Award Winning CEO of Cotopaxi Shares the Rule of 3’s- Episode 157

On this episode of Dentist Money™, Reese interviews Davis Smith, CEO, and Founder of Cotopaxi, one of the world’s fastest-growing outdoor gear brands. Davis shares his experiences and advice on what it takes to build a fulfilling and profitable business – and how to improve your hiring process. Plus, you’ll hear how to set clear core business values, which can unite your team and cultivate a more productive office culture. To find greater practice success, view your business through the eyes of an acclaimed entrepreneur.

Find out what it takes to create a value-oriented and unified team.

Show Notes:

Cotopaxi 

Podcast Transcript:

Reese Harper: Hey Dentist Money Show listeners, it’s Reese Harper here. Recently I had a chance to interview a close friend and mentor named Davis Smith. Davis has started several businesses both in the US and internationally and while his story isn’t completely dentist centered, I wanted to have him come in because he offers some really great hiring tips and a ton of entrepreneurial perspective that I thought I wanted to bring into the show. He also had some ideas on how you can create a proactive and really positive practice culture, one that’ll really make a difference in your employees and patients. It’s a super interesting interview and you’ll find that what Davis has been through and learned on his journey can really help you find success as well.

Reese Harper: Before we get started, I want to remind you, join the Dentist Advisors Discussion Group on Facebook. You can sign up for free at dentistadvisors.com/group. You can book your free consultation also on our website with one of our dental specific advisors by just clicking the Book Free Consultation button. Thanks again and enjoy the show.

Speaker: Consultant an advisor or conduct your own due diligence when making financial decisions. General principles discussed during this program do not constitute personal advice. This program is furnished by Dentist Advisors, a registered investment advisor. This is Dentist Money. Now, here’s your host, Reese Harper.

Reese Harper: Welcome to the Dentist Money Show, where we help dentists make smart financial decisions. I’m your host, Reese Harper here with a special guest this morning. In studio, a successful entrepreneur and longtime friend, Mr Davis Smith. How you doing Davis?

Davis Smith: Reese, it’s great to be here. I’ve been looking forward to this.

Reese Harper: Yeah man, it’s tough to get on your schedule so we’re grateful to have you. I’ve seen you accomplish some pretty amazing stuff over the last decade or two. I’m excited to get some of your experience and entrepreneurship in business passed on to our audience.

Davis Smith: I think you and I have been entrepreneurs for about the same amount of time and I think what we both realized is you’re learning constantly. I’m happy to share some of the few lessons I’ve learned and understanding that I have a lot to learn still.

Reese Harper: Well, thanks man. I appreciate you coming on. The things that I think would translate really well, a lot of them have to do with leadership, we have some with team building, we’ve got some with making strategic business decisions. A lot of our audience, they’re either working as a private, small one, to two, to three location dental practice and they make a lot of the same decisions around team building that you’ve had to make. I think well have some good feedback and good insight there.
To start, how about you tell us a little bit about the journey. Our audience knows your background now from the intro to the show, but tell us a little bit about maybe the entrepreneurial journey that you went through to where you’re at now. Just a little bit of a background.

Davis Smith: Okay, yeah. I’m happy to do that. When I graduated from undergrad in 2003, I started my first business and it was an e-commerce business, pretty random business called pooltables.com. It’s exactly what you think it is. Did that for about six and a half years and grew up from … It was just a bootstrap business. My cousin I built it together. Started online and then slowly started opening up retail stores around the country and we became the largest retailer pool tables in the US. It was a really fun experience for a first time entrepreneur that didn’t really know what I was doing.
Then my cousin and I both, we sold the business. We both went to business school. He went to Harvard Business School, I went to the Wharton School. Then when we graduated, we moved down to Brazil and launched an e-commerce business there called [baby.com.br]. It was an e-commerce retailer of baby products. We had a great experience there. We were Brazil Startup of the Year in 2012. In our first 18 months from our launch, we went from four employees to 300 employees. It just had some really rapid growth and learned a lot of great lessons around what not to do as you scale.

Reese Harper: I’m just curious if we pause on those two and you look back at your experience at Pool Tables, which I remember your initial branding of that business was different than what it is today. I think you guys had named it [Billiard Ex] or?

Davis Smith: Yeah.

Reese Harper: Tell me the things you remember from that journey. What were the maybe one or two takeaway lessons that you learned from the pooltables.com adventure?

Davis Smith: Actually, just a funny little side comment. When we started the business, we actually named that Billiards Express, with the idea that we were really one of the first retailers that sold pool tables online anywhere in the country, free shipping.

Reese Harper: Direct to consumer.

Davis Smith: Direct to consumer, yeah. Within a week or so, we had someone send us a cease and desist saying, “Our company’s name is Billiard Express.” It was some company in the Midwest, and so we were like, “Oh, we never even thought of that.” As young kids like, you sometimes don’t even think of that stuff, so we changed it to Billiard Ex, which was short for Express. Who knows why we did that. Then pretty soon, everyone including my mother is spelling it Billiard Sex. Then we realized, “Okay, we’ve got a name problem.” We ended up eventually getting the domain pooltables.com.

Reese Harper: It’s proof though, that name doesn’t necessarily drive the business, because you were able to grow independently of that.

Davis Smith: I think some of the great lessons … You know, our first full-time hire was one of my best friends. He’s someone I just admire to this day tremendously, but that’s not the way you hire. You don’t hire people you know, you hire the best person to solve a problem within your organization. That’s something I hadn’t learned yet, and so a number of months into that my cousin told me, “Hey, we need to fire this friend, and you need to do it. You’re his friend, it’s not right for me to go do it. You need to do it,” and I was terrified.
I mean, firing someone till this day is the worst thing that you have to do. But, I had to let go of one of my best friends. He was my best man in my wedding. Fortunately we’re very close still. He’s such a good person, he didn’t hold it against me. But, what I learned was that you need to … When you’re building a business, you need to identify the needs that you have, and then you need to go hire the best person on the planet to go do that job. For me now, that involves a very rigorous process that I’m happy to dive into if you want at some point during the conversation, but around how to identify the best candidates for a job and hire them.

Reese Harper: I think we will jump into that a little bit. We’ll talk about that here in just a second. This specific issue, I think it plagues a lot of entrepreneurs, and especially in a professional community like the dental market, where primarily they don’t have a lot of experience hiring, or training around hiring. The people that typically are hired in a dental practice are immediate family, they’re relationships in a community, they’re friends, and I think that’s one of the reasons why it’s difficult to get an operation properly staffed.

Davis Smith: Yeah, and I’ll say to, one of the challenges that a dentist would have, and my brother my brother-in-law’s a dentist. My little sister married a dentist and he’s got a practice that’s doing well. But, one of the challenges is that a lot of these lessons around hiring, you learn them after making a lot of hiring mistakes, and a lot of hiring. When you’re running a small dental practice, you don’t have hundreds of employees, and so the learning curve is just slower because your team might be seven people, or 10 people or something. So the lessons, it just takes longer to learn some of those lessons. I’m happy to share a little bit about-

Reese Harper: Let’s talk a little bit about some of the hiring procedures and the hierarchy and design of your hiring process.

Davis Smith: We have implemented something in my current business. My current business is a company called Cotopaxi. We’re an outdoor gear company and we use our profits to support poverty alleviation. We’re focused on giving back. A really fun brand, but we have something called the rule of threes. The rule of threes involves a pretty disciplined process for hiring, which is, we understand that a lot of times, especially in a small company or a growing company, the person that’s hiring is usually desperate for help.
You postpone hiring until you absolutely have to hire someone, and then that person that’s doing the hiring is so overwhelmed with their job anyways, because they’re probably doing two people’s jobs at that point, that actually going through the hiring process is just so time consuming, it’s overwhelming and the oftentimes will accelerate the hiring to try to just get someone in as quickly as possible, which is the wrong thing to do.
So, we set up something where in the rule of threes, you have to have at least three exceptional candidates. What I mean by that is not three candidates, it means running a process where you end up with dozens or hundreds of applicants for the job, you slowly filter that down until you find an exceptional candidate and you don’t hire that person yet, you go find two more people at least as good as that person. Once you have three exceptional candidates, then that’s a great pool to choose from.
Oftentimes, we found that sometimes we think, “Oh my gosh, I think I’ve found the perfect person for this job,” but we don’t hire them because we’re like, “Okay, the rule is we have to find at least two more exceptional candidates.” And oftentimes, it’s the second or third person that we end up hiring and then we realize, “Oh my gosh, we almost hired the wrong person if we hadn’t been disciplined.”
One of the other things is we have at least three people on our team interact with that person over at least one hour. It’s hard to fake it for an hour. You can fake something for 20 or 30 minutes, but give me three different people in different settings to interact with a person, you get a better sense of who they are. Then the third rule of threes is around references, and I cannot overstate the importance of calling references. Sometimes it just seems like a tedious task, that’s just not the case.
I just went through the process in the last few months of hiring a CFO. We just made an offer this week that was accepted, which we’re excited about. We had narrowed 350 candidates down to two over several months and these two candidates, we were really debating between them. We were kind of leaning slightly towards one of the candidates. We went to called the references, we called the three references that they gave us and then we called a number of other references just through our networks. What we discovered was that the candidate that we were not leaning towards, his references just blew the other guys out of the water.

Reese Harper: Interest. In terms of the quality or the authority and description of the candidate?

Davis Smith: What we saw was that on paper, they were both incredibly strong candidates, but what we heard from all of the CEOs that he’d worked for in the past as a CFO and all the people that had worked under him, that were reporting to him was that yes, he was a great CFO, but what made him a spectacular person and hire was all the intrinsic value that he added as a leader and as someone that was a visionary within the company, someone that everyone loved working for-

Reese Harper: He carried a leadership role that was unusual for-

Davis Smith: A CFO.

Reese Harper: A CFO, yeah.

Davis Smith: Exactly. So yeah, those references are critically important. And, you need to ask probing questions. I mean, they’re going to give you people that love them most likely but I’ll tell you what, it’s rare that I’ve had one of these calls where I haven’t been able to get something out of it that gives me more insight into maybe a weakness or something that when things were really stressful, how did they react? Tell me about a problem that happened-

Reese Harper: It’s interesting with references, you’d assume that, I guess as the CEO, you’d assume that the references are all people that like the candidate. But what’s interesting as you’re mentioning is, even though you’d assume there’s kind of a conflict of interest there from the references, they have a lot of intellectual integrity a lot of times and they don’t tell you things that aren’t valid. They don’t sugarcoat things oftentimes.
Anyway, the rule of threes you talked about, initially the first one you said was make sure we have three, not only three candidates, three exceptional candidates. That’s often a very small ratio of the total … I’ve been surprised when … My first we’ll say seven to 10 hires, I didn’t use the same level of rigor around the hiring process. The candidate pool was smaller, the effort we went through around advertising was smaller, the time we spent, the duration of time was shorter and we ended up luckily … Sometimes you just luckily for better or for worse, you end up with some amazing people.
Even if the learning curve might be a little bit longer, sometimes you just get a great high quality person, you have just great instinct about them. But, that kind of a shortcut process usually results in a less efficient organization, less efficient growth plan because these aren’t really people that have been narrowed down from a large list, they’re people that were already in your immediate sphere and it’s impossible for your immediate sphere to be a great hiring pool.

Davis Smith: Absolutely. I will say hiring people, it’s probably the most important thing you can do as a leader. That’s your job, is to hire exceptional people and if you do that, it will change your business.

Reese Harper: I think in a lot of cases, one of the challenges a dentists struggles with is, one of the ways for them to expand and grow is adding an associate dentist. They bring in another dentist to help alleviate some of the production and grow in scale. That’s their opportunity to add a second location maybe or some more production within one location, and that’s a really … I think access to hiring information, access to a pool of candidates is sometimes a challenge for dentists. There are some resources, but a lot of them end up just asking their friends for referrals and getting … They hire based on inputs from people that are coming to them. So, someone’s request for a job is the stimulus for a hire.

Davis Smith: Yeah, which is backwards.

Reese Harper: I just think it’s a huge issue. I appreciate you highlighting those three. We said exceptional candidates, three. The second one was …

Davis Smith: Making sure that at least three people in your organization are meeting this person, because sometimes you just need someone else to … Maybe you have a blind spot or maybe you just didn’t catch something. It’s pretty amazing to see how, especially if you’re meeting independently, to see how someone comes away with a completely different experience.

Reese Harper: Yeah. You mentioned something that’s quite unusual though, which I would imagine most people don’t do which is, spend an hour with that person. Am I understanding it correctly? You want an hour spent by three independent people?

Davis Smith: Yeah, exactly. At least an hour and then if you can, longer. Sometimes we’ll do like an hour long interview, and then we’ll go grab lunch with them.

Reese Harper: See them in a social setting, maybe as opposed to an interview setting. Some of the experience I’ve had … Okay, the third one real quick was?

Davis Smith: Three references, getting at least three references. If you can do more, even better.

Reese Harper: It’s critical. One of the things that I’ve noticed is, people respond very differently, some people respond very differently to interviews. Some people are very nervous, and sometimes that has turned me off as an employer. I interview someone and they’re nervous, and then I call the references and I’m reinforced by those references, or I feel better about the candidate? Or, I have the pool of three exceptional people, the person that’s least likely to be selected ends up being the one that just really impresses me in an interview. It’s just really important to get those three angles I think, because I always find that if I make a phone call decision, or just a face-to-face based decision, or no references-

Davis Smith: You need all of these pieces to get a full picture of a person.

Reese Harper: Yeah, it’s critical. All right, let’s go to the next topic. We were walking through your career evolution. We talked about the experience at pooltables.com, then we talked about the second business, which I started to interrupt you. Let’s finish the story about Baby and Brazil, and then we’ll talk about some lessons you learned from that.

Davis Smith: Yeah. The second business, the one in Brazil was venture backed, which means instead of using debt, we used equity to grow the business. We actually raised money from venture capitalists, in mostly Silicon Valley and New York. They gave us capital in exchange for equity in the business, ownership. We shared ownership, but we had a tremendous amount of … We raised over $60 million, so a tremendous amount of capital to go build this great business. The great thing about that is that you don’t owe that money back if something doesn’t go right. The downside of course, is that you’ve just shared ownership in the business.

Reese Harper: Talk to you about the lessons you, or one or two lessons you may have learned from that experience. I mean, you’re still in college doing your master’s degree right? I’m assuming that was probably a big experience for you to raise capital in a significant way for the first time. What are some of the main lessons that you remember from that experience though? Maybe not necessarily the raising of capital, but just the lessons from growing that business.

Davis Smith: I think the biggest lesson from growing that business was that we did not do a great job with establishing a firm culture. When we grew from four to 300 people in such a short time, the culture just evolved in a way that we hadn’t expected and it wasn’t bad, it just wasn’t great. I think if you want to build an exceptional company, you need exceptional culture. They’re two sides of the same coin, you can build an exceptional organization without an exceptional culture.
We let our culture be developed by default, it wasn’t done by design and over time, it just organically changed. That’s impacted by key people you hire, how spread apart your team is, whether you have two locations or three locations. Maybe have two or three different cultures based on who the leader is at that place. That’s what happened with us and I didn’t like it. I wanted to do better next time.

Reese Harper: We’ll touch on that here in a second. One of the lessons was about firm culture. Was there any other lesson you learned walking away from that, that you thought was insightful?

Davis Smith: I’d say business partnerships are really difficult.

Reese Harper: Yeah, and I think both … I think dentists have a lot of experience in that area. Let’s talk about those two things lightly. Firm culture, what is firm culture? What is business culture? How would you describe that now, knowing how well Cotopaxi’s culture has evolved which as you mentioned, is the business you spent the last several years building and it’s become a really well known outdoor brand. Tell me a little bit about the difference in those cultures and what really defines culture for you.

Davis Smith: For me, culture is around defining values. When I had the idea to go build Cotopaxi, I was still living in Brazil and I flew back to the US. I’d actually identified a few people that I felt I needed to go build this brand. A couple of them were people in my network that as I went through this process of okay, if I can pick the best person in the world to solve this problem, who would it be? A couple of people were people in my network, and then a few of them were people I didn’t even know. An award-winning pack designer, an award-winning apparel designer.
These were people that worked at Nike and Marmot and Columbia and other great brands. I just found them on LinkedIn and I reached out to them. I sold them on this vision of what I wanted to build and they quit their jobs, and they joined this team. We all flew out to Utah to meet in a mountain cabin, some of these people had never been to Utah. I flew in from Brazil and we spent a few days together in this cabin, and I laid out the vision for what I wanted to build.
We didn’t talk about product, we didn’t talk about our go to market strategy, we talked about our values. I talked about what I wanted this brand to represent and we identified three core values. Then we decided that we would build our culture and our brand around these three values. What it’s done is, it’s just transformed the way that our culture is in our organization. It’s transformed the brand, because it’s so authentic to these values, which are authentic to us. Maybe I can just share examples.

Reese Harper: Yeah, I think that’d be really insightful.

Davis Smith: One of the values is people. We wanted people to be at the core of this brand. The whole reason I wanted to build this company was about giving back. I grew up in the developing world. My family left the United States when I was four years old. I spent my entire childhood in the developing world, and then I spent a lot of my adult life back in the developing world. I knew from the time I was a child that I had a responsibility, a duty to help other people. I came from a very middle class family, not a lot of wealth but I had opportunities that other kids my age in these countries would never have.
Not because I was better, or smarter, or more deserving, I was just lucky in where I’d been born, the circumstances of my birth, and just felt like … I knew from the time I was a kid, this was something I had to do. It was something I thought about every day, my whole life. So, we wanted people at the core of this brand, and that meant thinking about how we manufactured. You know, where do we manufacture? How do we make sure that people that are manufacturing for us have a voice? It meant, how do we build a place, an organization where people love coming to work, where they’re growing and learning constantly?
We injected some of these elements into the brand. If you order something from our website, you’ll actually get a handwritten thank you card that’s written by a refugee that’s been resettled here in Utah. It’s their first job, they’re learning English still so it’s written in their native language, Arabic or French or some other language. We created a job club where we help them learn how to create a resume, how to do a job interview. We’ve had over 100 refugees go through this program.
We’ve had some really cool stories with our product, where we’ve been able … We have some sweaters and socks and some other items that we make out of llama wool. We went to a community in Bolivia where I used to live, and we’ve … These are communities that make like $200 a year per capita, they live in extreme poverty. I always wanted to go back and help, so we’re buying llama wool from them and we’re making these cool items out of this llama product.
We have a bunch of other great stories, but we’ve injected this human story. In fact, even our warranty. Instead of just having a lifetime guarantee like all these other brands have, we have what we call the 61 year human lifespan warranty. 61 is a random number, but it’s actually the average lifespan of someone in the underdeveloped world. It’s 20 years less than someone in the developed world.

Reese Harper: I was talking to you about this a few months ago. My parents are in Mongolia right now and when they first moved there, one of the things that surprised me most was the adult life expectancy was in the 50s because of the diet, because of the access to healthcare, because of the air pollution. It was just something you wouldn’t … it’s almost 30 years less than what you’d expect for what a lot of forecasts are right now for United States.

Davis Smith: It’s crazy. It’s horrible and the sad thing is that a lot of these things are so solvable. I mean, there are solutions to a lot of these issues. It’s women dying giving birth and anyone that have four children … I’m surprised any woman survives birth. It’s crazy, it blows my mind. But with modern medicine it’s like, you don’t have to die giving birth but in these countries a lot of times, they just don’t have access to basic medical care. Little babies dying from diarrhea, I mean things that just shouldn’t be happening.

Reese Harper: When you thought of your values, people being at the top of that, I guess there’s a lot of aspects of people you’ve hit on. It wasn’t just the people within your firm, but it was your customers, it was this human connection and that you felt a responsibility towards helping try to elevate the human condition to some degree. I mean, that’s kind of the underlying people part of the brand. What was the second value?

Davis Smith: One of the other values is adventure. I love adventure. I grew up internationally, I still love traveling internationally and exploring the world and I love the outdoors. I’ve done a few fun trips, kayaked from Cuba to Florida a couple years ago. I do these survival trips where I’ll go to a little island and survive for five days with no food, just spearing fish or eating coconuts. I love that kind of stuff, but I wanted to inject this sense of adventure into the brand, and so we give our entire team 10% in the wild time.
10% of their work week every week, they can go spend in the wild. That means if it’s a powder day here in Utah, they go skiing, if they want to go rock climbing or hiking with their family, if they want to go volunteer in the community somewhere, 10% of the work week is theirs to go do that, to get out of the office, to go be involved in their community. My idea here is that what it does is, it takes these evangelists of our brand and goes and pushes them into our community.
If you were riding up a ski lift and you’re telling somebody on the ski lift, “Hey, I work for Cotopaxi, I’m skiing today because they let me and I’m wearing Cotopaxi gear,” or I’m volunteering at a soup kitchen and you’re evangelizing you’re work at Cotopaxi, pretty soon the community knows wow, these guys are out in the community. They’re building the community, they’re helping, they’re enjoying the outdoors. It’s something that was for us, a great way to help build the brand as well.
When you’ve been with us 18 months, you get a bucket list adventure trip and we give you a small stipend to help cover the cost of that. It’s only $1,000, but for $1,000 if you’re scrappy, you can do a pretty cool trip. Our team, we’ve built a culture on our team of sharing travel deals, and it’s pretty crazy what you can do for $1,000 bucks. We have people doing some fun stuff.

Reese Harper: That’s cool, that’s awesome. You make them use that $1,000 towards the adventure trip though?

Davis Smith: Absolutely.

Reese Harper: It can’t go down to pay student loans.

Davis Smith: Nope, and you can’t go to Disneyland. It has to be something real. It has to be a real adventure, something that you wouldn’t have done otherwise.

Reese Harper: Shout out to all you kids who are going to Disneyland here this Father though.

Davis Smith: I love Disneyland.

Reese Harper: It’s not an adventure though, despite what they tell you. What’s the another value that … You’d mentioned three. What was another one-

Davis Smith: The third one was innovation. It was around making decisions through trying to be innovative, and it’s in the outdoor industry. For us, it wasn’t around building the most technical gear or trying to sell our product by saying, “Oh, we make a better technical product or feature than this other company.” That’s table stakes. I mean, everyone in the outdoor industry makes exceptional gear, or a lot of brands do. We fall in that category, but we wanted to innovate in different ways.
For example at our pack factory, we saw two big problems. We saw a ton of waste material being created. We use the same pack factory as a lot of the brands that you all know, some of the premium outdoor brands. There was a lot of waste. The other problem was these sewers that are absolutely amazing, have been there on average 11 and a half years. They love their jobs, they’re paid well. They rock to 80s music all day, which is my favorite. It’s a great place to work. There’s great programs around new moms or expecting mothers.
The problem is, they have no voice. They sew what we tell them to sew over, and over, and over again. We just felt that needed to change and so we went to them and we said, “Hey, we want you guys to help us make some bags.” We have like 10 different different styles, shapes, patterns, but then we went to them and said, “You guys can design the bags. Use any colors, any materials you want from that remnant material that’s leftover. The only rule is to make no bag alike.”
So, we have all these crazy, funky bags. The straps are different colors, the buckles that they go together sometimes are different colors and you can see the personality of every sower in their stack of bags. Then when you get one as a consumer it’s like, “Wow! One of these amazing artisans actually designed this bag for me and I’m the only one on the planet with this configuration.”

Reese Harper: That’s really cool. I’ve loved that part of your story. These three values, I think what’s applicable maybe to our audience here is, they’re trying to determine to what their set of values is for their organization. There’s a lot of platitudes in any industry about values and mission and vision. How did you guys come up with those three? I’m sure there were others that were competing maybe for that pinnacle spot. How did you arrive at those in a group exercise like that?

Davis Smith: What we did is, we actually sat down, there were six of us and we just wrote on a whiteboard all the words that we felt represented things that matter to us in our lives. After we put all these words, there were probably like 50 words up on this board, we kind of saw that a lot of them could be grouped into some different categories. As we started moving them into these different groups that all kind of fit each other, these three themes popped out to us. You know, it’s important to not have, you can have … I mean, every company has a different number of values that make sense to them. In my mind, three to five is the right number. You can remember three to five values easily.

Reese Harper: I think one of the things that is important to highlight here, how many companies across the world do you think make bags?

Davis Smith: Thousands.

Reese Harper: I think dentists sometimes feel like they’re just another bag manufacturer and that we’re one of 1,000, one of thousands. I think that the thing that is really important is to realize that even in a very, very, very crowded market, there’s room for a small team of people to identify values that really make them stand apart. If you go through that exercise like you did with your team, and have those be organically reflected from the team, what you’ll find is they will be different than the next dental practice that does same exercise.
Not all of these values are going to be the same and the practice that you build will be different than the one directly across the street from you from people from the same city. You went through that exercise with your team. You didn’t go through that exercise alone, and I that’s pretty critical.

Davis Smith: Yeah, it is and I think you’re exactly right. Your values are going to be unique to your team. Plus, I’d say then what you need to do is you need to take those values, and you need to figure out ways to inject them into every single thing that you do. It’s not just something you put on the wall. In fact, our values are not even on our wall in our business, they’re something that we live.

Reese Harper: They’re organic to your culture, because they weren’t manufactured over time. They were manufactured over time organically in … By the time the six of you got to that meeting and came up with those values, they were deeply ingrained through decades of life experience right?

Davis Smith: Exactly.

Reese Harper: I think that allowed you to … Because they were organic and they were part of who you are as a leadership team, it wasn’t difficult probably to continue to, I mean, maybe it was.

Davis Smith: The one thing I will say is, I think it’s really important to take those values, to identify and create rituals and traditions around those values. These need to be things that you never waver on. When you create those traditions and those rituals, and you’re enacting those weekly, or daily, or monthly, however often you do each of those traditions, it reinforces to the team that this matters and that it’s real.

Reese Harper: Yeah, I think that’s critical. What are some of the rituals and traditions that you were able to interject into your culture that followed that set of values?

Davis Smith: For this question, maybe I’ll use the example of my family. We actually went through an exercise a few years ago, where I kind of realized that I was a hypocrite. I had been talking to a lot of entrepreneurs about this idea of identifying core values for your organization and using those values to build a deliberate and culture by design. Then I realized the organization that mattered the most to me, I hadn’t done that for and that was my own family. And so, my wife and I sat down and we identified five core values, we attached them to the letters of our last name, S-M-I-T-H. Each one represents one of these. It helps us and our kids remember them, and we created some rituals.
I’ll give one example. When I’d come home from work sometimes, I’d see my girls, they’d be watching Netflix. They had some favorite show they were watching at the time, and I was always kind of bothered because we’re not a TV fan. I don’t watch TV really, it’s not something I spend a lot of time doing and I kept telling them, “Why aren’t you guys reading a book or something? You should be reading, instead of watching this TV show.” Of course, nothing changed when I said that.
It wasn’t until we identified a core value, which was being intellectually curious. We actually went through this exercise of identifying the values with our two oldest girls and we created a ritual, tradition around reading. And so every Sunday afternoon, we’d get together in the master bedroom, we’d put all these pillows and blankets around, we’d all cuddle together and we’d read, each of us read a book quietly for an hour. We’d put our little guy down for a nap during that hour and we’d all read quietly and at the end, we’d all share our favorite things.
We had some snacks in the room and stuff, made it fun. Pretty soon, this became a favorite thing of my daughters, they loved it. They never let us falter from having this hour and throughout the week, I’d come home and I’d see them reading their book. We all know once you start reading a book, sometimes it’s like you get into it and so once we created this new ritual, a tradition around one of these values, it changed behavior.

Reese Harper: I that’s a really important part of really bringing those values into your culture. Take a chance to think about some of the ways that you would develop those rituals, establish those values with your leadership team and your practice and try to implement some cultural rituals that would help reinforce those values. You talked about another lesson from building the business in Brazil, which is how partnerships can be difficult. Without getting into too much detail, because I know everyone who’s been through a difficult partnership, there’s a, it’s on one hand there’s two sides to every story.
I think that the common learning lessons around partnerships are still applicable to both of the voices on both partners. Everyone’s got their side of the story, but I’d like to have you share some of the experiences you learned about why are partnerships particularly difficult, and how those challenges may be mitigated?

Davis Smith: Partnerships can be one of the most fulfilling and fun aspects of business and also one of the most challenging and heartbreaking experiences. My partner that I had for 10 years was my cousin. We grew up together, one of my closest friends. We traveled together, we did stuff with our families, we built homes on the same street. I mean, really, really close. What we found in this last business was, I don’t think we did a great job in setting clear expectations for each other.
What happened was because we knew each other so well, we just weren’t very structured in the way that we handled our partnership and we just grew apart, and we stopped getting along in the same way and we were frustrated with each other. We were co-CEOs of this business and it just didn’t work. As I look back, I remember him telling me that he just didn’t feel I was doing a great job in keeping my team accountable, and I think he was right. As I have moved on to this new business, and I’m not working with him anymore, he stayed in Brazil running that business. I tried to reflect on some of the feedback I got, but the problem was that the feedback we had for each other just wasn’t timely, it happened in an emotional moment instead of being consistent.
One thing that we do here at Cotopaxi is that we have at least monthly, sometimes weekly depending on the team and the manager, one-on-ones, and this is two-way feedback. I meet with my direct reports every month in a one-on-one meeting. There’s a format that we follow, but part of that is giving praise, and also giving areas of improvement and I request … None of these meetings happen without you both sides. You need to give your manager or the person that’s reporting to you, some areas that they can focus on doing better and I want that.
My COO, my CFO, my CMO, these people, they give me feedback and I want it. I want that feedback every month. If there’s something that I need to do better, I need to know about it instead of just waiting till a moment of frustration. That has really transformed our culture and the way that we work together. My co-founder and Cotopaxi, we’ve worked together five years now and we’ve never had a single argument, not one, not even close to one, which is just very different.

Reese Harper: Why do you think some of the … I mean, obviously the process by which you’re following, the process you’re following to encourage a positive relationship contributes to you not having with your current co-founder that tension, or you’ve never had an argument. But I mean, sometimes it’s just difficult to, to know how two very strong personalities or two leaders, in a case of a dental practice, you can have two really opinionated people, in the case of a marriage you could have that same thing.
Sometimes it’s just challenging in a business environment, where sometimes that the altruism in a business environment isn’t the same as it might be in an employer-employee relationship, or in a spousal relationship. I mean, it doesn’t feel like there’s as much upside to gain there sometimes. It’s a capitalist kind of relationship, or at least it gets burned down to that. It gets to the point where it’s not about the human connection, it’s about getting this thing done.
I feel like it’s harder sometimes when you … The probability of success is just, it’s not as optimal as it is in an employer-employee relationship, or in a minority-majority relationship. When there’s equal kind of power and you have equal kind of pinion or strength or strong leaders, it’s just really tough because one way might not be the right way, but the business has to go down one direction. It’s got to go down one of two paths and if both people have their visions and they both have equal say, it’s just difficult to mesh it eventually.
We’ve covered a ton of great topics today. Tell me about when … We started getting into the Cotopaxi story. Tell me some of the lessons, the most important lessons you’ve learned at Cotopaxi that maybe we haven’t covered.

Davis Smith: One of the things that I’ve really loved and one of the lessons I’ve learned in building this business has been the idea of not just selling a product, but about creating experiences. We don’t just sell backpacks, and jackets, and tents and sleeping bags, we also create experiences that allow people to go live our brand values. We have an event that we created called the Questival. It’s a 24 hour adventure race where you form a team of six people, everyone gets one of our backpacks as part of the race, they get access to our app which gives them hundreds of challenges that they can choose from, they kind of go create their own experience.
It’s almost like The Amazing Race, the TV show but in 24 hours in your own community, exploring the outdoors, giving service in the community. You get points for all these different things and then we give away trips, and gear and other things to winning teams. I think it’s less important what exactly the event is, but I think what is important is creating experiences. I think no matter what that business is that you’re building, it’s more than just selling a product or service. It’s about creating an experience that impacts people, that they want to talk about, that they want to share on social media, that they want to evangelize your brand. I’m not exactly sure what that would be for dentistry, but I’m certain that there’s ways to do that.

Reese Harper: Yeah, I think the challenge is in professional services, there are in my experience, there are unique ways to really empower your customers with experiences that allow them to live those brand values. It’s just something I think is not traditional and it requires a lot of innovation, it requires a lot of creativity. It does require some effort and you have to as a dentist especially, you have to push back against this tendency to say, status quo is fine, we don’t need to do that, because they do have thousands of patients that they’re impacting on an annual basis.
There are opportunities and our clients who do take those values and transform them into their patient base, it’s just a viral marketing product project in their community and it’s crazy the difference. I mean, you’ll have five times the amount of collections or revenue in a city and practices are a kitty corner from each other.

Davis Smith: Yeah. Again, I know very little about the dental space but I’m just thinking, I know a lot of dentist friends or relatives or whatever that do a lot of good work. They’ll go travel and do like, I don’t know if it’s almost like Doctors Without Borders or whatever, but they’ll go do dental work in these different places, they’ll do dental work for free for some patients that just don’t have money.
Some of those good things they’re doing, I think there’s ways to benefit from that as a business and maybe telling those stories and saying, “Hey, by the way just so you know, for every 10 patients I treat or every 50 patients I treat, I will go treat a child in the developing world, or I’ll treat somebody here in the community that doesn’t have access.” I don’t know how you would tell that story. We use the refugee thank you cards, there might be something there, but there’s ways to tell those stories and help reinforce your brand and your values in a way.
I’ll tell you what, if I left my dentist’s office with a little card that showed the face of a little kid and in Bolivia or somewhere that he helped it was like, “Man, I want to keep going back to this dentist because he’s doing some good in the community or in the world.” I think just finding ways to tell those stories.

Reese Harper: I think it’s excellent. Well, any last minute lessons you want to leave with our readers or our listeners as we wrap up? I’ll give you a chance to think through all the stuff we’ve covered and bring it to a close.

Davis Smith: Yeah, the biggest thing I think I’m learning as an entrepreneur and you know, I’m 40 years old. I’m still learning a lot and I hope I learn more than I’ve learned. But for me, it’s around the idea that I get the most joy and satisfaction in life in giving and I feel each of us, anyone that’s listening to this, we have a responsibility to use our talents to lift the lives of others. We will never get more satisfaction than doing that.
If we measure our lives based on how much money we have or how big our house is or how nice our car is, there’s a good chance we’re going to be disappointed because there’s always someone that has more. But if we build our life around this idea that my success is based on how many people I impact and touch, how many lives I make a little bit better, then that’s in our control and we’ll be satisfied.
As an entrepreneur, building a business that’s around giving back, I’ve never been more satisfied. I think that’s for me, the biggest lesson I’ve learned. Dentists obviously have an opportunity to make a big impact. I mean, they can make a good amount of money, they touch the lives of individuals every single day and I think there’s a tremendous opportunity for people that are listening to this to go make the world a little better.

Reese Harper: Thanks Davis, I really appreciate it man. It’s been a great interview and I know there’s a lot that people can take away from today. Thanks so much for taking the time and we’ll look forward to having you back here on another snowy morning.

Davis Smith: All right, all right. Thanks Reese, appreciate it.

Reese Harper: Our thanks again to Davis. I think that was such a great interview and I really appreciated it. There was some great business advice from an expert outside of our industry. Check out his latest venture at cotopaxi.com, that’s cotopaxi.com. I wanted to remind you also to join the Dentist Advisors Discussion Group on Facebook. You can go to dentistadvisors.com/group to join for free. Also, book a free consultation with Dentist Advisors on our website by clicking the Book Free Consultation button on dentistadvisors.com. Have a great day, and carry on.

Practice Management