Mike Salguero: How I Grew ButcherBox to $600M/year in Revenue; Tips for Influencer Marketing | E998

Mike Salguero 0:00 ... we can't just do what we're doing anymore. We're too big. We'll do about $600 million in revenue this year. The old tactics, like, we're just gonna blanket Facebook and do influencer, it doesn't work anymore. Like, we need a new oil field. (instrumental music)

Harry Stebbings 0:12 Mike, I am so excited for this. I think your story is fantastic, fascinating, worrying, that you actually don't need venture investors to scale to huge-

Mike Salguero 0:21 (laughs)

Harry Stebbings 0:21 ... re- profitable businesses. I'm terrified for my career, but thank you so much for joining me.

Mike Salguero 0:25 Yeah. Thank you for having me. I'm super excited to be here and, uh, chat, chat and disagree.

Harry Stebbings 0:30 Well, I look forward to it too. But I wanna start with, uh, a little bit of context. So we're all a function of our histories. Clearly, I'm a failed psychologist. Um, and it means we're all running from something. Mike, on reflection, what do you think you're running from?

Mike Salguero 0:43 What am I running from? I mean, I, (sighs) I think that our past is what kind of creates the people that we are today. And, uh, what I spend a lot of my time... I'm 41. What I spend a lot of my time trying to do is actually notice it and not run from it. Like, a lot of my past, like, life, and shadows, and triggers, and stuff, like, come up constantly. I mean, I shared with you that I grew up without a father, so the fear of abandonment is, like, really, really... runs really deep to me. And whereas in the past, I've, like, run from those emotions and run from my past, uh, my work now is t- kind of to sit there and take it, and to notice and allow. And, you know, feel the feelings in my body and then let them, let them be.

Harry Stebbings 1:22 Can I ask you, what is the result of the fear of abandonment? So what I mean by that is, like, I was bullied a lot as a child for being more like Augustus Gloop than, you know, I am today.

Mike Salguero 1:31 (laughs)

Harry Stebbings 1:32 Um, but it means that I just wanted everyone to like me.

Mike Salguero 1:35 Yeah.

Harry Stebbings 1:35 And it's led to a bad trait in leadership, which is I'm a people pleaser.

Mike Salguero 1:38 Yup.

Harry Stebbings 1:39 When you think about, like, the abandonment, what's the impact of that on how you act?

Mike Salguero 1:43 Yeah. So on the positive side, it certainly drove me. Like, yeah, I, I was very driven to accomplish. And I think deep down, that was to, like, make my father, uh, come back, which was never gonna happen. On the negative side, I mean, in my personal relationship, I have a really hard time advocating for myself, like, with my wife or with my friends, 'cause I'm worried that they'll leave me. I've oftentimes been made fun of by my friends where I'm like, "Guys, don't leave," and they're like, "We're not gonna leave you." Like, "We're..." (laughs) "Don't worry, you're fine." And in my professional life, yes, I, I think, uh, I can tend to be overly generous and overly accommodating, uh, with this... because of this fear that, like, people are just gonna go. And that's something that I've had to work hard on through the past 16 years of CEOing.

Harry Stebbings 2:30 Can I ask, what's worked in terms of actually getting through that and getting over that? 'Cause it is a big thing to get over.

Mike Salguero 2:35 The biggest thing that's worked for me, so, I mean, I'm happy to talk about my, my entire career, but I, I've spent a lot of time leading people, and I've seen a lot of people come and go, whether we had to fire them or whether they left on their own volition. And one of the things that I've really focused on in this business is to make sure, or to try to make sure, that any person who comes into the company, when they leave, they're like, "Wow, that was the best career decision I made." And if I can say that, if I'm, if I look at them and it's like, "Oh, yeah. We hate to see her go, but now she's gonna run data and analytics somewhere else." Like, th- that is... Uh, y- people aren't designed to work at a company forever. And so again, it's kind of like noticing the fear of abandonment, but then also just, like, not letting it hijack my day-to-day.

Harry Stebbings 3:18 What happens when you overestimate someone, when you think someone's better than they are, and they turn out to disappoint you?

Mike Salguero 3:25 (laughs) Happens all the time. There's kind of two ways of looking at that. Um, one is like, can they get there? Is it because of y- you need to help them through something, you need to grow them in a certain way? And sometimes, it's just you picked the wrong person. And in that case, you just need to be open with them and part ways.

Harry Stebbings 3:43 And it's about parting ways, not about moving them within the company?

Mike Salguero 3:47 I mean, I, I have definitely... I have this, um, this analogy of a useful life meter. And so your job as the, as the leader is to, um, figure out when people's, like, like old parking meters. Like, the, when their parking meter is down in the red, you wanna throw another quarter in it. And that doesn't mean that you, like, pay them more. But oftentimes, you see people who kind of, like, fizzle out. They did great, and then they're fizzling out, or they're not able to, to, to go into the job that you want them to. So, there is a huge opportunity to move people around, but you really wanna make sure that you're dealing with the right, right parking meter. Oftentimes, we try to move people just to avoid having a hard conversation, and that's like, you know... Again, I'm, I'm big into, like, conscious leadership and stuff. Like, having a hard conversation is hard for people to have. And if you, if you end up just, like, hiding that by moving somebody to a different department, you're not doing yourself the service of being able to, you know, grow by having a hard conversation, and you're not doing them a service either. Like, nobody wants to be a poor performer that everyone knows, and just moved to a different part of the organization.

Harry Stebbings 4:53 Mike, what are the biggest fuck-ups you've made in hiring?

Mike Salguero 4:55 Oh. (laughs)

Harry Stebbings 4:58 (laughs)

Mike Salguero 4:58 Oh, man. Well, the biggest one that comes to mind is... This was really early. This was, like, really early Custom made. We hired this guy. He was a sales guy. He didn't do any work. (laughs) We were told by a restaurant, like, nearby that he stole a sandwich. Like, they, they made a sandwich and he, like, took it, and didn't pay for it. And so anyway, we're like, uh, you know, basically like, "Hey, man, um, you're not really doing any work. Like, w- I think it might be time to replace you." And he's like, "Yeah, that's fine, but just in... When you do, I'm gonna let everyone know that you hired a level three sex offender." And we're... (laughs) I had the same reaction. Like, I- I'm, like, typing in level three sex offender. Like, what does that even mean? I don't even know what that means. Uh, and you know, it turns out-

Harry Stebbings 5:44 And he stole a sandwich.

Mike Salguero 5:46 And he stole a sandwich, and spent time in jail. It turns out that when you hire people, it's a really good practice to run a background check on them. But we were so early and scrappy that, like, we just didn't know that we had to do that. So, learned that lesson the hard way. That wouldn't happen again. But it was... (laughs) ... it's like, "Oh, my God. I guess we need to run those background checks."

Harry Stebbings 6:06 Final one, and then I promise to get back to the schedule. I always find that actually the, uh, negotiation on comp package is one of the most revealing parts of a hiring process-

Mike Salguero 6:15 Mm-hmm.

Harry Stebbings 6:15 ... whether it's how they approach equity, whether it's how they approach salary, bonus. Title's a big one I find revealing.

Mike Salguero 6:22 Yup, for sure.

Harry Stebbings 6:22 Do you agree? And what do you find is the red flag specifically in the negotiation on comp packages?

Mike Salguero 6:28 Okay. Well, first of all, um, nobody, nobody understands their equity and negotiates for it. Like, in, in my career, I've had so few people actually read the document. I- I've probably had, like, a dozen questions, and usually it's on page two of a 75-page document, right? So like, nobody reads it. And I think if you are getting a big comp package, or if you're negotiating for comp and part of the compensation is equity, you should understand what you're actually getting, 'cause people don't. So, I'll, I'll just leave that at that. In terms of red flags, well, I guess the other one for people who are hiring is, I find that sometimes people anchor around, like, money. So, if somebody really wants 100 grand, don't come in at 95 just 'cause, like, you wanna make ... Like, "Oh, we only had 95 budgeted." Like, pay them 100 grand, because they have that, that level in their head. And oftentimes, like, I don't want to lose someone over, like, salary. I think that's a big mistake to make. Where I've seen the biggest red flag ... I mean, aside from the interview process and what they might show you in the interview process, or how they might treat people, and all that stuff. The biggest red flag for me would be on title, where, you know, you're pretty clear on what you want, and they're like, "Well, I, I need to, I need to report to the CEO." And it's like, "Well, that's not available. Like, you're not reporting to me. I'm sorry." Like, "I- I'm interested in this work, but, like, you're not gonna report to me." So, title and reporting, I would say are the two, the two red flags that we watch out for. We have, we have a core value of humility. Things that show up in the interview process that kind of show that somebody might not be as humble as you would hope certainly are big red flags for us.

Harry Stebbings 8:00 You said there about kind of direct reports, and if you have too many direct reports, it obviously impacts the, the lifestyle and the life of the, uh, direct report themselves who receives them. And you said before,

Harry Stebbings 8:11 throw out your business plan-

Mike Salguero 8:13 (laughs)

Harry Stebbings 8:13 ... uh, every entrepreneur who went to business school is shuddering, and think about lifestyle design. If we kinda break it up first, why should you throw out your business plan, Mike?

Mike Salguero 8:22 Here's the deal. There's a lotta different ways to be an entrepreneur. There are lots of different companies. I mean, I live in the United States. There's tons of opportunity and tons of ways to make money and build a business. Tons of different stuff. What I find most people do is they spend a whole bunch of time on, like, the idea, like the business plan. Like, "Oh, here's how we're gonna make money. This is what it is." Like, "I can't leave my job until I've, like, actually ... Like, I've, I've figured out all these things." And usually, y- y- you can't really foresee what the future looks like. So oftentimes, people get into a business, and then they realize like, "Oh, this is ... There's no business here. Like, we're gonna pivot it and we're gonna do something else." Or, uh, you know, the business that you start looks nothing like the business that you end up with. Like, you know, perfect example is like, uh, Instagram, right? Like, it started as something completely different than where it ended up. So, okay, why spend so much time, like, figuring out the, the market and doing all this stuff when, like, you haven't even decided what you want this business to look like? I think one of the lies of entrepreneurship is that you need to raise money. People think, "I need to raise money, and therefore I need a business plan, and therefore I do all this stuff." And what I try to encourage people to do is to try to take a moment. I generally say it's a three-year vision. So, you look three years in the future, and it's like, what does your life look like? W- what time are you going to work? Are you going to work? Uh, what does your office look like? Like, uh, who are you talking to? What, what are the core functions you're doing on a daily basis? Did you get two workouts in? Are you hanging out with your family? Like, like, architect a day, like, think about a day. Oftentimes, I think, like, walking in the woods, and like, you know, really getting, getting, you know, in tune with what your soul is looking for is the way to do it. And what you find is, like, a lot of people are chasing a lifestyle. They're not chasing a business. Now, that's not true for everything. Like, I ... We're, we're not talking about launching ChatGPT or putting a rocket into space. We're talking about, like, entrepreneurship. And, you know, the person who owns the dog poop cleanup company, uh, is doing quite well for themselves, and has a pretty sweet lifestyle, provided they've outsourced the dog poop pickup, which they probably had to start doing. Um, so, you know, w- what I try to say is, like, obviously a business plan is important, and it's especially important if you're gonna go raise venture. But oftentimes, like, what you start with is, or what you intended to start with is not where you end up. So, you really wanna get straight on, like, what you're looking for, and then how this business can drive you to the future.

Harry Stebbings 10:48 Can I just interrupt? And, and we said we were gonna just, like, you know, have a discussion I disagree, and I disagree because I don't think you can foresee actually the next three years. When I look back three years ago, I was living a completely different life, doing different things, enjoying different modes of everything in life. I couldn't have foreseen that now I love being in an office. I always thought I hated it. I love working with a larger team. I always thought people were annoying before. I thought I sucked at collaboration. Actually, I've learned to enjoy it. Like, people change in ways we cannot anticipate. And so projecting a three-year vision of what we want our life to be actually could present us with the wrong life.

Mike Salguero 11:29 Yeah. I mean, that's a great point. So, uh, I will respond with the story of writing that for ButcherBox.

Harry Stebbings 11:36 Okay.

Mike Salguero 11:36 So, my plan for ButcherBox when I started ButcherBox in 2015, my vision was that I was in Argentina-... uh, it was, like, the Tim Ferriss 4-Hour Workweek, right? Like, uh, I'm in Argentina, I open up my laptop, I check in with a few people. This is what the, the structure looks like. We have a thousand subscribers. I make $20 a month off them. Covers my nut and I'm, like, working on other projects. And there was a lot of detail in there, but that was, like, essentially the point. It was a hobby business, right? Uh, three years after I started ButcherBox, we were, like, north of $100 million. I had, I don't know, 50 employees. I mean, we, we were, like, humming and I had failed at my (laughs) vision. You know, like, it... Activating my vision did not happen. I did not create a hobby business, although I could argue... So, so, uh, like, if you looked at the vision and you looked at what I had, you'd be like, "Yeah, what's the point of doing this?" When you look at the details, though, there's all of these things, all of these threads that were dead-on accurate. Like, the way in which I prioritize my family instead of traveling. The way in which I prioritize, like, you know, giving to my community or, like, what ButcherBox was gonna represent or, like, how we... We outsourced everything, which we can talk about, but one of the big keys to bootstrapping is you need to be able to outsource key functions, like distribution centers. If you're building a business for a hobby, you're gonna make different decisions than you do if you're building a business to go raise venture capital. And so the, the fact that I had, like, a vision session and came up with like, "This is gonna be a hobby. I'm gonna be in Argentina, not really paying attention," sure, that didn't come true, uh, but also it helped, uh, it helped me on a path. And you never know, like, where the path is gonna go. You're totally right. Man plans, God laughs, right? Like, who knows what's gonna happen in three years?

Harry Stebbings 13:21 Did that not lead to a ton of operational debt because you wanted to outsource and you wanted an ops-lite model that then transformed into actually, you wanted a much more different model and probably a much more involved model because of the way that you were operating?

Mike Salguero 13:37 No. So we're in the box subscription company, ButcherBox. We ship a b- box of meat to your doorstep. We started in 2015. In 2015, box subscription companies were humming. It was like Blue Apron, Plated, you know, uh, all Green Chef, Hello Fresh... Like, all of them, right? And they all had similar models. They had raised tons of money, hundreds of millions of dollars in some cases, and built out their own, like, stuff. Like, we need to, we need to ma- do distribution. And we need to, like, in Blue Apron's case, like, we need to figure out the machine that cuts the vegetables and, like, everything has to be ours. And because I wanted a hobby business, I didn't wanna do that, and I started by partnering with people and the difference with partnering with people, like a distribution center, we work with a company that's been in business for 110 years. Like, I think it takes a special kind of entrepreneur to think that you can get into distribution and do it better than somebody who's been in business for 110 years, like, right out of the gate. That's not gonna happen, right? So we partner with everybody. It's like w- the, the more the merrier. We're actually moving this year, we're moving to Shopify, and I'm thrilled because like, I think even that i- it needs to be, like, you find the best partners, you work with them, you find the best apps to attach to it in the ecosystem, you work with them. Um, but we don't own our backbone. So we don't own the farms, we don't own the slaughterhouses, we don't own the cutting facilities, we don't own the distribution centers, we don't own last-mile shipping, we don't own customer service. Now, all of those people, in a very kinda like Toyota model, are running our program, and we're doing quarterly business reviews and we're holding their feet to the fire and we're telling them all the things that they need to improve on and we're getting them real-time information about what they're messing up on, but we don't, like, own it.

Harry Stebbings 15:24 Does that not smash your margin? 'Cause you have the idea that when you internalize those functions, you internalize the margins and your margins go up. Does that not really harm your ability to actually generate premium margins?

Mike Salguero 15:35 It... (sighs) I mean, certainly if you look at other food companies, um, that is the way that they do margin expansion, and we have definitely asked the question over the past year of like, "Okay..." Well, especially before this year with, um, you know, Trump's tax code where you just get a ton of depreciation if you, if you take on assets. Um, we actually, two years ago, started, uh, a dry ice factory. We now have two. That was one, a margin play, but two, it was like this critical component that if we don't have dry ice, we don't ship, and we wanted to, like, control that. So yeah, there is, there is definitely the ability to improve or increase margins by owning bigger pieces of the stack, and that does improve EBITDA, right? Because your amortization is below that. So-

Harry Stebbings 16:20 What is the biggest chunk out of your margins? Distribution, loss mart-

Mike Salguero 16:24 MECOS. MECOS.

Harry Stebbings 16:25 MECOS? Yeah. Got you. You can't do anything with that. You ain't getting no cows, man. So if we were to put that to one side, what is heavy margin that could be internalized?

Mike Salguero 16:37 I wouldn't just dismiss that you can improve margin in meat. One of the places where, if you are a bootstrap company, you have to focus on is driving margin in everything. And so like for meat, there's like yields, right? So you cut a larger hunk of meat into ribeye steaks and there's a yield percentage, there's a yield of ribeye steaks that you get. So you might lose 7% of it and, and like that gets thrown into a different bucket. Well, it, it's like do you actually... Like, is... The difference between 7% and 6%, or 7% and 4%, uh, massive numbers. I mean, right now, I'm looking at, like, we ship chicken, three-pound pack of chicken. One of our problems is that unlike a retailer who has a price per pound multiplied by the package size and just charges you, the customer, that, that's not the case for us, right? We s- sell you a custom box and then you add three pounds of chicken to it. So if the three pounds of chicken is actually 3.3 pounds, well, now my chicken cost just went up 10%. And if you're able to reduce that, it's literally like 50 bips of, of margin to the bottom line. And it's just like literally being like, "Hey, we've now decided we're gonna weigh this stuff and you're off by 10%. Like, please fix it."... um, or, like, let's sell it as 3.3 pounds, but at least, like, let's not just say it's three pounds and have it be 3.3 pounds, right? So when y- when you start and w- when you've... Like, for us, we were constrained at the beginning by not raising money, so we had to be... What I loved about the business was it was very right brain, left brain. The right brain side is like, "How do we market? How do we do that differently?" Like, "How do we market, um, you know, cheaply?" And then on the left brain side, it's like, "How do you squeeze every bit of operational, like, waste out of this thing?" And it's not all... Like, even that case i- is probably a bad example because the customer does benefit by getting 10% more. But like, let's negotiate the price of the tape that goes on the box. Why? 'Cause when you're shipping millions of, of linear feet of tape, it, it turns out it matters what price you get. You know, let's not run half-filled trucks. Let's... Like, there's all sorts of ways in which companies waste, and if you're overfunded or if, frankly, if growth is like big, big, big, you don't actually have the time to look at that stuff, and there's a ton of money to be made in the details of, like, eliminate waste, relentless improvement, get better, get better, get better.

Harry Stebbings 19:01 There's a couple of things I really want to unpack, which is just, number one, like, all VCs are like, "Oh, I don't like people who do, like, ch- try it out on the weekend and see if it's a thing," 'cause you need to be all in-

Mike Salguero 19:11 Yeah.

Harry Stebbings 19:11 ... if you're in this.

Mike Salguero 19:12 Yep.

Harry Stebbings 19:12 You need to be all i- You know, VCs talk.

Mike Salguero 19:15 (laughs)

Harry Stebbings 19:15 Do you agree with that? Or do you think, "Actually, fuck that. Weekend side hustle to see if it works is a good thing. Idea validation is a good thing"?

Mike Salguero 19:23 I think if you are hopping on the VC train, like, you need to understand that the train that you're hopping on is not one that you can get off of, and it's not one that you can then build lifestyle design into. So, no, if, if, if a VC who's responsible for taking other people's money and driving a return, if that VC is like, "You need to quit your job and do this full-time," I agree with that. Like, if I was gonna give someone a million bucks, I would want them to quit my job too, or their job.

Harry Stebbings 19:49 But it doesn't mean you can't test it before that. Understand what's possible.

Mike Salguero 19:51 Yeah, and it also doesn't mean that you can't, like, build a company, like, on the side, figure it out, get to a point where you're like, "Okay, like, I've figured this out and this out. I need this machine," or, "I need this thing," and, like, now is the time to raise? Sure. Just make sure you're not doing it because, like, everyone else raises, so why don't we? I mean, that was what my first company, that's what we did. We, we, w- you know, all TechCrunch wrote about was, like, people raising money, so we're like, "Oh, i- to be a good entrepreneur, you need to raise money." And then we just got on the VC train, and that train don't stop.

Harry Stebbings 20:24 Y- y- you mentioned the tape. You mentioned, uh, the multiple elements where you have margin opportunity. That's because you had the constraint of, bluntly, runway, 'cause you had no money. When you raise $5 million for a pre-seed or a seed, like many in Silicon Valley do and many in the US do, k- honestly, it's almost a waste of time-

Mike Salguero 20:43 Correct.

Harry Stebbings 20:43 ... optimizing for the cost of tape, actually. As a VC, I'd say, "Fuck it. It doesn't matter, Mike."

Mike Salguero 20:48 (laughs)

Harry Stebbings 20:48 "Whether you spend 62 cents or 70 cents, it doesn't matter." And it's kind of true

Harry Stebbings 20:53 in that case. How do you think about the importance of constraints as an entrepreneur today, and looking back at the early days of ButcherBox?

Mike Salguero 21:02 Well, (sighs) okay, so this entire business, like, a subscription model, really, arguably any DTC, but let's just talk about a subscription model. It's customer acquisition c- cost, and then there's what's called lifetime value, but really is gross profit dollars over time, right? How much money do you make off the person that you acquired? And so yeah, a lot of VCs are like, "Don't worry about negotiating the tape. W- you need to worry about getting more people in the door," right? But the reality is, what you need is actually a good ratio. You need to make a return on that customer, you need to make it as fast as possible, and you need to watch those cohorts go up over time. And so, uh, you know, tape is a bad example 'cause it's really not that big of a mover, but, like, the price of a box. The price of a box can be 10 bucks, right? If a customer's getting eight boxes a year, and you can shave, you know, $2 out of that thing, well, that's $16 that you can actually redeploy into your CPA and keep the same ratio, right? So all of these savings, actually, you can dump back into marketing and get more confident spending more marketing dollars, 'cause that's what's gonna happen. 'Cause what happens is you get through your first, like, cohort of people, and then your CPAs rise, especially with all the iOS changes and an election happening, and, like, CPAs are through the roof. And the only way that you can handle that is if you are making incremental progress on, one, keeping the customer and delighting them with the product that you have, but two, actually removing some of this waste so you can improve your gross margin without just, like, charging the customer more. 'Cause they, that, that doesn't work. You can't just be like, "Well, we'll charge 'em more." It's like, no, it doesn't work that way.

Harry Stebbings 22:35 S- h- help-

Mike Salguero 22:35 You need to find the, the money in your operational inefficiencies.

Harry Stebbings 22:39 Help founders understand. Uh, CPAs is, you know, uh, cost per acquisition. Um, why do f- why do they increase over time? 'Cause a lot of s- seed companies pitch me, and they go, "It's $8," and I go, "That means nothing."

Mike Salguero 22:52 (laughs)

Harry Stebbings 22:53 And they don't kind of understand. So why do CPAs go up over time?

Mike Salguero 22:57 Yeah, like, I think, uh, oftentimes, entrepreneurs, they're like, "Oh," like, "I went into three places today and sold them on this thing, and they all love it. Like, they're gonna do it." And it's like, "Well, yeah, that's because you're the founder and you're going in there," and, like, that doesn't scale. Like, that's not gonna y- you know. So, your early cohort of people, the early adopters, those are gonna be your m- typically are gonna be your most loyal people and the cheapest to get. And then you're moving into other spheres of people and other buckets of people. And so, like for us, we started ButcherBox with claims, claims-based meat, grass-fed beef was our thing, and there was a huge market of people in the US who already were predisposed to buying grass-fed beef, but didn't know where to buy it. And so, you know, we, we used an influencer strategy and an interesting strategy to like, go get all of those people. But once you've gotten those people, and by the way, it's like 2% of the United States are predisposed to eat grass-fed beef, if you wanna keep growing, what do you do? You have to actually, like, create a market.... right? And so then that becomes, like, it's not just like, oh, they're searching for grass fed beef and you put up a Google ad and you get them to your site and you sign them up and it costs 30 bucks. It's like, oh, we need to run like a, you know, whatever, a brand campaign around, like, all the benefits of grass fed beef, and that just costs a lot more money. And so over time, you see these businesses' CPA goes up and up and up and up. And one of the challenges of a subscription business is you get into this paradigm where you have so many subscribers, and even if you focus on churn like a pack of hungry dogs, uh, even if you focus on churn, you're going to churn people. And so you get into this scenario where you're losing so many people, it's hard to add them, and the CPAs are rising, so your business over time just gets worse and worse and worse.

Harry Stebbings 24:40 How do you advise founders on calculating CPAs? 'Cause your CACs vary by channel.

Mike Salguero 24:45 Yeah.

Harry Stebbings 24:45 Is blended the best way to show CPAs and what

Narrator 24:48 Yeah.

Harry Stebbings 24:48 ... thoughts and actions on that?

Mike Salguero 24:49 Yeah. So, um, I think that the easiest way which is, like, very low, you know, low lift is to take all of your marketing expenses for the month, so when you see your PnL and it's like, "We spent this on Facebook and this on Google and this on whatever," take all of those costs and divide by the number of people you signed up. Um, some places, some PE shops want you to then load in your marketing spend as well. Now that doesn't help you decide to deploy more dollars towards Facebook versus, like, Google, right? But it does help you understand in the aggregate what happens. 'Cause what happens is, like, s- somebody's on Instagram and they see a thing, and then they, like, decide to search for it, and then they forget about it, and then they go directly to it, and, like, it's really... Like, an attr- a truly functioning attribution

Mike Salguero 25:34 model is really, really hard to build.

Harry Stebbings 25:35 It's, it's almost impossible.

Mike Salguero 25:37 Yeah.

Harry Stebbings 25:37 I think there's scientific data that says almost, uh, an average of seven touch points with a brand leads to a conversion.

Mike Salguero 25:42 Right. Right.

Harry Stebbings 25:42 So it's like, well, was it the Facebook ad at four or the Instagram picture at seven which led to the conversion?

Mike Salguero 25:47 Right. So you, you, you just, like, instead of making, like, going down the road of, like, "Oh, we need somebody to measure this day in and day out," uh, uh, it's like, no, just divide by the number of people that you, you signed up and that's your number.

Harry Stebbings 25:59 We're gonna make this the best fucking show ever 'cause it's going so deep, which is gonna help a lot of people I think. I think one of the things that I find interesting is channel spread and difficult for founders. They try to be everywhere.

Mike Salguero 26:11 Yeah.

Harry Stebbings 26:11 How do you think about channel concentration and where to deploy dollars and lessons from that as you scale

Narrator 26:17 Yeah.

Harry Stebbings 26:17 ... ButcherBox?

Mike Salguero 26:19 So I have an analogy of wildcatting for oil. When you, when... This is probably not how wildcatting for oil works, but when you go out wildcatting for oil, you have a small, cheap shovel and you just dig some holes, right? You think this is gonna be a fr- fertile ground and you dig some holes. You wanna make the holes small, you wanna make the holes cheap, you wanna make the holes rapid. When you start seeing oil bubble up through that hole, time to build a rig. But don't build a huge rig. Don't, like, get the, you know, the massive rig. Get a small rig. Like, maybe you hire one person and that person is gonna be responsible for extracting the oil out of there. And then it's like, "Wow, we think there's a lot of oil here." It's like, "Cool, build a bigger rig." And so y- you basically build and build and build. At a certain point, you bring in the fracking technology and you're trying to extract all the oil possible from the thing, but you as the founder don't really want to go wildcatting until you make sure that that rig is, is being manned, right? That somebody is on that rig, that they're actually working harder on it tha- than you can, uh, before you move. So for us, our first, our first thing was influencers. We started with a Kickstarter campaign where we raised $215,000 in pre-orders and there was, uh, we, we reached out to all these, like, anyone who had ever mentioned grass fed beef on Twitter and we were like, "Hey, we're launching this company." And one guy, this paleo doctor from California, uh, um, during our Kickstarter campaign was like, "This sounds like a cool idea," and, and tweeted it out to his, like, his audience. And we just saw a flurry of, of people sign up for the Kickstarter campaign as a result of that. And by flurry, I mean like probably like seven people, you know, who were like, "Oh my God, this works." Um, and so over the next y- w- really, we still do it today, but over the next two years, we focused on influencers and anybody who had written about paleo diet, the importance of grass fed, the importance of treating animals right for, like, your own personal health, reached out to all of them, signed them all up as, like, affiliates where they would, uh, send an email to their audience and then get a commission every time the person's box came to their door, and, uh, we didn't, we didn't even move to really anything else for two years, uh, because it was so fertile and such a big market, a- and frankly, we didn't have a lot of money, so it was like, okay... 'Cause all of those, we, we also paid people on a residual. It wasn't up front, so it was a really great cash conservation technique for us.

Harry Stebbings 28:44 Residual meaning that they got paid on monthly completion of payments?

Mike Salguero 28:48 Right. Right.

Harry Stebbings 28:48 How does that work?

Mike Salguero 28:49 Yeah. So instead of paying somebody... And by the way, influencers has changed a lot since 2016, so you, you can't really run this anymore, but instead of paying like, "Hey, we'll give you $10,000 to sponsor your email," we would say, "Hey, uh, send an email to your audience, have them click on this link which is, like, your unique URL. Um, we'll do a special offer for your audience, and anyone who signs up, we'll give you, like, call it $15 or $20 a month for that. Like, every time they get a box, you get $20." And, you know, again, this is, like, one of those, like, w- what are the core decisions we made as a company and, like, uh, how did it end up? Because we didn't raise money, we didn't have $5,000 to pay this person to send an email, so we're like, "Yeah, sorry, we can't do that. We can do this." And what happened was, we kinda stumbled into this, like, really interesting moat where, you know, other competitors c- have, have come along, both in, in the early days as well as now, and in general, the people who talk about ButcherBox don't really wanna write about anybody else because they're, they'd be messing up their income stream.... and so we just (laughs) built this, like... In- in- in the community of people who were early on grass-fed saying, like, "This is what you should be eating," because you should, they were the ones really pushing that and we were able to sign them all up in- in very short order, which was, like, really the zero to 100 million was influencers.

Harry Stebbings 30:17 So- so 100... I was gonna ask, that was my thing, you said two years in, that's pretty much all you did. What revenue was that when you decided to add new channels?

Mike Salguero 30:25 (smacks lips) I think we were technically in the... We- we went, like, Kickstarter in a little bit, so we did like 300 grand the first year, 5 million the second year, 33, and then 105. So I think in- in between the 33 and 105 is when we did Facebook.

Harry Stebbings 30:42 And s-

Mike Salguero 30:42 We started doing Facebook.

Harry Stebbings 30:44 So I- I had Kipp, the CMO of HubSpot, on the show and he said, "You need one channel really humming-

Mike Salguero 30:49 Yeah.

Harry Stebbings 30:49 ... to get to 50 million in revenue."

Mike Salguero 30:51 Yup.

Harry Stebbings 30:51 "And you need two to get to 100." So it pretty much correlates-

Mike Salguero 30:54 Yeah.

Harry Stebbings 30:54 ... to that.

Mike Salguero 30:54 Spot on, yup.

Harry Stebbings 30:55 Okay. So, like, talk me through the second expansion on channel, and how did you know it worked? 'Cause I think the other thing is people continue with a channel that doesn't work for too long.

Mike Salguero 31:07 If you're not funded, it's hard to do things that don't work. You gotta start with small budgets and figure out what's working, and then just be open and honest with like, "Is this working? Is it not working?" A lot of... Like, for us, when we started, certainly for the first year, maybe two, we wanted to be what we called Box One Profitable, which means, like, we're gonna ship a box and we're gonna make a margin on it, call it 20, $20 or $25. We need to acquire that customer for cheaper than that box, like, w- within the margin. 'Cause otherwise you're upside down and you- you can't- you can't make any money. So you start with that constraint, which is a lot harder to do these days. Like I- I... If I was starting a company now, I'm not... I- I... It would be hard to do Box One Profitable. I'm sure it's out there, but it's hard, and I think it's actually changed, uh, it's changed the types of people who can start a company like this, um, because I think the, you know, the influencer market has changed, the social media market has changed. Like, there's a lot of change that's happened. Um, but yeah, so y- you run Box One profitable, then you can shy into Box Two, right? It's like, well, if you put it on a credit card, you don't have to pay the credit card for 30 days, so then y- you know, you can actually pay for that customer after they've gotten two boxes, and we know the percentage of customers who are gonna get two boxes. And we did not have the luxury of, like, having things not work, because we had to make sure that our CPA, our aggregated CPA, was under Box One.

Harry Stebbings 32:36 This is what I think people forget about margin, which is the higher the margin that you have-

Mike Salguero 32:39 Mm-hmm.

Harry Stebbings 32:39 ... the more you can spend to acquire that customer.

Mike Salguero 32:41 Absolutely.

Harry Stebbings 32:41 It's a beautiful thing. I don't know if you've ever read it, but I'll send it to you if you haven't, but it's a beautiful economic study on the manufacturing-

Mike Salguero 32:47 (smacks lips)

Harry Stebbings 32:48 ... of Dr. Dre headphones and how their high margin status means you can spend a lot of money on sports athlete endorsement.

Mike Salguero 32:55 Right.

Harry Stebbings 32:55 Um, so...

Harry Stebbings 32:57 Ah, c- sorry, I'm going in the weeds. What were your margins then at the beginning and what are your margins today?

Mike Salguero 33:03 The way that we talk about the business is actually what we call dollars per box. And I learned this from the head of operations of Omaha Steaks who helped me start the company, and he's like, "You should just be worried about dollars per box." What does that mean? A box that leaves your distribution center, how many dollars are you making off the box?

Harry Stebbings 33:23 Mm-hmm.

Mike Salguero 33:24 The gross margin percentage doesn't matter nearly as much. Um, it can, but it- it- it obviously drives your dollars per box. But I think the most important thing for people who are starting these companies is to think about dollars per box. I don't think in my, um... You know, I invest in a lot of these companies, I advise a lot of companies, kind of box subscription companies or DTC companies. Um, I don't think you can make a go of it if your dollars per box are under $30 per shipment.

Harry Stebbings 33:52 Wow, so that's $30 you make per shipment?

Mike Salguero 33:55 Yes. And that is... And that's like, uh, in a subscription business, right? 'Cause- 'cause right now, you know, it- it can cost 140 to $150 to acquire a customer. That- that's a five-month payback, you know. So yes, higher margins absolutely helps. And in our space, in the meat space, you know, you're competing against grocery stores who don't tend to take... Who don't... They're not large margin businesses, right? So we have to pro-

Harry Stebbings 34:21 It's 6 to 7%. I- I-

Mike Salguero 34:22 Yeah.

Harry Stebbings 34:22 ... did last mile delivery-

Mike Salguero 34:23 Yeah, net-

Harry Stebbings 34:23 ... for groceries.

Mike Salguero 34:23 Net margins, yeah.

Harry Stebbings 34:24 Fucking horrible.

Mike Salguero 34:25 Yeah.

Harry Stebbings 34:25 Don't ever do that business.

Mike Salguero 34:27 Yeah.

Harry Stebbings 34:27 (laughs)

Mike Salguero 34:28 Right.

Harry Stebbings 34:29 Am I... Okay, so it's $30... Yeah.

Mike Salguero 34:30 So we started, we started at, like, I think it was about $20 a box is what we were trying to make. And the reality was that, like, every shipment, we were shipping out of one facility in Wisconsin. Every shipment that went to the West Coast, I think we were losing money on 'cause it was, like, a five-day ship with 35 pounds of dry ice and it... You know, it's just like we could only ship on Mondays and it would get there on th- the next Friday. But we knew we were gonna open West Coast facility, it was just a matter of getting enough volume to get the attention of somebody on the West Coast. And so as soon as we made that change, maybe our- our average went from 20 to $25, just like that change alone, right? And then you just march up that- that number.

Harry Stebbings 35:08 Okay, so you march up that number, starts at 20. What does the dollars per box look like today?

Mike Salguero 35:13 I mean, it depends on a whole bunch of factors, but let's say like north of 50. That's not for everybody, but we look at it a lot more granularly than like an average-

Harry Stebbings 35:21 (laughs)

Mike Salguero 35:21 ... these days.

Harry Stebbings 35:23 50? (laughs) That's it. Uh, no-

Mike Salguero 35:25 (laughs)

Harry Stebbings 35:25 ... I'm- I'm sure. Um, that's VC-funded startups that are like, "Ah, 50 to 100, whatever. Something in between." Um, but okay, so 50, that says a lot. Okay, so we have 50 then, say, there. How do you work out... You know, ultimately we

Harry Stebbings 35:38 wanna get to our payback period as well.

Mike Salguero 35:40 Yup.

Harry Stebbings 35:40 But how do you work out your LTV? Because we don't have that much data in the early days, there's very variable rates of churn. What have been lessons in terms of how to figure out LTV accurately?

Mike Salguero 35:52 Well, uh...Your LTV doesn't matter as much if you say, "We need, uh, to be box one..." Well, it doesn't matter at all if you're, we need to be box one profitable, right? It doesn't matter as much if you're like, "Hey, by box one or two or three, we're profitable," right? It's 100-day payback period, or whatever that is. Then your LTV doesn't matter that much, right? Because you're taking a bet that after three months, which in subscription businesses is de- generally, like, where you lose a lot of people, you're taking a bet that, like, you'll keep some of them and they'll keep paying, right? So the way to look at it is really, like, how fast can you pay back your customer acquisition cost?

Harry Stebbings 36:30 Mm-hmm.

Mike Salguero 36:30 And oftentimes, people get into trouble with, like, customer acquisition costs are going up, it's like, "Yeah, but we need to do this. We need to dominate the market," and it's like, yeah, but it's unsustainable. Like, it doesn't work. Like, you're not gonna make any money doing this. Um...

Harry Stebbings 36:44 What were your paybacks at the beginning? Was it box one profitable?

Mike Salguero 36:47 Box one profitable, yeah. Like, the day that they purchased, we'd made money on them.

Harry Stebbings 36:51 Are you box one profitable today?

Mike Salguero 36:53 No. No. (laughs)

Harry Stebbings 36:55 (laughs) Woo!

Mike Salguero 36:56 That'd be fun. No.

Harry Stebbings 36:57 I would love-

Mike Salguero 36:58 No, no longer. No longer.

Harry Stebbings 37:00 One, is it a mental challenge for you, and is it a mental challenge that founders will have to overcome, going from box one profitable to accepting actually a four-month payback or a five-month payback?

Mike Salguero 37:12 Yeah. Yeah.

Harry Stebbings 37:12 How did you get over that?

Mike Salguero 37:13 Well, you get over that because, by that point, you've seen enough game tape to know, like, how your cohorts are doing. So what do they look like after a year? Or maybe you're starting to see after two years. And you start to see the return profile, right? And so then it makes all the sense in the world to invest. In our business, so we, we're profitable, right? So we're an, we're an LLC. We're profitable. So if I don't deploy a dollar and it drops to the bottom line, which obviously we want a healthy amount of profit, uh, for a whole host of reasons, but if I don't deploy that dollar and it ends up as profit, you know, Joe Biden's gonna take 50, 50% of it, 50 cents on the dollar, right? So like, okay, well, that- that gives you even more motivation to like redeploy it into marketing, where at least I can see a return, a 2X return or a 3X return. Like, you see this return, and if you think about it, this is what I love about subscription businesses, it's like such an interesting securitized investment, right? Because it's- it's over hundreds of thousands of people or tens of thousands of people that you're signing up. You know the return profile. You know the things that you're gonna do to improve the return profile by negotiating the price of tape or whatever else you're gonna do. And so it just becomes like a, a really interesting investment.

Harry Stebbings 38:29 And Tony-

Mike Salguero 38:29 That's how we look at it.

Harry Stebbings 38:31 So box one profitable was. What are your paybacks today?

Mike Salguero 38:35 They're at like five months.

Harry Stebbings 38:36 Five months.

Mike Salguero 38:37 Something like that.

Harry Stebbings 38:38 Okay, I get you. Can I ask, what are the single biggest moments of churn in a customer's life you've seen? Is it after the first box? Is it a year in? When-

Mike Salguero 38:48 No, it's, um, the first three months are the most important. It's where you can build a habit. For us, we ship meat in the mail frozen, and generally that meat goes into your freezer. And one of the challenges we have is people, at least in the US, they think about their freezer as like a savings account and their refrigerator as a checking account. And so when they say like, "What's for dinner?" very few people are opening up their freezer, right? You open up your refrigerator, you're like, "Oh, okay, I got some broccoli that's about to go bad and I thawed this chicken, so I'll just cook that. Chicken and broccoli, great." Like, people aren't like... Generally, our members have to in order to be successful. They're not necessarily meal planning, like, "Let me pull out these four cuts of meat," and like, "This is what we'll eat this week," right? So because of the defrosting issue, we actually have a customer who, like, needs to get into a pattern. So for us, the first 30 days is, you know, big churn 30 days, gets a little smaller, gets a little smaller. If you get them through that first 90-day hump, you have a customer who will stay with you for a very long time. And so we do a lot of work trying to... What are we trying to do? We're trying to empower our customers and our members to cook awesome meals at home, 'cause the quality of our meat's amazing. And oftentimes there are things you can't access at the store, and certainly not at the prices that we offer it. And if you're successful in the kitchen, you're going to feel more and more empowered to try different things and to like thaw things out and whatnot. Uh, interestingly, we actually see a huge amount of churn right after people purchase. So there's a whole cohort of people, like, who don't want a subscription, and so they sign up and then they cancel.

Harry Stebbings 40:26 So they get-

Mike Salguero 40:26 And then, so that's like daisies are churned.

Harry Stebbings 40:28 So they get one box delivered.

Mike Salguero 40:30 Not even. They literally cancel right after signing up. They like sign up, they go into their account, and they cancel, and they get that one box. But they don't want to have a subscription. Blue Apron used to force people to receive the box before they canceled. It's like, "Oh, you can't do that yet. You have to like wait until you've received the box to cancel," to like kind of make it a little more hard to do. We don't do that. We just allow people to cancel. But yeah, the next, the next big hump is when they receive that first box. It's like if anything goes wrong or if they just don't like it or they're like, "This isn't worth it," then they cancel, right? And then the next big hump is on day 27 when we send you an email saying, "Hey, we're gonna bill your card in a couple days. Make sure to add these different specials and whatnot." That's the next big hump of people getting-

Harry Stebbings 41:13 Why, why is... I never get why people send that email. You're basically reminding me that I'm paying for a service that is a virtual...

Mike Salguero 41:18 Yeah, I mean, we didn't to start with. The problem is that you get an influx of customer service complaints, right? Because people are like, "I didn't remember I was on a subscription. Please don't send me this box. I'm gonna do a charge off on my credit card." So you really like piss people off. And if you have a product that is like, uh, actually providing value to the customer... Like, we talk about margin, but really, margin is just a measure of like how much value you're providing to the customer. If you provide something that like the customer likes, you shouldn't have to be scared about letting them know that you're gonna send them another box. Like, that doesn't need to be...... you know, like, we, you know, we believe we should be open and honest about that, especially because yo- you're just gonna get a bunch of charge offs and a bunch of customer service nightmares that you could avoid by sending an email.

Harry Stebbings 42:06 I totally get you. What percent churn in the first month and what percent churn in the first year? Fascinated.

Mike Salguero 42:12 Gosh, I don't, I don't actually know. I don't, I don't have that number in front of me. Um, but it's, uh, for-

Harry Stebbings 42:19 If you were... Oka- help, help me out then, Mike. I'm, I'm an investor, I look at many consumer subscription-

Mike Salguero 42:24 Yep.

Harry Stebbings 42:24 ... businesses. What is, like, r- good, really good, fucking amazing, for churn numbers on, like, one month and one year?

Mike Salguero 42:34 Churn-wise, for a long time, we're better than this now, but for a long time we were about 1%. This is in aggregate, not for, not for, uh, a month, or month, or year one. Uh, we're about 1% churn per week, and that we thought was really good. So that means every week, you know, if you have 100,000 subscribers, 1,000 of them are leaving, and it means you've eroded, in the course of a year, 50% of your revenue.

Harry Stebbings 43:02 I'm an enterprise software investor, I've just thrown up in my mouth.

Mike Salguero 43:05 Oh, yeah. Well, yeah, no, enter- enterprise software is totally different than that, totally different. Um, yeah. The, you're, you're looking at something a lot smaller than 1% (laughs) a week.

Harry Stebbings 43:15 Yeah.

Mike Salguero 43:15 Uh, and of course, you know, the, the enterprise software model, which is similar to the model of box subscription or any direct to consumer, is you want to march them up in terms of how much additional stuff they're putting into their box, right? So you, over time, you, you satisfy some of your churn or you, you change some of your churn by your really good customers adding more to their box, which just... and getting boxes more often and whatnot, right? So, um, which I think enterprise, I mean, enterprise sounds awesome for that, you know?

Harry Stebbings 43:48 Yeah.

Mike Salguero 43:48 The, the churn dynamics in enterprise

Mike Salguero 43:50 sound way better than the churn dynamics in direct to consumer.

Harry Stebbings 43:53 What has really worked for you in terms of that AOV expansion? AOV, for people listening, average order value, or like basket expansion. I'm sure you do the same. What's really worked for you in driving per order up?

Mike Salguero 44:06 Yeah. What's great is what's worked is also, uh, very much in alignment with what our customer is looking for, and that is super well-priced deals above and beyond your box. So you get your custom box from us, you get your six cuts of meat in it, and then we have, like, a whole member deals and a whole catalog, and those things are priced to beat retail, essentially, right? So we want you to go in there and be like, "Ooh, I'll pick up one of those and one of those and one of those." That has worked really well for AOV. Um, and-

Harry Stebbings 44:38 I've, I've-

Mike Salguero 44:38 ... oftentimes the retailer is doubling the price that they buy for wholesale. Like, that's gen- th- the general rule. If they buy, like, you know, chicken breasts for 3 f- 3.99, they're gonna sell it in the store for 8.99. We find that we can provide a better value to the customer than they can get at the grocery store.

Harry Stebbings 44:56 When you see me kind of fade out of screen, it's 'cause I'm literally writing notes.

Mike Salguero 45:00 (laughs)

Harry Stebbings 45:00 Uh, one, businesses that I love are those that have pricing power with scale. I always like businesses that get easier over time, and many don't actually.

Mike Salguero 45:08 Yeah.

Harry Stebbings 45:08 When you think about your ability to get pricing power over time, how do your costs per meat cut change with quantity? Does that change much or not?

Mike Salguero 45:20 Yes, for sure. It changes a lot with, like, a-

Harry Stebbings 45:23 How does that... What, what does that actually look like?

Mike Salguero 45:25 Well, uh, so meat is all about efficiency, right? It's all about how, how big are the runs and l- and efficiency. So, somebody who's cutting, like, a pallet of rib eye steaks is gonna charge you one price versus somebody who's cutting a whole truckload of rib eye steaks. Not to mention, if you have distribution centers and you need to take those rib eyes across the country, it costs the same to move one pallet on a truck, uh, although you can get, like, LTL or whatever, but it costs the same to run a truck half empty as it does to run it fully full. It's the same price. And so, where you get a lot of efficiencies is your runs are bigger, you're moving trucks around better, and logistics is a massive number, just moving stuff around. Not to mention, your pick, pack, ship operation should be cheaper. The boxes that you're purchasing should be cheaper with scale.

Harry Stebbings 46:15 How much cheaper does it get on the actual... If we think about the biggest point of margin compression, which was the meat, how much cheaper does it get when ordering at the scale you are now compared to the early days? Is it 20% cheaper? 30%?

Mike Salguero 46:28 Oh, man. Yeah, we brought in a meat guy-

Harry Stebbings 46:31 (laughs)

Mike Salguero 46:31 ... a year and a half into the business and we're like, "Here's what we're doing," and he's like... I, I mean, I remember, he, he... The price that we were paying for a pound of organic chicken, he was like, "I can get three pounds for the same price. You wanna do that?" And we're like, "Uh, yeah, we should do that." (laughs) I mean, we were paying way too much. People were definitely taking advantage of us until we found, uh, this guy Mike, who, who came on board and, um, really helped me, like, become a meat buyer.

Harry Stebbings 46:58 Okay, so that's 70%. Uh, fuck. That's pretty great.

Mike Salguero 47:02 (laughs)

Harry Stebbings 47:02 Um, uh-

Mike Salguero 47:03 It's amazing what people who know what they're doing can actually, you know, do to the business.

Harry Stebbings 47:07 Totally. Can I ask, in terms of, like, cohorts, what to you looks like really great cohorts? What are the attributes? What are the key features? When you look at yours, what concern you? How do you measure cohort health?

Mike Salguero 47:21 Yeah, that's a great question. Uh, to be honest, like, I think that we are... we don't do a good job at this as a company, um, we-

Harry Stebbings 47:29 'Cause you haven't raised VC money. (laughs)

Mike Salguero 47:31 Yeah, exactly. (laughs) I mean, if we had some VCs in here, we'd know how to do things.

Harry Stebbings 47:35 Dude, I'm right here.

Mike Salguero 47:36 (laughs)

Harry Stebbings 47:36 Right here for your growth rounds. (laughs)

Mike Salguero 47:37 (laughs) Um, we tend to th- look at things in the aggregate, and it's a mistake. We tend to think about, like, "Oh, we signed up X number of people this month," or, like, "This many people canceled per week," and we're not thinking, like, "Hey, this is, like, a stream of our best people, like, they should be treated this way, or we should be doing this for this cohort."It's actually, quite frankly, work that, um, we are embarking on because, um, we're, we're, we're pretty behind in that area. We know that the best cohorts that we can get are referral cohorts. And in terms of, like, where we wanna go as a company and in terms of where we wanna focus as a company and in terms of how do you get value out of these things, 'cause you, you hit this point with subscription businesses where it's really tough, which is where we are. I think referral is your way out, and it's something that we're seeing. You know, we have a remarkable product. It's like, "Wow, these steaks taste great. Where are they from?" "Oh, they're from ButcherBox." It's like, we, every chance we can get, encourage that type of behavior and are really trying to drive that and use

Mike Salguero 48:36 our members to help bring in other members.

Harry Stebbings 48:39 How do referral code acquisition customers differ from alternative acquisition customers?

Mike Salguero 48:45 Yeah. So referral customers tend to perform really well. Like, you'll see an additional, think it's, like, an additional box, uh, in year one and they stay for longer. The only customer that's better than that is, like, a paleo/keto, kind of, like, influencer-related customer who seem to be, like, like we were saying before, like, they're kind of your early adopters, even though some of them are trickling in now.

Harry Stebbings 49:09 We've seen D2C-funded to the hills over the last few years.

Mike Salguero 49:13 Yeah.

Harry Stebbings 49:13 And New York branding agencies have made a fucking fortune.

Mike Salguero 49:16 Yep.

Harry Stebbings 49:17 Well, well done them, by the way. You make money in selling picks and shovels. It's clearly the right thing.

Mike Salguero 49:22 (laughs)

Harry Stebbings 49:22 Have a, have a generation of VCs

Harry Stebbings 49:24 just burnt a load of VC money on these D2C companies?

Mike Salguero 49:27 Oh, boy. I mean, uh, it's looking that way. I, ugh, you look at these businesses, even the ones that, like, w- are, are the darlings of, you know, like, uh, I don't know, like, Warby Parker or Allbirds.

Harry Stebbings 49:41 How much are they, like, Allbirds, okay, I'm doing this, like, live news.

Mike Salguero 49:44 Yeah, do it real time. It's gonna be a number.

Harry Stebbings 49:46 Allbirds market cap today, do you know what it is?

Mike Salguero 49:48 Uh, probably like 300 million or something.

Harry Stebbings 49:51 Halve it. 180-

Mike Salguero 49:52 150 million.

Harry Stebbings 49:53 183.

Mike Salguero 49:54 Okay, and then go to Crunchbase and what did they raise? Or PitchBook, whatever you use.

Harry Stebbings 49:58 Uh, fundraise. How much do you think?

Mike Salguero 50:01 Ah, 250? I could be wrong. I don't know.

Harry Stebbings 50:04 202.

Mike Salguero 50:05 Okay, (laughs) right.

Harry Stebbings 50:08 Okay, let's say-

Mike Salguero 50:08 So, and, and if you look at their financials, I don't think they make any money. I don't think they've ever made money.

Harry Stebbings 50:14 What about Hims?

Mike Salguero 50:16 No idea. What are they trading at? It's probably-

Harry Stebbings 50:19 Trading at two billion.

Mike Salguero 50:21 Wow.

Harry Stebbings 50:22 Yeah.

Mike Salguero 50:22 There you go.

Harry Stebbings 50:23 Not bad, hey?

Mike Salguero 50:24 Not bad.

Harry Stebbings 50:24 And they raised 230.

Mike Salguero 50:27 Okay, that's a little bit better.

Harry Stebbings 50:29 Pretty, pretty good.

Mike Salguero 50:29 When did they go public?

Harry Stebbings 50:31 Uh, a year and a half ago.

Mike Salguero 50:32 Okay. They actually kept their value too.

Harry Stebbings 50:35 Okay, final, final one 'cause I am enjoying this. What about Warby Parker? Where do you think they are?

Mike Salguero 50:39 Uh, last I looked, they were, like, at 350, but that was a couple of weeks ago. Let's say 275.

Harry Stebbings 50:46 1.15 billion.

Mike Salguero 50:47 Oh, wow, way off.

Harry Stebbings 50:49 Yeah.

Mike Salguero 50:49 Jeez, they must've done something different.

Harry Stebbings 50:51 They stopped selling glasses. (laughs)

Mike Salguero 50:54 (laughs)

Harry Stebbings 50:54 They sell meat now. Uh-

Mike Salguero 50:56 Yeah.

Harry Stebbings 50:56 ... they ra- they raised 530.

Mike Salguero 50:58 Yeah.

Harry Stebbings 50:58 So yeah, I mean, that, you know, I've just lost all my friends at Allbirds. (laughs)

Mike Salguero 51:03 No, I mean, Allbirds are amazing shoe. I mean, that's the thing is, like, I don't wanna cast shade on the, yeah, the, the, uh, Warby's. Same thing, like, very disruptive, very exciting companies that really paved the way. I mean, w- I don't know if we'll talk about B Corp, but, uh, I was very inspired by hearing, uh, Warby's founders talk about, like, how they wanted to build a company that cared about something other than just making money, and, like, uh, that's what we do here and great companies. Y- your question was whether D2C people have lost a lot of money in D2C, and I, I, honestly, I think so. The biggest problem is the no-brainer acquisition channels have really dried up.

Harry Stebbings 51:39 Yeah.

Mike Salguero 51:40 Um, and I, I, I do think they're out there. I think it's, uh, it's actually more creator/influencer-related than it's ever been before. Those are the people that can, like, really build something big fast. You know, look at MrBeast or-

Harry Stebbings 51:54 I get you. The trouble is, are we seeing the internalization there? Like, MrBeast has MrBeast Chocolate, KSI and, you know, Logan Paul have Prime. Fuck, I've been fucking, uh, approached to do financial tooling software-

Mike Salguero 52:07 Right.

Harry Stebbings 52:07 ... on a VC internalize, so branded me, find out. But, like, actually, if you're really good and really big, you internalize it yourself.

Mike Salguero 52:18 What do you mean you internalize it?

Harry Stebbings 52:20 MrBeast largely will now only promote MrBeast products.

Mike Salguero 52:24 Right, exactly.

Harry Stebbings 52:25 And so actually, the ability to have mass influencer strategies with the big names is gone.

Mike Salguero 52:30 Yes, it's gone because they've actually, same thing with these nutritionists and influencers that we used. Then they were like, "Wait a minute, I can just launch my own protein powder, or I can just launch my own vitamin set, or I can just..." Yeah, and, and it's, yeah, it's dried up.

Harry Stebbings 52:43 So, so then we're in the realm of micro-influencer segmentation where it's, like, 10 to 100K followers where you can still pay them. But that's pretty capital-

Mike Salguero 52:54 Yeah.

Harry Stebbings 52:54 ... like, heavy too, no?

Mike Salguero 52:56 Right. No, totally. That's what I'm saying is I think if you are an influencer, like, if you wanted to go do something, you have a unique advantage to most people in terms of the ability to, like, do something.

Harry Stebbings 53:09 I think that ButcherBox is a media company. (laughs) And the reason I say that is 'cause I think you should do steaks in the weirdest places in the world, and you should do, like, challenges or media cooking steaks on Mount Everest, cooking steaks in the Guatemalan rainforest-

Mike Salguero 53:29 (laughs)

Harry Stebbings 53:29 ... cooking steaks underwater-

Mike Salguero 53:31 I like this.

Harry Stebbings 53:31 ... and actually capture the world's imagination with the weirdest places in the world you can cook a steak. A submarine in the, you know, trenches of, you know, wherever James Cameron's filming the next Avatar movie. (laughs)

Mike Salguero 53:46 Oh, yeah. Love it.

Harry Stebbings 53:46 That is, that is cool. Not fucking Gordon Ramsay doing a masterclass. Like, capturing the world's imagination of where steak can be cooked.

Mike Salguero 53:56 That's amazing. I love that.

Harry Stebbings 53:57 Um-

Mike Salguero 53:58 I love that.

Harry Stebbings 53:59 Uh-- (laughs) Hey.

Mike Salguero 54:00 Oh, oh, and by the way, can I just say something? I- I- I don't mean to cast shade on what you just said, 'cause I think that's really awesome and creative. But just for your listeners who are thinking about, like, raising venture capital, what you just said, Harry, is, like, actually totally on the table for a board meeting. Like, you, so you're in there, you're like, "Here are all the things we're d- dealing with." Your VC comes in. Maybe they've looked at the deck, maybe not. And they're like, "You should do this." And you're like, "Uh," (laughs) , "G- g- great, let me write that down. Let me get back to you." Um, and-

Harry Stebbings 54:26 Was, was I a r- was I a real VC there-

Mike Salguero 54:29 Yeah. (laughs)

Harry Stebbings 54:29 ... where it's like, you're dealing with all of the things that you have to do.

Mike Salguero 54:31 (laughs)

Harry Stebbings 54:31 And then I'm like, "You're a media business. Go to Mount Everest-"

Mike Salguero 54:34 No, I- I- I-

Harry Stebbings 54:35 ... "and cook a steak"? (laughs)

Mike Salguero 54:36 ... I- I think you're right. I mean, we're, you know, we, we actually sponsored, uh, for the past few years we've sponsored, like, a cr- bicycle team because we're like, "Maybe this is, like, we can't just do what we're doing anymore. We're too big, right?" So we'll do about $600 million in revenue this year, and we... Hopefully, God willing. But w- the old tactics, like, "We're just gonna blanket Facebook and do influencer,"

Mike Salguero 54:57 it doesn't work anymore. Like, we need a new oil field, so to speak.

Harry Stebbings 55:01 How do you think about brand marketing? You mentioned the cycling there.

Mike Salguero 55:04 (laughs)

Harry Stebbings 55:04 Honestly, I- I don't-

Mike Salguero 55:06 I think brand marketing.

Harry Stebbings 55:06 Yeah, I don't like it honestly.

Mike Salguero 55:08 (sighs)

Harry Stebbings 55:08 I, I fricking hate it.

Mike Salguero 55:10 I am sure that there are plenty of really good reasons to do brand marketing and to really dive deep into brand marketing. Last year, we spent eight and a half million dollars on brand marketing, and anytime I ask the question of like, "Well, how do we measure this? Like, how do we know if we're doing well?" It's like, "Well," it's like, "you know, there's, like, a lift." And it's like, "Well, how does that equal dollars back to us?" And what happened was, that eight and a half million dollars, eight and a half million dollars, it's a lot of money for us at least, you basically just destroy your customer acquisition to lifetime value. Like, oh, there's no payback. And (laughs) for a highly measured, like, let's go negotiate the price of tape kind of person, very hard for me to be okay with that. And so we- we now look at-

Harry Stebbings 55:55 And then, and then I- and then I tell you about the media strategy that I just had, and that would probably cost 500,000. And so I think companies too often lose their creativity-

Mike Salguero 56:05 Right.

Harry Stebbings 56:06 ... spend on billboards or cycling teams-

Mike Salguero 56:08 Right. Right.

Harry Stebbings 56:08 ... sorry-

Mike Salguero 56:09 Right. Right.

Harry Stebbings 56:10 ... uh, and don't turn into a media house for a quarter of the cost.

Mike Salguero 56:13 Yes. I, I totally agree with that, and I think there is absolutely something there in terms of media, in terms of community, in terms of like, how do we ... Like, we need to jump from kind of, you know, what we're doing into a larger dialogue. Uh, and that really is, you know, it's my job to go figure that out.

Harry Stebbings 56:31 Well, what about Million Dollar Meat? Okay. Every quarter you give away a million dollars to the person who cooks the single best-looking piece of meat.

Mike Salguero 56:42 Ooh.

Harry Stebbings 56:42 All you have to do is submit seven pictures of your ButcherBox meat in that quarter on social and tag us and tag two friends.

Mike Salguero 56:53 Love it.

Harry Stebbings 56:53 A million dollars. Can you imagine the person who wins? That if you get someone who wins, all your local newspapers will be talking with a massive check that says, "ButcherBox Million Dollars." You're gonna get insane free local press. You're gonna get every single person in the whole fucking town hearing about Linda who won that ButcherBox. It's gonna cost you h- uh, half of that brand marketing.

Mike Salguero 57:17 Yeah.

Harry Stebbings 57:17 You're gonna see such better performance.

Mike Salguero 57:19 That's amazing. That's a good idea. I like it.

Harry Stebbings 57:22 I genuinely should be a CMO. (laughs)

Mike Salguero 57:24 Yeah, shit, what, what, what else you got?

Harry Stebbings 57:26 (laughs)

Mike Salguero 57:27 (laughs)

Harry Stebbings 57:27 I, I got a

Harry Stebbings 57:28 lot. I really also enjoy it. Can I ask you then, what have, like, when we look at the cohort of companies that you're with, your Blue Aprons, your HelloFreshes, all of these big names, what did they do wrong?

Mike Salguero 57:40 I actually think HelloFresh is doing a pretty, a pretty good job. The way that they have been growing through acquisition is pretty interesting. So they've been bolting on other s- services, which I think is a pretty interesting strategy. And then they, like, co-market throughout, so they, they bought fa-

Harry Stebbings 57:54 Is that is-

Mike Salguero 57:54 ... Factor 75 and they, they like-

Harry Stebbings 57:56 Is that not just a sign of losing innovation?

Mike Salguero 57:58 Maybe, but if you look at food companies, I mean, that's how they grow. Like, you just look at the set of food companies in this country, and they all kind of at some point turn into, like, "Okay, let's, like, go acquire something." But what did they do wrong? I mean, I- I- I think that the, the story I... (laughs) The story I heard about Blue Apron when they opened their New Jersey facility and they insisted that, like, all the software that runs, uh, like, all the machines is custom, like, "We're gonna build it ourselves." It's like, uh, you know, the sales guy's like, "Okay, but like, uh, this works in thousands of factories across the, the world." He's like, "No, it's not good enough, we need it better," right? And, uh, the story I heard is that there was a time where boxes were piling up on a conveyor belt that was 40 feet up in the air because of some sort of like, "Oh, it's gonna be a lot more efficient." The problem was they couldn't even get the boxes... Uh, like, they were piling up, they couldn't even get the boxes down 'cause they were 40 feet up. They didn't know how to get up there. So their orders are not going out and it's just this big freaking mess, and they spent hundreds of millions of dollars on this facility. I see that a lot, both in that scale as well as on smaller scales where it's like, "In order to do this well, we need to do it ourselves." And that, to me w- if I were an investor, would be a big red flag 'cause there is oftentimes a company that y- you know, yes, are you giving away a little bit of margin? Sure. But you don't have to worry about that as, like, something that you're worried about. And a lot of founders try to boil the ocean really fast by worrying about everything at the same time, and that just is not conducive, in my opinion, to, one, having any sort of life outside of the company, and two, to actually building something that, uh, you know, peop- people want to support. It seems like that

Mike Salguero 59:42 D2C model of like, "We need to own it all ourselves and insource it," like, it- it doesn't work.

Harry Stebbings 59:46 What's the biggest resource allocation mistake you've made?

Mike Salguero 59:51 (sighs)

Harry Stebbings 59:51 Like you said there about people spending it on legi- um, the warehousing and actually kind of the tooling. Wh- when you review, what are you like, "I can't believe we spent money on this"?

Mike Salguero 1:00:00 (laughs) ... I mean, brand is up there. Not that I don't believe in brand, but I mean, that's a big one. Um-

Harry Stebbings 1:00:06 As a res- as a re- sorry, actually on that, as a result of that, do you just cut brand marketing to zero? Then you're like, "Listen, I have no idea-"

Mike Salguero 1:00:12 What we've tried to do is to make sure that the m- marketing dollars that we're deploying are defensible, right? That they have, like, a ready line to some sort of, of money, and it can't just be like, "Oh, yeah, we're gonna hope for the best." It's really like, "How does this turn into something better?"

Harry Stebbings 1:00:28 Which channel really didn't work? Brand marketing is like a bucket, but when you look at Facebook, Instagram, YouTube, TikTok, influencers, all the different channels you have, which one really didn't work?

Mike Salguero 1:00:40 Out of home, the out of home being, like, billboards and bus wraps and that type of stuff. I think you could argue, though, that we didn't give that a fair shot, but that would be the worst performing thing that we've seen.

Harry Stebbings 1:00:52 You don't have the luxury of giving it a fair shot. That's the hard thing I find, and that's something-

Mike Salguero 1:00:55 Right.

Harry Stebbings 1:00:56 ... I don't like with bootstrap businesses in your model, which is, like, bluntly, content takes a long fricking time to work in a lot of cases.

Mike Salguero 1:01:04 Yeah.

Harry Stebbings 1:01:04 You just have t- you know, blogging takes years before you really see the compounding advantage of SEO.

Mike Salguero 1:01:10 Yup.

Harry Stebbings 1:01:10 You don't have the luxury of that time to keep going and keep allocating towards it in a bootstrap model.

Mike Salguero 1:01:15 Well, the counterargument would be you actually have all the time in the world because there's no one breathing down your neck, so you grow faster, right? So, like, if you're willing to take some time-

Harry Stebbings 1:01:24 But you can't literally afford to keep spending on it.

Mike Salguero 1:01:27 But interestingly, if you think about the dynamics we were talking about with marketing, every marketing dollar you don't spend, generally, for these companies, is profit, right? So you've got your gross margin, and then you've got your cost to do business, and then you've got what's left over, marketing and profit. So if, if I'm like, I don't, I can't deploy dollars fast enough in a certain area, generally those equal profit. So you can, you can go slower, and oftentimes you have to. Like, I, the, the number of people who have told me that we would be growing faster if I took venture over the past, like, five or six years, although I've just been a broken record of, like, "Not interested, not interested, thank you very much, not interested," which is a whole thing. You know, going back to, like, what was I running from? I mean, one of the things I was running from is I had a pretty bad experience raising money my first company (laughs) . It was pretty, like, traumatizing, and I, yeah, I didn't want that experience again. I wanted something different.

Harry Stebbings 1:02:16 Well, I mean, it would be different, mate. They're throwing money at you (laughs) . Like, it's very different to the first time you went raising money. I heard about it on other shows. It's, it's not-

Mike Salguero 1:02:25 It's, it's very different until you don't hit your numbers, and then it's the same story.

Harry Stebbings 1:02:30 Oh, yeah. Uh, y- uh, I have a friend, and he always says, "My company is gonna do this," and he c- he jokes and nicknames me Miss Your Numbers 'cause I just tell every company.

Mike Salguero 1:02:39 (laughs)

Harry Stebbings 1:02:39 I, I mean, the amount of companies that hit their numbers, I have one or two, and I'm just like, "Mike, I love you." Um, ha, but it's rare, very rare.

Mike Salguero 1:02:48 (laughs)

Harry Stebbings 1:02:48 Um, can I, we're going, I'm, we're jumping around here. So with the generation that did get funded, did they just bluntly fizzle out and die? Do you acquire them? Do they turn into lifestyle businesses? Where d- where's, wh- what happens?

Mike Salguero 1:03:02 Yes, we are a buyer. We would love to find distressed subscription, ideally perishable shipment businesses. We are looking for them. We're talking to people. Like, we're, we're, we're, a- as in, in terms of, uh, a way to grow or a way to take our know-how and apply it somewhere else, like, we're pretty interested in that realm. The big thing that happened was, so we started, uh, again, we started in 2015. At that time, Blue Apron had raised, like, a $2 billion valuation round. Like, they, y- you know, it was, it was the toast of the town. And then in mid-2017, I think it was, like, they went public in, like, July of '17, and by December of '17, they had gone from, like, $140 to, like, $40. And all the money, and everyone was still in lockup, all the money for box subscription companies dried up overnight. And so some people are like, "Oh, don't, aren't, don't you wish you raised money?" And, like, actually I think we'd be out of business if we raised money, because we would've raised money in 2015 when it was hot with big valuations. We probably would've raised again, and then when all the money, l- like, w- would not had, had to build a profitable business, and then all the money dried up, and everyone sold, and, uh, the, the market, like, was empty for a few years. And, you know, for us, that was amazing because Blue Apron stopped advertising. The 150 Blue Apron lookalikes star- stopped advertising, and we really were able to, like, that's when we ramped up Facebook and kind of w- were able to capture more people.

Harry Stebbings 1:04:33 In the times when they're flush with cash, and they're spending it, driving up CPAs for you, do you try and compete with them, or do you go, "Fuck it, we can't play a game where we're competing against them in this world. Let's go where they're not"?

Mike Salguero 1:04:45 Yeah, well, w- we find that our buyer's actually very different than, like, the Blue Apron buyer. A Blue Apron buyer tends to want, like, all of the ingredients prepackaged, and we just send you the meat. And so what we find is somebody who's, like, a little bit more confident in the kitchen or wants to get confident in the kitchen and wants to follow their own recipe rather than have those thing, like, the, the recipe sent to them. Generally, for example, in an election year, so we're, we're, we're, everyo- ever- everything's starting to, you know, get fired up about the election, that is a time when f- CPAs go way up, right? And so, yes, you have to have, like, a different strategy. You have to be thinking differently. I mean, it's a really tough time to be running DTC right now between Apple's changes, m- making iOS changes, where Facebook performance, like, really went down quite a bit. You know, TikTok's interesting, but, like, I don't know anybody who's doing well on TikTok who's like, "Holy shit, TikTok is, like, where it's at." I see a lot of people, like, hopeful because there's a lot of volume, but I haven't seen people, like, really crush it on that platform.

Harry Stebbings 1:05:51 It's tough to see the conversions. The views are there are, but the conversions are less there, I've seen.

Mike Salguero 1:05:55 Right, right.

Harry Stebbings 1:05:56 And can I-

Mike Salguero 1:05:57 So there's not really, like, a new, ef- exciting thing. I, I think it's just having your ear to the ground and, you know, when it comes, it comes, and then exploiting it when you see it.

Harry Stebbings 1:06:08 Is ButcherBox the biggest in the space?

Mike Salguero 1:06:11 Yes.

Harry Stebbings 1:06:12 Okay.

Mike Salguero 1:06:12 Well, it depends on how you- well, it de- depends on how you define the space, right? If you're com- if you're having us compete against, like, grocery stores, like, no. Then there's Omaha Steaks, which is a direct to consumer... It's been around for 100 years, direct to consumer, generally a gift giving and holiday business. They might be bigger than us. The last I had heard, they were around 600 million as well, but m- maybe during the pandemic they went way up. Um-

Harry Stebbings 1:06:35 I'm gonna get- I'm gonna get the CEO on the show and he's gonna dish all his numbers then.

Mike Salguero 1:06:38 Awesome.

Harry Stebbings 1:06:39 Um, m- my, my question to you is, okay, you're at 600 million. Let's say growth continues, world continues beautifully, brilliantly, you're at 900 million, okay?

Mike Salguero 1:06:48 Yeah.

Harry Stebbings 1:06:48 Let's give you a nice revenue bump and say on a revenue multiple you're worth three billion at that 900 because, respectfully, revenue quality is not as good as enterprise.

Mike Salguero 1:06:59 Yep.

Harry Stebbings 1:06:59 It's a consumer subscription business.

Mike Salguero 1:07:01 Yep.

Harry Stebbings 1:07:02 I- and this is the best of the best. Is this whole market even VC backable if the one crown jewels is at best three billion?

Mike Salguero 1:07:13 A- a three billion. Yeah, I don't, I don't think so. I mean, y- the only way... So, m- uh, again, HelloFresh just seems to be bolting on other services and going broader than just like, "This is what we do," but I think it's, I think it's a... I'm not sure it's a VC backable model.

Harry Stebbings 1:07:32 Yeah. For every consumer VC, please shed a tear at that moment.

Harry Stebbings 1:07:38 (laughs) Uh, did you sp-

Mike Salguero 1:07:38 Yeah, certainly don't, don't, don't fund anyone who's trying to compete with us, that would be nice.

Harry Stebbings 1:07:42 (laughs) Did y- did you sell any secondary along the way, though?

Mike Salguero 1:07:46 No.

Harry Stebbings 1:07:47 Why not?

Mike Salguero 1:07:48 Well, I have always... Well, we can talk as deep as you want about this, but I- I've always wanted to not have... Like, the minute you sell secondary to an external investor, now I've got someone breathing down my neck telling me what to do. Now, there's a difference between me selling secondary and people in my company selling secondary, right? So what we did, which is probably crazy but it's how I started the company, so we create this company and, again, we didn't raise money but my early people, I gave a- I gave away equity like candy. Like, everyone gets equity, right? A- and to date, like, you know, virtually everyone has equity. So we have these people who started out and my first thing I said, and this was a mistake as well, I said, "Company's only worth $750,000." So it's like, "Oh, you're gonna help me stand up the meat thing for 75 and that's like a $75,000 engagement? Like, cool, I'll give you 10% of the company 'cause this isn't gonna be anything, it's just gonna be a hobby." (laughs) A big mistake. Um, so those people and... So basically what we've done since 2018, is we've run a tender every year where we do a valuation, a, a 409A valuation, we get a price, a share price, and the company says, "Hey, we'll repurchase people's shares." We also allow people to purchase shares, but really it's more people trying to sell their shares, and so we deploy some of our profits into share buybacks essentially. We've done that over the past, y- like I said, four years. We're actually not doing one this year because, (laughs) you know, when the tide goes out a little bit, it's like, "Uh, we should stop just, like, throwing money on the street and (laughs) keep it in our bank account 'cause, you know, we, we want it for a rainy day." But no, we have not, we have not done the, like, uh, go raise outside capital. And I think part of that has to do with, like, my whole philosophy here, which is I'm not focused on the exit. Like, I'm not trying to sell the company, I'm not trying to go public. If you look at companies or brands in food, the ones that have become really big, they kinda have a similar makeup which is they're closely held, family controlled and, like, 100-year plus holds. At least in this country, you look at like the General Mills and the Campbells and the Tysons and the Purdues, the Hersheys, the Mars, like they're, they're kinda all similar. And I don't know if that is, i- if we'll be lucky enough to actually be able to operate a company for that long or whether, frankly, I will be able to keep my attention on this, like, you know, 'cause I- I don't wanna operate this thing for 100 years. But where we stand today, I'm really excited about that, like, what does 25 years of this look like? Like, where are we in 25 years? And, you know-

Harry Stebbings 1:10:29 How much of the company do you own today, my friend?

Mike Salguero 1:10:31 Uh, north of 70.

Harry Stebbings 1:10:33 North of 70%. Okay. So if someone came to you and gave you a billion dollar offer in cash today, would you sell?

Mike Salguero 1:10:39 No.

Harry Stebbings 1:10:41 Not for 700 million in cash?

Mike Salguero 1:10:43 Yeah, so this is... The, the, (laughs) the problem I always have is like there's not a-

Harry Stebbings 1:10:47 Have you spoken to your wife? (laughs)

Mike Salguero 1:10:47 ... there's not a letter on my desk right now. So I can be on this podcast and be like, "Yeah, no. Hell no," but there's not a letter on my desk, right? If there's a letter on my desk, obviously at a billion dollars I would be thinking long and hard about what I wanted. But the question is like, okay, great, you go bank $700 million, you can do whatever you want for the rest of your life. Cool. What are you gonna do? I know what I would do. I'm gonna, like, literally erase my whiteboard and be like, "What's next?"

Harry Stebbings 1:11:13 Great. And then you can do something new.

Mike Salguero 1:11:15 Yeah. But like, but a- and what? Chase this? Because this gr- this has grown and has grown me in all of these ways and I feel like I have the ability to impact a totally broken industry, which is meat, and I have a- I d- I have a great team, I have all these great people. And so, like, you sell the thing at the very moment where it's starting to deliver the things that you always dreamed of, uh, like f- for what? For security.

Harry Stebbings 1:11:40 How trans- how trans- how transferrable are the skills you've gained with ButcherBox to alternative DTC consumer subscription companies? If I gave you vitamins, if I gave you Very. So you could, you think you could switch segments and sell vitamins, uh, healthcare, um, anything else?

Mike Salguero 1:11:59 Yes. I mean, I- I- I do a lot of investing and advising in companies that are not perishable but are, you know, some sort of subscription, and turns out I can be pretty helpful, so I do think it's somewhat transferrable, for sure. And the types of companies we're looking for are e- like, perishable shipping, obviously we know how to do that super well. Subscription, we know how to do that super well. And then meat or meat adjacent, we know how to do that.... pretty well. So, like, that- those are the realms that we wanna- we wanna play in. And