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Malcolm Lui:
Malcolm Lui here. Welcome to Eversprint.com. Today we're speaking with Geoff Habicht, the President and Co-Founder of Smoking Vapor, a fast growing company that designs manufactures and distributes lines of premium electronic vaporizers for the electronic cigarette and cannabis market. We'll be talking today about how he increased his company's revenue 454% from one point two million in 2014 to six point eight million in 2017. Welcome to the call Geoff.

Geoff Habicht:
Thank. Glad to be here. Thanks for having

Malcolm Lui:
So Geoff how do you do it. How did you boost revenue 454% over three years?

Geoff Habicht:
Holistically, you look back on it and you're like wow like where did we come from and how did we get here. It's I think at its core as a business we've always focused on the consumer and making sure that we understood better than anybody else in our market what the consumer wanted. And for smoking vapor as we've grown and to design our own products the rest of the industry was chasing the vaping culture right. These are the extreme vapors right that one. Bigger clouds and more vapor. And so that's where a lot of the focus and engineering and design stand point for other businesses went. And I think one of the things we realize is that we were former smokers and we quit smoking by vaping and there's a billion of those people on the planet still and how do we help those people quit.

Malcolm Lui:
When you say we. Who are you referring to. Geoff

Geoff Habicht:
Yeah. So it's myself and my business partner Amir Hancock. So yeah. So I met Amir through a mutual friend back in 2012. He had at the time had started smoking paper as a small retail business but wanted to expand because he had all these ideas and he's like how do I sell how I make my own products and sell them to other people because I know a lot about the consumer and what they want. When he at the time I was selling another business and I ended up he gave me anything and I quit smoking. I'm like there's something to this

Malcolm Lui:
Fantastic. How long does that take from the time you start using the second you just gave up cigarettes.

Geoff Habicht:
Completely it took three months for me

Malcolm Lui:
Ak

Geoff Habicht:
And what's crazy about that is that I had been you know a smoker for 15 years. So it was significant. I tried to quit a dozen times but every time you go out and meet up with your friends and somebody pulled out a cigarette you like. It's a hard thing to just stop. No matter how hard you try. But and that when that happens in 2012 it's you know here we are at the end of 2018 and I haven't had a cigarette since and nor do I have any craving for the

Malcolm Lui:
Now do you think your customers are buying your product for the same reason to quit smoking the traditional cigarette or are there other reasons why they're buying your product.

Geoff Habicht:
Yeah I think what we have is to two bases of our customer right. There's the guys that are already vaping that are looking for something that's less obnoxious than the other large vape devices on the market. And there there are people that are looking for an alternative to smoking right. I mean it's a social habit. They've tried to quit smoking and they can't. So this is a viable alternative. And there's. And that's the growing segment of our market and that's really where when where we focused what is Who are the people like us that wanted to switch to something that was didn't make a stink. You know that was a lot less intrusive and it was much safer for smoking. And that's where that's really where we focus

Malcolm Lui:
Okay so now how much of your business is coming from from selling the devices to vaporizers as opposed to selling the the liquid for them to vaporize.

Geoff Habicht:
Well we're a hardware manufacturing business so we have engineering design hardware so we don't manufacture any liquid. Our retail stores are now only about 3 percent of our business. So we're getting out of the retail space so we are up we are focused and we're unique in that and because almost every other hardware manufacturer is a Chinese based company in our industry

Malcolm Lui:
Are all your sales just come from people buying your products repeatedly or are you just acquiring a huge number of new customers who are buying your product for the first time in their in the keep on using it.

Geoff Habicht:
Yeah it's a growing market. It's about exposure. When we started making our own own products when we went through made the mistakes of using contract manufacturers and it's what everybody has to go over you find somebody can make this product for you bring them engineering design and over the course of two or three years we be kept making really cool stuff but it kept getting knocked off or being you know sold out the back door or under somebody else's brand and or a variety of different reasons for that. And so it was really hard for us to control our own design and our own IP. So in 2015 we actually we actually built our own facility engines from the ground up to the capital equipment hours the design hours. The factory only makes things for our business. And by being able to do that we could also control our sub component suppliers so we can make sure that the quality control is exactly what needed to be. And that was a huge huge lift for us because once we could control all aspects of manufacturing process we could build a brand that matter to our consumers. And so the market is so vast you know the electronic cigarette and both the cannabis market vaping in general is in its infancy so a lot of our growth is acquisition of the users.

Malcolm Lui:
Ok how long do they stay with you. Once you are buying your product

Geoff Habicht:
Surprisingly We've had customers that have been with us since the beginning you know 9 10 years because it's that you know right wrong or indifferent since the beginning of the dawn of man. Right. People have been smoking.

Malcolm Lui:
Right.

Geoff Habicht:
Native Americans are Egyptians. It happened to be. And so it's kind of a part. I think there's something ingrained in humanity but the it's a part you know it kind of becomes a part of culture and smokers smokers have an ostracized rightfully so over the past decade because of how bad it is for them and the people around them. And but it's so difficult to quit. It left a lot of people in a place where there's nothing they could do. So finding a viable alternative like vaping was it made a huge difference in my life and I think it's the customer. But you know people have made that change and others smokers have seen their friends switch to vaping. It's it's created this word of mouth effect and we're seeing more and more people adopt it every day.

Malcolm Lui:
So you're you know a lot larger for your growth is coming from acquiring new users but yet you have a pretty significant repeat business as well. Why are why are your customers buying your product over and over again why aren't they just sticking with the with the their latest purchase they need from you and just keeping on using it going forward. What's motivating them to upgrade or try different products.

Geoff Habicht:
I think we really continue to release new products that are improved from the last one the technology is so new that you know every 90 days we have something new a eureka moment where we've been able to increase battery life with bile reducing size or you know improve the flavor profile or create a device that we'll know is more fashion forward. Or I mean think about it like an iPhone right like you really think that new phone every single year people that you know are an iPhone user they come back and they might about six. Now they're going to buy an eight you know. So the same thing happens in the vaping industry. It's for people who were heavy smokers that switch to vaping your vape device kind of becomes you use it you know regularly throughout the day. And so it's something you know that it is easier to use or simpler to refill or has a better quality. You know people are looking for those improvements as the technology advances

Malcolm Lui:
How much of your growth over the past three years came from acquiring new customers as opposed to them just buying more and more of your product your existing customers just buying more and more of your product.

Geoff Habicht:
I I think almost all of our growth has come honestly from now I would say 80 percent new customer growth. But part of that also is that you know somebody who is using a device that have lower quality from another manufacturer something he may have bought at the gas station would say those people are converting to you know higher quality products like the ones that we produce.

Malcolm Lui:
I take it you never had the case of your products blowing up while Sony was using it. As I read in the news a few months back

Geoff Habicht:
No no a lot of things you hear in the news are about it. It's not the devices it's the batteries because those larger vape devices use lithium ion batteries typically called ateam 652 or 21 700 which is just the size of the battery. And if the batteries get wrapping gets damaged all they can spark or vent if they get too hot the devices that we manufacture are much smaller compact devices and they all of our devices have PCB boards or printed circuit boards inside them that have short circuit protection overload production all of those things to prevent any of those things from happening. So when you hear about those things they typically are what's called an unregulated device meaning it doesn't have a chipset in it that would prevent that from happening. But again our devices we don't use batteries that are of that size or scale that could ever cause an event like the

Malcolm Lui:
Is that a key criteria when people are buying your product safety or they don't really think about it so much.

Geoff Habicht:
I think it's becoming far more important. You know any time that you're you know buying a consumer product it has to you know the companies manufacturing them have to make sure they go through the proper you know consumer product safety protocols to ensure that the users are safe. And I think we pride ourselves on is not only the quality control engineering but of making sure that we're doing things that are always in the best interest of the consumer.

Malcolm Lui:
Yep for those consumers that stopped buying your product to go somewhere else. And then they came back to give you any reasons why they came back to you. Well for them what they did he gave you reasons why they left and then give you reasons why they came back.

Geoff Habicht:
Yeah sure there was a period of time where we weren't releasing new devices like we were you know changed when we were building our own manufacturing facility. As a of you ebb and flow as far as what we were able to do back then because we didn't raise capital when we built this business it was all bootstrapped. So there were times where we had to cut back on product development or cut back on production. And so or we missed the trend of getting creating our own liquids and things like that. So people moved on to bigger devices because they wanted certain flavors or things like that that they couldn't use in our older devices. But then they you know we released the new device and then they come back and more. I'd be out the more often than not people come back and stay with us because of the customer service

Malcolm Lui:
Ok. Yeah for sure with that as you know we've bought stuff from from the vendors on Ali Baba. And you know like I can say we've

Geoff Habicht:
Yeah.

Malcolm Lui:
Been thrilled about the experience when things don't work out.

Geoff Habicht:
Yeah. It's I think what. And I'm active on you know in our industry it's big as far as like the consumers are on the Reddit chat board. You know the industry associations and so personally myself and his partner are active in engaging with the consumers on those forums that are you know limited free time because it's important for us to keep our pulse on what's going on in the market and hearing something that a consumer might have had an issue with so we can address it right away. And I think that's something that hardware companies in our industry don't do because like you said most of them are you know it's overseas manufacturers. So as you know a very proud American company that we design engineer manufacture recreant we do all that stuff here.

Malcolm Lui:
Yep

Geoff Habicht:
And our customer service is here and so we stand behind everything 100 percent. So customers know that they ever have a faulty device ever have a problem with anything that Kampala's had become a day or night we'll take care of them. We don't you know we now we're using things like Instagram and Facebook Instant Messenger to give them instant access. Think about it as a consumer you're if you have a problem you have to send an e-mail and wait a couple days

Malcolm Lui:
Yep.

Geoff Habicht:
Or you got to pick up the phone and call customer service and talk to a robot. You can finally get to the person you want. So giving them access to US anywhere Instagram Facebook YouTube the chat boards and getting a response within minutes as opposed to within hours has really started to set us apart and to introduce us as a company to those those customers you know they may have gone into a shop and just bought our product from a vape store or a tobacco shop or something like that and they don't know the first time they pick up our product that you know who we are as a company and what we do. But the second that they have that interaction with us that word of mouth spread and a big part of our awareness growth has been through that word of mouth and predominantly from an advertising marketing standpoint we use Instagram just because that's where people are right now and learning about you know the new devices and new products that are coming up

Malcolm Lui:
Interesting. So you're finding your new customers either through word of mouth primarily. Is that your number one source. Word of mouth referrals. Or is it coming from your Instagram marketing efforts.

Geoff Habicht:
I think it's about 50/50 because

Malcolm Lui:
Ok.

Geoff Habicht:
On Instagram we've actually done a really good job of you know we didn't a lot we don't we haven't we started to know a little bit. But in the beginning we didn't pay any influencers. There are a lot of people who have Instagram pages with a thousand followers one point five million followers whatever the case may be and they have a lot of powers for touching the user base in the community. We would just send them free product and they tell us what you think honestly

Malcolm Lui:
It

Geoff Habicht:
You know we were really proud of the devices we were making and were like. And a lot of those people you know were became huge advocates for us and that advocacy really started the word of mouth. So I think it's one goes hand in hand. The other

Malcolm Lui:
It. So the people who are on Instagram following your your channel. Who are they. I mean like for me Instagram is not something I personally use but your market obviously isn't. Who is your market that's living on Instagram. That's hanging out there.

Geoff Habicht:
Yeah I don't necessarily know if it's you know they're hanging out. I think there's the age group of like you know I think it's past froths in art history. It's kind of it's the 25 to 35 that are Instagram obsessed a

Malcolm Lui:
Ok.

Geoff Habicht:
Couple

Malcolm Lui:
Yep.

Geoff Habicht:
Taking pictures of their food and the like.

Malcolm Lui:
Yeah.

Geoff Habicht:
And but they're into fashion and style and what's new and what's not. And as that that segment of the pop you know we kind of watch those trends and try to understand what's going on. It's the reason why with our latest releases of products we've really started to try and focus on fashion.

Malcolm Lui:
Ok.

Geoff Habicht:
You know we in our industry products are very utilitarian right it's like industrial aluminum and black and you know maybe you might get up brushed paint you know

Malcolm Lui:
Yet

Geoff Habicht:
That's still aluminum. And so we started to design our products in a way that we like what it's you know what if I could take a fabric that was on a pair of Christian Louboutin shoes and use that on a one of our newest iPod devices. You know how would that play with a demographic that you know is socially smoking let's say that's looking for a better alternative.

Malcolm Lui:
Right.

Geoff Habicht:
And so we're trying to find these unique avenues that make us different and stand out. And it's been really interesting on how that's set us apart from everybody else in the market. And it's also talked earlier about people that come back and really buy for some of our smaller devices it's actually created multiple users meaning people who don't own just one me pod they own four depending on the Alps that they're wearing that they're going to take out

Malcolm Lui:
Can you share with me Hadas

Geoff Habicht:
Yes sure. So the army pot it's a vape device that uses a small pod as opposed to a tank. So vaporizers in general come to the battery and then a tank and then you fill the tank with the liquid you push the button on the battery heats up a coil that vaporizes the liquid. That's traditionally how everything works. The pod systems are different in that they're much more compact they're much smaller. Typically instead of filling a tank and having to replace a coil and all that you just fill up the pot. The pod lasts for a couple of days. When you're done with the pod you toss it and get a new one. And so it's much simpler it's much easier on the go. They typically don't produce the same amount of like vapor production. Would got a big one but you users use a higher nicotine level in a pod system than they would in a big shaped device. So they get there they're craving satisfied but they don't use it as often.

Malcolm Lui:
Right. So what's your thinking behind not going aggressively into the E liquid market as well and selling that product which is a consumable and they'll be buying it again and again from you. What are you thinking behind not going to that market right now.

Geoff Habicht:
It's in the pod system market preferences the pods is the market in general is a lot of the industry is starting to transition there because users want something that is simpler and easier to use especially the vast majority of the smoking population that is transitioning to vaping. You know it's a demographic that starts to push past 30 into 35 40 45 and so they're looking at presumptive synchronicities and they're in the pods as the market you have guys that do make their own liquid. So the pods come prefilled that would be like Apple. Right so Apple Computer for instance you. It's their own if you will use their device you have to buy their juice. They get to buy things that work in their architecture and then there were more like Android. Right. So our devices come with refillable pods so you can use any liquid on the market which gives users a much better value over the long term because they could buy a bottle you like with it and still are pods it costs them a third or fourth of what it would cost to just buy prefilled. So we give the users that choice. And the reason we didn't get into the liquid market is we wanted that open system and we're not experts in it you know as soon as I start getting into chemical compound being and you're talking about needing the GMP facility pharmaceutical grade laboratory if we're going to do something at the company we're going to do it the right way.

Geoff Habicht:
And as you know engineers might lack of engineering so as product you know consumer product people we wanted to stick with our strengths and one of the most important things I think our business coaches tell us is focus right take. Don't try to do too many different products don't try to go into many different categories and it's easy when you're starting a new business when you have a product or service and a category to see ancillary products or ancillary services. It's like as an opportunity to run down those rabbit holes. But as a smaller business it's one of the most valuable things for us is focus because you have limited resources. And while it may look like all every bright shiny object that you want to go grab in your repertoire is important. It's it will distract you and it will take away from winning in your market or your niche. And so for us you know we make we all make all kinds of devices we make smaller compact devices and our niche we've stick to fashion for devices and we stick to hardware because liquid's not our strength.

Malcolm Lui:
Right.

Geoff Habicht:
And instead what we did was we partnered with companies that we've met throughout industry trade shows and networking and things like that that we saw were doing it the right way. Guys that are doing the right manufacturing that are complying with all of the regulatory environment. And we we partnered up with them and said look we'll promote your liquid as part of you know as partners with our system. And if you'll promote our system when you're promoting your liquid and forming those partnerships with our industry gave us a much broader reach than trying to make our own liquid right because then we would have been one you know the liquid amongst a million others and we weren't experts in it so we'd be trying to fight an uphill battle. Instead we went out and found experts that were already spending all the money on marketing and we tagged along and the and that gave us a lot more exposure and allowed us to focus on our own core business.

Malcolm Lui:
Yeah makes sense. Before you said your growth of your sales is driven by two things referrals and from Instagram a little bit more about how you might have accelerated the new use acquisition from those two channels. Is there anything you did on the referral side to encourage it. Anything you did on the Instagram side to get more people engaged in seeing or hear your new products

Geoff Habicht:
I think yeah. There's a couple of parts of it. One is we excuse me we started going to every trade show we could that was industry specific to us and not be to be shows only but also the B2C shows. So it put us in front of consumers that were looking for what's new and what's hot that helped us build up not only like an e-mail database but it also allowed us to share our Instagram handle at all of the shows. So it got people to fall into so we could keep in touch with them after the show and then the B2B shows allow us to do networking to meet the distributors right. Who are the guys that are servicing all of the places where I really want my product sold.

Malcolm Lui:
Right.

Geoff Habicht:
And we it was important to be there as owners a lot of times. It's like Hajaj tradeshow team or send them out. And now as our kids grow we do have a trade for team owners Amir and I still go as often as we can to the shows because you need the owners of the other businesses and you form relationships and it builds. It takes time but you build a core that when you release something new you know you're going to to hit the consumers because they've seen you and you have access to them and you know you're going to be able to get it into the right distributors hands because you've learned about who they are and how they operate.

Malcolm Lui:
Right. OK. How on the referral side. What did you have any programs in place any contests any promotions encourage people to make more referrals of your product.

Geoff Habicht:
Yes certainly. There was a time and most industries can still do this early on in our. You know I go for a year and a half two years ago you could still do like giveaways right. So we would do contests on Instagram like you know share this post with five of your friends like this feed you know leave a comment. Tell us what you think and be entered into the contest and to win to win FREE products. Something like that once in 2016 once the FDA regulations came through in August the regulation guidance basically told us we can no give way free products so a lot of that is stopped but it shouldn't deter other industries. Right if you're not selling age restricted product you absolutely should no leverage contests and giveaways and not just on your own Instagram page but also through the influencers in the industry. Send them 10 free products and tell them that they can do a giveaway

Malcolm Lui:
Right.

Geoff Habicht:
And that will really start to drive awareness and part of the giveaway requirement be that they have to like and share your page as well.

Malcolm Lui:
Right okay good. What are the trends that you're seeing that you expect to unfold over the next few years. And how are you positioning your company to either take advantage of them or perhaps get out of the way if they are a negative trend.

Geoff Habicht:
Yeah. That's. I guess there's a lot of different ways we could go with that question. First and foremost for our industry. There's two sides one the electronic cigarette side. There's in the U.S. There's FDA regulation that's coming through. Right. So we have benchmarks and milestones that we have to comply with every couple of months. Something else comes up it's a little bit more stringent as we get these milestones going towards premarket approval process in 2022. Basically it'll get to the point where we're not allowed to release the product to the market unless it has pre market approval from the FDA that's in the U.S.. So strategically we've been really building our international business over the past year to mitigate our risk associated with the costs associated with launching new products in a regular regulated environment. And then we're making strategic investments in compliance officers and the right legal partners and things like that to make sure that we have state ability over the long term in Europe we were already compliant with all of the European regulations and so it's kind of for us to continue to grow that business is really important for us from a studio standpoint.

Malcolm Lui:
Yes I could see that the FDA regulations are going to slow down your new product releases but at the same time I think it makes it more difficult for new entrants to come into your business come into your industry as well

Geoff Habicht:
Yeah we are huge advocates for the industry we're also very much in favor of logical and responsible regulation right. Meaning that the guidelines and rules we put in place to not stifle innovation and to allow companies that are doing it the right way to be able to get through the stage gates to get new products to market to help benefit public health and the consumer that doesn't exist right now the way that the current regulations are written is basically treating us like tobacco and there's no tobacco on any of our products but yet we still have to pay here. It's a long story for another time. But but yes I think smart logical and responsible regulation is important for industries in order to help companies that are doing it the right way like ours as we grow to you know if you're doing it the right way and it keeps out the people who aren't. Another thing that we had really done to diversify. That's why we got into the cannabis space about two years ago in 2016 when all of this stuff started going on we were like Well we look at what was going on in the candidates market. It's like the technology didn't exist. You know it was pretty terrible and we thought you know what we can make some modifications and really know cater to that demographic too and not have any of the deal with you know a lot of the issues that are going on as quote unquote a tobacco product. So we were able to adapt some of our technologies for that space. And you know we make the picks and shovels for the green gold rush. You know we don't touch the flour we'll see oil.

Malcolm Lui:
Right

Geoff Habicht:
So we're not limited by anything. So we that's why we started to get the announcement was for diversification purposes. And we're fortunate that because we don't touch any of the flower oil. You know we're kind of relatively neutral. You know we can ship across state lines all over the world. We can make products that are technology right as opposed to you know regulated

Malcolm Lui:
Dtc going going ahead that the bulk of your growth is still going to come from the cigarette market or is going to be coming from the cannabis market.

Geoff Habicht:
It's going to be it's both. I mean they are trying to get the markets growing globally as well. But Canada's market has taken off like a rocket ship and the Kansas market hasn't adapted the advances in the technology as quickly as the industry has. So because of that there's still there's still a lot of older technology being used. We have we have some new patents that we're getting ready to type the products that we're getting ready to release that we think will really catapult us into the cannabis business. And for us our cannabis market is very much an OEM based business right now. It's not a branded to consumer business and we're using our technology and we're selling products to the growers or the extractors that are you know growing flour or extracting oil and we brand it under their labels and then they sell it

Malcolm Lui:
Right.

Geoff Habicht:
And it's just because the in that space to get into the dispensary it's just a different distribution channel. But we have the technology we have the manufacturing capabilities. And so it became a really good fit for us as we as we developed new technology.

Malcolm Lui:
Right. And it goes back to your strategy of finding the experts in whatever you're looking to accomplish

Geoff Habicht:
Yeah

Malcolm Lui:
And

Geoff Habicht:
Absolutely.

Malcolm Lui:
Have them do it for you.

Geoff Habicht:
Know

Malcolm Lui:
That makes a lot of sense. Geoff you share a lot of fantastic ideas and insights as to how you grow your business. For the listeners out there interested in doing business with smoking vapor you either as a consumer of your products or may be interested maybe doing some sort of strategic alliance. What's the best way for them to get in contact with you or your team.

Geoff Habicht:
Yes sure they can reach out to me directly. My email is Geoff G.O. at smoking as I'm okay I enjoy energy vapor com so Geoff it's making their production feel free know me or it just called our customer service number which is 800 7 6 8 9 9 8 2 and somebody can transfer them over to me and we're always looking forward to speaking with other business owners understanding the challenges they're having and and things that maybe we can share. We're looking for business partnerships as well as our business grows. And we've been very fortunate that the growth from 2014 to 2017. You know from 2015 to 2018 we also grew again and we made the 5000 now 3 years in a row and we're looking forward to continuing to grow our business and the best way to do that is to continue to build our relationships with people in our own industry and people outside of that so that we can continue to be better.

Malcolm Lui:
Yeah it really makes sense it's being able to leverage other people's expertise. You know really helps you grow more rapidly.

Geoff Habicht:
Yeah. So.

Malcolm Lui:
Yeah. Thanks so much for joining us today Geoff and sharing how you grow your company so fast. We've been speaking with Geoff Habicht of Smoking Vapor about how he grew his business 454% over three years. To listen to other interviews with other fast growing companies or to learn how we can increase your firm's high ticket sales through automation, visit Eversprint.com.

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