Talking Business with Daymond John: Pound Cake Society, LLC 

BRG – JPMC – Daymond John Pound Cake Society – Transcript

Daymond John:

Hello everybody, I'm the shark, Daymond John and today, we're talking business.

(soft music)

Welcome to entrepreneurial conversation. I am the shark, Daymond John, and I have the pleasure today to be speaking to Adrienne and Rana of Pound Cake Society and Everyday Ritual. How are you?

Rana Farshoukh:

Oh wow, thanks.

Adrienne Stewart-Gordan:

Thank you. How are you?

Daymond John:

I am amazing, amazing. Thank you for being here with me now. I know a little bit about your history, and I found you fascinating that, you know, fashion is your love and your passion, obviously it's mine as well. And, I know that you had a show on at one point and you decided to shut that down and, you know, pursue... which I think is harder than any other career, which is stay at home parenting. (laughs) So, shout-out to moms and dads, but shout-out to moms. And so why don't you tell me a little bit about Pound Cake Society, and Everyday Ritual? Where were you prior to the pandemic? Where are you now? And then let's get into some questions that hopefully I can answer and you can learn from me. And hopefully I can learn from you at the same time.

Adrienne Stewart-Gordan:

Pound Cake Society came about because my longtime friend and now business partner, Rana, and I, when I moved back to Los Angeles from Connecticut, she was waiting. Oh, so years and years ago, we both have worked in fashion. We both studied science in college-

Rana Farshoukh:

Yeah.

Adrienne Stewart-Gordan:

And I had a showroom and she was manufacturing. And we got together to create a really beautiful line of skirts called palazzos, and we had major success with it. And then around 2006, we did the whole family thing. But we kept in touch. Yeah. So when I said, "Oh, we're moving back to California." She's like "What do you want to do?" And I'm like, "I'm studying medicine now." "What do you wanna do?" (laughs) I was like, "Let me see". And I said, "Sleepwear"

Rana Farshoukh:

Because it's easy. It doesn't go out of fashion. You can stock pajamas. It's not like it's gonna go out of style the next year. So there's no danger in having merchandise around.

Adrienne Stewart-Gordan:

But it's mostly something really nice and pretty for you. Your everyday ritual.

Daymond John:

You went through a very challenging time. And then all of a sudden you open back up and boom! COVID hits.

Adrienne Stewart-Gordan:

We started the business in 2019, but 2020 was our first official sale. We had our first sale with Nordstrom, $30,000. We hit the jackpot. We were ready to go. It's supposed to be delivered in April. And... COVID. You know, COVID was happening. All of our wheels were turning. We didn't know how bad it was. I'm trying to get, you know, you could see it coming in the tea leaves, schools are gonna be closed. What am I doing with my child? My husband will be home now all the time. And you know, how does that work?

Rana Farshoukh:

Fabric was not coming from China, 'cause China closed down, but we had local fabric.

Adrienne Stewart-Gordan:

We had a little bit.

Rana Farshoukh:

That we were ready to make pajamas out of.

Adrienne Stewart-Gordan:

For samples, actually.

Rana Farshoukh:

So we cut them, made them into masks. Instead of making pajamas, we took that same poplin and boom! We started making masks.

Adrienne Stewart-Gordan:

Rana came to me and she said, "You know, we've done a couple requests, just random requests for masks, government, manufacturers, who does this, who does that?" She's like, "I'm thinking maybe we'll try and make some masks." And so with her background in geophysics, went out and really put together a good mousetrap. Like it's a really good mask.

Rana Farshoukh:

So we ordered a few thousand yards of that. Cut them up into masks, cut up our pajamas, and a bunch of masks.

Adrienne Stewart-Gordan:

Where we are today is, we are manufacturing masks that around 100,000 a month.

Rana Farshoukh:

At least.

Adrienne Stewart-Gordan:

At least.

Rana Farshoukh:

And we supply a lot of masks to... major corporations. (upbeat music)

Daymond John:

How did you get to have these major outlets come to you?

Adrienne Stewart-Gordan:

I... you know, our comfort zone, our business model was business to wholesale, business to business. And when we sold the 40,000 masks to the individual members of our society, that was a challenge. It was new for all of us. I found my comfort zone to be in business to business. So we started sending out feelers and went with people we knew that worked for companies that we knew and said, "Hey, we've got this mask. If you guys are trying to get back to work, let's see if this works for you."

Daymond John:

The easiest thing to sell is the truth. And if you put that kind of quality and that kind of effort into it, obviously product is king in any business. Right? But next, I think the people can learn from you is that: just pick up the phone

Adrienne Stewart-Gordan:

Yeah.

Daymond John:

Don't have to hire all these fancy salespeople... pick up the phone. Nobody will sell your company or your product or your love better than you will. So what is the question that you may have from me? How can I, hopefully give you some insight?

Adrienne Stewart-Gordan:

I think the first question is just basically about cashflow loans versus investors. How do we get to the next level? We have the business, but the investments are now really outweighing what we've been able to cover personally, correct?

Rana Farshoukh:

Yes.

Adrienne Stewart-Gordan:

Yeah. And we also want to pay ourselves. We pay everyone else, we don't pay ourselves.

Daymond John:

You haven't been paying yourself.

Adrienne Stewart-Gordan:

Not yet.

Daymond John:

Okay, so... as you grow the business, you're going to have to find some level of a strategic investor, but the sooner you take in money, the more it costs. And we have to look at the business now. If you have not paid yourself, and I think you said you have, is that a million dollars in orders? How much cash do you need to be invested in the company?

Rana Farshoukh:

We could use a million.

Adrienne Stewart-Gordan:

About a million.

Daymond John:

Okay. So you are selling right now, strictly B to B, or are you selling B to C?

Adrienne Stewart-Gordan:

We're doing both B to B and B to C. What percentage of the business is B to B, and what percentage is B to C?

Adrienne Stewart-Gordan:

B to B is, I'd say 90, 95% of the business. And B to C is 5%.

Daymond John:

Here are a couple ways to think about it. When you're dealing with the stores you're dealing with, you're dealing with the top chains in the world, and that's great because they can highlight you and put you on a great stage. You have the consumer in there with the disposable income. When you get in orders from them, have you ever looked into factoring?

Rana Farshoukh:

We have, we have looked into factoring. Mostly, we have not done factoring because it's been for the masks where we can write these ginormous orders for $300,000. And the margin on that, we were trying to keep as much of it to ourselves. And we, because we managed to actually finance up to now on our own, those kinds of orders. But we keep getting more orders. And that's where we're like, "Oh, I don't think we can keep going with our own money going forward."

Daymond John:

Factoring... I'm not sure the rates today in factoring. I find that to be a little bit better. I'll tell you why. And for those who do not know what factoring is, you have credit worthy stores. They place an order, let's say for a million dollars and, a factoring a financial institution gives you an advance on that, but they put a VIG on the, the amount of it. However, they don't take any of your company, which is the important part. You get to grow the company. And, you know, as you gain more credit with the factors, you know, you can get 5, 10, 20 million, because what if you took in a million now and somebody wanted to take 25% of the company or 20% of the company. Well, then it doesn't look like you women are slowing down , when you have $10 million in orders and you need to raise another three. Well, I'm not giving up the 25% that I have. Why should I? And then you end up working for the investors. Slow and steady growth is important. However, the margin is the most important thing. You know, how much are you traditionally making? What is your number one seller? How much do you make that unit for? And how much do you sell it to the retailer at?

Adrienne Stewart-Gordan:

We were working off of a 60% margin. So 2.6 is where we're going with the retailer. And then, that's because we know what their margin needs to be. So we cover ourselves.

Daymond John:

Your margin is healthy. That means there's some other place, there's some other leakage going on. Because if you look at, as you break down, you know your margins, it should be 50% is here. And you have payroll, you have advertising, marketing, advertising, marketing should be 5%. Payroll and everything else should really all come to probably about 30%. And you could, you know, profit probably about 20%, 50% for cost of goods, 30% for everything else. And then 20% goes into your pocket. Yeah. There are some places that you are over-indexing in. That I don't happen to know where.

Rana Farshoukh:

Okay so-

Daymond John:

Maybe you have too many people in payroll, maybe rent, warehousing, something else.

Rana Farshoukh:

No, it goes in, let's say when we have the mask order for a couple of hundred thousand dollars, that needs to be finance, that we have to buy the fabric, we have to pay for the labor on that. And what's happens is, the contract that we have with our big clients, says that they need to put 50% down. And then 45 days after we ship, they do the other 50%. That has not happened.

Adrienne Stewart-Gordan:

No.

Rana Farshoukh:

They have consistently not put in the 50% deposit, which we were hoping to get. So we can finance those orders for a hundred thousand 500,000, 300,000. So the money coming in from the clothing, which is about a third of the business, really two thirds is from the mask, goes into financing production of the mask. And then when it's, when we shift, we have not received the 50%, even though we've gotten... we could use your advice on how to deal with that, really. And they'd go past the 45 days. We struggled to get paid from them.

Adrienne Stewart-Gordan:

A lot of it.

Rana Farshoukh:

On time.

Adrienne Stewart-Gordan:

Yeah. A lot of it is, I think when you're dealing with, I'm not making excuses, but it's been my experience that dealing with some of the bigger platforms, you know, you don't get a person, it's all automated. When you get to a certain level, it's all just getting through the accounting and accounts payable, receivable piece of it. They like to, you know, "It's submitted this way, it's gotta be that way." There's no real consistency from big company to big company with their platforms and how they want these things submitted. So we find ourselves...

Daymond John:

You also cannot, you cannot be a manufacturer and the bank at the same time. That is not your business to, as we call in the business, hold the paper and wait 45 days. So you're gonna have to have those discussions because that can put you out of business, unfortunately. So you will have to have that and you may not have- listen, all money's not good money. And I think that you will, you may have to have that discussion. I think you also need desperately, is to educate yourself on B to C, because B to C is whether it's your crowd funding campaign or whatever those were. You can obviously take pre-orders on these things and your margins are much bigger. Now it's easier said than done. But I like to say, I wanna be one step away from the money. You know, when I was prior to being on Shark Tank and prior to social media out there. I was just like you. You know, I would make a product. Hopefully the store buys it. Hopefully the kid that's busy on, you know, Instagram or looking for his college application, brings it out of the back and puts it on a rack. Hopefully a, you know, a person goes by and they like it on the rack and they pick it up. Hopefully there's not a long line at the register, or somebody's not even at the register and they don't just put it down, said come back to it. And hopefully they take it home and they like it. And if they don't, they return it. And now I got... You know, the store asking me to take back goods and I'm making much less instead of selling it directly to a customer. And being able to make this thing at 29 and sell it for 1.20. You get the money, you know, right there and know the customer. Because you know, after you know the customer, then you know how to upsell them and or say, "How did you like it? Can I have a testimony? What more can we do for you?" And you have now all the ambassadors running around, talking about your brand, you are directly talking to them and you are making twice the amount of money. I would really highly suggest investing in understanding social media conversion, and dealing direct with your customer. And that's the only way because you need, you need to bring in more cash or you need to be retaining more cash. All good. So congratulations on everything. I think that you're off to a great start. A 100% sell throughs are so, so rare. I think you just have to touch up a couple things, how you're getting the funding, meaning don't be the bank at the same time as the manufacturer. Express to people, you know, your challenges, people are people at end of the day, if your brand, your product, has already worked, at these companies, well, then you already have an in and you can say, "I just can't afford to do it this way." And I'd rather be that great story of how I have provided for you. And you are supporting two amazing women entrepreneurs. And I'm sure with your big organization, you can afford to just, you know, give me the money, hopefully as I deliver it on time. You don't wanna, you don't want to put me out of business. And then also learn how to, keep learning how to talk directly to your customer and be one step away from the money instead of seven.

Rana Farshoukh:

Great advice.

Adrienne Stewart-Gordan + Rana Farshoukh:

Thank you so much.

Daymond John:

You're welcome.

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