Today on the More Cheese Less Whiskers podcast, we're talking with Randy Redinger from South Dakota on his way to Washington.
We talked about a very interesting part of the startup phase, trying to figure out the best model for approaching people.
He's in a situation where he has a really great opportunity with a unique product making custom closets that people can fully design. They know exactly what they want, and he can have it cut out and delivered right to them.
It's a unique process for selling one at a time, but we talked about the possibility of selling through distributors or people who can actually install the closets, people who have a chance to create a kit, and buy multiple at a time.
When you're looking at something like this, the opportunity of being able to sell anywhere to anyone, it can sometimes blind you because there are too many opportunities. Often, the best thing to do as you're figuring it out is to artificially constrain yourself to a geographic area so you can get all your ducks in a row, and then roll out with a proven model.
We had a great conversation about the opportunity. You're going to love the discussion.
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Transcript - More Cheese Less Whiskers 172
Dean: Mr. Redinger, I presume?
Randy: Yes. Mr. Jackson, how are you?
Dean: So, we survived the Florida winter four days ago. We're right back now to the 80 degrees or so today.
Randy: Oh boy. Oh boy. So, I brought the kids to school this morning and it was 17 below.
Dean: Are you in North or South Dakota?
Randy: South Dakota. Yes.
Dean: South Dakota. So, much warmer than North Dakota.
Randy: Yes. Yes. Means we're down South, yeah.
Dean: That's funny. Well, I'd love to hear what's been happening with you since you first came on the podcast probably a couple of years ago now, wasn't it?
Randy: Yeah. I think it was a couple of years ago.
Dean: So, yeah, tell me what's going on? What are you up to?
Randy: Okay. So, I've worked for this company now for, it'll be four years this spring, and what we do is we build custom homes in a big shop in one piece, and then we ship them to the job site, and have them set on the basement, or the crawl space, depending.
Dean: Custom homes?
Randy: Custom homes.
Dean: You build custom homes. Okay.
Randy: Yes. Built in a controlled environment, which is a big deal. You keep the mold and mildew out during the damp seasons, and you don't have warpage of your building materials, and so on, and so forth. Anyhow, one thing we've always offered is custom closets. So, melamine, if you know what melamine is, but it's a-
Dean: I do, yeah.
Randy: ...chipboard with plastic coating. Anyhow, based on some conversations we had, so I'm the sales and marketing guy for you guys. We got to thinking about that and we thought, "Well maybe, that's a parallel market we should approach." The original thought was for nice garages, or garages have become the man cave now, and people really - them up making them nice. Yeah. So, that was the original thought, and we're going to get there.
We haven't actually approached that market yet, or we haven't decided to target it full time. But based on that, they started doing some research, and they went to some trade shows, and they ended up buying a bunch of CNC equipment to mass produce closet systems. And so, we're starting up this company, and we are offering custom closets so you don't have to buy one of our houses to buy a closet system from us, I guess is the difference, and our appointment is a lot better.
It's not so labor intense like it was. So anyhow, so now, we've got to market closets. And so, that's why I'm having this conversation with you. And I guess, what I would like to do if it's all right with you is go through my thought process up to now, and get your take on that, and then we put on your thinking cap, and come up with an evil scheme, or two for me.
So, my plan personally is to move to Washington State, where all my married children and grandchildren are, which is the impetus for moving. And to set up out there, so shipping the products from South Dakota to there. So, I wanted to lay that groundwork first. So, I've been asked by my boss, and the guy that we consult with on graphic design. He does our website, and stuff, and that we work with him pretty closely on the marketing stuff too.
What is your USP? Why would somebody buy your closet system instead of somebody else's? Which is a very good question. And when we designed what we have, which is still a little bit creaky and getting there, it's not all refined yet. My theory going in is that I wanted, and this is thanks to you and Joe, I wanted every step of the system to be painless and easy. So, there's no bottlenecks from the time you decide you want a closet to the time it's hanging in your closet, or in your closet, and you're using it, right?
So, with that in mind, there's five distinct steps in my mind to get in your closet. There's the marketing portion of course, to get the customer, and the sales part. But then, once the closet is sold, we have to design the closet. So, with that in mind, we've partnered up with a third-party vendor with a really cool 3D design thing. So basically, the way it works is we have over, I think it's pushing 60 different separate modules that you stack together to create a closet.
And so, you get in this designer, you just click, and drag, and you have this 3D room that you can spin around, and look at. It's pretty neat. So, you design your room. How big is the room? What's the shape of it? And then you start clicking, and dragging these units in there, and you can move them around, and change the width, and all this neat stuff. Okay. So, that's the design part. It's very slick. When you design the closet, there's a storefront part. Okay.
So, after the closet is designed, you go over to the storefront, and it has a list of what you've put in there with all the options that you can change. So, you say, "Okay, I'm done designing, I'm in the storefront." And you go down and you say, "Okay, yes, this is the right width. That's the right color, that's the right color, hardware," all that stuff. And when you're done with that, it creates the order. So, there's no reentry of data, right?
Once that's done, that becomes a bid. So, we're thinking about contractors here. They want to give a bid to a customer, and then once it gets approved, then it creates the order. And the cool thing is, is that software talks directly to our CNC equipment. So, there's no opportunity for order entry errors, if that makes sense. So, create the order. The CNC equipment is, "Oh, I got these parts to make for these closets."
So, the equipment makes the closet, and then we ship it out to them. Okay. So, now we got marketing, design, and ordering. That'd be those three steps. The next step is shipping. We're going to ship it out to the customer, and then that'd be the fourth step. Fifth step is assembly. So, what we've done there is some research, and we found a system where you just lock it together. There's no screws, no glue, no camlocks.
I don't know if you've ever tried to put together a Walmart or Ikea shelf system for instance, but they're a big pain. It's not complicated and frustrating. Yeah. But anyhow, so these are very easy. I mean, our guys that are putting on our homes can do a whole house in half a day. If you're doing a custom job, it'd be two weeks or whatever. So, that's the assembly part, and then the installation part, I won't go into detail, but it's just you just hanging on the wall. It's very simple.
So, that's the system that we've created. And that's to me, our USP is the system itself every step along the way in theory is super easy. So, that's where we're going with the closets. Now, as far as-
Dean: So, are people putting them together themselves, or are you having them installed?
Randy: Okay. So, that was where I was going to go next. So, we have in minimum, two different markets. We have professionals, and we have homeowners. And our initial thrust has been professionals because we want to have... so, it's more sales driven, like we want to be hands on, making sure they know what they're doing, helping them out in getting our system dialed in that way instead of shipping out a bunch of material, and then deal with a bunch of people who don't know what they're doing.
Okay. So, that's been the thrust so far, and we don't have a ton of sales under our belt because we're still starting this up. I spent some time out there in Washington last summer, and I've got some people that are interested in selling our product, and I've been through the software with them, and they're excited, and all that stuff. So, the other thrust then will be the general market, and that would be DIYers.
And we're not going to have every unit available to all those people because some of them are complicated to put together, and we don't want to go down that road. So, this is what we have to offer to the homeowner. If you want the fancy stuff, you need to get ahold of a contractor. That's how we're looking at that. So, with that front, the guy I mentioned earlier, that's our website guy who's putting together our website. It doesn't have the fancy designer. It's got basically all the units you can buy.
And the options are more limited. It's not sky is the limit on width. It's every two-inch increment, or that kind of a deal. So, they can go in there, and pick the different units, pick their color, they just have a few options, and then they can buy them, and we'll ship them out, and they can put them together. And we're going to put how-to videos together to put on the website so they can see how to do it.
Dean: Let me ask, are you artificially throttling that back, like their ability to do the increments, or are you pre-building custom sizes kind of, or stock sizes?
Randy: We're pre-building.
Dean: No?
Randy: We're not pre-building anything. We just have limited options. I guess, it would be what you said the first time, the artificial thing where if they're looking at a shelving unit, these are the widths that are available in the drop-down menu.
Dean: I got you.
Randy: Yeah.
Dean: Okay. Okay.
Randy: And so, that's where we're at. So, I have negotiated a deal with this company to be the national marketing guy. In other words, I have a territory out in Washington for my contractors. Somebody has to deal with the general public. If we ship a closet to New York city, who's taken care of that? Who's finding that - and so on? So, I'm also taking on that responsibility, and that's where I would like to go with you in how to find that customer. Just some thoughts around that. Does that make sense?
Dean: How to find the person, you mean, who wants to buy the closets?
Randy: Yeah. How to market to them. How to get them excited about our closets. I don't know if you have... I'm sure you've heard of Marie Kondo, Marie Kondo.
Dean: Marie Kondo, yeah. Of course.
Randy: So, the whole organization thing is big right now, and people are into organizing, and getting stuff put together. So, I think there's a pretty good market out there. So, I need to find those people wherever they are, and get in front of them.
Dean: Yeah. Nice. And so, tell me about the money. What's the average, what's the price range, the margins? All that kind of stuff. What's the money equation of this? Because that's going to determine what you can do to find people?
Randy: Sure, sure. The money is good. The money is good. I'm trying to think of some hard numbers, like for a shelving unit, we have maybe 20 bucks in the material, and another maybe five bucks in machine, time, labor, and overhead. Okay. And we're selling that unit for 150 to 200 bucks depending on the size of the unit.
Dean: Okay. So, there's margins. Yeah.
Randy: Yes.
Dean: And so, what's the typical order size, or medium order size, would you say, or a range of order sizes?
Randy: Yeah. I can give you a range. That would be much easier. We just did a sizeable job at a pretty big master walk-in closet, and then another pretty big closet for their daughter. Not quite as big. And that would be like a $6,000 order.
Dean: And that's for that two closets?
Randy: Two walk-in closets. Yes. So, I mean it's going to run the gamut. You're going to have people with smaller region closets where they just need a few units. And you're going to have people with huge closets, you know what I mean?
Dean: Yeah.
Randy: So, if I was to guess, I would say an average order would be around $4,000.
Dean: Okay. So, the average order would be about $4,000, and what would it cost you on that $4,000 order to get it complete to them? What would your total cost of goods, or be on them?
Randy: Yeah. First of all, that would be their cost to buy the order, that would not include shipping. So, we would put shipping on top of that.
Dean: Okay. Yeah. But that's just to pass through.
Randy: Yes.
Dean: Let's not even worry about that. Let's not even worry about that in the equation here because that's just the logistics.
Randy: Yes. I would say we are about $1,500 into that.
Dean: Okay.
Randy: For our hard costs.
Dean: Okay. And is that all in with an allowance for the person that's going to handle your... does this require any labor, any personal intervention, or is it all online? Do they have to call to a customer service rep, or a design rep, or anything?
Randy: Yeah. In theory, we wouldn't have to. Now, in practice, there's going to be questions. There's going to be, "I can't get this to go together. I watched your video, and it still don't work."
Dean: Right.
Randy: Some of that has to be determined. I just really don't know how it's going to go. I mean, based on human nature, people like to have their hand held, especially with the purchase. So, I'm assuming there's going to be some customers for stuff.
Dean: Okay. And then what if you figured out an allowable cost per sale for marketing, and-
Randy: No, I haven't.
Dean: Okay. All right. So, part of that is going to be how much would you cheerfully pay for it? If you look at it right now for 1 $4,000 offer, where you're making 2,500 bucks, how much of that $2,500 would you allocate for sales and marketing? Have you thought that through for your dealers, or your commission salespeople, or how are you going to get the word out about this? It's going to be able to go direct to consumer, which means you're going to have to get in front of them, or-
Randy: Yeah. Those numbers between the two different markets that I talked about, the professional and the homeowner, it's going to be pretty different because we are selling to the professional at a discounted rate at wholesale pricing, right? So, we're giving them, depending on... go ahead.
Dean: Yeah. Is that $4,000 number, is that the retail consumer price or is that-
Randy: Yes.
Dean: Okay. So, if I were at trade, if you were selling this to me wholesale or whatever, is that... what would you charge me for that?
Randy: Right. And we've done a lot of thinking about that, and what we've come up with is an initial percentage off, and then that can be increased with volume. So, what we're thinking about is like 15% off retail. And then if you reach a threshold of whatever that would be in sales, then we give you a better, like 20% off.
Dean: Okay. So, that would mean that you're willing to pay up to $800 for that sale. It's right, right? You're willing to, if the retail sale is $4,000, you're willing to sell it to a wholesaler for $3,200 so that they can make $800 on the sale.
Randy: Yes.
Dean: Right. And that, okay, so that equation then out of that $800, and would you be happy with that, or would you be happy... if you could get all of your production line filled, I mean, what's your capacity with the current equipment, and stuff that you had, how high is high? What's your-
Randy: Well, we haven't-
Dean: If you were operating at capacity.
Randy: Yeah. We have never been there, so I can't answer that question. I'm sorry. We haven't had enough work to push it to its limit. Let's put it at that.
Dean: Okay. So, you've got excess capacity, how much excess capacity do you have? This is just to get a sense of the scope of what you've got here.
Randy: Yes. We have talked about those numbers, and my boss has we went through and said, "Okay, in an eight-hour day, we can push this much material through, which means this much money." And I'm sorry, I don't have that number in front of me.
Dean: Okay. I'm guessing, I've watched equipment run, and I'm thinking if we took that $4,000 job, we could probably do six of those in a day, if we were really cranking.
Randy: Yeah.
Dean: Okay. And what would you say you're at now, roughly? Would you be at three a day, or two a day, or just to get a sense of, do you have more capacity than you're doing, or is it incremental, the capacity that you have left?
Randy: It's so incremental right now because we're still in startup phase. I mean, we're still-
Dean: I got you. Okay.
Randy: We're still doing a lot of setup work, and all that. yeah.
Dean: Okay. So, where I was going with that was to give you, what's something to bounce up against here is you're in a situation where you'd like hotel rooms, your slots are the... if you ran two shifts, or whatever a day, you've got your 16 hours of production available, right? Are you running one eight-hour shift now, or how do you guys operate at?
Randy: Yeah. It's one shift, although it tends to be longer than eight hours most days.
Dean: Okay. So, if that's the case, you got eight, 10, 12 hours a day available up to 16 probably, if you had to really get under the crunch. And I look at those things like a process, where the only thing going on is that that machine is only making money when it's chopping up pieces, right?
Randy: Yes.
Dean: When it's doing its job. Now, at the hours that that machine is idle are lost forever, right? So essentially, by not being at six jobs a day, and let's say you're at two jobs a day, you're losing four jobs a day worth of money on that, right? Because it's not at that capacity. And so, what I'm asking is similar to a hotel situation, right? They have an interesting metric in hotel room that runs their dynamic pricing. They have dynamic pricing on the hotel rooms, and what drives everything is a number called RevPAR, which is revenue per available room.
Randy: Okay.
Dean: Okay. So, if you take that, they take all of the rooms that they have, if they've got a, let's say it's a small hotel, they got 100 rooms, and they're at 50 rooms right now, they're at 50% occupancy, and they're getting $50 a night for the room, or $100 a night for the room. That means that they're generating $5,000, but they've got 100 rooms available. So, they have to divide that 100. They have to divide the $5,000 by the 100 rooms that they have available. And they get a revenue per available room of $50.
So, even though they're renting them for $100, they're actually only getting $50 per available room. So, if they were to rent a room, if they were to rent that 51st room for anything more than $51, that room is profitable for them, and extra money that they didn't have, right? So, they're not sticking. That's why hotels never stick to the price for their rooms are $39 a night, or $139 a night, or whatever is. You never see a room just like airline tickets, right? Just like flying somewhere. They're dynamic, and they change with the capacity availability, right?
Randy: Okay.
Dean: So, what would I look at for this opportunity is that you look at those, how long does it take to run a typical job? The minimum thing that fires up, is it one hour? Would it make sense that you'd look at the metrics, the dynamic capacity that you have as a revenue per available hour of this machine going, right?
Randy: Yes.
Dean: Because that's the magic ticket, it's the only time you're making money is when the machine is carving out somebody's design, right?
Randy: Yes.
Dean: So, everything else is all to that, to line it up, to most efficiently get to where the jobs are running in production, and the next job is lined up right behind it, and the next one right behind it, right? So, you've got this maximum yield that you can have with the machine. And so, when I look at it that right now, you were saying that you would pay 20% to a wholesaler for that, but if you thought about it from the capacity issue, would it make sense for you to, in some situations pay 40%, if you had more available? You know what I mean? If you've got capacity that's perishable.
Just wonder about that. It seems like the business where on the retail side, on the consumer side, you've got one client that's not... it's not an ongoing recurring revenue relationship that you have. You're going to do their closets. I've done all the closets in my house, and I did them when I bought the house, and haven't done them since because I don't need to, right?
Randy: Right. They're beautiful.
Dean: Right. Yeah. They're beautiful. And we laid them out exactly the way that I wanted it. But I've never heard from them again. I couldn't tell you who it was, but that's okay because it served its purpose. When I was in the market for that, we found the place, and they did it for us. So, it all worked out. Now, so the job of work of the before unit if we look at this is to deliver people to the during unit who want to get closets so that that machine can be in process all the time at advertised capacity, right?
And that right now, you've got... it might be an interesting thing to back yourself into the revenue per available hour of the machine. Because that's really what it does come down to.
Randy: Sure. That totally makes sense.
Dean: Yeah.
Randy: Which is why I'm why I'm talking to you because I get to think it in circle. So, it's nice to get a fresh perspective on this.
Dean: Right. And it gives you a thing to really test the pricing there, and there may be some ways to use that as an opportunity to introduce different contractors, or maybe even designers, or stakeholders, people who are doing... it could be an ancillary thing for them. Especially, if they don't have to do anything. Especially, that if they're not having to... and maybe they would be doing the installation, but certainly, it should be the thing where somebody could be a certified, install them for you, you know?
Randy: Yes, yes. And in fact, that's one thing we are doing is, is one of the guys out there in Washington that I've contacted, and he's excited about it, is he just bought a house. He's remodeling for himself. So, we're providing some custom design, which we don't do for everybody. You asked for his closet so he can get a feel for how they go together, and how they work, and quality, and all that stuff. And we're doing it at a very reduced price just to get in his hands. So, is that what you're talking about?
Dean: Yeah. I mean, part of it because you're thinking what would be... it's good for you to have a contractor, or remodeler, or somebody who does that kind of thing as a client. Because if they can get set up in a little dealership, where they can do the closets, buy them at wholesale, and then would they charge additionally for the installation?
Randy: Yes. Yes, they would charge. In my mind is how I would recommend to them if I was the contractor, is I would charge up to retail price for the cost of the unit plus installation.
Dean: Right. So, then the choice becomes, are you looking to build a consumer brand around this, or are you looking to be a white label provider for a contractor to do the marketing on their end?
Randy: Well, it's a hybrid. In my mind, that's how-
Dean: It doesn't matter how... you're right, got the-
Randy: Exactly.
Dean: I look at these things, there's a really interesting phenomenon happening right now, which is the business is that bridge, what I've been calling Cloud Landia, and the Mainland, where this business is made for Cloud Landia, and that you can get out there on Pinterest, and Instagram, and Facebook, and YouTube, and get out there to build, and you can reach the whole world with this. It doesn't matter.
And they get, it's very visual before and after, there's a lot of closet porn on the internet, and that is going to get people... it's aspirational, right? People want a dreamy closet. And so, I don't know whether there's differences in the way that yours look like, or are you talking about something that would be like an aspirational luxury closet, or a utilitarian Ikea type of closet where it's got the stuff, but it's not like you wouldn't call it a luxury closet?
Randy: Well, I mean, you can get on Pinterest like you said, or just Google it, and you can look at some of these closets. They're like the size of my house, and they're very luxurious. And that's really not our push. That's got to be custom built by somebody with custom materials. So, we can do pantries for instance. Well, that's pretty utilitarian. You don't have a fancy pantry. It's just a bunch of shelves in a room. And like in this job I was referring to earlier with the two closets, I forgot about it, but there was also a pantry, and this has a series of shelves in a room.
Dean: Yeah.
Randy: But we also offer in those 60-ish units that we have available, there's a whole bunch of cool accessory stuff. There're ironing boards, there're hampers, there're shoe carousels that you spin around, and hang your shoes on there. There're a lot of neat stuff that I would call luxury myself, but I'm a pretty simple man, but it's not like marvel, and peak, and that kind of stuff. So, I guess depending on your definition of luxury.
Dean: Right. Yeah. But I would say that that sounds pretty affordable compared to what you if you look on the scale of things, right, because you look at the options, you could go to Ikea, and buy something off the rack, and fit it in, or go to Target, and get some wire frame one or whatever they have on Home Depot, walk into a box store, and get something standard, or you can get something. This seems like what you're describing would be the entry level of the custom fit it, right?
Randy: Yes. And I would say that's a good way to put it. So, here's another thought. I forgot to bring this up earlier. So, I look at it like, if you're looking at what you're talking about with the entry level custom as a scale, on one end you have Ikea, which is basically go on their website, find what you want, buy it, put it together yourself, right? It's all you do it yourself. On another end is California Closets. I don't know if you've heard of them, but they're-
Dean: That's where we got ours through. That maybe who we got ours, actually, now that-
Randy: Yeah. So, with them, you call them, they send out somebody to your house, you sit down, and you design the closet, and then they take the information back, and give you a bid. And if you like it, they order the stuff, and then the contractor comes up, and installs it. So, your only involvement is what you want, right? And so, we're in between that.
There is an element of designing yourself because you're picking the units, and you're picking the sizes, and all that, but you're also installing it yourself, but you have the option to have a contract. So, we're filling that gap, and it's not like it was the only company doing that, but it's fairly limited based on our research.
Dean: Well, that's great. So, I mean, there's certainly, part of the thing is that is to not get caught up in the fact that you can sell anywhere. Because it feels like the approach that I might take on something like that is to artificially constrain yourself to Washington at first to figure it out. I mean, if you're thinking where in Washington are you going to be?
Randy: Well, it'd be the western side, and it would be more southwestern, although, I mean, Seattle is an option, but it's just a whole different market. It'd be more like the Portland, Oregon Metro area, and North, in that area.
Dean: Okay. So, when you look at that, you look at the Portland, and Vancouver, and that whole... just a lot of people there, right?
Randy: Yeah.
Dean: And that may be the good model to look at figuring out both sides of this, right? To certainly establish, because what you don't have right now is a working model that you can point to set your expectations, right? You're speculating, you've got your capability in place. Are you ready to go right now? Are you doing it right now?
Randy: Yes and no. We've got some bugs on the programming in the thing, we're still working out. But yeah, I mean we're ready to go. Like I said, it's, I don't know, not super smooth right at the moment. It's pretty high touch on our part to make sure everything goes through.
Dean: Got you. Okay. And so, you look at that as a... if you just draw a radius around that area there, and look at it and say, "Okay, this is our artificial constraint here is within a one-hour radius of where we are, and let's see what we can do in this universe here." And that way, you know what I'd start looking at is because then you get knowable, manageable numbers, right? So, there's a knowable number of homes in that one-hour radius.
There's a knowable, and it may be that within that one hour, you don't even have to go take the whole thing at first. I mean, maybe you start with Vancouver, Washington as the thing, and you're starting to get a sense of the scope of interest in something like this, right? And what figures out, it's easier to... I learned something years ago that it's better to convince 10% of the people 100% of the way than convince 100% of the people 10% of the way. Meaning, it's better to-
Randy: You get results that way.
Dean: Yeah. Better to amplify your message to a manageable audience, so that you can find them. And then you look at it that within that area, there are people who are already contractors, people who are... you look at who are the influencers there. And it could be starting from the top, probably home remodel people, or small remodel. Maybe people who are doing home remodel projects, or home repair, or handyman.
It seems like the thing that a handyman could do, and there's a certain number of those people within that radius, right? And then there's a certain number of interior designers who are in that area, and even real estate agents in that area. So, you start to look at building the influencer side of this, who are the people who could be conduits to get in front of people, that they could influence people, and make some money.
That could be a whole new source for them. And that can be an interesting thing. The thing that you've got is the ability to actually do the work. This software, and the stuff that you have, is this your proprietary software, or is it something that other people have, and your licensing it, or?
Randy: No, it's not proprietary. It's highly customized to the company. So, in other words, it was actually designed for cabinet companies, not closet companies. But I think as far as I know at this point, we're the only... or there might be one other closet company from what the feedback from them was, mostly cabinet companies. So, it's not proprietary, but every account that they have is customized for that company. In other words, I'm not taking closet units from some database, and incorporating it. We're having to design everything from scratch within our account.
Dean: I got you. Okay. And is it, do you have a brand for it already?
Randy: Yes, we do.
Dean: Rebrand. Oh, what's the brand?
Randy: Yes. That was one of the first things we did. We wanted to not be... we wanted to be professional, I guess you could say. So, we put a lot of thought into who our target market is, which in my mind is women of a certain age, and family association. That's the target. And of course, we're going to sell to all kinds of people, but so we're called Kiwi Closets, and we have fairly feminine, I don't even know how to say stuff without getting myself in trouble anymore, but fairly feminine-
Dean: What did you call it again, sorry?
Randy: Kiwi, K-I-W-I. Kiwi Closets.
Dean: Okay. Kiwi Closets. Okay.
Randy: Yes. We do have a live website, it's pretty... there's not tons on there yet because it's still a work in progress, and we're redoing it, but we have our branding on there.
Dean: Okay. And how is that? Have you brought that out into the world yet, and test marketed it and-
Randy: No.
Dean: ...or you're just ready to go? Okay. See if we're ready to go out, Steve.
Randy: Go ahead.
Dean: Part of what I see with this is that you've got the opportunity to test different approaches to this. I read, it's funny how this has evolved right now because a couple of years ago, maybe half years ago, three years ago, there was a concept that I discovered that was new, and a little bit underworld, and that there was this thing I read about called ghost kitchens, and it was a ghost restaurant where the article that I found was that they were nine brands, nine restaurants, one kitchen, no dining room. And this one brand, this one group was running nine restaurant brands from the same kitchen, and only existing on Grubhub and Seamless.
Randy: I think you wrote an article about this, didn't you? Opposed? I'm losing you again, Dean. I'm only catching a few words here.
Randy: Not really.
Dean: Okay. Hang on a second.
Randy: Okay. Now, I can hear you.
Dean: Okay, good. We got some turbulence there. Okay. So, the nine brands, that model has evolved now to where it's created a whole category of kitchen as a service, which are now called cloud kitchens
Randy: That's crazy.
Dean: And Travis Kalanick, who was the founder of Uber has sold almost all of his Uber stock now, and is full steam ahead on this cloud kitchen concept. And what they do is they set up these kitchens for people to rent from them to start a restaurant brand. And they have these hubs where they set up in an old storage facility, where they turn these 10 by 10 storage stalls into commercial kitchens, and rents you a stall that then, it's a hub that the delivery centers services can come and pick up your food there, right?
So, you get to, rather than launching all the expensive launching a restaurant, you'd tap into a marketplace, and you have that opportunity then to have a kitchen way less than what it would cost you to set it up on your own. They're likening it to a food truck, but that's stationary, food truck that you just tap into whatever the delivery services are, and it's taking off. And so, I look at this thing is you've got this capacity, you've got the ability, the machine, it doesn't matter so much on the front end, whether it's a Kiwi closet or a Ozzie Closet.
It doesn't matter what that is. The brand is irrelevant. It's the same thing. Because your wholesalers can do that same that it becomes accustomed.
Randy: No, that totally makes sense. In fact, one thing that we've talked about, I mentioned earlier about custom garages.
Dean: Yeah. That's what I mean, and that that same machine is going to be able to do that. But you could have the front of that be no man who's putting in a man cave is going to want a Kiwi Closet with flowers and stuff-
Randy: Exactly, yeah.
Dean: ...in their man caves, right?
Randy: Exactly. So, yeah, so that was our thought is once we get the closet thing going, we would create a new brand. But maybe, I don't know. So yeah, it would be our vision is, is we would have, it's called Procom closets is mothership, right? And so, Kiwi Closets is the first iteration of that. And then the next one would be around, say for instance, garages. And then the third one would be around home offices, a whole different branding set for that, and then so on, and so forth until we hit that.
Dean: Yeah.
Randy: So, that was our thought. So, that's where you're going with it too then, correct?
Dean: I am. Exactly.
Randy: Okay.
Dean: Yeah. It feels like you get people who are already in process of wanting a closet that they're already... and that's what's going to happen with designers, and contractors, and those people who are influencers. They're already in contact with somebody, and they're there. But the other thing, if you want to go straight to consumers, certainly they're invisible prospects. Meaning, you can find the pool of where they're going to come from because they're one of the 500,000 closets in that area.
But you don't know who is thinking about that, right? You don't know who is interested in a closet. So, you can be in front of them, but you pick the higher probability, right? So, I mean certainly, somebody going to Google, and typing in custom closets Vancouver, or custom closet ideas, or custom any of those things with closet on their mind is certainly an ideal prospect for you. And one of the things that I might start looking at would be that right now, you can run YouTube ads that are triggered by Google searches.
So, somebody goes to Google, and searches for closet organizers, or closet, anything with closet in it. And then they're watching YouTube videos four hours later, and there you come. "Hey, are you looking for a great closet idea? Look at this." And you've got this whole... because I think it's very visual, which you have to... you can put together a really good simple, real, - actionable, practical, here's how easy it is, and drive people to the website.
That would be a really good way to target the people who are most likely. And then backing up from that, another high probability group might be new movers, people who move into, because the odds of somebody redoing their closet in the first six months of owning a new home are much higher than in the sixth year out of the random basis of owning their... getting their new closet.
Randy: Yes. So, how would you go about that, and get ahold of real estate agents, or use by lists or-
Dean: Yeah. You can buy a... it's called trigger data, which you can get. And I would look at doing... where this might be perfect for something that I'm pioneering right now, which is digital variable QR codes. And do you remember or do you know about QR codes?
Randy: I know what they are. Yeah.
Dean: Yeah. I remember they used to be... they came out years ago, and I had a lot of hope for them. But you had to have an app, and a reader, and all that stuff, and nobody knew what to do with them. Well now, every smartphone is wired, preprogrammed. So, all you have to do is point your camera at it and it activates.
Randy: Okay.
Dean: Yeah. So, we're testing now digital variable QR codes. So, you could send a postcard to someone, and when they scan the QR code, you automatically know who scanned it without them having to enter anything. They don't have to leave their name and email ad. They don't have to do anything. They just scan and watch this video. And you know that John Smith at 20 to Happy Valley Lane, watched your video, and now you've got a prospect list, right?
So, you can send the smallest affordable postcard with the minimum viable interest in closet kind of thing that somebody would watch. And then, you narrow down your list. Now, you've got a certain number.
Randy: That is awesome.
Dean: Yeah. I think it's going to be revolutionary. So, that would be-
Randy: Could you break down the name of that? What do you call it, the digital variable, variable digital?
Dean: Yeah. It's digital variable QR codes. And you're not going to find it anywhere because it doesn't exist. We're creating it right now. I mean, that's-
Randy: What's the variable?
Dean: The digital variable, meaning that each postcard is addressed to Randy, and one is addressed to Dean, and one is addressed to Joe Polish. And when we send the postcards, they've got a QR code on them that is specifically coded for Randy, and one that is specifically coded for Joe, and one specific for me. So, if we send the postcards, and it looks like a regular QR code, but if you scan it, then we know that Randy scanned, and watched the video.
Randy: Very interesting.
Dean: And now, you send out a thousand postcards, and you find the 50 or 100 people that are interested enough that they watched the video. And then you mail a second larger, or bigger package, or more info to that person. And you've also, because they did that, placed a pixel on their phone so that now, you can do that same retargeting with them because now you know who they are, but you also know which device they watched the video with.
Randy: That's impressive.
Dean: Yeah. Right. So, there's so much you can do that way, bridging offline to online. It's crazy.
Randy: So, another quick question. I know we're getting close to the end here, but as far as, okay, so we've talked a lot about as professionals, and I agree that that's a very good target because it's repeating, it's not one thing and you're done-
Dean: Yeah. That's the thing.
Randy: ...for the next 20 years. Okay.
Dean: And you're going to get feedback, you're going to get valuable feedback from people who are actually in the field talking to people about their desires from the closet.
Randy: Yes. I totally agree. So, in your mind, okay, so my mindset has been, get that dialed in before I do anything with outreach to the general public, DIY or type things.
Dean: Sure. I agree.
Randy: Okay. So, my question would be then, if we spent a couple of years doing that, and now we're good, we're pushing forward, we're ready to open it up. And you talked about targeting a certain area.
Dean: What are you talking about? Yeah.
Randy: Open it up to the general public is what I meant.
Dean: Right, I get it. Yeah.
Randy: Yeah. So, once we get to that point, if you're on Pinterest, and Facebook, and all these social media sites, you don't really target an area like you're targeting the country pretty much at that point.
Dean: Right.
Randy: So, the targeting you are talking about, like keeping it around Vancouver, Portland, that's for the contractors, correct? I just want to make sure I understand-
Dean: No, you could do that same thing. Once you get a contractor, or handyman, or people who are able to install these, it might be nice that you could pay them to install the closets that you sell, or give them a way to market. That would be the ideal thing is set them up with a marketing toolkit that they can locally promote these through the most targeted things, or the Facebook ads, and the Instagram ads, and postcards, and local home magazines, and the trigger data, all that stuff. What you need is to think about what it would be like to be one local in the field dealer of your closet system.
Randy: Yeah. I totally get that. But so, for instance, we've gotten... because our website is live, we've gotten a few form submissions from people.
Dean: Sure.
Randy: One guy in New Jersey, another guy out in New York City.
Dean: Yeah. You're going do it for wherever. I'm not saying that you need to shut down everything else. What I'm talking about is for you proactively spend money. There's going to be strategic, there's going to be byproduct of all the stuff that you are doing is because the web. The web can reach everywhere. You're not going to shut that down. What you're doing is, when you're proactively spending money, and your efforts to build something is less, the most densely reach should be within an hour of your thing. Especially, because you're at 100% available capacity kind of thing.
Randy: Yes.
Dean: So, it's better to have somebody right there where you can... that way, you can go out, and document the process, and get great before, and afters, and durings, and get their use, and maybe give them a beautiful bottle of wine, or a $500 whole foods certificate if they'll let you host an open house to invite the neighbors to come, and look at the closet, or do you know what I mean? That show closet that there's lots of things where you can... you'll really use this to your advantage.
Randy: Yeah. I like it. That's awesome.
Dean: Yeah. Well, I think we hatched some evil schemes there, Randy.
Randy: Yes, we did. That was impressive. That was awesome. My mind is really spinning, and I can't wait to get the recording so I can listen to it again, and -.
Dean: That's great. Well, I think it's cool.
Randy: I love it. That's good.
Dean: Yeah. You got a big meaty thing with a lot of layers to it.
Randy: Yes. And it's always been apparent to me, but it's even now more apparent with all these ideas floating around in my head that a lot of opportunity there. Yes.
Dean: Yeah.
Randy: Love it. All right man.
Dean: That's good. We'll keep an eye on that. Can't wait to see how that unfolds. We need to get you to Florida, spend three days with me doing that. I think we got a good opportunity.
Randy: That is one of my goals. One of my goals in the next year or two is to actually get together with you at your meeting, but I want to get this going, and get some history, and whatnot going so we have something to talk about.
Dean: Absolutely. Awesome.
Randy: Yeah. All right, Dean. Well, thanks a bunch. I wish you the best in 2020, hope everything goes good.
Dean: Yeah, keep me posted.
Randy: I love it.
Dean: I want to hear all about it.
Randy: You bet. Will do.
Dean: Okay. Thanks.
Randy: All right, thank you. Yeah. Bye-bye.
Dean: Bye. And there we have it. I love, as I said, conversations like that where we're talking about the strategy. I love this idea of artificially constraining yourself to a geographic area, and a particular target market while you figure things out. I recently saw an interview with Brian Chesky, the founder of Airbnb, and one of the things he said was similar along the lines of this is too, that it's easier when you're getting started to focus on building something great for one person.
Meaning, you pick an audience. Let's say it's these handymen, or home repair people to have this closet, organizing closet, build out situation in their portfolio. What would be a dream come true for them? How can you make it work so that it's easy for them to get closet jobs, and to use your product as the way to fulfill that? So, lots of great, great conversation there. I really enjoyed that. If you want to continue the conversation here, you can go to morecheeselesswhiskers.com.
You can download a copy of our More Cheese Less Whiskers book, and if you'd like to be a guest on the podcast to talk about your business, just click on the be a guest link, and let's see if we can hatch some evil schemes for you. That's it for this week. I will see you next time.