November 6, 2024 • 40 mins
Ever wondered how a Wall Street options trader could successfully pivot to leading a $250 million air filter empire? Our special guest, David Hecox, the visionary founder and CEO of FilterBuy, shares his incredible journey, revealing the strategic decisions that propelled his direct-to-consumer indoor air quality business to new heights. Discover why David chose to focus on air filters and how manufacturing them competitively in the U.S. helped him outsmart import rivals. With insights into FilterBuy's vertically integrated production model, David opens up about leveraging major marketplaces like Amazon for distribution and the innovative marketing strategies that keep his brand top-of-mind.
Growing and scaling a company requires more than just a great product; it demands a clear competitive advantage. In our conversation, David unpacks the nuances of capturing demand at scale through intent-based marketing and how FilterBuy's structure enables them to excel across platforms like Google and Amazon. The discussion shines a light on the challenges of attributing marketing successes in an omni-channel landscape and the critical role of data-driven decision-making tools like Amazon QuickSight. Moreover, David shares the importance and hurdles of running a subscription program in the air filter market, providing listeners with a treasure trove of lessons learned along his entrepreneurial path.
David also dives into navigating the modern workforce landscape post-COVID, balancing remote and in-person roles. With a vast manufacturing workforce, he emphasizes the need for physical presence, while his corporate team thrives remotely, maintained through strategic in-person gatherings. We explore the symbiosis of technology and business strategy, weighing proprietary systems against third-party tools to optimize operations, not forgetting the potential of AI in shaping competitive moats. Wrapping up, David champions transparency and growth, passionately discussing his mission to build an authentic, purpose-driven company, and the inspiration he hopes to offer to fellow entrepreneurs through his candid sharing of business highs and lows.
Here's what you'll learn:
📈 Transitioning from Wall Street to entrepreneurship at 29.
💰 Vertical Integration - Filterbuy manufactures in Alabama.
📦 The air filter market is logistically complex, providing a competitive edge.
💸 Marketing spend is primarily focused on intent-based strategies.
🚀 Scaling requires hiring experienced leaders in key roles.
💼 Remote work has become a significant part of the corporate structure.
🤖 A hybrid technology stack is essential for operational efficiency. AI is expected to revolutionize custom-built solutions in business.
Timestamps:
00:00 Introduction to Entrepreneurship and Air Quality
02:57 The Journey from Wall Street to Filterbuy
06:13 Understanding the Air Filter Market
09:11 Marketing Strategies for Direct-to-Consumer Brands
12:09 Subscription Models in E-commerce
15:00 Scaling the Business and Team Dynamics
17:47 Navigating Challenges in Manufacturing
20:51 Remote Work and Company Culture
23:49 Technology Stack: Build vs. Buy
27:07 The Future of AI in Business
30:09 Long-term Vision and Personal Motivation
David Heacock:
LinkedIn - https://www.linkedin.com/in/davidfilterbuy/
Website - https://davidheacock.com/
Filterbuy - https://filterbuy.com/
Brandon Amoroso:
LinkedIn - https://www.linkedin.com/in/brandonamoroso/
Web - https://brandonamoroso.com/
Instagram - https://www.instagram.com/bamoroso11/
X - https://twitter.com/AmorosoBrandon
Scalis.ai - https://scalis.ai/
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Hey everyone, thanks for tuning in to D2Z, a podcast
about using the Gen Z mindset togrow your business.
I'm Gen Z entrepreneur BrandonAmoroso, founder and president
of retention as a service agencyElectric, as well as the
co-founder of Scaleless, andtoday I'm talking with David
Hecox, who's the founder and CEOof Filtered by, which is a
leading direct-to-consumerindoor air quality company.
(00:21):
Thanks for coming on the show.
Thanks for having me.
So, before we jump into thingshere, can you give everybody
just a quick background onyourself and FilterBot?
Speaker 2 (00:33):
Sure, I'm from Talladega, alabama, originally,
fast forward and went to work onWall Street where I was an
options trader at Goldman Sachsand, when I was 29, decided that
I wanted to do something elseand ended up buying a family
industrial supply business thatI was not entirely clear what I
(00:56):
was going to do with it, but Ilooked for a product that I
could sell direct to consumerand manufacturer in Talladega,
my hometown, and ultimatelysettled on pleated air filters
and that was the genesis forFilterBuy, and we're now about a
$250 million a year primarilydirect-to-consumer air filter
manufacturer that has locationsin seven different states and
(01:17):
ships across the country.
Speaker 1 (01:19):
That's some impressive scale and quite the
career transition.
Speaker 2 (01:24):
That's some impressive scale and quite the
career transition.
Yeah, I wouldn't recommend itfor everybody, but I knew that I
wanted to be an entrepreneurfrom an early age and I spent
most of my life, most of myearly days, exploring things
like affiliate marketing and alltypes of advertising strategies
, kind of in my spare time, hada lot of side hustles and in
that kind of general realm.
(01:44):
So it's not quite as random asit looks.
It was definitely an evolutionover time.
Speaker 1 (01:51):
And how did you go about deciding on air filters?
Speaker 2 (01:56):
Well, I was looking for a product that I could
manufacture competitively inAlabama and not have to compete
with imports.
That was incredibly importantto me.
In the industrial supplybusiness that I had bought, I
saw that we were effectively themiddleman.
We were buying from bigcompanies and selling to other
companies and competing with bigcompanies like Grainger or
Uline or whatnot, and we werenot really competitive.
(02:18):
So I really wanted somethingthat a product that I could
build, that I could manufactureand sell direct to end user,
with the idea that if I could dothat competitively, nobody
could build, that I couldmanufacture and sell direct to
end user, with the idea that ifI could do that competitively,
nobody could out-compete me, andthat that ultimately led me to
the air filter market.
Speaker 1 (02:33):
And are you uh completely, uh vertically
integrated?
Speaker 2 (02:38):
Yes, as vertically integrated as you can be.
I mean, we, we buy rawmaterials and and, um, you know,
make a finished good out ofthem.
So you know, we obviously haveframe manufacturers and you know
media manufacturers and thingsof that nature, but we're
completely vertically integratedfrom a product production and
sales perspective.
Speaker 1 (02:57):
And from like a direct-to-consumer standpoint.
Are you primarily sellingthrough, like your own website?
Are you selling throughmarketplaces?
What is the… we do?
Speaker 2 (03:06):
all… In our direct our direct to consumer business,
we do all of the above.
So about 60% of our businessends up originating on
marketplaces, which is aboutconsistent with, you know,
online search behavior.
If you were to look at it,about 60 or 65% of online
product search behavior ends upon marketplaces, primarily on
Amazon, um, and the rest, restcomes up from our website.
Speaker 1 (03:27):
Got it.
Okay, that makes sense.
I have a lot of questions, butone of the things that really
jumped out to me when I went toyour website was the Jeep
Wrangler and the sweeps, andI've heard really great things
about sweeps and I've heardreally negative things about
sweeps.
And I've heard I've heardreally great things about sweeps
and I've heard really negativethings about sweeps.
(03:47):
How has that?
How have you come upon likedeciding that that's going to be
your lead sort of capturemethod?
And you know, what does thatwhole process look like from
from, from your side?
Speaker 2 (03:57):
Yeah, it's something that we started exploring this
year and we're actually going toreally lead into it next year.
So we're so we're going to do alot more of this.
For us, it's purely a brandbuilding type play.
You know, I think that withinthe direct-to-consumer world
there are all different types ofproducts.
You know, we are in aconsumable commodity, necessity
(04:18):
product, right, which is verydifferent than you know, maybe a
clothing product or some typeof toy, or you know, some type
of a nice to have gadget.
So for us, you know, socialmarketing is kind of difficult,
right, because it's notsomething that I'm going to be
able to show up in yourInstagram feed or your Facebook
feed and you say, hey, I'm goingto buy my air filter today,
(04:40):
because it's one of these thingsthat either you need it or you
don't, and when you do need it,you have a very short
consideration window, right.
And so, you know, for us, thetraditional Facebook type
marketing doesn't really work.
But we need ways to increaseour brand awareness and increase
our top of the funnel, and forus, the giveaways are an easy
way to do that, because we justwant to be considered when you
(05:02):
are, when you are in market forour product Right, and so having
that giveaway allows us to getyour information and just remind
you that we exist, and then,when it comes time or when you
have the need, then we are thefirst place that you think of,
hopefully, and that's thestrategy behind it, and we've
seen some success with that sofar.
Speaker 1 (05:20):
Got it?
Yeah, that makes sense.
Got it, yeah, that makes sense.
Yeah, you're definitely aunique product within your
traditional D2C brands that areout there.
There's endless coffee brands,endless skincare and beauty
brands.
What would you say thecompetitive landscape and
dynamic looks like on your endwhen it comes to, you know, the
(05:42):
the air filter market is it?
Speaker 2 (05:44):
Yeah, well, the contract can, to contrast us, to
say, a beauty brand, um, as you, as you just articulated, you
know there are lots of um, youknow kind of um, private label
manufacturers of beauty products, for instance, or any of these
other products that you'retalking about, and because of
that, then what ends uphappening is the only advantage
(06:05):
that somebody has is ultimatelybrand, and so that's why you see
a lot of these celebrity typeendorsements that are driving
product sales.
For products like that, that,that complexity ultimately gives
(06:26):
us an edge.
It would be very difficult forsomebody to go out and find a
first a contract manufacturer ofair filters but then, more
importantly, to be able to, youknow, to be able to warehouse
them and then ship them at scaleand be competitive with us,
because you know we manufacturea hundred thousand units of our
product a day and ship them inan average of four and a half,
you know, from a customerperspective, to that end user.
(06:48):
So there's a lot of logisticsinvolved that go behind that,
and that's really where ourcompetitive advantage lies.
It's not something thatsomebody can just go and find a
contract manufacturer and say,hey, I'm going to be in the air
filter business, whereas I lookat a lot of these, you know,
traditional direct-to-consumerbrands.
Whereas I look at a lot ofthese traditional
direct-to-consumer brands, theyreally are not offering any
value other than marketing.
(07:09):
So marketing becomes theirdifferentiator, and that's a
pretty difficult way to surviveover a long period of time from
my perspective.
Speaker 1 (07:16):
Yeah, it reminds me I had an internship in high
school at a company called PCA,which is one of the few paper
manufacturing companies in theworld, and it costs like a
billion dollars to build a paperplant.
So it wasn't exactly a hypercompetitive industry and that's
not like you could just, youknow, snap your fingers and
(07:39):
somehow you would have.
You know, a paper company andyou know, air filters are
definitely not at the top of mymind.
If I were going to think aboutbuilding a new, you know, D2C
e-com brand, it would not be thefirst product category that I
would be looking at.
Speaker 2 (07:54):
Yeah, I think that the takeaway that everybody
needs to get from that, though,is that you need to be able to
articulate and understand yourcompetitive advantage in
business, like why is it thatyou uniquely exist and why are
you the person to solve thatproblem?
And you know, I think we allhave, you know kind of things
that suit us, or the things thatwe have a unique understanding
(08:16):
of that maybe somebody elsedoesn't, and that allow us to
have that competitive edge.
And for me, it was ultimatelyyou know, coming from a small
town where I had a manufacturingbase, and kind of being able to
utilize that and thatinfrastructure to be able to go
on this unique path where I sawan opportunity, but everybody
has their own unique skill setsor unique superpowers that they
(08:36):
have to tap into in order to beable to carve out a niche that
has a competitive vote over along period of time.
Speaker 1 (08:44):
From a marketing standpoint, though, albeit you
do have that competitiveadvantage when it comes to
everything that you justmentioned, but you still have.
Obviously, you have your TikTok.
You have some other socialchannels that most of the
companies that we just discussedare reliant upon when it comes
to creating theirdifferentiation.
How do you think about?
Is it similar to thesweepstakes, where you're
(09:06):
building that awareness eventhough the consideration and
buying window is very small, andthat's why you're investing in
some of these channels, likeTikTok and others?
Speaker 2 (09:15):
Yeah, I mean, if you were to look at our marketing
spend, we spend tens of millionsof dollars a year on marketing.
The vast majority of it is whatI would call intent-based
marketing.
So that means somebody is inmarket for a product and is
searching for that and we arecapturing the demand in that.
And if you want to be able todo that at scale, you have to
have good economics.
And because we are completelyvertically integrated, we have
(09:37):
the economics that allow us tocompete in that marketplace of
searching air filters on Googleor certain sizes on Amazon or
whatnot, which is very large.
We're able to compete at thatat scale and win because we have
those competitive advantages.
So that's the largest portionof our marketing spend and where
that money goes.
And then we do experiment withthe Facebooks and the TikToks
(09:59):
and whatnot of the world, but asa percentage of our marketing
budget is very small and we viewthat and whatnot of the world,
but as a percentage of ourmarketing budget is very small
and we view that, as you know,top of the funnel brand
awareness.
You know, making sure thatpeople know who we are, and
that's how we justify that typeof marketing spend.
Speaker 1 (10:16):
How do you sort of deal with the measurement and
attribution of your marketingefforts when you know you are
selling a lot on marketplaceslike in Amazon and not all the
sales are coming directlythrough your website?
Because I know that's been achallenge for some companies as
they get more omni-channel.
It's like measuring that haloeffect and trying to understand
(10:39):
where the actual transaction istaking place versus where the
advertising was most effectiveand actually captured that
consumer intent.
Speaker 2 (10:47):
Yeah, I mean at a high level.
It's really an art more than ascience.
I mean there really is noperfect way to do that.
In Amazon world, for instance,you do have ways of tracking
external marketing that leads tosales.
I mean they do actually havethe functionality for you to do
that now, at least in the lastcouple of years.
So we measure everything thatwe can when it's something that
(11:08):
we can measure.
But if we're doing just brandawareness top of the funnel type
stuff, we're really looking atmarketing spend as a percentage
of sales and looking at thatover a few month forward basis,
and we have different modelsthat we kind of utilize to just
take a guess as to what theimpact is.
But anybody that's giving youexact numbers in that world is
is, um, I think, not beingfactually honest.
(11:30):
Um, but you know we have, um anestablished framework for for
thinking about these, and Ithink it's important to spend
the time just understanding whatis your framework going to be?
How are you going to measure it?
Um, so that you at least, whenyou're tweaking something,
you're doing it with as muchinformation as as you possibly
can.
And so you know, we use AmazonQuickSight, which is a business
investment intelligent tool thatwe actually take down all of
(11:54):
our Google analytics data andall of our transactional data
and use that to then build amodel that allows us to, you
know, attribute this, based offof different factors, to the
best of our ability, given thedata that we have access to.
Speaker 1 (12:09):
How do you um, I got one or two more questions for
you that are specific to e-comm,and then I would definitely
want to talk a lot about.
You know how you've scaled thecompany, because you know you're
quite a sizable organization,and, uh, you know I had my own
pain points when, when, whenbuilding my my first business.
That I definitely want to pickyour brain on.
But I noticed you have asubscription program on your
website and a lot of the peoplethat are listening also have a
(12:31):
subscription business, albeitfor, most likely, different
products.
When did you launch that?
How do you get people to buyinto?
I want to be on a subscriptionprogram for an air filter, which
is not necessarily the firstthing that would come top of
mind for me when thinking abouta subscription program.
Speaker 2 (12:49):
Yeah, we've had a subscription from the very
beginning.
We started about the same timeas, say, like a Dollar Shave
Club or a Harry's, and so thatwas definitely something that
was top of mind when I wasfounding and thinking about it,
and originally I thoughtsubscription was going to be a
huge driver for us and it'sextremely important.
It's about 15 to 20% of ourrevenue comes from subscriptions
(13:12):
, and that's a very sticky 15 to20%.
But the problem in the airfilter market is that the
economics don't really lenditself to a subscription model,
because it costs us about thesame to ship you six filters as
it does one filter, and soultimately we have to pass that
shipping cost on to a consumer,right?
(13:33):
So you'll see that we giveconsumers meaningful discounts
the more that they buy, becausethe shipping economics are that
way, and so because of that, ouraverage subscription is about
nine months, because people aregenerally buying about nine
months, which is four to sixfilters, depending on.
You know how many units you haveand how often you change them,
and so on average, that's when aconsumer purchases from us on a
(13:56):
subscription, but it's it'sreally not as meaningful for us
as as I originally would havethought when we went into it
because of the shippingeconomics.
So for everybody it's different.
If you have a supplement orsomething like that where it's
very cheap to ship, then aconsumer probably is happy
buying it once a month from you,because you're not going to
(14:17):
give them that much a discountif they buy a year's supply at a
time, whereas we're in aposition that we can pass on a
significant discount the morethat you're willing to buy in
one go.
And because of that thatactually discourages people from
subscriptions.
But for us, as an aside, ourbusiness-to-business market is
actually where we see moresuccess with the subscriptions,
because they're generally havingto buy more at a time and are
(14:40):
changing them more often, and sosubscription lends itself more
to kind of the small businessworld than it does the
direct-to-consumer residentialDo you have a completely
different sort of experience andinsight for those B2B
purchasers or is it allfunneling through the same sort
of front-end e-com experience?
(15:01):
Well, the small business, b2bcustomers oftentimes use the
same front end experience thatyou might see.
But, like, one of our biggestgrowth opportunities, and where
you know we've invested heavilyin the last year and a half, is
hiring a outside sales team thatjust focuses on business to
business customers, to consumerbusiness.
So we have about 30 outsidesalespeople that call on, you
(15:27):
know, hotels and gyms andindustrial complexes and car
companies and kind of run thegamut of all these.
You know industrial typecompanies that use air filters
and that customer base has acompletely different kind of
sales platform that is hosted onFilter Bycom but when you log
in they have the ability to getquantity discounts and you know
appropriate pricing based off ofwhatever volume it is that
(15:48):
they're ordering.
Speaker 1 (15:50):
Got it, got it.
That's a nice segue into yourteam and how you've thought
about sort of growing andscaling that.
Because you mentioned theoutside sales team, so how do
you determine at this point, youknow, whether it's a function
or a role that you're going tointernalize and actually bring
like in-house, or something thatyou're going to look to
external parties to, you know,spin up?
Speaker 2 (16:18):
external parties to spin up.
At this point we mostlyin-house.
Anything that's meaningfulenough to be worth doing and
that's kind of an advantage ofbeing our size now is that it
doesn't make sense to outsourcetoo many aspects of our business
, but early on that might havebeen quite different.
For me, it ultimately comes towhen can you budget or when can
you afford to hire a reallysolid manager that has a lot of
(16:41):
experience in the function thatyou're looking out to build, and
once you have the budget to beable to budget for that as well
as the team members that they'regoing to need to hire, that's
when it makes sense to make thatinvestment internally and
internalize it, if that makessense.
Speaker 1 (16:57):
Yeah, no, that does make sense.
That was similar to how I builtthe agency.
As soon as we had enough moneycoming through that particular
channel, that's when there wasthe department head and then the
investment in the team membersthat would come underneath that
person.
But until then it was alloutsourced or other things like
that, as we sort of scrappilygrew and grew and grew the
(17:17):
business.
So that definitely makes sense.
When it comes to yeah makesperfect sense.
When it comes to when you werefirst starting out and creating
this company, because obviouslythe way that you think about
things and do things right noware a lot different when you're
at the size and scale that youare.
But when you were firststarting the business, what were
(17:38):
some of the biggest pain pointsor challenges that you had that
you didn't necessarily expect.
Speaker 2 (17:47):
Well, for me the earliest challenges were
manufacturing related.
Were manufacturing related, Isignificantly underestimated
just how challenging it is tobuild and operate a
manufacturing business in the USin the you know the timeframe
that I that I started and I wasvery naive going into that.
So you know, in retrospect Ithink I, you know, kind of
(18:08):
bought off, bit off more than Iprobably should have and you
know I would not have the energyto go back and start that exact
type of process again.
But that was the thing that Iunderestimated by far the most
was just how trickymanufacturing the product at
scale was going to be Got it andfrom a team perspective, as
you've been, as you've beenscaling and growing, are you
(18:32):
fully in person?
Speaker 1 (18:33):
Are you remote?
Are you, are you hybrid?
How have you dealt with some ofthe some of the ramifications
that have come out of out of outof the COVID period when it
comes to you know where yourteam is located how you like,
keep and build that companyculture and ethos?
Speaker 2 (18:49):
Yeah, that's a good question and I think it's one
that a lot of us are wrestlingwith and struggling with.
You know, we have about athousand employees and the vast
majority of them are located inone of our manufacturing
facilities.
Right, you can't, you can't bea remote manufacturing employee.
So you know that, by definition, those those are, you know,
(19:10):
in-person jobs.
You know in-person jobs.
But we do have about a70-person you know corporate and
management team.
Now that really came to ageduring COVID, like most of those
jobs and people did not existbefore COVID.
So because of that, a lot ofthose hires were remote and so
we have a pretty kind of robustremote workforce.
(19:33):
In the last couple of yearswe've started to have two
centers, one in West Palm Beach,florida, where I'm based, and
one in Atlanta, georgia, wheremy chief of staff is, and we're
mostly hiring in those centersfor any new corporate roles.
But we still have a prettyremote workforce and because of
(19:54):
that we do try to have quarterlyget togethers with, you know,
each of those remote teams, sothat teams do have some
in-person you know interaction.
But it's, you know, we're kindof figuring it out as we go
along, to be honest with you.
Speaker 1 (20:09):
Yeah, I think the cat's sort of out of the bag
when it comes to that side ofthings, especially if a lot of
the growth happened during COVID, similar to my previous
business we ended up in like 12different states and at this
point you know it's very hard tothen centralize upon a few
(20:29):
locations because you know thenpeople either have to move or
the people have to change,whereas if you're starting a
business from scratch today it'sa lot different.
You can be a little bit moreintentional with the hiring that
you're doing.
But we were all San Diego andthen COVID hit and then now all
of a sudden we're in 13different states and there's no
really going back.
It feels like in person.
Speaker 2 (20:51):
Yeah, I mean, I think for every company and every
situation is going to bedifferent and I think ultimately
we all have to figure out whatworks best for our you know
situation.
I don't know that there is aright or a wrong.
I do think in-personinteraction for certain jobs and
certain roles is extremelyimportant, like I just brought a
CFO in-house here with me inWest Palm because that's a
(21:15):
critical function and it'sreally important to have that
kind of you know, regularinteraction and trust, to be
honest, with you.
And so for those types of roles, I think in-person is really
important, whereas, you know,like for development roles and
things of that nature, it'sprobably less important because
you can kind of track people andtrack progress in more
measurable ways, can kind oftrack people and track progress
(21:36):
in more measurable ways, andthat allows people to work at
their own pace or at theirleisure and whatnot and
ultimately leads to moreproductive workforces in those
areas.
So I think you just have tofigure out, based on the role in
your company, what makes themost sense for you company.
Speaker 1 (21:56):
what makes the most sense for you when it comes to
like your commerce stack, howmuch of it is you know build
versus buy?
Are you investing a lot in sortof creating custom solutions or
are you trying to leverage youknow off the shelf technologies
as much as possible?
Speaker 2 (22:11):
Yeah, so I started the business off a completely
custom backend and basicallymanaged that myself.
And going back to yoursubscription question, earlier,
believe it or not, when Istarted the business, shopify
did not have a good subscriptionsolution.
It was not native, and youdidn't have the third party
solutions that you have now on aplatform like that.
(22:33):
So part of the reason why wedid not start on a Shopify
install in the beginning wasbecause they would not offer
subscriptions, and subscriptionswas extremely important to me,
and so I use that as an example,because early on, you know, we
did not have the luxury ofhaving a lot of these
third-party tools that existtoday, and so we actually built
(22:55):
our own custom-built system thatwe still use for all of our
warehousing and order managementand all of our core functions.
But then we will hook into thirdparties where it makes sense or
where there's a solution that'sbeen put in place for us, but
we would much prefer to use athird-party solution in a lot of
cases.
But as our tools developed, alot of times there was not a
(23:16):
third-party solution in a lot ofcases.
But as our tools developed, alot of times, there was not a
third-party solution at thattime, which caused us to create
an internal solution for that.
But if I was starting today, Ithink I could build a business
almost solely on third-partysolutions, and it's likely what
I would do.
Speaker 1 (23:31):
Do you envision yourself migrating some of those
components that you've builtin-house to third-party
solutions over the next three tofive years, or do you think
that you'll continue to investin some of the proprietary
technology like?
Speaker 2 (23:50):
our.
When I talk about our coresystems, I'm really talking
about our, you know, orderprocessing and warehouse
management and stuff that we'vereally made very efficient for
our specific business.
So, you know, it's not the kindof thing we could go and buy off
the shelf and and since we'vealready built it to where we are
today, it's something we'regoing to continue to manage and
(24:11):
build on our own.
But, like you know, we'rereally investing heavy in a
service business on top of ourair filter business.
For instance, like, we have aHVAC service business in South
Florida that we intend to takenationwide, called Filter by
HVAC Solutions, and in that weuse a third party software
called Service Titan, which isbasically the the you know it's
(24:31):
big in the service industry,it's like an ERP for for service
businesses, and so in that, inmaking that investment, we are
deciding to use third-partytools from the get-go, and so
that's kind of how I see itgoing.
We'll we'll continue to investin maintaining our kind of core
functionality for our corebusiness, but as we expand into
other things, um, we're going toleverage third-party technology
(24:52):
as much as reasonably possible.
Speaker 1 (24:55):
Yeah, it feels like for the more like niche product
categories that have veryspecific requirements, the
proprietary technology is almostnecessitated Because you know,
to our earlier point, you knowthere's thousands of skincare
brands out there, and so itmakes sense that you know a
Shopify would be able to easilysupport their needs.
But the needs of a businesslike yours are far more complex
(25:18):
and more specific, and so itwould make sense that they don't
have.
You know some of those featuresand functionality just off the
shelf, but the needs of abusiness like yours are far more
complex and more specific, andso it would make sense that they
don't have.
Speaker 2 (25:24):
You know some of those features and functionality
just off the shelf, Correct,and it's part of our secret
sauce, to be honest with you.
I mean, like I said, wemanufacture 100,000 pleated air
filters a day and we ship them,you know, in 20,000 or so boxes
to end customers at the end ofevery single day.
And you know we keep about twoweeks of finished goods
inventory in our whole systemand we're constantly making
product to replenish inventoryand keep those levels where they
(25:48):
need to be, and in order to dothat it takes a lot of moving
pieces that we've developed acustom system to allow us to do
that and that's part of thereason why we have the
competitive advantage that we do.
Speaker 1 (26:02):
Would you ever license any of your technology?
Because a recent trend I'vebeen seeing, even from some VC
investments, is in buying orhaving a business where you
develop proprietary technologyto better effectively service
your customers.
But I'll use a pool cleaningcompany as an example.
(26:23):
So there's somebody I'mconnected with who they bought a
pool cleaning company and nowthey've built technology for
that pool cleaning company to beable to better service its
customers and now they'relicensing it to other pool
cleaning companies.
Is there anything you knowcomparable or similar here that
you would ever think about doing?
Speaker 2 (26:37):
Yeah, when I was younger and maybe more ambitious
or naive depending on how youlook at it I would have said yes
, and now I would tell you no,partially because you know we're
a unique business like you'renot going to go out and find
another business specificallylike ours, and you know I don't
think that there's a huge marketfor a lot of those things that
(27:00):
we've actually built, becauseit's kind of a one-on-one use
case, year or so time horizon,because you know it's going to
allow companies like us and youknow, yours or anybody, to
(27:28):
create custom built tools in a,in a way, um less um intense way
than has been required in thepast.
So the ironic thing about AI, Ibelieve, is going to be that a
lot of the complexity or thingsthat have kept people from
building custom tools in thepast is now going to be unlocked
because it's going to be somuch easier to have
purpose-built solutions.
And so I would be very nervousto go and be investing heavily
in a, you know, saas type ofsoftware business that did not
(27:50):
have a big competitive moat ofsome kind, because I think it's
going to change a lot over thecoming years, so I would be
reluctant to go too heavy intothat personally.
Speaker 1 (28:01):
Yeah, I was out in San Francisco, I want to say,
two weeks ago for Tech Week andit was interesting listening to
one of the talks about how tobuild a moat as a business.
And there's sort of the old waywhere there's high switching
costs and there's networkeffects, but the new way is in
data, you know, becauseeverybody has access to the same
(28:22):
LLMs, the same AI.
But if you have a proprietarydata set that you know Google
can't see or any of thesemassive, you know AI providers
cannot have access to, then thatis really your competitive mode
is you have data that can thentrain the models to be able to
be more effective in whateveryou're actually doing.
And so it's just veryinteresting how the business
(28:44):
building or creation of thatmoat, is changing over time with
AI.
Speaker 2 (28:48):
The corollary to that , you know, which is why you
know I'm in the business I'm inand intend to really focus the
rest of my life on building itis that I think that you know,
it's going to be a long timebefore you have AI robots that
are, say, installing an HVACsystem and things of that nature
, and so, you know, I'm reallyfocused on building the most
(29:09):
efficient company that allows meto offer those types of
services at scale.
So you become a bridge betweenthe technology and the AI that
it takes to run these thingsefficiently and the people that
are actually making theseservices or these products
happen.
And so, you know, I think thatthat's where I see the biggest
opportunity is actually thatintersection between the you
(29:31):
know people that are actuallydoing services and whatnot and
building the systems that allowyou to do that efficiently at
scale through technology.
Speaker 1 (29:39):
Yeah, it feels like AI is really, at this point,
sort of disproportionatelyimpacting you know, your
traditional knowledge workers,and it hasn't really touched the
service industries, which arealso, you know, woefully
understaffed At least has beenmy experience, you know, in
Miami dealing with, you know,house remodels contractors,
(30:02):
things like that.
There's no plumbers, there's noelectricians, there's no
availability of any of theseresources.
And it makes me think, when Ihave kids and they're going to
be that age to go to college,are they actually going to go to
college?
Are they going to go to tradeschool?
Are they going to look at otheralternatives?
That 10 years ago was sort ofyour golden ticket.
If you got an undergraduatedegree from an esteemed
(30:23):
university, you were sort of offand on your way.
I don't think that is going tobe the case for very much longer
.
Yeah.
Speaker 2 (30:30):
I 100% agree with you and it's why I'm in the
business I'm in and in our HVACbusiness we have a big
apprenticeship program wherewe're taking people that went to
a basic training trade schooland then giving them the skills
that they need to be effectivetechnicians for a company like
ours.
And that type of training andskill building, I think, is a
(30:52):
place that way we as a companycan differentiate ourselves.
But I think that there's goingto be more and more demand for
that type of work in the future,and so it's why I'm trying to
get ahead of it with my newbusiness.
Speaker 1 (31:16):
There's things that we're doing today that are only
possible as of three months ago,both from a product development
standpoint, but also thingswe're just doing internally as a
company.
How are you leveraging it orhow are you thinking about that?
Speaker 2 (31:29):
Yeah, I mean, I think that first you have to be
self-aware about, hey, is mybusiness going to be replaced by
this anytime soon?
And like, where am I vulnerable?
So we all need to take internallook at that and say, maybe I
need to rethink my strategy orwhat my mode is.
So that's the first thing Ithink we all have to do.
But for us, for me, internally,I'm constantly looking at our
(31:52):
teams and our systems and ourprocesses and saying is there a
way that we can do this betteror more efficiently?
And that, as you say, changesquite often and so, like,
whether that be within customerservice or whether that be
within, you know the tech toolsthat you're using and building
and the sizes of the teams thatare needed to do that.
You know making sure that youhave people that are focused on
(32:15):
understanding what is possibleand implementing that quickly
with a quick, biased action isreally critical, I think, if you
want to scale and survive andit's something that we do
religiously here and it'ssomething I spend a lot of time
thinking about and studyingmyself company back in 2012 to
(32:42):
today, as your team has gottenbigger and bigger, because I've
met with a lot of founders whohave trouble delegating or
transitioning from what theywere doing to what they need to
be doing as the businesscontinues to grow.
Speaker 1 (32:49):
So what does that evolution look like for you and
how have you been able to manageand handle that?
Speaker 2 (32:55):
Yeah, I mean I don't know that I've always done the
best job of it.
To be honest, a lot of timesI've been that founder that does
have a tough time walking awaybecause I know every little
nitty management team andconsciously went out and found
people to help me to hone incertain processes of our
business, and that's really whathas now allowed me to take my
(33:33):
vision even bigger.
And you know, I'm on a missionto build the world's leading
indoor air quality company andI'm documenting that through
YouTube and YouTube, and westarted that about two weeks ago
and it's something I'm spendingmore and more of my time on.
And really the process over thelast 18 months of going through
every major department andbringing in a solid leader that
has experience, doing somethingsimilar to what they're being
(33:57):
tasked with here, has reallybeen game changing for me and is
what is allowing me to kind ofthink bigger and invest in
bigger projects than I ever havebefore.
Speaker 1 (34:09):
One last question for you.
You know, in 10, 20 years fromnow, what is like your sort of
North star, what, what is a youknow success look like for you
as as a business owner?
And like what are some of themotivations that lead into that
as well?
Because I think there's quite afew people that look at
entrepreneurship for all theritz and glamour that might be
(34:31):
portrayed in the media, but moreoften than not it's a shit
sandwich of a daily what, Iguess what gets you up out of
bed every morning.
And you know what does thatlike 10, 20 year North star look
like for you?
Speaker 2 (34:45):
Well, you know, the last couple of years I really
did a lot of soul searching.
I was kind of trying to answerthat question for myself.
You know, I just turned 41years old and and you're
thinking, well, I built this bigbusiness, I could, I could sell
it.
And um, you thinking, well, Ibuilt this big business, I could
sell it and retire and livehappily ever after.
Is that what I should be doing?
Is that what I want?
(35:05):
And I realized that for me, it'simportant to wake up every day
with a mission and a purpose,and I really believe that you
can impact the world by how youinteract with the people around
you and how how you buildopportunities for those people
around you.
It's very important to me and Idecided that I wanted to be
(35:25):
building something for the restof my life.
And you know, if I sold it now,that I would probably always
regret it, because you never,never, really can recreate that
kind of first baby that you,that that you build in in in
business, and I've seen a lot ofpeople try and fail at that,
and it's something that I wasn'tinterested in doing.
And so that's how I ultimatelycame to my, my mission, which is
(35:47):
to build the world's leadingindoor air quality company, and
I, you know, spent the first,you know, 12 years of my
business career not sharinganything on social media, not
being, you know, not having anysocial media presence or web
presence at all.
But now I actually want toshare my mission with the world,
show people how I'm doing it,show exactly what you said.
(36:07):
You know, entrepreneurship, touse your words, can be a shit
sandwich and that's oftentimesreality.
And I want to show that.
I want people to understandthat, because if they're going
to go on a, on a big journey,they got to be prepared to, you
know, withstand that and livewith that.
And you know, I think, thatthere is so much fakeness out
there.
And so I'm going to document myjourney of building something
(36:28):
big, a multi billion dollar ayear indoor air quality business
.
And you know I want to takepeople along for the ride, good
and bad, and for me, that thatjourney is something that gets
me out of bed every day and I'mexcited for it and that's why
I'm doing it.
Speaker 1 (36:43):
Yeah, that transparency is awesome, Because
if you went on LinkedIn, youwould think that everybody had a
billion-dollar company and thatmoney was raining from the sky,
which I mean, I'm definitelynot saying that I'm any
different.
You're not rewarded for beingtransparent and showing the
negatives, because that's notthe way that the current like
social framework is is set up.
(37:04):
And but I always, I always jokewith my brother who's who's a
co-founder in this business,like it'll be really funny.
And you know, five to 10 years,once we're sort of through this
stage and you know we're, we'repast having to portray that on
on on social media, like beingable to share and shed some of
the light around some of thosedays where you're like, holy
shit, you know how am I going tomake payroll today?
(37:26):
Or you know, something happenedwith a team member and you know
all of the sort of nitty grittybehind the scenes that nobody
actually talks about or ispublic with, because you know it
is.
It could potentially be, youknow, damaging to what you're
trying to achieve in thatparticular moment.
Speaker 2 (37:41):
Yeah, well, part of the advantage now is I've I have
a big enough company with bigenough scale and don't have, you
know, any investors that I thatI have to answer to, and I'm in
a in a unique position to beable to share more than I think
that the than the average personcan.
And you know, my challenge is tobe really authentic as I show
it and take people through it,both good and bad, I mean.
(38:03):
And obviously there are somethings you can't share but you
might get sued or you knowimpact people and whatnot, and
so I mean, you know fulltransparency is not realistic,
but you know, I do think thatyou know we can all be honest
about.
You know what it really takesto run a business and to scale a
business, and it's not foreverybody, and I think people
need to understand that becauseI think a lot of people get
(38:25):
sucked in that probably would bebetter off being the second or
third in command at some otherbusiness and not having to deal
with what it really takes toscale a business, and I think
people need to work on thatself-awareness.
Speaker 1 (38:45):
Yeah, I heard a term the other day called
intrapreneur, where it'ssomebody who is very passionate
about entrepreneurship but theydon't necessarily want to take
on the risk associated with itor some of the stressors that
come with it, and so they joinearly stage startups, or they'd
even join an organization likeyours, where they're provided
the platform and the frameworkof which to innovate, but
without some of the negativesthat come with.
You know, having to, you know,run the whole ship.
Speaker 2 (39:08):
Yeah, I mean, I think that for a lot of people, that
is a very smart strategy and Iwould counsel you know a lot of
people in that, you know to dothat, but I want to show people
an example of what's possible.
And if you, if you want to signup for it and you have the
stomach for it, then you need todream bigger and that that's
kind of, um, you know, theexample that I want to show.
Speaker 1 (39:32):
Well, I really appreciate you taking the time
and sharing all these insightswith us.
Um really amazing what you'vedone um so far, and I'm looking
forward to seeing you build thatbillion-dollar company.
Before we hop, though, can youlet everybody know where they
can connect with you online,where they can follow along with
this journey of yours as well,on YouTube and whatnot?
Speaker 2 (39:53):
Yep, I'm just David Filterby on all platforms.
So if you go to David Filterbyon YouTube you'll find me.
We've posted our first coupleof episodes, but every week
we're updating you on ourjourney and gonna take you along
for the ride, so I'd appreciateit if you followed me.
Speaker 1 (40:09):
Awesome.
Well, again, I appreciate youtaking the time for everybody
listening, as always.
This is Brandon Amoroso.
You can find me atbrandonamorosocom or scalistai.
Hey everyone, thanks for tuning in to D2Z, a podcast
about using the Gen Z mindset togrow your business.
I'm Gen Z entrepreneur BrandonAmoroso, founder and president
of retention as a service agencyElectric, as well as the
co-founder of Scaleless, andtoday I'm talking with David
Hecox, who's the founder and CEOof Filtered by, which is a
leading direct-to-consumerindoor air quality company.
(00:21):
Thanks for coming on the show.
Thanks for having me.
So, before we jump into thingshere, can you give everybody
just a quick background onyourself and FilterBot?
Speaker 2 (00:33):
Sure, I'm from Talladega, alabama, originally,
fast forward and went to work onWall Street where I was an
options trader at Goldman Sachsand, when I was 29, decided that
I wanted to do something elseand ended up buying a family
industrial supply business thatI was not entirely clear what I
(00:56):
was going to do with it, but Ilooked for a product that I
could sell direct to consumerand manufacturer in Talladega,
my hometown, and ultimatelysettled on pleated air filters
and that was the genesis forFilterBuy, and we're now about a
$250 million a year primarilydirect-to-consumer air filter
manufacturer that has locationsin seven different states and
(01:17):
ships across the country.
Speaker 1 (01:19):
That's some impressive scale and quite the
career transition.
Speaker 2 (01:24):
That's some impressive scale and quite the
career transition.
Yeah, I wouldn't recommend itfor everybody, but I knew that I
wanted to be an entrepreneurfrom an early age and I spent
most of my life, most of myearly days, exploring things
like affiliate marketing and alltypes of advertising strategies
, kind of in my spare time, hada lot of side hustles and in
that kind of general realm.
(01:44):
So it's not quite as random asit looks.
It was definitely an evolutionover time.
Speaker 1 (01:51):
And how did you go about deciding on air filters?
Speaker 2 (01:56):
Well, I was looking for a product that I could
manufacture competitively inAlabama and not have to compete
with imports.
That was incredibly importantto me.
In the industrial supplybusiness that I had bought, I
saw that we were effectively themiddleman.
We were buying from bigcompanies and selling to other
companies and competing with bigcompanies like Grainger or
Uline or whatnot, and we werenot really competitive.
(02:18):
So I really wanted somethingthat a product that I could
build, that I could manufactureand sell direct to end user,
with the idea that if I could dothat competitively, nobody
could build, that I couldmanufacture and sell direct to
end user, with the idea that ifI could do that competitively,
nobody could out-compete me, andthat that ultimately led me to
the air filter market.
Speaker 1 (02:33):
And are you uh completely, uh vertically
integrated?
Speaker 2 (02:38):
Yes, as vertically integrated as you can be.
I mean, we, we buy rawmaterials and and, um, you know,
make a finished good out ofthem.
So you know, we obviously haveframe manufacturers and you know
media manufacturers and thingsof that nature, but we're
completely vertically integratedfrom a product production and
sales perspective.
Speaker 1 (02:57):
And from like a direct-to-consumer standpoint.
Are you primarily sellingthrough, like your own website?
Are you selling throughmarketplaces?
What is the… we do?
Speaker 2 (03:06):
all… In our direct our direct to consumer business,
we do all of the above.
So about 60% of our businessends up originating on
marketplaces, which is aboutconsistent with, you know,
online search behavior.
If you were to look at it,about 60 or 65% of online
product search behavior ends upon marketplaces, primarily on
Amazon, um, and the rest, restcomes up from our website.
Speaker 1 (03:27):
Got it.
Okay, that makes sense.
I have a lot of questions, butone of the things that really
jumped out to me when I went toyour website was the Jeep
Wrangler and the sweeps, andI've heard really great things
about sweeps and I've heardreally negative things about
sweeps.
And I've heard I've heardreally great things about sweeps
and I've heard really negativethings about sweeps.
(03:47):
How has that?
How have you come upon likedeciding that that's going to be
your lead sort of capturemethod?
And you know, what does thatwhole process look like from
from, from your side?
Speaker 2 (03:57):
Yeah, it's something that we started exploring this
year and we're actually going toreally lead into it next year.
So we're so we're going to do alot more of this.
For us, it's purely a brandbuilding type play.
You know, I think that withinthe direct-to-consumer world
there are all different types ofproducts.
You know, we are in aconsumable commodity, necessity
(04:18):
product, right, which is verydifferent than you know, maybe a
clothing product or some typeof toy, or you know, some type
of a nice to have gadget.
So for us, you know, socialmarketing is kind of difficult,
right, because it's notsomething that I'm going to be
able to show up in yourInstagram feed or your Facebook
feed and you say, hey, I'm goingto buy my air filter today,
(04:40):
because it's one of these thingsthat either you need it or you
don't, and when you do need it,you have a very short
consideration window, right.
And so, you know, for us, thetraditional Facebook type
marketing doesn't really work.
But we need ways to increaseour brand awareness and increase
our top of the funnel, and forus, the giveaways are an easy
way to do that, because we justwant to be considered when you
(05:02):
are, when you are in market forour product Right, and so having
that giveaway allows us to getyour information and just remind
you that we exist, and then,when it comes time or when you
have the need, then we are thefirst place that you think of,
hopefully, and that's thestrategy behind it, and we've
seen some success with that sofar.
Speaker 1 (05:20):
Got it?
Yeah, that makes sense.
Got it, yeah, that makes sense.
Yeah, you're definitely aunique product within your
traditional D2C brands that areout there.
There's endless coffee brands,endless skincare and beauty
brands.
What would you say thecompetitive landscape and
dynamic looks like on your endwhen it comes to, you know, the
(05:42):
the air filter market is it?
Speaker 2 (05:44):
Yeah, well, the contract can, to contrast us, to
say, a beauty brand, um, as you, as you just articulated, you
know there are lots of um, youknow kind of um, private label
manufacturers of beauty products, for instance, or any of these
other products that you'retalking about, and because of
that, then what ends uphappening is the only advantage
(06:05):
that somebody has is ultimatelybrand, and so that's why you see
a lot of these celebrity typeendorsements that are driving
product sales.
For products like that, that,that complexity ultimately gives
(06:26):
us an edge.
It would be very difficult forsomebody to go out and find a
first a contract manufacturer ofair filters but then, more
importantly, to be able to, youknow, to be able to warehouse
them and then ship them at scaleand be competitive with us,
because you know we manufacturea hundred thousand units of our
product a day and ship them inan average of four and a half,
you know, from a customerperspective, to that end user.
(06:48):
So there's a lot of logisticsinvolved that go behind that,
and that's really where ourcompetitive advantage lies.
It's not something thatsomebody can just go and find a
contract manufacturer and say,hey, I'm going to be in the air
filter business, whereas I lookat a lot of these, you know,
traditional direct-to-consumerbrands.
Whereas I look at a lot ofthese traditional
direct-to-consumer brands, theyreally are not offering any
value other than marketing.
(07:09):
So marketing becomes theirdifferentiator, and that's a
pretty difficult way to surviveover a long period of time from
my perspective.
Speaker 1 (07:16):
Yeah, it reminds me I had an internship in high
school at a company called PCA,which is one of the few paper
manufacturing companies in theworld, and it costs like a
billion dollars to build a paperplant.
So it wasn't exactly a hypercompetitive industry and that's
not like you could just, youknow, snap your fingers and
(07:39):
somehow you would have.
You know, a paper company andyou know, air filters are
definitely not at the top of mymind.
If I were going to think aboutbuilding a new, you know, D2C
e-com brand, it would not be thefirst product category that I
would be looking at.
Speaker 2 (07:54):
Yeah, I think that the takeaway that everybody
needs to get from that, though,is that you need to be able to
articulate and understand yourcompetitive advantage in
business, like why is it thatyou uniquely exist and why are
you the person to solve thatproblem?
And you know, I think we allhave, you know kind of things
that suit us, or the things thatwe have a unique understanding
(08:16):
of that maybe somebody elsedoesn't, and that allow us to
have that competitive edge.
And for me, it was ultimatelyyou know, coming from a small
town where I had a manufacturingbase, and kind of being able to
utilize that and thatinfrastructure to be able to go
on this unique path where I sawan opportunity, but everybody
has their own unique skill setsor unique superpowers that they
(08:36):
have to tap into in order to beable to carve out a niche that
has a competitive vote over along period of time.
Speaker 1 (08:44):
From a marketing standpoint, though, albeit you
do have that competitiveadvantage when it comes to
everything that you justmentioned, but you still have.
Obviously, you have your TikTok.
You have some other socialchannels that most of the
companies that we just discussedare reliant upon when it comes
to creating theirdifferentiation.
How do you think about?
Is it similar to thesweepstakes, where you're
(09:06):
building that awareness eventhough the consideration and
buying window is very small, andthat's why you're investing in
some of these channels, likeTikTok and others?
Speaker 2 (09:15):
Yeah, I mean, if you were to look at our marketing
spend, we spend tens of millionsof dollars a year on marketing.
The vast majority of it is whatI would call intent-based
marketing.
So that means somebody is inmarket for a product and is
searching for that and we arecapturing the demand in that.
And if you want to be able todo that at scale, you have to
have good economics.
And because we are completelyvertically integrated, we have
(09:37):
the economics that allow us tocompete in that marketplace of
searching air filters on Googleor certain sizes on Amazon or
whatnot, which is very large.
We're able to compete at thatat scale and win because we have
those competitive advantages.
So that's the largest portionof our marketing spend and where
that money goes.
And then we do experiment withthe Facebooks and the TikToks
(09:59):
and whatnot of the world, but asa percentage of our marketing
budget is very small and we viewthat and whatnot of the world,
but as a percentage of ourmarketing budget is very small
and we view that, as you know,top of the funnel brand
awareness.
You know, making sure thatpeople know who we are, and
that's how we justify that typeof marketing spend.
Speaker 1 (10:16):
How do you sort of deal with the measurement and
attribution of your marketingefforts when you know you are
selling a lot on marketplaceslike in Amazon and not all the
sales are coming directlythrough your website?
Because I know that's been achallenge for some companies as
they get more omni-channel.
It's like measuring that haloeffect and trying to understand
(10:39):
where the actual transaction istaking place versus where the
advertising was most effectiveand actually captured that
consumer intent.
Speaker 2 (10:47):
Yeah, I mean at a high level.
It's really an art more than ascience.
I mean there really is noperfect way to do that.
In Amazon world, for instance,you do have ways of tracking
external marketing that leads tosales.
I mean they do actually havethe functionality for you to do
that now, at least in the lastcouple of years.
So we measure everything thatwe can when it's something that
(11:08):
we can measure.
But if we're doing just brandawareness top of the funnel type
stuff, we're really looking atmarketing spend as a percentage
of sales and looking at thatover a few month forward basis,
and we have different modelsthat we kind of utilize to just
take a guess as to what theimpact is.
But anybody that's giving youexact numbers in that world is
is, um, I think, not beingfactually honest.
(11:30):
Um, but you know we have, um anestablished framework for for
thinking about these, and Ithink it's important to spend
the time just understanding whatis your framework going to be?
How are you going to measure it?
Um, so that you at least, whenyou're tweaking something,
you're doing it with as muchinformation as as you possibly
can.
And so you know, we use AmazonQuickSight, which is a business
investment intelligent tool thatwe actually take down all of
(11:54):
our Google analytics data andall of our transactional data
and use that to then build amodel that allows us to, you
know, attribute this, based offof different factors, to the
best of our ability, given thedata that we have access to.
Speaker 1 (12:09):
How do you um, I got one or two more questions for
you that are specific to e-comm,and then I would definitely
want to talk a lot about.
You know how you've scaled thecompany, because you know you're
quite a sizable organization,and, uh, you know I had my own
pain points when, when, whenbuilding my my first business.
That I definitely want to pickyour brain on.
But I noticed you have asubscription program on your
website and a lot of the peoplethat are listening also have a
(12:31):
subscription business, albeitfor, most likely, different
products.
When did you launch that?
How do you get people to buyinto?
I want to be on a subscriptionprogram for an air filter, which
is not necessarily the firstthing that would come top of
mind for me when thinking abouta subscription program.
Speaker 2 (12:49):
Yeah, we've had a subscription from the very
beginning.
We started about the same timeas, say, like a Dollar Shave
Club or a Harry's, and so thatwas definitely something that
was top of mind when I wasfounding and thinking about it,
and originally I thoughtsubscription was going to be a
huge driver for us and it'sextremely important.
It's about 15 to 20% of ourrevenue comes from subscriptions
(13:12):
, and that's a very sticky 15 to20%.
But the problem in the airfilter market is that the
economics don't really lenditself to a subscription model,
because it costs us about thesame to ship you six filters as
it does one filter, and soultimately we have to pass that
shipping cost on to a consumer,right?
(13:33):
So you'll see that we giveconsumers meaningful discounts
the more that they buy, becausethe shipping economics are that
way, and so because of that, ouraverage subscription is about
nine months, because people aregenerally buying about nine
months, which is four to sixfilters, depending on.
You know how many units you haveand how often you change them,
and so on average, that's when aconsumer purchases from us on a
(13:56):
subscription, but it's it'sreally not as meaningful for us
as as I originally would havethought when we went into it
because of the shippingeconomics.
So for everybody it's different.
If you have a supplement orsomething like that where it's
very cheap to ship, then aconsumer probably is happy
buying it once a month from you,because you're not going to
(14:17):
give them that much a discountif they buy a year's supply at a
time, whereas we're in aposition that we can pass on a
significant discount the morethat you're willing to buy in
one go.
And because of that thatactually discourages people from
subscriptions.
But for us, as an aside, ourbusiness-to-business market is
actually where we see moresuccess with the subscriptions,
because they're generally havingto buy more at a time and are
(14:40):
changing them more often, and sosubscription lends itself more
to kind of the small businessworld than it does the
direct-to-consumer residentialDo you have a completely
different sort of experience andinsight for those B2B
purchasers or is it allfunneling through the same sort
of front-end e-com experience?
(15:01):
Well, the small business, b2bcustomers oftentimes use the
same front end experience thatyou might see.
But, like, one of our biggestgrowth opportunities, and where
you know we've invested heavilyin the last year and a half, is
hiring a outside sales team thatjust focuses on business to
business customers, to consumerbusiness.
So we have about 30 outsidesalespeople that call on, you
(15:27):
know, hotels and gyms andindustrial complexes and car
companies and kind of run thegamut of all these.
You know industrial typecompanies that use air filters
and that customer base has acompletely different kind of
sales platform that is hosted onFilter Bycom but when you log
in they have the ability to getquantity discounts and you know
appropriate pricing based off ofwhatever volume it is that
(15:48):
they're ordering.
Speaker 1 (15:50):
Got it, got it.
That's a nice segue into yourteam and how you've thought
about sort of growing andscaling that.
Because you mentioned theoutside sales team, so how do
you determine at this point, youknow, whether it's a function
or a role that you're going tointernalize and actually bring
like in-house, or something thatyou're going to look to
external parties to, you know,spin up?
Speaker 2 (16:18):
external parties to spin up.
At this point we mostlyin-house.
Anything that's meaningfulenough to be worth doing and
that's kind of an advantage ofbeing our size now is that it
doesn't make sense to outsourcetoo many aspects of our business
, but early on that might havebeen quite different.
For me, it ultimately comes towhen can you budget or when can
you afford to hire a reallysolid manager that has a lot of
(16:41):
experience in the function thatyou're looking out to build, and
once you have the budget to beable to budget for that as well
as the team members that they'regoing to need to hire, that's
when it makes sense to make thatinvestment internally and
internalize it, if that makessense.
Speaker 1 (16:57):
Yeah, no, that does make sense.
That was similar to how I builtthe agency.
As soon as we had enough moneycoming through that particular
channel, that's when there wasthe department head and then the
investment in the team membersthat would come underneath that
person.
But until then it was alloutsourced or other things like
that, as we sort of scrappilygrew and grew and grew the
(17:17):
business.
So that definitely makes sense.
When it comes to yeah makesperfect sense.
When it comes to when you werefirst starting out and creating
this company, because obviouslythe way that you think about
things and do things right noware a lot different when you're
at the size and scale that youare.
But when you were firststarting the business, what were
(17:38):
some of the biggest pain pointsor challenges that you had that
you didn't necessarily expect.
Speaker 2 (17:47):
Well, for me the earliest challenges were
manufacturing related.
Were manufacturing related, Isignificantly underestimated
just how challenging it is tobuild and operate a
manufacturing business in the USin the you know the timeframe
that I that I started and I wasvery naive going into that.
So you know, in retrospect Ithink I, you know, kind of
(18:08):
bought off, bit off more than Iprobably should have and you
know I would not have the energyto go back and start that exact
type of process again.
But that was the thing that Iunderestimated by far the most
was just how trickymanufacturing the product at
scale was going to be Got it andfrom a team perspective, as
you've been, as you've beenscaling and growing, are you
(18:32):
fully in person?
Speaker 1 (18:33):
Are you remote?
Are you, are you hybrid?
How have you dealt with some ofthe some of the ramifications
that have come out of out of outof the COVID period when it
comes to you know where yourteam is located how you like,
keep and build that companyculture and ethos?
Speaker 2 (18:49):
Yeah, that's a good question and I think it's one
that a lot of us are wrestlingwith and struggling with.
You know, we have about athousand employees and the vast
majority of them are located inone of our manufacturing
facilities.
Right, you can't, you can't bea remote manufacturing employee.
So you know that, by definition, those those are, you know,
(19:10):
in-person jobs.
You know in-person jobs.
But we do have about a70-person you know corporate and
management team.
Now that really came to ageduring COVID, like most of those
jobs and people did not existbefore COVID.
So because of that, a lot ofthose hires were remote and so
we have a pretty kind of robustremote workforce.
(19:33):
In the last couple of yearswe've started to have two
centers, one in West Palm Beach,florida, where I'm based, and
one in Atlanta, georgia, wheremy chief of staff is, and we're
mostly hiring in those centersfor any new corporate roles.
But we still have a prettyremote workforce and because of
(19:54):
that we do try to have quarterlyget togethers with, you know,
each of those remote teams, sothat teams do have some
in-person you know interaction.
But it's, you know, we're kindof figuring it out as we go
along, to be honest with you.
Speaker 1 (20:09):
Yeah, I think the cat's sort of out of the bag
when it comes to that side ofthings, especially if a lot of
the growth happened during COVID, similar to my previous
business we ended up in like 12different states and at this
point you know it's very hard tothen centralize upon a few
(20:29):
locations because you know thenpeople either have to move or
the people have to change,whereas if you're starting a
business from scratch today it'sa lot different.
You can be a little bit moreintentional with the hiring that
you're doing.
But we were all San Diego andthen COVID hit and then now all
of a sudden we're in 13different states and there's no
really going back.
It feels like in person.
Speaker 2 (20:51):
Yeah, I mean, I think for every company and every
situation is going to bedifferent and I think ultimately
we all have to figure out whatworks best for our you know
situation.
I don't know that there is aright or a wrong.
I do think in-personinteraction for certain jobs and
certain roles is extremelyimportant, like I just brought a
CFO in-house here with me inWest Palm because that's a
(21:15):
critical function and it'sreally important to have that
kind of you know, regularinteraction and trust, to be
honest, with you.
And so for those types of roles, I think in-person is really
important, whereas, you know,like for development roles and
things of that nature, it'sprobably less important because
you can kind of track people andtrack progress in more
measurable ways, can kind oftrack people and track progress
(21:36):
in more measurable ways, andthat allows people to work at
their own pace or at theirleisure and whatnot and
ultimately leads to moreproductive workforces in those
areas.
So I think you just have tofigure out, based on the role in
your company, what makes themost sense for you company.
Speaker 1 (21:56):
what makes the most sense for you when it comes to
like your commerce stack, howmuch of it is you know build
versus buy?
Are you investing a lot in sortof creating custom solutions or
are you trying to leverage youknow off the shelf technologies
as much as possible?
Speaker 2 (22:11):
Yeah, so I started the business off a completely
custom backend and basicallymanaged that myself.
And going back to yoursubscription question, earlier,
believe it or not, when Istarted the business, shopify
did not have a good subscriptionsolution.
It was not native, and youdidn't have the third party
solutions that you have now on aplatform like that.
(22:33):
So part of the reason why wedid not start on a Shopify
install in the beginning wasbecause they would not offer
subscriptions, and subscriptionswas extremely important to me,
and so I use that as an example,because early on, you know, we
did not have the luxury ofhaving a lot of these
third-party tools that existtoday, and so we actually built
(22:55):
our own custom-built system thatwe still use for all of our
warehousing and order managementand all of our core functions.
But then we will hook into thirdparties where it makes sense or
where there's a solution that'sbeen put in place for us, but
we would much prefer to use athird-party solution in a lot of
cases.
But as our tools developed, alot of times there was not a
(23:16):
third-party solution in a lot ofcases.
But as our tools developed, alot of times, there was not a
third-party solution at thattime, which caused us to create
an internal solution for that.
But if I was starting today, Ithink I could build a business
almost solely on third-partysolutions, and it's likely what
I would do.
Speaker 1 (23:31):
Do you envision yourself migrating some of those
components that you've builtin-house to third-party
solutions over the next three tofive years, or do you think
that you'll continue to investin some of the proprietary
technology like?
Speaker 2 (23:50):
our.
When I talk about our coresystems, I'm really talking
about our, you know, orderprocessing and warehouse
management and stuff that we'vereally made very efficient for
our specific business.
So, you know, it's not the kindof thing we could go and buy off
the shelf and and since we'vealready built it to where we are
today, it's something we'regoing to continue to manage and
(24:11):
build on our own.
But, like you know, we'rereally investing heavy in a
service business on top of ourair filter business.
For instance, like, we have aHVAC service business in South
Florida that we intend to takenationwide, called Filter by
HVAC Solutions, and in that weuse a third party software
called Service Titan, which isbasically the the you know it's
(24:31):
big in the service industry,it's like an ERP for for service
businesses, and so in that, inmaking that investment, we are
deciding to use third-partytools from the get-go, and so
that's kind of how I see itgoing.
We'll we'll continue to investin maintaining our kind of core
functionality for our corebusiness, but as we expand into
other things, um, we're going toleverage third-party technology
(24:52):
as much as reasonably possible.
Speaker 1 (24:55):
Yeah, it feels like for the more like niche product
categories that have veryspecific requirements, the
proprietary technology is almostnecessitated Because you know,
to our earlier point, you knowthere's thousands of skincare
brands out there, and so itmakes sense that you know a
Shopify would be able to easilysupport their needs.
But the needs of a businesslike yours are far more complex
(25:18):
and more specific, and so itwould make sense that they don't
have.
You know some of those featuresand functionality just off the
shelf, but the needs of abusiness like yours are far more
complex and more specific, andso it would make sense that they
don't have.
Speaker 2 (25:24):
You know some of those features and functionality
just off the shelf, Correct,and it's part of our secret
sauce, to be honest with you.
I mean, like I said, wemanufacture 100,000 pleated air
filters a day and we ship them,you know, in 20,000 or so boxes
to end customers at the end ofevery single day.
And you know we keep about twoweeks of finished goods
inventory in our whole systemand we're constantly making
product to replenish inventoryand keep those levels where they
(25:48):
need to be, and in order to dothat it takes a lot of moving
pieces that we've developed acustom system to allow us to do
that and that's part of thereason why we have the
competitive advantage that we do.
Speaker 1 (26:02):
Would you ever license any of your technology?
Because a recent trend I'vebeen seeing, even from some VC
investments, is in buying orhaving a business where you
develop proprietary technologyto better effectively service
your customers.
But I'll use a pool cleaningcompany as an example.
(26:23):
So there's somebody I'mconnected with who they bought a
pool cleaning company and nowthey've built technology for
that pool cleaning company to beable to better service its
customers and now they'relicensing it to other pool
cleaning companies.
Is there anything you knowcomparable or similar here that
you would ever think about doing?
Speaker 2 (26:37):
Yeah, when I was younger and maybe more ambitious
or naive depending on how youlook at it I would have said yes
, and now I would tell you no,partially because you know we're
a unique business like you'renot going to go out and find
another business specificallylike ours, and you know I don't
think that there's a huge marketfor a lot of those things that
(27:00):
we've actually built, becauseit's kind of a one-on-one use
case, year or so time horizon,because you know it's going to
allow companies like us and youknow, yours or anybody, to
(27:28):
create custom built tools in a,in a way, um less um intense way
than has been required in thepast.
So the ironic thing about AI, Ibelieve, is going to be that a
lot of the complexity or thingsthat have kept people from
building custom tools in thepast is now going to be unlocked
because it's going to be somuch easier to have
purpose-built solutions.
And so I would be very nervousto go and be investing heavily
in a, you know, saas type ofsoftware business that did not
(27:50):
have a big competitive moat ofsome kind, because I think it's
going to change a lot over thecoming years, so I would be
reluctant to go too heavy intothat personally.
Speaker 1 (28:01):
Yeah, I was out in San Francisco, I want to say,
two weeks ago for Tech Week andit was interesting listening to
one of the talks about how tobuild a moat as a business.
And there's sort of the old waywhere there's high switching
costs and there's networkeffects, but the new way is in
data, you know, becauseeverybody has access to the same
(28:22):
LLMs, the same AI.
But if you have a proprietarydata set that you know Google
can't see or any of thesemassive, you know AI providers
cannot have access to, then thatis really your competitive mode
is you have data that can thentrain the models to be able to
be more effective in whateveryou're actually doing.
And so it's just veryinteresting how the business
(28:44):
building or creation of thatmoat, is changing over time with
AI.
Speaker 2 (28:48):
The corollary to that , you know, which is why you
know I'm in the business I'm inand intend to really focus the
rest of my life on building itis that I think that you know,
it's going to be a long timebefore you have AI robots that
are, say, installing an HVACsystem and things of that nature
, and so, you know, I'm reallyfocused on building the most
(29:09):
efficient company that allows meto offer those types of
services at scale.
So you become a bridge betweenthe technology and the AI that
it takes to run these thingsefficiently and the people that
are actually making theseservices or these products
happen.
And so, you know, I think thatthat's where I see the biggest
opportunity is actually thatintersection between the you
(29:31):
know people that are actuallydoing services and whatnot and
building the systems that allowyou to do that efficiently at
scale through technology.
Speaker 1 (29:39):
Yeah, it feels like AI is really, at this point,
sort of disproportionatelyimpacting you know, your
traditional knowledge workers,and it hasn't really touched the
service industries, which arealso, you know, woefully
understaffed At least has beenmy experience, you know, in
Miami dealing with, you know,house remodels contractors,
(30:02):
things like that.
There's no plumbers, there's noelectricians, there's no
availability of any of theseresources.
And it makes me think, when Ihave kids and they're going to
be that age to go to college,are they actually going to go to
college?
Are they going to go to tradeschool?
Are they going to look at otheralternatives?
That 10 years ago was sort ofyour golden ticket.
If you got an undergraduatedegree from an esteemed
(30:23):
university, you were sort of offand on your way.
I don't think that is going tobe the case for very much longer
.
Yeah.
Speaker 2 (30:30):
I 100% agree with you and it's why I'm in the
business I'm in and in our HVACbusiness we have a big
apprenticeship program wherewe're taking people that went to
a basic training trade schooland then giving them the skills
that they need to be effectivetechnicians for a company like
ours.
And that type of training andskill building, I think, is a
(30:52):
place that way we as a companycan differentiate ourselves.
But I think that there's goingto be more and more demand for
that type of work in the future,and so it's why I'm trying to
get ahead of it with my newbusiness.
Speaker 1 (31:16):
There's things that we're doing today that are only
possible as of three months ago,both from a product development
standpoint, but also thingswe're just doing internally as a
company.
How are you leveraging it orhow are you thinking about that?
Speaker 2 (31:29):
Yeah, I mean, I think that first you have to be
self-aware about, hey, is mybusiness going to be replaced by
this anytime soon?
And like, where am I vulnerable?
So we all need to take internallook at that and say, maybe I
need to rethink my strategy orwhat my mode is.
So that's the first thing Ithink we all have to do.
But for us, for me, internally,I'm constantly looking at our
(31:52):
teams and our systems and ourprocesses and saying is there a
way that we can do this betteror more efficiently?
And that, as you say, changesquite often and so, like,
whether that be within customerservice or whether that be
within, you know the tech toolsthat you're using and building
and the sizes of the teams thatare needed to do that.
You know making sure that youhave people that are focused on
(32:15):
understanding what is possibleand implementing that quickly
with a quick, biased action isreally critical, I think, if you
want to scale and survive andit's something that we do
religiously here and it'ssomething I spend a lot of time
thinking about and studyingmyself company back in 2012 to
(32:42):
today, as your team has gottenbigger and bigger, because I've
met with a lot of founders whohave trouble delegating or
transitioning from what theywere doing to what they need to
be doing as the businesscontinues to grow.
Speaker 1 (32:49):
So what does that evolution look like for you and
how have you been able to manageand handle that?
Speaker 2 (32:55):
Yeah, I mean I don't know that I've always done the
best job of it.
To be honest, a lot of timesI've been that founder that does
have a tough time walking awaybecause I know every little
nitty management team andconsciously went out and found
people to help me to hone incertain processes of our
business, and that's really whathas now allowed me to take my
(33:33):
vision even bigger.
And you know, I'm on a missionto build the world's leading
indoor air quality company andI'm documenting that through
YouTube and YouTube, and westarted that about two weeks ago
and it's something I'm spendingmore and more of my time on.
And really the process over thelast 18 months of going through
every major department andbringing in a solid leader that
has experience, doing somethingsimilar to what they're being
(33:57):
tasked with here, has reallybeen game changing for me and is
what is allowing me to kind ofthink bigger and invest in
bigger projects than I ever havebefore.
Speaker 1 (34:09):
One last question for you.
You know, in 10, 20 years fromnow, what is like your sort of
North star, what, what is a youknow success look like for you
as as a business owner?
And like what are some of themotivations that lead into that
as well?
Because I think there's quite afew people that look at
entrepreneurship for all theritz and glamour that might be
(34:31):
portrayed in the media, but moreoften than not it's a shit
sandwich of a daily what, Iguess what gets you up out of
bed every morning.
And you know what does thatlike 10, 20 year North star look
like for you?
Speaker 2 (34:45):
Well, you know, the last couple of years I really
did a lot of soul searching.
I was kind of trying to answerthat question for myself.
You know, I just turned 41years old and and you're
thinking, well, I built this bigbusiness, I could, I could sell
it.
And um, you thinking, well, Ibuilt this big business, I could
sell it and retire and livehappily ever after.
Is that what I should be doing?
Is that what I want?
(35:05):
And I realized that for me, it'simportant to wake up every day
with a mission and a purpose,and I really believe that you
can impact the world by how youinteract with the people around
you and how how you buildopportunities for those people
around you.
It's very important to me and Idecided that I wanted to be
(35:25):
building something for the restof my life.
And you know, if I sold it now,that I would probably always
regret it, because you never,never, really can recreate that
kind of first baby that you,that that you build in in in
business, and I've seen a lot ofpeople try and fail at that,
and it's something that I wasn'tinterested in doing.
And so that's how I ultimatelycame to my, my mission, which is
(35:47):
to build the world's leadingindoor air quality company, and
I, you know, spent the first,you know, 12 years of my
business career not sharinganything on social media, not
being, you know, not having anysocial media presence or web
presence at all.
But now I actually want toshare my mission with the world,
show people how I'm doing it,show exactly what you said.
(36:07):
You know, entrepreneurship, touse your words, can be a shit
sandwich and that's oftentimesreality.
And I want to show that.
I want people to understandthat, because if they're going
to go on a, on a big journey,they got to be prepared to, you
know, withstand that and livewith that.
And you know, I think, thatthere is so much fakeness out
there.
And so I'm going to document myjourney of building something
(36:28):
big, a multi billion dollar ayear indoor air quality business
.
And you know I want to takepeople along for the ride, good
and bad, and for me, that thatjourney is something that gets
me out of bed every day and I'mexcited for it and that's why
I'm doing it.
Speaker 1 (36:43):
Yeah, that transparency is awesome, Because
if you went on LinkedIn, youwould think that everybody had a
billion-dollar company and thatmoney was raining from the sky,
which I mean, I'm definitelynot saying that I'm any
different.
You're not rewarded for beingtransparent and showing the
negatives, because that's notthe way that the current like
social framework is is set up.
(37:04):
And but I always, I always jokewith my brother who's who's a
co-founder in this business,like it'll be really funny.
And you know, five to 10 years,once we're sort of through this
stage and you know we're, we'repast having to portray that on
on on social media, like beingable to share and shed some of
the light around some of thosedays where you're like, holy
shit, you know how am I going tomake payroll today?
(37:26):
Or you know, something happenedwith a team member and you know
all of the sort of nitty grittybehind the scenes that nobody
actually talks about or ispublic with, because you know it
is.
It could potentially be, youknow, damaging to what you're
trying to achieve in thatparticular moment.
Speaker 2 (37:41):
Yeah, well, part of the advantage now is I've I have
a big enough company with bigenough scale and don't have, you
know, any investors that I thatI have to answer to, and I'm in
a in a unique position to beable to share more than I think
that the than the average personcan.
And you know, my challenge is tobe really authentic as I show
it and take people through it,both good and bad, I mean.
(38:03):
And obviously there are somethings you can't share but you
might get sued or you knowimpact people and whatnot, and
so I mean, you know fulltransparency is not realistic,
but you know, I do think thatyou know we can all be honest
about.
You know what it really takesto run a business and to scale a
business, and it's not foreverybody, and I think people
need to understand that becauseI think a lot of people get
(38:25):
sucked in that probably would bebetter off being the second or
third in command at some otherbusiness and not having to deal
with what it really takes toscale a business, and I think
people need to work on thatself-awareness.
Speaker 1 (38:45):
Yeah, I heard a term the other day called
intrapreneur, where it'ssomebody who is very passionate
about entrepreneurship but theydon't necessarily want to take
on the risk associated with itor some of the stressors that
come with it, and so they joinearly stage startups, or they'd
even join an organization likeyours, where they're provided
the platform and the frameworkof which to innovate, but
without some of the negativesthat come with.
You know, having to, you know,run the whole ship.
Speaker 2 (39:08):
Yeah, I mean, I think that for a lot of people, that
is a very smart strategy and Iwould counsel you know a lot of
people in that, you know to dothat, but I want to show people
an example of what's possible.
And if you, if you want to signup for it and you have the
stomach for it, then you need todream bigger and that that's
kind of, um, you know, theexample that I want to show.
Speaker 1 (39:32):
Well, I really appreciate you taking the time
and sharing all these insightswith us.
Um really amazing what you'vedone um so far, and I'm looking
forward to seeing you build thatbillion-dollar company.
Before we hop, though, can youlet everybody know where they
can connect with you online,where they can follow along with
this journey of yours as well,on YouTube and whatnot?
Speaker 2 (39:53):
Yep, I'm just David Filterby on all platforms.
So if you go to David Filterbyon YouTube you'll find me.
We've posted our first coupleof episodes, but every week
we're updating you on ourjourney and gonna take you along
for the ride, so I'd appreciateit if you followed me.
Speaker 1 (40:09):
Awesome.
Well, again, I appreciate youtaking the time for everybody
listening, as always.
This is Brandon Amoroso.
You can find me atbrandonamorosocom or scalistai.
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