Acquisitions Anonymous - #1 for business buying, selling and operating - Growth Marketing explained: Shopify Superfood Greens Brand with 40% subscription rate - Acquisitions Anonymous episode 148

Episode Date: December 8, 2022

Want to receive this listing in your inbox? Signup for our weekly newsletter:https://www.getrevue.co/profile/acquanon-----Michael Girdley (@Girdley), Bill D’Alessandro (@BillDA), and special Guest Jesse Pujji (@Jspujji) talk about a Shopify Superfood Greens Brand.We dig into the financials for a stress test, discuss the most important KPIs to acquire the business, and assess its real value. Jesse talks about his understanding of the potential and shares some of his best tricks to understand whether an eCommerce business can scale.We also discuss digital marketing, culture, leadership, Twitter, and hiring overseas.-----Thanks to our sponsors!CloudBookkeeping offers adaptable solutions to businesses that want to focus on growth with a “client service first” approach. They offer a full suite of accounting services, including sophisticated reporting, QuickBooks software solutions, and full-service payroll options.-----Show Notes:(00:00) - Introduction (01:04) - Our Sponsor is Cloudbookkeeping(03:32) - Who is Jesse Pujji? (06:00) - How does Jesse staff his businesses? Where does the culture come from?(10:13) - What are the advantages & disadvantages of hiring in a “Tier 2” market?(12:48) - What is Jesse’s talent strategy?(15:25) - Growth Marketing: Explained(21:10) - Deal & financials: Shopify Superfood Greens Brand(24:38) - What do we think about the Deal?(25:37) - What is Jesse’s #1 trick to spot a profitable category?(28:49) - What are Jesse’s 3 levers to improve profitability on eCommerce businesses?(31:46) - Let’s do a pressure test on the financials! Which KPIs should you look at?(35:38) - Is this a buyable business or a bootstrapped one?(39:40) - How does inertia affect buying vs. starting a business?(44:30) - What are the best traits to show as a leader in your organization’s culture? -----Links:gateway.xyzhttps://twitter.com/jspujjihttps://www.kahaniapp.com/-----Additional episodes you might enjoy:#146 - Should we buy 239,000 Domain names?#145 - Is this design agency a good buy?#144 - We spot an amazing Business Broker#142 - Should we buy this Crossfit Gym?#141 - A very profitable B2B Internet Business in the Petcare Vertical#140 - Let’s SBA the heck out of this deal - with special Guest Subscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Hey, everyone. Welcome back to another episode of Acquisitions Anonymous, the internet's number one podcast on buying and running small businesses. I am one of your host, Bill D'Alessandro, and I am super pumped for this episode. Today, we have Jesse Poogee of Gateway X and several other businesses, Kahani, a SaaS product, and also a growth assistant, which is an outsourcing, helps place Filipino employees in American businesses. Jesse's been a friend for a long time. Both Michael and I have gotten a chance to spend some time with him in person. He's a serial entrepreneur, one of the best digital marketers, growth marketers I know, has sold millions of, probably hundreds of millions of dollars of products across several different businesses. We review an e-commerce

business in the kind of green smoothie space, but it really goes off onto all kinds of tangents. We talk about leadership. We talk about Twitter. We talk about hiring in tier two markets in the United States. We talk about hiring international markets. Jesse's just whip smart, really brilliant and a great guy. So I think you'll really enjoy this episode with Jesse Poogee. Hey, Michael here, want to talk to you about today's sponsor for the episode, which is cloudbookkeeping.com. So cloud bookkeeping is actually run by my neighbor, Charlie. So I've met him in person and can attest that he's a real human being and a good person. And what cloud bookkeeping does is offer a full suite of bookkeeping services.

all in the cloud for you around QuickBooks and other technologies that you're using as a small business owner. So if you're interested in getting the bookkeeping part of running a business off of your plate and focusing on running your business, Charlie and his team are one to call. They can put together a bunch of other stuff in terms of helping you manage and grow your business besides just bookkeeping, sophisticated reporting, definitely helping you get your QuickBooks online set up in the right way, and a number of things around payroll as well. So definitely know them and recommend them. If you want to find out more about cloud bookkeeping, you can go to their website at cloudbookkeeping.com,

reach out to Charlie. I know many of you have and see if he can help you running your business easier and more fun by letting them help with a lot of the bookkeeping solutions. And when you call, mention this podcast. It would help us. help Charlie know that we're supporting him as well. So thanks a bunch and cloudbookkeeping.com as the sponsor for today's episode. All right.

Jesse Poogee, welcome to Acquisition Anonymous, man. Good to have you here. I'm happy to be here. I can't wait. Yeah, Jesse and I've been friends for a long time and I was psyched to see his name pop up on our podcast schedule. How did you wiggle your way into this podcast, Jesse? It was not through me.

I have no idea. Somebody sent me a message. I think it was Michael pretending to be somebody else. and he told me there'd be huge promotional value from this. And I said, okay, you know, whatever. We got to sell more software and more people in the Philippines. So we're good. So the true story, Bill, is Mirka and I were talking about how do we get more downloads?

And Mirko says, we need more badass guests. And I said, I'll go find us one. And Jesse was the first person I deemned. And it turns out the only person I've deemned. So it's going good. You're one for one, Michael. you're one for one. All right.

Well, awesome. Jesse, however you got here, I'm glad you're here. So I know you pretty well, and Michael knows you pretty well, but I bet a lot of our listeners don't. Can you just give everybody a sense for kind of who you are and what you do? Yeah, yeah, sure. So I guess I'd consider myself a serial entrepreneur at this point. I started my first company in 2010 called Ampush, and our claim to fame was we were

one of the first companies to figure out how to make direct response work on Facebook and one of Facebook's earliest marketing partners. And, you know, of our first 20 clients, half of them are names you wouldn't recognize because they were sort of companies that never went anywhere. But the other half were Dollar Shave Club, Peloton, Uber, Blue Apron, kind of the who's who of the big successful, disruptive brands. And so we were core to helping them grow and scale their business. We scaled the business to several hundred million a year in annual ad spent, a couple hundred

people. We sold a big stake in the business to Red Ventures, who you guys obviously know really well. and they sort of, we thought we were cool and good until we met them. And then we said, oh, my God, these guys are, you know, way smarter, way cooler. And they actually helped us turn the business into a pretty profitable, bigger operation. So, you know, I ran that business for 10 years, took a year off and happened to be during the pandemic. And then, you know, started to ask the question, like, could I start something that would, there was a bunch of criteria in my mind.

It was like, I want to work on the things that I love working on. I love that entrepreneurial process. I want to coach and mentor people. I want to make it sustainable but still ambitious. Like I don't want to have to kill myself and other people to be ambitious, but just be ambitious while also lifting other people up. And that's kind of when Gateway X was born. And so it's sort of my version of Venture Studio meets Holdco.

We're launching our own businesses. They're all pretty capital light. You know, we, so we try to get them profitable or raise very little money to make them work. And then we're trying to run them as one unified culture. So they, you know, they all share a lot of the same culture inside of what we're doing. and it allows me to kind of do a lot of entrepreneurial things, but also coach and teach some of the leaders who are running parts of the organization. And each business is totally different.

One, we have like a services business, a subscription supplement business, and a SaaS. But they all have some tie in to kind of e-commerce growth marketing, kind of my unfair advantages. So we have lots of ideas, but the most important question we always ask is like, why should we be starting this? What's our way of sort of having an unfair advantage for this? And so, yeah, it's been around almost two years now. I'd say it'll be two years in February, and we've launched three ventures.

They're all in different places, which we can talk about if we want to. But they've been a lot of fun. So that's the story. How do you, so you mentioned that you're kind of the mentor in chief, it sounds like. And then you've got leaders running each business. How autonomous are they? How integrated are they? You know, what type of folks?

I know everybody that listens this podcast kind of dreams of a whole co with semi-autonomous businesses that collaborate, but don't take up too much of their time. Can you share a little bit about how you staffed it so that you're not like full on CEO, every single one? Yeah, you know, I, um, let me start by saying like this to me is a multi-decade journey. And so part of early on, it was really helpful for me to go, I don't know what the hell I'm doing and I'm going to try a bunch of different things and see what happened. So each one was actually completely different. And now I, now I think I have a better sense for what to do next time, which I can also talk about. So in the beginning, like,

growth assistant, which is, you know, offshore high quality growth marketing talent, right? That's sort of the pitch. That one was a more sort of maybe traditional version. I've been the chairman and founder with Adrian, who's the CEO. She's always been the CEO. She has a HR recruiting background. And we've collaborated in that way to get it off the ground. And I was pretty heavily involved for the first six months. And then, you know, now I'll spend maybe five, five hours a week with or something like that. And of course, well, so anyway, So that was one version of how I started it. One funny way we're integrated as all the other businesses use growth assistance.

So that's always good. And I'll come back and talk about that. The second two businesses I sort of started as the CEO myself and then hired GMs in to run them. One person has worked out really well and become the COO of Kahani. The other person was great, but just didn't work out. We can talk about why. But in general, that model didn't work. didn't work where I was trying to run two companies. And so I shifted the model where the brand now,

which I've also spent a fair bit of time with, is sustainable enough than I brought in a different person to kind of be the GM. And I think she'll be the CEO soon. And then for Kahani, I'm actually running that as a CEO. So what it looks like today is I'm the CEO. We raise money for that one. And then I'm the chairman of the other two officially. That's kind of my title. And then we're very clear on roles and responsibilities. And so obviously autonomy, like, I'm still weekly involved in those businesses and I'm helping, I think where I try to help is coach and mentor the leader and help kind of with prioritization decisions. Those are kind of the two. And then the third one is maybe bringing resources or unique things to the table with the two where I'm chairman. The one where

I'm being the CEO, I'm the CEO. I'm running the weekly meeting. I'm not running the weekly meetings. I'm thinking about what's going on. I'm selling the product. And so I think some of it is just learning to be in those different roles. I think in the future what I would do, and I think Michaels maybe already figured this out is come in as chairman and founder, be really, deep actually do this serially not i did three at a time which i don't recommend do one at a time for maybe 12 to 18 months i love it i enjoy that part of the process but then i want to pull out and let kind of someone else run the day to day from there forward so that's likely what i would do i don't have any plans to start anything new yet but like in say a year or so maybe we'll we'll think about it

and so um that's kind of how i would do it going forward the other thing i do just lasting on culture is you know i have my coach and each of these leaders have a coach that kind of we get together on a monthly basis. We talk about, we kind of do an internal forum where we're talking about learnings and growth. We're sharing different parts of culture that we think are super important to try to create a unified way that people will behave so that in the future we can start moving people around in between these organizations based on what's best for their growth and development. So that's kind of the culture part of the unification part that we're trying to create. That's awesome. It's such a cheat code if you don't have to recruit new people every single time.

Yeah. Yeah. I think the dream is, I mean, you know, I've learned from Red Venture. and Ampush did this, but Red Ventures has really done. It is like homegrown talent that sticks around for a long time. One of the advantages of being in a St. Louis or Charlotte or San Antonio is you get a great, great group of people and you start hiring from universities. They will stick with you. And that's, again, I'm in a decades-long journey. So it's like, that's a real big part of what I want to do is create this place where,

you know, where right now, and you tell people who we've hired in who are a little bit more junior, I go, you are the GM of the next thing in a few years. And that's sort of the way to think about how I want you to approach, you. approach being a part of this. Yeah, I feel like we should call this the tier two markets podcast because you're in St. Louis and you're like Mr. St. Louis and you're committed to St. Louis. Michael's in San Antonio and I'm in Charlotte and we're all like putting down roots. But doing internet things from tier two markets, right?

You can do it from anywhere. Well, I think there's there's a huge plus to being in a tier two market or, I mean, look, Cantio is maybe like tier two and a half. I'll just be honest with you guys. But like, you know, we had kind of the, you, you see the upside. of being in a tier two market like these places is there's not a lot of competition for the type of talent that wants to work in the type of environments that the three of us are creating. At the other side of it, it gets really easy to deplete the entire pond. So like Rackspace, which was like the biggest tech

success in the history of San Antonio, like was number two in that Google fund or the Sequoia Fund that had Google in it. It had Google and Rackspace in it. And everything else was noise. So anyways, is like a whatever, a 10 MOIC fund, right? But anyway, like what Rackspace saw was after a certain period of growth, they didn't have the depth of talent like the bigger markets had. So like it creates this weird yi and yang. Like you have an unfair advantage being in one of our markets, but you also have a disadvantage, which is there's maybe only two, you know,

DevOps people at a high, very high level, like in your whole city, right? And that's true for San Antonio. I don't know about Jell's markets. But like, so you have to get sometimes really creative to fill roles especially the ones that are hard to fill. Yeah, I think St. Louis is big enough, and it's got a big research university and Washu. It's like, you can get away. But also, the other thing I found is like, now in the new world, it's like you can have a

talent center here, but also you have lots of hybrid remote people because of the way the world has changed. So you can kind of get the best of both worlds. Well, it's interesting that you guys have both done it, right? So, Jesse, you're in St. Louis and you've built this entire Filipino staffing arm in growth assistant, which I love to hear more about. And then Michael, you've kind of done the same thing from San Antonio, except you've gone south to South America with hire with near, right?

So you've got this core tier two market talent, talent center with overseas supplementation. Yeah. Well, Jesse publishes his numbers for growth assistant. And I will tell you they are an order of magnitude higher than where near is. So he's doing something right. So going really well. So kudos to you, Jesse. I have lots of former employees who are growth marketers at companies.

is that's my, that's my secrets. Like, remember how I gave you first job out of college? Like, here, get somebody from me. And they're like, okay, fine. Payback time, sucker. We'll do it. So, Jesse, tell me a little bit about that talent strategy, how that works with growth assistant.

You guys are in St. Louis, all of growth assistant. Is it staffing? Is it more kind of like outsourcing you sit in the middle on an ongoing basis or is it placement? You know, tell us how that business works and how it's scale. Yeah, you know, we always view. it as wanting to bring, I think the big insight was, you know, I think of 25 years ago, everyone said, oh my God, you got to do software engineering. That's the most important job function.

And they said, I need software engineers, I need software engineers. And there was so much demand. There wasn't enough supply. And then obviously someone said, well, what if we did it overseas and offshore? And that became a hundred plus billion dollar kind of BPO industry business process outsourcing. And, you know, to a little extent it's happened, but I don't think it's happened yet in digital marketing. And I actually remind Adrian, she's been in this for a few years. I go, you know, the job of Facebook ad buyer is like an eight-year-old job. Like, it is so nascent actually in the grand scheme of things that we are really in the beginning, I think the second or third ending of this trend of demand for digital marketing talent versus lack of supply. So we think of it as a

marketplace. We want to hire people. We train them. They work for growth assistance. We handle all the logistics of it. And then we effectively lease them, you know, quote unquote, to the companies, but they, they're on their Slack, they have their email, they have their as if they're a full-time employee. They're embedded. They don't work on multiple things. And we found it's just an incredible model for everybody. It's like a triple bottom line business where the companies, people and the company themselves benefit. We obviously benefit. And then the folks in the Philippines benefit. The other big thing, like we've used a lot of growth marketing. We have a TikTok. If you look up growth assistant on TikTok, I think 26,000

followers. Because what we found is there's a huge growth marketing. It's a marketplace, right? So there's supply side. You can run Facebook ads. You can run TikTok. But what we found is that there's a huge shift going on their post-COVID, which is these people hate commuting into, you know, sweatshops essentially for United Airlines or whatever place there is.

They want to work at home and they want to work on more intelligent kind of tasks. And so it really, for them, it's actually a big leg up also, both in terms of quality of life and the type of work that they can do. And so that talent side of it is super, super important. But that's essentially how it works. And I think, you know, our smallest, client probably has two folks through us. Our biggest has like 50.

And so it just depends on, you know, the nature of the bees. A lot of the Shopify aggregators are big customers. Not you guys yet, Bill, but we'll get you. But there's, you know, there's brands and there's, we've kind of seen a whole mix of different, different kind of companies. So when you say, you know, we've got a lot of small business folks that listen to this podcast, when you say growth marketing, can you help people understand exactly what that means, what these people are doing?

Yeah, sure. It's a fancy word for digital marketing. I'd say it at a high level. I'd say that when you run Facebook ads, there's some stuff you want really strategic folks doing. You want them thinking about the messaging. You want them figuring out who it's going to show to. Maybe you want them making budget decisions. But there's a lot of tasks that are, hey, can you upload a bunch of assets into the thing?

Can you pull a report and cut a couple numbers in six different ways? Can you do that across every single ad platforms? There's a lot of work that someone who's more of a coordinator level or more entry. level could be doing that task for. And it's almost impossible to find those people in the United States because they're just not that many of them. And when you do find them within a year or two, they can go get a job doing something bigger and better somewhere else. And it's really hard to maintain that talent. And so there's really this sort of entry level email marketing. Same thing. You got to upload templates. You know, you may want to design a template. If you're running

Facebook ads with any kind of velocity, you're running five to ten different iterations. So you might need a designer. If you're trying to get influencers, you're sitting in Instagram reaching out 20 people a day. All of those kinds of things are things that growth assistance are great for and can build out for people. Whereas you could find someone entry in the U.S., it'll be hard, it'll take a long time. They probably won't be trained. And then within 12 to 18 months, they're going to get another job somewhere else. And so that's kind of the layer so far that we focused on. Turns out that layer, by the way, is a wedge because once we get into companies, there's ARAP, there's like recruiting HR stuff. We found a lot of other places inside the

organization beyond digital marketing that can benefit from offshore talent. My favorite term for this I've ever heard is from Mr. Michael Gurdley, who calls it a mullet business. Americans in the front, international in the back. The whole back of house is all international. All the back office stuff, all international. The things we've learned that, like, happened are pretty incredible. Like, we've met a digital marketing agency who will remain nameless.

they have like 10 account managers who are American and they have 50 people in the Philippines. And there's not a single ad operation happening on the U.S. And they charge whatever, six to seven percent of spend. But if you do the math on that, it's an insane business for them. And I've resisted the desire to go forward into solutions. Like I've said, no, let's be really good at the talent side of this because solutions bring their own challenge. Whereas, like, you're just really good at finding and cultivating the talent and making it a great talent center that that in and of itself is good enough. but it is tempting to get into different solutions.

So one more question, then we'll move on to the deal. As people, when you think about the economic model, right, you know, this remote work has enabled, I don't care if you're in St. Louis or San Antonio or Charlotte or Philippines or South America or wherever you might be, right? It's all remote work. But there's a huge cost advantage. You know, can you help some people? I mean, we've got people that listen to this that run HVAC companies, you know, old Main Street

businesses. And some of them, some of even them are. starting to move their back office, you know, I know Nick Uber from Storage Squad, the whole backend, or of Bolt Storage, rather, their whole back end of Bolt is all Filipino. So, like, what's kind of the cost difference, you know, how much are people saving by doing it this way? Yeah, I mean, look, I think that if you go, like, typically you think of the average U.S. employee, even at even a low cost or entry level of $75,000 a year, right?

Because you got to pay them their salary. Maybe there's some bonus. There's some taxes of FICA. There's health care. that's like the lowest. It's really 100K is probably the better number to use. In our case, we charge between 2,500 and 4,000 a month depending on skill level and a variety of other things. But, you know, it's 30,000 to 50,000 a year all in. There's no additional taxes. There's no health care. There's no benefits. So it's at, you know, 50 to 70% cheaper. But there's also a longevity thing, right? You're not going to lose that person.

And like there's a lot more consistency because of the nature of the work, which is a huge benefit. And that's with us, you know, that's with us white gloving it. We find you the person. We, if they get rid of it, we replace them. Like, there's a bunch of service. We handle the insurance. We handle the legal. Some people, if you go to do this directly, it's more probably like, I don't know,

15 to 20,000 a year, something like that. And of course, then you have to figure out how to recruit the people. You have to maintain, like there's a whole other set of things, which there's just a different strokes for different folks. I'd say, or there's a different level of comfort with it. but you're talking about a very meaningful, I'd say, you know, 50 to 80% cost savings by going offshore. The other thing that we don't even talk about, and this is a huge one for growth marketing, is you make your people more productive.

If you have two growth assistants doing creative and doing campaign management support, guess what? That U.S. person who you're paying 120,000 to your marketing, they get to spend way more time coming with ideas and experiments. They get to coordinate other opportunities. So there's like a whole revenue side of the equation, in which if that person saddled with a bunch of power editor work or what's not called power editor or more,

Facebook ads manager work that's breaking every time, every time they try to upload a spreadsheet, they're frustrated, they don't like their job, they're not spending time on strategic things. So that's a whole other animal. It's harder to quantify, but that's a very meaningful animal, I would say.

That's a sign of an old school Facebook marketer that you still call it power editor. It's been business manager for like five plus years or more. Four years ago, I called it the bulk upload tool. Facebook marketer inside jokes for everybody. Okay. So we did promise to do a deal this week.

So, Jesse, we brought a cool one that I'm hoping sparked some good conversation from you. I'm going to turn it over to Michael to introduce our deal for today. Cool. Well, this one is from Quiet Light. So I pulled up the teaser for those of you on YouTube. It is a Shopify Superfood Greens brand, 40% subscription revenue, high margin and marketing needed. Do we know anybody that's good at marketing? Oh, yes, we have a guest today.

That's really good at. So revenue-wise, $833,000 is what they list here. Income, which I assume is net income, is $230,000. So $833,000 revenue, $230,000 income. And they're asking 2.6 times, what are they asking? Oh, they're asking 2.6 times income. In this case, this is at the, I happen to know this broker. Okay.

Yeah, this is, okay, well, cool. They're asking $600,000 plus inventory for the business, $830,000 in revenue, $23,000 in income. Launched in 2018, this trademark to Shopify-based Superfood Healthy Greens brand has developed a momentum, a premium and fun brand by custom formulating the best natural ingredients to create the highest quality and best-tasting greens products possible to provide the foundation of daily health. Inspired by the owner's own health journey, this company is the result of years of endless formulations, testing and tweaking. So basically this is one of those people who like, you know, blended up a bunch of kale and bananas and eventually ended up like turning it into a business. The one thing about doing that, have you guys ever done blending at your house? I mean, I have a blender. I mean, I've done a smoothie. I made a smoothie, but never in any

special way. Like my buddy got me into it, you know, because we're middle age and we're trying to live forever. And he's like, do this, put like kale and ginger and all that in there. The thing they don't tell you is that like errating the things that go into your colon creates a massive problem in middle age like my wife was like you have to stop go back to eating bread so anyway jesse might be able to sell you a supplement for that michael oh there i go yeah well no i tried everything they get you coming and they get you going yeah like they uh like all of those things like whatever whatever the over-the-counter stuff is whatever whatever whatever i was putting in the smoothies overpowered it. Like there was just no, it was like, it was like an unfair war.

The Bino lost. Okay, about 40% of the company's current revenue comes from monthly subscriptions with a $58 average order and an average of 7.7 orders per subscriber. This in combination with both 80% high gross margins and 28% net margins means there's ample opportunity for customer acquisition to spend. They have been declining as the owner has shifted his focus to spend more time with his family and on another business venture. They currently work one to two hours a week. This company does have a virtual staff member who is also part time doing inventory management and all that kind of stuff. This business is not SBA eligible, cash buyers only. And it is sold here by Ethan. Ethan looks like a really nice guy from the broker perspective. He passes all of our

all of our tests, Bill. He's not touching his face and he's not wearing a hat. It's a low bar. We're very suspicious of business brokers that wear hats or touch their face and their photos and Ethan looks like just a guy you'd invite over to hang out at your house. Maybe you would. I don't know if I would. Jesse, what do you think about a business like this? Super Greens. I mean, big category, you know, high subscription.

Like, is this exciting to you? I don't know. It's 40% high subscription? I don't know. My, um, I think on paper it looks pretty interesting. I'm very skeptical of a lot of what they say here. But like, you know, high gross margins. Like we, when we, when we started unbloot, we, we, we,

you know, I've run Facebook forever and I said the same thing. I said, hi, you know, I want high gross margins. I want repeating, recurring revenue. I want something that's marketable and has like interesting fun marketing angles. And so yeah, I think look, I think on paper it's super interesting, you know, if you can, because you could apply marketing and you could apply a lot of pieces of something like this. We know obviously one of my simple test for something is like just can you find a version of it that's really big in the world. And we obviously know A1 Athletic Greens is massive and has had a lot of success with it. So I think on my initial read would be on paper, it seems super interesting if you can buy and believe some of the numbers that are here.

So do you like that? So I think most of our listeners know Athletic Greens. I think we'll really have made it when Athletic Greens sponsors are podcast. But if you don't know athletic greens, they're huge, you know, green powder, raise a ton of money, lots of celebrity endorsers, all that stuff. Does that, Jesse, excite you? because it proves the size of the market and kind of all other Me Too products draft on that? Or does that scare you because they're going to outbid you for your audiences and how you possibly outmarket athletic greens? Yeah, I'm one of these people who maybe wrongly thinks, no, I think if there's a big category, it excites me. Like it means that a person can do it.

And there's almost no, if you can't identify a reason why something should be sort of a monopoly or the only winner, then by definition, there's going to be multiple. multiple winners. And so to me, you know, do you take this? Like, one of the things we've learned with unblows, this is completely, this is part of the entrepreneurial journey. We started marketing it. There's like Gen Z or girl, college girls who don't want to blow it when they go out. There's like, you know, older women who have,

but we've found the people who give us the best reviews, literally started to say like premenopause, menopausal belly, menobene, menobilly, which we learned. So it turns out you can take any product in some sense and cater it to different categories in different groups, and that creates market share in a market. Athletic Greens has a very, in my opinion, a very specific group. It's like the rich go-getter type A entrepreneurial, whatever people, and that's a great category to own. In our world, seed owns that in the, in the probiotic world. They've done a great job in their business. So I get excited because when there's

no reason you can identify that something should have all the market share, that means there's going to be multiple winners. And that's a huge opportunity for someone to come in. I love that you said, that because, you know, if you spend any time at all around SaaS or venture capital, it's so easy to get into this winner takes the whole market mindset, right? And I think for, we're coming, we're recording this year in late 2022 and the bloom has come off the rose. D2C is not sexy anymore in the way that it was. And I think one of the things that made D2C maybe perhaps wrongly sexy over the last couple years is a lot of venture guys funded it as though markets, you know, like cereal and green powder

were winner take all markets, right? Like the way they were used to doing it in SaaS and they funded and marketed these CPG companies like there would be only one brand of soda or cereal. That's right. And it just doesn't work out that way in CPG. Yeah. And it turns out they can be very big, but they're not going to be dominant. And so there was, and honestly, what's interesting is like if you had raised, you know, low eight figures and capped it there, I think every D to C story would be a success story for investors, for employees, for everyone. The second people started raising nine figures, it's just the math was never going to work. And the assumptions you had to make were just, we're sort of silly, right? And, you know, I think that's a big, that's a big sort of thing that

people are learning. But yeah, I mean, look, I think this is, there's, there's so many leverage. You know, I always talk about, people ask about Red Ventures and they go, how do they do that? How do they, you know, buying these publishers and multiplying them. And when I explain it, it's so dissatisfying to someone. You can see it on their face because they want me to tell them like, they have a leprechaun under a bridge and they shake him. And then all of a sudden, revenue in EBITDA. I go, no, they, first of all, they have an incredible culture of doers and people

who are really rigorous and analytical about incremental EBITDA. They're constantly finding angles to get it. That's number one. Using that culture of go-getterness, they have a few levers. The first lever is they think a lot. about on-site optimization and how to make kind of grow revenue per session. And that's stuff like make sure the button's in the right place, make sure the arrows there. When you see a behavior of a user that seems to indicate they want to do something or take an action, make sure that the

you know, make sure it's easy for them to do that. So it's a bunch of conversion optimization. It's a bunch of putting the right sort of page around that. So there's that one lever. They're very good at improving paid media and scaling it and organic media for that matter, like SEO and other things. And then they're really good at optimizing sort of pricing. And in their world, that means charging the right amount for like a credit card application. But in this world, it could mean, you know, we've been doing a ton of price discrimination with unblote. We started launching three packs, which we priced way lower than the one pack. And that's actually made the business first order profitable for that segment at least, right? So there's those three

levers, right? Onside optimization, traffic acquisition and then and sort of pricing and revenue side optimization. If you're really good at those three things, you can, you can do extremely well in any internet business, especially e-commerce businesses or publishers. And I think that would be, you know, to me, if I bought this business, that's exactly, you know, I'd literally sit down, look at those and start to, you know, go through each one of them to see where the opportunities lay. So as I look at this business, right, the paragraph that jumped out at me that is the most information dense paragraph in this whole thing is the following. About 40% of the company's current revenue comes from monthly subscriptions with a $58 average order value and an average of 7.7

orders per customer per subscriber. This in combination with 80% gross margins and 28% 30% net margins means there's a lot of room for customer acquisition spend. So Jesse, how would you kind of walk through the analysis, like the marketers view on those numbers for this business? Like while we were talking, I was like, well, maybe I could fit. Sometimes we play the game called see if you can figure out what the actual company is from the listing without them actually telling you game. Jesse, which is one of my favorite. So I kind of failed on this one. But what I do discover is there are like a billion me-toes of exactly this. Like, and maybe this is why I don't choose to be in businesses like this where it's just like, oh, I'm competing against a million smart

people. And the way you described how you win is precisely the type of stuff I don't like to work on. Like, oh, hey, let's figure out what color that button should be. Like, forget the that that sounds terrible um but yeah i mean the context here of how you know to bill's question i'm super curious about it just because when i look at this it's like amazon has a bazillion exactly me-toes of this thing right and it just it scares the heck out of me so anyway unscare unscare us please yeah well i'm not sure i mean well let's first pressure test these numbers because the way they share them are a little bit interesting right and i'm doing this live on top of my head fifty eight dollars an average order value per subscriber and 40% are subscription. Okay, so let's do the unit economics real

quick. So first of all, $58 average order value, it's called 60 because my math is not that good. 80% gross margin bullshit. I think that when you put shipping in there, it can't be more than 60%, I'll say 70% to give them the benefit of the doubt. Right. So that's $42 in gross profit by my math, right? Multiply by eight roughly. That's it's $320. is that right? $3.36. Yep, pretty good. Which then comes, let's just say over a year,

because I don't, again, I'm a little skeptical, but let's say it comes over a year. So which means I make $90 a quarter, roughly, if I'm a subscriber. But that's only 40% of the business. And now I've got to multiply that by 0.4. Right? So my $90 in a quarter I make times 0.4 is $36 in a quarter

because I sell, you know, $60 average order value, single product. to 60% of my customers. So again, same math. $60 times 0.7. That's 42. Same math there. But that's single purchase for 0.6 times 42, right?

So you guys still with me? So 24. So basically in my first 90 days, I only make $50. On the blended average. On the blended average, right? And so that's like, that's not easy, right? That's a hard kind of cack to get necessarily for a Me Too product, for something that's got a lot of, you know, challenges around it.

So I think the first thing to realize is that like, even though that on the surface, if that was 100% of their business, they'd be really exciting. Now, I tried to run, I launched a business. I tried to run subscription only. I think I talked to Bill about this just for fun to see like, could I. And like, you know, what happens? The conversion rate's really low. So all of a sudden, your cack, you know, your cack is really high, essentially, right?

So I think one thing just to look at in this business, the other thing we will calculate often is subscriber cack versus non-subscriber cack, right? Because in some case, you're buying both, but then 40% become subscribers. And so in general, I'd say the math of this, if you make $50 in the first 90 days, unless you have a big balance sheet and you have the ability to float yourself for the other. And remember, that's only 40% of the business. So it's like, even after the fact, you're only getting another, based on our math we did earlier, $40 or $50 a quarter from those cohorts. But that's a long time to get that money coming back in. And it's not a lot of volume either in the business. So I think the first thing is like,

yeah, it's actually a pretty tough thing to market. And then to your point, Michael, it's very me too. So I mean, the first thing you'd have to do is you'd have to believe that there is, I think, some segment, you know, and you could, I don't know, Latinos or old Indian men or like some group that you actually think you could run ads to with a specific messaging around this product or rebranding it in such a way that you could actually get a lot of people buying into it. I think that would be a really, really successful way to start to approach the marketing around this. And even then,

like I, you know, I'm not surprised it's profitable, but I'm guessing they're not spending any marketing dollars with the fact that it's declining. And so the 230, if you did like a marketing adjusted EBITDA or whatever, meaning you actually deduct what marketing you'd have just to keep the business flat,

my guess is the EBITDA would go close to zero. So I don't know. I didn't maybe do what you wanted, but that's where my brain starts to go. It may also explain why. the seller has conveniently started to work on other stuff, is these numbers. These numbers can look great, but when he's looking at his or her bank account, it's not as sexy as the numbers make it sound like it is.

Totally. Yeah, it says at the bottom, paid marketing efforts have proven successful in the past and has a significant growth opportunity for a new owner. Usually what that means is they ran paid ads and they were probably acquiring customers at roughly cacked LTV break-even, but the business is too small doesn't have the balance sheet to finance that because cack is due today LTV comes back over a year or two or more, who knows, right? So that, I think that's one of the real traps and, you know,

I've fallen into it at times, Jesse, I'm sure you're running into it, this cack to LTV metric because LTV, for one, is a revenue metric. So at the very least, you should use contribution margin LTV, which you did immediately, Jesse. So profit LTV, not revenue LTV. And it's a timing thing. Like, it's just really expensive, you know, because you got to run the business while that LTV comes back. And that's why it can make sense to raise money for D2C brands, not $100 million plus, as you mentioned, Jesse. But to me, this says, I tried to run ads. It kind of worked, but I can't finance it. But you, buyer, could definitely finance it. So you should buy this business and turn back on the paid ads.

Yeah. And then I think the question is who buys the business, right? Because Bill, you and I could probably buy this business knowing we'd probably need to put at least a million bucks into it or get financing from it. And I think we could, turned it into a business we could flip in two years of hard work for for 10 million bucks let's say get it to a few million a couple million a bit uh but then you and i are like well we got a bigger fish to you know we've got other things we've got other priorities the other person who could buy it is is probably someone who doesn't know anything about this world but they're going to get secured i mean it's i'm talking about you and me i we know how to run facebook ads and we know how to get these things

dialed in and so it just becomes like a in my opinion you got to pay for it the the return profile is $2.30 plus say million, whatever, and then you may get, you know, five or 10x if you have a really good outcome here. You know, but that's that person who doesn't know what they're doing. It's a real scary problem. Versus by the way, like what I tell a lot of people and they show me stuff like this is just start something

because you need to go through that learning process, you know, person. And by going through it at a small scale, spending 50 bucks a day on Facebook is where to start. Not like, you know, thousands of dollars, which is what you'd probably need to move this business forward. in some way. I always tell people that young doctors start by operating on cadavers. They don't start operating on a living, breathing patient. So if you plunk down, you know, six figures, you know, mid six figures of money plus investment and you just start operating

in a live patient here, you have a good chance of killing someone, you know, maybe yourself or the patient, right? So, yeah, I always advise people, you know, take your 600 grand plus inventory here. And there's already a zillion brands of these things, you know, which means that the contract manufacturing infrastructure is pretty mature and accessible. You could probably start one of these for a hundred grand and spend another hundred grand on advertising, you know, and kind of scale one up and spin it up pretty quick. Yeah. I mean, we're unblowed as an example that we started, launched in January, when we started working on it a year ago, and we've maybe put 300K into it, and it's already doing, you know, this month it'll, it's run rating well over a million. Let's put it that

and it's roughly break even. So, and again, it's me starting. It's a little bit different. But, like, I think someone's starting slower, taking their time. The other thing is, to your whole point on the kid everything, a lot of entrepreneurs, too, it's like, especially if they're young and their first time, I'm like, take a year to find nonpaid ways to do this because it'll really benefit you in the long run. And to create any base of revenue that's recurring that's nonpaid is an advantage you can

have as you grow and scale the business. And if you force yourself to find them, they are out there, right? If you talk to the guys like the Pura Vita, I've interviewed a bunch of these guys for the Kahani podcast. They all got started with, you know, it was influencer. Now it's called influencer. At the time,

it was just hustly ways to try to get free customers. And there are new hustly ways. I don't know, you know, I don't know all of them. If I knew them, we'd be doing them. But like,

you got to go be creative and figure those things out. And that's the way to drive it forward. The other human thing I'll just talk about for a second that always comes up for me is, inertia is such a real force. And when you buy someone else's business, I think unless you're very experienced, there's a ton of inertia of just dealing with what's there versus getting to like draw on a blank piece of paper.

And so unless you're highly experienced and you know exactly how you want to change something when you buy it, there's so much inertia you have to absorb, which I just think is really challenging. Yep. Yeah. I think our friend Elon is seeing that in dramatic fashion with Twitter at the moment. A lot of inertia coming in as a new guy. There was a good tweet. There was a good tweet yesterday.

Sejillo was like, hey, what if this is all like 4D chess? And he's just playing everybody. I think there's a part of it that is that for sure, Michael. I call it a Trump playbook. Own the news cycle. Get people talking about you for free and you benefit from it dramatically. Well, he keeps tweeting that Twitter engagement is in an all-time high now, right? The hilarious thing is that my friends who would text me like crazy with what

people on the right would refer to as Trump derangement syndrome, which, whatever. That's just, by the way, full disclosure, straight down the middle of the road, Gerdley. That's political leading for Gurdley. But now those same friends of mine that were that way and texting me every day about Trump, they're now texting me the same way about Elon that they did about Trump. He has replaced Trump and is running that exact same playbook. To your point, Bill, it's very interesting. Also, where's my blue check mark? But I do think the three of us are all entrepreneurs. And I do think I love that tweet he sent a couple days ago.

I think I copied and pasted it, which is like, hey, guys, we're going to do a bunch of stupid shit. We're going to keep what works and we're going to get rid of what doesn't. And I think like that just to me, that entrepreneurial admission from many people consider one of the best entrepreneurs out there is like, I wish every entrepreneur. I literally sent that to every single team. I go, guys, this is our philosophy. We are going to, we're going to do stupid stuff.

We're going to try things. if we're going to keep what works and get rid of what doesn't. So I do think that was like a powerful sort of build-in-public lesson he gave. Yeah. And like, isn't it amazing how uncomfortable it makes people, Jesse? Like that idea of try a bunch of stupid stuff and only some of it's going to work, the whole world cannot handle it, right? Because they're all experiencing it in real time.

And they're like, I can't handle this much change. I can't handle this much failure. Like you're supposed to be right all the time. Change your mind is not allowed. You know, it's just amazing. the rejection that so many people have of that whole concept, which is what makes entrepreneurship so hard, right? And that's what makes entrepreneurs unique is that, like, is they're willing to do that,

you know? Yeah. I don't know, man, what he's doing. Like, I don't think I'm capable. Like, I just want to, I just want to be friends with everybody. I just, I don't like enemies. And it's like, some of what you have to do is just be totally okay having people hate you. And, yeah, it's ballsy.

I think what he does is he's, it's super ballsy. It may not work. I think he's like, I will say the one thing, the one big sort of place where I diverge with Elon is like the people who want to solve, solve and help humanity while not being human while, while getting dropping their humanness, the way that the layoff was conducted, the way like I, like I, to me, you know, the way even his family life, like there's been these lots of articles about him. He's got, you know, like to me that that it stops short. I stop admiring someone. when they can't balance a full life. And then they talk about changing things for humanity. And maybe he will, by the way, and maybe that's part of the nature of the world. But I just like, dude, you could, could you not learn how to write a paragraph saying, I know this is a tough day for you, people,

and I, you know, this is what happened. It's not great. I wish you were different. You know, could you not be a little bit more empathetic and human in those processes? And to me, I think that's where it falls short a little bit for me. But the business stuff, I think, is amazing. Did you guys see the other end of the spectrum of doing what you're

talking about Jesse was the guy CZ who runs Binance. Did you see his letter? No. Talking about, hey, he wrote, it's an amazing letter. Like, does exactly what you're talking about, where he wrote to his folks like, hey, here's what we're doing with what he was going to rescue FTX. But like just exactly what you're talking about, like super high EQ, super mature, represented high values and done in a second language, by the way.

I think the guy's a native Mandarin speaker. And you look at how even somebody like Zuckerberg has trouble relating in that letter he wrote, which was like, okay, well, good. Like Mia Copa, great job. But like the Benance guy was like an order of magnitude way ahead of that. So I highly recommend reading that. But I totally agree with you. And it's where I have like, my buddy texted me this morning.

It was like, how do you feel about Nassim Talib? And I was like, I think he's a jackass. Like, because I think it's just, it's so disrespectful. to everybody, not to slow down and treat everyone around you like a human first before you like push your views on them. Right. It's like to what you're saying, Jesse, like it's just inexcusable. Like, take an extra 30 seconds. Like the world doesn't, the world doesn't owe you the right to be a jackass. Yeah. But there is this narrative and I believed it for a long time myself, which was like if I go and achieve a lot and I do a lot, I don't have to, I don't have the obligation to do that. And I just don't

think it's true anymore, obviously, for a variety of reasons, even for nothing else for myself and my own you know, what brings me up and what gives me energy. But I do think it's a common sort of like if I'm, if I'm a killer, if I go get a bunch of stuff done, I don't have to give a fuck about anybody else. And I think it's just a very, it's a false narrative that leaves people, you know, ultimately feeling lonely, empty, whatever. Like it doesn't lead to a bunch of positive. It doesn't, it doesn't lead people to where they want to go ultimately, I think. I think they there's, like, be ruthless, you know, be compassionate with people and ruthless about business. and I think they're often viewed again as polarities or like dichotta.

I can only be one or the other. And I think the truly best business leaders, Rick Elias is a great example. He is both at the same time. And it's amazing to watch because he really has, he finds ways to separate them and be them at the same time. But you never, he can be very, very human, more human than anyone I know while also making a really, really tough, like a very ruthless business decision. And it's possible. It is possible. It's hard.

it takes lots of training, learning. It's hard, but it's possible. And so that's why I don't think we should just sort of, oh, yeah, it's fine. As long as he's sending things to the moon, he doesn't have to treat humans like humans. Yeah, if you can nail that. I mean, it's not a type of thing that many people are naturally good at, right? And it's also not a type of thing that naturally hard charging people are necessarily even naturally good at, right?

Well, it's a form of cultivating presence. I found it's like all about how present are you. And if your mind is always on the next achievement or whatever, in that moment, you're just not going to treat a person. There's a really good book called Leadership and Self Deception. Have you guys heard of this book? No. It's all about this concept where you start lying to yourself and then you're using other people solely for your ends versus to try to be helpful to them and how your brain works around those things. But it's a very common thing where it's like, I don't, I'm going to turn off my humanness and my receptors because I don't, it's ultimately to protect yourself.

your own feelings, your own emotions. So anyway, but it's a, that's the hard one. That's the, I tell everyone, that's my aspiration is to be both of those things at a 10 out of 10. Highly ambitious, highly ruthless about business, killer, while also like the biggest heart and loving and being able to bring people up and coach them and teach them. And it's really, really hard. I love that.

I love that as a place to conclude as an aspiration, I think, for all of us. So, Jesse, thank you for being here, man. I want to give you, you know, 30 seconds here at the end. where can people find you in business on the internet? You know, this is your chance to sell promo. Where can people find you? Yeah, Twitter, J.S. P-UJJI or Gateway.XYZ,

super easy domain. It's the site needs a bit of a facelift, but bear with me. But those are the two places and just Jesse at gateway. dot XYZ, if you ever want to email me, I have lots of support from overseas people with my inbox as well as I look at a lot of my emails. So I'm pretty responsive. Oh, man.

we might need to do a whole other episode about that, getting overseas people to process your email. Bill, before we conclude, I want to tell you the story, Jesse and I had the best session together that I had at Capitol Camp last May. And you know what we did? Jesse and I went for a walk around the block, and we just talked like human beings. So I think we're all three going to be a Capitol camp next year. We need to figure out a way to do that between the three of us and maybe it was a slightly bigger scale with a highly curated group of people. You know, it's fun to be at the cocktail parties, eat the great food, all that kind of stuff. But man, the one-on-one time you can have with really good people there, like, we needed to figure out how to accelerate that. That was the, that was the feeling

I left was, man, I want to spend less time in the cocktail party and more Jesse Pucci time. 100%. I got a long car ride with Jesse also to the closing party. So you got to get the one-on-one time. All right. No, I love those moments. And I agree. I think the cock. I don't like that. My only version for the cocktail party is I'm going to find two or three people and actually spend most of my time with them because I don't want to say the same thing to 20 different people. No kidding. All right. Cool. Well, thanks for being here, Jesse. Good guys. Have a good weekend. This is awesome. Talk soon.