Entrepreneurs

The 31-year-old CEO of $600 million RXBar once fired his own mother from the company — here's why

RXBAR co-founders Jared Smith (left) and Peter Rahal
Courtesy of RXBAR
RXBAR co-founders Jared Smith (left) and Peter Rahal

Peter Rahal, the 31-year-old CEO of natural protein bar maker RXBar, turned an idea for a simple and healthy snack into a company with millions in revenue in less than five years.

In 2017, Kellogg acquired the Chicago-based business for $600 million.

"I have financial freedom. I'll just say that," Rahal told CNBC's "Power Lunch" of the deal, declining to specify exactly how much of a windfall he's come into.

To turn RXBar into a half-billion-dollar company, Rahal and his childhood best friend and co-founder, Jared Smith, 32, spent countless late nights, early mornings and weekends running the business — which sells meal bars made primarily of egg whites, dates and nuts — out of Rahal's parents' Illinois basement.

"Jared and I didn't go on f---ing vacation for four years," Rahal tells CNBC Make It. "Every weekend was occupied for work, and we were on call. We were pretty intense.

"The decision to go on vacation on the weekend or take your girlfriend out to dinner, that comes second to your customers," he explains.

In an early iteration of RXBar's packaging, Rahal's cell phone number was even printed on the back, Chicago Magazine reports.

The devotion has paid off: RXBar saw $600,000 in sales in nine months of 2013 after launching, $2 million in sales during 2014 and exploded to an estimated $160 million in sales in 2017, according to the publication.

Along the way, uncompromising focus on detail has been key, Rahal says. For example, the team recreated the recipe for the coconut chocolate flavored bar 250 times.

"If a product doesn't meet our high standards, we won't ship it. Period," RXBAR's website proclaims. "'Okay' is never good enough."

It's a mindset Rahal has held since the company's inception. In fact, he's so serious about quality, he even fired his mother from a job labeling bars in the early months of the upstart.

In 2013, Rahal and Smith were making the bars themselves and packaging them with labels made on Microsoft PowerPoint. They would print labels on adhesive stickers at FedEx Kinkos and stick them onto prefabricated packaging for each individual bar.

"The biggest pain in the a-- job was peeling those labels, applying them to the front and then taking the back [label], peeling that and applying it to the back," Rahal tells CNBC Make It.

Since RXBar — which the co-founders started with just $10,000 — avoided raising money from outside investors, Rahal and Smith turned to their moms to keep labor costs low.

Peter Rahal at age 2, with his mother, Lynda, and Rahal and co-founder Jared Smith in 2013
Courtesy of RXBAR
Peter Rahal at age 2, with his mother, Lynda, and Rahal and co-founder Jared Smith in 2013

"[We were] constrained, we couldn't hire anyone to do this, so Jared's mom started and my mom started," he says. But Rahal soon noticed the job wasn't being done to his standards.

"My mom just kept f---ing up and putting the front panel on the back panel, and on the back panel she'd put the front panel," he continues. "I was like 'Mom, this isn't working.'

"She wasn't getting paid so it doesn't really matter ... but she actually was fired," he says.

While that may seem harsh, Rahal says the experience was an early example of how important dedication to quality would be for RXBar's future.

"Bless her heart, she's an amazing woman, but our customers don't want to buy a product with a label that's not centered," he explains. "We don't tolerate here, as a company, mediocrity. Excellence is a value."

For Rahal, there aren't shortcuts for success: "Even if it's my mother, she's got to put the labels on straight."

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