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Problems to Profit
The Data-Driven Playbook: Matthew Barnes on Fixing Broken Marketing & Scaling Real Businesses
00:56:30
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- [00:03]
A
Welcome back to Problems to Profit. Guys, I have another amazing guest. As our illustrious president has said, we need to honor our geniuses. And you're gonna have your minds blown a bit today. We're gonna talk about that dark, dirty subject of technology. All of my brick and mortar entrepreneurs out there, get ready to have your minds blown. All of my click and order entrepreneurs out there, you guys know who you are. Some of you are amazing. Some of you are toxicos and toxicas that are really not doing it right. And you might get a little bit challenged when Matt comes on today and squeezes you on what you're not doing right. Okay, I have today, guys, a very special guest. I have Matthew Barnes. Matthew has a company. Let me explain the clients he services. You can't get in with Matthew. Like, everybody wants to go do all that paid marketing and, like, expand and grow. You can't call him. You can't get access to him. Why? Because he's on top. He's the best of the best. He works on referral. He has dozens of clients. But their clients are all in the ten plus million dollars in revenue working on Shopify and outlets similar to that. Correct, Matthew?
- [01:17]
B
Yeah, that's right. That's right.
- [01:19]
A
Matt is kind of the king of the digital ad space, data management space. They've created some proprietary softwares. They've learned how to kind of leverage networks to create just some really fascinating thing that I don't want to go too far into yet because I'll let him spill his own beans. But if you follow through on this entire episode, I guarantee you will get gems that will result in millions of dollars that benefit your business. Technology is the wave of the future, and understanding how to operate it from leaders in the industry who are working with the biggest and best leaders in the industry might just be the right way to go. So, Matt, without further ado, would you mind telling us a little bit of how you became, like, this prophet of digital marketing? Because it's kind of a dirty word in the space. Those are sort of the cockroaches of the industry. Or maybe we'll call them caterpillars. We don't want to. Some of them could turn to butterflies. You sure did. But. But it's sometimes a dirty word, I think.
- [02:23]
B
Yeah, for sure. I mean, the thing is that my favorite people in the space are the ones that have sort of found some sort of orthogonal way in, sort of almost by accident, just from having some unique perspective. So in any business, the most profitable businesses are the ones that capture some Uncovered arbitrage. And I think that one of the biggest opportunities out there is when you have novel approaches to certain sectors of business through people, again, who don't have necessarily the formal training. Like, you get somebody in who's like, oh, yeah, I have a degree in marketing. Like, those are your worst people. Right. Like, it's like, just run. That's not a real. That's actually not a real degree. Like, I was like saying, oh, I have a. I have a. I have a degree in creativity. Like, it's just like, that's not actually how it works.
- [03:16]
A
You had to get a degree in creativity. Like, somebody had to tell you you were creative. That's how creative you are. I love that. That's a really good way to analogize it. Hey, before we dive too deep, though, you've done something that, I mean, a lot of people want to do.
- [03:31]
B
Sure.
- [03:31]
A
Like, I mean, I know this because ever since I built a social media brand, I mean, it's interesting. I get messages every day from people saying, hey, I can really improve how your content is put out. Hey, you need to hire me for this. Hey, please say. And they're all digital marketers, bro. They're the people that all want to be you. And what's funny is, I've got somebody that's doing a decent job for me, and none of those guys ever messaged me before the person that was. That is doing a decent job for me started working with me. So you've really created something that actually blows way beyond my level. You've created something that goes, like, to the people that are doing this as an actual business, it's not just a podcast where they're out there burning time and helping folks. They're actually moving tens of millions of dollars in revenue.
- [04:17]
B
That's right.
- [04:18]
A
You've created that product. I'd like to hear a little bit about before we go into the business, your journey. I want to hear who are you now, the things that you've done, kind of describe your business. But then I want you to take us all the way back to some of the problems that built you up and made you into that person, helped you learn and earn all of that knowledge that made you this guy.
- [04:38]
B
Yeah, I appreciate that. So probably it makes sense to think back. So my background. So I talked about orthogonal backgrounds. My formal training is in civil engineering. I was a structural engineer by training in my undergraduate, and I was getting a master's degree in seismic design. So I was doing earthquakes research. We were modeling pistons that were filled with a Ferromagnetic fluid that would change the stiffness of buildings during, like, an earthquake. And I was doing that and moonlighting, working with an apparel company that I was just like, infatuated with. And my background, Right. Like, I'm the first in my family to go to college. And so my hometown is 2000 people in rural Indiana. Half of them are Amish. And so.
- [05:37]
A
Stop. You went from rural Indiana, 2000 person, small town. I mean, some people who haven't lived in a small town or grown up around that. To engineering.
- [05:46]
B
Yeah.
- [05:47]
A
That's not an easy break away.
- [05:49]
B
No. And that's the thing is that in school, right? Like, favorite subject of mathematics. And you know, one of the. A funny story is so I really like going to mathematics competitions. Like, that was like a really, like, fun thing for me. And so I'd go and I'd win every single time. And as I got toward high school, I remember I went to one of my competition and I got second. And I was talking to my teacher about this or whatever, and he's like, hey, like, don't feel bad about it. Like, these other kids, they trained a lot to get here or whatever. And I turned to him and I said, people train for these competitions. And so that was it. Right. It's like never quite really feeling like you fit in or whatever, but it was just kind of like an odd duck in that experience.
- [06:50]
A
I mean, in a way, that's a very beautiful experience. Because you said you got second place.
- [06:55]
B
Yeah, I got second for once.
- [06:56]
A
You got second place because loved something.
- [06:58]
B
Yeah.
- [06:58]
A
And everybody else was training for it.
- [07:00]
B
Yeah.
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A
And you came from a place where there were probably realistically no resources to go train for that.
- [07:05]
B
Oh, completely. Yeah. It's just. Just going to school. Yeah.
- [07:09]
A
Okay. Well, I mean, that, that, that already, like, like, we're, we're starting the show. We haven't even gotten into the full background. And you're giving a lesson in. If you're not doing what you love, how's the outcome going to turn out?
- [07:18]
B
Yeah, that's the thing. Right. Is like, if, if you're, if you're trying to. If you're drawing from something that you truly find fascinating, that you can't put down, that's an infinite well to draw from. And I think that's really what it takes. It's not the actual business itself that's exciting to me. It's the unique problems that I get to solve with mathematics. And this is just an outlet for that. And I think when you can approach it from that Space as opposed to just trying to figure out again like, oh, I should start a business. I got a degree in entrepreneurship. I now have a formula for how to find businesses and start them and run them. Like it's just not going to work out.
- [08:05]
A
I agree with you. Because every 21 year old business coach online has reached out and offered me advice 100%.
- [08:11]
B
They're so successful and they have nothing but time on their hands to message you on LinkedIn. It's great.
- [08:16]
A
Well, and it's funny cause the guy that was Messaging me on LinkedIn later wanted to take pictures with my airplane and my cars, of course. And I was like, but I thought, oh, so that other shit, okay, all day there's a lot of fake sauce out there. But like, I love that you loved mathematics. Which a lot of people look at that and they're like, whoa. I mean, how could you love mathematics? I mean, it's just, there's people out there that are. I mean, I love math too personally, but I've had people come at me and be like, well, how? Like this is what you want to do.
- [08:49]
B
Yeah.
- [08:50]
A
And there's somebody out there for like every role. Yeah, there's somebody out there for every different thing. And when you can find the people that are passionate in the area.
- [08:57]
B
That's right.
- [08:58]
A
They can create magic.
- [08:59]
B
So again, like even within my company, I love finding people again that have, have no formal training. Right. But have the right disposition. So one of the, hold on, let's.
- [09:09]
A
Go into your company before we, before we dive into that. Like you're, your company is Proteus Digital Labs, correct?
- [09:15]
B
Yeah. So Proteus Digital Labs. So what we do is we, we do E commerce business consulting for these, these large E commerce businesses and we do conversion rate optimization, analytics and development. I think it's very important actually those three things happen hand in hand because you have these sort of like, let's.
- [09:31]
A
Say, let's, let's, let's line item each one of those things and kind of break them down because there's a synergy between them that is needed together.
- [09:38]
B
Well, and so the thing is we can start with analytics, right? So measuring things, that's a good idea. If you don't have the actual context of how a real business is actually run, how it generates profit and what actions can actually be taken after you do that measurement, then it has no value. So the thing is that I have these people that come all the time, they say, oh, you built all these dashboards. I say, when's the last time you Actually made a damn business decision using one of these dashboards. And they're like, oh, never. Oh. But they just basically pay, like, gilt tax to maintain these things. To feel like they have their finger on the pulse, and then they slam it into a slide for a board meeting, but nobody's actually making any tangible progress in the business with it.
- [10:24]
A
So. I love that you're saying this. I get asked all the time, well, how do I create KPIs? And for anybody that doesn't know, KPIs are key performance indicators. And I tell people, you don't create the KPIs the business does. Like, I mean, a business can start with some obvious KPIs. You should be like, okay, well, what is our net cash? You should probably measure that. You need to know, like, how much dry powder you have. Like, okay, what are our net sales? Okay, what is our net income? I mean, there's some reasonable. You can probably come up with 5 or 10 KPIs that you should have in your business if you want to go through and make them. But then how do you create KPIs? You figure out the problem you're having.
- [11:02]
B
That's right.
- [11:02]
A
And when you're having a problem, you start measuring to that. Because people don't do what you want them to do. They do what you measure them to correct. And so I love that you're saying this, because I cannot tell you how many fucking tech people have come at me and been like, look at this dashboard we've created, assuming that we know everything about your fucking business.
- [11:18]
B
All the time. All the time. And the thing is, there's one metric that actually ends up mattering to the people that own the business. In the end, it's marginal dollars in the bank account. Everything else is a proxy for that. So if it doesn't serve that end goal, it's a waste of time.
- [11:32]
A
I love that. I love that. That is a perfect way to frame analytics.
- [11:36]
B
Yes.
- [11:36]
A
All right, what are our next two?
- [11:37]
B
All right.
- [11:37]
A
Or one of the next two.
- [11:39]
B
So we'll go to, like, what do you do with it? Right. So the thing is, measuring something doesn't tell you what to do with it. It tells you what happened. Right? And so someone will say to me, like, oh, we want to know, like, where does all of our traffic go on the website? And then I come back and I say, it goes where you send it. And they're like, what do you mean? I'm like, well, you land traffic on collection pages. All your traffic is on collection Pages like, why are you even asking the question? You're the one making that decision, right? What they want to know actually is where should I be landing traffic? Which is a different question than where does it land? And there's only one way to answer that, and it's through validating a hypothesis. So the reason that we do conversion rate optimization is that you have to take that data, you've measured something. If you want that data to change, you need to form a hypothesis and then need to test it. And people say like, can I just make the change and look at it week over week or month over month? And I challenge them to say, go look at your just like paid media conversion rate month over month and tell me it doesn't differ by more than like 20 or 30%. There's no actual way to measure that because real businesses are seasonal. Real businesses have competitors into the market. Real businesses go through like odd cycles of inventory and advertisement and promotions, et cetera. And there's no actual control in that sort of thing. So unless you're actually doing hypothesis testing, you have no idea what you're doing. You're just making guesses.
- [12:55]
A
I'm so glad you're explaining this. And so I've got analytics as number one and conversion rate optimization is number two. But the way you're explaining conversion rate optimization is not really how most of your paid media marketers who are coming at every business brick and mortar click and order, doesn't matter. The people that are coming at them and saying, hey, look, you need to advertise on Facebook, advertise on Google, advertise on this, advertise whatever, whatever it is. They're saying, oh, you just need to give us so much money and so much time to optimize it. They're not factoring the seasonal cycles, they're not factoring like what's going on in the markets. They're only looking at maybe some Google Analytics and kind of what they've done at best. Right. And that's if you get a good one. And so the way you're explaining this is so many people need to hear this. I wonder. I don't want to wonder. It hurts me to think about how much money goes into bad marketing.
- [13:47]
B
Oh, almost all of it. The thing is as well is that. And it's not enough to get a transaction right. Because the other thing as well is that no one thinks about customer lifetime profitability. So the work that we do is we explicitly optimize for customer lifetime profitability. So the thing is that people Use blended average order value or blended lifetime value metrics. When you actually, like, plot it as like a histogram. So for if a histogram is a.
- [14:17]
A
Plot where you, you're talking to us entrepreneurs here. I love that you're breaking it down.
- [14:21]
B
Yeah, we're breaking it down. So a histogram is where you might say within the different bands of the amount of money, how many people fall into that? So oftentimes what you'll find is it's not like a smooth curve. You may have a bunch of people that are low or negative lifetime margin concentrated and then you'll have other another band where it's like very high. Right. And so when you blend those together, you might come to me and say like, oh my, you know, my lifetime margin on my customers is $50. Well, actually it's negative $10 and it's $100. And those things average together to be 50. So like one of the analyses that we do, try to identify customer segments that lose you money, and then we figure out how to slice those out by forming a hypothesis and then testing it. But that's just like the basic, like mathematics, right, that you can apply to the situation.
- [15:09]
A
So can I retell this in sort of a simpleton way?
- [15:13]
B
It would be great for me.
- [15:14]
A
I love our geniuses. And you're absolutely genius. And you're explaining this so perfectly. I had a doctor come to me for coaching a few years ago, back when I was doing coaching before I started the podcast and put all my stuff like digitally out there so that I could just like help people without taking my time. I wanted to spend time with my kids. And this doctor said, you know, my biggest problem is. And he was like a world class surgeon. He was a robotic surgeon. He's an amazing guy. Not everybody pays. Like, the way the laws are structured. Not everybody pays. And I was like, well, what are you doing to find out who's going to pay and who's not? And I was like, what do you mean? I said, well, you have only enough time to service so many customers, and there's more customers than you can service. And some will pay and some won't. And as long as you're busy 40, 50, 60 hours a week, whatever you want your office to work like, then, then you're still operating within your Hippocratic oath, but maybe you should give referrals to other doctors, which maybe you could even sell. And you could refer the ones that won't pay. And it was like, how could, how could I do that? And so like I cross pollinated like what he'd brought me, which. And he obviously has a very high margin business. He was making millions of dollars, like doing, doing his surgeries. Right. And I was like, you know, high margin businesses should really learn from low margin businesses.
- [16:28]
B
Yes, that's right.
- [16:29]
A
And he was like, which low margin business can I learn from? And I was like, well, how about my property management company? Like we do an application on every tenant because we can't afford to have any of the people not pay. Like, so in an application you don't have to do the same application that a property management company does. But you know, ask 20 questions, I would bet you. But if you ask 20 questions that are unique identifiers, you're going to find out which ones are going to identify which client won't pay. When you see trends, you just say, oh, you know what, we can't get you in for like nine months, but we can refer you to this other guy and that guy might literally pay you for the referral. He was like, this is genius. So he had 50 plus percent of his clients not paying. It wasn't quite 60, but it was over 50 as I remember. I don't remember the exact number. And that dropped to 14% killer inside of six months. So now, of course, I mean, he bought me a very nice bottle of scotch. I was very appreciative of it, but I think I made him more than that Scotch cost.
- [17:30]
B
It seems like it.
- [17:31]
A
And that's your conversion rate optimization you're removing in a digital way, which means it is possible in click and order, just like brick and mortar, completely, you're removing the bad egg.
- [17:43]
B
Customers I can move make you money by lowering your conversion rate.
- [17:47]
A
Oh, so many people, if they just knew it was possible and understood the way you're breaking it down, would literally want to run up and hug you. Because they're dumping hundreds of thousands, in some cases millions of dollars into marketing waste.
- [18:00]
B
Totally. And the thing is there's all these half rate firms trying to administer conversion rate optimization, analytics, et cetera. And so one of my favorite examples of a test that we ran is we work at this apparel company and we identified a segment of customers who have a high return rate. And when we started breaking it down, we realized that the company was doing free shipping and returns essentially. And what was happening is they were incentivizing a pocket of customers who were not serious about purchasing and they would buy the product and then immediately return it. So we, and I won't go too much in the details on it. But the short answer is that we administered a test that at first blush, right, like a traditional CRO agency, if they could even figure out how to run a test like this, they would have called it a loser. Conversion rate went down and of course shipping revenue went up or whatever, right? Average order value went up like a little bit. So on, like just gross revenue in on first order, it's about a wash when you actually start looking at it, right. You have these higher AOV orders that are higher margin because you're shipping to fewer customers. We have the return rate phenomenal, right. Because now they're not paying, shipping both directions on these deadbeat orders and then having to restock all the product.
- [19:21]
A
And at the end of the day it's the bottom line. A lot of, a lot of entrepreneurs will get scared though of that gross revenue dip.
- [19:26]
B
Correct. And that's, that's why, good, that's why the analytics piece is, is so paramount, right. Is that if you don't have an actual way to measure the long tail effects of testing, you're just only gonna get superficial results.
- [19:39]
A
And I wanna frame something because I don't want people to like kill themselves upfront. Cause this is so like, I mean, this is gold. I'm so glad we're doing this because so many people need to hear this. And I can't compliment you and thank you enough for just a. The way you're framing the content, but also what you're bringing to people. People. When we're looking at a business launching, there's probably a reason to create that irresistible offer to do like the, hey, free shipping, free returns. Like there's probably a reason when you're starting a company to do that because at that point you're in a race for revenue. You have to get in. Like you're not going to get any customers unless you have an offer that's going to beat all of your competitors. But people build big inefficient companies. We refine them down later to make them more, more efficient. So I don't think Matthew's sitting here telling us like, hey, you shouldn't have done that. He's not saying that. He's saying you shouldn't keep doing that once you've already reached a certain scale. Am I correct?
- [20:38]
B
Totally. I mean there's different priorities for different phases of growth. And even with some of the businesses that we work with, there'll be different metrics and things that we want to prioritize where perhaps they are looking to see how far they can expand the subscription side of their business. Right. Because they want to raise around or something. Right. So there's like strategic value in intentionally indexing for certain things, even if it doesn't get you the most profit immediately.
- [21:08]
A
Okay, I'm. Wow. Like Mind blown. Like, I'm already thinking of things. Like I almost want to swerve and go talk about what I want to go correct at my company right now because there is Marissa at our marketing office. You better watch this episode. The three things we have analytics.
- [21:27]
B
Yes.
- [21:28]
A
We have conversion rate optimization. What is number three? Like, if we're already at gold here, I feel like you might have made me improve my bottom line. Hundreds of thousands of dollars on some things already. I'm kind of nervous to go. The third one.
- [21:41]
B
Yeah. So the third one is development. Because you actually have to action these things after you have measured them and you have tested them. And the problem with traditional development is again, if it happens in a silo, what are developers incentivized to do? To add complexity. To add complexity that must be maintained. To add complexity that may only be maintained by them. When you have someone who is doing your analytics work and doing your conversion optimization that is also handling the development, I'm going to do the absolute minimum surface area development that's necessary to drive the business result because I have no other incentive.
- [22:20]
A
Mind blown. Okay. And this is actually how we initially connected. You and I were in a mastermind. We're at the forums Mastermind and we were just talking and I was telling you how I have a team building tech and they're building tech for our home building company, we call it Z Builder. We're eventually going to SaaS product. It's probably a year or two away, but I think it's going to be just an incredible product. And we were talking about how there are tech companies that build products for companies and then there are companies that build products for themselves.
- [22:53]
B
Yes.
- [22:53]
A
So the way your operation works is you go in with these larger scale clients and you're not just the tech company building a product for them. You're in their operations. Like you're dialing in their analytics, you're dialing in their conversion rate optimization. And so you're, you're not just a tech company sitting somewhere in the cloud with a bunch of guys answering the phone with some accent that you may not be able to understand in English. You're, you're a partner.
- [23:18]
B
That's right.
- [23:18]
A
You're a partner in.
- [23:19]
B
The outcome is a long term partnership. So, so we work with the. The businesses that we do consulting for, we work for years. I always make the joke. As long as you're. As long as you want to make decisions with data, it's relevant, right? Because the thing is, is that as you continue to grow a business and scale a business like that, and markets change and you're acquiring colder and colder traffic, I always say that there's an inflection point that happens where the business stops acquiring customers that look like the CEO and then they start looking like the CIO's mom. That's really where you have to get smart with the actual data and segmentation so that you can essentially build businesses within the business that address all of those pieces of the market.
- [24:03]
A
I love how you framed it that these three things need to be done together.
- [24:08]
B
Correct.
- [24:09]
A
Like it maybe not that it cannot be done with three separate organizations, but would be much easier to be done with one organization. One. One roof, where everybody's under the same roof and in partnership with that organization.
- [24:25]
B
Because it aligns the incentives. Again, if you have a separate agency doing development, or even internal team doing development, even internal teams, right. It's a job security thing. So they will always overbuild everything, because that's the incentive forever and always. When you have someone doing testing, their goal is to show you tests that look like they win on the front end and to make sure that those tests are as trivial as possible in terms of copy changes or image changes, et cetera. When you have someone doing analytics, the goal is to make it look as impressive as possible, even if it doesn't do anything.
- [25:00]
A
And also, like, this is funny. We had a gentleman come on the podcast, and he was talking taxes, and he was talking about four different things that you had to work on. And, like, you know, one might be taxes, and one might be turning your business into an asset, not just an income generator. And one might be, like, you know, protecting yourself legally, this, that, and the other. And one might be, like, he said another thing. And like. But each one was in silos, and the entrepreneurs trusting this expert in each silo, which means, effectively, the expert's the guide. The expert's in charge. The entrepreneur, if he were to go to his office, would not be number two. He would be number one. He would be in charge. He'd be the CEO. He'd be guiding everyone. And it sounds like I'm hearing a very similar thing in the tech space that I heard there.
- [25:43]
B
No, completely.
- [25:45]
A
You allow the CEO to still be the CEO when they come in with you, because you're operating on their data. And while you will advise, you're a partner, you're not. I mean, I guess there's leadership on both sides, but you're not guiding them. You're allowing their data to guide them so they can lead their own future.
- [26:03]
B
That's right. They come and they say, like, we have this objective or we have this initiative that we want to be successful. How do we make it successful? What would we need to prove in order for this to work? How do we not cannibalize our core business? And by introducing this new product. It's. Et cetera, et cetera.
- [26:17]
A
Okay, so, Matthew, how did you create. Because, I mean, look, I know people that do digital ads, and of course I get all my Instagram messages, and of course I get all my. Like. I mean, they're an interesting group of humans. Okay. We've all seen them. You've developed three in one. That gives you a competitive edge, that gives you a niche that is near unbeatable. And some of the guys that I know that do digital ads, they're not bad people. They're just in a state of overwhelm. They're in kind of a constant race to get enough clients to pay their bills.
- [26:50]
B
Yes.
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A
And they don't really have time to develop these other two. You have three things in house. How did you develop that? I mean, that sounds. I feel like you'd need hundreds of people or some kind of amazing technology or something to be able to do this well.
- [27:03]
B
So the important aspect of this. Right. So I'll go back to my story and fast forward it a little bit.
- [27:09]
A
Yeah, sorry, I didn't mean to swerve you too far off the story, but you're blowing my mind, bro.
- [27:14]
B
That's fine. It's all relevant. So I was working for a small apparel company while I was at university, and the way that I had gotten that job actually is they had launched a campaign. I quite liked the apparel, but the campaign was lame. My parents owned a small print shop in my hometown, and I happened to have a copy of Photoshop. And while I was in high school with nothing to do in rural Indiana, just taught myself how to use Photoshop. Fun, right? And so I redid their marketing campaign and then emailed it back to them. And they were like, who the hell are you? Like, what are you doing? And I was like, hey, can I have a job?
- [27:59]
A
Could I pause you again?
- [28:00]
B
Sure.
- [28:00]
A
Because you just dropped, like, a lesson bomb that I find so common in, like, nearly every successful entrepreneur. And you're A very successful man has said this in one way or another. And you just did too. Those who are willing to work for free will always be paid.
- [28:15]
B
Yeah.
- [28:16]
A
Like if you're a heart servant leader that's willing to work for free, somebody's gonna hire you.
- [28:21]
B
Yeah. And this is the thing. It's like I just wanted. I just wanted the brand to be better. Right. Like, it was something that I cared about and they were doing a poor job of it and so they ended up hiring me on. I started like kind of land grabbing opportunities internally where people were just kind of like missing the, you know, missing the mark. And then as I kind of like maturated in that role, it was a very small company. Like it was a little niche apparel company. And their operator left. I was in graduate school and I said, hey, if I drop out of graduate school, can I be the operator? And they said yes. So you burnt the boats.
- [28:57]
A
There's a new lesson. Another lesson?
- [28:59]
B
Yeah.
- [29:00]
A
Wow.
- [29:01]
B
Totally. And the thing is like. Right. Like, it's one of the things that I will encourage people. If you're in the position where you have something that you quite want to do before you burn the boat, keep a foot in two of them for as long as humanly possible. Because if you actually care and you actually are going to pull the thing off, you'll ride it till you're doing Jean Claude Van Damme splits.
- [29:26]
A
I got the image.
- [29:27]
B
I got to the point where my professor was like, you have to write a thesis now. And I realized I couldn't write a thesis and run a company. It wasn't going to happen. And so that was the inflection point. That was the moment. So I then rebuilt this apparel company on this new platform called Shopify. Flew out to the warehouse, set up the distribution. I ran the ads. Literally. Just watch a video on YouTube, go try the thing. If it worked, do more of that. If it didn't work, do less of that. And. And I ran the brand for a couple of years, actually.
- [30:02]
A
You literally built this for yourself.
- [30:04]
B
Yes.
- [30:06]
A
That makes so much sense.
- [30:07]
B
And now right when I'm. When I'm interior into these other e commerce brands, I've done all of their jobs in some capacity. Right. Which I think is actually like a really, really important aspect of this.
- [30:16]
A
Can we drop another bomb you just dropped? Sure. Can never delegate what you haven't done.
- [30:20]
B
Absolutely. I mean, you can. It'll just go poorly. You're free to do whatever you like. You just only have the only time.
- [30:25]
A
You can delegate, which you haven't done is if you hire somebody that is at least C suite level capacity that has done it.
- [30:30]
B
Yeah, it's quite expensive.
- [30:31]
A
Yeah. You have to get the true expert.
- [30:34]
B
No, completely. And the thing is that anybody not willing to learn the basics of a function is just like doing a poor job.
- [30:40]
A
And they probably shouldn't be leading.
- [30:42]
B
Of course. Yeah. Now that goes without saying, I think. And that's the thing. So from there then, as I kind of like maturated my career, I ended up going to another business. I went from big fish small pond to working with a. It was like a nine figure outdoor retailer. And I built a conversion rate optimization program interior to there. I didn't even know it was at the time. The CEO happened to also be a mechanical engineer and hired me basically on that fact and said the way he pitched it to me was we're going to use all that statistics that you did in school except we're going to try to make some money with it. And I said, all right, I'll do that.
- [31:21]
A
I like that. That's a really good segue actually, because you'd mentioned at the beginning when I kind of pulled you out and I was like, no, I want to hear your story first. You'd mentioned how you're pulling in different people with different skill sets for this and that makes some sense because that's also part of your story. You got brought in because you were an engineer like him, but now you've leveraged that same thing that he did. Can you dive into that and some of the alignments that's created?
- [31:50]
B
Totally. So one of the things is that internally in my company I want people doing what they excel at and what they're excited about because one, I care about them as people and two, that actually just makes you the most amount of money. And so for me, a fine example is I have at my house like a house manager, someone that basically like runs a bunch of the aspects of our house in terms of like organizing things, schedule, like all of that fun stuff like an in person personal assistant. And I hired somebody in for this role. And after about six months I went to her and I said, hey, you're gonna quit. And she said, what? And I said, you're gonna quit. Like you're actually too qualified to be doing this. You're going to get really bored and you're going to quit. But I'd like to get ahead of that. What is it that you actually want to do? Like what are you interested in? And she said, well, I mean, I was like, it's fine. Like, you tell now why don't you tell me? Like the blue sky, like, what, like, what would you do? And she's like, well, I was thinking, like, actually I'd really like to be remote. And I kind of wanted to explore the idea of being of like being like a project manager or something, or whatever, but I don't really, like, have the training in it. And I said, all right, so here's what we're going to do. I'm going to be traveling. Like, our family's going to be traveling.
- [33:07]
A
Did you keep her in both boats for a while?
- [33:09]
B
So here's what I did is I said, we're going to be traveling for like a couple of months. I want you to house sit for us. You're going to, I'm going to give you all of these resources. I want you to go, I want you to go learn from them. I want you to download everything into your brain and then I want you to build the job description for somebody that can do the job that you're doing right now for me better than you can do it. So I want you to hire your replacement and we're going to bring you into Interior, into my company. And the thing is, what I found is, like, she's a very regimented, disciplined person who cares about successful outcomes, naturally.
- [33:43]
A
And I want to pause here because I love where you're going and you're hitting another truth bomb. And bro, I might have to give a medal or something because you might be hitting more truth bombs faster than any other guest we have ever had. Like, so, so, I mean, this is epic. But when you get incredible people with incredible talent and maybe even more important than the talent, but, like, the incredible caring, like, they have to really love the mission. They have to really love the idea. Where they are can't be where you continue to see them. You have to see them where they see them.
- [34:18]
B
That's right.
- [34:18]
A
And I think you've done this incredibly well here. And I just, I want to make sure I'm framing that for the audience. Because your best person, my CEO, guys, is the secretary of the company I bought in 2018. And now, you know, she did not see herself as the secretary. And now everyone in our market sees her as like a queen among women. So anyway, please continue. But, like, people need that information.
- [34:47]
B
Yeah. And the thing is, right, is, is that you have to have a path for that person to succeed. Potential isn't expertise. And so the way that we did that transition was I had her essentially shadow and Apprentice, my coo, essentially, to become an extension. So one of the things actually I feel quite strongly about is this idea of apprenticeship. So it's very easy to start a company and then just go around and say, we need this function, we need this function. We will hire a person with this job, role, etc, etc, etc, right? And what you get is you get a bunch of mediocre people that have already put themselves into some, some semblance of a box. And what I'm more interested in, right, are like all the qualities that lead to, to excellent work, right? And it's, it's personal qualities, right? So like, for me in particular, right, Like I know a lot of people as they scale their businesses, like CEOs, et cetera, right? They, everybody wants to be like out of their business eventually, right? They want to take a step back and work on their business, et cetera. And they all suck at doing it. They go. And then it just horror stories over and over and over again of them hiring people. They're there for a year, they spent a bazillion dollars, et cetera.
- [35:59]
A
Well, it's true. I mean, every guru out there is saying, oh, you gotta go be an owner, not an operator. And that's bullshit. There is something to automation and you can build a business that's automated. I mean, I've done it, but I didn't go from operator to owner. I went from operator to master to trainer to owner. I mean, it's a much longer path, correct.
- [36:22]
B
And the thing is that you can get a tremendous amount of leverage very quickly with the right person. It's more of a thing of recognizing there's a difference between judgment and action. And every single function that happens in your company, every job that someone has, every task, has some amount that is judgment and some amount which is the action, which is the carrying out of that judgment. And the judgment, the surface area of that tends to be very small by comparison. And so if you can distill down the things that you wish to delegate to the part that is judgment and the part that is action, and focus on delegating the action while retaining the judgment, you can pass that on over time, right? The judgment is the calibration. So when you have someone who is more like an apprentice inside of the company than taking the best performing people, you have the leaders that you have, and taking all of the action away from them so that their job now is just to have amazing judgment. You can scale like a tremendous amount with the same people because you're getting the same level of quality because it's their judgment that is valuable, not them carrying out the actions that that judgment.
- [37:31]
A
This is magic. I love it. Please continue.
- [37:34]
B
Well, so essentially then we've assembled a team of people that again have non traditional backgrounds. So my COO was a practicing civil engineer in Chicago that I went to school with. He was a guy that when I was in school I'd moonwalk into the study session or whatever that he's been there for like three days studying for this exam. I'd ask him like three or four questions, kind of get what was going on. He'd get a 95 on the exam, I'd get a 94. That's the guy I want as my COO. I want the guy who is so disciplined and so dedicated to the craft and goes over every detail. Because I'm a CEO, right. I'll just jump around between things. I'm less responsible and less organized than he is. But it's those character qualities and that working relationship that I knew that I could have with him from the ways that we had interacted at university that I didn't go find like a traditional coo. I asked him to quit his engineering job and come join me.
- [38:35]
A
I love that.
- [38:36]
B
Yeah. Because the thing is that it's never the skills that you think matter. Right. Like there's a difference between having like an actual skill and having domain knowledge in something. And when you get people that go and get hyper specific degrees, they're getting domain knowledge. Right. But the Internet exists. So find somebody that has the skills that you want and one of those skills is going to be oftentimes that they're like, they self teach themselves things. Right. So they can go after the domain knowledge in any accessible way.
- [39:07]
A
I'm going to compliment you, even though I've probably done that a little too much. You're going to walk out of here with a bigger head, dude. But I, I often tell people like the single greatest skill you must learn is the skill of learning.
- [39:19]
B
Yeah.
- [39:20]
A
And the people that get promoted the highest at my organization and the people that I've interviewed that are the most successful are the ones that learn the best and by nature of that have the largest amount of. It's like a simple thing. It's called common sense, which is a horrible name for it because it's so radically uncommon.
- [39:38]
B
Yeah.
- [39:38]
A
But like anyone with radical common sense, like you could pay them a million dollars a year, they will bring you back 10.
- [39:43]
B
Sure, that's totally right. Well, and so like one of the things that for me Personally, right. So I interface a lot with board members of large companies, private equity firms, even own some of the companies that we work with, et cetera. And the thing that I learned early on is I mentioned in my kind of story that I went from tiny company to huge company. It's a very intimidating thing, right? Like I'm now all of a sudden with all these people who like actually have degrees at this point. I've not figured any of this out yet, right? So like I think, oh man, they must be like a marketing genius or something, right? They have a degree in marketing. So I'd go sit, I'd go sit in these meetings or whatever, right? I'd sit in the meeting with the CEO, the CMO, the CEO, etc. Or whatever. And they'd go around and start asking people questions and things. And the pattern that I noticed was all the people, people that prepared the most, did the worst. They would come in with some rehearsed amount of some information they wanted to present some slides or something or whatever for their domain. And then what always happens, you go immediately off that script or whatever because someone asks you a question and then they freeze up or they stall out or they try to pull something up. And so I realized that the true skill that I needed to master was improvisation. So for my way of exercising that in that company when I was first, there is one of the things that was really intimidating to me is there are all these vendor calls. You have to talk to all the people that have the software, the agencies you're working with, et cetera. And at this time early on in my career, it's a very nerve wracking thing because these people are supposed to be experts and I don't know anything at this point. I'm just making it up as I go.
- [41:17]
A
The marketing experts.
- [41:18]
B
Exactly.
- [41:18]
A
But expert does mean spurt. That already happened, just so you know.
- [41:22]
B
So I would, I would just volunteer to take all the vendor calls and I'd go lock myself in a conference room and take them all back to back, just like sweating bullets on it. Because they'd start asking me questions I don't know anything about and gone.
- [41:34]
A
How long did it take you during this process to realize while they had an expertise and they may have known lingo.
- [41:40]
B
Yes.
- [41:41]
A
You actually knew more than them about the situation.
- [41:44]
B
I mean, pretty quickly, right? Because you start asking them questions they don't know the answers to that seem quite fundamental. And I think that's exactly again, one of the things that's so important when you have somebody who enters into a domain they're not familiar with, they're going to ask the best questions because they're going to get down actually to the root of things. One of the things I've totally banned within my company is we don't use acronyms or specific language for anything. It's absolutely banned. The reason for that is when you start using those words, language is necessarily figurative. When I use a word, it is not the thing itself, it's the thing that represents it. And if we're not careful, we can choose words that mean something different or lose the actual arbitrage or the thing that we want to action by choosing that word. So, for example, someone will say, what's a good conversion rate? Well, websites don't really have conversion rates. Products have conversion rates. Channels have conversion rates. And then while we're at it, what do you mean? Do you mean purchases divided by sessions? Oh, yes. I guess that's what I mean. Define a session. Are we counting bot traffic? Is it just engaged traffic? What's engaged traffic mean? We're talking about all the people that came through this particular channel. When you start diving into the actual language that we are using, you realize that we have all of these assumptions sort of built into it. And the arbitrage of those assumptions is where the value actually is.
- [43:10]
A
I'm going to rewatch this and literally take notes on all this, because I cannot tell you how many times I've been on marketing calls, and I want to be able to ask some of the questions that I can only imagine you were asking the experts in those calls. You're giving me my notes on some of the next marketers I have to interview.
- [43:28]
B
Yeah, I mean, the thing is, I just. I don't like things that feel like magic. Right. And so you get on a call with one of these, these people and they start again using jargon or using acronyms and that sort of thing. And I just started stopping them and asking them what they mean by it. Right. And just getting. Getting over that awkward feeling of feeling dumb because you happen to not know, you know what LTV is, and then you find out, oh, it's lifetime value. Okay, what does that mean? Oh, it's the sum of all the revenue divided by the number of customers. Right.
- [43:58]
A
So see, an LTV, to me as a lender, means loan to value 100%.
- [44:01]
B
Right.
- [44:02]
A
So like one acronym for one, one acronym for another.
- [44:04]
B
There's only so many interesting combinations of letters. All the acron, like, run over each other, and then from business to business and from companies that we work with, they all define them slightly differently and they have no idea. Again, because language is necessarily figurative and it's breaking down to those core things of like, what do we mean by this? So is actually kind of like where we took our company. So we actually use software that we developed internally that breaks some of these things down, down to their root definitions and that's the way that we do business analysis.
- [44:40]
A
So you've created a system where with your system and the expertise you've developed and all these three things, you've created a process for doing these three things. I'm sure it's not fully automated, but in a semi automated way where you can work with several different types of clients, give them their analytics, optimize their systems and sales, and then go in and redevelop for them as necessary.
- [45:08]
B
Correct.
- [45:08]
A
And some of this is software or all of this is software driven.
- [45:11]
B
Yeah. So basically the available tools right now, again, they approach everything from one facet of what it means to run a business, which is inadequate. And so the thing that, what I ended up doing as we were building our business business, I realized that I'd be pulling information from lots of disparate sources and running my own statistical analysis on it. Because the software tools that were available were all very elementary. And how they go about it, we're calculating P values, which is just alpha, but nobody's actually calculating beta. So they know that they can trust the result, but they don't know if they can actually trust the measurement of the result. Right. Because they have no, no fundamental understanding of statistics. And the thing is, is that someone running an E commerce business shouldn't actually have to have taken an advanced statistics course. They should work with an expert who can like represent their intent like on their behalf in doing this.
- [46:10]
A
You know, I'm loving everything you're saying, but can I be a little honest? Sure, sure. I'll be all the way honest, but maybe blunt. You're almost like hurting my heart right now some. Because with, with everything you're saying, if I'm doing paid media right now and you're not taking clients and look like I don't do 10 million on Spotify, how can I go about like finding somebody like you that would take on a smaller client like me? Like, I mean, there's not going to be a dozen organizations like yours.
- [46:39]
B
No, that's right. And that's actually something that like that we've taken quite, quite seriously as well. So I mentioned that we've built internal software that we use to do all of this analysis and the deployment of testing, et cetera. And as I mentioned, we service DTC brands 10 million up on Shopify. But there are 100x number of businesses that are at that $1 million mark or even less that desperately need access to this information. If they're going to, and you say.
- [47:14]
A
D to C, you're going direct to consumer. But like B2C and D2C same thing, right?
- [47:18]
B
Completely. Completely. Yeah, exactly. I mean actually we actually do have a client or two that we work with that is B2B. Basically as long as there's numbers involved, we can manipulate them. But the thing is that for those smaller brands as you are growing, you need access to the information to know what happens after that initial touch. After that purchase. You need to look at repeat purchase rate. You need to break it down by category or you need to break it down by channel. These fundamental things. And so one of the things that we're, we're just now offering is access actually to the exact software that we use for nine figure E commerce companies.
- [47:53]
A
You would license your software to, to marketers.
- [47:56]
B
That's right, that's right. Because the thing is, is that customer lifetime profitability is how people need to be running ads. And so that's sort of like our way of being able to address that problem in the market is by taking the people who are supposed to be scaling these brands and make sure that they are doing it in a more responsible way that gives a competitive edge.
- [48:15]
A
Okay, well that's freaking awesome. I mean I would love to you know, offline connect and have my marketing team that just works for all of my companies like beta test this and of course I'd happy to pay for it. But like this sounds magic. This sounds like absolutely amazing.
- [48:31]
B
It's honest math.
- [48:33]
A
So if a marketer was interested in not being the typical, as I call them, cockroaches. But let's not be assholes. Yeah, let's maybe, maybe they're caterpillars that could turn into the butterfly. They could turn into somebody that was going to do something better one day by providing a better product or service.
- [48:50]
B
Let's, let's.
- [48:52]
A
They could reach out to you and you'd be willing to basically democratize this across the market and allow other people that I'm sure you've had got to have some vetting process for. Yeah, to, to, to leverage it.
- [49:03]
B
It's, it's a great question. So I guess what, what I'll provide is we, we have a link that we can provide that basically has an application process. So as you mentioned, there are lots of businesses, especially in the media, buying space that are, are, you know, less than savory.
- [49:20]
A
Well, and can I, can I dive into my three piece real quick that we, we mentioned? So, so the way I came up with this 3P is basically because of con artists, okay? And I have a saying and I use it for any business I'm going to buy into, any business I'm going to invest in, any marketer that I'm going to speak with. And it's, there must be three P's before I'm going to give you money that I can at least understand. It doesn't always have to hit all three Ps, but I have to understand it, okay? There has to be productivity, profitability and there has to be purpose, okay? And any of the things can be removed, right? Like, so if I remove purpose from a thing, well, you know, then, then like so say I go invest a million dollars in an apartment portfolio or something. Or I invest some money say, say like I'm like, wow, you know, Matthew, I really, I love your deal. I want to invest in your business. Like that's not my purpose. If it went to shit, I'm probably not going to go in and save it. I'd rather lose the million dollars. I don't want to lose a million. But I know it's not my purpose. I'm willing to take a risk and buy. If you remove purpose, it's just an investment. It's no longer a business you're doing. You have to have all three to be a business. If it is, you know, not profitable. I mean, look, I invest a lot of money in airplanes and boats. You know what, I know you don't make any money on airplanes and boats. Like I think I had one year where I was the anomaly and I actually made some money on my airplanes. But was funny enough, one had to freaking crash. And luckily the guy didn't want to go through insurance, so he just paid me enough money to where I made money on that airplane when he did a prop strike. Okay, So I actually did make money on an airplane, but yeah, not wonderful. So what does that mean, you remove profitability? It's a hobby. It's something you just love to do. You're willing to spend money on it. Like I don't make money hanging out with my kids. That's my hobby. But it is my purpose, right? There's a lot of productivity. I want to be a good father. So anything that you were willing to commit time. But the one that. And I would even say triggers me, because it really frustrates me. And it frustrates. The reason I call those people cockroaches is I think when you remove productivity from any situation, if it's not productive at all and you're selling it, you're a fucking con artist. You're a piece of shit. And like. And maybe this is a message to all the people that are gonna watch this and reach out to me now that I have a larger podcast that's hitting and taking off. And it's funny, cause this podcast took off. We launched it. It took off like, my team did a phenomenal job. The girls back here, the team back in, they all did amazing. And I didn't have a podcast before. I'd never been reached out to before. But all of a sudden, my podcast takes off. We hit, like, number four on Apple and investing. We're in the top 50 for business. And I now have daily, daily people reaching out to me. I can help you get your podcast to the top. How the fuck did you find it? It's there. Like, what, should I fire my team that was highly recommended by amazing fucking people that I had to go out and network with and resource to and get rid of them all to trust you, the guy that didn't find me until I was at the fucking top. You're a fucking con artist. Go away. Like, so the 3Ps that I think you're kind of referencing in a roundabout way are so critical.
- [52:23]
B
That's completely right. Right? And so that's the thing, is that it's why we need that. It's why we need an application process. Because the thing is that what we're really looking for, right, is like, if you're running a meteor buying agency and you're doing an honest job of it, and your big problem is that you have all of these disparate sources of information that you're truly trying to piece together to do a real honest, good job at this. Those are the people that I want to help. Those are the people that should get the competitive advantage to take that. That painstaking process that they're doing and make it more efficient. And just by the nature of how our software product works, in order to do the testing element, we end up solving for a lot of things on the customer identification side that can help with things like email deliverability, for abandonment flows, et cetera. And so it has the unique qualities of the fact that the software essentially pays for itself the moment you Install it just through the efficiency that you gain in customer profile matching. But beyond that. Right. It's just a very useful tool in the right hands of people that want to do an honest job.
- [53:36]
A
I love that. I will make a point of putting your application link, if you're okay with it, in the show notes of this show. That way anybody can go.
- [53:44]
B
And anybody listening to this podcast has made it over the first hurdle. Right. They're trying to do an honest job of actually improving themselves and improving the business.
- [53:51]
A
Right. And I'm sure you'll have some initial vetting process and then if there's anything going on in, in the business that you disagree with over time, there will either be a coaching moment or a disconnection from their opportunity to continue use. I'm sure it's a licensing agreement of some sort that you're proposing.
- [54:07]
B
Exactly, exactly. That's the thing is it's life's too short and business is too boring to work with people that suck.
- [54:17]
A
Yes. Amen. Amen to that. Matthew, can, can I, can I just shower you with one more compliment that you have absolutely blown my mind today. You've. You've gotten me more excited about technology. You're one of very few technologists, as I call you guys, that communicates as articulately as you do and has actually solved a problem that I think is a dynamic need. Like there is so much waste in the sector that you are talking about that you are dominating, that you could bring efficiency to. And so I'm just so honored to have you on my show and I hope you will come back and be a guest again in the future.
- [54:57]
B
Absolutely. This has been a lot of fun actually.
- [54:59]
A
Man, this is gold. How can people, outside of what we're gonna put in the show notes, how can people reach you? How can people get like a daily dose? How can people find you?
- [55:08]
B
Yeah, that's right. Well, so you can. We'll put a link to my, my LinkedIn and then we're also starting a YouTube channel where we're going to be just kind of posting some of the ways that nine figure E comm businesses are thinking about customer lifetime profitability and the work that we do there and the kind of strategies that we employ that are totally referenceable by business of any size.
- [55:34]
A
Magic, guys. You got it here. Finally, Finally. Finally. I mean, I feel like I've looked for my whole life and I found a unicorn in a gentleman that works with me named Zach. But you don't normally find two. I found two unicorns that can actually bring this simplicity, they remove the complexity and they bring a simplicity and productivity to this click and order world which is the wave of the future. It is how people are communicating, it is how people are languaging. And if you want to be a large scale player in any market, you need to understand this world. And by coming to this show, you've gotten the gift of Matthew Barnes, a man who's literally simplifying the click it order space and better than that, saving you and making you millions and or tens of millions of dollars. Thank you for watching. I look forward to having you on the next show. And you all have an amazing day on purpose.