Kelcey Lehrich, co-founder and CEO of 365 Holdings reveals a multichannel formula for building diversified DTC brands as a sustainable growth strategy
If you think running one business is tough, try scaling 6 consumer brands, 3 verticals and hundreds of products. It’s surprisingly not that crazy, according to 365 Holdings, a holding company that owns and operates multiple retail brands.
In this episode, Kelcey Lehrich, CEO and co-founder of 365 Holdings, shares the unique operational strategies behind building profitable and sustainable multi-channel brands, including:
- Key multichannel revenue strategies for rapid growth
- How to prioritize inventory and operations across multiple channels
- Building diversity to become a durable business
Meet Kelcey Lehrich
Kelcey Lehrich is the CEO and co-founder at 365 Holdings. His background in M&A has created an environment of rapid growth through acquisition, while his desire to ride the wave of cutting-edge digital marketing drives each brand to new heights.
When he is not working in business development, Kelcey challenges himself through CrossFit, Rucking, Marathon training and other endurance sports, but what he enjoys the most is spending time with his family.
About 365 Holdings
365 Holdings is a vertically integrated holding company of DTC-centric brands, including Nicki’s Diapers, Vallery Food Storage, Cultures for Health and Steel River Co. Their strategy is to acquire, improve, and create a “forever home” for ecommerce businesses deploying best practices around digital marketing, eCommerce operations and customer journeys through a vertically integrated shared services model.
They accomplish their goals by living a culture that embraces 365’s core values: Team and culture first, EQ over IQ, winners keep score and relentless execution.
The Checkout episode 48 unpacks:
In today's episode, Adii Pienaar picks the brain of Kelcey Lehrich, co-founder and CEO of 365 Holdings, as he shares their ideal acquisition targets, and their strategy when it comes to growing profitable and sustainable brands.
[2:31] — The vision of having multiple durable businesses
- The future of ecommerce belongs to a big number of small and mid-sized businesses that may not be the next 130-million unicorn but they need to exist
- 365 is a holding company that provides a team, infrastructure, capital, warehouse and ERP system to these small but durable brands with the intent to hold them for a really long time
- “We're only gonna do food, baby, and consumable. We wanna be the best home for those really good, really durable businesses going forward.”
[4:29] — Being function focused when running multiple businesses
- The focus of 365 is to build a diversified business as you would a basket of stocks to have a diversified outcome
- “I think overtime we'll need to focus on different things. My focus is running the enterprise, my business partner's focus is on running the day to day operations, our VP of marketing is focused on revenue, so people are focused.”
[7: 22] — 365’s ideal acquisition targets
- Behind the profitable numbers, 365 Holdings tries to understand what drives customer acquisition and what drives retention
- “Our dream business is like 20% revenue on Amazon, 80% DTC. The DTC is like 20% Facebook and 10% affiliate and 35% email and 20% SEO and a bunch of Google, and like very diversified, right?
[8:40] — Post-acquisition playbook
- First, Kelcey looks for opportunity. “There's always some kind of low hanging fruit that a smaller organization just can't get to, and so we certainly build those plans for each transaction.”
- Being vertically integrated — their biggest challenge is usually integrating a new business into the 365 ecosystem
[12:33] — Calibrating expectations and business strategy
- Kelcey gets a ton of questions from people who are really upset that the market moved and they’re not gonna be valued at 10X revenue anymore
- As soon as you realize it’s not working out, you should have the optionality to flip things
- "Most businesses don't go to the moon. I'm like — well, all right, if that's not possible, can you just make 500K in earnings and have a great life?
[16: 11] — Multichannel revenue strategies
- Focus on DTC to create demand. "We should run media, Facebook, YouTube, a podcast, run an email newsletter, go-to-market and declare kind of who we are and who should buy from us"
- SKU rationalization by channel is planning what needs to happen in each channel separately for the business to be successful in the greater scheme of the business plan
[17:32] — Different playbook for different businesses
- Kelcey’s mistake is that they try to overfit cross learnings across brands early on
- “So we kind of threw the playbook stuff somewhat out the window. We have different playbooks for different businesses that share some principles on how to make decisions. Those principles don't really change.”
[19:20] — Inventory planning in multiple channels by hierarchy
- Their philosophy is to have a hierarchy for inventory planning which varies by brand and product category
- DTC subscriptions get fed first. Amazon listings going outta stock are gonna get fed second. DTC third.
- "With limited inventory, it’s necessary that we're feeding the inventory to the best opportunity for business to flourish.”
[22: 37] — A durable brand has competitive advantage and profitability
- “I would define thriving as having a durable and profitable future for the business. Durable means that there's a competitive advantage and a reason to exist. We know where to play and how to win. And profitable is just that, that it makes money.“
- "There is equity in that [durable] business, whether it's sweat equity from a founder or an investor, even if there's lenders and other capital providers that are in the stack of funding that deserve to have a return paid for their investments."
[24:15] — The intentional culture of 365 Holdings
- Team 365 has a unique culture where they are intentional about their goals and have 4 core values to support that
- Core value: Relentless execution — “Getting things done well and not going home until it’s finished. We're gonna get this project accomplished.”
[27: 15] — What’s not going to change in M&A for the next 12 months
- The federal funds rate and the cost of debt will affect valuations a little bit, but good businesses that have good unit economics will always get traded at fair prices
- “What's not gonna change? People want great service, fast shipping, and low prices. That's not gonna change.”