Christina Stembel Founder and CEO of Farmgirl
Faced with 104 rejections, zero-funding, and the prospect of launching a new business during an economic downturn, Christina Stembel has not only grown her company Farmgirl Flowers to a $65m empire, she has also done it completely bootstrapped.
Stembel’s journey from bootstrap to business mogul is nothing short of inspiring. What began as $46k savings and a 2-year window to achieve her goal, her ecommerce flower business saw 5x growth in the first 2 years. As Stembel says, “the fact that I was able to bootstrap without running out of money is the biggest accomplishment of my life”
In this interview, listen in to discover how Stembel marketed and advertised her brand on a shoestring budget, the importance of word-of-mouth and how that helped her achieve her first million, and why she views FarmGirl Flowers as the workhorse among unicorns.
- How Stembel started FarmGirl Flowers, and why she gave herself 2 years
- Marketing on a shoestring budget
- Complications she faced selling perishable products
- Why she views FarmGirl Flowers as a workhorse among unicorns
- The importance of product-quality, and why she believes that a good quality product will outsell any level of marketing
- The future of FarmGirl Flowers and reaching her first billion
Full Transcript of Podcast with Christina Stembel
Nathan: The first question I ask everyone that comes on is how did you get your job?
Christina: Yeah. I got my job by just doing the hard work. My job was every job. I wore all the hats and so I’m just being willing to do every single job gave me the job.
Nathan: Yeah. That’s usually how it is when you first start. How’d you find yourself doing the work you’re doing today? How did Farmgirl Flowers start?
Christina: Yeah. It’s not the story that most people think. Everybody kind of wants this romanticised version of I must have grown up frolicking in my grandmother’s garden or loving flowers and it wasn’t that at all. I just wanted to start a business and I wanted it to be able to check some boxes. Mainly, I wanted to be able to grow really big. I wanted to actually do something different. I didn’t just want to take somebody else’s idea and slightly tweak it. I wanted to actually like, go in and… I hate to use the word disrupt because it’s so overused but I wanted to actually disrupt an industry. I wanted to do something different in an industry. Flowers was the first idea. Farmgirl was the first idea I had that checked all the boxes.
Another big one was I knew it needed to be bootstrapped. I knew there was no way that I was going to be able to go down to Sand Hill Road here and get one of the big Andreessen Horowitz to invest millions of dollars into me because I didn’t have a tech pedigree, I don’t have a college education. I have a very untraditional backstory. It wasn’t going to be possible. So this was the first idea that I knew that I could bootstrap. That’s why I went for it. It did check all the boxes, but the one that I didn’t know, back then that I wish I would have is how hard perishability would be because if I was going to start a business now, I would definitely have a checkbox that says, “Is it perishable? Yes or no?” If it’s yes, I would go on to the next idea. But that wasn’t the case. It was the best idea I had out of probably 4,000 ideas I thought that I could do.
Nathan: Okay, interesting. What were you doing before that? What is your background? Is it marketing, PR, products, tech?
Christina: Yeah. You’re giving me a lot of credit. My background before was just I did a lot of jobs. I was in hospitality. My last job before starting Farmgirl Flowers was at Stanford University, which is ironic, since I didn’t go to college. I ran a catering company within the university that was owned by the university to start, which I learned a lot from that helps me now today. It also was great because I was able to kind of start a company within a company without the risk. I had a paycheck. After that, I became the director of alumni relations. I did a lot of programmes and events and we used flowers at those events, which is why I started researching the flower industry because we would buy a lot of flowers.
I couldn’t understand why they cost so much, which led me down this rabbit hole of research on why flowers cost so much, only to find out very quickly that… I understood why they cost so much. I thought I could switch very quickly from the event space to the eCommerce space because that was where most of the opportunity and the white space was that I could go into and start something in.
My background was varied. I’ve worked lots of wage level jobs, coffee shops, hospitality, hotels. Then I worked my way up. Because I didn’t go to college, I always had to start at the bottom and I worked my way up until I was running the hotels and then going and working for the university. But I knew for at least 10 years that I wanted to start a business and I was just trying to figure out which one that I could start and that I thought would actually be able to scale.
Nathan: Amazing. Well look, you’ve done really well for your first business. How long ago was it when you launched?
Christina: Yeah, almost 10 years. I launched it November 7th, will be our 10 year anniversary, back in 2010. Everybody thought I was crazy then to leave a pretty stable job. Stanford’s not going anywhere even though it’s considered itself a nonprofit. But still the economic downturn in 2010, people are like, “Wait, you’re quitting your stable job at Stanford to start a flower shop?” I’m like, “No, no.” How many times I’d be like, “It’s not a flower shop. It’s an eCommerce flower company.”
But people thought I was crazy. But now the research I do has shown that companies that start during bad economic times are actually the ones that tend to do better. I’m always [inaudible 00:09:01] right now and people are scared about the recession that’s probably looming in front of us. It’s the perfect time to start a business. There’s a lot of pros for it.
Nathan: Yeah, I agree. Talk me through kind of how you kind of got the business up and running. You said proudly you bootstrapped, which is incredible. Did you start with a Shopify store? I think Shopify was still early days or they weren’t around.
Christina: They weren’t around then. At least they weren’t around in a way that I knew about them.
Nathan: Yeah, okay.
Christina: Yeah. A friend of mine… 2010, I quit my job in June. I gave myself until August to get a website up. That didn’t happen. It took till November. But a good friend of mine, his company built it for me for only a few thousand dollars back then, what I spend in one week of development work now, less than one week of development work now. It was just very scrappy.
I had $49,000 of savings. I was like, “I’m going to start this with $49,000.” I gave myself two years or until I ran out of money, but that was to live on too. Just one account. I need to live on this and I need to start this company. Everything was very bare bones, very grass roots. It cost about 5,000 to start the website. I had to go teach myself how to make flower arrangements. I knew nothing about flowers. So I would go buy flowers and practise and watch YouTube videos and how to process flowers or anything like that. Just did everything myself. I did it from my dining room for the first two years.
Christina: I got very close to running out of money at year one and a half. I went down to $411 at one point. Thankfully, I had just paid rent so I still had a couple weeks before rent again. And then at the two year mark, my corporate attorney landlord found out I was running an illegal business from my dining room and then gave me the pink slip that either I had to get out or the business had to get out. So I moved the business out before I would have actually because I still wasn’t financially stable. The first year we did, we, I say we because it made me sound like we’re big time, it was just me and my dining room, $56,000. In the second year, I did 276,000. So I thought, “Wow, 5X growth. That’s amazing.”
Between the second and third year is when it started to get some traction, but I had zero marketing dollars to spend. When I look back at my first financial model, it’s hilarious because I think I had 24 cents per unit in marketing.
Christina: I’d always been in operations working in hospitality and everything. I just was like, “Marketing, this is a waste of money. I could hire people for this.” Instead of putting it into marketing, I spent it. But for the first probably two and a half years, maybe three, all of my marketing was going to coffee shops around San Francisco and putting out a flower arrangement with these little marketing cards that I had made that cost three cents a piece. And every week, I would go back to each coffee shop in different neighbourhoods. I did them all over the city and I would count how many cards were taken.
If 40 or 50 cards were taken every week or more, then I would deem it worthy expense to put another bouquet there for the next week. But if only 10 or 20 were taken, I was like, “I don’t think that’s worth the $20 it cost to do this flower arrangement.” That was it. I was going to a lot of networking events at night and taking flower arrangements there. I would always put them on the registration tables everywhere. Even though people didn’t… I didn’t ask, I just put them out with cards and that was all of the marketing spent. It worked though. People picked up those cards. That’s how they found out about us, about me, at that point.
Between the second and third year is when it really started to get some traction. I hired my first employee. We went from 276,000 to 920 that year, so almost broke a million. But really, from the start, I thought I was going to be able to prove out the concept and then go get funding. That was always the plan. I was like I just need to prove. It was very different model. It was less is more. In the early days, we only had one bouquet option that fit on our site. Everybody else had a minimum of 169 on their website. The education was really challenging because this was way before the less is more than everybody has now. The fewer better, less is more. Everything that… Anything from clothing to shoes, anything now, there’s lots of companies that do that. But this was very early in 2010.
Trying to educate consumers so they couldn’t call us in order red roses and Baby’s-breath, that they just had to take our daily bouquet was challenging to do and it took a couple years to do that. To my dismay, I was never able to go raise capital. I’ve gotten 104 nos. I’ve tried many times and this is now the first time I can honestly say that I’m so glad that happened though because we’re in such a better place and we’re doing really well with profit right now and to own your company and be able to do whatever you want with it and to be able to make the decisions that you want, it’s amazing.
Nathan: Yeah. That’s incredible. I’m curious, I’d love to delve… I definitely want to go from year three all the way up to 10 and really talk about that journey but if we could rewind for a second, I’d love to know about finding the stock for your first order to fulfil and how you got your first customer and how you even got like in your first year that $50,000 in revenue. That’s customers. That’s like… Where or when you can see the product market fit somewhere around probably in between one and two, you’ve kind of like, “Okay, we’re on to something here.” How did you know to keep going even though you were struggling?
Christina: The first… I mean when you asked about the stock, when I had to like product you mean to…
Christina: Because it’s not a very heavy business to start. Now, it’s inventory heavy because I have to order. We can’t order off the shelf anymore. Back then, I could order off the shelf. I was very fortunate that we had a very robust flower market in San Francisco. There’s very few cities. There’s only really two cities in the United States, I could have done that in. If I was in the middle of the country or if I was in Chicago still or back in Indiana, where I grew up, I couldn’t have started this company, because I didn’t have the accessibility to small quantities of flowers. Because I had a flower market in San Francisco, I could go and buy one bunch of this and one bunch of this. All I needed was a wholesale licence to do that.
I remember telling my dad, we still talk about it to this day like, “I just need to get 11 orders a day so I can break even on the flowers that I’m buying,” because I have to buy so many different types of flowers to make this bouquet but I needed 11 orders. It took a while to get to 11 orders a day, a long while. That’s how I came up with the idea for the coffee shops though was I had extra flowers that I didn’t have orders for and so instead of throwing them away, because they’re highly perishable, you have about three days before you can’t use them anymore, I [inaudible 00:16:08] how can I turn this into marketing? That’s why took them to coffee shops, the excess ones.
To get customers, really it was just… My first customer, of course, was friends and family. In 2010 when I started, November and December, I don’t even count that as revenue, because those were just friends and family. But really the first real paying, I mean they were paying my friends and family, people that didn’t know me, my first customers, I remember being giddy when I would look in the back end of the site and you’re like, “I don’t know this person. This is someone I don’t know and they’re ordering flowers from me.” That was from the coffee shops. It really was or it was friends of friends. I’d send out emails to my friends being like, “Can you send this out?”
I’d make like a little marketing flyer and get, “Can you send this to your email list and stuff?” It was just very much that. It was anything I could do that didn’t cost money. I did for marketing. I even did a few illegal things like papering people’s cars. It was just like… [inaudible 00:17:05] I’d make something like flyers and be like, “Valentine’s Day is coming. Buy real flowers!” And put it on people’s windshields and stuff. That was very cheap because I would just print it myself and cut them at home. So it was things like that and that’s where the customers came from. I had no digital spend at all until probably 2013 let’s say, when started doing digital spend and I got really lucky with that.
I can’t take credit for how well we were able to build our digital presence because the timing of when we started, you couldn’t do that now. We were acquiring customers in 2013 and 14 for under a $1.
Christina: It was…. Yeah, to acquire a customer because this was before… My ex-husband worked in marketing at Facebook too. I also had that benefit. Really, it was great timing, because it was before all of the big companies. They hadn’t transition from… Nordstrom, the big companies are all looking for 25, 24-year-old female consumers. We’re all fighting for the same people, right? It was before they were savvy enough to have switched over all their traditional channels because they all are huge companies and have tonnes of red tape to digital channels. They had done that yet.
Now, there are certain times like Black Friday, we don’t even try to market. We just turn off our ads. It’s not even worth trying to do that to acquire that customer when those companies are spending so much money to do it. It’s being smart about when you’re going to spend it. But back then, it was easy. To be honest, I don’t… Nothing was easy. I shouldn’t say it’s easy, but it was cheap. To acquire customer under dollar is phenomenal and I wish we could do that now.
We still are well under $10. We’ve never really exceeded $10 of customer acquisition. This year, we turned off marketing when COVID hit in March to conserve every dollar we could. Then we found we didn’t need to turn it back on because we didn’t have the supply for the demand even because we’re over 100% year-over-year growth right now. We just turned marketing back on last week for the first time since March. This year to show… A two or $3 customer acquisition cost as well because we had it turned off for so long as well.
Nathan: Wow. That’s fascinating. In the early days, you basically just did things that don’t scale, as Paul Graham would say and you kind of kept going. Why did you keep going even though so tough?
Christina: Yeah. Because it was working. You have to really build a very authentic brand and that’s what I was doing. I put in a lot of work to build… We’re now benefiting from that work that I did from the first five years of building a really authentic brand that people love. It takes a lot longer to do it, a lot longer to do it. Even though I don’t have explosive growth… It is funny that everybody thinks we’re an overnight success. And when I tell them we’re 10 years old, they’re like, “Oh, my gosh. I just heard about you a couple years ago though.” And I’m like, “Yeah, because I was in my dinning room.”
I think Larry or Sergey from Google said, “Yeah, after five years, after eight years, we were an overnight success.” That’s how it feels for Farmgirl. This year, we’re probably going to do around 65 million. We definitely built it and it did scale, but it just took a lot longer. 10 years is a long grind. I think the reason I kept going is because I think I, like most entrepreneurs have a really big fear of failure and I don’t quit much. I just needed to prove that I could make this work and it was working from the standpoint of… We were doubling every year, at least. We’ve never had 20% growth a year. That would be horrible, I would consider, but to most companies, that’s a good year.
We were always doubling or tripling the lowest year we ever had was 50% growth or 49% growth. That was somewhat intentional because we needed to fix some problems that we were having supply chain distribution and also some culture issues internally because we’d grown so fast. We put the brakes on sometimes intentionally. But it’s hard. I think that most people just gloss over how hard it is. I think we get this over glamorised viewpoint of venture capital and we think that companies are supposed to become unicorns in three years and that’s the norm. That’s not normal. That’s the exception.
We like to call ourselves the workhorse in a sea of unicorns. In Silicon Valley, everybody’s focused on being a unicorn and we’re focused being the workforce. We’re going to win at the end. We’re going to build a really good company that’s profitable. I like to say, we kick it old school and we spend less than we make. We’re healthy company and we treat our team right. We have great benefits for our team and we worry about more than just the bottom line. We’re able to do that, because we don’t have to answer to investors that are looking for that three to five year 10X turnaround, return on investment.
It’s funny because half the people I talk to think 10 years is so fast to have built a $65 million company and half the people are like, “Oh, my gosh. 10 years? How have you been doing it for 10?” It depends on what day you talk to me and which which camp I’m in. But usually 10 years is a long time.
Nathan: Yeah. Look, I know what you mean, especially if you’re in San Fran and it’s… It’s crazy, the growth and all sorts of things, but you’re making that conscious choice to grow controllably which gives you all the power. It is a really great alternative path and I think there is a big bootstrapping movement. You look at the guys at base camp. There’s many other founders that are now choosing to go down this pathway. It’s not just a one size fits all.
Christina: Yeah, I think we need to talk about it more, because it’s… The most freeing moment probably for me was when I finally realised that success does not equal funding. I can be successful without funding and I can stop chasing it and stop spending. I was spending 30 to 40% of my time pitching to people that-
Christina: Yeah, a lot of time. I have spent thousands of hours pitching in the last-
Nathan: Really? Wow!
Christina: So many. So many. Every single time it was a no, or a couple times, we got yeses but horrible offers. I did a lot of research, and I got very bitter for a long time. Then I realised, look, I have less than a 2% chance of raising capital. As a solo female founder, I have less than a 2% chance. You take tech software companies out of that, I have less than a 1% chance of raising capital. Why in the world am I spending 30-40% of my time pitching to a bunch of guys who have never actually built a company and they’re telling me what I should be doing differently? I’m sitting there thinking that oh, my gosh. At first, I was thinking, “They’re so smart. They’re so much smarter than me. I didn’t even go to college.”
And then the third year pitching, I was like, “No, I know what I’m doing. Look, I’m building… Look how fast we’re growing. We’ve not run out of money.” The fact that we haven’t ran out of money should give me enough accolades and enough… Proof is in the pudding basically to say how many companies can grow a perishable product company, where even the big guys do less than 10% margins? Most are 6-7% and that’s billion dollar flower companies.
The margins are tiny, they’re scarce and what we’re doing. The fact that I’m able to bootstrap without running out of money is the accomplishment that I’m most proud of in my entire life. The fact that VCs and private equity individuals don’t see the value in that, to me shows me that they’re not the smartest people in the room. Because if I saw that in front of me and when I have enough money to invest in lots of female-owned businesses, which I can’t wait to do one day, I will give so many points to people that can do that. Because it’s the hardest thing in the world to do. It absolutely is.
Not having to spend 30 or 40% of my time felt like a gift I was given back. It also seemed like the wisest decision, because if I let a 1-2% chance max, that I should be giving it one to 2% of my time.
Nathan: Yeah. Wow. That’s crazy. So how many nos do you reckon you got in those first five years of trying to raise VC?
Christina: 104. I have a spreadsheet. I’m going to send them all… I’m going to have my pretty woman moment and I’m going to send …… and I’m going to be like, “Big mistake, huge mistake.”
Christina: 104 nos. Mm-hmm.
Nathan: 104 nos. Wow! What a story. Let’s go back a little. First three years, broke a million dollars, obviously, probably had a couple of employees. Were you still just servicing the local San Fran market or were you starting to service other states to?
Christina: Only San Francisco. My intention was always to get national shipping going within two years. I was so wrong. It was not possible to do that. The subsidies on shipping were huge and I had no idea how big they were. I couldn’t afford it until year five and a half. A dozen, ’15 mid-year, we started with just some, not national shipping, we started just doing some other Bay Area areas. We were only in San Francisco, which is seven miles by seven miles. It’s a very small 49 mile square radius. It was very tiny for five and a half years. We were able to build it… We have pretty market saturation in San Francisco and we should have launched national shipping much sooner than we did but I just couldn’t afford it.
Our subsidies started at $19 per box that we had to subsidise. If we’d just done rack rates, before I had enough buying power, it was almost $200 to ship a box and you can’t charge consumers that. I did all kinds of focus groups to find out how much we could charge. All of our customers said basically $15 was the sweet spot. I had it tiered in $3-15, 92% of people in my focus group would buy, because 18, it was like 80 something percent, 81% or 82% and then when I went up to 25, which was the highest tier, which is what we launched national shipping with, 2% of people pulled and said that they would buy.
Do you how much [inaudible 00:27:26] charge for national shipping? $25. We have not been able to get shipping rates down because even once we launched national shipping, when I could afford to which was in 2016, we did some local areas, additional local areas in 2015. And then 2016, we started doing California shipping, and then mid year, we started doing national shipping and those subsidies instead of going down, they increased very quickly. I hadn’t anticipated that because when I was doing my modelling on it, I anticipated that the entire United States would grow at the same rate, all the zones and that’s not what happens.
Major metro areas on the coasts grow faster. New york city grew very fast and that’s the furthest zone away from San Francisco. Florida grew very fast. Texas grew very fast. Those are still our biggest states outside of California. Our subsidies grew at one point almost $40 a box.
Christina: Yeah. Knowing your numbers is really important. Otherwise, you run out of money super quick. I would have to control how many we could even ship. The first Mother’s Day that we were shipping nationally, we sold out in four minutes. I could only afford to do 200 boxes.
Christina: Yeah. After 200, I ran out of money for subsidies. Then I just… Gradually, I would be able to open up more and more. Then in 2017, about a year later, we had enough margin in other areas that we were able to negotiate better supply chain costs and things like that, that then I could put that towards. I always took from my marketing buckets, which is why my marketing is often $2-3 for my CAC. When I tell people our ROAS is 27, they’re like, “That’s not right. You’re not doing the math right.” I show them and they’re like, “No, it’s 27.” I’m like, “Yeah, because I never have enough money to spend on marketing because that’s the first bucket I take it from for shipping subsidies.” 2017 is the year we’re able to open it up without selling out, except for holidays.
We really only been shipping nationwide without being handcuffed to the subsidies and selling out for three years. It has grown really, really fast which is great.
Nathan: How come you didn’t set up supply chains in the different cities or in like a traditional eCommerce business, if you, let’s just say, start in Australia, you see a lot of customers coming from US. So you set up probably something in middle of the US or maybe you just do East Coast or West Coast and you can control Canada and US and then you set up something in Europe. Why didn’t you do that? Is it because of the flowers?
Christina: No. It takes a lot of money to set those up and bootstrapped, we never had a million dollars or half a million to set one up, which is… It took about $680,000 to set one up. Now we have. We have in Miami. We’re opening other ones. We’re doing a hybrid model with fulfilment centres and distributions centres. The other reason that I don’t just do what all the other flower companies do and they have bouquet makers and farms ship for them all of their product is because we’re a high design bouquet.
The thing that sets us apart is we are designed bouquet. We are not just a bunch of flowers. That’s why we have a devout following that is willing to spend $25 to ship their flowers to them instead of free shipping like everybody else too. …… Better product in our opinion. I tested seven different companies to see if we could use that 3PL type model and we couldn’t keep the design where it needed to be. I knew we need to open our own facilities then and also highly perishable by the way. The flowers we use, we use a lot more specialised varieties of flowers than a lot of our competitors because they don’t last as long, which is why they don’t use them.
They can’t sit on a pallet in a cooler for two weeks until those button …… are used when you’re using garden roses that have a one week shelf life. You have to use them within 24 hours or the customer is not going to get a week out of them. We use higher quality, more expensive flowers, a higher designed bouquet and everything’s highly perishable both inbound and outbound. It adds a lot of complexity that you can’t just… I wish we could use 3PLs that are just boxing and shipping. Pulling …… sweaters for us, but unfortunately that’s not the case.
We had to open up our own, which is what we’ve done now. But we have to do it more slowly than we’d like to because we just don’t have millions of dollars to do that at once because we’re bootstrapped.
Nathan: Yeah. No, that makes sense and I totally understand. One of my friends, he runs one of the largest hamper companies in Australia. I understand the challenges around perishability. I also understand the challenges around seasonality and being able to model how much stock to pre-purchase. I’d love to know… Because one thing I did notice is even when you first started, you said, “Oh, I’ve got to sell 11 to break even.” I think that’s a really good takeaway for people. I’m not a mathematics person.
I was hopeless at maths, but I’m not bad on my numbers and I really got to know those numbers. I think I can really say that you know your numbers. Tell me about kind of modelling that out, especially around seasonality. Mother’s Day would be a big time for you. Obviously Christmas. Would you say you guys are seasonal business all because you’ve gotten kind of the more personalised premium approach. There’s less seasonality in your model or?
Christina: Yeah. We’re lumpy. I think every company is lumpy in some way. We’re lumpy like every company, but it’s less than what people think. From October through end of May is our busy season. That’s a long busy season. June through September is our slow season. We go down about 30% during those months. This year was not that. [inaudible 00:33:23] Because there’s no summer really when everybody’s sheltering in place. I know next year, we’ll go back to having more of the summer slump as we call it probably hopefully when we have some vaccines. Let’s hope, knock on some wood.
We’re lumpy like everything else and everything is planned. I’m in YPO and some other entrepreneur groups I want to talk to other CEOs, I have big network of friends who are CEOs and they’re just dismayed by how much risk there is at what we do, what you just said. If we overbuy for a major holiday, we’ll go out of business. We literally will go out of business because we’re buying millions of dollars of flowers well before… Now, we’re so big that we are custom growing with a lot of farms. We’re guaranteeing that every stem that they grow for us, if it meets our quality standards, we will buy. That is a year before any of the orders come in.
Christina: A pandemic happens or a recession happens next year, there’s a lot of things that go into that and planning for it. We have some really positives to our model to help with that where with our mixed bouquets, our signature burlap wrap bouquets [inaudible 00:34:36], you don’t get to pick what the flowers are at all. We have some varieties that you do get to pick but with our mixed bouquets, you don’t get to. If I have to sub things later on because of quality or I need… This single stem product we have didn’t sell, I can move those stems into one of our mixed bouquets and do a new recipe for it. There is some flexibility that our model, it’s a novel concept that I came up with that was different than everybody else allowed us some pros with that that helped with supply chain management. But it’s so risky.
When we were shut down for the shelter in place in San Francisco, they gave us 12 hours to shut down. They gave everybody 12 hours notice that’s it. We had hundreds of thousands of dollars of flowers already on their way to us. We had to throw out a lot of flowers. 150,000 [inaudible 00:35:21] throw out. If we had to do that often, we would go out of business. If we over order by more than a couple percent, we could go out of business. It’s really risky. We have to know our numbers. This is why people get very upset when we sell out and I’m like, I would rather sell out all day long than overbuy and go out of business because I just had to throw away half a million dollars worth of flowers because I overbought that week.
It’s challenging. I’m very lucky that I have an amazing team. I have somebody on my team who her projections are, I mean, crazy. A year from now, she’ll tell me how many medium burlap wrap bouquets we’re going to sell this week next year and she’s within 1.3%. It’s crazy.
Christina: She so on it. She’s been with me for many years and it’s interesting how things stay the same. The same percentage who are buying mediums now that are buying later. It’s interesting to see that, the psychology of purchasing is really interesting to see that but it’s risky. It’s really, really risky. I have no… There’s nothing I can say that takes away the risk because it’s a big risk.
Nathan: Yeah. No, that’s really interesting to hear because like I said, my friend, he has a similar type model to you and we’re quite close. I actually met him through …… and… Yeah. I hear you. I really do because it’s Christmas time. You’ve got those three months for him where it’s just crazy.
Nathan: So I’m curious, coming back to you three, broke the million dollar mark. Sounds like you’re really started to get traction now. What do you think that was? Was it just compounding of just building the brand grassroots style and really starting to ramp up on the digital side?
Christina: Honestly, it was… This may sound… Marketing people would not agree with me at all on this, but I will stand behind it. It was having a better product. It was really being focused on our products and our customer experience. Because word of mouth, I cannot stress enough how important it is. Women loved us. The other thing is, everybody assumes that men are the ones that buy flowers, they’re not. 80% of people that buy flowers are women buying for women. You buy for your mom and your sister and your girlfriends. The reason is because you know how it feels to get flowers.
You want to give all your loved ones in your life that feeling. Valentine’s Day is the only time that flips. It becomes 90% men. I hate that holiday. But the rest of the year, it’s women buying for women and when women love something, they love it and they tell all of their girlfriends about it. And so that’s what happened with us. We told a story about who we are and what we do. We have these little pins that go in each… Each of our box has a little pin that has a story on it that’s about grit and resilience. We’ve done a lot with the unboxing experience to make it this wonderful thing instead of it being, “Oh, I got flowers [inaudible 00:38:25]. I’m so excited to get a Farmgirl box.” And they’re Instagramming it and stuff.
Those women told all of their girlfriends, “Oh my gosh, this is the most amazing flower company. You have to try them.” There’s no other reason that we grew other than we made a better product, a better mousetrap basically and we really stuck with that. We made a better customer experience. We sold all of our customer services in-house and we make sure that we take care of every customer and all of the review sites, they rave about us and it’s not about our product, it’s about customer experience. It’s about our customer service.
People don’t put enough value into that. Everybody talks about like, “If somebody has a bad experience, they’re going to tell 10 people and somebody has a good experience, they are going to tell one person.” I don’t agree with that. I do think people tell 10 people, if they don’t like it but if women really love it… Like last weekend, all my girlfriends were talking about my clothes, they love them. When I saw them and I was like, “Okay, well…” They’re like, “Where’d you get it? Send me all their referral codes.” All I was doing was sending referral codes to my girlfriends of where they can buy their clothes. So if you really love company, a brand and a product, you’re going to share it and that’s what happened and that’s how we were able to grow without any money.
Nathan: That’s awesome. Yeah. Look I do agree with your sentiment there that when you can find a product that just flies off the shelves, that’s when you know you’re onto something and it is so much easier to market. It is so much easier to sell versus a subpar product and you need next level marketing. Yeah. No, look… That’s really pushed from San Fran, Silicon Valley. They’re obsessed with the product. They’re really product people down there. It sounds like maybe a bit of that has rubbed off on you?
Christina: Definitely. But it’s interesting to me that there’s many other Silicon Valley flower companies that started after us that look strikingly similar and other-
Christina: Yes, absolutely. The thing… They took a lot of inspiration from Farmgirl Flowers and almost everything. The one thing they didn’t was making the product in-house because it costs a lot more. But that’s the only way to keep the quality where you want it to have a design bouquet. You can’t have the same people making Safeway or the big grocery stores bouquets as making yours and expect them to look different.
It’s interesting to me because they… I tried to explain this in those pitches, those 104 pitches that turned me down. When they’d be like, “Yeah, but it’s not sustainable to have $10 customer acquisition costs.” I’m like, “I get it, it’s not sustainable. But I don’t think I’ll ever have to have $80 customer acquisition costs like our competitors do.” The reason I won’t have to is because people always come back to Farmgirl Flowers because I make sure that we have a better product and we have a better customer experience. If the average American consumer buys flowers four times a year, they come back to Farmgirl four times a year. I don’t need to spend $80.
The other companies that aren’t putting the emphasis on the product, you’re going to have to keep spending their marketing because you have to acquire new customers all the time. Because when people come, they don’t like what they get. When I would go buy from those companies, I felt ripped off. I felt like I got a grocery store bouquet that I spent $100 on and that’s what’s happening because they’re not focusing on the customer and the product. They’re focusing, they’re really great marketers, they have great technology companies, they have great marketing departments. But until you fix the problem which is that flowers should not be ugly.
You should have a beautiful bouquet and you should take care of your customer. If those flowers sat on a porch in 100 degree heat and died, you should send them a new one really quickly and make sure they’re taken care of. That’s what we do.
Nathan: Yeah. I know. I love it. A lot of respect. You said you turn over 60 million this year and you’re profitable. Are you able to share kind of around about for the margins or?
Christina: Yeah. Until this year, we ran it as close to zero as possible. That’s the only thing that we were like Amazon on. We tried to run it at… I would budget 2% profit and then I could afford to do some marketing if I had more than 2% profit.
Christina: Yeah. We ran it close to zero as possible in order to be able to grow it and because everything is how much marketing you spend, how much… All the things require a lot… How much subsidies you can do on shipping. We’ve had to turn off certain areas that the subsidies were too high and so it’s very controlled, like you said earlier, but everything was controlled down to the profit. This year, when COVID hit and I didn’t know if we were going to make it to be quite honest, because we actually make things with our hands and having to layoff 191 people in 12 hours and figure out where I was… And have to shut down our facility that we’re still paying really high rent on, a huge 30,000-square foot warehouse in San Francisco, and all the things with that.
I was like, “How are we going to afford to do this?” And is a couple of months before Mother’s Day, which is our Super Bowl of the year and I have to figure out how to get distribution in place by then. But the way that I did it, I rearranged our entire distribution model, was so much better for the company and for profit. We are actually doing really well with profit and may even hit double digit profit numbers for the first time ever. Like I said, we just turned marketing back on because we didn’t need to because I couldn’t do more than 100. We’re at 105% year-over-year growth and we couldn’t do… We didn’t have the supply to do more than that.
I was like, “Why spend any money on marketing when we’re selling out?” That’s not a good use of money. This year has been really bad year. Just with all the stuff we’ve had to do and figure out and get through a really good year financially for us.
Nathan: Yeah. Wow, that’s fascinating. You’re running it like a VC based model where you’re not… You could be profitable but you’re extremely aggressive on growth?
Christina: Yes, yes. We could make a lot more money if I had done things differently and not tried to get 100% growth numbers. If I had tried to do this at a 10 to 20% growth and stayed… What that would mean is I wouldn’t do national shipping. The subsidies are far too great. Last year, we subsidised over $3 million in shipping. If I had $3 million more in my pocket and a lot of founders would do that. They would just take a distribution of $3 million out of their company and call it a day. That’s not what I… I never started this company to be a small business. I want to grow it to a billion dollars. That’s what I’m doing.
Nathan: A billion in revenue or a billion in valuation?
Christina: A billion in revenue.
Nathan: Okay. Wow. When do you think you will get there?
Christina: It depends. I think we could definitely get there… Honestly, it depends on the economy, what’s going to happen with the economy, with unemployment being what it is but if everything went as it is right now and how things have gone right now, we could be there in five years.
Nathan: Just servicing the US market or have to go international?
Christina: I would like to go international. We’re already you working on some international plans. Mm-hmm (affirmative).
Nathan: Okay, interesting. COVID’s been an interesting one because I think it’s been a true test of every founder’s leadership abilities and skills and entrepreneurial skills. I’d love to know what have been your biggest lessons that you wouldn’t have had if you didn’t go through this?
Christina: Yeah, that’s a great question. What I realised very quickly, when having to shut down the company in 12 hours was that the things that I was most proud of and how I’d set up my company, were the things that made us the most vulnerable to what just happened. [crosstalk 00:46:32]. Yeah. The things that I just said about how keeping all the control in-house by doing everything ourselves, until… I was very fortunate that we had just opened a second distribution centre in Ecuador, January 5. Two months before COVID. If I hadn’t done that, it would have been even much worse because…
That was a very small… I’d only been operating for two months. So I was doing about 10% of our orders from there. We had to then move all of the orders that were in the system very quickly there and then communicate to all of our customers that we’re going to be late because we had to figure out it takes longer to get them from there. But even doing that in two locations, really, one and a quarter, because that one was not up to scale yet because we had just launched it two months earlier, made us so vulnerable because when a city tells you, you have to shut down because nobody budgets for a pandemic. Nobody plans on a pandemic.
I planned for unplanned expenses, and my P&L and stuff, but I never planned for this. All of the other companies, like I said, they don’t make the flowers in-house. They have partner farms and just bouquet makers and 3PLs and all these distribution model is very different than ours and they were able to keep going because they have people all over the world fulfilling these orders for them and say, if you had to shut down based on what was going on in those cities, they had many others. Even if they had to shut down 25% of places, they have 300 places shipping for them, they’re not vulnerable to shutting down their whole company and we were.
I was so proud of how we had done that and then we had everybody in-house and we had created great had created great manufacturing jobs. 12 hours later, I went from 197 team members to six. Six, everybody else had to furlough and figure out what I was going to do. What I’ve learned though is that I should have done what we just did so much sooner, changing my whole distribution model to a much smarter one that makes us less vulnerable to things like this happening, I should have done years ago, but I didn’t because I was really wedded to this. This is the right way to do it. That, I won’t do again. Also there was some fear to it, because it’s a PR nightmare if you were going to shut down in San Francisco where everybody is really into brand and we’re the sweethearts of San Francisco, where you see our bike couriers all over the city with flowers all over their baskets and stuff.
We had all this press and we were in a national commercial, Capital One commercial for it. [inaudible 00:49:13] To then say like, “I’m going to close down this facility and move it somewhere cheaper [inaudible 00:49:20] the city in a city.” San Francisco was not set up for manufacturing, it was ridiculous to run a manufacturing facility in San Francisco. That was the stupidest thing that I could have done and so I should have moved it years ago.
But I was like, I can’t. The PR nightmare, I’d be scared of like people what they would say and I should have just done it. Do the hard things sooner, and the things that are right for the company and don’t care what people say about it. Because there’s armchair quarterbacks everywhere telling me every thing I do is wrong, but so what?
Nathan: Yeah. That’s a great one and any others that have really forced you to level up as a leader or an entrepreneur that you’ve really learnt from during this time, from point of reflection?
Christina: I don’t know if this is learning, but I would say it’s this year has been absolutely the hardest year of my life. I think it would have been really easy to give in. This year would have been the year to just give in. When all this happens, after I cried for a little bit that night and felt sorry for myself, I realised that this… How I set up the company was… All of it was choices. Everything is a choice. I can either make the choice to walk away now and I thought about it.
I don’t pay myself a whole lot of money. I’m not the CEO that makes a half a million dollars a year. I was paying myself $60,000 a year, putting everything back into the company. This was like my baby and I didn’t set myself up well either because when I sat there feeling sorry for myself and thinking, “Oh my gosh, I would have made more money if I just stayed at Stanford literally. I just worked 120 hours a week for 10 years. That’s not smart either.”
It sounds like a weird thing to say, but making sure that you’re setting yourself up well, that you’re setting your company well and not… I was putting every dime back into the company because this was so important to me and it could be gone tomorrow. It could really be gone tomorrow. There’s that learning. We’ve had everything from… With that, we had to [inaudible 00:51:34] distribution. It has definitely shown a very bright light and I always knew this, but to see it so clearly on the importance of your team. Like my team, the fact that they are right alongside me opening up like eight more fulfilment centres by the end of the year, working just so hard is because they care so much. I can’t do this myself. It’s just making sure that I’m taking care of my team because they’re so important.
That’s been a great learning and a great reminder of that this year. Then also, we had an issue with some accusations of race, whatever was going on with George Floyd here. That was the hardest thing I’ve probably ever gone through as a CEO and what I’ve learned from that is, honestly, not to give it any weight because you’re never going to stop people from saying things. The bigger you get, the more people they’re going to be out there that want to say things that are not true. By giving it any weight and time is taking away from the things you need to do.
Really staying focused on… There’s all these distractions all the time and just not giving it any weight or any of your time, because you have so little of it. Time is the most important resource that you have and so to spend it on anything that’s not important is a waste of time. That was a big learning. It’s hard because I don’t have… I think that this might be a female trait more so to on really caring what people think about you a lot. I’d like to think of care about people, but don’t care about what they think of you. That’s kind of my mantra right now.
Nathan: Awesome. Well, look… Yeah. We’ll wrap there but last question I’ll ask is where’s the best place people can find out more about yourself and your work?
Christina: Yeah. The best place is at farmgirlflowers.com, our website. That’s where I’d love everybody to go. That’d be great. And then also, we’re very active on digital channels as well. Instagram, Facebook and all of that, we do stories, and you can kind of see behind the scenes …learn more about Farmgirl.
Nathan: Awesome. Well, look, that was an amazing interview. Thank you so much for your time and congratulations on your success.
Christina: Thank you Nathan. Thanks for having me. It’s been a pleasure.