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.
Paul Guess 0:00
As I look at the commonality across all of my businesses, I do not focus on the end result, that end result being the dollar.
Matt Waller 0:12
Excellence, professionalism, innovation, and collegiality. These are the values the Sam M. Walton College of Business explores in education business and the lives of people we meet every day. I'm Matt Waller, Dean of the Walton College, and welcome to the Be Epic podcast.
Matt Waller 0:30
I have with me today, Paul Guess. And Paul is a graduate of the Walton College from 1993. He had a career with Eli Lilly, before starting his own businesses, and he currently owns three businesses. You're quite busy, Paul with these businesses.
Paul Guess 0:53
I am I would say that my days start at 4:30 in the morning, and many times I'm not done until seven or eight o'clock every night. You know, what they always say is a blank mind or an empty mind is the devil's workshop. So I don't have much time to play around or have an idle mind. So yes, sir. I'm very busy.
Matt Waller 1:14
Now, it's interesting. You majored in small business when you were in the Walton College?
Paul Guess 1:20
That is correct.
Matt Waller 1:21
And you graduated in 93. And then you worked for an enormous company for quite a few years. And then you finally started your own business. But I'd love to hear what got you interested in starting your business? And which of those three did you start first?
Paul Guess 1:37
it's kind of a combination of all of it. I was gainfully employed with Eli Lilly and Company for 14 years, starting at the bottom as a sales representative and rose to the ranks of upper middle management for Lilly, where I was responsible for three quarters of a billion dollars in revenue covering six states with the organization of approximately 160 people reporting to me, during that time, I was fortunate enough where Lilly paid for me to go to the Harvard School of Business, executive education for their general management program, where there are only 125 students accepted into the program from all over the world, and only 13 of us from the United States. That piqued my interest in international business, because in my living group, I lived with people from India, people from Japan, people from Switzerland, all over the world. My curiosity led me to exploring, importing and designing and working in factories overseas. So that sounds wonderful.
Paul Guess 2:46
But the reality of it is, when I was a regional for Lilly, there was a time where I became a little bit bored in my assignment, and it was in 2008, where the economy crashed. I thought, you know, I want to test my hypothesis and my theory of in a retail business, if you offer great product at a competitive price and great service, can you withstand the fallout of the economy and still be successful? And so I opened up a Christmas pop up store, in Searcy, Arkansas where I went in, and basically, I knew that I was only going to be there for three months, just in and out. And I was in an old pizza restaurant, I invested wisely invested roughly $100,000 and had a 35% net profit return on the money. And at a time where the economy was down, I thought, wow, there's something to this Christmas business.
Paul Guess 3:53
I continued my career at Lilly, and in 2013, we were downsizing as a company. At that point in time Lilly had asked me to relocate and I had moved seven times in those 13 and a half to 14 years with Lilly, and I was back home in Arkansas. I did not want to move again. And so my brother said to me, well, Paul, why don't you start a Christmas design business and import? And I said, well, number one, because I'm not a designer, and number two, I don't know how to import. I know nothing about that. Long story short, I taught myself how to import and more importantly, how to put the right people around me to create the designs fill the gaps of my shortcomings from a design perspective. So I started a company called Deck the Halls Y'all. DTHY is what you will see in boutiques and my brand today.
Paul Guess 4:54
So from there then Lux Fragrances came for sale Lux was started by Nancy Shine in Marble Falls, Texas. And Nancy asked me she said, Oh, don't you want to buy my company? I'm ready to retire. I've known Nancy. She was a senior executive for Estee Lauder for years. And she said, Don't you want to buy my company? And I said, no, thank you. I don't want to be in the manufacturing business. I simply want to design and import. Well, as time progressed, I decided, yes, I did want to purchase Lux and relocated from Marble Falls to my hometown of Des Arc. We hit the ground running, and we have never looked back. Now it's sold across the entire United States from large retailers to small independent Mom and Pop boutique type stores. So that is how I started and pretty much kind of where I am today.
Matt Waller 5:52
How did the pandemic affect your business?
Paul Guess 5:57
At first, with the pandemic I thought, gosh, all of my accounts are closed. And how are we going to be successful? One of the marketing firms that I use is actually located in Fayetteville. And they suggested to me to go and get my cell phone and begin doing videos. And I said, oh, no, no, no, no, no thank you. I don't want to do videos of candle manufacturing. And I don't need that, I'm 40. At that time, I was 48. And I don't, I don't want to do that, I, no thanks. And lo and behold, I did and I took their advice, and we created a direct to consumer arm of our business, In Lux. We had historically always been wholesale and wholesale only. But I knew that for me to stay alive, my candle business, I had to create another selling channel. I was the creator of a candle that is poured in a wooden doble the videos somewhat went viral. As a result, we now have a healthy direct to consumer portion or arm of our business, we've sold close to a half million units at this point. So that's what happened on the candle side of the business.
Paul Guess 7:19
In my warehouse sale, which is called Guess And Company Christmas at the Warehouse. I had to strategically plan because I knew that Christmas was still coming regardless of a pandemic. I surveyed my customers and looked at it as an opportunity to still meet their needs, or hopefully exceed their needs, and to give them an opportunity to be normal, if you will. And so at that point in time, we were planning for 18,000 people to come to the warehouse. And so we increased our number of days. And we had people to sign up for appointments. And so I thought it was a very interesting dynamic, that people would still come to our warehouse and schedule appointments to do so so they could shop safely. 18,000 people did come and actually the pandemic positively affected my business.
Matt Waller 8:18
That's impressive. Congratulations. You know, there's been such a surge in demand. It's hard for the import supply chain to handle all the volume. How are you dealing with that?
Paul Guess 8:30
Uh, why do you think that I am? I don't know that I am as successful dealing with it from a leadership perspective. So one of the most challenging and most difficult things that I have dealt with, because it is somewhat out of your control. And I have always thought throughout my leadership career that I can control most everything. My leadership style can at a minimum influence it. In 2020 containers from Asia, whether that be the Philippines, China, India, etc. cost on average anywhere between six to $8,000 in US currency to get the container from door to door, the factory door to my door. In 2021, it rose from that amount to as much as $32,000 for a 40 foot container. We planned as best we could. We followed the advice of our representatives from the freight forwarding companies that we used. I knew that I was going to have to pay more. We implemented a surcharge on the wholesale side that we felt was warranted and doable versus just immediately increasing our pricing. Because we were told that at some point, the freight charges would go back down. One of the representatives with the freight forwarders that I use, he said you need to book your containers, at least one month in advance. Well, then one month became two months, and then two months became, you're going to have to pay for what they're calling expedited freight, just to even get a place on the ship.
Paul Guess 10:20
I would not tell you that we have been successful. We're still, as of today, December the 10th of 2021, we're still waiting on five container loads of seasonal merchandise to arrive. Christmas is 15 days away. So obviously, we can't ship that, we'll have to sit on it in inventory. And that's not my style. My style is one in which I like to turn inventory back to cash, always and as quickly as possible. So I can't tell you that we have been very successful with it, I think we've been more successful than most. It is one of the biggest challenges that I've ever faced.
Matt Waller 10:59
So based on your experience from this crisis that we've seen as a result of a spike in demand, the import supply chain has been a bottleneck. What do you learn from that that you could share with our students?
Paul Guess 11:14
Leadership and planning is not always just in theory. You must plan ahead as much as you possibly can. But be prepared to change course, as quickly as you can. Yes, I can sit here and tell you that this year in 2021, we've had 20 plus thousand people to come through our warehouse, and you know, the orders are there and the demand is there. But I can also tell you, we're a small business. So initially, when I saw the freight rate increase, I had to go back to my lenders and say, Hey, this is where the freight is now, we did not account for that increase as it was happening. And that was to the tune of a half million dollars only to realize we still didn't account for enough of the price increase. And so there are times in business, that you simply can not plan for every single scenario, you think one thing is going to happen. But yet something else happened. And then you've got to react. And I never like to be in a reactive position. I like to be very proactive. But there are times. And this is one of those times where I had to react. And it doesn't always feel good for somebody that's type A.
Matt Waller 12:32
You bought Lux, and it has grown five times the size it was when you bought it. You took Deck the Halls from nothing, and now it's a multi million dollar brand. And your warehouse 20 plus thousand people came this year, to this little town in the Delta. You clearly know how to win as an entrepreneur. What do you focus on to bring about these successes?
Paul Guess 13:03
As I look at the commonality across all of my businesses, I do not focus on the end result, that end result being the dollar. And I think that goes back to who I am as a person and what I am personally motivated by. At the core of who I am, I am amiable and want to please people. I focus on the experience, let's say with the candle business, the experience that would be created with that candle. Fragrance or smell is one of the most important pieces of memory. That is what I personally, that's what rolls my socks up and down. And that's what I focus on at the core of who I am whether it is creating a candle or whether it is people coming to my warehouse sale. My customers are going to be creating memories for their families or their friends. And so how can I create and develop product that will then help my customer? And then how can I create the experience within my warehouse or within my candles or Deck the Halls so that that my customers are just overwhelmed with the ability to create memories. And I give them more than they ever asked for.
Paul Guess 14:38
From a competition perspective, you say well, who's your competition, Paul? In the warehouse sale, it could easily be someone like a big box retailer like a Hobby Lobby. So how am I different? What did the displays look by? What do people see when they come in? What do they hear? What do they feel? If they feel what I'm wanting them to feel, that inspires them to purchase. They will go tell many other customers. People in the state of Arkansas will even come to the warehouse and say, I never knew about this. And that's because that is a multi million dollar business, and I spend less than $20,000 a year in advertising. It's primarily by word of mouth. If you want to compete in the marketplace today, which is incredibly difficult to compete in, that's what you have to focus on in how you separate yourself and differentiate yourself, in my personal opinion, because anybody can focus on price, but it takes somebody that is wanting to go the extra mile to truly create a difference for your customer.
Matt Waller 15:47
That is good business sense there, so.
Paul Guess 15:50
It doesn't mean that I'm always successful, please don't take that that it- but it's what drives me. And the creative side of me. That's what drives me. I mean, my goodness, we're in a warehouse, it's got leaks in it in the roof. The, the warehouse that we're in was built in the 50s. It was an old Van Heusen shirt factory, and it's been vacant for 25 years. So you're not walking into a Neiman Marcus. You know, when people pull up to that warehouse, they think, number one, where in the hell am I? I'm in a little town in 1700. And the outside of the warehouse is awful. But when we open those doors, and people see what has been created for them, they cannot get enough. It is becoming a destination people come from a six state area. It is mother-daughter trips, it is girlfriend trips, it is husband-wife trips, it's- if you love Christmas, you're coming there. You know, luckily, I had the opportunity to do some training as well, years and years ago and worked beside Disney and their leadership model which you know, they're variations of everyone's leadership model base. That's, that's where I focus.
Matt Waller 17:10
Well, Paul, this has been a very insightful conversation. Very impressive.
Paul Guess 17:17
Matt Waller 17:19
On behalf of the Sam M Walton College of Business, I want to thank everyone for spending time with us for another engaging conversation. You can subscribe by going to your favorite podcast service and searching be epic. B-E E-P-I-C.