Hello, and welcome back to The Breakdown. My personal diary where I break down businesses in simple terms for my own learning, and for you to better understand businesses.

Today, we are going to be breaking down a company you may have heard of, and one you may even use. It is a household brand that has shot into popularity in the last 5 years, and went from totally internet business, to the shelves of Target, Walmart, and ended up being bought by Proctor and Gamble for $100 million.

That company? Native Deodorant.

Yes, that product that can be found under the armpits of millions around the world exited for $100 million, and the story is an entertaining one as well.

Here's what you might take away from this breakdown:

1. How to launch a company with minimal capital upfront

2. Surrounding yourself with like-minded people will probably pay off

3. My own experience running a DTC brand

Native Deodorant

Native was started back in 2015 by Moiz Ali, a previously practicing lawyer turned entrepreneur, out of the kitchen of not even his own house, but his brothers. His brother, Suli Ali, could have a breakdown of his own as he has sold multiple companies, being most well known for selling TinyCo for hundreds of millions.

So the great business of Native was literally started out of the kitchen of not even his own place, but his brothers.

Also, I should say I have heard a lot of this research from episodes of Moiz's podcast, Limited Supply, and from one of my favorite podcasts, My first Million. Check these both our for some of the best business content out there right now.

The beginning is my favorite part, Moiz didn't want to invest a lot of money into starting his business, he wanted a quick idea that he could validate there was demand for, and make some sales immediately.

He actually got the idea from either a relative or close friend who looked at their own deodorant and couldn't recognize any of the ingredients that were being used and they were putting on every day, but there was no great alternative. Thus, Native was born.

Lesson: Listen to the pain points of friends, family, and in your own life, those often make for the best businesses.

He started by throwing up a website he could send traffic to, made a logo that is literally just the word "native" in a general font, and creating some basic ads he could put on Facebook.

You might be asking, how did he get his first actual deodorant? Isn't there a development process for making your own product? And you would be right. But that's not how Moiz got started. Rather, he looked up "all natural deodorant" on websites like Etsy, would order the top ones, and then him and his brother would put each one on and run around the block to test how good it actually was. He also bought of bunch of plain white shirts and would put the deodorant on them to see if they caused discoloration.

He found one he liked, put his own packaging on it, and boom, he had v1 of his deodorant. Meanwhile, he was getting orders from the site he put up, so he started shipping out his product that he ordered from other people. He pretty quickly formalized a partnership with one of these people who would produce for him since he didn't meet the minimum order quantities of large manufacturers, but a random lady on Etsy would, and started messing with his recipe.

Side note, he actually tried launching on Product Hunt with this, but it flopped and he didn't receive any orders. He was able to get it posted for a second day towards the top, and that drove the initial ~50 orders.

Lessons: There are a few to take away here.

1. Validate your idea as quickly and simply as possible. Moiz wanted to test if there was demand for an all natural deodorant, so he just used someone else's product first, and then validated his idea.

2. Don't bite off more than you can chew in the beginning. Moiz could have gone to a large manufacturer, put in an order for 10,000 units, and been stuck with a bunch of inventory that never sold. Instead, he kept the operation small, only ordering and getting units as needed. He actually in the beginning would wait until he got the order, and would then product the stick of deodorant he just sold, meaning he made the money before he even spent anything for the product.

3. v1 doesn't have to be perfect. Launch as fast as possible, you don't need a fancy logo, nice website, branding, etc. That will come with time. But, none of that matters if you don't have a product to sell because you went out of business.

Now, let me ask you a question. What do you pay for a stick of deodorant. If you're like me, maybe $3-$4. What did Moiz price Native deodorant at?

$12. For one stick of deodorant.

Now people like you and me might think that is crazy, but there is a group of people who are willing to pay top dollar for a great product. And in Moiz's case, a great product that was all natural. Two things that can command that top dollar.

AND, because it was so good, and there was nothing like it in the market, these people kept coming back for more and more.

Lesson: For DTC (direct-to-consumer) businesses, the best combination is usually a low-medium priced product, with a large repurchase rate. AKA, people will continue buying more and more of the product, again and again. This increases what is called the "lifetime value" of your customer, or the amount your customer is worth and will spend with you.

This is so critical because you have only paid to get this customer once, and you don't have to do any more marketing, so the only ongoing cost is your product.

And this is how it would get started. He would dial in little by little with his recipe until he got it to something he liked, but even then he would try and make it better. He would go on to a larger manufacturer, he would raise some money (~$300k, and is another way to get around amazing people is have them invest in your business) and get some advisors in his company, and continue operating the business.

One thing he credits a large amount of success to, and is another lesson, is Moiz personally did the customer support and worked his support email so he could figure out what the issues were, what the customer liked, didn't like, etc so he could continue improving his product.

Lesson: Talk to your customers. End of story.

A way he was able to do this, even once he stopped working his customer support, is by keeping his team small. I want to say by the end, Native was less than 20 people still in total. And it was doing a large amount of business, as you will soon see. But by keeping the team small and lean, communication was easy, it flowed, and he would hear from everyone on his team if something was wrong, or something needed to be discussed.

The last main thing that Moiz did, was he sticked to what worked. And he did this in two main ways.

1. All the sales only came from his website. He never tried to go into brick and mortar stores, or change how his customers ordered from him. People came to know the brand and come through his website, and by sticking with that for a long time, that compounded to bring a ton of traffic, and therefore a ton of purchases to his website.

2. He really only ever did Facebook ads. He flirted with influencer marketing, newsletters, and ads in other places, but none ever worked as good as Facebook did to bring him traffic. So, he stuck with it, and by the end of 2017, the brand was on pace to do $50 million run rate for the year. All from online, all from Facebook ads.

And in 2 years, Moiz went from idea, to $50 million per year business, and in November 2017, Moiz would sell Native deodorant to Proctor and Gamble for a reported $100 million.

A wild story, and all just in a couple of years. There was a lot skipped over, and obviously a lot more that goes into running a brand with things like manufacturing problems, people problems, website problems, etc., but these are the main lessons and learnings of the building of a $100 million business. I recommend checking out his interviews on podcasts he's been one, because he does a great job telling the story and is very funny and entertaining.

Word of caution though, his favorite word does start with the letter f, and ends in uck, so listener beware.

I wanted to quick touch on why DTC businesses are great, and my experience helping run one.

Me and my boss at my current day job were in the offseason of our main business, and wanted to start something and see what we could do. We ended up on the business of drop shipping, which is a type of e-commerce where you buy from someone for one price, and sell it for a higher one. Super complex, yes I know.

Yes, this is what Moiz did in the beginning, but with drop shipping it typically is a pretty bad product usually bought from something like Alibaba or Wish, and sold at a pretty high markup. Not a super highly looked upon business, but it has a few perks which is why we landed on it.

1. Low startup cost. The benefit of drop shipping is you never hold inventory. You wait for someone to buy, then you buy it yourself. Your only cost is your website and ads.

2. Ease of start. This business is really easy to spin up, and get going on. Shopify has made this 1000x easier for businesses.

The greatest benefit of DTC businesses, is how transparent they can be in terms of financials. Really what DTC businesses come down to, and drop shipping especially, is:

Customer Purchase Price - your purchase/manufacture price - cost to acquire that customer

And if that number is positive, you have a business my friend. And as long as that number remains positive, you will be in business. But that is the hard part, and that's what we came to learn.

Your main problem is going to be how you acquire those customers, and the price you can get them at for the product you are selling. When you do Facebook ads, this can be highly volatile, and depends on the quality of your ad, quality of the audience you are showing it to, how the Facebook algorithm is working, and how easily customers can get to your site.

We ended up making about $50k in the span of 5-6 months, but broke even spending about the same if not a little more. Granted our product was pretty bad, so it makes sense, but that shows how quickly these businesses can get up, running, and generate cash.

But, that is it. That is the breakdown of Native deodorant. When I hear this story, I love it for it's scrappiness, simplicity, and obviously, that would be a pretty nice outcome. If you're looking for a DTC business, following these lessons and learnings will get you a long way, and maybe one step closer to your own $100 million exit.

And that's all for today, if you want to get more follow me on Twitter @Cam_LaChance, where I interact with people and share more thoughts similar to what I write about here.

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💯 Freaking sick dude🤷‍♂️ Meh, do better next time😑 Bruh, I might unsubscribe after reading that