Managing Business Growth

Michael Krigsman: I'm Michael Krigsman. I'm an industry analyst and the host of CxOTalk. I'm here speaking with Bart Thielen, who is the chief financial officer and the chief operating officer of Blue Microphones. Hey, Bart. Thanks for spending time with us today.

Bart Thielen: Thanks, Michael, for having me. I appreciate it.

Michael Krigsman: Bart, tell us about Blue Microphones.

Bart Thielen: Blue Microphones, as the name implies, we are a manufacturer and distributor of microphones, both pro as well as the consumer side, and we also produce headphones. We're a fast-growing company. Last year we grew over 20%.

Michael Krigsman: I have to say that Blue Microphones is the official microphone of CxOTalk. In fact, every guest that's on the show, we recommend that they get a Blue Yeti.

Bart Thielen: Thank you so much. I appreciate the endorsement.

Michael Krigsman: You are both CFO and COO. Please, tell us about that.

Bart Thielen: My CFO role is traditional, working with the budgets, the cash flow, forecasting, [and] all of the financial side of it, but I also have the operational side, and that is, I'm responsible to make sure we're getting product manufactured and distributed and into the distribution all over the world.

Michael Krigsman: Now, Blue has been growing very rapidly. Please share with us the business strategy that has enabled this growth.

Bart Thielen: I would say maybe it's almost like a three-prong approach to this. One, early on, we've put a lot of focus on distribution and growth here in the United States. Then, we really started to open up the international markets, particularly going into Canada and then into Europe. Then, most recently, we're really putting a big push into Asia and into Australia. It's definitely a worldwide approach to it. Then, what sits over top of this is we really have put a lot of focus on developing new product in the consumer space and pro space for the worldwide distribution.

Michael Krigsman: You have product innovation, combined with competitive pricing, and then that very intense focus on distribution.

Bart Thielen: Yeah, absolutely. The international has been pretty significant for us, and there are a couple of things that have happened because of that. One, obviously, we've really gone through distribution and into Europe in a fairly big way, starting probably about three or four years ago. We were actually shipping a lot of the product into Europe from the U.S., and so, what we ended up doing was then opening a third-party logistics facility in Amsterdam and actually stocking our product in Amsterdam.

As you know, in the retail space, and when you're dealing with retailers, they typically will give you orders somewhere probably 30 days in advance, maybe 45 days. That's not enough time to do it well and get the product out of the United States. Really, to be able to grow that market and be able to open that up, we had to have product there within days of where our customer was.

Amsterdam was kind of the perfect location for us. It actually services all of Europe, the Middle East, and into Russia. We typically can get product anywhere in Europe within one to two days.

We've done a very similar thing. We've got a 3PL [third-party logistics facility] in Hong Kong now that actually services all of Asia, so it's going back into China. It's going into Japan, South Korea, into India, and then also that services Australia as well.

Michael Krigsman: I suppose this is where your dual role of chief operating officer, combined with chief financial officer, means that you can focus on the systems, the processes, [and] the tools needed to manage this growth.

Bart Thielen: Absolutely. In fact, from an operational standpoint, it's really working with my team to really put kind of a financial perspective on it. If you're shipping a lot from the U.S., you're dealing with freight costs. You're dealing with going into Europe for that and being able to manage that. Whereas, now, we actually put that physical location there. From an operational standpoint, it makes not only good sense from an operational to support growing sales, but also just from a financial standpoint; we actually can distribute it at a lower cost.

Michael Krigsman: As you're growing, how do you pull together processes, tools? How do you think about managing the business that way?

Bart Thielen: Growing a company is a bit of a different animal. You've obviously got to pay attention to today and the very short term. But, at the same time, you've got to be looking longer-term as well. What I mean by that is, as you're looking maybe a year, two years down the road, when you're thinking about increasing your size by 30%, 50%, maybe even doubling, you always need to be looking at the systems that you currently have, will it support a higher growth, and being able to take steps ahead of time before you get into the situation. Otherwise, it becomes too late. Then, when you're in that situation, it actually becomes very painful to try to get out of.

Michael Krigsman: How do you look forward? What kind of tools do you use to manage? What kind of processes have you put into place?

Bart Thielen: We looked at our overall central system, specifically our ERP system that tied into the GL system. Again, there's kind of the operation and the financial side of it coming together.

What we ended up doing was looking at nine different systems, narrowed it down to six, narrowed it down to three. The system we ended up picking was NetSuite. In hindsight, it was the absolute right decision. The reason being is the vision back four years ago was being able to get all of our systems onto one database.

As we looked at NetSuite, we looked at other systems. NetSuite was a cloud-based system. The key there was being able to have the flexibility and also go with a company that was continuing to be kind of a forward-thinker.

As we believe we're a technology company and always forward-thinking, we wanted to align with a company that had very similar views to us. We ended up selecting NetSuite [and] brought on an ERP. We did the GL system, fixed assets, and then we started to bring in Arena, which was then a tie-in from the engineering side. Then we looked over on the marketing side. Then we, just recently, brought on e-commerce, so it's our own Web store. That's a NetSuite product.

Then, we're actually in the midst of going live, probably in the next two weeks, with the NetSuite system called Bronto. When we do that, we have literally taken about seven or eight databases, and we've moved it down to one.

Now, the CFO side of me says that's always what you want to be able to do. You drive efficiency. If I can put everything into one system, mining the data, getting at that is so much easier, and also just being able to manage it. Being a cloud-based system, we don't have a staff internally managing it. We rely on NetSuite to do that.

Now, we're down to where we can just basically take that data, and it's integrated. If we have a customer that calls in, they can actually have an account, and everything is tracked, so then if they're buying a product or registering it, if they're sending it in for service, et cetera. We literally, by doing this, have been able to drive efficiencies.

I've got my 3PL [third-party logistics facility] in Amsterdam and also in Hong Kong using NetSuite, so they're using the portal. They're pulling tickets. They're fulfilling and then, ultimately, finalizing the transaction. This is all through being a cloud-based system. Because of this, it's allowed us, I think, as a great backbone to be able to continue to not only support the growth but then continuing on.

The other requirement, as we were looking at systems, we don't want to change this out in five years. Any CFO knows a conversion is a very painful process. It actually can be very risky, too, to an organization. Our goal was really to get kind of the one and done.

Michael Krigsman: Right.

Bart Thielen: There are companies out there that have NetSuite that are $1 billion companies, so we can stay on the system for a very long time.

Michael Krigsman: Now, as the CFO, how do you balance this innate desire for efficiency against the need to innovate because, at the end of the day, the core of your sales rests on the innovation rather than the efficiency of the processes?

Bart Thielen: Absolutely, and that's kind of that right brain, left brain, right? Part of this is, I tend to think of myself as being somewhat of a creative person. But, if you look at our product, we've got amazing talent here. We do all of our own ID in-house. We've got an engineering team. We've got a product management team here, a marketing team. They all work together. They're just an amazing group of individuals that come together that think about new products. We think about names of products. We think about the utilization of the product.

From the CFO side of me, that's the key to the growth of the future. We've got to be able to spend. We've got to be able to innovate because, if we don't do that, then potentially we're going to cap our growth somewhere down the road. To me, innovation and creativity is key to Blue and what we're doing.

Michael Krigsman: Efficiency of the business is what enables the company. It's the platform, in a way, that enables the company to have the funds and the freedom to innovate the way that you're describing.

Bart Thielen: Coming back to the financial side, you've got to have good earnings, right? That's EBITDA. If we can continue to drive topline, but then drive EBITDA even higher, it actually creates opportunity for us as a whole. More dollars can be plowed back into R&D, or more dollars can be plowed back into marketing.

We think about that, proactively, every year, as we're sitting down doing budgets. There is a pretty intense process where we've got the senior management team all involved, all talking about it, coordinating, working together as to what we need to do for next year. Then, at the same time, we're also looking two and three years out because, as you know when you're developing product, it's a multiyear process to be able to ultimately start something and ultimately get it in the marketplace.

We always have to have that process in place. We need to be efficient about it. And, at the end of the day, we want to develop an amazing product that sells in the marketplace that our customers want.

Michael Krigsman: Okay. Bart Thielen, CFO and COO of Blue Microphones, thanks so much.

Bart Thielen: Thank you.