There is an old Yiddish proverb, "Mensch tracht und Gott lacht." Roughly, this translates as "Men plan and God laughs." When Justin and I sat down at the beginning of 2020, we planned out a very clear vision of exactly how the year would unfold. Well, God definitely laughed at us this past year. Thankfully, through it all, our team also enjoyed a number of laughs as well. Justin and I often remark that at any given time, you can usually hear someone in the office laughing. 365 really embraced internal culture development this past year, and our core values are a big reason why we’ve thrived through the craziness that was 2020.
As we embark on 2021, we again have a big vision for what we’ll accomplish in the next 12 months. We are hopeful for fewer surprises than last year, but there will still likely be many new challenges to navigate. Despite the issues we faced from the pandemic, we look back on our 2020 goals having largely achieved or exceeded all of them. This speaks volumes about our team’s dedication and hard work.
Our 2020 team meeting largely focused on raising awareness around our internal core values. As leaders, we’ve constantly been developing, refining and honing them. The move from a small business to a small business that owns a couple small businesses, to now a medium-sized business that owns a portfolio of small businesses means the culture must evolve with that growth. Our four core values are:
- Team and Culture First
- EQ over IQ
- Relentless Execution
- Winners Keep Score
These four values permeate throughout this letter. The results achieved in 2020 have little to do with a global pandemic or explosive growth in eCommerce — and everything to do with our team and our culture.
Typically, we run the business from the EOS visionary/integrator framework. I have traditionally done more of the marketing and strategy roles and filled the seat of Visionary, while Justin has done more of the operational roles and filled the seat of Integrator. As 2020 began, both of us would find ourselves working “in the business” extensively. Fast-forward to 2021, and I am proud to say that the two of us are largely working “on the business,” and that the internal organizational development of the team is to thank for that. I get to spend more time on capital allocation, M&A, writing, thinking, strategy development and generally looking for what’s next. Justin gets to spend more time leading internal HR, owning the P&L and managing daily operations at an executive level.
It All Started So Smoothly...
2020 started with the move to our current office and warehouse in Akron, Ohio followed promptly by the acquisition and relocation of Nicki’s Diapers from New Glarus, Wisconsin. No sooner than the trucks started arriving from Wisconsin did we realize that the sales of Valley Food Storage had skyrocketed. I thought, “Surely this was the excellent handiwork of our crack marketing team!” Yet, there was no marketing attribution for the increase in sales? Then, news of a new strain of virus flooded the media and the increase in customer demand became more clear.
February through June felt like a total blur. The relocation of Nicki’s Diapers did not go nearly as smoothly as planned, and the demand for Valley Food Storage put us into a large backorder situation. All of this combined with the health risks posed by COVID, stay-at-home orders and shipping carrier delays meant our typical operational cadence was quickly thrown out the window.
In March, Justin made the call to split the entire company into two groups: those who would work “essential” warehouse jobs and those who would work remote in ”non-essential” customer service roles. Whether a person’s career was in marketing, operations, management, accounting or something else — our employees were now working full time in a customer-facing role. Justin led the warehouse team in packing and shipping orders; I managed the remote team and got everyone else cross-trained on doing customer service. The right decision was made as we came out on the other side with the entire team healthy, intact and back to their normal career roles. Thankfully, the business emerged financially strong as well. Justin watching out for the short-term safety and long-term health of our team is the perfect example of Team and Culture First.
Catching Our Breath Mid-Summer
By the time we caught up on Valley Food Storage backorders and wrapped up the Nicki’s Diapers warehouse reorganization, it was July. We settled on a few key priorities for Q3:
- We acquired Nicki’s Diapers knowing it sorely needed a complete website replatform and redesign. A large part of the team went head down on this monumental undertaking and, just in time for Q4, a shiny new Shopify website with 7,000+ SKUs went live. There is still a backlog of improvements to be made, but this was a critical first investment in the long-term health of that brand. I told Joe I needed roughly six hours of his time to wrap up that project when I started it in June. The saying, “About Six Hours” is now a standard joke internally as we clocked thousands more to take the site live. Kudos to Joe, Ryan, Chris, Allison, Erin, Jen, Dre, Jenn and everyone else who spent many hours in spreadsheets making this a reality. (i.e., Relentless Execution at its finest!)
- The lessons from our food backorder situation opened the door for our operations team to source and set up an entire food co-packing facility on site. We gave the project to one of our youngest and most ambitious team members, Frank, who dove in and made us proud. This supply chain investment for Valley Food Storage means that we can be more responsive to customer demand and better control our costs and quality.
- Justin began to re-assess the org chart and realized that we had a lot of roles to hire for. The business had grown significantly but the scaling of the team hadn’t kept pace. He and Kensley got to work on recruiting, and as I write this letter, I can confidently say that all of those key roles have been filled with great additions who are not only intelligent and technologically proficient but are also great cultural fits. (i.e., EQ over IQ)
Heading into Q4, we got back to planning operations and growth strategically again. Justin and I made time to sit down and set some priorities to close out the year in a strong position. As always, the list was ambitious. (Are you sensing a theme around how we set goals here?)
- As soon as Joe was done with the website project, he was to start in earnest on an ERP deployment that will tighten up our financial reporting and generally improve our operations. (i.e., Winners Keep Score)
- Justin launched our internal leadership development program (he aptly coined it 365 Leadership). I am excited to watch the growth of our team and am thankful for the influences that shape his thinking around team development and HR.
- Ryan and the marketing team had clear goals and plans for Black Friday and Cyber Monday. While the results were mixed, we were proud of the way the team came together and executed its plans for one of the most important retail periods of the year.
- Jerrica had plans to fulfill the Q4 spike in sales from a shipping and service standpoint — and she nailed it.
- Kensley launched our community outreach program (365 Gives Back). Beyond great pay, a benefits package and fun culture, we want to build the kind of organization that Justin or I would want to work for if we were employable (another long-running joke is no one would ever hire either of us). 365 Gives Back is going to be a key part of this puzzle. More updates forthcoming.
As the year wrapped up, a number of exciting initiatives all fell into place:
- With the growth of Ryan’s marketing team, I could spend more time on developing the 365 brand — and as a result, we were able to launch a shiny new website for 365.
- Justin and I committed time to document the core strategies and internal frameworks that guide 365’s future growth. We are beginning to publish these and look forward to sharing more soon.
- We pulled together two year-end acquisitions and made one strategic divestment!
- As mentioned in the opening of this letter, Justin and I evolved our roles out of working “in the business” to more so “on the business.” Both internally and externally, we have embraced the differences in our roles and responsibilities of President and CEO.
2020 Financial Results
To say we are blessed is an understatement. With so much bad news in 2020, we are beyond grateful to end the year in a strong financial position:
- We exceeded our revenue and profit goals for 2020.
- As you read this we have announced our first Profit Sharing plan payout thanks to the point above! The 28 employees who qualified for the payout shared in a pool of more than $350,000!
- We had enough capital available to fund year-end acquisitions off our own balance sheet.
Context & Market Conditions
One of the reasons I wanted to start writing these letters was to be able to look back on them in future years. If we’re to learn from our past, I think it is critical to include the context of where the world is:
- Interest rates continue to be very low. This pushes up asset prices across the board — stock valuations, business prices and real estate prices are all at record highs. Capital markets are at all-time highs led mostly by huge valuations of big tech companies.
- Government subsidies continue to buoy consumer spending. We think about this a lot in relation to the durability for demand in the products we market. How much of our revenue is from stimulus checks?
- Antitrust claims are beginning to be filed against big tech ad giants while hardware vendors enhance user privacy via control of the hardware devices. The implications here for digital advertising are far reaching and as of yet, unknown. This is a new and different business risk.
- COVID accelerated a decade of eCommerce growth (see 2020 stock performance for Amazon and Shopify — and headlines about legacy retailer bankruptcies and mall vacancies).
- The socio-political climate remains tenuous and largely divided. The shocks of political unease can be seen in the ebb and flow of daily business metrics.
Our Go-Forward Business Plan for 2021
- This will largely be a year of focusing on eCommerce fundamentals — content, advertising and merchandising. Our core frameworks for marketing are coming to focus around our Media Company Strategy and on Direct Response Advertising.
- Our M&A focus has been refined into acquiring market-based eCommerce brands and giving them a permanent home. Yes, we buy brands with the intent to “never” sell them.
- Thanks to our year-end M&A activity, our business plan for 2021 will still see meaningful revenue growth over 2020 despite large, one-time revenues in 2020 from outsized COVID demand.
- This year, we are launching 365 Ventures. While the full details are forthcoming, this will be somewhat of the intersection between a search fund, a fundless sponsor and a partnership vehicle for future brand acquisitions! If this is of interest to you, please get in touch. Final details to come in Q2!
- Lastly, we will finish professionalizing our internal financial infrastructure with the ERP roll-out. Cheryl has begun the process with our CPAs of getting prior years’ books reviewed, and we are ready for a full audit of our 2021 books. All of this sets us up for a refinancing in Q1-2022 that will fuel growth for years to come.
Thank You to Our Team!
It probably sounds trite, but to say, “we couldn’t have done it without our team” is an understatement. From the overtime hours in customer service to the “essential workers” team who did warehouse duty for months on end, it was an all-hands effort to get through 2020. On behalf of Justin and myself, thank you to everyone who has been a part of this journey with us. Here’s to a successful 2020 and an exciting 2021 ahead!
Please reach out if….
- You want a career in eCommerce in Akron, Ohio
- You want an internship in eCommerce in Akron, Ohio
- You want to sell an eCommerce brand
- You want a partner to help you grow your eCommerce brand
- You want to finance or co-invest in future acquisitions
If you have made it this far, thank you for taking the time to read this first annual update from 365 Holdings. As I wrote this, I considered my audience as current and future employees, business leaders outside of 365, other entrepreneurs and all 365 stakeholders. I hope that sharing some of what happened with us this year is of value to you. If it was, please reach out to me directly. I would love to hear your feedback.