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Making It with Jon Davids
230 - This Little Box is a BIG Business | with Ghassan Halazon, CEO of Emerge Commerce
00:50:31
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- [00:00]
A
This metal box is worth millions of dollars and you've probably never even seen one. I'm going to tell you all about it and why it could be a cash printing machine. And that's just the first thing I'm pulling out of my business treasure grab bag. Me and my buddy Ghassan, who runs a company with $20 million in sales. Last year we each brought five things to share. Lessons, tactics, money making hacks that every business builder is going to love. My name's John Davids. Let's do it.
- [00:32]
B
You're listening to Making it with John Davids.
- [00:38]
A
Ghassan, when was the last time you were on a road trip?
- [00:42]
B
On a road trip? You know, I don't do as much travel as we used to in part because we're largely focused on Canada and a little bit of the US I would say.
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A
No family road trips. No. No. Taking your, your daughter on a, on a drive across.
- [00:55]
B
Yeah, yeah. I've done a road trip practically every month during the summer.
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A
Really? I love how your mind, by the way, went to like the raising money, financing road trip.
- [01:06]
B
That's the world we're in.
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A
I love where your mind's at. So you're driving for hours and what do you do if you're starting to feel tired?
- [01:13]
B
Well, if my wife is next to me, normally I would ask her to switch seats and have her drive for a bit while I take a bit of a break.
- [01:22]
A
I like, I like your style. That's a good answer. Let's just say you're on a road trip, you're not feeling so hot. You gotta get some shut eye. I want you to head over to this website called hotelinbox.com.br because this is a site in Brazil, so hotelinbox.com.br and I don't know how strong your Portuguese is. If you're like me, you got to hit the English, you know, translate to English. So the basic concept here is it's a hotel in a box and it's for those who aren't watching on YouTube. It's basically like a metal box. Maybe it's like 10ft long, maybe it's 7 or 8ft wide. It's like really small. You can get a single, a double or a triple. And it's literally sitting in a gas station. And it's got a bed, it's got a bathroom, a sink. I think it's got TVs in it and it's got WI fi. And the whole concept here, these are popping up all over Brazil. The whole concept Here is, let's take a motel and let's just skim it down to its basic function and let's just put a box at the side of the road that people can go into, snap their credit card, get some shut eye. You can be there for an hour, you can be there for eight, nine, 10 hours. And this is like the modern motel. So I found this thing and I was like, but by the way, have you heard this before?
- [02:41]
B
I have not. I. I have not. I love it though.
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A
I love it immediately. The comments on this when I put it on social were crazy. So the whole idea here is, all right, we've got the motel already exists, and roadside motels have been around for decades. But how do we take that form factor and kind of make it smaller and make it totally purpose built? And so they've done that. It's literally a metal box, almost like a big storage facility that you can sleep in at the side of the highway. But the other thing I love about this is that if you think about the revenue potential for the gas stations, for the BUC EE's at the side of the highway, for wherever you're driving to, even if it's not like an actual rest stop, you could put these in the middle of, you know, highways in different areas and give people the opportunity to hop off, take a nap and get back on. So I saw this and my mind just exploded with opportunity. So when you see something like this, where does your mind go?
- [03:37]
B
Wow, what a smart way to monetize what is probably otherwise empty space, right?
- [03:43]
A
It's a parking lot. It's literally a parking lot.
- [03:46]
B
You know, I see a few of these, you know, add on features, the wi fi, the AC kind of the beds, the security cam, et cetera. This is really, really smart and juicy. The margins on this thing once you build it, and the payback, I imagine, is very lucrative. I like it.
- [04:05]
A
Well, what's interesting also about that is it's like I'd imagine that in 10 years from now you're going to. Let's just say this is normal. It's in Brazil now. When I posted this, I literally had entrepreneurs and investors dming me like, hey, can we bring this to the US to Canada? And the reality is, I think in 10, 15 years from now, if this kind of thing is normalized, we'll start to wonder, how did we ever not have these? Like, think about the cost of putting up a motel. The millions and millions of dollars could throw these up for, you know, whatever, two, three thousand bucks. And then Take them down if you want to. But I think things like this, we, we sort of take for granted that, you know, a place to sleep at the side of the highway needs to be a motel. It needs to look like this. It needs to cost this much money. It needs to, you know, it sort of has a certain built in formula and all of a sudden you change the form factor and this is just where innovation comes in. So I love this. Made my day.
- [04:57]
B
The timing of it is, is great too. I feel like the world's moving towards more minimalist and you know, then the basics have to be covered and this kind of checks those boxes. I always, I always ask myself, like, why do hotel rooms not charge like on a smaller level or a smaller package, right? Like, why does it have to be an overnight thing? It's probably has to do with the logistics of cleaning the rooms and all of that stuff. But like all that space, you know, could, could be rented. If you're in a city, why have, why do you have to sit at a cafe or at a hotel lobby? Why can you go up, rent a room for four hours and get out? So I feel like this, this kind of resonates with, you know, as you said, a road tripper and being able to just plug in, detach, sleep a little bit and, and get going. I, I, I think this is a.
- [05:40]
A
Winning idea if you're Gen Z or Gen Alpha. I feel like, you know, if we're talking in the year 2040, you're going to look back and think, wait, you guys built like these huge buildings just to sleep in? We, we could sleep in this metal box. What are you talking about?
- [05:54]
B
The rate that Z is going, I can see them wanting to live in these little spaces ongoing.
- [05:59]
A
We're going to see these turn into little homes at the side of the road. You just live in full time. This episode is brought to you by my Playbook social media selling machine. Available right now@johndavids.com playbook. Let's be real. You don't want likes, you want sales. You want to know that customers are going to show up every day from the content you're already posting. This Playbook shows you how that's done, how to turn social posts into cash flow, and how to scale in a way that's simple, repeatable and on brand. Grab it free right now@johndavids.com playbook that's johndavids.com playbook. Okay man, that's my first idea. I know you got a good one here. I love this. You Wrote down Boomer commerce. So tell me about Boomer commerce.
- [06:46]
B
So the opposite of Gen Z actually good segue. Boomer commerce is really sort of this idea that while everyone else is focused on the newest, greatest, flashiest, sexiest business models, catering to Gen Z and other younger generations, there's this world of boomers that happen to be sitting on the most income and the most time and probably the most loyal types of customers and to cater to them. And so part of our strategy, and I admit this wasn't fully intentional, but we seem to have landed on a portfolio of E commerce brands and categories like golf and like grocery shopping for the family that skew on the older demographics. So that's you know, sort of 50s and 55s and even 60s shopping online with great wallet. They unsubscribe less than your average, they complain less, they are more loyal, they're more likely to refer others. They're more, or I should say less price sensitive when it comes to raising prices in this increasingly expensive world. So we kind of like that idea. And so we have, I'll give you an example. We have a website called underpower.com. it is our golf voucher marketplace for discounted tea times and experiences. And while there are a fair amount of young professionals on the site, the vast majority are what I would call boomers and older demographics that have been with us for years. Very loyal crowd, have the money to spend and tend to have friends they bring with them.
- [08:24]
A
So the average user on underpower.com is what, in their like late 30s, 40s.
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B
Yes. Skewing upwards. Yeah, yeah, in the 40s and 50s. And now we have, you know, a rising demographic with the younger generations as golf becomes more popular again. But the heart of the service and the vertical really our golf vertical has three brands, is kind of that, you know, 45 to 55 or even 60 age age group.
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A
That's so interesting because so much of E commerce, you know, we like I hear about E commerce, I'm not in it like you are, but I hear about TikTok shops and everything that you can build on Shopify and so much of it is geared towards, you know, the D2C crowd which is, you know, what, what can we sell to the 22 year old girl or the 17 year old guy. But you're right that whatever you sell them, they're not going to be loyal, they're going to be more price sensitive, they're going to churn if it's a subscription service. So you're selling here to basically rich People, which is a great demographic because it's golf and they're going to be older, like you said, if you raise your prices by, you know, 9%, like, who cares? They don't even notice. Did you, did you do that intentionally going in, or was that just a happy coincidence?
- [09:31]
B
Yeah, I think at some point early on we identified that golf as a vertical, naturally was what some would call an old school, school vertical. And with that came a deep sense of community and loyalty because these folks have stood the test of time and they care deeply about the sport of golf. And so by virtue of that, we were acquiring a business that had a loyal, long term, quote, unquote old school following.
- [10:00]
A
And is this the site? The business itself is. What is it? A marketplace?
- [10:05]
B
It's a marketplace for discounted tee time. So it's to play golf across hundreds of different golf courses in Canada and.
- [10:11]
A
The U.S. aren't these like marketplaces? Once you have supply, demand, liquidity, you have buyers, you have sellers, and you have kind of a moat around what you do, there's not a lot of competition that can come in easily. Aren't these just the best businesses on earth?
- [10:28]
B
You need the scale, right? And it took time to get to scale. I mean, this business has been around since the Great Recession 2008 and 9, and actually thrives in a weaker climate because golf courses pretty much rely on us to bring customers through the door. And so they kind of need us more in down times. But, you know, essentially it is quite sticky. I'll give you a sense that the vast majority of the golf courses on our site in Ontario and California, Arizona and other golf regions have been with the platform for years. So they don't, they have no reason to leave us. And at the same time, the existing customers tend to stick around for much longer than your average model. So many of them are, you know, multi year, like high CLTV type customers.
- [11:12]
A
So you mentioned though it took a while for this to get to scale. And so I'm guessing what you mean by that is for like, if you don't have scale on these things, you have a bunch of buyers with nothing to buy or a bunch of sellers who can't sell it.
- [11:26]
B
Correct? The chicken and egg, classical chicken and egg, you know, situation with marketplaces, you know, how do you start, how do you bring enough scale and convince enough courses to sign up if you don't have the users? How do you keep the users coming if you don't have the courses? And so that balance has been struck through the years and now is to kind of just like a given, right? Like you're going to come to underpart, you're going to see tens, if not hundreds of courses across Canada and the US and you're going to see we have 400,000 golfers and golf database. With a click of a button, we reach them and they come to the site. So it's a sort of a push and a pull model at the same time.
- [12:01]
A
Wow. And so is a business like this, like Boomer Commerce as a category, Is that now something that you're really focused on? Like, do you want to buy more sites that specifically, you know, are targeted towards the 45 plus crowd?
- [12:14]
B
Yeah, I would say so. I mean, we, we don't go out and scream it or shout it as a strategy, but, but, but deep down I really believe and see it like we have another business in the, in the meat and seafood subscription world, which is actually a cool brand. But when we did some surveys, we realized that it was resonating the most with moms aged 45 to 55 in the suburbs, you know, buying all our true local meat and seafood and doing it for the family. And it just happened to work better there because they're not as, you know, the whole foods of the world aren't as accessible and, you know, sort of, again, another example of where like some of these quote unquote older demos are stickier. They, they, you know, are supportive when we have to raise prices. They understand it better, they're more patient and they shout it out. They shout out their pride and affiliation or support with the brand.
- [13:04]
A
So cool. I think the takeaway for me on that one is it's the less sexy stuff. Like I said, everyone wants to create the next D2C hot TikTok brand, but boomer commerce and just going for a market that actually has more money, that's the way to go. You know what it kind of reminds me of is so on social media, I'm active on every single channel, but the one that is growing the fastest and has the most valuable, I'll say, audience is actually Facebook. So everybody wants to get big on TikTok and Instagram and YouTube and whatnot. And I have audience in all those places and they're great. But Facebook, not only is it the fastest growing, but it has a ton of really wealthy, affluent people that are engaging every single day, which nobody wants to be. Oh, you know, Facebook, it's not, it's not quite as cool.
- [13:51]
B
Yeah, well, the reason it's not quite as cool is because all the parents joined it and all the kids decided to run away and go to Instagram and TikTok. So pretty smart move on Facebook's part to actually buy Instagram and get and have that foresight. But it's absolutely true that the money, so to speak, the real money, the old school money, is on Facebook and it is a huge opportunity. And I'll tell you what else is a huge opportunity and completely underrated is email. As a matter of fact, email is not dead. All caps. It is not dead. We've used email as one of our primary channels and as you know, John, we've acquired dozens of brands and businesses in e commerce through the years. In one of our biggest findings and one of our quickest optimizations is when we pick up a brand, we notice that they barely email their subscribers. These are subs that have joined for free, willing to hear from you for at least once a day, if not more. Okay. And some people might say, well, that that's too much. The spam, it goes against our brand. Well, guess what, you can give them choices. That's what we call a preference center. Right? And worst case, before they leave, you can tell them, do you only want to at least hear from us on days like Black Friday, which is coming up, right? Like there's ways to get smart about it. But don't just assume that people joined your email program want to hear from you occasionally. They can tell you if they want to hear occasionally. Otherwise assume they want to hear from you daily. So ramping that up to daily is one of the quickest, freest unlocks there is in all of E commerce.
- [15:21]
A
I feel like e commerce has a secret weapon here because you guys aren't afraid. I get e commerce emails every single day from you, from all the others, seven days a week or maybe five days a week at the least. And then the really skilled online marketing people also are sort of like five to seven day a week emailers. But a lot of people are afraid, like, you know, they'll do once a month, like, you know, whatever. Once a week. That's nothing. People don't get offended or insulted or they're not angry when you send them an email. Now texting is a little more sensitive. I wouldn't recommend sending a text every day. But email, you can email someone seven times a week and they'll be fine. You know, worst case scenario, like you said, they'll just say, hey, I prefer to get three emails a week.
- [16:04]
B
As long as you set up your preference center. Give some flexibility. I really like Letting them tell you how much is good enough or how many times is acceptable. But start with the assumption that this is a daily program. I highly advise everyone out there who has an email list and is in commerce, not just e commerce, any sort of commerce, you need to be emailing your members daily.
- [16:26]
A
I love it, man. Okay, I got one here. Pull up that Chrome tab again. Head over to germanpro.net I'm taking you around the world. We're going Brazil to germany now.
- [16:36]
B
So germanpro.net this has an interesting connotation to it. I hope it's not what my mind got me to, but okay.
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A
Germanpro.net so this to me is like the alternative to the vending machine to everyone's kind of like laundromat vending machine starter business. So what do you see on this site? Can you tell what it, what it is?
- [16:58]
B
I need the translation. But I can see, I can see an adorable puppy.
- [17:03]
A
Your Germans on up to par. It's basically a self serve dog bath, like a dog wash. So I, I saw this. I can't remember what city I was in. I was traveling one time and I saw it and I sort of made a mental note about it and I thought that' kind of interesting. So apparently this is big in Germany. I found a company in the Netherlands that does this. So they sell these machines, they're basically self serve dog washing stations, coin operated in the same way you would see like again a laundromat or a vending machine. And so if you own a convenience store, if you're the same dude at the side of the road with the hotel inbox put next to the hotel inbox, a dog washing station in case people come with their, their pets. And so what these are, are basically like self operated passive cash flow machines the way I see them. And so I did the math, I thought, wait a second, how would this actually work? So if you went to this website, germanpro.net, by the way, I have no affiliation with any of the companies I'm talking about today. Hasan definitely does buy from him. But if you go here to germanpro.net and you look at the pricing and you sort of say, okay, well I'm interested in this, these machines. I did the quick math. So it's about $30,000 to buy one of these machines and it would cost you in a year about $5,000 to operate. I kind of did the napkin math. I said, well what would it cost if I had to pay a bit of rent and I got to pay for water and whatever, 5,000 bucks a year. So that gives me $25,000 or about an 83% margin. And so if you do the math, it's about 14 months until you break even. 14 months later, you have paid off your $30,000 and then some. Even if you had to borrow the money for 30, you know, $30,000 and then pay off the interest, okay, maybe 15, 16 months, you're home free. And now you just have this coin operated cash flow machine. So if you're looking for a starter business or a side hustle or maybe just making some more money off your empty space in your gas station. I love the dog washing bath.
- [19:01]
B
Let me ask you something. The math, maths, as the kids say. But what do you, what do you think could, you know, sort of go wrong with this sort of model or, or with laundromats and so forth? I mean, obviously there's been a lot of talk about, again, the boring cash flow model that you and I have touched on a few times. What, what would, something here. What would, what, what would have to go wrong for this not to break even in 14 months? It sounds too good to be true.
- [19:23]
A
It's, it's, it's way too good to be true. And there's always a catch. So, number one, machine breaks customer service anytime you hear about a passive income like a laundromat gas station. The reality is people want customer service. And so I would say only do this if you're near the machine or if you literally have a store you're going to put it in. So someone's always there when the thing breaks, the water doesn't turn on. That's number one. Number two, if you don't have foot traffic, then you're in serious trouble. So the, the, the core mistake you could make here is just assuming, oh, if I put it here, people will come. No, no, I would count the number of dogs in the neighborhood. I would look at how many of them actually want something like this. That's what I would do. What do you think?
- [20:02]
B
No, I think, I mean, I like the simplicity of it. And it's a little similar to your first idea with the hotel inbox in the sense that it's like making use of real estate in or near the convenience store and, you know, monetizing it pretty much hands off with a little bit of attention, a little bit of support, a little bit of watering it kind of thing. So, so I like the allure of it. I still prefer the first idea more maybe, because I can, I can Personally relate to it. I don't have any pets, although we had a pet business. People love their pets and they want them clean, that's for sure. So, so, so this, this can work. It's smaller. It's. It's. But again, like, if you have 20 of these, you know, one day or 50 of these, like, that's. That's a pretty cool little business I've done.
- [20:49]
A
I'm actually writing a script now for this big pet video I'm working on. And it's $160 billion American market. 160 billion is what Americans spend on their pets. And most of that is in the category of what's called premium services. So grooming, bathing, nutrition, exercise. Like, we're not just talking dog food and chew toys.
- [21:10]
B
There's this whole humanization of pets is the term they coined. Obviously, during COVID it became one of the biggest sectors in all of e commerce and obviously continues. The half joke is once you've committed to buying a pet, you tend to have to have a pet for, you know, 10 or 15 years or something like that. And so it's like a commitment. It's. It ends up being part of the family. Like, there's this sort of this whole new attachment. In some cases, people prefer them to family, but that's a different story.
- [21:38]
A
Yeah. It's interesting, though, the, the idea of kind of getting into a market like a market like this. I think you're right. So I think the idea is definitely smaller because more people do road trips than people who need to bathe their pets on the go. But at the same time, I think the novelty of something like this, if you, if you did your research and you were going to, you know, go for something like a vending machine or something else, this is a much lower capex type investment. And by the way, the same with the first one. I like the. You know, I spent so long looking at real estate when I was a young entrepreneur, and it was like, oh, you got to have $250,000 to put down, and then you got to have reserves. I like the idea of people being able to get into. My number one choice, of course, is a digital business, because that's where I live. But if you're going to do something physical, don't, you know, put your life savings into something where if it fails, you got to start from zero. Like there's ways to do it that are smarter.
- [22:29]
B
Right. I totally agree, Totally agree. In this sort of a scrappy way, especially if someone doesn't have any, you know, entrepreneurial background. It's the type of thing where like you said, if you do have a convenience store or something similar like that, this is the perfect way to monetize the space.
- [22:46]
A
Quick break. So I can tell you about Influicity. That's the little marketing agency I started in my apartment about 10 years ago. Well, fast forward, it is not so little anymore. Influicity works with some of the biggest brands in the world, building customer communities that drive revenue. We do this through influencers, podcasts, paid media, social media, content, AI and so much more. You can learn more@influicity.com and hey, while you're there, check out our case studies. We have a lot of them. That's influicity.com okay man, I love your next idea. Supplier financing. Running a business and having your suppliers pay for it, right?
- [23:26]
B
Yeah. So it's not officially financing. You're not entering into an agreement with interest or anything like that. It's this bigger idea that this comes from is like that there's so much attention on profits and making company profitable. But really that doesn't necessarily mean you have the cash flow you need. So a lot of these businesses I find don't or haven't thought through their terms with their suppliers and what's the art of the possible? Right. In other words, what I'm practically saying here is reaching out to suppliers and working, reworking those terms, getting those terms stretched out. Rather than having to pay them net 15 for example, or even net 30, push them to go out to net 60 or even net 90, convince them you this is, this is partly a pitch like from a CEO perspective or from management team perspective. You are pitching your suppliers on the what you can do with the excess cash flow to reinvest in the business to grow, which will ultimately have them win as well. That's the key. They need to feel like they're winning as well. They're not just freely financing you. Right. So with that comes more cash flow and that, that's where, that's the way I think most DTC E commerce companies need to be thinking of their business because the reality is most of them have to buy inventory, which sucks cash flow. Right. So the more you can push those payment terms out, the more you can, you can generate cash flow to maintain and ultimately grow.
- [24:49]
A
What are the best payment terms that you've ever been able to negotiate?
- [24:53]
B
You know, we, we found ways with our long term clients and customers to really, really stretch things out on the premise that we're going to keep doing business with them forever now in return. And so whether that means three months, six months, nine months, things that are unheard of generally in business in general, 60 to 90 days is like maximum stretch unless you have real leverage or you give them other services, whether they're complimentary, whether you open doors for them, whether you help them raise capital for their own business. These are the types of things we've done to really build out these much longer term relationships. But I would say like naturally, you know, getting things to 60 to 90 days is a good start. And 90 days, I think once you built a reputation with suppliers, you know, that stood the test of time, whether you've had them for three, four, five, six years, you should be able to go back and be like, what's the harm, right? If I'm just one of your customers, it means the world to me to push this out to 90 or even 120 days. But you know, in return, here's these other things that are intangible that I'm gonna provide you, right? So I think it's a lot of give and take, but it's still a pitch. Like it's not a given, it is a pitch.
- [26:03]
A
So we had a client, I guess I probably shouldn't say their name, but we had a client, very, very big Fortune 100 company that everyone knows. We had a client that asked us, I think they had asked us initially for a six month payment term. And this is a publicly traded big company, but because it's a physical product company, I guess they have the same cash flow concerns everyone else does. They probably just made it a standard ask to all their vendors. They wanted six months and we said that that's insane. I think we settled on like 90 days. But the reality is I understand why they wanted it because they got to pay for a billion dollars of product, you know, to sit on the shelves of Walmart. So if they can take a little longer to pay me, that's better for them.
- [26:42]
B
It is all a leverage game, my friend. And you reminded me when you just said that a few years back, this was actually pre pandemic. The, one of the biggest telecom companies in the country, if not the biggest, owed us for some, an advertising campaign. It was a small amount, it might have been like 15 or 25k something in those ranges. And month after month, we normally collect like hawks, by the way. So we'll, we'll stretch things out, but we want to be collecting, as I said, at least back then, as a startup. And month after month kept Passing by. This wasn't even about terms. They were just delayed. Like they were paying us late and no one was giving us the real reason, and there was no real reason. It seems like a lot of this stuff either was getting lost in, you know, how big they were and how meaningless this amount was to such a huge company, or it was just part of their policy, hey, because they could, they're just going to push everything out. And I started telling my team, if those guys are paying us late, you want to go pay early or pay on time. Are you out of your mind? So we now, we speak to folks transparently. We push payment terms out. That is how we've created cash flow in our business early on. Now we're profitable and we're cash flowing. So we're fortunate to be in that position. But it wasn't always this, Rosie. We had to fight tooth and nail. Like we came up with this expression internally, half jokingly, we call survival of the stingiest. You got to hold on to your cash. You gotta hold on to your cash, my man. Right? You don't just part with your cash for anything. You part with your cash when you have to and you collect your cash right away. That's rule number one.
- [28:22]
A
So Manjeet Minhas, who's been on the podcast, has said that she, she's obviously a very, very tough negotiator, took $10,000, built a business that, now she doesn't publicly say what it is, but it's, it's nine, many nine figures of revenue. And the reality is she has done so much of that on, on being able to work with cash flow. And so she'll go to the point of like, hey, if I can pay you in this time, I'll take a percentage off. So if I pay you Sooner, I want 5% off, or if I pay you, if you give me a little later, I'll pay you an extra 1 or 2%. So she's looking at every dollar and figuring out how do I get this dollar to work the best.
- [28:57]
B
Absolutely makes all the sense in the world. And I would, I would take that a step further. So, I mean, I started with supplier financing, but really what it is is looking at every vendor, every contact or contract, every employee, and understanding that everything is negotiable and everyone is replaceable, including myself. And so once you understand that, that, you know, you hear the oh, well, but I'm stuck with this four year lease, I'm stuck with this huge salary or what have you, whatever it may be, across the company it's all negotiable. You got to put it out there in the world. You got to sit in front of someone and you got to explain your reality and your intention and then let the chips fall where they may. But from my experience, most things are very, very negotiable.
- [29:46]
A
One of the best negotiation things to understand in negotiation is there's price and there's terms. You can pick the price, but I pick the terms. You want the terms? Fine, I pick the price.
- [29:55]
B
The great example that I heard of recently around that was, listen, if someone says, all I care about is the price, and you do whatever terms you want, you know, to buy my company, then I'll say, you know what? I will pay you $1 billion, but I'm going to owe it to you 100, 100 years from now.
- [30:12]
A
Exactly.
- [30:13]
B
So it really is about the terms. That's it.
- [30:16]
A
So the best example of this, the mega example, if anybody thinks maybe they're too big or they're too small or whatever, the best example is Costco. And I'll tell you why Costco, in my mind, is the best example. So retailers, physical retailers have, have turnover. I guess all retailers have turnover. And so you get a product in and then it sits on the shelf for whether it's a month or two months or three or four or five. And I think a lot, and I'm not an expert on this, so the retailers in the audience can correct me on this. But you know, there's a lot of businesses where the turnover is like four to eight months, maybe even 12 months, where you have stuff sitting on the shelf and someone's not going to come into the store to buy it for eight months. And so a business like that, if they're paying the vendor that sold them that product on the shelf, they got to pay them in whatever it is, 30, 60, 90 days, and they have to put the cash out. Costco is such a great example, because Costco's turnover is about 30 days, right. Immediately they get a product in and then it's off the shelf, sold in 30 days. Which means if they have a 30 day payment term or a 60 day payment term, they are literally never paying a dollar out of pocket. They could have literally $200 million worth of merchandise sitting in their warehouse that they didn't pay a dollar for, and then they're going to sell it, and then after that they're going to pay for it. What an amazing business model.
- [31:34]
B
There's only one Costco for a reason.
- [31:37]
A
Copied many times, never ever duplicated it's just, it's, it's, it's a class of its own. So one more thing I'll say on this, I jotted a note down. Another way to play this exact same strategy is to introduce something like Klarna or Afterpay or one of these short term payment companies. And so if your client, if you need a way to get money upfront and you partner with them, your clients can basically do a deal with them. And so do you know how these things work? Like if you buy a peloton for.
- [32:05]
B
Example, it's like a payment plan, essentially.
- [32:07]
A
It'S a payment plan, but then they will pay you. So if you buy a peloton, you pay, let's say 80 bucks a month to, to the, you know, the afterpay or whatever vendor they use. The company gets paid immediately. So peloton gets their cash up front minus 5, 10%. Whatever it is, it's clear you get.
- [32:23]
B
The money up front and you get. Exactly, exactly. I would say like another interesting parallel to that, that, that I think companies and for example subscription boxes can, can do directly with their customers is, is offering, you know, especially since, you know, some of these services have loyal followings. If you're in need of cash, you can offer for example a full year of boxes now at a discount and get all the cash from your customers. Now it's actually a pretty cool loyalty mechanism as well, right? Because if someone actually committed to paying 11 months out of the 12 now, then they're very unlikely. I mean they're locked in for a year, right? And you and I know that, you know, having someone for a full year in consumer is pretty damn good, right? There's a lot of these guys churn within two, three months, but if you can keep them for a year, that's pretty damn good. So at the same time you get all that cash up front, but you really foregoing one month on the back end. But hey, someone could have quit on you by month four or six or nine. So why not get 11 months guaranteed and give one month free?
- [33:23]
A
So I know you brought a mystery box. Gasan, you got one more for us. What's in the mystery box?
- [33:29]
B
Well, the one that comes to mind right away is what I would call channel arbitrary or channel arbitrage. Right? And you know, in this busy world of attention going in a million directions, once in a blue moon, you get to see something that has the potential to be the next big thing.
- [33:45]
A
Right.
- [33:46]
B
A little while ago, I mean there was some chatter about TikTok obviously, that's, that's kind of. I think the Arb is gone there. The most recent one that we've been dabbling with is Applovin. Right. And for those of you who don't know, Applovin is a public company. It's skyrocketed like no other company or stock has in recent years. On the back of their ad tech and ultimately their monetization of ads in apps. Okay. And so we've been dabbling with it. It's still not huge budgets, but it is starting to creep up as a percentage of our overall mix. Right. So you obviously got your metas and your Google. Those are still the big dogs. But if you can develop a channel that's now 10, 20, 25, maybe 30% one day of your overall spend, that's a pretty positive thing to diversify. But to do that, I think folks have to jump in on these sorts of opportunities very quickly. And you will see that the Arb is really high because it's ultimately a supply and demand topic. Right. If there aren't as many advertisers as there are eyeballs, then you're going to be one of the lucky advertisers to monetize and drive insane roi. Right, on your, on your ad spend. And so what we're seeing, you know, for some of your viewers that are in Canada, Applovin launched just at the beginning of October here. It wasn't available here. Folks have been raving about it in the US and it just launched in Canada. So we've been jumping on this early and quietly, and we've been seeing tremendous early results. And so we're exploring, scaling it.
- [35:15]
A
So the classic example of this is if you got into Google Ads in 2003 or if you got into Facebook ads in 2009, you were getting huge traffic for not a lot of money. Tell me what I know Applovin, the company, I'll be honest though, I don't have any idea what they sell. So what is unique about Applovin's product?
- [35:35]
B
Well, I think what's unique is that these video, they're ultimately video ads in apps.
- [35:41]
A
Okay, so give me an example of an app that has a video ad that you would be on.
- [35:45]
B
They have tons, hundreds and hundreds of different ads. It might be a gaming app, it might be a puzzles app, a word game, like all sorts of stuff. Right.
- [35:53]
A
It's app made. Let's say I'm an indie developer and I create like a bingo app, a game people can play bingo or something. And there's a little video that shows under the bingo board. Your ad can be in there.
- [36:04]
B
Yeah, but that ad format is, as I say, it's a video and you're locked in, so you're more or less forced to watch it. So I think that's part of the advertiser lure. A lot of users hate that. Sometimes you'd say, or you'd argue back to boomer commerce. Right. You know, folks, folks tolerate a lot more. They accept a lot more of that. And what we found, though, is that these video ads, when catered to the right audiences, again, this is still early, but like, if it's like this popular mom word game or puzzle or something online that has this certain demographic you're looking for, and then you feed them true local meat and seafood, healthy living, local support, local farmers, which is our subscription box, suddenly there's context and there's like a willingness from their end to think about their family. Right. And to shop for them, which is what they do best. You know, in terms of household. The mom is usually the best shopper for the family is what we found. And so, so this is sort of a channel. They have this program called Axon, which is their, you know, essentially this, this, this video ad product across many, many apps that, that is scaling fast and has like, really nice ARB and roi.
- [37:11]
A
Right.
- [37:12]
B
Now.
- [37:14]
A
This episode is brought to you by Influicity's new tool, the AI Ads Generator, available now at johndavids.com ADS Most marketers waste weeks testing headlines and burning cash on ad copy that doesn't convert. The AI Ads Generator deletes that pain in just seconds. It gives you ready to run ad copy built on 10 years of data pulled from brands like Samsung, Mindvalley and Airbnb. With the AI ads generator, you'll never run out of ideas. You'll beat competitors to market, and you'll scale campaigns with confidence, knowing every word is optimized to sell. And it's free. Yes, seriously, it's free@john davids.com ads that's john davids.com/ads. How do you think about how much you're investing, let's say in paid ads on channels that, you know, perform versus these, as you said, channel arbitrage, where it might work. You don't know. Are you putting 10% of your money there? 5% of your money?
- [38:14]
B
Yeah. Yeah. So I think you're spot on. And then we say like sort of 5 to 10%. We always trying to dabble with stuff. So right now, again, Facebook, I. E. Facebook And Instagram plus Google, that's the lion's share, depends on brand, but overall, that's the lion's share of. Call it 80 to 85%. Then there's, you know, 5 to 10% experimental and another 5% offline, or whether it's sponsorships, podcast ads, you know, direct mail, that. That's also underrated when done right. So, but, but I would still say, like, we would like a day to come where Facebook and Google are more like 50%. Right. We don't want to be as reliant. But that is also where email can play a very key role. Because, remember, the best part about email is once you've acquired those subscribers, those members, it's free. It's a click of a button. I mean, obviously you have the ESP cost, you know, the email service provider. You need someone like, you know, you know, Klaviyo or Send Lane, et cetera. But at the end of the day, those emails are yours and they're free to reach. So. So we like that plug as well as a bit of a hack to minimize your reliance on Facebook and Google.
- [39:22]
A
Yeah, we get email like, you know, as a marketing agency in fluidity. We. We do emails, I don't know, three times a week, let's say right now we should probably do more, but we're seeing people that signed up for, let's say, a free ebook download or something, a tool that we had, and they downloaded it seven months ago, and they've been getting emails now for seven straight months, three times a week, and finally they click on that button that says, yeah, I'd love to talk to somebody at Influxity about running, you know, paid ads with you guys. And so it's like, okay, you've opened the emails, and then when we do talk to them, it's like, oh, yeah, I've. I've seen all your emails. I've listened to your podcasts. I've seen you on social media. So even though they're silent, they're there. It's working. You have to trust that it's working.
- [40:04]
B
Absolutely. I could. Couldn't agree more. That's. That's worked really well for us through the years.
- [40:09]
A
What do you think? So you said 80 to 85% of your ad spend is on Facebook, Meta, and Google, which is the same as everybody else. And every advertiser dreads it. But also, there's just no turning away. You can't turn that off. So, two questions. What do you think it is? Is it just that all the eyeballs are There and so that's where you have to be. Or is it that there are other places to go but nothing is as efficient as those places.
- [40:34]
B
Yeah, Ultimately it comes down to not only their audience. I think that start, you start with the fact that their audiences are absolutely massive. But, but their algorithms, most importantly, you know, they figured out how to get you to monetize it and there's a reason they're worth a trillion trillion dollars each or something like that many trillions.
- [40:52]
A
Three, four trillion.
- [40:53]
B
I know, I know. I think it comes down to how they match you. And again back to the supply demand dynamics of what's possible with these platforms. I do think though that again, your TikToks, your app Lovins, your, you know, podcast ads. There you go, that's plug for you. You know, all of, we don't sell.
- [41:12]
A
Ads on this podcast, but thank you.
- [41:14]
B
But, but I think that there's a lot of these other areas. I would say that by the way, just for what it's worth, for brand and like sort of top of funnel and just building out, I mean Facebook and meta and Instagram work really well. I mean Google is very intent based we find.
- [41:30]
A
Right.
- [41:30]
B
So it's kind of like people searching, knowing kind of what they want generally and then they stumble on your ad and they click on it because it's something in the vicinity of what they've been looking for. But majority I would say is going to meta.
- [41:42]
A
Yeah, yeah, podcast, I will say podcast ads because that was a big arbitrage. It's, it's still, it's, I mean it's still super effective. It's just expensive these days. But yeah, we get, I don't know, five people emailing us a week wanting to advertise on this podcast. And the reality is the inventory is more valuable for us to push our own products and services than to sell it. So that's how we look at it. But yeah, I mean podcasts are fantastic. So my other question there is what do you think of ChatGPT and all the AI engines and how do you think those are going to cut into not just the Google, but maybe the ad spend that comes with it?
- [42:16]
B
Yeah, I think it's a serious threat, obviously. I think all of the SEO world is at risk. We're seeing it, we're hearing it from others. Sort of the organic traffic from Google is down across so many different sites, you know, sort of forum type sites and blogs and stuff like that. Those are really getting hurt. It's pretty clear. You know, we saw the partnership between Shopify and OpenAI recently. And you know, I think this is just going to be, it's so obvious that Chad, GPT and others like it will be super plugged in, searchable. You're going to pay money. They're going to monetize by the way. They have to monetize. Look at how much money they're spending on the search servers and, and, and, and they're losing all sorts of money. As you know, that's okay when everyone's flying high, but when the music stops and you're already kind of seeing the cracks in the macro and the economy, these businesses have to make money. Well how, what's the best way to make money when they're starting to capture millions and millions if not billions of people searching and relying on them is, is, is ultimately going to be ads. And so, so these are going to be very serious and real channels. No one's cracked it exactly quite yet, but it's pretty obvious when the early days of Google 2.0, yeah, ChatGPT reported.
- [43:30]
A
Revenues of, what was it? I think $4 billion in the first half of 2025, $12 billion annualized. The reality is though, and that might be low, it might be higher than that, but the reality is they're making all that money now off subscriptions, off users like me who pay the 20 or the 200 bucks a month once they throw ads in there, the equivalent of, of AdWords. Oh my God. I mean that's going to be a hundred billion.
- [43:55]
B
But just remember like, you know, like they're spending hundreds of billions so they better. There's a bit of a criticism in that like something that started so novel now has to make money to cover the cost. Like any startup times a thousand or a million, like it is such an opportunity and it's such an arms race that they're all being forced to spend hundreds of billions quicker than the next guy. Some of them are talking about a trillion dollar race and that means that $10 billion is nothing in terms of revenue right now. To be at 100 billion ASAP, they need to be at 500 billion, they need to be at a trillion. And the idea is that if the music keeps going and the money keeps pumping in, they will get there. It is true. They have a real opportunity to disrupt, you know, the Googles of the world, which, which, which really happens kind of once in a lifetime, like opportunity with, with, with this situation. But it means that there will be monetization, there will be commercialization asap. It's coming and it, it kind of already is here.
- [44:53]
A
So speaking of that, can you give me a quick update on kind of where you're at? You've been. So I've been a shareholder of your company since pretty much the inception. Can you give me an idea of kind of where, where you think you're at in your life cycle in terms of like, okay, we started here, then this happened, now we're here today. Like, are you at the beginning? Are you about to turn a corner? Are you on like where. How do you think about where you are in your own life cycle?
- [45:15]
B
We are at the end of the beginning is. Is how I like to say it. And that beginning has been a long ass beginning. But I think, I think for you, for, for viewers or listeners that don't know much about us, we, we built an E Commerce brand portfolio, you know, over the past decade or so and you know, we went through different trials and tribulations. We built up $120 million GMV business. We came down from that. Following the peak pandemic kind of reversal, we decided to refocus our platform on our, on our, you know, sort of fewer, more compelling opportunities in grocery and golf, AKA boomer commerce. And so where we are now is like, we're really focused on both organic growth, profitability and ultimately cash flow. Which is why so much of my focus is on where people aren't paying attention, where are the, you know, the hidden gem opportunities, the tuck in acquisitions that, you know, generate cash flow that we can accelerate with our playbook. In this sort of, everything we're doing is around strategic, disciplined growth. And so we're really excited about these two verticals and we're building E Commerce in my view, the right way right now. We're more disciplined, we have much stronger balance sheet and we have the right captains of each vertical running these businesses to double digit growth and profitability.
- [46:36]
A
So you feel like you're kind of at the end of the first inning. I'm guessing you've learned a ton and there's a lot of stuff you do.
- [46:43]
B
Yeah, maybe not the first inning. That's a little early. I genuinely feel like we're really pumped about what we've landed on now. You know, coming back from a major turnaround that we believe we've successfully completed over a couple of years. It took a lot out of us. We paid down 80% of our debt, which was like 27 million bucks. So not trivial work, not necessary if you ask me. But we had to, ultimately we had to, right? The Ship a lot of e commerce aggregators, ran out of fuel and ran out of business. We're still here, we're growing again. And that was because of the hard decisions we had to take over the past few years.
- [47:18]
A
So when you're looking at a $27 million hole, did it ever feel insurmountable? I mean, and I don't mean that emotionally, I mean that literally. Did you ever feel like, oh, we just, we can't pay this back or. Or did you always have a plan?
- [47:31]
B
Yeah, no, listen, when, when you're rock bottom and pretty much your equity is practically wiped out or, or borderline wiped out. At least that's what the market was viewing this as. You know, it really was difficult to come to terms with the type of maneuvering necessary and asking yourself whether it was worthwhile. You know, what are the odds of coming back from, you know, 30 plus million in debt? Today it's down to 4 or 5 million in debt. But at the time, yeah, it was, it was really difficult to want to make this happen, to be hungry and eager, because again, like, if you don't have the 110%, what's the point? I think once we came to terms with the fact that we really had a couple of special businesses and brands and people that we could double down on once we really knew what we were sitting on. And there's a lot of work and time and effort thinking through what could golf be, what could grocery be? You know, if we sold these other businesses, including the pet business, and paid down all of this debt and got a fresh start, could we take this to 10x20x again? And the minute we were convinced that that was possible again, then, now you had our fire back. Now we're like, okay, we're going to get pragmatic. And so a lot of what I suggested and shared with your audience around supplier terms and cash flow management, a lot of that we really had to learn the hard way. We had a PhD through this turnaround, a few years of renegotiating every single thing on the balance sheet, every single thing on the P and L to get to a point where not only is our business now growing and coming back up double digits, you know, we'll grow like, you know, 40 or 50% this year, but we're also doing it profitably and with cash flow. Our cash is building up year over year, quarter over quarter. It is a great feeling, right? But it certainly felt dark as hell coming out of the cave and starting to clean things up. But, you know, we're all showered up now we're shaving and we've taken a nap in one of these Brazilian little kid boxes. Exactly. We've taken a little nap. We're feeling good. The sun is back out, you know, it's shining again and we're ready for the, for the next wave.
- [49:41]
A
It's an inspiration, man. Ghassan, this is awesome.
- [49:44]
B
Thank you so much, John.
- [49:45]
A
Thanks for listening. Get my best stuff to your inbox@johndavids.com Talk to you soon. This episode is brought to you by my Playbook website selling machine, available right now@johndavids.com Playbook Most companies want websites that look nice. But a lot of nice looking websites don't sell. What you really want is a website that grabs attention, builds trust and turns visitors into buyers while you sleep. That's what this Playbook gives you. Based on 10 years of work we've done at Influicity, optimizing websites for 7, 8 and 9 figure brands. Download the Playbook now at johndavids.com playbook that's johndavids.com Playbook.