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Joe Cassandra

@JoeCassandra

Nov 11, 2023

Harsh truths about having kids for millennials on the fence about whether they should or not

(Have 4 myself. Come from family of 11 kids)

If your relationship w your spouse sucks before kids It's going to 50x suck with kids

Honestly, the #1 tip to handle kids is have a rock solid relationship...and to keep working at it

Because you'll find the magic wane as you lose sleep + being elbow deep in poop

The old days of just getting down w your spouse at the drop of a hat is going to hit a wall

As sleep deprivation, stress etc swallows you

You have to double the work on your relationship (which is hard as hell with kids hanging off you)

Read 30 tweets

Joe Cassandra

@JoeCassandra

Sep 22, 2023

We sold our children’s brick-and-mortar retail business…

But it was ultimately a failure...

Ending with our manager yelling at us in front of the new buyers about how we’re the ‘worst bosses she’s ever had’

Bought it after seeing a tweet on here about biz for sale on Loopnet. Closed on store in 40 days.

Started off well, big plans… but, eventually we failed & dumped it.

Read about employee theft, bad luck, almost sued, city screwing you over and you have to take it… and more.

Lessons & what it’s like to own a retail business (& owning a biz w/ your spouse to boot)

(Long post ahead, get coffee and bookmark).

***************************************

Store was a girl’s children’s clothing & gift spot in our Downtown.

We could walk to it. We live in one of the fastest growing counties in the state, we were already customers of the store, items in store were unique…

Old owner was burnt out from retail, had stopped investing in store.

Our thought:
We put up ecommerce (had none)
Invest in marketing
Invest in more inventory
Build the brand

Expand to more stores… become a national brand, land on Oprah… ok, I’m stretching.

Everything seemed to line up.

We self-funded the store w/ an outside investor who had invested in one of our real estate projects.

We were buying the store for 0.8x its EBITDA of 2018. We were confident we could get it back to 2018 numbers (we bought in 2021).

At the time the store did about $500k in sales which is pretty good for a small retail outfit with no online presence.

Foot traffic was gravy in this part of town.

The store had 6 employees led by a 20-something manager who’d been there for 4 years & knew the store inside and out.

“Great, we can lean on her expertise as we learn the ropes.”

And we did.

We gave her a 20% raise Day 1 & near autonomy on running the store while we learn.

Our skills coming in:
Me: I’m a marketer full-time. Accounting background so I know numbers.
Wife: Great at fashion, merchandising, and in-person selling (she’s awesome)

I was so cocky & arrogant, before we even closed on buying the store, I was looking at a 2nd location in a satellite city that was also growing.

Fortunately, the original seller talked me down & told me, “Figure out 1 store first, because two is harder than one.” (She owned multiple women’s stores as well.).

Here’s the business model for a retail store like this one:

Buy a bunch of inventory from wholesalers
Mark it up a minimum 57%
Sell

Children’s clothes (as we find out) have lower margins than women’s clothes. Women’s clothes, they can jack up the prices by 80%+.

Women will pay that.

Children’s clothes… moms are less willing to open their wallets that high.

-A woman will buy three $150 dresses for herself in a weekend.
-That same woman may only buy one $150 dress for her kid in their lifetime.

The goal is they buy an outfit, then you can upsell them on jewelry, gifts which have those 80%+ margins.

In this children’s stores best years, they would hit that 57%+ gross margin.

During Covid and later, the gross margins were sinking… 53%... 50%.

Red flag we should’ve seen.🚩

The biggest expenses in a retail store:
Inventory
Employees
Rent

Other than that, it’s pretty standard set costs --- electric, internet, point-of-sale, credit card fees, etc.

So obviously, if you can get one store to go from $500k to $1M without spending much more on employees… your rent is the same, so is electric, internet, etc.

That’s where you can make money. Even if gross margins shrink, your volume can make up for it as many costs can stay fixed.

…or at least that’s what we thought.

🚩We did all DD ourselves, which meant I didn’t know what pitfalls to look for.

The original seller had a holdco that rolled up all her retail stores into one biz. She was breaking this children’s store out of her holdco.

“I can’t give you my tax returns as that has everything.”

So she gave me QB printouts of the store’s financials for DD.

“That’s fine”, I said. “I was an accountant.”

Famous last words.

Every year, the seller showed a profit.

For a retail store like this:
Gross margins should be 60%
Rent should be 9% or less of revenue
Payroll should not go over 14%

Meaning, if after all these costs even, plus normal credit card fees, office supplies, etc… we could net 15-18% pretty steadily.

All the numbers seem to justify this and we moved forward.

A mistake we made was we ‘fell in love’ with this deal. So no matter what small bumps or flags we saw, we waved them off.

🚩A few days before close, the seller told us, “Oh yeah, the HVAC is old and will probably need to be replaced.” That’s a $10k hit. Waved off.

🚩Day before close, seller runs a big sale if people spend $100, customers get a free $50 gift card.

On Day 1, we were now on the hook for thousands of dollars of gift cards. And the seller’s response was, “You said I could run any sale I wanted to get inventory down.”

Waved it off.

🚩“We’ll run this store better than her anyway.” (stop thinking you know better than grizzled vets)

Again, right away, we hand the keys over to the manager and let her run the shop.

She handles employee issues, she inputs all inventory, she helps us buy new inventory, she buys office supplies as needed, makes the schedules etc.

Meanwhile, we work on “high level” stuff like finding new vendors, marketing efforts, planning store events, my wife does merchandising and is in the shop 1-2x per week learning the ropes.

Immediately,

-We bring in double the inventory the old seller had.
- We launch marketing efforts costing thousands… run online ads… start sending weekly emails.. Posting daily on social…

We’re seeing sales go up.

Soon, we’re hitting record months. (the store was 5 years old at this point).

Last 6 months of 2021 were great… we were profitable… staff was happy.

We got drunk on this beginner’s luck (free guvmint $) and let the manager expand hours for the other employees, she herself got lots of unchecked overtime

“We’re investing in growing this store and need a great team”

Mind you, most of the employees were high school kids just making some side money. Their motivation is sometimes there, sometimes not.

By 2022, we’re rolling.

The first half of 2022, the store did the most revenue it ever did in that timeframe.

Our events were full.

Everything going great, right?

I did the books for first half of the year…

😡We were showing a big loss.

“WTF”... our revenue is great!

What happened?

My thesis was wrong.

🤢Even though sales were going up, payroll was not 12-14% of sales… it was 22%+ because of all the unchecked overtime… girls hanging around past their shift.

Meanwhile, gross margins weren’t 57%...

🤒They were 48%!

We’re perplexed. Mind you, inflation in 2022 was picking up fast. Dresses we used to buy for $15 were now $25. Shipping was $5 before, now $15. Those add up as they cut into your margins.

That wasn’t the only thing.

🚩🤡When the original seller showed her books, she showed office supplies and shop repairs as extremely low. Maybe $700 for the year.

We were doing $700+ per month!

From needing the windows cleaned, bugs sprayed, HVAC fixed, snacks for the workers, toilet paper, paper towels, new hangers, birthday gifts for employees…

What we realized later was the seller likely hid those expenses at the holdco level…

Or hid them on the books of the other retail stores.

So she’d buy a huge bulk of toilet paper for her best store, then bring some of the TP over to the children’s store. No paper trail.

…

Meanwhile, the manager decides to fire our 2nd best employee b/c she didn’t like her. This 2nd employee was 50+ year old but an amazing saleswoman. She’s working with a bunch of young girls, tho. It didn’t mix well.

To keep the manager happy, we let her do it.

We also notice the manager’s been getting lax with her schedule. The store doesn’t open until 10a.

She originally would come in at 9a.

🤡Slowly… that became 830… then 8… some days she’d clock in at 7:15a!

In July 2022, we have an emergency meeting:

-Cut payroll way down
-Manager can’t come in more than 1 hour before her shift & no overtime
-Inventory margins need to be higher or find new vendors
-Get more net60 terms

Let’s step back for a second…

Retail is a different biz than service.

In a service biz, you likely get paid something upfront… then it’s using that money to pay your workers to do the work.

Or, you do the work (your time) and get paid at the end.

Retail is different.

😩You’re spending ALL your money upfront to acquire inventory and then marking it up. Meaning, you have massive negative carry for awhile… especially if items don’t sell fast.

In a business like this, your choice is to fund from profits or fund from debt.

Seeing as we discovered we’re losing money… we’re now carrying debt with rising interest rates!

Our plan was to cut fat but keep pushing sales…

Unfortunately, summer 2022, we saw a shift in consumer behavior.

Money started flowing out of goods and into entertainment (restaurants and travel).

Our sales started dipping. Just slightly in 2022… but it was noticeable that the holiday season was disappointing.

👍A good way to cut expenses could’ve been we fire the manager (who now was making 50% more than she did a few years prior) and my wife work full-time in the store. “Artificial profit.”

👎But I was still arrogant in the sense of “We can’t work IN the business, we need to stay working ON the business. We need to expand.”

Our goal for 2023 was to set up the store to be able to expand.

We wanted a clean slate.

Goals for 2023:
-Every expense accounted for & approved first
-Negotiate harder with vendors
-Raise prices 20%+
-Push harder on marketing again
-Get all processes documented
-Develop a sales script (sales script jumped cart value by 20% in a week)

Unfortunately, with a slow 2022 holiday, we were left with bloated inventory.

Tons of fall/winter inventory we didn’t sell.

I made a (bad) decision not to heavily discount it in Nov/Dec to get it out the door. “We’ll save it for when demand comes back.” Never do this. Just cut your losses and go.

2023 started off good… record January and solid February.

But margins were still getting crushed.

We were still losing money despite pushing hard to get revenues up.

March - June sales kept falling.

We were trying to unload bad inventory but still trying to pay off that debt from 2022… so we couldn’t bring in a ton of new stuff…

It seemed like a hole that you try and dig your way out of … and it just keeps going down.

Nothing we did worked.

***

A big move I wanted to make when we bought the store was to add ecommerce.

The store ran on Quickbooks POS. No online presence but Instagram.

We came in, added more social channels, got dozens of 5-star reviews, posted new creative, etc.

Then, early 2022, we moved to Shopify POS. Quickbooks POS doesn’t sync well with ecommerce. We needed an online platform that also had a physical store component. Shopify does (it really is a great product).

There was a big grind to move all the inventory over, but we did…

Then, we got everything set to launch online in June 2022.

“It’s going to be big. Customers who shop with us in store will now also be able to shop online, pick up in-store… amazing.”

We worked for weeks to get the online store set up, pictures, etc.

Light went on June 10th.

💤Crickets. Effing crickets.

Our first day online we sold maybe $100 of stuff. Half of that was my mom.

It was embarrassing as I was getting the employees excited about it.

“Maybe we need better pictures and descriptions.”

Worked on that. Didn’t move the needle.

I even tried stupid stuff like “Flash sale 50% off all shirts and pants.” Would get a trickle of sales.

Our in-store customers just didn’t want to buy our stuff online. They wanted to physically come in and buy.

So, I did what any desperate person does to sell online…

🥹Started buying FB ads like a mad man.

July 2021, FB ads had gone off the rails thanks to the ios14 update. Many online stores made a killing for years thanks to FB ads… saw their sales dry up overnight.

I thought, in 2022, “I don’t care, we’re going for it…”

Spent thousands across the US to try and drive sales.

Sure, we drove some… but the profit was negative. It at least let me save face with employees (for a little) that online worked.

Still, we were losing money.

🤡Other mistakes we made:

The biggest event the store did 3-4x per year was a “Model Call.”

Moms could bring their kids, buy an outfit, model it for us and we’d feature them online/social media etc.

The sales would be double-triple our normal weekends

The first one we did, I drove the most sign-ups the store had ever done by triple. (good marketing across the city).

Unfortunately, half the people on the model call day showed up, couldn’t find parking and left…

(Our DT is famous for having bad parking especially on the weekend).

We decided these Model Calls were a hassle (and they were) so we would try and get more of our BEST buyers into the store more by featuring their kids.

In hindsight, was a terrible idea.

Our BEST buyers were our best… but just b/c you get them into the store more doesn’t mean they’ll drop $300 each time like the other times.

Was a bad idea to stop these Model Calls.

🤡Next, when we first bought the store, I did a weekly email.

The email was written in my wife’s voice and I’d normally share a personal story, a very 1-to-1 type email. And it did very well. Customers loved it.

The manager hated them.

My wife was uncomfortable as she’s never wanted to be an ‘influencer’ type and didn’t want the spotlight of thousands reading about her personal life. (I don’t blame her and don’t want her to be uncomfortable).

So we turned back to the normal retail emails of “20% this week” with flashy pictures. Didn’t do as well.

🤡Next… our marriage was struggling.

Every conversation would go back to the store.

We’d argue about strategy, finances, “why isn’t this making money,” “why’d you buy this stupid thing, Joe”...

She would have to be at the store while our kids were at home wondering “why is mommy gone again.”

Our kids at the time were 1, 3, 5, 7.

My wife also likes to volunteer at school and extracurriculars…so she’s putting those on hold while she’s running around town prepping for an event, or taking pictures for the website.

She was burning out as she was legit working for free.

Last…

🤡One of the contentious points for our marriage was my wife wanted to fire the manager after a few months.

The manager is knowledgeable, but very stubborn, never admits fault, she does things her way, can be very biting with words.

My wife had to work with her more than me.

She’d tell me, “We should fire her and I’ll find someone else to train or I’ll do it.”

🚩I told her, “No, we can’t be working IN the biz, let’s just wait. Training a new manager will be a pain.”

I kept kicking the can down the road…

I’d ignore red flags like when the manager clocks in but doesn’t actually come into the store for another 20 min… little steals here and there.

My wife would merchandise the store on Friday… by Monday, the manager changed it back to how she wanted it.

It was a passive aggressive struggle.

It came to a boiling point in June 2023…

My marketing biz was going through a transition and I told my wife,

👀“I can’t do any more with this store. We’re not making money, I need to focus on my one business. I made a mistake trying to split my time with marketing biz, our real estate biz and this. None of it complements each other.”

My wife said, “We should just sell the store.”

And we looked at each other and we both knew it was the right thing to do.

With young kids… we also wanted to move 30 min away to be in a top school district…

I wanted to double down on my financial biz…

She wanted to volunteer more and enjoy the last of our now-2 year old before she goes off to school next year.

Within 1 week of this convo, I had posted the shop for sale.

Got dozens interested.

Found a local family who owned another non-related biz.

I shared all the financials truthfully, all the issues we faced, all the things they needed to do.

😡Two weeks before close… that darn HVAC finally ate it and broke down. With no recourse, we had to shell out $7.5k on a new one (got a deal).

During the buy, the buyers were dragging their feet on getting landlord approval. They didn’t get approval until the day of closing.

It was stressful.

😡A week after closing, they message and tell us, “Inventory is $10k short of where you said it was.”

We’ve counted inventory multiple times and it was never more than a few hundred dollars off.

That’s when it boiled over…

We know the manager effed things up, likely stole a bunch, but we couldn’t prove it.

🤢That’s when she shouts we’re terrible owners…

All this while the buyers are standing there… likely partly regretting now being in this situation…

We weren’t terrible owners in we treated her badly. After all, she got paid 50% more than she used to, got to take multiple trips to DFW, one to Nashville, autonomy with her schedule, hired who she wanted, many gifts, dozens of meals paid for, 3-4 weeks of PTO…

We were terrible in not being there daily to direct the ship… also in failing to realize our vision of expanding stores.

We came to an agreement on the inventory based on stuff we found and they chip in for the HVAC.

Wiped our hands clean and that was it.

Everyday I’m relieved we got out & now I can focus on my marketing biz that’s made 6-figures in just the 2 months since we closed.

SOME LESSONS/FAILURES THAT DIDNT FLOW IN THE STORY:

1. If there aren’t competitors in your area, that doesn’t mean you found a goldmine. It means it’s a bad idea. There were no competitors in our area within 10 miles that wasn’t a big box store. It means there wasn’t enough demand.

2. One of our longtime customers came in 2022, asked about how our store worked, etc. She owned a women’s boutique so we thought she was just talking shop. She then opened up a competing store 2 blocks away.

3. Don’t think family and friends will suddenly want to buy everything from you. Many of my family never shopped once with us. You can’t force people to spend money. Don’t bank on it.

4. Be stingy about giving out the family/friends discount. Once you open that Pandora’s box, you can’t close it. You’ll have Janice Smith who you met once come in claiming she knows you and wants 15% off.

5. If the business model is too easy, it’s going to be a rough road. For retail, there are markets across the country you can show up, with a Sales&Use ID and buy items wholesale to re-sell. It’s very easy. If it’s “very easy” , it’s a bad business.

6. Retail is NOT something you can passively do. That was one of our biggest mistakes. You need to LOVE retail. Part of it is passion, the other to make money. D2C isn’t retail as you’re making your own product. Small business retail doesn’t operate like WalMart. Walmart, if they don’t sell your wholesale products, they can ship ‘em back to you and get a refund. Good luck doing that as a small business.

7. After we sold, a vendor called up and said we owed her $3k and was going to sue if we didn’t pay. Apparently, we ‘ordered’ product 4 months prior and she was about to ship. I told her we sold and didn’t need it. She said we’d hear from her lawyer. I said, “do it.” She came back and offered a deal. I told her “My lawyer said we don’t owe you anything, but we did order them, so I’ll give you $210 to never contact us again.” And she took it.

8. I told the new owners, “You’re likely buying this store at the bottom. Once the economy comes back, this store will do well again.” And I mean that. Here’s the lesson --- every business has shit you have to go through. You have to know what shit you’re willing to put up with and what you don’t. For me, I realized retail shit is NOT the shit I want to deal with.

9. The idea of owning multiple businesses sounds sexy on here… it’s not. Focus hard on the businesses you enjoy and are good at that you have an edge in. There’s NO such thing as passive income or a passive biz… unless maybe you’ve been doing it for decades.

10. Dealing with low wage employees is taxing work. It’s not fun and you’ll have high turnover. If you NEED to have low wages, you better be getting them overseas else you’ll have daily headaches juggling minimum wage employees.

11. If you’re going to own a business with your spouse, make sure you both are on the same page, do NOT spend all the time talking about the business, and if someone believes strongly in something, make way for them to go through with it.

https://twitter.com/JoeCassandra/status/1507397560897577014

If you want to hear about how things were BEFORE it got bad...

Listen to this embarrassing podcast I did with @girdley

I think it's their most popular downloaded one. Sorry guys lol.

https://twitter.com/JoeCassandra/status/1507397560897577014

Read 4 tweets

Joe Cassandra

@JoeCassandra

Jul 31, 2023

twitter.com/i/web/status/1…

Don't hire HVAC folks, plumbers etc who drive around in those fancy painted cars

They're not a 'contracting co.' They're marketing companies

They take what it costs, double the price

Just go to a FB group for "RE investors", ask for XYZ contractor

You'll save a fortune

That… twitter.com/i/web/status/1…

twitter.com/i/web/status/1…

It doesn't mean these people won't have 'reviews/credibility'

many still have small FB pages & a few dozen google reviews, but they aren't good marketers

So the big fancy places dominate the search rankings w/ 10k Google reviews

But those people are paying premium prices for… twitter.com/i/web/status/1…

Our go-to painter for houses is 1/2 the price of the fancy car guys

I tell all my n'hood about him. He's painted half the houses on our street

And they all say "He's 1/2 the price of the other guys"

Read 4 tweets

Joe Cassandra

@JoeCassandra

Jul 23, 2023

Men are expected now to make way more money,but also be 50/50 raising kids & keeping up the house

Women are expected to keep a Instagram home & perfect kids (w/ no help),be 'active' at school, & make $ now

It's a crazy battle going on in the US

How we stay married w/ 4 kids:👇

Learned from a divorce lawyer recently... the largest cohort of women he's seeing file is married working moms who realize: "I'm taking care of the house, kid's schedules, etc & making money...why do I need this 'extra child' to keep track of"

It's effing sad

MEN:

This isn't the 1950's anymore.

Where you come home late from work after being at happy hour, sit in front of the TV, Mary Tyler Moore brings you dinner then she goes and puts kids to bed

The house is now 50/50. I clean the kitchen, bathe kids, sweep, do laundry at times

Read 16 tweets

Joe Cassandra

@JoeCassandra

Jul 1, 2023

How to get your name in major new pubs.

My Dad sent this text when a friend saw us mentioned in WSJ

For 2 weeks I commented on diff reporters posting articles on Linkedin to see how easy it is to be 'interviewed'

1 reporter reached out asking to interview us

2 weeks later...

Other times, just reach out and ask. I did that with INSIDER and they wrote a whole article on me

Even better, now you have a reporter who you can reach out to whenever to get featured again and again.

Reporters are starved for good stories

Read 4 tweets

Joe Cassandra

@JoeCassandra

Jun 30, 2023

Zillow $Z gives mountains of data away for free.

You can pull current inventory, values, rents for hundreds of major cities.

Some cities like Austin are already above 2019 inventory levels. NYC down 50% still

I'll post the link in the next tweet, plus share a few findings

Here's the link to it

You export to an Excel and sort columns (like below)

https://t.co/CyoESkmdApzillow.com/research/data/

Overall, we're still 45% below the inventory of 2019 in the US.

Austin and New Orleans are the only ones ABOVE 2019 inventory levels.

However, prices for Austin are up 51% from May 2019 + NOLA up 24%

Austin prices down 10% from 05/22.

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