‘I’ll Tax Your Seat’

[Music] Hello everyone. Welcome to the 21 Hats podcast. I'm your host Lauren Feldman. This week we meet special guest Ben Neppepler who along with his co-founder Nelson Warley came up with an idea for an outdoor chair that they believe could be a gamecher. They like the idea so much that they quit their corporate jobs. They raised money. They borrowed money putting their own homes at risk. They fought through the pandemic. They found a manufacturer in China. They launched on Kickstarter. They found another manufacturer in Cambodia. And then they ran smack into the brick wall of President Trump's secondterm tariffs. Or as George Harrison almost put it, if you try to sit, I'll tax your sturdy portable folding chair that could create a whole new category of high-end outdoor products. Except you'll probably have to try to sell them in some other country. Cuz I'm the tariff man. Even in good times, owning and running a business can be a lonely pursuit. Our hope is that these weekly conversations will let owners know they are not alone in facing challenges. In fact, that's the whole idea behind the 21 Hats community, engaging with other owners to get the kinds of insights only another owner can offer. If you're interested in learning more, step one is to sign up for a free trial of the morning report, which highlights the most important news of the day for business owners, so you don't have to go looking for it. Step two is to get on our Slack channel where you can ask questions, get vendor recommendations, and tap the wisdom of a very impressive crowd. Just search for the 21 Hats Morning Report to sign up for a free trial. Joining me this week on the podcast is Ben Neppler, who is co-founder of True Places, a startup that is trying to create a new category of outdoor products. And by the way, Ben will be hanging out on the 21 Hats Slack channel on Tuesday and Wednesday this week in case you have any questions for him. The episode is titled I'll Tax Your Seat. Welcome, Ben, our special guest today. It's great to have you here. Ben, you've had a a very interesting journey building true places. I I want to ask at what point have you been most excited and confident about your business and and what's the vision that you had at that point? Well, Lauren, thanks for thanks for having me. It's great to talk to you. Um, I think I'm actually even now with with the many challenges that I know we'll talk about. Um, I'm as excited about the opportunity and the and the vision of what we're building, um, as I was when we first made the the crazy leap to to leave our jobs and start True Places. Um what we were seeing at that time, and this is about five years ago, is that we realized we were spending a huge amount of our time outdoors and outside with with friends and with family. Uh but not necessarily going on a huge camping trip or going to the mountains every time, although those are great, too. But we are spending hours and hours every week in the situations that you can kind of describe as just outside your door. It might be in the backyard with your family around a fire pit. It might be on the sidelines of kids sports games. Could be in local festivals or concerts in the park um or block parties. And the the list goes on. There are all these different situations. Um and people are spending a huge amount of time and it's really meaningful time. But when you look at what people are taking with them and using in those situations, it's usually old, uncomfortable camping gear that wasn't really designed for those occasions and those purposes. Um, and once you once you see something, it's really hard to unsee it. um is that we started digging into it more and more and trying to understand the the category and the the types of products that we could maybe create. But we realized that this was a huge aspect of people's lives that is a massive behavior but no one was really designing and creating products for this aspect of people's lives. So that's what we set out to do and the the vision of of creating this this brand and this company that um is really focused on that part of people's lives um is something that we were excited enough to start the business around um and we we remain as excited about that vision. And so our first product is a is a portable chair because we notice that in all of these situations that at least in the US uh people are mostly sitting for hours and hours and they're usually sitting in generally lowquality uncomfortable old camping chairs that weren't really designed for for that situation. Um, and so we set out to try to solve that literal painoint, but also to try to build a brand for uh more broadly for this the these occasions and this part of people's lives. Can you give me a sense of what the ultimate vision was? H how big an opportunity did you perceive this to be? Well, I think it's it's massive. Um when you think about the outdoor industry, it's um it's really dominated by what we would call the the great outdoors and um going hiking and and mountaineering and all of those activities. Um but there is this huge behavior that is just much tends to be much closer to home. It might be the odd, you know, camping trip now and again. Um it's it's much more frequent behavior. Um, and it's it's things that people are doing more in their everyday lives. Um, so it doesn't really make sense to use all of the same kind of kind of gear and equipment for all of those different uses. So when you think about how big these these behaviors are, there's probably 60 70 million households in the US that have kids playing organized sports. Um, the number of people that have fire pits in their backyard is is enormous. You can go down the the list of all these different use cases and when you add it all up, it's it's an enormous opportunity. At least we think. Take us back to that crazy leap you referred to. What were you doing? How did you get the idea? And what did it take for you to to take the leap? Yeah, I I think everyone who started a business has their own personal reasons or or story around around why they why they started the business and and why they did it. Then um for me it was uh a lot of I'd been thinking about it for for many years um with this idea that if I got to the end of my end of my career and I hadn't I hadn't tried to start something for myself from from scratch then um I had a strong sense that I would regret that. Um, but there were always all kinds of reasons why it would be a crazy crazy leap to to do, especially once you have a family and once you have kids. So, I I knew I couldn't really do it alone. I needed to to do it with the right the right people or the right person. And um I I knew it had to be the right idea, the right kind of opportunity and the the right the right timing. Uh so all of these things kind of came together and I was um catching up with with someone I used to work with Nelson who's my my co-founder. Uh we worked together years ago um in uh innovation and and marketing in consumer products. Was that a corporate job? Yes. Yeah. We were both working at um Campbell Soup Company. um this many years ago. I was only there for a few years, but Nelson was there for um almost 15 years. Um, and I heard that he was leaving or thinking about leaving and uh we we were catching up because we we really enjoyed working together and we both realized that we were thinking along the sim similar lines and we were both thinking about similar kind of opportunity and realizing that there was this aspect of our lives where there there weren't really brands or companies that felt relevant and were creating the kinds of products that we wanted. And so it felt like a lot of different elements kind of clicked into place at at the same time. Um, at least enough that I left my consulting job to to go all in on True Places full-time. When you pondered taking that leap, what was the most uh frightening aspect of it to you? What held you back as long as it did? I'm sure anyone who's gone through this kind of journey can can appreciate it's a it's an odd combination of being incredibly exhilarating and certainly the most exciting thing I've done myself professionally but also the most terrifying I think especially from a just a a personal and household financial perspective. Um, so that was probably the the scariest um the scariest part of it. We have three amazing kids and um the idea of of giving up a comfortable um kind of corporate or or consulting job um in order to to make that leap was absolutely terrifying. I'm sure. What did you have to do to get over that hurdle? Did you did you raise money? what ultimately led to you deciding to to go? Yeah, I think as as Nelson and I talked about the opportunity more and more and we started uh just spending a a lot of time trying to figure out whether it was going to be viable, figure out a business plan. Um ultimately we had to make the the leap before you have to make the leap before uh you figure everything out. um which is which is why it's called the leap. Uh but we basically gave ourselves a certain amount of time. We we said let's uh let's try this for for a few months I think maybe maybe 6 months at the time and if we're able to make the progress that we hope to and we hit kind of milestones that that we' put in place which included raising some outside capital figuring out product design and and various other aspects of the business. um then you know we would we would feel good enough to to keep it going. At least that's what I said to my wife at the time just it'll just be 6 months. Um little did we know so this was literally a few months before the pandemic started. So of course the whole the whole world turned upside down. Um I would not recommend starting a physical products business um during a global pandemic. Um obviously no one had global pandemic in in their business plan. Uh so from the very beginning it's it's just been a huge huge roller coaster and we've had to overcome just a a lot of challenges but you know that's part of the the excitement of the of the journey. How did you go about designing uh the portable chair that ultimately became your first product? Neither myself nor Nelson are are trained designers or or engineers. Um we were able to do a lot of pretty good consumer research very quickly. Uh that's that's an area that we did have some background in. So we had a very good idea pretty quickly of what it was we wanted to create. Um, and then we spent a lot of time trying to find the right designer to to help us. That was really kind of the focus for for for many many weeks was it would be a very big decision and an important one to to be able to partner with the right the right person. Um, fortunately we were able to find an incredible industrial designer who's originally from the Netherlands but based in in New York and he was at the time just starting his own studio. Um he he'd been working for some very famous industrial designer called Karim Rashid for a long time and working with some other companies. He was just starting his studio. So it um actually worked out to be a really good fit. And um he had some background in in furniture design as well as other kind of related topics. And so um he he he was fantastic. we we worked really closely with um with him um in order to to design the the the product and we actually managed to get through that design process um almost quicker than we thought it would take. And so um at that moment we were like oh this whole you know entrepreneurship thing this is this isn't so hard and then the pandemic uh began just around that time and we also hugely underestimated how much engineering work would be required. We thought, "Oh, we've we we've designed this, you know, this amazing amazing product that that hits on like everything that we think well, not not only ourselves, we we want in our in in these like moments in in our life. Uh, but everyone that we've spoken to and all of our consumer um research points in in the same direction and we're we know that we've designed the best portable chair that there's ever been, but then actually making that a reality." So turning from the design to a physical product and then beyond that to one that you can produce at some kind of scale uh is an enormous process that we we definitely underestimated. I want to ask you about the engineering and the factory but first tell me about that consumer research uh what were you looking to find out? Yeah. So, we we done a lot of research on just the the overall market um side of things and this again like I I I was pretty comfortable with from my background as as a consultant. Uh you get to understand industries pretty quickly. We knew for example that there had just been very little innovation in this category over time. anything that existing companies had had been doing was really trying to remove as much cost as possible. So just to make the the cheapest possible chair and really it had come from a design perspective originally of how do you make something that folds up that you can somehow sit on? Like that's how the original uh traditional camping chairs were were created. And we we knew that we wanted to take a completely different approach. How do we create create a real chair and almost a piece of furniture that people will will love sitting in and then how do we figure out how to fold it and make it really portable. So coming at it from a completely different different perspective, but we we had a lot of uh conversations with with consumers just trying to understand how these kinds of products fit into their lives at the moment and what it is they're looking for. So that was that was kind of very basic um basic research. We then went off and and created with with our industrial designer um some like potential directions and then what I think was the really valuable research was being able to show some of that to consumers and getting some reaction because as you say if you just ask people for a wish list everyone will want everything. So you have to force some tradeoffs and say would you rather have this or that? How important is are these different things relative to one another. And when when you think about, you know, an an outdoor portable chair, there's like a basic inherent tension between how comfortable and sturdy it is and how portable it is. And so um the the only innovation we'd seen in the really in the past um couple of decades was trying to create an ultra lightweight and ultra sort of portable um chair. So you you get these um they're really good for, you know, going on a really long hike. Uh but you have to assemble them like a tent. They're only a couple of pounds. They're they're really lightweight and they fulfill on that. But the trade-off is that, you know, they're not really chairs. They're not they're not very comfortable. They're not particularly sturdy. Um, and so, you know, you're making that trade-off based on on the use case. Um, so we we were really focused on how our consumers are actually living, what do they need in these moments with their with their friends and their and their family. Uh, and it's a slightly different kind of set of trade-offs. So once we had some designs done uh we were able to go back to consumers and get some reaction and and understand how people felt about them. We were able to do at least some research on what could people be willing to pay for this kind of thing. Um which is a whole another kind of set of of difficult research to do. But um that's that's the way that we approached it. I wanted to ask you about the uh the pay issue. I mean, obviously, if it costs $10,000 to make one uh of the greatest outdoor chairs ever made, that's going to be a problem. At what point did you start limiting your vision to make sure that people would be willing to pay what it would take to to build it? We were pretty focused on that from the from the very beginning because like you say, there's no point um uh creating the most amazing product that no one's ever going to buy. And as we worked with our industrial designer and our engineering team and and others um we were incredibly conscious of that. We we knew that we were going to be at a premium to what most people were used to in the category mainly because the category had just been a race to the bottom over the past 20 or 30 years. And so when you say cam chair or portable chair to people immediately they get an image in their mind and they also have all of these associated thoughts around how yeah it's going to be portable. It's going to be pretty low quality. It's not going to last and it's going to be really cheap. So we we knew there were going to be inherent challenges about trying to create a better product and almost try to uh create a more premium segment within that market. But within that context we we were very conscious of how can we get to the best possible product at the uh the most affordable price points. You talked about how you you felt pretty good when you had your design. What was the next step? Did you do the engineering first or did you find a factory where the they would help you with the engineering? We knew that the engineering would be complicated. We we didn't realize how complicated it it would be. Um but we uh really the the only way that we managed to make it through is that we managed to find a um an incredible engineer actually someone who I I I knew personally um also based in Philadelphia but he's an just an incredible engineer. He he was an an undergrad at at MIT and while he was there he co-invented electronic ink which was the uh the technology behind Kindles and e-readers and he uh is just an incredible mechanical engineer as well. And so we we didn't realize how complicated the mechanical engineering and the geometry would be. you know, it's not rocket science, but it's actually not trivial to create an incredibly comfortable chair that can fold very compactly. And so we we now have patents on our on the folding design. And um you know, the result is it was fantastic, but it took a huge amount of work to to get there. I never imagined that you know my name and and Nelson's and others would be on on patents for folding chair but um again that's you know part of the part of the journey on once we had got the engineering to um to a good enough point and we could really start thinking about there's there's a process called design for engineering or or engineering design for manufacturer which really involves how do you take the the prototype and figure out how you're going to be able manufacture it at at scale. Um so once we got close to that point then we really started engaging our our manufacturing partners. And how did you find that manufacturing partner? Yeah, we um again it was this was a huge challenge because it we were it was really in the middle of the pandemic and so we couldn't we couldn't travel to meet people. It was again it looking back it feels like it's a miracle that we made it to to market. All altogether you've picked a really interesting time to start a business. Right. Exactly. It it seemed like a good time um you know when we when we started uh but you you never know. Uh we we spoke to a lot of people in the industry. It became clear immediately that the the actual manufacturing and assembly of these kinds of products just doesn't really exist in in the US at all at all. I mean, there are, you know, a couple of like very small shops that that make kind of like old style lawn chairs. We we've spoken it once or twice to uh groups that that make more kind of military equipment, but basically everyone that we spoke to um explained that the actual like manufacturing and assembly of this kind of product and it really varies across categories. So this isn't this isn't sort of a general statement across um any kind of product, but for what we do like it's a very particular combination of of hard goods and soft goods. So you have the kind of metal frame, but then the the fabric and like very specialized fabrics. Um, and the way that it's assembled is um requires a lot of expertise. Um, and we'd created a um a more sort of premium version of of what had been done before. on. So, um, when you add all of that together, you have to go to where all of the expertise and and the the scale of, um, this kind of manufacturing is, which at the time was like 99% in China. Um, and so we we it wasn't even a, you know, a question for us. We we didn't have any any kind of choice. Like we um we we had to be there and that that's what we did. Again, like I think we went through our first two production runs without ever being able to meet in person. and w with our manufacturing pond and going to to visit our factory. Um Nelson finally was able to go he literally got got a visa the the day that the borders opened um coming out of the pandemic. Um but that was you know well after we' done you know majority of the of the initial work. Were you happy with the first run? Um, we did a Kickstarter campaign when we first when we first started partly in order to help validate that the opportunity and that the market opportunity that we kind of felt strongly was there that people can say that they want all kinds of things, but it's only when they actually, you know, have to put their own money down to buy something that you really that you really know. And so we we had done that which gave us a little bit more time in order to work through all of the manufacturing setup. We're we're pretty proud of being able to deliver that that first production run and that first batch of of product to our um to our Kickstarter backers. So, you know, we we were very very happy with that. Um there have definitely been some, you know, tweaks and improvements that we've made over the past past couple of years and now I think we're at a point where the product is really kind of where we always wanted it to be. And what uh what price did you charge uh on the Kickstarter? Well, um we initially we we we we probably underpriced in the in the in the Kickstarter. One of the advantages of of doing a Kickstarter is that you get um th those sales immediately. So, it's it's really like very early pre-sales and pre-orders and then you don't have to deliver that product for for many months. So, from a cash flow perspective, it's it's really appealing. The flip side of that though, and it's it's a bit of a double-edged sword because, and this is what happened to us, between when we actually did our Kickstarter campaign and we got all these sales, it was it was fantastic. We had over $40,000 worth of sales in the first few hours of of launching, which was really incredible. Um, and you know, pointed towards the huge kind of demand for what we were doing. But between doing that initial Kickstarter campaign, which was I think 30 days, and when we actually did our production run and fulfilled the product, our costs um skyrocketed um mostly due to the pandemic. So, it's it's hard to remember now, but if you if you remember at the time um freight costs and shipping were about 10x of what we of what they had been before. Sure. um our product is, you know, it's not enormous, but it's it's it's not tiny either. And so the shipping costs are are significant. At the same time, the costs of metals, so whether it's like the steel that went into the molds that we created or the aluminium that we used to um to actually make the frame of our chairs, all of those costs um went through the roof. And so yeah, financially it was it was very very challenging because we'd already we'd already sold the product at one price point and then all of this kind of supply side shocks happened mostly driven by the pandemic exactly in between the time when we when we sold and when we had to fulfill. It sounds as if you had immediate success on on Kickstarter. Did that happen organically or did you do something smart in terms of marketing? Uh well it's you know nothing nothing ever just happens completely on its own. Um I think the the Kickstarter platform was was good for us because there is there is some organic um interest in that in that platform. There are people who who are are checking it out all the time and they're really excited about new innovation. And so that definitely helped. At the same time in conjunction with that you you need to help drive some of your some of your own demand. And so we we started doing some um some social media advertising and you know it wasn't a huge amount. It was relatively little but the combination of those two things really really helped. So what was your uh the next channel that you used to sell? So since uh since the Kickstarter we've been almost exclusively direct to consumer through our own website. So throughplaces.com. Um, and that was always our plan for various reasons, but um, it was a fairly seamless transition from, uh, you know, being able to fulfill the Kickstarter orders to selling on our own website. Did you think about Amazon? Yes, we we thought about it. We continue to think about it. Um, it's not it's not a channel that we've ever we we've done up until this point. Uh but we debate it all the time. Um it's uh I think there are some very significant pros to to doing it and very significant cons to doing it. Um ultimately we've we've landed on um not doing it for now, but that that could well change. It's it's obviously a huge market. That's where people people go as the first place they go for any kind of any kind of product. I think over 40% of of product searches start within Amazon. So it's an enormous uh channel, enormous market. We didn't think that we would be able to at least at the very beginning really tell the story of our brand and our product in a way that it would make sense to people in that context. So you know most people are searching and then it's really a price comparison immediately. You know, as I mentioned previously, the market in our category is dominated by essentially private label um traditional camping chairs. And so if that's what people are used to and they're used to those price points, when they see something that is significantly more expensive, they they're not going to pay much attention to it. Um at least at least in that in that kind of context. Um, and so for those and and other reasons, we've we've not done it yet, but that could change. Before the the the tariffs hit, had you reached a point where you were able to uh produce enough of the chairs to to meet the demand that's out there? Uh, well, uh, it's kind of a delicate balance uh, when you're trying to get a a physical products business off the ground and trying to Well, I mean, we're still very much a startup. Um, so cash flow is just, you know, incredibly challenging and it takes it it takes about three months from start to finish to go through an entire like production and get the product into our warehouses in in the US. And so that's like a lot of time where you have to make a lot of a lot of outlays um in terms of cash. And so it's kind of a delicate balance with how much do we produce? Um, one of the challenges that we had at the at the beginning, we still, it's still a bit of a challenge, is that we're a a premium product, so we're not talking about, you know, millions of units. And so, we we run up against minimum order quantities, whether it's trying to get enough of our sort of special outdoor fabric that we kind of help co-develop. Um but you know it it's much more efficient to produce that at much larger much larger scale and the same with our with our kind of entire product. Um and so our bigger challenge has been getting through the the cash situation in the context of minimum order quantities. So but but you know given that we've we've sold out you know multiple times but we we tried you know not to do that too too much cuz that's obviously frustrating for for consumers. So it's uh as you as you know like these kind of operational factors are really end up being like delicate balances. So as we start to talk about tariffs can you just give me a snapshot of where the company stood uh at say at the beginning of the year some sense of how big it is and how many you were selling? Um do you have employees? Yeah. So it's in terms of full-time employees it's just myself and and Nelson. Uh we obviously work with a lot of of others whether it's our third party logistics partners who who run our run our warehouses um to to others on the on the marketing side and our engineering and and manufacturing and so the tariff situation is something that has been an issue for us for you know really since we started. Um it's something that I've been trying to raise awareness around for a couple of years. So well before the current situation, I wrote a series of articles uh and just posted them on LinkedIn, not thinking that many people would uh would actually read it, but more almost for cathartic reasons for myself cuz it was such a um a terrible situation even then. So in the first Trump administration, they instituted 25% uh tariffs on a whole variety of different kinds of products that were coming from China. Um and so we even though we didn't have any other option, we got caught up in that and we had to pay a a 25% tariff um on everything that we that we produced and and brought to the US which was a almost like an enormous anchor on our on our business. Um almost kind of killing killing our business in and of itself. Um so last year uh we we we've been you know looking um for for many years but finally last year we found a viable alternative to manufacturing and assembly in China uh which was a a new partner in in Cambodia. Um so for the best part of the last year we've been moving our manufacturing from China to Cambodia. So, we're we're now actually in the middle of of our very first production run with our new our new factory in in Cambodia, which, you know, is exciting, but also incredibly stressful given the current situation. It sounds like it it took a long time to to move uh to the Cambodian factory. What did that entail? I think most people, and there's no reason why why most people would would know what really goes into manufacturing anything. And again, like a lot of variations across different categories, but it's a it's actually a very kind of complex process. Part of which involves like the before you can actually make anything, you have to make all of the equipment and the tools and the molds that you use in order to make the product. So, in order to produce, you have all this, it's called tooling. Um, but it's essentially all of the tools and equipment that the factory uses in order to produce your your product. Um, and it's incredibly expensive. Uh, we've had to, you know, invest in that and that was all residing at our previous factory. So, we had to figure out how to get hold of all of that and and we own it, but it's it's complicated to actually get it out of uh the previous factory and get that moved not just out of the the factory, out of the country and and um to to Cambodia. Why is that complicated? It's just a lot of equipment that is not that easy to to physically move and the, you know, your existing factory has very little incentive to kind of help you with with that. And so, sure, just it just takes time and, you know, in in the meantime, it's literally like the lowest priority on on anyone else's um list except for us, right? Of course. So, that's that's complicated. It's also there's a lot of like knowledge and expertise that has been built up through the relationship with with with any factory that you work with, but through their experience of actually making your product multiple times. And so through the course of three or four, you know, manufacturing runs, we'd every time we make little improvements and little tweaks and the, you know, our our manufacturing partners gain more knowledge of what potential issues are and how to solve them. And so now we're when when you move your your manufacturing elsewhere, you're almost starting all of that up from scratch. Were the economics of manufacturing in Cambodia pretty similar to those in China? Yes. Yeah. Actually, um not exactly the same. Um it's hard to fully explain and and unless you've actually been there just the the scale of the the infrastructure and the just the scale of expertise and interconnected like supply networks that really exist in China. And so nowhere else can can fully sort of compete with that. But it's at least sort of good good enough for us. the tariff on you in China would have been at least 145% maybe more. Correct. Yeah. And give me a quick breakdown of the evolution in in Cambodia cuz I guess over the past month or so since April 2nd um so-called liberation day this has uh evolved. So before April 2nd and you know going back many many years um including when we made the decision last year in order to move our manufacturing um the there was zero tariff on on goods coming from Cambodia. So that was absolutely, you know, part of the decision here that we we thought we're getting back to more of a sort of free trade situation um on April 2nd. And you know, I don't think I'll ever forget trying to squint at the the TV trying to see what was written on the on the cardboard that um that President Trump was was holding up. Um but it said Cambodia 49%. Um, so at 49% it's it's just not viable for us. We we literally can't afford to um to bring our own product into our home market, which is kind of an absurd um situation. The week after April 2nd, there was an announcement that there's a a reduction uh for 90 days on most countries outside of China down to 10% tariff. To be clear, like that's that's still difficult as well. But obviously compared to it, it becomes kind of relative compared to 49%. It's um uh we're we're able to to make it work. And so the night of April 2nd, we instructed our factory to stop production. Uh we we literally couldn't afford to bring bring that product in into the US on that first run that you you've referred to. Yes. Yeah. I mean, we've, you know, we we've we've paid for some of it, but from a just a financial perspective, we we literally couldn't afford to to finish that run and bring it into into the US. A week later, uh, when this, uh, sort of 90-day window opened up, we we got back on the phone to the to the factory and and and instructed them to to resume. So, we, as you can imagine, like they, you know, it's not like they can just stop and start, you know, any any second. Um, they they have to plan out their operations a lot as well, and they're they're under a lot of pressure. Um, so we we've probably lost at least, you know, 10 10 to 20 days from this process, which was already kind of behind where we really wanted it to be, but we are at least able to uh complete this production and hopefully get that product here within the 90-day window. Um, and there's still a lot of uncertainty around obviously around what what will happen after that 90 days, but even it's it's not 100% clear whether the 90 days ends when ships leave port or whether you actually have to bring it into the US within the 90 days and what happens if there's, you know, essentially like a huge traffic jam off the coast. uh there's a lot of uh uncertainty that is still creating a lot of stress and then we we're still left with the question of what what's going to happen after the 90 days. Um and it's it's just you know an incredibly incredibly frustrating situation that was bad enough last summer when I wrote those original articles. I could see that it was going to get worse. I I couldn't imagine that it would get this much worse. And I I could also see that most people don't really understand what I mean multiple things. They don't understand what a tariff is. They don't they don't realize that it's it's just a tax. Uh they don't understand who pays it um and when they pay that. That's because there's been some I would say deliberate misinformation about that to suggest that it's paid by the country where the goods are made. Correct. Correct. Um, people have been told for multiple years by by the politicians that we're putting a tariff on China or on Canada, whatever it is, and it makes it sound like like a parking ticket that you're getting someone else to pay. But, you know, the US government has a lot of power, but it doesn't have the power to tax anyone except its own citizens or people that are doing something in the US. So the tariff is paid when you bring the product into into the US and that's mostly done by by US businesses whether it's finished goods or inputs to domestic production. Um people people certainly don't understand the the broader effects and it gets very complicated. I mean, economists will will disagree about exactly what what's going to happen, but you know, understandably, no one most people aren't thinking about international trade. If you if you try to talk about any of this to someone at a party, I mean, they're their eyes are going to glaze over there. No one really wants to to talk about this, but um there's a lot of misunderstanding um that exists. And then people don't understand why you can't just make it in America. And did you take another look at that when uh last year when you went to Cambodia? Was there a thought that maybe the economics had changed? If there were going to be tariffs, maybe it became feasible here. Yeah. The the thing is it's not really about the economics. It just doesn't exist. We haven't found like any putting aside, you know, how much it would cost, but really sort of viable um factories that are making anything like what we're what we're doing. Um, and so it's it's it's really not even an option. It's, you know, we we would love to, all else equal, but it's really not not an option. Do you have inventory available for sale now? So, we we have a very small um amount of uh of inventory left. Um, but we're we we've already opened pre pre-orders for our our new inventory. So, we're able to sell now. It's for delivery in in June uh in probably late June. Um but we are we're taking those those pre-orders and in fact we we've been communicating that these are it's at you know pre-tariff prices. So we're going to absorb that 10% um at least during pre-orders and then you know after that there's probably going to have to be some some price changes. What is the price you're charging now? So a single chair is 149. Um, and if you buy two or more chairs, it's 129 for each chair. And so at the moment, the pre-orders uh come with either free accessories. So there's a cup holder and a phone holder that you can put on either side or a carrying bag upgrade that we we have a couple of different kinds of carrying bags, both of which are fantastic. Um, so we're offering, you know, one of those for for free with every chair that's pre-ordered as well. And how many chairs are you expecting? Um our our current production is um under a couple of thousand chairs. So not not many. Got it. The idea is um you know we our original intention was we would do you know a small run and then we you know once we get through through this first production run with our new partner we um we we can start ramping up. So, have you contemplated what your options would be if those so-called reciprocal tariffs went back into effect at 49% or something like that? Would you have options at that point? Well, I I think there are kind of two two main options. The the first that that everyone sort of naturally thinks of is well, you just just raise your prices. That's not really an option uh for us partly because of the the scale of the tariff. So that there's no way that we would be willing or want to raise our prices commensurate with with that. Um and people wouldn't be really people don't aren't willing to to pay that. But actually a bigger issue is that we can only raise our prices once we have the the inventory to sell and we can't afford the tariff payment in order to bring the the product into the US. So, you know, a t a tariff is a is a tax. It's a tax on imports. But unlike say a corporate income tax, it's not assessed on the income of the business at the end of the year. It's assessed on the cost of the product that you bring in and you have to pay it when you bring it, you know, into into the port into the US. And so we literally can't afford to pay those those taxes um at 49% in order to bring our product into the into the country. So we don't even really have the option even if we were willing to of kind of raising prices. So that's one one path which isn't really an option. I think our our only other viable option in that scenario which um again is is really tough because we're a we're a US business. We do everything in the US except except just the you know the manufacturing and and assembly of the product. We do everything from design engineering uh all the way through to you know distribution and advertising and customer service and warehousing and fulfillment. We do all of that um here in the US. We we we'd probably have to start selling in other markets outside of the US. So instead of shipping our product to the US, we we could start shipping it elsewhere. That would be very complicated. You'd have to duplicate all those services you just described. Correct. We don't currently oper I technically we um we we accept orders from Canada, but the shipping is very expensive. uh but we don't really operate in in any other markets outside the US. We always had it in our longer term vision of the company that we would expand internationally. We weren't thinking about that for for many years and we weren't thinking about that as a replacement for the US. It would be in addition to it. And so obviously it would be very difficult for us. It would it would also be you know a shame for consumers in the US to not have you know access to to to our products. And I I think that the same you're going to start seeing that across all different kinds of products and different categories over the next few months. I think you said at the beginning of this conversation that you remain as excited about the business as you've ever been. Given what you just described, does that mean you you are committed to to making this work and if you can't bring uh the chairs into the US, you will find a way to sell them elsewhere? Uh I I certainly hope so. I mean it needs to be the business needs to be financially viable. Um it's you know back to what we talked about at the very beginning it's you know starting a business and running a startup is is terrifying from a like personal financial um perspective and you know if Nelson and I are not able to to sustain that um and and make it work then we we won't be able to. So it's um yeah it's something that we're exploring. How are you financing the manufacturing of the chairs? I mean, we took on a decent amount of debt in order to make the manufacturing transition from China to Cambodia happen. And so, it makes it very difficult. We have some incredible angel investors who have been unbelievably supportive. Um but we're really financing um the kind of current operations through a combination of of debt and the and the cash flow from the business. Is that with a traditional bank? Um from a few different sources. We have a line of credit with our bank. So most of it is is through there. We have some uh a loan with one of our investors. We have some Shopify capital which is um almost like a a revenue share um type of type of arrangement. So, u it's a variety of of sources, but it's um it definitely feels very precarious. You talked about the number of things that people in general don't understand. And and I think another thing that people in general don't understand is how routine it is for people to have to use their own homes as collateral. Is that something that you've had to do? Yes. Yeah. um between Nelson and and myself that we at least a portion of the debt I think we're we're personally um liable for. Um and so it it's very it's very scary. Um and I know I've I've spoken to other startup founders and other business owners who are in much worse um situations than than us. But it's uh it's it's very scary and and you're absolutely right. I don't most people don't don't understand that that situation and don't don't realize what it's what it's like and that's understandable. Why why why would anyone really think about this? Is there anything else along those lines that you'd like to call our attention to? Yeah, I like to say that uncertainty is is kryptonite for business or certainly for business decisions and any kind of investment decision. And this level of uncertainty that we're seeing at the moment is off the charts. I've never experienced this level of uncertainty and this level of chaos. And as much as, you know, I I disagree with the individual trade policies that are being implemented at the moment, even worse is all of the uncertainty that that surrounds it. And so when when you start a business, you get relatively comfortable with ambiguity and uncertainty and and a lot of unknowns, but this is insanity. Uh this is really uh ridiculous and it's almost impossible for anyone to to plan or make any meaningful decisions around their business. Well, I think that's where we'll have to leave it, but hopefully you'll come back at some point and tell us how this all worked out. I'd be happy to. It's it's always great speaking to you, Lauren, and thank you for all the work that you do and raising awareness around small businesses. I appreciate that. My thanks to Ben Neper. Best of luck to you as you continue to figure this out. Thank you so much, Sean. One thing before you go, everything we do at 21 Hats is created by entrepreneurs for entrepreneurs to help us all learn together. If you get something out of listening to these podcast episodes, consider joining the conversation. You can do that by joining the 21 Hats sounding board, a Slack channel where you can tap the wisdom of a very smart crowd or by becoming a founding member and joining our monthly Zoom forum where you can be part of conversations much like the ones we have on the podcast. You can sign up for both by subscribing to the Morning Report. If you have any questions, you can email me at lauren21hats.com. And if you get something out of this podcast or out of the morning report, please tell a friend, tell an enemy, tell every business owner you know. Your word of mouth owner to owner will always be the most effective way to build this community for all of us. Thank you. It means a lot. This episode was produced by another entrepreneur, Jess Stubberon, founder of Blank Word Productions. Thanks for listening, everyone. [Music]