October 15, 2024 • 56 mins
Joe Grover sits down with the journal enthusiast, traveler, entrepreneur, and founder of Rustico Leather, Isaac Childs. In this episode, they discuss how Rustico Leather started, the challenges of parting ways with loyal employees, insights into product development, and how journaling is a therapeutic tool.
Isaac has been a serial entrepreneur and business owner for most of his life. While in college, his passion for writing and travel led him to create and build Rustico.com, a leather goods company that focused on journals and notebooks. Isaac's lifelong passion for journaling and His vast knowledge and expertise have made him a highly sought-after speaker on the effective methodologies and science behind the subject. He is a practicing yogi, breathwork practitioner, and meditation guide. Isaac can often be found traveling the world, hanging out with his kids, or fly fishing on a remote spot on the river.
This episode was recorded on September 27th, 2024
-Links-
For Isaac:
https://www.instagram.com/mindfulnessmatrix/
For Joe:
https://www.linkedin.com/in/joelgrover/
#entrepreneurship #ecommerce #businessgrowth #Journaling #leathercraft #realfword
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Transcript
Episode Transcript
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Speaker 1 (00:00):
So tell me about when it became clear that you may
not be able to pull out of this.
Speaker 2 (00:04):
Even till the day we closed the website down.
I mean, I actually rememberwriting the email and the social
media that we were going to puton the next morning.
That night, at like three inthe morning, I was still.
I was still looking for ways toget through it.
Speaker 1 (00:21):
You're listening to the Real F Word, a podcast that
dives deep into the realities ofentrepreneurial failure, and
each episode features raw,unfiltered stories from founders
who have navigated both thehighs and lows of startup life.
We'll discover the lessonslearned and the strength found
in facing setbacks head on.
Welcome to the Real F Word.
Isaac Childs is here today andyou were the founder of Rustico
(00:45):
Leather and we had a breakfastmaybe two weeks ago and it was
profound, as you and I talkedabout entrepreneurship and you
shared your story with me.
I thought this experience andsome of the wisdom and the
learnings from your experience,I wanted you to share that with
more people, and so we're goingto go deep today.
You ready?
Speaker 2 (01:06):
Yeah, yeah, and thanks for having me Like I.
I heard about your podcast andI love the title, the real F
word, um and excited to talkabout that, cause I think
there's a lot that needs to besaid and so hopefully we can
share something that resonateswith people.
Speaker 1 (01:24):
So yeah, let's talk about the F word for a minute
before we dive into your yourstory.
Why do you think the wordfailure is something that
carries so much weight forentrepreneurs?
Speaker 2 (01:41):
Hmm, uh, that's a great question.
I think, as an entrepreneur, wewant to succeed and we see the
way to grow, like we.
I think that's what kind ofwhat's unique about
entrepreneurs is we tend to seehow to make things happen right.
We see a need, feel a need Ithink there's a there's a Pixar
(02:02):
animation film about thatsomewhere and need fill a need I
think there's a there's a Pixaranimation film about that
somewhere.
Um and um.
So for us, the measure ofsuccess is that progress that
happens, that occurs as we fillthat need Right.
And so we can easily.
I think there's just a Iwouldn't say a fear.
(02:24):
We can easily.
I think there's just a Iwouldn't say a fear.
But we don't feel like we'remaking progress if we're not
succeeding.
And by succeeding, failure isnot really the way we succeed.
We just don't tie failure into.
That's actually part of theprocess.
But, and so it becomes kind ofthat, that hush, hush word.
It's kind of like the yips.
You know, we just don't, wejust don't talk about it, we
(02:46):
just don't talk about it.
Speaker 1 (02:46):
unless you're on the real effort podcast, then I'm
like forcing entrepreneurs toget real about it, right.
Um, yeah, I think we give theword too much weight you know,
yeah, we do.
Speaker 2 (03:00):
I mean even the podcast sometimes I think about.
Speaker 1 (03:02):
Don't want to glorify it, we just want to like
destigmatize it and normalize itin a little bit, but the
reality is is that it does carrya lot, a lot of weight and I
think it was fascinating.
I, you know we talked aboutlike the very first time you
failed a test as a gradeschooler, right, Like the very
(03:22):
first time you saw an F on ahomework assignment.
That might've been a traumaticexperience for your third grade
mind, where you couldn't processthat and you couldn't decouple
your failure on a test or ahomework assignment to you as a
person.
And that's what entrepreneursstruggle with.
And we're going to talk aboutthat because for 22 years, a big
(03:43):
part of your identity was tiedinto Rustico Leather.
Tell me the origin story, Likewhy did you start Rustico?
It was 2001, right?
Yep.
Speaker 2 (03:51):
Yeah, 2001,.
Back in school, at the time incollege, with a couple of
buddies this is the dot-com era,right, and brand new websites
going up like crazy.
Marketing a class assignment.
We were taking a third levelmarketing class, which was brand
new about the internet, and itwas all about building websites.
And right at the bottom of thesyllabus was this caveat you
(04:14):
know, build a website and sell$20,000 worth of product or
whatever services through thesite, instant A in the class,
right, of course?
This is back when nike struggledto sell shoes online.
Who can think of that?
Right?
But no one put credit cards in.
It was still just at itsinfancy.
And so, um, we were like sure,we're gonna sell, we're gonna
(04:36):
sell, uh, these journals thatI'd been making and building.
And me and my two partners,jefferson moss and court griffin
, we built this website.
And a couple weeks into puttingthat posting that site online,
uh, disney called us and endedup placing a pretty large order
for a press release for a newmini series coming out called
(04:58):
Storm Stories on the DiscoveryChannel.
Um, which at the time I had noidea it was owned by Disney, but
either, regardless, we sold the$20,000 and more of what we
needed and got the A in theclass and literally launched
into the next five years of justgrowing, growing, growing.
This, this, this business thatbecame Rustico from these, this
(05:18):
initial marketing class project.
Speaker 1 (05:21):
Wow, and tell me, tell me about the product.
I mean I in fact I thinkprobably two or three years
after you launched, I was at aconference at BYU and I had for
years a Rustico leather journalnot a binder, a Rustico leather
journal and used it fornote-taking, probably for two or
three years.
It was super high quality, likegenuine leather, you know tell
(05:44):
me a little bit about theproduct and what made it special
.
Speaker 2 (05:46):
Yeah, so the products which we put on the site, which
is kind of the origin story forRustico.
The product, though, wascreation.
Really, it started withleather-bound journals and
notebooks, and that was becauseI like to write.
There's two things that I'mvery passionate about it's
travel and it's journaling.
Really Writing different story.
I've, I've, I've gone the the uh, um gamut back and forth with
(06:12):
true writers and journalers, andthere is a difference, but, uh,
a journaling closet journaler.
I have written in in journalsand notebooks since I was six,
seven as little as I canremember, and I have them, most
of them, and so how manyjournals do you think you have?
(06:33):
Ooh, hundreds, yeah, it's, it'sin the hundreds at this point.
Um, uh, yeah, I don't know.
I can almost visually see allof them, but I don't know if I
could get them all, um, but yeah, so I was writing in notebooks
and journals and traveling quitea bit in my early twenties, uh,
really, through Europe andthrough South America, through
and through the U?
S, a lot of road trips as, as akind of a you know, really a
poor college kid, it's like it'sa backpack and, and you're, and
(06:53):
you're kind of really what'sthe right word, I don't know
Dirt bagging it, you know alittle bohemian.
Well, these journals andnotebooks just got kept getting
beat up.
I remember, specifically on theway to Flathead Lake, montana,
with a bunch of buddies and wegot, our car just broke down, so
we're on the side of the road,it's a little bit windy out in
the middle of nowhere.
I pull out my journal to theright and all my pages just went
(07:14):
flying everywhere because thespine had busted.
I was just so frustrated and Iremember, over in Europe I was
in Italy at, I think, inFlorence somewhere, and there's
these beautiful hand-sewnleather journals that cost way
too much money for me and so, uhto to buy at the time.
And so, after seeing and havingthat experience in Montana, I
(07:36):
was like that's it, I'm going tofigure out how to make a
leather journal that won't fallapart.
And so took a couple of classesat BYU, actually audited some
bookbinding courses and thenbought some leather but brought
some paper over from France andcreated these leather bound
journals and and that's what Iwas using when we launched
Rustico at the marketing classassignment.
And that's cause for the last.
(07:57):
For a few years before that Ihad just been building these
leather journals for family andfriends, and it's all comes from
my passion, uh, aroundjournaling and why it was so
impactful for me and just wantedto keep doing it.
Speaker 1 (08:09):
So this really was a mission driven business from day
one, something you care deeplyabout.
You're providing this higherquality product where someone
could really keep you know theirdeepest.
Speaker 2 (08:19):
And yeah, for most people like it's, it's, it's
it's uh interesting, as weengaged with so many customers
over the years like people wantto have a place to where they
can put those deepest anddarkest and rawest is what I
will say.
We say darkest right Comes backto that word.
It's like this, this taboothing, like we don't want to be
dark.
Speaker 1 (08:37):
Well, the reality of it is is we have both in us, and
so journaling is a huge way forus to actually release a lot of
that and so journaling is ahuge way for us to actually
release a lot of that, and so wecan talk about it more, but
it's maybe the only place wherewe, yeah, put those deep, deep
thoughts and concerns and fearsand failures is on the, on the
paper, with pen and paper, inour journals.
Speaker 2 (08:56):
Yeah so, yeah, we, we do, or we completely neglect it
, which is where most of us sit,where it's like hey, I'm not a
journaler, you know, I don'tneed to be in in, um, but yeah,
that is one place where weabsolutely can and hopefully are
allowed to Right.
Speaker 1 (09:12):
So so the company you launched, the company, you get
an A on your project,congratulations, yeah, we did
yeah.
Speaker 2 (09:18):
And then how?
How did the company grow thefirst five years?
Speaker 1 (09:20):
And then, how did the company grow the first five
years?
Speaker 2 (09:23):
Yeah, so interesting.
Me and my two partners decided,hey, we'll create a little
two-year operating agreement,just kind of a commitment that
we're going to take this and runwith it for two years and then
hopefully sell it off.
And those two years quicklywent to five years and then we
(09:45):
actually burnt out completely.
We had grown it fairly decently.
I mean, the internet was stillin its infancy, so we got lucky
there.
But then it really didn'treally see much growth on the
internet.
We ended up pivoting over totrade shows and wholesale
accounts and and B2B, you know,really doing customization and
building at the time was amanufacturing facility in the U
(10:06):
S, you know, and still, um, upuntil we we uh, closed the doors
.
Last year we were producing 90%of everything of our products
in our facilities in Linden,utah, and so that what we went
through the first five years, um, then we decided to sell it.
We actually sold the businessat the time this was 2006.
That deal rescinded.
(10:26):
So a little bit of a successand a failure and a lot of
learning in that process.
Speaker 1 (10:32):
What does that mean?
It rescinded, they bought thecompany and then they gave it
back.
Speaker 2 (10:35):
Well, they bought the company.
We actually had three offers atthe time to buy different
offers to buy the company.
We went with the one thatoffered the most money but
wanted to finance a portion ofthe business and use the
business as the as the as thecollateral for that.
Unfortunately, we didn't reallythink through that process.
Could they actually run thebusiness?
(10:56):
That that business, thebusiness is actually?
Just they almost tanked itcompletely and then, of course,
when they couldn't, when theydefaulted, that came back to us
as a really as a business thatneeded a lot of help.
And at that time my twopartners you know, jefferson
Moss was on his, on his way toMBA school and Court Griffin was
(11:17):
literally packing up the truckfor a move to Alaska and so we
worked through an arrangement,bought them out, brought on
another silent partner which wasone of them, uh, a great
partner of mine for the next 14years, uh, jim Loveland.
And then I started running it.
Speaker 1 (11:30):
Um, from there.
So it went from a growthbusiness to a turnaround really
quickly because the buyercouldn't operate the business
right.
You guys foreclosed, you tookthe business back, Um, and then
you started running it and for14 years years you're building,
you're building manufacturing.
So for the next 14 years, tellme, tell me about that, that
journey.
Did the business grow?
(11:51):
Did it contract?
Speaker 2 (11:52):
Yeah, what was yeah?
So, when we got the businessback it, um it, it had largely
depleted pretty, pretty rapidlyin the in the tenure of that of
that buyer, so it was likestarting from scratch.
We did have, obviously, somenotoriety, we had some accounts,
and I spent the first coupleyears just really just growing,
(12:13):
which we grew pretty decently,pretty quickly.
The differences for me, though,was having two invested
full-time partners in the firstfive years and then just all me
for the next 14 years, really,you know, having a really good
outside partner but not one onthe day-to-day, and so it took a
shift in my mindset from havinggreat companions and friends
(12:37):
and kind of guys in the trencheswith me to go through those
struggles.
Right, we, you know, we got itback in 2007.
Then, of course, you had 2008housing crisis, you know, kind
of going through a recessionthen and figuring out how to
grow.
In that standpoint.
Also, for me, what wasinteresting was, you know, like
you said earlier.
Earlier, you said, hey, youknow you had a passion from the
(12:58):
beginning and a purpose behindthe business, and, to be quite
honest with you, I didn't.
I loved journaling, I lovedwriting, and I loved what we
were doing in marketing andproduct development, but I
hadn't really tied the twotogether to like this is
actually how I can fulfill mypurpose.
And it wasn't until I'd jumpedback into the business on my own
that I had to discover that alittle bit more and say, oh,
this actually does help mefulfill what I feel like is my
(13:22):
dharma and my purpose and, atthe same time, provide income
and provide value to otherpeople.
Speaker 1 (13:27):
How did understanding your purpose and your why help
fuel you in that 14-year periodwhen you were pretty much
running the whole businesswithout a lot of support from
partners?
Speaker 2 (13:36):
Yeah, yeah.
Well, a few ways Like for thefirst little bit it was my
attitude towards the businesswas that we were just a private
label manufacturer and we werecreating products and services
for people.
And then, when I really sat downand dived into it and realized
that the products that we wereproviding for people that
(13:58):
created this tremendous valuewhether it was through writing,
recording deep thoughts andreflections, or capturing
memories like photo albums andwhatever else then I realized
like holy crap, that's theimpact that's actually being
provided by the products andservices that we provide.
Right, and so, understandingthat and tying like, what's the
(14:19):
end result of this product andhow does it make the customer
feel and what is it they loveabout it?
It took me a good uh, I wouldsay eight or 10 years and a few
different website reveals toreally get our messaging right
and our branding corrected.
Um, and tie that back to whereit was like hey, um, you know,
rustico is all about how youleave your mark right and how
(14:39):
you, as an individual, get toleave your mark, whether it was
on the product itself, whetherit was in the product, whether
it was the way that youdelivered it to someone else as
a gift or the memories that wentin it.
It was this whole dynamic andecosystem that was around it.
As we understood that, itbecame easier and easier for us
to build product and also talkabout our product and sell it.
(15:03):
Yeah it was a huge part.
I think that was some of thesuccesses.
But it took time, like that wasa lot of failures over and over
Many failures.
I guess you should say therewere trying something and it
didn't work and trying somethingdidn't work.
Speaker 1 (15:16):
So you're on this like extended entrepreneurial
journey and you're not venturebacked.
You don't have a lot of capital.
So really you're using cashflowright, not venture backed.
You don't have a lot of capital.
So really you're using cashflowright.
The business is profitable andable to pay for manufacturing
facility here in the U?
S and your employees and yoursales and marketing.
What happened?
Speaker 2 (15:33):
Yeah, yeah, thanks.
Speaker 1 (15:34):
Um, yeah, what happened?
Yeah, thanks, thanks a lot.
Speaker 2 (15:38):
Yeah, let's get to the meat of it.
No, for a long time it was.
It was very much cashflowbusiness.
Um, you know, it wasn't.
It was not going to, um, youknow, billions of dollars, but
it was definitely, uh, very mucha lifestyle business and it was
running well.
We were having profitability.
Uh, no debt, um, and this is upuntil about 2018.
(15:59):
Um, and in 2000, the end of 2018and 2019, um, I had some
opportunities to actually sellthe business.
You know, people came to me, um,and I looked at those offers
and talked to a few keypersonnel and and, and friends,
family and and other outsideinvestment groups as well, and
just people that I admired andtrust, and the feedback I got
(16:23):
from a lot of them and I thinkthe consensus not everyone but
was like, hey, this issuccessful, successful.
But if you really want to seelife changing money, what can
you do in the next five years?
Right, you've, you've got this14 year track history of pretty
good successful up until theright growth.
Right, if you can just continueto do that for five more years
and then sell, right, it's whatwas the term that I remember,
(16:46):
that caught me and that that wasreally what I think changed my
mind more than anything was likethen it's life changing, money,
right, and at this point intime I was.
The interesting thing is I wasactually feeling like it was
time, and then it was like forme it was like it was time to to
, to transition into more ofwhat I wanted to do, which was
getting back more to the core ofhow do I really connect with
(17:08):
others and help them find whothey are authentically.
Speaker 1 (17:12):
You were at a point in your own journey where you're
like I'm going to give it ahard run for the next five years
, but that'll also hopefullyfree me up to do my other life
purpose, yeah.
Speaker 2 (17:22):
Yeah, Well.
Well, there was two parts tothat.
Whereas I infused so much of mylife's purpose into, and what I
felt like was my Dharma into,the business Rustico and we can
talk a little bit my identityhad tied to it so much as well.
Well, the business itself hadgrown to a level of where we
were now in e-commerce, goodsand retail, manufacturing and
creation company right, which isI love that part, but there was
(17:45):
some aspects of it that werenot tied to my dharma anymore.
So it had started on its ownpath really, but I was still so
tied to it in a lot of ways thatit was very hard for me to
recognize that and say that canbe its own thing and that can
still be a way to serve theworld, and I can do my own thing
and be a disattached from it.
Speaker 1 (18:04):
So it's interesting that I've had this conversation
with so many entrepreneurs aboutlife-changing money and because
we often measure our success ina startup or a company by the
eventual outcome financialoutcome for the entrepreneur or
the founder or the managementteam.
The life-changing moneyquestion is such an interesting
one, and the timing of when wesell that business depends how
(18:26):
life-changing that is.
We rarely talk aboutlife-changing losses.
And you and I maybe will unpackthat, but I've always been
swinging for the fences andlooking for that life-changing
outcome, but the reality is isit doesn't always come.
That life-changing moneysometimes is a mirage and
(18:47):
motivates us to make somedecisions.
We're going to talk about thosethat may or may not lead to the
outcome that we were hoping.
Talk to me about 2018.
You brought on some additionalcapital.
Speaker 2 (18:58):
Yeah, so I made the decision to give it the
five-year run 2019,.
I brought in.
Really, we grew, I moved to anew, twice as big facility, I
picked up quite a few levels ofmanagement over the top that I
normally didn't have, which wasgood.
As we decided, hey, I want totake it to this next level,
brought on some capital to dothat.
And then, of course, 2020 hit,you know and COVID, and that
(19:23):
shifted gears.
Speaker 1 (19:25):
Was it debt or?
Speaker 2 (19:25):
equity.
It was debt.
All of it was debt Actually forthe first part.
Yeah, that in 19,.
It was definitely debt.
And why did you choose debt?
Did it was debt actually allfor the first part.
Yeah, that in 19, it wasdefinitely debt and and why did
you choose debt?
Speaker 1 (19:36):
did it seem less expensive than equity at the
moment?
Speaker 2 (19:40):
um, yes, absolutely at the time it was less
expensive.
Um, I didn't really want tobring in another partner at the
time.
Um well, I had one existingpartner and and uh uh, I think
it was just actually just moreconvenient and fairly
inexpensive to get the debt thanit was to give out the equity.
Speaker 1 (20:01):
So some term debt, right, yeah, business is
profitable, so you can servicesome debt and you bring in these
partners and some debtproviders, put on some fixed
costs, a management team,seasoned management team, double
the size of your warehouse.
You start ramping upmanufacturing and maybe
inventory.
What were some of those otherbets when you're like, hey,
(20:23):
we're going to double or triplethe size of this business?
Speaker 2 (20:27):
Well, those were the tangible bets.
I think the intangible betswere.
We're going to continue to sellthe way we sold Right and at
the time we were heavily likeyou know I talked about.
We started as an internetcompany, right, but we pivoted
pretty quickly from that becauseit's 2001.
Speaker 1 (20:43):
Yeah.
Speaker 2 (20:44):
Took another 10 years before really online sales even
started going, and so, uh, atthat time, online internet sales
were less than 10% of our totalrevenue and we were focused
heavily into the B2B space,promotional space and wholesale
retail in stores and so, but,based on my history, it was like
, hey, we've seen this kind oftrajectory and growth year over
(21:06):
year, consistently.
I should be able to hit this.
Speaker 1 (21:09):
So those are my bets.
There really was a lot ofgrowth.
Speaker 2 (21:12):
It wasn't like hey, 100% and to the right all the
time but there was enoughconsistency where I could
average out any five years at agiven time and it was 20% 25%
growth consistently across theboard.
That's great.
So it was just what felt likevery steady future.
Speaker 1 (21:27):
Predictable Predictable yeah.
Speaker 2 (21:30):
So I think that was probably the biggest bet was hey
, we're going to continue togrow at this rate and so
therefore I can make these otherinvestments and turn them
around in this kind of atimeframe.
Speaker 1 (21:40):
And then a pandemic came, a worldwide pandemic which
none of us could anticipate.
What was the impact of COVID onthe business.
Speaker 2 (21:49):
Interesting dynamic for us.
I mean the first three months,four months, it was like no one
was selling anything.
So I pivoted immediately toselling masks and for the first
five, six months all of mymachinery got switched over to
selling cloth masks and so on asthe world kind of caught up to
supply the shortages there.
(22:10):
And then we transitioned backto our traditional lines of
sales or our sales channels, buteverything had pivoted from
there.
It was definitely all focusedon more e-commerce, which was
awesome.
We saw massive growth there.
But our other two main channelsreally suffered.
Wholesale retail, you know, wehad, oh, 2,500, 3,000 retail
(22:33):
locations that carried ourproducts across USA and Canada,
and I think by the end of COVIDthere was less than 300.
You know, it was like it justdecimated that industry
completely.
And then B2B space uh, quite abit different.
It took quite a while for thebusinesses to really adapt to
looking at a product outside ofPPE for quite a while.
Speaker 1 (22:57):
So yeah, interesting.
So that did I mean.
It was a mixed bag.
It sounds like there was alittle bit of a tailwind on the
e-comm, but some pretty bigheadwinds on your wholesale and
B2B businesses.
Yeah.
Speaker 2 (23:08):
Yeah, so for us it was a wash across the board in
terms of revenue.
Yeah, so for us it was a washacross the board in terms of
revenue.
We actually about flatlined.
But some of the real issuesreally stemmed more from costs.
Our costs started to go upquite a bit.
Supply chain issues started tochange.
Our costing structures and billof materials all shifted pretty
(23:28):
drastically from where theywere.
Speaker 1 (23:30):
Yeah.
What was the increase in costof goods sold?
Because at that time the supplychain was a mess, right?
Yeah, I mean, what was theimpact on your margin?
Speaker 2 (23:40):
Yeah, impact on our margin was pretty big.
I mean it probably took a hitof almost 50% or more.
Speaker 1 (23:47):
While you increased fixed costs because you have
more space, more people, so youmade these huge investments.
Cost of goods gets upside downand now you're facing a
different reality.
How long did it take to realizethat things were pretty?
Speaker 2 (24:03):
hairy.
Unfortunately for me it took alittle while.
You know I had built a reallysolid, strong team and loved the
people I worked with, andtrying to hang on to them,
especially through the pandemicand after post-pandemic, was
really more my MO.
You mean just retaining thepeople Just trying to retain
(24:25):
people as long as possible andstill thinking, hey, we'll
weather the storm, we'll comethrough this, and just probably
about two years, I think.
And then, finally, it was justlike, hey, the writing is on the
wall that there's prettydrastic changes that need to
happen.
Speaker 1 (24:45):
I've made this.
I've been in this same positionwhere I look at these people
who have rallied around thebusiness and around me as a
leader, and I feel this loyaltyand responsibility
responsibility and stewardshipfor the livelihood of this whole
team and I have procrastinatedthe decision right To right size
the organization, to make thetough choices to have, just
(25:07):
because it was so painful for meto look these people in the eye
and say, hey, sorry, I got tolet you go.
Yeah, you still got, you stillhad to do it, yeah.
Speaker 2 (25:17):
Yeah.
Speaker 1 (25:19):
Would you have made a different decision?
Speaker 2 (25:23):
No, I uh, yeah, um, wow, it's weird how it's, it's.
It's hit me pretty emotionallytoday, uh, that kind of comes
and goes.
But, uh, some of thoseemployees for me were, uh, you
know, 15, 18 year employees, andso that's really tough to to
(25:46):
make the decision to even needto let them go Right and, uh, um
, the reality of it is Iprobably hung on longer than I
should have for the business'ssake.
Um, some of that was because ofthe loyalty and because of the
tenure and and and uh, mycommitment to see these
(26:06):
employees through, uh, um, andthese people really just stay
connected and have a job and soon.
Uh, but in hindsight, you know,and and no, I feel actually
pretty confident that, like, Imade the right move.
Was it the um, especially giventhe information I had at the
(26:28):
time?
Um, I had at the time, um, butthere there's absolutely an
argument where I I could have,um, let people go earlier, made
changes and cuts sooner andquicker.
That may have saved thebusiness, um, but there's a part
of me that actually says, um, Idon't know about that.
(26:49):
I don't know if that would haveactually changed the actual
outcome, but the decision I madeto, at least when it came to my
people, was, I feel like, theright ones to make at the time I
made them.
Speaker 1 (27:03):
What's up, Phil fans?
You know, as we've listened toso many guests on this podcast,
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(28:13):
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The toughest days right, yeah,yeah.
So finally you're into this twoyears and now you're like now
drastic changes need to happen.
Was that your decision?
(28:35):
Was it with the investors?
How active were the investors?
Were you getting pressure from?
You?
Probably had some vendors, somepayables that you need to
you're responsible for.
You have employees you'reresponsible for.
You have investors you'reresponsible for.
You're kind of like I'm sureyou're trying to solve this
puzzle and doing everything thatyou can possibly imagine to
save the business at this pointyeah, yeah, we, you know, I
brought on a couple otherpartners sometime after 2020, I
(28:59):
think, 21.
Speaker 2 (29:06):
What was right, as we needed more capital and more
financing to help us kind ofweather the storm, and they came
in, brought in a debt vehiclein order to help us do that.
So this is the second debt.
This is yeah this is the seconddebt, this is the second debt
round.
Basically, and as we had tojust start letting people go and
kind of downsize in order tohelp us kind of right that ship,
it just didn't feel like therewas enough.
(29:28):
We just weren't cutting enoughat the right time and there was
a little bit of a delicatebalance there where we had this
noose around our neck of debtthat we needed to service, and
it was, at a certain level,channels of revenue that were
coming in that were not asprofitable that we really
probably needed to cut andreduce revenue but focus on the
right kind of revenue.
(29:48):
But that wouldn't allow us todo that with the debt that we
had to service, to service thedebt.
so so this is this chicken andegg and we were working with a
lot of our debtors to help uswith that.
But there is this dynamic whereI don't think from the debt
side, I think there's just anattitude more of like, well,
you're kind of signed on thedotted line and you're going to
(30:09):
make it happen, whether you wantto or not, instead of really
thinking, well, how do Iactually help these guys fulfill
on what, what we've agreed to,versus just what's the learning
about how to capitalize yourbusiness at that stage?
Speaker 1 (30:25):
do you, when you think back on the equity versus
debt decision and the timing ofthe debt and the terms of that
debt and the partners you chose?
What?
What wisdom can you share withentrepreneurs who may be running
a business that is, you know,can go raise 10 million, $5
million of like term debt and um, and that might seem more
attractive and less expensivethan equity.
But what's what's the learningthat that you can share with us?
Speaker 2 (30:48):
Yeah, Um, I think that, well, I absolutely there's
.
There's pros and cons to both.
For sure, there's debt, youknow, can be a very great way to
run that while still holdingequity in the business.
It can also be a little bit ofa downfall if things go south,
like that was the issue that wehad in 19, as we picked up some
debt from some banks and linesof credit and so on, and as
(31:11):
those lines like, literally, Ihad one line of credit come due
in March of 2020, right, aseverything happened.
Right, it was just up forrenewal.
Um, not due, excuse me, it's upfor renewal and our ratios and
everything looked in line for itto be renewed.
But because of the pandemic,they're like we just cut your
line.
It was $750,000, gave us 30days 30 days to figure it out,
(31:32):
to pay it back, yeah, so thenyou had to find a different.
Yeah.
So then we had to go to findeither subprime lending or a
different debtor, Right, sothere's a debt situation there.
It's like you don't kind ofhave that partnership right.
They're not vested in your fullinterest.
When it's like, hey, there's apandemic and we're just pulling
the line, Okay, Right.
Whereas partners or investmentgroups, I think if you are
(31:54):
aligned and that would be theother side is like making sure
you really are aligned in howyou want to move that business
forward they can be absolutelyvaluable and helpful in that
regard.
But also, at the same time, ifyou're not aligned like that
turned out with me and in these,this group of equity partners I
brought in there they were wewere completely misaligned.
(32:15):
Although it felt like we wereat the at the beginning, as
things started to get harder andharder, it really became clear
that there was a difference inin how we wanted to move forward
.
Speaker 1 (32:27):
Are you comfortable talking about the amount of
money you raised between all thedebt and all the equity?
Speaker 2 (32:31):
Sure, yeah, yeah, about the amount of money you
raised between all the debt andall the equity?
Sure, yeah, yeah, um, rustico,I think it in 2019,.
I raised, oh, in terms of debt,uh, debt, we had close to 2
million, and then, um, I broughton another 1.5 million in in in
another debt vehicle withequity partners.
So so we had roughly three anda half, almost four million by
(32:55):
the time.
Speaker 1 (32:56):
Yeah, so tell me about the last three months of
Rustico, when it became clearthat you may not be able to pull
out of this.
Yeah, what were the secrets ofevents that happened that really
helped you to realize that thiswas the end of the road for
something you had put your heartand soul and energy into for so
(33:20):
many years?
Speaker 2 (33:21):
Yeah, yeah.
That's interesting because evenuntil the day we closed the
website down, I mean, I actuallyremember writing the email,
writing the, the, the, the emailand the social media that we
were going to put on.
Um, on the next morning, um,that night, at like three in the
(33:42):
morning, I was still, I wasstill looking for ways to get
through it, right, and that thatwas knowing, still knowing,
knowing probably five, sixmonths before then, that that
things were probably not goingto make it happen.
I think, I think, if you wouldhave sat me down and put me into
(34:03):
like a truth serum, I wouldhave been very clear like, hey,
this isn't gonna happen.
But the entrepreneur in me andof course, the visionary, was
like, no, we'll see through um,you'll figure out a way, yeah
yeah, but at the same time, likeI, I could see I look back now
and I'm like I was superoptimistic and always looking
for the opportunity, but at thesame time I was tactfully making
(34:25):
sure the employees I had to letgo had found jobs and and
people had landed safely,knowing, I think, in the back of
my mind that it was, it wasgoing to be inevitable.
Um, so that was a really,really weird I wouldn't say
weird.
It was just such a hard,impactful day where there was a
part of me that was superrelieved um, super relieved to
(34:48):
just finally be able to say,okay, I can close this down and
now we can move in a directionthat feels like we can go
somewhere.
And then another part of methat was just devastated.
Speaker 1 (35:01):
You know I shared my journal entry with you that I
had shared on this podcast, andthose final days and weeks and
months before shutting somethingdown that you've built are are
just really painful.
Yeah, what was the hardestdecision you had to make?
Speaker 2 (35:25):
Wow, I don't know if there was just one.
I think there was a lot of harddecisions.
Um, you know, I I'd go all theway back to.
You know, if I look at theseries of events those two or
three years and this is actuallyprobably why there was a relief
the day that it shut down andfor a lot of people that found
(35:45):
out and are still finding out Istill get emails from people
that are like holy crap, youshut us to go down.
And that's shocking.
You know, 22 years in to a youknow a business.
But two years before that, youknow I had to let go.
Uh, my COO that had been with mefor eight years built we had a
great working relationship,built a great friendship but had
(36:07):
to had to say let me, let yougo and let's, let's move on all
the way to, to the differentdecisions of needing to tell
these partners that I brought inwith the intent to make
something happen, make somethingbig, that we're not aligned.
And I need you guys to step outof the way, if I can even turn
this around and having that hardconversation, uh, to Finally
(36:32):
fully just saying it's time toshut the doors.
And what does that look like.
Yeah, a lot of hard decisionsthere that were tough to make,
and that's why, when I said,when we finally pulled the
trigger on shutting those doorswhere it was also a relief,
(36:58):
pulled the trigger on shuttingthose doors where it was also a
relief, it feels.
It felt a little bit likesomeone, or like here's my, my
child that's been on lifesupport for two or three years
and while you want them with you, you can't move on, and so
letting that go was needed, eventhough you don't want to see
(37:25):
that.
Speaker 1 (37:27):
So, yeah, this was last fall.
This isn't that many months agoright.
Less than a year ago.
First of all, thank you.
These are personal stories andemotions and experiences that I
hope bring some wisdom andinsight and some direction to
(37:54):
entrepreneurs who may be facingthe same reality with their,
their child or their business,right and um.
So thank you for being so openand vulnerable.
I think that this is what Ifelt when we had breakfast is
the genuine love that you have,not just for a business, but for
the people that helped createthat business and that product.
(38:17):
For me, it's that element offailure that is so hard when you
feel like you filled someoneelse, and because those are
human relationships, those arepeople that you care about
deeply, and so the worst days ofmy career were not the days I
had to shut a business down.
It was, before I had to shutthe business down, having
conversations with employees andpartners about the fact that
(38:40):
this was the end of the road,not just for a company, but for
their contribution and theirsacrifice and hard work, and so
I can feel your, your deep andgenuine love for all those
people that worked, that youworked with.
Speaker 2 (38:54):
Yeah, it's it's.
It sucks when you do havetenured employees that have been
with you for a long time, thathave created and contributed
massively to the vision that youhave to say this is the end of
the road and there's definitelya lot of your own personal
identity tied into being theperson that provides and
(39:16):
supports and those families andme learning how to unpack.
That was massive as well, and Ineeded to do that, but I think
there's still a huge part of methat is a genuine part of me,
that that really wants to helpothers succeed and and and the
um.
Speaker 1 (39:36):
I can also relate to that moment of relief, as
devastating as it is.
You've also been carrying thisweight around for months and
years.
Really Right, and now thefinality, while difficult, also
allows you to start a newchapter.
What was the impact to you andyour family financially when you
(39:57):
had to shut down Rustico?
Speaker 2 (39:59):
Yeah, it was pretty devastating.
Um, you know, we we basicallystarted over, went through a
full bankruptcy.
Um, my wife at the time and Ihad both signed on quite a bit
of the debt personally.
Um, guaranteeing that, that'svery common, I think, probably
more.
Speaker 1 (40:17):
Is that a red?
I mean, should entrepreneurs becareful before they sign and
sign up for a personal guarantee?
Speaker 2 (40:23):
A hundred percent, as much as possible, and and I
would and we talked about this alittle bit I actually don't
know, you know a lot ofinvestment groups or, or banks
or whatever, will want thatpersonal guarantee.
But there's a part of me thatsays, like I don't know if
that's even in their bestinterests.
Like there are, there arethere's too much that becomes
attached to a business ownerthat it does have, that has tied
(40:47):
his personal home and hisfamily's future into the
business, that that may actuallybe detrimental when the
business is in distress.
Right, and I, for me, forinstance, I'll be just very
clear.
Like, not only was this a 22year business and my identity
was tied into it, but once I'mfinancially committed, on a
personal level too, to see itsucceed and it is struggling to
succeed in the hard decisionshave to be made.
(41:10):
It's harder and harder toactually make some of those
decisions unclouded, without,without because, I guess, of the
attachment that you, the tiesthat you have personally, like
your house if my house is on theline, like my kids eating and
food and and providing for themlike will create a tent in the
(41:35):
way that you view.
How do you make decisions inbusiness?
It's really hard to keep thatseparate.
Speaker 1 (41:40):
It's really an interesting aspect of a personal
guarantee that you're going tomake.
Yes, you're going to be in itto the very end and that's what
they want.
But you may make decisions thatput even more capital risk and
more things at risk, and maybethe banks at that point don't
care.
They want you to do whatever ittakes to return their capital.
But, yeah, you probably prolongsome decisions and make some
(42:04):
decisions differently.
I'm so sorry to hear that,isaac, but it is a reality.
The reason I bring it up isbecause it is a reality of some
of these outcomes.
Failure is really a steppingstone to success and we talk
about that, but we don't ignorethe real financial costs
associated with a failure.
Um, and and I've felt some ofthat, some of that sting as well
(42:25):
Um, tell me how you're doing.
Yeah, like how you do it's beenless than a year.
Speaker 2 (42:30):
Yeah.
Speaker 1 (42:31):
And um, how are you feeling now about the whole
experience?
Speaker 2 (42:35):
Yeah, well, it it.
Well.
You go through moments, right,like even today.
There's some grief that'sassociated with a loss, right,
and it takes time for that lossto not feel as dramatic, I guess
, or as intense there's still aloss, right, dramatic, I guess,
(42:56):
or as as intense there's still aloss Right, um, uh.
But overall, like I actuallyfeel I feel really good, like
there's been a lot of reallysolid things.
I can look back at the 22 yearsand while I feel like the
ending um was not the ending Iwanted right, it wasn't the life
(43:17):
changing money goal, or eveneven the successful um right out
off in the sunset and put alittle bow on this Um, I feel
like there was some massivelearning lessons for me.
That was necessary, as itlaunches me into what I want to
do next and what I am doing, andit also has provided
opportunity for for me, for myfamily and for everyone else to
now move into that next space.
Speaker 1 (43:37):
So tell me about that .
How did you cope with some ofthis grief?
Cause this is what I was really.
I mean, we connected and I wasjust like wow, I loved some of
the insights you share with me,some of the things that you've
done to just kind of move pastthis and find your purpose and
and move on.
Speaker 2 (43:53):
Well, you know, this comes back.
This comes back to square one.
Like I started rustico becauseI have the journals that I
created, because I love to write, I love what I do in that, and
so I really got back to thebasics and said, okay, what is
it about me?
Right, if I'm not mr rusticoanymore, like what is me?
Like what caught?
What created rustico?
(44:13):
And and that is really where itgot back to, which is which is
something I've always done.
I've always had a journalingpractice.
I always reflect daily.
I have a process and a system Iput in place for me that helps
me get clear around how I'msupposed to move forward and
what it is internally that Ireally want and what it is
(44:36):
internally that I really want.
And I'm not going to lie likeunpacking or or not destroying,
but tearing down.
The house, if you so you willthat I had built over so many
years has been it's.
It's like a demolition.
It takes time, but thefoundation for me has always
been this this journalingpractice and meditation is
massive for me.
(44:57):
Over the years, I've reallydeveloped a strong connection
through meditation andjournaling.
Well, what I'm doing now, andso for me, I as other people
around how to use um, ajournaling practice to help you,
(45:20):
uh, really focus in and stayclear on your priorities and
stay connected and findfulfillment.
Really, what my business is nowgoing forward, which is
Mindfulness Matrix, and that isall about helping people
discover their true, authenticself through a journaling
(45:43):
practice, through a daily, whatI call the walk or the map
methodology, and I'm reallyexcited about where it's going.
I feel like that's exactlywhat's next.
Speaker 1 (45:55):
In fact, you've also launched a podcast recently.
Speaker 2 (45:57):
Yeah.
Speaker 1 (45:57):
So we're on a podcast journey together.
Speaker 2 (46:00):
Yes.
Speaker 1 (46:02):
And talking about the MAP method.
Yeah, and just share with us ahigh-level view of what that
method is.
And then let's encourage peopleto listen to your podcast too.
Speaker 2 (46:12):
Yeah, absolutely so.
Mindfulness Matrix podcast andMindfulness Matrix comes from
this idea.
That really what we call theMAP methodology, and it's
mindfulness, mindfulness andawareness, authenticity and
purpose.
You tie those three togetherand then plug them into what I
call our journaling method,which is a daily journaling
(46:36):
practice that is built aroundthis idea of how do you stay in
a being state versus a doingstate, and it all stems from
understanding who.
You are right, that mindfulnessand awareness that comes with
actually getting deep and deeplyconnected to intrinsically how
you want to show or who you wantto be in the world.
That's where your authenticitycomes from.
And then how do you want toshow up in the world?
(46:57):
And you blend those threetogether through alignment and
connection and then apply it ona in a daily simple journey and
practice.
Speaker 1 (47:05):
I love that, and so mindfulness, awareness,
authenticity and purpose.
It is beautiful, and maybeironic, that this whole business
Rustico was originally builtaround this idea of a journal
and that, full circle, it is thejournaling that has helped you
(47:26):
deal with the loss and thetransition between running this
product business to this newpurpose for you.
I think that that's incrediblypowerful.
What are the other lessons thatyou learned through this
process that you would sharewith your children and your
father or other entrepreneurswho are either starting or at
(47:46):
the end of the road and windingdown a business.
Speaker 2 (47:51):
There's a lot in there, I think.
To unpack what comes to mindwhen you said, that, more than
anything, was be careful withwords like needs and should and
could.
I think, as entrepreneurs, likeif we get too wrapped up into
what others think we need or do,that's when we know we're not
on our path right.
So doing what it is that youfeel intrinsically is important
is always, like, the key inentrepreneurship, and having a
(48:13):
purpose and a passion towardsthat is massively important.
Making sure, though, that youare not tying your identity to
that and what I mean and here'smy story around that, after
Rustico closed down and I had acoach that I was seeing to
(48:34):
really help me through thistransition, and I just was
devastated, and I was like Iremember this conversation I was
like I have no skills.
That was having to my coach.
I literally was like I don'teven know if I can get a job.
Like I, I've been leading thiscompany for a while, but I don't
(48:55):
know how to do digitalmarketing.
I don't know how to.
I don't know how tooperationally put the product
together, like all of theselittle hard skills or whatever.
I felt like.
I was like I don't even Ihaven't written a resume or a CV
in 22 years?
Like, how am I supposed to findwork?
Like no one would hire me,right?
I'm just in this feeling oftotal devastation and I think it
(49:15):
was because my entire identityhad been tied into this persona
that I had at at at my business,and it wasn't uh.
Obviously she coached me throughthat very well with like is
that is that really true?
Um, but it really took um.
A few days later, I actuallygot a phone call from a group,
uh company, that had found outabout Rustico and the process
(49:40):
that we're going through.
It followed us for a while andthey called me up and were like
hey, we're a five-year-oldleather company and we need
someone that has your experienceto come on board and just
consult with us for X amount.
Board and just consult with usfor X while.
(50:01):
And it was like um, it was justa huge shift for me to
recognize like oh, yeah, wait, Iactually have value, um, but
still, I had tied so much of myidentity into this entity that
was dead that I'd somehowfigured out like I did.
And so my, my advice is is islike we are not the things we do
, right, even though, asentrepreneurs like, we do so
(50:23):
much things and we tie ourselvesto them, but that is not who we
are, and making sure we stayclear on that is is super
important.
Speaker 1 (50:32):
It is the most profound insight that we are not
what we do, we are not thetitle that we hold, we are not
the business that we started orare running or work in, and I
think, for the last five or sixepisodes, this has been the key
thread and learning, which is wecannot tie our identity, our
(50:55):
feelings of worth and confidenceand value to a business which
outcome we don't fully controlas much influence and control as
we have as entrepreneurs wedon't fully control and is also
fleeting.
It's not forever and nobusinesses, and so I think
(51:15):
that's so insightful.
How do you do it, though?
How do you, in this moment andyou're still working through it
is journaling part of that, buthow do you really decouple it
and just say I am not Mr Rusticoanymore, I am Isaac Childs and
I care about people and I havepurpose and I have value and I
have skills?
How do you do that?
Speaker 2 (51:35):
and I have value and I have skills.
How do you do that?
Yeah, um, right now, for me,man, the uh, the way I do that
is uh.
I'll just start by saying Ithink that's probably my biggest
um blessing, if that's what Iwant to call it.
Uh, that's coming out of this,this whole uh, failure, right,
(51:56):
and the lesson that I'm learningis getting to discover who I am
on a daily basis and keepmyself detached from the things
that I get to do or be oraccomplish, um and the one, the
biggest way I do that is.
You know, this is a process forme.
(52:16):
It's a daily process right now,and it starts with, uh, really,
a morning meditation.
It's a reading and a morningmeditation that is then tied to
some, um, some short journalingthat I do, uh, which is tied
around gratitude andaffirmations.
Um, in the evening I'll do whatI call my walk methodology,
(52:39):
which is I'll write basically apage in my journal and out of
that will come the wonder of theday.
That's the W.
So walk is an acronym.
It means wonder, actions, livesacross paths and then knowledge
gained, and I'll just writewhat was the wonder?
What did I experience today?
Wonder is important, and thenactions are what brought me
(53:01):
energy and what took my energyaway, and really getting clear
on like what what was I reallytruly excited to do today versus
what did I have to do?
or should do right and what wasreally draining and why, and and
just getting clear on that.
And then lives across past withlike, like who did I get to
meet, how did I get to engageand how did I choose to engage
(53:23):
and what did that take me?
And then, of course, knowledgegained right, or aha moments
like anything else that'susually downloaded, and that
process on a daily basis rightnow has really helped me get
back to um, staying focused onlike I, I am me and these are
the things I do, and not tyingmyself so much into how the
(53:45):
things I do are me anymore.
Speaker 1 (53:47):
So I love that.
What great methodologies thatyou've developed through your
your own journey, that um thatyou've been able to apply as
you've gone through this.
I think there's so manyentrepreneurs who are probably
listening to this podcast likewriting down quickly, trying to
write all these things down andso that they can adopt some of
these similar practices.
I love gratitude as a principleSometimes, when we kind of take
(54:10):
a step back and even in theface of failure, we say what are
we grateful for?
What do we learn from this?
Like, how has this set me upfor the next 22 years?
Speaker 2 (54:23):
And so my final question is tell me where Isaac
Childs is in 22 years, in 22more years, wow.
Speaker 1 (54:28):
Um cause you'll still be relatively young.
Yeah, yeah, oh yeah, I'll beskiing still.
Speaker 2 (54:31):
Yeah, I was going to say we'll still be skiing, I
will absolutely still betraveling, um, and, to be quite
honest with you, I'll still bedoing what I'm doing.
Like I have, I have a mantra.
What that looks like?
Like I would really, reallylove to see.
Mindfulness matrix providestremendous value to a lot of
people around the world.
I think there's some somethingthere, and so I would love to be
(54:52):
spending my time uh, full time,really doing so.
I would love to be spending mytime uh, full time, really doing
, uh, having the opportunity toguide and help others and
inspire others to live moreauthentically to themselves, um,
but what I can tell you andwhat that looks like, obviously
that would be awesome, but whatI can tell you is this is my
mantra, personal mantra, but,like I, I want I always want an
(55:16):
athlete's body andentrepreneur's mind and an
artist's soul, um, or spirit,and so it will involve those
three things, whatever it is I'mdoing, so skiing or surfing, or
snowboarding, or fly fishing,like um an athlete, an athlete's
body and entrepreneur's mindand an artist's soul.
Speaker 1 (55:35):
That's beautiful.
Well, I can tell you one thingI feel that from you, I feel the
keen entrepreneurial spirit andthe ability to build and create
I won't comment on yourathletic build, because that
would be weird and I feel anartist's soul, someone who cares
deeply, who's deeply empathetic, who wants to give back, who
(55:58):
wants to share in ways that arereally open and vulnerable and
personal.
And you have done that today.
You have impacted the lives ofeveryone that will listen to
this podcast and you've impactedmy life.
I went home after we talked thefirst time and that night I
journaled for the first time inmany, many months.
Awesome.
And so you're making an impact.
Isaac, thank you so much forsharing.
(56:20):
Thanks for having me.
Hey, I'm Isaac Childs, mrRustico, and I failed, and
that's okay.
Thanks for tuning into the RealF Word.
The Real F Word is failure, andremember that failure is a
stepping stone, it's not just astumbling block.
Join us next time as wecontinue to explore the journey
of resilience and growth,without ignoring the true cost
(56:42):
personally, professionally andfinancially that comes with
failure.
Keep learning, keep growing andkeep embracing the real stories
of entrepreneurship.
See you next time.
So tell me about when it became clear that you may
not be able to pull out of this.
Speaker 2 (00:04):
Even till the day we closed the website down.
I mean, I actually rememberwriting the email and the social
media that we were going to puton the next morning.
That night, at like three inthe morning, I was still.
I was still looking for ways toget through it.
Speaker 1 (00:21):
You're listening to the Real F Word, a podcast that
dives deep into the realities ofentrepreneurial failure, and
each episode features raw,unfiltered stories from founders
who have navigated both thehighs and lows of startup life.
We'll discover the lessonslearned and the strength found
in facing setbacks head on.
Welcome to the Real F Word.
Isaac Childs is here today andyou were the founder of Rustico
(00:45):
Leather and we had a breakfastmaybe two weeks ago and it was
profound, as you and I talkedabout entrepreneurship and you
shared your story with me.
I thought this experience andsome of the wisdom and the
learnings from your experience,I wanted you to share that with
more people, and so we're goingto go deep today.
You ready?
Speaker 2 (01:06):
Yeah, yeah, and thanks for having me Like I.
I heard about your podcast andI love the title, the real F
word, um and excited to talkabout that, cause I think
there's a lot that needs to besaid and so hopefully we can
share something that resonateswith people.
Speaker 1 (01:24):
So yeah, let's talk about the F word for a minute
before we dive into your yourstory.
Why do you think the wordfailure is something that
carries so much weight forentrepreneurs?
Speaker 2 (01:41):
Hmm, uh, that's a great question.
I think, as an entrepreneur, wewant to succeed and we see the
way to grow, like we.
I think that's what kind ofwhat's unique about
entrepreneurs is we tend to seehow to make things happen right.
We see a need, feel a need Ithink there's a there's a Pixar
(02:02):
animation film about thatsomewhere and need fill a need I
think there's a there's a Pixaranimation film about that
somewhere.
Um and um.
So for us, the measure ofsuccess is that progress that
happens, that occurs as we fillthat need Right.
And so we can easily.
I think there's just a Iwouldn't say a fear.
(02:24):
We can easily.
I think there's just a Iwouldn't say a fear.
But we don't feel like we'remaking progress if we're not
succeeding.
And by succeeding, failure isnot really the way we succeed.
We just don't tie failure into.
That's actually part of theprocess.
But, and so it becomes kind ofthat, that hush, hush word.
It's kind of like the yips.
You know, we just don't, wejust don't talk about it, we
(02:46):
just don't talk about it.
Speaker 1 (02:46):
unless you're on the real effort podcast, then I'm
like forcing entrepreneurs toget real about it, right.
Um, yeah, I think we give theword too much weight you know,
yeah, we do.
Speaker 2 (03:00):
I mean even the podcast sometimes I think about.
Speaker 1 (03:02):
Don't want to glorify it, we just want to like
destigmatize it and normalize itin a little bit, but the
reality is is that it does carrya lot, a lot of weight and I
think it was fascinating.
I, you know we talked aboutlike the very first time you
failed a test as a gradeschooler, right, Like the very
(03:22):
first time you saw an F on ahomework assignment.
That might've been a traumaticexperience for your third grade
mind, where you couldn't processthat and you couldn't decouple
your failure on a test or ahomework assignment to you as a
person.
And that's what entrepreneursstruggle with.
And we're going to talk aboutthat because for 22 years, a big
(03:43):
part of your identity was tiedinto Rustico Leather.
Tell me the origin story, Likewhy did you start Rustico?
It was 2001, right?
Yep.
Speaker 2 (03:51):
Yeah, 2001,.
Back in school, at the time incollege, with a couple of
buddies this is the dot-com era,right, and brand new websites
going up like crazy.
Marketing a class assignment.
We were taking a third levelmarketing class, which was brand
new about the internet, and itwas all about building websites.
And right at the bottom of thesyllabus was this caveat you
(04:14):
know, build a website and sell$20,000 worth of product or
whatever services through thesite, instant A in the class,
right, of course?
This is back when nike struggledto sell shoes online.
Who can think of that?
Right?
But no one put credit cards in.
It was still just at itsinfancy.
And so, um, we were like sure,we're gonna sell, we're gonna
(04:36):
sell, uh, these journals thatI'd been making and building.
And me and my two partners,jefferson moss and court griffin
, we built this website.
And a couple weeks into puttingthat posting that site online,
uh, disney called us and endedup placing a pretty large order
for a press release for a newmini series coming out called
(04:58):
Storm Stories on the DiscoveryChannel.
Um, which at the time I had noidea it was owned by Disney, but
either, regardless, we sold the$20,000 and more of what we
needed and got the A in theclass and literally launched
into the next five years of justgrowing, growing, growing.
This, this, this business thatbecame Rustico from these, this
(05:18):
initial marketing class project.
Speaker 1 (05:21):
Wow, and tell me, tell me about the product.
I mean I in fact I thinkprobably two or three years
after you launched, I was at aconference at BYU and I had for
years a Rustico leather journalnot a binder, a Rustico leather
journal and used it fornote-taking, probably for two or
three years.
It was super high quality, likegenuine leather, you know tell
(05:44):
me a little bit about theproduct and what made it special
.
Speaker 2 (05:46):
Yeah, so the products which we put on the site, which
is kind of the origin story forRustico.
The product, though, wascreation.
Really, it started withleather-bound journals and
notebooks, and that was becauseI like to write.
There's two things that I'mvery passionate about it's
travel and it's journaling.
Really Writing different story.
I've, I've, I've gone the the uh, um gamut back and forth with
(06:12):
true writers and journalers, andthere is a difference, but, uh,
a journaling closet journaler.
I have written in in journalsand notebooks since I was six,
seven as little as I canremember, and I have them, most
of them, and so how manyjournals do you think you have?
(06:33):
Ooh, hundreds, yeah, it's, it'sin the hundreds at this point.
Um, uh, yeah, I don't know.
I can almost visually see allof them, but I don't know if I
could get them all, um, but yeah, so I was writing in notebooks
and journals and traveling quitea bit in my early twenties, uh,
really, through Europe andthrough South America, through
and through the U?
S, a lot of road trips as, as akind of a you know, really a
poor college kid, it's like it'sa backpack and, and you're, and
(06:53):
you're kind of really what'sthe right word, I don't know
Dirt bagging it, you know alittle bohemian.
Well, these journals andnotebooks just got kept getting
beat up.
I remember, specifically on theway to Flathead Lake, montana,
with a bunch of buddies and wegot, our car just broke down, so
we're on the side of the road,it's a little bit windy out in
the middle of nowhere.
I pull out my journal to theright and all my pages just went
(07:14):
flying everywhere because thespine had busted.
I was just so frustrated and Iremember, over in Europe I was
in Italy at, I think, inFlorence somewhere, and there's
these beautiful hand-sewnleather journals that cost way
too much money for me and so, uhto to buy at the time.
And so, after seeing and havingthat experience in Montana, I
(07:36):
was like that's it, I'm going tofigure out how to make a
leather journal that won't fallapart.
And so took a couple of classesat BYU, actually audited some
bookbinding courses and thenbought some leather but brought
some paper over from France andcreated these leather bound
journals and and that's what Iwas using when we launched
Rustico at the marketing classassignment.
And that's cause for the last.
(07:57):
For a few years before that Ihad just been building these
leather journals for family andfriends, and it's all comes from
my passion, uh, aroundjournaling and why it was so
impactful for me and just wantedto keep doing it.
Speaker 1 (08:09):
So this really was a mission driven business from day
one, something you care deeplyabout.
You're providing this higherquality product where someone
could really keep you know theirdeepest.
Speaker 2 (08:19):
And yeah, for most people like it's, it's, it's
it's uh interesting, as weengaged with so many customers
over the years like people wantto have a place to where they
can put those deepest anddarkest and rawest is what I
will say.
We say darkest right Comes backto that word.
It's like this, this taboothing, like we don't want to be
dark.
Speaker 1 (08:37):
Well, the reality of it is is we have both in us, and
so journaling is a huge way forus to actually release a lot of
that and so journaling is ahuge way for us to actually
release a lot of that, and so wecan talk about it more, but
it's maybe the only place wherewe, yeah, put those deep, deep
thoughts and concerns and fearsand failures is on the, on the
paper, with pen and paper, inour journals.
Speaker 2 (08:56):
Yeah so, yeah, we, we do, or we completely neglect it
, which is where most of us sit,where it's like hey, I'm not a
journaler, you know, I don'tneed to be in in, um, but yeah,
that is one place where weabsolutely can and hopefully are
allowed to Right.
Speaker 1 (09:12):
So so the company you launched, the company, you get
an A on your project,congratulations, yeah, we did
yeah.
Speaker 2 (09:18):
And then how?
How did the company grow thefirst five years?
Speaker 1 (09:20):
And then, how did the company grow the first five
years?
Speaker 2 (09:23):
Yeah, so interesting.
Me and my two partners decided,hey, we'll create a little
two-year operating agreement,just kind of a commitment that
we're going to take this and runwith it for two years and then
hopefully sell it off.
And those two years quicklywent to five years and then we
(09:45):
actually burnt out completely.
We had grown it fairly decently.
I mean, the internet was stillin its infancy, so we got lucky
there.
But then it really didn'treally see much growth on the
internet.
We ended up pivoting over totrade shows and wholesale
accounts and and B2B, you know,really doing customization and
building at the time was amanufacturing facility in the U
(10:06):
S, you know, and still, um, upuntil we we uh, closed the doors
.
Last year we were producing 90%of everything of our products
in our facilities in Linden,utah, and so that what we went
through the first five years, um, then we decided to sell it.
We actually sold the businessat the time this was 2006.
That deal rescinded.
(10:26):
So a little bit of a successand a failure and a lot of
learning in that process.
Speaker 1 (10:32):
What does that mean?
It rescinded, they bought thecompany and then they gave it
back.
Speaker 2 (10:35):
Well, they bought the company.
We actually had three offers atthe time to buy different
offers to buy the company.
We went with the one thatoffered the most money but
wanted to finance a portion ofthe business and use the
business as the as the as thecollateral for that.
Unfortunately, we didn't reallythink through that process.
Could they actually run thebusiness?
(10:56):
That that business, thebusiness is actually?
Just they almost tanked itcompletely and then, of course,
when they couldn't, when theydefaulted, that came back to us
as a really as a business thatneeded a lot of help.
And at that time my twopartners you know, jefferson
Moss was on his, on his way toMBA school and Court Griffin was
(11:17):
literally packing up the truckfor a move to Alaska and so we
worked through an arrangement,bought them out, brought on
another silent partner which wasone of them, uh, a great
partner of mine for the next 14years, uh, jim Loveland.
And then I started running it.
Speaker 1 (11:30):
Um, from there.
So it went from a growthbusiness to a turnaround really
quickly because the buyercouldn't operate the business
right.
You guys foreclosed, you tookthe business back, Um, and then
you started running it and for14 years years you're building,
you're building manufacturing.
So for the next 14 years, tellme, tell me about that, that
journey.
Did the business grow?
(11:51):
Did it contract?
Speaker 2 (11:52):
Yeah, what was yeah?
So, when we got the businessback it, um it, it had largely
depleted pretty, pretty rapidlyin the in the tenure of that of
that buyer, so it was likestarting from scratch.
We did have, obviously, somenotoriety, we had some accounts,
and I spent the first coupleyears just really just growing,
(12:13):
which we grew pretty decently,pretty quickly.
The differences for me, though,was having two invested
full-time partners in the firstfive years and then just all me
for the next 14 years, really,you know, having a really good
outside partner but not one onthe day-to-day, and so it took a
shift in my mindset from havinggreat companions and friends
(12:37):
and kind of guys in the trencheswith me to go through those
struggles.
Right, we, you know, we got itback in 2007.
Then, of course, you had 2008housing crisis, you know, kind
of going through a recessionthen and figuring out how to
grow.
In that standpoint.
Also, for me, what wasinteresting was, you know, like
you said earlier.
Earlier, you said, hey, youknow you had a passion from the
(12:58):
beginning and a purpose behindthe business, and, to be quite
honest with you, I didn't.
I loved journaling, I lovedwriting, and I loved what we
were doing in marketing andproduct development, but I
hadn't really tied the twotogether to like this is
actually how I can fulfill mypurpose.
And it wasn't until I'd jumpedback into the business on my own
that I had to discover that alittle bit more and say, oh,
this actually does help mefulfill what I feel like is my
(13:22):
dharma and my purpose and, atthe same time, provide income
and provide value to otherpeople.
Speaker 1 (13:27):
How did understanding your purpose and your why help
fuel you in that 14-year periodwhen you were pretty much
running the whole businesswithout a lot of support from
partners?
Speaker 2 (13:36):
Yeah, yeah.
Well, a few ways Like for thefirst little bit it was my
attitude towards the businesswas that we were just a private
label manufacturer and we werecreating products and services
for people.
And then, when I really sat downand dived into it and realized
that the products that we wereproviding for people that
(13:58):
created this tremendous valuewhether it was through writing,
recording deep thoughts andreflections, or capturing
memories like photo albums andwhatever else then I realized
like holy crap, that's theimpact that's actually being
provided by the products andservices that we provide.
Right, and so, understandingthat and tying like, what's the
(14:19):
end result of this product andhow does it make the customer
feel and what is it they loveabout it?
It took me a good uh, I wouldsay eight or 10 years and a few
different website reveals toreally get our messaging right
and our branding corrected.
Um, and tie that back to whereit was like hey, um, you know,
rustico is all about how youleave your mark right and how
(14:39):
you, as an individual, get toleave your mark, whether it was
on the product itself, whetherit was in the product, whether
it was the way that youdelivered it to someone else as
a gift or the memories that wentin it.
It was this whole dynamic andecosystem that was around it.
As we understood that, itbecame easier and easier for us
to build product and also talkabout our product and sell it.
(15:03):
Yeah it was a huge part.
I think that was some of thesuccesses.
But it took time, like that wasa lot of failures over and over
Many failures.
I guess you should say therewere trying something and it
didn't work and trying somethingdidn't work.
Speaker 1 (15:16):
So you're on this like extended entrepreneurial
journey and you're not venturebacked.
You don't have a lot of capital.
So really you're using cashflowright, not venture backed.
You don't have a lot of capital.
So really you're using cashflowright.
The business is profitable andable to pay for manufacturing
facility here in the U?
S and your employees and yoursales and marketing.
What happened?
Speaker 2 (15:33):
Yeah, yeah, thanks.
Speaker 1 (15:34):
Um, yeah, what happened?
Yeah, thanks, thanks a lot.
Speaker 2 (15:38):
Yeah, let's get to the meat of it.
No, for a long time it was.
It was very much cashflowbusiness.
Um, you know, it wasn't.
It was not going to, um, youknow, billions of dollars, but
it was definitely, uh, very mucha lifestyle business and it was
running well.
We were having profitability.
Uh, no debt, um, and this is upuntil about 2018.
(15:59):
Um, and in 2000, the end of 2018and 2019, um, I had some
opportunities to actually sellthe business.
You know, people came to me, um,and I looked at those offers
and talked to a few keypersonnel and and, and friends,
family and and other outsideinvestment groups as well, and
just people that I admired andtrust, and the feedback I got
(16:23):
from a lot of them and I thinkthe consensus not everyone but
was like, hey, this issuccessful, successful.
But if you really want to seelife changing money, what can
you do in the next five years?
Right, you've, you've got this14 year track history of pretty
good successful up until theright growth.
Right, if you can just continueto do that for five more years
and then sell, right, it's whatwas the term that I remember,
(16:46):
that caught me and that that wasreally what I think changed my
mind more than anything was likethen it's life changing, money,
right, and at this point intime I was.
The interesting thing is I wasactually feeling like it was
time, and then it was like forme it was like it was time to to
, to transition into more ofwhat I wanted to do, which was
getting back more to the core ofhow do I really connect with
(17:08):
others and help them find whothey are authentically.
Speaker 1 (17:12):
You were at a point in your own journey where you're
like I'm going to give it ahard run for the next five years
, but that'll also hopefullyfree me up to do my other life
purpose, yeah.
Speaker 2 (17:22):
Yeah, Well.
Well, there was two parts tothat.
Whereas I infused so much of mylife's purpose into, and what I
felt like was my Dharma into,the business Rustico and we can
talk a little bit my identityhad tied to it so much as well.
Well, the business itself hadgrown to a level of where we
were now in e-commerce, goodsand retail, manufacturing and
creation company right, which isI love that part, but there was
(17:45):
some aspects of it that werenot tied to my dharma anymore.
So it had started on its ownpath really, but I was still so
tied to it in a lot of ways thatit was very hard for me to
recognize that and say that canbe its own thing and that can
still be a way to serve theworld, and I can do my own thing
and be a disattached from it.
Speaker 1 (18:04):
So it's interesting that I've had this conversation
with so many entrepreneurs aboutlife-changing money and because
we often measure our success ina startup or a company by the
eventual outcome financialoutcome for the entrepreneur or
the founder or the managementteam.
The life-changing moneyquestion is such an interesting
one, and the timing of when wesell that business depends how
(18:26):
life-changing that is.
We rarely talk aboutlife-changing losses.
And you and I maybe will unpackthat, but I've always been
swinging for the fences andlooking for that life-changing
outcome, but the reality is isit doesn't always come.
That life-changing moneysometimes is a mirage and
(18:47):
motivates us to make somedecisions.
We're going to talk about thosethat may or may not lead to the
outcome that we were hoping.
Talk to me about 2018.
You brought on some additionalcapital.
Speaker 2 (18:58):
Yeah, so I made the decision to give it the
five-year run 2019,.
I brought in.
Really, we grew, I moved to anew, twice as big facility, I
picked up quite a few levels ofmanagement over the top that I
normally didn't have, which wasgood.
As we decided, hey, I want totake it to this next level,
brought on some capital to dothat.
And then, of course, 2020 hit,you know and COVID, and that
(19:23):
shifted gears.
Speaker 1 (19:25):
Was it debt or?
Speaker 2 (19:25):
equity.
It was debt.
All of it was debt Actually forthe first part.
Yeah, that in 19,.
It was definitely debt.
And why did you choose debt?
Did it was debt actually allfor the first part.
Yeah, that in 19, it wasdefinitely debt and and why did
you choose debt?
Speaker 1 (19:36):
did it seem less expensive than equity at the
moment?
Speaker 2 (19:40):
um, yes, absolutely at the time it was less
expensive.
Um, I didn't really want tobring in another partner at the
time.
Um well, I had one existingpartner and and uh uh, I think
it was just actually just moreconvenient and fairly
inexpensive to get the debt thanit was to give out the equity.
Speaker 1 (20:01):
So some term debt, right, yeah, business is
profitable, so you can servicesome debt and you bring in these
partners and some debtproviders, put on some fixed
costs, a management team,seasoned management team, double
the size of your warehouse.
You start ramping upmanufacturing and maybe
inventory.
What were some of those otherbets when you're like, hey,
(20:23):
we're going to double or triplethe size of this business?
Speaker 2 (20:27):
Well, those were the tangible bets.
I think the intangible betswere.
We're going to continue to sellthe way we sold Right and at
the time we were heavily likeyou know I talked about.
We started as an internetcompany, right, but we pivoted
pretty quickly from that becauseit's 2001.
Speaker 1 (20:43):
Yeah.
Speaker 2 (20:44):
Took another 10 years before really online sales even
started going, and so, uh, atthat time, online internet sales
were less than 10% of our totalrevenue and we were focused
heavily into the B2B space,promotional space and wholesale
retail in stores and so, but,based on my history, it was like
, hey, we've seen this kind oftrajectory and growth year over
(21:06):
year, consistently.
I should be able to hit this.
Speaker 1 (21:09):
So those are my bets.
There really was a lot ofgrowth.
Speaker 2 (21:12):
It wasn't like hey, 100% and to the right all the
time but there was enoughconsistency where I could
average out any five years at agiven time and it was 20% 25%
growth consistently across theboard.
That's great.
So it was just what felt likevery steady future.
Speaker 1 (21:27):
Predictable Predictable yeah.
Speaker 2 (21:30):
So I think that was probably the biggest bet was hey
, we're going to continue togrow at this rate and so
therefore I can make these otherinvestments and turn them
around in this kind of atimeframe.
Speaker 1 (21:40):
And then a pandemic came, a worldwide pandemic which
none of us could anticipate.
What was the impact of COVID onthe business.
Speaker 2 (21:49):
Interesting dynamic for us.
I mean the first three months,four months, it was like no one
was selling anything.
So I pivoted immediately toselling masks and for the first
five, six months all of mymachinery got switched over to
selling cloth masks and so on asthe world kind of caught up to
supply the shortages there.
(22:10):
And then we transitioned backto our traditional lines of
sales or our sales channels, buteverything had pivoted from
there.
It was definitely all focusedon more e-commerce, which was
awesome.
We saw massive growth there.
But our other two main channelsreally suffered.
Wholesale retail, you know, wehad, oh, 2,500, 3,000 retail
(22:33):
locations that carried ourproducts across USA and Canada,
and I think by the end of COVIDthere was less than 300.
You know, it was like it justdecimated that industry
completely.
And then B2B space uh, quite abit different.
It took quite a while for thebusinesses to really adapt to
looking at a product outside ofPPE for quite a while.
Speaker 1 (22:57):
So yeah, interesting.
So that did I mean.
It was a mixed bag.
It sounds like there was alittle bit of a tailwind on the
e-comm, but some pretty bigheadwinds on your wholesale and
B2B businesses.
Yeah.
Speaker 2 (23:08):
Yeah, so for us it was a wash across the board in
terms of revenue.
Yeah, so for us it was a washacross the board in terms of
revenue.
We actually about flatlined.
But some of the real issuesreally stemmed more from costs.
Our costs started to go upquite a bit.
Supply chain issues started tochange.
Our costing structures and billof materials all shifted pretty
(23:28):
drastically from where theywere.
Speaker 1 (23:30):
Yeah.
What was the increase in costof goods sold?
Because at that time the supplychain was a mess, right?
Yeah, I mean, what was theimpact on your margin?
Speaker 2 (23:40):
Yeah, impact on our margin was pretty big.
I mean it probably took a hitof almost 50% or more.
Speaker 1 (23:47):
While you increased fixed costs because you have
more space, more people, so youmade these huge investments.
Cost of goods gets upside downand now you're facing a
different reality.
How long did it take to realizethat things were pretty?
Speaker 2 (24:03):
hairy.
Unfortunately for me it took alittle while.
You know I had built a reallysolid, strong team and loved the
people I worked with, andtrying to hang on to them,
especially through the pandemicand after post-pandemic, was
really more my MO.
You mean just retaining thepeople Just trying to retain
(24:25):
people as long as possible andstill thinking, hey, we'll
weather the storm, we'll comethrough this, and just probably
about two years, I think.
And then, finally, it was justlike, hey, the writing is on the
wall that there's prettydrastic changes that need to
happen.
Speaker 1 (24:45):
I've made this.
I've been in this same positionwhere I look at these people
who have rallied around thebusiness and around me as a
leader, and I feel this loyaltyand responsibility
responsibility and stewardshipfor the livelihood of this whole
team and I have procrastinatedthe decision right To right size
the organization, to make thetough choices to have, just
(25:07):
because it was so painful for meto look these people in the eye
and say, hey, sorry, I got tolet you go.
Yeah, you still got, you stillhad to do it, yeah.
Speaker 2 (25:17):
Yeah.
Speaker 1 (25:19):
Would you have made a different decision?
Speaker 2 (25:23):
No, I uh, yeah, um, wow, it's weird how it's, it's.
It's hit me pretty emotionallytoday, uh, that kind of comes
and goes.
But, uh, some of thoseemployees for me were, uh, you
know, 15, 18 year employees, andso that's really tough to to
(25:46):
make the decision to even needto let them go Right and, uh, um
, the reality of it is Iprobably hung on longer than I
should have for the business'ssake.
Um, some of that was because ofthe loyalty and because of the
tenure and and and uh, mycommitment to see these
(26:06):
employees through, uh, um, andthese people really just stay
connected and have a job and soon.
Uh, but in hindsight, you know,and and no, I feel actually
pretty confident that, like, Imade the right move.
Was it the um, especially giventhe information I had at the
(26:28):
time?
Um, I had at the time, um, butthere there's absolutely an
argument where I I could have,um, let people go earlier, made
changes and cuts sooner andquicker.
That may have saved thebusiness, um, but there's a part
of me that actually says, um, Idon't know about that.
(26:49):
I don't know if that would haveactually changed the actual
outcome, but the decision I madeto, at least when it came to my
people, was, I feel like, theright ones to make at the time I
made them.
Speaker 1 (27:03):
What's up, Phil fans?
You know, as we've listened toso many guests on this podcast,
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(28:13):
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The toughest days right, yeah,yeah.
So finally you're into this twoyears and now you're like now
drastic changes need to happen.
Was that your decision?
(28:35):
Was it with the investors?
How active were the investors?
Were you getting pressure from?
You?
Probably had some vendors, somepayables that you need to
you're responsible for.
You have employees you'reresponsible for.
You have investors you'reresponsible for.
You're kind of like I'm sureyou're trying to solve this
puzzle and doing everything thatyou can possibly imagine to
save the business at this pointyeah, yeah, we, you know, I
brought on a couple otherpartners sometime after 2020, I
(28:59):
think, 21.
Speaker 2 (29:06):
What was right, as we needed more capital and more
financing to help us kind ofweather the storm, and they came
in, brought in a debt vehiclein order to help us do that.
So this is the second debt.
This is yeah this is the seconddebt, this is the second debt
round.
Basically, and as we had tojust start letting people go and
kind of downsize in order tohelp us kind of right that ship,
it just didn't feel like therewas enough.
(29:28):
We just weren't cutting enoughat the right time and there was
a little bit of a delicatebalance there where we had this
noose around our neck of debtthat we needed to service, and
it was, at a certain level,channels of revenue that were
coming in that were not asprofitable that we really
probably needed to cut andreduce revenue but focus on the
right kind of revenue.
(29:48):
But that wouldn't allow us todo that with the debt that we
had to service, to service thedebt.
so so this is this chicken andegg and we were working with a
lot of our debtors to help uswith that.
But there is this dynamic whereI don't think from the debt
side, I think there's just anattitude more of like, well,
you're kind of signed on thedotted line and you're going to
(30:09):
make it happen, whether you wantto or not, instead of really
thinking, well, how do Iactually help these guys fulfill
on what, what we've agreed to,versus just what's the learning
about how to capitalize yourbusiness at that stage?
Speaker 1 (30:25):
do you, when you think back on the equity versus
debt decision and the timing ofthe debt and the terms of that
debt and the partners you chose?
What?
What wisdom can you share withentrepreneurs who may be running
a business that is, you know,can go raise 10 million, $5
million of like term debt and um, and that might seem more
attractive and less expensivethan equity.
But what's what's the learningthat that you can share with us?
Speaker 2 (30:48):
Yeah, Um, I think that, well, I absolutely there's
.
There's pros and cons to both.
For sure, there's debt, youknow, can be a very great way to
run that while still holdingequity in the business.
It can also be a little bit ofa downfall if things go south,
like that was the issue that wehad in 19, as we picked up some
debt from some banks and linesof credit and so on, and as
(31:11):
those lines like, literally, Ihad one line of credit come due
in March of 2020, right, aseverything happened.
Right, it was just up forrenewal.
Um, not due, excuse me, it's upfor renewal and our ratios and
everything looked in line for itto be renewed.
But because of the pandemic,they're like we just cut your
line.
It was $750,000, gave us 30days 30 days to figure it out,
(31:32):
to pay it back, yeah, so thenyou had to find a different.
Yeah.
So then we had to go to findeither subprime lending or a
different debtor, Right, sothere's a debt situation there.
It's like you don't kind ofhave that partnership right.
They're not vested in your fullinterest.
When it's like, hey, there's apandemic and we're just pulling
the line, Okay, Right.
Whereas partners or investmentgroups, I think if you are
(31:54):
aligned and that would be theother side is like making sure
you really are aligned in howyou want to move that business
forward they can be absolutelyvaluable and helpful in that
regard.
But also, at the same time, ifyou're not aligned like that
turned out with me and in these,this group of equity partners I
brought in there they were wewere completely misaligned.
(32:15):
Although it felt like we wereat the at the beginning, as
things started to get harder andharder, it really became clear
that there was a difference inin how we wanted to move forward
.
Speaker 1 (32:27):
Are you comfortable talking about the amount of
money you raised between all thedebt and all the equity?
Speaker 2 (32:31):
Sure, yeah, yeah, about the amount of money you
raised between all the debt andall the equity?
Sure, yeah, yeah, um, rustico,I think it in 2019,.
I raised, oh, in terms of debt,uh, debt, we had close to 2
million, and then, um, I broughton another 1.5 million in in in
another debt vehicle withequity partners.
So so we had roughly three anda half, almost four million by
(32:55):
the time.
Speaker 1 (32:56):
Yeah, so tell me about the last three months of
Rustico, when it became clearthat you may not be able to pull
out of this.
Yeah, what were the secrets ofevents that happened that really
helped you to realize that thiswas the end of the road for
something you had put your heartand soul and energy into for so
(33:20):
many years?
Speaker 2 (33:21):
Yeah, yeah.
That's interesting because evenuntil the day we closed the
website down, I mean, I actuallyremember writing the email,
writing the, the, the, the emailand the social media that we
were going to put on.
Um, on the next morning, um,that night, at like three in the
(33:42):
morning, I was still, I wasstill looking for ways to get
through it, right, and that thatwas knowing, still knowing,
knowing probably five, sixmonths before then, that that
things were probably not goingto make it happen.
I think, I think, if you wouldhave sat me down and put me into
(34:03):
like a truth serum, I wouldhave been very clear like, hey,
this isn't gonna happen.
But the entrepreneur in me andof course, the visionary, was
like, no, we'll see through um,you'll figure out a way, yeah
yeah, but at the same time, likeI, I could see I look back now
and I'm like I was superoptimistic and always looking
for the opportunity, but at thesame time I was tactfully making
(34:25):
sure the employees I had to letgo had found jobs and and
people had landed safely,knowing, I think, in the back of
my mind that it was, it wasgoing to be inevitable.
Um, so that was a really,really weird I wouldn't say
weird.
It was just such a hard,impactful day where there was a
part of me that was superrelieved um, super relieved to
(34:48):
just finally be able to say,okay, I can close this down and
now we can move in a directionthat feels like we can go
somewhere.
And then another part of methat was just devastated.
Speaker 1 (35:01):
You know I shared my journal entry with you that I
had shared on this podcast, andthose final days and weeks and
months before shutting somethingdown that you've built are are
just really painful.
Yeah, what was the hardestdecision you had to make?
Speaker 2 (35:25):
Wow, I don't know if there was just one.
I think there was a lot of harddecisions.
Um, you know, I I'd go all theway back to.
You know, if I look at theseries of events those two or
three years and this is actuallyprobably why there was a relief
the day that it shut down andfor a lot of people that found
(35:45):
out and are still finding out Istill get emails from people
that are like holy crap, youshut us to go down.
And that's shocking.
You know, 22 years in to a youknow a business.
But two years before that, youknow I had to let go.
Uh, my COO that had been with mefor eight years built we had a
great working relationship,built a great friendship but had
(36:07):
to had to say let me, let yougo and let's, let's move on all
the way to, to the differentdecisions of needing to tell
these partners that I brought inwith the intent to make
something happen, make somethingbig, that we're not aligned.
And I need you guys to step outof the way, if I can even turn
this around and having that hardconversation, uh, to Finally
(36:32):
fully just saying it's time toshut the doors.
And what does that look like.
Yeah, a lot of hard decisionsthere that were tough to make,
and that's why, when I said,when we finally pulled the
trigger on shutting those doorswhere it was also a relief,
(36:58):
pulled the trigger on shuttingthose doors where it was also a
relief, it feels.
It felt a little bit likesomeone, or like here's my, my
child that's been on lifesupport for two or three years
and while you want them with you, you can't move on, and so
letting that go was needed, eventhough you don't want to see
(37:25):
that.
Speaker 1 (37:27):
So, yeah, this was last fall.
This isn't that many months agoright.
Less than a year ago.
First of all, thank you.
These are personal stories andemotions and experiences that I
hope bring some wisdom andinsight and some direction to
(37:54):
entrepreneurs who may be facingthe same reality with their,
their child or their business,right and um.
So thank you for being so openand vulnerable.
I think that this is what Ifelt when we had breakfast is
the genuine love that you have,not just for a business, but for
the people that helped createthat business and that product.
(38:17):
For me, it's that element offailure that is so hard when you
feel like you filled someoneelse, and because those are
human relationships, those arepeople that you care about
deeply, and so the worst days ofmy career were not the days I
had to shut a business down.
It was, before I had to shutthe business down, having
conversations with employees andpartners about the fact that
(38:40):
this was the end of the road,not just for a company, but for
their contribution and theirsacrifice and hard work, and so
I can feel your, your deep andgenuine love for all those
people that worked, that youworked with.
Speaker 2 (38:54):
Yeah, it's it's.
It sucks when you do havetenured employees that have been
with you for a long time, thathave created and contributed
massively to the vision that youhave to say this is the end of
the road and there's definitelya lot of your own personal
identity tied into being theperson that provides and
(39:16):
supports and those families andme learning how to unpack.
That was massive as well, and Ineeded to do that, but I think
there's still a huge part of methat is a genuine part of me,
that that really wants to helpothers succeed and and and the
um.
Speaker 1 (39:36):
I can also relate to that moment of relief, as
devastating as it is.
You've also been carrying thisweight around for months and
years.
Really Right, and now thefinality, while difficult, also
allows you to start a newchapter.
What was the impact to you andyour family financially when you
(39:57):
had to shut down Rustico?
Speaker 2 (39:59):
Yeah, it was pretty devastating.
Um, you know, we we basicallystarted over, went through a
full bankruptcy.
Um, my wife at the time and Ihad both signed on quite a bit
of the debt personally.
Um, guaranteeing that, that'svery common, I think, probably
more.
Speaker 1 (40:17):
Is that a red?
I mean, should entrepreneurs becareful before they sign and
sign up for a personal guarantee?
Speaker 2 (40:23):
A hundred percent, as much as possible, and and I
would and we talked about this alittle bit I actually don't
know, you know a lot ofinvestment groups or, or banks
or whatever, will want thatpersonal guarantee.
But there's a part of me thatsays, like I don't know if
that's even in their bestinterests.
Like there are, there arethere's too much that becomes
attached to a business ownerthat it does have, that has tied
(40:47):
his personal home and hisfamily's future into the
business, that that may actuallybe detrimental when the
business is in distress.
Right, and I, for me, forinstance, I'll be just very
clear.
Like, not only was this a 22year business and my identity
was tied into it, but once I'mfinancially committed, on a
personal level too, to see itsucceed and it is struggling to
succeed in the hard decisionshave to be made.
(41:10):
It's harder and harder toactually make some of those
decisions unclouded, without,without because, I guess, of the
attachment that you, the tiesthat you have personally, like
your house if my house is on theline, like my kids eating and
food and and providing for themlike will create a tent in the
(41:35):
way that you view.
How do you make decisions inbusiness?
It's really hard to keep thatseparate.
Speaker 1 (41:40):
It's really an interesting aspect of a personal
guarantee that you're going tomake.
Yes, you're going to be in itto the very end and that's what
they want.
But you may make decisions thatput even more capital risk and
more things at risk, and maybethe banks at that point don't
care.
They want you to do whatever ittakes to return their capital.
But, yeah, you probably prolongsome decisions and make some
(42:04):
decisions differently.
I'm so sorry to hear that,isaac, but it is a reality.
The reason I bring it up isbecause it is a reality of some
of these outcomes.
Failure is really a steppingstone to success and we talk
about that, but we don't ignorethe real financial costs
associated with a failure.
Um, and and I've felt some ofthat, some of that sting as well
(42:25):
Um, tell me how you're doing.
Yeah, like how you do it's beenless than a year.
Speaker 2 (42:30):
Yeah.
Speaker 1 (42:31):
And um, how are you feeling now about the whole
experience?
Speaker 2 (42:35):
Yeah, well, it it.
Well.
You go through moments, right,like even today.
There's some grief that'sassociated with a loss, right,
and it takes time for that lossto not feel as dramatic, I guess
, or as intense there's still aloss, right, dramatic, I guess,
(42:56):
or as as intense there's still aloss Right, um, uh.
But overall, like I actuallyfeel I feel really good, like
there's been a lot of reallysolid things.
I can look back at the 22 yearsand while I feel like the
ending um was not the ending Iwanted right, it wasn't the life
(43:17):
changing money goal, or eveneven the successful um right out
off in the sunset and put alittle bow on this Um, I feel
like there was some massivelearning lessons for me.
That was necessary, as itlaunches me into what I want to
do next and what I am doing, andit also has provided
opportunity for for me, for myfamily and for everyone else to
now move into that next space.
Speaker 1 (43:37):
So tell me about that .
How did you cope with some ofthis grief?
Cause this is what I was really.
I mean, we connected and I wasjust like wow, I loved some of
the insights you share with me,some of the things that you've
done to just kind of move pastthis and find your purpose and
and move on.
Speaker 2 (43:53):
Well, you know, this comes back.
This comes back to square one.
Like I started rustico becauseI have the journals that I
created, because I love to write, I love what I do in that, and
so I really got back to thebasics and said, okay, what is
it about me?
Right, if I'm not mr rusticoanymore, like what is me?
Like what caught?
What created rustico?
(44:13):
And and that is really where itgot back to, which is which is
something I've always done.
I've always had a journalingpractice.
I always reflect daily.
I have a process and a system Iput in place for me that helps
me get clear around how I'msupposed to move forward and
what it is internally that Ireally want and what it is
(44:36):
internally that I really want.
And I'm not going to lie likeunpacking or or not destroying,
but tearing down.
The house, if you so you willthat I had built over so many
years has been it's.
It's like a demolition.
It takes time, but thefoundation for me has always
been this this journalingpractice and meditation is
massive for me.
(44:57):
Over the years, I've reallydeveloped a strong connection
through meditation andjournaling.
Well, what I'm doing now, andso for me, I as other people
around how to use um, ajournaling practice to help you,
(45:20):
uh, really focus in and stayclear on your priorities and
stay connected and findfulfillment.
Really, what my business is nowgoing forward, which is
Mindfulness Matrix, and that isall about helping people
discover their true, authenticself through a journaling
(45:43):
practice, through a daily, whatI call the walk or the map
methodology, and I'm reallyexcited about where it's going.
I feel like that's exactlywhat's next.
Speaker 1 (45:55):
In fact, you've also launched a podcast recently.
Speaker 2 (45:57):
Yeah.
Speaker 1 (45:57):
So we're on a podcast journey together.
Speaker 2 (46:00):
Yes.
Speaker 1 (46:02):
And talking about the MAP method.
Yeah, and just share with us ahigh-level view of what that
method is.
And then let's encourage peopleto listen to your podcast too.
Speaker 2 (46:12):
Yeah, absolutely so.
Mindfulness Matrix podcast andMindfulness Matrix comes from
this idea.
That really what we call theMAP methodology, and it's
mindfulness, mindfulness andawareness, authenticity and
purpose.
You tie those three togetherand then plug them into what I
call our journaling method,which is a daily journaling
(46:36):
practice that is built aroundthis idea of how do you stay in
a being state versus a doingstate, and it all stems from
understanding who.
You are right, that mindfulnessand awareness that comes with
actually getting deep and deeplyconnected to intrinsically how
you want to show or who you wantto be in the world.
That's where your authenticitycomes from.
And then how do you want toshow up in the world?
(46:57):
And you blend those threetogether through alignment and
connection and then apply it ona in a daily simple journey and
practice.
Speaker 1 (47:05):
I love that, and so mindfulness, awareness,
authenticity and purpose.
It is beautiful, and maybeironic, that this whole business
Rustico was originally builtaround this idea of a journal
and that, full circle, it is thejournaling that has helped you
(47:26):
deal with the loss and thetransition between running this
product business to this newpurpose for you.
I think that that's incrediblypowerful.
What are the other lessons thatyou learned through this
process that you would sharewith your children and your
father or other entrepreneurswho are either starting or at
(47:46):
the end of the road and windingdown a business.
Speaker 2 (47:51):
There's a lot in there, I think.
To unpack what comes to mindwhen you said, that, more than
anything, was be careful withwords like needs and should and
could.
I think, as entrepreneurs, likeif we get too wrapped up into
what others think we need or do,that's when we know we're not
on our path right.
So doing what it is that youfeel intrinsically is important
is always, like, the key inentrepreneurship, and having a
(48:13):
purpose and a passion towardsthat is massively important.
Making sure, though, that youare not tying your identity to
that and what I mean and here'smy story around that, after
Rustico closed down and I had acoach that I was seeing to
(48:34):
really help me through thistransition, and I just was
devastated, and I was like Iremember this conversation I was
like I have no skills.
That was having to my coach.
I literally was like I don'teven know if I can get a job.
Like I, I've been leading thiscompany for a while, but I don't
(48:55):
know how to do digitalmarketing.
I don't know how to.
I don't know how tooperationally put the product
together, like all of theselittle hard skills or whatever.
I felt like.
I was like I don't even Ihaven't written a resume or a CV
in 22 years?
Like, how am I supposed to findwork?
Like no one would hire me,right?
I'm just in this feeling oftotal devastation and I think it
(49:15):
was because my entire identityhad been tied into this persona
that I had at at at my business,and it wasn't uh.
Obviously she coached me throughthat very well with like is
that is that really true?
Um, but it really took um.
A few days later, I actuallygot a phone call from a group,
uh company, that had found outabout Rustico and the process
(49:40):
that we're going through.
It followed us for a while andthey called me up and were like
hey, we're a five-year-oldleather company and we need
someone that has your experienceto come on board and just
consult with us for X amount.
Board and just consult with usfor X while.
(50:01):
And it was like um, it was justa huge shift for me to
recognize like oh, yeah, wait, Iactually have value, um, but
still, I had tied so much of myidentity into this entity that
was dead that I'd somehowfigured out like I did.
And so my, my advice is is islike we are not the things we do
, right, even though, asentrepreneurs like, we do so
(50:23):
much things and we tie ourselvesto them, but that is not who we
are, and making sure we stayclear on that is is super
important.
Speaker 1 (50:32):
It is the most profound insight that we are not
what we do, we are not thetitle that we hold, we are not
the business that we started orare running or work in, and I
think, for the last five or sixepisodes, this has been the key
thread and learning, which is wecannot tie our identity, our
(50:55):
feelings of worth and confidenceand value to a business which
outcome we don't fully controlas much influence and control as
we have as entrepreneurs wedon't fully control and is also
fleeting.
It's not forever and nobusinesses, and so I think
(51:15):
that's so insightful.
How do you do it, though?
How do you, in this moment andyou're still working through it
is journaling part of that, buthow do you really decouple it
and just say I am not Mr Rusticoanymore, I am Isaac Childs and
I care about people and I havepurpose and I have value and I
have skills?
How do you do that?
Speaker 2 (51:35):
and I have value and I have skills.
How do you do that?
Yeah, um, right now, for me,man, the uh, the way I do that
is uh.
I'll just start by saying Ithink that's probably my biggest
um blessing, if that's what Iwant to call it.
Uh, that's coming out of this,this whole uh, failure, right,
(51:56):
and the lesson that I'm learningis getting to discover who I am
on a daily basis and keepmyself detached from the things
that I get to do or be oraccomplish, um and the one, the
biggest way I do that is.
You know, this is a process forme.
(52:16):
It's a daily process right now,and it starts with, uh, really,
a morning meditation.
It's a reading and a morningmeditation that is then tied to
some, um, some short journalingthat I do, uh, which is tied
around gratitude andaffirmations.
Um, in the evening I'll do whatI call my walk methodology,
(52:39):
which is I'll write basically apage in my journal and out of
that will come the wonder of theday.
That's the W.
So walk is an acronym.
It means wonder, actions, livesacross paths and then knowledge
gained, and I'll just writewhat was the wonder?
What did I experience today?
Wonder is important, and thenactions are what brought me
(53:01):
energy and what took my energyaway, and really getting clear
on like what what was I reallytruly excited to do today versus
what did I have to do?
or should do right and what wasreally draining and why, and and
just getting clear on that.
And then lives across past withlike, like who did I get to
meet, how did I get to engageand how did I choose to engage
(53:23):
and what did that take me?
And then, of course, knowledgegained right, or aha moments
like anything else that'susually downloaded, and that
process on a daily basis rightnow has really helped me get
back to um, staying focused onlike I, I am me and these are
the things I do, and not tyingmyself so much into how the
(53:45):
things I do are me anymore.
Speaker 1 (53:47):
So I love that.
What great methodologies thatyou've developed through your
your own journey, that um thatyou've been able to apply as
you've gone through this.
I think there's so manyentrepreneurs who are probably
listening to this podcast likewriting down quickly, trying to
write all these things down andso that they can adopt some of
these similar practices.
I love gratitude as a principleSometimes, when we kind of take
(54:10):
a step back and even in theface of failure, we say what are
we grateful for?
What do we learn from this?
Like, how has this set me upfor the next 22 years?
Speaker 2 (54:23):
And so my final question is tell me where Isaac
Childs is in 22 years, in 22more years, wow.
Speaker 1 (54:28):
Um cause you'll still be relatively young.
Yeah, yeah, oh yeah, I'll beskiing still.
Speaker 2 (54:31):
Yeah, I was going to say we'll still be skiing, I
will absolutely still betraveling, um, and, to be quite
honest with you, I'll still bedoing what I'm doing.
Like I have, I have a mantra.
What that looks like?
Like I would really, reallylove to see.
Mindfulness matrix providestremendous value to a lot of
people around the world.
I think there's some somethingthere, and so I would love to be
(54:52):
spending my time uh, full time,really doing so.
I would love to be spending mytime uh, full time, really doing
, uh, having the opportunity toguide and help others and
inspire others to live moreauthentically to themselves, um,
but what I can tell you andwhat that looks like, obviously
that would be awesome, but whatI can tell you is this is my
mantra, personal mantra, but,like I, I want I always want an
(55:16):
athlete's body andentrepreneur's mind and an
artist's soul, um, or spirit,and so it will involve those
three things, whatever it is I'mdoing, so skiing or surfing, or
snowboarding, or fly fishing,like um an athlete, an athlete's
body and entrepreneur's mindand an artist's soul.
Speaker 1 (55:35):
That's beautiful.
Well, I can tell you one thingI feel that from you, I feel the
keen entrepreneurial spirit andthe ability to build and create
I won't comment on yourathletic build, because that
would be weird and I feel anartist's soul, someone who cares
deeply, who's deeply empathetic, who wants to give back, who
(55:58):
wants to share in ways that arereally open and vulnerable and
personal.
And you have done that today.
You have impacted the lives ofeveryone that will listen to
this podcast and you've impactedmy life.
I went home after we talked thefirst time and that night I
journaled for the first time inmany, many months.
Awesome.
And so you're making an impact.
Isaac, thank you so much forsharing.
(56:20):
Thanks for having me.
Hey, I'm Isaac Childs, mrRustico, and I failed, and
that's okay.
Thanks for tuning into the RealF Word.
The Real F Word is failure, andremember that failure is a
stepping stone, it's not just astumbling block.
Join us next time as wecontinue to explore the journey
of resilience and growth,without ignoring the true cost
(56:42):
personally, professionally andfinancially that comes with
failure.
Keep learning, keep growing andkeep embracing the real stories
of entrepreneurship.
See you next time.
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