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Build a Business Worth Buying brings you candid conversations with industry leaders, M&A experts, and successful founders. Learn advanced strategies to scale, optimize, and prepare your business for an acquisition—because building a business worth buying starts with smart decisions today.
STEVEN J EDELSTEIN (00:00)
that's the best advice I can give somebody. Don't look at the financials. Don't look at the operation.
Don't look at everything else, but the one thing you have to look at is inside your own head, am I motivated? Am I emotionally attached? Do I wanna do this?
Aaron Alpeter (00:52)
Today's guest is a fascinating one. Steven Edelstein has built his career at the intersection of capital and creation. His early exposure to private equity and leveraged buyouts gave him a front row seat to how businesses are evaluated, structured, and sold. But instead of staying on the sidelines, he moved into the arena. He built and exited multiple niche beauty brands himself and earned the title King of Beauty by many in the industry.
What makes Steven interesting is not just that he's done it once, but he's done it repeatedly and across industries. He has launched brands, scaled them, and next to them enough times to develop a pattern recognition most founders never get.
Today's conversation is about that filter, how to tell if you're building something durable or just riding a wave and what to do before the market makes that decision for you.
Aaron Alpeter (01:31)
Steven, how you doing?
STEVEN J EDELSTEIN (01:33)
I'm doing great. Thanks, Aaron. I appreciate that very much.
Aaron Alpeter (01:36)
one of the things that was really interesting to me was just your career history and how you, became the king of beauty and you've done all these interesting things. Do you want to give our listeners just a quick summary of
STEVEN J EDELSTEIN (01:45)
Mm.
Aaron Alpeter (01:47)
kind of how you got to being here today.
STEVEN J EDELSTEIN (01:51)
Wow. It's been quite a journey. I will say that. coming out of college, I ended up working for a private equity firm in New York, primarily handling mergers, acquisitions, leverage buyouts, liquidation deals.
looking at distressed properties, understanding the structure of them. What did the brand do? How does it tick? And then of course from a financial standpoint, understanding the viability of that. From there, you talk about king of beauty, which I always laugh and sidebar my wife of course laughs as well. But my point is that I started recognizing a lot of different things. First of all, I started getting very involved with chemical formulations, which is kind of funny because as a...
as a student, in lower education and certainly in college and grad school, science was never my forte, nor was chemistry for that matter. But like everything else, when it's money motivated, you learn very quickly. So with that said, learn chemical formulation, learn product design, development, et cetera, et cetera, and started buying formulas and building formulas.
for very scientifically formulated, skin care. And started with one, and it grew, and we exited, and then like everything else in my DNA, I couldn't stay away. So, did another one. And then I started diversifying, and went from a female-focused product line, to a male-focused product line, to a unisex product line,
et cetera, et cetera. So the point is a lot of different products in different categories. And what I learned through all that was that A, you become subject matter oriented, need I say niche oriented, B, understanding who your customer is, really getting to know who they are, how they operate, what do they want, what don't they want? How loyal are they? And most importantly, do the economics.
play a role in that relationship. And in some cases it did, in many other cases it did not. So after a series of these, selling to different companies, suddenly learned something. I knew the brand business, I knew the product formulation business, I got forced into learning the logistics business.
But my natural next step was to get involved with the logistics, the supply chain, the technology part of the business. And that's where it all happened. And I ended up with companies like Saddle Creek Logistics, and I ended up with companies like GSI, and working with a lot of good friends that are still in the industry, subsequently with Fuzz, et cetera. The point is I learned from the ground up for something that I was a necessity.
in my prior business.
I do a lot of different things as well. I'm also a certified chef, if you didn't know this. I, yeah, believe it or not, went to culinary school in my spare time, which is bizarro because I have no time, but I found it. And I was in New York City and ⁓ had a great time with that.
Aaron Alpeter (04:45)
No way.
STEVEN J EDELSTEIN (04:57)
and ended up becoming an executive sous chef, part time of course, because I can't do it full time, I'm doing all the other things. And that's my history. And now we are here today.
Aaron Alpeter (05:06)
You are just a boring guy.
STEVEN J EDELSTEIN (05:09)
I can tell you right now, I don't sleep a lot, unfortunately. ⁓ And ⁓ I wish I did. Trust me, I wish I did. ⁓ But I like to keep busy. And obviously, I like to learn. And I like to learn about a lot of different things. And most importantly, I like to learn from people.
Aaron Alpeter (05:24)
Yeah, no, that's fascinating. when you think about the brands that you have touched, not just the ones that you've owned and managed, but all the mentorship, all the people you've seen, you've probably seen hundreds of brands up close and personal. What is it about the brands that actually take fire and do well that separates them what's that staying power actually look like when you distill it?
STEVEN J EDELSTEIN (05:29)
Hmm.
Mm. Mm?
It's actually quite academic, One, know who your audience is. I mean, most importantly, know who you're selling your product to. Who's that relationship with? What are they using it for? Why do they want it? And can you provide it at the best value in the most timely way, the best performance possible? And most importantly, create that emotional bond.
Aaron Alpeter (05:50)
Mm-hmm.
STEVEN J EDELSTEIN (06:11)
because the emotional purchase, in my opinion, is probably not only the most sticky when it comes to consumer relationship and lowering your attrition in terms of leaving the brand and going to somewhere else, but also the profitability. That's A. I think also understand the product that you're working with. You know, I mentioned earlier that the products in the skincare line that I was involved with,
were all scientifically formulated. They were based on either microbiomes or nanoparticle technology or some faction of that. But they were all very specific to a very specific cause, a result. There was something we were trying to achieve. And by putting together a program that was based on some type of scientific formulation, it allowed us to achieve that.
And I think most importantly is really understanding the economics. Where do you want to play? What price points do you think are most respectful of the brand, but also based on value perception? Is it perceived to be a product or a service that somebody really wants? Certainly somebody needs, but somebody wants.
Aaron Alpeter (07:25)
I love that. I feel like a lot of founders will say, I know who my customer is or I understand this product well.
I think understanding something and actually understanding something are very, very different. if you were mentoring a founder today, how could they realistically tell if they've got something that is durable, they really do understand this product or this market, or if it's just something that might be working and they might have success right now, but doesn't really have that durability that you'd be looking for.
STEVEN J EDELSTEIN (07:37)
Please.
Hmm.
It's a great question and I'll tell you something. People ask this question to me all the time. What do I need to do or what should I do? That's important to build a product that people need and what I say to them every time is find that one thing that nobody else has built. Find that one product that nobody else is brought to market. I have a colleague of mine who's actually the CEO of a brand now.
who actually created one of the first powder formulated shampoos and conditioners. She found a niche. She found a product line that nobody had had. And she ran it right up the flagpole and exited and did very well. Why? Because she focused on something again that nobody else had. And I think it's important to do that. I don't care what industry you're in. Find that differentiator and for God's sakes,
Be a differentiator, be a disruptor. Understand that it's okay to be a little nutty. I mean, we can go down the list of all the brands that have been in market that have done things in the most unorthodox way who have been super successful. Two most notably, Dollar Shave Club started out as a YouTube joke and the one that we know in our industry more than any, Dr. Squatch. Amazing story.
Amazing story and I forgive me for saying this out loud. It's a it's a good product. it a great product? Maybe it is maybe it isn't but they're marketing their packaging and the fact that they found their audience is Absolutely brilliant. And that's why they sold for 1.5 billion dollars to Unilever prestige
Aaron Alpeter (09:40)
Yeah, so let's kind of go into that a little bit more, because when you're about doing something that nobody's done before, a lot of people think about the dry shampoo, powder shampoo example. It's like, all right, I've got to develop a product. But you just mentioned that Dr. Squatch didn't invent soap, right? They have a unicorner element. So what are those different parameters that you would look at that a founder should be saying, OK, I got kind of a commodity product here. Maybe I'm selling logistics. Maybe I'm selling soap, right? How do I think about?
STEVEN J EDELSTEIN (09:43)
Yeah, please.
No!
Aaron Alpeter (10:09)
actually having a point of differentiation versus doing something that you know you're going through the motions of differentiation.
STEVEN J EDELSTEIN (10:16)
100 great question again, and I say it very simply be subject matter focused You did let's take the 3PL example, and I say this all the time Don't be a generalist. I know a lot of companies want to be a generalist. They're afraid to say no They're afraid to tell that potential client no matter who it is. I can't take on your business Well, the best thing they can ever do for their business is to tell them no if it doesn't fit
the specialty that they're putting in market, stay true to that. And the same thing applies to product. Be true to your product. Be an expert in that category. Do everything you can from a marketing, from a content, from a messaging, from a product, all the way through the whole process. Be specific to your audience and build something that they need and they want.
rethink your process. Think about what you're doing. Take a step back. Look at your audience. Look at your business. Look at the 3PL business. I say this all the time and people hate me for saying it. They're all the same. Every one of them. They're all circa 1972. They have the same racks, the same floors, the same floor as Zamboni's.
The same forklifts. What's the differentiator? Technology and people. and by the way, automation. And maybe AI sprinkled in there a little bit right now. Probably sprinkled a lot later on. My point is, it's an academic industry. So what are you going to do to be different? It's how you approach the market. It's the customers that you work with. It's the people within your operation. Those are the differentiators. Those are the things you have control over.
So you might as well take advantage of that because everything else is pretty commonplace.
Aaron Alpeter (12:13)
Yeah, Stephen, can you talk to me a little bit about the feedback loop that a founder can go through? Because it feels that you can have a business, maybe it's even growing, maybe it's doing OK. And you may use that as a false positive that, I actually am differentiated. I actually have something that's going to be durable and worthwhile. And yet, the outcome or the revenue that you're saying,
STEVEN J EDELSTEIN (12:23)
Mm.
Aaron Alpeter (12:35)
is just that, it may be a flashback. So how do I, as a founder, how do I separate that and say, what is the feedback loop actually telling me? Is this the signal I'm looking for or am I just being lucky right now or I'm riding a rising wave for everybody?
STEVEN J EDELSTEIN (12:50)
Very cliche, talk to your customers. Talk to the people around you. Build focus groups, build committees, let people actively contribute to how you run a business. It doesn't have to be an ESOP, it doesn't have to be an employee-supported program. Take advantage of the people around you, inside and outside of your building. Outside of your building, the people that you interact with, your friends, your family, your colleagues, people you've worked with in the past.
Talk to them about what you're doing. Understand what you're trying to achieve and they will give you a much, much clearer line of sight than you possibly could ever have because you're so close to it that you don't have an opportunity to take, again, take that step back and really listen to who's actually contributing to the revenue that you're trying to achieve.
I want to understand from them what's working for them technologically. What is sufficient in terms of hours of operation and how we conduct our business, particularly in a logistics environment? Is my supply chain fluid? Am I complying with the different requirements that are made of my business relative to the products that I either represent on my own?
or are represented by the brands that I work with. ⁓ In simple language, follow your process, follow your procedures, ask those questions, and most importantly, don't have bias in how you approach the business. Be completely unbiased, and most importantly, open your ears, and forgive me for saying this, because I don't keep my mouth shut, ⁓ keep your mouth shut.
Aaron Alpeter (14:32)
Yeah, I love it.
STEVEN J EDELSTEIN (14:33)
Pretty simple. It's very
simple. It's really not that difficult.
Aaron Alpeter (14:36)
when you share like that yeah absolutely it does does seem pretty simple I think that you know the hardest part can is often
STEVEN J EDELSTEIN (14:40)
Yeah.
Aaron Alpeter (14:44)
doing what people know to be right and true and simple. What advice do have for people in terms of like, I'm scared to talk to my customer. if they realize that maybe this guy isn't as good, I should be looking elsewhere? Or they're just afraid of saying no to somebody because they need the revenue to fill the space or to fill the capacity. How do you help people overcome those challenges to actually put what you're saying into practice?
STEVEN J EDELSTEIN (14:57)
Mm.
Yeah, it's very difficult question because obviously, you know, they have a responsibility to their product and to their brand, and most importantly, to the revenue. ⁓ And when push comes to shove, you have to do what you have to do in order to keep the lights on, keep the people employed and all those good things. I think quietly, I think you have to listen to the cues of your business. Is there fluidity in what you're doing?
Are you following again those processes? Are you benchmarking what you're doing? In simple language, are you evaluating how things are taking place on a step-by-step basis? And most importantly, are you using the tools that are available to you, both inside and outside your business, to help you be better at what you do? And I'm not so sure, mean, most people are smart enough to understand that, but there are a lot of people that get caught up.
in what I call the maelstrom of the business and don't understand that they do have an opportunity to make change and they do have an opportunity to listen to their customers. And most importantly, to your point of earlier, they don't have to be afraid of their customers. Their customers are always going to work with them. Their customers want desperately to collaborate with them. They are not their, they're not your enemy. You know, they are your ally. No, I'm serious. And you should treat them as such.
You know, when we use the word partnership, and I gotta laugh about that because the word partnership has become so genericized, but in true form, that's really what you're asking for. You're asking for a partnership in a business that's gonna take outside information, you're gonna make it actionable for your business, you're gonna apply it in such a way that it might actually make you better in how you perform day in, day out, and most importantly, you may be able to enjoy some success.
with these brands and with these customers based on their feedback that otherwise you would never have heard or never seen at all in that journey whatsoever. I really do believe that you have to keep your eyes and ears open.
Aaron Alpeter (17:12)
you've gone from exit to exit. And a lot of founders will work their whole life and maybe get one, maybe two exits. You've got a couple more than that. I'd like to learn a little bit more about the thought process that goes into working toward an exit.
And how do you know when it's like the right time to sell? Are there any specific indications or, how do you understand if you've taken, if there's enough upside there for the acquirer to be interested, but not enough upside that you're like, hey, I'd be dumb to let it go right now.
STEVEN J EDELSTEIN (17:42)
I mean, there's a lot of reasons.
First of all, the usual pat answer is you look at your financials. Are you at a point financially that it is viable, not attractive, not desirable, but viable to sell the business? I personally always looked to any acquisition. First of all, anything I did was on a licensing basis to start anyway. So I call it the honeymoon period. You don't give up full ownership. You license the use of the brand.
In my particular case, my skincare line, you know, the different SKUs involved, and we test the waters, test the relationship. You know, are they treating the brand selfishly the way you wanted to treat the brand or how you did treat the brand? And then you make that transition to full ownership, but over a period of time. But most important, and I know the answer for your question is very simple, there's also got to be a cultural connection.
They have to understand the industry. They have to understand the product that they're getting involved with. It's not just looking at EBITDA. It's not looking at P &L all the time. Financials will tell only part of the story. What's really important is understanding the nature and again, that culture both inside and outside of the business to be able to make that acquisition not only profitable for all parties, but also comfortable for the people involved in the business. I can tell you that every single acquisition
we got involved with, there was a guaranteed transition of a 12-month period minimum where the people that were working within the brand initially were able to stay on board in order to, transition into the new environment, but also give them a little breathing room to be able to make some personal decisions as to whether they wanted to stay or whether they wanted to go. But they were never forced out is what I'm saying. So that's a big part.
The philosophical is important. The psychological is important. The cultural is important. And that assimilation of understanding the environment that they're about to get involved with from an acquisition perspective, to me, to me, was vital. Vital. I think most companies, particularly, and I say this respectfully, on the private equity venture capital institutional investor side, ⁓ they don't look at that. And they really should.
They really said, and that's when founders, a lot of founders will back out of a deal if they don't find the right acquisition partner to take over their quote unquote baby. And that's literally what it's like. It's like raising a child and sending them off to college, in my case. They've built a brand to a certain level and then they're ready for the next level. My own mind reason for the licensing, not to belabor the point, was
to be able to test the waters to make sure that that cultural relationship was firmly in place. And that was really important.
Aaron Alpeter (20:45)
You you hear a lot about earn-outs, but this is almost like an earn-in. And I guess when you talk to acquirers and look at that, how do they view that? Because it's not a standard structure.
STEVEN J EDELSTEIN (20:57)
No, it's not a standard structure. And it's pretty arrogant, actually, to be perfectly blunt. I mean, because you're saying to this investor, your money is not good enough.
I mean, that's as simple as it is. And the reality is the money is good enough because the whole idea was you want to exit. So it's a balancing act. And I'm not saying it's always clean and I'm not always and it's not always comfortable and comfortable, meaning the conversation is comfortable because one side is looking at something and the other side is looking at another. But finding that common ground, that's where the magic happens. And to your point,
If it's a financially motivated investment, purely financial, that's one personality. And as long as you're able to live with that as a curator, as a founder, as an owner, then fine. The acquisition, the deal goes through, everybody's happy. If you're not, well, the obvious takes place, you back
off.
Aaron Alpeter (22:04)
how often do those deals fall apart where, yeah, OK.
STEVEN J EDELSTEIN (22:06)
All the time All
the time surely do because it's either either the financials are right or there's there's information that's hidden Okay, I mean nobody wants to do a debt finance deal. I certainly never wanted to I certainly don't want to finance anybody's debt I want to be clean. I want to be solvent Okay, so the point point is as you go through that due diligence process You're going if you're smart enough and most people are and I say this respectfully
Most people that go through it understand the process and therefore they know what cues to look at and what predictors to look at. ⁓ In some cases you don't find that. That's why a deal will go bad. But again, it could be motivated by a lot of different things. And in some cases, you can get all the way to the end line, to the finish, and it could be as simple as a personality conflict.
And I've seen that a million times.
Aaron Alpeter (23:06)
Yeah, and so in these cases did the, like, I wanna understand this deal structure in a little bit more detail. So let's suppose, you know, you're gonna buy my company and we're gonna do this earn-in mentality. What does that look like? Do you write me a check to get started? Is it something where it's like, here, you get the keys to it and if you go above a certain point, there's a strike price. Like, how does that actually work if I wanted to structure an earn-in sort of deal?
STEVEN J EDELSTEIN (23:12)
Yeah, please.
Well, first of all, when you talk about a licensing deal, it's typically on a percentage basis. So ownership becomes X, historically 51%, the typical 51 % is maintained by the brand owner, by the company, by the structure, whatever that entity is, they maintain control of the business. It's done over a period of time, but there is a number that both parties agree
Aaron Alpeter (23:40)
Okay.
STEVEN J EDELSTEIN (24:04)
is that benchmark, is that achievable number at which time full acquisition takes place. So that's the trigger, if you will. ⁓ But it is a progressive way of doing business. And like I said, in my scenario, no, it's not typical of every type of acquisition, just to be clear. But in my scenario, I did not want to relinquish control of that brand, of that business.
until said time that I knew financially, operationally, structurally, everything was going to be handled in which hopefully the same way or close to the same way we as a group developed the program. So that's great. And then to your point, at that point, checks get written. And then the keys get handed over and you usually have a transition period, typically 12, 18, 24 months.
depending on how long they want you to hang around. Usually it's about 18 months on average, could be less, but generally that's about the time period and then you vacate. You move on. Yeah. So there's nothing magical about it. People can make it very complicated. I've seen it get very complicated and I don't really subscribe to that. I just don't think that's the right way to handle business. I'd rather have it clean and understand what the numbers represent right up front.
and know what those achievements need to be.
Aaron Alpeter (25:35)
We talked about this a little bit earlier about
just kind of how you've been able to time these exits and move along as it goes through. ⁓ Part of that is like the founder being ready and the founder recognizing that, you know, I'm ready to, I've taken this as far as I can and it's ready to go on to the next piece. And that's more of an inward looking capability piece. Do you subscribe to the idea that businesses have particular exit windows as well? That there is just, whether it be the market, whether it be the size of the business, whether it be the fact that they've expanded or
expanded into certain channels or geographies that there's just a season that is right for for exiting.
STEVEN J EDELSTEIN (26:16)
I don't know if there's a season.
I think there's certain predictors and I think there's certain cues that you take from the industry and from the business and the business environment that you live and breathe and derive your income from. ⁓ don't, from my perspective, ⁓ it was more about the suitor. It was more about the acquisition partner and how motivated they were. And like I said, a lot of it was going through the due diligence and the interview process to understand,
What do you want to do with this brand? What are your growth channels? What are your opportunities to build it out, to be diversified? Maybe in the healthcare space or in the health and beauty space, building out your portfolio, adding more products to your line, ⁓ getting diverse in your product line, moving into other categories. Those kinds of things, to me, are important to recognize and certain the conversations take place ⁓ as you start looking at what that exit to your point.
what that exit schedule looks like in terms of timing. I do not believe that there is ever a perfect time for an acquisition, but I think philosophically, you know, you know. I mean, you really do, you know, and it's not all money motivated either. That's what's most interesting. A lot of people say is there a magic number that you're looking to hit? Sure, economically, financially,
We all wanna achieve the biggest valuation we could ever have and we're always striving for that. But you also have to look at the longevity of what you're selling. How many years left or how many months left or how many decades left do you have for that brand or that business? And what is the, again, what does that growth strategy look like? So therefore there are a lot of variables that you really have to both tangible in terms of hard, ⁓ again,
indicators of where you're going and where that what that timing needs to look like and then there are intangibles that are more emotionally motivated.
100 %
Aaron Alpeter (28:23)
That
makes a lot of sense. think sometimes there are structural things that will push a brand to have to exit later. Like I'm thinking of a startup that raises $100 million. They raise at a high valuation. They're kind of locked in to an exit that is higher than whatever they raised money at or whatever the valuation was.
STEVEN J EDELSTEIN (28:42)
100%. 100%.
Aaron Alpeter (28:45)
I think that there's a lot of founders that may not necessarily understand that when they take on a particular valuation or particular investment level. Can you talk a little bit about any advice you have in terms of, when you are raising capital or you are looking at the lock in evaluation, how do you think through what doors that's opening, what doors it's closing based on what feels good right now?
STEVEN J EDELSTEIN (29:06)
That is the most beautiful question I've heard all day my friend
You have to look at the personality of the group that you're working with You know understand who are they? What do they do? How do they do it? Why do they do it? do they fit with what you're doing and then as far as
the financial motivation is concerned.
First of all, you gotta be smart about it. How much money do you really need? I have companies right now, even today, I say this out loud, that come to me, I've got four actually, right now, that I'm mentoring. And they're all raising money, every one of them.
They want to raise millions. Why do you need millions? Why do you need millions? You're a young brand. You're new. Start with money that you can manage. And most importantly, know what you're going to do with that money. I mean, the biggest mistake I think, the biggest mistake that most founders, most companies make, they take too much capital. Too much. What do you, mean, unless you allocate that money to a specific need.
or a build out or a growth or an extension or a change in your business or you're investing in technology or blah, blah, blah, blah, blah, it may be, there has to be a usage. There has to be a reason for you to want to take in that capital. And that's why the allocation is so important. You know, I'm probably one of the few people, maybe I'm not, maybe I shouldn't say that out loud. I'm a person that
whenever I wanted to attract investment dollars, I was very clear in what that usage would be, at least from that particular point in time. Now, of course, it does change. It does change. But my point in all of this is be smart about it. Don't over capitalize yourself. Do not get yourself into a black hole financially because it's like kids. It's like an old man when I say this, know, kids.
They get a bank, they get a credit card or they get a bank account, mostly credit cards. They think it's free money. You know, it's free money. a credit card. I go buy things. Oh, wait a minute. You mean I actually have to pay this back? I have to pay the credit card company? Well, the same thing with private equity. There are a lot of companies. There are a of founders that'll take money because they think that's the cool thing to do. And they take the money, they bring it in.
and they have no idea what to do with it, and they get more money, and they get more money, and they get more money, and they get more money, and then they're digging themselves out, and to your point, their valuation just goes up and up and up up and up in order to satisfy the payback schedule that you've just now locked yourself into. So my two cents is always be smart about what you're doing, understand that taking money from an outside interest is not free money, it's not...
Generally speaking because they love you It's because they're making a financial investment in your business they believe in the philosophy and the and the and the the direction of your company and They want to be your partner but understand it's a financially motivated investment and a financially motivated act that they are performing
Aaron Alpeter (32:29)
Yeah, I think people forget sometimes that investors are not donating money, they're buying.
STEVEN J EDELSTEIN (32:34)
100%.
Aaron Alpeter (32:36)
You know, it's, it's actually, as you were sharing that, was reflecting back on the last 10 or so years that I've had in the startup ecosystem and how founders make money has changed. And it used to be that most of their personal wealth would come from secondary sales. And so I was like, okay, I'm going to take as much money as I can. I'm going to push the valuation as high as I can, because if I can take a couple of million bucks off the table, that's awesome. Uh, because you know, if this thing sells like, whatever it's, it's fine, but I'm,
STEVEN J EDELSTEIN (32:52)
That's right.
Aaron Alpeter (33:06)
I'm selling this dream of a startup. And I think now with interest rates, with money coming out of the ecosystem, with the economy, with all of the tribulation that's been going on in the startup ecosystem, it's actually much, much healthier. Where the conversations I'm having with founders is now like, hey, I have to build something that's durable. I have to build something that is going to have free cashflow that can support me. And you know what, maybe I shouldn't be paying my head of supply chain ⁓
STEVEN J EDELSTEIN (33:08)
Mm-hmm.
No.
Aaron Alpeter (33:36)
$500,000 a year if I'm a $5 million business. You're starting to see these other things here where people are being a little bit more responsible and actually making the math math. And I think that's ultimately good for the ecosystem.
STEVEN J EDELSTEIN (33:48)
You're there.
I think it's brilliant. I think it's absolutely very healthy or absolutely 100%. No doubt about it because they're being responsible. They're being mature, you know, which I hate to say that out loud because I hope that most people would be mature, but they're unfortunately not. And most importantly, they're being respectful of their own business. Again, go back to the child, to the college student analogy. You put a lot of time and hard work and emotion
and need I say dollars into raising that child. Well, be respectful of that child. Make sure when you send it off to college to continue that analogy that they're well-educated, that they're well-dressed, that they know what they want to do, or at least within reason, and they know what their guiding principles are. Of course, 99 % of the people who go to college have no idea, but that's another story. But, you know, I'm just joking. But the point is that they need to have a direction.
And the same thing applies to any particular acquisition. same thing applies to any type of partnership. It same applies to any type of merger. Whatever the structure is, have a common, common bond. Have a focus, have a line of sight, have an understanding. Where do you wanna go? And I was gonna bring something up earlier. Make sure that you've got sustainability. That's the other thing. In today's investment environment,
I think people are looking at sustainability, longer term sustainability, more than they ever did.
Aaron Alpeter (35:27)
Yeah, and that's changing quite a lot right now with everything AI, with geopolitics, with new trade barriers being rewritten. So that can be kind of difficult to understand and say, it would have been good for the last 10 years, but what does the next 10 years look like?
STEVEN J EDELSTEIN (35:44)
Well, exactly. And I, you know, we could talk about all the variables regarding tariffs and, and of course the war and all the things that are disrupting the economics of this business. But at the end of the day, comes down to very simple math. Do you leverage your manufacturing in such a way that you reduce your cost of goods to a level where you have a multiple that you can absorb, absorb all of these unintended expenses that you otherwise would never have if we didn't have
the tariffs at the level we have. If we didn't have a war with Iran or any other country for that matter. My point is you have to think back to when they didn't exist and create a line of sight financially and more importantly from a business perspective, build your business with those things in sight versus worrying about all the other variables which are going to disrupt your business anyway.
Because if it's not tariffed, it's not a war, it's gonna be something else.
Aaron Alpeter (36:45)
That's interesting point. Stephen, I want to get your perspective on knowing when it's time to walk away. I think one of the things that I think is interesting in this new day and age of founders is that I've had more than a couple founders who have reached out or who have said, hey, this business is fine. It's profitable. It's kind of growing. But
I don't want to do it anymore. I've made the calculation in my head that I can make more money, I can have a better life if I get out of what I'm doing here and I go do something different. Can you walk me through?
STEVEN J EDELSTEIN (37:17)
100%.
Aaron Alpeter (37:19)
kind of how that logic needs to go through in someone's mind to say, hey, you've got something here that you could ride for a long time and it's doing fine, right? But you're ultimately saying no to a relatively stable if minor job, and maybe it's a lot of work anyways, to go do something that's unknown.
STEVEN J EDELSTEIN (37:35)
Yeah, no.
That's a great question. And I think it comes down to one simple thing, and that is your emotional investment. What do you have invested? Is this something that you really do love? Because if you love it, then you probably won't want to sell it. Because it's something you enjoy. It's something that's part of your life. It's part of your general ecosystem of life. But I think most people will either exit or will change.
or will transition or whatever the word is because they just got tired. They got tired. It's usually not financially motivated, although sometimes it is. I think most of the time it's that they just got to a point where in their mind and their body, not to get metaphysical or whatever the wording is, they got tired. They got tired, they lose interest. They're not motivated. They don't wanna be innovative. They don't wanna change anything.
They don't want to develop anything. They don't want to deal with people. They don't want to deal with anything administratively anymore. I know that. I ran a management consulting firm for a number of years. I loved every minute of it until I did not. And I'm very serious about that. And it literally was that simple. I ran it for a number of years. I think we ran Logical Step for six years, seven years, something like that. And I got to the point where rinse and repeat was not my thing.
And that's exactly, by the way, what a management consulting firm does. You know, one client after another client, another client, another client, and you just keep going. And it's okay. It's a great living. I'm not gonna lie to you. It's a great living. But eventually you get to that point where you say, you know what? I'm ready to move, move on to something else. And that, like I said, in long-winded way, that's, to me, that's the best advice I can give somebody. Don't look at the financials. Don't look at the operation.
Don't look at everything else, but the one thing you have to look at is inside your own head, am I motivated? Am I emotionally attached? Do I wanna do this? And if the answer is no, that's your direction. Very simple. And I know I'm probably oversimplifying it, but that, quite honestly, to me, that's everything. Right there.
No, it doesn't.
Aaron Alpeter (39:53)
It doesn't need to be that complicated either.
What is it about each of these experiences you've had that you always take with you in terms of, this is just my process. This is a repeatable thing that I'm gonna do no matter what I'm selling, whether it's a service or whether it's a product.
STEVEN J EDELSTEIN (40:10)
Okay, a lot of it has to do with personality. And when I say that, it's not about being a good person or being a bad person, being a funny person or being a subdued person. It has to do with what I call gumption. And it also has to do with speaking your truth and being true to yourself. And I think that in my world, my personality, the way I do things, ⁓
I respect everyone around me and I like to learn from other people, but I also know what my direction is and in every single situation I've been in. being a chef. Work my way up from the prep kitchen and the bowels of restaurants in New York City. Okay?
not the sexiest business, not the most interesting thing to do. You put in the hard work, you work away. My point in all this, whether it be the culinary world, whether it be the investment world, whether it be the product world, whether it be the logistics world, work hard, be smart, be true to yourself, focus, focus.
Most people don't focus. all of this combined to answer your question. ⁓ You're driving principle.
is being true to what you want to do. Having a focus, having a plan, having a process, following those things. You're gonna deviate a little bit, because we all do, ⁓ but get back to center. And that to me is probably more important than anything else. and really, ask those hard questions. Open your mouth. Speak to people. People will respond. Most people don't do that.
Aaron Alpeter (42:02)
been the the common thread or motivation for you as you've had all these different life experiences?
STEVEN J EDELSTEIN (42:11)
my own tenacity. I think it's my approach and how I do things. The perception is unique to each individual that is observing all of this. But for me, it's more about just keep moving forward, keep moving forward, keep driving, never take criticism as a personal affront.
and continue to be true to what your goals are. And I know that's lofty to say, because most people say, wow, I can never reach my goals. Like, maybe you can, maybe you can't. But what I'm really getting at is just understand who you are and what your capabilities are. And don't put more pressure on yourself than you need to. And most of us do. And unfortunately, I'm sometimes an offender as well. But most importantly, I think that common thread
is really understanding who you are. Who is this person? What am I doing? How am I doing it? And why am I doing it? And most importantly, the people around you understand that they're also people and they deserve respect. And I think that's also a big part of it. You know, I talk about the four pillars of partnership and I'll just throw this out there quickly. ⁓ I learned this a long time ago from a mentor and he said to me this. He said, first of all, mutuality is the key to success.
So work together for a common bond. Reputation is critical. Once you lose credibility, you've lost everything. And most importantly, trust is critical. And I've always subscribed to those four words and those principles because I think it's important that, again, we have mutuality, that we work together to build our reputation collectively, that we have credibility in what we do. For God's sakes, just be who are.
And most importantly, trust your judgment, trust your aspirations, and trust who you are as a person. And if you can do all those things, which are not easy at all whatsoever, try
Aaron Alpeter (44:23)
Yeah, it feels like that journey of self-realization is something that a lot of young people or founders, even older founders, maybe don't always have wrapped up. Was there any specific experiences or things that you did that helped you recognize that, you know what, maybe I was motivated by X, Y, Z because that's what the world told me to be focused on, but I actually realized that I really like one, two, three.
STEVEN J EDELSTEIN (44:51)
from a familial perspective, I'd have to credit my parents, both of which were incredibly successful practitioners in their own respective industries and were laser focused on what they were doing and how they were doing it, but very respectful of their family, meaning myself and my siblings. So I took a lot of cues from that. I also believe that
looking around the room in your environment, taking cues from the people that you interact with is very, very healthy. I just fundamentally build your personality based on the most positive attributes of the people and the things and the places that you're participating within, because those are always going to give you those guiding principles. I really do believe that. And I think a lot of it is motivated not by what you learn,
the learning is important. ⁓ And God knows I've been to enough education at this point, sincerely, to understand all that. But I think fundamentally what really separates what I'll call, and I don't use the word successful people because success is all relative. The people that find that way, find that path are generally people that have either been fortunate,
to be in environments like I talked about earlier from a familiar perspective and have those guiding principles and those cues and that example. Or they've had the complete opposite and didn't have all that but learned that their life and their journey and their path and their aspirations and the things they wanted to achieve in life had to be a lot better than that. So therefore, they're gonna change their perspective. So I really do believe that the fundamentals of what you're talking about are certainly
are easy to achieve. If you wanna learn, you'll learn. If you wanna explore, you'll explore. It takes a matter of ⁓ preference and motivation. Do all that. But philosophically, psychologically, better word, ⁓ being able to know that you have examples to lean on and examples that have given you that path, to me, that's the best thing you could ask for.
Aaron Alpeter (47:03)
you are a naturally curious person. You want to learn, you want to push yourself, if anything, just to prove to yourself. And all of these different experiences that you've had around starting different businesses, moving industries, selling things, mentoring, it's kind of been the way that you have expressed your curiosity, if to put words in your mouth. Would you agree with that assessment?
STEVEN J EDELSTEIN (47:08)
Mm.
100 % and curious to a fault, I might add, my friend, ⁓ because believe me, putting myself in situations that I needed to learn and explore, we're not sometimes the best places to be. But, I'll just say it out loud, people have fear. People have fear, most in my opinion.
Most people do not succeed in their own aspirations because they're afraid. They're afraid to do it. They're afraid to take the steps to do it. Or, God forbid, they're afraid of success. And believe it or not, there are a lot of people out there that are afraid of success for whatever reason. You can call it a self-fulfilling prophecy. Whatever the terminology is, they are. My attitude is yes, you are absolutely right, Aaron.
Curiosity is a big part of it. But it's also the fact that I have no fear. What am I to fear? Being serious. I have nothing to fear. You have to try. Always try something. If you fail, you fail. If you're successful, you're successful. And by the way, if you fail, you get yourself up, you try it again. And you keep moving forward. And you just keep doing that and doing that and doing that. And hopefully, hopefully,
It'll be contagious to the people around you. I've always believed, and I know it's somewhat cliche to say this, that surrounding yourself, if you're as I was, and have been, a founder, an owner, a leader, if you will, surrounding yourself with people that are more capable and smarter than you are, always the way to go. Always. Always, always, always. Because I don't care how smart you are, I don't care how well-educated you are, I don't care how culturally
deep and affected you are, you can learn something from anybody. Doesn't matter who it is. So yes, in business and in life, those principles apply. And yes, curiosity is a big.
Aaron Alpeter (49:37)
I it. Well, I know we're coming up on time here and I want to be respectful. probably have a million other companies you're mentoring and podcasts you're on and stuff like that. So we're grateful to have you here. We have ⁓ one question that we always like to ask our guests on build a business worth buying. And that is what is the best example of a moat you've seen another business build?
STEVEN J EDELSTEIN (49:48)
Thank you. appreciate it.
Yes.
I think the answer to that, at least from my business product background, would be leaning into the specific formulation of the product that was unique to not only the audience, but the effect that that product had on the
person that was using it. So for instance, one of my brands was a company called Specific Beauty. It was based on a dark spot corrector product. It became the best dark spot corrector product. It was invincible. Why was it invincible? Because it had to do with a chemical called, we did both an anon and an active hydroquinone.
type of environment. Now you probably don't even know that because I didn't even know it when I first started. ⁓ It's a highly, highly activated ingredient. Why was that a moat? Because that created the effect, the viability, and most importantly, ⁓ the success of the use of that product on the individual that obviously purchased it. And therefore, it created not only
you know, in today's terms, stickiness, but what it really created was it created a very strong relationship with the customer, the consumer, because eventually they needed to use it on a consistent basis. That's why it was the way it was and that's why it was indefensible.
Aaron Alpeter (51:46)
Awesome. Well, Stephen, thank you so much for joining and just all these nuggets. I'm going to listen to this episode a couple of times. If people want to get in contact with you, what's the best way for them to do that?
STEVEN J EDELSTEIN (51:53)
Thank you.
Sure, I mean, you can always go to LinkedIn. Stephen J Edelstein, sometimes you'll see me wearing a crown, sometimes you won't. I actually played an April Fool's joke recently on April 1st and I did a chat GPT of me with hair. Nobody saw it, of course, so it's kind of funny, but yeah, a little fun every once in a while. Yeah, go to LinkedIn. It's probably the best place.
Certainly can contact me, my email address is there, my phone number is there, so all of the above. And I welcome anybody. I really am an open book. I love to explore, love to learn from other people, and I'm more than happy to help in any way I can.