Billion Dollar Creator

Cathryn Lavery: [00:00:00] When I'm old, what's a cool story I could tell my kids? It's, oh, I sold my business and then I bought it back again.

Nathan Barry: I'm Nathan Barry. I'm the CEO of Kit and I've thought about selling my business.

Cathryn Lavery: Who's going to want to buy the business? How much are they going to give it? What if I regret it the next day and I can't go back?

Nathan Barry: Are you wondering what that process might be like and what you should know, what mistakes you should avoid?

Cathryn Lavery: I was pretty tired the last two and a half years. It was just been hard mode. Let me take this deal and then start over again. So often people don't get their earn out. Make sure they earn out in something that they can't like pull an accounting trick.

And suddenly it doesn't exist.

Nathan Barry: Anything that you wish you'd done differently?

Cathryn Lavery: One thing I would say is whenever you're negotiating is like, it's only afterwards you're like, Dammit, I probably could have got more.

Nathan Barry: What were some of the biggest things as you were scaling Best Self?

Cathryn Lavery: If you haven't been embezzled from yet, you've either not been in business very long or you haven't found out yet.

Nathan Barry: How much money did you have stolen from you?

Cathryn Lavery: Two hundred and thirty thousand.

Nathan Barry: Wow. So, Cathryn, a little while ago, [00:01:00] I guess the beginning of this year, Michael Girdley, who's a friend of both of ours, posted a tweet about hanging around the hoop. Can you explain he says basically a good way for entrepreneurs to get rich is to hang around the hoop What did he mean by

that?

And yeah, let's just start.

Cathryn Lavery: So I'm not a sports person So, I don't know any of the references for that But it was basically talking about business owners who sell their business private equity and then they hang around Long enough for them to screw it up and then they buy it back for pennies on the dollar

Nathan Barry: So yeah in the basketball reference, it would be Uh, someone else takes a shot and you're right there for the rebound when the shot doesn't work.

And so in this case, you know, you often think about private equity coming in and you ran your business a certain way. And then now the experts are going to come in and the professionals and they're going to buy it, scale it, bring in all this capital and, and further experts and go from there. The reality is most of the time we see these buyouts, the company tanks.[00:02:00]

And the founder watches from the sidelines is like, Oh, that's not the decision I would make or Oh, well,

Cathryn Lavery: yeah. But if you hang

Nathan Barry: around the hoop, sometimes there's this opportunity. to come back into the business.

Cathryn Lavery: Yeah, and I didn't realize this was a thing until I did it. And then a lot of people were like, well, this other person bought their business back.

And so there's this like weird club of people that you have like chapter one of your business and then chapter two

Nathan Barry: of

Cathryn Lavery: what do you do when you come back? And honestly, one of the first things that came to me when I was like trying to make the decision if I wanted to buy it back was like, this would be a really good story.

And if I'm thinking of like When I'm old, like, what's a cool story I could tell my kids. It's like, oh, I sold my business and then I bought it back again. And it's funny when you're talking about like PE coming in and they're the experts in the MBAs and everything, and it's this thing going on on Twitter, like founder mode, manager mode, founder mode.

And there is a lot just in like bootstrapping and [00:03:00] starting, you know, how to do a lot of the things where PE will come in and they think that everything's supposed to be on a spreadsheet. And there's just a lot in a small business, especially in our business, that was like nuanced.

Nathan Barry: There's so many things in there.

One you said something about, it's really a framework for decision making and this is, I think I first heard it from my brother in law when it's like when you're faced with two options and you're trying to decide, should I go with option a or option B, go with the one that makes the better story as like just this fun way to live your life.

Like that's 10 p. m. Should I go to bed or should I like go catch up with those friends that yeah, you know Catching up with the friends is the option for the better story So let's go with that, you know And so I like that that was a factor in your decision to buy the company back

Cathryn Lavery: Actually one of the I was talking to someone the other day about like the decision to sell it in the first place was I was like three months postpartum when I was approached, like, so I wasn't going to people to sell, but someone came to me and the offer they gave me was like, uh, and I read this book and I was talking about [00:04:00] decisions and usually people were like, okay, will I sell to this person or not?

And that's kind of like the binary decision. And it's like, well, there's a third decision of like, let's open the conversation up and just talk to other people. And so my whole thing was like, I'm just going to say yes to conversations because I don't want to get to the end of this thing and be like, I'm not going to do a deal.

I'm not that excited about it. Cause like, what's the point. And so I'm literally in a crypto group, in a slack group. And I mentioned in a chat, like these are people I've been in this chat with for like years, been through the gauntlet together. And so I just mentioned like, Oh, I got this, um, offer to buy my business and I'm interested in selling, but like, this isn't a great deal.

And so one of the guys that I'd never met in real life, he was like a cartoon figure who not as a friend and I know him and he's in Austin, he connected me. He's like, Oh, I have these. Uh, guys that are wanting, they're basically, they're a new private equity firm, but they're well funded. Um, your products kind of fit their analysis of what they're looking for.

Do you want to get on a call? And I was like, sure. And I [00:05:00] literally didn't take it seriously. I just got on a bunch of calls and had conversations and I kept doing it, not knowing it was going to go anywhere. And then they were like, they gave me an LOI and I was like, okay, cool.

Nathan Barry: So we should back up a little bit and best self, the business that we're talking about.

Cathryn Lavery: Yeah.

Nathan Barry: Uh, what is it, what kind of products do you sell?

Cathryn Lavery: So best self we sell. Bunch of different tools around relationships, productivity. We started in productivity with a journal. So I grew up, always felt disorganized, left behind and realized much later in life that I had like ADHD and I didn't know it.

And so I'd always come up with these like systems to just do everyday things. And I came up with this goal journal in 2015. It was basically like, I'd read all these books, but I'm like, I need like an actual framework. I'll just forget. I just want, what's the system that I need to use. And so. Launched on Kickstarter and it did really well.

Best self, I think in like 2018 we pivoted, not pivoted, but we just were like, actually let's look at how we help people with different parts of their life. So it was relationships with your [00:06:00] friends, with your partner, with your kids, productivity. And it's kind of like, what is your best self mean for you?

Nathan Barry: I like that you, you chose a brand that had a very specific meaning to it, but then you realize like, oh wait, no, this could, this could expand in so many things. And one of my favorite products that you have is the. Um, I really personally like to buy the conversation cards. Particularly, I think it's, they're called little talk, the ones in for kids and we use them all the time, you know, and it's just, yeah, I've got three boys and you know, they love.

It though, Hey, when are we going to?

Cathryn Lavery: With your kids or with your partner, it removes a lot of defenses when the card's asking you the question. It's not like your parents, like, when was the last time you lied? If I'm a kid, I'm like, why is he asking? What does he know?

Nathan Barry: What's the question behind this? Yeah.

Cathryn Lavery: And so just having like almost like a third party removes a lot of the defensiveness that would otherwise come up.

Nathan Barry: What were some of the biggest things as you were scaling by self? That, like, drove the success of, [00:07:00] uh, you know, from a marketing and sales perspective.

Cathryn Lavery: I mean, I think one of the first things was like, the first product was a journal.

And it was a 13 week journal. It was like the first one that You set a goal. We show you kind of a system. So you're not working in a year, you're working in like three month chunks. I'm like, okay, well, if we want this to become a business, people have to come back and rebuy. So it's like, how do we

Nathan Barry: repeat purchases are really, really important.

Cathryn Lavery: Yeah. And that was like the whole, it's like. yeah, getting people in, but how do we keep them in? So we put a lot of effort into creating a community, like giving people, like, what's the first 10 minutes when someone gets our product, putting out content, giving people like, oh, is this your goal? Here's what worked for these four people.

I was actually undiagnosed ADHD when we came out with the self journal. It was only like a year and a half later, but we got a lot of comments of like, this works for me. And I'm like, that's pretty cool. And then it was, you know, a year and a half later where I actually got diagnosed and I told my parents and then my mom's like, That makes a lot of sense, not.

Yeah. [00:08:00] So I, basically with any business or product I've had, it's always, what do I want to exist in the world? And, and it starts from there.

Nathan Barry: Yeah. I like that. Okay. And so then how long did you run it? Cause when did you sell the company?

Cathryn Lavery: So I started in 2015. And then I sold it in 2022 in October, and then I bought it back in end of January, 2024.

So it was like 15, 14, 15 months later. Yeah.

Nathan Barry: Oh, that's fascinating. What, what effects did COVID have on the business? Cause you ran into all the supply chain issues.

Cathryn Lavery: Oh, yeah. 2020 was just like, we're hearing what the single COVID or we're running out of inventory. Our factory, um, is closed on 2021. Like supply chain, you go from spending 4k container to 24k.

And if you have like 10 containers of product coming in.

Nathan Barry: Yeah. And to be clear, that's not the cost of the product in the container. No, that's just, just getting it across. [00:09:00] So imagine

Cathryn Lavery: like when you're planning out your business. you plan out what you think the margins are going to be. And it's like, it's going to be 4k to get this container.

And then it's six times, I don't like doing public math, but six times, plus it sits on the port for six weeks. So we ended up moving our facility, or our, production to Columbia.

Nathan Barry: Okay.

Cathryn Lavery: Um, so I find a manufacturer there and we still actually work with them. There's a couple of products that I'm moving back to our original production, just cause I don't like the quality of the paper as much in Columbia, but a lot of our product, we find a really good partner in Columbia.

And so that helped us, like, I don't know that I would have been able to sell the business if I hadn't made that move. So it was just like thinking strategically, like, I don't want to take six months to get new inventory and we can get it. Inventory from there. And, you know, a month if they ship it to, to Miami.

So we're not sitting at LA port for a while. And then another thing we did was we moved to another 3PL cause we had. literally [00:10:00] years of issues. You, we had a good first year and then we were there for three years. And then the second year, like, no, we're, we're putting all this investment in. And you, you see, they're getting all this funding and they keep promising it's going to get better.

And then at some point it's just like, we have to cut bait and the new 3PL was much better. We like saved so much money. And that was another thing where if we hadn't have done that. It also would have been very difficult to sell.

Nathan Barry: Yeah. That makes sense. Okay. So when it came time to sell, I think that's another conversation that a lot of listeners have thought about with their business of like, okay, should I keep running it for a very long time?

Is it time to sell? This is a good offer. What's happening in the market broadly. You what, what was it that made you think like, okay, I'm, it's, I'm actually going to really entertain offers and then ultimately take this deal.

Cathryn Lavery: I think at the time, I mean, I was, I was pretty tired by 2022. I felt like the last, I don't know, two and a half years, it had just been very like [00:11:00] hard.

It was just been hard mode.

Nathan Barry: Nonstop putting out fires.

Cathryn Lavery: Yeah. And I, you know, I'd, I'd bought out a business partner two and a half years before. And so I took on some personal debt to deal with that. And then e com is just a very capital intensive business. So it was always, and then, you know, I had a big team and it was like, okay, people are.

I'm responsible for their livelihoods. And when a deal came along where they were going to keep on the team for at least six months and I paid a, what's, what's it called? Like a retention bonus. And then they matched it. I paid a three month one, they paid a six month one. And so I'm thinking like. Cause I can see almost the writing on the wall as far as like margins are getting smaller.

You have to kind of pivot and figure out different things in your business. But when you have people's livelihoods depending on it, it's really difficult to like make a hard switch. So I could see that there was like difficult conversations and decisions coming up. I also had a three month old baby when I first started making decisions.

These, and I hadn't taken much time off. So I was like, it'd be really nice to just take some money off the table [00:12:00] and like feel secure and then take some time off. I love like the business and the products. I still believed in it, but it was almost like I had built a business. By just trying to figure out as I went and I'd gathered what I call like inexperienced debt.

So where I, you know, you just like build things cause that's what you know at the time, but it's not ideal. And you keep building on it. It's like technical debt, but it's like inexperienced. And then when you sell it, I was like, I cleared the slate. I can go and start something else. And I can like take the learnings that I have from that and do it differently the next time.

Nathan Barry: Right. Without carrying all the baggage, you can leave the baggage behind and just bring the knowledge and experience.

Cathryn Lavery: That's kind of what I was planning for. I was like, okay, and it's a cool idea. It's a cool feeling to start something from nothing and be able to sell it like someone wanted to buy it.

Like, that was cool. And it was also very much like an ego thing where you're like, Oh, I exited my business. And then after you're like, Oh God, what I do now?

Nathan Barry: Yeah. So I think a lot of people get into that feeling as well. [00:13:00] Uh, I've, you know, in the past when I've thought about selling ConvertKit was, I was like wrestling with a lot of those things.

Um, our friends who run the tropical NBA wrote the book, um, before the exit, I think that talks about like, as they sold one of their businesses and then their, uh, thoughts on it. And I read

Cathryn Lavery: that after the exit,

Nathan Barry: it's in the title before the exit, you're supposed to read it first. Yeah.

Cathryn Lavery: I should have done that, but I mean, I'm still, I'm glad everything worked out.

I did, but there's definitely. And I don't think that someone has to sell their business and buy it back in order to make the changes.

Nathan Barry: Yeah.

Cathryn Lavery: But I think at the, I could see what was coming up. It was almost like you have to turn the ship and it's going to be really difficult.

Nathan Barry: Right.

Cathryn Lavery: And I don't think I had the personal bandwidth at the time to do that.

And so it was just kind of like, let me take this deal and then start over again with something else where I don't, I just do it better next time. Cause I know better. And so that's kind of how I framed it. But then [00:14:00] after so weird, you go from like a business that makes money. So you have an asset you can sell sometime, and then you also have a cash flow coming in and then you sell it and you've no asset and you've no cash flow, but you have more money than you've ever had.

Nathan Barry: Right.

Cathryn Lavery: But it's like, this is going to run on it.

Nathan Barry: You, so for the first time, you're noticing it as like a fixed pie instead of, uh, you know, renewing cashflow every month,

Cathryn Lavery: which is, which is. I've been less stressed when I like

Nathan Barry: less money.

Cathryn Lavery: And so my wife would be like, you know, she's like, you can take time off.

Cause I'd never had just time to just explore and learn things and do whatever. And I was doing that, but I wasn't enjoying it because you know, she would come home, I built this like coal, you know, I had a whole personality of like a coal plunge in my yard. I'm like, I want to ingrown one. So I like designed it.

I used all, and I'm like learning electrical and plumbing and she would come home and She's seeing all this progress and she's like, how was your day? And she's expecting me like, Oh, it was really good. And I'm like. It's terrible. Nothing I did made money today. [00:15:00] And so like detaching your worth from, yeah, that was from your income.

Yeah.

Nathan Barry: Yeah. What helped in, in actually doing that? Or do you think that did you just put that journey on hold or is, I mean, I feel like you actually made progress and

Cathryn Lavery: I made progress. For sure, because I think I was just, yeah, just, eh, scared, because I was like, what am I going to do next? Because I like working on projects when I don't have something, because everything I've started was started on the side of something else.

I've never had just the time to just do whatever. And I think not having the constraints was not a great thing for me. It's also maybe the ADHD, because I would just be all over the place. And so I think having a project to work on. Because. A business is just like, what problems are you solving? And so when I sold it, it was like, I didn't have that many problems anymore.

And so one thing I started doing is like a problem log. So I'm like, okay, if I start another business, what problem am I going to solve? So I started just writing down all the problems I had in the last few [00:16:00] years. I'm like, how painful was it? Would I be interested in? And so I was kind of like exploring what I would want to do.

I like test drove a couple of things. I'm like, I don't like this at all. Like, I like creating and building something, but I wouldn't want to, like, I don't want to run like a service business. I realized I tried that. I'm like, I don't like having a boss. And so the clients. Yeah.

Nathan Barry: Yeah.

Cathryn Lavery: And so there was, I think it was good.

A friend of mine, Mike, I was talking to him and he's like, I think the idea is good. I don't think she'd like, marry it until you know you like it. So just test drive it. And if you decide you don't like it, don't do it. And so that actually gave me the permission to be like, because sometimes I'm stubborn and I'm like, I'll just stick with something, even if it's hard.

And I was like, actually, no, I don't like this. So I'm, and I had like a couple of clients and I was like, yeah, no.

Nathan Barry: What was that business?

Cathryn Lavery: It was going to be like, um, some sort of mix between, uh, chief of staff, house manager, like type thing, but where you like have, you know, [00:17:00] Someone locally and people remotely because I was very into like optimizing your life, and I'm like that's I don't know how like manage people Yeah,

Nathan Barry: yeah, that's a you gotta have just the right people because it's closely and it's also

Cathryn Lavery: like that business is actually just hiring people Right.

It's it's like a what's the word? You just constantly having to hire people all the time. And that's actually the business you're in. You're not in like, you're not creating prod. Like, you're not, like, that's not my skillset.

Nathan Barry: Yeah, that makes sense. Okay, so when you sold the business, any lessons learned if someone is in that position of they're about to exit their business, they're in those final negotiations, anything that you wish you'd done differently or that you'd want to flag for someone who is about to exit?

Cathryn Lavery: Yeah, I think there was a couple. There was like, I would have had someone on my side helping with the negotiation piece because I probably could have got more. Okay. But I think I was honestly tired, which I hear is pretty common. It's just like, let's just [00:18:00] I was much better negotiating on the way back in, but on the way, I, I definitely, um, because the deal was actually much better than the other deal.

So it was also anchored to the other deal offer that I'd gotten before. So I'm like, Oh, this is way better. And so I probably could have got more, but what else would I have done differently? Um, I mean, there's like funny stuff, like use your. Business email for anything personal,

Nathan Barry: right.

Cathryn Lavery: Or talking to your lawyers that they might sometimes, not that ever anything ever came up from that, but it's one of these things where it doesn't, it's only afterwards you're like, damn it.

Nathan Barry: Yeah. Cause it's not yours anymore. And so, yeah, I've seen people negotiate like, Hey, uh, as part of this deal, I get one year access to my email address on this domain or, you know,

Cathryn Lavery: Yeah, I got like six. Well, I, cause I was still a brand ambassador, but I didn't negotiate those small points of like, I remember one of my teams like, Oh, okay, we're going to remove you off slack now.

Makes sense. But in [00:19:00] the moment I'm like, and it's weird because you start this business and you run these people for like seven years. Like the longest person that was with me was seven years and like, Two years was like the shortest of the team. And so it's like, Oh, okay. Bye. And, and like, I understood that I'm selling the company, but then it's like, Oh, I'm an ambassador, but I can't have an email.

And I also, I'm not in Slack and we were supposed to have these like meetings that, that, but they were like, Oh, if we don't schedule them, like, don't worry about it. And so, but there was an ambassador payout. So I'm just like sending emails into the void. I'm like, Cause I remember ChatGPT came out like a month after I sold it.

And I'm like, here's all these ways you should use it. Like, I think I'm literally just talking to no one.

Nathan Barry: You're sending ideas of how to continue to run the company well.

Cathryn Lavery: Yeah. I was just like, here's how you could pull this stuff from, from reviews for this thing. And, um, again, nobody would respond. So,

Nathan Barry: yeah.

Cathryn Lavery: And I wasn't sending it to like my old team. Cause I do understand that they want to have their own way of like [00:20:00] managing people, which is fine. It was more of, um, I'm like, you guys are paying me, so let me just like send you ideas. Also, there's an earn out tied to it. So like selfishly, I wanted them to do a good job.

Nathan Barry: Yeah. Are there any, so the earn out's a big thing for you?

Cathryn Lavery: Also, one thing I would say is whenever you're negotiating is like, sometimes our ego wants the deal size to be bigger, but it's better to get the more money up front than the deal size to be bigger. And, uh, a friend told me, it was like, Oh, you, why don't you just ask for it?

almost like the ninth hour or whatever, the deal changed from like the earn out being, you know, 10 percent to like 25%. And that was because of an Amazon change that they made.

Nathan Barry: Okay. And

Cathryn Lavery: I did see like, there was more risk. Well, not get into it, but it was, it wasn't our fault. And it wasn't their fault. It was just something that happened like a week before close.

And that, so they didn't change the, the numbers. They just changed like when I was going to get paid. And so I went from like, not really caring that much to like, [00:21:00] okay. And so then I saw the, you know, I ended up not getting that run out spoiler because of how things were run. But I mentally, I think Q, Q2 of 2023, I was like, Because the Q1 numbers were so bad.

They were like, they had never been that low since like 2018. Because they just didn't order inventory in time and they didn't have anything. And that's like our biggest quarter. So it was like, okay, it's impossible. And so mentally, that was another scarcity thing. I'm like, oh my God, I have even less money than I thought.

Right, because they're

Nathan Barry: not going to get the zern out.

Cathryn Lavery: Right. So I, I like have to figure out what I'm gonna do next, even if it's not based in reality. Like that was what I was thinking.

Nathan Barry: So using like made up numbers, you're basically saying, okay, if it's a $5 million deal, then uh, 20% of it is an earnout. So that means 4 million upfront, 1 million is held back.

And you're saying even like, really, you should think of that as a $4 million deal. Yeah. With the potential for additional bonus. So [00:22:00]

Cathryn Lavery: often people don't get, they're annoyed and I've talked to so many people where. Now it's kind of a known thing where I'd be like, oh, yeah, of course you didn't

Nathan Barry: well, I bet it's known within

Cathryn Lavery: yeah Yeah, well actually sometimes my initial offer that I was given was a Earnout based on EBITDA, which I was like, that's dumb because like you can easily fudge those numbers so easily And then this one was based on gross revenue.

So I was like, whatever That seemed fair, but that's another thing is like, make sure the earnouts in something that they can't like pull an accounting trick and suddenly it doesn't exist.

Nathan Barry: Yeah. EBITDA is one of those metrics that on one hand is standardized and everybody uses it. And then on the other hand can be.

changed wildly in various ways.

Cathryn Lavery: Yeah. Like you buy, you invest in something. It's like, Oh, sorry. There's no profit.

Nathan Barry: Yeah. Well, and especially at e commerce where it's so cash intensive that you're like, Oh, Hey, you know, we got a better deal with this factory if [00:23:00] we pre ordered two years of inventory. And so then you're like, Yeah, it changed it entirely.

Okay. So that was the process of selling, uh, and then you had this 15 month period or so of, you know, doing things on your own, exploring, uh, feeling bad about yourself that you're no longer making money, which I can deeply relate to, but how did it come back? What was the first time that you? you, you know, had an inkling of like, Oh, wait, I might have an opportunity to, to, to rebound this business.

Cathryn Lavery: I mean, the inkling was they called me because I, they'd sent me the, the 12 month numbers and I think they were like 11 percent off. And it was kind of like an all or nothing. That was the way the contract was written, but I'm like, maybe I can chance my arm here and see if I can get some sort of prorated thing.

Yeah. And. So he's like, I, we can like talk about it. I think he was playing good cop, but he's like, let me talk to the board. So then maybe three, four weeks later, he's like the CEO of the [00:24:00] private equity company. He'd always be like, let's get on a call and then like never schedule it. And so maybe three, four weeks later, calls me up and he's like, Oh, we're boards, not going to do that any of the year now, like it's pretty much done.

And um, also we're closing down and if you want to buy the business back, we could talk about that. So it wasn't the inkling more than, more than them being like, do you want it?

Nathan Barry: You had an open question and then you're like, Hey, can I get some of my earn out? And they're like, no, but you can, you can buy the business.

Cathryn Lavery: And to be honest, when he first asked me, my first reaction was like, Oh God, no. Because I was thinking of putting myself back in the place that I was before of like, all this pressure and, um, payroll and stress and e coms hard. And what, what I realized, I kind of like journaled on it for a couple of days.

I actually, I told him I was open to the conversation.

Nathan Barry: Yeah. It's a good, always a good move.

Cathryn Lavery: Yeah. So I wanted to [00:25:00] like keep my options open, but to be honest. I was like, no, I also felt like, oh, am I going to be going back, like, because I closed that chapter and I'm going back, is that like weakness to do that?

And so there was, I'm like, why would I do that? And so, because it's almost like I played that game, why go back and do it again? Um, and at that point there's no team anymore. And my old team. I'd gotten them, like one friend of mine who was an e com company has four old best self people in a way.

Nathan Barry: So you like help people find new roles and all of that.

Cathryn Lavery: And so when I was thinking like, well, I, they have roles and I also don't want to do, it's like, I don't want to do the same thing again. It's like, do the same thing and expect different results. So I was just kind of thinking like, and then the time off when I wasn't, you know, scared about money. I was.

It's like learning programming and learning AI and playing around and just like exploring. And so I was, I was like, [00:26:00] okay, how do I frame this question differently? It's like, how do I buy it back in a way that's not risky and also buy it back in a way that can inherit a bunch of problems that,

Nathan Barry: right.

Cathryn Lavery: So it's like, if I want to, cause I'm like, I could buy this thing back, figure out or run it differently.

Or like. maybe find another problem that I could solve somewhere else. But, but right now I am just kind of treading water and I don't know what I want to do. If I had something else. You have to leave

Nathan Barry: all that baggage behind.

Cathryn Lavery: Yeah. And then you're like, I don't want

Nathan Barry: to buy that baggage back

Cathryn Lavery: at any

Nathan Barry: price.

Cathryn Lavery: I'm basically buying the brand, the products, the trademarks, the people aren't coming. And I can kind of like, Start over and see how I do it again. And it was funny because my time off, I would think like, Oh, I love that. Like, I love that brand. I love working on those products and I love the team. And I would love to have something like that again, where I could do it better.

Nathan Barry: And so

Cathryn Lavery: it was this thing of like, Oh, I love that. And I hope I can do it again next time, [00:27:00] not expecting it to be the same company. And, um, and so that's kind of how I was like, okay, let me see how to do it differently. And then it got more exciting. Cause I'm like, okay. And one of my challenges was, is like, I'm going to buy this back.

And I'm not putting a dollar into the business. It has to run. You put

Nathan Barry: constraints on it.

Cathryn Lavery: Yeah. I'm like, I'm buying the business back and the deal that I negotiated was basically like a percentage of the inventory. So I'm like, even if I sold the inventory. Um, and it's, you know, let's say half clogs. So it's like if I sell it at retail, then I'm going to make my money back.

So it's kind of like, it might take a very safe

Nathan Barry: transaction. Your downside was, was capped.

Cathryn Lavery: Yeah. So, and I, and I, again, I was like, I'm not putting money in, so I have to use revenue to do it, hire people, do whatever. And so I haven't had to put any money in. since that and I've taken money out of it and it's been great.

Nathan Barry: So I want to talk about how the deal came about [00:28:00] because you kind of glossed over it in what the deal actually was. Uh, and like, I understand it because we've talked about this a lot, you know, but in that when it was that you're open to the conversation and then did they come back and say, Hey, you could buy it back for this.

Or did they ask you, what do you want to buy it

Cathryn Lavery: I mean, they threw out some numbers. Which were too high and I was like, and it was over credits. So the good thing about Negotiating with these people is like none of them put their own money into it, right? Right. So it was like they don't have that loss aversion that I would have and they're all

Nathan Barry: about to walk away

Cathryn Lavery: And they're all waiting.

They basically have to get rid of these things off their books So that they can move on to their next thing. Um, and so I think I sent them an offer around like the two days after Christmas or something like that. And, They're like, it's too low. And it was low.

Nathan Barry: You're like, yeah, I know. But [00:29:00]

Cathryn Lavery: yeah. And I like was running some numbers and discounting a lot, but then it was like, okay, this is the, and, and to be honest, like it was basically, I knew everything coming in and if they had to sell it on the market, they have to like transition and do, and by that point there's a skeleton crew running it, so there's not Like, when I came back, there was like 25 credit card disputes that just hadn't been responded to.

So, like, things weren't going well.

Nathan Barry: Right.

Cathryn Lavery: And it would be hard for them to take it to market because they have to now pay more salaries to transition it. And so it was just, you know. And they just wanted to move on, right? And so there was a lot of, part of my offer was like, look, you can give me the one passport and just leave.

Like, I don't need anything apart from that. And, um, that was like a big benefit to them because they don't need me to do anything. The transition was like a two hour call, um, where, you know, There was like so much disorganization at that point because everyone was kind of like one [00:30:00] foot out the door. So the negotiation when one foot outside the door is much easier.

Nathan Barry: And

Cathryn Lavery: so it was things like that where, and I use like Chachapiti to help me negotiate. You know the way you used to send emails to your, like I had some friends that would be like, okay, how do I say this? And I do have a couple of like really good negotiator friends, like at the end of the deal. So my offer was based on an inventory number and we have really good terms with our supplier and When I was giving the deal, I was like, okay, so all this inventory has been paid for.

And they're like, yeah, they like told me on a call. And they also told me on the phone, like it's been paid for. And I'm like, okay. Cause that, that my offer was based on it being paid for. But I was like, I don't know why they would have paid for it. Cause we have, um, like 120 day terms. It wasn't, So it, but they kept telling me it was paid for, so I'm like, okay, and then because they're closing down, there wasn't a, like, oh, I can go back to them in a month if something goes wrong.

It's [00:31:00] like, we have to figure out all the numbers. And so the lawyers are going over the numbers. And so I'd agreed to take on, um, let's just say like 150 K of liabilities or something like that, which I knew about. It was like stuff in production and everything else was paid for us. I'm like, okay, cool. And so then a couple of days before close, we're like finalizing the numbers and it's like, Oh, here's 250 K of liabilities.

Um, or something like that. And I was like, what?

Nathan Barry: The inventory that was on terms, basically.

Cathryn Lavery: Yeah, there was things that hadn't been paid for. And then basically the inventory, like, oh, it was invoiced for, it just wasn't paid. And I'm like, that's not my problem. The check's

Nathan Barry: in the mail. Don't worry. Yeah.

There's no money to back up the check, but don't worry about it.

Cathryn Lavery: And so I was like, look, I made this offer based on this being paid. Here's an email that you said it was paid for. And now I, like, I. I don't want to retrade this deal. You know, we're supposed to close in 48 hours. So what are we going to do?

And at the time, like I was talking to my friend [00:32:00] Dave about it and he was just like, you have all the leverage here,

Nathan Barry: but

Cathryn Lavery: I'm like shitting it because I'm like, am I going to really walk away from this deal? Cause then they were like, Oh, we'll pay off this stuff. But. It's like a 60 K Delta, something like that.

And I'm like, two years of daycare. And so I'm like, am I really going to walk away over this? But, um, they ended up, the CEO called me. He's like, look, we're not trying to read the trade, the deal. Like we just didn't understand. Um, like it was invoiced, just wasn't paid for. And then it was like, he said something like, and he was like a nice guy, but he said something like, I just don't understand these, this manufacturer, like why they would have like four month terms.

It just, why would they not want to get paid earlier? And I was like, I, those are really good terms. Like I negotiated those terms. That's a

Nathan Barry: great thing for the business. It's

Cathryn Lavery: like, and it was almost like, that's the business you're in of like managing. Cash

Nathan Barry: conversion cycle, all of those things.

Cathryn Lavery: Yeah. So it's just this funny, like last thing [00:33:00] where I'm like, yeah.

And so they ended up coming down on the number and. Paid off the inventory that I was gonna get.

Nathan Barry: So you ended up what you mentioned earlier is that you bought the business back for half, the cost of the inventory,

Cathryn Lavery: right?

Nathan Barry: And yeah, that's, that's wild. Like that's a fantastic deal.

Cathryn Lavery: Yeah, it was, it was, and I was, I'm like, oh, this is risky.

And so I'm sending it, like, all the numbers. I had a friend who bought an e com company out of, I think it was, what's it, a distressed e com company. And, uh, it didn't go well. He ended up taking a loss on it. And so I'm just like, um, am I, this is, he's like, no, you're doing it completely right. I wish I'd, cause he, you know, the valuation was all wrong and things went, you know, wrong.

You know, Facebook changed and their whole like business model changed. But he's like, no, you're doing it right. Like you basically sell through the inventory. And that's kind of what I was thinking of. Like, even if I want to pivot or do something else, then I still own [00:34:00] all the assets and configure something else.

Right. And so I was really looking for like copying the downside because I didn't want to. Again, get myself in trouble and I was trying to push them to close ASAP because like the number was the number and the longer they had the business, the less inventory I had, the more money they had. And so I was pushing because Valentine's Day is mid, you know, obviously mid February and they wanted to close after the next Amazon pay cycle and I'm like, no,

Nathan Barry: it's gotta be sooner.

Cathryn Lavery: Yeah. It was like, I want it. Friday. Let's do a Friday. And it was like the 26th of January. And so I'm like, cause I'm like, I need to go all systems go to make the most out of the next two and a half weeks so that I can get rid of inventory and have money to like, and

Nathan Barry: do everything from there.

Cathryn Lavery: Yeah.

Nathan Barry: So you, I think so many founders run their business and they think, okay, if I were doing it over again, I would do this.

Or, um, you know, if I could start from scratch, here's how I would do it. And then [00:35:00] they look at their own business Or even this line that I've said before of like, oh man, if I can make the decision here, this is what I would do. You sort of stopped me like,

wait,

I can, but it's really hard to see beyond like 10 percent improvements or changes where you're like, okay, maybe this was the wrong hire.

So we're going to go a little bit in this direction and we're going to change the way the culture is a little bit in this way. Yeah. we don't really think that we can ever do blank slate changes. And so you got an opportunity to do

Cathryn Lavery: it. So you can't really do blank slate unless you fire everyone.

Nathan Barry: Yeah.

And, and even

Cathryn Lavery: that's like, not really,

Nathan Barry: there's all kinds of challenges in that. And then any, any big change is going to take you months to execute on. Like, I mean, I made a big change in November where I changed a substantial amount of my management and leadership team where in a single week, I let six people go.

And it took us five, it took us six months to replace all of those key roles. And so that was [00:36:00] as close to a blank slate change that you ever get. And you know, that was a 10 percent change in the team, actually, even though it felt like this giant thing. But you got to, to come in, maybe just,

Cathryn Lavery: well, actually it's funny cause they were like, Oh, you know, when we did the deal.

And it's funny cause we did the deal on Friday. I didn't get access stuff to the Monday cause the person was on vacation. Um,

Nathan Barry: I feel like some like that says so much about how the company was run, you know, just in general, but

Cathryn Lavery: yeah, I mean,

Nathan Barry: manager mode versus founder mode. Exactly.

Cathryn Lavery: And it's funny. I came back and.

It's, I still am finding like these golden nuggets in the Google Drive of like, oh, this, they did a whole photo shoot. Sick. Because I'm like, that's creative that now I don't have to pay for it. Right. Um, so it was like a big bet. Highly recommend this. Don't know how you make it happen. I never would have like pictured it happening.

But, um, It's been a like fun journey. But one thing I look at differently now is like before, I think you can [00:37:00] get into just bad habits in general in your business of like buying things that you don't really need. And so now that I've sold the business, I look at every expense is like, okay, is this thing worth four to five X what I would pay for it?

Because that's what's going to cost me if I ever sold the business again.

Nathan Barry: Because you're selling on a multiple of EBITDA.

Cathryn Lavery: And a lot of things is like, no. And so I, I'm just like more, and I'm not Building in a way that I have to sell it, but I want to build it. It was like, if I wanted to sell it, I could, cause I built it in a way that's sellable, but I also don't want to build myself this prison that I did before of like feeling trapped.

And so by being more intentional with like spending and having less pressure, I have more freedom to do what I actually want to do.

Nathan Barry: Yeah. That makes a lot of sense. So what are some of the big differences in how you're running the business now systems team, all of that compared to. Uh, a few years ago,

Cathryn Lavery: I mean, even like AI.

[00:38:00] I'm, I, I mean, I have like a team, but I also teach them how to use AI. I'm like, don't like, for example, an SLP don't ever start from scratch with like, it's just a waste of your time, record a loom video, just walking through it and you can get 80 percent of the work just from, I mean, not even a habit built into their program, but you can just create a prompt and you get 80 percent of the work done just from that.

And so I'm trying to teach them how to like. Think and do things differently. I also, there's a tool called Final loop, which I love. It's just e com accounting and inventory. So we used to pay, uh, like a CFO company type thing. And. We wouldn't get our books to the end of the, the middle of the month. And it was in some Excel thing that I don't know how to do what they're doing.

But Final Loop, you can see your live P and L anytime. And because it's so integrated into all of your systems, like I don't even need a [00:39:00] bookkeeper. I have like a finance guy that we go through and I can see my profit margin on everything. And I'm like, Dialing everything in so I know exactly where I am and I didn't have that before like I kind of knew the numbers But it almost because I had people on it.

I wasn't as on top of it as I am now and It's things like that of just like measure what matters if you're looking at it, you're gonna pay more attention to it

Nathan Barry: So before Those things were abstracted away and the pain around it was abstracted away because there was a person who handled it

Yeah,

which on one hand is a great thing about entrepreneurship is you're like, okay I mean I can pay someone else money to solve that problem But then you might not realize that they're spending 10 hours a week doing some part of it That's a total waste of time But they think is important to you or that's the way they've always done it and so then when you come back in That pain is now your pain, and you can decide.

But

Cathryn Lavery: I'm also starting from scratch as far as like, like I said, I'm not putting any more money into it, so I'm just much [00:40:00] more intentional, and I'm the one that's categorizing the expenses the first time, so I'm seeing everything, and then auto does everything, but there's just so many systems now that are so smart that you don't actually need a person.

It's not even that I'm taking on, like I probably spend, 10 minutes a month doing the little thing. I kind of like it. It's podcast and I'll just do it. And then it just keeps me thinking of like, cause there's so much time in my old business where it's so cashflow intensive. And we had a big team and you're like, Oh, let's pay this credit card here.

And it's. feels like a struggle because you know, one thing goes wrong. You're like, Oh my God, how are we going to like pay for this? There was a time where it was like, Oh, we have all these expenses coming up. I don't know what's going to happen. And uh, I mean, I always figured it out, but it was just like, I don't want to get into that.

So if I be more mindful, like going into it, I don't have that problem.

Nathan Barry: That makes sense. Okay. So you've implemented a lot of tech, you know, and, and [00:41:00] really just software has gotten so much better at the last. You know, five years, but you're probably using systems that you chose. Yeah. When you don't know what

Cathryn Lavery: you're doing.

Nathan Barry: Yeah. And then talk about more implementations of AI. So you had the one example of like creating an SOP. Yeah. Don't sit down and be like, all right, now I'm going to go write a five page SOP from scratch. I think what you're saying is record a loom, feed the transcript of the loom into. Yeah. I mean,

Cathryn Lavery: pretty much.

So a lot of, you know, I mean, creators and running a business, there's a lot of like minutiae. You don't know what's happening until you're sitting and you're like, what did I do today? And you're like, Oh, I spent 30 minutes writing this email. And some of them are important. Like before, if I would deal, you know, sales tax thing comes in and I'm like, I deal with this.

Cause there's stuff that happens. You're like. Your team be like, what should we do with this? I'm like, I have no idea. And that's hard to say. It's like, I literally don't know. And I just ask it. I'm like, I got this letter, and this is what I think's going on. Um, what, [00:42:00] and it, I find dealing with like government agencies, if you're, at least if you're not doing anything wrong, you just explain, you have them explain it and then you flex it over to their number and you get a response and it's done.

What I would have to do before is I would hand it off to one of my teams and their time's wasted, or I just wouldn't deal with it. And I pay, I pay a penalty later by not like whatever tax I'm going to pay by not dealing with it. And so much of business is just like, and now with AI, I can run through Stuff that would have taken me months and literally like 30 minutes, um, hiring people, like writing a job description, writing a test for the job description.

Once you have people, um, forecasting inventory, so like you can give it all the information. And then what we do right now is we have it. Um, forecast what we think it's going to do based on like trends and historical data. And then it's, we'll keep checking back and like, was that correct? So we'll have our number and we'll have, they [00:43:00] tell us, and then we keep going back like how close, and it's been pretty close because of how we're feeding it.

And even like product creation before we still have like. You know, we had these conversation cards, we'd be working with experts, then you have to like, come up with 300 cards to get 150. And then you're working on grammar, oh, is these all in the same tense or perspective? Someone manually is going through all that and then checking for errors.

Now you can just like, have AI like, do all that. Oh, this, this question, similar to this one, maybe we could tweak that. And so you can literally go from like an idea of something to going into production so much faster.

Nathan Barry: So getting really specific on that. Are you using, uh, tools that have this baked in or is this like you have a clod window open and you're interacting with that or chatgp?

Cathryn Lavery: Uh, mostly it's clod and chatgp and I just have very long prompts for specific things. You keep

Nathan Barry: coming back to the same prompt and [00:44:00] you fed it more and more information over time.

Cathryn Lavery: And I keep the same modal window.

Nathan Barry: Yep.

Cathryn Lavery: Um, like I dealt with this like terrible vendor and unfortunately we signed like a year long contract with them and they just were costing us money, not even, they were just, so I, I just gave Chai GPT the contract.

I'm like, I need to get out of this. This is what's going on. Like, help, help me. Okay. And. They're like, okay, here's the clause we can get out of it. And so I'm like, okay, write me an email and this would either, I wouldn't deal with it and I would just take the cost or I, it would take me way too much time and it would take my time away from something else.

And so you've basically taken what would otherwise not be dealt with. And now it takes 10 minutes of my time because then I'll respond like, Oh, you have a contract with us. And then I'm like, this is what they said. What do I say? And then I, you know, obviously I'm not verbatim copying it, but it's 90 percent of the way there.

And it's actually much more thoughtful than I would have [00:45:00] put in. And also just like writing, even sometimes delivering news. In a more thoughtful way. So there's a tool I use called super whisper and it's, um, you just talk into your mic and it's like, Oh, I want to write an email to Nathan about this thing and it will write the email.

I actually showed a friend yesterday. I'm like, yeah, I'm not really interested in this opportunity. Like, how do I tell Mitchell about that? And it just wrote it and he's like, holy hell. And so sometimes it's not perfect, but what you can do is you can take your transcription of what you're trying to do.

And you can say this is the first draft and then it can tweak it. So it's just like, yeah,

Nathan Barry: more in my voice, if it's as long thread that we have. So as context or say, that's great, but now soften it to let them down gently, you know, or something else.

Cathryn Lavery: Yeah. So it's just, and then using it for brainstorming, uh, yeah.

Forecasting, brainstorming KPIs. Like I've been trying to set goals for my team. That's both like fair based on where we're at. And not based on [00:46:00] historical data for Q4, like if I was like, okay, cause I want to, I'm focused on more profit instead of just revenue. So I'm like trying to figure it out. And so I'm literally just, I mean, Claude keeps telling me like, Oh, you're close to your limit now.

Cause it's so long and I'm feeding it. Spreadsheets and data. And then it's telling me, um, based on that and where I want to go, like what I should set goals at.

Nathan Barry: That's awesome.

Cathryn Lavery: Which I literally would. Oh yeah. And another thing I did. So because I had such one thing, like that's been a little more difficult is I don't have this team that's been there for years.

So it's like when you don't have to explain why something is the way it is. And I realized that I was kind of throwing the new people I hired in because they don't know. Why things

Nathan Barry: yep,

Cathryn Lavery: and I'm bottleneck because I don't have like I have a toddler so I have to like condense my day Because I'm I'm trying to have like more boundaries than I did when I first started it and so one of the things I did that I would just never have been able to do before was [00:47:00] just start talking to you.

I'm like, look, I started the business and I just went through and I just talked through like major decisions, why it was made, why we made this product inflection points in the business. And it turned into this like, I don't know, 40 page document of different like parts of the business. So they have something if they're curious about why we did it the way we did it or, or how, how, why we moved to Columbia or this manufacturer used to work with, why did we stop working there or this.

legal issue we had, um, what happened. So it's just like historical things that we don't really document, but we should. And this is a way. Where I'm not going to be the bottleneck of like them being able to find out the answer.

Nathan Barry: I think what's so important about that is when you join your, uh, you know, you join a team or company, you're getting all this, all these little bits of information and you don't have any scaffolding to hang it on.

You're like, okay, that's interesting. I don't know what to

do with that.

Yeah. And so what you're doing is providing all of [00:48:00] that context. Uh, I was talking to a friend and he reminded me of a quote from Steve jobs where Steve talks about how his favorite product that he ever created at Apple. Was apple university not the Mac or anything else but apple university because it taught people how to think the apple way And I was thinking about that because I realized like I spend very little time like creating Yeah, the types of historical context and that sort of thing that That you're talking about and so actually last week Uh, I was here in the studio with, uh, Haley, who's on our team.

Who's been leading like sales and creator partnerships for a long time.

Yeah.

And we got up here on the board and we just recorded in the studio entirely internally for the team and said, okay, here's what, if you're joining the team at kit, here's what you need to know about the creator economy. Here's the types of creators.

Here's how the different industries are different. It's like a 40 minute video.

Yeah.

And now it'll live and everyone who works in sales, account management, partnerships, all of that, they [00:49:00] can watch that video. And I'm just like, I've been running this business for 11 years now. And I'm just now starting to do those things, but it makes a huge difference.

Cathryn Lavery: Yeah. And it also you're, yeah, you're teaching people how to think, because I learned this with my old team. I was like, when I'm working on product, instead of just like sending them something. I'll like just open up Loom and I'm like talking through why I do the things that I do. And even now with the new team, I'm like, I'll make a decision and then I'll give them context about why I'm making the decision.

Nathan Barry: What's interesting about that is now you can, the way you can store this information, you're training not only your team, but an AI on it because that, because you could say, okay, every decision that I make, I'm going to record a two minute Loom explaining why I made that decision. And then at some point, either continually or at some point, you could feed.

Those 50 decisions and the little loom snippets into an AI and then be like, Hey, what are the principles [00:50:00]

Cathryn Lavery: that

Nathan Barry: I use to make decisions? And it's like, well, well, Kat, as the way that, you

Cathryn Lavery: know, And like, you don't know the through line of how you do things. Yeah. It's, it's wild. What even, even like personal things.

So like my wife and I will like do therapy twice a month. I remember once we got into this argument the day before. And so we have this, Call coming up the next day, and I had just started talking to AI. I'm like, are you gonna do this fight? Last night. This is what happened. This is like what happened on my side And then it's almost like homework for therapy and like can you frame like what she might have been going through?

So that I could better understand her perspective. Right. And so That was helpful. So then I'm like going into therapy was like, okay, now I have a better idea of like where we could have It's just like I would never have it's just being able to talk to someone all the time That and it's not taking away from any personal things almost like saving you Energy and like you can show up better once you do like a little homework with your little robot friend [00:51:00]

Nathan Barry: What I'm thinking about is Uh, today's Friday.

So on Wednesday, I was at therapy with, uh, Hillary, my wife, and we're forgetting what we talked about the month before. And we're like, Oh yeah, what was that thing? And so the first benefit of what we're talking about is even just logging and taking and having that. And then when you layer on that, you get to give this context to your team or to your future self or, and then the next layer is you get to have that context to your little robot friend that you can talk to at any time who will tell you those things.

And you can say something like, okay, what's the, what's the biggest argument against this? What am I missing here? Those things are so powerful.

Cathryn Lavery: Yeah, I think like seeing your blind spots. And I think honestly, I'm more excited working on the business now because I can do, I'm interested in exploring that stuff and it just wasn't possible before and I would sometimes get caught.

Like I. [00:52:00] Yeah. Okay. I have certain, I like figuring out new things and exploring, but sometimes you just get caught up in the minutia of like the day to day and getting in the weeds. And so it's been fun because I still am in the weeds, but I'm also having fun with it.

Nathan Barry: So what are some of the other big differences in how you ran the company and team now compared to a couple of years ago?

Cathryn Lavery: I mean, I think I'm just, my team is lean. So it's like, I also have half my team in Latin America and we have Spanish products coming out, they're out already. And so I hired them. And then I also had this idea to come up with Spanish products. And so it's actually been really good hiring consultants. Like I almost think like fractional people that are experts at their job.

Like I have this finance person that was referred to me and he's been like, I mean, I think it's like way more helpful than the 6, 500 CFO company that were not very good. And I dealt with so much like problems with them after selling because they just didn't do [00:53:00] things right. And so it's like fixing their mistakes.

And so I'd like because a lot of times like bookkeeping is. I don't really need that as in like, that's not a big lever for me, but someone coming in and teaching me about like marketing efficiency rate. So I'm like looking at different channels. Like I wasn't doing that before. Not really. Like I would look at ROAS or whatever.

And now I just have a much more, I'm just like better at the game of business because I understand it in a way that I wasn't before. Not because I mean the tools weren't out there yet. And I also didn't have the capacity to, to like get in the weeds with everything. Cause I had so much going on. Yeah.

Nathan Barry: There's always all those, those other factors. The way you're talking about bringing in outside experts, it seems like you're doing it in a really different way than the age, than the, the PE firm was doing it. Like they were outsourcing the entire problem. Like, it sounds like to an agency and saying, Oh, they're going to run all the Facebook ads.

This company is going to do this other thing. [00:54:00]

Cathryn Lavery: But yeah, it's like a Frankenstein because nobody knows what each other's doing and no

Nathan Barry: one's responsible for it. So then what you're talking about, the other version that people like the other extreme would be bringing it all in house. But it sounds like what you're doing is.

You're trying to automate as many things as possible, have a really lean team, uh, and then bring in these fractional experts as needed. Is that what you're doing to then consult on? The finance person

Cathryn Lavery: is one of the few people that's on monthly because we'll get on calls like once a week, but everyone else is as needed.

I also, sometimes we think we need to hire someone as a position when actually we just need to hire a contractor to do a project. And I find When I got the business back, one of the things was like, the site was so slow. And it was just like Frankenstein Shopify theme. That was a theme, but it was just an imp to do anything.

You need to hire developers. So I was like, we needed to like to go to a really good theme. Um, [00:55:00] but before that, before I like did a whole redesign, like I need to speed the site up. And so I'm talking to these people, I was like developer, Oh, like 5k and it'll take like 30 days. I'm like. Okay, let's let me just go on Fiverr.

Nathan Barry: Yeah,

Cathryn Lavery: and I literally went on Fiverr. I paid a hundred and twenty dollars to this guy They've gone by I've like referred him to so many people. He got it done in like three days and Way, it's like did everything that the other people and it's just like oh if I would have burned 120 dollars I would have figured it, figured it out faster.

And I think the feedback loop where I'm just like inpatient with like, get it, you know, I'll like jump in and handle something myself, which I guess like founder mode or whatever. And I think the, the P firm was like, Oh, they weren't doing that. So stuff like, We dealt with this counterfeit issue on Amazon, and they told me about it, and how they were dealing with it is like, oh, they were just lowering the price so that they had the buy box, but it was like creating this bigger problem where you, like, the profit margin's dying, and we have, like, trademarks, it [00:56:00] was just, it just takes time to, so I was the first, I think in March, I just, like, okay.

Anytime it came on listing, I have, I order it to come to my house. And I would like set as a system. I'd take a picture of it. I create a spreadsheet, took me probably like five hours a week for the first two weeks, and then it was solved.

Nathan Barry: We're basically documenting, you're buying the counterfeit product, documenting that it's counterfeit.

Then you

Cathryn Lavery: report it, you just create a system to report it. And again, this is something they were dealing with for months because they weren't actually dealing with the real problem where I was just like, okay, let me just grind for like, again, it's not really grind. I would take a picture on my iPhone when a box arrived in my house.

It's not very difficult, but it was just like the thought of. Nobody on the team like doing that and just creating like, and it was solved in again, like two and a half weeks. We got access to this Amazon thing that allowed us to like throw people off, but it's just something that they hadn't explored or dealt with.

And it's just things like that where, um, cutting the feedback away, but just, just handling [00:57:00] stuff instead of like, Trying to like hire an agency or just like do it yourself. Literally. And that's another thing. It's like chat GPT You don't like a developer Shopify. I wanted to write a script to do something specific took me like 20 minutes I'm like you're a Shopify developer.

This is what I'm trying to do I had to like run through some errors and then it worked and that's like, okay, that's done Whereas what you would do is like I have to find a Shopify dollar I'll talk to a couple then they'll send me a quote and then it's just like is I'm exhausted You

Nathan Barry: Oh, I love that.

Okay. I want to wrap up with three topics that we haven't gotten to yet. Uh, the first one is, uh, talking about hiring overseas. Second one is all of these systems and AI things and all that. We've talked in the business context. I want to get into it. If you have any like hacks or little things you do on the personal side.

Uh, and then the third thing is I want to talk if you're up for it about embezzlement, uh, as, as a topic, just a casual, have you been

Cathryn Lavery: a bezel from,

Nathan Barry: I have not,

Cathryn Lavery: okay. Not that you know of.

Nathan Barry: Correct.

Cathryn Lavery: That's [00:58:00] another girly quote. Actually. Uh, he, he, he put something out. I think it was him. It was like, basically, if you haven't been embezzled from yet, you've either not been in business very long or you haven't find it yet.

Nathan Barry: Okay. So let's go there right now. And then we'll come back to the overseas hiring and, and, uh, we'll end on like the fun life hack kind of systems things.

Cathryn Lavery: Yeah. So 2020 was a, I like dealt with a business partner buyout that had been like years in the making and it was just like a torture. And that it was actually part of how the embezzlement thing happened because it was like the founders are distracted.

Nathan Barry: Yeah.

Cathryn Lavery: And we had this inventory manager who, um, was selling inventory on the side essentially and fudging the, the numbers and basically wholesale customers think they're paying us, but he is, is, Own business bank or his own personal bike set up to the stripe. And so they're paying to his Alejandro best solve.

co, but it's actually going to him [00:59:00] and then he's just, um, at the time we were running our inventory off our spreadsheets and then he was doing this weird thing where like the three PL was shipping, he would go into an existing order from the three PL and he would edit all of the information, like the product where it's going.

So it looks like a reshipment cause it doesn't come up as a new order cause it's. It was just like this hack, right? Yeah. And so this one day we have this person selling against us on Amazon and I ordered the product. And I was like, okay, either it's a fake product, someone's stealing inventory, or our manufacturer is like selling against us.

Competing with you, yeah. But we'd been with our manufacturer for years and it wasn't our top product. So I'm like, if they're going to screw us, like they would go for like the better product. Right. Uh, so I ordered it and it seemed real. So then I. Kind of went on the rabbit hole of like, hey, we need to do like audits of this is how many orders, how many we got.

And so then it starts coming back like he, the numbers are just like all over the place. [01:00:00] And to be honest, at first I thought it was, um, like just negligence. Because I assumed positive intent. Like I just never would have thought that I would get into this situation. So I, um, I got on a call with him. I, I, I fired him for negligence.

And then I went into his email and he deleted all of his emails. And I restored them. And so then I realized what was actually going on was that he was selling product. fudging all the numbers, taking the money. And then the customer thinks they really bought it from us, but they hadn't. And, and what had happened is someone he sold to third party started selling on Amazon.

He's emailing them like, dude, like you've just, you know, and, and they also don't know that they're not properly buying from us. Right. So he's trying to be like, cool. Oh,

Nathan Barry: against our terms, you actually can't sell on Amazon. That's not right. He's like,

Cathryn Lavery: so freaking out. And there was like between actually taking revenue, selling product.

And then there was. These expenses on a, my ex [01:01:00] business partner, he'd set up like a credit card because he wanted the points or whatever and I didn't have access to it, but it would be coming from the business bank account and there was charges going on there from, this guy and he'd gone to him and be like, what are these charges?

And he just made something up. And because my partner never checked, it just kind of like went by the wayside. And I think if we didn't have that stuff going on, it wouldn't, there was just a perfect storm of everything. It was like running yourself on spreadsheets. Which

Nathan Barry: someone's going to notice and then be able to like take advantage of it.

Cathryn Lavery: And like the, we didn't have a proper like inventory, um, like doing checks and all that. So I fixed all that. So it showed a lot of, Issues that we had in the business tech, like it's our responsibility to do that. You just don't expect to deal with that. So that was tough because also I hung out with this person.

It wasn't like, even though we were remote team, he was in New York when I was in New York and I would like. He came out to think he like met my family. It was like, so of all the remote people I [01:02:00] hired, he actually was one that I hung out with in real life. But there was like, you know, these people that you meet them and you feel like you don't know them at all because they never give up personal information.

He was one of these people where it's like in my gut, I think I knew like something wasn't right, but I didn't know what it was anyway. So I ended up, um, cause I was like, he's going to go and do this. I actually think he had a job as well as doing that. And so I, And he was based in Denver, and I reached out because I was like, I don't know what to do here.

He also didn't know that we knew what the full story was. And so how we find out is he got a call from a detective. who called him and was like, oh, you know, wanting a statement. And then he was like, oh, I have my, um, identity stolen. And I'm like, I would love to have my identity stolen. They put money into my account.

Yeah,

Nathan Barry: instead of taking it out.

Cathryn Lavery: And so because he kind of like made that statement, uh, and I'd get like, I gave all the proof. He didn't really have to do much work. They actually went and arrested him. So he spent one night in jail and then he pled to a felony. [01:03:00] Um, and that, it was another thing I like, didn't expect to deal with in business.

But

Nathan Barry: how much money did you have stolen from you?

Cathryn Lavery: 230, 000.

Nathan Barry: Wow.

Cathryn Lavery: Oh, so, so my brother, so I, my family are all like not entrepreneurs at all. So I put this video out cause I'm like, I'm going to tell the story. Cause I also, Oh, you know, I. There's been a lot of like cool things we've done with the company and it's like really nice to be like, Oh, everything's wonderful.

But there's also been like real shit and you deal with that. And I think a lot of times people don't talk about the negative stuff of like, and even the embezzlement. Some of my team were like, should we talk about this? I'm like, I think it's interesting

Nathan Barry: as like, Yeah, I watched the video.

Cathryn Lavery: But also it's just when I, when I shared that other people came to me in my DMs, like, Oh, that happened to us.

And they like never talked about it publicly, but it happens way more than you think. And so, um, I put this video out, and my brother is a doctor, he He just sees like the headline like the 230, 000 and he's in Belfast. He calls me. He's like [01:04:00] Cathryn. I saw your video That guy stole all that money from you.

God, that's awful. How much money do you make anyway? I'm like, he didn't take it from my bank account like it was

Nathan Barry: yeah,

Cathryn Lavery: like I would notice that anyway So that he's like Because now he's imagining

Nathan Barry: how much money do you have to make personally to not notice a quarter million dollars missing. You're like, well, it's over a long period of time.

It's in a much larger business. So you gotta love the family questions. Like

Cathryn Lavery: what is wrong with you?

Nathan Barry: So if You know, going back to the, the, the girly quote about embezzlement of, you know, it, either you haven't been in business that long, or you haven't noticed it yet. What are the things that are like advice you'd give someone?

if they're digging in, setting up better systems and just making sure that.

Cathryn Lavery: [01:05:00] Checks and balances of like, we have one person that's managing the inventory and we're not doing like check. It was just like, um, we would, I would just assume people are doing what they say, because that's what I do. And so I, that's gotten me in trouble in general of just, Um, trust but verify kind of like, yeah, trust is someone's going to do something, but like contracts, those are smart and like really protecting the downside, which now I do because I have gotten, you know, hurt not handling that.

Cause I just assume if you say you're going to do something, you're gonna do it. And that is actually a big assumption. So I think, um, just sitting down and being like, okay, I mean, using AI, like, here's what I'm doing. What are the weak spots here that someone could take advantage? And that could be stealing inventory, having a second job, like whatever that looks like.

Um, [01:06:00] just put things in place of like, not one thing is under one person's jurisdiction that could get you in trouble later.

Nathan Barry: Yeah. A common thing is that, you know, in, in accounting or finance, like someone who never takes vacation. Because they're the one to always do that system and maybe their, their embezzlement isn't very sophisticated.

And so as soon as they take a vacation, show someone else how to, you know, how to do it for the week that I'm out. Someone else is like, well, none of this adds up. But if one person is only ever does it, then they're, you know, it doesn't get caught.

Cathryn Lavery: I mean, no, I would. So when you're, again, when you're not running things on spreadsheets and there's a, like this fina loop thing I use, it goes into your bank account.

So it like ties everything together.

Nathan Barry: Yeah. The verification. So there's not

Cathryn Lavery: even, you know, we were with the sale and stuff, you know, like changing bank accounts. There's like a couple of payouts that went to the old. Um, to the people I bought from and they're still like, [01:07:00] where is this money? And I'm like, this is, we're just never going to see this again.

How do I

Nathan Barry: write this off?

Cathryn Lavery: Yeah. I'm just like, this is just, this is gone. How do we say? And it's still like showing up on my thing of like, we still don't know where this is. So it does make it much more difficult to like do weird things.

Nathan Barry: Yeah. That makes sense. It's a good thing for anyone running a business at.

You know, as you get into this, probably, yeah, 500, 000 in revenue and above to like, really think about those systems, not just because of, you know, the, the peace of mind or the, um, like how the operations work for yourself, but also because it really insulates you against, you know, fraud or embezzlement from whether it's a vendor, an employee or someone else.

Cathryn Lavery: And I also, I would say to people, like, if you're working with a new vendor, getting references and also doing a background check, never would have thought. I dealt with this vendor [01:08:00] in 2021 and we were trying to move to, uh, South America. This was our take one that didn't work out. So I had this guy that came from a referral from like two different people.

It was in a community I was part of and I'm like, okay. And it's weird now I listen to my gut. I wouldn't trust it before. And there's, when I look back at like ways I've lost money, it's always like, Oh, you had that gut feeling and you just ignored it. So like not trust it and you got, it's taking information from a bunch of places, you don't know why you have that gut feeling, but it means something.

And I, I do listen to it, but this vendor basically said he was going to make product and we, we paid 50 percent upfront for like basically 105 K and then he never delivered it. And the referrals that I had, that he was also making stuff for them, didn't deliver it to them. And we had a contract, so I'm like, okay, do we sue him?

So our lawyer does a background check. Turns out this [01:09:00] guy has Like 600k of judgments against him already, and this was in 2021. I later since find out he's screwed so many more people. And had I done that background check, because if you have a gut feeling, like don't do a background check on everyone. If you have a gut feeling about someone, do a background check because it's probably coming from somewhere.

And um, if they have other things against them, just like, no,

Nathan Barry: that makes sense. Okay. So one thing that you did. coming back is that, you know, you're hiring overseas more, right? Hiring the team in Latin America. Any advice for someone who, for someone who's thinking about like augmenting their team or expanding, uh, overseas or outside of like the U.

S. and Europe?

Cathryn Lavery: Yeah. So I have two people in the Philippines and then now I'm hiring more Latin America, even though I love my people in the Philippines and I love them on my team. One thing I struggle with is because, you know, Um, like my company's called Best Self and I'm asking people to stay up all [01:10:00] night to work on my time.

So health wise, I don't think it's a great long term health thing and I want long term people. And so I've used, what did I use? I use this thing called Sagan Passport. It's like a membership and they will find you. That's where I find a production person in Columbia who's like 20 minutes from our factory.

Um, it's. Someone in Mexico City and what they have is like they can recruit people for you But they also have a talent pool that you can just pull from if you happen to need someone you see that someone in there And you that doesn't get taken away from your credits And then I've used another one where I find my ops person from the Philippines and he's called quick hire VA bucks and he'll just find you three people and you can hire three people Honestly, it's too cheap.

I told him that after I hired him, but, uh, so, and then there's also like online jobs or, you know, somewhere. So there's a bunch of different options from

Nathan Barry: somewhere.

Cathryn Lavery: Yeah. But I think the biggest thing is like figuring out [01:11:00] who, who you need and like really defining the job. Sometimes we like start hiring cause we're like feeling frantic, but it's like, what does success look like in the job?

and how do you give them the systems that they need? I'm like not the best at that, like sometimes I just throw people in the deep end and hope that they swim, but I'm generally getting better as far as like, like setting up the systems, but not with all the tools. Like we were already remote when I had a US team.

Nathan Barry: Right.

Cathryn Lavery: And no, I, I hire, I have like a few US contractors to hire for specific specialized tasks. And then otherwise I'm again, trying to stay really lean.

Nathan Barry: Yeah. Well, cause with that constraint of all of the money to grow the business has to come from.

Cathryn Lavery: Yeah. Like I don't want to have to, yeah. I just don't want to get myself.

It's also like a fun challenge of just seeing where I can take it. Um, so yeah, I'm like, we're, our revenue is lower than significantly, maybe like 30 percent lower [01:12:00] than it was when I sold maybe 35, but the profit's higher.

Nathan Barry: Like, uh, profit percentages. What, what was it when you sold versus? It was like

Cathryn Lavery: 7 percent and I'm trying to keep it at 20.

Nathan Barry: Nice. It's a big difference even with lower revenue.

Cathryn Lavery: Yeah.

Nathan Barry: Yeah. That's awesome to run that way. Okay. So you talked a lot about systems in the business. Uh, do you have any habits or systems, things that you've set up at home that, you know, or how you run your personal life that, uh, other people could benefit from?

Cathryn Lavery: Um, what do I do?

Nathan Barry: What do you do? I'm trying to remember this one. You were telling me that. What do you do with Amazon packages? Do you have a system for returns? Oh yeah, I

Cathryn Lavery: have this, cause I, so my ADHD, I basically like, how do I set up tools for myself? Yeah. So I don't have keys in my life. Yeah. Yeah. I put smart locks on all of my doors because I lose keys and it just happens.

And so

Nathan Barry: everything is to your phone or my phone

Cathryn Lavery: or my fingerprint or code. Um, and so anything that like basically [01:13:00] adds friction, one thing is like, I'm really bad at return. So what I do is like, no, I have a system where if I'm not going to keep it. I will put it back in the box and then I put it in my car and then I drive it around for a week because like, that's the first step is done and then I have this thing set up, what's it called, like um, it's like an alert.

Nathan Barry: Okay.

Cathryn Lavery: So when I drop my daughter at daycare, if I go to like HEB, there's a UPS right there and it will alert me and it will just ping my phone, be like, do you need to return anything? And because of, I'm like right there, I'm like, yeah, I do need to return a geofence around. my, my assistant will put the return codes into a notes form and if it's empty, it doesn't pop up.

But if it's not empty, it will. Um, so it's, uh, so, and then like my wife and I will have a. We'll do like a weekly meeting on Monday to like go through a week of like who's doing what and then we have a Like a shared note of like grocery things that we need also a lot of times [01:14:00] Parenting I find that one person is in charge of getting all the notifications and stuff and then they relay the information but if you can you can create a A Gmail account for your kid.

Nathan Barry: Oh, okay. Have everything sent

Cathryn Lavery: there and then it's forwarded to both emails. So like both. So not one person's like the bo bottleneck of like, oh, I have to like communicate this to you. Yeah. I put my

Nathan Barry: email down for daycare and now you know nothing about daycare and I, I have to tell you everything. And it's like, uh, and so yeah, it puts the burden on one person.

And then also, you know, if one of you is out of town Yeah. Then it's like half this information is just gone .

Cathryn Lavery: Right, exactly. So. Things like, so basically I'm always looking at like, okay, where's their friction and then reducing it as much as I can and stuff like, oh, I live in Austin, it's hot as shit in the summer and our gym is in the garage and we don't have AC and this summer I was like, okay, I gotta, I gotta, I'm just going to get like a window unit because I [01:15:00] want to work out more, but I cannot do it in the seat if I don't do it before 10 a.

m. I'm like, you know, like toddlers in the morning, it's just mayhem. And so, um, Yeah. So I'm trying to think if I have any like cooler systems, but it's just stuff that I think that

Nathan Barry: I think the Amazon one is great of, like, I think there's a lot of things that you could automate in that way. And then just even thinking about, I think you're pretty aware of like your habits or what causes friction for you.

And so even just saying like, Oh, I do not have keys in my life. And you can make that rule. And it's like, well, but that one thing it's like, no, for a hundred dollars, you could replace that, you know, that one random lock with a smart lock as

Cathryn Lavery: And even when I first So I have like a, we have a little casino where my office is and when I first put the smart lock in, in our other locks it was like a key thing, but it was like a hundred dollars more and I'm like, Oh, I could just type in the code.

And then a day, I was like, no, this is going to save me like a minute, four times a day to just have a key thing or a

Nathan Barry: fingerprint.

Cathryn Lavery: And so it's stuff like [01:16:00] that where it compounds over time. The more you do something. I also have a. Like an Alexa thing. Cause I'll just, I'll forget things. I'm like, can you set a timer for like 30 minutes or remind me to do something?

And she, and it's kind of like your robot friend of like, add this to my calendar. So like any friction where you're like, Oh, I have to like pick up my phone and like do something, um, between like super whisper where it can write emails for you and you just like tweak it a little bit to, um, setting up automations on your phone.

Nathan Barry: Yeah, that's

Cathryn Lavery: really good.

Nathan Barry: Those are awesome. Well, thanks for sharing so much great stuff. Like first, the story of buying back the business, the rebound that most people don't get. Uh, but then all the way through to lessons learned, how you run your team now and everything else. It's been really fun having you on.

Cathryn Lavery: Yeah. I am excited for the next chapter, whatever it looks like.

Nathan Barry: Yeah. Where should people go if they want to follow more of your content or buy products from bestself?

Cathryn Lavery: Go to bestself. co. And if you want to. If you want to hear about my embezzlement stories or any of the behind the scenes stuff, you can go to LittleMike.

com [01:17:00] or follow me on Twitter.

Nathan Barry: Sounds good. Thanks for coming on.

Cathryn Lavery: Thanks.

Nathan Barry: If you enjoyed this episode, go to the YouTube channel, just search BillionDollarCreator and go ahead and subscribe. Make sure to like the video and drop a comment. I'd love to hear what some of your favorite parts of the video were and also who else we should have on the show.