UGG® founder, Brian Smith, shares how perseverance, smart pivots, and honest marketing took his sheepskin boot idea from California beaches to global shelves and closets everywhere.
Brian Smith sold UGG boots out of a van at Malibu. His first year? Twenty-eight pairs. For five years, he worked construction jobs while sales barely hit $30,000 annually.
Then a group of 12-year-old surfers called his ads "so fake." That brutal feedback changed everything. He switched to authentic athlete sponsorships, and sales jumped from $30,000 to $220,000 in one season.
Brian gets honest about the realities of building a product business—the profitless prosperity trap, running out of capital right when you're gaining traction, and why he gave away 150 pairs of boots in his most effective marketing campaign ever.
What you'll learn:
If you're grinding through the early stages or wondering if you should give up, this is what you need to hear.
Brian:
“There's a certain amount of ignorance you have to have. Because if you knew what was about to happen, you’d never start.”
“You can’t give birth to adults. Every business starts as an infant. And most die in infancy—not because they’re bad ideas, but because people give up.”
“Profitless prosperity—it’s when you grow fast but can’t afford to keep going. Margins matter more than momentum.”
Links & Resources:
Timestamps:
01:52 - The Birth of UGG: From Australia to California
04:13 - Early Struggles and Marketing Lessons
08:08 - Breakthrough and Growth Strategies
13:15 - Perseverance and Entrepreneurial Wisdom
19:08 - Empathy and Encouragement for Small Businesses
22:17 - The Birth of Ugg: From Concept to Reality
26:13 - Advice for New Product Companies
31:40 - Navigating Product Pricing and Margins
37:48 - Reflecting on the Journey
38:54 - Future Plans and Closing Thoughts
0:00:00.2 Brian Smith: Would you believe that the first five years sales of UGG was greater than the first five years sales of Nike?
0:00:05.9 Everett Sands: That's Brian Smith, the founder of UGG.
0:00:08.6 Brian Smith: One really key lesson for entrepreneurs is there's a certain amount of ignorance you have to have. Because if you knew what was about to happen, you would never start.
0:00:18.0 Everett Sands: Brian helped transform UGG from a small Australian surf brand into a global lifestyle phenomenon. Brian and I are going to talk about building a brand that redefined an entire product category and his insight into entrepreneurship in 2025 and beyond. I'm Everett Sands, your host and CEO of Lendistry. This is Small Business Unscripted. Let's get into it. Welcome, Brian.
0:00:47.3 Brian Smith: Hey, thank you, Everett.
0:00:48.0 Everett Sands: You're here on Small Business Unscripted. We are going to talk to businesses of all shapes, sizes, all different parts in terms of their path. And we're just going to give them some guidance from the legendary Brian Smith, the founder of UGG.
0:01:01.2 Brian Smith: All right, my favorite audience. Thank you.
0:01:02.9 Everett Sands: That's great. So I always ask all individuals who come and speak this one question. So I'm going to start. I think I know the answer already, but I'm still going to ask you this. This changes throughout your career, but I want you to put these in order for me.
0:01:16.0 Brian Smith: Okay.
0:01:16.5 Everett Sands: A value to you today.
0:01:17.7 Brian Smith: Okay.
0:01:18.4 Everett Sands: All right. Career, compensation, quality of life. What's most important to you today?
0:01:23.4 Brian Smith: Both. Quality of life.
0:01:24.5 Everett Sands: I knew that already.
0:01:25.4 Brian Smith: Yeah. And the other two, they're phases of life that everyone grows through. But as you grow older, 30s to 40s to 50s, values change. And I'm very non-material now. I've downsized and I really love my life.
0:01:43.4 Everett Sands: It's a little easy to be non-material, Brian, when you sold UGGs. Just so we're clear about that.
0:01:50.2 Brian Smith: Yeah.
0:01:50.6 Everett Sands: But let's get right into it for the audience. I mean, let's talk about the '70s. What was that like? I mean, just why and how?
0:01:58.3 Brian Smith: Yeah. The '70s, I was in Australia, and I wanted to become an entrepreneur, so I knew there was something else. So I figured out all the cool trends were coming out of California. So I thought, I'm going to go to California, find the next big thing and bring it back to Australia. But it didn't work out that way because after three or four months of not finding anything I was surfing up at Malibu and it just turned into the winter swell, you know? And I was pulling on the UGG boots that I'd brought from Australia and just had this massive aha, the goose bumps all over me. And I thought, oh, my God, one in two Australians wear some sort of sheepskin boots, and there's none in America.
0:02:43.3 Everett Sands: Okay.
0:02:43.9 Brian Smith: So bottom line is I just never went home. I just did some research, called up a manufacturer because there were lots of them in Australia, and bought six pairs of samples, and that was the birth of UGG.
0:02:57.3 Everett Sands: So let me get this straight. So you're getting out of the ocean.
0:02:59.7 Brian Smith: Yeah.
0:03:00.1 Everett Sands: You're a surfer.
0:03:00.8 Brian Smith: Yeah.
0:03:01.6 Everett Sands: And you decide that you want to warm your feet.
0:03:03.6 Brian Smith: Yeah, big time.
0:03:05.0 Everett Sands: And because you wanted to warm your feet, you put on these boots.
0:03:07.8 Brian Smith: Yeah, in Australia, every surfer just has a pair.
0:03:11.4 Everett Sands: Interesting.
0:03:12.0 Brian Smith: Yeah, it didn't exist in America, but I went around to all the shoe stores to try and with my samples.
0:03:18.3 Everett Sands: Yeah.
0:03:18.7 Brian Smith: Just got shut out by 100%. You're crazy selling sheepskin in California. But California climate's identical to Australia, so it wasn't the reason, right? And then I realized, well all my friends at Malibu think this is a great idea, and then I figured out so many of them have been to Australia and brought half a dozen pairs back for their buddies. So in the surf market, UGG was pretty well known.
0:03:43.5 Everett Sands: Interesting.
0:03:43.6 Brian Smith: So I just switched gears and started going after surf shops. We would go surfing early in the morning, and then at 9 o'clock I'd open up the back of the van. I'd just sit there all day and sell UGG boots, and it was amazing. There were people coming from all over LA to, hey, that guy up in Malibu, he's got a...
0:04:01.3 Everett Sands: I've got this vision of the Scooby-Doo-Bee-Doo van. And you just open up the back, and some people sell, I don't know, their rap tapes, and you right there beside them.
0:04:11.8 Brian Smith: That's exactly what it was.
0:04:13.9 Everett Sands: So, okay, talk to me. I mean, how did the business go in the beginning? Did you run out of money? Coming.
0:04:19.1 Brian Smith: Horrible. But I learned that one really key lesson for entrepreneurs is there's a certain amount of ignorance you have to have. Because if you knew what was about to happen, you would never start.
0:04:35.5 Everett Sands: I would totally agree with that.
0:04:36.7 Brian Smith: Right. So I had no idea how hard it was going to be. And my first year's sales was 28 pairs.
0:04:43.8 Everett Sands: Okay.
0:04:44.2 Brian Smith: Man, I'd just bought 500 thinking I was going to be really rich. And that one put a slammer on the brakes. And then I had to figure out how do I get them? And that's when I started doing the street fairs and swap meets and things. But for three or four years, I just dribbled along, and I was advertising all these beautiful models on the beach and getting nowhere. The sales were $25,000 and the next year $30,000. It should have been way, way more.
0:05:14.8 Everett Sands: So our audience understands $25,000 per year?
0:05:18.3 Brian Smith: Dollars worth.
0:05:19.9 Everett Sands: $30,000 per year.
0:05:21.0 Brian Smith: Per year.
0:05:21.5 Everett Sands: Okay, that probably got you a really nice apartment in Malibu, huh?
0:05:25.4 Brian Smith: It was horrible. Anyway, I got to the point where I just wanted to give up. I decided to quit all the inventory. But it sort of rained that season in October, and all the surf shops started calling me, hey, Brian, Brian, I've had people in the store all day, and they're clamoring for UGG boots, and I've run out. Can I come and get more? So I realized, I can't even go out of business properly. So I called up Australia and ordered 1,000 more pairs and then started delivering. But this time, I decided to do something different with the advertising. And before, I was having a beer with one of my surf shop owners, and I was explaining this problem with my ads not working. And he just shut up, Brian, and he called out back to all these little 12, 13-year-old grommets who store their surfboards in the back. And he just said to them, what do you think of UGG boots? And every one of them just went, oh, those UGGs, man, they're so fake. Have you seen those ads? Those models, they can't surf.
0:06:30.0 Brian Smith: And instantly, I realized I'm sending the wrong message to my target market. I was going after young surf kids, and they just saw these ads as so fake. And when I saw my ads through their eyes, I was so embarrassed. So really quickly, I found a little group that was avid surfers who were about to go pro. And I got two guys, Mike and Ted, and did a deal with them for sponsorship. And I just took my own camera and went surfing at Black's Beach in La Jolla and Trestles up in San Onofre. And I just used a couple of shots from them walking to and from the beach and ran them in October, November, December at Surfer Magazine. Sales, $220,000. Just because I'd finally, after five years, figured out the essence of marketing and advertising, which is you have to create an image that you want people just dying to get into that scene. And the more you can make it desirable, oh, my God, if I was just walking along that beach with Mike Parsons, the peer pressure really sort of kicked in. And I learned a huge lesson from then on that from now on, I'm going after the youth because they're the ones that they've got no money. But now, mom, all the kids at school have got a pair of UGG boots. Man, I want a pair for Christmas. So the money's there.
0:07:57.2 Everett Sands: By the way, I just got that request like a couple months ago.
0:07:59.9 Brian Smith: Good for you.
0:08:00.4 Everett Sands: So that still works.
0:08:01.5 Brian Smith: That still works.
0:08:02.6 Everett Sands: It's still working now and other things.
0:08:02.8 Brian Smith: Yeah. And so, yeah, after I figured that out, I was able to piggyback on the snowboarding market, which was getting out of California. And again, with the youth. And I struggled a bit back east because I didn't know what they did for sport in the winter. I was asking a sporting good owner one day and he says, oh, he rolled his eyes and goes, oh, they play hockey. And I had no idea being Australian that that existed. And when I researched the hockey market, it's twice as big as surfing. So we got in with all the youth hockey programs and did everything. So it was a natural sort of growth across the country starting from like five years of being knocked back because I was really killing my brand by these bad ads. And then the minute it turned and I understood, oh, you never sell your product, you sell the features, you sell whatever it is that wants them to get into that scene.
0:09:05.4 Everett Sands: That's a great lesson. Let's go back a little bit to those first five years. What was it like? I mean, $20,000, $30,000 in sales. How did you eat? How did you maintain it?
0:09:17.7 Brian Smith: Luckily, my girlfriend who became my wife, she had a really good job. So she would keep me for the first couple of years. And I mean, each summer I had to get a summer job. The first summer was scraping the underneath of boats at Marina Del Rey. The next one was construction in Bel Air and Beverly Hills. And the third year was working on a golf course. And that was when I had the aha about the advertising was that year. So it took the fourth year before it really kicked in.
0:09:52.0 Everett Sands: So always kind of working this other job to kind of make ends meet while you're still chasing your dream.
0:09:56.7 Brian Smith: Yeah. And every entrepreneur has got to look forward to that. They've got a choice. If they've got a regular job, my advice is hang on to that job as long as you can and only give up when it's getting in the way of your new venture. Because a lot of people go all in. They've just had a windfall of money and they go, oh, I'll put it all in. And you can't give birth to adults in a business. In fact, that's the theme of the book that I wrote, 'The Birth of a Brand', is you can't give birth to adults. Everything has to be conceived and then action taken. So I conceived of UGGs at Malibu, took action and bought six pairs of samples, and then it just lies there. And every business, if you look at the stock exchange page on the Wall Street Journal, every one of those companies started probably with $1,000.
0:10:48.7 Everett Sands: Yeah. No, I totally agree.
0:10:49.1 Brian Smith: And it just lies there and it lies there. And that's when most entrepreneurs give up. It's really sad because they think, oh, it's not going to work. But if you can hang in there, you'll hit the toddling stage, which is magazines are writing articles about you and all your friends are telling all their friends. That toddling phase is really cool. And then it gets into the youth where you've got consistent sales, productions working, shipping and receiving. You get that all in sync, and you can run a $20, $30 million business in that phase.
0:11:22.8 Everett Sands: I think that's great.
0:11:23.9 Brian Smith: But then if it's a really great product or service, you're going to hit the teenage years. And remember you wanted to be at every party on a saturday night? It's the same in business. You want to be in every mass trade show, every retailer in the country. And man, it's so easy to run out of capital when you get that popular.
0:11:43.7 Everett Sands: So you start selling the boots, sales start going up, you're in the different magazines. Walk me through kind of that progression. You didn't know marketing, you didn't know analytics. I mean, how do you just...
0:11:54.4 Brian Smith: There was a salesman who had a magazine called Action Sports Retailer, and I saw volume one, number one. And I said, oh my God, that's perfect for the market I want to go into. So I met the salesman, and he said, well, it's $1,000 a page, I'll give you two pages for $1,500. And I said, you're kidding me, we don't even have product yet. And I said, there's no way I can advertise. And he says, Brian, it's not how big you are, it's how big you are perceived to be that counts. And he talked me into two months of ads. We didn't even have any products. But I ran those ads, and it was amazing how much feedback I got. And people all those years just thought I was a real big company. But I had all the product in my bedroom. And that's the beauty of today's internet. Back then, you had to have a warehouse, you had to have physical assets to impress people.
0:13:01.0 Everett Sands: No Amazon.
0:13:01.9 Brian Smith: Yeah, now if you can build a web page for 500 bucks, you can look like a million dollar company, and no one's ever going to know you're working in the garage.
0:13:09.9 Everett Sands: Absolutely.
0:13:11.0 Brian Smith: So people today have got a big advantage in that part of the marketing.
0:13:15.5 Everett Sands: So the business starts to take off. You've now got ads. You said you kind of, I'd say, evolved into kind of other sports, right? So you started going into snowboarding and other things like that. What triggered that for you? Like what made you decide?
0:13:29.3 Brian Smith: Well, I just piggybacked on those because I knew that if I market to the youth, it's going to filter out. But I had a new problem now, right? We got lots of stores, and they're all buying half a dozen pairs, right? But they're not really moving. And I ended up doing probably the cheapest marketing campaign that I've ever done that was by far the most efficient and effective marketing campaign of the whole 20 years that I ran UGG, right? I was in a store, and this girl came in, and she's picked up the UGG boots, and she says to the clerk at the store, what are these like? Oh, I don't really know. Do they look pretty hot? Yeah, they could be, yeah. And man, they're expensive, yeah. And what happens if you get them dirty? He had no clue, right? So she put them back and kept shopping, right? And that had a profound effect on me. And I tried to figure that that's the reason the product isn't moving is that nobody knows how to sell them. And so I came up with what I called the six-pair stocking plan. Like if a store had six pairs on the shelf, I gave a free pair to the floor manager. And it cost me maybe 150 pairs of boots.
0:14:47.6 Everett Sands: Sure.
0:14:48.0 Brian Smith: But a different time I was in there, and a guy came over and says, hey, what are these things? Oh, man, they're fantastic. I'm wearing them now. Well, don't they get hot? No, they breathe. You never sweat in them. Well, what if I get them wet? Oh, you can just wash them. And wow, they're so expensive. Oh, no, they're not. No, not compared to... You wear them so much, and the sales of the company just rocketed, more than doubled. Purely because the messaging was given to the right people who were the right people to talk to the customers.
0:15:23.8 Everett Sands: Well, I think you're pointing out a couple of different things to our audience. Number one, you have to be able to allow for free stuff and obviously give samples.
0:15:31.9 Brian Smith: Sometimes the cheapest thing you can do, yeah.
0:15:34.1 Everett Sands: Number two, that salesperson or that sales manager is your number one salesperson. Whether they work for you or not. And then I think number three, you had an actual metric that you were following to recognize that there was a sales issue or an inventory issue.
0:15:47.2 Brian Smith: It was getting out and speaking. You remember how we spoke to the young kids in the surf shop and realized my marketing sucked? Right? It's putting yourself out into that vulnerable place where you're going to get bad feedback, but it's the most critical feedback. And me witnessing that in the store was great feedback to which I could fix.
0:16:08.3 Everett Sands: That's amazing. Now, when did you know UGGs could be bigger than kind of your wildest dreams?
0:16:13.3 Brian Smith: Well, the day I was sitting on the beach at Malibu pulling on my UGG boots for the first time, I knew then, I was thinking, oh my God, half the country in Australia wears some sort of sheepskin footwear. I said, okay, there's 23 million people in America, in Australia, there's 230 million people in America, and there's none here. And I just like, oh my God, I'm going to be an instant millionaire, right? Which every entrepreneur, if you're watching and you've just had that aha moment, I get it. It's, you're going to change the world.
0:16:51.3 Everett Sands: Absolutely.
0:16:51.7 Brian Smith: And you just got to be able to stick in long enough to do it.
0:16:56.6 Everett Sands: I totally get it, totally get it. What about competition? I mean, you bring it over. I'm sure someone in Australia does it.
0:17:04.6 Brian Smith: Oh man, and especially in footwear. You can't patent a shoe design, and you can't patent the colors, and you can't patent the materials, and so after about three or four years when we started to get some traction, then all the competitors from Australia said, oh man, look, he's doing all that in America, let's... And so I got together with my staff and we made this mantra, which is, let's not worry about competition, let's get out front first and then run faster, right? And that mantra, year after year after year, we'd start off with that as the beginning mantra, and so by the time the next trade show rolled around, I've got a completely new set of styles and colors, and they've got all my last year's product out on the tables, right? And then they'd photograph all this lot, and then the next year, so we just stayed ahead by being inventive and creative and taking chances.
0:18:05.9 Everett Sands: Now a quick word from our boss, Lendistry's customer. We'll be right back.
0:18:14.4 Coco : My name is Coco, and I'm the owner of Coco's Lip Smacking Cupcakes, and we are located in Lakewood, California. The problem that I was facing before working with Lendistry was getting access to funding because at that time, I was doing a full build out for my bakery, and we were exhausting our own funds, so Lendistry came through with a grant, and it was very beneficial. They definitely look out for small businesses, so every opportunity they have to plug my business, they've done so, so I also have a great personal relationship with them. I know that if I have questions on funding or gaining an internship or trying to get employees, I can call on Lendistry. I would recommend Lendistry to other small business owners if they're looking for funding, resources, and just to have a great connection with someone that they can grow with.
0:19:09.1 Everett Sands: I'm here with Brian Smith, an international speaker, as well as the author of a great book, and a legend, having built one of the most iconic brands. Do you have any nostalgia when you go to like a farmer's market or a flea market these days, and you see people, I don't know, peddling is the right word, product?
0:19:25.7 Brian Smith: Yeah, I have this incredible empathy for them, and I'd go out of my way, more than I should, to buy something from these people, because I remember being in that street fair, the San Diego swap meet in the drive-in theater that's empty now, and just praying that I could sell five pairs in one day.
0:19:49.5 Everett Sands: Now, do you look at them, just curious, because you're an entrepreneur, it's in your blood, do you look at them and say, oh, I wish I had done this to make their lives easier? Like I think about, they collect money on a Cash App or Venmo, or something like that. You had to carry cash.
0:20:04.2 Brian Smith: Yeah, I just see the stage they're in, and all I can do is encourage them not to give up, because perseverance, like the number of setbacks you get, in my book, it's like full of philosophy.
0:20:17.6 Everett Sands: And by the way, Brian has a book called 'The Birth of a Brand', absolutely should take it out. Check it out.
0:20:23.6 Brian Smith: It's full of philosophy and spirituality, but one of my favorite quotes in there is that nearly always your most disappointing disappointments will become your greatest blessings.
0:20:34.2 Everett Sands: Interesting.
0:20:35.2 Brian Smith: And I ask the audience every time put your hand up if it's the last six months, something disastrous happened in your business or your personal life, and now you look back and think, thank God, every single time, 80 to 90% of people put their hands up. So that's what I call perseverance. Doesn't matter what hits you because success doesn't start here and go up to there, right? It goes whack wherever it hit a wall and your job is to get around it or over it, and then you cruise along and whack another one. And it's all those whacks that keeps you improving and finding solutions and getting better and better. If you can do it more than your competitors, you get market share, and so it's all about not giving up.
0:21:22.0 Everett Sands: Yeah, I tend to think of those whacks when I think about the industry, like each one of them, to your point, has led us to another stage of growth.
0:21:27.9 Brian Smith: Yes.
0:21:28.1 Everett Sands: Or it's something to look back on. I even think about times where we got declined for like licensings or authority, and we just kept going and kept going. I think you also, because you go through so many, you also build a bit of tolerance, right? You have a bit of staying power and staying momentum. I mean, you're calling it perseverance, but I think one of the things small business should pay attention to is they're actually getting some muscle memory. They're learning how to recover.
0:21:51.1 Brian Smith: That's right.
0:21:51.7 Everett Sands: And they're learning how to bounce back. Yeah. So yeah, totally agree with that.
0:21:55.5 Brian Smith: Yeah, there's always a solution to a problem.
0:22:00.0 Everett Sands: So speaking of which, sort of a problem, I don't know I think everybody wants this problem, but you grew really big. You made a decision to partner. But how did you feel kind of after that? Like, did you...
0:22:13.8 Brian Smith: Well, I got to refer to this again. You can't give birth to adults, right?
0:22:20.0 Everett Sands: Right.
0:22:20.0 Brian Smith: So I was sitting on the Malibu beach and conceived the idea that there's no sheepskin boots in America. I'm going to start. That was the conception. And then I went home and called a bunch of factories. That was the birth. Getting six pairs of samples was the birth of UGG. And so I look at selling the company to Doug Otto as like growing my child all the way up to she's ready to get married and go out in the world and have babies and do whatever they do. So me handing off to Doug was like just the teenage level just getting put out into the world. And I'm so proud of it. I mean, I still walk through airports and I'm always looking back to see if they've got the UGG logo. So I'm so proud of the brand. And now it's doing, I think last year was $2.2 billion in retail sales. It's hard to believe. I always saw it being big, but never in the billions. I mean, people didn't talk about billions back then.
0:23:24.6 Everett Sands: Yeah. Do you still have that knack as an entrepreneur to start something different?
0:23:30.2 Brian Smith: I could in fact. I find I help more young kids start their thing. I don't need another business. There's a young guy who's starting to build out these computers and making these little mainframes for the gaming industry. And he's churning them out. And I said, well, what's your brand? What do you mean? Well, you've got to have a brand. Why don't you brand it? This is something that you could turn into. And so in all sorts of ways, what's your cost of sales? So by asking them questions and quizzing them on things, I give them things to think about for when we meet the next time.
0:24:09.5 Everett Sands: Totally right.
0:24:10.1 Brian Smith: And nearly everyone has taken some sort of action on whatever it is I'm talking about. So I love helping entrepreneurs in that respect.
0:24:18.8 Everett Sands: Yeah, well, I mean, sometimes we talk on the show about like unit economics, which is what's the income that they're earning? What is the cost of production, distribution, or raw material, whatever that might be? And trying to make sure the entrepreneurs understand those types of things.
0:24:33.7 Brian Smith: That's right.
0:24:34.1 Everett Sands: So you spend time going back to some, well, going to some of these younger entrepreneurs.
0:24:37.5 Brian Smith: Yeah, a lot of people will call me after a talk, for instance, because my website's got my email address. And they say, hey, I'm doing this sort of business. Do you mind if I ask you a question? Some of them say, do you mind if I pick your brain? And I hate that term because it's so one-sided. It's like, I want, but I'm not giving anything back. But the ones who are smart will say, they describe their business and I'm having a problem with this and this. I wonder if you would be willing to help me. I'm all into that.
0:25:11.6 Everett Sands: What do you think in terms of entrepreneurs, in terms of mentorships? I mean, I frequently get asked that question, like how many mentors should I have or what types of mentors? What's your guidance on something like that?
0:25:22.0 Brian Smith: I'm the worst person to ask. I started this in 1979 and I was Robinson Crusoe. There was no Lendistry. There was no SAGE. There was no EO. There was no YPO, right? And so there was no one for me to go to, especially on the financing side. Even though I was an accountant, I had no clue about finance. And I was always trying to catch up with getting money to pay for product, which crippled my sales every single year I owned a business, right? Had I had access to some really good mentors in a system like that, I might still even own the company. Who knows? But I did the best with what I could at the time. And a lot of people in the industry would help tell me things to look out for and stuff like that.
0:26:12.9 Everett Sands: All right. So let's shift gears a little bit. Someone starting a product company today.
0:26:17.4 Brian Smith: Product company.
0:26:18.3 Everett Sands: Product, yeah. Specifically clothing.
0:26:20.1 Brian Smith: Yep.
0:26:20.7 Everett Sands: What two or three pieces of advice would you give them?
0:26:23.5 Brian Smith: Okay. Well, I'm going to imagine they all have a logo and this logo is going to make them millions and millions and millions of dollars. And it's such a false hope, right? Because your brand is not a trademark registration, right? Your brand is not your logo. Your brand is not the product, right? Your brand is what people think about you. When they hear the word of your brand, what do they think? And it takes years to build trust, quality, deliberate actions that are going to make, like if you go to McDonald's, before you walk in the door, you know exactly what it's going to look like.
0:27:08.5 Everett Sands: That's right.
0:27:08.4 Brian Smith: When you get it, right? That's a brilliant brand. There's lots of brands like that. And UGG now, it's like when they open the box, they know exactly what they're going to get. And it's so easy to ruin a brand by screwing any of those things up, right? So to answer your question, yeah, you've got a great logo. And the trouble is, the clothing industry is seasonal.
0:27:36.5 Everett Sands: Sure.
0:27:36.8 Brian Smith: And in six months' time, it's going to be summer. And then in six months' time, it's going to be fall. And then you throw in the winter and everything into that. And so if you can't sustain a new complete look every single season, you're going to really get nowhere. So you have to have a brand that means something to somebody that they can go talk about and tell their friends about and slowly build that brand. And that's that infancy stage we talked about where most give up. But if you can persevere through that and you believe in yourself and your product, then eventually you'll start to get the reputation. And then if you bring in some influences, like my two young surf kids, they were influences 50 years ago. You bring in some people like that that can start to get credibility and a following. You just keep doing the right thing over and over and over again. And that leads into my favorite quote from my book, which is that the quickest way for a tadpole to become a frog is to live every day happily as a tadpole.
0:28:44.1 Everett Sands: That's amazing.
0:28:44.6 Brian Smith: Because if you just keep doing what you're doing the best way you can, month after month, year after year, pretty soon you'll look back and go, oh shit, I'm a frog. And you'll have traction.
0:28:56.5 Everett Sands: I totally get it.
0:28:57.8 Everett Sands: Now let me ask you this, staying on that same vein, product company, knowing what you know today about social media and different things like that, would you go influencer or would you go more of the bootstrap kind of street route you went, selling at the flea markets, the local shops, and different things like that?
0:29:15.5 Brian Smith: It depends on the stage you're at. I think those street fairs are absolutely critical for any entrepreneur getting in business because the best feedback is face to face. So I would recommend everybody, even if they've got a slick computer set up and a sales funnel and everything, still get out on the streets. Because the feedback you get there, you'll never get through the internet. The other thing for a product-based business is that beware of your success because it can kill you. Because most products you have to put a deposit down. And then when they ship, you pay like another 25% or 25% on arrival, right? So you've paid 100% out before you even get your product that you can start selling.
0:30:09.5 Brian Smith: Now, you can sell online ahead of time. But that's a problem if the delivery is a... There's a whole fraud with problems, right? But that's easy to do when you've got $100,000. Yeah, I'll give them a check for $100,000. But when you want a million dollars worth of product, it's like, oh, where do I get that money? Right?
0:30:29.7 Everett Sands: That's right.
0:30:29.8 Brian Smith: And so you borrow it, you get a good bank, like Lendistry, right? They understand the process. And then you put it out there and it's so successful, oh, shit, next year we made $2.5 million.
0:30:42.1 Everett Sands: Exactly.
0:30:42.7 Brian Smith: And that for product, if you're in a service-based business, you're doing software, stuff you can ship out on the internet, best business model of all time. But if it's a product business, you've got a warehouse, you've got staff, you've got receiving, you've got shipping, you've got customer returns, you've got... That's when you can run out of capital so fast.
0:31:05.7 Everett Sands: Yeah. So I was going to ask you, would you use e-commerce? I think I know the answer already, but I guess it'd be some combination. Could you still want the customer feedback?
0:31:13.8 Brian Smith: Absolute combination, yeah.
0:31:15.5 Everett Sands: Gotcha.
0:31:16.1 Brian Smith: Yeah, yeah. Retail stores are great, but they're expensive. And it's fantastic for your image and to promote new product and keep number one on the spectrum. But the online sales is a really profitable part of the business because your margins are much higher.
0:31:39.2 Everett Sands: Absolutely. And you mentioned this a little bit, but talk to me about like price point. I mean, when you want to offer a premium product and you're new, how do you convey that quality?
0:31:50.1 Brian Smith: I screwed that up so badly. The first like seven or eight years, we were like everything in the surf shops would be $40 or $50 and my UGG boots are $80 or $90, right? So super expensive. I had to keep cutting my margins like sometimes to 25% just to get the sales and I was so fearful of putting the price up that I'll lose my customers. And so for seven or eight years, I was making a 25% to 30% margin and I finally got this one investor in and he says, well, what are your margins? Let's put the price up. I go, oh, we can't put the price up. And he just looked at me and said, Brian, that's profitless prosperity. Isn't that a brilliant term? Profitless prosperity, which means the more you grow, the less money you've got to grow more because the margins weren't there. And so he finally convinced me and I put the product up like $20 in one hit. You know what happened to the sales? Nothing.
0:32:57.4 Everett Sands: Nothing.
0:32:57.8 Brian Smith: They just kept going.
0:32:58.7 Everett Sands: Interesting.
0:32:59.3 Brian Smith: And they just kept going. And so we put it up a little bit more and finally we got it up to a 50%, 60% margin and started to change the face of the company.
0:33:08.6 Everett Sands: I can only imagine.
0:33:09.6 Brian Smith: Yeah. The extra cash flow from that and my fear of the consumers wanting to scatter, absolutely unfounded. They saw the quality. They looked at the competitors and they were willing to pay an extra 20 bucks.
0:33:25.7 Everett Sands: Interesting.
0:33:26.3 Brian Smith: So, yeah. So anyone margins is key.
0:33:31.3 Everett Sands: Absolutely. I mean, it goes back to kind of that unit economic conversation. And I think understanding components, because sometimes we have people that are like extremely creative, and they know they want to design a product, they really, really care about that. And that makes sense.
0:33:43.8 Brian Smith: It does.
0:33:44.3 Everett Sands: But they don't know pricing. Or they'll get themselves involved in a deal, whether it be a distribution deal or a contract, and they forget the basic math that we teach people is one third operations, one third costs, one third profit.
0:33:58.7 Brian Smith: That's right.
0:33:59.3 Everett Sands: If the math is literally that simple.
0:34:00.7 Brian Smith: If you can do it, yeah.
0:34:01.5 Everett Sands: If you can do it. Everybody can't do it, and every transaction can't do it. But if they can think simply in that third, third, third.
0:34:08.5 Brian Smith: I wish I had that mindset 40, 50 years ago.
0:34:11.5 Everett Sands: Of course. We all do starting out.
0:34:13.6 Brian Smith: Yes, that's true.
0:34:15.6 Everett Sands: As you continue to educate, whether it be your audiences, whether it be the one-on-ones, whether it be through the books, what's kind of the reoccurring question you keep hearing from entrepreneurs or the reoccurring theme you keep seeing that you wish you could just give some advice on?
0:34:31.2 Brian Smith: So many people say how do you start a billion-dollar company?
0:34:35.3 Everett Sands: You don't.
0:34:35.9 Brian Smith: You can't. You can't. It takes a worldwide societal shift to get to the billions. Like Nike, when I first started, they were starting as well at the same time. It wasn't until JOGGY took off, which they had nothing, no control over.
0:34:51.8 Everett Sands: Interesting.
0:34:52.3 Brian Smith: JOGGY took off and Nike got sucked into this vortex of demand. And at the same time, there was Reebok in Santa Monica. They'd been like 10 years trying to get the dance market going. And it wasn't until Aerobics took off.
0:35:07.5 Everett Sands: Interesting.
0:35:08.2 Brian Smith: And Aerobics just, what are the best dance shoes? Oh, there's Reebok, Reebok, Reebok. And they got into the billions. And here's an interesting fact. You've heard how bad my first five years' sales was, right? I read 'Shoe Dog' by Phil Knight, who started Nike.
0:35:28.2 Everett Sands: Yeah, very good book.
0:35:29.3 Brian Smith: Would you believe that the first five years' sales of UGG was greater than the first five years' sales of Nike? So everybody has to go through the infancy, birth to adult phase, every single company.
0:35:44.3 Everett Sands: I totally believe that. One thing that is unique about UGGs and Nike and Reebok, from at least the stories I heard, sports marketing was leveraged.
0:35:54.0 Brian Smith: Yeah, very much so.
0:35:55.2 Everett Sands: And as you think about sports marketing today or you just think about new companies, do you think that that is a good way to go in terms of getting the product?
0:36:03.4 Brian Smith: If you're in the sports industry, yeah. Yeah. Like Reebok started out mostly running, but then they got into basketball and different sports. Nike started out straight in running, and they never deviated from it. No, then they got into basketball by Michael Jordan and stuff. Hugely important if you're in the sporting industry. But if you're not, then you need a different type of influencer. And that's how come all these media and social media stars are all happening, and they're very valuable. And so, yeah, any way you can get. Remember we talked about credibility? You had to have... You can't use fake models and everything. If you have credible spokespersons, that's what you got to use. And let me just close off that last Nike Reebok thing.
0:36:55.3 Everett Sands: Absolutely.
0:36:55.8 Brian Smith: UGG's societal shift was Oprah Winfrey. We shipped the business...
0:37:01.0 Everett Sands: She's a great influencer.
0:37:01.4 Brian Smith: Yeah, she was. And we got with her when she was at the peak of her popularity, and so it went worldwide overnight. So that was our sort of societal shift into the millions.
0:37:12.8 Everett Sands: Makes sense. So as you think about the brand, it's pretty much everywhere in terms of retailers. First of all, what's your favorite product?
0:37:21.2 Brian Smith: Mine's the Tasman. It's a slipper. They're really cool. I wear it at the supermarket. I wear it at the gas station, and I wear it indoors. That's my favorite. And then there's a desert boot style, which I wear out.
0:37:35.6 Everett Sands: Mine is the Throw Blanket.
0:37:38.6 Brian Smith: The what?
0:37:39.3 Everett Sands: The Throw Blanket.
0:37:40.2 Brian Smith: Oh, the Blanket.
0:37:40.5 Everett Sands: It's so soft.
0:37:41.5 Brian Smith: Best thing in the world, yeah.
0:37:42.4 Everett Sands: Yeah, I just can't wait for football season. That's when I use it the most. You have to have some nostalgia, some things that you look back on. Tell me one or two things you tell O'Brien as you look at where it is today, and you think about kind of just looking back.
0:37:59.0 Brian Smith: Yeah. I look back, and most of the fun was in the first five years when I did not have a clue what I was doing. Getting summer jobs and just piecing together bits and pulling it out of wherever. You know that saying that once you start out on a path, the universe will conspire to work with you?
0:38:21.7 Everett Sands: That's right.
0:38:22.7 Brian Smith: It's so true. But you have to be in motion, and you have to have a goal. And, oh, my God, that would help me get there. Oh, look at that. My friend said this. And everything's building towards the goal. But if you're sitting on the TV in front of the couch watching TV, you'll never see all these things. You have to be in motion. So that's the one thing I would tell the younger me is just don't stop. You don't know all the answers. It doesn't matter.
0:38:54.1 Everett Sands: Just as we wrap up here, what excites you these days? What's on your mind?
0:38:58.5 Brian Smith: Well, I love getting out and traveling. That's really what I've got left. I'm in my late 70s now, and there's a lot of world out there that I haven't seen yet. And I love speaking. So if I can combine both of those things and get out to travel and also give value to entrepreneurs on the way, that's the best. I haven't surfed for about a year and a half. I just got finally fed up with the cold water in San Diego. And like if I was in the Bahamas or something, I'd be surfing every day.
0:39:32.7 Everett Sands: I could see that.
0:39:33.5 Brian Smith: So, that's been a grind. I do play a lot of golf. So, I'm keeping myself pretty active that way.
0:39:40.1 Everett Sands: That's good. Well, thank you, Brian. Thank you for coming and sharing with us.
0:39:42.7 Brian Smith: All right. My pleasure.
0:39:43.8 Everett Sands: For those who haven't met you before, this is Brian Smith, international keynote speaker, author of 'The Birth of a Brand', and just one of the most sought-after business speakers and knowledgeable people. This is my second time talking to you this close. So, thanks again, Brian, for being here.
0:40:01.9 Brian Smith: Excellent, Everett. Thank you.
0:40:03.9 Everett Sands: Thanks for hanging out with us on Small Business Unscripted. Want more? Head to smallbusinessunscripted.com for episodes, helpful resources, and to keep the conversation going. Follow Lendistry at Lendistry, that's L-E-N-D-I-S-T-R-Y, on all the major platforms. See you next time.