Derric Haynie, co-founder of Splash
and Matthew Michalewicz, CEO of Complexica
The Foundr Incubator (Business Breakdown) with Derric Haynie & Mathew Michalewicz
A couple of months ago we sent an invitation to all the readers of our weekly newsletter. We asked if there was anyone who would like to have a one-on-one with tried and true entrepreneurial professionals.
Out of the hundreds of responses we received we picked out Derric Haynie, former professional poker player, and today the founder and CEO of Splash. An online marketing consultancy based in San Diego.
He sat down with Foundr’s own CEO, Nathan Chan, and Mathew Michalewicz, author of Life in Half a Second and entrepreneurial genius to talk strategy. You might remember our previous interview with Matthew where we talked about the science of success, and his journey in building 4 incredibly successful businesses.
What happened was a full breakdown of Derric Haynie’s business, his goals, what he wanted to achieve, and the steps he needed to take in order to get there.
There has never been an episode before where we’ve given away so much actionable advice and strategy, invaluable guidance, and lessons in entrepreneurship.
This is an episode you definitely don’t want to miss.
For your reference here’s a before and after display of Derric’s goal pyramid (once you listen to the interview you will understand better)
- Invaluable insight on how to exponentially scale your business with the goal pyramid
- The best way to pitch potential clients and investors
- How to generate the right leads
- The steps you can take today to become a successful entrepreneur
- Multiple marketing strategies for online, cold calls and emails, referrals
Full Transcription of the Podcast with Derric Haynie, co-founder of Splash and Matthew Michalewicz
Nathan: Hey guys. Welcome to another episode of the “Foundr” podcast. My name is Nathan Chan and I’m your host coming to you live from Melbourne, Australia. Thank you so much for taking the time to join me. I’m really excited about today’s interview. This one is a little different and we’ve called it The Foundr Incubator and the reason that is, is pretty much because a while ago, I put a call out to our newsletter community saying, “Anyone want access to somebody that’s taught me so much?” And this is someone, actually, I consider a mentor and a friend and his name is Matthew Michalewicz. And if you refer to episode number 17, you will see that I actually interviewed Matthew around his latest book at the time, “Life in Half a Second,” and it’s about the science of success.
And funnily enough, the interesting story is that Matthew is in Adelaide, I’m in Melbourne, and after that interview, we actually met up in person. And he said to me, “Nathan…” We actually… When we sat down in Melbourne, he said, “Nathan, where’re you at with Foundr? How can I help?” And he taught me this amazing stuff around setting goals and this amazing stuff has, in fact, allowed us to already reach our interview goals this month, so, you know, and I’m recording this at the end of August. So it’s pretty amazing how Matthew operates. He sold his last business for over $50 million and he’s just an extremely savvy, switched-on, super successful entrepreneur.
So anyways, I put a call out, anyone wanna learn from Matthew? And we had hundreds and hundreds of people contact me saying that they wanna learn from Matthew. And me and Matthew managed to find someone named Derric, Derric Haynie, who has a very interesting story and he’s trying to grow his marketing consulting and services based business. And pretty much, this is a business breakdown, guys. Like I just jump on the line with Matthew and Derric, and Matthew just really, really breaks down Derric’s business and how he’s gonna achieve his goals and all these other amazing things and really interesting insights that I know you’re going to love.
So this is a really potent episode with a lot of gold. Like it’s a very long episode. I must warn you. This episode goes for an hour and 45 minutes. And I tell you what, it’s one of our best episodes because it is so different, because it is so potent. Like I know a lot of our interviews, there’s a lot of words of wisdom and bits of gold that you can take from it, but well, I have to say that this one is very, very potent. And I know I say this about every episode but this one, I have to say, is one of our best and I’m really excited to bring it to you guys.
So before we jump in, I just wanted to let you know of a little treat that Matthew is offering anyone that’s listening to this episode, and that is, he’s got 50 free copies of his book that he’s giving away for free and he’ll take care of everything. And if you wanna get a copy of his book which breaks down this framework and how he’s achieved the amount of success that he has, very well detailed in this book and he goes through a lot of the frameworks and tactics and strategies in this episode but if you wanna get the book, no cost to you, free from Matthew, go to foundrmag.com/mattm, so foundrmag.com/mattm, and make sure you fill out the form and the first 50 people will get access to his book and shipped to you wherever you are around the world. That’s just a gift from Matthew.
And that’s it from me. I hope you enjoy this episode. If you are enjoying these episodes, please do leave us a review on the iTunes or Stitcher Store. Also, guys, before I forget, any of the resources mentioned, you can access them on the show notes or from our blog. Now, let’s jump into the show.
Derric, can you just give a little bit of an introduction, you know, one minute of where you’re at as an entrepreneur, where you’re at with your business and a little bit about your business for the audience.
Derric: Yeah, absolutely. So about me, I have been, I guess, an entrepreneur my whole life. In college, I started playing poker and I was making a lot of money. So that was my profession. I just quit three and a half, four weeks ago officially, so a little bit of a scary transition. So I played poker for 10 years. I made some good money, made some bad decisions, all that stuff.
I knew that I wanted to get into business so about a year ago, I created this little small project called Open Face Solutions where we were solving…it was kind of educational tool for a card game that not that many people play. And when I started going about the process on that, I realized I was getting heavily into digital marketing and how it can better that business and I started realizing I could help small business owners in my community.
So we started Splash – Online Presence Management. It’s my wife and I right now. There’s two of us. We’ve got a seed investor already locked in and a couple of more advisers, investors that will probably be coming up pretty soon. We’ve got four to six clients, however you wanna look at it, and have been moving forward with the business, still kind of trying to find that product market fit, still trying to figure out how we can best help our clients, what services to offer, whether we should go with a certain vertical, certain horizontal. A lot of people ask that question a lot and it’s been an exciting journey learning a lot here in Downtown San Diego, very close to the San Diego tech scene, which is small but growing and cool, and just really enjoying learning and the culture and tech startups and marketing startups and marketing startups and all that jazz.
Nathan: Fantastic. That’s a great introduction and breakdown. Now, Matthew’s on the whole other side of the spectrum. You know, I have been very privileged to learn a lot from him. So Matthew, can you please give us a short round introduction to what you’ve achieved as an entrepreneur, where you’re at and everything like that.
Matthew: Yeah, look. Derric, I can certainly relate to you about being an entrepreneur all your life. I’ve been the same way. So I started my first business when I was 18. It was a personal training business while I was in college, graduated with a finance degree and went into money management, also as an entrepreneur along with a couple of co-founders. Then moved into the tech space, and the last two companies that I grew and sold were in technology. They both got to about 200 employees before being acquired. And about a year ago, I’ve created my third tech business, Complexica, that I’m growing at the moment. We’re approaching 20 people and it’s in the area of cognitive computing.
So one side of me loves the entrepreneurial lifecycle of innovating, growing, trying to change the world or impact people’s lives and businesses, and the other side of me loves teaching about entrepreneurship. So throughout the last probably 15 years, I’ve heavily involved in educational programs. I teach at the University of Adelaide for the last decade, entrepreneurship for graduates. I am involved in a variety of mentoring programs, like Key Person of Influence from STAGE, I do keynotes on the subject, and I’ve written four books. So I love education and I love really practicing the art and science of entrepreneurship as well.
Nathan: Awesome. Awesome. So thank you for sharing that with us, Matthew. Now I think the next stage of this process, I guess, is we’ve given Derric some homework because Matthew has written a book about success and he’s helped me tremendously with how I’ve grown Foundr and he’s given me a lot of structure and he’s given me a lot of guidance. So he actually gave Derric some homework around setting goals and Matthew’s formula for setting goals. So first of all, look, I’m gonna leave the floor to both of you guys, and I’m just…you know, you go, Matthew.
So thank you so much for taking the time to go through and read Matthew’s book. It’s an absolute game-changer and let’s just leave at that. “Life in Half a Second,” brilliant book and we’ve got a special prize and gift for people that are listening and we can go into more details after the show, but I’ll just let you guys go.
Matthew: Thanks, Nathan. And look, I’m a huge fan of Foundr and it’s been a privilege seeing your journey and the success that you’re achieving. It’s all extremely well-deserved. I know you’ve worked extremely hard, so well done and thank you for having me on this podcast.
So Derric, look, I’ve got your goal pyramid and I’ve also got a list of things that you sent through earlier that you’re interested in discussing around finding the right team, systematization, common mistakes when pitching investors, common mistakes from growing the business and so on. So what I thought we’d do is why don’t we go through the goal pyramid that you’ve sent and I’ll give you my impressions of it and we’ll work through how we can change it and make it a little bit sharper and better.
And for the listeners, we’re actually gonna have a link to this goal pyramid which I encourage you to download and have in your head as we’re going through the podcast. And then at end of the podcast, Derric, I’ll ask you to create a new goal pyramid which will be an updated one which will also load up and link to this podcast so viewers can kind of…listeners can have kind of like a before and after of what it looked like at the beginning, what it looked like after, and they’ll listen to the process of me and you kind of refining it. How does that sound?
Derric: Yeah, very cool. I’m ready.
Nathan: Awesome, awesome. So just before we jump in, Matthew, are you just able to just give us a short rundown for the listeners to clarify, one, the importance of setting goals, and two, a little bit about the goal pyramid and your formula that you teach. Do you call it formula or your way of, I guess, growing and scaling businesses and just approaching everything you do and to achieve the level of success that you’ve achieved? Can you just give a run through?
Matthew: Sure. So when I became an entrepreneur, I wanted to succeed because I quickly discovered that unless you achieved some level of success, you’ll starve to death. You know, in entrepreneurship, if you don’t win customers and create profit, you don’t eat. No one’s gonna pay a salary for you, no one’s gonna do things for you unless you do it yourself. So success became a really important subject and one that I began studying.
And I came across a whole lot of literature around goal setting, and all of the literature really indicated that if you’ve set goals, your chances of success will increase. I come from kind of a science background. Both of my parents are PhDs. They’ve been in academia all their lives. So I like to question things and I kind of questioned the idea of goals helping you succeed. I wanted to know why.
And after a lot of research, what I discovered is goals do in fact help anyone succeed in whatever their pursuit is through two very simple mechanisms. One is they create focus for you. So if you go through your day or week or month without being focused on any particular thing, there’s a lot of opportunities you’re missing and a lot of energies that you’re putting into the wrong area simply because you’re not focused on one specific outcome, on a specific goal. So people that have a goal, “I want to achieve this or I wanna achieve that,” go through life looking for things that will help them achieve that goal and they put their energies towards the pursuit of that goal rather than diffusing themselves in a whole lot of areas.
The second thing that goals do is they provide context for an entrepreneur. So I’ve had lots of entrepreneurs come to me and ask for advice. And they say, “Matt, you know, should I do this or should I do that?” And I always tell them that, “Look, that’s the wrong question to be asking. The right question you should be asking is will this or that help me achieve my goal.” That’s the only correct question you should always ask yourself as an entrepreneur. Because if you don’t have a goal, then the decision that you’re trying to make doesn’t have any context. It’s not grounded in anything and that’s why entrepreneurs struggle with what they should do and it’s very difficult to give advice. So goals really work just on those two very simple things. They focus you and then they provide context within which you should be making decisions.
Now, the problem with goals is that they can be discouraging because there is usually a big gap between where people are and the goal they want to achieve. So I wanna lose 20 kilo, that’s a big gap between where I am and my goal of losing 20 kilo. So I invented this goal pyramid, which is really a process of creating a bridge between where you are and the goal you want to achieve. So don’t make the goal smaller, try to create a bridge of all of the steps that you need to go through to get to the goal, and then it becomes more attainable. And research backs that up and it shows that people that unpack their goals into smaller steps, bite-size steps or micro steps, however you wanna call it, have a much greater chance of achieving the goal because it’s not as daunting and it’s not as discouraging.
Nathan: That was awesome. Now I just wanna say that, you know, this stuff works. I’ve gone through this process of over two years now, since I’ve started Foundr, and I’m up to my second year of goal pyramid, of my goal pyramid, and I look at it every day and it just helps me bring so much clarity. So I’ll leave it to you guys. Please, please go.
Matthew: Perfect. So look, Derric, I’m looking at…I’ve got your goal pyramid in my hand and it’s given me insight into kind of a little bit, your character, and what you’re trying to achieve. So it’s clear to me, you wanna build a business that at some point in the future, you can exit from and create wealth for yourself, make money for your investor, and do something during the time you’re building the business that you enjoy with people that you enjoy.
So I can see steps on the goal pyramid like hiring geniuses with passion, creating the right culture, becoming well-credentialed through thought leaders. Those are all statements that show me that you kind of value the people you work with. You want the journey to be enjoyable. You wanna work with cool people that you’re inspired by or you have a fantastic culture around that so that the whole journey is a pleasure. Is that right?
Derric: Yeah, absolutely. That’s exactly what it is. And even with the main goal’s being, you know, trying to make a lot of money, we’ve talked about ways to exit it. It could be that I just keep the business and we grow it over time and stuff. So the exit strategy, it will depend on, I guess, how I feel in five years, but I thought that that summed up really nicely as where I’d like to be in, let’s say, eight years from now, something like that, five to eight years from now. So I thought it made a pretty good goal to go for, at least to have the opportunity to sell it for 10 million or something like that. I made it real goal.
Matthew: Absolutely. So I wanna make a couple of comments on that. One, I like entrepreneurs that think about the end at the beginning. It’s kind of like a statement that Warren Buffett made, “Don’t get into an investment unless you know how you’re gonna get out.” So it’s common for entrepreneurs to get into something without any future thought about how this is gonna end, how they want it to end up, whether they want to exit through what mechanism, and what that does is they miss out on a lot of opportunities along the way to build a better business because they’re not thinking about the end at the beginning. So I think that’s fantastic. And from personal experience in working with lots of entrepreneurs, everyone wants to exit at some point. You want to retire, you might get sick of what you’re doing, the market might change, your circumstances might change, you might start a family, you might move, whatever the case might be.
So even if you don’t…people listening to this, even if you don’t feel right now like at some point, you’re gonna sell your business, you think, “Oh, I love what I’m doing. I wanna be doing it forever,” I promise you that at some point, you’re not gonna feel like that. You might turn 80, 70, 60, your family circumstances might change, you might wanna go and do something else, you might wanna retire. There always comes that point where you will wanna exit. And if you prepare for that from the beginning, you’re gonna have a better chance of achieving it. So I think that’s good.
So what I wanna do, Derric, is take your goal and, to me, the goal that you’ve got 8, 10 years into the future, I would think of as a direction. So think of your…the current goal pyramid you’ve built as something — this is the direction I wanna head in. I wanna build a business, I wanna make it financially sound, I wanna put process and systems into it, I wanna make it something that I can sell in the future. it’s not just that totally dependent on me. It’s actually a business that has value that someone will pay for, and I wanna enjoy the journey. I wanna build a specific culture around high-end people. We have fun, we’re smart, we add value to customers. I think all of that is fantastic. That’s your direction. That’s kind of your ethos as a company.
And what I wanna do is create a goal pyramid for what do we need to do for the next year to kind of move you in that direction, in that vision that you’ve got. So do you have, in your mind, an idea or a vision or just tell me the first thing that comes to mind, where do you wanna be 12 months from now? Say we’re having another call and you’re giving me an update, what does like Splash look like 12 months from today?
Derric: It’s either in a small office or a part of a co-working environment where we have, let’s say, between three and five people total. So between one and three additional employees. We need to grow obviously our client base by a bit. We only have five or six clients right now. So we’d need 25 to 30 clients, something like that, maybe even closer to 50. We would have our own podcast launched with a great educational platform and blog on our site, a long list of interested marketers and small business owners that we help educate on a regular basis, and a laid out meet up/schedule for bringing people into the office and giving free informational lectures or talks and stuff like that. I think that’s the whole goal for the next 12 months.
Matthew: All right. So let’s kind of put some structure in that. So that’s fantastic and I’m gonna…I’ve written down all the points that you’ve just said and I’m gonna come back to them. Tell me what you want the business to look like financially 12 months from now. If 12 months pass, what about revenue, profit? Are there specific numbers in your head? Do you wanna be turning over 1 million, 2 million, half a million, do you wanna be making $100,000 here? Just some metrics.
Derric: That’s what’s really funny is that I’ve always been really lacking on the financial side, both on projections as well as the laying out the context but I do think something along the lines of $40,000 to $50,000 monthly recurring revenue with, hopefully, relatively low churn as well for our clients.
Derric: Yeah. Relatively low churn most of the time if you’re doing a good job.
Matthew: So Derric, the customers that you sign up, do they sign up on…is your business model, they sign up for monthly retainer and you do marketing for them? Is that more or less the structure?
Derric: Yeah. Pretty much. So we’re trying to take over the entire internet marketing department of small businesses so that we can be in control of the website, the ad and Adwords and advertising platforms and directing leads to the client while being able to control that side of their business in a way that helps them the most.
Matthew: Okay. Perfect. I love that you can imagine that small business owners, their speciality and expertise is whatever they do, whether it’s accounting, personal training, repairing sofas. It doesn’t matter. Their expertise typically isn’t gonna be in internet marketing. So I can see the value proposition. That’s good. And if you don’t have a good handle, and this applies really to any listener, on what financial metrics you should be shooting for, another way to approach that is you told you want 25 to 50 clients, if your goal is also 40,000 to 50,000 a month in recurring revenue, does that mean, Derric, that your average customer spends between 1000 and 2000 a month in recurring revenue? Is that correct?
Derric: Yeah. I think that’s kind of where we’ve been aiming for, kind of a target price point obviously exactly.
Matthew: All right. Look, so what I would do is I’d make the 40,000 to 50,000 a month in recurring revenue, the top of your new goal pyramid. And we’re looking at just the next 12 months because that’s a very concrete goal and it’s a kind of snapshot goal. It doesn’t look at what happened in the last 12 months, it doesn’t look at what’s gonna happen in the next 12 months. It’s just a snapshot. In 12 months from now, is your Splash turning over 40,000 to 50,000 in recurring revenue a month? I love that goal. It’s very precise, it’s clear, and it makes sense. So if you put that at the top and then say, we move down to the two boxes below that, what you’re gonna need to do is pretty obvious, Derric. To get that, you’re gonna need the 25 to 50 clients, right?
Matthew: Okay. And you’re also gonna probably need, the box next to that, is gonna be the small office with the three to five people because you’re gonna be servicing these customers, the small office provides credibility, it also is part of your business model which is in the original thing you sent Nathan. You’re opening up a physical presence where people can come and learn about internet marketing where you engage with them. So that office is pretty important.
Matthew: All right. So you’ve got the top three boxes in the pyramid. You’ve got your revenue target, you’ve got your…and don’t worry about profit because profit is highly variable depending on how much you pay yourself, depending on how much you invest in the business on your own marketing you’re your own branding, on your own advance. That’s gonna change your profit. So I wouldn’t be too concerned about profit. I like the revenue target at this stage, 40k to 50k a month recurring. Underneath that, we’ve got 25 to 50 clients and then the box next to that, is a small office with three to five people. Now the question becomes what do we need to do in Splash to get to 25, 50 customers which will allow us to get the small office, hire additional people and will drive the revenue target. So let’s give that sample. What are the first things that come to mind around what you’re gonna do for the next 12 months to get you to 25 to 50 customers?
Derric: Yeah. There is definitely two fronts to it. The first one is creating the educational platform that we want to be our lead generation kind of mixing education and obviously trying to generate leads in the process which is pretty common, I suppose, with a lot of other businesses and stuff. And then the other side of it is using a well-devised cold email strategy to reach out with like a helpful cold email too, small business owners in the San Diego area see which one they’re interested in learning more doing business and obviously, we could then send them to the educational site as well. You can say, you know, I can help you for instance. We look at people that haven’t claimed their Yelp page, their Google+ page and we can say, you know, claiming this is a big deal. It’s really easy. It should only take you a few minutes. If you want more information, you can visit our blog or we offer these services for a monthly recurring cost.
So I don’t like colding all those too much and I really don’t like cold calling people because small business owners get hit up all the time but it’s…I’m San Diego based and want to cater to only San Diego businesses where…the business owners that I can meet with. So it could be even be a cold walk-in at some point where I’m actually walking into the physical presence and saying, “Guys, I noticed your website was down. I can help you out with that if you’re interested.” Something along those lines. And so both of this, of course, targeting lead regeneration and organizing them.
Matthew: All right. That’s perfect. Now a question. You mentioned earlier on the call that you’re gonna create events within your office or whatever facility you have so people can come in, perspective customers, and learn about what you offer in the whole area of internet marketing. So as you have a front end lead generation process of outbound calls or this educational platform where you mix education and lead gen, is the next, Derric, gonna be you invite them to your office for an event or the event is kind of independent of these two things?
Derric: I see the events as being independent a bit because some small business owners will want to learn what we have to offer and some might just want us to get the job done. So they will kind of go into two buckets in that sense.
Matthew: Gotcha. Gotcha. So okay, perfect. So we’ve got events, we’ve got outbound cold calls or cold walk-ins and we’ve got the educational platform. So next question, on the educational platform, what needs to happen for you to get that up and going?
Derric: It’s gonna take some time. We have to create some PowerPoints, we need more blog content, we’d like to start a podcast kind of around that, we have to create the meet-up group itself and then drive people to our site, the meet-up group, trying to collect our audience, get at least our audience to know about it. So we kind of have to market ourselves a bit so that we can get some eyeballs on it and letting people decide if this is something they are interested in or not. Then I guess we have to spent a lot of time really just creating content, the way that you might sit down and write a book or something like that. You just gotta get all the information that you know and research it online as well and then start putting it together in some sort of fun and easy to understand way for someone else to teach it to someone else.
Matthew: All right. So if we go to our new goal pyramid which is for the next 12 months, the goal at the top, let’s just call that box 1, just so listeners can know where we’re at. The two boxes below that, we’ll call that boxes 2 and 3, and then the three boxes underneath that, now we’re on the third level from the top. We’ll call those boxes 4, 5, and 6, and I’m going left to right. So perhaps we could put in box 4, your educational platform, and underneath, this is now on the bottom row which will be box 7, we could put the things that are required to get your educational platform and it is really two main things that you’ve said. You’ve gotta create content and then you’ve gotta market that content. You’ve gotta get people to the content. Is that correct?
Derric: Yeah. I like how you broke it down. That’s exactly perfect.
Matthew: All right. Fantastic. So now at the bottom row, our boxes are gonna be 7, 8, 9, and 10. So there are 10 boxes in the goal pyramid. We’ve now got half of them filled out. Box number 1 is our revenue target, 40k to 50 K a month recurring revenue. Underneath that box is 2 and 3. We’ve got our 25 to 50 customers and then we’ve got our small office with three to five people. The next level underneath that, box 4, is the educational platform and right underneath that which is box 7, jumping one level down, we have to create content and we have to market that content to get us to the educational platform. So now, let’s move on to boxes 5 and 6. This is level 3 from the top and one of the other things you’ve said is using cold email or cold walk-in strategies or even making a cold call because you’re very specialized and focused which I think is great.
It makes life easier. You’re focused on the San Diego area. So why don’t we put using outbound marketing strategies as box 5, which will be email, calls, and walk-ins? Cold outbound strategies. I think they’re great. That’s the kind of stuff you need to be doing to generate leads. Any listener listening to this podcast, to grow your business, you need more customers and to get more customers, you need leads and to get leads, you just can’t be afraid of the phone, you can’t be afraid of reaching out to people you don’t know. It’s an essential part of business. So then the question becomes, Derric, underneath that, underneath your cold strategies, do you need anything to kind of enable those strategies? Can you do it tomorrow or is there some prerequisite we need to do first?
Derric: There is a little bit of setup. It would take, I think, only really a few hours to set it up and we’ve been meaning to set it up pretty soon here.There is an awesome course on Udemy that talked all about the cold email and it provided a great framework for the strategy. So we just have to get our cold email strategy down a little bit. So it would take a couple of hours of prep work and then kind of creating the email template, creating the timing and follow-up email, creating the Excel spreadsheet.
And we’re also going to use a third-party data entry company for $3 an hour which is pretty good price. They can kind of mine the internet for by getting us the names of websites, the name of the owner of the website, whether their business in San Diego, whether they’ve claimed their Google, Yelp pages and stuff like that. So we’d have to get that list together and that’s kind of our potential lead list. And then we will create the personalized email using the template for each one of those leads individually and kind of start going down the process from there. So I guess it is a little bit more than I thought but it shouldn’t take too long to set up. I’ve been a little slow on setting it.
Matthew: That’s perfect. So look, box 8, which sits underneath box 5, which is under your cold strategies, why don’t we put in box 8, set up for cold strategies, and kind of your action items there are exactly, Derric, what you’ve just said. You’ve gotta put your lists together, you’ve gotta create the email templates, you’ve gotta do your prep work. So it’s all of the set up required to enable the cold strategies.
Derric: Yeah. Okay. Perfect.
Matthew: Now we move to box number 6 which is the third level. It’s the box on the far right and why don’t we put into that box…well, hold on one second. Before we put anything into that, how does…where does the podcast fit into your overall strategy? Do you see that happening early, later, is it a critical component of generating leads and getting your customers? Where does it fit?
Derric: That’s a good question. Maybe it’s something that we don’t even need to do when you phrase it like that. I mean I see it as a way…well, I see it is actually being when we can promote a live event and when we do one, we’ll be videotaping it, and so we can turn that into a podcast content. It’s kind of a secondary way to educate on the website for the people that couldn’t make it to the live event.
Matthew: Gotcha. And is there any setup required for getting a podcast going? Is that something, Derric, you’re planning on doing sooner rather than later or is that something on the back burner at the moment?
Derric: It’s something a little bit on the back burner because it takes a bit of time. And right now, it’s kind of complicated because I’m trying to do my client services as well as build the whole business itself. So only so many hours in the day, I have to choose which educational things I can create and grow the business with, and I think the podcast is gonna come in a little bit later. It’s more important to prepare, let’s say, some PowerPoints and get in front of real business owners in the San Diego area, and stuff like that, the podcast, are just to help people and improve our value and prove that we know what we’re doing and it’ll be like a tertiary lead generation strategy, I suppose.
Matthew: All right. And given that your focus is very geographically specific, which is gonna make it much easier for you to market, reach your customers, develop mind share, penetrate the market, all of that is extremely positive and will give you a leg up versus businesses that are more geographically dispersed, I see events having a lot of power because, you know, the virtual stuff is great but there’s no substitution, in my view, from actually shaking someone’s hand, looking them in the eye, listening to them speak at an event and doing business with them, and that’s something you have the power to do in your specific geographic area. So I would focus on that.
And if I had to choose doing like you said both but focus on events first, because I think you’ll get more bang for buck. That way, you can reach the people through cold calls, through your list, you can invite them to an educational event. So you’re giving them value early in your sales process and you’re making the whole process less salesy because they come to something non-threatening, they get educated, value is provided. So I like the events angle.
So if we put events in box 6, which, like I said, is the third row from the top, far right box, and then we have two boxes left underneath that, box 9 and 10. So what do we need to do to enable events? What are the requirements before we can get an event off the ground?
Derric: Well, what’s kind of funny with this. I mean this is kind of, in box 6, sorry, 4, because it is part of the educational platform. So it has a lot of the same things going on. We need to create PowerPoints, we need to create them well. We need to make sure that we’ve got bleeding edge content that hasn’t just been regurgitated across the internet a hundred times which is pretty easy to do when you’ve got webinars 10 times a day and all that stuff. So we have to make sure that it’s not just content but that it’s fresh content and that it’s portrayed well and that it’s relevant to our target market. So just a ton of research and creation of the content and make it so that we build out something that’s valuable. I mean you’re talking of a lot of hours through the day to fine-tune it.
Matthew: Yes. Which is great because that means box number 7 which is the create content box actually serves more than just one box above it. It’s more than just the educational platform but it’s also something you’re gonna leverage in the events and probably a lot of other things you do as well. So that becomes a critical box for us.
Derric: Yeah. Absolutely. We definitely started on that process as well.
Matthew: Perfect. Perfect. So in terms of holding an event, we need the content for the event. What about physical facilities? What about where you’re gonna hold it and how that relates to the address of your company, future office space and so forth? Have you given that some thought?
Derric: Yes. Absolutely. Tomorrow, we move into Co-Merge which is a co-working office space in Downtown San Diego meant to foster kind of like openness in startups and freelancers and small businesses and stuff. So we’ll be able to move in there and use their facilities to host a lot of our talks out of. So you can either rent the facilities, sometimes they’re free, depending on what exactly is going on. And then we can give talks there and that’s also great because what we’re planning to do will directly be relevant for a lot of people that are already working there. So we’ve got a small start of our audience right off…right away.
Matthew: Perfect. And one other idea that came to mind as you were speaking, Derric, is if you have…you said you had five to six existing customers. I think nothing beats holding an event at a customer location because there’s tons of credibility associated with that. You can give them the educational seminar around internet marketing and then you could have your customer speak for 5, 10 minutes or have a around the journey that they went through and what the results have been. And you can do it in their office which adds credibility to you and takes away the requirement for a physical space that might not be available at the time you want.
Derric: Yeah. I like that a lot. We did a quick presentation to one of our current clients on a management but it was a very small in-office thing. Right now, none of our clients actually have like a large facility for that. So maybe when we think about what client to hire next, maybe we’ll focus on somebody that does have a large facility that we can tap into.
Matthew: Yeah. Absolutely. There is always, in growing a business, your, you know, what I call anchor customers which are the customers that you provide more attention and focus because you’re gonna leverage them for your marketing in the future. So these customers, you want them to love you. You give them the most love. You make sure they get the outcomes. You measure the outcomes that they get. You make sure that they allow you to use that case studies on your website and make videos out of that. And then if they have a nice meeting room, you use them to hold events. And maybe in exchange for them doing all of this for you, you give them extra value or you give them a discount or a sweetheart deal around the price for your services. But if you had a few customers like that, then these would be the…they would help sell you and would make it so much easier to get the new…the leads coming in, to convert them into customers. So it’s something to think about.
Derric: I love that. That’s awesome to kind of track.
Matthew: Yeah. And so what you could put at the box is…at the bottom box 9 and 10 is develop anchor customers, because you’ve got a whole year to do that. You could like… Well, I’m developing Complexica at the moment and I’ve got my anchor customers in place. And these are more than just customers. These are gonna be my business partners for the next decade or however long it takes me to grow the business because I’m gonna make sure that they get absolute value from us. They get the outcomes that the technology is enabling for them. We measure those outcomes, we use those outcomes in all of our marketing materials. We’re gonna make joint videos with them, we’re gonna have them at our events, and these are the customers where we will bend over backwards and do anything humanly possible to make them happy and help them succeed.
What I build a business, I always think to myself, “Can this prospect that I’m currently talking to, can this be one of my anchor customers because it’s got all of these attributes that I’m looking for? Is this the kind of customer where if I develop and deliver extraordinary value for them, they will help me grow my own business?”
Derric: Yeah. That’s definitely very important. I wonder if sometimes, and this is one of the things that I’ve been struggling with, because right away, we just started taking any customer that was interested, anybody that we could help and had talked to us. Now, I think we have to be a little bit more picky with it because we only have so much time.
Matthew: Correct. Correct. Every major company segregates and segments their own customers and there’s various ways of doing that. You’re segmenting into ABC customers or however they do it. But as an entrepreneur, in an early stage of the business, there are two types of customers. There are customers that just pay, you deliver a service, you do it well so you get good word-of-mouth and referrals. And then there are, what I call, these anchor customers which have some attribute which will…if you add more value, if you develop a closer relationship, if you’re able to partner with them beyond the client relationship, they will help you grow the business and it might be customers that have great brands, they’re well-known, they have a lot of customers themselves that you want as customers.
So I look for those things early on. And if I identify that in a business and I think, “Well, this is the kind of business where if I had them as a customer and we did everything we said we’re gonna do and more, they could really help me grow my business because they’ve got a brand, they’ve got amazing presence in the market, they’re happy to do co-marketing with me, they’re happy.” I’m not telling you to turn away customers but try to identify within the people that you talk to, who could be a super customer, who could be an anchor customer for you.
And then on the last box, what I would encourage you to do is create a time table and location schedule for your events, or actually for everything on that goal pyramid. Because in my experience, Derric, when we put goals, and we’ll get to numbers in a second, but the first number we need is time. We’ve got a deadline at the top in terms of we want this business to be at 40,000 to 50,000 a month in recurring revenue 12 months from today. So that puts a stake in the sand in terms of what we’re trying to achieve and when, but all of the goals that we’ve just gone through underneath that, the milestones or the steps, none of them have specific time targets on them.
So the last box, the goal…the box 10, which is the last level, level 4, it’s at the very bottom on the right-hand side, create a timetable and a timeline, and that should be easy to do. You might be able to do that in a couple of hours and have that whole box ticked off, and look at that pyramid of everything we’ve just gone through and start putting dates by it. So if you’re gonna run events, don’t just have a milestone of events, create an event calendar. How many events are you gonna do in the next 12 months? Is it gonna be one a month, two a month, one a quarter, what time, what topic, when are they gonna be or where are they gonna be hosted, what content do you need for those events which starts putting some time pressure around creating content? When is your educational platform gonna be up? What content does that need, which creates additional pressure and constraints around time around the content?
So all of the boxes that we’ve gone through underneath the primary goal should have some kind of target date. If you miss it, that’s fine. Life happens. The unexpected happens. There’s nothing wrong with the date slipping, and God knows, in all of my goal pyramids, I’ve had slippage but it’s good to kind of target a specific date. I wanna get this done by this date.
Derric: Yeah. That’s gonna be really helpful. I think that can be a very powerful, as a motivator, to me because we keep getting distracted with client services or I’m out kind of talking to a new lead and all of a sudden, I’ve had a piece of educational content that I’ve been meaning to publish. So it’s just kind of sitting around, expiring. So putting the exact days to the deadlines early on will help me a lot.
Matthew: And one other number that I want you to create for this goal pyramid is, and what I love about your goal pyramid, Derric, the one that we’ve gone through, is it’s extremely sales and marketing focused. It’s the kind of pyramid every entrepreneur should do at the beginning. How do I generate leads to get customers to have a financially sound business? That’s the absolute correct logic to be thinking about rather than having a huge pyramid with 10 boxes around how to create a product, and then you do that and you’re in trouble because there is no money coming in. So I like the focus.
And then the number that I want you to think about is how many leads do you think you need, and it would be a guess at this point, to get 25 to 50 customers? And let’s define a lead as someone that has either emailed you as an inquiry or you’ve talked to them on the phone or by email, and they’ve expressed some level of interest. So they’ve come to an event, they’ve sent you an inquiry, or you’ve walked into their business, or you’ve called them and they said, “Yeah, I think this is something that we would like more information on.” Let’s just call that a lead. How many leads do you think you need to get to 25 to 50 customers?
Derric: Yeah. That’s definitely a tricky question. It could be between, kind of, like a 10% conversion rate to like a 25. So I’d say 10 leads per one client that fits. What’s really funny, this would be like the…it would be a warm lead but we haven’t necessarily qualified them whether we fit with their business very well. So if we’re talking about like a qualified lead, I feel like we’d have about a 50-50 chance of getting the business. But as far as just a warm lead or somebody that came to a free educational talk, definitely I’d say 10% would be where I.
Matthew: Perfect. So look, why don’t we create a goal for the next 12 months, and I’d be willing to bet a lot of money that if you got 500 warm leads in the next 12 months, you will get 50 customers. So if you just plant that number in your head and you create a spreadsheet and call it warm leads, and every warm lead that comes into your business, every call you made where someone said, “Yeah, look Derric, I’d be interested in getting more information,” or “Yes, Derric, I’ll come to your event,” or an online inquiry or a response to a cold email, “Yes, we’re interested,” or “Yes, send me more information,” you just put their name onto your spreadsheet or onto a CRM system if you’ve got one. It doesn’t matter, because that becomes a motivator. You know, this is now in your control. You know that if you fill up that spreadsheet up to 500, all things being equal, you’ll get 50 customers, and with 50 customers, even at the minimum rate of 1000 a month per customer, you’re at 50,000 recurring revenue a month. So it’s as simple as that.
Generate the leads, hit 500 leads this year, convert 10%, that gives you 50 customers and at the minimum financial threshold of 1000 a month, you’ve got 50 a month. And if the numbers work out better, say your conversion is 15% and say instead of 1000 a month, it becomes 2000 a month, then you might be able to hit 100,000 a month recurring or even more. But I think if you had that number, boy, your chances of making this happen this year become very high.
Derric: Yeah. It’s really exciting to break it down that simple. And I think it also gives…you can kind of structure a little bit of what we call internal reward incentive around, you know, just getting a warm lead and not caring about the end result as much because there’s a lot of variance and emotion that’s placed in actually landing a client and usually less on getting the warm lead. So I think when you can kind of extrapolate and say every warm lead is important and where we know how many we want this month, and if it’s 500 in 12 months, 500 divided by 12, 41 leads a month so I better get started.
Matthew: Yeah. And look, it’s not that intimidating, Derric, because it’s only really 10 leads a week, 2 leads a day. So if you make 20 calls, you should be able to get 2 leads and to make 20 calls, it might be a couple of hours a day. You break it down and this is to get you completely on track to achieve the goal in full.
So look, as an action item, what I’d love for you to do is, over the next maximum week, what I’d love…if you have time, Derric, do it over the next couple of days, create this goal pyramid. It’s 12 months. It’s a very exact, 40,000 to 50,000 recurring revenue per month at the top. Underneath that, you’ve got all of the different sub-goals in terms of 25 to 50 customers. Next to that box 3, you’ve got your offers with three to five employees. Underneath that, which is box 4, you’ve got your educational platform. Then in box 5, you’ve got your cold outbound strategies. Box 6 becomes events. And then the bottom four boxes are all of the enablers of your lead gen strategies which are your create content. Next to creating content, it was…boy, I’ve misplaced my notes.
Matthew: Yeah. And then box 9 is identify anchor customers, and box 10, create a timeline for all of the other boxes. So put that into new goal pyramid. Put the dates next to it on the third level. You’ve got your target of 500 warm leads, and this becomes kind of your execution plan for the next 12 months. This is your one-page plan for Splash.
Derric: Yeah. I love it. And I’m gonna create that. I’ll have it done by the end of the week for sure and I’m gonna put that up in my new office space so that I can stare at it every day. I think that’s the best way to do it.
Matthew: Absolutely. Look, I love it as well and I think you’re gonna be successful, and it, like we said at the beginning, creates focus and context. You’ll wake up, you’ll look at it, you know your target is the 500 warm leads. You know that those leads are gonna put you on track to the customers, the customers are gonna put you on track to the 40-50 a month. Everything fits together so you’ve got focus. And then when you make decisions for Splash, it will be within the context of that goal pyramid. You’ll be asking yourself, “Would this help me achieve what I’ve put down on this goal pyramid?” So I think that’s great.
I’d love to change gears unless, Derric, you or Nathan would like to add anything, and kind of address some of the other questions that you’ve put to us in the initial document that you sent.
Derric: Sounds good to me.
Nathan: Yeah. That was really, really awesome. That just blew me away. So thank you so much both of you. It was really inspiring and really educational. I learned a lot just then too, Matthew. So yeah, look, I think let’s just open the floor. I wrote a ton of notes here, Derric, and I have a few questions for you but let’s just open the floor. I’m sure you have a few questions for both Matthew and I, you know, what…can you give us maybe a top three and we’ll unpack it from there?
Derric: Yeah. Some of those questions that I asked originally have changed a little bit. I don’t necessarily see our business talking to a lot of investors so I’m not focusing on being the best investor pitcher. I need to pitch my business better to my clients and we’ve been restructuring our reporting strategy because we found out that our clients are making decisions based on how much it cost them but not how much it benefits them. So sometimes we’re giving them too many…too much information and too many choices but then I feel like what we’re doing now might be not transparent enough or they’re gonna ask more questions. So I guess that leads me into a really probably common question which is how do you go about kind of educating your client enough on whatever you’re trying to sell them so that they can be up to speed but at the same time, you can’t give them everything that they need to know because it’s not in their. It’s not their technical problem to solve.
Matthew: All right. So look, I’ll reference some key pitching concepts that come from an organization that I’m heavily involved in called Key Person of Influences in the U.S. and London, in Australia, Singapore, and some other places. And in this pitching architecture that they’ve created which I think is excellent, the most important thing they should be focused on in dialogue between a business and its customers is really the problems that you’re solving for that business and how you’re solving them which is secondary but what happens when you solve those problems. And you could call that the benefit, you could call it the ultimate result or you could call it the price. That’s the word that I’ve called it over many decades. So if you at what you offer which is your product, solutions services and so forth, my experience, Derric, is that most entrepreneurs spend too much time talking about what they do and not enough time talking about the problems that customers are experiencing and what kind of benefit or what kind of result they could get by solving those problems.
So it becomes a much more interesting conversation if I walk into a business and describe their problem so well that they feel like I know their business and then I talk about how I’m gonna solve them by introducing my solution then the way around or not even talking about problems at all. I walk in and I just start talking about the services that I offer or the solutions. That isn’t as effective because I haven’t set the stage for the pitch, I haven’t put my solution or offer into context, why is it important like. I say you were a business consultant and you were selling systems and processes and you walk into a small company and you start telling them that you offer systematization, you create processes, the business owner might be thinking to himself, “Why is it important to me? Why do I need that?” There is no context created. So if we just keep that in mind, what are the fundamental problems, and it can be one, two, or three, that you solve for small business owners? Let’s just start there.
Derric: The first problem that’s pretty simple is time. Small business owners don’t have enough time to handle this kind of problem, you know, updating their website or they don’t have the expertise to advertise online, etc. So I guess time, then expertise and then the biggest one is lead generation. We’re in the business of getting them their leads. So we’re in the business of taking all of these actions online so that they can get more business to their business. We’re really just trying to get more people in the door for them. So we’re trying to solve the problem of their potential customers going to their competitors or not finding out about them.
Matthew: And this is perfect. So leading a conversation by saying, look, in our experience, most small businesses don’t have enough leads or certainly they would like more leads which I think is an accurate statement. I mean we’ve just spent the last hour or so talking about lead generation for Splash. So leads are important for everyone. So you open with a pitch in saying look, in our experience, small businesses don’t have enough leads or they would like more leads and the reason they don’t have enough leads is because A, they don’t have enough time to do all of the things required to generate leads. B, they don’t have the expertise to all of the things required or the online stuff, whether it’s website, whether it’s social media, whether it’s AdWords, whatever the case might be. And the third could be they don’t know how to generate an effective return on investment around lead generation.
I’m sure you’ve seen there are small business owners that spend some ridiculous amount on advertising in a magazine or in a paper somewhere and it generates two leads for them and then they get very discouraged from investing in the future because they’ve had such a poor result. So if you don’t have enough leads in a business, it creates other problems. It creates cash flow problems, it creates a type of business that’s always struggling hand to mouth, profitability is under pressure, margin is under pressure. Lack of leads almost leads to a business owner being trapped in a business because they can never afford to hire the other people they need simply because there is not enough leads to generate more customers or sales to generate the profit needed to go and hire the other people.
I mean the problem that you are attacking is a great one because so much is tied to that problem. So depending on the business you talk to, you could go in and say, “Look, most small businesses that I work with, cash flow is an issue, the owner is working 7 days a week, 80 hours a week, in the business and feels like they can’t take a vacation and margins and profitability is always under pressure. And the reason that these problems exist in a business is simply because there is not enough leads and without enough leads, you can’t get enough customers and the reason there is not enough leads is business owners don’t have the time because they’re actually working in the business. They’re doing a lot of the stuff. They don’t have the expertise. They’re experts in what they sell or what they offer being a dentist or lawyer or a personal trainer or a carpet cleaner, it doesn’t matter, rather than being an internet marketer and they’ve typically had bad experiences in marketing before because they don’t know what they’re doing which has yielded very horrible results which has kind of discouraged them from investing in that area.”
So if you kind of…like I’m just talking off my café at the moment but if you kind of refined that kind of messaging and opened your conversations like that, not specifically about a business. You don’t wanna walk in and say, “Oh, I think you’re struggling. I think you’ve got this.” But you never wanna do that. That’s a hard approach but to walk in and say, “Look, I’ve worked with a lot of small businesses and this is the kind of stuff I’ve observed: business owners trapped in their business working long hours, cash flow issues, blah, blah, blah.” If you talk like that, you will have enormous engagement if you’ve got that problem set down pat and it sets you up to talk about your offer. Because in my world, in entrepreneurship, you know, Derric, it’s you world as well, if you can identify and describe somebody’s problem better than anybody else, the prospective customer automatically assumes you’ve got the solution to that problem.
So in your original question, do I give them enough technical information, not enough and so forth, the way I would position it is talk about them, talk about their business, talk about your observations of similar types of businesses and then lead into the solution. You’re gonna become their marketing department. You’ve got the time, you’ve got the expertise, and you’re in the business of generating leads for companies like them. You’re gonna solve these problems for them and then if they want more detail underneath that, how you’re gonna do that specifically, how. What are the…you’re gonna do this, you’re gonna do that. That’s where your technical elements come in. That’s how I would frame it.
Derric: I gotchu. I mean you just gave a great sales speech. You’re hired. That sounds like…I mean I thought I was doing okay with what I was telling to my prospective customers but I think you really helped solve that problem. And this is the digital marketer’s problem is often that they find themselves talking about features rather than benefits. And so it’s funny that I fall into the same stereotype that I’ve pretty much been training myself not to fall into.
Matthew: Yeah. And you know, there is a really tough lesson that I’ve learned over the years, Derric, and the lesson that I learned is no one really cares about what I’m selling. They care about the outcome that I can generate for them. And I try to convey to other entrepreneurs and at some…entrepreneurs are skeptical and I tell entrepreneurs, “Look, if your customers could just take a blue pill and they take the pill and they immediately get the outcome, they lose 20 kilos, they get their leads, they get their teeth fixed, whatever the outcome is or they actually go through your process. They train with you for two months or they do all that lead generation strategies or they go in to see the dentist for 10 hours, what do you think your customers will choose? Will they choose the blue pill, instant results, or will they go through the whole process? And needless to say, everyone is gonna choose the pill which proves that people don’t read on businesses, don’t really care about what we sell. They care about the outcome that is gonna be generated from what we sell. So that means, the lesson twice as old as we need to be focused on the outcome we need to communicate the outcome, lead with the outcome, convince the prospective customer that we’re credible and capable enough to deliver the outcome, and then show them how the outcome is gonna be generated by introducing our solution and our offer, whatever it might be.
Matthew: Excellent. So that’s one. Anything else, Derric, that’s front of line pressing on your brain in terms of a question problem or something you’d love advice on?
Derric: Yeah, absolutely. You talked about your companies earlier. It sounds like you’ve grown businesses with lots of employees. So I have never hired anyone before and I’m going through kind of some training on the hiring process using behavior-based questions as one route, having people kind of jump through hoops before even setting up a phone interview and stuff like that to make sure that they fit the right way. What have you found to be the best techniques when hiring someone especially, I’d say, maybe in the interview itself but maybe also in the meeting after that?
Matthew: Great, great question because if you make mistakes and you bring the wrong people into an emerging business, it can kill the business. It can change the culture, you can piss off your customers, you can do all kinds of things that will really mess up a business. So Derric, a really good question. So three things immediately come to mind and these are in no particular order. One, I love doing what I call a real world test with someone. So if we’re hiring software developers, we’ll actually lock them in a room and give them a software development challenge for two or three hours and actually get them to write code. Technical people in the office will evaluate that code, they’ll look at the quality, the number of bugs. There might be some difficulties around the problem that that code is solving so we’ll see how they were able to tackle that, what kind of think they are, are they creative think or they would have think…are they a problem solver? Can you put pressure on them?
If I’m hiring a salesman, I would get them to come into my boardroom and pitch me and some other people from my company using PowerPoint and full presentation skills on why we should hire them. So they would come in and pitch themselves, tell us why you are the ideal fit for the company, your experience, what value you can add. And that shows me everything I need to know about a salesperson, you know, interpersonal skills, presentation skills, what research they do prior to a call, how they’re etiquette, how they behave, how they treat my receptionist, do they arrive on time, how they dress, do the they prepare material for handouts? If I’m hiring an account manager, during the interview process, I’d take them to a few of my customers and see how they interact and see if they were charismatic, if customers take to them, if they are able to ask good questions, and engage. So those are just the immediate examples that come to mind. Whatever role you hire someone for, see if you could test that role in a real world environment because it’s doing them a favor and you, a favor.
If you find in that process that they actually aren’t good at what they’re gonna be doing in their job, then it’s better you find out in the interview process than after you’ve hired them. If you wanna hire someone to do cold calls, during the interview process, get them to do a few cold calls. Give them a script, give them list. Here is the phone. Let’s do 50 calls and see how you go. So do a real world test in the interview process. The second thing is do a social check and by that, I mean go out with them socially. In my companies, hiring is really important for me. So I wanna take the person to lunch, coffee, dinner and see how they behave. What do they talk about, what language they use, what are their experiences? So usually when people are taken out socially, their interviewing card goes down and they become themselves and that’s what I wanna see.
I don’t wanna see someone giving me the interview face or the interview presentation. I want them to show me them. And the way I do that is by doing something socially. And if it’s an important hire, I’d invite them with their family to my house. Let’s have a barbecue for lunch. I wanna see how they interact, what their family is like. So check them out socially. And the last thing is do off-reference checking. People submit a resume and give you references, you could throw those references in the trash. Today, with the power of LinkedIn and all of the information that’s available of people online, check out where they’ve worked, find different connection points to different companies, call those companies or places of employment, ask to speak to whoever is in charge of the division where this person worked and talk to that person and see if they knew such and such person, what they thought of him, blah, blah, blah because that, again, will give you a true insight.
So all of my advice, Derric, is around gain a true insight into someone’s character, get them to do something real, take them out socially and get advice and references from people that aren’t on their referee list. And I think we’ve got time for one more.
Derric: So on the note of hiring, I was kind of writing this question down as well while you were talking about it. How do I convince them to become part of my tribe, that they…to tell them they should want to work with me aside from just paying them a salary? You know, a start up like ours, the salary is probably not even gonna be necessarily market value right away. Hopefully, we can get someone a market value salary when we start hiring but I imagine we might even trade down a little bit of equity or something like that for the early hires too because we need them to be a believer in the end goal themselves. So how do we indoctrinate them with that?
Matthew: Yeah. There is two ways and the best approach, Derric, would be to use them both. One is kind of the Silicon Valley style of doing tech business which is give key people stock options which is equity but it’s not direct equity. The stock options become valuable when the business is sold. If the employee leaves, they typically lose those stock options. So it becomes an incentive in two ways, one, for them to stay and the second, for them to contribute maximum value because that’s gonna increase the value of the business. So in the last two tech companies I ran, both of them had that kind of approach. When the businesses were sold, people with stock options made money. So I’m a big believer in kind of, you know, share the love, share the vision, make sure everyone feels like a winner when the end comes. So that’s one approach.
But the second, which I’ve gotta say is even more important, is you’ve got, and this is really your job to do this. You’ve got to create passion and engagement in the people you hire. So you gotta make sure you get the right people. You don’t wanna get people that aren’t passionate about what you’re doing, don’t care, it’s just a job. You’ve gotta find the right people but then it’s kind of your job to create that desire to serve your customers. My ethos as an entrepreneur is it’s all about the customer. I want my customers to love me, I want them to have maximum value, I want them to speak just incredibly highly of what we offer and us as a business and the only way I can do that is if all of the people I employ share that same ethos. So I need to get them phenomenally engaged in what they do for customers and why it’s important.
So it’d be things like, just thinking of your business, Derric, getting people in your company, getting them to understand that by generating leads for small businesses in San Diego might be the difference between that business staying in business or not being in business. It might be the difference between the owner being able to have a vacation with their family and not having a vacation. It might be that…you connect them with the result that they’re generating for customers. You make them proud. You make them part of the process of actually helping the customers and delivering the outcome. So it’s those two things. You have an incentive and then you create engagement and passion with people and give them a feeling of I care and you should care because of this.
It kind of brings to mind Simon Sinek’s video, Simon Sinek, S-I-N-E-K, for listeners that haven’t come across him. Look him up on YouTube. He has a great video called “The Power of Why,” and “Leading Through the Power of Why.” It’s a TED Talk. I’d highly encourage everyone to look at it and see if you, as an entrepreneur or a business owner, can kind of lead through those types of examples after you watch Simon’s video and generate that kind of culture within your own business.
Nathan, what are your thoughts.
Nathan: Awesome. Yeah, look, that was…we’re channeling some serious gold. I’m mindful that you have to go now, Matthew. So yeah, look, thank you so much for your time.
Nathan: And I’m sure that Derric is taking a lot of why from these, I have. So yeah, thank you.
Matthew: Derric, look, it’s an absolute pleasure. The reason I love education is for these kind of conversations. I really admire and respect people that have a dream and a vision and are trying to achieve it. The people that I don’t respect and don’t admire are people that sit on their ass and talk all their life about the things they wanna do or should have done or one day will do, etc. So I really respect what you’re doing and I want you to succeed and I have a lot of personal satisfaction and engagement in these kind of conversations because you are someone that’s trying to achieve something and I feel like you should get all the helping hands you can on your journey.
So the one thing that I wanna leave listeners with… Actually, it’s a couple of things but they’re related. Entrepreneurship has highs and lows and if it was easy, everyone would do it. Everyone would quit a job they don’t like, they’d set up a business, they’d do something they love, and they’d make lots of money. If it was as easy as that, everyone would do it. It’s not that easy. It requires work, it requires goal setting, it requires the things that we’ve been talking about in this podcast. but the juice is worth the squeeze.
If you make that first step, like you’ve made more than the first step, Derric, but once you get out of a job you’re not happy about or you get on to the entrepreneurship path, whatever the listeners might be in, it’s certainly a road worth pursuing, and it’s rewarding and it creates huge meaning in lives. Now the closing message is people are afraid of all of the things they don’t know. In making that first step, there’s all these unknowns: will I get customers, how will I get customers, what will this look like, what would that look like, and so forth.
And the kind of message I wanna leave listeners with is “You don’t need to see the whole staircase to take the first step,” a very famous quote. Entrepreneurship is like that. Derric has a…what I like, Derric, is you’ve got a goal of where you wanna end up in 8 to 10 years, and now, you are beginning to step on that staircase towards that goal. And I promise you, it’s gonna be a great journey given what you’ve outlined and the things that you’re gonna do. And I’d encourage all the listeners to do the same. It’s really worth the journey.
Nathan: Awesome. Well, thank you so much again, Matthew, and yeah, we’ll catch up soon and I’ll be in touch, and thank you, again, and wish you a fantastic day.
Matthew: Thanks, Nathan and Derric, great to talk to you.
Derric: Great to talk to you too. It was an honor.
Matthew: Take care. Bye-bye.
Nathan: Bye-bye. Awesome. So yeah, I hope you’re enjoying this experience, Derric. By all means, I know you had some questions for me and I actually had some questions for you. This is gonna be quite a long podcast episode.
Derric: Go ahead. I’ll let you take the floor and ask away.
Nathan: Yeah, sure thing. So first of all, you talked about how you plan to acquire customers. Your current customers that you have right now, your current clients, did you use this cold calling/cold emailing approach already?
Derric: No. We haven’t started using it yet. Our first clients came to us kind of very organically, kind of a reference, people that we had known. Kind of talked about how I played poker professionally for 10 years, so in a poker room, there are a lot of small business owners there including the…our first client was a casino or is a casino. And so the casino themselves needed help with their website and they said, “Hey, you know a thing or two about this. Can you help us out?” And that turned into the premise for all the researcher I started doing for them. And I said, “Well, a website is a website but what you actually want are customers in your door.” And I started learning like, “Okay, well, I can just give them the website, I need to give them online marketing. I need to help them on their local listings. I need to help them on their social media management.” Before I knew it, I was doing a hundred things at once.
So we’ve been through referral and Craigslist actually is where we found a couple of our clients right now. We haven’t started the cold call/cold email one yet and so it would be interesting to see how it turns out.
Nathan: Okay. Awesome. Yeah, look, I’m very confident, like I think it’s a solid plan and it’s these old-school sales before the internet. That’s how people were doing it, even without cold email and they were just cold calling and it does work. So I think that’s a solid plan.
You mentioned that you did do some referral stuff. You know, the first thing that came to mind for me was lowest hanging fruit would just be to ask your current customers, if there would be anyone that would be willing to refer you and you pay a referral commission once you land that client, but it sounds like you’ve already done that.
Derric: Yeah. We started a little thing like that. We’ve given incentive. I think I’m gonna up the incentive a bit and make it a little bit more like we take $100 off the bill every month for the first six months or the first nine months or something like that so it can be a bigger incentive, because locking in one long-term customer, they have a very high lifetime value. So I think it’s okay to give a bigger discount upfront for it. So we just need to get that in our client’s eyes, because they’re not necessarily trying to advocate for us on a daily basis yet. You know, the process of what I’m doing, and we only started a few months ago, it takes about six months really to prove our worth. So we’re just now coming into that right now.
So I think once I prove my worth, I’ll revisit with the client, “Hey, I am now making you money. We can see it here, we’re doing great for you. Is there anybody, you know, once I’ve got that proof of concept for them, is there anybody that you think I could help out, anybody else that you know? Any of your vendors or clients or customers, etc.”
Nathan: I think that’s really solid. I like that plan. That makes 100 % sense. So I had another question around…you mentioned that you already have some investors, like how…I’m curious, just for the audience, how many investors do you have, how much equity do they have in your business, and are you open or willing to say how much investment you received and stuff because that might…I find that interesting.
Derric: Yeah. I don’t see any reason to keep it a secret. My first investor is a very successful guy on his own. He started a company called All Inbox which focuses on getting emails into the inbox and not in the spam folder. So he sent out like 4 billion emails last year and the company did very well. And he built that from the ground up. I met him through poker. He is one of the people that I made a lot of money off playing poker against. And he’s allowed to throw the money away because he’s been so successful. So it kind of worked out well. And he’s in email marketing and I am in digital marketing, so I thought that there was some alignment there.
So I came to his house, he had us over for dinner, his wife and him, and we talked about it. And after a few drinks, I’m like, “I’d like to offer 5% of my company for $50,000. We’re gonna use the money to kind of extend our runway a little bit, probably make our first hire, buy some office equipment and probably, like, video, educational equipment, stuff like that.” And he said that he’d do it for 15% and he wouldn’t budge on it and I said, “For 15%, I’m gonna make you work for me like…” He’s gonna be an advisor as well. So we agreed at 15% for 50,000, and he has to do a lot of additional work outside of our traditional advisory role and he’ll help me with some of the hiring process and structuring the business and ideas with clients and stuff like that.
So he’s also very good at sales. So I’m gonna be here leaning on him quite a lot to get that value from him, and I think that it was a very fair deal, especially fair for him, but giving away 15% of my business to make sure that it’s successful and getting him as a strategic partner is way more important, even though five years down the road, I’m gonna wish I had 5% equity more or something like that maybe. It’s better to have 5% of something than 100% of nothing, and I really feel like it’s a good partnership to start our business and validate that we have something going on and that somebody believes in us and it makes it easier to pitch to clients. It makes us have to worry less about money today and more about long-term strategy. And so it’s really good that I was able to find him.
Nathan: That’s fantastic. And I’m also curious. Did you have any other investors? Like thank you so much for your transparency and being open and sharing that because I find this fascinating.
Derric: Well, I have a couple of potential investors that would be more on the silent side. So if we ever did something like…we talked a little bit about kind of opening a storefront location. If I ever wanted to like actually buy a storefront location, that might be a time where I seek that kind of investment. But I knew that I wanted my first investor is also the advisor and play crucial roles in the business to help me because I don’t actually have the experience. I didn’t leave a digital marketing firm to start this business. I have very little actual experience in this industry even though I think that I’m very capable of kind of the job functions, the experience is also very helpful so I’m pulling from this.
I had another guy who is a big time media buyer, a very successful guy, and he’s helped a lot of businesses and he runs a few different businesses in media buying, pay-per-click advertising and stuff like that. And when I talked to him about the business, he kind of said that his specialty is growth stage investing and taking you from 10 employees to 100 employees and how to do that the right way. So to me, we said, “Okay, that sounds great. I’m going to call you when I’m ready for that.” So I’ve got him on the line as a possible growth stage investor and advisor when we hit that spot, but he didn’t quite fit the bill for the initial seed investment.
Nathan: This is really interesting. But I think, yeah, you are on the money like especially, when you want to learn, it can be difficult to know where to go unless you have people that have done it before. So that’s a really smart thing to do. That’s something that I do…ridiculously, that’s how I brought Matthew on here and got him to speak to you and stuff like that, and he’s very generous with his time and he’s helped me a lot. So that’s awesome.
I had a few other questions and that was when you said around, you know, how you’re going to acquire leads, I think something definitely to keep in mind is you said that a lifetime value of a customer can be very…like it can be very, I don’t know if you could call it lucrative but it can be quite beneficial because in your business, you can make a lot of money from the lifetime value of a customer. So my question to you is also because you haven’t, you know, this cold calling stuff, it can take time. Another way to get to your 500 leads or to shortcut that, and this might be another thing you might want to put on your pyramid in terms of customer acquisition, is if you know the value that you’re prepared to pay for a customer because you know the lifetime value and you know the churn rate, you could look at paid customer acquisition as well. Is that in your plan? You could do Facebook ads, you can do all sorts of things. So you could use your own generator…your own skills for what you do for your clients. I’m curious, is that in the plan as well?
Derric: Yeah, a little bit. So it is definitely…the plan, we will put some dollars towards advertising and we know that there will be a cost of acquiring the customer, but we wanna build that cost into kind of the educational model so that we can tie it to the value of having an educational platform, so that I can say, you know, I spent four hours making a PowerPoint presentation, one hour preparing it, and one hour talking to people. That was six hours of my time, we’ll value it as such, and how many leads does that generate, how valuable was it, is this the way to go, is it not? And so I’ll also put advertising dollars into advertise the educational side of it and hope that that churns the leads.
I haven’t thought about kind of using, let’s say, a third-party service for lead acquisition. I get into a zone, and I mean, a lot of people are already very comfortable with doing something like that and or having like aggressive sales teams that have interesting reward incentives to get new clients and nail new leads and stuff. I want it to be genuine and from us and just helpful, because small business owners get pandered to on a continuous basis. All of my clients tell me that they’ve got an email about SEO today, they got a cold call from even just like a machine trying to get leads or something, like, you know, not some of the worst ways. And I think that if you push it a little too hard, it could degradate the value of your business or the…it’s just a little bit rude to be very pushy and it becomes spam at some point. So I wanna be able to do it in the most helpful way and the least intrusive way to the business owner.
Nathan: Okay. That makes 100% sense, but when you say intrusive like with the cold calls, man, there would be follow ups you know.
Derric: Yeah. And that’s why I know. I get a little handsy when I talk about them and I think it’s hard. The first thing is overcoming my…I admit that I have a fear of cold calling, like I don’t wanna pick up the phone and call someone where I just know I’m gonna get hung up on like a lot in the first couple of minutes. That’s a little bit spamming. I do have a little bit of a fear of that and it will be…so I cringe a little bit at thinking about doing that but I think that it’s just…it works. It actually does work and for every 10 people that I piss off just a little bit, if I can get a little bit of help to somebody that really needs it, then it does make it worth it on the grand scale of things.
Nathan: Yeah, man, 100%. And I think now that Matthew has helped you break it down, like you need 500 leads, that makes it almost like…like to me, that sounds more exciting than, “Oh, I have to pick up the phone today,” and you can really break it down. So if you want to achieve your goals, you have to be prepared to step outside your comfort zone and I know you will.
Derric: Yeah. I’ll do it when I have to.
Nathan: Awesome. Yeah, look, I think we definitely have to do a follow-up interview/talk maybe 12 months from now. That would be really interesting to see where you’re at. But that’s it from me on the questions. Now, we have to work towards wrapping up.
So first of all, do you have any questions for me? How can I help you? Do you think there’s any maybe top two questions and then we’ll wrap there?
Derric: Yeah. I do have a couple of quick questions. It might be a little bit off-topic perhaps. You’ve been growing business in the list. How do you go about segmenting your list and finding value from it, especially on the side of maybe using a partner, a partnership with another company that’s related to market that to your list? How do you go about finding that kind of relationship and using this list to the maximum?
Nathan: Yeah. That’s a really good question. So probably in the past six months, I’ve been quite focused on building an email list and I’ve taken that… The Foundr email database which has…you know, six months ago, we had like 3000 people on our email database, and now, we’re almost at 20,000, and that’s something that’s been a big focus of mine and I believe we can get it close to 100,000 by the end of this year. And how I’m doing that is from many different ways but the reason I…this actually ties them all, because the reason I asked you about the cold calling piece and other forms of customer acquisition is because when I do any sort of marketing, like I believe marketing is just like throwing things at the wall and seeing what sticks, and then when you find something that does stick, you hit that channel hard.
So for me, I found that Instagram is an absolutely brilliant form of customer acquisition to the point that I’m generating thousands of leads every week, so thousands of opt-ins. People are signing up to our email list and these are targeted people that are interested in business, that are interested in starting a business, because I’m giving them a lead magnet which, in order for me to get their email address and take them through our process, they have to sign up to our mailing list.
So I think the first things first for me, this is like how I do things, is I look for a channel and then I hit that channel hard. So we’re getting most of our leads right now and people that are…they’re joining the Foundr email list through Instagram but then also from our website, then also from the magazine within the app. And then, yeah, pretty much, that’s about it. A little bit from the podcast but not too much. So it’s all about having multiple channels to build because it’s like if you wanna grow a website, you can’t just have one source of traffic. You need to have multiple sources and you need to use the technology to do that on automation. So anybody that comes to our website, there’s many calls to action to sign up to our email list and stuff like that.
In terms of the technique or elements for managing and segmenting a list, it comes down to just whatever email marketing service provider you choose to use. So when I first started Foundr two years ago, I was just using MailChimp and for at least a good first year, I wasn’t even interested in building an email database. I didn’t even know the power of having a big email database. So I was just using MailChimp and that was kind of churning and I was just segmenting that list by okay, we have a certain amount of people that opt-in to share their email with us on the magazine side, I would just put all those people into MailChimp and then name in that list, “magazine email subscribers.” And then I’ve kind of got more savvy around it and now I’ve got like 10 or 15 different segments where it depends on the lead magnet that I’m giving away.
So like on Instagram, we give away this guide which is “The Definitive Guide on How to Start a Business.” So I’ve segmented that so anybody that signs up for Instagram that want that guide, I know that they’re interested in starting a business. Then we have other guides and other lead magnets that we give away. And I segment whatever guide that we give away, I put them into that bucket. But now, we’ve actually moved to Infusionsoft and we’re gonna get more savvy around managing our contacts and managing the people in our email database and we’ll be using tags with Infusionsoft. So yeah, does that answer your question?
Derric: Yeah, definitely. I like segmenting by the lead magnet and I’m gonna learn Infusionsoft myself pretty soon here because that’s definitely important to us as well.
Nathan: Yeah. I think a really good way to get people to sign up for your email list is to give away value. I’m very, very big on giving away your best stuff for free to build that trust and provide value. So lead magnets are a great way to do that and if you know your customers, like Matthew said, better than they know themselves, you know their pain, frustrations, and problems, if you can give like a little guide or a quick wins kind of thing, people love the quick wins stuff. So if you can give something away that people find when they’re just browsing your website or they found some form of your collateral or if your channels or your podcast or whatever, you wanna get people excited. You want them to be like, “Oh, okay. I just want this.” And then you extend that relationship over email. So once you give them that lead magnet, you take them through a series of emails which I’m sure you would’ve…this is how I met you, through our Foundr email list and you’ve been part of that community and you are seeing the sequence of emails that I take people through.
So you want to have a sequence of emails and then with Infusionsoft, you can use all sorts of…it’s really powerful because it allows you to work out what people want through that sequence and if people do certain things, there will be certain triggers and actions that take them down another sequence. So yeah, that’s what I’m doing and that’s I’m doing with Foundr. So mindful that this is dragging on so please, one more question and we’ll wrap there but thank you so much for your time.
Derric: Yeah. Thank you for the answer. So I guess the other one that I was thinking about was content. You create a lot of content on a monthly basis. What kind of quality assurance process do you have to make sure that you’re writing or creating something and not something, because we’ve all been around the internet, that isn’t just repeating the same things, top 10 things that we heard on blog or something like that?
Nathan: Great question. So I think in our business, in the entrepreneurship kind of online marketing kind of business world, I’ve found that the best kind of content is actionable strategic tactical based content. So that is content where people can take something away. It will add value to their life if they absorb that piece of content. So that’s the kind of content we create in-depth. This whole interview in itself, there is so much nully bombs in there, it’s crazy man. So I’m always…whatever I do in terms of content, I always look at it from a value perspective. Yes, the least things are great and they work really well but that’s just not really. We might have a few least based articles here and there but I am always looking to draw on the founder experience, what I’m finding is working because I’m on the journey with you guys here too and then also yeah, it just comes back to the value. It’s just the simple self-task like would I find value in this.
And then the next piece of that puzzle is finding…because we do…you’re right, we do produce a lot of content. We’ve got at least one podcast episode a week, we’ve got a magazine issue a month and that’s got at least three to four interviews and then we’ve got all sorts of other content in the magazine, then we’ve also got the podcast and the blog content. We have at least 10 pieces of blog content that goes out every month as well and we’ve got all sorts of social content and stuff like that. So I guess I try and…I don’t do hardly any writing to be honest, Derric. I utilize just brilliant writers. What I do it at Foundr wouldn’t be possible if it wasn’t for our amazing team. It’s simple just trial and error going for a lot of different writers and doing test projects like what Matthew said from the hiring standpoint. I did that the same thing. We had so many people that said no, that they wanna just contribute to the magazine or the blog or whatever, the question I asked is okay, let me see your writing and like what other previous published work do you have and then if it is good, then let’s do a test-based project. Here is kind of stuff we’re looking for. Here is examples. Off you go.
And then 9 times out of 10, people weren’t even, to be honest, write back and say, “Okay, I’m gonna do this,” or they say they’re gonna do this and they don’t even get back to me because the kind of quality of content that we’re looking for does take a considerable amount of time to create. So the list-based articles are easy to create. The kind of articles that we want to create generally, they take a while and people just aren’t prepared to take that time. So I actually spend a lot of money on content as well so that’s another thing that allows us to be outcome, a content house and I spend a lot of time in this space reading consuming content from other content providers working out what people I guess are reading and what’s working. And then also another thing is, it comes back to what Matthew said, knowing your customers better than they know themselves. I’m constantly speaking to our audience and finding out what their struggle and pain points and also, I’m getting a lot of questions, So a lot of those questions now that I get, I see commonalities and then I create content around those problems and frustrations.
A key one would be, for example, one thing that comes up a lot is people say, “Nathan, I want you to be my mentor or how do I find a mentor.” So we’ve got a guide…we’re gonna create a whole epic guide on how to find a mentor or how do I get capital for my business or how do I get more traffic for my website? How do I get more leads? How are you getting 1000 plus leads on Instagram? I’ve created in-depth guides in regards to all of these things or in-depth articles or pieces of content. So yeah, does that answer your question?
Derric: Absolutely, yeah. And you gave me a couple of secret tad bits there especially, and I’ve heard it before but it’s always good to hear again, to use the questions that your customers are asking or that you’re hearing over and over. When you hear that a few times, you realize that there is a demand for that problem being solved and if I can solve it for them myself or if I know the answer so that I can solve it for them, then I can create the content on that pretty easily because I’ve already done it and it’s fresh in my mind and then I can solve that problem for other people and hopefully use that as a lead magnet.
Nathan: Yeah. Whether it’s a lead magnet or a piece of content to build trust or whatever, yeah. And also when you get that question again in the future, you can direct people to your blog post, whether you had a cold email or whatever, you can say, “Oh, I read this awesome book…I wrote this awesome blog post on this exact question.” So it keeps bringing people back to your content.
Derric: Yeah. You also told me hire brilliant writers and I think because we are…our next hire is gonna be a jack of all trades kind of person but writing is gonna be very important. It’s gonna be important to see someone write a blog post and be able to know the difference between writing for a blog as opposed to white paper as opposed to a magazine, etc. And so I think we’ll make sure we spend a lot of time vetting people that can do good writing. We’ll probably even build that into the hiring funnel so that they don’t even make it to our door unless they’ve written something about themselves. I heard someone once say, “Don’t even look at the resume. Have them write a blog post outlining the resume,” instead of letting it be the old-fashioned cover letter resume kind of thing.
Nathan: I really like that one. But yeah, look, I think we should wrap there but thank you. This has been an awesome experience, Derric.
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