Hi, everyone. Im j. J. Ramberg, and welcome to your business. The show dedicated to helping your Small Business grow. When things are falling apart or just not going perfectly well, how much do you tell your employees and how much do you tell your customer snz its a tough question. We hear the word transparency a lot, but it can hurt you . We went to San Francisco to meet the people behind the upstart Flower Company bloom that, about their meet oric rise and their more recent troubles. They say part of what brought them through the rough patch was simply letting everyone know what was going on. You know that cliche of assembling the plane on the way down. What do you do when you realize it . Do you let it go down or fix it . This is the story of one entrepreneurs oh, shoot moment, and how he brought his company back from the brink. I was in new york in i guess summer of last year when it really hit me that, oh, man, weve got a bit of a problem on our hands. David at bloom that in San Francisco was riding a wave a few years back. Like so many entrepreneurs at the time, with plans to become the uber for this or the uber for that, the idea was to become the uber for flowers. We started bloom that, ift made sending flowers as simple as sending a text message, would you do the more often . Like many startups, it blossomed from a desire to streamline a fairly common but frustrating experience, ordering flowers. The experience is horrible. A really painful process to select something thats going to represent you well. The pricing is ridiculous. And then i gotta order like sometimes two, three days ahead to get it done. The idea was simple. Give the customer just a few choices, and deliver the same day. Usually within 90 minutes. Prices would be low and there would be no delivery fees. It was 35, flowers delivered within 90 minutes anywhere across the 7 x 7, the dimensions of the city of San Francisco. On demand flower delivery, the uber for flowers. And sort of from the beginning, it worked out very well. It was pretty simple. And the flowers, they would be exactly as pictured online. They would be high quality, farm fresh, seasonal blooms that were just picked. Wrapped beautifully in burlap and hand tied with a bow. Success came fast. Venture capitalists and celebrities like ashton cusher and joe montana swooned over the idea, forking over millions of dollars, hoping bloom that would succeed and disrupt the 8 billion floral industry. As an entrepreneur, your job is to go and disrupt some things. So youre a crash dummy in a car crashing into a brick wall and you hope you have enough steam to sort of get through that wall. But the Business Model that worked so well in San Francisco didnt work as well when they moved into other cities. We launched los angeles, 90minute delivery. And we launched new york, 90minute delivery. Before we knew it, we built up the infrastructure to accommodate the speed, but not the base line revenues in the expanding markets to support all of the infrastructure. These new economics, the assumptions we were making around what was happening in San Francisco are no longer applying to the new expansion markets and we couldnt keep up. Suddenly, the business which was flying high since day one was hemorrhaging money. David was busy launching the new york market when the shocking reality of their situation became crystal clear. At the peak of last summer, i think we burned a little over a half a Million Dollars in the month of june. So that was just like, takes the breath out of your lungs. And its one of those things where youre like, you question whether this is even feasible. How in the world did this happen . Customers love the product. They seemed to be growing. But when you lifted up the curtain, they were spending too much money. Like many startups moving fast, accounting was an afterthought, and they simply didnt have a foundation or system in place to keep up with their rapid growth. And the problem was that we were moving so fast that we were maybe 60 to 90 days in arrears of actually closing our books. So by the time we sort of found out what was really happening, it was, you know, 90 days ago. And 90 days is a lifetime in the world of startups. So i would say advice to any entrepreneur is like get your financial house in order from day one. Make sure that youve got systems and processes in place that are going to scale. David swallowed hard and knew to right the ship, he would have to make swift and dramatic changes. His approach was to break the business down and build it back up. This included layoffs, shutting down sameday delivery in los angeles, and streamlining and thinning out all of the fat in their distribution model. We focused on really fixing the Unit Economics of business. Heres what i said to everyone. Every touch that a person that bloom that bays has on each bouquet, that costs 1. Think of that, every touch cost said a dollar. We have to find a way to reduce touches. Part of that effort included a change in the way they created their signature burlap wrapped bouquet. Instead of folding each individual burlap which takes time, they created a sleeve so it just slides in, speeding up the process. Its a cost saving in that its a time saving. Consistency and efficiency obviously, like, those are key ingredients to making this work. The next step was raising the price of their flowers. So we sort of moved our 35 product up to 45, and then we introduced a higherend product. We went from 35 to 55 was our range before. Now it was 45 to 85. So we created more differentiation. And the last bitter pill that helped correct their margins, they added a delivery fee. So we basically said, were going to roll out delivery fees, and the response we received sort of in turn was, i think i received an email that said its about time. Im like, its about time . You know, this if i would have known that, we would have done this sooner. Now, a year after that oh, shoot moment, bloom that is thriving again. They have reopened in los angeles sameday Delivery Market as well as expanded delivery nationwide by shipping flowers overnight, and though they have more competition, bloom that is in a stronger position than ever to succeed with their original idea of becoming the uber for flowers. I think the competition is what the customers have needed for a long time. And its a thing thats going to jolt this industry out of stagnation. And so, you know, i say sort of bring it on. Its been a busy time in our Nations Capital when it comes to addressing issues facing americas Small Businesses. Those issues include evidence that the irs may be targeting Small Businesses disproportionately for audit. Legislation to help Small Companies combat cybercrime, and a federal lawsuit brought by more than 50 business groups, including the chamber of commerce and the nfib seeking to block new overtime rules that go into effect december 1st. Steve chabot of ohio is chairman of the house Small Business committee and he joins us from washington. So good to see you. Great to be with you, too. I want to take these issues one by one and lets start with the irs. Where it seems a professor at the Business School at american university, david williamson, has found from his studies that it seems that the irs is disproportionately targeted smaller businesses. A, do you find that, too . B, why . And c, what can we do about it . Very good questions. I think hes absolutely right. They are targeted Small Businesses for one major reason, and that because Small Businesses dont have the resources to fight back like the large corporate entities do. And we understand that the irs has quotas for some of their agents now, and theyre just hauling them in. Theyre abusing them. Oftentimes, theyre literally fishing expeditions. They generally dont find anything that the Small Business person has done right excuse me, done wrong, but even if you did everything right, even if you win, you lose, because you have attorneys fees oftentimes or accountants fees and the irs isnt going to pay that. What can i do as a Small Businessperson who has been targeted if i think its unfair . You can contact your local congressman who can weigh in to some degree as an advocate. You may well need to get a good tax accountant or attorney. But legislation that were pushing for here in the house would do a couple things. One thing, simplify the tax code so that it isnt such a cumbersome thing you have to deal with that tens of thousands of pages and nobody understands it. And just as importantly, as part of the legislation that were pushing is to rein in the irs. Make them much more customer friendly. Not have the person or the Small Business being targeted. Its somebody you ought to be able to work with but not feel you have committed a crime. Lets move on to the next issue here, which is the house, this week, passed the improve Small Business cybersecurity act, where its going to empower Small BusinessDevelopment Centers to help Small Businesses with preventing cybersecurity. What does that mean . What will they do . Well, right now, the sbdcs, there are probably 1 th,000 all over the country generally tied to a university or college and it will make Small Businesses, they would have access to training, to other types of things that can help them to avoid a cyberattack themselves. And cyberattacks are becoming a huge problem all over the country. Bigger and bigger. We have seen the government itself hacked innumerable times. The office of personnel management, over 20 million files hacked. We have seen the state department, the white house itself. We have seen Large Companies like target and home depot targeted, but now they seem to be going after Small Business folks, and we have seen in fact over 70 of the cyberattacks now are targeted at companies that have fewer than 100 employees. So its something that Small Businesses really need to take seriously because it could happen to you next. Absolutely. Okay, finally, a little time left to talk ability this lawsuit to try and overturn the overtime rule which is supposed to take effect on december 1st. Talk to me a little bit about why this is important from your perspective . Were getting more complaints from Small Businesses all over the nation on this than anything really since obamacare that i can remember. Because what it would do is it would say youre now going to have to pay overtime rather than people under 23,000, its going to double up to 47,000. And its going to kick in december 1st. A lot of people, Small Business folks who are busy running their business and hiring folks or paying their employees, havent been thinking about this, but in a couple months, thats going to hit them. Let me ask you a question, then. What youre talking right now is the burden is about the process. And im with you. The process of changing over for a Small Business, it is hard. But is the issue that people dont believe that this should happen at all, that there should be more time around it, that the numbers are wrong . Its both, i think, j. J. And for good reason. What we have heard as a direct result of this, a lot of folks thereat are now salaried employees that are moving up the ladder, their boss is now going to have to a lot of these folks will make them hourly employees. They may cut back on their hours. There may be people laid off. Its unfortunate, and theyre going to have to treatme them differently. I really appreciate you coming on. We have to end it here. Thanks for everything you do for Small Businesses. And you. Thank you. A former hooters waitress who would eventually end up turning cinnabon into a billion dollar blond. It sounds like the plot of a madefortv movie, but its the real life story of kat cole. The 37yearold business mogul whose Creative Ideas and Marketing Strategies helped the food franchise become the mega force it is today. She shared three freiggreat bus tips with jenna bush hager. Im kat cole, Group President at focus brands. I believe anyone has the potential to start and build a billion dollar brand. Because she did. As president of cinnabon, she led the 30yearold brand across the billion dollar threshold. That recipe for success came from an unlikely start. At 17, cole started working at a hooters restaurant in jacksonville, florida. I was a hostess and i became a waitress. I learned how to cook in the kitchen and pulled bartender shifts and helped run shifts with the managers. She said her work ethic came from her mom who worked hard to raise three girls on her own. She had to work three jobs. She fed us on 10 a week for three years. This was in the 80s. She encouraged her daughter to dream big. Kat became the first in her family to attend college with plans of becoming an attorney. But her life took a different turn. When i was 19, i was offered the opportunity to open the first hooters in australia. She was soon opening franchises all over the world. She dropped out of college and quickly rose through the ranks, becoming hooters youngest Vice President at 86. 26. What type of reactions do you get . I got so many reactions but i remember several times when people would say, how can you work there . How can you say you advocate for women yet you work with this concept that has socially acceptable sex appeal at the center. My pride around what we had built was so high, and my gratitude for all the opportunities i received, lets be serious, i was a 19yearold college dropout, collehild of a single parent, you tell me what large fortune 500 company would have send me to open their businesses . No one. That inspired her to earn her mba while attending school parttime, and in 2010, her rise at hooters led to an opportunity at cinnabon where she waus taskd with reenergizing the brand. Its what she called a taste of the bon. We knew people loved a taste of cinnabon in their home. So International Delight coffee creamer has been an awesome partner. We launched cinnabon popcorn. That taste of the bon was everywhere. Restaurants, grocery stores, online. That strategy helped turn cinnabon into a billion dollar brand. Her success earned her a promotion. 37yearold cole is now the Group President of focus brands. Where shes hoping to work the same magic with all six of their companies. This is the focus Brands Research and development center. We call it our innovation campus. For from mini bons to cakes. That cake, really good. To salsas. Salsa. Salsa tasting. My expertise. With all her success comes hard and fast rules of business. One, be honest and authentic and confident in who you are and what you stand for, because ultimately, its all thats going to differentiate you in the marketplace. Two, stay incredibly close to the customer. They have all the answers. Three, do the right thing for the right reasons and use that to guide who you partner with. What products you launch, whether or not you take funding externally. As the architect of a billion dollar brand, cole understands the power of words and messaging. She has a brand of her own. Your twitter handle, very important. Reads, connected, creative, conscious, community building, capitalist, building adviser, coffee loving chronic learner. Is that the definition of you . I would say that definitely describes a lot of the things that i believe. I hope the definition of me is someone who helps people see theyre capable of more than they know. Doing well by doing good. That is the goal of our elevator pitcher this week. Hes created an interesting product that he hopes will address an important Nutritional Health issue around the world. He called it the lucky iron fish. Now, lets see if our judges take the bait. Theyre two of our favorites, Jeffrey Hayzlett is the head of the hazlett group and the author of think big, act bigger, and carol roth is an entrepreneur and an investor. Hi, im gavin armstrong, founder of the lucky iron fish, which is a simple solution for iron deficiency, which negatively imp pacted 3. 5 billion people in the world and is a 30 billion market in the u. S. Alone. We need a simple solution for the serious problem. We need the lucky iron fish. Simply cooking with the lucky iron fish for ten minutes will add natural iron to your diet. Its safe, sustainable, and affordable. Our Clinical Trials have shown it reduces iron deficiency without adverse side effects and its reusable for up to five years. If you buy it on our website at luckyironfish. Com, well donate a flee fish to a community in need around the world. This year, were giving away 70,000 free lucky iron fish, which is amazing. Were poised to gross 2. 1 million and are seeking a 250,000 investment for a 6 stake to increase our retail presence and expand into new markets. Together, we can put a fish in every pot. All right. Nicely done. Thank you. These are for you. Two numbers. Okay, ill take your fish. Two numbers, one, what do you think of the product . Two, what do you think of the pitch . I know something you missed in the pitch. Im going to ask you, i like your pin, which is where are you are you selling now . Were selling on our website at lucky iron fish. Com for 25. And any retailers . Were going into retailers now with new packaging. I got to give you a 7 for the product. Im not sure if it is right for me. I would rather take a pill than drop