B (2:47)

So you've got this framework. I really like that. I need people to understand, you know what I'm about to say.

A (2:53)

No, I have no idea.

B (2:55)

The nine figures, Nine steps, nine figures. Nine steps, nine figures.

A (2:59)

That's right.

B (2:59)

So walk me through that.

A (3:02)

So most founders deeply misunderstand what it takes to scale a business beyond seven figures. You have to transition from being a product led founder to now one where you're building a company. And the nine steps, nine figures essentially goes through three phases. The first phase is startup. That's everything getting to product market fit. The second phase is scale up, which is really around company creation. And then the last phase is around legacy protection, which is grow up. So startup scale up, grow up. It's three separate phases that completely changes the way you run the company. The startup is really around product market fit, which is Persona. Who am I selling to? Every single business should start with market. I love your ATM framework. We should go deeper into that. Then it's, well, what am I selling to that market? And then lastly is how am I selling at scale, which is promotion. Once we figure that out, and that's typically around mid seven figures, I'll tell people that this is the equivalent of, you know, you've hit product market fit when it feels like you're wearing a meat suit in a dog park. Like you just have more leads than you know what to do with. And that's oftentimes when founders really struggle and they don't know what to do next. And that's oftentimes when they reach out to me, which is really the second phase was the scale up.

B (4:08)

So I want to cover more about the nine steps to nine figures. Because I want nine steps to nine figures. And I think others do too. What else? Can we talk more about that?

A (4:22)

Yeah, I mean, when we think about goal planning, most people have maybe five years of dedicated, focused, obsessive energy to put into their business. So how do we, what do we do in five years in order to have $100 million business? You're familiar with the triple triple double double. So for the no. So okay.

B (4:41)

Oh, yeah, I'm Canadian. A triple, triple, double double to me sounds like you want coffee with three creams and three.

A (4:48)

It's a Tim Hortons, Tim Hortons.

B (4:50)

Or I'm like, yeah, yeah, I am familiar with the triple triple double double.

A (4:53)

So the triple triple for those that Aren't familiar is how do we triple our revenue three times and then double our revenue twice. So you have a $3 million business, you go from 3 to 9, 9 to 27, then we double from 27 to 54 and then from 54 to 108. So in five years you can have a $3 million business, go to a $108 million business. At that point you've got all the optionality in the world. If you want to have a hundred million dollar exit, if you want to keep growing, you've probably end up dominating. And so when we think about the triple, triple, double, double, this is where we go, how am I enabling us to triple? And so we go back to is the sales or delivery. Do I have enough leads in order to triple this year? If I don't, then I have probably a bottleneck in sales. If I did have enough leads, if I have a waiting list or I could, I'm. I'm not sending enough tweets because my team is struggling. Then it's my job to think about the next phase, which is the scale up phase. Scale, scale up is process people, performance. Oftentimes I got a lot of advice when I was you know, running seven AppSumo at 7 million, 10 million. They're like it's people first. It's people first. You gotta think about people. And what I ended up realizing is like that's actually bull. It's not people first. In fact, nobody wants to run a business that's full of people, that's bureaucratic. It's like the dmv. What, what's way more fun is actually building a business that's highly optimized, highly automated, almost all always software driven. Now with AI, I wish I had AI back then. Leveraging AI and you have a handful of A players that are super fun to be around. Like that's, I mean GoldenEye was built with like 12 people. Like the greatest game of all time. Like if, if you don't need more than 12 people. So like if we can build GoldenEye with 12, like what makes you think that your, your logo studio needs 60?

B (6:45)

And that was back then, right?

A (6:46)

That was back then, yeah. So it's like let's just get exactly a handful of incredible people surround ourself, be obsessive about this and get that triple, triple, double, double. So process people and then once you've got those two, then it becomes your job to manage performance. So what does performance mean? Imagine you're Bill Belichick or a world class coach and now imagine your team in the middle of a game. You shut off the scoreboard. LeBron James would have no clue what to do. Like, how am I going to help you win this game? So it's your job to give your team the scoreboard and to give them the incentives to give them the compensation package. And it's your job to sit on the sideline and draw up the next play.

B (7:23)

Quick break in the pod to tell you a little bit about Startup Empire. So Startup Empire is my private membership where it's a bunch of people like me, like you, who want to build out their startup ideas. Now, they're looking for content to help accelerate that. They're looking for potential co founders, they're looking for tutorials from people like me to come in and tell them, how do you do email marketing, how do you build an audience, how do you go viral on Twitter? All these different things. That's exactly what Startup Empire is. And it's for people who want to start a startup but are looking for ideas, or it's for people who have a startup but just they're not seeing the traction that they need. So you can check out the link to StartupEmpire Co and in the description, you know, Charlie Munger, show me the incentive. I'll show you the outcome. Obviously. Perfect quote. So good, so good. Again, it's one of those things where it's, I agree, but how do I do it? How do you structure, how do you structure incentive programs for partners, VPs that work for them but also work for you?

A (8:42)

Yeah. So let's use COO. So let's say you hire a COO. The biggest mistake that I see CEOs will do is they go, well, profit's really important. So we're gonna incentivize you on profit. Cause that's what I care about. I care about cash in the bank. So guess what they do? They create a bonus structure on profit. And what they end up realizing is the COO all year, all they care about is cost cutting. All they care about is, oh, I found, I found us. We were able to transition from upwork to fiverr. It's like, oh, my God, this is not what we're trying to do. Or I was able to fire this, this team or is able to save us money on this rent. And they're not thinking about growth at all. And so then what do they do? The opposite. Oh, so the following year, guess what? I'm going to do it on revenue. So we're going to incentivize on revenue. Well, what ends up happening? I hired 40 salespeople, I spent all this money on, on, on advertising that made no money. And so then you end up having an individual that, yes, you doubled revenue, but now we made less than half the money at the previous year, so we work twice as hard for half the money. So to me, the ideal structure is a 50, 50 split. So you get 50% of your bonus on top line and 50% of your bonus on bottom line. So what ends up happening is now you have founder alignment, you have an individual that's thinking about both top line growth and, and bottom line profitability. And so if I have a hundred thousand on top line and 100,000 in bottom line in terms of my bonus structure, then all of a sudden I don't mind dropping down a little bit of profitability if it results in a top line increase. But what I won't do is I won't drop my profitability if I end up with just flat revenue growth or I won't just grow top line if my profitability drops as well. I'm thinking about both of these together. And the second you do that, I mean this is a very simplistic comp structure, so. And one that we can get across in a podcast, but that's infinitely better than just focusing on one of those other two.

B (10:33)

So I sound old, but you know, in my generation of startups, a lot of us got equity in Silicon Valley venture backed startups. On paper, we're millionaires. Companies raised billions of dollars. And you even see, you know, front page of TechCrunch, Wow, this company sells for a billion dollars, but they had 1.4 billion in pref stack employees get zero. I think that there's a lot of us who are now in our 30s and 40s who are kind of like, yeah, that equity of venture backed startups, I'd rather profit sharing or a bonus structure. And I think that's going to be a trend that's only going to accelerate totally. So if I'm trying to incentivize people I'm working with, how do I think about equity versus straight up cash?

A (11:25)

Yeah, this is really tough. So number one, Harvard did a study where they actually found no market increase in performance when they handed equity to individuals. And I actually found the same thing to be true. Because the issue is most employees, even the most successful sophisticated ones, don't know how to value equity. They're like, what is, what are these 10,000 RSU's? I have no idea what these mean. I have no idea how it measures. So the only way that I think about if you were to do equity, I personally don't do equity. But if you were to do equity is we start with, here's your total compensation package. Let's say we hire a VP of Revenue at 400,000 a year. Your total comp package is 400K. Your base. I like to keep the base as low as possible. So let's say we do 100k for base. So 100k base. So that means you have 300k and you get to decide how much of that is going to be cash bonus versus equity. And they're like, oh, now all of a sudden they start to like, do the math. Like, oh, do I actually want to invest 100k into this business? Now all of a sudden that equity means something to them and so they have to make a decision, oh, I want to invest 100k in this business. Well, guess what? Now they understand the math. If you invest 100k based on today's 409A valuation, they this is how many RSU's you get. And now sudden they're like, oh, this is like buying Nvidia stock. Yes, it's exactly buying Nvidia stock. Except this company is not public and we're not able to trade it. You will get that exit in the future.

B (12:56)

You may get that exit.

A (12:57)

You may get. It's a lottery ticket. So I have no problem with them going, you know what, cash is actually more important to me. I want all 300k in cash. Some of them go, you know what, give it to me. 250, 50. Some of them are like, you know what, I'm very bullish on this company and I don't need the cash. I've already had an exit, give it to me all in stock. But now they have to make a decision rather than me handing here's 10,000 RSU's that gets slammed into a shoebox, never to be seen again. And then they ask me every year, how come I'm not getting a raise? Well, you get a raise, like your raise is effective. When you are right, like when we exit, then you're going to get a raise. And so the problem that you have with most equity structures is the employee doesn't know how to structure it, they don't know how to value it. And as a result, the founder gives up so much and gets nothing in return.

B (13:40)

What's cool about that model is let's say you get 250k for the employee to say, like, I can invest this all of a sudden, if they do invest it, they're actually invested versus getting this like phantom equity. Basically. Like, let's be real, no one's logging into their Carta and being like, I got 1632 RSUs vested to me today. That's right. You know, but you definitely are opening up your Chase app or you're getting a push notification from bank of America that's like, oh, wow, I got $100,000 deposited in my bank account today. This is dope. I've got some swagger in my step. No one gets swagger from 1600 RSUs on Carta.

A (14:18)

No one.

B (14:19)

It's just not happening.

A (14:20)

No, not at all. 100%. To me, that's the only way that I've seen that it actually works and creates founder employee alignment is when now there's some skin in the game. You have made a decision you're not gifted this equity. You've made a decision to invest in the company.

B (14:34)

Yeah, I like that. I just have to say this because a lot of people are going to be listening to this and they're going to be like, I'll worry about all that stuff later. Yeah, you know what I mean? Like, they're going to be like, Steve Jobs was never thinking about all that stuff. Are they wrong?

A (14:54)

So the problem that I see a lot of founders is if they ignore this stuff now in the beginning, what ends up happening is the equivalent of building a skyscraper on a Sandy foundation. We know what happened with that building down the street. And so what ends up happening is when you ignore that you've probably seen this a lot in Agency World.

B (15:12)

By the way, spoiler alert, the building down the street collapsed.

A (15:15)

Yeah, yeah, exactly. And I see this happen all the time where these companies will scale to mid seven figures and they fail to think about the fundamentals and all of a sudden churn starts to rear its ugly head. Competition starts to come in and all of a sudden they realize like, oh, we're building floors on top of a very Sandy foundation. And all of a sudden around mid seven figures, the founder is burnt out. They try to push more in order to grow and they're like, you know what, I'm done. And they either exit or they burn out and the company falls apart. And so if you ignore this in the beginning, it becomes really, really difficult in order for you to scale over time. So I do think, even if you are still early phase, I think this episode is really important to. Because it's a preview of what's to come once you are Successful.

B (15:57)

I think the. You said a really important word. Churn. Yeah, like, I feel like a lot of people from this, you know, listen to the show, come steal an idea, they're doing 100k a month, they're feeling like they're on top of the world. And then churn just gets worse and worse. How do you think about churn and how do you, like, is there a scientific way to combat churn?

A (16:27)

So I think when you, it's kind of like when you're riding a motorcycle, what is the first thing they teach you is like, don't look at the wall. And I think that oftentimes the, the big four letter word and startup ecosystem is churn. And I think the problem is when you think about churn as your main focus, it ends up thinking about the opposite, which is actually what you really should be thinking about, which is loyalty. So loyalty is the way I measure it, is net revenue retention. Which is not just how do we avoid churn, but rather how do we get more loyalty from each existing cohort? Every 3% increase in net revenue retention doubles a company's valuation.

B (17:01)

Okay, can you define net revenue?

A (17:04)

So for a singular cohort, so let's say January, all of your customers in January, if you have 10% monthly churn, that means in February they will spend 90% of what they spent in January. That's 10% churn. The opposite of net revenue retention, or the opposite is net revenue retention, which means that that cohort actually spends more with you in February than they did in January. A good example of that is like Slack. You sign up reluctantly to Slack and then you pay for it. And then all of a sudden, well, you add more contractors, you add more features. And so in January to February, you start spending more. As your usage increases, you've created loyalty. AWS is another example. So Snowflake is probably the best, the company that's doing the best right now. And if you can think about net revenue retention more than anything else, that singular KPI, more than any other KPI, is going to drastically increase your company's valuation. It's going to make it much easier for you to grow your business over time. And it's going to make it much easier for you to exit five, 10 years down the road when you're ready to move on to your next thing.

B (18:04)

So when you're doing 0 to 1, should you be focused on net revenue retention or like, what are the things that you should be focusing on 0 to 1 versus when you're scaling?

A (18:13)

I think the biggest Mistake that a lot of founders make is they, they try to jump right into growth before they think about retention. I think it's so much easier to grow a business when you have incredible customer loyalty and then you're able to then throw gasoline on that fire. I think a lot of founders make the mistake of going, well, we've got something that's kind of break even. Let's just go and market it like crazy and eventually we'll grow. What ends up happening, you have massive churn. It's hard to profitably grow. As we know, acquiring customers becomes harder and harder every single month. I think Sam Sampar mentions like, growing on these platforms is like buying real estate beachfront. But rent goes up every 18 months, so it becomes harder and harder. And so I do think you need to focus on retention upfront, first and foremost before you ever worry about promotion. So I do think it's important.

B (19:04)

Yeah, I think it's like, you wouldn't build a leaky ship, right? You don't want a leaky ship because even if you start getting 10, 15, 25k of revenue, if it's going to go away in six months, like you do the math, what's the point, Right? So I feel like the mistake a lot of people make is they put all their product energy, iterations, product velocity into how do I grow this thing as big as possible? I'll figure out retention later where it's like, probably not the move. Maybe you keep it tight, small, have less revenue, but your retention is higher.

A (19:46)

Well, oftentimes your first handful of customers are the ones that are the most loyal. They're coming to you because they have the biggest pain point. And so that feedback loop, that iteration can be a lot tighter when you with your first 10, 15, 20, 100 customers versus your first 10,000. And so it's so much better for you to nail that up front, develop the brand equity before you start throwing that gasoline on the fire. I've seen way more success when you've nailed retention, when you've nailed loyalty up front. That's why you start creating a movement. That's how you start getting individuals wanting to stick around forever versus like the companies that are a flash in the pan. They're amazing in one year and then you don't see them ever again.

B (20:25)

So someone's going to be listening to this and they're going to be like, cool, you know, I'll focus on retention, but I still need to grow. Like, I've got VCs that I got to impress. I Want to, you know, I, and honestly, it feels good to grow.

A (20:39)

Yeah.

B (20:39)

You know, it just, it's fun to wake up every morning and see your dashboard go up, not just retention go up. How do you think about growth channels? Paid versus organic? How do you think about, you know, should I go international or not? Walk us through how you think about growth tactics once you're, you know, you're figuring out retention over here, but you know, you still want to grow.

A (21:04)

Totally. Well, I mean, the beautiful thing about retention, if you've priced things properly, you are actually still going to grow. Because if you think about that net revenue retention number, if you have a certain cohort of customers month over month, your revenue overall is going to grow. It may not be growing as fast as you want it to because you're not accelerating that promotion strategy, but you're still going to be experiencing growth month over month. That's how you know you figured it out. In terms of your portfolio approach for marketing, as an example, I like to think about it like an investment thesis. I know you're not 100% in crypto. You're probably not even 100% in cash. There's probably a medley between that. Right? And I think the same thing is true when you're thinking about your marketing channels. 80% should be in index funds. 80% should be in the stuff that you know is going to produce that consistent year over year results. So your number one marketing channel should be getting 80% of your investments, but that 20% should be thinking about, well, what's next? What has the potential to be a rocket ship? What is my next Nvidia? What is my next Bitcoin? And so with 20% of your allocation, which includes your money, your people, that's where you should be thinking about, well, what is the next marketing channel? So that way you're not beholden or stuck. If one channel ends up falling apart and cratering you, you've got a second backup channel that could easily recoup and make up the first channel if for whatever reason that first channel ends up stopped working for you.

B (22:26)

Okay, can I, can I be selfish for a minute?

A (22:28)

Of course.

B (22:29)

So right before we hit record on this pod, I got a text message kind of out of the blue. I'll let you read it.

A (22:43)

All right.

B (22:45)

It's just at the end.

A (22:46)

Right at the end. So the question is, let's buy biz with 50 plus million revenue together this year. That's the new year intention.

B (22:53)

Just out of the blue, I get this text from this guy saying he Wants to build a 50 million. He wants us to partner up and buy a $50 million a year revenue business together. And last night we were at dinner with a bunch of friends and you asked me, well, what my superpower is. And the second question was, what do you hope? What do you need help from? What was the second question?

A (23:28)

Yeah. So the two questions are, what's your superpower? What can you help everyone else in the group? And then number two is what's one thing you need help with?

B (23:35)

Right? And I said, you remember what I said?

A (23:39)

You want to say it?

B (23:40)

Think big. Thinking big. And so I said that last night. All of a sudden now I'm getting this text message where someone is pushing me to think big about a strategic acquisition in a 50, you know, a $50 million revenue thing might be an acquisition of $150 million. Right. This is really outside my comfort zone. I would like to know when, how do you think about, how should I think about acquisitions? If you were me. And then, so that's just like strategically. And then on the personal side, how do I get my comfort level to be like, yeah, I can make that, that big bet. Right. It never feels really good when you're making a big bet. At least for me, you know, it never feels good to, to me, it like I've got a really good thing going. Right? When you have a really good thing going, it's hard, you know, you don't want to mess it up.

A (24:45)

Totally.

B (24:46)

So what advice do you have for me?

A (24:48)

So one of the most important things that a CEO should be really good at is making decisions. And one of the main frameworks that I use for decision making is, is I call it the shield versus sword, which is how much effort is this acquisition going to take versus what is the potential impact that it has on my business. So it's this impact versus effort matrix that's super important. I'm always thinking about what is something that is super easy for me to do that's going to have a massive impact on my portfolio or on my business. When I'm looking for massive impact with low effort, those are the low hanging fruits. I'm always going to be optimizing for those things. They don't require a lot of shield, they don't require a lot of sword. They're super low hanging fruit. And I'll typically rank these 1 to 5. How much effort is this going to take? And then how much impact is this going to have in my business? And I'm looking for 10 out of 10 ideas. I want five in terms of effort and five in terms of impact, because it's super easy to do and it's going to have a massive impact on my business. For me, something like this, just gut feel. While it's going to have a massive impact. Right. If it's done well, what's the effort? That's probably a 1 out of 5. So that's really only a 6 out of 10 in terms of my. Is there 8 out of 10 ideas? 10 out of 10 ideas. Oftentimes, founders love to go after the new thing, the shiny object syndrome, and they completely ignore the amount of 10 out of 10 ideas that are in their existing business. And so for something like that, if I'm working with a founder, I'm going to, I'm going to hit pause. I'm going to be like, you know what, Is that actually the best thing that we should be doing strategically for this year? Or is there something else inside of your own portfolio that's actually worth a way higher ROI?

B (26:27)

Is it worth. So, you know, the one on 10 that. The one on five that you're giving the effort?

A (26:33)

Yeah.

B (26:34)

Is it, Is it worth being like, is there a world where I can make this a 5 on 5?

A (26:39)

Totally.

B (26:39)

Or should I give up on that idea right now? Or, Or.

A (26:42)

Well, here's the thing. If you give up the effort, let's say, hey, I'm happy to do it, but I'm only gonna do 10k and of an investment, and I don't wanna be on the board. I don't want any advice. I'm not gonna promote it at all. Well, you're also reducing the impact because you're not gonna get as much equity, you're not gonna get as much impact as a result of it. And so you have to throttle how much effort it's going to require in order to do this with the impact that's gonna require. So, of course, who wouldn't love a 1000 out of 1000 impact for a zero effort? It's like, if you could just respond, yeah, let's do it. Here's a hundred bucks and you're going to get a $50,000 equity stake. Of course it'd be amazing, but that's not the case in most scenarios. And so you do have to adequately rank these things. And then more importantly, you have to rank it compared to all of your other opportunities. Someone like you, Greg, you've got hundreds, maybe, you know, thousands of ideas sitting in your dm, sitting in your brain. I know how your brain works. You've got tons of ideas. Even with your existing businesses, how does this rank compared to everything else?

B (27:43)

Yeah, it's kind of one of those things where everyone else is trying to get you to do their idea right 100% and you kind of have to block out everyone else for a second. We're recording this in January 2025. Like, January is such a good time, Honestly, February is such a good time. Like the first quarter 20, you know, the first quarter of the year is a good time to be like, okay, what do I, what's important to me? What are the, what are, what are the most impactful things I could do? And then you can start tuning people in once you figure that out.

A (28:23)

That's right. Yeah. Look, there's, it's not that you don't want those ideas. I mean, it's amazing that they're coming into your ecosystem, but it becomes so easy for them to become distractions and noise. If you don't have a framework for how does this fit into my strategy? How does this fit into all of the other ideas that I have? I guarantee you your team has probably some incredible ideas. Maybe there's a company worth acquiring that you want to fold into the overall portfolio. How does that acquisition fit into the ecosystem? Because you got to remember, okay, let's just go through. Oftentimes people are like, oh, just buy $50 million company. Which $50 million company. What are the financials? How much effort is it going to require? How much due diligence is going to be an 18 month process? It could fall apart at the last minute. So now I'm doing a 10 out of 10 effort and I have yet to see a dollar of impact.

B (29:12)

It most likely will fall apart.

A (29:13)

Most like 100%.

B (29:14)

Right.

A (29:15)

And then once I've actually signed the paper and we're able to pop the champagne, well, guess what? Now the real work starts. Now we have to grow this thing, right? It's already hit 150 million. Guess what? If things were growing and going well, I guarantee you that founder is not willing to sell. And so there's probably going to be some things that need to get fixed. There's probably going to be some churn issues. Right? We got to make sure that we're not buying a skyscraper that's about to collapse in on itself, which I see all the time. So, yeah, no, thanks, but no thanks.

B (29:47)

Who's a founder that you look up to that is doing like a lot of the right things that people can model themselves after?

A (29:57)

I mean, to me, I've Been going deep down. James Sinegal, Founder of Costco I know he's bigger than most, but I love the focus, I love the pricing and strategy model. I love that he gave back to the next generation of entrepreneurs. Like he famously coached Jeff Bezos, which is where the Amazon prime idea came from for the membership. So it's not someone that just focused on pricing and modeling, but he's also giving back to the next generation of entrepreneurs. So that's someone that, you know, maybe from like a tier one founder is someone that I'm admiring. Someone that I'm admiring right now that's, you know, just working on a lot of like really cool things. Honestly, like I'm, I enjoy watching like Natalia just tinker and come up with ideas. And he's got an audience right now. I saw him just launch an AI course two days ago just because of his audience being like, yeah, this is cool. So I like seeing what he's doing. Um, you know, Marshall just exited somewhere. Com. I love his tinkering philosophy.

B (30:54)

What's his tinkering philosophy?

A (30:56)

Um, I mean it's funny, he had Peel and then he ended up using that to start somewhere and he used that to. And, and he ended up just selling that for 50 plus million dollars. Uh, and now he's moving 12 minutes down the street from me. So I'm super excited for us to be hanging. Um, I love seeing him just figure out, hey, like, where are my cur? Like, doesn't seem very monetarily driven. Where I think over the last four years, the amount of people that chase the latest NFT project, the latest crypto project versus like how do I just scratch my own itch and then sell that solution to others?

B (31:28)

Isn't. Is it Marshall? Didn't he create a few products and one of them kind of hit? And I know you're a focus guy. You know, whenever, whenever I'm telling you I'm working on like a bunch of projects, I'm like, oh my God. Oh my God. He's. I know what he's thinking. I know what he's thinking. Focus, Greg, focus. So how should people think about. A lot of people are into product studios now, launching multiple products. I call them multipreneurs. How should people think about having multiple cash flowing businesses? Does it work? What are your thoughts?

A (32:06)

This goes back to what we were talking about in the beginning of this conversation, which is, are you a founder or are you a CEO? And founders found, builders build. And if you know, this is your zone of genius, this is actually the most valuable part of the overall value chain, if you can get something, if you can discover flight, like that, more than anything else, is the most valuable part of the overall ecosystem. The problem that most founders have is they discover flight and then they abandon it to go start the next thing, right? They spend 2,000 years discovering flight, and then they go, okay, well, like, let me go build. Let me go invent the helicopter. Where it's like, the last hundred years is actually where the exciting parts of flight happened. So you have to hand off the baton. You have to successfully hand off the baton. And so if. If you have discovered flight mid seven figures, your only job right now is go, am I the right CEO for the next phase of growth? And if not, the only thing you should be doing is either hiring a CEO or a president to execute on your vision or recognize this is actually not a business I'm very passionate about, and hire a CEO to. To take your vision to the next level. Once you do that, go back to Tinker mode, because that's actually way more valuable for your skillset. But the problem that most founders face is they go right back to Tinker mode when the first thing still is a spinning plate, and it ends up crashing, failing. And now they have nothing to show for all that hard work.

B (33:26)

The founder of Costco. What's his name again?

A (33:28)

James Sinegal.

B (33:29)

James. So if you think about Costco, Costco, the only expansion that they've done is expand internationally. They haven't really changed their model that much. And when I hear you talk, I'm like, that's what I want to be doing too. Right. I call it building skyscrapers, not strip malls. So have a. You have a business, and it's starting to work. But then it's like, how can I expand upon it versus creating new business units? I think that's the mistake a lot of people make when they're building these product studios. Yeah, I mean, they're not like James.

A (34:14)

Well, let's use AppSumo as an example. When I joined Appsumo, we were selling everything from ebooks to fonts to digital courses to software. The way we build skyscrapers instead of strip malls is we then analyze the portfolio and we go, well, which thing is selling the most? How do we get more customer loyalty? And software was outselling all of the other ecosystems by 10x. So why? What's going on there? We realized if we dive deeper, marketing agencies were our most profitable customer segment, and they were buying software to reduce their monthly spend on software. So let's just do more of that. We go way deeper with them. We build way more customer loyalty. We, we tripled our customer lifetime value. That alone, all things being equal, tripled our business. And so when we talk about how do I go deeper. Yes. You know, James Sinegal expanded only internationally, but I would argue each opening of a new Costco was an expansion. It's a new market. Each time someone walked in and bought a membership that was deeper, deeper loyalty with that customer base. Each time they reinvested profits to lower pricing and increase their buying power, they were building more customer loyalty. They were going deeper and deeper with each market, each store. And that's why they are the most profitable per square inch of any retail facility in the United States.

B (35:32)

It takes a lot of courage to focus. You know what I mean?

A (35:36)

It does.

B (35:37)

I feel like you really have to believe that if you execute on this vision and you expand on this vision, that you'll win that market. And in a world where AI makes building so simple, I feel like, yeah, it takes courage.

A (36:02)

Greg, who's the fastest man on earth?

B (36:05)

The fastest man on earth? I don't know, dude.

A (36:09)

Do you know Usain Bolt?

B (36:11)

I know the name. Is he the fastest man on earth?

A (36:13)

I mean, he could be, right? Like, I mean when you say top, top, top, top.

B (36:17)

Exactly.

A (36:18)

Who's. Who's second?

B (36:21)

Lord knows.

A (36:22)

Yeah. Who, who knows? And that's the. When you look at most markets, they only care about the winner, like they only care about the gold medalist. And so if you're not going, if you enter a market, you have to ask yourself, can I be the gold medalist in this scenario? Can I be number one in this scenario? Because when you take a look at where the market will flow nine times 99.9% of the of the actual rewards will only go to the best in the market.

B (36:47)

Is that true even with non venture backed businesses?

A (36:51)

It's true for any business. When you ask yourself who is the best in the world at anything, that's where the majority of the value is going to go. And so you shouldn't enter any market that you're not going to be the best in. By the way, markets are broad and can be sliced up. So Amazon is the best, let's say for two day shipping, but Target's the best for an in person experience. And so you have to ask yourself, well, in what arena are we competing in and can we be the best in it? Because if not you're going to end up being a Sears where they're not good at anything. And they end up going bankrupt. And so before you enter a market or before you decide to focus, you have to ask, is this something even worth focusing in? Is this something that I'm uniquely qualified for? Can I be the best in the world in. And if, yes, if this is something you want to dedicate your life to, you think you can be the best in the world in, or at least for five years. If you can focus for five years, you can have $100 million business and, and have a life changing exit. Once you do that, then you can do whatever you want. Once you're an exited founder with a nine figure exit, you can do whatever you want. Because all of a sudden those business ideas, those texts are gonna come to you.

B (37:55)

Okay, so you know, Eamon, tell me a story of, you know, hypernicing and relentless focus.

A (38:03)

Yeah, well, going back to the nine steps, nine figures, the very first step is Persona. I think that deeply understanding who you sell to, who loves you, who do you love back, who's sending you referrals, is probably the most critical question that any startup can ask itself. And we ask ourselves that question every year. And what we do is we analyze our customer data. We look at, are there any trends with our top 10 top 100 customers? And for us, 2017, we analyzed that customer data and we realized, oh, wow, over 80% of our top customers are marketing agencies. So we branded and I like alliteration. So we called it marketing agency Matt. And ironically there was an actual marketing agency Matt on our list. And we go, why is marketing agency Matt coming to AppSumo? They're coming to AppSumo because they're spending monthly on expensive, on software. But as an agency, as you know, revenues, feast or famine, you might have 40% churn in one month, but your expenses stay the same. And so they're coming to AppSumo to reduce their monthly expenses on software. So at the time we were maybe doing one software deal a quarter because they're hard to do, hard to negotiate. I go, what would happen if we did one a month? So we tried that for the following quarter as an experiment. One of our frameworks is called Test, then invest. And we tried that and guess what? Revenue went up. And I'm like, well, what would happen if we did two a month, three a month, four months? And every quarter we kept increasing it to the point where now we were launching, got to the point where we were launching one software lifetime deal every single day. So 30amonth. And of course, when you're selling more of what Your ideal customer wants what ends up happening. Not only does your ideal customer start coming to you with more loyalty, they start referring to you more in the communities that they serve. But guess what? Even solopreneur Sally enterprising Ethan, the other customers that we were quote, unquote, ignoring, they benefit because now we can negotiate better deals because we're able to drive more revenue to the founders of those software deals. And so all things being equal, our customer lifetime value overall went up. Our customer acquisition costs were slashed. Every single KPI in the business went up into the right. And all things being equal, our business tripled.

B (40:22)

So testing, like, how should, how should people think about how many of these test and invests that you know, should they be running a year or a month or. Yeah, how to think about it?

A (40:31)

80, 20. So 20% of your money, time and energy should be spent on these experiments. And I'll give you a good example. We would, we would think about a hypothesis. One of my hypothesis in 2018 was if the number one way we acquire customers is through referrals, so people sharing their referral link, would they share more if we paid them instead of giving them credits? So basically an affiliate model. And so we literally, with our top 1000 shares, emailed them and go, hey, for the month of October, if you share using your share link, we will pay you via PayPal instead of with appsumo credits. By the way, Greg, completely manual. We were literally logging. It was literally a spreadsheet and I manually PayPal each individual and I look at the data and it was a marketed increase month over month. That alone was enough for me to invest into proper software, proper tracking software, and actually launch our affiliate program in the following year. Today that, that, that revenue channel does multiple eight figures in revenue for appsumo. And so when you're thinking about testing and investing, your core team should probably be focused on what's working. So for us at the time it was email, whose email was our number one channel. Don't distract your core team. It's now your job. The founder's job is to look and dig for oil and then hire to scale it. So it's the founder's job to discover revenue. And I think this is one of the biggest mistakes that founders make is they hire to discover revenue. What you need to do is hire to scale revenue because it's your responsibility to discover it.

B (42:06)

I want to talk about team for a little bit. So we've got an executive team. I think we're doing a good job. I don't know what I'm trying to figure out? How can I take my executive team to the next level? How do I identify holes and places where we can double down? How should I be doing that?

A (42:27)

So there's only two core functions of every business. Sales and delivery. You first and foremost need to ask yourself, where is the bottleneck? Meaning, do I have a bottleneck in sales? Meaning, is there not enough leads? Is there more leads than we know what to do with? We don't have enough salespeople. Is there enough salespeople, but we don't have a proper onboarding process? Or after onboarding, is it the delivery side? Is delivery not fully automated, or is the quality not up to par, or are we experiencing high churn? Those are your two executives, your top two executives, let's call it Chief Revenue officer and your coo, your chief Operating officer. From there, it's your responsibility to determine where is my zone of genius? I think that oftentimes the quote is hire great people and get out of their way. I think that's a terrible idea. I actually think it's much better to hire people actually in your zone of genius. So if for me, I. My zone of genius actually at appsumo was more on the sales side. So the very first executive that I hired was actually in charge of sales. Why? Because it allowed me to know what I was looking for, know what genius looked like in that regard, be able to properly train that individual and then know whether or not they were doing a good job. If instead of hired a cto, I have no clue if that individual's doing a good job. I have no idea what greatness looks like. They could end up just telling me complete lies. And honestly, it would be a complete mismatch. So for you, when you're thinking about your executive team, we have to ask yourself, first and foremost, do I have the right executives at each. Strategic flywheels are a huge component of it. Do I have the right executive at each corner point of my strategic flywheel? Do I have the right executive in order to drive sales? So if I send out a tweet and we get 100 more leads, can that VP of Sales actually go and close them at a north of 50% close rate? And. And then if that person is able to close them, can we properly deliver it? And if not, there's probably something broken down in your value chain and it's your responsibility to go and look, well, is it on sales or delivery? And if it's on sales, where is it broken down and how do we hire an executive for just that particular function?

B (44:39)

So I buy that a key component of it though is figuring out what your zone of genius is. And the question is like, how do you identify that? How do people identify what their zone of genius is?

A (44:55)

When you look at your calendar, where do you get excited versus what do you push off? If you get excited for certain calls, if you get excited for certain areas, where are you tinkering in the morning before you have any meetings? That's your zone of genius. If you find yourself dreading a sales call, that's an area for you to get out of. If you find yourself excited in order to tinker with the latest AI tool or finding yourself excited to jump on a customer call, not a, not a sales call, but an existing customer, you're probably thinking more in terms of delivery. And so ask yourself, where does your motivations go when you have an empty calendar?

B (45:31)

So that could be a cool exercise to give to your, your team, right? You could say, like, I'm going to, you know, create a Google Doc and I'm going to, you know, list out the five things that give you energy and the five things that suck energy away from you.

A (45:46)

Totally. I mean, to be honest, most people should be able to knock it off at the top of their head.

B (45:50)

Totally. I already like in my head. I know.

A (45:52)

Yeah, exactly. So like, I mean, we don't need to make this esoteric like, like two day retreat, like tell me about your feelings. You know, take ayahuasca and just get one shot at the company retreat.

B (46:03)

No, turns out I love sales.

A (46:06)

Exactly. Like, let's not. That's the problem that most of these frame, they over engineer everything. Like, oh, let's spend nine weeks to think about our core values, bro. Move on, let's go, let's move quick. So like, just tell me where your zone of genius is and let's get it off the plate. And by the way, eventually your job. So the founder is the hardest, hardest working person in the room. The CEO is the laziest. The job of the CEO is to have nothing on their plate. I had maybe one meeting a week on my calendar. You have to get eventually everything off your plate. And so forget your zone of genius. Eventually both sales and delivery was off my plate, where in the beginning I was writing every piece of copy, closing every deal, doing every customer support ticket, sending out every email. But eventually got to the point where I was thinking 2, 3, 4, 5 quarters ahead in the business. That's actually the ultimate goal for every founder that wants to transition to CEO is how do I become the laziest person at the company?

B (46:59)

I think that's a. Jeff Bezos has a quote on that that's right around on stock price. I think the Amazon stock price was going up a lot and some analysts asked him, congratulations. Yeah, congratulations, you've done so well. And he basically was like, oh, you should have congratulated us three years ago.

A (47:20)

That's right.

B (47:20)

Because it was three years ago that we put in the work that's exactly for today.

A (47:25)

And to me, individuals like Bezos, Zuckerberg, like those are the rare. The reason they are so successful in the game of business is because it's so rare to have a founder also be a great CEO. The reason they are the top 10 richest people in the world is the founder is an artist, whereas the CEO is a manager. So hard for you to put down the paintbrush and then pick up the clipboard. And so for individuals that have successfully made that transition, to all the riches go the spoils. And so for those individuals where, as Jeff said, don't congratulate me on this quarter because that quarter was baked three years ago. That's a perfect example of Jeff, who was very much in founder mode, has now transitioned to CEO mode. And he's thinking about, well, how do we get on the moon? Right. How do we get on Mars? Like he's already thinking about things five, ten years from now that have nothing to do with the socks that got shipped to me this morning.

B (48:19)

He recently said that what's the name of his Blue Origin? Is that what it's called? Yeah, he recently said that he thinks Blue Origin is going to be bigger than Amazon.

A (48:29)

I believe it. Yeah. And that's, that's a multi decade business.

B (48:32)

Yeah. And, and is that, is he thinking too far ahead, you think?

A (48:38)

Well, you have the luxury to. Right. Because guess what, he's no longer driving to and from the UPS in order to ship his packages.

B (48:43)

Like, if you have a seven figure business, should you be thinking 15, 20 years?

A (48:47)

Absolutely not. Not. Yeah, yeah. If you got a seven figure business, you probably don't have enough. You're in the awkward haircut phase. Right. Your hair does is not too long, not too short. Nobody's looking in your way, you kind of look weird.

B (48:57)

You don't.

A (48:58)

Meaning you don't have enough profit to hire a proper exec team. Right. You've got a ragtag group of individuals, you're all wearing multiple hats. The only thing that matters is probably hitting this month's numbers. So no. Yeah. You shouldn't be thinking about 15 years from now. You don't have that luxury.

B (49:13)

Cool, dude. I'll end this by saying I love you.

A (49:19)

Yeah, Greg, this was fun, man. By the way, you know, I was thinking back to when you and I first connected. It was actually, like, in clubhouse 2021. I was looking back through our DMS, and I remember just being, like, number one, like, super, super blown away by what you were saying back then and ended up realizing, like, oh, wow, like, this individual actually walks the walk. Talks to talk. I think you and I were joking. Most people in our space sometimes, like, they're. They're essentially Hollywood actors and they're getting puppeted, these talking points. But it was very clear to me on that clubhouse conversation way back when that it was that you actually walk the walk, you talk the talk, and it's been fun watching your journey and consuming your content.

B (49:59)

I appreciate it. I will say I got to think bigger, though. You know, I. I don't want to be one of those people that is complacent. I don't want to grow 10, 15, 20%, you know, a year. And the reason. It's not a financial reason. It's just a. I like to play. I like to play games, and I like to win games. It's really fun for me. And I think it would also be really cool if I can bring lots of partners, employees, teammates, and allow them to buy their house of their dreams and help them win at their games. Thanks for helping me think bigger. Like I said, we don't do pods like this really. We really focus on the tactics for ideas. But I'm happy this exists because this is the foundation that everyone needs. Nine steps to nine figures, baby.

A (51:03)

Love it.

B (51:03)

Love it. Where could people get to know you more?

A (51:06)

Honestly, X. Probably the best place.

B (51:07)

So just.

A (51:08)

Just look for me.

B (51:08)

Not clubhouse.

A (51:09)

Not clubhouse.

B (51:10)

Yeah.

A (51:11)

Talk about retention.

B (51:13)

All right, my man.

A (51:13)

All right, brother. Great catching up, my man.

B (51:15)

See you later.

A (51:16)

Cheers.

B (51:16)

Peace.