Developing an Entrepreneurial Venture That Succeeds

Anita Brick: Hi, this is Anita Brick, and welcome to CareerCast at Chicago Booth to help you advance in your career. Today we're delighted to be speaking to Brian Douglas. He's co-CEO of Itsy Ritzy, which is an amazing company that makes baby, toddler, and adult products that—I mean, Brian, I know you're going to tell us about it, but they're eco-friendly and they're a big hit all over the place, which is wonderful. You started the company with your wife, Kelly, correct?

Brian Douglas: That's correct. First of all, thank you very much for saying that. Do you think the products are wonderful? I certainly agree, and thanks for the nice introduction. They actually—we acquired a predecessor company back in 2007, and the company itself has been around back to 2002, but we did actually acquire the business. And then it started over in many respects. So we do view it as really a startup company, even though it started with an acquisition.

Anita Brick: So why did you choose to leave? I know you were… you did management consulting, you did telecom, you did investment banking. Why did you decide to leave all of that and go become an entrepreneur?

Brian Douglas: I think, you know, a lot of people—and a lot of people listening to this, if they have any interest at all, probably have, down in their gut, that itch that tells them they want something a little bit more. They want to be an entrepreneur and everything that that means. But I've always had that desire, you know, even while I was at Booth—well, it was the GSB then—but I did, what was it called, the Kauffman Entrepreneurial Program? I think it’s just now the entrepreneurial internship program, but that was a wonderful experience for me. It was in a very safe environment for me to kind of dip my toe in the water knowing that, hey, I really want to do something on my own.

Here's a way to kind of test it out without any real repercussions. And so I spent my summer with Vonage—a lot of people probably know Vonage.

Anita Brick: Oh, sure.

Brian Douglas: And so I worked directly for Jeffrey Fisher, the original CEO; he's now the chairman, and I worked directly for him that summer. And it was a wonderful—sometimes wild, but a great experience. And it definitely solidified that this is what I want to do. It just didn't feel like the right time for me. I actually went back and did investment banking after business school, spent a few years on Wall Street, but even consistently, while I was working there, I was always moving towards smaller and smaller companies within banking, kind of going from bulge bracket firms down to the big firms. I knew that this was something I wanted to do.

Anita Brick: You know, one of the big questions around when is the right time, that came from actually two different alumni, how important is financial stability, personal financial stability? And then the other variation of that question is, is it really true that you need to have two years of personal operating expenses stashed away before you make that leap?

Brian Douglas: So this was a great question. The personal financial stability, I mean, you have to really think about that because in terms of what the dollar number might be, it will be very different for people. If you are a 22-year-old just coming out of undergrad with a brilliant idea, you probably have a different standard of living, different expenses that you're accustomed to versus … even in my situation, when I made the leap, I was married with two kids.

And you have to really consider that is going to be a lifestyle change, especially down where we operate. You know, I like to call ourselves a small business, but to be honest, we're a microbusiness. You know, a small business to me might be a, you know, a 20, 30, 40, $50 million business. We're not there yet. So we really are a microbusiness.

And when you're down operating at this level, you really have to take into account how that's going to impact on your personal life and your personal finances. If you have a spouse that works, you know that's going to factor into it. If you have a family, not have a family, you know it's coming out of a fairly high-paying industry.

Well, I was in investment banking until I was able, over, you know, a few years, to put myself in a pretty good position. I don't know if you need two years worth or one year's worth or what the time might be, but you want to have some sort of cushion, because the last thing you want your entrepreneur thinking about on a day-to-day basis is, how am I going to pay the mortgage?

How am I going to pay my rent? That takes the entrepreneur's eye off the ball. And what you're really trying to do with the business is too distracting. So you do have to have some comfort either with your personal finances or capitalizing a business so that you can pay yourself from day one. You don't want to get yourself in such a bind where all you think about is the house is going to go into foreclosure. It just … that's not a healthy way to start a new business.

Anita Brick: And I think that's a really good point, because then everything becomes, how do you sell whatever you're selling? And you may make bad decisions.

Brian Douglas: Absolutely right. Especially in the early years, whether you are well funded or bootstrapping, you're still going to be putting a significant amount of whatever you're making right back into the company. You want to grow something and grow it with some speed and get up to scale or some size. Even if you're funded, you're going to be putting a lot of money back into the business.

And if you're having to decide between do I buy groceries or do I go to a trade show, you know, you don't want to have to be making those types of decisions. Ultimately, you're right. It just clouds the decision-making too much.

Anita Brick: It's a really, really good point. You know, there were a number of questions about financing. One was: what were some of the budget surprises, either positive or negative ones, that you would do differently if you were going to plan ahead?

Brian Douglas: This is so critical. In terms of how you're going to finance a business, but also any surprises that I would have found. And you can make financial models, you can do your business plan, you can look at and you … look, I was buying an existing operation. I had past-year financials to go off of. You really have to be honest, if you're going to do different scenarios, you have to have a downside scenario because, look—like me, you know, you might buy a business and two years later you go into a big recession.

So you have to be prepared for something like that. For me, the biggest surprises. You know, I was used to dealing with small businesses and working at a boutique bank and knowing the numbers, you may be able to track those ….. If you're buying a company, and this is a little maybe more to buying a company, but also if you're starting a company, really dig deep into that diligence.

I was fortunate in that I had been doing it for a long time, and I still miss things. Sometimes there won't be information available, and you're going to have to get comfortable with that, but really try to, you know, forecast out the cost that you're going to incur. Might even want to put a multiplier on those to be a little bit conservative, because cash is so critical to any startup, any growing business.

I care much more about cash flow than I do about what the profit is. You know, cash is the lifeblood of any growing business. You know, all the professors at Chicago used to say cash is king, and it's true. Specific surprises? No, I didn't have any real big “aha” moments. Wish I had a little done a little bit better diligence on the inventory acquiring. I think I probably overspent by, you know, 10 or $15,000.

So I wish I'd done a little bit better job there. You know, looking at cost of goods sold. You know, I think we came out pretty good. But I think the moral of the story is dig deep into the diligence, and don't be afraid to take the extra time to really get the way down into the weeds in terms of the numbers.

Anita Brick: That makes sense. Now we're talking about cash flow. And one of the questions from a weekend student was, how do you raise or obtain additional capital when the cash flow really isn't sufficient to run the company?

Brian Douglas: Good question. And something that we've really sort of faced in terms of funding our working capital—and again, critical to any small business, because you might have a great idea, you are growing very quickly and people have read about it in their textbooks or in the newspaper or whatever it might be—you know, growing businesses need cash as much or more than failing businesses.

You're probably going to be faced with a situation that you're going through. And similar to what we're doing, we've been very fortunate, especially in these times, to be growing and growing at a pretty good clip. But what that means for us is we have to start carrying more inventory. We're bringing on more people. We just hired our intern full time.

But, you know, we have a lot of cash needs as we grow—more and more cash needs. And I would say to anyone, and, you know, I don't care if you're the biggest company or the smallest company in the world, just get very, very friendly with your bank or banks, plural. It's very important they invite you to go to golf, go play golf with them. They invite you to go to a concert, go to the concert because they're going to be critical for you.

Stop by their office, give them a phone call, give them frequent updates because you're going to need their help at some point. And, you know, like a lot of us, me in particular right now with small companies, I am loath to ever give up any equity because I think the future value of this company is so much more than any valuation I would get now that I do not want to be giving up any sort of equity.

So I always look at, OK, well, where are my other sources of capital? My first job, well, initially was friends and family and in conjunction with that, a bank and we went and looked at all smaller regional banks. If you're a smaller business, kind of 10 million or less, they're a great home for small businesses. There is much more of a personal element with your banker, and there's much more face to face.

And if you have a bank in particular that is accustomed to or used to working with smaller growing companies, they do a better job. I think it … peeling away maybe a top layer of financials or a top layer of numbers and having a better understanding of what growing businesses have to go through, and then how that relates to what they can do in terms of financing.

And I'm not saying that the banks, you know, regional small banks are out there just handing money out, but at the same time that they do have money and they are in the business of loaning money. And if you have put together a nice company or a good business plan, you can still raise that. You know, in this environment, probably more difficult would be my hunch than what I did two years ago.

But, you know, even our banks, about three months ago, they doubled our line of credit. And they also gave us a significantly larger backstop through a letter of credit with one of our vendors. And, you know, those are the kinds of things that, you know, allow us to keep growing at a fast rate.

Anita Brick: What if you don't really have any assets to put in the game? I mean, this came both from an evening MBA student and then from an Exec MBA student. The kind of business that you have to some degree is a lifestyle business. It is very different than the work that you did before. How did you create the credibility to actually have that kind of relationship with a bank, when you didn't really have that kind of experience, that industry experience, before?

Brian Douglas: Good question, Anita, and in my situation—and you have to remember that I was acquiring a positive cash flow company—even as a small business, I could get some lending off of the cash flows. I think you can still do that. I bet that's a little more difficult if you are really doing it literally today. I think credit is continuing to loosen up, you know, with every day.

But it could still be tough to get lending off of cash flows from small businesses right now, no matter how nice your banker is. The other is, I went to a bank, but we were pretty conservative with the bank. We could have probably raised more than we did in terms of our term debt, but we didn't want to do that.

And so I, like I said, was kind of fortunate enough to have built up some significant assets, at least in regards to the size of the company I was buying, that I put a lot of my own money into it, and then there was also still a gap. And so we did what a lot of startups and a lot of young entrepreneurs have to do: we started looking for outside equity. And their first stop should be friends and family.

Not easy to do, by the way. And not that, you know, family don't give you money, but it puts a lot of pressure on you dealing with your own money. And you really don't want to lose your family's money. But you know, whether it's a family member or a former boss or colleague, they know you. And so, yeah, you're selling the business, and this is going to kind of segue into the second part of the question: selling yourself in terms of raising capital.

But they know you already. If they have faith in what you're trying to do, you know, it's an easier story to tell to go out and raise money from them when you have a past with them, when you have experience with them.

Anita Brick: Sure.

Brian Douglas: You don't have to piece together all your capital needs, and it'll probably come from a variety of sources—from yourself, from other friends, family, colleagues on the equity side. Depending on what the business is, you might even go out to certain angels outside of friends and family. You can piece together a debt piece as well. You know it's going to help your returns in the long run.

And, you know, that may be another option, but you probably have to piece together a lot of things. On the second part of the question, in terms of—especially if you're coming out of one area or one discipline and seemingly moving into something very different, how do you get a bank, or any capital source for that matter, comfortable with management of the company?

A big, big part of what you're trying to do, especially in small business, you're selling the idea, you're selling the concept of the business, but you're also very, very much selling yourself as the executive or the management team or you and your partners, however it might be. And so look at whatever you're getting into. If you are going into a telecoms startup and you have years of telecom experience, well, that's an easy connection.

If you're doing something more along the lines of what I did, coming out of, you know, service-based, you know, M&A, investment banking and moving into a much more of a manufacturing-like, design-like distribution company in the children's products industry, you know, and not even being a consumer or retail banker, a lot of people might on the surface say, well, what do you bring to the table?

Or how can I afford you? You know, as a management team, we look at, OK, what are we bringing to the table relative to especially the other competitors in our industry? And then also maybe relative to any other small business, kind of coming to a capital source with their hands out. One reason we looked at this company that we bought is our industry is incredibly fragmented.

It's littered with mom-and-pops, and the company that we bought was basically a glorified mom-and-pop, and I think we moved to maybe do microbusiness one step up from mom-and-pop. But, you know, these are the types of businesses and this type of industry. And so what did we think we were bringing to the table?

Well, a certain level of sophistication that you may not, that you really do not, find if you're selling it to a bank, that you do not find that these other businesses. You can even point to other, you know, success within your past that you had; you can point to a pedigree. But when you're talking to a banker and you're trying to raise some money, the fact that you went to the University of Chicago and got an MBA does go a long way.

You are very smart to get in there, and you work very hard. And whether you're just coming out now or you came out and did something else, every student at the University of Chicago has a long history of accomplishment. And so you just have to tell your story. What makes you special enough to receive financing? And I won't bore you with our long story, but we presented the management team and especially relative to our industry, as extremely sophisticated and tried to lay out exactly why we think we were that way.

And we, you know, we work that into our business plan, identifiable things that we would do once we bought the business. It's like interviewing for a job. You have to tell a very coherent story, and you have to sell both the company that you're trying to raise money for and you have to sell yourself. If you're not good at selling yourself, if you're going to be the entrepreneur you might want to think twice about, is this right for me?

Because even with a great product, if you're not good at getting out there in front of people, it can be very difficult.

Anita Brick: My guess—and I won't assume this, but that you probably had some doubts along the way. One of the alums asked, how did you overcome any inner doubt that you had? I mean, it could be in any phase of the business.

Brian Douglas: Absolutely. I have doubts every single day. And every day has been a better day than the last one, but I tell them all the time, you know, I think maybe it's part of a lot of people's personalities when they get into something like this—you analyze and you look at many, many things and you a lot of times look at what could be the downside.

And, you know, the downside could be a lot. You can lose a lot of money and you could lose assets of your own. You could lose the house. And it can be scary. It can be daunting. But you know, I heard someone describe—I think they were talking about Hollywood as an industry with an actor. And he was saying that there are a lot of ups and downs in this industry in Hollywood. One year, you might feel like you're on top of the world, and the next year nobody knows who you are.

And I thought that that applies very well to entrepreneurs, except look at it on a day-to-day basis, or even one day you can walk in one morning and you think that, oh my gosh, this whole company is going to fold and we're all going to lose our jobs.

And then that afternoon something happened along the way, something you've been working on for the last few months, and you feel like you're Superman. I tell that story just to highlight: yeah, I do have concerns. I do have fears. How do I overcome them? You can't focus too much on the day to day. If you have a … whether you're selling a product or you're out pitching companies, you're going to have days that are bad days. You have bad sales days, you're going to get some bad news here and there.

The next day you might get great news. So you have to be disciplined enough with yourself to realize that one bit of bad news or one bad day is going to happen. And so don't get too upset or too excited about that. You know, over the long term, if you're having concerns, year after year, month after month, well, you know, maybe there are some concerns to really be considering.

You have to have a lot of faith in yourself. You got into this, I think, to be, you know, if you're thinking financially, not from a lifestyle perspective, but long-term greedy, you might have to give up a lot in the near term. You might work as hard or harder than you worked before for little to no money.

But the idea is, if you can be true to yourself and you really believe in what you're trying to do, and you know that you can make it work, you just don't know how long it might take—if it's going to be six months, a year, two years, three years, you know, not sure, but I think if you can maintain that faith in yourself, if you have that belief in yourself, then that is a lot to get you through those days when it seems like, you know, every creditor you have is knocking on the door and the whole business is going to go under.

I think, you know, just having faith in what you're trying to do in your business plan and yourself. As long as truly you aren't going under, that can be a lot to sustain you through some of those, you know, tougher moments.

Anita Brick: Well, and it sounds like one of the weekend students was saying that he or she has been in a venture for about two years, and things are slowly getting better, but optimism and drive fluctuate. It sounds like that's just the norm.

Brian Douglas: I think it's absolutely the norm. At least it has been from my experience. … We've had several two or three, four, $500,000 orders with, verbally: “Yeah, yeah, I think we want to do that.” And they haven't happened yet. They're actually all still kind of in the hopper, but nothing's happened yet, so we don't count anything until we've got cash in hand and a done deal.

Kind of like what I would do with banking. I've seen so many deals fall apart at the 11th hour that, don't count on it until papers are signed or cash is in hand. Yeah, things definitely fluctuate. You're going to have a lot of, you know, really exciting things that sound exciting, that might not happen.

So don't let them get you down if they don't. You've got 10 other things lined up, and one of them is bound to happen over time. And so when you're talking about the person who has been doing this for a couple of years, you know, it would be great to hear what you know, they would say, you know, in their third year and in their fourth year as some of the things they're working on start to bear fruit.

Anita Brick: Makes sense. One of the questions from a Booth alum was, how much of your business was based on front-end strategic planning, and how much of it was execution?

Brian Douglas: Also, great question. We did a lot of planning because all of that—I took probably about 10 months just searching for companies to acquire, kind of homed in on two industries, one of which being children's, and the other is products and services. Broadly speaking, I looked at lots and lots of companies. And, you know, we had kind of our criteria checklist.

And when we identified a company, one thing that we wanted to be able to say to ourselves was, OK, where are the easily identifiable gains? Or you know, what easily identifiable value can we add to that company right away? And so we did a lot of planning. So with the company that we acquired, we essentially acquired, you know, a little bit of product knowledge.

But really a customer base is all we've really got out of it. Because one thing that we want to do is … We rebranded the company in the first year. I think we introduced three or four new products on top of only a three-product portfolio, a new website, bringing on some new sales reps. We have an outside sales force.

When I say that we acquired a company, even though we acquired it, we still look at ourselves as a startup. That's because in a lot of ways, we did start from scratch. And because we, you know, we're trying to figure out from the beginning: here is this platform, how do we make it better? There was a lot of execution up front.

And, you know, it's writing your business plan, more or less. Write your business plan. Come up with how you're going to move forward. It is definitely going to change. It's absolutely going to change. You're going to try things from a strategic level that don't work, and you're going to learn things along the way that you just couldn't have thought of ahead of time, because you didn't know the business well enough, or you didn't know the industry well enough, and and so we have obviously had a mix of both.

We've tried to launch a new distribution channel, and even though we still firmly believe in that distribution channel, our products are incredibly new to these customers. And we've kind of shelved this project because it just takes too long right now. And we have other things that, you know, can hit a lot faster. That was part of our execution of our plan from the beginning with launching this new distribution channel, where we gained a pretty good foothold early.

And then we found out that this is going to take more effort than we're willing to devote the team's time to right now. And then there have been other things—customers in particular, especially larger customers. We've launched a sub-brand, a lower price point sub-brand that targets the mass merchant retailers of the world. And, you know, they're an easy one to point at, right?

You can look at—whether it's Target or Costco or, if you have the stomach to, you know, do business with Walmart, not that they're not a huge player—they are, you know, a massive player, but not easy to work with. You can identify a lot of them pretty easily, but there are many, many, many more large retailers out there that we didn't even think about.

And after a couple of years, they’re starting to pop up on our radar and are becoming potentially very big accounts for us. But we would have never thought about them ahead of time. So … and to answer the question, kind of a long-winded way of saying you have … You should do a lot of upfront planning.

You'll find that some of your plans when you go to the execution phase work very well. You'll find some of them work only so-so. You have to decide what you're going to do—and some aren't going to work at all. And along the way you're also going to … opportunities are going to present themselves as you move forward—things that you wouldn't have or even couldn’t have thought about ahead of time. So it's definitely a mix of both.

Anita Brick: So what are some crucial steps for the future to take you to the next phase?

Brian Douglas: We bifurcated ourselves a little bit into two different brands. There's the Itzy Ritzy brand, which is our high-end luxury brand. If you were to take a look at our website, that's what you would see. We have a lower-price-point brand called Little Locks, which we sell currently to Costco and to Target, and that's where I actually end up spending a lot of my time recently, on the lower-price-point brand.

But in terms of getting to the next steps, it depends on which brand you're talking about. I’ll first talk about the higher-end brand. We've been lucky to be experiencing a lot of organic growth. We are a small company, things are going well, and sometimes you forget, OK, we have to go back and set out our plan for how to get to the next level.

And being small is good in some ways—you can be very, very nimble. You don't have to have committee meetings and board approval on things, but sometimes you forget that you do need a bit of structure. And we lost sight of that a little bit even over, you know, four or five, six months because things kept growing. Things kept going well.

And it was actually last week we sat down and had our 12-month kind of sales and marketing planning meeting. It was amazing what came out of it. Even in that core business, the high-end business, we were able to foresee so much more potential than I was even looking at myself in terms of—on the growing sales piece of it.

And so we put a lot of things in place from a cost side. They're really in place now, and now it's kind of, how do we go from nice growth of 25, 30-plus percent to, you know, 50, 75, 100 percent plus revenue growth. You know, that's the next level we want to get to with this side of the business.

And so our meeting last week was very important in terms of laying out, OK, what are the levers that we have to pull to get there? What are we doing well and what are we not doing well, especially on the sales side? How would it relate to our sales force—we have 10 outside sales reps, you know, how do we work better with them?

New product development: what will that mean in terms of our sales growth over the next 12 months? We are in an industry where I believe it is very important to, even as a small company, have constant research and development. You know, it might not be as formalized as doing something in a lab when I have research and development, but truly, it is always, always looking for the next product, always thinking about improving products.

So how that relates to getting up to the next level—on the high-end side, you know, we're at that point now where we've got kind of the plan in place. We've got the back-end structure and price, and it is just about trying to push go on some of these new sales initiatives in terms of the next 12 months to get us to that next level.

I'm not overly ambitious. We're kind of conservative. You know, when I say big percentages, like 100 percent, you have to keep in mind, you know, we're not talking about doubling a $20 million company. We're a small company. So doing that is very achievable. But the numbers are still pretty meaningful. So on that business, that's kind of what we want to do.

On the lower-end brand, that's a very different ballgame. And that's dealing with the larger mass-merchant retailers. You know, in some ways similar to the products or similar to what we do now and in other ways very different because you're dealing with a bit more sophisticated, or certainly a bit more professional, buyer than you might be at a one-location children's boutique.

You know, they have different, you know, sensitivity points, things that are going to be interesting to them. Price is much more crucial to Target and Walmart than it is to a high-end baby boutique. So with that business, our goal over the next 12 months is we have a list of five to seven larger businesses that we're in active conversations with, and some are getting very close. Some will probably still take another year for anything to happen.

Our goal for that side of the business—we really just launched it last October—and we want not just a verbal but an actual sales commitment before 2009 is over. Even if they were to ship in 2010, you know, at least a yes. And we put that goal down kind of earlier this year.

And I think we're going to revise that goal, because that seems a little too easy at this point, because we've got a couple people who are pretty much going to say yes. We bumped that up to, OK, not only do we want one person to say yes, we want two yeses, and we want one of those orders to actually ship in 2009.

Those are our high-level goals. Not overly ambitious, but takes a lot of work for, you know, a small team to get there.

Anita Brick: That's a really good point about … I mean, because I know it is a small team. And I guess a couple of questions around that. Someone asked, how did you decide to partner with your spouse? How do you retain talent when you don't have unlimited resources?

Brian Douglas: First one is easy: because she's extremely smart and she's free. You know, she's in the same boat that I am. I'm lucky. Lucky enough, you know, above and beyond everything she is as a wife, she has a very talented and very impressive background in terms of business. She was led by the management consultant, moved into healthcare, and has had a lot of big jobs.

And so, you know, I think similar to my background, she comes into a fragmented, relatively unsophisticated industry and brings a very, very high degree of professionalism and sophistication. I've got essentially someone who should be making hundreds and hundreds of thousands of dollars working for free. If someone really wanted to know, also, about working with your spouse, I am not always the best model to look at, because we do quite well in a business situation. We actually—when we met, we worked together at the same firm.

If anyone's looking to do something with a spouse, think about it. Make sure you can work with your spouse and know what your strengths and weaknesses are. We're lucky in that if you asked her, we both agree we have our hands in everything. It's a small business. Everybody does everything, but we have certain strengths that I think she is much better at than I am, and I think I have certain strengths that I'm better at than she is.

And what we end up working on kind of falls into those different buckets. I think her ability at marketing and individual product sales is outstanding. Her knowledge of e-commerce is very deep, and so she does a lot with our PR, our marketing and on sales. Everybody does everything.

Anita Brick: Before you go on there, I just have a question about marketing while we're on that subject. You do have a presence on the web. It's actually a really good presence on the web. How much are you using things like search optimization and things like, you know, Facebook and Twitter and all of that to forward your agenda?

Brian Douglas: We try to do all of it. Do we do any of it extremely well? Probably not as well as, you know, someone who's very, very well trained. But we use search engine optimization. We're always trying to improve, whether it's traffic flow … what we always, you know, kind of track it by who is actually ordering from our website, whether it's organic search or pay-per-click search.

How do we improve our rankings all the time? We have to …. you know, as a small business. You have to allocate funds. Big company, small company. Again, everybody's always fighting for money for what they're working on. And so when it comes to search engine optimization or some of the other marketing tools that we use, it's sometimes tough to, you know, allocate the dollars even if we know it's very important.

So we try to do a lot on our own. We talk to as many people as we can and, you know, look, University of Chicago or, you know, the undergraduate institution that you went to, probably have a lot of very successful people I know University of Chicago in particular, who are experts in these fields, right, and are absolutely willing to at least talk to you, to point you in the right direction to get you started.

And so we do that with a lot of things, but certainly with what you are asking about, you know, we go to the experts and we try to garner as much information and knowledge as we can. We try to learn as much as we can, because we do think that is critically important. Even though we're primarily a wholesaler.

You know, our retail business is a much, much smaller piece of what we do. Our website is still very, very important for our wholesale side of the business, for just general brand awareness. So that is incredibly important. And Kelly, but my wife and partner definitely spearheads that much more than I do either. So I think she really enjoys that.

Secondly, I think she's very good at it and she's learned an incredible amount, and we're always working with our website in terms of how do we improve our search engine optimization? And then in terms of other social networking avenues, we have a Facebook page, we are up on Twitter, and one of our employees manages the day to day on both of those.

And that is one of those areas where it’s hard for us to figure out. We know that it has value. We know that there's a massive …. But, you know, the numbers are huge. People on Facebook, there are just millions of avenues you can go down and people that you can connect with. And it's really hard to, you know, use it effectively.

Anita Brick: It's true.

Brian Douglas: Just having a Facebook page, that doesn't really mean anything. How do you use that to get your brand out there to connect with other folks on Facebook? What could that mean in terms of sales? And we've learned a tremendous amount. And I think, you know, as we move forward, we’ll continue to do more and more and devote more time to aspects of marketing where we're just learning something, especially as we continue to get bigger and bring on more people and have a little bit more cash to devote to things.

Anita Brick: Can I ask you two really quick questions?

Brian Douglas: Oh, sure.

Anita Brick: OK. So one, and this came from an EMBA student. And the short answer is certainly fine. If you all of a sudden realized that you needed a huge infusion of capital—say, $20 million, and that's what this EMBA student was asking—what would you do? Because obviously, you wouldn't take the same tack that you are now. Or would you just choose not to grow unless you could grow organically?

Brian Douglas: If I really thought that I could justify, and I needed, $20 million, well, that means that I'm on to something very, very big. And it would be my personality to go after that. Now, you’re talking about … when you get up to … it doesn't even have to be $20 million. If you're looking to raise $10 million, $5 million, now you're flirting much more into more institutional-type money. Whether it's literally coming from a wealthy individual or an institution, I would categorize that much more as institutional money than what I had to go and do.

Like I said, I've always had that entrepreneurial itch, so I've looked at doing other things as well as what I'm doing now that are, you know, larger in terms of dollar number, in terms of capital raised. I thought about how would I do that? I would say definitely go after something like that.

Because if you can justify that kind of money, that means you've got something. It can be very big. It's going to take you a longer time to raise that amount of money—the dollar size is bigger. It's also going to mean real—and again, back to selling yourself. You're going to have to sell your business plan in a big way, and you have to sell yourself in a real big way too.

But I would still start with your personal network. I would start with colleagues that you've worked with, and try to find every smaller VC or private equity firm that you can find a personal connection to. If the numbers are real big, then depending on what your background is, you might go to some of the big VC folks out there. They might look at something like this.

Anita Brick: But you have to justify it, and you have to really be able to sell it in a compelling way, especially in today's market.

Brian Douglas: That is for sure. It's true. But there is … also remember, too, there's a lot of idle cash on the sidelines.

Anita Brick: That's true. That's very true.

Brian Douglas: And so the trick is you just might not get a really good valuation, which is real hard when you're dealing with an early-stage company. Because if you're raising 10, 20 million, unless you've been in business for a while and you can give yourself a pretty nice valuation on your existing business, if you're raising 10 million, just make sure you still have a big enough slice for yourself when it's all said and done and that it was not just fine, but also worth your while.

Financially, I do believe there is money out there, especially a lot of these smaller VCs that look to do private placements of $500,000, $1 million, in that range. They're out there. Family offices are a great place to go to also. There are a lot of very, very wealthy families in and around the Chicago area who operate family offices, who are not shy about doing investments down into the $500,000 range.

It's just an idea. You’re going to have to do something more than that… You have to have a great idea, a great product and a great management team, which includes yourself. That might mean bringing on the right partner or partners to round out what you are lacking, which I would advise a lot of people. It's hard to do, even down where I operate, I’m lucky to have a team that I've got because it's very, very hard to do anything, especially run a business on your own. You want to know everything that's going on, but you have to learn how to delegate some things.

And I've been fortunate enough to have a great team. And, you know, I always say my partner when I'm talking about business, my wife, who picks up a lot of the slack where I either can't do it or don't have time to do it or, you know, don't want to be in the office until four in the morning when I could be leaving a lot earlier than that.

Anita Brick: How do you retain talent when you don't have unlimited resources?

Brian Douglas: The fastest, easiest answer there is if they've earned it, if you believe it's going to tie them to the business, make them owners, get them equity ownership. Put a vesting schedule on it. We've already done that here. We've been flat out, I think, extremely lucky with our first person that we hired because not only can we operate the day-to-day function, he's got the real mentality of an entrepreneur and an owner that he understands what we're trying to do.

He understands that there's a long-term goal here. And while we can't just—you know, we really cannot pay him what he could make elsewhere. And so for us, we gave him ownership in the company. He earned it for sure. And there is a vesting schedule. But I think that's a great way to change an employee's mentality from just employee to owner.

And I think it's also just a very good way to guide employees to the business. if you might not be able to afford to pay them a salary that you think they really deserve.

Anita Brick: That's great. And it sounds like you've really taken things really from start to finish. I mean, you had the plan, but you also had the confidence to sell the plan to get the funding that you needed—and that you are using a lot of the skills that you learned, certainly at Booth. But throughout your career, both you and Kelly, to both build the team and execute in a way that is creating organic growth.

And it sounds really great. And Brian, we're so glad that you took the time. We really, really appreciate it.

Brian Douglas: No, thank you. Had a great time. I hope I wasn't overly long-winded. I actually love talking about this because it's my passion. That's what I do every day.

Anita Brick: Again, thank you. And if you all want to check out the website, maybe you want to see how they're operating and maybe, you know, maybe there are some products that you're interested in. It's ItzyRitzy.com. Thanks again, Brian.

Brian Douglas: Great. Thanks, Anita.

Anita Brick: And thank you all for listening. This is Anita Brick with CareerCast at Chicago Booth. Keep advancing.