Patrick Coddou launched Supply.co with his wife, Jennifer, in 2015. The company, which sells razors and shaving supplies, is bootstrapped — no outside investors. He has little patience with the concept of lifetime customer value or paying more to acquire a customer than he can recoup on the initial purchase.
“Our competitors, such as Dollar Shave Club and Harry’s, have spent more to acquire a customer than they get from the first purchase,” he told me. “They’re hoping for a lifetime value to become profitable. Our biggest weapon is that we’re profitable on the first purchase. The day of reckoning is coming — if hasn’t already for a lot of direct-to-consumer brands — where they can’t afford the customer acquisition cost.”
Coddou’s approach has produced, in five years, a profitable, mid-seven-figure-revenue business that, until recently, had just two employees: Jennifer and himself.
He and I recently spoke about marketing, scaling, and the ups and downs of entrepreneurship, among other topics. The audio recording of that conversation is embedded below, followed by a transcript, which has been edited for length and clarity.
Eric Bandholz: Your success with Supply.co speaks for itself. A few episodes ago, Taylor Holiday, who owns Common Thread, the marketing agency, suggested that advertising to existing customers was a bad idea, more or less. You disagree, I believe.
Patrick Coddou: Yes, I disagree with Taylor, who is a friend, incidentally. Our email open rates are around 20 to 30 percent. That’s decent. I don’t know what our email opt-in rate is from customers that go through the checkout flow. Let’s say it’s 20 percent, meaning that 80 percent of our customers don’t sign up. And then 80 percent of the signups do not open an email. So roughly 90 percent of our customers don’t read our emails. If we’re not advertising to that 90 percent, we’re missing out.
Bandholz: At Beardbrand, we stay in front of our audience through content, such as YouTube videos, Tumblr pages, or Instagram. And we don’t have to pay for the exposure.
Coddou: You’ve always been better at creating organic content than me. I don’t have a YouTube channel, yet, or a content creation engine. So my options for getting in front of customers are email, SMS, and advertising. Or, just hope they remember to come back to my website.
I’m losing out on a significant amount of traffic and purchases if I don’t target my customers because I’ve got all sorts of products to upsell to them.
Bandholz: To be fair to Taylor, for a new product launch, he would probably agree that it’s an excellent opportunity to re-market to your audience after you email them and exclude all the people who bought it. He’s not 100 percent opposed to including customers. But many of them might come back anyway.
Coddou: Yes, we certainly set up our flows, both in Klaviyo and for our ad retargeting, based on what a customer has purchased. That’s definitely something to pay attention to.
Bandholz: We’ve built pretty extensive flows based on the number of orders from a customer. Our online community, called The Alliance, is also helpful. We encourage people to join. If they have never bought from us, it’s a $90 lifetime membership. But if they have placed three orders, then it’s free. We have the second and third emails as reminders, “Place one more order, and you’ll get free access to The Alliance.” It encourages repeat orders.
Coddou: How long have you been offering that membership?
Bandholz: A year and a half ago, maybe two years. The original goal was to have recurring revenue at $30 a month from our audience. It would provide a stable foundation. Then we realized that’s not our bread and butter, and we shifted it as a perk to loyal customers. Those are the lessons when dealing with a community.
Coddou: We tried a membership program, back in April and May. We called it our Lifetime Membership. You bought a razor, and you got free blades for life. It didn’t bomb, but it was not as successful as we hoped.
Bandholz: Let’s discuss the growth of Supply.co. You built a multi-million dollar business with just you and your wife.
Coddou: That’s correct. We didn’t start hiring until a few months ago.
Bandholz: How do you build a multi-million, product-based brand, run the operations, run the customer service, run photography, website management, and all that with just two people?
Coddou: It’s exhausting. I have always ridden the rollercoaster, the ups and downs of the business. The downs can certainly be deeper without a staff to share the burden. But the short answer is we try to keep things as simple as possible.
A good example is our product line. We have roughly 15 core SKUs. If you add scents, colors, and bundles, it becomes 70, perhaps. In general, we have a simple supply chain, not a lot of vendors, not a lot of products. Our strength is also our weakness. We don’t have a lot of customer acquisition channels. We’re not on YouTube, Snapchat, or Instagram organic.
We’ve built our brand through paid acquisition on Facebook, Instagram, and a bit of Google. That takes care of the demand side. As for supply, it’s all about setting up processes that allow the business to run itself. But it’s certainly not been easy by any stretch.
My Twitter profile states, “I’m making this up as I go.” The smartest people are the ones that are just making it up. They don’t have any pretense that they’re experts — just that every day is a new challenge, and they will figure it.
Bandholz: The ups and downs. I certainly get in the doldrums, even for weeks. It’s crazy how the wellbeing of entrepreneurs is tied to our businesses. Hiring team members has helped me. I’ve had days where I didn’t check our numbers. Hopefully you can get there, too.
In my experience, when you get to the point where you’re not checking the daily results, when you’ve got a team in place that you trust, you can find happiness beyond the business. But there’s a lot of joy from building a business, too.
Coddou: Yes, absolutely. Somebody recently said on Twitter, perhaps it was Taylor, that a key indicator of a successful hire is when you don’t worry about his or her part of the business anymore. I found that to be true.
Two or three months ago, I hired a guy to take over the supply chain side of the business. I no longer worry about that function. I hired, about a month ago, a vice president of marketing. He’s getting up to speed, but I don’t think about marketing as much now.
My focus this year has been to put talented people in key roles, where I don’t have to think about those things. It’s a stark contrast to where we were just a year ago, where I just had to do everything.
Bandholz: You’re in a space with huge competitors: Dollar Shave Club, Gillette, and Harry’s. How do you compete?
Coddou: It is expensive to compete, to acquire customers. Those companies have deep pockets. What they don’t have, though, is an average order value that’s anywhere close to ours. They may have millions of dollars in their war chest, but the day of reckoning is coming — if hasn’t already for a lot of direct-to-consumer brands — where they can’t afford the customer acquisition cost. I love the way Taylor Holiday talks about this. He said, “We’re all going to die waiting for lifetime value to come.”
Our competitors, such as Dollar Shave Club and Harry’s, have spent more to acquire a customer than they get from the first purchase. They’re hoping for a lifetime value to become profitable. Our biggest weapon is that we’re profitable on the first purchase. We have a lot of available margin to acquire a customer.
So I don’t spend a lot of time thinking about Harry’s and Dollar Shave Club. I focus more on internal threats, such as stagnant product development, poor customer service, and how we invest in our brand.
Bandholz: It’s one of the most important lessons for bootstrapped entrepreneurs: build a profitable business, and you’re not going away. It’s as simple as that — black and white. I wish more people understood it.
Coddou: It’s also the trade-off between profitability and growth. There’s no right answer.
When you spoke at the Klaviyo conference last year, your theme was, as I recall, that we can build businesses the way we want. If I want to build a $5 million company that’s pulling in 20 percent, there’s nothing wrong with that. That’s a great business to run. I don’t necessarily want to build a $100 million business that’s only pulling in 5 percent. But if others want to, more power to them.
But at the end of the day, I think about what size of business I want to run?. We’re in the mid-seven figures now. My dream is to be in the eight-figure range eventually. But I may find, when I get there, that I don’t enjoy running that business. I don’t know the answer, but I think about it a lot.
Bandholz: What’s your biggest fear? What’s holding you back?
Coddou: Moiz Ali built Native Deodorant. He doesn’t run it anymore; he sold it. He said on a podcast a while back that one of the reasons he sold was, “I don’t know what’s going to happen next month. Deodorant sales could plummet. My supplier could catch on fire. Shopify could go down, and I lose everything.”
Perhaps that’s an irrational fear — everything going to zero tomorrow. But that’s always been a fear of mine, too.
It’s not rational. As the business matures, it’s less and less of a fear. But, it certainly lingers in the back of my head.
Bandholz: Where should people follow you? And where should they buy your products?
Coddou: I’m on Twitter at @soundslikecanoe. Our products are on Supply.co. Listeners who don’t have a beard should go there. Otherwise, go to Beardbrand.
See multiple interviews with Patrick Coddou: