Ridge, the maker of metal-clad wallets, launched in 2014 via a father-son Kickstarter campaign. Sean Frank joined the company in 2018 as chief operating officer. He’s now CEO and hopes to sell the company for $1 billion within three years.
This is my third interview with Frank, following our discussions in 2021 on influencer marketing and in 2022 on iOS 14.5 turmoil. In this installment, we covered the overall state of ecommerce, the perils of excessive debt, and Frank’s goal of selling the company.
The entire audio of that conversation is embedded below. The transcript is edited for length and clarity.
Eric Bandholz: How was 2022 for Ridge?
Sean Frank: There were highs and lows. We didn’t double revenue as planned, but it was a decent year.
Ecommerce overall was down in 2022. In a given week, I probably touch base with 50 brands. Around half of those were down 10% year over year. Another 15%-20% were down disastrously and will end up going into bankruptcy or having a fire sale. Thirty percent were down but planned on being down, and profits were up because of it. A small cohort — 5%, 10% — had their best year ever.
I have a few friends who’ve had nine-figure exits — earning over $100 million from selling their businesses. That was unimaginable to me in high school. I grew up in an economically depressed area during the opioid epidemic. I knew folks who died of heroin overdoses. Most problems in America today stem from the opioid crisis. Now I’m 28 and run a nine-figure business. I won.
My goal is to sell Ridge for $1 billion within three years. I’m trying to time it right. We’re coming out of a bubble. Interest rates will go up in 2023 and will likely go back down in 2024. Hopefully, we’ll be in a new bubble by 2025 or 2026, and I can sell my asset. The goal after that is to start another company in a bigger, addressable market, get that to $100 billion, and sell it. I enjoy business. It’s fun.
Bandholz: Could you convert Ridge to that $100 billion company?
Frank: No. Here’s why. The most valuable single company in our niche is Hermes. It’s worth around $250 billion. There are conglomerates such as LVMH and Keurig. There’s Nike, which owns Converse. Nike is worth about $170 billion. There are maybe three brands worth $100 billion in a non-tech or non-automotive way. Given our market, Ridge cannot be a $100 billion company.
We could build a little VF Corporation, which owns North Face and Vans — two iconic brands. It’s worth about $12 billion.
The biggest mistake entrepreneurs make is choosing the market to pursue. My advice is don’t sell wallets. Folks don’t care about wallets. We’re the biggest wallet company. It sucks. But we’re pivoting in the next couple of years. We launched rings, watches, and knives to be an accessory company. The wallet category as a potential addressable market is as big as we are now. You’re better off capturing 1% of a massive market than becoming market makers.
Bandholz: You mentioned 10%-15% of companies won’t survive. What would save them?
Frank: Interest rate cuts. Debt is what makes a company go out of business. Without debt, you can scale operations down, eliminate liabilities, and live in some state forever. If you had no debt, you still exist without employees or office space.
But many brands don’t understand their underlying metrics and have way too much debt. They’re sitting on bad inventory or thought Q4 would save them. It didn’t.
Now they have inventory people don’t want, not enough money for marketing to sell that inventory, and creditors knocking on the door wanting their money back. The non-traditional lenders will start taking money from the brands’ Shopify distributions. That’s 15% of brands right now.
Ecommerce in 2023 requires high gross-profit margins — 80% if possible. The more, the better. It’s not easy to get above 80%. When you earn 90% gross profit, you start looking like Louis Vuitton, where you have to sell a product for thousands of dollars. To get those margins, you need to charge more. That’s the most important thing.
We’ve had this conversation before. There’s a buyer at every end of the spectrum. Someone buys Hanes t-shirts, and another buys Buck Mason t-shirts for $32. Someone else buys James Perse t-shirts for $125, and some consumers pay $400 for Brunello Cucinelli t-shirts. There’s a buyer at every price point.
Bandholz: What’s your next industry after Ridge?
Frank: There’s an epidemic in America of folks not going to the dentist. Specifically young men. Most males under 35 haven’t been to a dentist in 10 years. There’s a massive business to be built around getting guys to go to the dentist. It’s a horrible experience. You pay a bunch of money to be in pain and confused.
I want to streamline that process. There’s a lot of regulation. Some dentists listening will be angry. But it’s mostly an art, not a science. Go to two dentists, and you’ll get two different treatment plans.
There’s a $100 billion brand to be built around dental care.
Bandholz: Where can folks reach out and support you?