Trust your intuition... then bring in the experts

Hey everyone,

I went to Build-A-Bear recently. 

That store is a fantastic machine for getting money out of my pocket. 

I spent $115 on two bears, which I’d guess cost the company maybe $5 or $6.

And their story is wild. Huge success → 8 straight quarters of losses → turnaround → lucky break. Today, their stock is outperforming Nvidia. (If you want the whole story, here’s my video about it. )

However, this is about looking under the hood at two key moments: their strong start and their world-class turnaround.

Let’s do it.

Build-A-Bear founder Maxine Clark got the idea from her daughter, who said she wanted to make her own Beanie Babies. 

But she didn’t just run with her gut instinct. She did two bright things:

First, she tested multiple concepts with a focus group of kids aged 6 to 14. (They overwhelmingly chose Build-A-Bear.)

Then, she hired a professional design firm to help flesh out the concept and get all the details right. 

I wish I’d done this. 

A few years ago, I incubated a coffee chain here in San Antonio. We had the idea, we were excited, we launched. 

But looking back, I would have brought in some experts to help us build something truly unique. As it turned out, we ended up with a me-too idea that didn’t scale as I’d hoped.

So, two suggestions for any new concept:

Build-A-Bear grew rapidly from an excellent concept. 

However, when malls in America began to turn into ghost towns, it stopped working. 

The business experienced profit declines for eight consecutive quarters until it brought in a new CEO named Sharon Price John. 

She ran a turnaround that was just as important as their start. Quick sponsor break, then we’ll dive in.

Sharon Price John’s turnaround strategy was by the book. 

She followed a pattern you can apply to any struggling business:

1. Stop the bleeding immediately

Identify what's actively a) not profitable now, and b) won’t be profitable in 90 days. Then cut it fast, with no sentimentality. 

Build-A-Bear closed 60 stores in 2013-2014. In your business, it might be unprofitable product lines, a money-losing customer segment, or overhead that doesn’t generate returns.

2. Secure your cash position

Cash is oxygen in a turnaround. You can't strategize your way out of bankruptcy.

Focus on making payroll for the next 6-12 months before you worry about anything else. Extend payment terms with vendors, collect receivables faster, cut discretionary spending. Your only job at this stage is survival. 

→ Great tool for a cash crisis: a 13-Week Rolling Cash Flow Forecast. Here’s the template I use (and my guide to using it.)

3. Fix what broke in your business model

Something changed in the market and you didn't adapt. Identify what that was and fix it.

For Build-A-Bear, only 5% of sales were online in 2013. They fixed it immediately (and that saved them during COVID later on).

Ask: what customer behavior shifted that we ignored? Where did we stop meeting the market where it is?

4. Expand your addressable market

Once you've stabilized, growth comes from finding new customers or new reasons for existing customers to buy.

Build-A-Bear was aging out, so they went after licensed partnerships (Marvel, Star Wars, Disney). By 2022, 40% of sales came from adults (or “kidults”) who otherwise would never have walked into a kids store.

Where can you expand? New customer segments? New use cases? New distribution channels? 

Broaden your base.

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The big takeaway: turnarounds aren't about one brilliant move. They're about systematic execution.

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Thanks for reading!

Michael

P.S. I’ve added a new lecture to the schedule — talking end-of-year taxes! Link below.