How Working Hours Relate to Crafting a Powerful Culture with Stephan Aarstol with Tower Paddle Boards
People are the heart of every company. Technology, strategy, finance, and other business aspects are driven by crafting a powerful culture. The culture you have defines your ability to attract and maintain talented people. Today’s guest is Stephan Aarstol, Founder & CEO of Tower Paddle Boards. Tower Paddle Boards is direct to market paddleboard brand that has experienced significant growth since it struck a deal with celebrity billionaire Mark Cuban on the set of ABC’s hit TV show, Shark Tank. The company has nearly quadrupled in size and grown revenues near 500 percent. Stephan gives us his views on crafting a powerful culture. He knows the importance of people and shares his lessons — good and not so good. We all know that crafting a powerful culture will give you a place where you people do their best work and give them meaning in their work.
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Stephan Aarstol: The Transcript
About: Prior to launching The No Middleman Project, Stephan’s last start-up was Tower Paddle Boards. Founded in 2010 and funded by billionaire Mark Cuban, it remains one of the biggest success stories in Shark Tank history. With only $100K in lifetime sales at the time of the 2011 pitch, Cuban invested just $150K, and by 2018 Tower surpassed $30M in lifetime sales.
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Disclaimer: This transcript was created using YouTube’s translator tool and that may mean that some of the words, grammar, and typos come from a misinterpretation of the video.
Stephan Aarstol: It made a company culture where we focused on productivity tools, the identification and the use of them. So people were working at a faster clip and they were, we had a culture of identifying these tools and sharing with everybody. I didn’t want to lose that. So what we did is we went to summers only on the five-hour Workday. So, and that was when we did 70% of our revenue from June 1st to the end of September. We were going to squeeze people for time because that’s what really, the magic of the five-hour Workday is. It’s like an unrealistic constraint and you just have to get the same amount of work done and you put pressure on other people and they find sort of better means to do it. That was absolutely effective.
Intro: Welcome to Growth Think Tank. This is the one and only place where you will get insight from the founders and the CEOs, the fastest-growing privately held. I am the host. My name is Gene Hammett. I hope leaders and their teams navigate the defining moments of their growth. Are you ready to grow?
Gene Hammett: Your culture involves a lot of different things today. We’re going to look at a very specific aspect of culture that you [00:01:00] might be in control of some of the things that you can learn through our conversation with our guests will help. But also it’ll help you avoid some of the things that he had to go through to figure out what worked specifically. We’re talking about working hours, the flexibility needed to attract and retain the right talent today really does require you to be intentional about your culture, the working hours, and so many aspects that it really takes special consideration. Today. We’re going to be looking at it with Stephan Aarstol. He is the founder of Tower Paddle Boards. Now you may have seen this on shark tank. Partnered with Mark Cuban, mark invested 150,000 for 30% stake. It’s one of the biggest returns, according to Stephan of all the investments that Mark made while being on Shark Tank. But what we talk about today is about the five-hour Workday. Yep. You’ve heard it the five-hour Workday. There were some elements that really worked well for the organization, but in some ways, it kind of fell apart. We talk about what it is, why [00:02:00] it’s important, and what he learned. By creating a culture where the brand really aligns to the values of the company today, we’re talking about how working hours relate to a powerful culture with Stephen. One of the things before we get into this, I want to remind you that if you are looking for a place to grow as a leader, you want to be extraordinary. That I want to invite you to look at fastgrowthboardroom.com. What that is, is a community of incredible leaders who really understand the power of leadership.
They want to create a place for the culture to go beyond where it is today. They want the company to continue growing, and these leaders are learning to play and evolve as leaders. If you want to apply, check out fastgrowthboardroom.com. You can see what we’re up to. Who will you invite? What we believe in, what we stand for. And if you think you’re a good fit, then make sure you apply. Now, this is only available to the founder CEOs of fast-growth companies. If you apply, we can actually see if you’re a good fit through a phone call. So there’s no risk just by [00:03:00] applying, but I’d love to connect with you. I’d love to answer your questions about what does it take to be a coming extraordinary leader, just go to fastgrowthboardroom.com.
Now here’s the conversation with Stephan, Stephan how are you?
Stephan Aarstol: Good. Thanks for having me on Gene
Gene Hammett: Excited to have you on the Growth Think Tank podcast. We’re really going to dive into something really kind of interesting. A lot of people talk about work-life balance, but we’re going to talk about the five-hour workday that you implemented and some of the impact that had, and some of the dangers of it, but also what you kind of evolve to and you find out what worked for you and your company. Before we get into that, tell us about a Tower Paddle.
Stephan Aarstol: So Tower Paddle Boards was, was founded in 2010. You know, I’ve been in the online space since 1999. So this was probably the second or third business that I’ve started in my home. , we’re just a direct-to-consumer standup paddleboard company. We were funded, after a couple of years, we’d been on shark tank. They sort of called us out of the blue. We ended up getting funding from Mark. He put in [00:04:00] 150,000 for 30% stake. And since then we’ve become his best investment in the history of the show. We’ve done a little over 40 million in sales. We were sort of a poster child with Amazon at one point, you know, there’s a hard case review on us, about selling on Amazon. And now, so we did that run up and now we’ve got off of Amazon. So we’re, we can sort of purely direct to consumer and we’ve also diversified into tower electric bikes. And, tower beach club, which was a, an event space here that we sort of office out of it’s for weddings and stuff like that waterfront event space. And then we have another business called nomiddleman.com, which is kind of the, of the Amazon antidote. It’s, you know, the aggregation of all the top direct-to-consumer brands in the world, just information. And then we sort of pass freely. So those, those companies that are kind of in hibernation right now, as we’re, we’re really trying to tackle, the huge opportunity of electric bikes, rapidly growing industry.
Gene Hammett: I was out yesterday in Atlanta, Georgia. We have this thing, where people are coming out [00:05:00] when the weather’s good and, , saw probably about 200 or so plus or minus electric bikes.
Stephan Aarstol: Yeah, they’re just, they’re just booming. I mean, it’s, it’s essentially exactly what happened with our standup paddleboard business in 2010. So we can kind of see the future of this business. And we’ve navigated this before, you know, there are hundreds of brands going after the e-bike market. Just like there were. You know, 80 to 150 brands going after the paddleboard market. So, we think we’ve got a pretty good opportunity, to rise to the top of this industry as well. And the Paddle Board market or our business grew 80% last year. Yeah, that was kind of after a long fall of like three or four years. But, but we’re back, we doubled the news last year overall.
Gene Hammett: Well, Stephen, one of the things that’s interesting about your story is because you have this kind of lifestyle, product. And you wanted to attract people that were kind of into the lifestyle elements of this. And so you had this like bread idea. Walk us back to the journey of this five-hour workday.
Stephan Aarstol: Yeah. I mean, we’d had early [00:06:00] success in 2000, I think 14, we were the number one fastest-growing company in San Diego, you know, as a surf company and this, you know, and most know the award shows, it was always like, you know, VC funded biotech companies, all this technology company and this, you know, crazy little surf company with five kids in it. Is, you know, dominating the growth and everybody thought that was weird, but a lot of things were coming together. Right. You know, direct to consumer was, was hot. Paddleboarding was hot. So, and then the next year we were on the Inc 500 number 2 39 on the Inc 500. So we’ve proved we can grow fast, but honestly, we were operating this surf brand. We office two blocks from the beach and we really weren’t living our brand, which is this sort of work hard, play hard. And I felt to get us from this sort of small upstart to a really major brand, how do we do that? And I started researching what sort of these great brands do. And that was one of the things they do is they sort of live there, their brand. So you mentioned, you know, work lifestyle balance earlier. I mean, we’re a beach lifestyle company that is kind of motto is work lifestyle [00:07:00] balance. Right? So that’s really what the five-hour Workday was. , it was a renegotiation with my workers. You’re going to walk out the door at one o’clock every day.
We’re going to go from [8:00] AM to [1:00] PM straight through. And I’m going to give you your life back, but I’m going to expect you to be as productive or more productive than you were before. I’m going to try and give you the incentive of being like an entrepreneur. If you work hard, you get the benefit of this sort of extraordinary life. And really my intent year was to attract everybody that works at three times. The pace. Of everybody else in their office because we had some of those people and I wanted to just get a company with just those types of people and sort of repelling all the leap, like the slot, like, workers. So that was the premise. And we tried it for three months and then it worked well, but so we ended up doing it solidly for two years.
Gene Hammett: Well, I appreciate that. The story and the context behind that, I was made me think of Patagonia as kind of, words, like let people go. Right. The owner of that. Why did you study kind of the approach that Patagonia took?
[00:08:00] Stephan Aarstol: I didn’t, I haven’t read that book. I’m aware. Yeah. That book. And I sort of ran into that. Like after, when I w I, we weren’t writing a book on this first, I ended up writing a book called the five-hour workday. I was writing articles and these articles just were really well received. So then I had to do research to write this book, and I ended up finding that it was like, let my people surf or something where he was really aligning his brand and his lifestyle of his employees with what he wanted to do in the brand. He was. I think they’re, they’re an excellent example of a business that really has leveraged the identity of their brand. And they go all-in on it, for sure.
Gene Hammett: Absolutely. And they’ve created a force within the marketplace. They really are able to live by their values as well. But Stephan, you, you ran into some trouble with this. Where did you first realize that the five-hour Workday, just, maybe wasn’t working the way you want it.
Stephan Aarstol: Well, you know, the first year we, we grew revenues 50%, but then revenue started to come down and this, you know, this is, this was an experiment, to begin with. And, you know, in a small startup, [00:09:00] experiments are kind of a luxury, right? So you do them when you can. But revenue started to come down and I started. A little concerned about it. But you know, productivity seemed to be fine, but I had a three-month period at the beginning of 2017. So almost two years into this where I lost four of my nine employees within a 90 day period. Now, one of them I fired that was my fault, but the other three left. So these, these are young kids in their twenties that are being paid very well, that have a five-hour Workday and they’re leaving. And I just. And these were some of my best employees too. And I’m like, it’s not working. So my whole hypothesis that this would attract and retain these best workers didn’t work. I mean, we were able to attract good workers before we were doing this, just because we’re a beach lifestyle company. And we sort of had a tech angle with the direct consumer and, you know, we had the shark tank, Mark Cuban thing. So, but we weren’t retaining them. And I thought this would be a way to attract and retain them.
It didn’t ha it had zero effect. Like people were not coming or staying because of the five-hour Workday, [00:10:00] which was shocking to me because if I’m in my twenties and I have a five-hour workday making pretty good money for a fun company, I’m not leaving that company. Right. So that, that hypothesis got proved wrong, basically. And I think when I really sort of started looking at it right after those people left, I was like, I think we broke the company. We had this startup culture where we’re working in the trenches together, you know, as a startup. And when you do that, you form these very strong bonds with everybody in the company. Right. Very hard to leave a company like that because you really are leaving the people you’re working with, not the company. Right. So if you’re working with your best friend, it’s hard to leave that company. But when you start walking out the door at one o’clock every day, you know, your, your work week is better than most people’s vacation week. You know, when you roll out of bed, you know, noon in Cabo or whatever. So. People got a much bigger outside life, which was great for the, for the people, but it wasn’t so great for the company because then they felt real, it was easy for them to leave. So we, we weren’t retaining them. We broke the company culture. Those were the [00:11:00] downsides many positives though.
Gene Hammett: Well, when you and I talked about this a couple of weeks ago, to be able to bring you on the show, I was trying to understand, like, this theory seems logical. But some shifts happen probably in your market as well. Some shifts probably happen in breaking the culture. It’s a combination of things, but you ended up finding a kind of a happy medium. What, where, where did you end up landing on your typical work?
Stephan Aarstol: Yeah. So when we got rid of the five-hour Workday, it was kind of like, that’s the awful a little bit. I was like this isn’t working. They feel entitled to this five-hour workday, we’re going to get rid of it. And we also got rid of profit-sharing because that was a little bit of a nightmare at the time, too. But there were things that we’re working really well about the five-hour Workday. It made a company culture where we focused on productivity. The identification and the use of them. So people were working at a faster clip and they were, we had a culture of identifying these tools and sharing with everybody. I didn’t want to lose that. So what we did is we went to summers only on the five-hour Workday. [00:12:00] So, and that was when we did 70% of our revenue from June 1st to the end of September. We were going to squeeze people for time because that’s what really, the magic of the five-hour Workday is. It’s like an unrealistic constraint and you just have to get the same amount of work done and you put pressure on people and they find sort of better means to do it.
That was absolutely effective. So I still wanted that. But then in the off-season, we would go back to start-up hours. So we would have sort of a blend of this startup that also had this sort of, you know, lifestyle, focus and, you know, productivity focus. And we did that for. I want to say like three years, but the company’s revenues continue to decline. And as you sort of mentioned that there’s a lot of factors that go on in a startup. It’s not like everything. The drive up and the drive down was based on our five-hour Workday, you know, magic bullet. There was there are market conditions. There’s sort of the Amazon effect. I mean, retail has really changed for online brands.
The up of direct to consumers, there’s a lot of direct to consumer companies that went out of business. I mean, we’re still in [00:13:00] business and we started 10 years ago. I think that’s a pretty good run in and of itself. But you know, we had an up and a down our, we peaked at about seven and a half million in 2019, we were at 2 million. We had a defaulted loan of about 1.1 million. We were looking at going out of business, going into the pandemic. And we had, but we had diversified that, that prior year on the way down, and we went into tower electric bikes and you know, a beach club. And so then last year, Here we doubled revenues. We’re back on this growth trajectory. So it’s working well, but in 2020, during the pandemic, you know, facing bankruptcy and the banks taking all my houses and stuff, I finally said, okay, well, we can’t do the five-hour Workday this summer. We’re fighting for our lives. I need you guys to take what you’ve learned with that productivity. And you’re going to have to do two days work in one day and let’s, you know, let the company survive.
Gene Hammett: Stephan, I’d love for you to kind of reflect back on what have you learned about a culture that applies to us business owners, [00:14:00] running fast-growth companies, trying to extract top talent, retain them. What could you share with us about what you’ve learned through this experience?
Stephan Aarstol: Yeah. I mean, and really that was the focus of this experiment because when we started, it was 2010 and I would put a Craigslist ad out and just get incredible people. Right. And so I was getting these extraordinary talents. That’s really why we were the fastest-growing company. It wasn’t me. It was these incredible people that I was able to hire right out of school. Cheap. And then, you know, in 2014, 2015, as the market heated up, it was harder and harder to find these incredible people. Right. And so that’s why I did the five-hour workday. I’m like, I got to find those incredible people again. So there’s the external market, you know, and the job market has just been crap. It’s actually now really good. Yeah. I just posted a job in the last two weeks. Again, I have three incredible people that would hire all of them. So there are external factors there, but really with the company culture, In my opinion, you have to find alignment with your brand. That’s why you’re going to attract people. So [00:15:00] you’ve got to have an interesting company that people sort of believing in the mission of this company, or they’re so aligned with what you’re doing, that they’re sort of avid fans of this. It doesn’t matter. Cause I can hire people, you know, in the early days we hired them for 36,000. I could hire them. I can give him a raise all the way up to 80,000 and somebody would leave two years later. So they’re happy with 36. They’re not happy with 80. So money in today’s market and at least with the people that we’re hiring, which tend to be, I guess you would say like millennials, they don’t care about money. Money has no, no value to them. Basically. They don’t need it. I don’t know. Maybe times are good. And then. How much they work, you know, it’s, you can be Tesla and work people 120 hours a week, or you could be, you have no power paddleboards and work on 25 hours a week. They don’t care about that. They want to go to a company that they’re interested in. So this has really reinforced that to me. And I think it’s the same on the customer front. You know, you mentioned Patagonia. Why is Patagonia has? You know extraordinary success when they’ve [00:16:00] got a lot of, limitations, weird things, they do that. They have to do that other companies don’t because they have that alignment with their brand and their customers. You have to have that with your employees, but you also have to have that with your customers. And I think in today’s world, where there’s, you know, a hundred brands of soap and toothpaste and everything, it’s, it’s all the more important if you don’t have that. You basically, don’t have a long-term sustainable competitive advantage.
Commentary: Second, Stephan just talked about the need to hire incredible people. Well, not only do you want to hire incredible people, but you want to create a leadership and culture space that allows them to grow and develop. You want those people to feel a sense of ownership. You want them to feel connected to the mission. You want them to feel like you’re being transparent. Open. There are so many things that you have to manage. If you’re concerned about what those things are. Take a look at some of the episodes we have here on the podcast, many of them around, how do you create the feeling of ownership even when you don’t have a financial stake in the company, you can do this and inspire this as a [00:17:00] leader. A lot of the content we have here is for you to be an extraordinary leader, create the impossible. So make sure you check out the free content. Now back to Stephan,
Gene Hammett: I appreciate you’re giving us that insight, looking back, Stephan. And, I want to make sure we’d spend a little bit of time on that. You said that you were the number one investment. I don’t know how you track the numbers, but, Mark Cuban had put in 150,000 for a 30% stake. He had gotten back probably his money. Many many times over, tell us just a little bit about kind of your working relationship with Mark.
Stephan Aarstol: Yeah, it’s been pretty good. And I think that’s because we’ve, we’ve done well, and it was set up such that, you know, I was taking out a small salary and I was. At that, you know, $60,000 a year, and the rest of it, I had to take out distributions. So the net of that was I ended up, , you know, paying mark out well over a million dollars in dividends. And he still has his percentage stake in the company, but I was just like a cash machine to him, every, you know, report weekly report to him by email. You know, I’m like, yeah, we sent you another [00:18:00] $20,000. Like, it’s just like, this is the greatest company ever, you know, in doing that because of the way we were set up, we were actually sucking a lot of money out of the company and it got us into some financial woes. , so we’ve restructured in the past year into, sort of being taxed as a court. entity. So we can basically retain earnings better because I know this is my first time going, going through this with a, with a high growth company and with an investor. And it definitely learned some lessons there, but, you know, Mark’s been very helpful to us. It’s not like he’s going to, you know, if I ask him, Hey, mark, you know, introduce me to the, you know, the CEO of. Costco or whatever. He’s not walking around doing introductions. He doesn’t want to be used for that. You know, he doesn’t want to be asked favors. He doesn’t want to be asked for money. He doesn’t want to be treated as an ATM for sure. But he’s when we signed the deal, I was like, Mark, I’m going to use your face on the cover of our website. And he was like, yeah, of course, you can use my, you know, my brand to grow your thing. I just don’t want to do any work. This is what you know, and, and, but leverage me. [00:19:00] How do you think is intelligent? And then I use him and what’s nice is when you’re an entrepreneur. You don’t have anybody above you. Right? A lot of people think like, oh, this is the greatest. I run my own ship here, but I actually liked the corporate world where I could bounce stuff off of the person above them. Because it’s just a more comfortable thing to do. It’s very uncomfortable to make that final decision on a lot of things. And, you know, I’m learning how to do that better and better over the past, you know, 15 years, but it’s very uncomfortable.
So now I kind of have this hybrid where, you know, I have, you know, the majority stake ownership of the company so I can do whatever I want, but if I really want somebody’s opinion, I throw it over the wall to Mark. And, you know, he gets back to me in 10 minutes in the middle of. And give me, and it gives me this real opinion. So that has been invaluable. I’d say,
Commentary: Let me pause here for a second. If you’re listening to this on your phone, you’re in a car. You’re, it’s a workout. I’d love for you to consider checking out what we have on YouTube. We have some content that’s only available on YouTube. Just go to genehammett.com/youtube, the channels growing. We want to make sure you don’t miss an opportunity to become [00:20:00] an extraordinary. Go check it out now at genehammett.com/youtube.
Gene Hammett: One of the things I know about from reading articles and whatnot, and I’ve actually engaged with him a little bit through text messaging. When I used to write for ink magazine, I reached out to him cause I knew he texted people and I was like, can we do an interview? And he’s like, sure, do you write for print or online? And the answer was online at the time. And he goes, come back to me when you write for print, but Stephen, you have had to. Engage with him almost exclusively through text messaging and maybe some emails. Is, is that fair to say?
Stephan Aarstol: Well it’s just email, so I don’t have his phone number and I’ve never spoken with him on the phone or never texted him. You know, he’s been out here a couple of times in person, we did a follow-up show called beyond the tank. When we rolled out our tower electric bikes, you know, our first bike, we took that up to the Sony studios and I got them out for like five minutes out of filming shark tank and, you know, just quick videos of him. And then he runs back. But our communication has all been [00:21:00] email. And so it’s interesting that he would say, okay, well, I’ll give you the interview. If you’re writing for print, he’s looking for a leverageable moment here. Right? He’s very high leverage. And so with us, it’s just emailed communication. And I think he does that. He likes to sort of the asynchronous nature of email communication. Like I can send it whenever I want. I can spend an hour writing an email to them. He can. Feel these emails at 11 o’clock at night and just, you know, pop through them real quick, as opposed to, I’m going to occupy as time on the phone, we got to schedule a phone call. He doesn’t want to do a phone call at all. Unless, you know, there was like $10,000 involved or something I’ve heard of Sydney in unless he’s writing a check to somebody or somebody is writing a check, that’s the way to get him on the phone. But other than that, I mean, he’s in even just shark tank companies. I think he’s invested in over a hundred. So, how do you do that? It’s sort of mind-boggling to me that when I email him on a Saturday, he’ll respond in 10 minutes. Like how does he do that with a hundred companies? And I think he’s, he’s just got this very, you know, it’s [00:22:00] got to fit in his little square box of how he wants to communicate and I’ve actually adopted that. I mean, I do everything by email. I try not to get people on there. Because you can’t sort of holding them to what they said. If you have email, you have a perfect recollection of what went on and the, you know, for the past 10, 15 years that you can go back on and that’s much more valuable. , to me, you can, you can communicate a little more precisely and hold people to what they say to.
Gene Hammett: Stephen I wanted to just kind of take a look at what the relationship was there with Mark. I really admire your success, your ability to create something, capitalize on a market, you know, through the Paddle Boards and now the electric bikes. And I really appreciate you sharing that insight here with us. All right.
Stephan Aarstol: Hey, well, thank you. I appreciate it.
Disclaimer: This transcript was created using YouTube’s translator tool and that may mean that some of the words, grammar, and typos come from a misinterpretation of the video.
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