Speaker 1: 0:00

So tell me about when it became clear that you may not be able to pull out of this.

Speaker 2: 0:04

Even till the day we closed the website down. I mean, I actually remember writing the email and the social media that we were going to put on the next morning. That night, at like three in the morning, I was still. I was still looking for ways to get through it.

Speaker 1: 0:21

You're listening to the Real F Word, a podcast that dives deep into the realities of entrepreneurial failure, and each episode features raw, unfiltered stories from founders who have navigated both the highs and lows of startup life. We'll discover the lessons learned and the strength found in facing setbacks head on. Welcome to the Real F Word. Isaac Childs is here today and you were the founder of Rustico Leather and we had a breakfast maybe two weeks ago and it was profound, as you and I talked about entrepreneurship and you shared your story with me. I thought this experience and some of the wisdom and the learnings from your experience, I wanted you to share that with more people, and so we're going to go deep today. You ready?

Speaker 2: 1:06

Yeah, yeah, and thanks for having me Like I. I heard about your podcast and I love the title, the real F word, um and excited to talk about that, cause I think there's a lot that needs to be said and so hopefully we can share something that resonates with people.

Speaker 1: 1:24

So yeah, let's talk about the F word for a minute before we dive into your your story. Why do you think the word failure is something that carries so much weight for entrepreneurs?

Speaker 2: 1:41

Hmm, uh, that's a great question. I think, as an entrepreneur, we want to succeed and we see the way to grow, like we. I think that's what kind of what's unique about entrepreneurs is we tend to see how to make things happen right. We see a need, feel a need I think there's a there's a Pixar animation film about that somewhere and need fill a need I think there's a there's a Pixar animation film about that somewhere. Um and um. So for us, the measure of success is that progress that happens, that occurs as we fill that need Right. And so we can easily. I think there's just a I wouldn't say a fear. We can easily. I think there's just a I wouldn't say a fear. But we don't feel like we're making progress if we're not succeeding. And by succeeding, failure is not really the way we succeed. We just don't tie failure into. That's actually part of the process. But, and so it becomes kind of that, that hush, hush word.

Speaker 2: 2:41

It's kind of like the yips. You know, we just don't, we just don't talk about it, we just don't talk about it.

Speaker 1: 2:46

unless you're on the real effort podcast, then I'm like forcing entrepreneurs to get real about it, right. Um, yeah, I think we give the word too much weight you know, yeah, we do.

Speaker 2: 3:00

I mean even the podcast sometimes I think about.

Speaker 1: 3:02

Don't want to glorify it, we just want to like destigmatize it and normalize it in a little bit, but the reality is is that it does carry a lot, a lot of weight and I think it was fascinating. I, you know we talked about like the very first time you failed a test as a grade schooler, right, Like the very first time you saw an F on a homework assignment. That might've been a traumatic experience for your third grade mind, where you couldn't process that and you couldn't decouple your failure on a test or a homework assignment to you as a person. And that's what entrepreneurs struggle with. And we're going to talk about that because for 22 years, a big part of your identity was tied into Rustico Leather. Tell me the origin story, Like why did you start Rustico? It was 2001, right? Yep.

Speaker 2: 3:51

Yeah, 2001,. Back in school, at the time in college, with a couple of buddies this is the dot-com era, right, and brand new websites going up like crazy. Marketing a class assignment. We were taking a third level marketing class, which was brand new about the internet, and it was all about building websites. And right at the bottom of the syllabus was this caveat you know, build a website and sell $20,000 worth of product or whatever services through the site, instant A in the class, right, of course?

Speaker 2: 4:24

This is back when nike struggled to sell shoes online. Who can think of that? Right? But no one put credit cards in. It was still just at its infancy. And so, um, we were like sure, we're gonna sell, we're gonna sell, uh, these journals that I'd been making and building. And me and my two partners, jefferson moss and court griffin, we built this website. And a couple weeks into putting that posting that site online, uh, disney called us and ended up placing a pretty large order for a press release for a new mini series coming out called Storm Stories on the Discovery Channel. Um, which at the time I had no idea it was owned by Disney, but either, regardless, we sold the $20,000 and more of what we needed and got the A in the class and literally launched into the next five years of just growing, growing, growing. This, this, this business that became Rustico from these, this initial marketing class project.

Speaker 1: 5:21

Wow, and tell me, tell me about the product. I mean I in fact I think probably two or three years after you launched, I was at a conference at BYU and I had for years a Rustico leather journal not a binder, a Rustico leather journal and used it for note-taking, probably for two or three years. It was super high quality, like genuine leather, you know tell me a little bit about the product and what made it special.

Speaker 2: 5:46

Yeah, so the products which we put on the site, which is kind of the origin story for Rustico. The product, though, was creation. Really, it started with leather-bound journals and notebooks, and that was because I like to write. There's two things that I'm very passionate about it's travel and it's journaling. Really Writing different story.

Speaker 2: 6:04

I've, I've, I've gone the the uh, um gamut back and forth with true writers and journalers, and there is a difference, but, uh, a journaling closet journaler. I have written in in journals and notebooks since I was six, seven as little as I can remember, and I have them, most of them, and so how many journals do you think you have? Ooh, hundreds, yeah, it's, it's in the hundreds at this point. Um, uh, yeah, I don't know. I can almost visually see all of them, but I don't know if I could get them all, um, but yeah, so I was writing in notebooks and journals and traveling quite a bit in my early twenties, uh, really, through Europe and through South America, through and through the U? S, a lot of road trips as, as a kind of a you know, really a poor college kid, it's like it's a backpack and, and you're, and you're kind of really what's the right word, I don't know Dirt bagging it, you know a little bohemian.

Speaker 2: 6:58

Well, these journals and notebooks just got kept getting beat up. I remember, specifically on the way to Flathead Lake, montana, with a bunch of buddies and we got, our car just broke down, so we're on the side of the road, it's a little bit windy out in the middle of nowhere. I pull out my journal to the right and all my pages just went flying everywhere because the spine had busted. I was just so frustrated and I remember, over in Europe I was in Italy at, I think, in Florence somewhere, and there's these beautiful hand-sewn leather journals that cost way too much money for me and so, uh to to buy at the time.

Speaker 2: 7:33

And so, after seeing and having that experience in Montana, I was like that's it, I'm going to figure out how to make a leather journal that won't fall apart. And so took a couple of classes at BYU, actually audited some bookbinding courses and then bought some leather but brought some paper over from France and created these leather bound journals and and that's what I was using when we launched Rustico at the marketing class assignment. And that's cause for the last. For a few years before that I had just been building these leather journals for family and friends, and it's all comes from my passion, uh, around journaling and why it was so impactful for me and just wanted to keep doing it.

Speaker 1: 8:09

So this really was a mission driven business from day one, something you care deeply about. You're providing this higher quality product where someone could really keep you know their deepest.

Speaker 2: 8:19

And yeah, for most people like it's, it's, it's it's uh interesting, as we engaged with so many customers over the years like people want to have a place to where they can put those deepest and darkest and rawest is what I will say. We say darkest right Comes back to that word. It's like this, this taboo thing, like we don't want to be dark.

Speaker 1: 8:37

Well, the reality of it is is we have both in us, and so journaling is a huge way for us to actually release a lot of that and so journaling is a huge way for us to actually release a lot of that, and so we can talk about it more, but it's maybe the only place where we, yeah, put those deep, deep thoughts and concerns and fears and failures is on the, on the paper, with pen and paper, in our journals.

Speaker 2: 8:56

Yeah so, yeah, we, we do, or we completely neglect it, which is where most of us sit, where it's like hey, I'm not a journaler, you know, I don't need to be in in, um, but yeah, that is one place where we absolutely can and hopefully are allowed to Right.

Speaker 1: 9:12

So so the company you launched, the company, you get an A on your project, congratulations, yeah, we did yeah.

Speaker 2: 9:18

And then how? How did the company grow the first five years?

Speaker 1: 9:20

And then, how did the company grow the first five years?

Speaker 2: 9:23

Yeah, so interesting. Me and my two partners decided, hey, we'll create a little two-year operating agreement, just kind of a commitment that we're going to take this and run with it for two years and then hopefully sell it off. And those two years quickly went to five years and then we actually burnt out completely. We had grown it fairly decently. I mean, the internet was still in its infancy, so we got lucky there. But then it really didn't really see much growth on the internet.

Speaker 2: 9:54

We ended up pivoting over to trade shows and wholesale accounts and and B2B, you know, really doing customization and building at the time was a manufacturing facility in the U S, you know, and still, um, up until we we uh, closed the doors. Last year we were producing 90% of everything of our products in our facilities in Linden, utah, and so that what we went through the first five years, um, then we decided to sell it. We actually sold the business at the time this was 2006. That deal rescinded. So a little bit of a success and a failure and a lot of learning in that process.

Speaker 1: 10:32

What does that mean? It rescinded, they bought the company and then they gave it back.

Speaker 2: 10:35

Well, they bought the company. We actually had three offers at the time to buy different offers to buy the company. We went with the one that offered the most money but wanted to finance a portion of the business and use the business as the as the as the collateral for that.

Speaker 2: 10:52

Unfortunately, we didn't really think through that process. Could they actually run the business? That that business, the business is actually? Just they almost tanked it completely and then, of course, when they couldn't, when they defaulted, that came back to us as a really as a business that needed a lot of help. And at that time my two partners you know, jefferson Moss was on his, on his way to MBA school and Court Griffin was literally packing up the truck for a move to Alaska and so we worked through an arrangement, bought them out, brought on another silent partner which was one of them, uh, a great partner of mine for the next 14 years, uh, jim Loveland. And then I started running it.

Speaker 1: 11:30

Um, from there. So it went from a growth business to a turnaround really quickly because the buyer couldn't operate the business right. You guys foreclosed, you took the business back, Um, and then you started running it and for 14 years years you're building, you're building manufacturing. So for the next 14 years, tell me, tell me about that, that journey. Did the business grow? Did it contract?

Speaker 2: 11:52

Yeah, what was yeah? So, when we got the business back it, um it, it had largely depleted pretty, pretty rapidly in the in the tenure of that of that buyer, so it was like starting from scratch. We did have, obviously, some notoriety, we had some accounts, and I spent the first couple years just really just growing, which we grew pretty decently, pretty quickly. The differences for me, though, was having two invested full-time partners in the first five years and then just all me for the next 14 years, really, you know, having a really good outside partner but not one on the day-to-day, and so it took a shift in my mindset from having great companions and friends and kind of guys in the trenches with me to go through those struggles. Right, we, you know, we got it back in 2007. Then, of course, you had 2008 housing crisis, you know, kind of going through a recession then and figuring out how to grow. In that standpoint.

Speaker 2: 12:53

Also, for me, what was interesting was, you know, like you said earlier. Earlier, you said, hey, you know you had a passion from the beginning and a purpose behind the business, and, to be quite honest with you, I didn't. I loved journaling, I loved writing, and I loved what we were doing in marketing and product development, but I hadn't really tied the two together to like this is actually how I can fulfill my purpose. And it wasn't until I'd jumped back into the business on my own that I had to discover that a little bit more and say, oh, this actually does help me fulfill what I feel like is my dharma and my purpose and, at the same time, provide income and provide value to other people.

Speaker 1: 13:27

How did understanding your purpose and your why help fuel you in that 14-year period when you were pretty much running the whole business without a lot of support from partners?

Speaker 2: 13:36

Yeah, yeah. Well, a few ways Like for the first little bit it was my attitude towards the business was that we were just a private label manufacturer and we were creating products and services for people.

Speaker 2: 13:52

And then, when I really sat down and dived into it and realized that the products that we were providing for people that created this tremendous value whether it was through writing, recording deep thoughts and reflections, or capturing memories like photo albums and whatever else then I realized like holy crap, that's the impact that's actually being provided by the products and services that we provide.

Speaker 2: 14:14

Right, and so, understanding that and tying like, what's the end result of this product and how does it make the customer feel and what is it they love about it? It took me a good uh, I would say eight or 10 years and a few different website reveals to really get our messaging right and our branding corrected. Um, and tie that back to where it was like hey, um, you know, rustico is all about how you leave your mark right and how you, as an individual, get to leave your mark, whether it was on the product itself, whether it was in the product, whether it was the way that you delivered it to someone else as a gift or the memories that went in it. It was this whole dynamic and ecosystem that was around it. As we understood that, it became easier and easier for us to build product and also talk about our product and sell it.

Speaker 2: 15:03

Yeah it was a huge part. I think that was some of the successes. But it took time, like that was a lot of failures over and over Many failures. I guess you should say there were trying something and it didn't work and trying something didn't work.

Speaker 1: 15:16

So you're on this like extended entrepreneurial journey and you're not venture backed. You don't have a lot of capital. So really you're using cashflow right, not venture backed. You don't have a lot of capital. So really you're using cashflow right. The business is profitable and able to pay for manufacturing facility here in the U? S and your employees and your sales and marketing. What happened?

Speaker 2: 15:33

Yeah, yeah, thanks.

Speaker 1: 15:34

Um, yeah, what happened? Yeah, thanks, thanks a lot.

Speaker 2: 15:38

Yeah, let's get to the meat of it. No, for a long time it was. It was very much cashflow business. Um, you know, it wasn't. It was not going to, um, you know, billions of dollars, but it was definitely, uh, very much a lifestyle business and it was running well. We were having profitability. Uh, no debt, um, and this is up until about 2018.

Speaker 2: 15:59

Um, and in 2000, the end of 2018 and 2019, um, I had some opportunities to actually sell the business.

Speaker 2: 16:06

You know, people came to me, um, and I looked at those offers and talked to a few key personnel and and, and friends, family and and other outside investment groups as well, and just people that I admired and trust, and the feedback I got from a lot of them and I think the consensus not everyone but was like, hey, this is successful, successful.

Speaker 2: 16:33

But if you really want to see life changing money, what can you do in the next five years? Right, you've, you've got this 14 year track history of pretty good successful up until the right growth. Right, if you can just continue to do that for five more years and then sell, right, it's what was the term that I remember, that caught me and that that was really what I think changed my mind more than anything was like then it's life changing, money, right, and at this point in time I was. The interesting thing is I was actually feeling like it was time, and then it was like for me it was like it was time to to, to transition into more of what I wanted to do, which was getting back more to the core of how do I really connect with others and help them find who they are authentically.

Speaker 1: 17:12

You were at a point in your own journey where you're like I'm going to give it a hard run for the next five years, but that'll also hopefully free me up to do my other life purpose, yeah.

Speaker 2: 17:22

Yeah, Well. Well, there was two parts to that. Whereas I infused so much of my life's purpose into, and what I felt like was my Dharma into, the business Rustico and we can talk a little bit my identity had tied to it so much as well. Well, the business itself had grown to a level of where we were now in e-commerce, goods and retail, manufacturing and creation company right, which is I love that part, but there was some aspects of it that were not tied to my dharma anymore. So it had started on its own path really, but I was still so tied to it in a lot of ways that it was very hard for me to recognize that and say that can be its own thing and that can still be a way to serve the world, and I can do my own thing and be a disattached from it.

Speaker 1: 18:04

So it's interesting that I've had this conversation with so many entrepreneurs about life-changing money and because we often measure our success in a startup or a company by the eventual outcome financial outcome for the entrepreneur or the founder or the management team. The life-changing money question is such an interesting one, and the timing of when we sell that business depends how life-changing that is. We rarely talk about life-changing losses.

Speaker 1: 18:30

And you and I maybe will unpack that, but I've always been swinging for the fences and looking for that life-changing outcome, but the reality is is it doesn't always come. That life-changing money sometimes is a mirage and motivates us to make some decisions. We're going to talk about those that may or may not lead to the outcome that we were hoping. Talk to me about 2018. You brought on some additional capital.

Speaker 2: 18:58

Yeah, so I made the decision to give it the five-year run 2019,. I brought in. Really, we grew, I moved to a new, twice as big facility, I picked up quite a few levels of management over the top that I normally didn't have, which was good. As we decided, hey, I want to take it to this next level, brought on some capital to do that. And then, of course, 2020 hit, you know and COVID, and that shifted gears.

Speaker 1: 19:25

Was it debt or?

Speaker 2: 19:25

equity. It was debt. All of it was debt Actually for the first part. Yeah, that in 19,. It was definitely debt. And why did you choose debt? Did it was debt actually all for the first part. Yeah, that in 19, it was definitely debt and and why did you choose debt?

Speaker 1: 19:36

did it seem less expensive than equity at the moment?

Speaker 2: 19:40

um, yes, absolutely at the time it was less expensive. Um, I didn't really want to bring in another partner at the time. Um well, I had one existing partner and and uh uh, I think it was just actually just more convenient and fairly inexpensive to get the debt than it was to give out the equity.

Speaker 1: 20:01

So some term debt, right, yeah, business is profitable, so you can service some debt and you bring in these partners and some debt providers, put on some fixed costs, a management team, seasoned management team, double the size of your warehouse. You start ramping up manufacturing and maybe inventory. What were some of those other bets when you're like, hey, we're going to double or triple the size of this business?

Speaker 2: 20:27

Well, those were the tangible bets. I think the intangible bets were. We're going to continue to sell the way we sold Right and at the time we were heavily like you know I talked about. We started as an internet company, right, but we pivoted pretty quickly from that because it's 2001.

Speaker 1: 20:43

Yeah.

Speaker 2: 20:44

Took another 10 years before really online sales even started going, and so, uh, at that time, online internet sales were less than 10% of our total revenue and we were focused heavily into the B2B space, promotional space and wholesale retail in stores and so, but, based on my history, it was like, hey, we've seen this kind of trajectory and growth year over year, consistently. I should be able to hit this.

Speaker 1: 21:09

So those are my bets. There really was a lot of growth.

Speaker 2: 21:12

It wasn't like hey, 100% and to the right all the time but there was enough consistency where I could average out any five years at a given time and it was 20% 25% growth consistently across the board. That's great. So it was just what felt like very steady future.

Speaker 1: 21:27

Predictable Predictable yeah.

Speaker 2: 21:30

So I think that was probably the biggest bet was hey, we're going to continue to grow at this rate and so therefore I can make these other investments and turn them around in this kind of a timeframe.

Speaker 1: 21:40

And then a pandemic came, a worldwide pandemic which none of us could anticipate. What was the impact of COVID on the business.

Speaker 2: 21:49

Interesting dynamic for us. I mean the first three months, four months, it was like no one was selling anything. So I pivoted immediately to selling masks and for the first five, six months all of my machinery got switched over to selling cloth masks and so on as the world kind of caught up to supply the shortages there. And then we transitioned back to our traditional lines of sales or our sales channels, but everything had pivoted from there. It was definitely all focused on more e-commerce, which was awesome. We saw massive growth there. But our other two main channels really suffered. Wholesale retail, you know, we had, oh, 2,500, 3,000 retail locations that carried our products across USA and Canada, and I think by the end of COVID there was less than 300. You know, it was like it just decimated that industry completely. And then B2B space uh, quite a bit different. It took quite a while for the businesses to really adapt to looking at a product outside of PPE for quite a while.

Speaker 1: 22:57

So yeah, interesting. So that did I mean. It was a mixed bag. It sounds like there was a little bit of a tailwind on the e-comm, but some pretty big headwinds on your wholesale and B2B businesses. Yeah.

Speaker 2: 23:08

Yeah, so for us it was a wash across the board in terms of revenue. Yeah, so for us it was a wash across the board in terms of revenue. We actually about flatlined. But some of the real issues really stemmed more from costs. Our costs started to go up quite a bit. Supply chain issues started to change. Our costing structures and bill of materials all shifted pretty drastically from where they were.

Speaker 1: 23:30

Yeah. What was the increase in cost of goods sold? Because at that time the supply chain was a mess, right? Yeah, I mean, what was the impact on your margin?

Speaker 2: 23:40

Yeah, impact on our margin was pretty big. I mean it probably took a hit of almost 50% or more.

Speaker 1: 23:47

While you increased fixed costs because you have more space, more people, so you made these huge investments. Cost of goods gets upside down and now you're facing a different reality. How long did it take to realize that things were pretty?

Speaker 2: 24:03

hairy. Unfortunately for me it took a little while. You know I had built a really solid, strong team and loved the people I worked with, and trying to hang on to them, especially through the pandemic and after post-pandemic, was really more my MO.

Speaker 2: 24:23

You mean just retaining the people Just trying to retain people as long as possible and still thinking, hey, we'll weather the storm, we'll come through this, and just probably about two years, I think. And then, finally, it was just like, hey, the writing is on the wall that there's pretty drastic changes that need to happen.

Speaker 1: 24:45

I've made this. I've been in this same position where I look at these people who have rallied around the business and around me as a leader, and I feel this loyalty and responsibility responsibility and stewardship for the livelihood of this whole team and I have procrastinated the decision right To right size the organization, to make the tough choices to have, just because it was so painful for me to look these people in the eye and say, hey, sorry, I got to let you go. Yeah, you still got, you still had to do it, yeah.

Speaker 2: 25:17

Yeah.

Speaker 1: 25:19

Would you have made a different decision?

Speaker 2: 25:23

No, I uh, yeah, um, wow, it's weird how it's, it's. It's hit me pretty emotionally today, uh, that kind of comes and goes. But, uh, some of those employees for me were, uh, you know, 15, 18 year employees, and so that's really tough to to make the decision to even need to let them go Right and, uh, um, the reality of it is I probably hung on longer than I should have for the business's sake. Um, some of that was because of the loyalty and because of the tenure and and and uh, my commitment to see these employees through, uh, um, and these people really just stay connected and have a job and so on.

Speaker 2: 26:15

Uh, but in hindsight, you know, and and no, I feel actually pretty confident that, like, I made the right move. Was it the um, especially given the information I had at the time? Um, I had at the time, um, but there there's absolutely an argument where I I could have, um, let people go earlier, made changes and cuts sooner and quicker. That may have saved the business, um, but there's a part of me that actually says, um, I don't know about that. I don't know if that would have actually changed the actual outcome, but the decision I made to, at least when it came to my people, was, I feel like, the right ones to make at the time I made them.

Speaker 1: 27:03

What's up, Phil fans? You know, as we've listened to so many guests on this podcast, that the road to success is often paved with failure, with a lot of challenges and even full-on face plants. There's a thing that you could do to help skip some of those bumps and bruises, and that's really where the consultants at Amplio come in. See, Amplio offers fractional executives in finance, marketing and HR, and these are people who've experienced a lot. They've been in the trenches, They've built businesses, They've failed. But here's the kicker They've learned from those failures and now they're applying all that wisdom to your business to support you. So you don't have to learn the hard way. I mean, think about it. Instead of stumbling around in the dark and hoping you don't hit the wall, you could bring someone in who's already mapped out that room right Am. You could bring someone in who's already mapped out that room right.

Speaker 1: 27:52

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Speaker 1: 28:27

So finally you're into this two years and now you're like now drastic changes need to happen. Was that your decision? Was it with the investors? How active were the investors? Were you getting pressure from? You? Probably had some vendors, some payables that you need to you're responsible for. You have employees you're responsible for. You have investors you're responsible for. You're kind of like I'm sure you're trying to solve this puzzle and doing everything that you can possibly imagine to save the business at this point yeah, yeah, we, you know, I brought on a couple other partners sometime after 2020, I think, 21.

Speaker 2: 29:06

What was right, as we needed more capital and more financing to help us kind of weather the storm, and they came in, brought in a debt vehicle in order to help us do that. So this is the second debt.

Speaker 2: 29:12

This is yeah this is the second debt, this is the second debt round. Basically, and as we had to just start letting people go and kind of downsize in order to help us kind of right that ship, it just didn't feel like there was enough. We just weren't cutting enough at the right time and there was a little bit of a delicate balance there where we had this noose around our neck of debt that we needed to service, and it was, at a certain level, channels of revenue that were coming in that were not as profitable that we really probably needed to cut and reduce revenue but focus on the right kind of revenue. But that wouldn't allow us to do that with the debt that we had to service, to service the debt.

Speaker 2: 29:52

so so this is this chicken and egg and we were working with a lot of our debtors to help us with that. But there is this dynamic where I don't think from the debt side, I think there's just an attitude more of like, well, you're kind of signed on the dotted line and you're going to make it happen, whether you want to or not, instead of really thinking, well, how do I actually help these guys fulfill on what, what we've agreed to, versus just what's the learning about how to capitalize your business at that stage?

Speaker 1: 30:25

do you, when you think back on the equity versus debt decision and the timing of the debt and the terms of that debt and the partners you chose? What? What wisdom can you share with entrepreneurs who may be running a business that is, you know, can go raise 10 million, $5 million of like term debt and um, and that might seem more attractive and less expensive than equity. But what's what's the learning that that you can share with us?

Speaker 2: 30:48

Yeah, Um, I think that, well, I absolutely there's. There's pros and cons to both. For sure, there's debt, you know, can be a very great way to run that while still holding equity in the business. It can also be a little bit of a downfall if things go south, like that was the issue that we had in 19, as we picked up some debt from some banks and lines of credit and so on, and as those lines like, literally, I had one line of credit come due in March of 2020, right, as everything happened. Right, it was just up for renewal. Um, not due, excuse me, it's up for renewal and our ratios and everything looked in line for it to be renewed. But because of the pandemic, they're like we just cut your line. It was $750,000, gave us 30 days 30 days to figure it out, to pay it back, yeah, so then you had to find a different.

Speaker 2: 31:34

Yeah. So then we had to go to find either subprime lending or a different debtor, Right, so there's a debt situation there. It's like you don't kind of have that partnership right. They're not vested in your full interest. When it's like, hey, there's a pandemic and we're just pulling the line, Okay, Right. Whereas partners or investment groups, I think if you are aligned and that would be the other side is like making sure you really are aligned in how you want to move that business forward they can be absolutely valuable and helpful in that regard. But also, at the same time, if you're not aligned like that turned out with me and in these, this group of equity partners I brought in there they were we were completely misaligned. Although it felt like we were at the at the beginning, as things started to get harder and harder, it really became clear that there was a difference in in how we wanted to move forward.

Speaker 1: 32:27

Are you comfortable talking about the amount of money you raised between all the debt and all the equity?

Speaker 2: 32:31

Sure, yeah, yeah, about the amount of money you raised between all the debt and all the equity? Sure, yeah, yeah, um, rustico, I think it in 2019,. I raised, oh, in terms of debt, uh, debt, we had close to 2 million, and then, um, I brought on another 1.5 million in in in another debt vehicle with equity partners. So so we had roughly three and a half, almost four million by the time.

Speaker 1: 32:56

Yeah, so tell me about the last three months of Rustico, when it became clear that you may not be able to pull out of this. Yeah, what were the secrets of events that happened that really helped you to realize that this was the end of the road for something you had put your heart and soul and energy into for so many years?

Speaker 2: 33:21

Yeah, yeah. That's interesting because even until the day we closed the website down, I mean, I actually remember writing the email, writing the, the, the, the email and the social media that we were going to put on. Um, on the next morning, um, that night, at like three in the morning, I was still, I was still looking for ways to get through it, right, and that that was knowing, still knowing, knowing probably five, six months before then, that that things were probably not going to make it happen. I think, I think, if you would have sat me down and put me into like a truth serum, I would have been very clear like, hey, this isn't gonna happen.

Speaker 2: 34:06

But the entrepreneur in me and of course, the visionary, was like, no, we'll see through um, you'll figure out a way, yeah yeah, but at the same time, like I, I could see I look back now and I'm like I was super optimistic and always looking for the opportunity, but at the same time I was tactfully making sure the employees I had to let go had found jobs and and people had landed safely, knowing, I think, in the back of my mind that it was, it was going to be inevitable. Um, so that was a really, really weird I wouldn't say weird. It was just such a hard, impactful day where there was a part of me that was super relieved um, super relieved to just finally be able to say, okay, I can close this down and now we can move in a direction that feels like we can go somewhere. And then another part of me that was just devastated.

Speaker 1: 35:01

You know I shared my journal entry with you that I had shared on this podcast, and those final days and weeks and months before shutting something down that you've built are are just really painful. Yeah, what was the hardest decision you had to make?

Speaker 2: 35:25

Wow, I don't know if there was just one. I think there was a lot of hard decisions. Um, you know, I I'd go all the way back to. You know, if I look at the series of events those two or three years and this is actually probably why there was a relief the day that it shut down and for a lot of people that found out and are still finding out I still get emails from people that are like holy crap, you shut us to go down. And that's shocking. You know, 22 years in to a you know a business.

Speaker 2: 35:55

But two years before that, you know I had to let go.

Speaker 2: 35:58

Uh, my COO that had been with me for eight years built we had a great working relationship, built a great friendship but had to had to say let me, let you go and let's, let's move on all the way to, to the different decisions of needing to tell these partners that I brought in with the intent to make something happen, make something big, that we're not aligned.

Speaker 2: 36:21

And I need you guys to step out of the way, if I can even turn this around and having that hard conversation, uh, to Finally fully just saying it's time to shut the doors. And what does that look like. Yeah, a lot of hard decisions there that were tough to make, and that's why, when I said, when we finally pulled the trigger on shutting those doors where it was also a relief, pulled the trigger on shutting those doors where it was also a relief, it feels. It felt a little bit like someone, or like here's my, my child that's been on life support for two or three years and while you want them with you, you can't move on, and so letting that go was needed, even though you don't want to see that.

Speaker 1: 37:27

So, yeah, this was last fall. This isn't that many months ago right.

Speaker 1: 37:34

Less than a year ago.

Speaker 1: 37:37

First of all, thank you.

Speaker 1: 37:40

These are personal stories and emotions and experiences that I hope bring some wisdom and insight and some direction to entrepreneurs who may be facing the same reality with their, their child or their business, right and um. So thank you for being so open and vulnerable. I think that this is what I felt when we had breakfast is the genuine love that you have, not just for a business, but for the people that helped create that business and that product. For me, it's that element of failure that is so hard when you feel like you filled someone else, and because those are human relationships, those are people that you care about deeply, and so the worst days of my career were not the days I had to shut a business down. It was, before I had to shut the business down, having conversations with employees and partners about the fact that this was the end of the road, not just for a company, but for their contribution and their sacrifice and hard work, and so I can feel your, your deep and genuine love for all those people that worked, that you worked with.

Speaker 2: 38:54

Yeah, it's it's. It sucks when you do have tenured employees that have been with you for a long time, that have created and contributed massively to the vision that you have to say this is the end of the road and there's definitely a lot of your own personal identity tied into being the person that provides and supports and those families and me learning how to unpack. That was massive as well, and I needed to do that, but I think there's still a huge part of me that is a genuine part of me, that that really wants to help others succeed and and and the um.

Speaker 1: 39:36

I can also relate to that moment of relief, as devastating as it is. You've also been carrying this weight around for months and years. Really Right, and now the finality, while difficult, also allows you to start a new chapter. What was the impact to you and your family financially when you had to shut down Rustico?

Speaker 2: 39:59

Yeah, it was pretty devastating. Um, you know, we we basically started over, went through a full bankruptcy. Um, my wife at the time and I had both signed on quite a bit of the debt personally. Um, guaranteeing that, that's very common, I think, probably more.

Speaker 1: 40:17

Is that a red? I mean, should entrepreneurs be careful before they sign and sign up for a personal guarantee?

Speaker 2: 40:23

A hundred percent, as much as possible, and and I would and we talked about this a little bit I actually don't know, you know a lot of investment groups or, or banks or whatever, will want that personal guarantee.

Speaker 2: 40:34

But there's a part of me that says, like I don't know if that's even in their best interests. Like there are, there are there's too much that becomes attached to a business owner that it does have, that has tied his personal home and his family's future into the business, that that may actually be detrimental when the business is in distress. Right, and I, for me, for instance, I'll be just very clear. Like, not only was this a 22 year business and my identity was tied into it, but once I'm financially committed, on a personal level too, to see it succeed and it is struggling to succeed in the hard decisions have to be made. It's harder and harder to actually make some of those decisions unclouded, without, without because, I guess, of the attachment that you, the ties that you have personally, like your house if my house is on the line, like my kids eating and food and and providing for them like will create a tent in the way that you view.

Speaker 2: 41:36

How do you make decisions in business? It's really hard to keep that separate.

Speaker 1: 41:40

It's really an interesting aspect of a personal guarantee that you're going to make. Yes, you're going to be in it to the very end and that's what they want. But you may make decisions that put even more capital risk and more things at risk, and maybe the banks at that point don't care. They want you to do whatever it takes to return their capital. But, yeah, you probably prolong some decisions and make some decisions differently. I'm so sorry to hear that, isaac, but it is a reality. The reason I bring it up is because it is a reality of some of these outcomes. Failure is really a stepping stone to success and we talk about that, but we don't ignore the real financial costs associated with a failure. Um, and and I've felt some of that, some of that sting as well Um, tell me how you're doing. Yeah, like how you do it's been less than a year.

Speaker 2: 42:30

Yeah.

Speaker 1: 42:31

And um, how are you feeling now about the whole experience?

Speaker 2: 42:35

Yeah, well, it it. Well. You go through moments, right, like even today. There's some grief that's associated with a loss, right, and it takes time for that loss to not feel as dramatic, I guess, or as intense there's still a loss, right, dramatic, I guess, or as as intense there's still a loss Right, um, uh. But overall, like I actually feel I feel really good, like there's been a lot of really solid things. I can look back at the 22 years and while I feel like the ending um was not the ending I wanted right, it wasn't the life changing money goal, or even even the successful um right out off in the sunset and put a little bow on this Um, I feel like there was some massive learning lessons for me. That was necessary, as it launches me into what I want to do next and what I am doing, and it also has provided opportunity for for me, for my family and for everyone else to now move into that next space.

Speaker 1: 43:37

So tell me about that. How did you cope with some of this grief? Cause this is what I was really. I mean, we connected and I was just like wow, I loved some of the insights you share with me, some of the things that you've done to just kind of move past this and find your purpose and and move on.

Speaker 2: 43:53

Well, you know, this comes back. This comes back to square one. Like I started rustico because I have the journals that I created, because I love to write, I love what I do in that, and so I really got back to the basics and said, okay, what is it about me? Right, if I'm not mr rustico anymore, like what is me? Like what caught? What created rustico? And and that is really where it got back to, which is which is something I've always done.

Speaker 2: 44:18

I've always had a journaling practice. I always reflect daily. I have a process and a system I put in place for me that helps me get clear around how I'm supposed to move forward and what it is internally that I really want and what it is internally that I really want. And I'm not going to lie like unpacking or or not destroying, but tearing down. The house, if you so you will that I had built over so many years has been it's.

Speaker 2: 44:48

It's like a demolition. It takes time, but the foundation for me has always been this this journaling practice and meditation is massive for me. Over the years, I've really developed a strong connection through meditation and journaling. Well, what I'm doing now, and so for me, I as other people around how to use um, a journaling practice to help you, uh, really focus in and stay clear on your priorities and stay connected and find fulfillment. Really, what my business is now going forward, which is Mindfulness Matrix, and that is all about helping people discover their true, authentic self through a journaling practice, through a daily, what I call the walk or the map methodology, and I'm really excited about where it's going. I feel like that's exactly what's next.

Speaker 1: 45:55

In fact, you've also launched a podcast recently.

Speaker 2: 45:57

Yeah.

Speaker 1: 45:57

So we're on a podcast journey together.

Speaker 2: 46:00

Yes.

Speaker 1: 46:02

And talking about the MAP method. Yeah, and just share with us a high-level view of what that method is. And then let's encourage people to listen to your podcast too.

Speaker 2: 46:12

Yeah, absolutely so. Mindfulness Matrix podcast and Mindfulness Matrix comes from this idea. That really what we call the MAP methodology, and it's mindfulness, mindfulness and awareness, authenticity and purpose. You tie those three together and then plug them into what I call our journaling method, which is a daily journaling practice that is built around this idea of how do you stay in a being state versus a doing state, and it all stems from understanding who. You are right, that mindfulness and awareness that comes with actually getting deep and deeply connected to intrinsically how you want to show or who you want to be in the world. That's where your authenticity comes from. And then how do you want to show up in the world? And you blend those three together through alignment and connection and then apply it on a in a daily simple journey and practice.

Speaker 1: 47:05

I love that, and so mindfulness, awareness, authenticity and purpose. It is beautiful, and maybe ironic, that this whole business Rustico was originally built around this idea of a journal and that, full circle, it is the journaling that has helped you deal with the loss and the transition between running this product business to this new purpose for you. I think that that's incredibly powerful. What are the other lessons that you learned through this process that you would share with your children and your father or other entrepreneurs who are either starting or at the end of the road and winding down a business.

Speaker 2: 47:51

There's a lot in there, I think. To unpack what comes to mind when you said, that, more than anything, was be careful with words like needs and should and could. I think, as entrepreneurs, like if we get too wrapped up into what others think we need or do, that's when we know we're not on our path right. So doing what it is that you feel intrinsically is important is always, like, the key in entrepreneurship, and having a purpose and a passion towards that is massively important. Making sure, though, that you are not tying your identity to that and what I mean and here's my story around that, after Rustico closed down and I had a coach that I was seeing to really help me through this transition, and I just was devastated, and I was like I remember this conversation I was like I have no skills. That was having to my coach. I literally was like I don't even know if I can get a job. Like I, I've been leading this company for a while, but I don't know how to do digital marketing. I don't know how to. I don't know how to operationally put the product together, like all of these little hard skills or whatever. I felt like. I was like I don't even I haven't written a resume or a CV in 22 years? Like, how am I supposed to find work? Like no one would hire me, right?

Speaker 2: 49:13

I'm just in this feeling of total devastation and I think it was because my entire identity had been tied into this persona that I had at at at my business, and it wasn't uh.

Speaker 2: 49:23

Obviously she coached me through that very well with like is that is that really true? Um, but it really took um. A few days later, I actually got a phone call from a group, uh company, that had found out about Rustico and the process that we're going through. It followed us for a while and they called me up and were like hey, we're a five-year-old leather company and we need someone that has your experience to come on board and just consult with us for X amount. Board and just consult with us for X while. And it was like um, it was just a huge shift for me to recognize like oh, yeah, wait, I actually have value, um, but still, I had tied so much of my identity into this entity that was dead that I'd somehow figured out like I did. And so my, my advice is is is like we are not the things we do, right, even though, as entrepreneurs like, we do so much things and we tie ourselves to them, but that is not who we are, and making sure we stay clear on that is is super important.

Speaker 1: 50:32

It is the most profound insight that we are not what we do, we are not the title that we hold, we are not the business that we started or are running or work in, and I think, for the last five or six episodes, this has been the key thread and learning, which is we cannot tie our identity, our feelings of worth and confidence and value to a business which outcome we don't fully control as much influence and control as we have as entrepreneurs we don't fully control and is also fleeting. It's not forever and no businesses, and so I think that's so insightful. How do you do it, though? How do you, in this moment and you're still working through it is journaling part of that, but how do you really decouple it and just say I am not Mr Rustico anymore, I am Isaac Childs and I care about people and I have purpose and I have value and I have skills? How do you do that?

Speaker 2: 51:35

and I have value and I have skills. How do you do that? Yeah, um, right now, for me, man, the uh, the way I do that is uh. I'll just start by saying I think that's probably my biggest um blessing, if that's what I want to call it. Uh, that's coming out of this, this whole uh, failure, right, and the lesson that I'm learning is getting to discover who I am on a daily basis and keep myself detached from the things that I get to do or be or accomplish, um and the one, the biggest way I do that is.

Speaker 2: 52:15

You know, this is a process for me. It's a daily process right now, and it starts with, uh, really, a morning meditation. It's a reading and a morning meditation that is then tied to some, um, some short journaling that I do, uh, which is tied around gratitude and affirmations. Um, in the evening I'll do what I call my walk methodology, which is I'll write basically a page in my journal and out of that will come the wonder of the day. That's the W. So walk is an acronym. It means wonder, actions, lives across paths and then knowledge gained, and I'll just write what was the wonder? What did I experience today? Wonder is important, and then actions are what brought me energy and what took my energy away, and really getting clear on like what what was I really truly excited to do today versus what did I have to do?

Speaker 2: 53:10

or should do right and what was really draining and why, and and just getting clear on that. And then lives across past with like, like who did I get to meet, how did I get to engage and how did I choose to engage and what did that take me? And then, of course, knowledge gained right, or aha moments like anything else that's usually downloaded, and that process on a daily basis right now has really helped me get back to um, staying focused on like I, I am me and these are the things I do, and not tying myself so much into how the things I do are me anymore.

Speaker 1: 53:47

So I love that. What great methodologies that you've developed through your your own journey, that um that you've been able to apply as you've gone through this. I think there's so many entrepreneurs who are probably listening to this podcast like writing down quickly, trying to write all these things down and so that they can adopt some of these similar practices. I love gratitude as a principle Sometimes, when we kind of take a step back and even in the face of failure, we say what are we grateful for? What do we learn from this? Like, how has this set me up for the next 22 years?

Speaker 2: 54:23

And so my final question is tell me where Isaac Childs is in 22 years, in 22 more years, wow.

Speaker 1: 54:28

Um cause you'll still be relatively young. Yeah, yeah, oh yeah, I'll be skiing still.

Speaker 2: 54:31

Yeah, I was going to say we'll still be skiing, I will absolutely still be traveling, um, and, to be quite honest with you, I'll still be doing what I'm doing. Like I have, I have a mantra. What that looks like? Like I would really, really love to see.

Speaker 2: 54:44

Mindfulness matrix provides tremendous value to a lot of people around the world. I think there's some something there, and so I would love to be spending my time uh, full time, really doing so. I would love to be spending my time uh, full time, really doing, uh, having the opportunity to guide and help others and inspire others to live more authentically to themselves, um, but what I can tell you and what that looks like, obviously that would be awesome, but what I can tell you is this is my mantra, personal mantra, but, like I, I want I always want an athlete's body and entrepreneur's mind and an artist's soul, um, or spirit, and so it will involve those three things, whatever it is I'm doing, so skiing or surfing, or snowboarding, or fly fishing, like um an athlete, an athlete's body and entrepreneur's mind and an artist's soul.

Speaker 1: 55:35

That's beautiful. Well, I can tell you one thing I feel that from you, I feel the keen entrepreneurial spirit and the ability to build and create I won't comment on your athletic build, because that would be weird and I feel an artist's soul, someone who cares deeply, who's deeply empathetic, who wants to give back, who wants to share in ways that are really open and vulnerable and personal. And you have done that today. You have impacted the lives of everyone that will listen to this podcast and you've impacted my life. I went home after we talked the first time and that night I journaled for the first time in many, many months. Awesome. And so you're making an impact.

Speaker 1: 56:18

Isaac, thank you so much for sharing. Thanks for having me. Hey, I'm Isaac Childs, mr Rustico, and I failed, and that's okay. Thanks for tuning into the Real F Word. The Real F Word is failure, and remember that failure is a stepping stone, it's not just a stumbling block. Join us next time as we continue to explore the journey of resilience and growth, without ignoring the true cost personally, professionally and financially that comes with failure. Keep learning, keep growing and keep embracing the real stories of entrepreneurship. See you next time.