Ridge, the metal-clad wallet maker, was launched in 2014 via a father-son Kickstarter campaign. Sean Frank joined the company in 2018 as Chief Operating Officer. He’s now CEO and hopes to sell the company for $1 billion within three years.
This is my third interview with Frank, following our discussions in 2021 on influencer marketing and in 2022 on the iOS 14.5 turmoil. In this part, we covered the overall state of e-commerce, the dangers of excessive leverage, and Frank’s goal of selling the company.
All of the audio from this conversation is embedded below. The transcript is edited for length and clarity.
Eric Bandholz: How was 2022 for Ridge?
SeanFrank: There were ups and downs. We didn’t double sales as planned, but it was a decent year.
E-commerce was down overall in 2022. In a given week, I probably touch 50 brands. About half of that was down 10% year over year. Another 15% to 20% were disastrously down and will end up going bankrupt or making distress sales. Thirty percent were down but had planned to be down and profits had increased as a result. A small cohort – 5%, 10% – had their best year ever.
I have a few friends who have had nine-figure exits — they made over $100 million selling their businesses. This was unimaginable for me in high school. I grew up in an economically depressed area during the opioid epidemic. I’ve known people who have died from heroin overdoses. Most of America’s problems today stem from the opioid crisis. Now I’m 28 and run a nine-figure business. I have won.
My goal is to sell Ridge for $1 billion within three years. I’m trying to time it right. We come from a bubble. Interest rates will rise in 2023 and likely fall again in 2024. Hopefully in 2025 or 2026 we are in a new bubble and I can sell my fortune. The goal thereafter is to create another company in a larger, addressable market, bring it to $100 billion, and sell it. I enjoy the business. It is fun.
band wood: Could you turn Ridge into this $100 billion company?
Frank: no Here’s why. The most valuable individual company in our niche is Hermes. It’s worth around $250 billion. There are conglomerates like LVMH and Keurig. There’s Nike, which owns Converse. Nike is worth about $170 billion. There are maybe three brands worth $100 billion in non-tech or non-automotive ways. Given our market, Ridge can’t be a $100 billion company.
We could build a small VF Corporation that owns North Face and Vans – two iconic brands. It’s worth about $12 billion.
The biggest mistake entrepreneurs make is choosing which market to pursue. My advice is don’t sell wallets. People don’t care about wallets. We are the largest wallet company. It sucks. But we’re turning around in the next few years. We launched rings, watches and knives as an accessory company. The wallet category as a potentially addressable market is as big as we are now. You are better off capturing 1% of a huge market than becoming a market maker.
band wood: You mentioned that 10-15% of companies will not survive. What would save her?
Frank: rate cuts. Debt causes a company to go bankrupt. With no debt, you can downsize, eliminate debt, and live in one state forever. If you had no debt, you still exist without employees or office space.
But many brands don’t understand their underlying metrics and have way too much debt. They are sitting on bad inventory or thought Q4 would save them. It didn’t.
Now they have inventory that people don’t want, not enough marketing money to sell that inventory, and creditors are knocking on the door wanting their money back. The non-traditional lenders will start taking money from the brands’ Shopify distributions. That’s currently 15% of brands.
E-commerce in 2023 will require high gross profit margins – 80% if possible. The more the better. It’s not easy to get over 80%. If you get 90% gross profit, you look like Louis Vuitton where you have to sell a product for thousands of dollars. To get those margins, you have to charge more. That’s the most important.
We’ve had this conversation before. There is a buyer at each end of the spectrum. Someone buys Hanes t-shirts and another buys Buck Mason t-shirts for $32. Someone else is buying James Perse t-shirts for $125, and some consumers are paying $400 for Brunello Cucinelli t-shirts. There is a buyer for every price.
band wood: What’s your next industry after Ridge?
Frank: There’s an epidemic in America of people not going to the dentist. Especially young men. Most men under 35 have not been to the dentist in 10 years. There is a huge business to be built to get people to go to the dentist. It’s a horrible experience. You pay a lot of money to be in pain and confused.
I want to streamline this process. There are many regulations. Some listening dentists will be angry. But it’s mostly an art, not a science. Go to two dentists and you will get two different treatment plans.
A $100 billion brand is to be built around dental care.
band wood: Where can people reach you and support you?
Frank: i’m on twitter @SeanEcom, and LinkedIn, @SeanDavidFrank. I have a free newsletter called Unsponsored Ecom. And listeners can visit Ridge.com.
