Advice Line with Seth Berkowitz of Insomnia Cookies

Today’s callers: Kohindo from New York is looking to reboot her African-rooted fashion brand after losing a few key retailers. Then Tara from San Diego considers avenues to educate consumers about the benefits of her wool sauna hats. And Carol from Houston wonders whether to market her collegiate purses and accessories l to students or their gift-giving family members. Plus, Seth lays out his ambitions to quadruple Insomnia’s locations and become a global chain — without turning to franchising. Thank you to the founders of Kohindo, Sauna Societé, and Desden for being a part of our show. Be sure to listen to Insomnia Cookies’ founding story as told by Seth on the show in 2024. This episode was produced by Casey Herman with music by Ramtin Arablouei. It was edited by John Isabella. Our audio engineer was Annlie Huang. You can follow HIBT on X & Instagram and sign up for Guy's free newsletter at guyraz.com and on Substack. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:07Guy Raz?

  Hello and welcome to The Advice Line on How I Built This Lab. I'm Guy Raz. This is the place where we help try to solve your business challenges. Each week, I'm joined by a legendary founder, a former guest on the show, who will help me try to help you. And if you're building something and you need advice, give us a call and you just might be the next guest on the show. Our number is 1-800-433-1298. Leave us a one-minute message that tells us about your business and the issues or questions that you'd like help with. All right, let's get to it. Joining me this week is Seth Berkowitz. He's the founder and CEO of Insomnia Cookies. Seth, welcome back to the show.

• 0:44Speaker 01

  It's great to be back.

• 0:45Guy Raz?

  It's great to have you back. You were first on the show, I think, in 2024. And of course, if any of you listening have not heard that story, we'll put a link to it in the show notes. It's a great episode. You got the idea for Insomnia Cookies while you were in college and you had a craving for like a late-night treat. And the only options were pizza and Chinese food. And you basically started this business delivering fresh cookies from your dorm room to customers. And then eventually, you built a brick and mortar and the rest is history. Insomnia Cookies is a national chain. When you were last on the show in 2024, you had, I think, about 300 locations of the stores. And today, you've got closer, I think, to 400. And the goal is to get to 1,800.

• 1:30Guy Raz?

  Is that the number?

• 1:31Speaker 01

  That's right. Yeah, we're going to finish the year with roughly 393 bakeries around the world. And that's our major aspiration, right? We want to open up 1,800 bakeries and really be a global chain.

• 1:42Guy Raz?

  And what's the 1,800 number? Where's that come from?

• 1:45Speaker 01

  Honestly, day-to-day, we're looking at, as the business scaled from city to college to suburbs to train stations and stadiums, that's what we ended up targeting, based on what we thought could be the US output and then so far, what the international opportunity looks like. So that's our goal.

• 2:03Guy Raz?

  One of the things that is interesting, I think you own and operate the stores, right? Insomnia owns and operates all your bakeries?

• 2:11Speaker 01

  We have four licensing arrangements, an airport and three stadiums. But beyond that, we operate 390 bakeries around the world.

• 2:19Guy Raz?

  So basically, you're not a franchise business, right?

• 2:23Speaker 01

  No, certainly not.

• 2:23Guy Raz?

  But of course, franchising could get you to 1,800 a lot faster, right? And you know that.

• 2:30Speaker 01

  It could, of course.

• 2:31Guy Raz?

  Tell me the thinking behind resisting that model.

• 2:35Speaker 01

  I mean, some of it is just how the system was built. It's a late-night, delivery collegiate business. These are three things that are: it's highly seasonal, operates off-hours, and it's multi-channel. It's hard. A lot of businesses have become this way. But historically, that wasn't something that people ultimately wanted to do. And we had to kind of bootstrap it and build from the ground up. And that's just how I've always operated it. And as a business that believes so deeply in innovation, having the ability to think of something new, bring it into the store, test it and deploy it, and then roll it out without not a crazy amount of complexity or pushback is pretty special.

• 3:19Speaker 01

  And we think it's the way that we stay relevant nearly 25 years since our founding.

• 3:25Guy Raz?

  And you have, of course, control over the quality of the product.

• 3:30Speaker 01

  Certainly. I mean, for me, I guess it's where I should start. But it's not just top of mind, it's the core, right? It's the only thing that ultimately matters. And so we hold that deeply in our hearts.

• 3:41Guy Raz?

  Yeah. You know, when you were on the show, we talked about some of the near-death experiences, including the very first one. You expanded, I think, to Wisconsin to Madison, and you had to shut that down and basically had to start over. Now, you are expanding probably faster than ever. What, as a CEO, what warning signs would sort of make you slam on the brakes? Even if the company was like, "Let's go, let's go." Given what you know about what happened in the past, is there anything that you would say, "You know, maybe we should slow down"?

• 4:18Speaker 01

  I mean, this is my philosophy. Lots of people don't subscribe to this one. But I believe you earn growth. I think you earn the right to grow. Consumer love gives you license, right? We tried to open, I'd say at this point, far too many stores in a couple of markets at the pace that we went. And the aperture wasn't as wide as we thought. And had we watched the brand awareness metrics in every geography incredibly closely, we could have seen pieces of that. And so you have to earn the love. And if it's there, then you have license to go as fast as you want. Some people think, grow and see how it all plays out. And sometimes it works. And some of the most magical stories for business, it really does work. It's just not how I think. I like being in the weeds.

• 5:03Speaker 01

  I like watching the business grow. I like seeing the community really love what we're doing and then feeling comfortable with it. So I never grow, grow, grow. I always make sure you've earned that growth.

• 5:15Guy Raz?

  Seth, I mean, there's so many great moments when you were on the show for the first time and told the story of Insomnia. I remember the Syracuse store and like all the... It was a college brand, right? The idea was expand to college towns. And it was a really smart strategy. I imagine that's not your core customer anymore. It's not the college student, late-night college student.

• 5:38Speaker 01

  I mean, it's interesting. They definitely are center of the bullseye because 250 of the 400 bakeries are college. So it's a regenerative community. And that part's incredible. And that's kind of how our growth narrative has worked, right? We've gone from college to cities because we were following our insomniacs. And many of them left cities and they moved to suburbs. And we're following along. So it's become this lifecycle brand in our minds. It starts in college. It works its way, as I just described. And then hopefully, if we get to enough scale in suburbs, we can start with their children. And then it all goes around and around. So that is the hope. That is earning the growth that I was describing before.

• 6:18Guy Raz?

  Yeah. Well, I mean, again, if anyone listening is a college student and you are trying to figure out what to do with your life, listen to Seth's story. I mean, you started this business in college in your dorm room. And it turned into this, a huge national chain. It's an amazing story. Are you ready to take our first call?

• 6:38Speaker 01

  Absolutely, let's do it.

• 6:39Guy Raz?

  All right, let's do it. Welcome to The Advice Line. Hello, caller. Please tell us your name, where you're calling from, and just a quick line about your business.

• 6:47Speaker 02

  Yes, hi. Hi Seth, hi Guy. My name is Kahindo Mateeni. And I'm calling from just outside of New York City. My brand is called Kahindo. And it's a luxury special occasion wear fashion brand rooted in my Congolese heritage and my African upbringing. And it's handcrafted by female artisans in Africa to empower the artisan as well as the wearer with bold and colorful special occasion wear.

• 7:19Guy Raz?

  Awesome. Well, thanks for calling in, Kahindo. So all right, so Kahindo, you are Kahindo. This is the brand. And basically, it's like luxury dresses, formal wear, all those things?

• 7:33Speaker 02

  Yeah, so we started broadly. But now, we're doing a pivot to focus on special occasion wear. So like mother of the bride, women going to weddings, even bridesmaids. So any woman who's looking for something unique and colorful and bold to wear to a special occasion.

• 7:52Guy Raz?

  And you mentioned that it's rooted in your heritage. Did you say Congolese heritage?

• 7:56Speaker 02

  Yes, correct.

• 7:57Guy Raz?

  So tell me about that. How does that inform the designs or the patterns?

• 8:02Speaker 02

  Yeah, absolutely. So I design all of the patterns and prints. And I like to say I want to bring a little bit of Africa to the world. So I was born and lived across six different African countries. So it's very colorful. And I also like educating people about Africa. Because when I came here as a college student, people had these crazy ideas about the African continent. So I talk about, through my colors, through my print, about different tribes, different countries. And I bring a bit of that to America.

• 8:39Guy Raz?

  Awesome. And when did you start your business?

• 8:42Speaker 02

  Yeah, I started in 2017.

• 8:45Guy Raz?

  And tell me a little bit about how the business is doing right now.

• 8:49Speaker 02

  Yeah, so it started off really well. 2020, in the middle of the pandemic, that was when I really started to see growth. And I think it was because there was a lot of focus placed on black owned businesses. So, you know, my biggest year was in 2023. I did 268K. But literally after that, I lost all of my wholesale business. So I was selling to Anthropologie, Rent the Runway, Newly, ShopBop, and lost all of the wholesale business. So last year, I did 50K and I nearly closed my business.

• 9:28Speaker 02

  So I'm in the process of kind of rebuilding and pivoting to focus solely on special occasion wear.

• 9:35Guy Raz?

  And now your sales are entirely direct to consumer through your website?

• 9:39Speaker 02

  And drop ship. So I am, I do drop ship with Nordstrom and Bloomingdale's.

• 9:45Guy Raz?

  Got it. Okay, before we dive in further, what's your question for us?

• 9:48Speaker 02

  Yeah, so after losing a lot of that business and pivoting to focus on special occasion, where I need to figure out how to find and grow my customer base with limited time as well as limited money. I'm a solo founder and I feel like I need to run ads, but I'm not sure if running Meta Ads, Google Ads is the right way of focusing on other customer acquisition strategies.

• 10:18Guy Raz?

  All right, so trying to figure out where to put your focus. I want to bring Seth Berkowitz in. Seth, she's got this brand and now she's trying to figure out where to focus her energy as she rebuilds. And presumably, Kahindo, you're looking to focus on direct to consumer or wholesale or both?

• 10:34Speaker 02

  Both.

• 10:35Guy Raz?

  Okay, got it. All right, Seth?

• 10:37Speaker 01

  All right, well, Kahindo, it's great to meet you. So I was looking on the website briefly. Talk to me about the community that you're particularly like, is this a, you believe you're going after? Because if you say I want to go after Meta and Google, 300 million people in the US alone, right? It's like, it's such, it's so hard to break through in the apparel industry. That's so vast. And the Meta and Google is so appealing because I can turn it on, create content, go. But also, it's unclear to understand how the data is exactly working. Is there, could you activate locally? Can you feature maybe some of the artisans that are making the product? Try to do something that is much core to your promise and your original founding than trying to go wider now.

• 11:19Speaker 02

  Yeah, that's like right on the money because I've been doing pop ups. I just had one last weekend in West Village. So I'm trying to do more of those in-person events where women can try on my pieces, touch and feel the fabric, and where I can tell the story about my brand. So that is literally the route that I'm going. And maybe even doing trunk shows in bridal stores or things like that to connect directly with a customer.

• 11:54Speaker 01

  What about like influencers in the, you know, the bridal space and the event space? Is there a connection you can make there? Because their audience and their amplification can be much larger than you're going to get from whatever the cost of acquisition might be on Google and Meta.

• 12:08Speaker 02

  Yeah, so in the past, I've dealt with influencers, but it wasn't successful. But to your point, I think if I narrow the search and narrow the focus and deal with like special events, yeah, that could absolutely work.

• 12:23Guy Raz?

  Kahindo, I have a question for you. Which, do you know which three or four products have generated the most revenue?

• 12:31Speaker 02

  Yeah, absolutely. So it's the Cleopatra dress, Hadiza dress, the Ada tunic, and the Egypt pants. So I even named my pieces after African themes.

• 12:42Guy Raz?

  I love that. Okay, so you know that. And do you know who is buying those pieces and for which occasions?

• 12:49Speaker 02

  Yes, and that's why I narrowed to focus on special occasion wear. So I would get, you know, people would tag me on social when there were either a mother of the bride wearing the Cleopatra dress or attending a wedding, wearing the Cleopatra dress.

• 13:06Guy Raz?

  Yeah, I mean, I think that's really where your opening is, right? It's, what are your three to five bestselling pieces? Who bought them, if you can find out, or if you can start to collect that information? What was the event? So to me, it's like, the question is, where should you focus your energy? You asked, and I think you were wondering, like, should it be Meta Ads or Google Ads? And I think your energy should be focused on really honing in on the three to five pieces that are your best sellers and build out from there. It's also an opportunity, once you collect that data and once you've got, you know, these proven pieces, that's what you could take to wholesalers when you go back. As you said, at one time, you were at Anthropologie and Newly and in a few other places.

• 13:51Guy Raz?

  I'm not saying go back to those retailers right away, but you want to be able to have data with what you are selling, right? You want to show sell-through rates and return rates and reviews. And that will enable you to go to 10, maybe 20 boutiques, smaller boutiques, because that's a great opportunity to be in these smaller boutiques. But I would really, again, that's where I would focus your energy, on really honing in on those three to five pieces. And then think about how to build that out and market those.

• 14:28Speaker 02

  Yeah, that absolutely makes sense. Because on my website, you know, there's like sweaters, cardigans, coats. So, you know, with this pivot, like, I'm only starting with, you know, five to 10 styles of my best sellers that have worked. And I think also the other issue I had was I was growing with these large retailers and I wasn't focusing, to your point, on the smaller boutiques. So that's my focus. I'm going to absolutely focus on smaller boutiques.

• 14:59Guy Raz?

  Seth, any thoughts, any additional thoughts?

• 15:01Speaker 01

  I mean, I was just, you know, I mentioned it quickly, but like, I think there is a way to differentiate your website that really highlights the designers. There's something about it, it shouldn't feel generic in any way. It should feel mission-based, oriented with why you started the business in the first place. And I think there's some opportunity there.

• 15:21Guy Raz?

  Yeah, I agree.

• 15:22Speaker 02

  Thank you so much.

• 15:23Guy Raz?

  Yeah, the brand is called Kahindo, Kahindo Mateen. Thanks for calling in. Good luck.

• 15:29Speaker 02

  Thank you. I appreciate it.

• 15:30Guy Raz?

  Thank you. Seth, I know that apparel is not your space, but it's also like, you've probably, maybe the best analogy, but you've probably introduced, you know, cookies or brownies or other treats that just didn't work and was not a good use of your energy to be selling those.

• 15:49Speaker 01

  I mean, I sold frozen yogurt, I sold cupcakes. I mean, I did everything, right? Like, ultimately, what won was reducing the SKUs down to the core. And then, once that became incredibly well-known, then you add platforms around it. So I found for me, simplicity, be great at something simple and repeat, repeat, repeat. I think your advice was very wise.

• 16:13Guy Raz?

  We're going to take a quick break, but when we come back, another caller, another question, and another round of advice. I'm Guy Raz. Stick around. You're listening to the Advice Line on How I Built This Lab.

• 16:36Guy Raz?

  Welcome back to the Advice Line on How I Built This Lab. I'm Guy Raz, and today I'm taking calls with Insomnia Cookies founder and CEO Seth Berkowitz. And Seth, what do you say? You ready for our next call?

• 16:48Speaker 01

  Let's go.

• 16:49Guy Raz?

  All right, welcome to the Advice Line. I'm Seth Berkowitz, founder of Insomnia Cookies. Tell us your name, where you're calling from, and just a little bit about your business, please.

• 16:56Speaker 03

  Sure. Hi, Guy. Hi, Seth. I'm Tara Gilman, calling in from San Diego. And my business is Sauna Society. And we are a premium sauna hat company designed to elevate the ritual of sauna. I found that I wanted to bring a product that was traditionally purely functional and create a more stylish, elevated product for the modern sauna goer user.

• 17:24Guy Raz?

  Got it. Okay, Tara, thanks for calling in. So Sauna Society with an accent, right?

• 17:28Speaker 03

  Very fancy, yes.

• 17:30Guy Raz?

  And you make?

• 17:33Guy Raz?

  Hats for the sauna. Okay, explain, tell me, explain, please.

• 17:38Speaker 03

  I would absolutely love to. And it's interesting because there's quite an education gap in why even wear a sauna hat in the first place, though it's catching on quite quickly. So sauna hats have been around for hundreds of years in Finnish culture, the Banyan Russian culture. So basically, what a sauna hat does, it protects your hair from high heats, from damage, from drying out. It also makes for a more comfortable sauna session. The purpose, if you could stay in the sauna for at least 15, 20 minutes, that's when the good stuff happens. So the sauna hat actually absorbs a lot of the heat and it allows you to stay in the sauna longer without your heart pounding and you need to quickly exit.

• 18:22Guy Raz?

  Wow. You know, I've been in saunas, I can't tell you how many times. And now I just did an image search. I have never seen somebody in a sauna hat in the sauna. That is kind of amazing. And they look like, I mean, yours don't, I'm looking at your website, but they generally look like, like elf, like elf, or what do they call it, like nomads, kind of?

• 18:41Speaker 03

  Yes, exactly. So part of the design is kind of traditional. They should be a little bit roomier because you want the hat, you don't want it skin tight. You want the heat to have somewhere to go. So the design, it is kind of a little funky.

• 19:00Guy Raz?

  To me, it looks a little like a pith helmet, like that shape, right? But, but I'm, but this is, so this is a thing, sauna hats, just to go back to this, that it's designed to protect your hair, but also to keep you in there longer?

• 19:15Speaker 03

  Yeah. So it sounds counterintuitive, right? That's like, wait, how can I wear a wool hat on my head and be cooler and stay in longer? It's one of those things, you just got to try it. And it's a game changer. You will not go back, absolutely not go back.

• 19:32Guy Raz?

  And, and was there, how did you come up with this idea? How did you get the start?

• 19:37Speaker 03

  So I have been a sauna user at a local wellness club. And about maybe two years ago, I started going maybe four times a week for 20 minutes at a time. And I went to my hairdresser about maybe six months into that protocol. And she said, Tara, what have you been doing to your hair? It's damaged, it's dry. Like definitely not flat ironing my hair more. So, oh my God, the sauna. She said, that's it. So I said, okay, like I've seen one person in my life wear a sauna hat. So I go on Amazon, go to look for a sauna hat,

• 20:17Speaker 03

  and one hat was truly like uglier than, I barely could press a button to buy a hat because they were so ugly. So I ultimately said to myself, what if I could just design a hat that was more aesthetically pleasing for the masses, especially as more people are getting home saunas, infrared saunas, and all these bathing sauna cultures?

• 20:39Guy Raz?

  And you are selling them on your website now only? It's direct to consumer? Or are you selling them in shops?

• 20:45Speaker 03

  Yeah. Right now, I'm working on, we're close to a co-branded hat at a local property that is luxury, right here in San Diego. I'm working on other hotel luxury spas and other sauna chains that are popping up.

• 21:05Guy Raz?

  All right, cool. And, and so you just, I think you just launched a few months ago. So probably, I'm assuming most of your sales are coming through the website or through boutiques?

• 21:16Speaker 03

  Yeah, actually, most of my sales have been coming in person. So I've been wearing my hat. Almost every time I wear my hat, it's the best conversation starter. How do I get your hat? Oh, you know, here it is. So I've been selling a ton that way. A few wellness fairs that I've been a vendor at, and a few influencer posts have converted, not a ton. And I just, we're in the Emmys gift bag. So we'll see how that translates. So just kind of like throwing darts, honestly, marketing wise. But I haven't found the direct to consumer in person A plus. The harder is just like ads, websites, et cetera.

• 21:59Guy Raz?

  Okay. Before we dive in further, what's your question for us?

• 22:02Speaker 03

  Yeah. So my question right now is I'm wrestling with kind of what marketing channels deserve my focus, kind of as Seth said earlier, to earn, to earn my growth. And really how to become synonymous with a sauna ritual. So I know insomnia certainly didn't invent the cookie. And I certainly didn't invent hats. I'm really looking to build a brand that becomes synonymous with this sauna culture that I certainly don't own. So that's really where I'm at right now.

• 22:37Guy Raz?

  All right, great. Seth, I want to bring you in. Seth Berkowitz, please say hello to Tara Gilman. Are you a sauna user?

• 22:44Speaker 01

  Occasionally, I mean, the hair piece is irrelevant to me, but I understand the use case for most. You know, the first thing that comes to mind is the education gap. So like, it took a few minutes here for you to explain it to us. And I'll tell you, people used to say to me, who needs a late night cookie? That's not a thing. And as you said it, right, creating that ritual requires a ton of hard work. So not to ask questions, back to a question, like, how are you feeling about the margin on the product?

• 23:13Speaker 03

  The margin's fantastic. It's about 85%.

• 23:16Speaker 01

  Okay. So giving this away is not that complex?

• 23:20Speaker 03

  Not at all.

• 23:21Speaker 01

  I'm mindful of trying to go to the masses, to go to, to go to, I mean, social, certainly influencer, you know, you can do all those things. But you described it, like, wearing it in the sauna seems to be-

• 23:31Guy Raz?

  That's what sells it.

• 23:32Speaker 01

  Right? The single easiest way, because like, you might see it online, and then no one can talk to you and get the answers you just gave. It's like, I'm, I don't, again, I don't need it, but I'm sold that others should use this hat. I think seeing it live is critical. Seeing somebody break down what, I don't know if it's stigma, but just seems like something that they need to be educated on, live would be pretty good.

• 23:52Guy Raz?

  Yeah, I, I think you're, it sounds like this is where you are focusing your energy, is that your main channel really is in studios and spas and clubs and, and resorts, right? Where there already is a sauna culture. I think that, look, social is tricky. The customer acquisition costs are very high, and they get, they get higher and higher. And I imagine you don't have an unlimited budget to just throw at social. It may be worth experimenting with a little bit. But I ultimately, I think that it's about getting it in as many places as you can locally, and getting as much data as you can from those places. Like, like,

• 24:37Guy Raz?

  what are customers saying? Like, you may have, maybe have like a little QR code on the, on the hat that people can click for some kind of incentive, just to give you feedback. And so, and I imagine, by the way, that this is not going to be the only thing you want to sell down the road, right?

• 24:52Speaker 03

  Correct. This is the entry point. And ultimately, I would love to make my brand, Sauna Society, synonymous with the whole ritual of the modern sauna goer. So, yes.

• 25:07Guy Raz?

  Like, what else, what other things do people, I mean, towels, right?

• 25:11Speaker 03

  Yeah, towels, robes, swimwear, sauna safe clothing. So that's, you know, a big new kind of category. But yeah, I mean, I really want to build the brand, prove out the hats. And so, and with respect to feedback, truly, anyone who's worn my hat has, I've only gotten positive feedback. And people love it and want to gift to other people. And I think the more I can have people see it and use it, hopefully that just will continue to build.

• 25:49Speaker 01

  I'm thinking about like at a spa, they're probably not going to spend, I thought, with $60 or so on the hat every time they go. Is there a way to make that more accessible on a more of a B to B landscape basis? Like, you can lower price point, right? That's where my head went initially, but it's, is there a $10 version of this one day that is more, and I know it like kind of brings your brand down, so that's not quite as interesting. But if you can get 100 of them into a spa, easier than getting, you know, one to a person you have to educate.

• 26:18Guy Raz?

  Oh, I have a thought. I want to build on that. Sorry to jump in. What if you could get, a lot of these hotel resorts, they have corporate events. They'll have three day, you know, events where they get 100 people or more. I wonder if you could somehow connect with, you know, some of these folks at the hotels and say, look, we want to, you know, for the gift bags or whatever, that, that the welcome bags, we want to include this. That could be an interesting sort of way in as well.

• 26:50Speaker 03

  I love that. And I think that that just gets more people wearing the hat. And corporate gifting is, is another kind of strategy that I'm looking into right now as we approach the holidays, because it's a unique gift for companies.

• 27:06Guy Raz?

  I jumped in there, Seth, yeah.

• 27:09Speaker 01

  I mean, I think it's a little bit of a slight shift from where my mind was going, but I think the concept's the same, which is, it sounds like seeing it, feeling it, wearing it is key to, to, to really bridging the education gap. So any way you can do that cheaply and accelerate the business makes sense to me as well.

• 27:26Guy Raz?

  Tara, thank you for calling in. Tara Gilman, your brand, her brand is called Sauna Society. Good luck. Thanks for calling in.

• 27:32Speaker 03

  Thank you so much. Bye, guys. Take care.

• 27:37Guy Raz?

  Yeah, I actually love saunas. There's, there's a cool one in the Bay Area. You basically use the sauna and then you jump into the San Francisco Bay. It's a cool one. That's your plunge. That's a cold plunge. Yeah.

• 27:49Speaker 01

  Oh, that's awesome.

• 27:50Guy Raz?

  It's right on the dock. It's super cool. Yeah. But now there's hats to protect our heads.

• 27:57Guy Raz?

  Okay, next up after the break, another caller with another business challenge. I'm Guy Raz, and we're answering your business questions right here on the advice line on How I Built This.

• 28:21Guy Raz?

  Welcome back to the Advice Line right here on How I Built This Lab. I'm Guy Raz and my guest today is Seth Berkowitz. He's the founder of the bakery chain Insomnia Cookies and we are taking your calls. All right, Seth, let's bring in our final caller. Welcome to the Advice Line. You're on with Seth Berkowitz, founder of Insomnia Cookies. Please tell us your name, where you're calling from, and just one or two sentences about your business.

• 28:41Speaker 04

  Hi Seth, hi Guy. Thanks so much for having me. I'm Carol Deschamps and I'm in Houston. I'm the founder of the brand called Desdun and we're officially licensed for 90 universities and growing. And we create clear stadium bags and game day accessories. I always say I design for the female fan that wants to show her team spirit without sacrificing her style.

• 29:07Guy Raz?

  Awesome, welcome to the show Carol. So this is a, okay, you make bags. They're collegiate, so they're with college logos on them and they're designed specifically to bring into, bring them into stadiums?

• 29:17Speaker 04

  Yes, so, and actually, we have a full line of totes and bags, but our core products are the clear purses. In 2013, the NFL instituted a clear bag policy for most all football stadiums. And so people, you know, we kind of had the right bag at the right time. I knew when NFL had gone that way that it was probably coming with college, on college campuses. And so I went ahead and designed one and we were at market at the time when it was announced. And so the buyers were sort of in a frenzy to find a clear purse. And so we make them cute. It's like a purse that you would want to carry, not because you have to carry it. So we have several different designs in the clear purses. I usually redesign every year.

• 30:00Speaker 04

  I come up with a new one and then sort of the accessories add on from there. Bag straps and charms, scarves and things like that.

• 30:09Guy Raz?

  And tell me a little bit, I mean, you've got licenses, obviously, I'm assuming, right from all these universities. How does, how does the business do? Give me a sense of your, your sales, your annual sales.

• 30:20Speaker 04

  So our sales, we've actually, this year, we're having a great year. We've grown every year. I mean, we started in 2007. We're actually going to be in our 20th year coming up. And it was just sort of a slow growing. We started with a handful of licenses and some different designs. I drew the designs, we print them. We actually, I've always been focused on wholesale from the beginning. Last year, we were at 1.4 million to end, or 1,475. And this year, we've already, our fiscal year starts in February and we are over 2 million. So we're on track to do about, I think, 2.5 by the end of January.

• 30:55Guy Raz?

  And you meant, you produce the bags yourself or are they made in overseas and brought here?

• 31:01Speaker 04

  Right, both. The clear purses are made overseas. We do, we make all of our canvas totes and duffels in-house in Houston. And then we print the bag straps, we make the scarves, we do all of that in-house. So it's kind of a combination.

• 31:16Guy Raz?

  All right, so before we dive in further, what's your question for us?

• 31:19Speaker 04

  So my question is, you know, after years of focusing on wholesale and now we've been growing our direct-to-consumer business, we've discovered that the person that's buying our product isn't the same person that's using it. Many of the people that are buying our product are their moms and the grandmothers that are buying it for the daughters and granddaughters. And so as we decide where to focus our next stage of growth, how should we market a brand when the buyer and end user are two different people with different motivations?

• 31:46Guy Raz?

  Got it, okay. Seth, I want to, I want to bring you in here, say hello to Carol. The brand is called Desdun, the clear purses, bags for game day, for the stadiums. It's a great combination.

• 31:58Speaker 01

  Yeah, I mean, this is my, like, this is my bread and butter. So Carol, it's a pleasure to meet you.

• 32:02Speaker 04

  Thank you, same.

• 32:04Speaker 01

  So college, I know this place a little bit. So you mentioned you're curious how you think about what appeals, feels to be a split consumer, end user and buyer. I would say, this is how I think about it with Insomnia, the consumer is the end user regardless of who paid for it, always, right? They're carrying around the brand, it's social currency for them if they love it. And if they love it, they're going to tell their friends, who are going to tell their parents to buy it from you. So for me, the center of the bullseye is the student. It is always the student. You have to make sure they think it's relevant, culturally relevant, socially appropriate for them, something that stands out, something that they will take a picture of and post on social media.

• 32:49Speaker 01

  I'm curious, so do you have marketing teams that go to tailgates? Do you set up tents at the games? Are you, how out there are you all?

• 32:57Speaker 04

  We do a little bit of that. We actually, we started an ambassador program probably about eight years ago and that's been really great for us. So we have girls on different college campuses, we send them our product and they'll go out on game day and take pictures and share it and, you know, post. And then we do, I mean, I'm doing, I'm actually doing a pop-up in Austin this weekend for the University of Texas game. So we can do that a little bit, but that might be something that we should look more into as far as getting, I mean, it's a great way to get content for social media and things like that. And that, social media is how we've really grown the direct-to-consumer brand over the past few years, which has taken off.

• 33:36Speaker 01

  It's also such a distinctive, I mean, you have a clear bag, right? So you have the brand of the college being represented simultaneously, but like, what if every bag was mandated to have an Insomnia cookie in it, right? Like, there's something where you can also be featuring, that is a joke, but you can be featuring somebody else's product, which is an opportunity to elevate, like partnership opportunities are endless with a clear bag. And then if you feel like, all right, I want to just get this cultural relevance up a little bit with a college student, make sure for them it feels like something that they're excited to share, put something in there that they really care about and all of a sudden things start to move. Like, there's, that clear piece is really interesting to me.

• 34:15Guy Raz?

  And that, I think, is really, so to me, it's like, it could be a collaboration with another brand where, you know, you're working together and you're both incentivized to promote each other. And the other thing, I mean, there, you know, there are QR codes. Again, QR codes are tricky, but if there's a way to sort of say, scan this and to win, you know, 10% off or a chance to win a trip to the college football championship game or something, and then you can start to collect information about who's buying it, you know, and, you know, because you want to be able to reach them during graduation or whatever it might be. But if you can get something in the bag that then allows you to learn more about the person

• 35:00Guy Raz?

  who's using it, then you can start to figure out how to, you know, add a market to them.

• 35:06Speaker 04

  Mm-hmm, I love that. I've never thought about that. That's a great idea.

• 35:11Speaker 01

  You know, there's a lot of teams where to get tickets, you have to line up and like, live outside for two days. Or, I don't know, in Duke, it's like, it's something like ridiculous amount of time. An opportunity to partner with, with them at that moment, right? It's, so many ways to market this, it's so fun.

• 35:26Speaker 04

  Yeah. And as far as growth from here, I guess my question is, you know, I've always focused on the wholesale and so then recently have moved more into direct and that has been, you know, we've got great margins being that we're the manufacturer and that's been really instrumental to growing our business, is growing the direct-to-consumer. But from there, would you suggest adding more licenses or moving into different licensing? Or what would, what do you think the best path?

• 35:58Speaker 01

  You would know the data on, I assume, each license, right? I mean, is there, is it balanced? Is there a certain level of, I don't know, sports success in a given campus that's better than, than in the others? Because there's a lot, I mean, carrying 90 licenses is a lot.

• 36:12Speaker 04

  Right, right.

• 36:14Speaker 01

  From my standpoint, that seems like a lot to manage at your current scale.

• 36:17Speaker 04

  Mm-hmm, no, agreed, yes.

• 36:19Speaker 01

  But maybe, pick a team or two in some other sport and see, see how it goes.

• 36:25Guy Raz?

  Yep, agreed, agreed. The brand is called Desdun. Carol Deschamps, thanks so much for calling in, good luck.

• 36:31Speaker 04

  Thank you, appreciate it.

• 36:32Speaker 01

  Take care.

• 36:33Guy Raz?

  Seth, I really appreciate, thank you for coming on the show. Before you go, I have a question for you, which I ask all the guests who come on again, which is if you could now go back to when you were just starting out, you know, in your dorm room, in toaster oven cookies for, for people, what advice now with all that you know about running a business, this business, what advice would have been helpful for you in those early years?

• 36:59Speaker 01

  You know, there's, follow what the consumer is telling you, right? They are the answer to every question, right? Every single question is embedded in their behaviors and their choices and, and the love that they're, they're showing you by buying your product. Cherish that and nurture it. And I think so many people go off their gut and it can, it can lead you in the wrong direction. So, you know, follow your, it's a great question from before, like, follow the consumer, see what they're, see what they need and try to be there for them down the road.

• 37:28Guy Raz?

  That's Seth Berkowitz, founder and CEO of Insomnia Cookies. Seth, thank you so much for coming back on the show.

• 37:33Speaker 01

  It was a pleasure to be with you again. Thank you so much for having me.

• 37:36Guy Raz?

  And by the way, if you haven't heard Seth's original How I Built This episode, go back and check it out, it's really fun. You can find a link to it in the podcast description, also known as the show notes. And here is one of my favorite moments from that interview.

• 37:50Speaker 01

  I went to the investors, as I'd been doing for the last three or four years, and like, here's what our loss is for the year, it's less than last year, but it's still a loss. You know, I'm hoping to raise a half a million dollars. And they're like, checkbook's closed. We have no idea what the future holds, the checkbook is closed, like, figure out what you're going to do. And so I ended up cutting my team and I stopped paying myself for 18 months.

• 38:16Guy Raz?

  Yeah.

• 38:16Speaker 01

  It was crazy. I'm honest, I did compartmentalize that time, like, I don't really think about it too much. It was so very hard.

• 38:27Guy Raz?

  Hey, thanks so much for listening to the show this week. And by the way, please make sure to check out my newsletter. You can sign up for it for free at guyraz.com or on Substack. And of course, if you are working on a business and you'd like to be on this show, send us a one-minute message that tells us a little bit about your business and the questions or issues that you're currently facing, because we would love to try and help you solve them. You can send us a voice memo at [email protected] or call us at 1-800-433-1298. Leave a message there and make sure to tell us how to reach you and we'll put all of this information in the podcast description as well. This episode was produced by Casey Herman with music composed by Ramtin Erablui.

• 39:11Guy Raz?

  It was edited by John Isabella and our audio engineer was An Li Huang. Our production team at How I Built This also includes Alex Chung, Carla Estevez, Sam Paulson, Chris Messini, Elaine Coats, J.C. Howard, Catherine Seifer, Carrie Thompson, and Neva Grant. I'm Guy Raz and you've been listening to the Advice Line on How I Built This Lab.