The Startup Ideas Podcast - The Step-by-Step Plan to Go From $3M to $10M+

Starting point is 00:00:00 most people have maybe five years of dedicated, focused, obsessive energy to put into their business. So how do we, what do we do in five years in order to have a $100 million dollar business? You're familiar with the triple, triple, double, double. So for the, no, so, okay. Oh, yeah. I'm Canadian. A triple triple double double to me sounds like you want coffee with three creams and three figures. It's a Tim Horton's order.

Starting point is 00:00:23 It's a Tim Horton's order. I'm like, yeah, I am familiar with the triple, triple, double. So the triple trip, for those that aren't familiar is how do we. you triple our revenue three times and then double our revenue twice. So we have a $3 million business. You go from three to nine, nine to 27, then we double from 27 to 54 and then from 54 to 108. So in five years, you can have a $3 million business go to a $108 million business. At that point, you've got all the optionality in the world. If you want to have $100 million exit, if you want to keep growing, you've probably ended up dominating. And so we are live. So, hey, wait,

Starting point is 00:01:07 I was going through my contact book and I was like, who is the person with the least amount of startup ideas that I know? And I invited you on the pod. You know why I did that? What an introduction, Greg. Really appreciate it. There you have it. Wrap it up. We're done. We're done. We're done. Pott's done. So Aman is the guy I call when I'm trying to figure out how to scale whatever it is I'm doing. So on this podcast, we talk a lot about the zero to one phase.

Starting point is 00:01:43 How you build a startup, ideas on how to build a startup. But what we don't really talk about is, okay, you've got a thing that's going, it's doing 100K a month, 500K a month, whatever it is. How do I scale that business? And you've done that.

Starting point is 00:01:59 You know, Absumo. You took it from... 3 to 84. 3 million to 84 million. And I was hoping today what we can accomplish is just giving people tactics on how they could scale whatever it is they're working on. Love it. Awesome. Yeah, I think you and I were talking jamming last night of dinner. I'm terrible at the start of phase. The zero to one is just not my jam. And I hate the growup phase, which is north of $100 million. But that scale up phase, that mid seven figures to $100 million. Like that's my sweet spot. That's my zone of genius. That's really what I enjoy. And so really looking forward to jamming on that today. So you've got this framework. I really like that. I need people to understand. You know what I'm about to say? No, I have no idea. The nine figures. Nine steps, nine figures. Nine steps, nine figures.

Starting point is 00:02:46 That's right. So walk me through that. So most founders deeply misunderstand what it takes to scale a business beyond seven figures. You have to transition from being a product led founder to now one where you're building a company. And the nine steps nine figures essentially goes to three phases. The first phase is, startup. That's everything getting to product market fit. The second phase is scale up, which is really around company creation. And then the last phase is around legacy protection, which is grow up. So startup, scale, up, grow up. It's three separate phases that completely changes the way you run the company. The startup is really around product market fit, which is persona, who am I selling to? Every single business should start with market. I love your ATM framework. We should go deeper into that. Then it's, well, what am I selling to that market? And then lastly is how am I selling at scale, which is promotion.

Starting point is 00:03:33 once we figure that out, and that's typically around mid-seven figures, I'll tell people that this is the equivalent of, you know you've hit product market fit when it feels like you're wearing a meat suit in a dog park. Like you just have more leads than you know what to do with. And that's oftentimes when founders really struggle and they don't know what to do next. And that's oftentimes when they reach out to me, which really the second phase was the scale up. So I want to cover more about the nine steps to nine figures because I want nine steps to nine figures. and I think others do too. What else can we talk more about that? Yeah, I mean, when we think about goal planning,

Starting point is 00:04:14 most people have maybe five years of dedicated, focused, obsessive energy to put into their business. So how do we, what do we do in five years in order to have a $100 million dollar business? You're familiar with the triple, triple, double, double. So for the, no, so, okay, oh, yeah. I'm Canadian.

Starting point is 00:04:30 A triple, triple, double, double to me sounds like you want coffee with three creams and three figures. It's a Tim Horton's order. I'm like, yeah, I am familiar with the triple, triple, triple, double, double. So the triple trip, for those that aren't familiar, is how do we triple our revenue three times and then double our revenue twice? So you have a $3 million business. You go from three to nine, nine to 27, then we double from 27 to 54 and then from 54 to 108. So in five years, you can have a $3 million business go to a $108 million business. At that point, you've got all the optionality in the world.

Starting point is 00:05:04 If you want to have $100 million exit, if you want to keep growing, you've probably end up dominating. And so when we think about the triple, triple, triple, double, this is where we go, how am I enabling us to triple? And so we go back to is the sales or delivery, do I have enough leads in order to triple this year?

Starting point is 00:05:23 If I don't, then I have probably a bottleneck on sales. If I did have enough leads, If I have a waiting list or I'm not sending enough tweets because my team is struggling, then it's my job to think about the next phase, which is the scale up phase. Scale up is process people performance. Oftentimes I got a lot of advice when I was running 7, absolutely about 7 million, 10 million. They're like, it's people first. It's people first.

Starting point is 00:05:51 You got to think about people. And what I ended up realizing is like, that's actually bull. It's not people first. In fact, nobody wants to run a business. business that's full of people. That's bureaucratic. It's like the DMV. What's way more fun is actually building a business that's highly optimized, highly automated, almost always software driven. Now with AI, I wish I had AI back then, leveraging AI. And you have a handful of A players that are super fun to be around. Like that's, I mean, gold and I was built with like 12 people, like the greatest game of all

Starting point is 00:06:23 time. Like if you don't need more than 12 people. So like if we can build goals. and I with 12, like what makes you think that your, your logo studio needs 60? And that was back then, right? That was back then. Yeah. So it's like, let's just get a handful of incredible people surround ourselves, be obsessive about this and get that triple, triple, double, double. So process people. And then once you've got those two, then it becomes your job to manage performance. So what does performance mean? Imagine your Bill Belichick or a world class coach. And now imagine your team in the middle of a game, you shut off the scoreboard. LeBron James would have no. no clue of what to do. Like, how am I going to help you win this game? So it's your job to give

Starting point is 00:07:02 your team the scoreboard, to give them the incentives, to give them the compensation package, and it's your job to sit on the sideline and draw up the next play. Quick break in the pod to tell you a little bit about startup empire. So startup empire is my private membership where it's a bunch of people like me, like you, who want to build out their startup ideas. Now they're looking for content to help. help accelerate that. They're looking for potential co-founders. They're looking for tutorials from people like me to come in and tell them, how do you do email marketing? How do you build an audience? How do you go viral on Twitter? All these different things. That's exactly

Starting point is 00:07:43 what startup empire is. And it's for people who want to start a startup but are looking for ideas or it's for people who have a startup, but just they're not seeing the traction that they need. So you can check out the link to startup empire.co in the description. You know, Charlie Munger, show me the incentive. I'll show you the outcome. Obviously, perfect quote. So good. So good.

Starting point is 00:08:12 Again, it's one of those things where it's, I agree, but how do I do it? How do you structure incentive programs for partners, VPs, that, that work for them but also work for you. Yeah. So let's use COO. So let's say you hire a COO. The biggest mistake that I see CEOs will do is they go, well, profit's really important. So we're going to incentivize you on profit because that's what I care about.

Starting point is 00:08:44 I care about cash in the bank. So guess what they do? They create a bonus structure on profit. And what they end up realizing is the COO all year, all they care about is cost cutting. All they care about is, oh, I found, I found, found us we were able to transition from Upwork to Fiverr. It's like, oh my God, this is not what we're trying to do. Or I was able to fire this team or is able to save us money on this rent. And they're not thinking about growth at all. And so then what do they do the opposite?

Starting point is 00:09:11 Oh, so the following year, guess what? I'm going to do it on revenue. So we're going to incentivize on revenue. Well, what ends up happening? I hired 40 salespeople. I spent all this money on advertising that made no money. And so then you end up having an individual that, yes, you doubled revenue, but now we made less than half the money the previous year. So we work twice as hard for half the money. So to me, the ideal structure is a 50-50 split. So you get 50% of your bonus on top line and 50% of your bonus on bottom line. So what ends up happening is now you have founder alignment. You have an individual that's thinking about both top-line growth and bottom-line profitability. And so if I have 100,000 on top-line and 100,000 in bottom-line

Starting point is 00:09:52 in terms of my bonus structure, then all of a sudden, I don't mind dropping down a little bit of profitability if it results in a top line increase. But what I won't do is I won't drop my profitability if I end up with just flat revenue growth or I won't just grow top line if my profitability drops as well. I'm thinking about both of these together. And the second you do that, I mean, this is a very simplistic comp structure. It's one that we can get across in a podcast, but that's infinitely better than just focusing on one of those other two. So I sound old, but in my generation of startups, a lot of us got equity in Silicon Valley,

Starting point is 00:10:30 venture-backed startups, on paper, we're millionaires. Companies raise billions of dollars, and you even see front page of tech crunch, wow, this company sells for a billion dollars, but they had $1.4 billion in Prestak, employees get zero. I think that there's a lot of us who are now in our 30s and 40s who are kind of like, yeah, that equity of venture-back startups, I'd rather profit sharing or a bonus structure.

Starting point is 00:10:58 And I think that's going to be a trend that's only going to accelerate. Totally. So if I'm trying to incentivize people I'm working with, how do I think about equity versus straight up cash? Yeah. This is really tough. So number one, Harvard did a study where they actually found no marketed increase in performance when they landed equity to individuals.

Starting point is 00:11:23 And I actually found the same thing to be true. Because the issue is most employees, even the most sophisticated ones, don't know how to value equity. They're like, what are these 10,000 RSUs? I have no idea what these mean. I have no idea how it measures. So the only way that I think about if you were to do equity, I personally don't do equity, but if you were to do equity is we start with, here's your total compensation package. Let's say we hire a VP of revenue at 400,000 a year.

Starting point is 00:11:52 Your total comp package is 400,000. K. Your base, I like to keep the base as low as possible. So let's say we do 100K for base. So 100K base. So that means you have 300k and you get to decide how much of that is going to be cash bonus versus equity. And they're like, oh, now of a sudden they start to like do the math. Like, oh, do I actually want to invest 100K into this business? Now all of a sudden that equity means something to them. And so they have to make a decision, oh, I want to invest 100K in this business. Well, guess what? Now they understand the math. If you invest 100K based on today's 409A valuation, this is how many RSUs you get. And now, so they're like, oh, this is like buying Nvidia stock. Yes, it's exactly

Starting point is 00:12:38 buying Nvidia stock, except this company is not public and we're not able to trade it. You will get that exit in the future. You may get that exit. You may get. It's a lottery ticket. So I have no problem with them going, you know what? Cash is actually more important to me. I want all 300k cash. Some of them go, you know what, give it to me 250, 50. Some of them are like, you know what, I'm very bullish on this company and I don't need the cash. I've already had an exit. Give it to me all in stock. But now they have to make a decision rather than me handing, here's 10,000 RSUs that gets slammed into a shoebox, never to be seen again. And then they ask me every year, how come I'm not getting a raise? Well, you get a raise. Like, your raise is effective when you are,

Starting point is 00:13:14 right? Like when we exit, then you're going to get a raise. And so the problem that you have with most equity structures is the employee doesn't know how to structure it. They don't know how to value it. And as a result, the founder gives up so much and gets nothing in return. What's cool about that model is, let's say you get 250K for the employee to say, like, I can invest this. All of a sudden, if they do invest it, they're actually invested versus getting this, like, phantom equity, basically. Like, let's be real. No one's logging into their carda and being like, I got 1632 RSUs vested to me today. That's right. You know, but you definitely are are opening up your Chase app or you're getting a push notification from Bank of America that's

Starting point is 00:13:56 like, oh wow, I got $100,000 deposited in my bank account today. This is dope. I've got some swagger in my staff. No one gets swagger from 1600 RSUs on Karta. No one. It's just not happening. No, not at all. 100%. To me, that's the only way that I've seen that it actually works and creates founder employee alignment is when now there's some skin in the game. You have made a decision. You're not gifted this equity. You've made a decision to invest in the company. Yeah, I like that. I just have to say this because a lot of people are going to be listening to this, and they're going to be like, I'll worry about all that stuff later.

Starting point is 00:14:33 Yeah. You know what I mean? Like they're going to be like, Steve Jobs was never thinking about all that stuff. Are they wrong? So the problem that I see a lot of founders is if they ignore this stuff now in the beginning, what ends up happening is that the equivalent of building a skyscraper on a Sandy Foundation. We know what happened with that building down the street. And so what ends up happening is when you ignore that,

Starting point is 00:14:57 you've probably seen this a lot in agency world. By the way, spoiler, the building down the street collapsed. Yeah, exactly. And I see this happen all the time where these companies will scale to mid-seven figures and they failed to think about the fundamentals. And all of a sudden, churn starts to rear its ugly head, competition starts to come in. And all of a sudden they realize like, oh, we're building floors on top of a very sandy foundation.

Starting point is 00:15:22 And all of a sudden around mid seven figures, the founder is burnt out. They try to push more in order to grow. And they're like, you know what, I'm done. And they either exit or they burn out and the company falls apart. And so if you ignore this in the beginning, it becomes really, really difficult in order for you to scale over time. So I do think even if you are still early phase, I think this episode is really important because it's a preview of what's to come once you are successful. I think the, you said a really important word, churn. Yeah.

Starting point is 00:15:50 Like I feel like a lot. of people from this you know listen to the show come steal an idea they're doing 100k a month they're feeling like they're on top of the world and then churn just gets worse and worse how do you think about churn and how do you like is there a scientific way to combat churn so i think when you it's kind of like when you're riding a motorcycle what is the first thing they teach you is like don't look at the wall and i think that oftentimes The big four-letter word and startup ecosystem is churn. And I think the problem is when you think about churn as your main focus,

Starting point is 00:16:29 it ends up thinking about the opposite, which is actually what you really should be thinking about, which is loyalty. So loyalty is, the way I measured is net revenue retention, which is not just how do we avoid churn, but rather how do we get more loyalty from each existing cohort? Every 3% increase in net revenue retention doubles the company's valuation.

Starting point is 00:16:49 Okay. Can you define net revenue? So for a singular cohort, so let's say January, all of your customers in January, if you have 10% monthly churn, that means in February they will spend 90% of what they spent in January. That's 10% churn. The opposite of net revenue retention, or the opposite is net revenue retention, which means that that cohort actually spends more with you in February than they did in January. A good example of that is like Slack. You sign up reluctantly to Slack and then you pay for it. And then all of a sudden, well, you're, you're, you're, you, you're, you're, you, you're going to, You add more contractors. You add more features. And so in January to February, you start spending more as your usage increases. You've created loyalty. AWS is another example.

Starting point is 00:17:31 Snowflake is probably the best. The company is doing the best right now. And if you can think about net revenue retention more than anything else, that singular KPI, more than any other KPI, is going to drastically increase your company's valuation. It's going to make it much easier for you to grow your business over time. And it's going to make it much easier for you to exit five, 10 years down the road when you're ready to move on to your company. next thing. So when you're doing zero to one, should you be focused on net revenue retention or like what are the things that you should be focusing on zero to one versus when you're scaling?

Starting point is 00:18:00 I think the biggest mistake that a lot of founders make is they try to jump right into growth before they think about retention. I think it's so much easier to grow a business when you have incredible customer loyalty and then you're able to then throw gasoline on that fire. I think a lot of founders make the mistake of going, well, we've got something that's kind of break even. Let's just go in market it like crazy and eventually will grow. What ends up happening? You have massive churn. It's hard to profitably grow. As we know, acquiring customers becomes harder and harder every single month. I think Sam, Sam Parr mentions, like, growing on these platforms is like buying real estate beachfront, but rent goes up every 18 months. So it becomes harder and harder.

Starting point is 00:18:44 And so I do think you need to focus on retention up front first and foremost before you ever worry about promotion. So I do think it's important. Yeah, I think it's like you wouldn't go, you wouldn't build a leaky ship, right? You don't want a leaky ship because even if you start getting 10, 15, 25K of revenue, if it's going to go away in six months, like you do the math, what's the point, right? So I feel like the mistake a lot of people make is they put all their product energy, iterations, product velocity into how do I grow this thing? as big as possible.

Starting point is 00:19:22 I'll figure out retention later. Yeah. Where it's like, probably not the move. Maybe you keep it tight, small, have less revenue, but your retention is higher. Well,

Starting point is 00:19:34 oftentimes your first handful of customers are the ones that are the most loyal. They're coming to you because they have the biggest pain point. And so that feedback loop, that iteration can be a lot tighter with your first 10, 15, 20, 100 customers versus your first 10,000.

Starting point is 00:19:49 And so it's so much better for you to nail that up front, develop the brand equity before you start throwing that gasoline on the fire. I've seen way more success when you've nailed retention, when you've nailed loyalty up front. That's why you start creating a movement. That's how you start getting individuals wanting to stick around forever versus like the companies that are a flash in the pan. They're amazing one year. And then you don't see them ever again. So someone's going to be listening to this and they're going to be like, cool. I'll focus on retention, but I still need to grow.

Starting point is 00:20:20 Like I've got VCs that I got to impress. I want to, you know, I, and honestly, it feels good to grow. Yeah. You know, it's fun to wake up every morning and see your dashboard go up, not just retention go up. How do you think about growth channels paid versus organic? How do you think about, you know, should I go international or not? Walk us through how you think about growth tactics.

Starting point is 00:20:46 once you're, you know, you're figuring out retention over here, but, you know, you still want to grow. Totally. Well, I mean, the beautiful thing about retention, if you've priced things properly, you are actually still going to grow because if you think about that net revenue retention number, if you have a certain cohort of customers, month over month, your revenue overall is going to grow. It may not be growing as fast as you want it to because you're not accelerating that promotion strategy, but you're still going to be experiencing growth month over a month. That's how you know you figured it out. In terms of your portfolio approach for marketing as an example, I like to think about it like an investment thesis. I know you're not 100% in crypto.

Starting point is 00:21:25 You're probably not even 100% in cash. There's probably a medley between that, right? And I think the same thing is true when you're thinking about your marketing channels. 80% should be in index funds. 80% should be in the stuff that you know is going to produce that consistent year-over-year results. So your number one marketing channel should be getting 80% of your investments. But that 20% should be thinking about, well, what's next? What has the potential to be a rocket ship?

Starting point is 00:21:50 What is my next Nvidia? What is my next Bitcoin? And so with 20% of your allocation, which includes your money, your people, that's where you should be thinking about, well, what is the next marketing channel? So that way you're not beholden or stuck if one channel ends up falling apart and cratering. You've got a second backup channel that could easily recoup and make up the first channel if for whatever reason that first channel ends up stop working for you. Okay, can I be selfish for a minute?

Starting point is 00:22:15 Of course. So right before we hit record on this pod, I got a text message, kind of out of the blue. I'll let you read it. All right. It's just at the end. Right at the end. So the question is, let's buy biz with 50 plus million revenue together this year. That's the new year intention.

Starting point is 00:22:41 Just out of the blue, I get this text from this guy saying, he wants to build a 50 million, he wants us to partner up and buy a 50 million dollar a year revenue business together. And last night, we were at dinner and with a bunch of friends. And you asked me, well, what my superpower is. And the second question was, what do you hope, what do you need help for up? What was the second question? Yeah, so the two questions are, what's your superpower? What can you help everyone else in the group? And the number two is, what's one thing you need help with?

Starting point is 00:23:22 Right. And I said, you remember what I said? You want to say it? Think big. Hmm. Thinking big. And so I said that last night. All of a sudden now, I'm getting this text message where someone is pushing me to think big

Starting point is 00:23:37 about a strategic acquisition in a 50 million dollar revenue thing might be an acquisition of $150 million. Yeah. This is really outside my comfort zone. I would like to know when, how do you think about, how should I think about acquisitions if you were me? And then, so that's just like strategically.

Starting point is 00:24:06 And then on the personal side, like, how do I get my comfort level to be like, yeah, I can make that, you know, that big bet, right? It never feels really good when you're making a big bet, at least for me. It never feels good to,

Starting point is 00:24:26 to me, like I've got a really good thing going, right? When you have a really good thing going, it's hard, you know, you don't want to mess it up. Totally.

Starting point is 00:24:33 So what advice do you have for me? So one of the most important things that a CEO should be really good at is making decisions. And one of the main frameworks that I use for decision making is, I call it the shield versus

Starting point is 00:24:46 sword, which is how much effort is this acquisition going to take versus what is the potential impact that it has on my business? So it's this impact versus effort matrix that's super important. I'm always thinking about what is something that is super easy for me to do that's going to have a massive impact on my portfolio or on my business. When I'm looking for massive impact with low effort, those are the low-hanging fruits. I'm always going to be optimizing for those things. They don't require a lot of shield. They don't require a lot of sword. They're super low-hanging fruit.

Starting point is 00:25:19 And I'll typically rank these, one to five. How much effort is this going to take? And then how much impact is this going to have in my business? And I'm looking for 10 out of 10 ideas. I want five in terms of effort and five in terms of impact because it's super easy to do and it's going to have a massive impact to my business. For me, something like this, just gut feel. While it's going to have a massive impact, right, if it's done well, what's the effort?

Starting point is 00:25:43 That's probably a one out of five. So that's really only a six out of ten in terms of my, is there eight out of ten ideas, ten out of ten ideas? Oftentimes, founders love to go after the new thing, the shiny object syndrome and they completely ignore the amount of ten out of ten ideas that are in their existing business. And so for something like that, if I'm working with a founder, I'm going to hit pause. I'm going to be like, you know what? Is that actually the best thing that we should be doing strategically for this year? Or is there something else inside of your own portfolio that's actually worth a way higher ROI? Is it worth, so, you know, the one on 10 that you, the one on five that you're giving the effort. Yep. Is it worth being like, is there a world where I can make this a five on five? Totally.

Starting point is 00:26:26 Or should I give up on that idea right now? Well, here's the thing. If you give up the effort, let's say, hey, I'm happy to do it, but I'm only going to do 10K of an investment. And I don't want to be on the board. I don't want any advice. I'm not going to promote it at all. Well, you're also reducing the impact because you're not going to. to get as much equity. You're not going to get as much impact as a result of it. And so you have to

Starting point is 00:26:48 throttle how much effort is going to require in order to do this with the impact that's going to require. So of course, who wouldn't love a 1,000 out of 1,000 impact for a zero effort? It's like, if you could just respond, yeah, let's do it. Here's a hundred bucks. And you're going to get a $50,000 equity stake. Of course, it'd be amazing. But that's not the case in most scenarios. And so you do have to adequately rank these things. And then more importantly, you have to rank it compared to all of your other opportunities. Someone like you, Greg, you've got hundreds, maybe thousands of ideas sitting in your DM, sitting in your brain. I know all your brain works.

Starting point is 00:27:25 You've got tons of ideas, even with your existing businesses. How does this rank compared to everything else? Yeah, it's kind of one of those things where everyone else is trying to get you to do their idea, right? 100%. And you kind of have to block it. out everyone else for a second. We're recording this in January, 2025. Like January is such a good time. Honestly, February is such a good time. Like the first quarter, you know, the first quarter of the year is a good time to be like,

Starting point is 00:27:58 okay, what do I, what's important to me? What are the, what are the most impactful things I could do? And then you can start tuning people in once you figure that out. That's right. Yeah. Look, It's not that you don't want those ideas. I mean, it's amazing that they're coming into your ecosystem, but it becomes so easy for them to become distractions and noise if you don't have a framework for how does this fit into my strategy? How does this fit into all of the other ideas that I have?

Starting point is 00:28:29 I guarantee you your team has probably some incredible ideas. Maybe there's a company worth acquiring that you want to fold into the overall portfolio. How does that acquisition fit into the ecosystem? Because you've got to remember, okay, let's just go through. Oftentimes people are like, is buy a $50 million company. Which $50 million company? What are the financials?

Starting point is 00:28:48 How much effort is it going to require? How much due diligence? This is going to be an 18-month process. It could fall apart at the last minute. So now I'm doing a 10 out of 10 effort, and I have yet to see a dollar of impact. And most likely will fall apart last minute. 100%.

Starting point is 00:29:02 And then once I've actually signed the paper and we're able to pop the champagne, well, guess what? Now the real work starts. Because now we have to grow this thing, right? It's already hit $150 million. Guess what? If things were growing and going well,

Starting point is 00:29:14 I guarantee you that founder is not willing to sell. And so there's probably going to be some things that need to get fixed. There's probably going to be some churn issues, right? We've got to make sure that we're not buying a skyscraper that's about to collapse in itself, which I see all the time. So, yeah, no. Thanks, but no thanks. Who's a founder that you look up to that is doing like a lot of the right things

Starting point is 00:29:40 that people can model themselves after? I mean, to me, I've been going deep down James Senegal, founder of Costco. I know he's bigger than most, but I love the focus. I love the pricing and strategy model. I love that he gave back to the next generation of entrepreneurs. Like he famously coached Jeff Bezos, which is where the Amazon Prime idea came from for the membership. So it's not someone that just focused on pricing and modeling, but he's also giving back to the next generation of entrepreneurs.

Starting point is 00:30:10 So that's someone that, you know, maybe from like a tier one founder is someone that I'm admiring. Someone that I'm admiring right now that's, you know, just working on a lot of like really cool things. Honestly, like I enjoy watching like Natal Isson, just tinker and come up with ideas. And he's got an audience right now. I saw him just launch an AI course two days ago just because of his audience being like, yeah, this is cool. So I like seeing what he's doing. You know, Marshall just exited somewhere.com. I love his tinkering philosophy.

Starting point is 00:30:42 What's his tinkering philosophy? I mean, it's funny. He had peel, and then he ended up using that to start somewhere, and he used that to, and he ended up just selling that for $50 plus million. And now he's moving 12 minutes down the street for me, so I'm super excited for us to be hanging. I love seeing him just figure out, hey, like, where are my cure? It doesn't seem very monetarily driven, where I think over the last four years, the amount of people that chase the latest NFT project, the latest crypto project, versus like,

Starting point is 00:31:12 how do I just scratch my own itch and then sell that solution to others? Isn't Marshall? Didn't he create a few products and one of them kind of hit? And I know you're a focus guy, you know? Whenever I'm telling you, I'm working on like a bunch of projects, I'm like, oh, my God, oh, my God, he's, I know what he's thinking. I know what he's thinking. Focus, Greg, focus.

Starting point is 00:31:35 So how should people think about, you know, a lot of people are into product studios now, launching multiple products. I call them multi-multipreneurs. How should people think about, you know, having multiple cash-fowing businesses? Does it work? What are your thoughts? So this goes back to what we were talking about in the beginning of this conversation, which is, are you a founder or are you a CEO? And founders found. Builders build.

Starting point is 00:32:02 And if you know this is your zone of genius, this is actually the most value. part of the overall value chain. If you can get something, if you can discover flight, like that more than anything else is the most valuable part of the overall ecosystem. The problem that most founders have is they discover flight and then they abandon it to go start the next thing. Right? They spend 2,000 years discovering flight and then they go, okay, well, like, let me go build, let me go invent the helicopter. Where it's like the last 100 years is actually where the exciting parts of flight happened. So you have to hand off the baton. You have to successfully hand off the baton.

Starting point is 00:32:35 So if you have discovered flight, mid-seven figures, your only job right now is go, am I the right CEO for the next phase of growth? And if not, the only thing you should be doing is either hiring a CEO or a president to execute on your vision or recognize this is actually not a business I'm very passionate about and hire a CEO to take your vision to the next level. Once you do that, go back to tinker mode because that's actually way more valuable for your skill set. But the problem that most founders face is they go right back to tinker mode when the first thing still is a spinning plate. And it ends up crashing, failing, and now they have nothing to show for all that hard work. The founder of Costco, what's his name again? James Senegal. James.

Starting point is 00:33:17 So if you think about Costco, Costco, the only thing, the only expansion that they've done is expand internationally. Right? they haven't really changed their model that much. And when I hear you talk, I'm like, that's what I want to be doing too, right? Like I want to be, I call it building skyscrapers, not strip malls. So have a, you know, you have a business and it's starting to work, but then it's like, how can I expand upon it versus creating new business units? I think that's the mistake a lot of people make when they're building these product

Starting point is 00:33:58 studios. Yeah. I mean, they're not like James. Well, let's use App Sumo as an example. When I joined Absumo, we were selling everything from ebooks to fonts to digital courses to software. The way we build skyscrapers instead of strip malls is we then analyze the portfolio and we go, well, which thing is selling the most? How do we get more customer loyalty? And software was outselling all of the other ecosystems by 10x. So why? What's going on there? We realize if we dive deeper, marketing agencies were our most profitable customer segment, and they were buying software to reduce their monthly spend on software. So let's just do more of that. We go way deeper with them. We build way more customer loyalty. We tripled our customer lifetime value. That alone,

Starting point is 00:34:43 all things being equal, tripled our business. And so when we talk about how do I go deeper, yes, you know, James Senegal expanded only internationally, but I would argue each opening of a new Costco was an expansion. It's a new market. Each time someone walked in and bought a membership that was deeper, deeper loyalty with that customer base, each time they reinvested profits to lower pricing and increased their buying power, they were building more customer loyalty. And they were going deeper and deeper with each market, each store.

Starting point is 00:35:14 And that's why they are the most profitable per square inch of any retail facility in United States. It takes a lot of courage to focus. You know what I mean? It does. I feel like you really have to believe that if you execute on this vision and you expand on this vision, that you'll win that market. And in a world where AI makes building so simple, I feel like, yeah, it takes courage. Great, who's the fastest man on Earth?

Starting point is 00:35:53 The fastest man on Earth? I don't know, dude. Do you know you, St. Bolt? I know the name is he the fastest man on Earth. I mean, it could be, right? Like, I mean, when you say, top, top, top, point one. Exactly.

Starting point is 00:36:05 Who's second? Lord knows. Yeah, who knows? And that's the, when you look at most markets, they only care about the winner. Like, they only care about the gold medalist. And so if you're not going, if you enter a market, you have to ask yourself, can I be the gold medalist in this scenario? Can I be number one in this scenario?

Starting point is 00:36:25 Because when you take a look at a look at, you. at where the market will flow, 99.9% of the actual rewards will only go to the best in the market. Is that true even when non-venture-backed businesses? It's true for any business. When you ask yourself, who is the best in the world at anything, that's where the majority of the value is going to go. And so you shouldn't enter any market that you're not going to be the best in. By the way, markets are broad and can be sliced up. So Amazon is the best, let's say, for two-day shipping. but targets the best for an in-person experience. And so you have to ask yourself, well, in what arena are we competing in?

Starting point is 00:37:02 And can we be the best in them? Because if not, you're going to end up being a seers where they're not good at anything. And they end up going bankrupt. And so before you enter a market or before you decide to focus, you have to ask, is this something even worth focusing in? Is this something that I'm uniquely qualified for? Can I be the best in the world in? And if yes, if this is something you want to dedicate your life to,

Starting point is 00:37:23 you think you can be the best in the world in, or at least, for five years, if you can focus for five years, you can have a hundred million dollar business and have a life changing exit. Once you do that, then you can do whatever you want. Once you're an exited founder with a nine figure exit, you can do whatever you want because all of a sudden, those business ideas, those texts are going to come to you.

Starting point is 00:37:42 Okay, so, you know, Amen, tell me a story of, you know, hyper-nishing and relentless focus. Yeah. Well, going back to the nine steps, nine figures, the very first step is persona. I think deeply understanding who you sell to, who loves you, who do you love back, who's sending you referrals is probably the most critical question

Starting point is 00:38:06 that any startup can ask itself. And we ask ourselves that question every year. And what we do is we analyze our customer data. We look at, are there any trends with our top 10, top 100 customers? And for us, 2017, we analyze that customer data and we realized, oh, wow, over 80, percent of our top customers are marketing agencies. So we branded. And I like alliteration. So we called it marketing agency Matt. And ironically, there was an actual marketing agency mat on our list.

Starting point is 00:38:33 And we go, why is marketing agency Matt coming to APSumo? They're coming to APSumo because they're spending monthly on expensive on software, but as an agency, as you know, revenues feast or famine. You might have 40% churn in one month. But your expenses stay the same. And so they're coming to APSumo to reduce their monthly expenses on software. So at the time, we were maybe doing one software deal a quarter because they're hard to do, hard to negotiate. I go, what would happen if we did one a month? So we tried that for the following quarter as an experiment. One of our frameworks is called test and invest. And we tried that. And guess what? Revenue went up. And I'm like, well, what would happen if we did two a month, three a month, four a month? And every quarter,

Starting point is 00:39:18 we kept increasing it to the point where now we were launching, got to the point where we were launching, one software lifetime deal every single day. So 30 a month. And of course, when you're selling more of what your ideal customer wants, what ends up happening? Not only does your ideal customer start coming to you with more loyalty. They start referring to you more in the communities that they serve. But guess what? Even Solopreneur Sally, Enterprise and Ethan, the other customers that we were quote-unquote ignoring,

Starting point is 00:39:46 they benefit because now we can negotiate better deals because we're able to drive more revenue to the founders. of those software deals. And so all things being equal, our customer lifetime value overall went up. Our customer acquisition costs were slashed. Every single KPI in the business went up into the right. And all things being equal, our business tripled. So testing, like how should people think about how many of these test and invests that,

Starting point is 00:40:15 you know, should they be running a year or a month or how to think about it? 80-20. So 20% of your money, time and energy should. be spent on these experiments. I'll give you a good example. We would think about an hypothesis. One of my hypothesis in 2018 was if the number one way we acquire customers is through referrals, so people sharing their referral link, would they share more if we paid them instead of giving them

Starting point is 00:40:41 credits? So basically an affiliate model. And so we literally, with our top 1,000 shares, emailed them and go, hey, for the month of October, if you share, use your share link, we will pay you via PayPal instead of with absumo credits. By the way, Greg, completely manual. We were literally logging. It was literally a spreadsheet and I manually PayPaled each individual. And I look at the data and it was a marketed increase month over month. That alone was enough for me to invest into proper software, proper tracking software,

Starting point is 00:41:14 and actually launch our affiliate program in the following year. Today that revenue channel does multiple eight figures in revenue for Absumo. And so when you're thinking about testing and investing, your core team should probably be focused on what's working. So for us at the time, it was email, email was our number one channel. Don't distract your core team. It's now your job. The founder's job is to look and dig for oil and then higher to scale it. So it's the founder's job to discover revenue. And I think this is one the biggest mistakes that founders make is they hire to discover revenue. What you need to do is hire to scale revenue because it's your responsibility to discover it. I want to talk about team for a little bit.

Starting point is 00:41:56 So we've got an executive team. I think we're doing a good job. I don't know what, you know, I'm trying to figure out how can I take my executive team to the next level? How do identify holes and places where we can double down? How should I be doing that? So there's only two core functions of every business, sales and delivery. You first and foremost, need to ask yourself, where is the bottleneck? Meaning, do I have a bottleneck in sales? Meaning, is there not enough leads? Is there more leads than we know what to do with? We don't have enough salespeople. Is there enough salespeople, but we don't have enough proper onboarding process? Or after onboarding, is it the delivery side? Is delivery not fully automated? Or is the quality

Starting point is 00:42:44 not up to par? Or are we experiencing high churn? Those are your two executives. your top two executives. Let's call it chief revenue officer and your C.O. Your chief operating officer. From there, it's your responsibility to determine where is my zone of genius? I think that oftentimes the quote is hire great people and get out of their way. I think that's a terrible idea. I actually think it's much better to hire people actually in your zone of genius. So if for me, my zone of genius actually at Absimo was more on the sales side. So the very first executive that I hired was actually in charge of sales. Why? Because it allowed me to know what I was looking for, know what genius looked like in that regard, be able to properly train that individual,

Starting point is 00:43:31 and then know whether or not they were doing a good job. If instead of hired a CTO, I have no clue if that individual is doing a good job. I have no idea what greatness looks like. They could end up just telling me complete lies. And honestly, it would be a complete mismatch. So for you, when you're thinking about your executive team, we have to ask yourself, first and foremost, do I have the right executives at each, and strategic flywheel is a huge component of it, do I have the right executive at each corner point of my strategic flywheel? Do I have the right executive in order to drive sales?

Starting point is 00:44:01 So if I send out a tweet and we get a hundred more leads, can that VP of sales actually go and close them at a north of 50% close rate? And then if that person is able to close them, can we properly deliver it? And if not, there's probably something broken down in your value chain. and it's your responsibility to go and look, well, is it on sales or delivery? And if it's on sales, where is it broken down? And how do we hire an executive for just that particular function?

Starting point is 00:44:26 So I buy that. A key component of it, though, is figuring out what your zone of genius is. And the question is like, how do you identify that? How do people identify what their zone of genius is? When you look at your calendar, where do you get excited versus what do you push off? If you get excited for certain calls, if you get excited for certain areas, where are you tinkering in the morning before you have any meetings? That's your zone of genius.

Starting point is 00:44:55 If you find yourself dreading a sales call, that's an area for you to get out of. If you find yourself excited in order to tinker with the latest AI tool or finding yourself excited to jump on a customer call, not a sales call, but an existing customer, you're probably thinking more in terms of delivery. And so ask yourself, where does your motivations go when, you're, you're probably thinking more in terms of delivery? when you have an empty calendar. So that could be a cool exercise to give to your team, right? You could say, like, I'm going to, you know, create a Google Doc,

Starting point is 00:45:26 and I'm going to, you know, list out the five things that give you energy and the five things that suck energy away from you. Totally. I mean, to be honest, most people should be able to knock it off at the top of their head. Totally. Like, in my head, I know. Yeah, exactly. So, like, I mean, we don't need to make this esoteric, like, like, two-day retreat.

Starting point is 00:45:44 Like, tell me about your feelings. Take ayahuasca and just won't get one shot at the company retreat. No. Turns out I love sales. Exactly. Like let's not, that's the problem that most of these frame, they overengineer everything. Like, oh, let's spend nine weeks to think about our core values. Bro, move on.

Starting point is 00:46:03 Let's go. Let's move quick. So like just tell me where your zone of genius is and let's get it off the plate. And by the way, eventually your job. So the founder is the hardest, hardest working person in the room. The CEO is the laziest. The job of the CEO is to have nothing on their plate. I had maybe one meeting a week on my calendar.

Starting point is 00:46:20 You have to get eventually everything off your plate. And so forget your zone of genius. Eventually, both sales and delivery was off my plate, where in the beginning I was writing every piece of copy, closing every deal, doing every customer support ticket, sending out every email. But eventually got to the point where I was thinking two, three, four, five quarters ahead in the business,

Starting point is 00:46:40 that's actually the ultimate goal for every founder that wants to transition to CEO. is how do I become the laziest person at the company? I think that's a, Jeff Bezos has a quote on that, where... That's right. Right around on stock price. You know, when I think the Amazon stock price was going up a lot,

Starting point is 00:46:57 and some analysts asked him, you know. Congratulations. Or yeah, congratulations, you've done so well. And he basically was like, oh, you should have congratulated us three years ago. That's right. Because it was three years ago that we put in the work for today. And to me, individuals like Bezos, Zuckerberg, like those are the rare, the reason they are so successful in the game of business

Starting point is 00:47:20 is because it's so rare to have a founder also be a great CEO. The reason they are the top 10 richest people in the world is the founder is an artist, whereas the CEO is a manager. So hard for you to put down the paintbrush and then pick up the clipboard. And so for individuals that have successfully made that transition to all the riches go to spoils. And so for those individuals where, as Jeff said, don't congratulate me on this quarter because that quarter was baked three years ago. That's a perfect example of Jeff, who was very much in founder mode, has now transitioned to CEO mode. And he's thinking about, well, how do we get on the moon? Right? How do we get on Mars? Like, he's already thinking about things five, ten years from now

Starting point is 00:48:03 that have nothing to do with the socks that got shipped to me this morning. He recently said that, what's the name of his Blue Origin? Is that what it's called? Yeah. He recently, He recently said that he thinks Blue Origin is going to be bigger than Amazon. I believe it. Yeah. And that's a multi-decade business. Yeah. And is that, is he thinking too far ahead, do you think?

Starting point is 00:48:25 Well, you have the luxury to, right? Because guess what? He's no longer driving to and from the UPS in order to ship his packages. Like if you have a seven-figure business, should you be thinking 15, 20 years in an event? No, absolutely not. Yeah. Yeah. If you've got a seven-figure business, you probably don't have enough.

Starting point is 00:48:38 You're in the awkward haircut phase, right? Your hair does, is not too long, not too short. nobody's looking in your way. You kind of look weird. Meaning you don't have enough profit to hire a proper exec team, right? You've got a rag tag group of individuals. You're all wearing multiple hats. The only thing that matters is probably hitting this month's numbers. So no, yeah, you shouldn't be thinking about 15 years from now. You don't have that luxury. Cool. Dude, I'll end this by saying I love you. Yeah, Greg, this is fun, man. By the way, you know, I was thinking back to when you and I first connected.

Starting point is 00:49:11 It was actually like in Clubhouse, 2021. I was looking back through our DMs. And I remember just being like, number one, like super, super blown away by what you were saying back then. And it ended up realizing like, oh, wow, like this individual actually walks to walk, talks, talk. I think you and I were joking. Most people in our space sometimes like they're essentially Hollywood actors and they're

Starting point is 00:49:33 getting puppeted these talking points. But it was very clear to me on that clubhouse conversation way back when that it was, that you actually walk to walk, you talk to talk, and it's been fun watching your journey and consuming your content. I appreciate it. I will say, I got to think bigger, though. You know, I don't want to be one of those people

Starting point is 00:49:53 that is complacent. I don't want to grow 10, 15, 20% a year. And the reason, it's not a financial reason. It's just a, I like to play, I like to play games and I like to win games. It's really fun for me.

Starting point is 00:50:13 And I think it would also be really cool if I can bring lots of partners, employees, teammates, and allow them to buy their house of their dreams and help them win at their games. So thanks for helping me think bigger. And like I said, we don't do pods like this really.

Starting point is 00:50:38 We really focus on the tactics, for ideas. But I'm happy this exists because this is the foundation that everyone needs nine steps to nine figures, baby. Love it. Where could people

Starting point is 00:50:52 get to know you more? Honestly, exes by the best place. Just look for me. Not clubhouse? Yeah. Talk about retention. All right, man. All right, brother.

Starting point is 00:51:01 Great catching up, my man. See you later. Cheers. Peace.

The Startup Ideas Podcast - The Step-by-Step Plan to Go From $3M to $10M+

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