How to Build a Successful Physical Product Business with Kevin Gianni

Transcription

I’m excited today because I’m speaking with a good buddy of mine who I’ve known since the inception of the internet. We started our online businesses at the same time and we both have a background in fitness, personal training, and have a passion for creating videos. He did things a little bit differently with his wife, Annmarie.

He’s going to share the story about how he packed up and went on a roadshow for two years; you’ll see how that played out and why they did it. Nowadays, he is the head visionary, co-founder, and CEO of Annmarie Skin Care.

Annmarie is the name of his wife, and they’ve developed this amazing, honest, wild, and all-natural skin care line that has been hugely successful for the past seven or eight years now. Kevin is going to talk about his entrepreneurial journey; he started out in the information business with a great website called RenegadeHealth.com, which still exists to this day. It’s under new ownership now, but he’ll discuss how he moved from that into physical products.

Kevin will discuss the differences in those two types of businesses, the pros and cons of each, and what he’s had to learn along the journey to make Annmarie one of the Inc. 500 fastest-growing companies, and one of Inc. 500’s best workplaces.

Kevin and our mutual friend, Nick Ortner, who runs The Tapping Solution, are the co-founders of the popular online summit model. They did the first one back in 2007, before summits were what they are today. He was at the forefront of developing and bringing summits to the limelight.

Kevin has written a great book with Hay House called “Kale and Coffee” that I highly recommend. The book contains lots of great thoughts and insights about health, life, and business.

 

Yuri:                Kevin Gianni, what’s up buddy? Welcome to the Healthpreneur podcast.

Kevin:             Hey, man. It’s good to be here. I’m excited.

Yuri:                I know. It’s been too long since we’ve spoken. We’ve known each other for about a decade now. It’s crazy how time has flown.

Kevin:             Yeah, close to that, right?

Yuri:                Yeah, it’s nuts. Back in the days where you guys had the …

What was the name of the RV you guys had?

Kevin:             The Kale Whale.

Backstory and the beginnings of Annmarie Skin Care

Yuri:                The Kale Whale. Back in the day you guys were crushing YouTube videos with all your travels and now with Annmarie Gianni Skin Care and doing some great things there. Let’s go back in the day.

Talk to us about that journey, about how you guys were in the Kale Whale for two years, traveling around the states.

Kevin:             That’s correct. Two-and-a-half years.

Yuri:                What did that look like? What was the intention? What were some of the highs and lows that you experienced during that time?

Kevin:             Well, it was ridiculous. It made no sense. We were doing our YouTube videos mostly from our condo in Danbury, Connecticut, and I got to the point where I was just bored. At that point we had about 200 videos or so, and it had gotten to the point where it just seemed like the same thing every day.

Annmarie and I were lying in bed talking about this, and she said, “You know what we should do? We should get an RV, travel around the country, and do a roadshow.” I asked, “Did you just suggest that?” Do you really want to do that?” She said, “I do.” So I said, “Then let’s do it.”

It took less than two months to be in an RV after that night.

Yuri:                That’s awesome.

Kevin:             We just said, “Let’s do it.” It was an incredible experience. At the time, it didn’t necessarily make business sense because we were not centralized, we were traveling. In terms of WiFi, I needed to have a little MiFi thing to tether WiFi.

We produced videos every day, so sometimes I would have to go into a strip mall parking lot and pick up on some of the WiFi signals. A trick we learned was that if you type in the phone number of the business, 30% of the time you can actually get into their WiFi.

Yuri:                Kevin the hacker. Here we go.

Kevin:             We were just hacking it, but it laid the foundation for a lot of our friendships, made the show more exciting, and laid the groundwork for the skin care business because it came from when we were traveling and interviewing people.

Yuri:                That’s awesome. You’re very well-connected to a lot of people in our space and obviously, as you just mentioned, you had to get out of the apartment. You had to get out of the office, meet people, and shake hands. You guys did all sorts of cool investigatory-type videos and interviews and killed several birds with one stone.

Managing expectations, building business plans, and setting goals

Kevin:             Yeah, and we didn’t know. What I love about it most is that we didn’t know what was going to happen, and what happened just came from it.

If you go to business school they say, “Write your business plan.” I’ve never opened a document and typed a business plan. Maybe that’s still advised, but for us we just follow whatever the heck we want to do.

Yuri:                Sure.

Kevin:             Then the rest came from it.

Yuri:                I’ve recognized that stuff changes so rapidly. If you set a goal 90 days ago, you see that you went off on a different tangent because the initial thing wasn’t what you thought it would be.

I’m the same way. I don’t think I’ve ever written a business plan. I have a vision, but in terms of how we’re going to get there, I don’t know. Just start with the next 90 days.

Kevin:             I find myself being disappointed almost every year by some arbitrary goal that I’ve set. When you think about expectations, how you feel about your business, your relationships, anything, if you simply make up a goal that doesn’t make sense and you don’t hit it, there’s no reason to be disappointed.

You tried to hit it, but maybe it just wasn’t in the cards. Maybe that goal wasn’t supposed to happen that year, and maybe other things that were supposed to happen did.

Yuri:                With the perspective and wisdom that you’ve acquired over the years, how do you approach goal-setting? How do you approach, “Here’s what we want to do”?

Kevin:             I still set goals. I have a list on my whiteboard of goals that we’re gunning for the fourth quarter. We have long-term goals set up. We just started working with a company called Rhythm Systems, which is pretty amazing.

They work with your management to do goal-setting and quarterly, monthly, and yearly planning. It’s really cool software.

Yuri:                Awesome.

Kevin:             We’re really excited about it. This year I expected to grow 35%. We didn’t. If you don’t hit your goal, there are two things you can do: You can cry, whine, and feel bad about yourself because you didn’t hit it, or you can say, “Alright, we didn’t do it.”

Manage that expectation. Every year I work through a mantra or a phrase and last year it was, “No expectations.” It was a great year, man. Everything was so cool. Everything was chill. If something bad happens, it’s fine. I just don’t have any expectations about people, goals, or things like that.

You work like hell though. You don’t just sit back and surf all day or something. That sounds pretty good, but…

Yuri:                California lifestyle.

Kevin:             You work like heck to try and achieve it, but if you don’t, you don’t have that distance, that gap between where you are and the expectation that you set.

Yuri:                Detaching from the outcome.

Kevin:             Yeah.

Yuri:                Is that pretty easy for you to do?

Kevin:             No. It’s hard as heck.

Yuri:                I can definitely relate to that even with kids. You have kids as well. It’s like detaching from the expectation that they should do certain things that we want them to do. They’re in their own little world. They’re doing their thing, and you have to honor that. It’s a good lesson, for me at least.

Kevin:             It’s crazy, right?

The entrepreneur’s tendency to create excitement and drama

Yuri:    It’s nuts. I want to go back to when you said that you guys were bored after shooting 200 plus videos from your place in Connecticut. I find a lot of people, a lot of business owners, end up creating excitement in their business because they’re bored.

Do you think that becomes a distraction or do you think it’s a creative spark to something greater?

Kevin:             This is so relevant right now. We just hired a marketing manager, we have a COO, and I’m feeling it now again in this business. I talked to my business coach about two weeks ago, and she said, “Don’t do anything right now. Just sit with it. Relax, read some books, but don’t start anything,”

It’s so unusual for me not to do anything because, you’re right, I want that drama. It’s not drama like backstabbing or anything like that. It’s just feeling like I need to do something.

I’m really uncomfortable with the silence because I went from managing all of the marketing to delegating everything, so it’s just a strange space. Right now I’m just getting comfortable with the strangeness of it.

Yuri:                You’ve done your Kolbe on some level at some point?

Kevin:             Yeah. Four, three, nine, three.

Yuri:                So you’re a high quickstart. I’m high quickstart. Most people listening who are entrepreneurial are high quickstarts, so we’re always looking to create new stuff and start new things. It’s challenging to balance that because you still want to honor your creative genius.

At the same time you want to just chill for a bit. That’s the fun part about being an entrepreneur; the learning and evolution that we go through to figure out how we best operate and take the next steps.

Kevin:             In the beginning, I had to be careful not to pass all my new ideas to my team. Now that they know me, they understand that if I tell them something it doesn’t necessarily need to be done right away. As long as it’s on a document somewhere that we will review sometime, I’m okay with it. You know what I mean?

Yuri:                Yep.

Kevin:             That’s just the way I am. For me, that means I was heard.

Yuri:                Sure. So you guys started Renegade Health a long time ago, then you brought on a partner to help you do some of that stuff. Then, you basically sold him the business.

Kevin:             That’s correct.

Yuri:                He currently runs it and is a great guy. Then you started Annmarie Gianni Skin Care.

How big is the team that you have built over the past couple years?

Kevin:             We have 17 full-time people in an office in Berkeley.

The differences between an information and product-based business

Yuri:                How have you enjoyed the transition from an information virtual product business to an office and a physical product business?

Kevin:             There’s pluses and minuses to both of these businesses. I look at the info business as a business where you’re essentially selling pixels. The cool thing is that they don’t cost that much, so your margins are fantastic. There’s a lot of cash in an information business, and if that’s what you’re looking for then it’s a good business to be in.

The challenge with the information business is that you have to continually create new content to sell to your existing people. You can have one lead-gen or one upfront offer and get new customers, but on the back-end you have to come up with new content because people aren’t going to buy your e-book 10 times.

That doesn’t happen. They don’t even buy it for a friend because they’ll just pass it along.

Yuri:                Yes. Forward the email.

Kevin:             Yeah. Exactly. Which is fine. Some people get all up-in-arms about that; I’ve always encouraged people to forward our e-books around when we had them.

On the other side, the product business is great because you create a product once and you don’t have to recreate it ever again. It’s just something that sells year after year and people re-buy it.

The challenge with the product business is cash flow. There could be times when you have $20,000 in the bank, you have $100,000 in bills, and you have $500,000 tied up in inventory. You think you have to do a sale, but you don’t want to devalue your products.

It becomes a learning experience that we knew nothing about. We brought on a contract CFO to help us this year, and that’s after eight years of doing a product business. Now we’re learning, but it took eight years to realize that there was such thing as a contract CFO.

Yuri:                It’s good though. It’s like having kids. You have no idea what to expect, and then you think, “Okay, what do we do with this thing now?” You learn on the fly.

Kevin:             I like being a little bit dumb about it all. It’s gotten me in trouble, but at the same time I think part of our success is that we didn’t plan for it. We didn’t know it was going to happen, so we were forced to deal with it when it came.

Yuri:                With the skin care business specifically, what has been one of the biggest challenges you guys have had to face, and what have you learned from that experience?

Challenges, mistakes, and advice for product-based business owners

Kevin:             Our slogan is, “Honest, wild, beautiful,” and that means a lot of things to us. Anything that we do in the business we run across, “Is it honest? Is it wild? Is it beautiful?”

One of the bigger challenges is that, in the skin care industry, a lot of things can fly under the radar. You can put things in your product that are not on the label. The biggest challenge for us is creating products that are honest, that work, and that have a decent shelf life without using any preservatives.

We use plant preservatives like aspen bark and rosemary extract, but keeping true to that theme is really challenging. We would have 10-15 more SKUs right now if we could bend our rules, but we don’t. I would say that’s one of the hardest things for us, but we set that up for ourselves. That’s not something that every entrepreneur would have an issue with.

Cash flow is also quite a challenge. It’s a creative challenge, but I would rather do without managing that. That is not my favorite thing to do.

Yuri:                No kidding. What advice would you give to somebody starting a physical product business where there’s going to be inventory and cash flow issues?

Kevin:             It depends on what kind of budget they’re working with, but I would definitely pick the brain of someone who is a CFO. Get an idea of things that you can set up beforehand so that your cash flow management is good.

That is particularly important during crunch times, holidays, and if your business is seasonal. 35% of our revenue comes from the last six months of the year. In order to do that, you have to buy your product for the holidays in slow months like August or September.

Work on creative financing with manufacturers, bank financing, loans, and line of credit. That would also be a really nice way to start.

Yuri:                That’s good advice. It is so different from an information business because you never have to consider those things if you’re selling e-books or digital memberships. If you want to get into that and evolve as an entrepreneur and business owner, it’s a stress you must learn how to deal with.

Kevin:             One of the best ways to move into products is to start with an information business. You can get cash from it and then turn that cash into your seed investment.

Yuri:                Totally. It helps if you have an audience to sell to.

Kevin:             Absolutely.

Leveraging a mature business to grow a new one

Yuri:                How did you merge Renegade Health with Annmarie in terms of audience and products?

Kevin:             It wasn’t even a separate business, really. We had branded the products as Annmarie, and launched the products out of our Renegade Health store. We didn’t even have a separate website for Annmarie when we started. We tested the market, and it started to work.

We started rolling out one product nearly every two months, to the point where we now have 35 to 40 SKUs. There was a point when I realized that I was spending about 70% of my time on Renegade Health and it was bringing about 30% of the gross revenue, and 30% of my time on the skincare business and it was bringing 70% of the gross revenue.

I realized that something had to give.

Lucky enough, Fred had been working with me for a while so we made a deal and he took over that business.

Yuri:                That’s cool. You leveraged both platforms at the same time. It’s challenging to start from scratch, especially in the physical product business. I spoke with someone who had 70 SKUs with no audience.

Kevin:             Oh my gosh.

Yuri:                I’m like, “Dude, holy cow. Let’s rewind a couple years.”

Kevin:             They need an audience. Our audience was great. We had a pretty deep network of friends and partners from Renegade Health since we had done summits for a long time.

We rolled out an offer that converted really well for people, and it still converts just as well as it did in the beginning. We’re still using that same offer, which is crazy. We’ve had that offer going for about six years.

Yuri:                It’s like one of those old Italian restaurants that don’t change the menu for 40 years. It works. It’s all good. Just pass the calzone. So 40 SKUs?

Kevin:             Yes.

Yuri:                I’m sure you’ve probably noticed the even 20.

Kevin:             Yes.

Yuri:                Do the 20% that account for 80% of revenue appeal to more pain points and desires at a deeper level for people? What do these products have in common that make them bigger sellers than the others?

Product sales and FDA protocol

Kevin:             For us, it’s anti-aging. Those products sell the best. It’s not preventative. It’s pain point. Our audience is in the 40 to 60-year-old range.

As you know, it’s hard to sell prevention. We have products for oily skin, but oily skin doesn’t tend to be in the 40 to 60-year-old market. Oily skin tends to be a younger audience, and our products aren’t cheap because they have high-quality ingredients. Oily skin products are a harder sale, so they’re on the lower end.

Yuri:                So less wrinkles, better skin elasticity, things that people of that age might be dealing with?

Kevin:             Reducing the appearance of wrinkles and fine lines, yes.

Yuri:                That’s right. Just the FTC, FDA compliance.

Kevin:             FDA, FTC.

Yuri:                Actually let’s talk about that. What are some things that you weren’t aware of, that you didn’t know you didn’t know, when you got into this? Any FTC things?

Kevin:             We got an FDA letter, so we were well aware of what we could and couldn’t say in the market. In skincare, you can’t really say anything. That’s why you see, “Reduce the appearance of…” or, “Diminish the look of…” You can’t say that it does anything to change the structure or function of your skin.

But you can change the appearance of your skin, so you can say that. It’s easier with supplements, to be honest with you. You can say things and you can cite studies. With skin care, you don’t even touch it, really.

Yuri:                Apply to your face. That’s pretty much it.

Kevin:             We joked after we got the letter that we should write, “This formula was brought down on the back of a unicorn to …” Just to give it just a fun, goofy spin. We didn’t know what we could say until we consulted with our attorneys. The whole FDA protocol document is probably about 60 pages long.

Yuri:                Wow.

Kevin:             It’s very detailed. If any listeners want it, we can pass it along.

Yuri:                That’s valuable. If you get slapped by the FDA, they’re not looking to slap you on the wrist. They’re looking to take you down.

Kevin:             Absolutely. It’s not a joke. You don’t mess around. You do exactly what they say and be a good citizen.

Yuri:                Yeah. No kidding. What’s one mistake you’ve made in your business? What did it cost you?

A mistake and its cost: The importance of keeping passwords secure

Kevin:             One that sticks out for me is not being diligent about securing our passwords, logins, and that sort of thing. That mistake led to a $200,000 breach from Nigerian hackers last year.

Yuri:                Oh, wow.

Kevin:             We just thought that we’d keep our passwords on a Google doc or something like that. Definitely don’t be loose about your passwords; that type of fraud is becoming more prevalent, and it’s definitely painful when it happens.

Yuri:                Are you guys using a shared LastPass now? How are you managing passwords?

Kevin:             Yes, we use LastPass, but we also have a specific protocol as to how we share passwords with vendors. We were hacked by someone disguising themselves in an email.

I don’t know if they hacked into our actual email account or if they hacked into someone else’s email account. They asked for passwords through email, so now we verbally confirm if someone asks for a password.

Yuri:                That’s a good lesson. We’ve learned the hard way, too. We had hacker issues on our websites so Bill, our web developer, changed the whole protocol for sharing passwords so nothing is ever shared by Gmail. The password must be texted and the login is sent separately.

Kevin:             Absolutely. You have to do it separate.

The Rapid 5 & Bonus Question

Yuri:                Cool, man. Well this has been fun. Are you ready for the rapid five?

Kevin:             I love rapid five.

Yuri:                You have no idea what these questions are, but you’re going to love them. I’ve got a surprise question for you at the end, outside of the rapid five, because you’re special so you get a special question.

Kevin:             Great.

Yuri:                Here we go. Number one: What is your biggest weakness?

Kevin:             Management.

Yuri:                Actually, hold on. Let me jump off on that for a second. So you’ve basically delegated all the marketing now, so what is your main role at Annmarie Gianni Skin Care?

Kevin:             Strategist.

Yuri:                So you just sit like a mad scientist with pen and paper, strategize, and hand it off?

Kevin:             No, I do a lot of reading and meet with consultants to figure out how to move forward. It’s a lot of work. It’s not as cushy as it seems because it bends me.

I’ll listen to a consultant, and they’ll be saying one thing, and I’ll think it’s hard and something I don’t want to do. But if I look at our goals, I realize that they’re right. It’s what we have to do even if I’m not really interested in doing it.

Yuri:                Cool. Number two: What is your biggest strength?

Kevin:             My biggest strength is strategy.

Yuri:                I would agree with that, other than your personal charm.

Kevin:             Oh, thank you.

Yuri:                And that amazing beard. Are you still wearing that bad boy out?

Kevin:             Yeah, it’s here.

Yuri:                It’s incredible.

Kevin:             It’s here with me. It’s not a part of me. It’s separate.

Yuri:                Totally. All right, number three: What’s one skill you’ve become dangerously good at in order to grow your business?

Kevin:             Dangerously. Dangerously is interesting. To be honest, I think I’ve been dangerous the whole time. I’ve always tried to hack things before I knew much about them.

In the beginning I was building web pages; I was always willing to do the stuff that I didn’t have any money to pay someone to do, and 50% of the time I’d screw it up. So I’ve been dangerous for a long time, much to the dismay of many of our team members. Our CEO has had to fix stuff when I break it.

Yuri:                Totally. Thank God those Dreamweaver days are over.

Kevin:             Oh, man. Dreamweaver. I love it.

Yuri:    I can’t believe I used to build pages in Dreamweaver. I get that for sure.

Kevin:             It’s amazing.

Yuri:                All right, number four: What do you do first thing in the morning?

Kevin:             No, I make a cup of puer tea. It’s fermented green tea.

Yuri:                I’ve never heard of it. That’s cool.

Kevin:             It’s really nice. I can’t drink coffee because if I drink one cup I want six. So I have my puer. It’s just enough caffeine. Then I sit down with my kids and we make breakfast.

Yuri:                Number five: Complete this sentence. I know I’m being successful when…

Kevin:             A challenge I have is that I’m not easily satisfied, so I honestly don’t even know the answer to that question.

Yuri:                All right. Ponder that for the next couple months or years. Here’s the bonus question: Speaking about your kids, what has having kids taught you about marketing, business, and being an entrepreneur?

Kevin:             This is a great question. Kids have definitely made me calmer. You’ve known me for awhile. I don’t seem like an intense person, but I tend to lean towards that.

In the beginning before we had kids, we hired Rachel, who was our COO. She knew me before and after kids, and after kids she said, “You’re so much cooler, so much calmer.” I guess I was more forgiving, and that’s definitely because of the kids.

Once you have a little life in front of you that you can’t control in the way that you can control yourself or maybe even your team members, things change. Control is a weird word but you know what I’m saying.

You don’t have as much influence over them. You do, but you don’t because they’re going to do the things that they want to do. You start to realize that all the stuff that you thought before is probably just a sham. For me, having a child made me realize what life is all about.

I’ve definitely been humbled. I’ve learned how to be more patient, more calm, and also how to speak to people in a different way.

Everyone still has a child in them and I’ve learned to honor that. I’ve realized, “Wait a minute. Maybe they’re scared, maybe they’re unhappy, or maybe they want to cry.” That’s been really cool and empathetic experience for me because I didn’t think that way before.

Yuri:                That’s awesome, man. It’s definitely a good journey. If you don’t have kids and you’re listening to this, by all means, go for it.

Kevin:             Yeah, just do it. Tonight.

Yuri:                You’ll be more productive. You’ll become a better human.

Kevin:             Number one entrepreneur tip.

Yuri:                Exactly. Kevin, this has been awesome. It’s good to chat business and life. What is the best place for listeners to learn more about what you’re up to and learn more about Annmarie Gianni Skin Care?

Kevin:             AnnMarieGianni.com.

Yuri:                We’ll make sure we link up to that in the show notes. Are you still writing your blog where you were randomly posting stuff?

Kevin:             No. I know I have the entrepreneurs’ disease, so I have to keep myself to one business, just one. That’s it. No more.

Yuri:                I totally appreciate that. This has been a pleasure as always. Thank you once again for your time, the amazing work you’ve done, your friendship, the team you’ve built, and for raising the bar in what you guys are doing not just in skincare, but in the way you’re building your culture.

It’is inspiring, man. So thank you for all that.

Kevin:             Thanks for having me, man.

Yuri:                Bye.

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Yuri’s Take

That was a lot of fun. I hope you enjoyed it as well. We had some good laughs and some good experiences to remember. If you haven’t used their skincare, I’d strongly recommend it. It’s awesome. I even use their stuff, and I’m not a woman. There’s nothing wrong with a man using skincare.

I really believe in what they offer and what they’ve created. It’s integral to their core values; they don’t go the cheap route by putting stuff in their products that would give more shelf life and profit, yet they still built a very successful business.

Again, the website is AnnmarieGianni.com, and we’ll provide that in the show notes if you want to check out their products. They offer skin care, sunscreens, lip balms, and more. If you’re a woman over the age of 40 who wants to reduce the appearance of wrinkles, check out their awesome anti-aging products as well.

I want to leave you with a little thinking exercise. Kevin mentioned the fact that he was bored so he went on a road trip. Oftentimes, as entrepreneurs, we have a very high level of creativity and always want to start new things. That is an absolute gift, but it can also be pretty dangerous if you’re not careful. We tend to jump ship a little too soon, especially if we don’t have the support around us to continue seeing the previous project to its completion.

My challenge to you is this: Asking yourself, “Am I looking to pursue something new?” If you are, ask yourself, “Am I looking to pursue something new, or am I distracting myself from what I’m currently doing? Am I doing this because I’m bored or because I really feel in my core that it is going to serve my higher purpose and my business?”

If it’s something you’re doing solely to get more excitement in your business, be careful. You  need to be able to tell the difference between entertainment and what’s actually good for the business. I want to leave you with that thought and plant that seed in your mind.

Is that new thing simply entertaining, or is it actually important to move your business to the next level?

Announcements:

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3.) If you still haven’t grabbed your copy of Health Profits Secrets, you can do so over at healthpreneurbook.com. It’s an awesome book that will walk you through the four underlying secrets that all successful health businesses have in common, whether it’s Kevin’s business with Annmarie, a business like mine, or any other businesses that are doing big things.

You’ll learn how to implement those secrets into your business, and a scorecard inside the book will help you score yourself and your business in those four areas. You’ll learn exactly how to close the gap, if there is one.

The book is yours. My gift to you. Free over at healthpreneurbook.com. Just cover the minimal cost of shipping. With that said, I want to thank you so much for taking the time out of your day to join me for another great interview. Keep doing your awesomeness, keep serving more people, go out there, continue to be great and do great, and I’ll see you in the next episode.

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