How to learn from failure, almost losing business

Ryan Bartlett is the co-founder and CEO of True Classic.

Source: True Classic

At first, confidence was the key to Ryan Bartlett’s success. Then, it was nearly his downfall.

When Bartlett and a couple friends pooled $3,000 to launch men’s apparel brand True Classic in 2019, he’d never sold clothing before. But the idea behind True Classic, affordable shirts built to flatteringly fit the everyman, seemed to resonate with people.

The company brought in more than $26,000 in revenue in just its first month of operations, Bartlett says.

The following year, when it came time to order new inventory for 2021, Bartlett overestimated how many units his business might sell, and requested more clothing than the company could afford to buy. The mistake, he says, nearly put True Classic out of business.

“It was the stupidest decision we ever made, because it took us a good year-and-a-half to dig ourselves out of that hole,” Bartlett tells CNBC Make It.

He and his co-founders — Nick Ventura and Matthew Winnick — spent more than two years trying to fix the problem. They shrunk their company’s profit margins, paid vendors more than $1 million extra in interest payments and took money from a financing company in exchange for a percentage of future revenue.

Now, finally, True Classic is once again positioned to compete with direct-to-consumer rivals like Everlane and Vuori, and clothing giants like Nike and Ralph Lauren. The company is on pace to bring in $250 million in 2023 revenue, which would match its total lifetime sales figure in just one year, Bartlett says.

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His plan to survive and thrive, he adds: Lean on the lessons he learned from nearly going under.

After beginning his career as a failed musician, mostly spent playing piano in restaurants, Bartlett landed a job in digital marketing. He later launched his own business-to-business agency, Los Angeles-based SEO Direct.

In 2018, Bartlett began thinking about combining marketing and apparel. He’d “always loved fashion,” he says, and he’d grown frustrated buying shirts from mass-market brands that weren’t fitted, and shrunk or stretched over time.

Those brands seemed to be not “really thinking about who the customer was,” Bartlett says.

He reached out to a couple friends: Winnick, an investment banker, and Ventura, who’d previously co-founded a sports apparel brand called Venley.

The trio drew $3,000 from their respective savings to order a first run of t-shirt samples, and Bartlett got to work buying online ads on Facebook. He started with as little as $100 per day on targeted social media ads, and reinvested revenue from early sales into more ads.

“I would spend $100 and make $300 [in online sales],” he says. “And then the next day, I would spend $100 and make $400. Or I would spend $100 and make $200 — whatever it was. As long as I wasn’t spending $100 and making $50, I had a business, essentially.”

After more than a year of incremental growth, Bartlett and his co-founders felt confident projecting big sales in 2021, says Bartlett.

But in retrospect, their planning process was “a joke,” he says: “We basically sat around a table and we said, ‘What do you guys think we’re gonna do this year?’ We just way over-bet on the upside, essentially.”

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True Classic spent $40 million on its first inventory order for the year. It soon became clear that it should’ve ordered about half as much, Bartlett says. The company couldn’t just sit on the inventory, hoping to eventually offload the apparel: Without sales, it didn’t have enough money to pay vendors on time.

“It was a terrible time in my life, because I just didn’t know what was going to happen,” Bartlett says.

True Classic’s latest Commuter Collection features t-shirts, pants and other products for everyday wear.

Source: True Classic

True Classic signed up with Wayflyer, an inventory financier that provides loans to e-commerce startups. Wayflyer charges an additional 2% to 8% of the total loan amount upon repayment, which can be spread out over time, according to the financier’s website.

The partnership gave True Classic a lifeline, allowing it to start slowly paying back vendors — after Bartlett convinced them to agree to long-term payment plans, with interest. “‘You’re going to make a lot of money with us long term,” he recalls saying. “So work with us.”

Today, Bartlett says he’s learned from his past mistakes, which is why he no longer relies on only his gut for financial decisions — and why True Classic’s 60 employees now include a team of demand planners with retail experience.

That’s important, because the competition is fierce. Bartlett says he dreams of turning True Classic into a billion-dollar company. Rival startup Vuori is valued at $4 billion, and is profitable, too. Ralph Lauren, a more established competitor, currently has a market cap of $8.02 billion, and reported $522.7 million in profits last year.

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They’re all outpaced by industry giants like Nike, which is worth $166.52 billion and reported profits of more than $5 billion last year.

Getting a stronger foothold may require the kind of strategy True Classic once eschewed. Demand planners helped the company expand into international sales last year, a market that already accounts for 30% of the company’s revenue, says Bartlett.

“Now, when we make bets, everything is super methodical [and] it goes through a huge process. We don’t bet on the upside like that anymore, we bet somewhere in the middle to on the lower end,” he says, adding: “If we sell out, we sell out. That’s the worst that happens, versus going out of business … So we learned our lesson.”

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