Boring Money
Boring Money is for the people quietly getting rich the unglamorous way. Hosted by David Heacock, founder and CEO of Filterbuy, this podcast covers boring businesses, acquisitions, cash flow, EBITDA, tax strategy, fixed income, and the real mechanics of compounding capital. Built for operators, investors, and business owners who care more about long-term wealth than hype, headlines, or status.
Boring Money
How a 28-Year-Old Built a $1M Apparel Manufacturing Business in 12 Months
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Most people have no idea how licensed apparel actually gets made.
In this episode of Boring Money, I sit down with Zarum, co-founder of Forge & Fabric, a Canadian apparel manufacturer that produced over 650,000 garments and crossed $1 million in revenue within its first year.
Forge & Fabric sits at the end of the licensed apparel supply chain, producing merchandise for major retailers and brands through partnerships that include sports leagues, Disney, Marvel, and more. Their business is simple on the surface: print, pack, and ship. But underneath is a fascinating manufacturing operation built around volume, efficiency, automation, and relentless execution.
We break down:
• How licensed apparel manufacturing actually works
• The economics behind a $1.20 t-shirt order
• Why one printing press can generate over $1 million in annual revenue
• The surprising advantages of domestic manufacturing in Canada
• How equipment financing enabled rapid growth without outside investors
• The operational challenges of scaling production and fulfillment
• When entrepreneurs should focus on sales versus operations
• Why contract manufacturing alone may cap your upside
• How to think about moving up the value chain and selling direct
• The lessons I learned building Filterbuy that still apply today
More importantly, we explore a question every entrepreneur eventually faces:
Do you double down on the business that works today, or start building the business you ultimately want tomorrow?
This conversation is a masterclass on manufacturing, scaling operations, finding product-market fit, and building a business around the life you actually want—not someone else’s version of success.
Whether you’re in manufacturing, e-commerce, B2B sales, or just love hearing how real businesses are built, you’ll get a lot out of this one.
We did about 650,000 units that we ship in the year.
SPEAKER_00Zargum runs a company called Forge and Fabric out of Brampton, Ontario, about 30 minutes outside of Toronto, Canada. They are what's called a licensed apparel manufacturer. Here's how it works. Companies like Fanatics manage licensing deals with sports leagues like the MLB and the MBA, and with brands like Disney and Marvel. They handle all the retailer relationships, all the artwork, all the order processing. Then they send it to manufacturers like Zargum.
SPEAKER_04We slot in at the end of the production supply chain where we get garments and things come in. We then produce the final product and then we package it and it gets sent off to large major retailers like Walmart, Winners and Marshalls at Costco.
SPEAKER_00His job is simple: print, pack, ship. The licensing company sends him truckloads of blank garments. He prints them, he packs them, he sends them to Costco or Walmart's warehouses, and they pay him every 30 days like clockwork. It's a beautiful business model if you can make the math work. Each shirt sells for $1.20. To see if this is actually a great business model, let's look at where every penny goes. 77 cents for the front print. Zargum's cost, 27 cents. That's a 50 cent margin. Another 20 cents for the custom neck label, the retailer's branding. His cost is 9 cents. That's another 11 cent margin. Then there's the packing. He gets paid 23 cents to fold it. Then you add price tickets, put it in a carton, and make it cost compliant for the retailer. His cost.
SPEAKER_04We actually lose money on the fulfillment unpacking side. We lose about 12 or 13 cents a piece on the packing side just because of how many people are involved.
SPEAKER_00After everything, Zargum's making about 47 cents per shirt. Roughly 50% profit margins, which sounds great. Until you realize he's running $100,000 a month in operating costs. To break even, he needs to print about 200,000 shirts a month. Zargum needs to grow if he wants this business to be sustainable. So I showed Zargum exactly how I scale up my company to $25 million a month. Anybody who wants to scale up their business can learn from this conversation. Here's our full masterclass.
SPEAKER_04Our company is a company that I co-founded with uh my dad. Uh, it's called Forge and Fabric. We are essentially a licensed apparel manufacturer. So we slot in at the end of the production supply chain where we get garments and things come in. We then uh produce the final product and then we package it and it gets sent off to large major retailers like Walmart, uh like Winners and Marshalls, like Costco. Um so we are really specialized as a uh we at the core level, we're a print shop, but in retrospect or a larger scale, I would more so call it a production facility uh because of the volumes we operate with and kind of the systems we've implemented. Uh we are really made to work at volume. Um, and a lot of the small order stuff is something that we don't usually do.
SPEAKER_00And so it's primarily t-shirts or like Yep, exactly.
SPEAKER_04So mainly tops, upperwear. Um, that is what's most commonly you'll see is uh hoodies, fleece, t-shirts. And then occasionally we'll do sweatpants and things like that. But that is a lot largely dependent on the retailer.
SPEAKER_00And you sell uh primarily in Canada, or you sell into the US or so majority of what we make ends up in Canadian shelves.
SPEAKER_04Um it's one of the reasons that uh they've partnered with us and we're one of the vendors with them is to target that Canadian market and really it helps them reduce some of that logistical cost if they were to order that same product, say from elsewhere.
SPEAKER_00Makes sense. And you and you do all the all the printing in Toronto, in the Toronto area?
SPEAKER_04Exactly. So we have our we're not exactly in Toronto, we're about 30 minutes out in a city of Brampton. Um, so all our talent, everybody, the team is from the city of Brampton, all our manufacturing happens there, everything ships out from there. So we are kind of one facility, one stop shop, and and everything comes out from here.
SPEAKER_00So, what was the origin of this business? How did you come up with the idea? How did you start?
SPEAKER_04So, to kind of start why we got into this, I have to go back quite a few years. Um, so my dad in 2011 opened a sporting facility. Uh, so we are a family of cricket players. Uh um and so he played professionally. And so when he came to Canada after he worked for a decade or so, he wanted to open his own business. So we opened an indoor practice facility similar to baseball batting cages. Uh, as that grew, those teams then wanted uniforms. So we started working with factories abroad in India, in China, and Bangladesh. Um, and we started doing uniform orders. From there, those customers wanted stuff with faster turnarounds. So we slowly brought in some material in-house uh with a simple heat press. We were doing t-shirts and things like that in-house, and we were outsourcing a lot of our more complicated work, our embroidery, our screen printing. And so we did that for uh, I would say maybe seven or eight years. Uh, and we really learned about the industry, the ins and outs of the techniques and printing of that sort. And eventually, a friend of ours who worked in logistics connected us with a licensed apparel company who was doing a lot of work with retailers and was looking to grow domestically. Um, so he made that intro for us. Uh, we spent about a year planning and making sure that you know everything was where we wanted it to be. And then we jumped in. So I guess one thing that makes us a little different is most shops or businesses will open and then look for customers. We had a customer before we started, and that's kind of we me, we made that big investment up front. Uh, we had that anchor client to really start and dial in uh and our build our base and build those systems in place, and then we can kind of expand from there.
SPEAKER_00Yeah. Why don't you explain the the whole licensing relationship? Um, because I think that's interesting. Um like in the US, I would be curious, like Fanatics, I think, is the like the big known, at least only brand I know that does this. So why don't you kind of explain in those terms like how how this actually works?
SPEAKER_04So finally, one of the customers we work with is in fact Fanatics. Uh, they're one of the licensed apparel companies along with uh a couple other. And essentially what happens is the licensed apparel company will manage all the licensing with a pro with the different teams, with the different brands. Uh, for example, the company we work with, they also do licensing work for Disney, for Marvel. Um, and then they are also responsible for maintaining a relationship with all the retailers. So they're basically doing the whole order process, they're doing the artwork, they're doing all of that uh work that honestly takes a lot of time.
SPEAKER_01Yeah.
SPEAKER_04Um, and then it is sent over to us. We fulfill, we print, and we make sure things are kind of shipping out consistently and uh on time.
SPEAKER_00And so basically, you're like who is who is your actual customer then in the in this kind of setup?
SPEAKER_04So in this case, the licensed apparel company would be our direct customer, um, and everything ends up there. So in turn, we do slowly build relationships with these retailers, uh, but our job is more so on the production side, not to deal with them on a one-on-one basis.
SPEAKER_00So you so when you say that it's like basically a company like Fanatics or like somebody that owns that actually has the license, like they are they are the customer in your case. Yes, makes sense. It's like when you're doing the shipping, are you shipping direct to their customers? Um, and so like but that is is that all like retail customers, or do you do any read direct shipped in terms of like you know, to uh you know, single customer at their home? Like, how does that work?
SPEAKER_04Uh so because everything is with large national retailers, uh, everything goes to the retailer's warehouse. Um it either goes to the retailer's warehouse to their stores, which we've also had before, is they will FedEx out one or two boxes each, and there's like 500 boxes that have to be FedExed out.
SPEAKER_01Yep.
SPEAKER_04Um, or they will go to the national uh the licensing brand's uh warehouse and then they will ship out from their end. Um so for our end, there's a a lot of compliance in terms of making sure the packaging and the box carton labels and things of that nature all adhere to the standards of that national retailer.
SPEAKER_00Yeah. So give me an idea for um the size of your business today and perhaps like what the trajectory of getting there has been.
SPEAKER_04Sure. So we started in February of 2025. So we've just come past a year.
SPEAKER_00Oh, okay. So you're you're very, very new.
SPEAKER_04Last year we uh I think last week we just crossed a million dollars in revenue. Um, we did about 650,000 units that we shipped uh in the year. Um and I would say bulk of that is in the back half of the year. Um first few months are just getting set up, building a team, and I'd say probably the first four or five months we're in that. Um so that's where we stand today. Uh we are currently working on our expanding our production abilities. And um, I think uh this year we should hit about uh 1.2 million pieces printed, and that should be around $1.5, $1.6 million in revenue.
SPEAKER_00Wow, so you're going growing quickly. Yeah. Um and walk me through like what the team looks like to support that currently.
SPEAKER_04So we have uh two main management members. Uh I currently am involved in the business in the day-to-day as well. Uh, we have one other person who manages the packing and fulfillment side. Um, and then everyone else is formerly is basically some sort of operator. Um, so we have a total of 15 employees, um, of which uh you can say six are about press operators, and the remaining are all part of the fulfillment team, or they assist in the pre-production side.
SPEAKER_00Makes sense. What are the bottlenecks that you know you're currently facing, I guess? I mean, you're in that kind of you're kind of in that early stage where um and I guess even before you answer that, um, you know, how much capital did you put into this business to start?
SPEAKER_04Uh so just to start to get the machinery, get everything in, we're about $200,000 uh Canadian. Um, and then we kind of did obviously have to boost the business the first couple months. And then from there it's been kind of relatively smooth sailing. Uh we've had ups and downs in months, but uh for the most part, we're we're we're probably down 10% over the year. Um and uh we had a few months that we were profitable, and I think that's kind of the trajectory moving forward, is now that systems are in place and we have the team in place, it's to really stack on that and build forward.
SPEAKER_00What are the bottlenecks for for for you over the coming months and years?
SPEAKER_04Uh so we have two big challenges. Currently, we run on uh a single press. Um, so we have one machine that's basically printing non-stop. Um, and so one challenge is our production capabilities. Um there's two aspects to this. The number one is because it's one press, we're fairly limited to what we can push out in a single day.
SPEAKER_01Yep.
SPEAKER_04Uh on average, we're pushing three to four thousand garments in a day. Um, if we are able to get another press or a few more, then that number will obviously shoot up.
SPEAKER_00Uh the second challenge we have is And how much is a how much is a press just out of order of magnitude?
SPEAKER_04That is about $150,000.
SPEAKER_00$150,000.
SPEAKER_04And so typically with that one machine, you will need a few other auxiliary items. Uh so total package you're probably looking at two to three hundred thousand.
SPEAKER_00Uh two to three hundred thousand. But then but then that brings you like uh effectively a million dollars of revenue um more or less to it. Exactly.
SPEAKER_04So the presses themselves are are very they they pay themselves off very fast. Uh it's more so I think our big challenge outside of that is is labor costs. Uh labor is very expensive as it is in the North America. Um, so for us, it's finding ways to uh optimize our production and and automate where we can. Um and then the other challenge I would say we have is our press utilization. So currently, because we have one press, uh we basically need to be 100% uptime. If we don't have that uptime, then you start to lose money at certain spots. Um and so one of the reasons we are getting another press is to have that redundancy in place. Uh so that if anything does ever happen or you know there's a technical issue or we need something to resolve, uh, we have a backup where we have a second press that can kind of overtake that production spot.
SPEAKER_00Yeah. You're um running the the press how often, like one shift a day?
SPEAKER_04That is uh two shifts, eight hours each. So 16 hours a day that press running.
SPEAKER_00So it's 16 hours a day, five days a week? Uh five to six days a week. Five to six days a week. And that that's what it takes for it to do that million dollars more or less. Yes. What about from the sales side of the business? Like um, like how are you setting pricing? Um, and you know, what are your bottlenecks to being able to scale from a sales perspective?
SPEAKER_04Yeah, we are in a space what what people would normally call contract printing.
SPEAKER_00Yep.
SPEAKER_04Um, and so most of the pricing is relatively consistent throughout the industry. Um, so I'll give you the numbers. On average, we make about a dollar and twenty per shirt. Um and that's breaking of revenue. Of revenue. Yeah. And that's breaking down into uh a few different items. The the printing costs, uh, we do neck labels on every shirt we do, and then all of the folding, packing, price tickets of that nature.
SPEAKER_01Yep.
SPEAKER_04On average, we make about 50% uh contribution margin that then will go into our fixed costs of that nature and things like that.
SPEAKER_00Sounds right.
SPEAKER_04Um, and so our big challenge with pricing definitely is because it's so consistent throughout the industry, we do push for a little bit here and there. Um, but it's something that I guess requires a longer relationship to really push that envelope a little bit more. Um and that's one of the reasons why we are looking to further diversify uh our clientele and find more corporate clients, more large retail clients that but what about for demand?
SPEAKER_00Like, like like if you had the like as a thought exercise, yeah, um, if you had the capacity to produce 10 million shirts a year rather than a million shirts a year quantity, like um would you have the ability to sell that in your current model?
SPEAKER_04Or maybe that's the uh currently the we are one of uh three or four shops in Ontario that are working with this licensed sparrow company. Um so they definitely have the demand. They've grown themselves 60% over the last year. And so for them, they are always looking to add on. Um and for us, even if we were to get a second press, that's something where we don't have to worry about order volume because that's something they're waiting to do. Uh for last in my discussion with them last year, they were turning away orders because they did not have the ability to produce them. Um, and so there is definitely a demand there, um, especially now that with the tariffs and other issues, a lot of work that was being done in the US and then imported in or being done in uh South America and imported in has reduced. And some of the national retailers are now actually looking domestically. For example, Costco was looking domestically uh to produce and be able to fill full orders uh on a shorter time basis. Uh so typically they're looking for orders within two weeks uh of turnaround. And that's one of the reasons why they don't go abroad uh in every case. Uh and then a lot of times what we also do is a lot of what they'll call top-up orders, where uh if Walmart ordered, say a million pieces of some print from abroad, um if they start to see that inventory is running low, they'll order 100,000 locally because they know they can get that in a week or two weeks.
SPEAKER_00Yeah. So walk me through the supply chain of this business.
SPEAKER_04So the way it works is uh once the orders come in from uh the retailers and the different brands, the licensed apparel company will assign it uh to one of their production partners. Uh from there, we actually get truckloads come in of the garments of the different supplies and trims that are required. Uh we will then produce, uh package everything.
SPEAKER_00So you're you're buying that or they're sending it to you? They're sending it to us.
SPEAKER_04So we have no costs associated with that side.
SPEAKER_00Okay, that was gonna be. Everything is sent to us. So no no cost and no and okay.
SPEAKER_04Um, and then we are basically that final step. Everything comes to us, we put it together, and we ship it out.
SPEAKER_00Okay, so like literally you don't have any accounts payable or anything. Um and then like what what payment terms do they pay you on like net 30. Net 30. So and and so you you can and you can rely on that 30 days.
SPEAKER_04We have not had any issue with payments uh in the last 12 months.
SPEAKER_00Yeah, interesting. Um, so effectively you're providing the labor and equipment, more or less. Like that that's really that's really what you're putting in this.
SPEAKER_04Yeah, exactly. So we're that final ex I think uh they do have facilities outside in South America where they do it themselves, uh, but domestically it makes more sense for them to outsource that part of their uh work.
SPEAKER_00When you're um thinking about this business, what type of net margins are you targeting and how do you think that that changes as you scale? Have you modeled that out?
SPEAKER_04So we have worked a lot or tried to optimize our finances and figure out where is that pressure point and where do we find kind of that balance. Um and so for us right now on a single press, um, our running costs are just shy of about $100,000 a month.
SPEAKER_00So that's $1.2 million a year.
SPEAKER_04Yeah. So roughly that's where we're at. Um most months we do hit more than that in revenue.
SPEAKER_00Um but that's pretty well, that's gonna be pretty well matched to your capacity for that one press.
SPEAKER_04Yes, exactly. Um and so one of the reasons for that is our fixed costs are roughly $45,000 a year. Uh that covers a year or a month? I'm sorry, a month.
SPEAKER_00Yeah, yeah. So about half half or um 40% of the cost is that, yeah.
SPEAKER_04Um and so that's why for us, adding that second press will add, you know, $10,000, $20,000 in additional costs, but then that will output another $50,000, $60,000, $80,000 based on how much we want to run that press.
SPEAKER_00Yeah, so you really you really need to get to a certain scale to be able to make it. So that that was what I was trying to get at. Exactly.
SPEAKER_04Exactly. So for us, uh, that is the the next step, and that's something we're working on. We should have another press coming in about a month, and that'll really help us scale up and move on.
SPEAKER_00So how are you financing that press?
SPEAKER_04Uh that is through the company as well. So everything is through the company. Uh we did have to co-sign the second one uh with our second business.
SPEAKER_00If I mean like you're you're when you say co-signed, that means like you're at you, you're you're taking you're taking financing on your borrowing the the exactly.
SPEAKER_04So our first press and our second press are all being financed uh through the bank. Yeah, but that's the probably the only way to move forward with that at the moment.
SPEAKER_00Yeah, I was I was just trying to understand, which I think is is interesting for maybe people that are that are watching it, but but that you know um oftentimes it's much easier to get equipment financing than people might think um because the the vendors are incentivized to do it. And also the bank has collateral, like they know that they can resell that if if you know you've defaulted on it. So like even as a fairly new business, it's possible to get financing for um you know equipment like this.
SPEAKER_04Yep. And I think that's exactly how the conversation went for us as well, is uh we were able to show potent projections and and different numbers, and uh that really helped with our financing situation and making sure that we could get what we needed done.
SPEAKER_00Yeah, which I think that you know a lot of times people think that you need a lot of capital to start a business like this, and um, you know, you you don't necessarily you don't necessarily it doesn't mean it's easy, but but um you don't need to go out and get equity investors.
SPEAKER_04Exactly, exactly. We this is fully bootstrapped, and I think um obviously for any sort of financing, you still need enough to put up the deposits, but outside of that, it's uh we're able to get finance for majority of uh the work we were doing and the machinery that we needed.
SPEAKER_00Before you were in this business, um, what is your background like what did you do before this?
SPEAKER_04Um, so as I mentioned, my dad opened a sporting facility. Um, so I studied architecture in school, so I had kind of developed some design skills and of that nature. And that's essentially the industry I wanted to work in.
SPEAKER_01Yep.
SPEAKER_04Um, but uh our other family business is as such a family business. It was a two or three-person show. And so I was eventually taking care of a lot of the marketing and the design work. Um, and a lot of the uniform work that came in was work that I was studying and doing myself. Um, and that's where I picked up a lot of the information on the manufacturing side of how does the garment supply chain work? Uh, what are the different things that people look for? How do you take care of sizing, uh, things of that nature, and the different techniques to creating a garment that's finished. Um, and I think that's that seven or eight year period is where I really I got to soak in a lot of that information. Um, and then when we went into this business, there's obviously still a learning curve, but a lot of the basic principles I was already aware of. Um and it was just a matter of uh systemizing it and implementing it.
SPEAKER_00So you've never worked a corporate job, you've always done this kind of entrepreneurial stuff.
SPEAKER_04Yeah, I would say here and there I work corporate jobs less than a year. Um, but I knew from day one that uh the nine to five was not for me.
SPEAKER_00Yeah, I was just I was just kind of kind of curious to understand the background. So um, you know, for for you personally, um um for Zirgom personally, I got it right that time, right? For Zirgom personally, um, you know, 10 years from now, what does success look like for you?
SPEAKER_04We'd like to make Fortune Fabric essentially the the biggest domestic production partner for large retailers in Canada specifically. Right now, there is a gap in the market, at least that's what we saw. Um, what happens right now is at the small scale, there's a lot of mom and pop shops, which is excellent. Printing custom apparel is very accessible. But the flip side is once you want to go to scale, most people only have the option to go abroad to go overseas, and there's obviously a lot of issues involved with that as well.
SPEAKER_01Yep.
SPEAKER_04Uh, and so I think there is a demand in the market in the middle uh to produce at scale domestically. Um and so that's what I want to eventually have Forging Fabric be in 10 years, is a self-sufficient company that's working with multiple brands where we then do have the room in the margins um where we've diversified our clientele a little bit more and not relying on a couple anchor clients. Um and we'd like to be that at the forefront of essentially uh domestic apparel production. Um and I think that's something that uh we've worked with the city with as well a lot, um, and something that they want to support as well is how do we bring manufacturing in-house. I think that's something uh unfortunately we're slowly losing uh here in North America. I guess one thing I do want to reference is is I I'm not sure if you there's a video from uh Dustin from Smarter Everyday, and he basically wanted to make a charcoal grill brush that was 100% made in America. Yep, and he struggled. He was not able to do it. Uh and they actually had to they they found that the the skills of manufacturing and tooling and dyeing were kind of being lost and outsourced. Um and so for me that kind of resonated a lot is that obviously we talk a lot about innovation and growth and and creation in tech and AI and other industries. But in the boring businesses, we forget that you know there's a lot of room there as well for growth and innovation. Um and I even look at the industry around me right now, is most of them are 20 or 30 years older than I am. Um and I think what that gives us the room to do is really innovate fast and and change and add automation as soon as possible. So for me, it's to kind of not necessarily revolutionize the space, but build that kind of solid foundation and that boring business in the middle where we can really be a partner that retailers can rely on on a domestic level.
SPEAKER_00Yeah, makes a lot of sense. So walk me through the plan for the next couple of years to put you on the path of achieving that.
SPEAKER_04Of course. So the very first thing, as we had discussed already, was adding a second press. So that's coming in a month that will help uh effectively increase our production abilities.
SPEAKER_00Um and and should make you profitable. Exactly.
SPEAKER_04Exactly, exactly. Um so that's our first goal is to achieve profitability consistently. Uh that will then give us obviously the capital to pursue more ventures and and build and grow. Um but our number one goal right now is uh diversifying our clientele and improving those margins. So 10 years down the line, we should have multiple that we work with and have strong enough relationships where perhaps we're working with retailers directly versus with a company involved in the middle. Um as we are now, we still have to do audits, we still have to do um all the licensing paperwork to make sure that we can work with these companies. Um so that infrastructure already exists, that work was already done. It's now a matter of approaching directly and uh really being that partner that we can.
SPEAKER_00What would you like to dig into about it today? I mean, I'm guessing you came here for a reason. So of course like what is it, what is it that you're looking to get out of it?
SPEAKER_04Yeah, of course. So when I was learning a little bit more about filter buy, uh one thing that I was trying, uh I I did see you mention was uh your decision between going direct to customer or going wholesale, uh especially with the margins you had in wholesale. Um so I guess my first question would be regarding uh how did you make that decision or what led to the ultimate decision you made? Um and then the other side I would ask about is how did you balance your manufacturing ability with also without over-leveraging your company and kind of pushing beyond uh maybe where you were at that moment?
SPEAKER_00Yeah, I understand. Before we get into that, I'm curious. Um, on the licensing side, when you're talking about direct versus not, um, do you envision your business being fully focused on you know um licensing partnerships that you then are you know selling to retailers or like or I guess when I think about wholesale versus direct in your world, one thing that maybe I don't understand very well is like um like you were kind to bring me a Toronto Blue Jays chart that you that you that you printed. Um like when you think about going direct, are you are do you envision having a license with the Toronto Blue Jays that then allows you to do that direct? Yes, or is it with the retailer? So maybe explain that a little bit. Of course.
SPEAKER_04I think our eventual goal is to go direct to the teams. Um I think what what happens right now because there's so many middle companies, they lose a lot of their margins as well. Uh and we obviously get the value final end of whatever's left over. Yep. Um, so to build those direction relationships directly, I think is beneficial to both parties. And again, our goal is to support domestics. So someone like the Toronto Blue Jays that's a domestic team, uh, I think they should be able to proudly say that this was made in Canada. Yep. Um and I think that's kind of the slogan when I'm yeah.
SPEAKER_00I mean, I think that you uh you're in a unique situation being Canadian and being able to play that card of like, and I think that that makes a lot of sense. I mean, I think if you were if I was sitting with you today and you were telling me that you wanted to do this in the US, ironically, I think it would be a way harder um path than you know being in Can and being in being Canadian. Yeah. Um, so I do think that that's uh like playing into that is a is smart. So I I I can totally see the path for that. Um but I guess kind of to to go and answer, start to unpack and answer your question, you know, the um, I mean, I think that that is the X factor, the X factor to me in your business is your ability to show value to the direct um to the people that you're licensing for. Um, and you know, I don't have any way of benchmarking that. I do think that your your your Canada roots for like the Toronto Blue Jays or anything that would be Canadian specific makes sense. But like I would imagine that you're set that they're still licensing um, you know, I I guess I should ask you a question. It's like um if you're able to disclose it, like what other like Toronto Blue Jays, I'm guessing you print for them. The other people you're printing for are Canadian-based or are they globally? Like, how do those licensing things work?
SPEAKER_04Uh so right now the way it works is our licensing works actually with uh in this case directly with the sports league. Um, so our license would be for the entire MLB. So then we would be able to print any MLB team. Um, so typically that's how it works is actually the same order that I brought the Blue Geese one, we actually did stuff for the Yankees. Um, it's then sold in Canadian markets.
SPEAKER_00So we're allowed to do any team, but typically it's sold in the basically like your goal would be to get the licensing deals that are like um we want we want the license for MLB as an example for the Canadian markets. And like basically your leverage would be to get the Canadian retailers to say we want to do business with a local Canadian manufacturer. That's basically the angle you would be playing.
SPEAKER_04Exactly. And it's it's not because they already do so much work for us, it's not necessarily taking that 100% business. We're looking for a slice of the pie um where they want to show that that's the case. Obviously, in a lot of cases, they want to just be as profitable as possible and reduce their costs or produce at scale, and often that means going abroad and and shipping in. Um, but there's still a lot of programs that they have where they want to show that it was made in Canada, and that's kind of where we're trying to slot in. Yeah.
SPEAKER_00Do you see there as being any value to being able to do end quarter in customer fulfillment within Canada for these products? Like example being somebody on um Amazon or or you know a retailer purchasing it um on a website and then you fulfilling it direct to consumer from your facility, like do you see that as being a particular potential opportunity?
SPEAKER_04I think definitely if we work directly with the licensing company, uh the licensors, uh so and let's say we'll keep using the blue jazz as an example. If we work to work them, work with them directly, then definitely there's an opportunity for fulfillment. Uh, but when we work with the national retailers, they already have a lot of that in place, so they don't need that. Uh but definitely directly with the licensors, we can definitely, I think there's an opportunity to reduce that workload on them and add that as part of the total package and and value proposition.
SPEAKER_00Yeah. Or I guess like to say like an uh say another way, and I'm just spitballing for now, and then we'll get more to your yeah, to your, you know, to how you know I think about it. But I I think it's more I'm more interested in framing it for how how it could be helpful. But you know, would you have the ability to um you know launch Sergom.com or Sergom's t-shirts.com and sell um you know licensed t-shirts on your on your on your domain. Um, you know, is that a is that a potential path for you or not?
SPEAKER_04I think that's something we can definitely explore. I think the the only not necessarily you can say challenge, but it's it's definitely what platform are you selling on. Um and I think it's building that the traffic to come to that website. So obviously if we were to do that route, you'd still have to build the traffic to get there.
SPEAKER_00Yeah, you'd have to build like what I'm trying to think of, yeah. What I'm trying to think through is Can you sell directly? Yeah, you as you asked me, how do you think about how do you do you sell wholesale or do you sell direct? And so the the the the the thought process needs to be what does selling direct look like? Okay, what is the margin of that business look like? What does it take to be that? So like that's the thought. So you asked me that question. Of course. My head starts going, like, okay, well, what would direct in your business look like? Yes. Because to be able as you have to mentally explore that to be able to understand what that looks like.
SPEAKER_04So actually, I'm glad you brought that up because there is a project we're working on where that is the case. Uh so we're doing some work for uh a FIFA project with that.
SPEAKER_00A what project? FIFA. Oh, a FIFA, yeah.
SPEAKER_04Uh and so that is being that we are helping someone do the production side for it. Uh, they're the ones who want that contract, it's a nonprofit organization in Brampton. Um, but how they're doing it is that is being sold on the FIFA website, but they are also selling on their own website. And so I think that sets the precedent that there is an opportunity there where you can sell yourself directly.
SPEAKER_00That was gonna be my question. Like, if you wanted to explore this, you like you go to the people you're already doing business with and say, um, you know, what like can I buy the can I buy these from you? Yeah, um, you know, and sell and market them on a website. And um, I don't know if that's good or bad. Like, I don't know if it's I'm not saying this is key business for you, of course, but like if I was if I was exploring how to build a direct business, then to me, that would be a very kind of easy experiment to start on. And then you then you can list, you know, I mean, obviously you'd have to understand what your agreement was, but you could have a Shopify store that creates this, and then you've become the the Canadian um can Canadian manufactured source for these products, which I would think would be a big selling point or at least a marketing point for sure. Um, and then maybe you have the option to then sell on marketplaces potentially. Um, and you know, I I don't know, obviously it depends on your your contracts and relationships, but it's it's definitely it would be a way for you to continue to do what you're doing, but then explore what a higher margin potential product line looks like.
SPEAKER_04I think there is also opportunity if we don't go directly to consumer, but if we go direct to the the retailers or directly to the licensed hours, where if you are also supplying the garments and and that will also automatically increase your margin. So right now, yeah.
SPEAKER_00Like I I certainly don't disagree with you. Yeah. I mean, obviously it's true, but like you don't want to um, you know, bite the hand to feed you. Of course. Um, and and that, you know, I think that you want to be really ready for that because my guess, I I don't know anything about your your customer base, but like my guess is if you start doing that, then they're not gonna like it. Of course. And then like you kind of have to be be ready. And so you asked me the question, like in the filter buy buy sense. Um, what I realized, I knew I wanted I wanted to sell direct because when I looked at the economics of an air filter, um, I realized that you know, I was manufacturing a filter for $2, call it. I could sell it on a wholesale basis for $2.40, or I could sell it online for $12. And I thought, well, I want to figure out like what the economics of that $12 looks like. There's a lot more um infrastructure that you need in order to do that $12. It's not free. Yeah. Um, but I knew that that was the market, that was the business that I wanted to be in. Um and so what I did is I used the wholesale to increase my volume, to get my cost per piece efficient, um, and also to get the revenue to allow me to build the infrastructure to attack the the bigger, the direct to consumer. And then over time, I got out of the wholesale business. So that was the filter buy trajectory to this.
SPEAKER_04You know what's very interesting is there could be a lot of overlap in both businesses in that exact same regard, um, where we're using the wholesale or the contract work to do exactly how you did wholesale work. And then from there, you build, or once you have your systems in place to produce at that scale, then you can go more D2C work, like a more standard print shop, or maybe you're going more B2B clients.
SPEAKER_00And that's exactly the model that I'm trying to get you to. Like that's exactly how I would think about it. Of course. Is I would use what you're currently doing to scale as much as you can to get your volume and your efficiency up. But then at the same time, you need to be thinking, okay, well, how am I going to take this infrastructure I've built and turn it into this direct model? And that's that's how you would fund it. Of course.
SPEAKER_04Um and I think I I probably did not do a great job explaining it, but perhaps that is when I speak to going direct to the licensed stores or direct to retail, um, it's more so, I guess what I'd rather say is I'd like to go direct to another business, but obviously larger corporate clients that are not being represented by this licensed apparel company. So for example, if you were to go to uh a Microsoft um and say, hey, we'd love to do the t-shirts for you guys domestically, you get the margins of direct to customer, but you get the volume of a large corporate client.
SPEAKER_00The person who was sitting with me right before us today um, you know, has a company called Hat Launch. Yeah. And he does effectively what you're talking about in hats in the US. Yeah. And, you know, I think that that is a smart model for you to think about. And so like effectively, what that would look like for you is you build up your printing infrastructure, and then you have a more custom, yes, like small pat small batch line where people can say, okay, filter buy in Canada needs shirts. Yeah. Um, and so I'm going to um go to your website and I'm going to order filter buy shirts, maybe a hundred of them, um, and you you are able to print them and ship them direct to me. Yeah. Right. But you need to start figuring out how you build that infrastructure. And so like that is why where my head goes is like, do you have the ability to start um with with your current product line, just take a little piece of it, start flexing the muscle of what it takes to, you know, actually ship that, actually get the contract with the carrier, deliver on all that. And then maybe that's not your end business. Maybe this other thing is your in business, makes total sense. But you got to start experimenting to get closer to there.
SPEAKER_04I think that's probably that your point there probably sums up exactly why I came today. Was I think we're now at a place now that we're a year in, we have a basic base built. Yep. We've shown that you know what, our systems are working, there's a team in place to to to produce that volume. But now it's okay. Now we're at a crossroad. Do we double down where we are? Do we start to diversify and really hone in on where the margins may be? Um, and I think there's with the systems we have, there's definitely a place.
SPEAKER_00And what's keeping you from doing both?
SPEAKER_04I think uh our first year was just how involved I had to be in place uh to really running the day-to-day operations. Um, there were technical challenges every day, uh production would have to move around, and uh there was a lot of just back and forth making sure that okay, we're hitting all our ship dates, getting everything out on time. Now that we're a year in and things are a bit more stable, and I'm not as involved in the day-to-day, that is what we'd like to explore. Um and we have the relationships already to do exactly how you might. Like the logistics is not an issue, getting the the garments and everything in-house is not an issue. We have those relationships already. It's merely a matter of okay, now we need to start working on a subset team that can help us with the artworks and prepping everything. Like you're saying, building the structure uh for the higher margin work.
SPEAKER_00Yeah, I mean, like how I would think about it if I were in your shoes is I would scale the contract manufacturing um as far as I could um to build the infrastructure. It's like the more that you build of that, you know, the more machines you're able to buy, the more people you're able to have, the more resources you have, you know, in place. It's like you know, people a lot of people like to think of um uh as money as a resource. I mean, I think like having you know that cap that human capital and that whatnot there, that's your real resource, but that's what allows you to maneuver to ultimately get money. Um so like the the more you're able to build that safely, then the um more optionality you're going to have. Yeah. Um, and so I would see like if I were in your shoes, like and I I asked you the thought exercise of like if you had 10 times the amount of capacity, would you have 10 times the amount of demand? And you think the answer is more or less yes, then um, you know, to me, that I say, okay, well, I'd like to see you get that up big enough, um, have that cash flowing um and also dial in your systems there. Well, then like, you know, I would be thinking, you know, if I were in your shoes, it's like, okay, I'm gonna spend all my extra time saying, how am I going to start building the drug business? And it's and it's probably doing a lot of basic stuff, actually. It's like, you know, you need to come up with a brand, you need to create a website, um, you need to figure out how you're going to do the um, you know, small package fulfillment, right? Like you're like all of that, like what the economics of that are gonna look like, how are you gonna price it? You know, all of all of all of those things. Um, and then once you once you start going, then you're probably going to want to have one of your production lines that's kind of dedicated to doing this. Yeah, right. And um, so like to me, this is very much a and game, not an or game. Like you need like you're in a place, you're early enough and you're young enough. Like you should be able to do both of these things at the same time. And that's what that's how I would be thinking about it.
SPEAKER_04Yeah. I think uh I think that definitely makes a lot of sense. Um, we surprisingly we already have a lot of the basic groundwork in place of the things you were mentioning. Um, and I think now we're at the stage of client acquisition. We have the base stuff, the brand stuff, the the website, that those are issues that we don't have a problem with.
SPEAKER_00So so what does an ideal client look like for you?
SPEAKER_04So because of the volume you work with, we'd like to do work at a higher volume. Um and I think for us, the ideal client is a corporate or a larger entity that is looking to place more bulk orders, perhaps seasonally. Um, and they're looking to place, let's say, a thousand, two thousand shirts at once. And then maybe next quarter they're doing that again. Um so whether that's employee shirts, whether that's for a camp, whether that's for a brand, yeah, um, that is the number we'd like to be at. I think that's where we find our most success is there's a lot of companies who do one-offs. And although we have the cap ability to do one-offs, and we have done them in the past, uh, we find our margin and our and our our team's output is is a lot more significant at at higher volumes.
SPEAKER_00Yeah. Um the and so what is the sales process for doing that?
SPEAKER_04I think that's where we are right now, is is how do we figure that part out is and get someone in. I think for us right now, a lot of it has just been uh through existing relationships or uh through cold outreach um and and pushing that and when you say cold outreach, like who's doing that?
SPEAKER_00You're doing it, yeah. Yeah, yeah, yeah. I mean, so like you need to build team a team and or you need to build structure around the outreach. I mean, like like B2B, you know, outreach is a you know, it's something that a lot of people do, but you you need somebody you you need to have a a structure around that. So I mean to me, like it may be as simple as LinkedIn prospecting or um LinkedIn posting with um targeted ads or um you know a Zoom info um account that you know you find target customers and do um targeted emails. Um, you know, that's type that's the type of like outreach that you need to that you need to build, but you need to, you know, you need to build structure around it and say, you know, yeah, like we're we're gonna target uh we're gonna do a hundred, a hundred, a hundred leads a a week or whatever, whatever it is. Yeah. Um but you need to build you need to build a structure around that for your business.
SPEAKER_04Okay. So regarding that, uh I guess we can I want to touch back just like Lee to the point where you mentioned of scaling the contract work to a certain scale. Uh with filter by, when did you figure out that this is where I want to stop the contract worth or the wholesale work? And now we're in a healthy place, and now I'm gonna focus more of my energy on the direct to customer.
SPEAKER_00When I no longer had the capacity to do both.
SPEAKER_04Interesting. Okay. And at that point, did you have other team members in place who are running the day-to-day operations at Filterby, or were you doing that yourself at that time?
SPEAKER_00I mean, by that time, we probably had a hundred to a hundred and fifty employees.
SPEAKER_04Okay, so you possibly couldn't do it yourself.
SPEAKER_00Yeah, but I mean, like, I mean, the manufacturing, I mean, it's like in the same way that you don't uh at least I don't think manufacture the shirts yourself. Um, you know, from day one, I had people that were um, or maybe not from day one, but from early on, people other people were manufacturing the filters. Um, and so when I say capacity, it's like ultimately um, you know, we had a fixed amount of product we could make any given day. And I remember it was one August where um, you know, we were um like vaxxing out running more overtime than we could handle. I was burning people out, um, and we did not have machines coming quick enough. And so I basically told all of our wholesale customers that um um we would serve them for the next um six weeks to be to to give them uh off ramp or to help and to help them, but like um that we were gonna have to stop doing that because it's just um we didn't have the the physical capacity to do that anymore. So that that was the
SPEAKER_04So in our case, um a large portion of our cost is the labor involved with the fulfillment and packing side. Uh we actually lose money on the fulfillment and packing side. Uh we make money on all the printing aspects, but we lose about 12 or 13 cents a piece on the packing side just because of how many people are involved.
SPEAKER_00But when you say you lose money, on a per piece basis. So if let's say you're just saying that there's that that's a cost, it's not free, or you're saying that they pay you a certain amount and you lose relative to what they pay you.
SPEAKER_04Yes. So they pay us a certain amount and we lose money relative to that. Um so we can dive into that as well. I mean, like I know the exact numbers.
SPEAKER_00Yeah, I I mean I'm happy I'm happy to.
SPEAKER_04Sure. So uh like uh we make roughly a dollar and twenty uh revenue per shirt on average. It fluctuates because uh uh different designs, different quantities, things of that nature. Um of that, about 77 cents goes to your front print. Uh and our cost of labor and cost of goods is about 27 cents. So you make about 50 cents on that side. Uh we also do uh all custom neck labels with the retailers' brands and things of that nature. Uh we make about 20 cents per shirt on that. Uh the labor cost is one operator, which is about uh nine cents per piece. Um so you're up on that. On the packing side, we get 23 cents and it takes about three to four people to, or essentially passes to three or four people's hands to finish one piece. Uh that cost is about 35 cents. So you're losing about 12 or 13 cents relative to uh the amount of labor involved.
SPEAKER_00Yeah. So your so your overall margin is something like 47 cents or so.
SPEAKER_04Yeah, yeah. We're roughly I'd say just under 50%. Um and so for us, I guess what we're trying to optimize right now is with this second press coming, our goal is not to significantly increase labor. It's to find that point where we can optimize our production to the maximum level without having to significantly increase labor. So our output is let's say now 6,000 pieces a day. We've only added one employee.
SPEAKER_00So how much time do you spend on the floor trying to optimize this?
SPEAKER_04Now it's a little bit less. When I started, it was probably every day. Um, and so we are still right now the phase is the phase we're in is is tracking metrics and making sure we see where our bottlenecks are. And we know that our bottleneck is definitely on the the fulfillment and packing side of tagging everything, of folding everything, of getting it compliant for the way that the retailer wants.
SPEAKER_00Yeah. I mean, have you spent a day doing that yourself? Yeah.
SPEAKER_04I would I'd say probably the first four months I was doing every aspect of the business uh to try to learn.
SPEAKER_00And and uh a lot of it was uh so does it run differently when you're there versus when you're not?
SPEAKER_04That is actually what I noticed uh six months in is when I was there, it was a lot faster. Um and then uh I obviously figured out what one of the challenges was that I didn't have the right standards and the right systems in place. Yeah. And so I spent about two months, two or three months uh to get the team up to that level where now there's not a substantial difference if I'm there or not. But there definitely was a period where if I was there, the production was up.
SPEAKER_00And I guess the question is like, do you do you see ways to optimize that further?
SPEAKER_04Yep. So one of the things we did was uh get some uh machinery. So we bought now we have two folding machines that now output uh those two machines can output the same of uh four or five employees with one operator. Um so things of that nature we've added in to reduce our labor costs and increase our output.
SPEAKER_00When you're giving me like you're losing the the nine cents or whatever or 13 cents on it, um is that after those improvements or before? Those are before. Before. So like you've already do you think you've already solved this problem effectively then?
SPEAKER_04I think we've solved one aspect. There is four aspects to it because we do on average four things for every garment. We fold it, we uh there's price tickets involved. Um, then you have to pack it in carton, uh, build cartons for it. Uh so one aspect we've solved. The other three is stuff that we're still working on. And I think that's more of a a capital and revenue issue is once we have the funds to find the right machinery uh or build the right machinery in some cases. Um that's what we'd like to do.
SPEAKER_00Yeah, so it's something that you think will ultimately be will ultimately be solved by automation.
SPEAKER_04Yeah, I think there's a lot of there's a big role for automation there. Um, and that will help a lot. Definitely we've seen the out we we've seen the packing machines have paid themselves off in like three weeks. So they were it was very fast.
SPEAKER_00What else do you want to what what else do you want to talk through or or or dig into?
SPEAKER_04I guess in your experience, how uh uh would you optimize the sales process for a B2B? I know you obviously mentioned putting systems in place, but outside of that, is there any technique and not necessarily technique, any tips you would give to someone who's now looking to add on to that business? You said we've we already have a large labor cost, which is why a lot of that outreach work I do myself. Yeah. Um but I do know that there is uh added benefit to having someone dedicated to doing that itself.
SPEAKER_00Yeah. Given what you told me about the economics of your business today, I don't think I can, you know, tell you today to go out and hire somebody to do this. I mean, I think it's um I I think you're not quite ready yet. Um, and you know, even if you even if you thought even if you thought you could financially swing it, what I worry about is that operationally there's going to be some um indigestion. Like if you if they were actually if I was a salesperson and I came in and I was like, okay, I'm gonna go out and sell your product and I was successful, then my guess is you wouldn't be able to fulfill it yet, or at least not not at the service level that would make for a um sustainable sales relationship yet. I think you'll get you can get there, but I I just you know, I don't think from what you've told me that I can't advise you would go do that today. Um, hopefully like in the next year you can. Um the honest answer is I think you gotta learn how to do it yourself. I mean, like in the ear in the beginning, I was the chief salesperson. I mean, like, and um it probably annoys our salespeople today, but it's like like when they come right when they are try to do things that like I just know will not work, um, I will interject pretty quickly. And it's because um, you know, I've done it before, and and I you kind of learn how to um what the process is like, yeah. And so, you know, I think that if if you know, I've kind of poked around like a few ideas for things like you can kind of try and do, and it's like from from what everything what you've told me, like your side project probably should be sales, like everything else, it sounds like you already have you at least think you already have an answer to. And so, like, you know, the sales, the sales piece seems like the the place where you should be spending your excess energy and time and then figuring out like what does an ideal customer look like this for this, yeah, look like for this part of your business? How are you actually gonna fill that order? Yeah. Um, and you know, I think it would just be, you know, committing a couple hours a day to doing you know, prospecting um for this part of the business and figuring out what works because um I don't think you're gonna be able to hire somebody that's gonna magically teach you that system. You're gonna have to figure it out. I mean, and this is the kind of um dirty part of the entrepreneurial journey. I mean, there's no um, as much as I would love to tell you, you know, just follow this playbook and it and it's gonna it's gonna work. The reality is that you're gonna have to figure out the the playbook. I mean, you can follow some certain best practices, but um, you know, I really think that for you specifically, it's um, you know, building some type of basic CRM, um, you know, using a service like a Zoom info or there's lots of lots of them now that that do it. Um you know, if you have like now if you have any type of AI ability, then like with you know cloud code or something like that, this is actually much easier than ever to do. And then say you're gonna spend two hours a day, you know, prospecting um for this type of business using LinkedIn and and cold email. Um, and you know, give yourself a quota for and you know, and stick with it until you you know figure out the kind of system that works. I mean, that's gonna be the yeah, you know, that's gonna be the way. I mean, I will say that like the reason I'm telling you giving you this advice is because you know, you say you specifically want 1,500 to 2,000 or more at a time on an order. I think that like um like Robert from Hadlaunch, who was here before here before you, um, he's targeting uh a smaller average order value. And um that allows him to prospect smaller businesses, which then you know you can use social media and a different type of marketing for that type that that that would be a different playbook, of course. And so like uh, but it doesn't, but I'm I it doesn't sound to me like that's the playbook you want to go. You want to go bigger businesses, probably bigger industrial, um, you know, um, you know, maybe school systems, um, bigger um like sport teams, you know, to me that would be uh uh you know, like um like little league teams and um in in like bigger counties, I guess. Um, you know, you need to you need to go out and kind of figure out yourself what the target customer looks like and start you know start start prospecting them. And and um, you know, there's you know, there's no secret to that playbook. I mean that you can there are plenty of YouTube videos on that. But um but I think taking like having and saying, okay, six the next six months, I'm gonna figure this out. Um and then at the end of that six months, once you figure it out, that's when you want to hire somebody to scale that because you figured out the system for how that's going to work. Of course, perfect.
SPEAKER_04And would you recommend uh obviously I I think there is still work that I need to do on figuring out who that ideal client is with a director customer model. Um, but uh I had mentioned earlier that right now the gap we see is is in that middle. Um there is a lot of people who do work at a very smaller, at a much smaller scale. Is that a an avenue we should also still prospect and work on?
SPEAKER_00The smaller scale? Yeah, the ones, the ten pieces. I mean, um if I were in your shoes, that's more interesting to me. Okay. Um simply because I think that's that that can be a higher margin business, but it's also a way more complex business to run. Yeah. Um, and so it did, I mean, there's no right or wrong, but it's like, um, you know, I think that, you know, doing prints for like HVAC service businesses, for example. Um, if you give all their employees, if they give all their employees shirts, you provide you provide it for them. And then anytime they get a new employee, they order from you and you ship it to them, right? That would be an example of a business model that I could imagine working. Um and, you know, so like that's where my head goes with this business. Doesn't mean that that's right. It's just something that I but, but then, you know, that's a different business to run. You got the the the fulfillment part of the business, which is you know, more expensive per piece, you're gonna get more dollars per piece. Um, and the whole marketing playbook for that is very different. You opens you up to you know, social media, you know, TikTok advertising, meta advertising, all that kind of stuff. Um, and so you know that that is the when I when you say direct, you know, that that's where my head goes, is what direct is. Um, but that's a very different business than what you're describing. And um, so for what you're describing, if you want to go to that middle, um, which is I mean, I'm not saying like that makes I think you can make money in the middle, um, but like, but the playbook for that is going to be the more B2B direct sales prospecting playbook. Yeah. Um, and you know, I I imagine LinkedIn being a platform for that, like, but it's not the kind of thing you're gonna be running social media ads against. Um and so like, you know, I would also I would what I would do is make sure I would build a very good, thoughtful landing page for this. Um, make sure that you know people can, you know, you know, get a quote very efficiently and quickly for that. I mean, like, I would invest in that. And, you know, again, now with the AI tools, you can basically build that yourself. It was harder before. You can get that up very quick. You build that um and then prospect against that. I mean, that that would be the that would be the playbook to me.
SPEAKER_04No, I think that makes a lot of sense. And uh I think when I envision where we'd like to be moving forward, um, that element is definitely there. I think for us it's uh we've tried the volume stuff and it definitely works for for building that base. I think if you want to take it to the next level, it's probably going uh more smaller scale and and focusing where we can get higher margins.
SPEAKER_00Yeah, I think you can what what you can do is play with that medium first for a while. Um and there's there have there's undeniably business there, you just have to figure out how to harness it. Yeah, um, and so I think that makes sense. Um, but I think like if you really want to go big, you ultimately are gonna have to do the the smaller, which is why like my idea of using your if you had the ability, your current partners to like then do a lot if you could start your own kind of direct website with that. That's that's what that becomes the thing that allows you to start experimenting with that. You know, I I don't know that that's the right avenue or not for you, but it's just that that would be an option. But the from where you are now, it sounds to me like you want to focus on that middle. So you got to be your chief salesperson and build that out and then get it to a point where then you have a prospecting system that then you can hope you can send over to a salesperson, um, and you've built, and by then you will have built the back-end infrastructure to do that supports that. Um, yeah, I think it makes a ton of sense. I mean, but you should start that you know on the plane on your way home.
unknownYeah.
SPEAKER_04I think I was working out of the plane here. But no, awesome. No, I appreciate that. I think that definitely uh resonates with what we're looking to do. And um, like I said, we're we're right now at that crossroad where it's okay, now we double down which uh on which path we want to go with forward. Yep. Um and I think that avenue definitely makes a lot of sense. Uh one question I did have was uh on the operation side.
SPEAKER_01Yep.
SPEAKER_04Um now with our industry, the manufacturing is a little bit more complicated where there's a lot of nuance. There are technical challenges. Every day doesn't run the same. Some days you can hit 5,000 pieces, some days you may only hit 3,000 uh because every design is different. But is there any things you implemented operationally that you found there was a lot of success with?
SPEAKER_00The same is true for air filters, right? Like we make extra air filters that are 10 by 10 by one the size, and we manufacture them that are 30 36 by 2, um, you know, air every shape and size, you know, in between. Um, and you know, we we now have more automated machinery and those machines, you know, on a good day, you know, we can make 5,000 pieces and um and um maybe the weather changes or the humidity changes, or you know, the um part of the components that you feed into it um were kind of marginally off or faulty in that 5,000 it becomes a 2500 um day, and you're always fighting for like all of those X factors. So I that's just that's just manufacturing um you know in reality. So um I don't think that it's I don't think it's unique to you. Yeah. So don't don't um don't give yourself that excuse. Yeah, it's process, process, process. I mean, ultimately, like you're still early in your stage, and what I would say is you need to be spending time every week in every part of your process and probably for the next few years, like if you really want to scale it, of course. Um, you know, and you know, constantly thinking about how am I going to improve this process, um, how am I going to um get production up, like what are the levers I can pull and experimenting until you figure it out. I mean, it's just trial and error. Um and you know, printing is a big enough industry that, you know, unlike air filters, actually, I ironically, like I think that you could probably could hire um talent that has done this, like operational talent that has done this specifically and solve these specific problems. Um, and so that would be a like I would probably do that. I mean, like I I would I think you should run the sales, but like if you can find a good operations person that can bring in this efficiency, it would be worth it. Um, and one thing that I one piece of advice I would give you there is um, you know, it's more or less free to interview, right? It takes your time. And like you you I you shouldn't do that, you know, maliciously in that in the sense that like your intent needs to be to hire somebody for what you're interviewing for. Um, but it can be a great way to um to learn how other people think about process. Um, and you know, you may be surprised what you learn in that, yeah, in that. So like um, you know, I would be looking at interviewing production managers from yeah, other people that do this and um you know hopefully finding the right right person to you know help you to get up that learning curve even faster.
SPEAKER_04Of course. No, awesome. No, that that definitely works. And would you recommend that's something we look at from today or or would you wait in the process to do that? I guess like you said, interviewing is free, so we could probably start interviewing right away.
SPEAKER_00I guess it I I don't know, I have no, other than what you've told me, I have no frame of reference for you know how efficient you are relative to what's possible. Gotcha. And so I think you have to be honest with yourself about like like if you're already are you know as efficient as you realistically can be, then you know, you're probably not um it's it's not something that's worth focusing on because you're already kind of there. Um but you know, if you um like within air filters, for instance, I I knew from having talked with other people in the industry what what the production yield for the type of machinery we were running should be. So I always had that as a target in my head. And like I knew like if we were close to that or not. And for many years we were not, to be honest with you. And like it drove me crazy. And like I took me, it took me years, really five years, to get kind of our production capacity up to a point that um I thought it should have been. Um it's a lot of trial and error and and and and and it's tricky. Um, but like I knew where we were benchmarked relative to that. You need to be honest. Like, if you don't have an answer to that, then I would go out and find that. And that's that's probably going to be doing competitive research for like your vendors are probably good research for that, or like really getting an understanding of what like you need to know what your targets are. That's why I tell people financially, it's the same thing. It's like um, you know, you need to know what you're targeting to be able to reverse engineer how to get there. And so if you tell me you're 50, you're you're producing 50% less than you should, then I would say you need to focus on this. And like, and if it requires going and hiring somebody to do it, absolutely you should do that today because it would make sense. But if you're 95% of the way there, then it does not make sense for you to hire somebody to get you another 5%. You understand?
SPEAKER_04Yeah, 100%. No, I think that's definitely where I think my next step is going to be is benchmarking against other shops. And I think the vendor again.
SPEAKER_00If you haven't done that, you got to do it because you don't even know, you don't even know how much potential your business has yet, right?
SPEAKER_03Yeah.
SPEAKER_04I think one challenge we've had is is when you speak directly with owners, often those numbers are either very inflated or very deflated. We had when we're intro interviewing operators, someone would say we can only output a thousand pieces a day. And be like, that's not even where we want to be. But definitely something that I think for us, like you said, is to understand where we stand and figuring out, okay, is there a way we can further optimize, or is there someone who can come in and help us further optimize?
SPEAKER_00Plus that and it's also it's why it's that information, plus it's you working on the floor, doing time studies, seeing what happens in a 30-minute period, um, knowing what's possible, you know, kind of thinking through like how do I, how do I remove friction out of this process? And um, you know, you as like you're at this stage in your company, um, you as the owner have to take responsibility for that. Nobody else is gonna do it. Nobody's gonna come in and solve that problem for you. You're not gonna be able to afford an operations person that's going to come in and truly solve that problem for you. Um, you know, I was 10 years in before, or maybe 11 or 12 years in before I really hired somebody that that does that. And he and the guy that does it now does it much better than than I ever did. Um he's much more consistent than I was because he can focus on that fully. Um and it's wonderful, but you're not there yet. Um, and and that's okay. Um, but that means you got to take responsibility for that. And um the way you do that is going in, seeing it for yourself, doing the work, thinking through, being creative, experimenting, um, seeing what you can do, but then also benchmarking yourself to the best best of your ability. And you can you can suss out. Yeah, you can suss that out.
SPEAKER_04Yeah. One thing I do want to talk about quickly is uh wanting to get some more insight on where you think as a company we could land. So in America, a shop with 10 presses is considered. Or small. In Canada, the biggest shop probably has seven. So for us, there is a lot of margin or a lot of room to grow beyond what the biggest shop is right now down the road. Is that something that you think it's worthwhile exploring, or is that something that you move on based on demand if you think there's an opportunity there?
SPEAKER_00It's all about demand. I mean, it's like I have no idea. Yeah. Um, you know, I don't think that, you know, a 10 press shop, at least at your current economics, is a $10 million a year business. Like the beauty of a direct business is that's probably a $100 million a year business. Um, so that's that's the like it's very similar, it would be very similar to to air filters. And when I say direct, I don't mean direct to retailer, I mean direct to customer, but you know, um, so you know, can can Canada sustain um you know a you know $10 to $100 million a year t-shirt printing operation? Absolutely. It's a big enough economy to to do that. I mean, I there's no question in my mind. Um, but you know, I wouldn't get hung up on that. It's more of like um, you know, how are you going to be the best at what you do? And then the that business is going to be it's gonna be big enough to sustain you and and have a good, you know, you know, impact and and lifestyle outcome. So it's like like whether whether that's you know, seven presses or or 70 presses, I don't know that that really matters. Um but you know, I think that you know, you clearly have an opportunity to to you know 100x your business from where you are today. I mean, and so you know, you once you get to that hundred X, then you can worry about, you know, what's next kind of thing. But I think it's a little premature to worry about that. Yeah. Um, but like the biggest opportunity you're gonna have is, you know, and it goes kind of comes full circle in the conversation, but um grow your capacity and then take that same capacity and move up your both revenue and therefore margin by going direct. I mean, that that's how you really scale. So it's like if you if you scale to that 10 machines or 10 machines um wholesale and that's $10 million a year, okay, great. And then how do you start taking that same capacity and moving it up the value chain and adding more value? Um, and then that's how you that's how you ultimately grow the business, even if you're not growing your units, right?
SPEAKER_04Yeah. No, I think uh I think that sits better with where we I think we'd like to be. Is perhaps maybe our volume doesn't 10x, but our margin that we can 10x, that definitely will put us way more profitable than we are now. Uh one question I had regarding because I think the manufacturing side is something I find very interesting. Or that industry specifically is where a lot of us are using the same machines or the same kind of outputting a similar product. How did you stand out specifically with filter buy versus maybe other companies producing filters?
SPEAKER_00Well, we just had a different business model because we went direct rather than selling through middleman. So, like if you look at most manufacturing or most supply chains and air filters were manufacture filters sell to a distributor who will repackage it and um then send it to the end user. And we cut all of that out, right? Um, and so that was the that was the differentiator for us. And so, like the like I said, for the first five years, we were not good at manufacturing. Like I was losing money on those wholesale customers because we were not good at manufacturing. Um, and you know, it took um it took me a lot longer than I thought it would to get to scale. Now we're in a position where you know we've been automating large portions of our of our um manufacturing. You know, we buy million-dollar plus machines um to um you know, to to automate, you know, our manufacturing process. We have a lot of um economies of scale in our shipping to in customers, which is you know actually more expensive for us than the than the manufacturing is. Um and so, you know, our business model is what allowed me to scale the manufacturing, even though we were not good at manufacturing. Now I'm very confident that we can manufacture as efficiently, if not more efficiently, than the next person. But there are other people that can manufacture at a cost that is comparable to ours, I'm sure, from a manufacturing perspective, but they can't get it to the end user at the same cost because I invested to in the infrastructure to do both. So there are people that are good at like, you know, Amazon is good at logistics, and there are companies that are good at the manufacturing of air filters. Um so there are companies that, but we're a one-of-one because we we do both of that. We do both of those things very well, right? Um, and that's why you know the hard the hard answer for someone like you is like you're gonna be capped at how good of a business you can have if you just do contract manufacturing. Like doesn't mean you can't make a business doing that and and you can't make a good living doing it, but it's gonna cap like your potential upside. Um, so you have to, it's more of an and thing. You have to figure out how I'm gonna do both or I'm gonna have to go up that stack. It's way harder to execute on that. I mean, it's it's not a it's it's um there's no established playbook for it. There's a reason why probably nobody else has done that in Canada at least, um, because it's harder. But like if you're able to execute on that, the reward is much bigger.
SPEAKER_04Perfect. And just in terms of the output product that you guys were having, would you say it was comparable to your competitors, or was there a difference in the output, the product that was being outputted as well?
SPEAKER_00Um air filters are a little complicated in that um, so we manufacture what I would call a commercial grade product, and at least early on we were selling largely to residential. And so, like if you go to a like some of our biggest competitors, um um, like um 3M Filtrate, for instance, um, they man they mostly um or basically only um distribute through retailers. Um and so that is and that is for a specifically for a residential-specific use case. And so like resid residential filters are not on average as as sturdy um, you know, or made to to kind of um last in industrial conditions, whereas ours are but made for commercial, but we oftentimes sell to to to um residential. So like we have like two-sided frames, which are way more, way more sturdy. Um, it's a more expensive construction. Um, and because for us, like the the the 10 cents or whatever, the fraction of the the product cost that we would save by making it less sturdy is not worth um, you know, is is very small relative to the the cost of where we're selling it. It allows us to have a higher product, higher quality product and also sell that same product into multiple markets so we can sell both commercial or to residential. So ultimately, um, you know, we do have a very high quality product relative to our price point for relative to a lot of the competitors, in my opinion. Um, and so we're differentiated in that sense. Like we um, you know, have not injured engineered out like those kind of like um kind of product things that other other other you know companies have. Um, but you know, at the end of the day, an air filter is largely a commodity. I mean, it's like, you know, like we we um we sell a high quality product, um, but you know, there are you know, like there are there are other companies that can manufacture a comparable product. Um, but it's the um, but it's ultimately the distribution, like we're able to get it to you quicker at a price point that is, you know, in my opinion, unbeatable. Um and that's that's really where the competitive advantage for us comes from.
SPEAKER_04I think that's probably what drew me a lot to your story and your work, is I find a lot of overlap in how we can structure how we move forward. Like so we are just beginning, um, but we are kind of the same where we are delivering a retail level product that now we can possibly pursue and advertise to the end customer directly that hey, this is something that ends up on your shelves, anyways. Why don't you go through us and get it for yourself or your company that same way?
SPEAKER_00Yeah. Yeah. My gut without knowing anything, I mean, I do think the Canadian angle is helpful. I think that it will be easier for you to do that going direct to businesses rather than doing the licensing piece of it. Um, I don't know that. Uh, I just I'm not an I'm not an expert in the licensing world, and I just know that that's complicated. Um, and you're dealing with big companies and contracts and stuff like that with that. So um, you know, I just don't, I'm not the guy to to give you advice on that. Um, but I've I have a higher degree of confidence in your ability to, you know, do that middle market sales for like, you know, middle market companies that that need these things for employees or for events or whatever it is, makes a lot of sense to me. So that seems like the next next angle. Um and then once you have the bandwidth, I would be thinking about the offering for small businesses um that maybe are ordering, you know, 50 pieces at a time or whatever you want that to be. Um, you know, I think that that would be like if you're able to crack all all of those things, um, then you would have a comparable business to ours ours from a model perspective. Yeah, yeah. Um, and you know, so like, you know, I would be my where my head would be turning is like I would be thinking about like what would the economics of that look like? Like what are these actually sold for? You know, like you know, how much money can I get? What does that break down? Like, like one of the things that I did early on is I modeled it out. Like, like I know, I still believe to this day, you know, to the penny, like every um, you know, cost that goes into the construction of the filter, the moving it through a warehouse, the getting it to the end customer, like I've modeled that out, but like I modeled that out on day one. Um, and like obviously I've learned over the period, but like, you know, like I understood the business that I was in. Um, and I so I think like how I would, if I were you, I would be thinking, like, what does the model for this business look like? What does the model for that that direct business look like? Theoretically, you know, how would I um service a business like that? How would I market a business like that? Like, you know, and then um once you spend enough time thinking through that, then you're gonna start finding ways to actually make that make that happen. But but it it does make like I would scale, like to kind of wrap it up, I would scale the business that you have, you know, as much as you can to be your um kind of um growth engine that finances your you know your operation, then you know, at the same time, you're gonna figure out this middle market direct sales business with the idea of within a year getting it going and to a point where you can hire a salesperson to just focus on that. And then I would probably start exploring the next level of it. Um to really dominate the market, if you can do all of those three things, um it like then you're really dominating. Then what you'll find is you have enough capacity or not capacity, you have enough leverage that you can then pro at that point probably go direct on the licensing, right? Because you got to stack those three things to to really make to make it a really good, yeah, uh sustainable legacy business.
SPEAKER_04Perfect. And I guess as we are wrapping up, is there any last piece of advice you have as a for me personally for someone who's looking to get into the space or very early in the journey, and it's maybe something that you learned along the way um and something you I guess I can hold on to and and keep in the corner of my mind as we push this forward.
SPEAKER_00Yeah, well, I think that the theme that I've kind of come on to recently in talking to people, so you're gonna get the the theme of the of the week at least, yeah. Um, in advice because I there's so many angles you can go with go with advice. Um I think that you need that everyone would be smart to to do a to be introspective about what your motivation is and like really what um you personally want as a um outcome for your life. And I I view business as a as a kind of a vessel against which you can um you know build craft your your life and your legacy through. And I mean that's why I love entrepreneurship. And like I that's ultimately what filter buy is for me. It's not about the air filters, it's about you know about so much more than that. I mean, that's really what what drives me in building it. Um, and you know, I think that you know, business is hard, no matter any business, any business model is hard. And we all like as entrepreneurs think, oh, like like I listen to your business, and sometimes I say, Oh, I like that that sounds easier than things like like it's just natural. Like whenever I listen to businesses, I say, oh, I'd like to be in that business. Um, that business is so much better. And it's like we all we all think that way. And the reality is all business is hard. Um, but you need to to really stick with it through the the the hard times, you need to um have your why, like why are you doing this? Like what is like what are you really looking to achieve? Um what is the motivation? And the sooner that you can understand that, um, the sooner you can emotionally attach yourself to that and um and ultimately um engineer that outcome. Um because it's like you you say like your your motivation is to you know you know build the largest Canadian screen printing business. I'm paraphrasing, um, but you know, that's not a why. Like why, like, why do you want that? I mean, it's like if we had more time, like that's really to me, that's way more interesting is the why. Um, and like what are you really looking to achieve with that? Because there may be a much easier way for you to achieve whatever that why is, or uh maybe, maybe, or maybe your why is big enough that that's not ambitious enough. You need to go have it bigger than that. But um, you know, really kind of understanding what you're looking to get out of it all, um, then um engineering a business outcome that is consistent with that. Um, I think that just is a recipe for a happier life.
SPEAKER_04Yeah. Awesome, perfect. I appreciate it.
SPEAKER_00I think uh the the wisdom I've gained is there's a lot of work that we need to do introspectively before we can continue to move forward, especially now that we're past that first initial beginning stage, and now we're kind of going into how we build for you just don't want to just go through this stuff on autopilot or like listening, listening on to YouTube videos about, you know, this is how you start the ideal business, because then like the worst mistake I see so many people make is they spend their life chasing somebody else's dream. And you know, you don't want to you don't want to chase somebody else's dream, you want to chase yours. And so like copying me or copying anybody is uh is a fool's errand because like you you would be miserable being me and I would be miserable being you. Um and and that's what's wonderful about life, but you got to figure out like what it is that you're really looking to achieve and then engineer that outcome. Um, and you know, within the business framework that you have, you can engineer any outcome you want. Um, but just like dominating an inter industry for the sake of it is not a good, it's not a good outcome. It's like if you really, you know, want a million dollars a year cash flow and to be able to um be home for dinner every night at five o'clock and have a good life, then you know, that's a that's you know, that's a fairly easy outcome to engineer, but we should be working back, we should be, you know, thinking through like how do we engineer that? And like what's the least stressful way of doing that? Then you probably don't want to do the direct to the pure direct to consumer part of the business, you know. You know, you could you can have a much easier business model that's that's sustainable that gets you to that. And we should be putting our energy into that. I mean, like, so you have to know, like I certainly don't know you well enough to help you to to know which one of those to go into, but you need to figure it out. But what's so beautiful about business and boring businesses specifically, um, is that it you have the freedom to engineer whatever outcome you want, big or small. Um, and that's why the introspection is so important to, you know, understand like what is what what is it that you're really looking to achieve with this. Um, and then then make sure that every action is consistent with that. And that's the starting point.
SPEAKER_04Awesome. I appreciate it. Thank you.
SPEAKER_00Thank you so much. Thank you for for for coming to New York and having this discussion with me. I really appreciate it.
SPEAKER_04Likewise, a pleasure is all mine.
