Interview with Steven Farag, Campus Sportswear

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From the course by University of Illinois at Urbana-Champaign

Entrepreneurship II: Practices and Approaches

31 ratings

University of Illinois at Urbana-Champaign

Entrepreneurship II: Practices and Approaches

31 ratings

Course 6 of 7 in the Specialization Innovation: From Creativity to Entrepreneurship

This course builds on previous concepts and outlines strategies and tactics for forming, financing and launching a new venture. Topics to be addressed will include building the new venture’s initial management team, identifying and reaching out to early customers, developing financial plans, raising startup and initial growth financing, and preparing for and managing rapid growth. Course objectives: Entrepreneurial Team Building: Develop an understanding of the what is required in a new venture Initial Go-to-Market Strategy: Develop a plan to identify and approach your first customers Financial Forecasting: Building financial projections for the new venture Entrepreneurial Financing: Raising Equity Capital for the new venture Growing the Business: Monitoring the new venture’s health and scalability

From the lesson

Module 4: Growth and Next Steps

In this final module we will be focused on post-startup issues – growth management, pivoting, and the hard decisions that must be made if the new venture is not successful. It includes interviews with two entrepreneurs who are executing on fast-growth strategies, and dealing with challenges while positioning their companies for success.

Growth Metrics10:57

Interview with Dan Klein, Tiesta Tea22:10

Interview with Steven Farag, Campus Sportswear19:53

Meet the Instructors

Thomas E. Parkinson
Visiting Professor
University of Illinois College of Business

I recently had a chance to interview Steven Farag,

who's a partner at Campus Sportswear Inc.

While he was a student at UIUC,

Steven started a small business that used a variety of

social media platforms to help other students who needed to have T-shirts printed,

fraternities and sororities and other types of campus organizations.

Convinced that he could capitalize on the opportunity,

he decided to invest and become a partner in Campus Sportswear,

a 45-year-old small business based here in Champaign.

Since joining Campus Sportswear,

he's implemented a new sales and marketing strategy,

and the company has already tripled in size.

Now, he's looking to extend the model to other campuses around the Midwest

competing with both national companies and local mom-and-pop vendors.

I've asked Steven to share his experience in turning a stable,

slow-growth business into a scalable rapid-growth company.

So Steven, tell me a little bit about

yourself and why you decided you wanted to be an entrepreneur.

So I was a college student here at the University of Illinois.

I was actively involved in different clubs, organizations, fraternities.

And I saw that there was a huge potential for decorated apparel here on campus.

I used some of my tech skills to create some online stores,

and I was able to make a couple of T-shirts.

T-shirt orders go viral on the U of I campus.

After I got that taste of kind of owning your own little business,

making enough money to pay for your summer trips,

I realized that there was just this kind of inner urge

to be able to grow to something bigger than working for someone else.

And that's why I decided,

instead of going kind of into the corporate world after graduation,

to buy into Campus Sportswear which has been

an established screen printer on this campus for over 50 years.

So that's an interesting decision.

Rather than starting your own business,

you decided it made more sense to become a co-owner of an existing business.

One that had been around for quite a while,

but it had been a pretty stable business over the years.

Why did you make that decision?

Well, I realized that I could go and start my own T-shirt company from scratch.

I could go take a loan,

and I could go get all the equipment to do that.

But the time that it would have taken to actually learn the industry.

Screen printing is a very skilled trade and

it requires several years to master the true craft.

And my talent was in sales using technology to grow sales.

And I wanted to kind of find someone that knew

the trade itself and that could partner

with me so that we kind of offset each other perfectly.

And that's kind of what ended up happening in Campus Sportswear today.

I don't deal with any of the production,

my business partners deal with it.

I handle all the sales and the overall growth of the company.

So, as I mentioned before,

the business had been around for quite a while,

and it had been pretty stable doing a reliable predictable business every year.

But you thought that you could come in and help

the company move to a much higher level of growth.

Is that right?

Right. So the company had passively done $800,000 or $900,000 a year of business.

They were on campus at a great location but they used no technology whatsoever.

They really didn't have any means to be sustainable,

kind of, in the 21st century.

And what I saw is just a huge potential for

both market here and on other college campuses.

So what does this growth mean for the management of the business?

What are you having to do?

What systems are you having to put in place right now to manage this much faster growth?

So when I first walked in the Campus Sportswear,

they literally were using carbon copy pencil and paper to take their orders.

They barely answered emails.

They didn't have a functioning website.

They weren't listed on Google or anything like that.

And so the first year was just creating a flat line system within the business.

So bringing our presence and

our brand to kind of a 21st century standard, that was step number one.

But more internally, to create an invoice and a billing system and just using

the very basic tools that we would think are common practice today into the business.

And so by invoicing, by billing,

by creating good tools for customer communication,

we at least brought our standards up before we were ready to grow.

Tell me how you went about building and motivating a sales force to grow the company.

Right. So when I was in college,

I sold several hundred thousand dollars of apparel and made some pretty good money.

And one of my goals was that I could recreate

that experience that I had in college for other college students.

So I started with a few college students.

I taught them the basics of selling a T-shirt.

I taught them how much money they would make on every order,

how to design, what the different catalogs were.

I kind of put them out there to see how they would do.

Within our first semester,

we had some awesome success.

We had three students do, I want to say, I don't know,

40 or 50 grand,

and that was very passive.

Nothing was in stone yet.

There wasn't a system whatsoever.

And what we did was we started to systemize that.

We started to recruit students and interview them and train them and incentivise them.

And what we saw is over the past three years,

they've done over $700,000 in three years combined so far.

And now, we have expanded to other college campuses to recreate that experience for them.

So how hard is it to manage a sales force?

I'm sure you have some students out there working for you that are

generating a lot of revenue and others that aren't generating very much at all.

What systems do you have to put in place to really make the sales force efficient?

So I believe in sales,

there's like three components in there.

There's tracking, there's teaching and there's inspiring.

I can teach these kids how to sell. I can inspire them.

But tracking them is probably one of the hardest things to

do especially with a college student that has a busy, busy life.

This isn't their first priority.

We're currently building a CRM that can manage the,

but currently, we are very much on a Google Docs kind of platform.

And people are like, "Wow. You can manage that much money with just Google Docs."

But there's very free

open source tools out there that we use such as Google Docs and Salesforce.

And when we use that in combination with the software we use in our shop,

our students are actually able to put in their orders remotely.

And what I found is, once I was able to create that science where

students could put in their orders remotely and track their job,

I realized that we could really start to scale it.

How much of your revenue is really coming through the sales force

as opposed to directly off of your website now?

So currently, the business did about $800,000 passively.

On campus, they've been doing that for the last 10-15 years.

So in our first year, we did just over $1.2 million of revenue,

and I want to say $200,000 or 300,000 of that

was based on my students really selling really, really hard.

Now, we look at

about 25%-30% of our sales are brought from our sales people and the other

75% are just kind of the outlier that's just coming into our shop, walk in, call.

So what are the most important metrics that you try to track to determine whether

your sales initiatives are really doing as well as you want them to?

We primarily target the RSOs and the Greeks for our student population.

So what I'm tracking right now is when my students highest potential is as a salesperson.

So when their peak is and when they start to fade out.

And actually, what I've learned is that their peak is

very early in their career with our company.

And that as they get older,

their reach actually starts to slow down.

So trying to create career progression through my students,

that's one thing that I'm tracking.

The other thing I'm constantly tracking is just numbers;

gross numbers, gross sales,

gross commissions and how much the products cost and what profit we're making.

We're finding that through our student model,

we are actually more profitable because we actually turn into a retailer.

But more importantly, our students actually get to make a decent amount of money.

more money than they would in their average college job.

So we kind of track those numbers.

I also tracked them on a seasonal schedule because we are kind of a school-based company.

We have the fall, and then we have the spring.

So let's come back to that first metric.

I know that you don't have to spend a whole lot to support

your sales force because they're essentially independent contractors working for you.

But you still have to spend some time training and

bringing in new sales representative up to speed.

And it seems to me that it would be a lot easier to make sure

your existing sales people are continuing to produce

rather than having to continually bring in new sales people.

Correct.

So what can you do to try and

manage that activity level for the sales force so it won't taper off as much.

Right. So here the thing is,

by the time they turn into seniors,

they have started to look at their own career and that often isn't with our company.

Now, we are on our first bank of seniors this year,

so we're going to be testing out a lot of different things

and putting them in maybe management positions,

putting them in positions to teach.

Right? But what we're trying to do is create a lineage from

every student so that we're never losing a customer.

The biggest thing in the college market is the decision makers that are

buying the shirts are usually sophomores and juniors.

So the seniors, they're kind of effect,

kind of wears off a little bit,

but they know pricing,

they know how to sell, they are very artistic.

And so it's important to keep them in and kind of

create something for them so they still feel important.

I think the beauty of it is once you give the college student that experience,

whether it's two, three or four years,

they're going to be a customer for life.

So what we've started to see is that our students,

when they actually leave campus,

they go work for other jobs and companies,

they are continuing to bring us orders just because they're that T-shirt person.

So I assume that these Greek organizations

and some of your other major customers have plenty of options

for where they can buy apparel and

other types of things the Campus Sportswear would offer.

How do you position yourself relative

against that competition and make sure that you get the order?

Right. So while price might be one of

the biggest factors that most people would see on a first hand,

really, price is kind of the last thing.

I think it's the relationship,

and it's the quality and speed at which we're able to deliver.

And that's going to be a factor of growth.

When we decide to grow is how do we retain that kind of brand integrity?

And so one thing that we have over any other printer at the U of I campus,

is we can be faster and cheaper.

That's just down pat simple.

But when we go to another campus,

are we going to be able to be faster and

cheaper to be able to produce the same quality product?

So we first focus on relationships then we focus on

our speed and then kind of price falls in the last.

There are a couple of big players in

the industry but with a T-shirt, it could be sold for $7,

$8 or $9, and you kind of have to

know the right person who's going to make the right decision at the right time.

Okay. So let's talk about moving on to other campuses.

You've learned a lot here on this campus.

What are your expectations for how quickly you can grow on

other campuses and make them contribute as much to the company as this one is?

Right now, we're currently in our first phase of expansion.

So we've expanded to two college campus with a pretty Greek presence.

We found that Greeks are our niche and that's what we are going to stay with.

And so the one thing that I have to deal with,

I have to personally support them.

I don't have a management team that can support them yet,

so it's a lot of one-on-one with me spending time with them.

And the more time I'm putting into them,

the more they're bringing back to me.

So what we've been doing is we're spending time all summer training them,

teaching them the sales, teaching them pricing.

And then this fall, we're really going to

launch them into the school and see how they do.

What I have to do though is I have to create a campus presence.

I have to make them enjoy their job.

But more importantly, I have to teach them to

build those relationships very, very quickly.

We've had some pretty good success so far.

We're at Vanderbilt in Indiana.

And so far, we've already started to just get

some orders before we hit the ground running.

Okay. All right, well that's interesting.

So let's come back to the fact that this was an existing company that you joined.

What did it really take to get your co-owners on board

with really pursuing a faster growth strategy?

So my business partners are both 55 years old.

They've been in the industry their entire life.

And they really didn't have an exit strategy.

They knew that in 10 years from now,

if no one came around,

they would sell what they have and close their doors.

And when I came to that and I was eager, I was excited,

I brought the kind of tech millennial side to the business,

we found out that when we put all our minds together,

we have the perfect ingredients.

We have the kind of master of their crafts,

that really understand the business and understand how to make money consistently.

And then, you have the young gun,

that was me, to be able to keep pushing forward and grow the business.

So it was almost like low-risk for them because they said,

"What's the worst going to happen?

In 10 years from now, we are going to retire anyway."

So it's kind of a boom and bust,

and it's okay for them.

And once we came to that census,

I needed them as much as they needed me.

And once we agreed upon that,

we kind of just took it from there.

So what's the vision? Where do you want

this company to be three or four or five years from now?

So my goal was in five years to be on 10 college campuses.

And right now, I'm just systemaizing everything before I really make that jump.

So when I'm ready to make that jump and turn the light switch on,

that means all my systems are in place.

I know that I'm going to be able to fulfill every order.

More importantly, I'm going to be able to support my sales staff.

So my goal, my first goal was in five years to be on 10 college campuses.

That would have about 40 or 50 students working for us on a local level.

We obviously want to monopolize the Champaign Urbana area,

and be a big printer in Central Illinois.

But to take that model,

make sure it's almost perfect,

and then really ramp up with it.

So the next five years go up to like 30 or 40 campuses.

The biggest issue right now is we have to stay within

a logistically-sound shipping radius.

And as we grow,

we're either going to need to make partners on

different campuses or make something where speed,

quality and price is still a priority.

I'm glad you spoke a little bit about the systems in place.

We hear the word scalability a lot for startups.

If you're at a point where you wanted to go out and raise money,

I'm sure your investors would be asking, "Is it scalable?

Can we really just flip a switch?"

Do you really now know how to grow the company?

So it's just a question of how much do you devote as resources into growth?

And what's the output that comes out when you invest that cash or deploy those resources?

So the issue here really is, is it scalable?

And you seem to have made a real focus on both technology and

on a different structure for a sales force in order to make the business scalable.

Can you elaborate a little bit more on your thinking there?

So we talked about turning that light switch on.

And when I say that there has to be one side of

the business where I can employ the right people,

train them over time to go and recruit and train on college campuses,

then there has to be a system that is able to

teach these students and that is able to manage them,

whether that's a CRM or something.

Recognize that you're going to be managing hundreds of college students.

So there's a game factor to it that we have to take into account.

So once we've done that,

we also have to talk about the fulfillment side of things.

Right? These kids are going to be bringing sales.

Are we going to be able to fulfill it as fast and as

accurately as we're doing it today with five or 10 employees?

And so I believe I have the fulfillment side down.

It is a very simple process.

I have networks all across the country that can print for us.

Really, right now, it's creating that perfect sealable,

scalable system for the kids that is also

sustainable because we have to think about the lifespan of my sales kid,

sales student is going to be two to three years.

Right? And so we don't want to see something where we go into a market,

we invest all this money into it and then it dies.

Right? So that lineage and continuity is also super important.

So what is the exit strategy?

Are there people that you're already looking to as

potential buyers of this business when you're out there on 10 campuses?

Sure. So, I've already been kind of meeting the big wigs in

the industry and manufacturers and

the big distributors and kind of talking about this model.

So far, I haven't gotten any kickback from anyone that doesn't really believe in it.

But I truly am passionate about teaching students and I really really love doing that.

So that's something I want to hold on to.

It's not like something I just want to flip on and then evaluate and sell.

Now, with the right number, anyone will sell.

And so there are some big giants in the game,

such as Custom Ink,

that does a half billion dollars of revenue online.

And I've had some early conversations

with them just about what I'm doing, just for mentorship.

We haven't gotten to that point yet. Pretty far down the road.

So you're still asking for advice.

I'm still asking for advice.

And that makes sense.

What advice would you give to

another college student today who's thinking of an entrepreneurial career?

Yeah. I think if you're thinking about being an entrepreneur,

now is the time to do it rather than later in your career.

When I had different job offers,

I was like, "Oh, maybe I could start this on the side."

And I decided to jump in feet first and

devote everything to it because I knew that the older I got,

the less opportunity I would have to really

restart as life progresses, if that makes sense.

More importantly, it's find support and

advisors and mentors that can help you along the way.

We are the millennials,

and we think we know it all.

But in the last three years,

I have learned so much from the people that have been in

business for quite some time on how to keep money in the bank,

on how to save, on how to do those things because it's scary out there.

And if you don't have those resources,

you can get swallowed up pretty quickly.

And so those are probably the biggest piece of advice.

Well, one last question.

You have not raised any third party money for the business.

No.

How do you make the decision when it makes sense to do that?

That's obviously a big step.

Big decision for any entrepreneur to make.

Do you think that's a bridge that you're going to want to cross someday?

And how will you make the decision? When is the right time?

Absolutely. So I think the first thing is,

when you're looking for capital,

it's why do you need it?

What is the purpose for that capital?

Is it to scale one side of the business to the other that you personally can't afford?

Or is it for the resources?

Is it that you're going to get an investment but also be in

an accelerator that's going to help you grow there?

I've heard it in some different podcasts that going into venture,

it's kind of like hitchhiking.

And that you can take it from one place to another but the second you run out of gas,

you're getting kicked to the curb.

And so, when I decide,

my business partners are very conservative from a business standpoint.

So they've always taught me to save money and buy in cash.

And from the startup standpoint, it's kind of the opposite.

And so I think I'm going to get to a point, very shortly here,

where we're at a point where the business is ready to really take a jump.

And that's where we're going to say we're ready to

approach people on the other side of the table and say,

"What can you bring to us so that we can make this kind of balloon pop?"

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