Ten Questions for Ten Years of Threadless : An Interview with Thomas V. Ryan, CEO of Threadless/skinnyCorp

As part of our ongoing Perspectives Interviews initiative here at Killswitch, we interview everyone from creatives to CEO's in hopes of taking the pulse in the creative business community.

Our latest interview is with Thomas V. Ryan, CEO at Threadless/skinnyCorp, a company that creates online communities and pioneered "crowdsourcing" through their popular art community and e-commerce site, Threadless. Thomas also currently serves on the Board of Directors for Smule, and in the past, has worked at the executive level for Virgin Mobile, EMI Music, and eMusic. Thomas' first company, Cductive, which he founded in 1996 was a pioneering digital music retailer which was among the first to sell mp3 downloads and custom CD compilations. Thomas was kind enough to take some time out of his busy schedule to sit down and answer some questions I had. I asked questions that I thought could benefit a wide range of readers, and I also asked a few on topics that, as a small business owner, I struggle with as well.

Some of these were not easy questions to answer and will shed some light on the real challenges and triumphs of the Threadless brand over the years. This is definitely an organization that should be used as a model of excellent leadership, awesome employee morale and commitment, as well as a brand that achieves great results.

www.threadless.com
www.skinnycorp.com

As the CEO of Threadless/skinnyCorp since 2008, can you reflect back on what this 10 year anniversary means to you and your company?

This year is a huge milestone for our company. Our founder Jake Nickell started Threadless in his apartment in 2000 after winning a one-off t-shirt design contest on the now defunct online designer forum Dreamless. Over the years since then, and thanks to the support of our awesome community, Threadless has become not just a successful business but an important influence in the visual artist, Internet, and business worlds. For example: a Threadless win has become a respected piece in an artist's work portfolio; Threadless has become a posterchild for the web trend Jeff Howe of Wired calls "crowdsourcing"; and universities like MIT and Harvard teach courses based on learnings from Threadless. Having only been here for two of those ten years, I can't take much credit. In fact, when I started here, Inc. Magazine ran a cover story calling Threadless "the most innovative small company in America." I thought to myself "how am I going to help us top this?"

During this tenth anniversary year, we want to celebrate the accomplishments of our community and our company, but we also want to look forward to the next decade of Threadless. To celebrate, we're reprinting popular designs from all ten years, doing a lot of exciting events, releasing a book, and much more. We're also working hard on new initiatives that will drive Threadless forward. We're focusing heavily on international expansion and we're pursuing new opportunities for our artists, such as offering new products (like the iPhone cases we've done with Griffin and the premium tees we've done with Gilt Groupe). We'll have a lot more to announce soon.

As you know there are a lot of people out there that make t-shirts. It seems like the vehicle that has allowed the company to grow, has been the classic t-shirt, but upon further discussion, the design is the real product that Threadless sells to customers. Designers are rewarded by having their designs featured and also get a cut of good ole' hard cash. From your point of view though, what is it about the Threadless concept that set your company apart when it started, and more recently what has been done to make the company successful long term?

It's true that t-shirts are an ideal product for many reasons and that customers come to Threadless first and foremost for the designs. However, lots of companies sell well designed t-shirts. What has always set Threadless apart is the community. From the early days through today, our community members have always been very supportive of one another. Real relationships are formed on Threadless and lots of members are actually friends with one another. Having an authentic community with these types of bonds isn't something that can be forced on people or rushed, so I think it's no surprise that it's been a decade in the making.

As a business owner in the creative space, I find one of the biggest challenges is working within the scope of a client's expectations for a project. In your industry, how do you manage the expectations of both your customers and your content providers, i.e. the designers?

There's a few key things we do that stand out in my opinion.

First, we always try to surprise and delight the community. Another way of saying this, and this is our mission statement, is to "inspire awesomeness." We're always trying to come up with ideas and projects that will inspire awesomeness in each other, in our community, and in the world. Examples are charitable campaigns like our Tee for Haiti which raised over $100K for Red Cross relief efforts in Haiti; partnerships like the ones we've done with RISD; and design challenges with prestigious museums like The Tate Modern or New Museum. These things capture the imagination of artists and customers alike.

Second, we listen to our community and we make decisions and changes to our business based on the things they tell us. An example is our retail strategy. We were getting approached by brick and mortar retailers of all shapes and sizes who wanted to distribute our tees in their stores. Some were really big and we had internal debates as to whether or not we should be selling our tees through them. Ultimately, we felt that the community would be best able to guide us, so we asked them what they thought and got great, immediate feedback from them. That's been informing our retail plans since.

Third, we are always trying to make Threadless valuable to the community. An example is offering a new product that artists can design and that customers will want to buy. Sometimes these decisions can be difficult, since the interests of artists and customers are not always aligned. However, we're making progress and so far the reaction to our new products has been great on both sides.

Last, but not least, we're authentic. We speak openly, we inject our personalities into how we speak to our community, and we try to have fun wherever possible.

It's been a challenging year for the majority of creative businesses. Whether you are a large agency or a small shop like Killswitch, I know no one likes to talk about this subject, but has the recession impacted Threadless? If so, how? And what are you doing to keep morale up and the t-shirts leaving the loading dock?

It's certainly been a challenging time for creative businesses. Fortunately, we have been growing rapidly through the turmoil, but it hasn't been for lack of effort! When I joined, we decided that we should focus on our core business of Threadless and related ventures instead of launching new projects or concentrating on some of the other businesses SkinnyCorp had launched in the past. Since then, we've gotten even more disciplined, and Threadless is our primary focus. It's tough to balance the desire to launch new creative ventures with focusing on the core business, but over the past couple of years we have channeled our creativity into making Threadless better and that focus has paid off.

Threadless has opened 2 retail locations in the last 2 years. Can you talk a little bit about why Threadless decided to enter the retail space? There has been both praise and criticism for this move, and I'd be interested in your thoughts.

The first retail store, located in the Lakeview section of Chicago, was intended to extend the Threadless community and business into the real world. It's a physical manifestation of the online community - we only have two weeks worth of releases at any one time (like the homepage of our website); we invite visitors to take a picture of themselves so their face appears on the TV which sits atop the shoulders of the mannequins in the shop (mirroring our community-approach to product models on the website); and we reserve a large amount of the space as an art gallery (just as Threadless is largely about showing off art, rather than solely selling products). The second store, in the Wicker Park section of Chicago, was started as a Threadless Kids store, but now serves both kids and adults. We feel the stores are a great extension of our online business, excellent marketing vehicles, and allow people to step inside Threadless in a physical way. We don't see a brick and mortar retail rollout as the best or fastest way to grow the business, but the stores made sense for us to open here in Chicago.

As the CEO and with the help of other advisors, you make a lot of critical decisions for the organization. If you could do one thing over again as the CEO, in any of the sectors you work in on a regular basis (i.e. Management, Thought Leadership, Employee Communication, etc) what would it be and how would it affect the Threadless/skinnyCorp brand?

I haven't been active enough in the community. I'm certainly a part of it: I score designs, submit slogans to Type Tees, I read and comment in the blogs, and I attend our meet ups and events. However, I need to become more active. Most Threadless employees are so active in our community that I defer to them and take a less prominent role than I should. Given how critical the community is to our business, I should stop lurking and get out there more! In doing so, I would get to know our community even better, hear all of their great ideas or criticisms directly, and be better able to help make Threadless even better. I'm not an artist, but maybe to feed my masochistic side I'll even submit my first design under a pseudonym!

There are a lot of tips for designers that want to submit for Threadless on the site and elsewhere. What would be your best advice be to a new designer out there looking to submit a design and win a challenge on the site?

Spend time on the site, see what's working, and go for it. You can only benefit from submitting, even if you don't win, so once you feel your design is worthy, go ahead and submit. Lots of community members give valuable feedback and try to help new members improve their art and improve their chances of winning.

As a business model that clearly has a deep footing within the design community, both from a content as well as customer standpoint, what can companies, including skinnyCorp, do to support art and design in their communities, beyond the monetary rewards offered to designers of Threadless merchandise?

Money is certainly a part of it, but there is certainly more. Artists submitting to Threadless today already get a good amount of constructive feedback on their designs. Those who win a design challenge also make progress in their careers by creating a valuable portfolio piece and gaining notoriety. Additionally, we are expanding the number of products we sell and the places in which we sell them, so that our artists have more and more opportunities to sell their work. Aside from that, we are actively trying to do more for the arts. We introduced a program called Threadless 101 that aims to bring Threadless to schools, and we are working on a charitable strategy for the arts. We'll have more to share on that soon!

I read on your blog you are in the process of making a 10th Anniversary book. Can you tell us a little about it? I'm sure the readers are giddy with excitement on this one!

Sure. This is an exciting project Jake has been spearheading. It's a retrospective of the past ten years of Threadless. The art, the artists, and the community that makes us who we are. It showcases the 400 best designs that we've printed over the years and also includes "think pieces" about Threadless by luminaries like John Maeda, Jeff Howe of Wired, and Seth Godin.

And finally, now that you are in the midst of celebrating your 10 year anniversary, after Threadless, which of the skinnyCorp brands do you see the most potential for growth over the next 10 years and why?

Threadless. Community-driven design is a universally appealing proposition - to the artists who submit, to the members who score, blog and give feedback on designs, to the customers who want to buy an awesome design with a unique story and real person behind it. As we continue to grow Threadless by growing internationally, adding new community-design products, and distributing our products more broadly, we hope to increase our impact on the arts and the world.

How do you scale your business, from 2 to 20 and beyond? A creative company's approach: Part 2

For those of you who have not read my first article on this topic, please do so before reading Part 2. It sets the tone for some specifics I am going to talk about in this next article.

So now that we have our groundwork in place--the right thought leadership, positive revenue growth, the right clients, and a reason to expand--we can begin to scale up. It is important to note that the topics below are not in any specific order of execution.

1. Hiring Strategy: It's not as easy as just hiring a designer or support staff at your company. You must weigh each decision to hire a new team member with equal importance to your company. Let's say your goal is to be big enough to support 20 staff members. Each member will play a role in the success of your business, whether they answer the phones and cut payroll or manage a project.

You must, even early on, develop a hiring strategy that you and the other leaders at the company can agree on. How do you interview? What questions do you ask? What type of potential team member is the right fit for your vision? And will you base decisions on past performance and references, or will you base them on your gut instinct and what potential you think the person might have? Perhaps it is a little bit of both. Whatever the need is for hiring, having a strategy in place first will save you and your potential staff members a lot of headaches and will ensure interviews are focused to complement a streamlined process.

2. Firm Capabilities: Once you're established and ready to grow, you must revisit the capabilities you offer to your clients. As a creative shop starts out, it usually takes on a lot of projects it is not always qualified to complete. A newer shop is going to get hit with a lot of requests that will span the spectrum, and while building a base from these types of projects is OK, eventually you have to look in the mirror and concentrate on your very best offerings.

Also, as you hire new people, each team member will contribute to the capabilities offering, and so focusing on what the firm is good at and what made you successful in the first place, is a critical step in the growth process.

For a creative firm, capabilities are essential. You are only as good as the work you push out the door to many potential clients. And for those clients that come through a referral, don't assume that you won't have to demonstrate your capabilities to them.

-Take a look at that last 12-18 months, categorize your work, and rate the successes versus the failures. You should end up with a nice list of projects that demonstrate your strong points and should represent your "bread and butter" client work.

-Once you have honed in on your true strong points, sit down with the other leaders at your company and make decisions on how these strong offerings can be managed internally.

-For the weak offerings, brainstorm ways to increase success for those capabilities you wish to continue to offer to new and existing clientele. You should answer internal questions like, why do we want to improve these capabilities, what does the market look like for these moving forward, are we going to be able to hire staff to support these capabilities, and so on.

-Develop a capabilities report outlining your findings from the above discussion, and make sure that for each service offering, you have a plan for acquisition, execution and evolution.

Once you have your final capabilities in check, and you have a plan to support them, your small firm will be on a good track to continue to move forward. What happens if you don't go through this exercise? Well, it's pretty easy to understand that as part of a proactive growth program at any company, you must know in your gut what offerings are appropriate for the market, what will grow your company, what offerings will generate positive revenue and what capabilities your staff can support.

3. Thought Leadership: Are you a designer or a business person? Or both? If you start a firm with a partner, and you divide the "Creative" and "Business" responsibilities from the get-go, you will likely see success much earlier. This is how Killswitch has grown so rapidly over the past 6-7 years and why we have been successful. Seems simple right? Well it is, and it isn't. Not only do these two people need to respect each other and their "halves" of the business, but they have to be able to bring to two parts together as a whole. The creative has to match the business offering and promises, and the business offerings should not sell the creative short. In other words, if you are a higher-end shop creatively, you don't want your "business" side of the firm making cold calls and selling web design door-to-door right? The business market model has to match the creative approach to accelerate success and to build a brand with not only the perception of high-end, but also one that can deliver the goods. The business offering that goes out can only be successful on its own if the creative matches.

But for those of you who do not have the 50/50 split I describe above, than you have an even bigger challenge. You must identify what your are best at. If it is design, you will need business guidance, and if it is business, you will need design guidance.

What I am really getting at here, is figuring out what you are best at and how you fit within the thought leadership as you begin to scale your firm up is a critical exercise to go through. If you haven't done an audit on yourself, and you think your hiring strategy and firm capabilities are in check, you need to look in the mirror and make sure that your business, the hiring strategy and the offerings can be supported by your thought leadership alone, when you are singularly in-charge of a creative firm.

Knowing this helps you hire the right people, and it helps you find the right clients which I will talk about next.

4. Client Acquisition Strategy: I know this sounds rather technical for an element within a creative firm, but it is so important. When you are starting out, you take on any client you can find, especially if you start younger and without a reputation or past firm experience like we did here at Killswitch. You learn the hard way which is sometimes the best way to learn. You get knocked down, time and time again, but as long as you get back up, there will be a reward.

If your small firm is about to embark on a growth phase, you must develop a client acquisition strategy. This can be a plan that outlines the type of clients you will go after, based on the capabilities we discussed earlier. How will you approach cold clients? How will you approach referral based clients? How will you approach clients who invite you to bid on an RFP? And the list goes on.

There are 6 major client categories Killswitch has identified, and they apply to all the industries out there.

1. Cold Clients: Clients who you engage on your own when there is no work on the table at that time.
2. Cold RFP Clients: Clients who you engage to bid on an RFP that was not sent to you as an invitation only.
3. Cold Referral Clients: A client who is referred to your firm through someone who recommends you who has not necessarily worked with you.
4. Referral Clients: A client who has been referred to you by a client you have worked with and have a relationship with.
5. Existing Bid Clients: A client who you have worked with, who comes back to you to do more work through a bid process.
6. Existing Clients: A client who you have worked with, who comes back to you to do more work, without a bid process in place.

As you go through the list above, the clients get riper and riper. Obviously each category has its plus and minuses, and I won't go into each now, but the bottom line is that as part of your strategy you must make some decisions about which of these categories you will contend in. You should have an acquisition plan in place for each, because each demands a different type of engagement.

In addition to determining the client categories in which your firm will work, you must also think about industry. Which industries fit the firm the best? This is another question easily answered from your capabilities exercise. If you can hit a few industries and make them your sweet spot, you will grow quicker than you imagined. Just make sure you have enough in the tank in the event you lose clients. Some industries, as just exhibited in the recent recession, can stop sending money all at once, and that is something that you want to protect your firm from.

5. Internal Structure: Once all the strategy and discussion is in place, the bare-bones structure of your firm must be addressed. This problem is probably the single biggest issue I hear from small business owners, both in and out of the creative industry. How do I structure my business? Well, if you go through the above exercises, you should have an idea of the positions you need to create at your firm and the type of people that will best fill those positions.

Each business has a model that hopefully works for them, whether they have 20 people or 2,000. And the size doesn't matter that much actually. As the company gets bigger, there are just more tiers and layers of accountability. Some creative firms choose to be heavy on the account manager/designer position, while other firms like Killswitch that are more evenly split between creative and web development have two over arching structures in place: one for managing the creative side of the business, and one that manages the web development/sofware side of the business.

Development:
-Principals oversee development managers, development managers oversee developers, developers execute development.

Creative:
-Principals oversee designers, designers execute their projects.

Projects:
-Principals oversee project managers, project managers oversee clients and projects.

Admin:
-Principals oversee human resource staff, human resource staff oversee employee needs.

Client Acquisition:
Principals oversee new client acquisition.

Hiring Strategy:
Principals oversee new hiring strategy, human resource staff supports hiring strategy.

Obviously the above descriptions over simplify things a bit. Within each are additional layers of description which define how each role is executed, but the important thing to take away is that all tiers have equal importance and equal input on all stages of a project depending on what capability area they are working in, and that is essential for a small firm like Killswitch.

It is important to not over complicate your structure. Even for smaller shops, it's important to have these tiers defined so that everyone has a clear understanding of responsibilities.

6. Paperwork, Paperwork, Paperwork: Do you have an employee handbook? Do you require any legal documents like an NDA or Non-Compete for your employees? Do you have a sick-leave policy? Are you even sure you are following the laws of the state with which your firm resides?

One of the most overlooked things by creatives who scale their business up is the legality of hiring and firing. If you are scaling up, you should have things in place to cover the interests of your business, and you should meet with a human resources consultant to ensure all laws are being followed. Having these documents is for the benefit of everyone involved.

7. Finances: Uncle Sam is in control when it comes to scaling any business up. Your business is likely taking risks when hiring people, especially in this climate. Having enough funds in the bank to back up these risks is essential.

Creative businesses, like many others, have one major form of traditional revenue.

- Client Receivables: The money that is on its way to your doorstep from those projects you just completed can be most easily broken down into "per-project income" and "retainer income." Both will support just about 100% of the revenue at your firm, and for many, I am only speaking the obvious. For some firms who offer additional products or other services for sale, there may be a 3rd called "recurring customer income," but for purposes of this article I am not going into that.

So while these are obvious, there is one area that time and time again business owners fail to realize (especially those in the design industry) and that is good ole' cash in the bank. Savings, savings and more savings is the best alternative strategy to ensure your scaling up doesn't bite back. There is no magic number here, but most businesses should try to save up to 3 months of monthly costs and have that in the bank at all times, and if you're scaling up from your current monthly expenses, I would recommend having at least another 2 months saved at the new budgeted monthly amount. That means if you operate on $100,000 per month and you are expanding 20% you should have $300,000 in the bank plus another $240,000. This could be in the form of saved client receivables, a line of credit, or even a loan. Whatever the form, if you are going to scale up, make sure you have money to back it up. In this climate, it may not seem reasonable to require this type of rainy day fund but it is a discussion that must be had during the process of expanding your firm.

8. Expansion Plan: All of the points thus far should be articulate in a singular document, a plan that outlines your expansion and everything that comes with it. There may be things as you draft this plan that you will see are unique to your specific scenario that need to be addressed. Issues such as office space and presence or other issues like planing out how you will set up interviews. You may also find that you have already addressed everything. No matter what happens, bringing this all together will help streamline execution, and will allow you to communicate more easily to those in the company as to how the strategy is rolled out.

Obviously for certain people, there will be areas that I have not covered. The points above are simply meant to be a guide and are not all inclusive.

Feel free to email me through our general email address if you have any questions or need help figuring out how to get things off the ground with your new venture.

How do you scale your business, from 2 to 20 and beyond? A creative company's approach: Part 1

The question of scalability in the business space, especially the start-up environment is a daunting task for creatives. Whether you are a start-up that has 5 people or 500, business structures must be in place, and you must be committed to trying things and failing early on.

In our industry, there are so many talented designers and web programmers out there, each with his or her dream of being their own boss. And while the freelance community supports this methodology well, building your business from being a designer in the living room, to becoming a business owner that manages multiple facets of the service offerings, client requests, budgets, payroll and so on, is not an easy task.

One of the most critical facets of building a creative shop that can scale is ensuring that no matter what structure is in place, the staff can be flexible within their job descriptions. In other words, team members must wear many hats at a small firm, and so having a team backing you up that can not only serve many roles, but also can take on new responsibilities through promotion and other benefits, is absolutely critical for scalability's success. As a small business, if you cannot promote those from within, you can never scale up with any certainty that as the owner you won't be micromanaging everyone, every day.

In addition to the ingredients of the structure, i.e. the employees, business operations and thought leadership, the structure itself must scale or be flexible enough to allow for new positions to be adopted as the firm grows from a smaller shop into a more mature creative machine.

Over the years here at Killswitch we have tried different structures. Some have included managers, some have not. Some give employees equal input on many facets of a project, or an operational problem. Some include project managers or in other scenarios, development managers that manage different aspects of the operational and development portions of a project. And over the years we have grown into a model that works for our level of firm and clientele.

But there is still always a lot of room for improvement.

And there should be with any small business, not just a creative firm. The most important thing to remember if you are a new creative starting out, and looking to build your shop up, is not to worry about the things that are not going to be with you tomorrow. Concentrate on the big picture items, and that should serve you well to ensure the details of your client's project are being taken care of.

For the back story on how Killswitch grew, I would recommend reading this article first, and then coming back to this one, as it offers a more clear back-drop for what I am talking about here.

Below I have outlined the most important things I have learned over the years in scaling a creative business, from getting it off the ground to maintaining it, and everything in between.

1. When you first start out, you have to understand that you will make mistakes. If you are a creative person, you probably do not have a business background, so from the start, be comfortable with the fact that you're probably not going to just step on your own toes, but you may at times, step on a few clients' toes as well. The most important thing you can know when you first start is that you must learn from these mistakes the very first time you make them.

2. Your business never gets big enough, and you never get busy enough to ignore the work that is being sent out. Even at a firm of 10 or 15 people, work can squeak out that the owner or managing partner never sees, especially when there is more than one owner. Control the flow of outbound information, design, and anything else that will impact your brand. This point is especially important in an early growth stage company. Work that is not up to par early on can have a worse impact than many think. Some of those early client connections will be the ones that bridge you to your next project and next tier of success.

3. Work, work, work. If you expect only to do good design work and be successful, you've got another thing coming. Designers are a dime-a-dozen these days. At Killswitch, we receive between 3 and 4 resumes per day from creatives. Clients have so many options for their projects, and so it is important that the design strategy and execution not only be good, but that you distinguish yourself from the rest. This could be a service that you offer, in addition to design. It could be the way you manage a client, or it could even be the thought leadership you employ if you are a slightly larger company. The bottom line is that your work is never enough in the small business space. You should always have to offer more.

4. As your business grows, your bank account should too. Just because you are a designer, and you now have a studio with employees, payroll, deadlines, and all the other things that come along with this, doesn't mean you should be living like you were in college. Quality of life, when you are a small business owner, comes with a lot of stress, but should also come with plenty of rewards if you are doing things right. This is a topic that is overlooked a lot in this industry. The saying goes that if you do something you love, the income and quality of life that you desire will follow. Well, that is just not true. You must decide where you want to be, and how you want to live and work towards those goals, whether they are financial, or a mix, it doesn't matter. Just don't forget to think about this as you grow your business and client base.

5. Think about your employees first and your clients second. This statement might sound a bit off, but in many circumstances, you must consider the impact a project has on your talent, especially in this industry. Cultivating a small business is as much about building a talent pool as it is building a client base. Killswitch was fortunate early on to land some big accounts, and while those have lead us to where we stand today in many regards, there are things that would be done differently now when it comes to employee impact and so on. Creative firms will lose some great talent no matter how well you manage your employee morale, but you should try to make sure it is never because they are burnt out on a project or a client. Staffing and other strategies can be used to ensure that employees don't get burnt out on one client or project, and I would recommend using everything in your arsenal to ensure this does not happen

6. When your company is more established, and you have operating income and the freedom to make a great hire, do it, and do not hesitate. More importantly, when you hire someone, make sure they are not just qualified for your position, but are better at what they do than you are. While being a small business owner and creative professional can make it hard to hire someone more talented or experienced than you are, this strategy will never let you down. By surrounding yourself with great talent, you will see your business grow quickly.

7. Secondary to the point above, and my concluding point... put the power in the hands of your staff. Allowing your staff to make the recommendations and to have a voice is a very critical practice, especially at a smaller, more collaborative studio. At the end of the day you might be surprised at how much better the outcome is for your client. The real power here, is that as your staff become more active in the business and critical decisions, the easier it will be for you to scale up and hire more team members.

Many of these points help contribute to the base that allows you to scale. Once the base is in place, read Part 2 for specific strategies to execute that will help you succeed in scaling up

Feel free to email me through our general email address if you have any questions or need help figuring out how to get things off the ground with your new venture.