cc >> Jeanan Yasiri Moe: Good
afternoon, everybody. This is Entrepreneurship in
Society. It is a course that's offered
through the University of Wisconsin School of Human
Ecology. I'm Jeanan Yasiri Moe.
We, of course, want to start by thanking our partners in this
course, the Office of Corporate Relations, the College of
Engineering Media Services for their technical support and for
providing us with space, and we also want to thank our financial
partners, the Ewing Marion Kauffman Foundation for
financing this course over the many semesters that we've been
able to provide it. They are a foundation based out
of Kansas City, Missouri. We also like to thank our media
partners in this course, Wisconsin Public Television and
their University Place crew for taping today's lecture.
I'm very pleased to introduce a special guest to this class
today. His name is Troy Vosseller.
He is a 2006 graduate of UW-Madison, and while he was an
undergraduate here he started Sconnie Nation, a t-shirt
company which he continues to own and operate.
Troy's company focuses on producing apparel that targets
people who herald from Wisconsin, people who live here,
people who go to school here, but in some way identify with
Sconnie. And I know that Troy is going to
share more with us about what that means, that identity means
in his talk. After earning his undergraduate
degree, Troy went on to earn his MBA in entrepreneurial
management and a law degree, both here from the UW.
And in addition to running Sconnie Nation, Troy currently
works as a supervising attorney with the UW Law School's Law and
Entrepreneurship Clinic. That's a program providing free
legal services to start-up businesses and entrepreneurs.
Please join me in welcoming Troy Vosseller to tell his story
of how, as a student, he started Sconnie Nation.
[APPLAUSE] >> Troy Vosseller: Thank you.
All right, thank you for having me today.
It's a pleasure to come here and speak, and I can remember very
fondly sitting in your shoes, whether you're an underclassman,
a upperclassman, maybe some of you own your businesses here or
are thinking about owning your own business or your going into
maybe the corporate world and taking a job otherwise.
Hopefully there's tidbits here for all of you to be able to
appreciate and learn from, again, whether you're becoming
an entrepreneur yourself or thinking about it or even with a
traditional job, the concept is very much a live of
intrapreneurship, so being able to think entrepreneurial within
an existing corporate structure is also very important.
For today's presentation, I think we'll kind of divide the
history of Sconnie Nation, the company, into three kind of
distinct parts. So we'll start with the founding
of the company, the ideation phase, how myself and my partner
came up with the idea and how we ultimately made the leap into
starting a company. Next, we'll move into kind of
how we grew the company and scaled it while we were still
students here at UW, and we'll talk about some partnerships
that we made during that time. And then we'll reflect a little
bit on where we currently are as a company and some of the new
things we are looking to do in the very near future that you
guys will get a sneak peak of. So to begin with, as a
background I'm originally from Brown Deer, Wisconsin, which is
just north of Milwaukee. I came to school here in the
fall of 2003 as a freshman. Lived in Kronshage Residence
Hall, specifically in the Turner House, and met a guy who lived
on my floor named Ben Fiechtner. Now, Ben and I never knew each
other before. We had no friends in common,
nothing like that, but we quickly became friends just by
virtue of living on the same floor and quickly realized that
we both had this entrepreneurial bug, this entrepreneurial
spirit, and we wanted to start a company together.
So we made just an informal pact that we would constantly
brainstorm different ideas and try to put a company together
for a few reasons. One, to make a little bit of
money on the side, but perhaps more importantly to go through
the process, the entrepreneurial process, and learn from it.
So even if that company that we were starting wasn't ultimately
successful, we would still have a fantastic learning experience
that we could hopefully parlay into future experiences and
future endeavors. So Ben and I would constantly
brainstorm different ideas. At the time, on a monthly basis,
there was an insert in the Badger Herald, I think it was
called Young Money, and it was kind of this entrepreneurial
college magazine. And it would talk about
different businesses being started across the country by
college students. And we would always thumb
through the pages of that magazine and think of different
companies that we could potentially start.
So that kind of got the ball rolling in terms of what we
wanted to do together. So, to be quite frank, our ideas
ranged all over the map. So everything from an online
dating service just for UW students, and this is before
Facebook and a lot of other online platforms that facilitate
that now, all the way to the other end of the spectrum which
was to fill up gasoline containers with gas off campus
and bring those back to campus to fill up people's mopeds so
that if you had a moped you didn't have to drive off-campus.
But needless to say, we weren't too passionate about smelling
like gasoline all day or anything like that, so we just
kept constantly going back to the drawing board until one
night, it was the spring of our freshman year, so the spring of
2004, when we decided why don't we start a t-shirt company.
So Ben and I had both used the word Sconnie up until that point
as a way to refer to people from Wisconsin, like myself, or
anything Wisconsin-esque. So really synonymous with
Cheesehead. Now, to be very clear, we did
not coin the word, we did not come up with the word, we didn't
create the word, and we never claim to have done that.
The word had been around, and people had been using it.
We weren't the first to say it. We had heard it.
That's where we got it, and that's where it became part of
our vocabulary. But we really liked the word and
what it stood for and our interpretation of the word,
again, similar to Cheesehead in a way of gently poking fun at
Wisconsin stereotypes like beer, brats, and cheese.
And so we decided that we were going to brand that word.
So even though we didn't coin the word, we didn't create it,
we weren't the first to say it, we were the first to actually
create a brand around it and create kind of a marketing
message and a product line representative of that word,
which we later trademarked. So with that, we decided why
don't we just put Sconnie on a t-shirt.
And so Ben and I both had experience in high school
student council and clubs like that ordering t-shirts for
different events. So we had familiarity working
with screen printers and t-shirt companies, and so we got in
touch with a screen printer by the name of Underground Printing
who we still continue to partner with until today.
So this is also a story of kind of long-time business
partnership. So we went to Underground
Printing. Ben and I each threw in $300 of
our own money. So we started with $600, and we
printed 100 shirts. So half of them were just a red
shirt with Sconnie written in white print across the chest.
The other half was a gray ringer t-shirt and it had the United
States logo and said Sconnie Nation and had the state of
Wisconsin filled in in red. So we started with $600, we
ordered 100 shirts, we got those shirts the spring of 2004 of our
freshman year, and we stared just selling them out of our
dorm room. We ended up selling out of the
entire batch in about a week, and I think we had a promotion
about one for $12 or two for $20, and most people went for
two. So we went through them pretty
quickly, and at that point Ben and I sat back and said I think
we're on to something. We had this idea, we put a
little bit of money into it, and we had some very early success
in terms of selling it. So one thing that I think is
really key in the entrepreneurial process is
having that early customer validation because I think too
often companies put in too much time and money on creating a
product or being in stealth mode, you might have heard, and
ultimately when they launch there's not the uptake that they
think or customers actually want different things, different
functions, different designs than the founders, the
entrepreneurs behind it actually thought.
So I think getting out there with something in more of a beta
mode, so for us it was just let's just throw this idea out
there and see if it sticks, and luckily it did stick for us.
Now, that's not to say we didn't keep improving and listening to
our customers, which is something we still do today, but
ultimately we had that very early customer validation which
I think was very important to the overall process.
So we sold out of our first batch, and at that point Ben and
I said I think we're on to something.
Even though the majority of our customers were people we knew,
friends of ours, friends of friends, people who lived in the
dorm, but we still made the decision to move forward with
that venture. And so we talked to as many
different people as we could, whether it was family members
that were entrepreneurs, university professors, and other
resources on campus and within the Madison community related to
entrepreneurship. Frankly, and the thing I'll
touch on in the next segment, there wasn't nearly as much in
terms of classes. There were no classes like this
for undergrads in entrepreneurship at that time.
There were no support services geared directly toward
undergraduate entrepreneurship. In fact, the majority of the
campus initiatives related to entrepreneurship at the time
were really externally facing, and they're looking at taking
existing big business and seeing how they could leverage
technologies that come out of the university, and they really
weren't thinking about internal ideas that could come from
undergraduates and start lifestyle small businesses, if
you will. So at that point we formalized
the business, we registered as an LLC, we trademarked the word
Sconnie in the state of Wisconsin and later at the
federal level, and then we made a pact really to constantly
reinvest all the profits that we made back into the company.
So for every batch we sold we would just put that money right
back into the company, and that allowed us to order larger and
larger batches. It allowed us to expand our
product selection or our product mix so we could offer girls
styles, sweatshirts, hats, you name it.
So it was really a bootstrap, organic growth process.
With that, we're also seeing economies of scale kick in
because for our initial batch of just 100 shirts, let's say we
were paying $6 a shirt at the time, if we were able to double
the order quantity, let's say we were able to order shirts at
just $5 a shirt. So our margin per shirt was
increasing, and that, again, allowed us to put more money
back into the company to retain as profits and to fuel really
our growth. For the most part, we're selling
shirts in person. So we're meeting people on
campus. People might contact us and
we'll meet them at the library, the Union.
They'll come to our dorm room. We'll sell them the shirts
there. Someone else will pick it up for
them. We're also starting to launch
our initial website. So one thing I'll touch on is I
think college is a fantastic time to start a company because,
for one, you have just such a unique, diverse group of people
around you and that's diversity in background but really it's
also diversity in ideas and diversity in skills.
So, for me alone, I found my business partner, who is
complementary to me in terms of my skills, on my dorm floor.
Another guy from our dorm floor became the web designer for our
very first website. So that's something, again, that
as a result of being in this close-knit college environment
we were able to find the people and resources that we needed.
Another guy who lived on our dorm floor eventually became the
store manager of our store on State Street and continues to be
in that role. So the story is very much rooted
in the college experience and the relationships that were made
as a result of being a college student.
So we launched our first website that had rudimentary e-commerce
capabilities. So now people could order the
shirts online, which was fantastic because up until this
point you had to, essentially, live in Madison or know someone
in Madison to pick up that shirt for you.
Now people from all over who may have heard of the brand could go
online to, originally it was SconnieNation.com,
later we shortened that to just Sconnie.com,
now those people could order online and get their
shirts delivered to them anywhere in the country.
So I'll pull up a picture, there's a cool website called
the Wayback Machine which allows you to, it takes snapshots of
websites from long ago. So, unfortunately, there's not
pictures anymore, but you can see kind of how basic the site
was, and it was really basic in terms of what people could order
on the site. Ultimately, later, through
multiple iterations, that became our main site here where people
now order online, etc. So now we're selling online and
we're finding a lot of traction with that.
We're finding that people really get the brand and they know what
our brand message is and what we're all about.
So, at this point, we're now living in apartments, and Ben
and I each have inventory, literally boxes of inventory,
in our apartments. And we're fulfilling orders on
campus in person, and we're also fulfilling online orders.
So first it started on a weekly basis, we let online orders
build up throughout the week, and then we'd go pull those
orders, package them, hand-write the envelope, take them to the
post office, ship them out. Eventually, that became twice a
week, and then it became three times a week, and then
it became every other day, and then it became every day.
That really got to a point where we couldn't sacrifice any
more of our time to meet the demand of the business.
And so that forced us to think about different ways that we
could scale this business that took that manual labor aspect of
it off of our shoulders. So, at that point, we looked
into third party retailers and selling wholesale.
So we had this idea that we could just sell our most popular
shirts to a store on State Street and have them carry it.
Now, granted, we wouldn't be able to make as much money per
shirt, so our margin would go down because we were selling it
wholesale, but we would be able to drop off a huge number of
shirts all at once, and then the store could take care of selling
those. So, for us, our first go of it
was with the store called The Den which was an independent
novelty kind of convenience store on State Street located
where Fat Sandwich Company currently is.
So they occupied that spot. We knew that they carried stuff
similar to this in terms of t-shirts and things like that.
So Ben and I literally walked in with a handful of shirts in our
arms. Luckily, the store manager was
there. He had power to buy on behalf of
the owner, buy inventory. And we literally walked out with
cash. And we said, wow, that was
pretty easy. So now we were kind of on cloud
nine, and we're thinking let's keep trying our luck here.
So we took that luck, we went to the bookstore and we got in
touch with their buyer, and their buyer liked the idea and
appreciated the fact that we were college students and didn't
look at that as kind of a bad thing but really looked at it as
a good thing saying I've seen your stuff get out in the
marketplace and I think that you guys have a good knowledge of
the customer base, so the target customer, the demographic.
So she took a shot at it. And so we left that meeting with
a purchase order for a case of shirts, 144.
And so we were felling pretty good.
Eventually, throughout the history of that time period, we
ended up selling wholesale to The Den, UW Bookstore, Bucky's
Locker Room, Insignia, Name of the Game, and a couple others in
other areas of the state. And that was a very successful
model for us because, for one, it allowed Ben and I to be able
to direct people in Madison who didn't want to order online just
to have it shipped somewhere else in Madison or the
surrounding area. So now we could direct them to a
store. They could see the shirt, hold
it, try it on, everything like that.
So that was fantastic for us. It was also great in terms of
legitimacy of our brand and our business.
So up until this point we were just two college freshman, later
sophomores, meeting people on campus at random places, at
random times, selling t-shirts. Now we're actually a t-shirt
that was in the store window at the UW Bookstore or was a
t-shirt at Bucky's Locker Room that was next to other very
formidable brands, if you will. And so people really bought into
it and saw it as not just this hobby or this project of two
college students, but a true business and a true brand.
So, for us, that was absolutely fantastic.
I mentioned the online sales, those were really picking up
throughout this period, and right now we're talking like
2005-2006. And it was a very manual
process. We would have to write out
envelopes, go to the post office, and for two full-time
students, frankly, it became difficult because it meant us
having to skip class or take short-cuts on our homework or
studying for exams, and it also meant we had to miss out on
different social opportunities. So during the early part of our
company we would street vend. We had a street vending license
outside of Camp Randall for football Saturdays, but the city
has really strict rules about where you can set up and when
you have to be set up by and when you have to take down by
and all these things, so that meant that for the most part on
Friday night before home football games we would have to
get things in order and ready to prepare for the game.
We'd have to get up really early on Saturday, way before any of
our friends I can guarantee you, load the truck, take the stuff
over to Camp Randall area, unload it, take the truck back,
and then sell all during the game and after the game.
After the game we have to close up, pack stuff up, and then kind
of return home. So, for us, we had make
sacrifices in terms of skipping out on social opportunities.
So whether it was going to football games or being able to
party with our friends before games, things that I think a lot
of college students take for granted in that today people can
quickly say you have this company and now we have people
and employees that cover those different aspects of the
company, but when we were growing, that was all stuff that
really fell on our shoulders. And so, as an entrepreneur, I
think oftentimes you find yourself wearing many different
hats. Whether it's the hustler, the
salesperson, or the logistics operations person, the sales and
marketing person, the promotions person, the legal person, the
accounting person, the tax person, you're really all these
things, and it's a matter of budgeting your time really
appropriately to accomplish those.
So kind of at the peak of us handling the online sales
ourselves, we had moved out to a storage unit on the east side of
Madison to store all of our inventory.
But, like I mentioned, it was becoming too difficult for us.
So we went to Underground Printing, who, for the most part
since our very first batch of shirts up until today, has been
the only screen printer that we've worked with, and we've had
a great working relationship with that company.
So we approached them and said you guys have expertise in terms
of when to order more shirts, kind of that idea of
just-in-time production from an operation standpoint.
You guys have expertise in order fulfillment, which is the
packing, pulling, and shipping of orders, because they had UPS,
DHL, FedEx come into their loading dock every day.
They had labeling capabilities, they had staff in place to
handle all those things because they were already doing it.
So we approached them and said can you guys handle our online
orders? Can you be our order fulfillment
contractor, essentially? They jumped at the idea.
We eventually negotiated a contract with them which
essentially said that they would continue to be our exclusive
printer for Sconnie Nation, they would maintain all of our
inventory so Ben and I would not have to worry about our
inventory, they would handle that for us, and they would ship
orders out on our behalf. They would handle exchanges,
returns, customer service, anything like that.
That was one of the biggest turning points of the company
because now rather than worrying on all the kind of manual labor
things, aspects of the business, Ben and I could really focus on
what, to us, was our core competency, which was the
branding, the marketing, the promotion and product
development for Sconnie. So that was a great move for us.
Granted, we gave up a little bit of profit by doing that.
So in order to have Underground Printing handle that, they're
not going to do it for free, we had to cut them a little bit
more of the profits to enable them to do that.
That means we took a slightly smaller margin, but overall it
really paid off because the amount of volume that we were
able to increase through our efforts paid that in dividends
through. So now we're at a point where a
lot of stuff is kind of being taken off our shoulders, and
we're able to focus on what we really want to do.
And so Ben and I, at this point, saw a new business opportunity,
and that opportunity was custom screen printing.
So Ben and I both were involved in a lot of different student
organizations on campus and off-campus, and we were
constantly being asked to buy a t-shirt for this or that, and we
were seeing the prices being charged for those and we knew
what the actual costs were because we had been working in
that industry. So we thought that there was
room in the market to be, essentially, a middle man for
custom screen printing. So with that we, again,
approached Underground Printing, who did not have a presence in
Madison, and we said you guys know how well we're doing on the
retail side of things, what would you think of us being you
face or your sales agents here in Madison to go out and solicit
custom screen printing orders, and I'm talking orders for, you
come with a design for a student organization, a fraternity,
a sorority, a local charity, a local business, an intramural
sports team, a club, you name it.
So they liked the idea. We entered into an agreement
with them where we got wholesale printing prices.
We already had wholesale garment relationships with the big
manufacturers like Gildan, Fruit of the Loom, Adidas,
American Apparel, all those players.
So we eventually created a sales force of
commission-based sales employees, again all college
students, and they each had a different area of campus
assigned to them. So they would go out, we didn't
have any storefront or anything at this time, they would go out,
they would solicit orders mostly through referrals, and they
would meet with the individual placing the order, they'd
collect all the order information, so product style,
the sizes, number of sizes, the color, the artwork, so whether
is was just an abstract idea for artwork or if they actually had
artwork digital files. They would collect all that
information. The salesperson, who was our
employee, they'd collect all that information, send it off to
Underground Printing. Underground Printing had an art
department, they'd create the artwork proof.
They'd email that to the customer.
The customer would approve it or make any changes.
Once the artwork was approved, Underground Printing would ship
that order directly to the customer, and then Underground
Printing would invoice Sconnie Nation, Sconnie Nation would
invoice the customer. So to the customer, Underground
Printing didn't really exist. Only Sconnie Nation existed.
That was the only interface that the customer had, but behind
Sconnie Nation was this whole kind of production black box,
you could say, that was creating the order, fulfilling the order.
So in that middle man relationship where Underground
Printing was making the shirts, then they're invoicing Sconnie,
Sconnie was invoicing the customer, there was room to make
money. So that actually became a very
profitable side of our business. It's something that we really
enjoyed because it was all very much relationship-based.
It was about getting the right decision maker within these
different organizations, created trust around them, but at the
same time, because we had no overhead, we didn't have a
store, we didn't have a lot of other expenses, we were able to
undercut all of our competition. So that was great for us.
So I'll pull up their website, give them a little credit too.
So these guys, like I said, they've always been around and
been a partner of ours, Underground Printing.
Kind of concurrent with that time line I was mentioning, they
also were entering into a new business model where thus far
they had just been kind of factory and warehouse where
people would go to them to place an order, they saw a need
because they came from college and they were only a few years
older than Ben and myself, and they saw a need for college
student needing easier access to be able to place a custom order.
So what the Underground Printing guys did was to experiment by
opening a retail store in the heart of a college town.
So their very first retail store was in Ann Arbor, Michigan, at
the University of Michigan, and the concept was a drop-in
location where anyone could go place an order for custom
t-shirts for their group or their organization.
So you could see blank styles there, see all the colors, work
with a live person, and you didn't have to borrow a car or
you didn't have to have a car to potentially drive off-campus.
So up until the store for us opening in Madison, there
weren't a lot of options. So students would either have to
own a car, borrow a car, and then they'd have to drive out
to Middleton to like Top Promotions,
or Madison Top Company. There was nothing really
convenient for students on campus that meshed with the
lifestyle of college students. So they saw a need and they
experimented to fulfill that need in Ann Arbor, Michigan, and
it was a great success for them. So they continued to expand and
open more stores so that they expanded to Michigan State and
then Western Michigan. And at this point they had their
eyes set on opening a store in Madison.
And so I can remember a time where Ben and I were walking
down State Street as freshman after we had started the
company, and we said, wow, this would be amazing if we could
someday have a store of our own on State Street.
And sure enough, that's kind of where the path started unveiling
itself for us. And so now we're in the
beginning of 2007. I had graduated in 2006.
Ben was graduating in the spring of 2007, and so a lot of things
were up in the air. I wasn't sure if I was going to
go to law school. Ben had already accepted a job
doing sales. And so we were kind of at this
turning point in terms of the company.
The company was making money, but at the same time it wasn't
enough for both of us to be able to sustain or live off of
post-graduation. So Underground Printing
approached us again and said we want to open this store in
Madison, we know what kind of volume you guys are doing for
Sconnie retail because we're printing all your shirts whether
they're for wholesale or sales coming directly to Sconnie.com,
and furthermore, we know the kind of sales you're doing
as this middle man for custom screen printing and we would
love to be able to capture that market and grow it in Madison.
So we entered in to a new relationship with Underground
Printing where they would open a store on State Street in Madison
at 521 State Street. Same location it always has
been. That store opened in the summer
of 2007. And under that relationship,
it's really Underground Printing's store, and they
manage all the employees. They pay, for the most part, the
majority of costs associated with that store, but, again,
this was going to be an experiment for Underground
Printing because up until now there other stores had only been
drop-in custom screen printing locations.
None of them had a retail component where you could go in
and buy a production shirt off the rack.
So with the Madison store they were going to experiment by
having both things. They were going to have custom
screen printing, which they would control and fulfill, and
they were going to have a retail component where all the Sconnie
Nation inventory would be available for sale.
So that store went live in the summer of 2007 on State Street.
And since then it's been a great success.
We continue to grow year after year in terms of volume, in
terms of revenue, number of customers, number of orders, all
things, and it's been a fantastic relationship.
I should say that part of that deal was Sconnie Nation, so my
company agreeing no longer to solicit custom screen printing
orders. So Sconnie Nation no longer
partakes in the custom screen printing side of things.
That's completely Underground Printing's realm and territory.
But, again, that was a partnership that were it not for
that relationship there really would not have been a way for us
to have a store on our own because of the fact that we
weren't doing enough volume to be able to pay all the costs
associated with it. Likewise, for Underground
Printing, they were able to maximize their revenue per
square foot by subsidizing their revenue stream by having this
retail component. So it really was a win/win for
both of us because a lot of customers came in and they knew
about one or the other. So they were going there to
place custom screen printing shirts, but they didn't know
about the retail side of things. Other people came just to buy a
Sconnie shirt, and they didn't realize I could also buy
t-shirts for my student org here as well.
So it really worked both ways, and that was a great
relationship. Jumping forward to today, I
mentioned I eventually went off to law school so I was staying
in Madison, and I really had an interest in taking the company
and growing it even further and really focusing on growth.
At the same time, my partner, Ben, who I had started the
company with, he graduated and took a job in sales, and so he
was becoming more removed from the company, and frankly our
differences in terms of strategy and stuff were starting to
bubble to the surface. So I mentioned we were at this
turning point now where as a partnership where does this
business go? So I approached Ben and wanted
to buy him out. So we were 50/50 partners up
until that point, and I wanted to buy him out.
Unfortunately, we did not have any sort of written partnership
agreement, no operating agreement, no buyout agreement
or anything like that, so there was no framework around which to
negotiate a buyout, no process which, frankly, was rather
unfortunate. So from the time I broached the
subject of buying Ben out until that actually happened that took
about a year, and, frankly, it was a very long and tough year
because I wasn't too motivated to grow a company that I felt I
was putting in 100% of the effort just to get 50% of the
benefit. And so I wasn't interested in
continuing to do that necessarily.
And at the same time Ben had really strong feelings which
were warranted to not want to walk away from something that he
really helped to create as well. So there was a lot of emotion
tied to these things. And so we ultimately agreed on a
buyout. That happened about three years
ago now. So since then I've owned Sconnie
Nation 100% and have been able to take it in the direction that
I wanted it to go. Ben continues to work in sales,
has a very successful career, but unfortunately one thing that
fell by the wayside was really our friendship.
So a lot of people start these companies, and I think
partnerships are great and I think they're important because
oftentimes you'll have complementary skills.
One might be a technical person and one might be more of a sales
and marketing person. There's other complementary
skills that fit together. But if you don't think about it
carefully or plan ahead by having things in writing, people
go their separate ways. At the time we started we were
just 19-year-olds, and people told us you should put something
in writing, have a partnership agreement, have an operating
agreement, but we always just kind of dismissed those
comments, and we said we're good friends, we're living in the
dorms, we're doing this thing and it's doing all right, we
don't need to worry about that, nothing will every come of it.
And to be honest, people never disagree over or people never
have a disagreement over how to split a pie which is worth
nothing. They only have a disagreement
over how to split something when it actually has real value.
And so for us, we waited, waited, waited, never put
anything in writing, and then all of the sudden we're at this
decision point where we had differences of opinion, we had
differences in terms of where our lives were going, and we had
this pie which had significant value.
And so that's what really lead to the falling out because it
was a difficult experience to walk away from that, and I'd say
the biggest regret I have with the company is losing, frankly,
one of my best friends that I started the business with.
So I think that's an important take-away of getting everything
in writing because one piece of advice I'll say is you'll never
agree more than at the beginning.
You'll only tend to disagree more as time goes on, and that's
due to lifestyle, that's due to life decision, that's due to
finances, and it's due to just differences of opinion.
And it's not to say one is right and one is wrong, it's just that
it becomes difficult. So don't enter into it lightly,
and definitely have things in writing.
So for the last segment, to jump to where we are today, we
continue to partner with Underground Printing.
Now the arrangement is in the form of a license.
So Sconnie Nation grants Underground Printing an
exclusive license of our trademark, Sconnie, as well as
the license to all of our designs.
And then Underground Printing is free to sell them on
Sconnie.com, which they completely manage and operate,
and they're also free to sell our product in their store
on State Street. And that license is in exchange
for a royalty. So since that license exclusive,
we've pulled out of other third-party retailers.
So you can't find our shirts, with a few exceptions, anywhere
but Sconnie.com, and then the Underground Printing
Sconnie Nation store on State Street.
And that, again, has been a fantastic partnership.
There are some drawbacks in a license like that.
At the time I originally entered into that license I was still a
full-time student here at UW, and so it made sense for me
because I had other things on my plate.
It allowed them to really focus again on the things that they
were good at, and it allowed me to focus on my core
competencies. But over time there are,
especially after I've graduated and had more time to devote to
the company and reflect on it, there are things that I would
handle differently. For instance, customer service
issues or store layout issues or employee management issues.
There are things that I would handle differently, but,
unfortunately, I've kind of relinquished those rights to
Underground Printing. But, frankly, that's true in any
sort of licensing agreement. It's true in personal
relationships and life. There's always a give and take.
People sometimes say it's your brand, can't you go in and
demand certain things? And to an extent I can.
That's drafted into the contract.
But then there are other things with any sort of contract that
always come up that aren't really defined in the contract
but the parties just agree and continue on and business keeps
going on. And so there's always that fear
that if you push to hard on certain things, other things
will start to fall off. And so really it's about finding
that homeostasis point where both parties can agree and be
happy. That being said, the licensing
agreement isn't perpetual. It has defined timelines, and
so there will be future renegotiations where certain
concerns that I have, certain concerns that they have can be
re-looked at and improved in terms of that.
My role with the company today is limited to really whatever
I want. I'm free to be as hands-on or
hands-off as I want to be. I choose to still be involved in
product development, product design, approving new shirts, as
well as social media, so I still manage our social media pages.
For instance, if you went to Facebook.com/Sconnie,
that would be our Facebook page where we post all different
things, and we really try to make it be not just about
product, product, product, but about things that are relevant
to the brand in general. So whether it's quotes
by Bo Ryan, or things about the Brewers or Internet memes,
or sports articles, other things about the greatest booze stash
in the world, things like that. So you name it.
I manage those things. I also manage our Twitter page.
So just @Sconnie would be our Twitter account, which I
encourage you guys to follow. So we find a lot of traction
around social media. We began, really, as a word of
mouth company in the dorms. I think we continue to be a word
of mouth company in terms of the viral nature of the different
products and promotions that we have and that we do.
Some more reflection on what we currently do.
One thing that we noticed was that we were having really
uneven cash flows between the store and online, and we were
finding we had a lot of seasonality.
So when students moved back to Madison at the end of summer, we
found big spikes. We found big spikes throughout
the fall and continuing through the Christmas shopping season,
but then in the first and second quarters of the year our revenue
would drop off a lot. That's not uncommon.
That's very common in retail. First quarter is traditionally
the lowest for all of retail, but we wanted to find a way
where we could improve on that. So for us the spark came by
saying why don't we diversify. Since our slogan is celebrating
the Wisconsin lifestyle, anything that fits into that
bucket is fair game. Why don't we try and diversify?
And so that's when we came out with our famous "We'll never
forget you, Brent" Brett Favre parody t-shirt which went viral
like crazy all across the country.
It was just the perfect storm of news and sports related events
in terms of Brett Favre's waffling, his retirement and
unretirement and his trade and whatnot.
And so it really became the gift that kept on giving because he
kept going through these different, dragging fans through
different turmoil. So we came out with that shirt.
It was a huge hit. We continued to do other Green
Bay inspired t-shirts. So whether it was for the
Super Bowl last year with our Claymaker shirt
or our champ belt shirt. So we had a lot of success with
that. So we were able to really smooth
our revenue year-round because now we were finding customers at
different times of the year, and we're bringing new people into
the brand, and it was absolutely fantastic.
Another way we try to capitalize on that was to create a
community specific to that product really.
So that's when we created a Facebook page devoted just to
"We'll never forget you, Brent" which ultimately became kind of
a sounding board and a way for fans to come together to talk
about the Favre situation, but really that evolved into a blog
about the Packers in general. So Packers news, rumors,
discussion, etc. And it's a page that is actually
more active than our Sconnie page.
It has more fans, more followers than our Sconnie page.
So we took that and we said, well, I think we could build
more brand around that, and that's when we created
BrentFavre.com, which really was a play off of Perez Hilton,
if you will. So where Perez Hilton is a
celebrity gossip blog, we're kind of a Packers gossip blog.
And so we hire bloggers to write and draft posts throughout the
year, only during the football season so it falls off now.
But we find that we get a ton of traffic to that site.
We get a lot of cooperation with other Packers blogs.
It's a very close-knit community.
And then we advertise the shirts in a very, what I think is,
subtle manner on the site. So the site is really, truly a
blog, a news blog, gossip blog, but then we also sell t-shirts.
So it's not a t-shirt site with a blog.
It's really a blog that also sells t-shirts.
So that's been really successful for us as well.
In terms of going forward, we are, some of you may have heard,
but we're working on launching a Sconnie beer.
So here, this is SconnieBeer.com.
So there's the image of the can, what's it's going to be.
But this is something that's going to come out.
I mentioned the whole Sconnie brand really revolved around
what I call the Sconnie tripod, which is beer, brats, and
cheese. So beer, being one of the legs
of that tripod, it's been a long time coming.
So it's been a side project, kind of a passion project on my
behalf to make this happen, and we're excited to announce that
it's actually going to become a reality here very quickly.
We're looking to launch here in April, actually, so really
shortly. Initially, it will just be on
draft, on tap, only in downtown Madison, and then eventually
we'll launch with 16 ounce cans which you're seeing here.
So we're really excited about that.
It's aimed at the similar demographic to like a PBR,
Miller High Life, Schlitz, and that range.
Price-wise it's on par with all those beers I just mentioned.
It's a lager beer. It's lighter.
Really broad tasting in terms of who would enjoy it.
So we're really excited about that, and we think that we'll
have a lot of fun with that and, hopefully, a lot of success.
So that's where we are. So we went from my partner Ben
and I becoming friends, meeting in the dorms here at UW Madison,
starting this company, growing it, very much bootstrapping it.
We never had to take outside money, never had to dilute
ourselves. Started it with $600 of our own
money, eventually expanded into wholesale, eventually started
selling a line, and then working with Underground Printing,
opening a store on State Street, licensing our trademark and
other designs to them, and now coming out with a beer of our
own. So that's kind of the history of
our company and where we've been and where we look to be headed.
And so I open it up to questions from all of you.
Thanks, Troy. I'm going to hand off these mics
to Chuck and Alexis who have graciously agreed to split up
the room, delighted to do so, I can tell.
Chuck, you want to head on to the other side?
So, folks, just go ahead and wave your hand, and they'll hand
off the mics accordingly. I'm going to, I see one right
back there. Can you get to her, Alexis?
I've got one right here. >> Okay, here and then we'll go
back there, great. >> Go for it.
Hi, thank you for coming, first of all.
My question is regarding your business relationship, I guess
the falling out more so, and, I guess, would you recommend
avoiding those business relationships with close friends
or is having a clause or a written agreement good enough?
That's a great question. I think that's a topic that
people when they're young our when they're just starting out
in any business, they have blinders on, and I think they
ignore the elephant in the room, which is how is this
relationship going to work out if we have any measure of
success. So that's exactly how I treated
it when I got started. I was young, I was naive, and
frankly I heard the advice but I didn't heed the advice.
And I think that was my mistake. So if there's one thing you guys
can take away it is to truly appreciate the fact that if
you're starting a business with another person, treat it like a
marriage, like you are intimately involved with that
person of every aspect because things overflow into things
other than business because life factors come up.
He took a job elsewhere and that affected the business and that
affected me personally because it affected income and all these
things. So it really is more than
business, and I think you have to appreciate that and
understand that, and I think the best way to get around that is
to put something in writing. So if you're an LLC it's to make
sure to have an operating agreement that has buyout
provisions for the partners. So how you're going to treat
things if one wants to buy out the other, how are you going to
treat that. That's especially important in a
50/50 relationship because in the absence of that you really
have this deadlock where no party can act on their own, and
so then that means the business gets neglected.
And the business is the asset so that means the asset decreases
in value, and then that means what you're fighting for is
decreasing, decreasing, decreasing, and that's not good
for anyone. It's not good for the person
being bought out because their share of that asset is also
diminishing in value so that means they're getting less.
It's not good for the person that wants to do the buying out
because that means they're taking over something that is
declining rather than something on the upswing.
So it's really bad. So I think having it in writing
is the most important factor, and to address your question of
do you think it's okay to start a business with a friend, or
family member let's say. I think it's something you got
to think about carefully because, like I said, it's not
just business. It boils over into personal
things. So I've had times where I've had
friends that were employees over time, and there's times you'd
want to discipline them in a certain way but because they're
your friend and you're going to be going to poker night or
hanging out at the bar later it's awkward.
So I think it's best or it's easiest not to engage in
business with close friends, but at the same time I think there's
a lot of value to be had with a very close partner that you can
confide in, that you can trust, and that you do have a good
working relationship with. So it's very much a personal
decision, and I think as long as you're comfortable with it and
you're aware of what could happen and you have something in
writing, I think you'll be okay. >> Hi.
I don't know if you're going to be able to answer this question
because it's kind of new issue on campus, but do you see a
connection between your brand and the whole Coastie/Sconnie
dichotomy? >> That's not new, that's old.
[LAUGHTER] So that's always been kind of
hanging out there, this whole Sconnie/Coastie rivalry.
To be very clear, I would say we didn't coin the word Sconnie.
We didn't coin the word Coastie. We didn't coin any of those
words. In fact, we never used the word
Coastie and never have in a single piece of marketing
literature. We've never used the world in
absolutely anything that we've ever done because, to us, it was
never about this divide. It was about Sconnie being this
brand, an identity really, that anybody could identify with.
So it wasn't exclusively for people who were born in
Wisconsin. It was not exclusively for
people who went to school in Wisconsin.
It was for anyone that had any sort of connection with this
state and appreciated that connection and appreciated
things like the Wisconsin lifestyle, so beer, brats, and
cheese. If you like those things,
you can identify with Sconnie. So I'll pull up, for instance,
the definition on our web page which we really try to make very
inclusive. So, for us, and I'll read it
out loud here. So the idea behind
Sconnie Nation is simple. Anyone from Wisconsin, who
attends school in Wisconsin, or just loves the dairy state in
general can identify with Sconnie.
Sconnie is anything of or relating to Wisconsin.
Sconnie is an identity. It can be used as a noun.
For instance, I am a Sconnie. Or an adjective, look at that
Sconnie truck. You don't have to be from
Wisconsin to appreciate the Sconnie movement.
It's all about embracing and celebrating this genuinely
Wisconsin-esque environment we call home.
Sconnie is tailgating, bowling, bubblers, washing cheese curds
down with a beer, having a tractor-shaped mailbox,
or eating a cream puff. If you like eating a brat and
cheering for the Pack, you know what we're talking about.
So, for us, we wanted to make it very open and inclusive, and it
was gently poking fun at those Wisconsin stereotypes.
We make no bones about that. But it was never meant to be
derogatory towards Wisconsinites.
It was never meant to create a divide between people from
Wisconsin and people from outside of Wisconsin
or people from the coast. And we've never played into
that. We just completely ignore that
that divide exists. To be honest, our customers are
a huge melting pot of all those groups.
They're people from all over the state.
We've shipped orders to every state in the country.
We have customers that come from all over, and we sell to
students who obviously come from all over.
So we really don't play into that, and for us it's always
been about being positive and being open to anyone that wants
to identify with Sconnie. And I wish that that divide
didn't exist because I think it's harmful, and I think that
the more we can embrace each other for our differences,
I think the better. >> Hey, Troy.
Thanks for being here. >> Yeah.
My name is Darian. You've already given really
valuable insight on this, but I'm going to bring us back to
the whole partnership agreement that Justin just touched on.
My question is, when you're starting out you're pretty much
at this equal playing field and how do you really decide when
you're both getting all the really good advice, ideas, and
opinions, you're really coming together and collaborating as a
partnership. When you're starting off with
something in writing, do you advise going a 51/49 so there is
this one person has more of a leading role, but how do you
really start with that putting it into writing?
Sure. So that's one approach.
You could make it off balance like a 51%/49%, but then there's
ramifications for that because the partner getting 49%, does
that mean even though you're just talking a percentage point
apart, does that person feel relegated to the back?
Do they not feel like they're the leader of this company?
Because I think people want to feel empowered and especially
founders of businesses and there's ego at play and they
want to have a say and control. And even if something on paper
says I'm lesser than my partner, that might lead to differences
that arise. I think really what's most
important is to have, just spell it out in writing.
So make it say if one party wants to buy out the other,
here's the procedure that we're going to follow, and you're
agreeing at time zero what that procedure is going to be.
Are you going to take the book value of the company if you have
hard assets? Are you going to take it to an
independent accountant to do a valuation of the company and its
assets? What things can or cannot the
accountant take into account in terms of coming up with that
value? If one party objects to the
valuation, can they have a second appraisal done?
Do you average those appraisals? Do you get a third?
Do you have a third-party pick a third?
So there's all different ways of doing it.
Kind of as the stop-gap, if you're talking a 50/50
partnership, the arrangement that I really like is, some
people call it a shotgun, but essentially it's where you have
this procedure in writing that says if I want to buy you out,
I can make an offer for a dollar amount or whatever the
consideration for the exchange is and you can either accept it,
meaning you'll take that money in exchange for your share, or
you can flip it and say I'm going to pay you that much money
for your share. So that keeps everyone honest
because that means I can't low ball you because if I low ball
you, you might just flip it on me.
So I think that's kind of a stop-gap measure that can
prevent a lot of these things. >> Do we have a final question
for Troy on this topic? Well, I know all the students
join me in thanking you so much, Troy.
Very, very much. [APPLAUSE]