. Ten years off the growth. Well, obviously everybody wants to buy that book, The Birth of a Brand to learn these wonderful insights and you mentioned earlier that there’s like three times, I think you said, that you almost lost control of the company. Was it all related to production and traction?
Brian:
Yeah, there was one instance, this is a great story. I hope we got time left.
John:
Yeah, we do. We have five more minutes.
Brian:
Okay, so this is perfect. The business was doing $2.5-3 million dollars and I had to buy out the smaller investors each time, because they couldn’t handle the next big rush, so I brought on three new guys as investors and our deal was we were all going to share 25% each of the company and I didn’t get my 25% until I finished this little trademark lawsuit and I knew I would win that, so we moved the warehouse up to Anaheim where they belonged and the very first day I went out on the road, I had to finish the trademark and I got to be the sales reps for Southern California, alright.
So, first day out I went down to Huntington Surf and Sport and I walked in the door and he says, “Hey Brian, I heard you sold the business.” What? He said, “Yeah, I just got an order in and they said you don’t own it anymore.” And I went what?? And I couldn’t wait to get out of there and I went next door to the Shell gas station, before cellphones, you know, and I called up and go, Neil, what the hell are you telling people? And he goes, “Well, it’s true, you don’t own the business.” I just drove straight back to San Diego and I pulled out the contract and I looked at it and I read it again and I read it again and I went, oh my God, I don’t own the business and I went into this two or three days of depression, you know. I just stayed at home and all my dreams of building this huge international corporation crashed.
I think about the third day I was doing some meditation and I’m thinking, you know, what can I do? And I thought I’m not going to be an accountant, maybe I can get into real estate or business brokering and then I thought, you know, I really come to love sales. I think I’ll go back into sales, so I started thinking, okay, what can I sell that I really love and the answer was UGG boots. So, I decided to suck it up and eat humble pie and I went back out there and I said, okay, I’m just going to be the best salesman, because I really want to get UGG boots on everybody I can.
So, I went back on the road and by now all these guys are my friends, you know, my retailers, as terrified as I was starting out, now they’re all good buddies and I used to over service the heck out of them for inventory and all that and I got back after the first march to the warehouse and Neil handed me an envelope and it was a check for $5,000 and he said, that’s your commission and I went, oh my God, I have not pulled one cent out of the company in five or six years and here’s a check for $5,000 and I got back after the next month and there’s a check for $10,000 and the next month another check for $10,000. I’m going, oh my God, this is amazing. I’m doing what I love, I’m making all this money, and it lead me to this thing I wrote in my book, which is that most often your most disappointing disappointments become your greatest blessings.
John:
Wow, that’s so huge. We’re going to Tweet that out too. Your biggest disappointment becomes your biggest blessing.
Brian:
Yeah, so that was a classic example of all my dreams crashing and the irony is that over the next few years we went fantastic and Neil bought the other two partners out and we were just getting ready for me buy my stock back and we taken out life insurance policies on each other and by a chance, he was in motocross race and had this massive heart attack and died.
John:
Oh my God, how dramatic.
Brian:
Yeah, it was, and then within a few months the insurance policy paid out and I bought the business 100% back from his widow.
John:
Wow.
Brian:
So, you can’t predict what’s coming down the line.
John:
Brian, you just gave me goosebumps! That is such an amazing story. I don’t think I have ever heard anything that dramatic and the takeaways for me are, love what you do, don’t be attracted to having to own something, and you already acted as if you owned it, you couldn’t have worked any harder selling UGG. People bought from you because you had such passion and belief in it and you had a product that literally solved a problem for people, which was drying their feet after surfing and kept them warm. So, it’s just such an incredible to take all that disappointment and turn it around and we would never wish ill on anybody, but you never know how something is going to work out. So, that’s just so moving.
Brian:
Yeah, the first thing I talk about in my book is that the minute you start out on a path, the universe will conspire to work with you and that’s an ancient, ancient saying, but it is still as true today as ever, but if you don’t take that first step and start moving in the direction of your dream, nothing will happen.
John:
Nothing will happen.
Brian:
You gotta take that step.
John:
Well, you’re certainty the expert in talking about taking the first step when it comes to footwear with UGG. I love that analogy. You have a special creditability talking about taking the first step, because you created something for our feet and our hearts. Thank you so much Brian and let me, before I let you go, in addition to your book The Birth of a Brand, is there any other book or piece of advice you’d give to our listeners that are start ups besides some of this great takeaways you’ve already given us?
Brian:
I’m a veracious reader of books, but I think the things that have helped me the most and still do is to buy books on spirituality and there’s lots of things like called Law of Attraction, which is cool, and there’s lots of things about overcoming adversity, but you know, any sort of reading that is inspiring has an element of truth to it and those things work more to make you happy in life. Business is great, but it’s just what you do during your life. Your real life is living and being happy and so that’s why I found more comfortable in spiritual books than I do in any other business book.
John:
I love that line you just gave us. Real life is living and being happy and business takes care – if you have got that handled, you got a good foundation to make your business express that happiness and at the end of the day, people buy your passion and that’s what investors live in. Thank you so much. Now, Brian, how can people buy your book? How can they follow you? How can they book you as a speaker?
Brian:
Sure, the book is available on Amazon and it’s called The Birth of a Brand and it’s also available on my website, which is BrianSmithSpeaker.com and if you sign up there, you can get a free chapter of the download if you like and I have weekly videos that people can sign on for, but generally the book is designed to help people get over the hurdles that they’re facing and it’s a very, very strong in spirituality, which is a bit of a risk I took writing a business book. People end up saying, my God, thank you so much. So, yeah, just buy the book and I think it’ll really help you accelerate your business.
John:
Fantastic, Brian, I can’t thank you enough for those incredible stories, the inspiration, we’re all going to take the first step, we’re going to remember that our brand is a child and it needs to go through all the stages that children get to before it becomes an adult. Thank you again, Brian, we look forward to reading your book, following you, and staying inspired.
Brian:
Good, thanks a lot, John.