← Success Story with Scott D. Clary
Success Story with Scott D. Clary
Lessons - From Gang Member to $2B in Sales by Age 36 | Ryan Blair - ViSalus Co-Founder & #1 NYT Bestselling Author
00:11:52
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Interviewer
HubSpot is a success story, partner.
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Podcast Host
Now think about listening to this podcast. Right now you are probably multitasking. You are probably catching maybe 70 to 80% of what I'm saying. Now flip that and imagine catching only 20%. It's not a good use of your time. That'd be insane, right? But this is the reality for most businesses. Most businesses only use 20% of their data. That's like reading a book with 80% of the pages torn out. You are making decisions with a fraction of the picture. All the important details that get buried in the call logs and the emails and the transcripts and the chat messages, and it's just floating around doing nothing for you. Unless you use HubSpot. Their customer platform brings all that unstructured data together and turns it into insights that actually help you grow your business. Because when you know more, you grow more. And when you're running a business on a hundred percent of your data instead of 20, the decisions get a lot easier. Visit HubSpot.com to get the full picture today.
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Interviewer
It's in this lessons episode. Explore how unconventional business models can create
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Podcast Host
explosive growth when incentives are designed effectively. Discover how strategic innovation can revive a struggling company. Understand the risks of scaling too quickly without operational discipline. And uncover why strong leadership and compliance are essential when managing growth at scale.
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Interviewer
And help me understand the business model for Visalis. So help me understand, like when you say direct selling model, how does that differ from like a CPG company or a direct to consumer company? Now where they're going online or they're going to retail, like, what does that direct selling model look like? And I guess I, because I recognize that direct selling model from like an enterprise B2B space because that's, you're all, you're going pure outbound. But this is a consumer product at its core. So how did that work?
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Business Owner
Well, you're, you're, you're recruiting affiliates basically. So you know the way to describe it would be an affiliate model. And you're recruiting affiliates to basically sell that product, you know, and our unique innovation was our marketing was a challenge. And now you'll see on the Internet, everyone has challenges. And, and we brought challenges to social media. So we launched a thing called the Body by VI 90 Day Challenge. When you joined the Body by VI 90 Day Challenge, you were encouraged to bring three friends with you. And when you brought those three friends with you, we gave you your product as free. We built into our economic model incentive structure for, in our cost model, we built in the structure where we could bear that burden where the more people that brought in three people, the more free product we were shipping. And at one point we're shipping out tens of thousands of free kits, free product kits per month as a result of that marketing initiative. On the other end of that we had an incentive structure, a compensation plan that compensated our sellers based on them helping more people receive their product for free. And the more that they did that, the more we unlocked additional incentives. We had a BMW program that we put 18,000 BMWs into our sellers hands through the BMW program we had million dollar cash bonuses if they did enough of the activity that we just described. And so we built a very complicated multifaceted, multi variable compensation plan. And that was one of the big primary reasons for the fact that we were able to grow in scale to the size that we did.
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Interviewer
So walk me through numbers too. So when you joined, where was it at? Versus because you won awards I think for turning this company around? No, at some point.
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Business Owner
So it went through. When I bought it it was doing about 20,000amonth in sales. And then I scaled it to. And I do have to say I had a fantastic team. It wasn't just me. I hate even the fact that I say I because it was a we. You know, I had great investors, great business partners, great founding team members and I was. My primary role was handling the finance, raising the funds, providing the strategic direction and organizing the operation, the team. But there was some great contribut contributors along the way. But for the sake of explaining how it went, bought it at 25,000, built and scaled it and this was in 2005 and then built and scaled it to the summer of 2008 where I sold it to a publicly traded company called Blythe which was on the NYC. I was doing about 25 million a year at the time, a couple million a month in sales. When I sold it immediately upon the signing of the deal, the great recession hit. I sold it on 8, 4, 2008 and by September of 2008 the Great Recession hits. The company basically goes into severe debt. I went from two and a half million a month roughly down to 600,000amonth. I had accumulated a ton of debt to try to stay afloat. The business was burning cash to the tune of like $600,000 a month. Business was burning 600,000amonth. We were down to about our last 600,000. The public company that bought us wrote us down to zero. And so the gains that I was able to take off the table as a result of their acquisition because it was a multi year earn out that was structured as part of the acquisition. I had to put back into salvage the deal which myself and my co founders and one of my other investors did and we kept the deal alive. We re engineered the company, came up with the challenge idea that I had mentioned and then from there I scaled it in a, you know, in a new economic environment post recession where excuse me, we were able to take a lot of market share and we were able to while our competitors were retracting we cut our losses, re engineered our compensation plan, re engineered our product offering, re engineered everything and we were able to expand while everyone else was retracting and and we took the number one share in shake during that time we got to a 23% market share and we were number one over Costco, GNC and everyone during that time. Based on the innovations that I Upwork
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Podcast Host
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Interviewer
That's amazing. Now I know that there's been like, as you built this up, obviously the, the business model was successful, but there was a lot of, you got a lot of pushback. Like there's a lot of about this business model that, that didn't vibe with people. Obviously it's come up again and again. So what went right, what didn't go right? Why was there so much press around like how you grew the company? Like why was this something that. I guess it seems like, you know, there's a lot of companies that do direct selling models. Various companies do like affiliate multilevel setups. But in particular you were covered by tons of news outlets. There was like some legal issues that came up from this as well. So I'm curious as to why this all came, came to be.
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Business Owner
Well, one, you know, I, I could tell you I made a lot of mistakes. By all means, you know, I, I, I, I was hyper competitive and I got into a lot of competitive oriented situations and lawsuits that you know, in retrospect I, I should not have. The other thing is I sold to a publicly traded company and we became the most meaningful portion of their revenue. And so all of a sudden we started getting a ton of press around that every time the public company released earnings, their stock would blow up basically because the publicly traded company, which was basically a sleeper and dormant with zero growth and in fact was going downward and retracting all of a sudden now had hundreds of millions of dollars in revenue on a quarterly basis and significant sums of profit. And so all of a sudden all eyes were on us, both from the media and from Wall Street. And we were not a fortified business model by any means. The other thing that occurred, that was a big mistake was the publicly traded company couldn't afford to pay us the earnout, so they persuaded us to go public. And as a result of that, now all of a sudden, my company, as opposed to accelerating our growth and building fortification and building a strong infrastructure, my entire management team and everybody was focused on ringing the bell, myself included. There's such a grat idea that I would, you know, take this company from near bankruptcy to ringing the bell. So we lost our focus and lost our, our, you know, our, our discipline to building a, a company and fortifying. At that time, we should have had done nothing but, you know, fortify for growth and continue to invest in growth related initiatives, not try to ring the bell and go public. We weren't ready for that. So there were a lot of things that we did wrong. There were a lot of mistakes that we made. You know, and, you know, some of the negative activity that we had was short seller enticed in that there was a. We were the number one most shorted stock in all of Wall street for over a year. And so, you know, there was so many people that were trying to stimulate negative activity against us. And then there was plenty of things that we did that were, you know, just, you know, just the perfect storm.
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Interviewer
A perfect storm of everything. It was rookie mistakes, it was public too soon. It was short seller activity. It's all this shit coming together that probably caused you a few gray hairs too.
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Business Owner
Yeah. The second thing is, is when, you know, all of a sudden you're putting up 100 million in profit, like every attorney in the world is looking to figure out a way that they can squeeze you. So the bigger you are, the bigger the target that you are. So I had short sellers going after me. I had ambulance chasers going after me. I had competition going after me. And then I was, you know, also, I was not ready for that onslaught by any means. But we had class action lawsuits that all eventually got settled, but a ton of them. Like there was class action lawsuit after class action lawsuit after class class action lawsuit. Over $1 billion of class action lawsuits against us at one given time. One was for texting incorrectly. I had no idea that you weren't allowed to text people. Another one was for product efficacy that we ended up winning. And another one, the way the IPO was handled, which I didn't know, that I couldn't cite. You know, like, you see Elon Musk, trouble that he's going through like every time I tweet, I would have an SEC filing and another, you know, citing in a lawsuit. So I had no idea how to conduct myself as a publicly traded company and as a public figure by any means.
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Interviewer
Yeah, that's not, that's not easy to say. And, and do you still stand by like the core business model, like the direct selling, multi level affiliate? Because that also has gotten just a lot of negative. So how do you do that model? Right.
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Business Owner
Yeah, you can. So I will tell you, you can very much do that model, right. And there is a lot of good that comes from that model. But you have to be very careful because compensation drives behavior and as you know, human behavior is very hard to calculate. And so you might very well be creating great ideas and great incentives and so forth that create behaviors that aren't in alignment with your personal values and brand. And when you have a million people out there marketing your company on your behalf, which we did, you're going to have a lot of chaos and you're going to have a lot of people that are doing it in ways that are not in alignment with your values and in alignment with the brand's values. And so you have to have a strong compliance, you have to have strong policing of this. You have to be very rigid and tight and it's a very difficult environment to do correctly. It's highly competitive and it's kind of like the wild, wild west of sales. So I learned a ton from it. I'm no longer within the industry at all, so I can speak very objectively about it and I can tell you that there's some great things that come as a result of the industry, but then there's also some chaos that's a result of it as well. If you're not correct, if you're not disciplined and you're not forward thinking enough to understand the various things that could come your way. Some of these companies do create, you know, vehicles, marketing campaigns, messages, sales systems and compensation systems that are not great for the consumer.
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Podcast Host
Thanks for tuning in. If you found this valuable, don't forget to hit that subscribe button so you never miss an episode. And if you want to dive deeper into this conversation, check out the links in the description to watch the full episode. See you in the next one. Sam.