Joe: Everybody knows about the successes of FUBU and your other interests, your clothing lines, and everything that you represent. You have built powerful, powerful brands. We can celebrate business success, but the reality is that the path to success is never as smooth as it appears to be from the outside. What are some of the mistakes you made along the way, especially those related to the numbers? What are some things you wished you would have approached differently?
Daymond: There are so many mistakes I could share, but I want to share one of my great failures which taught me a lot of things.
Looking back, the major mistakes that I made were from when I had money, which is when I came up with the concept of “the power of broke”. Some of my biggest and most costly mistakes came when I actually had money, and I didn't activate the power of broke.
Early in 2000, we acquired a company called Heatherette. The company was a very popular company then led by two great guys named Richie Rich and Traver Rains. This company sold clothes for the pop culture teens, females ranging in age anywhere from 15 to 25. This company had a huge amount of free advertising out in the market. Every time somebody would do a big fashion week in New York City, Heatherette would have an arena for free. Naomi Campbell who typically charges $100,000 to walk down the runway, would do it for free for this company. She absolutely wanted to be part of what these kids were created. These kids were activating the power of broke and the entire world was talking about them.
At the time, one of the black holes in my current brands was customer acquisition and getting to market. So, when I looked at Heatherette, all I could see was a company that excelled at this. Everyone was running them on the news, and everybody was following them.
My first thought was that since I didn’t have good customer acquisition, it would be a great investment to acquire this company. Three years later, I realized that I had made a mistake. Instead of what Heatherette had been doing with so much free advertising, free runway shows and free press, I threw money into these areas. And I blindly purchased a lot of inventory, because I just knew that my paid efforts at customer acquisition were going to pay bigger dividends with massive sales. It did not work out that way.
Unfortunately, I did not use the fundamentals that I had followed with FUBU. I threw money at a situation instead of rolling up my sleeves, walking into the office and doing the work. I didn't activate the power of broke. I thought money could buy success, but it doesn’t. All businesses must be managed like any business and they need to be managed by yourself through fundamentals.
Joe: What I’m hearing from this story is that it's the hunger of the entrepreneur that you should never lose, no matter how successful you are.
Daymond: Absolutely. You should never lose sight of what you're doing no matter how successful you are. You have to understand who is operating the business, how they are operating it and you have to look at the numbers.
I should have been working the system and looking at what was happening. But in that case, I was listening to advice telling me to inject capital to grow the business. What I should have done was listen to my experience and look at the numbers. If I had, I would have used the power of broke and made sure that the revenue was sufficient to scale. I thought bigger is better, but it isn’t.
Joe: A lot of accounting and bookkeeping professionals are smaller businesses, and some of those firms operate out of their homes, just like when you launched your company. If someone is in this position and they want to grow their business and expand, what advice do you have for them? How do they not only grow and develop their businesses, but also become indispensable to their clients?
Daymond: In relationships – both personal and business, we usually don’t simply ask the other person exactly what it is they want or what they are looking for. We assume that because of what we want in our lives, that we know what they want. I recommend that you ask your clients what they want. The answer may be a simple one of wanting to make more money. However, maybe they are ready to scale their business down or have more personal time with their family.
Accountants and bookkeepers know the most personal things about a business owner, and yet they often don't specifically ask, “What are you trying to accomplish today? What are your goals over the next one, three and five years?” There is a lot of information about your clients that you need to know, but you won’t know unless you ask.
Next, figure out why your clients are using you for their accounting. Is it purely because you crank out good numbers, or can you give them some solid advice? There is a great opportunity for you to stand out in the market not only as someone who is consistent and always going to show up, but someone who is always going to give answers to clients. You can be the most valuable person in the business.
In doing these two things – asking your clients what they want and being of more value through being an advisor, you can create a business that can be scaled.
Joe: That suggestion for bookkeepers and accountants to increasing their value by adding advisory services is the mandate that accounting thought leadership, and the AICPA itself, is giving to the profession. We need to take on a stronger trusted advisor role – one that I call moving from the back office to the boardroom. As accounting professionals, we need to be more direct, be more insertive in and assertive in our relationships with our clients. We need to coach businesses toward success. We shouldn’t just look back analytically at the numbers, but we should look forward in a projective way and help steer the company.
To hear you, a highly successful and well-respected entrepreneur, say that is what you need from an accountant is a validator for the fact that we need to be doing that as accounting professionals.
Daymond: At the end of the day, don't you want to become part of your clients' success?