How to Build and Scale a DTC Brand to a 9-Figure Exit — Kyle Hency | How to Grow a Business With Friends, Why Focusing on Your Strengths Leads to E-commerce Success, Why Inventory Management is Crucial, How AI Revolutionizes Inventory Management (#355)

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In this episode, we explore how Chubbies grew to nine figures in revenue before being acquired. Kyle Hency, co-founder of Chubbies and now CEO of gooddaysoftware.com, shares his entrepreneurial journey from investment analyst to successful brand builder.

Kyle discusses the challenges of scaling a DTC brand, the importance of inventory management, and how this experience led him to create Good Day Software, an alternative ERP solution designed specifically for growing Shopify merchants. 

Topics discussed in this episode:  

• Why inventory management can make or break your e-commerce business
• What happens when spreadsheets break: the moment entrepreneurs need to upgrade their business systems 
• How to build a successful business with friends & maintaining relationships while growing a company 
• Why unit economics matter more than growth: an approach to building a sustainable e-commerce brand 
• How AI will transform inventory and operational management for online sellers 
• Why focusing on your core competency is the key to e-commerce success
• How to prepare your e-commerce brand for holiday sales 

Links & Resources

GoodDay Software: https://www.gooddaysoftware.com/
Chubbies: https://www.chubbiesshorts.com/
Loop Returns: https://www.loopreturns.com/
X/Twitter: https://x.com/khency6
LinkedIn: https://www.linkedin.com/in/khency/

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Transcript

Welcome to the E Commerce Coffee Break Podcast. In today's episode, I'm joined by Kyle Hency, one of the founders of chubbiesshorts.Com, and we talk about how they scaled their brand to a nine figure exit. So let's dive right into it. 

This is the E Commerce Coffee Break, a top rated podcast that helps you become a smarter online seller.

Each week, your host, Claus Lauter, and his guests, share what's working right now to grow your store, boost your sales, and stand out in a crowded market. Stay ahead in this fast changing world of e commerce and get expert advice you won't find on Google. 

Hello, welcome to another episode of the e commerce coffee break podcast.

Today, we want to talk about how Chubbies got to nine figures and then was sold. So Chubbies is a very well known brand and a very long brand story behind it. Very successful brand. And to hear it from someone who went through this very long journey, um, I have Kyle Hensie with me. Kyle is the founder of Chubbies and, um, he is not only a Shopify entrepreneur, I said for long road, but also now going into a different direction.

And we want to learn a little bit more about that. So I would like to welcome him to the show. Hi, Cal, how are you today? 

Hi, Claus. Thanks for having me. Appreciate it. 

Kyle, I want to go right to the start. When you started as an entrepreneur, what got you into entrepreneurship? How did you end up in the world of e commerce?

Yeah, I always, uh, I always tell folks I had like the easiest entrepreneurial onboarding. Um, I was working for an investment firm at the time and had spent the early part of my career, um, supporting and advising, uh, some pretty large e commerce businesses as a, as a young guy. I was Uh, an analyst on the, uh, Amazon acquisition of Zappos.

And so just had like a front row seat in e commerce and, and came away from that feeling, man, there was just a tidal wave of, of e commerce growth that's coming. And. You know, how can I be a part of it? And early on, you know, um, I spent a lot of time trying to invest in software companies that have now grown up like Shopify and big commerce, um, that have become really core to the e commerce infrastructure space.

And so, um, yeah, I had like a really interesting early perspective on that stuff. And ultimately kind of had a moment where I said, Hey, either I can decide to go get in and do it myself. Or I can continue to be a passive participant on the side. And so that was really the genesis for going and starting to build chubbies is I wanted to make a bet on myself.

I had 3 really close college buddies, uh, Rainer, Tom and Preston who were kind of at a similar point in their life. It was, you know, we were in our mid twenties and ultimately said, Hey, this is a wild idea for chubbies, but let's lean into it together. We're going to learn a lot. Uh, we'll be graded by our own merits.

Uh, we're going to work really hard and and we'll see where it goes and and it really it started as a side thing that just immediately worked so Uh, we we all had kind of full time jobs while we were starting and then it was flying and we all had to kind of Dive in 

Okay. Tell me a little bit about Chubbies.

Most of our listeners are from the United States. Some might not be aware about the brand. What is Chubbies? How did you start? 

So, so, you know, Chubbies is the most radical shorts brand in the world, um, was like our early tagline. So we, we set out to build a more authentic young men's, uh, brand, um, that was kind of irreverent and gregarious and just more like, communicating to our audience the way we communicated with our friends, which at the time was like very polarizing.

Um, and so, you know, we, we very much like all of our early instincts for what it could be, have held true to today, um, in a really cool way. And it's almost like, um, you know, what we actually did and what we actually do, which is make clothes that are fashionable, including this, this quarter zip right here, kind of felt secondary.

And now as you fast forward, 10, 11, 12, 13 years into building the business, man, the team is world class. Um, at identifying trends, building new trends, just making great gear year after year after year, which is hard to do. So yeah, the, the brand continues to live on well beyond me. You know, we sold it in 2021 to a brand aggregator called solo brands, which we took public in October of 21, um, which is a whole nother story and a totally wild ride.

But, but look back on that whole journey. And I'm so grateful for my co founder. So grateful for our team who continues to work and build Chevys. And man, the business has, has like grown and hit milestones. You know, I think none of us could have imagined, you know, when, when we were starting in the early, early days.

Now, a lot of our listeners are side hustlers, small and medium enterprises, people who have a corporate job, want to do their own thing. And obviously you have done it all. You have been on the entrepreneurial roller coaster, what I call it. What was the toughest part in growing a brand? 

I think that early in the early days.

When everything's working, and that was our, just our experience, it felt like we struck a chord so early that anything we would do would work, um, and we were young, so we were running at it, and we were having fun, and we were just going, and then, like, the reality of scale set in, like, the law of large numbers, uh, you know, hits one day, and you're like, whew, this is real.

And I think when I was in my mid 20s, I was like, Oh, this is scary. This is hard. Oh, I'm not sure I want to do any of this. And now, you know, as a more mature guy is about to turn 40. I look back and I'm like, Whoa, those time periods that were really hard. We're like, you can see now how, how much we grew. And it kind of required how hard it was for us to like really accelerate our own growth.

Like, I look back at our team. Every individual got better. I look back at our processes, our technology, etc. Everything got better because it had to. It was a necessity and you know, the business frankly didn't grow much for two or three years after we kind of hit that scale moment and working through that is one of the most rewarding things we ever did.

And then over time as a leadership team and a group of buddies building a business together, like man, we were able to do that together for over a decade. When people, when people were like, well, the four of you are starting this, like, how are you going to, how's the interpersonal stuff going to work there?

Like, I don't get it. I think one of the things that's most rewarding to me is we did it together and kind of against the odds, frankly, with everybody outside being like, no chance you're all going to be able to get this done. And so that was really galvanizing for us and something I'm really proud of.

So I always encourage folks, like find something you're excited to work on and do it with people you like to work with. It's so simple, but like, invariably things aren't going to go well. Yeah. You're going to definitely have that moment when you do. It's really helpful if you like working with the people around you to work through it.

And so, and so I absolutely had that and feel pretty fortunate. 

Yeah. I think that you summarized basically what a lot of entrepreneurs experience in their life. It's hard and it has to be hard because that's the only way that you get better. I mean, that's, I think that's a very good takeaway and then having a team around you, if it's friends or not, um, that really, yeah.

basically rounds up the whole thing and they have sort of experiences, they have skills that you don't have and then grow a business from there. That's such a major point in making a growth of a business successful or not. Now, I want to dive a little bit in what you do nowadays and want to start with, you said you were scaling very, very quickly.

Inventory is always on. Specifically when you scale quickly, tell me a little bit about how were you handling inventory? 

Yeah. So at the time, like just like kind of drilling into what I was alluding to, uh, as we were scaling the business, you know, think of the first like three or four years as like, hold onto your seat as many of as many things as you can come up with and make the world will buy.

And then like a moment of like, Whoa. Um, we're operating, uh, an e commerce site on Shopify. We have three or four or five stores and we want to grow to more. We have a bunch of wholesale accounts we want to bring on. And man, the, the complexity, the matrix complexity around just managing our inventory. Like, where are the items?

Are they sellable? Like some really easy questions became really hard to answer. And I think that moment for a lot of these brands, for whatever reason, whatever's driving it, typically the spreadsheets start to break. Everybody starts to panic and, and we experienced this and you begin to question, you're like, okay, I think our technology isn't quite right.

So we need to fix that. I think our people might not be right. Maybe we need to optimize that. Certainly our processes are not going to scale if we keep doing it this way. And so for us, we went to NetSuite and we spent a lot of money and several years building a big instance of that out. And so what I'm doing now with Good Day is I'm looking at the power of a lot of those tools and saying, Hey, can we make those way more simple and can we bring them to smaller brands at an earlier stage in their life cycle, do it in a way that's.

That's easy to set up, do it in a way that gives them the power of these systems, do it in a way that doesn't cost them an arm and a leg. It is as simple as that. Um, and then I would say the other unique thing we're doing with Good Day is we're bringing it really close to Shopify, which I think is, it's just kind of born out of my experience now building in the Shopify ecosystem three times is like all of these operators live in Shopify today.

And it always felt odd that the second you were wanting to do these complex inventory actions, it was like a wardened off team of five people who had access to NetSuite. So we're trying to bring all of that into one, one window for everybody to see and manage and really like centralize all of your operations in one, in one place.

So that's where we're spending a lot of our time. It's been really cool. We're about 18 months into building. Uh, we have 30 brands signed up and. And we're in it with them. We're going through the holiday with these brands for the first time. And it's just why I 

want to touch on this and take us a little bit back.

Um, so obviously you have been through that. Now you just mentioned you already working with brands, um, putting in the tool, do you see are the biggest mistakes that online sellers are making when it comes to inventory and ERP systems? 

Absolutely. So, well, I would say. Well, one in the build up to holiday in particular, you have to be really great at studying multiple years of past data to isolate.

What are these builds look like? How can we get the right inventory? You know, in house and ready to sell and ready to service customers kind of in this window of time, this time here in November is when you really got to get all of that, uh, all your ducks in a row. Um, so that's really what we're spending a lot of time, um, with our, with our early brands, but I always, I think you got to plan for this promotional window.

You got to plan for the window on the backside of it when things quiet down, but there's still a lot of consumer. Um, activity. You have to have proactive promotional planning throughout this period of time. And, you know, and this is kind of specific to Chubbies, but we would also be working through the next summer's buys.

Uh, while we were in the middle of this. So I do think there's something about, like, not losing track. Of the preseason work that still needs to get done when you're in such a chaotic time. So, so I think, I think it crossed those levers. Um, I think there are some big lessons that we learned over time. And we always felt like it was best to treat the special consumer holidays like holidays.

And treat our consumers special during those times. I think there's a lot of debate around should you discount, should you not, etc. We always just love to get in there with our community and do cool stuff with them. Uh, when, when it makes sense for them. So, so I always encourage people to, to get into it during Black Friday, Cyber Monday and do something fun and, and different.

Okay, I want to talk a little bit about who's using the ERP system, who's using your software, because obviously you touched on, you're doing marketing activities, you're doing purchase activities, you're doing long term planning, who's on the team? 

At the brand side, typically we're working with folks from the supply chain team, from Uh, maybe like the C.

O. O. and their, you know, supply chain logistics folks, et cetera. Um, sometimes it's just the founder and the two or three operators who want to have better systems. Um, I'd say that's probably about half of what we're doing. Um, and then increasingly, as we're moving down the stack of building the rest of the E.

R. P. we're getting into accounting. And so, uh, we're increasingly working with the finance and accounting team. So the vision is all the operators inside of these. Inside of these brands are operating in good day as their central operating system and then tangential commentary is just like who are we and and and I think it's pretty unique in the ERP space which is Half of our team is like ex Shopify engineers who worked on a lot of these back end tooling and then the other half Um, is X brand operators.

I have several people from chubby's. I have several people from other brands. And so we are very much taking like, uh, like a brand oriented approach to how we're building product. Um, we call all of our early customers design partners because we're in it with them every week, showing them future designs, getting their feedback and then getting that product.

And feedback loop moving really, really fast. I think it's something that will be very different about good day when we when, as we get into market. So, so really excited about how that's come to life. And man, these brand operators are so good. Like, that's what I, I do think I would just encourage all operators of all of these brands, like develop your own opinion, right?

Develop your own expertise and trust yourself. It's not like there's someone else out there. inventing something you're unaware of necessarily. It's like you have to pave your own path. Um, and man, we've seen that as we've gotten to work really closely with these operators. A lot of our best ideas come directly from their experiences.

It's really, it's really powerful. 

Oh, I like the, the configuration of having Brand operators and people that are coming from the IT side of things. Walk me through the implementation and the onboarding part of it. How does it work? 

I would think about our current solution in the market as a subset of supply chain tools, inventory management, order management tools, and then bringing off Shopify sales into Shopify.

So think B2B, think Amazon, those sorts of things, right? So kind of three buckets. Most of our customers are on either the supply chain tools or the inventory Tools. And those are just like where we started and that's why. Um, and it takes about four to six weeks to get those tools kind of humming and to be like your central operating system.

And then over time you were, we're just launching, we're launching so much new product every month, um, that we're rolling it out each month with all of our existing customers. But yeah, it'll generally take four to eight weeks is kind of the time window to be thinking about. And. And like, look, we're, we're wanting to drastically reduce the total cost of ownership of these systems for brands.

And that's, that's to be able to help these young brands who are complex, um, get the power of the tools. And, and, you know, I think that is one of the most unique things we're doing. And frankly, if, if there was not a way to do this closely to Shopify, I think that would be impossible. So I feel really fortunate that Shopify has a platform that has a lot of rails that allows us to build fast And bring a lot of value to merchants quickly But yeah, we're early early signals are that that folks are getting a lot of value They're getting out of spreadsheets.

So they're reducing a lot of manual data entry They're centralizing their operations is such a powerful moment in any business Because then anybody on your team can fish for themselves. They can come to where the data is You They can answer their own questions, and I think it just up levels every one of these teams.

Now you're not talking about what is the information you're talking about. What are we going to do with the information? Um, and I think that's a really important transition for these brands to make. 

Yeah. Tell me, who's your perfect customer? So you said once you make the transition or you want to get away from spreadsheets, which I totally can relate to, um, what kind of revenue do you need to make before you decide to go on a proper ERP system?

I would call what we're doing an alternative to traditional ERP. Traditional ERP systems. So the businesses are generally smaller. So, so think of this as anyone on Shopify, who's between two and a hundred million in sales and not yet on NetSuite. I want to talk to them. Um, I can likely help scale and automate a lot of their internal operations, but the, the promise of ERP and the promise of what we're building with GoodDay is still the same, which is to centralize all the information into one home, cleanse the data, make sure it's trustworthy.

And then give everybody access to that data. And that last part is where I think we're quite unique, where we're making it really easy for everybody else to access the data and make their own decisions. And I think that's just like a tool that's more modern and built for a world where most of the operators that these brands are remote by nature.

And so they need access to this data in a way that they didn't, when they could all be in a room together, you know, chopping it up and figuring, figuring out some of these complicated, you know, inventory actions or decisions they need to make. 

I totally agree. Um, remote teams, I think it's, it's more the standard than the exception by now, at least for young brands.

How do you see AI coming in there? I'm a big fan of AI. So that's why I'm asking the question, how do you see AI coming into these systems? 

I think it's one of the, when, when I like zoom out and you're like, just imagine building an alternative to, um, legacy ERP systems. One of the cornerstones of that strategy is.

We're building a vertical ERP specific for retail. The reason that's powerful is it's actually pretty approachable for us to build a contextually aware system that says it's a retail brand. If this is true over here and this is true over here, we should suggest that they do this, right? So it's pretty core to what we're building.

Um, and we already, we're already testing, um, really cool. Um, products. We have an inventory agent we're working on in the background. We have a product we're planning to roll out in the first half of next year. That's called nudges, which is effectively You're an operator operating through your day, and the system's just going to kind of nudge you in some, some interesting directions to go check out things, or even, and then in the future, you can imagine recommending them and automating them to do things, right?

So, um, the system itself is going to be built from the ground up to be contextually aware of what's happening in the system with the data. Um, and that's where it's like, why are you building? This brand with a bunch of brand operators inside of it. That's why. So you need to know how to build these brands to build that sort of technology.

Um, and so, and so, yeah, we're, it'll be central to, to how we come to life. And, and, you know, I think, I think we're just now getting to some of the fun parts like that in the build journey. Uh, we've spent the last year building all the pipes and in this world, there's a lot of infrastructure you have to build.

And so, um, we're just kind of coming out of that, getting a lot of customers on board and Helping them pull the value out of the system for themselves. 

I love the name good day software. I mean, as an entrepreneur, what you want to have is a good day and not every day is good as an entrepreneur. So I love the name.

You said you're in the process now to going through the first big season. What kind of clients are you looking for? What's happening there? 

Yeah, I would say in general, we're most We're most powerful for any Shopify brands. We definitely have, um, a lot of, uh, expertise in apparel, footwear, accessories world.

And a lot of our customers kind of tend to gravitate, uh, to the, to that world, but, but we can serve as any brands on Shopify. Um, who haven't put a centralized system in place. Um, and so, yeah, we're, we're really excited to be, we're, we're bringing up a lot of new customers live right now. I think the front half of next year will be pretty wild for us.

Um, and, and I would, I would just say, and I think it's good to feel, which is like, Since 20, since we came off of the top in 2021 and going into the early part of 2022, we haven't felt a lot of momentum on the consumer side. And so the brands haven't felt a lot of momentum. And man, in the last quarter, I'm starting to see that open up.

And so it's, I'm seeing really awesome early signals from our brands preparing for the holiday. You know, they're moving inventory up. They're getting excited. The consumers pulling it, you know, product out of their hands. Um, so as I look out over the next year, I'm really excited about the growth profile of a lot of the brands we're working with, um, and, and how we can support them.

Yeah. It's good to hear from someone who's so close to the data that there's positive science and things are heading finally in the right direction again. So I love that. How does your pricing structure work? 

Yeah, it's it's really simple. And again, we're we're heads early for us. So All of this stuff is flexible.

We actually don't even publish it on the site at this point Um, but if you're a subscale brand, let's call that under under 5 million in sales. It costs 500 bucks a month Uh for between five and ten it's a thousand between Between 10 and 20 million it's 2000 and then above that we just work with you and and try to figure stuff out I would say in general the lion's share of our brands kind of sit at that 20 million mark And we have some outliers that are 100 million plus and we have some Outliers that are far smaller and just kind of getting going and want to have mature systems Uh from day one, but but yeah, um wide swath of customer types But, but the product itself is meant to be, uh, meant to be pretty approachable from a pricing perspective.

Okay. Sounds good. I want to sort of end up where we started. What kind of advice would you give some young entrepreneurs that are trying to start their online business? 

Yeah. I mean, I think, I think people tend to overcomplicate things that are pretty simple. Um, and some of those at Chubbies that were pretty profound were like, You know, why do people come to your site?

They're really excited to buy shorts from you guys. They really like the community, et cetera. Um, so what do we have the credibility to go build and deliver to them? And, you know, time and time again, We tried new things all over the place, which is a part of the entrepreneurial journey, but we saw over and over and over again that was like, just get better and better and better and better at the core of what you're great at and continue to innovate there as a starting point.

Always pace. And so, uh, in a world where there's a thousand different things you could do, like really get to the essence of why you matter. and continue to innovate on that vector. Um, I've seen that work in apparel. I've seen that work in other types of businesses, and I've certainly seen that work in technology.

And so, so I do think that that is something that's like pretty straightforward, but like so hard to do so easy to get distracted. 

That's right. Yeah, it's easy to get distracted. Before we come to the end of the coffee break today, Kyle, is there anything that you want to share with our listeners that we haven't covered yet?

If I were giving advice to any brands being built today, I would just say don't ignore your unit economics. If something is off somewhere, Assess it, acknowledge it, address it early. There's going to be plenty of time in the future to accelerate growth. Until you figure that out, I think it's really dangerous to be too growth oriented.

And, and that's just lessons learned from Chubby's, you know, over a decade of operating. Uh, focus in on, on your unit economics, make sure they're working, and then scale. 

Yeah. Very, very, very true. Where can people go to find out more about you guys? 

Uh, yeah. You can go to gooddaysoftware. com. Um, if you want to learn about what we're doing, you can sign up for a demo.

I'm giving all the demos myself. Uh, we have a really lean team, um, and we're just getting started over here. So that's an easy way to get ahold of me. You can also just message me on LinkedIn or, or X. I'm khenc6. 

Excellent. I will put the links in the show notes that you just want to click away. Kyle, thanks so much for giving us an overview.

Um, I liked that you not just stopped working within, I sold the brand and now I stopped working and that you going through the, I think probably another entrepreneurial journey of doing, running a software company, which might be a complete different beast and giving back to the community. Really like that.

Thanks so much for your time today. All right. Thank you as well. Hey, Claus here. Thank you for joining me on another episode of the e commerce Coffee Break podcast. Before you go, I'd like to ask two things from you. First, please help me with the algorithm so I can bring more impactful guests on the show.

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