Despite Cutting Our Ad Budget By 50%, We Had Our Best Year Ever And Hit $3.6M ARR

$300K
revenue/mo
2
Founders
7
Employees
SHEATH LLC
from Woodland Park, CO, USA
started February 2014
$300,000
revenue/mo
2
Founders
7
Employees
297K
alexa rank
22.3K
followers
17K
followers
513
subs
market size
$26.3B
avg revenue (monthly)
$477K
starting costs
$13.7K
gross margin
40%
time to build
210 days
growth channels
Advertising on social media
business model
E-Commerce
best tools
Shopify, Klaviyo, Instagram
time investment
Full time
pros & cons
35 Pros & Cons
tips
17 Tips
Discover what tools Robert reccommends to grow your business!
Discover what books Robert reccommends to grow your business!
Start A Men's Underwear Brand

Hello again! Remind us who you are and what business you started.

Hello Again, this is Robert Patton, the Owner, and CEO of SHEATH LLC.

In case you didn’t know, SHEATH is a Men’s Dual pouch underwear that isolates the package, providing a unique comfort only known to those who have tried a pair. It has been described as having your boys floating on clouds or being held by angels.

No joke. We have over 20,000 Five Star Reviews and hundreds of thousands of pairs sold since 2013. We have many, many satisfied customers and influencers like Michael Malice (image below), and I am not just saying that, I wear SHEATH everyday. I am the CEO, but I am also a customer. Some of you will get that reference. We do have a women's line that is also extremely comfortable, but the men’s line is what started it all.

Most of our customers are health-conscious men and we primarily advertise to men from the working-class to royalty in Saudi Arabia and all over the world. We’ve sold to Congressmen and Senators and we even sold a pair to someone at the Vatican; the Pope? Who is to say? We have sold in over 113 countries and counting and grossed over 10 million in lifetime sales. Will you be our next customer or are you here to learn more about my journey?

Either is appreciated. We are currently on target to do about $3.6Ml this year. We are hoping for a big boost, but according to some reports, the entire underwear industry is down 30% from last year.

Many internet companies had a boom year in 2021 and since we are having only a slight decrease after such a monumental 2021, we are confident that our product has a stronghold in the market and will continue to grow as the world economy stabilizes.

Why is SHEATH so popular? Because people love it. We love it, I love it, and we are extremely honored to be your underwear merchant as well as providing outstanding customer service and “same day shipping” for your next underwear purchase. You can check out our website here.

sheath-llc

Tell us about what you’ve been up to. Has the business been growing?

As alluded to before, last year we had our best year ever, continuing with the perennial doubling in revenue since 2013. SHEATH did so well last year that by mid-summer we began selling out of most products.

This lasted for a few months which means we could’ve done even better. Fortunately, we got another shipment in time for Christmas, but if we had been better prepared and if the supply chain system hadn’t been disrupted so adversely we could’ve topped 5 million easily last year.

2022 has been a little different than any previous year since 2014. This year we have been way more proactive in ordering products to not run out and lose momentum like we did last year, but with the economic shift that has occurred with higher prices for most products, fewer people have as much expendable income and are only paying for absolute necessities like food and gas with underwear taking a back seat.

But fortunately, many in America and other countries are financially doing very well still and our business hasn’t been hit as hard as many other companies. Where many companies are taking huge losses compared to last year, we are more or less flat from last year which can be seen as a win, all things considered.

With a more conservative marketing budget, we are dissecting which marketing campaigns are working and eliminating those that aren’t. We have cut nearly 50% of our advertising spend compared to last year and our sales haven’t declined by 50% so we are finding that a great portion of our marketing budget from last year was not ROI positive.

Do as much of your advertising as you can. Start a youtube page and drop content weekly. Start a podcast and tell your story. Start every social media page you can manage and fill it with content. Don’t pay people to do that for you right now.

Most of the cuts have come from Professional Athlete sponsorships and YouTubers that just weren’t performing; and podcasts. Though we still sponsor Athletes, YouTubers, and Podcasters, we have parted ways with the ones that were not providing fruit.

What have been your biggest challenges in the last year?

During Covid when everyone was at home in their underwear getting checks from the government, business was booming, then the supply chain issues hit which caused sales to slow down as we were running out of inventory.

What we should’ve done here was raise the price and reduce advertising, however, due to contractual obligations, we continued to pay advertising fees with little inventory to sell and it hit us harder than we would’ve liked. It caused us to restructure the company and bring shipping back from a 3PL to save money and we ended up cutting as many of our advertising agreements as we could. Some to our benefit some to our detriment (We cut Tim Dillon, prematurely and then had to follow up and pay more to get him back. We cut some we shouldn’t have and kept some for longer than we should have.

My advice in this situation is to have hard conversations with your advertising partners when stuff like this happens. Sooner rather than later. You will eventually have to talk and it’s better to stay above water, regroup and reconnect when things are back in order.

Another tactical decision we made this year was to be super aggressive on ordering inventory to not run out. The problem with this can be the storage fees if you are working with a 3PL as well as capital being tied up completely in inventory. There is a fine line to keep the proper balance of inventory and you have to be on your toes with all of these variables.

Right now we are looking pretty good. Sales are starting to get back to where they were at our height of sales last year and we have plenty of inventory with more on the way, so we are hopeful that we can finish the year strong and get close to or even surpass sales from last year.

What have been your biggest lessons learned in the last year?

This year we also had the goal of releasing one new design each month and so far we are on track to keep that goal. The problem with this goal is a balance of product diversity.

We are finding that it is better to keep our staple products on hand for new customers, but existing customers want new designs so we have learned that 1 new item a month might be overkill since our existing customers won’t buy more than 2-3 times a year on average.

Start slow and do your best to stay organic, not only in your diet but in your growth. This will ensure that you don’t get a huge burst followed by a huge slump.

Our daily average of new customers is approximately 70% so we have to keep our best sellers at 70% capacity and only order about 30% of new items. Next year we will release 3 new designs, and trust me they are going to be FIRE.

We are learning as we grow and this is one of the lessons we learned in addition to having a more assertive voice when it comes to dealing with advertising agencies. If we are out of product, we need to discuss this proactively and negotiate a solution that is a win for everyone.

This is one of our most recent releases. The Blue Colossus:

sheath-llc

What’s in the plans for the upcoming year, and the next 5 years?

Next year we will only be releasing 3-4 new designs and we will put a huge emphasis on the marketing of these new designs. We think that fewer releases with more strategy upon releases will give us a better overall return on investment.

Over the next five years, we will continue to observe the market and adjust as needed. We plan on continuing growing however maybe not at our growth rate of 100% each year since 2013. 50% growth each year should be doable. If we don’t double every year, we will be fine.

To keep that pace, might be impossible without taking loans, so we will just continue to grow at a pace we can maintain without going into debt. It will be difficult this year to hit 100% growth from last year, but as the economy rebounds, we will be ready to continue to offer to be the most desired underwear available.

What’s the best thing you read in the last year?

The book that my team just finished is called Limitless by Jim Kwik. It is a great book for growing towards your full potential.

sheath-llc

My advice for entrepreneurs who might be struggling to grow their business is to keep a small team and stay nimble and flexible. If you’ve been in business for a few years, you will know that things have gotten more expensive. The barrier to entry for a new business is much higher than when I started 10 years ago.

Tariffs and transport costs are higher and to make a product in America, you are going to have to charge a price that right now, I am guessing Americans aren’t going to be willing to pay. We saw a company at a trade show selling Made in America Underwear for over 80$ a pair. Right now we are in the midst of an economic crisis so if you are making money, be very considerate of how you spend it. Advertising right now is extremely risky.

It is always risky, it’s sort of like gambling at a casino, you need to be comfortable with losing any money you might spend. If you can’t afford to lose money advertising, bet on the safe bets, Google, and Facebook that can target specific demos at incremental dollar amounts. Slowly grow organically if you can. This will ensure a stable base of customers rather than a surge of 1-time customers.

A surge of orders can be great, but if you sell out… then you will be waiting 2 months to get more products and that is a short timeline. A more realistic timeline for orders from overseas these days is 3-6 months. Be proactive on order until everything is running smoothly again.

Do as much of your advertising as you can. Start a youtube page and drop content weekly. Start a podcast and tell your story. Start every social media page you can manage and fill it with content. Don’t pay people to do that for you right now.

We hired an advertising agency from New York last year and paid them 6k a month only to realize that we were doing just as good by ourselves.

Companies are going to email you and tell you that they will solve all your problems. They are going to 10X you. It might even be Shopify or a company you trust. Never believe the 10X promise. It’s a fabrication, a falsehood, a farce. No one can guarantee growth for your company. They don’t even ask you if you have enough inventory to 10X, they just say they will 10X you. It’s a fairy tale. Beware.

Start slow and do your best to stay organic, not only in your diet but in your growth. This will ensure that you don’t get a huge burst followed by a huge slump. Stay steady. Keep it homegrown until you have enough revenue to gamble on someone to promote you and make sure it is someone who you are a fan of and you know has a great engagement or you have vetted by talking with other sponsors of that show or personality who are happy with the results.

Also, make sure you have inventory available when you take on these influencers in case one is successful in promoting your brand or product.

If you have any questions, follow me on TikTok and Instagram. Message me on Facebook or email my customer service line and they will put you in touch with me. I get too many emails now to put my info on here, but if you come correct and have a genuine question where I can be of some assistance, I try to help where I can.

I mostly try to motivate others on my social media because If I can do it, you can do it. I am barely average in all areas and we are doing pretty good, so you don’t need to be tall or handsome or smart to be successful, you just have to start and never give up. My advice is always no matter where you are in business, Read Think, and Grow Rich. Read it again if you haven’t read it in a while. If you still have questions, hit me up.

Where can we go to learn more?

sheath-llc

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Robert Patton, Founder of SHEATH LLC

SHEATH LLC has provided an update on their business!

About 2 years ago, we followed up with SHEATH LLC to see how they've been doing since we published this article.

Pat Walls,  Founder of Starter Story
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