Nina McKinney of Oats Overnight: Transforming a Brand from Good to Great.
The Profit Forecast: The eComm CEO's Podcast
Episode #19: Nina McKinney of Oats Overnight
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Ben Tregoe: [00:00:00] Hey, it's great to have you on the Bainbridge podcast.
Nina McKinney: Hey, Ben. It's great to be here. Happy holidays. Happy holidays.
Ben Tregoe: Yes. It's December 20th of 2022. So we're in that coming down from a big year and a big year ahead of us. I've been really excited about this conversation because, You have such a unique background.
You started at Deloitte in audit, then you went to a growth equity investor focused on brands. Then you went to circle up. So I assume you're still doing sort of equity, but also maybe debt at Circle Up and now you're at Boats overnight. So I think it's just like such a cool rare combination of accounting.
Investor and then back into operator. Tell me about what you're doing at Oats and why you're, you joined and what your role is.
Nina McKinney: Yeah, absolutely. I guess if I, if, [00:01:00] starting 2022, I think I was, very bullish on being a consumer investor for the rest of my life. I love, I, I still love consumer investing.
But over the summer I picked my head up, the markets obviously have been an interesting time and having conversations with friends, they said, is this the time to go and explore something else? And see what's out there and . There was a company that I sat on the board of that has a lot of investor overlap with oats.
And so those investors as I, I communicated, hey I'm thinking about what's next for me. They were like, we have to meet Brian Tate. As I joke, the Brian Tate, that's his Instagram handle. Got an opportunity to connect with Brian and it was just instant. Wow.
They're building something really special here. And I think it's really unique to find founder CEO combinations that truly can take it through. And I really, with, even from our initial call, got that impression of Brian and so I said, okay, this could be interesting [00:02:00] to spend some time together, get some experience to operating.
Everyone's always said having that operating lens and investing is great. And so worked kind of 10 99 with 'em for. A couple months. Commitment was 20 hours a week. We'll just say it was way more than that. Of course Ryan Paving but really just fell in love with this company. And then I think Expo East really which is a big like consumer packaged goods food conference.
Getting together with my community, getting the opportunity to talk about oats. It really solidified it for me. This is where I wanted to spend the next stage of my career and that I love what Oats is building. And so joined as Chief Strategy Officer beginning of October, took some time to make that LinkedIn official.
But yeah it's been a great journey. And, oats overnight is a digitally native business. About 85% of our revenue today is direct to consumer. , about 10% Amazon and then 5% retail. And I think what, there's so much [00:03:00] about oats that has really excited me. Brian probably being number one getting to work like very closely with just an amazing founder visionary but also executor and C e O.
. But also I think as you think about oatmeal in the oatmeal category today, the majority of that is, is purchased in store, right? And seeing the traction that this business had gotten online and the community that they had built around that was really unique. But then also getting to see how the retail case studies were performing and how the brand was performing in store and.
this is a little bit of a we don't need to go down the whole rabbit hole. But I think as you think about omnichannel businesses it's so challenging to build unique experiences for the customer in each channel. And oats had a unique challenge in that they're direct to consumer business is, it's like a blender bottle, and then you've got the pouch.
and that is how you interact with the product in d toc. And going to retail, they knew that wouldn't work, right? [00:04:00] Having the customer go home and not having a blender bottle. They knew that they needed, a solution that worked better on shelf, and so they came out with their bottle format that they have today, and that only requires water versus their D TOC product requires milk.
And but all this unique challenge, I think really built. Is very unique omnichannel model where they're creating unique experiences for the customer in each channel. And that really excited me. And so I looked at it and I said, wow, this is a fast growing, large business. That is really like only at the beginning I would say, we're 10% up the mountain of what oats could really be.
And I think all of the case studies there. And so the opportunity to jump on board with Brian and build this thing to be a true omnichannel machine was really exciting to me. So here I am end of the year as an operator. New level of urgency, new level of responsibility. I laugh at the questions that I used to ask as an [00:05:00] investor, sorry, to every founder that I ever asked questions of.
And, I think no matter where my career takes me next whether it's, staying at Oats for Life or operator for life, I this experience has just been, it is so unique and just a great one. As I build out what's next for me. , I say, what's next? , I think I will be at Oats for a very long time.
just to be clear, what we're building is really unique and you, I think every, people talk about this, that you have that moment in your career like, wow, this is something that kind of fell into my lap, right place, right time. I have the right skillset set to help, right? And I would just be amis to miss out and that's definitely how I feel.
So made some lemonade outta lemons this year, if you will. Nice.
Ben Tregoe: Yeah. I think there's so many cool things about oats but just in case people aren't totally familiar with the brand, I think one of the things that is it's so interesting is that you have this like incredibly loyal [00:06:00] customer base loves the product.
But it takes a little work. And delayed delayed
Nina McKinney: customer satisfaction, right?
Ben Tregoe: Yeah. Explain a little bit about how the product works, the flavors, the kind of verticalization of the business. I think that's really useful. Yeah,
Nina McKinney: yeah, absolutely. I forget that not everybody knows what even overnight oats are, let alone oats overnight.
So oats overnight our hero product, if you will, it comes in a pouch. And basically you pour our oatmeal into a blender bottle. And then you add milk and then you shake it up and it sits overnight. And then in the morning you have an easy on the go, convenient breakfast, right?
High protein and then all natural. ingredients healthy, better for you? Breakfast? What we're doing really uniquely from a flavor perspective is we are creating innovation at a rate that I think nobody else in the category is doing. . So if you take a step back and you think about breakfast, right?
So [00:07:00] breakfast is, for right or wrong, Americans think that breakfast is the most important meal of the. , but the majority of Americans don't actually eat breakfast. And I think that's really for two reasons. One, there aren't a lot of convenient solutions and then of the convenient solutions, right?
It's a lot of chocolate peanut butter bars or blueberry almond bars, right? , it's very, it gets bland and boring pretty quickly. . And so what Oats is doing is solving both of those. So yes, there is a delay, right? You prepare it at night, it takes you about 15 seconds, you put it in your fridge at, but in the morning it's ready to go.
I have a 14 month old. I quite literally grab my breakfast out of the fridge on the go as my little one is throwing her passie at me. We solved that con. Format. The other thing I'll say too is this is a drinkable product. Ditch the spoon. It's completely unique.
But what does that mean? It is very much on the go. So I think you look at bars even like when I'm eating, any bar today, right? I'm trying to open that as I'm [00:08:00] driving, I'm trying to get to daycare, I'm taking a work call, there's just too much going on, but oats. Quite literally, taking a sip as I'm running through the red light
The convenience I think is really clear in how we solve that. And I think yes, there's some prep and. involved. But the customer also, with that comes anticipation. And I think as at our community and what they tell us is like they wake up in the morning excited to eat their process.
That's cool. And I think there's an element of having to prepare it at night that creates that, that experience. Yeah, that's good. That's the first part of it, but then the second part is flavor, right? What Brian did very early on is we're vertically integrated. So we own our own factory in Tempe, Arizona.
We have an amazing c o Vincent Comerford literally cannot run this without him. But that was really done because there's nobody in the industry that's really set up to create products the way we do just because, there, there's your oat base, then there's your like protein [00:09:00] powder, but then there's also like your mix-ins, right?
And so that could be like, For instance, like our mango custard skew, right? That's like little chunks of mango right in there with your oats. And as you look at a lot of the co-man manufacturing options out to out there today, they can't really process the, that mix in portion for us, right?
And so we've been able to create A really unique and proprietary manufacturing process which I think is great for exit. But the reality is, and Brian might hate me for saying this specifically on a podcast, but the reality is, that could be replicated at any time. It would take money and it would take time, but it could be right, but what we've done to really build a moat around this is we've heavily invested in an r and d team. So we have a five person r and d team, which means that we're able to launch new flavors every single month. . And so what does that do? That solves the second problem that we talked about and my thesis and breakfast.
The biggest problem is just the mundaneness of [00:10:00] it, right? And not getting that variety. And yes, people might be drawn to a specific format, but they're tired of eating chocolate peanut butter, and so they just stop eating breakfast or worse, they, they go to a quick service restaurant to have something that's in no way healthy at all.
. And so we've been able to create, now we have over 30 flavors. We have things like Samos and fruity cereal and classics like Apple Cinnamon. And I think as you think about, it's really interesting too, as you think about the coast, Versus the Middle America. There's different taste preferences, right?
Some people want lower sugar options. Some people want higher sugar options. Somebody want, a lot of people want dessert for breakfast, right? They are super excited about our Boston cream pie or our birthday cake. And then there's, people like my husband that just, want something like apple cinnamon so they can have a little bit of flavor in their day and take on the day.
And yeah. , we are able to create that uniqueness and attract customers from across the country no matter what their flavor profile [00:11:00] are. And in the output of this. And really our secret sauce is, we're getting consumer feedback as we're developing these flavors. And I think quite literally at the intent of that was just to create a Good products right at the end of the day.
Yeah. And what's the best way to create good products? Get consumer feedback get feedback from people. But the byproduct is of it is really community. And I think that is really exciting when you've created something that the customer feels like they are a part of. really and truly, there's just a different level of loyalty that you see versus other brands.
Great. And I think while we were quite literally solving like a very practical issue in the breakfast category, we're onto something much bigger with this consumer feedback loop and excited to be a part of that, be a part of the strategy going forward and how we think about executing. Against that loop in retail and other channel.
Yeah. Cuz you know, that's gonna be a challenge [00:12:00] of continuing that throughput. But we're excited to tackle that challenge and I think we've got some great ideas and, 2023 is gonna be a big one and I'm excited for it. So yeah. Hopefully I just went on a long tangent, but No,
Ben Tregoe: it's awesome.
Actually that leads to a great segue of like, how do you think brands or oats specifically or another brand crosses that? That bridge, right? So you have this building a community online. Oh, we all, hey, we have emails and social and all sorts of tools that we can do that. Not saying it's easy, but if somebody's grabbing you off the shelf at Target, h how do you start community?
Nina McKinney: Yeah. Yeah. And how do you think about that? Yeah, so I think, community is such an interesting word. It's like a buzzword, being a consumer investor, the number of founders that were like, oh, we have a community. We have a community. Our community, right? . So what does that actually mean?
So I think to me, community [00:13:00] means somebody who's actively engaged. So we get a thousand comments a day in our community and that's about oatmeal. So an engaged community is something that really means something. And I think you get an engaged community really to, in my opinion, there's three prongs to it.
One, you have to be solving some sort of. Problem. That's the definition of any brand. Two, you have to have a good solution for that problem and quite literally a good product. So if it's food, it has to taste good, right? So if it's, if you're solving for, say I have a keto product, right?
I'm solving, hey, there aren't a lot of good keto snacks out there. And customers that are trying to be keto, like you've gotta also have a good product, right? Because at the end of the day, customers aren't gonna come back, even if there is like a nutritional element. to your product, that creates something harder to make something good.
And I think that's where a lot of brands have been challenged. But three, you have to create passion around your product. And I think that's where [00:14:00] community and engagement comes in. And, there's a lot of brands that have created passion and in very unique, in different ways. I think of brands like topicals in the skincare space where they've done, incredible things and.
Activations, I guess you would call 'em digitally to get their customers involved in the brand and feel like they have an emotional connection to the brand. Oats has done their, our community feedback program, which has led to engagement and passion around what we're building. People like Patagonia, right?
Their tenants as a company and how they speak and how they act goes way beyond their. And then you have the tailwinds of people just wanting to wear that product. And when you have cool people wearing the product and then every student sooner rather than later, every investment banker is wearing the product.
And it becomes a thing. So I think it's, it really comes down to passion. And you can unlock passion in multiple different ways and build community, but it's really challenging and there [00:15:00] has to be like a reason for it. Yeah.
Ben Tregoe: So interesting. It's a it. Yeah. When you're when you're giving that example, you're like, okay how.
people you know are gonna be like wanna talk about their oatmeal and you're like, oh, if you frame it that way, you're like probably not many. There's probably some that Hey, I love this flavor. But when you broaden it out like you did with a Patagonia example, it's you're so right.
Like it's not I don't know, okay, hey, this Felic is awesome. What else do I have to say about it? But Patagonia has now embodied this incredible ethos. very much owns that ethos. Or if you believe what Patagonia believes, then you are almost automatically in that. So that how does what is the kind of broader thing for uss?
Is it breakfast, is it nutrition? Is it like, where's that additional outer
Nina McKinney: layer? Yeah, think it's, I think what we found is just. Consumers are not being heard today, right? They don't get the opportunity to [00:16:00] feel like they're truly a part of the product building. Process. And so I think what we have found is, we are elevating the opinion.
So if you look at our community we love negative feedback that's just as valuable as positive feedback. The our f I D right now is mache mango. So our flavor and development that we're testing out with our 70,000 subscribers is mache, baggo Match's a pretty polarizing flavor.
, our engagement. Really high cuz people are all over the place. They're saying if you don't like matcha normally don't comment. Cause I love matcha and I need this to be smooth. And this is great to the, I absolutely hate matcha, don't ever launch this flavor. This is, gross to, I don't get enough mango to, and everything in between, right?
Oh, the mango pieces aren't elevated enough. And I think the key for us is we get that feedback, but then we communicate what that looks. Let's say we do launch Machi Mango, right? There'll be some iteration to that formula based on all the [00:17:00] feedback we got and we'll communicate to the customer, right?
We heard you, we elevated the number of Mango Beast pieces in there because there wasn't enough mango. Yeah. Or we dialed up the matcha. Or, last month our f I D failed, like it was the lowest response rate and the lowest scoring flavor that we've ever launched. It was chocolate covered pretzel.
We learned something really valuable. If you're gonna launch chocolate covered pretzel, there better be pretzel pieces in it. And so we have some work to do on how do you let pretzel pieces not, so overnight, but right. We went back to our customers and said, we heard you like we failed. And the.
From our consumers was honestly just as passionate and excited as when, the month before we had launched coconut cream pie and that was our highest rated skew that we'd ever done. And we had said, it's amazing, and they're all, in our community when it's coconut cream pie coming out, blah, blah, blah.
But, [00:18:00] So I think it's creating a true feedback loop. And quite honestly, like most people can't do what we're able to do cuz we're vertically integrated. And I think we've done a really good job of perfecting what our voice is. Yeah. And how we talk to the customer. I think, long term we're in breakfast, but we could be in other categories and I.
We, the one thing that excited me and sometimes I roll my eyes a little bit at this, but we have the opportunity to be like the next strategic in food, quite literally with this strategy, right? Like we do. I'm not saying that's what we do, but Yeah. We're onto something as far as how consumers respond when they're included in that innovation process.
And we're excited to see where that goes and what that looks like.
Ben Tregoe: Yeah. Yeah. That's, that makes so much sense. Cause I was imagining while you were talking you know what would happen if you tweeted at Quaker Roads or sent 'em an email, like you might get a response, but. It's here's more cinnamon apple for [00:19:00] you.
Like they're not gonna roll out a new flavor for Yeah. That's that's really powerful. So oats is this powerhouse has this big future that could go past oats or overnight oats. What are some of the things that you've, in your career, you've had the chance to look at and invest in and talk to so many brands.
What do you think makes for a great brand? What is that a definition of a great
Nina McKinney: brand? Yeah. Definition of a great brand, man, that's such a loaded, exciting question. . The definition in my mind of a great brand is I want to be. The brand that when somebody asks you, what have you tried? That tastes good this week, we're at the top of the list every time.
And so I think the definition of a great brand is the brand that your customers are your number one sellers, right? Because they're out there pushing your product every single day because they love it, they believe in it. So that's everything from, Roth's [00:20:00] to Modern fertility to Patagonia, right?
And there's different reasons why those brands are at the top of that. Households what I like to say on the top of their tongue, right? I wanna be on the tip of the tongue. And, but I think that's like ultimately like the North Star, right? , you wanna be a household name that people are just talking about and they're avidly excited about.
, I think how you get there, there's a lot of different ways to get there, but it comes down to those three tenants I think every single brand has, which is one, they're solving a problem, right? There's something new that they're doing. They have an excellent product and they've been able to unlock passion behind that product.
And that brand. And I think at the end of the day, sometimes an amazing brand is highly correlated with an individual. And sometimes a brand is highly correlated with a concept, right? So of course, Patagonia, first thing that your mind goes to is probably the jacket, right? . But [00:21:00] outside of that it's the broader ethos that you spoke to that is an excellent brand. But then, I think about Roth's, right? And I think about Ro. When I think about Roth's, I think about the shoes. I understand that, they've innovated into other things, but they will always, in my mind, be highly correlated with shoes. And I think that's okay too.
And I think where we're at on our journey is how far do we take this And is Oats overnight. . And potentially we rebrand in the future. Who knows Wink, wink. But like it is oats overnight. Are we gonna be always associated with oats or are we gonna be associated with something bigger?
Yeah. And I think that's a delicate balance that a lot of brands struggle with. And I've seen a lot of brands try to become bigger and more and it backfire, right? Cause they're not listening to their customer. . And so I think for us, as you think about like our biggest challenge, that will be our biggest challenge going forward is yeah, how far do we push the envelope and making sure that we're constantly [00:22:00] checking back with our customer and making sure that the story makes sense of that the excitement is there.
Yeah. Cause we have something so unique today. I know it's overnight is gonna be a huge brand unto itself, and so as we think about. Future innovation, future category expansion, all of that, making sure we're going back to what does the customer think and what does the consumer think and are we pushing the envelope too far or not?
And I think that's for every good brand, that's like the, I've seen a lot of brands that have, not been able to push that envelope or tried to push that envelope and lost who they are in the process and right. , gone from a good brand to an okay brand when they could have gone to a good brand, to a great brand but in a more limited product scope.
Yeah. Anyways, I dunno if that totally answers your question, but it's something that's top of mind for me right now. Yeah.
Ben Tregoe: I do think that's an interesting distinction that you [00:23:00] just made, which is, there's a natural tendency to try to expand the brand, expand the SKUs, attract a bigger a.
But then there is a, there's a sort of alternate which is no this is who we are and we're just gonna, be something within that space. And then cuz you can certainly see examples of both of those. It's, one thing that's has struck me from conversations recently is like the timing, ti time. , I think that we can are coming out of the sort of end of this period where oh, I can build a great brand in three years. We're talking about Patagonia a lot. It took. 15 years. To build to where they got, like what do you think about time?
Is there just like a, hey, it just takes a while, or can you really accelerate that, or,
Nina McKinney: what are your thoughts? Yeah, I think, we're coming out of the age of digital, right? Where you could quite literally had, 20 to 30 major brands. Popped up in under a five year timeline.
And they were able to do [00:24:00] that because it was pre iOS. CACs were at an all time low and the customer was at an all time high of. of wanting to experience products digitally. Quite literally, if you look at the home category, that went through the little roof in Covid, right?
There were great brands that were built out of that. And but I think we're coming into the next cycle of brand and what that means, and I think there's a few things that are happening all at the same time. You have Gen Z that is becoming a share of. , they experience and have preferences on brand in a different way than millennials.
Do you have obviously we are still dealing with Covid and we are, we'll still be dealing with it, I think five, 10 years down the road. , but in, you know what I like to consider our post covid. era. We're also dealing with, most likely a recession of some kind.
I think that's pretty much written in the stars at this point. And so you have a lot of really interesting consumer behaviors that are all triangulating at the same time. And then [00:25:00] probably the fourth and most important one too is, post iOS, right? That completely. The way that brands were able to engage and target customers effectively.
So you've got these four main trends that are all triangulating at the same time that I think are gonna push people back to omnichannel in a way that's a lot more significant. I think Omnichannel was a big buzzword like two, three years ago when people saw the writing on the stars.
But I really think that this is. The only way that brands are gonna be built in the future, I think, I don't think that digital is dead in any way, quite literally. I work in a big, digital brand. But I think that the way that customers wanna interact with brands is in, multiple channels.
And I think being able to scale in multiple channels takes a little bit more time. and a little bit more resource. So of course there will be brands that have that, five year, whoa, like trajectory. And it's all relative. What's big to you? No. [00:26:00] Is 50 million in five years huge.
Or is 150 million, right? Yeah. But I think there will be, a few that break out that way. But I think that, Path to billing brand significance is that timeline is longer today. Yeah, and I think that's why one of the reasons that I think venture capital and consumers specifically have realized, okay, return generation in this category looks a little bit different, and as a result, multiples have to come down because quite literally, it takes longer to build a significant brand.
Right. , I actually am of the mindset of this is a great thing because I think it is going to force people to build businesses. Whereas before we were building brands and I think, brands are amazing. I quite literally spent the majority of my career in brands and I will always be a brand person, but I think for a while it was building a [00:27:00] brand and now it's building a branded business.
And I think that. Gonna be really important as we think about the next stage of what is consumer. And I would say one of the things that attracted me to Oats is they have found a way to stay relevant digitally post iOS. And again, that comes back to those three tenants solving a problem, having a good product, and having a community that's passionate behind it.
And I think you have those things. You can tackle all these obstacles that are ahead of. And continue to grow at a rapid rate. But it's gonna force people to have those three things cuz if you don't, I, I don't know how you scale. And certainly quickly. Yeah. So
Ben Tregoe: I, I love that building a business as opposed to just building a brand, cause that I think leads to a topic that you and I both really enjoy.
It's a little wonky, but financial modeling, .
Nina McKinney: I love a financial model, Ben. I love it. First of all, like shameless plug for Ben and [00:28:00] Austin over here, but they are amazing. The tool that they're building at Bainbridge is really unique. And I think for somebody like us that, we have 70,000 subscribers.
We're a pretty decent sized business. We've multiple segments of our business, multiple segments of even our digital business, right? Subscriber, non-subscriber, all of that that we're trying to understand. And they've built a really amazing tool that allows us to seamlessly understand performance versus a forecast, but also understand scenario planning, right?
If we move. if we move to a 30% discount at first offer, what does that quite literally do to our p and l? Cuz I think for so long, businesses, specifically in digital have been very focused on cohorts and cohort building, and I think that's important. If you don't understand how your cohorts perform, that is a huge mess.
But you know what I saw in VC all the time? , even solid odes to an extent is like, how do [00:29:00] you connect that performance to an actual p and l and like the actual cash flow operations of a business? And shameless plug, but Main Bridge has been a huge resource for us in doing that.
And I think you didn't ask me the question yet, but I'm sure you would like, I think that is the most important thing is you're building a digital business. Being able to take that cohort performance and interpolate that or extrapolate that onto a financial statement to truly understand what that means for the, the core of your business, which is your cashflow and your ebitda.
Ben Tregoe: Thank you for that. That was awesome. I really appreciate that. We've really enjoyed working with you guys and I think, one of the reasons it we've really enjoyed working with you guys is. The more complex the problems are, the kind of more interesting they are to try to solve and then, the higher the stakes can be.
So it's really fun to have a partner that recognizes the complexity has the [00:30:00] ambition to I want to find a way to, to be better. So it's really, gratifying. But so thank you. In, you talked about the cash flow and you talked about the cohorts and the margin.
Why do you think it is, if you take a step back, maybe not just Oz, but across your career, what is it that makes these businesses so hard to. Model or understand and ultimately run and improve. Yeah. What do you think
Nina McKinney: are getting in the way? Yeah, it's a great question.
One I have so much respect for every single entrepreneur that has started a business the past five years because, COVID was brutal, iOS was brutal. There has just been so much that has happened. We didn't really have a line of sight too, and we didn't know how the consumer was gonna respond.
And I think that, that is just a challenge unto itself. And that's where I think it's important to have a tool and have a model that you [00:31:00] can quickly change inputs and run scenarios. And I think that's how a lot of founders survived the past five years is because they've been able quickly adjust what their business model looked like, depending upon what was the obstacle that presented that day.
So I think that's first, but I think yeah, so I think that's super important. I think in general, as you think about financial modeling, . A lot of people get scared by like just the word financial modeling. They think I'm not a finance person or I'm not an accountant. This is highly technical.
Like how do I do this? And I think the reality is, and actually I was like having this conversation with Brian the other day. Cause Brian was like, Bri, Brian actually, Brian was a professional poker player. He, before this. He, he did not go to college, right? Like he is the smartest person that I know, but has never been in an accounting class, right?
And he, a lot of this is intuitive after building a business. Like I understand how [00:32:00] cash is flowing in and out of our business. And so having a model that helps me predict how it's going to flow in and out in the future and have something for my team that I could say, these are our goals. Do we hit those goals or not?
I think it's actually way less intimidating than people actually think. And I think it just takes that, that day that you carve out of your schedule and just say, I'm gonna do nothing else but understand the financial statements of my business and what are the key inputs to that.
And I think that every business needs to do that. And then if they haven't, every business owner hasn't done. And I know a day is a lot, it's a lot of time, right? I get it. I, quite literally five minutes feels like a lot of time, right? These days to dedicate to anything. that is like the key to building a strong business, and specifically in consumer packaged goods.
It's the key to surviving because businesses are going to need to be EBITDA positive [00:33:00] before they exit. They're going to need to be margin accretive to the category of whatever strategic acquires them. Yeah, and so understanding the levers of your business and how. can influence those levers is like really important.
Yeah. And I guess in cg those levers are, revenue gross margin and ebitda. Yeah. And then what is your cash cycle? That's that cash cycle becomes less important at exit. But understanding until you're profitable what that cash cycle is and how you finance that cash cycle. Yeah. I dunno if that answered your question, Ben, but No,
Ben Tregoe: it was great.
It was interesting cause I was a little surprised when you started how you focus on the rapid scenario planning. Why is that so important in your mind? I agree with you. I, but I'm curious why you started there.
Nina McKinney: Yeah, I think so. Prior to Oats, I was a consumer venture capitalist, sat on the board of a lot of companies.
All these companies had budgets, right? Yeah. But what we [00:34:00] know when you're growing a business is your budget becomes, a little bit dated almost a month into the business. And I think what a lot of founders have is they don't ha, they don't feel like they have the time of the day to scenario plan, and then they just make business decisions and strategic decisions and where to take the business without understanding how that impacts the financial statements.
Yeah. And I. . Two years ago when we were in the bullish market, we had the luxury of doing that, right? But today, in the market that we're at and where venture capitalists are at and where investors are at in general, as a co, as a founder, you need to understand how every major strategic decision is going to impact your p and l.
and str and understand what the levers are to that before you make that decision. Or at least have a projection on what that's going to look like. Because it's high stakes today and it's [00:35:00] high stakes to get ebitda and it's high stakes to get gross margin and not thinking through those and having a, 500 k misstep could quite literally mean, I don't mean to be a doomsday killer here, but it's true.
Like it literally could. The death of your business. Absolutely. So I think in this day it's the most important. Four years ago it was like, budget. Budget. What's our budget? What's our budget? For oats, obviously we're setting a budget, we're gonna hold ourselves to that budget, and we have KPIs and OKRs tied into that budget.
All those things. It's extremely important, but like you at any point should know what your budget should be, right? Because you're running scenarios so frequently that Hey, this is. My current outlook on my business and what it looks like. Yeah so when
Ben Tregoe: you, when you say strategic, I think sometimes people can think oh, do I, go into target or Amazon or do I raise this big round?
but I, I think you're using the word strategic more. Hey, do we let C go to here [00:36:00] or,
Nina McKinney: yes. Strategic as in do we let Cs go to here? Do we increase spend here? , do we change our discount at first offer to here? Yeah. Do we add a free gift with purchase? Do we launch a new product category?
Do we another good one is do we go into Target, right? Understanding what that margin looks like. But quite literally anything that if you were talking to a potential investor, you would be excited about oh, we're doing this as a business because it's gonna impact our cohorts, or it's gonna impact this.
Yeah. You should be able to speak to what that business decision does to your p and l and to your. . Yeah. Or you think it will, right? Because also that's the way of judging whether it was successful or not. Yeah. I sat on the board of companies that would do let's just use the example of a free gift with purchase or a discount offer.
And they were excited by it and we saw take rate, go through the roof and it took four or five months to realize, oh. This [00:37:00] is actually not a positive like customer for us. Like we were just counting too much. We don't break even for 12 months. This does not make sense. And I think, yeah, and I think that's fine cuz that was like the market that we were in a few years ago, but today, like we're not in that market.
And so having tools that, quite literally, 60 days in, was that the right D TOC decision or not? Yeah. Or retail's a lot different, right? Like retail's a long cycle, all of that. But I think understanding what your price is as you go into each retailer how you stay price competitive and all the different channels, how you stay margin.
Neutral, right? Going through KeHE and unify, that margin structure looks very different than going direct to say a Walmart or a Target what the velocities are at different channels. You know how you create unique experiences at each customer. There's a lot into retail. There's less, like you can't pick at it in the same way.
But, [00:38:00] there are a lot of companies as well that, were just like, oh, we won Target, so let's go. And I think you need to understand what that does to your margin. Is it right? Is it positive? Is it negative? If it's negative, is it, is there a way to get that positive in the future?
It, maybe it's negative, but it's going to draw revenue up so much that your incremental dollars to the bottom line is worth it. It's about knowing all. or having ideas of what all that looks like before.
Ben Tregoe: Yeah, that, that's really interesting cuz the, your decisions are the they're like the kind of week to week decisions that companies are having to make, leadership is having to make, and then what do you think like the ideal we've experienced or heard, that finance has been deemphasized inside the, brands, marketing's been emphasized. It makes sense, Over the past year, but or past years. What do you think that ideal decision making structure looks like in a brand?
Not the, yeah. Hey I'm at 200,000 of sales, oats level sales. [00:39:00] Weekly
Nina McKinney: service. It's an interesting question, Ben, because like you and I have quite literally had this conversation, right? Like, how do we like org, our finance department, what does that look like?
So today, you've got our ceo, Brian Tate, CEO and founder. Yeah. I'm Archie, strategy officer. And then you've got Vincent, who's our coo, that is our C-suite. That will be our C-suite for quite some time. The reason that we don't feel like we need like a full-time C F O is that we feel like between Brian and myself and people like Bainbridge and then.
We have an outsourced accounting C f O group that we use. Yeah. That have also been great and instrumental, but we feel like between Brian and myself, we have the internal CAPA capacity and capability to understand what inputs do we wanna change, what's the strategy behind how we're looking at this scenario, the model.
And then, with people like Brain Bridge [00:40:00] and. Aj we have the tools to , execute on that. . I think if you are an organization and a founder that is not financially savvy or feels comfortable in that realm I think it's an incredibly important hire to make. . Because you need, you you need just as much as you need marketing, you need that person that is close to your financials and business performance.
Because they quite literally are the person that's gonna raise their hand and say, Hey, that's gonna cost us 500 K of capital, and we have a million and a half of capital. And as we think about going out to fundraise, That's not gonna give us enough cushion. And so we need, I understand that's gonna raise revenue, but that comes at an, at a cost, right?
Yeah. And Brian and I have this discussion all the time around, look our tax are great and our tax are stabilized. When do we step up in that marketing, that monthly marketing spend, right? Because there's a cost to that. Our current payback [00:41:00] periods are somewhere between four and five months, right?
We're not gonna. That step up, come back through our financials for four to five months, and are we at a place where we're like ready to spend that? I think it's a hire that's been deemphasized, but it's incredibly important. But I guess I'm a proponent of you don't need somebody that is, that, high power C F O.
There are lots of ways to get to this problem. And so finding for your company who that person is For? For Oats it's me and Brian. , that own that. It's funny also with my background, a lot of people are like, oh, are you the cfo? And I'm like, no, I'm not only the cfo. I have other roles and responsibilities, but I do think.
it's incredibly important. It needs to be just as emphasized as marketing. Yeah. In today's cycle.
Ben Tregoe: Yeah. I think, one other area that we, I think you'll have some real experience in is the difference between when you see a company come in, founder, her team [00:42:00] come in, and they're able to answer those questions of we considered this and we considered this other thing.
We ran these scenarios and then this, here's the range of outcomes. But we chose, option A, right? Or the company that's yeah, we chose Option A. It was awesome. . Like how much does that change your perspective on the company when you see that somebody really has a handle on their data and their finance versus, the more seat of the pants like,
Nina McKinney: Yeah.
Yeah. I mean for me that was like the difference between investment and non-investment. Oh, really? Yeah. Quite literally. Like I, and look, I, there's a lot going on in Are Brian and I the best at running every single model and every single scenario? No. . But I think people that understand how business decisions are gonna impact their financial statements that are talking through these things as a team.
Oats like personally, like we had a conversation with a amazing private equity firm in the space that is, still looking at, [00:43:00] potentially investing in our business, but for them they're like, look, we love the forecast. , but what are the other scenarios? And we were like, oh, okay, we're gonna open the hood.
And we just told them everything we said look like this is how we're building retail to happen next year. But there are like some other scenarios where it looks like this and it looks like this. And we're talking through strategies of do we do this? Do we do this? This isn't like a hard quoted number that we just came up with.
And I think for them that like completely changed the tone of. the opportunity to invest what that looks like, all of that. Because for them they were like, oh, okay, you guys really get it. You understand that, right? No, a forecast is just a forecast. And that there's a lot of scenarios in between there.
And, when you're building a forecast for. Fundraising specifically. It's literally my least favorite thing to do. Lit. I hate it because you've got investors that want growth at all costs. You've got investors that are like, I wanna see EBITDA first. You've got investors that are somewhere in between.
You've got investors [00:44:00] that don't know what the heck they want, and then when you change something, they're like, oh, now you're this like, but yeah.
Ben Tregoe: I'm gonna bring that for that model two years later. Hey, why aren't
Nina McKinney: you here ? Yes, exactly. And then what without ears look like, right? Like it's just a whole song and dance that I absolutely hated on both sides of it.
But I encourage founders when they can to have those honest conversations with investors because I think two things. One you're going to attract like the best investors. Out there if they're ones that are willing to have those conversations with you at entry, because the reality is your bullish forecast in some way or another is not gonna transpire in some way or another.
You might grow faster and spend more cash. You might grow slower and spend less cash. Like you might hit your first two years, but your third year looks completely different, right? Something is gonna be different. And so having those conversations early and often is great. But two, I think it also.
[00:45:00] Communicates to investors that you understand how every decision you're making as a business impacts the financial statements. Yeah. And at end of the day increasingly financial statements are the most important thing that investors are digging into because yeah, they need to see growth. They need to see incrementality, and they need to see ebitda.
And every single company out there, including oats, says, we're gonna be break even next year. And being able to really have discussions around why and what that looks like and the scenarios to get there, I think sets you up for success and fundraising in a different way. So
Ben Tregoe: I wish that founders, the founders that we work with, even if they aren't raising, could go have conversations like that with PE funds.
And I know the PE funds that have no interest in spending their time doing that, but the level of rigor. Sophistication in the modeling and the data analysis and the questions and the pattern recognition. Like C can't help but make you into a [00:46:00] better operator, yeah. . Unfortunately, too many people, like the first time they're having that conversation, it's like almost too late, right?
They're like I'm not ready, . It's clear I'm not ready. They ask me a question, I don't even know what that means. Or I can get that data to you, but it's gonna be a month from now. It's like just that. So having that forcing function would be so useful, for people to get a shock to the system.
Oh, we need to clean this. .
Nina McKinney: Yeah, it's a passion project of mine. When I find more time, Ben. I've always thought about, almost like an advisory, but also just like giving back to the community of just that's a good, yeah. Yeah. I'm having these like candid conversation about models and what they look like and Yeah.
For your business. Cuz I think there's so much support out there for fundraising. And how should you. What should your deck look like and great. All those really important things. But I think the thing that's been missed the most from the venture community and the founder community is ha, bridging the gap and like having these discussions about like really [00:47:00] and truly what do your business fundamentals look like and what are the different scenarios to get to?
Yeah. Whatever objective you're talking to. Yeah. And I think. , the best fundraisers are able to have those conversations. And then I think a lot of founders try to have those conversations and they're not received well for various reasons, but I think it's mainly because they come across as being too wishy-washy.
And so I think there is like art in having these conversations. Yeah. And how these founders navigate that.
Ben Tregoe: Yeah. Thanks so much. This is really fun. I really enjoyed our conversation.
Nina McKinney: Yes, thank you. And like I said, happy holiday.