06: How to Keep the Entrepreneurial Spirit Alive as You Grow with Barefoot Wine Founders Houlihan and Harvey

“The first thing we did was ask lots of questions.” – Michael Houlihan

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How do you start a business? Having an idea doesn’t mean you know what to do next! In fact, getting started is often much, much harder than the initial concept.

Michael Houlihan and Bonnie Harvey, co-founders of Barefoot Wine, are here to talk about what they did to get started after purchasing their first vineyard. They’re full of advice on the importance of asking questions, getting to know the whole production process, and keeping the entrepreneurial spirit alive as your company expands.

We’re also getting into how to know when you’re ready to start selling a product, and what to do when mistakes happen.

Bonnie and Michael have written books and courses full of insights for fellow entrepreneurs.  I’m so pleased to have them here to talk with me. No matter how big or small your business is, you won’t want to miss out on these two experts!

“When you sell the product you think you’re done but no, that’s when your job really starts”

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Bulletpoints

  • Get as much information on your customers as possible. Barefoot researched who their target market was, in what context they would be purchasing wine, and for what purpose.
  • Start out by asking lots of questions. Bonnie and Michael talked to everyone involved in the entire production process to figure out what people thought could be improved.
  • You don’t need a lot of money to get good marketing. Barefoot didn’t have the budget to advertise on traditional venues like radio and internet, so they started supporting local charities.
  • When companies get bigger and have more departments, it’s easy to lose track of the entrepreneurial spirit and what the end goal is: sales.  
  • Be transparent with your employees. They’re working in the field and often have great ideas on how to address problems, and can see issues arising before management does.
  • Work with everyone along the line to help them achieve their goals. If you’re not working with people along the distribution line, you’re never going to get the product to your end consumer.
  • You’re in a constant state of improvement. Start working and accept that you will make mistakes, and then change and adjust when you do.
  • Build relationships first. Before you even try to sell anything, establish a relationship with the client or the distributor or retailer.
  • Start small in your business. Learn your lessons in a small area and get your mistakes out there before you expand and take your business on the road.

Links:

TheBarefootSpirit.com

Books:

The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand

The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People

Online Courses

The Entrepreneur’s Guided Principles for Success

Transcription

[INTERVIEW START]

Kim Orlesky: Welcome back, listeners. I’m so excited to have you here. I am very excited to introduce to you the co-founders of Barefoot Wine, Michael Houlihan and Bonnie Harvey. They are also New York Times bestselling authors of ‘The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand,’ and ‘The Entrepreneurial Culture: 23 Ways to Engage and Empower Your People.’

They started with no money and no knowledge of their industry, and somehow, Michael and Bonnie were able to bootstrap their novelty brand into a top global icon. Since selling their company to E. & J. Gallo, Michael and Bonnie have been actively helping entrepreneurs live their dreams by sharing their expertise. You can now find them speaking internationally as keynote speakers training corporations and contributing to many online publications. Their newest e-course How to Get Your Product on the Shelf and Keep it There will teach entrepreneurs the lessons that they learnt that helped get their wines on the shelves across the US.

Welcome Bonnie and Michael.

Bonnie Harvey: Oh, thank you, Kim. We’re delighted to be here.

Kim Orlesky: Yeah. So let’s kind of get started a little bit. I mean, 20 years ago–or back in–I believe it was 1986, you kind of decided to go live a little bit of a dream and start a winery, completely bootstrapping right in from a laundry room. Is this correct?

Bonnie Harvey: Well, it’s pretty much correct except for living the dream part. It was not our dream to go into the wine industry. Actually, it was a trade for services. I had a client who hasn’t paid for his grapes. And when I asked Michael to collect the funds, he found out that the winery had just declared bankruptcy of all things, and they’d had no money to pay–my client, became our client–and so we actually fell backwards into the wine vat. And–

Kim Orlesky: Not literally, I hope.

Bonnie Harvey: Just about Michael saw wine tanks as he was trying to negotiate to get some funds, and a bottling line, and managed to negotiate a trade for services bottling, and the bulk wine. So there we were, that’s what we had. And our client couldn’t take over a new business so we did. Crazy, isn’t it?

Kim Orlesky: Yeah, absolutely. To hear that you really went from kind of creating something out of nothing, or at the time it was something that was not even really anywhere at the table. I know when you’re originally getting your brand off the ground, you didn’t really have a lot of money to even spend on advertising. What kind of creative ways were you able to use to come up with in order to get more exposure?

Michael Houlihan: Well, one of the things we did is we really took a close look at who our client was–or they’re called a target market or [avatar?] today. What we found out was that–were the product that we wanted to create, our [avatar?], was a 37-year-old mom with two and a half kids who was buying wine for Tuesday night wine as a staple. She wanted the wine to be at a very reasonable price because she was going to buy it every week. It was going to be like her personal house wine. It doesn’t mean that she wasn’t going to buy Saturday night wine, it just meant that she was looking for wine that always tasted the same from year to year.

Once we knew what our market was, what she would pay and what she was looking for, then we built Barefoot Wine to satisfy that specific need. So the first thing we did was we asked lots of questions. We asked questions to the buyers, we asked questions to everybody in the stores, the clerks, the people in the warehouses that handled wine, the people on the bottling lines, and we said, “What’s wrong with the system? What needs to be made right with the system? What can we do better? What would you do if you were doing this?” And so we learned a lot that way. That really gave us a big head start. It all happened because we didn’t know what we were doing. We were humbled.

Kim Orlesky: Yeah, absolutely. I love the fact that you really researched right down to a very specific person. Oftentimes I work with my clients and we do work on that as specific as an [avatar?] as you possibly can get to the point where you can actually personify this woman. This 37-year-old woman with 2 ½ kids. Absolutely love it. You also [read?] some of the stuff that I was reading. You had also contributed a little bit more towards some of the charities and everything, because you didn’t have the advertising dollars in order to be able to get the ads that you wanted to. How did that help you in the business side of it?

Bonnie Harvey: Yes, that’s very true. Really, we didn’t have any money. We started off broke in addition to not knowing what we were doing. So talk about disruption. We found out that if you were going to advertise on radio or on magazines, you just have to do it over and over and over again. That’s like a shotgun blast. You just shoot all that money out there in the ad and hope that somebody is going to respond to it. But we really became more targeted.

We went into the community to find out what people were interested in in their community that was around the market where our product was available. We started supporting their community fundraisers and non-profits. So that is how we got the word out about our product. Because we were supporting them, they had a social reason to support us. So it worked so well that even when we started doing better and actually had more funds, we didn’t have paid advertising. We chose to stick with worthy-cause marketing, which is what we called it, to get the word out about our product. So now, there’s been tens of thousands of people and communities and nonprofits that have benefitted as a result of that. So I’m very proud of that.

Kim Orlesky: Yeah, absolutely. I know even from my own personal experience when we host events, we’ll always contribute a small portion to charity. I find that the marketing exposure that you get from those initiatives, it [inaudible] the value that you would pay for a traditional advertising campaign. So I absolutely love the worthy marketing that you put behind that.

Bonnie Harvey: Yes, yes, thank you.

Kim Orlesky: When you were building your business, I saw that you had to really develop your culture around your customers first then sales and then your sales support. Tell me, what kind of inspired that initiative and how did that really help you grow your business even further?

Michael Houlihan: Well, when you have two entrepreneurs in a garage or a laundry room or a family room and they’re trying to start a business, neither one of them have any question in their mind that if they don’t make a sale, they’re going to be out of business tomorrow. In other words, their culture is a culture of sales. Sales first. And they know that the customers is who they have to serve in order to stay in business. But what happens is when the business gets a little larger, that’s when you start to have divisions of labor. You start to specialize because you have efficiencies [inaudible]. All of a sudden, you have that production division, and it’s different in the sales division. And then you have the accounting division, and you start to have these different divisions. That’s where you lose that entrepreneurial culture that your company had when you started.

So it’s not about how you get the entrepreneurial culture, it’s about how you lost it. So it is the divisions of labor that actually kill the entrepreneurial spirit. So what we try to do is help companies to what we did which is to be vigilant and look for that to happen. One of the ways that we did it was we said, “Okay. We only have two divisions at our company. One division is called sales, and the other one is called sales support.” So if you’re not in sales, you’re in sales support. We don’t care if you’re the receptionist, the accountant, the lawyer, the CEO, the CFO, it doesn’t matter, you’re in sales support. To underline that and to enforce it, we’re going to give everybody a quarterly bonus based upon how well the company did that quarter in terms of sales growth and productivity.

So now they were all out there on the same limb together. They had this financial reason for helping sales and focusing on sales. The other thing we did is we did the opposite of need to know. You might work for a company and they try to keep you in the dark–they don’t want to tell you they have a problem because they think it’ll scare you and you’ll [inaudible] because it is an insecure place to work or something. We did just the opposite. We told people all of our problems and we asked them for help. And we would bring the sales people in and we’d have the salespeople say, “Hey, we got a problem out in the field. We don’t know what we’re going to do about it. You got any ideas?” One day, one salesman came and said, “I got good news and bad news. The good news is we’re in 600 new stores. The bad news is they put Barefoot on the bottom shelf. What are we going to do?” So somebody in our staff laughed and said, “Well, I guess you’re going to have to go after the foot traffic.”

[inaudible] they thought that was pretty funny because we’re Barefoot. But then somebody said, “Oh, wait a minute. That’s not so crazy. Why don’t we have decal footprints that are like wine stain, and we could lead people from the front door down the wine aisle and turn them in toward where our wine is on the bottom. And they’ll be looking down anyway and they’ll see our wine.” Well, that worked so well that when we became popular and got up to eye level on the shelf, people called and complained because they couldn’t find Barefoot anymore.

Kim Orlesky: You know what? What a unique solution to a lot of problems that businesses have when it comes to actually putting their products on the shelves for the very first time.

Michael Houlihan: Yeah. And that came from the receptionist.

Kim Orlesky: Wow. Everybody was really integral in helping to build the business and having a piece of that.

Bonnie Harvey: Absolutely. And we asked a lot of questions of everybody in our industry. So people are often starting businesses and think that they have to satisfy the needs of the end user or the consumer. Indeed you do, but if you don’t satisfy the needs and requirements of everyone that touches your product along the distribution line, you’re not going to have an opportunity to get to that end user. So that was a big wake up call to us. We had to find out what our–not only our own staff required, but our distributors, the distributors’ sales people, the retailer, everyone along the line, what they wanted and how we could best work with them to help them achieve their own goals. So that was a huge lesson, Kim.

Kim Orlesky: Yeah. It was absolutely wonderful. I mean, to be able to work with so many people that had experience in different ways whether they were the distributors of your company or other companies. One of the other things that I noticed was when you guys were still kind of in that development stage, building your business, you decided at some point to actually invest in a wine connoisseur. Somebody to actually ensure that the product was going to be a great quality and consistency. Why did you decide at that point to hire an expert? Was that even a hard decision for you to invest in that at the very beginning stages?

Michael Houlihan: Well, it’s very difficult for any new business to invest in anything like that. What most people do is they go into business and they say, “Oh, I need an office,” or “I need a factory,” or “I need a vineyard,” or “I need a winery,” or whatever. What they need is they need sales. That’s what they need. You can outsource just about anything. I don’t mean to China. You can outsource right in your own town. But you can outsource just about everything except for sales, quality control, and accounting.

Now let’s talk about quality control. Yes, you can have somebody else make your product, but you have to have an expert on your team to make sure that that product lives up to your expectations. So what we did is we would write these contracts. When we started our business, our contracts were only three pages long. But when we sold our business, they were 37 pages long. That’s how many times we made mistakes. We [inaudible] and say, “Okay, we’re not going to write it that way, we have to write it this way because they’re getting [inaudible] over here.” But the idea was we would not give a company a contract to make wine for us unless our expert winemaker was on their sight on the day that it was being made and on all the decision-making days on that product. And we would not pay them unless that wine met our requirements for acidity, for sugar, for [inaudible], and all the other enological aspects of winemaking.

So yeah, it was a tough decision and we did it. Not only did we do it, but we put that person on our Board of Directors. It was a woman, too. Jennifer [inaudible]. She’s still with Barefoot.

Kim Orlesky: That’s absolutely wonderful. It also speaks volumes to the brand that she helped build. That she still is so invested in it. I love what you had said, though, about turning your contract from 3 pages to 37 pages. One of the things that I often talk with my clients about as well is done is better than perfect. You need to get everything out there. You need to be able to start selling your product sometimes even before you’ve actually created it. Do you have any other examples of when you were able to do that?

Bonnie Harvey: This is a good example in our winemaking contract agreement. The reason it became so many pages long is because we were continually making mistakes. It’s because you have to get out there with what you’ve got and fly with it and improve from your mistakes. So we created a little different kind of philosophy and we created a game of making mistakes and we called it Make Mistakes Write. Whenever we made a mistake because we’re in a constant state of improvement, right, Kim?

Kim Orlesky: Yes, absolutely.

Bonnie Harvey: Exactly. That’s what mistakes are, you learn from them. So we’d find out what contract had to be changed, what job description or label had to be changed, what kind of policy or procedure had to be changed, and signs. Whatever had to be changed, it was changed in writing. So we’d write down how the mistake took place since most of them in miscommunication. And what we had to change in writing to make that mistake right so it was less likely to happen again.

Kim Orlesky: Yeah, that’s wonderful, right? I love the idea that you’re constantly reiterating, constantly looking at what has happened. And not necessarily as a failure, but as a learning experience going forward.

Bonnie Harvey: Oh, yes. You can’t have “failures” get you down because you’re going to have many. That’s part of improving.

Kim Orlesky: Yeah. I usually say this question for the end, but since it’s such a nice segue into it, what kind of was your biggest or epic failure that you experienced during your entrepreneurial journey? And what did you learn the most from?

Michael Houlihan: Oh well, I think that we really underestimated what was required in terms of customer service. I think lots of businesses do that especially businesses that are in the process of selling a product. When you sell the product, you think it’s done, but no, that’s when your job really starts. Because people judge you more by how well you treat them when things go south than when everything is running smoothly. An example is we thought, “Well, Barefoot will sell in Hawaii.” Everybody’s running around barefoot, half the bars are called barefoot bar–this is a natural place. So I went over to Hawaii, and I got a distributor, and sure enough, we sold Barefoot all over the islands. They loved it–

Bonnie Harvey: Because you personally rode with that salesperson and went into all the markets and restaurants and bars.

Michael Houlihan: That was the mistake that we found out about. We found out that there was no reorders. We said, “How come there’s no reorders?” The answer is because I wasn’t there to personally get the reorders. I made this miscalculation that our distributor was going to get the preorders, or that the retailer would preorder it. Because we thought, “Well, he’s got a hot mover. It’s in his financial interest. He’s going to get to reorder.” But no, there was just too much competition, and the retailer had too many other products to think about, and so did the distributor. So I had to get on a plane, go back, and sure enough, resell all those accounts.

Well then I came back again and again, there was no reorders. So this goes on about two or three more times. Finally, Bonnie comes to me with two pieces of paper. She says, “This piece of paper shows you how much it’s costing you to go to Hawaii to sell product. And this piece of paper shows you how much money you were making on the product.”

Kim Orlesky: Yeah. You talk about that one as a failure, and I don’t know, I think there might be worse failures than having to have to return to Hawaii multiple times.

Michael Houlihan: Well, yeah. But I lost my tan, and it took two years to go back to Hawaii because we had to cash [inaudible] enough money [inaudible] have a person fulltime in Hawaii to service our sales.

Kim Orlesky: Yeah. Absolutely. It just kind of speaks all the miscommunications that sometimes we don’t realize that we make. But I mean, it’s wonderful that you were still able to continue to get those orders and continue to get that revenue coming through.

You have a brand new course that’s coming out for entrepreneurs called How to Get Your Product on The Shelf and Keep It There. What can students expect to learn from this, and how could they possibly sign up?

Michael Houlihan: Well, first of all, How to Get Your Product on The Shelf and Keep It There assumes that you have a product. Now, many people say, “Oh, I got a great idea. Pay me.” Well, I’m sorry, nobody’s going to really pay you for your idea. Or they say, “I got a great idea, I’m going to get it licensed.” Well, people aren’t going to pay for a license unless you prove it works commercially. At least you’re not going to have any negotiating power unless you prove that works commercially. So you have to take your idea–you have to wrap your idea in a product, you have to wrap your product in a business, you have to wrap your business in a brand, and then you have to sell your brand until you become an acquisition target. And then you get acquired, and that’s how you get paid for your idea. You get the big check from the acquirer.

So that’s like a real wake up call for a lot of people in business. They have to think about their exit strategy–yes, you make money on the way there, but if you’re doing anything that requires expansion to stay in business, you’re putting every single dime that you make right back into growing your business. So all those profits you thought you were making, you look at it and you go, “If I take this profit, so and so is going to copy my idea. They’re going to put their money into it–I’m not. I’m going to buy a boat and go out to the lake.” Right? And they’re going to pass me and I’ll be out of business.

So in the stream of commerce, there’s only upstream and downstream. There’s no treading water. So what we figured is let’s do a course that helps people understand what’s involved in getting their product on a retail shelf. Not only getting it there, but keeping it there. So we’ve taken all of the hard knocks lessons that we learned because our product had discontinued and failed in many different areas, and we got it into some states and provinces where we had to go there and do these things just like Hawaii. So the idea is we took all of our 20 years of experience and compressed it down to five one hour lessons in a five-hour series on how to get your product to market and keep it there. It’s everything from how you say hi to a retailer, what are the street smarts, where do you park your car when you drive in their lot, how do you talk to them–all these stuff. It gets really granular.

We’re really enjoying doing it because it’s something that we’ve done–and you see Barefoot everywhere. It’s in every store. You have to ask yourself: “How did they get there?”

Kim Orlesky: Yeah. Absolutely. I love the little nuances that you include in this course. Because I mean, a lot of sales courses or other types of e-courses, they go to very 50,000 ft. view. They go so high level. Knowing that we have to maintain our customer relationship and that client relationship, just those small things like where to park has such a big impact on the overall relationship when we’re having those initial meetings.

Michael Houlihan: Oh, yeah. The first time I went out there trying to sell Barefoot, I parked right in front of the store just like I was the customer. The buyer was standing behind the cash register and he said, “Is that your car?” And I said, “Yeah.” I thought he was going to compliment me on the car. He says, “If you want to talk to me, you better move it. That’s for paying customers.” And other nuances like if you’re giving the pitch and somebody comes in, I don’t care if you want to buy a lottery ticket or a quarter milk, you get out of their way. You stop talking and you physically back off.

There’s about 15 or 20 other points like that. And how to give a demonstration of your product in a bricks and mortar store. Most people go in there, they do a demonstration, and they’re really surprised that their product is discontinued right after their demonstration because they forgot to ask for a reorder after the demo to have goods on hand for all the customers they just created. So the story sells out, and that’s it. They’re out of there.

Kim Orlesky: Absolutely. And I know we’ve spent a little bit of time talking specifically about product, but you also–offline, we were mentioning a little bit how you guys had recently spoke at a convention for CPAs. We’re the [service?] industry. How when you’re working on a sales pitch does it kind of transform when you’re with whether your service or your product? Or is such conversation almost the exact same?

Bonnie Harvey: It’s not that much different because what we’re really doing is building relationships first. Before you make a sale of anything, you need to build a relationship. The way you build a relationship is using the world’s greatest sales pitch. I can help you sell your product. Your product may be service, your product may be shelf space, which is the retailer is trying to make the best use of his shelf space. You do that by being an assistant buyer. You stand next to your prospect and you look around the environment whether it’s an office or a store, whatever, and you find out what does well there, what doesn’t do well there, what the concerns of the buyer are. And that buyer becomes more and more reliant on you because you’re an assistant buyer. You have his or her best interest in mind. That’s how you make a sale. By satisfying the needs of every buyer that you’re dealing with.

Kim Orlesky: I absolutely love it. One of the questions right at the very end I do ask–if there’s one more piece of advice to entrepreneurs [inaudible] would tell them about sales–I mean, you covered a lot, but is there anything else you would want to add to that?

Bonnie Harvey: Well, I really believe Michael does as well that what you have to do starts small in your business because you are going to make mistakes. Hopefully, you make mistakes right. But when you do make mistakes, you’ve got to go around and make up for them to whomever was offended or whoever experienced a loss as a result of your mistake. So start small. Learn your lessons in a small area, be a big success in a small area, and then take that success to other areas as you expand. But understand the whole process by getting all your mistakes out in a small area. Become a hot seller and take it elsewhere. Expand with it. Take it on the road.

Kim Orlesky: That’s absolutely wonderful.

All right. So listeners that love everything that you say–because I know there’s going to be so many of them–they can buy your books on amazon.com. How else can they get in touch with you for any of your courses or your keynotes, anything else that you’re offering?

Michael Houlihan: They can go to www.thebarefootspirit.com. We call it The Barefoot Spirit because it’s this spirit behind the Barefoot brand. It’s like the management philosophy, if you will, and the sales philosophy. So www.thebarefootspirit.com.

Kim Orlesky: Wonderful. Well, thank you so much for being my guest today, Bonnie and Michael. I had such a fantastic time. Honestly, I am so excited to understand more about your e-course and get involved in that. And I’m so excited for all the entrepreneurs that you’re going to help in the future.

Bonnie Harvey: Thank you, Kim. We are, too. We really want to share all the lessons we learned so others don’t have to go through that pain–

Kim Orlesky: Absolutely.

[INTERVIEW END]

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