Tom Bilyeu, Co-founder, Quest Nutrition
Tom Bilyeu On Building a Unicorn
In the startup world, there’s a legendary animal every entrepreneur aspires to discover.
For young entrepreneurs, it’s the stuff of dreams, also known as a billion-dollar-valued startup.
Tom Bilyeu found his unicorn in protein bars and powders, after a nutritious snack recipe snowballed into one of the largest food companies on the planet. Since these famously tasty treats emerged from under the rolling pins of Bilyeu and his co-founders Ron Penna and Mike Osborn in 2010, Quest Nutrition has become a prominent name in health and fitness. Inc. named it the second-fastest-growing private company in North America in 2014, due to its 57,000% three-year growth rate.
Now, with their growing range of products sold in 80 countries, the president and his co-founders are taking on one of society’s biggest obstacles, metabolic disease, and trying to reverse its impact on our collective health and wellbeing.
We went one-on-one with Tom Bilyeu to learn how their journey got started, and to talk tactics for surviving hypergrowth.
‘Man, are you crazy?!’
Health food distributors didn’t exactly roll out the red carpet for Quest’s founders in the early days. Many thought they were crazy, with one even suggesting he needed another protein bar like he needed “a hole in the head.”
Indeed, launching into a crowded marketplace that was on the decline might have been overly ambitious. But for Bilyeu, it was all part of a deeply personal mission to become a force for good in health and nutrition.
Having grown up in a morbidly obese family, Bilyeu was determined to help the people he loved lead healthier lives. Bilyeu, Penna, and Osborn also believed that the industry’s go-to mantra at the time—which essentially encouraged people to eat less and train more—was fundamentally wrong.
“We wanted to be in health and nutrition largely because we saw what was going on in the world, and that was a massive slide towards ill health. We were also looking at metabolic disease as kind of a grand challenge. We wanted to move people forward from a metabolic standpoint.”
As Bilyeu explains it, the whole idea of “eat less, train more,” which only works for a narrow percentage of the population, simply didn’t represent an appealing lifestyle choice. By taking foods people wanted to eat, like cookies and cakes, and making them healthy, Quest’s founders believed they could bridge the gap between what the industry was dictating and what the average person was prepared to do to lead a healthier life.
After a year spent running their technology company during the day and testing new recipes at night, the trio came up with a winning protein bar recipe, only to discover that the low sugar delight they had created was un-manufacturable. Once you strip the sugar out, packaged food becomes virtually impossible to create with off-the-shelf equipment—or so they were told.
“I’m sure many people had come to the same conclusion we did, when they went to the contract manufacturers who said it couldn’t be done. They compromised on the product just to produce. But we had promised ourselves we wouldn’t do that.”
Instead of balking at such a major roadblock, the team decided the only solution was to self-manufacture their product, and do the necessary research to make it shelf stable. After purchasing equipment, the trio embarked upon what Bilyeu now refers to as an “absurd journey.”
Winning Hearts & Minds
One of the Quest team’s initial strategies—to build direct relationships with customers—became a powerful proof point for their product, and one of the early calling cards of the brand. As a group of seasoned marketers compelled by a belief in the power of community, they built a groundswell of early momentum by deftly applying a mixture of modern and traditional marketing tactics.
“We understood, back in 2009-10, that social media was not what people were perceiving it as. At the time people thought, ‘Oh Facebook is just a big distraction at work, how are businesses ever really going to use this?’ Now it might be self-evident, but back then it was a much less obvious answer. Our thing was, it’s just a megaphone.”
Facebook became a loudspeaker that allowed Quest’s founders to sell people on their brand vision, and urge anyone with an interest in health and fitness to become part of their connected online community. As Bilyeu explains, they wanted to evangelize to customers about their brand ethos by offering them the tools they needed to live healthier lives, including diet plans, recipes, science on metabolic disease, and mountains of free product samples.
“We were literally giving away the product saying, ‘Tell us if you like it and tell us if you hate it. We want to know.’
We had a very different approach that got a lot of people excited. Not just about the product, but they felt good about the way we treated them.”
The trio also went old school, researching several hundred health and fitness influencers, then sending them handwritten letters and free samples. Bilyeu says this was all about showing an understanding of what others were trying to achieve, and that Quest was interested in helping them connect with their audience.
“When people are building a community, they have a real sense of service to that community. … We would send them free product and just say, if you like it, tell people and if you hate it, tell people that too. Not trying to steer people’s comments gave us a pretty great recommendation. Some didn’t like it, and said so, but the vast majority loved it and were grateful we had showed an understanding of who they were, and what they were trying to do, so they spread the word.”
A little bit of leverage
In those early days, prioritizing relationship marketing over the might of major retailers allowed Quest to build enough ground-level momentum that the demand pulled through into stores.
Within 12 months, industry retailers were knocking down their door in response to the legions of loyal Quest fans asking for product, giving Bilyeu and his co-founders the leverage to negotiate favorable distribution contracts.
As Bilyeu explains, without this kind of negotiating power, retailers can make a ton of demands on an immature brand, including conditions on exclusivity and profit margins. Some larger retailers have also been known to demand product on consignment, forcing companies to take back unsold stock at a loss.
By saying no to the largest health and fitness retailers for over a year, Quest was able to negotiate balanced terms.
That’s a factor Bilyeu says was incredibly important to the success of the brand, as the early terms they would have received would not have been very profitable for them in the long term.
As Quest really started to explode, the company continued to give product away hand over fist—a strategy that Bilyeu, to this day, believes was the biggest gamechanger for the business. But it required a big picture mindset that considered the lifetime value of a customer, he says, and not the short-term idea that giving away excess product was sacrificing profit for growth.
“It was sacrificing profit if you think about the amount of money you make on each dollar. But think about the amount of money you’re putting in your bank account. I’d rather make 10% profit and put a billion dollars in my bank account, than make 90% profit and put a hundred dollars in my bank account.
“We thought, any company you can build by giving your product away, that’s a good business model, because it means it’s actually delivering enough value on that first exposure that people will come back and buy. So that became our motto, just give as much product away as possible, and be as supportive as possible.”
Buckling up for Hyper Growth
Quest Nutrition grew by an eye-watering 57,000% over their first three years in business, in what Bilyeu now describes as an intense “rocketship ride.” As he recalls, it was both thrilling and terrifying, on a number of different fronts, trying to manage that kind of explosive growth. Manufacturing challenges, in particular, caused more than a few headaches, with Bilyeu needing to estimate eight to 10 months down the road when pulling the trigger on new equipment.
The experience taught Bilyeu and his fellow co-founders a stack of valuable lessons, starting with the importance of having a fiscally shrewd founder on your team. While it’s necessary to have someone who can dream up a grand vision, he says, having someone with an eye for finance can be the difference between achieving modest growth and really turning the game on its head.
“I am a huge believer in partnerships. I would be nowhere without my two partners. And you need a mixture of different skill sets. … But if we hadn’t had my business partner, Mike (Osborn), who just focuses relentlessly on the finances, we would never have been able to get where we are now.”
Bilyeu goes even further to suggest Osborn’s knack for negotiating favorable contracts and terms was the reason Quest did not require outside capital during their high-growth phase.
“It really is a cash flow game you’re playing, so you’ve got to look at how much cash you have in the bank, how much is in accounts receivable and how much is going out. We were literally watching that by the day, and making very calculated bets on anything that required significant CapEx [capital expenditure].”
Finding clever ways to stretch the dollar was also an important strategy for the close-knit team. In addition to drawing meager salaries during the first two years, Quest’s founders were extremely canny in the way they operated the business day to day. One tactic they adopted was to find businesses who held more real estate than they needed, and would allow Quest to take over part of their space for minimal rent. After a period spent working in the back of a popcorn factory, Bilyeu and the team built a relationship with the landlord of a local business park, who gave them a heads up on any unused space as it became available.
“We would take over another and then another. By the time we left we must have had 30% of the business park, spread out all around. It was a nightmare driving forklifts around the parking lot—everybody hated us. But was a hyper-tactical way to save money.”
If you find yourself in a position of hyper growth, Bilyeu says, as much as financial clout and cash flow management will help you, you also need to know your business well enough that you become adept at predicting the future.
“I had to plan for my growth every time I placed an order. Because I knew that by the time that pallet arrived, it would no longer be enough for the run rate we were at. So you just have to be in your business. You’ve gotta know more about your business than anybody else. You’ve gotta know every aspect of it.”
Beyond the Business
When it comes to the company’s legacy, Bilyeu, Penna, and Osborn’s aspirations extend far beyond protein bars.
After setting themselves a lofty goal—to wipe metabolic disease off the face of the planet—the company has invested millions in cancer research, aiming to prove a hypothesis that cancer is a metabolic disease.
If they can prove it, Bilyeu says, this opens the door for a food company to create the solution, rather than a drug company.
“We’re doing some of the studies that other people don’t want to do, because there’s no drug at the end of the rainbow. There’s nothing we can patent. We just want to know, metabolically speaking, is it true or not?”
The company is also now coaching people with cancer on health and nutrition, which Bilyeu says gives them even greater motivation to push the research envelope. Spending time with people who are, and have been, affected by cancer makes the fight truly worthwhile, he says.
Bilyeu further identifies this philanthropic effort as one of the key reasons he and his co-founders have found it easy to reject the many suitors lining up to buy their company. Had they simply been motivated by money, they would have retired long ago and bought themselves an island in the Caribbean, he jokes.
“We just really wanted to go after one of the most major problems in society, and say, that’s our problem to solve, it’s not anybody else’s. We’re going after it, and give ourselves over to it completely. If you’ve got something you believe in that much, you’ll stay hungry. But if you’re just after the money, and you’re thinking ‘What is the least I can do today to get what I want?’, you will fade away.”
He considers this extra spark to be the secret sauce for up and coming founders. But getting started is critical, he says, referencing a popular sentiment by author and TV personality Marie Forleo:
“Clarity comes from engagement, not thought. If you want to start a business, just do it. It doesn’t mean you have to leave your job, it just means start the company. … You don’t have to gamble everything, but you do have to act.
“On the other side of that, it’s not about asking, ‘What opportunity can I exploit to make money?’, but ‘What is that thing I believe in enough, to have enough passion to learn more about than anyone else in the world, and that I will fight my ass off for when it gets really hard?’ If you can align your business around that one thing, man, you will be unstoppable.”
Key Takeaways Of Our Interview With Tom Bilyeu
- The challenges of managing a hyper-growth company and how to overcome them
- How to navigate the classic entrepreneurial debate of profit vs. growth
- Why you need to evangelize to your customer whenever you can
- How to build brand loyalty and have your audience believe in your vision
- How to crack the notoriously difficult and crowded health and nutrition market
Full Transcript of Podcast with Tom Bilyeu
Nathan: Hey guys? Welcome to another episode of the Foundr podcast, my name is Nathan Chan, CEO and publisher of Foundr magazine. Coming to you live from Melbourne Australia. So I just wanted to say thank you so much for taking the time and sharing your xxxxxx with me. If you are enjoying this podcast please do tell your friends. It helps more than you can imagine and I hope you’re enjoying the show. So let’s talk about today’s guest. His name is Tom Bilyeu and he is the founder of Quest Nutrition. And these guys absolutely crushing it. If you wanna talk about growth, you wanna talk about strategies and marketing, these guys have taken Quest to become a billion dollar startup. They’re considered a unicorn startup and the kinda companies that are considered unicorns are like Airbnb and Uber. And this is what Tom has done with his co-founders, with Quest Nutrition. They have 1300 employees. They’ve been around for I think six years and they’ve grown so fast they’re in the number two of Inc. 500. They grew over 50,000% which is insane how far they grew this company. And Tom is just an absolute masterful entrepreneur and what he’s achieved is so extremely inspiring.
Nathan: I know you guys are gonna learn a turn around marketing, growth, even around physical products the logistics behind it all and how they’ve manged to build this amazing company. And I was even lucky enough to actually catch up with Tom for dinner and I can’t just say how much he’s just an amazingly humble entrepreneur and it’s just so incredible to see someone that’s had this much success how down to earth he is and how sharing he is with all things he knows and has learnt as being a super successful entrepreneur. So guys if you are enjoying this please do share this with your friends, please do take the time to leave us a review and now let’s jump into the show. So the first question that I ask everyone that comes on is how did you get your job?
Tom: Well, this is a job that I made with my partners and I. We had a company before this one which was a technology company we had also built that. They actually hired me for that one as a copywriter. So when I met them they were just building this technology company and they said you know we need somebody to help us build this. We have an opening as a copywriter but don’t think of yourself as a copywriter look at the problems that we have, that we face and help us overcome them. And the sky is the limit. And I remember they used to say this really cool quote and I ended up adopting it later which was, “We look for partners we settle for employees. ” So they had just a really really cool mentality that allowed me to plug in and learn my way to the top if you will. So that’s how we became partners and then this was Quest was a reaction to like you we had built a company but we hated our jobs. And we really wanted to find a passion that love you know, something that we can really believe in and enjoy everyday even if we were failing.
Tom:And that concept of finding something that you would enjoy even if you were failing really became a powerful macho for us. So for three very different reasons we decided to found Quest Nutrition which at the time that we founded it was you know literally a crazy idea people thought we were out of our minds. We were launching a protein bar into a crowded market that had been declining for years. We actually had won distributor xxxx we made another protein bar xxxxx another hole in the head, so it was not exactly a warm reception. But we believed in what we doing and we persevered and here we are.
Nathan: Wow, so when did you start?
Tom: We started conceptualizing of the company about 2009 an we launched in 2010.
Nathan: Gotcha. So you’ve been around for about six years?
Nathan: Gotcha. Because you guys are crashing it. Like you know Quest Bars are massive even here in Australia. So the first question I have to ask is how did it all start? Like you said that you had this concept just yeah I’m really curious. You know people said that this is a massive crowd of market how did it all start? Why Bars?
Tom: We really wanted to be in health and nutrition largely because we see you know what’s going on in the world and there’s just a massive slide towards ill health and we were looking at metabolic disease as a challenge and seeing it really is a grand challenge. It’s one of the biggest challenge that we face as a human society and wanted to tackle that felt that we could make a meaningful contribution because we had the believe that until you solve the problem by making food that people choose based on taste and it happens to be good for them you’re never gonna get anywhere. And when we were looking to launch the company the refrain and all of nutrition was eat less exercise more. And we just knew man that works for a really narrow band of people sounds like yourself right? You’re gonna finish this interview and go to the gym, but for most people that’s just not a lifestyle they wanna live. And quite frankly if you not eating a terrible diet you don’t have to live like that.
[Tom: So we wanted to say because we see ourselves as a food company, we’re not a fitness company, we’re not a protein bar company, we’re a food company. And so we wanted to take a fundamentally different approach and make cookies, pies, cakes, whatever the things all the people actually want to eat, but we wanted to make it good for them. We saw that opportunity and quite frankly for me I grew up in a more obese family so it was incredibly an intimate challenge. It was to help people that I knew and loved and I wanted them to be happy. And I just knew that food is a drug and it’s a powerful drug and it gets people into this negative spiral where they are feeling bad so they turn to something that does cheer them up, food, but they choose the wrong kinds of food and then they feel worse, they look worse so they need more food and get into just a devastating cycle. And wow, if we can give them something that they would love to eat, they would crave, they’re moving towards, but it was actually moving them from a metabolic standpoint forward then we could do something really special and so at night when we were still running out technology company we started making these bars with rolling pens and knives and just started the old fashion way grinding it out.
Nathan: I see. And how did you make your bars to have a unique selling proposition that stood out from the rest?
Tom: The funny thing is with that we always thought the formulalation was going to be our calling card and you know and just the taste was gonna be insane and so when we had that we thought we were done we were like, “Man here we go. We’re gonna launch this out and the market is gonna be incredible.” And we just wanted to be marketers. That was our background right? And we went to contract manufacturers and we said, “Hey, we have this revolutionary formulation we want you to make it for us.” And they said, “Wow, this thing tastes great and it’s amazing unfortunately it can’t be produced.” And we didn’t know enough about it at the time so we’re like, “Why on earth can’t it be produced?”
Tom: Like it seems so straight forward to us but once you strip out sugar from the bar, because sugar doesn’t enlarge scale manufacturing, it’s not normally powdered sugar it’s coming inform of a liquid sugar so high fructose corn syrup is a very typical example of that. And once you strip that out the product did really become impossible to make with off the shelf equipment. So I’m sure many people had come to the conclusion that we had but when the went to the contract manufacturers and they said it couldn’t be done they compromised on the product just to make it produce. And we had promised ourselves we wouldn’t do that so when we hit that road block we decided that well, I guess we’re gonna have to get into the game of manufacturing ourselves.” And sort of crazily enough went out and bought our own equipment and embarked on that just absurd journey so we didn’t stop when we hit that roadblock we just made it happen.
Nathan: Yeah, wow, okay. And you said that you were working on the bars while you were working at technology company, but how did you come up with this revolutionary formula? Like how did that work? You just were playing around, just keep testing things in the kitchen or?
Tom: Yeah, so my business partner Ron and his wife Shannan they’re just avid fitness guys and I’m pretty into fitness like I’m a five day a week in the gym kind of guy but these two take it it to a whole other level. So they were doing some early prototypes at home and at one point they were getting to the part when we thought, “Hey, we should really look at commercializing this.” And that began and actually pretty long journey took us about 18 months to figure out how to make the product shelf-stable which is a lo harder than we would have thought going into it.
Nathan: Yeah. Well, Can you tell us about that? Like how does that work?
Tom: Yeah. Here’s a thing that really took us by surprise so water is your enemy. Now when we first started we thought, “Oh, it’s the bar it’s too hard add a little bit of water. ” But that’s what bacteria thrives on to grow
Tom: So when you have too high a level of water activity then the product will rot very quickly. So one of the most important thing to do when you’re making a product that needs to be shelf-stable is to find a way to bind the water. Most people use sugar for that and that’s where we really had a hard time because we had to find a substitute to bind the water that wasn’t based in sugar like high fructose corn syrup so we finally found a way to do it through fiber which ended up being really important in revolution of our product.
Nathan: I see. What ended up happening with the tech company?
Tom: Well once we got Quest Nutrition up and running we realized that not only was it an incredibly viable business but it was rapidly growing and really spoke to what we wanted to be doing with our lives. We were really passionate about it. We decided to sell the technology company. So at the height of our success with that company we sold it and moved over to Quest full time.
Nathan: Gotcha. And xxxxxxxx just a brief update where the company is at six years from now, like six years later?
Tom: Yeah, Sure. So in the first three years alone we grew by 57,000% which is pretty crazy. In 2014 we were named as the second fastest growing private company in America by Inc. magazine and it was just an absolutely insane roller coaster rise getting here. When you think about growing that fast in a manufacturing business it’s scaling up physical equipment which requires real estate and because we engineer a lot of our own equipment. So it’s not even like we’re buying it off-the-shelf we have to custom make a lot of the parts and components. So it was a thrilling and terrifying game of trying to estimate where you would be eight 10 ,months down the road when you had to pull the trigger on the equipment.
Tom: And now our company”s been valued at over a billion dollars. So it’s been an absolute just rocket ship ride from nothing six years ago to being you know what they call a unicorn company which is way beyond what any of us would have expected if I’m completely honest. I xxxxxxxxxx six years ago. I was like,” Yeah you know, hey.” But we didn’t see it growing this fast. Not at all.
Nathan: Yeah, wow. That’s crazy impressive. So you’ve got an amazing product you go into your own manufacturing, but how did you get into wholesale and your xxxxxx distribution chains?
Tom: So we had a premise in the very beginning and this is something anybody listen to this podcast almost regardless of what you’re selling, if you’re selling something B-B it won’t apply but id you’re selling to consumers this really will. And that is you want to establish a relationship with your customer directly. Don’t go to stores first. That was a big decision for us, “Do we go to stores and try to build our brand leveraging the visibility of some of the bigger retailers in the Heath and Fitness channel or do we go direct online ?” And now it might seem self evident but back in 2009 when we were really thinking about this this was sort of a much less obvious answer but going direct to the consumer, building a community online socially making sure that your product is really ressimating with people you create what is called pull through demand. So we had stores coming to us, we had distributors coming to us rather than the other way around and that really put us in a position where we could get more favorable contracts so that we weren’t having to agree to terms that were completely lobsided in the favor off the retailer and that has just been incredibly important to the success of our brand. Because the early terms that we were getting from retailers were would just not have been healthy for the brand long-term.
Nathan: Gotcha. What do you mean by that? I’m curious in terms of early terms wouldn’t have been healthy for the brand.
Tom: So you could imagine a large retailer can make demands of exclusivity, they can make demands of merging, they really can put a lot of different things into the contract about returns or even just some people will make you essentially give them the product on consignment which means if it doesn’t sell then you have to take it back and now you’re at the cost of xxxx both ways and you never made any money. It really can be disastrous to a small brand if you get yourself in a weak negotiating position. So we actually said no the largest retailers in our space for over a year. They had people coming into their stores and asking if they carried Quest Nutrition and they kept having to say no so they’re coming to us and we’re saying, “Look man we really wanna be a part of what you’re doing. We understand completely the impact that that would have on our business, but the terms for the health of our business , we can’t agree to the terms.” So we finally after about a year and a half we had so many people going into stores in the Health and Fitness channel asking about Quest everyday. Then we were finally able to find terms that were balanced.
Nathan: I see. And so you sold just direct to consumer via your website than manually?
Nathan: And what was fueling that growth? How did you build so much trust? Why Quest? Like you know you have a great product. Obviously word of mouth, but what were you doing to fuel that growth in particular?
Tom: So I think it was we understood back in 2009-2010 that social media was not what people were perceiving it as At the time people thought, “A man Facebook just a big distraction at work.” How were businesses ever really gonna use this? And our thing was, “It’s just a megathon.”
Tom: It’s really just an opportunity for people to connect with each other and talk about something and if you give them reason to say something good they’ll say it and if you give them reason to say something bad they’ll also say that. So our thing was we wanna evangelize customers and create a supportive community that they ca feel good about man. I wanted people like if you touch Quest I want you to feel like I’m not trying to push product on you I’m just trying to help you make your dreams come true and that’s the name of the company really speaks to that. We didn’t name ourselves after protein or anything like that not even food to be honest, we wanted to explain to people on a, don’t take this word the wrong way, but on a more spiritual level of what we were about. What’s our ethos?
Nathan: Your why?
Tom: Yeah. Exactly. Well said. And so to get to our why ourselves we’re all on quest, we’re trying to make things come true in our lives and if you look at the way we market like we have this show called Inside Quest and people look at that and say, “Okay, what does that have to do with selling protein bars?” And the answer is nothing. But protein bars is just one of the ways that we’re trying to help people lead a better life to really find fulfillment in their life and what they’re doing and that’s so important to us as a brand is to be supportive to encourage people to give them the tools they need whether they’re dietary tools or whether they are intellectual tools to go and build the life that they wanna build. And at the end of the day we see ourselves as a company of transformation and transforming isn’t just about the body it’s also about the mind. And so that’s been super important to us and I think people feel that and they feel that in a way that we view social media to connect authentically to give before we ask what we get and because of that, because we were literally giving away the product you just xxxxx try it man, tell us if you like it and if you hat it tell people that you hate it. We wanna know.
Tom: So we had a very different approach that got a lot of people excited not just about the product, but they felt good about the way that we treated them. And doing that evangelizing the people at the business level, I think that was a big part of our success.
Nathan: I see. And talk to me also about your first thousand customers. What did you do to get them very earlier on? You mentioned social media, what other tactics were you guys using?
Tom: So just like xxx talks about is we really wanted to identify those styles and true fans that would really understand our product and it would be meaningful and useful in their lives. We also tried to identify people that had reached, that had influence. We researched the life out of those people and we wrote to each on of them explaining why we thought the product might be useful to them, why it might be useful to their audience and just showed real appreciation and understanding for who they were and what they were trying to do because a lot of you know when people are building a community it’s like this real sense of service that community. They wanna do something awesome for their community and we wanted to help them with that. And we saw ourselves the sa,me way. We wanted to do something awesome. And we’d send them free product and say, “Hey man, if you like it tell people you like it and if you hate it tell people you hate it.” And I actually think not trying to steer their comments gave us a pretty great reputation which is really nit. And so some people did. They didn’t like it and they told people they didn’t like it, but the vast majority people loved it and really felt like it brought something great to their life and we’re grateful that we had shown an understanding of who they were and what they were trying to do and they just spread the word.
Nathan: So you did things that don’t scale? That’s how you built your unicorn company. In 11 days?
Tom: The irony is so if you listen to xxxx he talks about, “If you wanna get an advantage just do more work than other people.” And I think at the end of the day other people aren’t willing to write those letters, they’re not willing to go and research and figure out who these people are and show a real depth of understanding and that’s something that our podcast Inside Quest has become famous for is just the level of research that we do. Because I wanna honor the guest right? I wanna honor them by showing,”Look I know who you are. I know who you are. I know who you are as a person. I just don’t know your bio, I get your world view and I wanna bring that knowledge and those insights to our audience.” And when you show people you really see them, there’s a great quote of getting inspired a person’s name is the most beautiful word in any language right? Just feeling felt feeling understood it goes a long way. So is it scalable? I don’t know the community kinda picked up for us to be honest and reinforces that sense with inmate community but sure we can’t write letters all day everyday anymore I’m sorry to say.
Nathan: So a big play in the early day was fostering that community earlier on. What do you guys do now for the community and how do you keep fostering it?
Tom: Man we put a tone of energy and resource behind not just creating god content but creating a wide variety of content that we think will be super supportive to all the people in the Quest community. And that’s everything from Facebook Live, Live cooking shows where people can see how to use our products other products to make just amazing healthy items to Inside Quest which is bringing on incredible far readers from Tony Robbins, Tin Feres,
Carol Dweck, Gabrielle Reece, Laird Hamilton just some absolutely phenomenal people
Tom: And getting them to come on and tell their story obviously you really understand the power of podcasting and building a community and putting something out there and that just makes a lot of sense to us as well. So and all of this Inside Quest doesn’t generate revenue. We don’t try to sell anything, there’s no advertising, nothing. It’s literally giving back to our community and fans who have been so supportive o the brand.
Nathan: Yeah. Well, that’s amazing. And you got your true fans and what happened next?
Tom: It really began to grow rapidly word of mouth and like I was saying earlier the speed with which it caught on fire man really took us by surprise. And we were doing what we call mirror marketing so we didn’t want people to see us when they looked at Quest and the way that we were marketing we wanted them to see them. So it’s always been a celebration of the fans which gave them reason to tell their friend and in the beginning we were sort of that cool band that you knew and loved that nobody else did and you wanted to tell somebody about it. And people were. And we started to hand out product like crazy hand over fist. And we thought any company that you can build by giving your product away that’s a good business model because it means it is actually delivering enough value on that first exposure that people will come back and buy. So that became our mode man. Just give away as much product as possible and be as supportive as possible no matter what people are trying to accomplish.
Nathan: I see. And giving that product away was that sacrificing profit for growth?
Tom: It was definitely a sacrificing profit if you think about sort of the amount of money that you make on each dollar, but when you start thinking about the amount of money you put in your bank account which I think people actually lose sight of. I’d rather make 10% profit and put a billion dollars in my bank account than making 90% profit and put $100,000 in my bank account.
Tom: So we just looked at what’s the lifetime value of a customer, what level of profitability is comfortable in terms of just having enough cash in the bank that you can weather any storm. And then we have invested the rest and giving away product now we’re getting into cancer research and I’ve spent millions of dollars in cancer research and we’re doing that because we have a hypothesis that cancer is a metabolic disease. If that’s accurate it’s gonna be a food company that solves that problem and not a drug company and we’ve spent half a trillion dollars on cancer research and only created a 5% increase in life expectancy. So we’ve put a lot of money behind xxx Quest obviously that’s just sort of the global expenditure. But when you start really looking at ways that we might be able to be useful to people doing the studies that other people aren’t willing to do because there’s no drug at the end of the rainbow right? There’s nothing that we can xxxxx. We just wanna know metabolically speaking is it true or not. And for us the reason we wanna do that is our mission is to end metabolic disease. And that’s not gonna happen if we don’t fully understand metabolism and metabolic disease itself. So cancer is something that as the founders of the company we’re so passionate about and really believe we might be able to make a meaningful difference. And we’re not trying to patent anything or hide it we just had our first big conference where we were presenting all the data that we learnt. We invited competitors, some of them showed u. We just really want people to understand the state of metabolism, the state of nutrition and hopefully collectively we can all push that forward and be armed with better information.
Nathan: Yeah. Well that’s truly amazing dude. I love the fact that you guys are giving back so hard.
Tom: Yeah. Look man I think the greatest privilege of success is being able to do that and I’m such a junky of Tony Robbins and really believe in the concept of being fulfilled. And don’t get me wrong I’m a hardcore business guy, I want to win, I’m here to win this is not Pollyanna, but the same time giving back, identifying something that is meaningful in your life that you really think you can make a contribution to I mean so many people’s lives are touched by cancer and it’s just meaningful and it makes us feel good and when you’re siting across because we actually counsel people that are going through cancer right now on diet and what they should be doing to maximize their chances of success and when you’re siting across from somebody who’s going through something like that it’s like all you want to do is help. And if you can sort of close your eyes and imagine how that person is representative of millions or even hundreds of millions of people suddenly becomes easy to fight and show up everyday and kick as and try really to do something awesome.
Nathan: The secret to living is giving?
Tom: Yeah. Tony says that a lot and I just go to the Neuro chemistry of it right? And we are a social species and we’re wired for connection and when you can do something that really brings value to somebody else it feels right. And look at the end of the day if it made me sick to my stomach, it made me fell badly about myself I wouldn’t do it. But the great about being human is that it makes you feel connected and it makes you feel good and it’s awesome and it’s truly a privilege to be in this position that we don’t take that for granted.
Nathan: That’s amazing. So I have to keep pushing a little more on this xxxx staff because they’d be mad if I didn’t.
Tom: All right. Let’s get crazy.
Nathan: And we work towards wrapping up. What does it take? What are the things it takes to build a unicorn? Because you guys were going really fast and you must have been like a capital, you are a capital intensive business in terms of manufacturing, did you guys have to raise capital? Did you have to get a big line of credit from the bank? Because that can become a [SPEECH] to a business when you’re going that fast right?
Tom: Yeah. Growth is the most dangerous thing that any company can endure now. Without it it’s even worse when you are a hyper-growth company it’s incredibly crazy. So here the tactics if you wanna survive hyper-growth one I am a huge believer in partnerships and I would be nowhere without my two partners. And you need a mixture of different skill sets. You need somebody who can dream, you need somebody who can paint visions no question. But you also need somebody that can watch your financials and execute on that incredibly well. And if we hadn’t had our business partner Mike who focuses just relentlessly on the finances we never would have been able to get where we’ve got We did not take any outside capital atleast not during the growth phase of our company. and we were able to do that because literally we’re negotiating contract and terms that allow us to pay things at advantageous times so that we’re able to manage our cashflow. And it really is a cashflow game that you’re playing and so you’ve got to look at, “Okay. How much cash do I have in the bank? How much cash do I have on accounts receivable? and then how much do I have going out? ” And we were literally watching that by the day and making very calculated bets on anything that required significant capax. So we had to invest on new equipment for instance to have long lead times which it may be eight months before I get that and then another two-four months after that before I start collecting revenue.
Tom: So you’re a year sometimes further out so you have to place very very calculated bets putting is as little capital as possible. I’ll give you some examples of ways we really stretched a dollar. So first and foremost obviously as founders we were taking virtually nothing in terms of pay so we were I mean for almost two years my wife and I almost didn’t leave the house. We sold one of our cars only had one car which we needed together and it was like this beat up old car and obviously cut your expenses to the quick and then on top of that when we were growing we didn’t want to take on a big lease or we certainly didn’t wanna buy which while better from an investment standpoint is terrible from a cashflow perspective because you have to put 20% down. Could be in millions of dollars so that was out. So we went and we found businesses that had more real estate than they needed and we said, “Hey, let us come in and essentially work out of the back.” So for a while we were operating out of a popcorn factory and you just segment off the space and put essentially plastic wall was essentially what we put down it’s our health cody stuff. You put this wall in between and partition it out and so now for that cheap bread you’re able to start building your business and then we happened to be lucky and we were in a business park ad so first we would take over one building and then we would let the landlord know, “Hey, anything else comes up we want it.” And then we would take over another and another by the time we left we must have had 30% of this business part spread all around it was a total nightmare, we’re driving through the parking lot everybody hated us but you find these hyper-tactical ways to save money and if you find yourself in this position one like I said you gotta have somebody in your the partnership there that really understands finances but also understanding that you’re in a cashflow management game and that you’re also in the sort of crystal ball predictive game
Tom: Because we were growing so fast that when I would have ordered let’s say I was ordering a powder the protein powder I knew just in a four week leap time before that ingredient arrived I would have grown substantially enough, that I had the plan for my growth when placing the order. Because by the time that powder would arrive it would no longer be enough for the run rate that we were at four week later. So you just have to be in your business. You’ve gotta know more about your business than anybody else. You have to know every aspect of it.
Nathan: I see. You know one thing when you are growing sometimes it’s hard to maintain that growth and staying on top of it. So what are you guys to stay at the top of your game and you still feel like growth?
Tom: I think people have to have a very clear vision of what they’re trying to accomplish. And for us we feel like we are in our infancy because we judge everything, everything by whether or not we’ve ended metabolic disease. And the truth is we haven’t. We haven’t even come close. Have we taken maybe the smallest of baby steps? Maybe. But we know that there’s just a huge chasm between where w are today and where we need to get to in order to accomplish our goals. So staying hungry from that perspective is easy. Now if you’re money motivated then we might be in trouble. We got of with a billion dollars for the company, we could have retired, bought island and just been done with the whole thing but the truth is money isn’t a primary motivator so we’re so focused on really going after one of the largest problem that we face as a society and say, “That’s our problem to solve. That’s not anybody elses. We’re not going to wait for anybody else. We’re gonna go after that. That’s gonna be something that we’re gonna try to do in our lifetime. We’re gonna give ourselves to it completely. We’re gonna go after it all out.” And if you’ve got something in you that you believe in that much you’ll stay hungry man, but if you’re just in it for the money and you’re asking yourself, “What’s the least I can do today to get what I want?” you’ll fade away.
Nathan: I love that. Awesome. Well look a couple last questions Tom before we wrap up. If someone wanted to start a physical product business right now today what’s the best piece of advice you would give them?
Tom: There is nothing stopping you but you. WE live in a world where you can 3D print virtually anything you want.[SPEECH] print 12 different materials simultaneously it’s nuts. The magnetization of even manufacturing is so unbelievable this is the most exciting time to be alive. It is the most free time to be an entrepreneur you just need to get out and do it. And you need to find something hat brings value. And I cannot stress this enough if you have a product that people value they’ll pay for that. If people aren’t willing to pay for it you’re not delivering a product that adds value. There’s an amazing episode I think it created live with was was with xxxxxxxxx and Miller xxxxx from xxxxxxxxx and Miler xxxxxxx gives the most brilliant elucidation of how most people have some romantic idea of the thing that they wanna sell verses selling what people actually want. Gotta watch that episode it blew me away, it stopped me my tracks. It was absolutely incredible. It takes this guy that has a wooden toothbrush and he help him get a sale live on the air it was absolutely incredible and is I think from most beginning entrepreneur who are selling something physical just a breakthrough in a way that he is able to explain how to give your customers the value that they are willing to pay for.
Nathan: That’s good. Awesome. Well, look that was amazing. A couple last questions Tom. Before we wrap up was there any final words that you want to say and last question is where’s the best place people can find you?
Tom: Yeah. So I know the people that are listening to this podcast they’re me 20 years ago. They have a sense that their life could be better, could be more. Thy believe in their heart that they’ve got that entrepreneurial spirit and they just haven’t yet taken that step and I wanna quote Marie Forleo who hopefully your guest know but if they don’t well immediately go out and look her up. And she says, ” Clarity comes from engagement not thought.” And I think that is so powerful. If you wanna start a business just do it. That doesn’t mean leave your job, it doesn’t mean put everything at risk, it means start the company. So just like for us we started Quest Nutrition at night while we were running another business and it wasn’t even xxxxxxxx We were only trying to build that thing and yet at night we still got time to make these protein bars by hand and start giving them away and just s s this something that we can really build a business. You don’t have o gamble everything but you have to act and then on the other side of that if you’re not asking, “Hey, what opportunity can I exploit to get money?” but you’re saying, “What is that thing that I believe in enough that I have passion to learn more about than anyone else in the world ans I will fight my ass off even when it gets really hard?” If you can align your business around that thing man you will be unstoppable
Key Resources From Our Interview With Tom Bilyeu
- Connect with Tom Bilyeu on Linkedin
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- Like Tom Bilyeu on Facebook
- Follow Tom Bilyeu on Instagram
- Checkout Quest Nutrition