SANTA MONICA, United States — After launching and selling two successful businesses and experiencing the lows and lessons of one great failure, serial entrepreneur Blake Mycoskie founded Toms, the company that would become his “business soulmate.” Unlike Mycoskie’s previous ventures — EZ Laundry, outdoor advertising company Mycoskie Media and failed reality television channel Reality Central — Toms is a philanthropic retailer, born from a social mission: outfit needy children with shoes.
Best known for its simple cloth slippers and instantly graspable giving model, “One for One” — for every pair of shoes it sells, Toms gives a pair to a needy child — the company has attracted over 2 million followers on social media, now generates estimated revenues of over $250 million and, last month, hit a major milestone: since launch, in 2006, Toms has donated over 10 million pairs of shoes. The company has also expanded into eyewear with a similar social promise — donating eye care for one person, in the form of prescription glasses or medical treatment, for each pair of glasses sold — and plans to expand into up to five product categories, all under the Toms umbrella.
BoF spoke to Blake Mycoskie about the genesis of Toms, the business of being a social entrepreneur, the fire in his belly and why he’ll never sell the company.
BoF: I want to rewind back to the very beginning. What were you doing before founding Toms?
BM: I started my first company when I was 19 years old. It was a laundry business. I dropped out of college and did laundry for students all over the country: Texas, Nashville, Oklahoma. And then I sold the company when I was 20 years old and got interested in outdoor advertising. In Nashville, where I was living at the time, there were all these country music stars with big egos and they want to see their face on the sides of the building, so I decided to capitalise on that.
BoF: What happened next?
BM: My sister and I got cast for the television show “The Amazing Race” and we raced around the world for 31 days. We lost $1 million by four minutes, which was really heartbreaking. But it was also really interesting. This was the beginning of reality TV and we really did have 15 minutes of fame. All of a sudden we were on [the] Jay Leno and Rosie O’Donnell [talk shows] and getting invited to all these movie premieres.
Long story short, I wanted to start an all reality television channel. So, I sold my outdoor advertising company to ClearChannel, a big media conglomerate in the US, and moved to LA with the dream of starting a television network kind of like Ted Turner. We got some big players on board, but ultimately it was a very public failure and people lost a lot of money, including myself, and I had to let a lot of people go. That was kind of the lowest point in my career.
BoF: Before we move on to Toms, can you highlight the biggest lesson you learned from the failure of the reality channel?
BM: The biggest lesson I learned was that you have to be really careful, no matter how good your idea is and the response you’re getting from the end consumer. So, for example, everyone I talked to loved reality TV and loved the idea of having a channel where they could watch it all the time. But your real customer, when you run a cable network, are the big media companies. We didn’t learn enough about what their needs were — and their needs were not another channel for which they had to pay fees. They already had over 400 channels! So the biggest lesson of all was, if you’re in an industry that’s controlled by a few main players, you’ve got to make sure that you’re satisfying a real need for them and that’s not what we were doing.
The great thing about launching a footwear company like Toms is there aren’t that many barriers to entry, because there are thousands and thousands of clothing stores that sell shoes. So I don’t need to get the big dogs like Nordstrom or House of Fraser or Selfridges right away. I can get cool little boutiques and then, later, the big guys will come. So one of the things I learned was, I didn’t ever want to be in a business again where my whole fate was in the hands of a few companies that were very hard to penetrate.
BoF: So tell us about the genesis of Toms.
BM: Every year after I started my first company and was working crazy hours, I always tried, no matter what, to take off the month of January, which really helped to give me the energy and clarity I needed to do whatever I was doing. So that year, I took my month off in Argentina, where I met some women in a café who told me about the volunteer work they were doing, collecting lightly used shoes to give to kids who didn’t have them. I had never really done any kind of charity work like that before and I couldn’t believe that kids needed shoes to go to school and didn’t have them, because that seemed like such an easy thing to provide. So I went with these women to this village and saw kids and families who were so excited to get these shoes — and they weren’t even new shoes! They were used shoes. And it just hit me right in the heart. This was what I wanted to be doing. I mean business is great. Making money’s fun, but making people have tears of joy? That’s what life’s about.
Immediately, I thought I could start a charity, but I hate asking people for money. And later that night, brainstorming with myself, it hit me. I knew this group who do a cool shoe I’d been seeing everyone wear in Argentina called the alpargata and it’s not made very well and not very durable, but I was sure we could make some changes to that shoe and make it more appropriate for the US market — and every time we sold a pair, we’d give a pair away.
It was the birth of the “One for One” model. But it wasn’t like, “Oh this is going to be the greatest tag line in the world” or “This is the best way to connect with customers.” The easiest way to keep track of everything was simply: you sell a pair, you give a pair. It just seemed really simple.
My initial goal was to help 250 kids in one village and try to sell those shoes before Christmas, so I could come back to Argentina and give these kids shoes and have a fun vacation — that’s kinda how it started.
BoF: So you initially toyed with the idea of pure philanthropy, but at the end of the day, it came down to business. Do you describe yourself as an entrepreneur? Or a philanthropic entrepreneur?
BM: I like the term “social entrepreneur.” I love starting businesses. I love making things. I think making money is good. But at the same time, I love seeing lives change. So I’d call myself a social entrepreneur, but it all stems from my entrepreneurial passion and that’s something I’ve been doing since I was 19.
BoF: Let’s talk about the actual business model. How do you ensure accountability and transparency around the “One for One” model? How do you communicate that to the customer? And how do you finance the cash flow requirements of creating that second pair of shoes?
BM: We communicate to our customer in stages. At the very simplest level, it’s our tagline: for every pair of Toms purchased, we give a new pair of shoes to a child in need; one for one. But if someone wants to know more, our website provides a detailed explanation.
How we give is actually a lot more complex than people realise because we use giving partners. We have over 100 giving partners in 56 countries that not only help distribute the shoes, but make sure that the shoes are integrated into whatever programs are really important in those communities.
In terms of accountability, we receive audit reports showing that the shoes have been distributed. We also have a team of people that travel the world and do unannounced audits to make sure that those reports are accurate. The other thing we do is take customers and journalists on giving trips and those stories are distributed online and through social media and that helps people see it’s not just Toms telling stories about what we do, but other people.
BoF: How do you account for the additional cost to the business of creating that second pair of shoes? How does it work from a profitability perspective?
BM: The first thing I will say is that footwear and eyewear, the two categories we’re in right now, are two of the highest margin businesses in the fashion industry. We don’t have to fabricate an extra margin, because there’s already a very healthy margin on these products that the market allows.
The second thing is: most fashion companies spend a huge part of their sales margin on advertising. The millions and millions and millions of dollars our competitors spend on attracting and connecting with their customers is something Toms simply doesn’t spend. Instead we’re spending that money on giving. And because we are spending on giving and we’re including our customers in that story and because of the Internet, we can share that story easily and generate interest via social media, so we simply don't have that [marketing] expense.
BoF: That’s really smart. Can you talk a little bit about how you’ve built your social media following and how you’ve harnessed that following to evangelise and grow the business?
BM: My team is amazing, so I have to give them credit. I hired a bunch of really young, super savvy interns who have now become executives at Toms and who just live and breathe social media. We didn’t pay to build the following. It was all organic and it was really connecting one person at a time. I know that sounds kind of crazy, as we have millions of fans and followers, but it was a lot of retweets and direct messages. Our community could be 20 million people on Facebook, if we employed the tactics that a lot of companies do — add mass followers, bribe them with raffles, contests and gifts. But instead, we purposefully kept our community kind of small, around two million, because that allows us to have a more intimate connection.
BoF: Are you able to track how that social following has driven sales?
BM: It changes at times, but I’d say up to 35 percent of our online sales come directly from our social media channels. Now that percentage is coming down, however, because we are doing online advertising, which we haven’t done before, but there’s a high return on investment and it just makes sense.
BoF: Looking into the future, is this a company you plan to continue to own and operate privately? Or is this a business that, one day, you will sell, like some of your other businesses?
BM: I’m very clear on this. It’s a conscious decision I made about two years ago. We were getting so many people offering us tons and tons of money and I kind of looked around in my life and I was like, “Man, I’ve had way more financial success than I ever imagined. I have a group of people at Toms who I call my family. I get to be creative and I get to be entrepreneurial. I mean this is what I call my business soulmate; my long-term, forever, no-sale-of-company plan. And I believe that’s also really critical in terms of staying true to our values and vision.
I hope that someday, Lord willing, if I have kids, maybe they’ll want to be involved, but if they’re not, at some point, I’ll bow out and find another person that has the same fire in his belly that I did six years ago to take the reins. But Toms isn’t a company, it’s a movement. And you don’t sell a movement.
BoF: You just said “fire in my belly” and I’m wondering. You’ve had a couple of successful businesses that you have started and sold. You had this amazing 15 minutes of fame. You had the one great failure that many entrepreneurs have. And now, you have this incredible success with Toms. You have everything an entrepreneur could want. What keeps you going?
BM: I actually kind of lost that fire for about a year and a half and I asked myself that same question and didn’t have an answer. Everything was going great and I had a great leadership team and I realised that if I went on a surf trip for two weeks, the business continued to plod on and I really kind of lost some of my fire. And then, last month, I made a conscious decision to come back to the day-to-day of the business again. I realised that I’m happiest when I’m rolling up my sleeves. It’s hard to explain, but if you’re built a certain way, and I think certain entrepreneurs are, you’re only going to be happy if you’re creating and you’re working crazy hours and all that stuff.
So to answer your question, what keeps me going now is that I really believe, after taking a little time off, that we’re just at the beginning of what we can do and I think we have bigger battles to fight and mountains to climb. And because of the success, and the financial security, I can take some big risks. I can do some crazy stuff that I never could have done before and maybe we can be as disruptive as we were in 2006, when I first told people we were going to give away a pair of shoes every time we sold one.
BoF: Last question. What advice would you give to someone who wants to start their own business today?
BM: I think if you’re passionate about something, don’t worry about the size of the market or how big it could become. Get it right in a small way first. When we started, I was trying to help 250 kids. I wasn’t thinking about 10 million kids. We did it right for those first 250 kids. Then we did it right for the next 1,000. And then 10,000. So it grew organically and became really solid. But what a lot of entrepreneurs do is create these business plans and raise money they really don’t need because they want to get big fast, which is one of the biggest mistakes you can make.
The main thing is whatever you’re going to do, do it really well and do it small and if you’re successful there, business will come. So that’s my big piece of advice: start small, focus, get it right and then let the growth come.
This interview has been edited and condensed.
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