Welcome back to this week's rundown of the My Biggest Lessons podcast! Mike Fata, founder and CEO of Manitoba Harvest, joined our very own Chris Meade on the pod to chat about being a self-taught entrepreneur and the lessons he learned along the way. You can check out the full episode below! ⤵
From dropping out of high school at the age of 13, to eventually selling his business for $419 million, Mika Fata knows a thing or two about hard work.
The odds were against Mike in the beginning — growing up poor with a single mom, being an early high school dropout, having no care for his health or wellness. After hitting 300 lbs on the scale at the age of 18, Mike was sick and tired of being sick and tired. Mike set off on his wellness journey, learning about proper nutrition and exercise, and lost over 100 lbs. He found that all of the nutrition he needed to fuel his body could be found from one source: hemp.
With a newfound passion for health, $10,000 in savings, and two co-founders that were all-in, Mike brought the health benefits of hemp to the public with Manitoba Harvest. From Hemp Seed Oil to Hemp Hearts (and even Protein Powder!), Manitoba Harvest offers a wide range of consumable hemp products designed to transform your health simply and sustainably.
Mike saved a chunk of his earnings working in construction to start Manitoba Harvest, with no prior knowledge or experience of product development, logistics, or business in general. Being self-taught, he's learned a lot in the past 20+ years of building his immensely successful business.
You gotta rep the brand 😎
After over 20 years with Manitoba Harvest, Mike has taken his business expertise as founder and CEO to the advisor and investor side. As an investor, there's 1 key thing he looks for in every business: founder market fit.
While product market fit is obviously important, Mike emphasizes how crucial it is for a founder of a brand to have a background in the product they want to sell. For example, if the product is sports related and the founder is not at all athletic and doesn't know or care much about sports, they won't represent their own brand very well, and in turn, won't be as successful as someone who’s passionate about sports and athleticism.
Following the rules 📋
Looking back at some of the mistakes and lessons learned in the past couple decades, one important piece of advice comes to mind for Mike: don't f*** with the government.
Following government regulations is super important, especially in the world of food and supplements. With Manitoba Harvest, there were a number of instances where they were fighting with the DEA and FDA because of their hemp products. This caught them up in customs, shipping, and regulatory issues, which cost the company millions and almost killed their business on multiple occasions.
It takes a loooong time to get out from under the microscope once you're there, so cutting corners is not worth the risk of losing millions of dollars or even your entire business.
Building your business 🛠️
We've said it before, but taking things slow is super important to ensure your business will be successful in the long term. As an advisor and investor, Mike's advice when building your brand is to really think about your endgame and take your time building out your board and cap table.
The best way Mike has found to build your business, if you have the ability, is:
- Bootstrap your business to $1M in sales
- From $1M to $5M, use friends & family and angel investors to scale
- At $5M+, you can start to build out your board and explore venture capital
Alongside investor-extraordinaire Greg Fleishman, Mike has put together a toolbox for aspiring entrepreneurs with an abundance of worksheets and resources that'll help guide your new start-up to success. If you're interested, you can check it out here!
Profitability is key 🔑
Nowadays, businesses are doing everything they can to scale their profitability as quickly as possible. When advising brands and looking through the profitability lens, Mike tells founders to focus on their margin structure and to aim for a true 50% gross margin.
Reaching that true 50% gross margin means the perfect mix of promotional discounts, cost of goods, labor, materials, and overhead costs. If your business is able to reach this milestone, you'll have the freedom to turn on the tap and spend for sales, marketing, and bottom end things to generate even more profit. With a margin structure like this, scaling your business from $5M to $50+M is less daunting and more realistic.
Keep it formal 👑
Are you looking to sell your business? Mike's got one piece of advice for you: stick to the formal process and get yourself an investment banker to take lead.
Interview a few different banks and let them show you through presentations and conversations how they would approach the process of selling your business and how they view your brand. Finding the right fit is crucial, as once you've hired them on, they'll take the lead on the entire sale process from start to finish. Having them on your team for this process is immensely helpful, as they're able to walk you through every step and find you the best possible deal.
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