Episode 157

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Published on:

12th Jan 2022

Adapting Your Business to Outside Influences with Paul Guess

In this episode of Be Epic, Matt talks to Paul Guess about leaving the corporate environment to start his own businesses and how to adapt to the constantly evolving challenges of owning your own business, from global pandemics to supply chain challenges. Guess is the CEO of Lux Fragrances and Founder and CEO of Deck the Halls Y’all (DTHY) and Guess and Company based in Des Arc, Arkansas.

Transcript
Paul Guess:

As I look at the commonality across all of my

Paul Guess:

businesses, I do not focus on the end result, that end result

Paul Guess:

being the dollar.

Matt Waller:

Excellence, professionalism, innovation, and

Matt Waller:

collegiality. These are the values the Sam M. Walton College

Matt Waller:

of Business explores in education business and the lives

Matt Waller:

of people we meet every day. I'm Matt Waller, Dean of the Walton

Matt Waller:

College, and welcome to the Be Epic podcast.

Matt Waller:

I have with me today, Paul Guess. And Paul is a graduate of

Matt Waller:

the Walton College from 1993. He had a career with Eli Lilly,

Matt Waller:

before starting his own businesses, and he currently

Matt Waller:

owns three businesses. You're quite busy, Paul with these

Matt Waller:

businesses.

Paul Guess:

I am I would say that my days start at 4:30 in

Paul Guess:

the morning, and many times I'm not done until seven or eight

Paul Guess:

o'clock every night. You know, what they always say is a blank

Paul Guess:

mind or an empty mind is the devil's workshop. So I don't

Paul Guess:

have much time to play around or have an idle mind. So yes, sir.

Paul Guess:

I'm very busy.

Matt Waller:

Now, it's interesting. You majored in

Matt Waller:

small business when you were in the Walton College?

Paul Guess:

That is correct.

Matt Waller:

And you graduated in 93. And then you worked for

Matt Waller:

an enormous company for quite a few years. And then you finally

Matt Waller:

started your own business. But I'd love to hear what got you

Matt Waller:

interested in starting your business? And which of those

Matt Waller:

three did you start first?

Paul Guess:

it's kind of a combination of all of it. I was

Paul Guess:

gainfully employed with Eli Lilly and Company for 14 years,

Paul Guess:

starting at the bottom as a sales representative and rose to

Paul Guess:

the ranks of upper middle management for Lilly, where I

Paul Guess:

was responsible for three quarters of a billion dollars in

Paul Guess:

revenue covering six states with the organization of

Paul Guess:

approximately 160 people reporting to me, during that

Paul Guess:

time, I was fortunate enough where Lilly paid for me to go to

Paul Guess:

the Harvard School of Business, executive education for their

Paul Guess:

general management program, where there are only 125

Paul Guess:

students accepted into the program from all over the world,

Paul Guess:

and only 13 of us from the United States. That piqued my

Paul Guess:

interest in international business, because in my living

Paul Guess:

group, I lived with people from India, people from Japan, people

Paul Guess:

from Switzerland, all over the world. My curiosity led me to

Paul Guess:

exploring, importing and designing and working in

Paul Guess:

factories overseas. So that sounds wonderful.

Paul Guess:

But the reality of it is, when I was a regional for Lilly, there

Paul Guess:

was a time where I became a little bit bored in my

Paul Guess:

assignment, and it was in 2008, where the economy crashed. I

Paul Guess:

thought, you know, I want to test my hypothesis and my theory

Paul Guess:

of in a retail business, if you offer great product at a

Paul Guess:

competitive price and great service, can you withstand the

Paul Guess:

fallout of the economy and still be successful? And so I opened

Paul Guess:

up a Christmas pop up store, in Searcy, Arkansas where I went

Paul Guess:

in, and basically, I knew that I was only going to be there for

Paul Guess:

three months, just in and out. And I was in an old pizza

Paul Guess:

restaurant, I invested wisely invested roughly $100,000 and

Paul Guess:

had a 35% net profit return on the money. And at a time where

Paul Guess:

the economy was down, I thought, wow, there's something to this

Paul Guess:

Christmas business.

Paul Guess:

I continued my career at Lilly, and in 2013, we were downsizing

Paul Guess:

as a company. At that point in time Lilly had asked me to

Paul Guess:

relocate and I had moved seven times in those 13 and a half to

Paul Guess:

14 years with Lilly, and I was back home in Arkansas. I did not

Paul Guess:

want to move again. And so my brother said to me, well, Paul,

Paul Guess:

why don't you start a Christmas design business and import? And

Paul Guess:

I said, well, number one, because I'm not a designer, and

Paul Guess:

number two, I don't know how to import. I know nothing about

Paul Guess:

that. Long story short, I taught myself how to import and more

Paul Guess:

importantly, how to put the right people around me to create

Paul Guess:

the designs fill the gaps of my shortcomings from a design

Paul Guess:

perspective. So I started a company called Deck the Halls

Paul Guess:

Y'all. DTHY is what you will see in boutiques and my brand today.

Paul Guess:

So from there then Lux Fragrances came for sale Lux was

Paul Guess:

started by Nancy Shine in Marble Falls, Texas. And Nancy asked me

Paul Guess:

she said, Oh, don't you want to buy my company? I'm ready to

Paul Guess:

retire. I've known Nancy. She was a senior executive for Estee

Paul Guess:

Lauder for years. And she said, Don't you want to buy my

Paul Guess:

company? And I said, no, thank you. I don't want to be in the

Paul Guess:

manufacturing business. I simply want to design and import. Well,

Paul Guess:

as time progressed, I decided, yes, I did want to purchase Lux

Paul Guess:

and relocated from Marble Falls to my hometown of Des Arc. We

Paul Guess:

hit the ground running, and we have never looked back. Now it's

Paul Guess:

sold across the entire United States from large retailers to

Paul Guess:

small independent Mom and Pop boutique type stores. So that is

Paul Guess:

how I started and pretty much kind of where I am today.

Matt Waller:

How did the pandemic affect your business?

Paul Guess:

At first, with the pandemic I thought, gosh, all of

Paul Guess:

my accounts are closed. And how are we going to be successful?

Paul Guess:

One of the marketing firms that I use is actually located in

Paul Guess:

Fayetteville. And they suggested to me to go and get my cell

Paul Guess:

phone and begin doing videos. And I said, oh, no, no, no, no,

Paul Guess:

no thank you. I don't want to do videos of candle manufacturing.

Paul Guess:

And I don't need that, I'm 40. At that time, I was 48. And I

Paul Guess:

don't, I don't want to do that, I, no thanks. And lo and behold,

Paul Guess:

I did and I took their advice, and we created a direct to

Paul Guess:

consumer arm of our business, In Lux. We had historically always

Paul Guess:

been wholesale and wholesale only. But I knew that for me to

Paul Guess:

stay alive, my candle business, I had to create another selling

Paul Guess:

channel. I was the creator of a candle that is poured in a

Paul Guess:

wooden doble the videos somewhat went viral. As a result, we now

Paul Guess:

have a healthy direct to consumer portion or arm of our

Paul Guess:

business, we've sold close to a half million units at this

Paul Guess:

point. So that's what happened on the candle side of the

Paul Guess:

business.

Paul Guess:

In my warehouse sale, which is called Guess And Company

Paul Guess:

Christmas at the Warehouse. I had to strategically plan

Paul Guess:

because I knew that Christmas was still coming regardless of a

Paul Guess:

pandemic. I surveyed my customers and looked at it as an

Paul Guess:

opportunity to still meet their needs, or hopefully exceed their

Paul Guess:

needs, and to give them an opportunity to be normal, if you

Paul Guess:

will. And so at that point in time, we were planning for

Paul Guess:

18,000 people to come to the warehouse. And so we increased

Paul Guess:

our number of days. And we had people to sign up for

Paul Guess:

appointments. And so I thought it was a very interesting

Paul Guess:

dynamic, that people would still come to our warehouse and

Paul Guess:

schedule appointments to do so so they could shop safely.

Paul Guess:

18,000 people did come and actually the pandemic positively

Paul Guess:

affected my business.

Matt Waller:

That's impressive. Congratulations. You know,

Matt Waller:

there's been such a surge in demand. It's hard for the import

Matt Waller:

supply chain to handle all the volume. How are you dealing with

Matt Waller:

that?

Paul Guess:

Uh, why do you think that I am? I don't know that I

Paul Guess:

am as successful dealing with it from a leadership perspective.

Paul Guess:

So one of the most challenging and most difficult things that I

Paul Guess:

have dealt with, because it is somewhat out of your control.

Paul Guess:

And I have always thought throughout my leadership career

Paul Guess:

that I can control most everything. My leadership style

Paul Guess:

can at a minimum influence it. In 2020 containers from Asia,

Paul Guess:

whether that be the Philippines, China, India, etc. cost on

Paul Guess:

average anywhere between six to $8,000 in US currency to get the

Paul Guess:

container from door to door, the factory door to my door. In

Paul Guess:

2021, it rose from that amount to as much as $32,000 for a 40

Paul Guess:

foot container. We planned as best we could. We followed the

Paul Guess:

advice of our representatives from the freight forwarding

Paul Guess:

companies that we used. I knew that I was going to have to pay

Paul Guess:

more. We implemented a surcharge on the wholesale side that we

Paul Guess:

felt was warranted and doable versus just immediately

Paul Guess:

increasing our pricing. Because we were told that at some point,

Paul Guess:

the freight charges would go back down. One of the

Paul Guess:

representatives with the freight forwarders that I use, he said

Paul Guess:

you need to book your containers, at least one month

Paul Guess:

in advance. Well, then one month became two months, and then two

Paul Guess:

months became, you're going to have to pay for what they're

Paul Guess:

calling expedited freight, just to even get a place on the ship.

Paul Guess:

I would not tell you that we have been successful. We're

Paul Guess:

still, as of today, December the 10th of 2021, we're still

Paul Guess:

waiting on five container loads of seasonal merchandise to

Paul Guess:

arrive. Christmas is 15 days away. So obviously, we can't

Paul Guess:

ship that, we'll have to sit on it in inventory. And that's not

Paul Guess:

my style. My style is one in which I like to turn inventory

Paul Guess:

back to cash, always and as quickly as possible. So I can't

Paul Guess:

tell you that we have been very successful with it, I think

Paul Guess:

we've been more successful than most. It is one of the biggest

Paul Guess:

challenges that I've ever faced.

Matt Waller:

So based on your experience from this crisis that

Matt Waller:

we've seen as a result of a spike in demand, the import

Matt Waller:

supply chain has been a bottleneck. What do you learn

Matt Waller:

from that that you could share with our students?

Paul Guess:

Leadership and planning is not always just in

Paul Guess:

theory. You must plan ahead as much as you possibly can. But be

Paul Guess:

prepared to change course, as quickly as you can. Yes, I can

Paul Guess:

sit here and tell you that this year in 2021, we've had 20 plus

Paul Guess:

thousand people to come through our warehouse, and you know, the

Paul Guess:

orders are there and the demand is there. But I can also tell

Paul Guess:

you, we're a small business. So initially, when I saw the

Paul Guess:

freight rate increase, I had to go back to my lenders and say,

Paul Guess:

Hey, this is where the freight is now, we did not account for

Paul Guess:

that increase as it was happening. And that was to the

Paul Guess:

tune of a half million dollars only to realize we still didn't

Paul Guess:

account for enough of the price increase. And so there are times

Paul Guess:

in business, that you simply can not plan for every single

Paul Guess:

scenario, you think one thing is going to happen. But yet

Paul Guess:

something else happened. And then you've got to react. And I

Paul Guess:

never like to be in a reactive position. I like to be very

Paul Guess:

proactive. But there are times. And this is one of those times

Paul Guess:

where I had to react. And it doesn't always feel good for

Paul Guess:

somebody that's type A.

Matt Waller:

You bought Lux, and it has grown five times the size

Matt Waller:

it was when you bought it. You took Deck the Halls from

Matt Waller:

nothing, and now it's a multi million dollar brand. And your

Matt Waller:

warehouse 20 plus thousand people came this year, to this

Matt Waller:

little town in the Delta. You clearly know how to win as an

Matt Waller:

entrepreneur. What do you focus on to bring about these

Matt Waller:

successes?

Paul Guess:

As I look at the commonality across all of my

Paul Guess:

businesses, I do not focus on the end result, that end result

Paul Guess:

being the dollar. And I think that goes back to who I am as a

Paul Guess:

person and what I am personally motivated by. At the core of who

Paul Guess:

I am, I am amiable and want to please people. I focus on the

Paul Guess:

experience, let's say with the candle business, the experience

Paul Guess:

that would be created with that candle. Fragrance or smell is

Paul Guess:

one of the most important pieces of memory. That is what I

Paul Guess:

personally, that's what rolls my socks up and down. And that's

Paul Guess:

what I focus on at the core of who I am whether it is creating

Paul Guess:

a candle or whether it is people coming to my warehouse sale. My

Paul Guess:

customers are going to be creating memories for their

Paul Guess:

families or their friends. And so how can I create and develop

Paul Guess:

product that will then help my customer? And then how can I

Paul Guess:

create the experience within my warehouse or within my candles

Paul Guess:

or Deck the Halls so that that my customers are just

Paul Guess:

overwhelmed with the ability to create memories. And I give them

Paul Guess:

more than they ever asked for.

Paul Guess:

From a competition perspective, you say well, who's your

Paul Guess:

competition, Paul? In the warehouse sale, it could easily

Paul Guess:

be someone like a big box retailer like a Hobby Lobby. So

Paul Guess:

how am I different? What did the displays look by? What do people

Paul Guess:

see when they come in? What do they hear? What do they feel? If

Paul Guess:

they feel what I'm wanting them to feel, that inspires them to

Paul Guess:

purchase. They will go tell many other customers. People in the

Paul Guess:

state of Arkansas will even come to the warehouse and say, I

Paul Guess:

never knew about this. And that's because that is a multi

Paul Guess:

million dollar business, and I spend less than $20,000 a year

Paul Guess:

in advertising. It's primarily by word of mouth. If you want to

Paul Guess:

compete in the marketplace today, which is incredibly

Paul Guess:

difficult to compete in, that's what you have to focus on in how

Paul Guess:

you separate yourself and differentiate yourself, in my

Paul Guess:

personal opinion, because anybody can focus on price, but

Paul Guess:

it takes somebody that is wanting to go the extra mile to

Paul Guess:

truly create a difference for your customer.

Matt Waller:

That is good business sense there, so.

Paul Guess:

It doesn't mean that I'm always successful, please

Paul Guess:

don't take that that it- but it's what drives me. And the

Paul Guess:

creative side of me. That's what drives me. I mean, my goodness,

Paul Guess:

we're in a warehouse, it's got leaks in it in the roof. The,

Paul Guess:

the warehouse that we're in was built in the 50s. It was an old

Paul Guess:

Van Heusen shirt factory, and it's been vacant for 25 years.

Paul Guess:

So you're not walking into a Neiman Marcus. You know, when

Paul Guess:

people pull up to that warehouse, they think, number

Paul Guess:

one, where in the hell am I? I'm in a little town in 1700. And

Paul Guess:

the outside of the warehouse is awful. But when we open those

Paul Guess:

doors, and people see what has been created for them, they

Paul Guess:

cannot get enough. It is becoming a destination people

Paul Guess:

come from a six state area. It is mother-daughter trips, it is

Paul Guess:

girlfriend trips, it is husband-wife trips, it's- if you

Paul Guess:

love Christmas, you're coming there. You know, luckily, I had

Paul Guess:

the opportunity to do some training as well, years and

Paul Guess:

years ago and worked beside Disney and their leadership

Paul Guess:

model which you know, they're variations of everyone's

Paul Guess:

leadership model base. That's, that's where I focus.

Matt Waller:

Well, Paul, this has been a very insightful

Matt Waller:

conversation. Very impressive.

Paul Guess:

Thank you.

Matt Waller:

On behalf of the Sam M Walton College of

Matt Waller:

Business, I want to thank everyone for spending time with

Matt Waller:

us for another engaging conversation. You can subscribe

Matt Waller:

by going to your favorite podcast service and searching be

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About the Podcast

Be EPIC Podcast
Welcome to the Be Epic Podcast featuring Brent Williams, interim dean of the Sam M. Walton College of Business at the University of Arkansas. In each episode, you will hear from guests that will inspire you to be epic. As experts in their field, they will emphasize strategy, leadership, and entrepreneurship. This programming will highlight innovation and cutting-edge information that will leave you wanting more. Be sure to connect with Brent Williams on LinkedIn to join the conversation, access show notes and discover fantastic bonus content.