#136: Michael Sirpilla (Society Brands)

Michael Sirpilla (Society Brands) [00:00:00]:

If an ecommerce mastermind, which is culture, community of founders that are coming on board and sharing best practices and an acquirer of ecommerce brands if those two entities were to have a baby, that would equal society brands because we're building a culture, a community, an ecosystem, a society of founders that are staying on board post acquisition. But we are very much hiring the brand. We're offering them cash at close, but then we're also offering them rolled equity into our parent company so we could share the wealth with those founders that are helping us get to where we ultimately believe that we're going to be someday, which is a multi billion dollar company.

Jeffrey Stern [00:00:41]:

Let's discover what people are building in the Greater Cleveland community. We are telling the stories of Northeast Ohio's Entreprenuership Builders and those supporting the welcome to the Lay of the Land podcast, where we are exploring what people are building in Cleveland and throughout Northeast Ohio. I am your host, Jeffrey Stern. And today I had the real pleasure of speaking with Michael Serpilla, the co founder and CEO of Society Brands. Society Brands, which is based in Canton, Ohio, is a Tech enabled consumer products company that acquires e commerce native brands and powers them with a global growth platform, scaling and evolving them into household brands. They provide meaningful liquidity for the founders of each acquisition, while allowing Those Founders to stay on board at Society Brands itself, building out a community of Entreprenuership who help one another reach new heights. In Addition, These founders have the ability to roll equity into Society Brands'parent company so that they can enjoy a second exit down the road that may likely be even larger than their first. Michael, who grew up here in Ohio, has been in and around retail his entire life, with extensive m. A. Experience throughout his career and has been part of multiple business ventures where he's primarily focused on organic growth. He founded a financial services wholesale agency with a team of 40 and built it to a multimillion dollar business. And in addition, he led a population health management business and scaled it from zero to $150,000,000 in revenue within five years. Under Michael's Leadership as CEO, Society Brands has raised $205,000,000 In Capital to continue their rapid consolidation in the Ecommerce Sector, with many completed and successful acquisitions since their inception. This was an awesome conversation. Michael does an Excellent job explaining what the World of E commerce Looks Like, how It Has Evolved Over time, Society Brand's Role to play within this Goliath market, and the way that he's been able to rapidly scale this organization over time. Please enjoy my conversation with Michael Serpilla after a brief message from our sponsor. Lay of the Land is brought to you by Impact Architects and by 90 as we share the stories of entrepreneurs building incredible organizations in Cleveland and throughout Northeast Ohio. Impact Architects has Helped hundreds of Those Leaders, many of Whom we have heard from as guests on this very podcast realize their own visions and build these great organizations. I believe in Impact Architects and the people behind it so much that I have actually joined them personally in their mission to help leaders gain focus, align together, and thrive by doing what they love. If you two are trying to build great, impact Architects is offering to sit down with you for a free consultation or provide a free trial through 90, the software platform that helps teams build great companies. If you are interested in learning more about partnering with Impact Architects or by leveraging 90 to power your own business, please go to IA layoftheland FM. The link will also be in our show notes to kick things off from the bird's eye view, how would you describe Society Brands?

Michael Sirpilla (Society Brands) [00:04:03]:

Yeah, so Society Brands is a tech enabled consumer products company. So if you think of an e commerce procter, gamble or Unilever, that's essentially what we're building. We grow by acquiring e commerce native brands generally that sell their products on either Amazon, Shopify or other e commerce marketplaces. We offer the founders cash at close, offer them liquidity, and also offer them some rolled equity into Society Brand's parent company. And we ask that founder to stay on board post acquisition. So if just the quickest way possible, is tech enabled CPG companies the simplest way to put it?

Jeffrey Stern [00:04:42]:

Excellent. So you've introduced a lot of ideas there that I think we'll have to circle back to and take one at a time. And we will. But to start, why did you find yourself starting this business? In particular, how would you describe your own journey as an entreprenuership as it led up to the founding of Society Brands? And how did you navigate that maze of ideas before you found this vision for the future of Ecommerce and M and a roll up? And just being in this space overall.

Michael Sirpilla (Society Brands) [00:05:14]:

One, I've never lacked ambition. I've always been a very ambitious person throughout the course of my career. And actually in 2020, it was a hard year for a lot of us due to COVID-19. And I had a population health management company that I was partners in, and that business was actually doing very well. And my brother Justin was actually doing a roll up in the PEO space. It's payroll processing, HR services, tax compliance, things like that. And he had acquired 26 companies, about $70 million of EBITDA, within like a two and a half year period of time. And so I always had a vision of doing a roll up with my brother because I realized the fastest way to grow is through acquisition. You could essentially acquire your competitor and you could double the size of your company a lot faster than just simply through organic growth. So Justin and I, for actually a few years prior to starting Society, we would always talk about eventually doing a roll up and in 2020, I was getting a lot of Amazon boxes to my front door. My wife was ordering a lot of stuff on Amazon, and I just simply asked myself a quick question. Is there going to be more or less products bought online ten years from now than what there is today? I think that the answer that I came up with was a genius one. I think that us as consumers, we are certainly moving more and more towards ecommerce, less and less towards brick and mortar. So I started doing some research, found some other companies that were essentially acquiring these ecommerce native brands. And the way that these other companies were going about it is they were acquiring the business and they were leaving the founder behind. That's how I like to put it. If you think of a typical ecommerce entrepreneur, you're not going to think of somebody that's maybe later in their life towards retirement age. You're going to probably think of somebody that's around our age, Jeffrey, in their twenty s. Thirty s, maybe 40s, that after they sell their business, they're not going to retire and sit on a beach somewhere for the next 30 or 40 years of their life. They're going to find something meaningful to do from a work perspective, since that's the case anyway. There wasn't any acquirers of these ecommerce brands that we could find at the time that was having the founders stay on board post acquisition, continue to keep on being the brand president for their PNL. So full PNL responsibilities. And then be part of an ecosystem. A mastermind of other founders that are staying on board post acquisition as well and running their P L and offering a shared resource model, but also being able to have these founders connect with one another. One of the biggest benefits I've had in my career, Jeffrey, is, is when I'm able to get in a room with other like minded individuals that share the same views as what I do when it comes to business or personal life or whatever it is, be able to really connect with those people. Obviously, we call those things masterminds. So in business we call them masterminds. Anyway, so what we decided to do at society at the very beginning is if an Ecommerce mastermind, which is culture community of founders that are coming on board and sharing best practices and an acquirer of ecommerce brands if those two entities were to have a baby that would equal society. Brand because we're building a culture, a community, an ecosystem, a society of founders that are staying on board post acquisition. But we are very much acquiring the brand. We're offering them cash at close, but then we're also offering them rolled equity into our parent company so we could share the wealth with those founders that are helping us get to where we ultimately believe that we're going to be someday, which is a multibillion dollar company. So that was kind of the thought in the end of 2020. And then I was introduced to Sean Dougherty, who's a co founder with me. She's our chief operating officer, and she basically was the founder of a tech company called Mophie. So. M-O-P-H-I-E. She was the co founder of that, and it was a $250,000,000 top line revenue business. They sold a billion dollars of products online. And she ended up selling that company several years back. So I was introduced to her. She has a ton of CPG expertise, supply chain, inventory management, but then also a lot of brick and mortar retail as well. Not just simply ecommerce. She sold her Mophie products in 130 different countries and 30,000 different retail doors. So I asked Sean. I was like, hey, Sean, would you be a co founder with me? You'll be the Chief operating officer. I'll be the CEO. And then let's get to work and let's build something great. So so we ended up doing it together initially. We also had some other really great advisors and strategic investors at the very beginning that we had come on board with us. And it was actually a few months later that Justin, my brother, ended up leaving his corporate job and coming on board as a co founder and president at Society Brands. He essentially saw this large pipeline of acquisitions that Sean and myself land our head of M. A. Lorentz. We had a very small team at the time. We essentially lined up a lot of acquisitions that were ready to close. The biggest problem was we didn't have any capital yet. We actually didn't raise the large amount of capital that we've raised today. But the biggest thing is, the founders really believed in our story. And Justin saw that the was that founder buy in and the fact that we were able to source a lot of deals because there's millions of the ez commerce brands. And Justin ended up quitting his corporate job and walking away from a lot. Land moving from Georgia back home to Ohio Land starting society, and then we ended up doing a large capital raise. We ran a process with an investment bank, and then we got three different offers. One for $50 million, then two for 100 million. And then one of them, I 80 Group, who's our lender today ended up increasing their offer from $100 to $200 million. And that was a really exciting opportunity. Great. They saw the vision. There was strategic alignment. It was a credit facility that we essentially got in place initially, and then we've raised well over $20 million of equity since then. And then we started doing acquisitions. So we've done seven acquisitions so far, and we're a pretty sizable company today. But that's kind of like the origin as to how we got started, how the idea launched.

Jeffrey Stern [00:11:52]:

Again. Lots of threads to pull on there, and we'll do that in a moment. But I love the kind of original inspiration in a way almost coming from Amazon. I think bezos talked know, betting on those things that are stable in time and what's not going to change. So that's kind of very interesting to think about. So I think it would be helpful to do a little bit of stage setting here and understanding what the market looks like today and how it evolved. I think we've all heard this word or set of words I guess, thrown around today. The Amazon aggregator, right? But what is an aggregator? How big is this market? You mentioned millions of potential businesses selling products over the Internet. What's kind of the history lesson on the evolution of this? When did third party sellers come into play? Why did they come into play? Why does Amazon have them? Just give us a sense here for a little bit of the backdrop to understand the world in which society brands is operating.

Michael Sirpilla (Society Brands) [00:12:54]:

Yeah, so there's a portion of the world that thinks that Amazon still only sells books. And then there's another portion of the world that thinks that Amazon sells mainly just their own products. So if you go on Amazon, you think that you're actually buying products from Amazon. And although there's a little bit of that most of the time two thirds of Amazon sales are made up by third party sellers. So essentially it's a whole bunch of consumer product brands. Two thirds of it is consumer product brands that are essentially using the Amazon platform as a marketplace. And then there's also this first party seller side which essentially still a consumer product brand, but they're wholesaling it to Amazon and then Amazon is then retailing it on their own platform. So what we focus on is third party sellers. There's about two and a half million third party sellers on the Amazon platform. But we don't consider ourselves an Amazon aggregator. We consider ourselves a tech enabled consumer products company. The thought of just aggregating stuff, just buying stuff, I think is an overly simplistic way of looking at what society brands does. And I'm not saying that there's not great Amazon aggregators out there because there's a lot of very good aggregators out there, I'm sure. But what we like to think of ourselves is again a tech enabled CPG company, a modern day Ecommerce, Procter and Gamble. And one of the reasons is we're not just focused on Amazon. We also acquire brands that are heavily focused on direct consumer. There's about 1.5 million shopify storefronts and we're very much in the process right now of looking very seriously at some direct consumer brands. And we've built true technology, our technologies. We've coined it as Evo because we believe that all societies evolve. So Evo is short for evolution. So we are very much technology driven as well. And when it comes to the aggregator space though, I mean, there's been billions of dollars raised to essentially acquire these e commerce brands, you have thracio that was obviously the very first one out there that really trailblaze, which was an innovator in this space, and then there was others that followed. What we tried to do was say, like, okay, where is the market going, and where are there others that are doing things a certain way? And how could we be different? What's our unique value proposition when you think of operating brands, integrating brands, and then also the unique value proposition to founders that are looking to sell. So that's a little bit of the origin and a little bit about the ecommerce marketplace as a whole.

Jeffrey Stern [00:15:45]:

And if you flip that script just a little bit here to talk about, from the builder's vantage point, the actual person who is an ecommerce store builder, what do those folks look like? How do they get their start? Who are they? Generally speaking, what do these businesses look like?

Michael Sirpilla (Society Brands) [00:16:02]:

Yeah, so a lot of them are solopreneurs. And I think of brands that we look at are anywhere from $3 million of revenue to $20 million of revenue. I actually know a founder that has $20 million of revenue, and the founder is the only employee of that brand. Now, we didn't acquire that brand, but that's an example of in the ecommerce space. It's a very efficient operating model. Unlike other businesses, where you need in order to be a $20 million business, you might need 50 employees. And there's a lot of operational overhead. The thing that's great about ecommerce is it's normally lean, opex lean operational overhead, and you can generate really high profit margins. That's one thing that I would say is common with most ecommerce entrepreneurs, is they don't really have a big team. Most of them are either younger in spirit or younger in age is just a generality. I could think of several exceptions to that. I know many founders that are older, but if we're talking about generalities, it's normally twenty s, thirty s, maybe forty s, and how they got their start. Normally, they just had a concept. They found a unique way of looking at the world through the lens of a physical product that they didn't see others doing, and they just were scrappy, and they just tried to fill that void. And most of them didn't have a high level of expertise when it comes to ecommerce or digital marketing. Those were things that they learned over time, for the most part. Again, if I'm making a general statement. So those are some of the commonalities. Another commonality with ecommerce founders is they do like to have some level of connectivity to other ecommerce founders. Most of the brand founders that we've talked with are either in a mastermind right now, or have been in masterminds previously, and they like to have a level of connectivity. And then the last thing is, a lot of them do like to have work life balance. You've probably heard of the book four Hour Work Week?

Jeffrey Stern [00:18:20]:

Sure, sure.

Michael Sirpilla (Society Brands) [00:18:21]:

By, I believe, Tim Ferriss. So a lot of them are founders that were able to scale a business and build it up to a place to where a lot of it is automated, and they could really have a good quality of life land balance in their lives. So that's another commonality that I would say is consistent with many of the founders that we talk with.

Jeffrey Stern [00:18:42]:

So one thing I'm curious about, you mentioned Thracio, and if you went back to the early days of, I guess what at that point might just be the aggregator space, why is there still space for a firm like society land industry that became so notoriously competitive? What did these companies miss, albeit having trailblazed the industry?

Michael Sirpilla (Society Brands) [00:19:04]:

Well, a lot of the companies like Thracio, I'm very much a believer in, I think that they're going to perform. And I actually talked to some of the Amazon aggregators and other e commerce aggregators, and I love hearing how well they're doing. And that kind of ties in. Jeffrey, to your question, because it's such a large marketplace, there is room for many, many winners. I'm going to put this in perspective for you real quick. So when my brother Justin did the PEO roll up, he was the head of M and A for this PEO. There was about 700 to 900 possible acquisition targets. My uncle, Johnny Serpilla, who's on our board, he did a roll up called Camping World. He was the president number two to Marcus Lamonis, the CNBC show the Profit. And there was about 2500 possible acquisition targets when it comes to RV retail stores in this marketplace, 2.5 million on Amazon, 1.5 million on Shopify, and hundreds of thousands of other ecommerce marketplaces. If you kind of aggregate all the other ecommerce marketplaces. So the world has never seen this amount of market fragmentation. It is the most fragmented marketplace, I believe, that has existed. So when you look at that, and you look at the $15 billion that was raised in this space to acquire ecommerce brands, if you put all that capital to work, we believe that it might take down 1% to 2% of the addressable market. So if you let that sink in for a second, we're very much in the infancy stages of a very large consolidation. That will happen over a long duration of time. There will be winners. I strongly believe that society is definitely going to be a winner in the space. But just like any other industry, there will be losers as well. But the biggest key is having strong operational expertise. When you're growing through M and A, Jeffrey, it's really important that you focus on integration. What we focus on at Society is integrating. We also try to not acquire too quickly. We are not going to acquire 100 brands within the next twelve months. And maybe there are some that could do that successfully. But for us, we like to focus on doing one acquisition a month is really what we try to focus on anywhere from twelve to 15 acquisitions a year and make sure that we integrate those brands operationally, financially. But then also the people we want to make sure that the people that are coming on board with that acquisition are also integrated. So those are just some of the few differentiations and a little bit of color to your question there.

Jeffrey Stern [00:21:57]:

So I think it would be really interesting to zoom in here a bit and go through something like a case study of what happens in the real world, practically from soup to nuts land. We can use that as a mechanism to explore some of these concepts. So I'll make up an example here, but I'm a mom and pop shop, and I have a shower curtain business that I started five years ago, and I'm selling on Amazon. I'm selling on shopify. I'll make up a number too. I'm doing 20 million in top line land, 4 million in EBITDA. And just through my blood, sweat, and tears of learning ecommerce, I stumble upon society brands having listened to Lay of the Land podcast somewhere along the way and reach out, and we end up connecting. How does this actually happen? The connection, the diligence vetting from your side, the valuation, the merge take us through that process.

Michael Sirpilla (Society Brands) [00:22:54]:

Yeah. So the very first thing, if you were that $20 million brand, $4 million of EBITDA, what we would do is you would get funneled to our M and A team. We have a head of M and a Laurent Truk land. Then we also have several other people on our M and A team. So just like anything, there's a funnel, and there's a few key things that we focus on. So it's not just simply the amount of revenue and profitability. We want to know that you're growing. So is your brand growing by at least 10% year over year? Are you at least 75% on ecommerce? It's okay if you have some brick and mortar, but we believe that it's important for society to be leaning into the future of commerce. So we want to know that you are either digitally native or focused heavily on ecommerce, at least 75% of your sales. And we also want to make sure that you aren't seeing any really big material margin compression when it comes to either marketing or supply chain. There's various different things in the P L that we can see to where there's some margin compression. So that's kind of like a high level. Like, what we focus on is e commerce, native brands that are growing in profitability and at least hopefully staying the same in margin or possibly even expanding their margins. And then we kind of dive deeper because there's six different categories that we focus on at society. So we would then hope that you were obviously in one of those six categories, we'd ask you to sign an NDA. For those that don't know, it's nondisclosure agreement and it's a mutual just. It goes both ways. So we know that everybody is not going to be sharing each other's information. And then we would send a diligence request asking for certain financial information, information about your product. The we do competitive landscape understand the competitors in your space, and then we get a rough idea as to how your business is performing in comparison to your competition, but then also just general revenue and profitability trends. And then we price the acquisition to see what is a fair price for us to pay for that given brand. It's generally a portion is cash. At close, a portion could be an earn out. So the better that your brand does, the more you get paid from a cash perspective. And then almost always we have an aspect of rolled equity where you are essentially becoming a shareholder in Society Brands. And as Society Brands gets more valuable, your rolled equity gets more valuable as well. We really want the founders to believe in that. So we do a prescreen diligence that it's called, and then we present an offer to you and then maybe you might say, well, I don't like this about the offer. And then we kind of work through to kind of cater towards what your desires are, but then also what our convictions are. And hopefully we can meet somewhere that makes sense for both of us to sign what's called an Loi or a letter of intent. And signing that letter of intent offers Society Brands exclusivity. Normally, it's 60 days to 90 days of exclusivity for us to do deep dive diligence land, really get a clear understanding as to how your business is performing. Because normally in prescreen diligence, we're making certain assumptions that these various different things are true. And then post Loi being signed, we're mainly just validating that what we believe to be true is true. And in our Loi, we're very transparent on if there are assumptions that we're creating, we let you know. Here's the assumptions. That way you can let us know if those assumptions are accurate or not before you enter into exclusivity with us. All right, so then we get an Loi signed. Then there's this diligence process. And biggest thing that I would mention there is a Q of E, which stands for Quality of Earnings, which is basically us working with an accounting firm to make sure that your financials are what you represented that they are. Here's the revenue, here's every aspect of the P L. And we can get a very clear understanding as to the profitability of the business. And if there's a Q of E miss or Quality of earnings miss, meaning that you represented that you were doing $4 million of EBITDA, but then after the Q of E, it's 3 million. And we were offering you this certain price, there's a chance that we're going to talk about it, right? Because we thought that the business was doing 4 million, and the turns out it's doing 3 million, right. So there could possibly be a price adjustment or maybe the acquisition doesn't happen altogether. That's likely not where we would want to go. We would try to figure out, like, hey, can we find a different price? Because here's the numbers, and it's a little bit different than what initially you had mentioned. And then we do product diligence and competitive landscape diligence, further operational diligence. And then once we get through every ounce of the diligence process, society Brands has what's called an investment committee. Land then we go to our IC or our investment committee and look to get approval on that acquisition. And what I love about Society's diligence process is the M A team is not just operating in a black box, where the M A team is the only one that's making the decision and really diligencing every ounce of what's needed. It's actually a collaborative approach with our operations team, with our product team, with our revenue team. So each one of our department heads are actually diligencing their own area. Biggest reason we do that is we would never want a situation where our M A team acquires a brand, and then our operations team says, why did you acquire this company? We don't have the same conviction. We want to get buy in before we ever do that acquisition. So we present that to our IC. Each department head essentially has an evaluation on various different things that they've diligent. And then we end up moving to a vote with our investment committee to move forward, assuming that we get that approval, then we negotiate actual definitive agreements because there's a letter of intent, which is kind of more so, high level, non binding, and then there's the actual definitive docs. And then we move forward with those definitive docs. In good faith with you, Jeffrey. And you would likely include your external counsel. So you'd hire an attorney to represent you. And then our attorney, our external counsel land yours would work together. You and our M A team would work together, and we would come to terms on the definitive agreements. Once we get to that place, that's when the fun starts, because we get to have a closing day or a closing call. And those are really fun to be a part of, because after we've gone through the diligence, which sometimes is a stressful moment for a founder to go through, we go through that and we go through the legal negotiations again, can sometimes be a little stressful. We're now at that place where we've made it, and we get on this closing call, where the attorneys are releasing the signature pages of everything, and there's an opportunity for us to celebrate with that founder because they did something. What I. Believe is the American dream, where you start something from scratch, you take something from your head, an idea that you had, you manifest it in the world, and you really are adding value, and then you're able to sell that for oftentimes millions of dollars. That's a really exciting moment for a founder. So we like to celebrate with them. And one of the ways that we go about celebrating with them post acquisition is we do a press release with them. One of the coolest press releases that we had, it was in the Canton Repository. So you can see here serpilla brothers launched society brands in Stark County. Society has been very fortunate. We've been in Forbes twice, cranes, Cleveland.com, all the local I'm very proud of, and also the national I'm very proud of. But one thing that's really cool is in your hometown. When your hometown puts an article about you, that's something that really hits home. And that's how I felt about all kind of the Northeast Ohio publicity that we've gotten, and obviously love the Forbes and that publicity as well. But with that, what we end up doing is for that founder post acquisition, we do a press release not highlighting Michael Serpilla, not highlighting Society, but we try to do a press release in their hometown of ABC. Company sells to Society Brands for millions of dollars for whatever the headline is, and then that founder contributes there, and it's their face on that headline. And we like to honor them and promote them in their own local community, and then we tend to do national press releases as well. So long winded there, there's obviously a lot that goes into it, but that's kind of from soup to nuts, from the very beginning to when the acquisition happens and everybody's celebrating.

Jeffrey Stern [00:32:15]:

Wow, fascinating. Thank you for peeling back the curtain there on how the sausage is actually made. It's such a cool process. So in this hypothetical, I'm really pumped. Now it's a privilege to be part of the society brand team as a founder. We've done a press release, and it actually goes back to one of the threads I wanted to pull on because you had mentioned this really kind of foundational strategy of retaining brand founders post acquisition, giving them ownership in Society Brands itself. And I know you had mentioned PNG as a model there, but what came to mind when you first mentioned that was most aspirationally. Perhaps something like Berkshire, where Buffett and Munger acquire these folks onto the team and then basically delegate at that point to the point of abdication land, really let those entrepreneurs set their own direction and standards, but able to pull from the shared resources of the parent organization. Can you talk a little bit about the thinking behind this approach of shared ownership and how it's played out so far?

Michael Sirpilla (Society Brands) [00:33:24]:

Yeah, so it's played out really well, but we have to be really intentional about it because there's two different extremes. One is the founder checks out altogether and then the company takes over. And that is one extreme. And then the other extreme is that the founder is just operating on an island of their own and nobody at Society Brands is participating. We don't do either one of those extremes. It is really focused on a collaboration with the founder and Society Land. So what the founder does is they are the brand president post acquisition, and they have full P L responsibility. But Society Brands offers them a shared resource model. So we offer the marketing services, new product introductions if they're wanting to launch new products, operational inventory management, supply chain, a lot of the things that normally the founder was doing. Because again, oftentimes they're solopreneurs, we're offering them a shared resource model. But what we need the founder for is their tribal knowledge, their heart, their expertise. Because what ends up happening oftentimes in private equity is the moment that that founder leaves, then the heart of that business falls apart. And what we need there is that vision, that direction on where they've taken the brand so far. And we want them to continue to keep on driving that PNL, but we want to take over a lot of the services. The kind of minutiae work that they were probably doing previously. One is a very easy one, which is accounting and back office, that's a very easy thing for us to take over. We have to take that over regardless. We do private audits every single year. So with that, it's important for us to kind of have those controls in place. But then also marketing omnichannel, like if we're looking to bring a brand not just simply from the direct consumer site, but they also want to sell on Amazon or vice versa, or on Walmart.com, we have experts that they could tap into doing that. So what we try to do at the very beginning is have a shared vision for where the brand is today and where we can collectively take it. That founder is the heart behind that vision. But they are tapping into a whole bunch of resources and services that we're essentially offering to them.

Jeffrey Stern [00:35:53]:

You mentioned know, back office, omnichannel, marketing, Amazon expertise. I'm curious, as these founders on board with Society Brands, how you think about taking their brand and scaling it right, taking it to a level of exponential growth. Do you think about things like the synergies between these different brands outside of the tactical lines of responsibility within the business? Is that interesting? Is that not interesting? What are the things that you guys are doing behind the scenes there?

Michael Sirpilla (Society Brands) [00:36:26]:

Yeah, absolutely. If it makes sense to doing cross selling initiatives, that's something that we certainly would do if they're in similar or adjacent categories. Another thing that we've done is we've consolidated warehouses because we had one warehouse in one part of the country and the an adjacent state, there was another warehouse. Well, one of those warehouses was really well run and it was very clean and we really loved how it was operating. And then the other one needed some TLC and wasn't maybe as efficient as the other one. So what we did is we moved this warehouse over to this one land. We were able to save money and we were able to consolidate things and really kind of create synergies amongst those brands. So it's not just simply cross selling initiatives to where, when there is an opportunity that we certainly do, but also consolidating physical locations as well, if that's something for us to do and other potential cost energies.

Jeffrey Stern [00:37:33]:

I'm curious. Just with all the businesses that you've both got to incorporate as part of the society brands family and just writ large, all the others that you've seen with one of the more sophisticated ecommerce platforms what have been some of the strangest or most non obvious things you've heard or seen someone do that leads to better revenue or optimizing ecommerce sales in some way.

Michael Sirpilla (Society Brands) [00:37:58]:

Here's one that is non obvious and it's surprising that it's non obvious, but founders rarely ask their suppliers for better prices. So in other words, if you have a relationship with your supplier land, most founders don't develop truly a relationship with their supply chain. At Society, we try to cultivate a relationship with all of our suppliers. And the problem with not having that relationship is you could eventually get better pricing and you could eventually do things like move the supply chain from China to Mexico. That's something that we've done. And it made sense for us to move the supply chain over there so that's supplier cost downs and negotiating with suppliers and really developing relationships with the suppliers, that is something that has been a low hanging fruit thing that we were surprised that most founders weren't doing. So I would say that that is a low hanging fruit thing. Another thing is a lot of ecommerce brands do what's called automated marketing campaigns, which is basically casting a really wide net amongst a whole bunch of various different keywords. So there's a whole bunch of keywords and they're trying to look for profitable ROAS. So ROAS stands for return on ad spend. So they're hoping that the average of all these keywords are going to average out to something that's profitable. And five years ago, maybe ten years ago, that could be the case where it was just wildly profitable because ecommerce was very new. In today's day and age, you've got to have more sophisticated marketing strategies on focusing on those keywords. So not just simply casting a wide net and just clicking a button and the you're hoping that it's going to be profitable. You need to manage and actually look at every single day, every single week, every single month what keywords are performing and the ones that aren't performing. Stop spending on those and then put those dollars to the ones that are performing. And that might even seem like an obvious thing, right? Like, well, if this isn't profitable, then I'm not going to spend there, I'm going to put it over here. But with the automated campaigns, it's just automated. It is what it is. So it casts amongst a whole bunch of different keywords. So that's another thing that we try to make a very data driven approach when it comes to our marketing strategies. It takes a lot of effort. It takes a lot of technology as well, because you need to have the right technology. I mean, we have probably 50,000 marketing campaigns spitting off every single day at Society Brands, and the only way that we're able to manage all that is through technology. So if you don't have technology like we have Evo or other platforms, then it would be very hard to be able to make those changes.

Jeffrey Stern [00:40:57]:

Looking a little bit towards the future here, you'd mentioned scaling to maybe an acquisition per month as kind of the target and broader growth strategy. I believe Society Brands may have had one of the largest early stage raises in Ohio's history here. So I'm curious, when you think about what comes next at a higher level, what does success mean to you and the organization? And when you think about that, what is the impact that you hope to have in retrospect land know, here in the local regional ecosystem?

Michael Sirpilla (Society Brands) [00:41:39]:

So, not to get too biblical for a second, but one of my favorite Bible verses is, to whom much is given, much is expected. And when I think of what you had just said there, Jeffrey, about one of the largest early stage raises in Ohio's history, I think of one word and I think responsibility. That is a tremendous amount of responsibility that myself and the rest of our team do not take lightly. I'm incredibly grateful for what we've done so far with Society Brands, but what we've done so far is nowhere in comparison to where we're headed. What I believe success is for us is to continue to keep on growing. Twelve to 15 acquisitions per year, and eventually have an IPO. When you think of like, economic, financial, still success, that's kind of what I would think of, is doing acquisitions, growing the brands, post acquisition, partnering with great founders, and then eventually having some sort of IPO where the story for society won't end. It's just beginning because as a public company, we then change the type of animal that we are. We're still an animal, but we're now a publicly traded company, and then we're further able to do more acquisitions, use our shares as currency, and really make a big difference. So that's kind of like from a financial perspective. When I think of just a humanitarian perspective of what we're building and how we're adding value to society, I think we're adding value to founders. I would love to see a time where we have so many founders that we've impacted that we were able to partner with them, acquire their business, and they were able to make millions and millions of dollars from that transaction. But then we were also able to cultivate a whole bunch of relationships in the process. That's where business gets to be a lot of fun is when you're partnering with people and then it no longer feels like work because you like the people that you're working with, you're connecting with the people that you're working with and then you're also, in some ways, sharing life with the people that you're working with. From the perspective of having company events and trips and things like that. I've benefited greatly in my life that way. So that would be another way that I feel like we're really going to add value. Then the last thing that I would mention, I'm sure that there's many more, but the last thing that I would say to that is how we're impacting consumers. We want to make sure that the products that consumers buy from society brands are the best products at a fair price. We generally focus on high value products, products that the everyday consumer can purchase. There could be an exception to that rule every now and then. But we want to make sure that when you buy a product from society brands, that it's a highly rated product, that it's a brand that you eventually develop a trust with and a rapport with. And that also it's something that is at a fair price for the consumer. So those are kind of the things of where I hope to see society go over the next several years and.

Jeffrey Stern [00:44:51]:

In that same time frame. If you instead think about the risks, why would it be the case that the business did not grow by multiples if it turned out to be that way? Where do you think about the risks and what it might be to falter what would have gone wrong both in the way the business is operating as well as potentially macro environment threats?

Michael Sirpilla (Society Brands) [00:45:17]:

So I would say that the biggest thing that we need to focus on as an organization is making sure that the companies that we acquire are growing post acquisition. And we really have had a good amount of success with that. But we need to continue that success not only on the brands that we've acquired so far, but the brands that we acquire for years to come. Because the fundamental truth that we have to answer for ourselves as an organization is is that brand better with us versus without us? And if we can continue to keep on answering yes to that, that brand is better with us than without us, then that should materialize itself with very strong organic growth. And that the brands that we're acquiring are scaling and growing and we're adding value to them. So when I think of the biggest, as you had called it, jeffrey Risk to Society Brands or any platform like ours, is Organic Growth. You want to make sure that you're building an operating system that allows you to manage many companies under one umbrella, have the right leadership in place, have the right systems and processes in place. So post acquisition, they're growing. If we have that growth in place, that is a really critical component. And at Society, my executive team knows this, but I develop this acronym called Rocco that's Raco. And I try to put blinders on what are the few things that make the biggest difference for us at Society. And I think it's really these four things. One is raising capital. Obviously, we've raised collectively well over $220,000,000 at Society Brands, and very fortunate and grateful for that. But there will be additional capital needs as the company grows. And that is something that we always need to make sure that we're doing a good job with in the public markets. That is a huge aspect, having not only retail investors, but strong institutional investors as well. So one is raising capital. The second one is acquisitions. Make sure that we're acquiring great brands at fair prices for Society. Then the next one is controlling costs. You've heard of many early stage companies that just they're growing, but they're not controlling their costs enough. And that's something that here in 2023, we've been blinders on on making sure that we have our costs controlled at the corporate level, but then also the asset level. So that's number three. Then the fourth is the one that I actually started with, which is the Organic Growth, making sure that the brands that we are acquiring are growing post acquisition. So those are the four things that are what we need to be focused on. And as you had called it, a risk, because you need to make sure that you need to do those four things really well.

Jeffrey Stern [00:48:12]:

When you think about those four things, there is a sort of underlying 900 pound gorilla in the room risk. I feel like that is laden and touches all those in a way which is Amazon. It's kind of like the overall tax on the Internet. Your margin is famously their opportunity. How do you think about its presence on the Internet? How do these e commerce entrepreneurs think about it? I know also kind of hilariously in an analogy that is, you know, arming the rebels against the Amazon empire. But how do you think about those larger players in the space?

Michael Sirpilla (Society Brands) [00:48:48]:

So, I think there's a few different schools of thought. One is like, look, I understand that Amazon has a high level control and they could change prices, and there's various different things that Amazon can do. We generally think that Amazon has been a good partner, but there are some that think like, hey, regardless, let's just focus on Amazon. Let's just grow on amazon. That's the only thing that we should focus on. There's the other school of thought, as you had mentioned, Jeffrey, the rebels on shopify just simply direct consumer, what we believe is a really balanced approach, and it doesn't mean that we get to that balance right away. By the way, if there's a brand that's 80% of their sales is on Amazon, 20% is on Shopify, we're not necessarily saying like, hey, let's focus on all of our focus on getting them off of Amazon, because quite honestly, one of the low hanging fruits could be that market that they've already proven themselves. How do we maximize that market? Land make sure that we get the most out of that market being Amazon, because that's where most of the consumer proof of concept is on Amazon. For that brand that's 80 20, it could be Maximizing, but over time we would want to see that brand get on Target.com or Walmart.com. Definitely direct consumer. We love brands that have at least some level of direct consumer expertise. Land proof of concept, then. The same thing is true with a brand that we look at that's on shopify. A few of the brands that we've looked at are almost entirely on Shopify, and we love that because we love the direct consumer. But we also want them to be able to take advantage of marketplace sales as well. So we do look at it as being a risk of only focusing on one platform for the long term, but in a very short term period of time. We don't look at that as a big risk, but we think over a three year, five year period of time, it's really important for all of our brands to be able to sell in various different marketplaces.

Jeffrey Stern [00:51:00]:

Of the things we have talked about, are there any that you feel are particularly important that we haven't yet that you think we should as part of the society brand story and your journey leading the company through that?

Michael Sirpilla (Society Brands) [00:51:16]:

So maybe one last thing that I think is really important. If you're an entrepreneur and if you're a founder, know that you can't do it alone. And what I mean by that is you need a strong team around you. And we've probably all heard the phrase that if you want something done right, you got to do it yourself. And I think that that is a surefire way to make sure that a business stays small. You need to make sure that you have a good team around you. Because all of us as entrepreneurs only have so many skill sets. Me as one entrepreneur and one person, I could take two approaches. I could say, you know what? I'm the CEO of this company, and it's either my way or the highway. Or I could have really smart people around me and make sure that I'm listening to what they have to say and they have an element of expertise that maybe I don't have. It's only in my own best interest to make sure that I am allowing them to come to me with ideas and thoughts and me being wise enough to listen to them. One of the people that I admire so much is ray dalio. He's a big finance guy right, in new york, and although it's very different business from society, he talks about cultivating a team and having the right people in. And I feel like that's one thing that we've done well at society. The biggest reason why we've been able to grow so much is because it's not just me. It's about the entire team. And the more entreprenuership embrace a team effort, it takes an element of humility, because all of us need to put our egos at the door and say, you know what? This is what I'm great at. Yes, I'm the CEO, but I want to have people that are smarter than me in the area of mergers and acquisitions, are smarter than me in the area of digital marketing and have those right people in place. And then you could really build and scale a business, because it's very hard to scale a business just simply by doing it yourself.

Jeffrey Stern [00:53:20]:

I think that's pretty powerful. So I'll close it out here with a traditional closing question that we ask everyone on the show, which is probably completely unrelated to what we talked about so far, but for your favorite hidden gem in the area, for something throughout northeast ohio, in cleveland, in canton, wherever that folks may not know about but perhaps they should.

Michael Sirpilla (Society Brands) [00:53:44]:

Benders restaurant in is that's a great restaurant that my wife and I go to in downtown canton. So I would say that's a great high end restaurant. It's been around for, I think, over 100 years, and it's got great food, and it's a really pleasant experience. So at least around canton, people know vendors, so it's not like that big of a secret. But that would be certainly one that I would mention for those that maybe aren't aware.

Jeffrey Stern [00:54:14]:

Awesome. Well, I just want to thank you again, michael, for taking the time to come on and share your story. It's really impressive and fun to watch the work that you're doing at society brands. So thank you very much.

Michael Sirpilla (Society Brands) [00:54:27]:

Yeah, thanks so much, jeffrey. Appreciate everything that you're doing.

Jeffrey Stern [00:54:32]:

Had anything that they wanted to follow up with you about, what would be the best way for them to do so.

Michael Sirpilla (Society Brands) [00:54:36]:

Yeah, so the best way to get a hold of us is our website, societybrands.com. There's a contact us page. If there's a question specifically to me, maybe the best thing to do is just say, please send this to michael, and then somebody on our team will literally forward that over to me, and I'd be happy to be happy to reach out.

Jeffrey Stern [00:54:58]:

Perfect. Well, thank you again. All right, thank you that's all for this week. Thank you for listening. We'd love to hear your thoughts on today's show, so if you have any feedback, please send over an email to Jeffrey at layoftheland FM or find us on Twitter at podlayoftheland or at @sternjefe. J-E-F-E. If you or someone you know would make a good guest for our show, please reach out as well and let us know. And if you enjoy the podcast, please subscribe and leave a review on itunes or on your preferred podcast player. Your support goes a long way to help us spread the word and continue to bring the Cleveland founders and builders we love having on the show. We'll be back here next week at the same time to map more of the land.