202: How Eric Siu Bought Single Grain for $2 and Turned it into a Marketing Powerhouse

Nathan: All right. So the first question I ask everyone is, how did you get your job?

Eric: Yeah, I love this question. Every time I hear you ask this, I’m like, “Such a good question.” So the current job I have right now, I guess the main job, is Single Grain.

And, actually, this is a marketing agency, and I actually got it because I was tapped to come help save the company. I was actually somewhere before that. So that’s basically how I got it, and I came in as a 10% partner in the company. I eventually took over the…I own the whole thing now. And that’s the whole, like, kind of ordeal on its own, which I’m sure we’ll jump into in a little bit.

But that’s how I got the current job.

Nathan: Got you. Awesome. And you seem to be pretty connected, Eric. Like, one thing I’ve, even before we met, it’s like, I used to listen to your podcast, and you seem to know a lot of people. Like, I know you’re really close with Neil, and you guys do that podcast together, and I know that’s killing it. So I’m just curious, like, before, you know, working at Treehouse, before taking on Single Grain, have you always been in the startup scene?

Like, how did you first get exposed to startups? Did you work in a corporate role or anything before then? I’m really curious, man. Are you based in L.A. or San Fran?

Eric: Yeah. So I’ve always been in L.A. I’m actually looking at the building, I’m in downtown L.A., I’m looking at the building that I first started working in after college, this is Wells Fargo building. But long story short, you know, I started learning digital marketing, and then I changed, like, five jobs the first year, just because I was trying to jump to the next opportunity each time.

I know, people are like focused. But, to me, it’s like, for you to climb the ladder, climb it quickly. So I did work in corporate a little bit. And then, eventually, I got fired from…I was working at break.com, and I got fired because they think that I was trying to start a company. So, eventually, that led to the opportunity with Treehouse, and, you know, there’s kind of a lot of things that led up to that.

But the opportunity at Treehouse came up, and they ended up taking a chance on me to lead their marketing team when I was like 25 years old. And that was kind of my first foray into the world of startups and online education.

Nathan: Got you. So what happened next when you joined Treehouse?

Eric: Yeah, dude. It was tough, because, you know, it was a great product, it was a great team but the revenues were stagnant. I had no idea. I thought it was a company that was just crashing. The revenues were actually flat for the last two years. And when I came in, I found out that we only had about five to six months of cash left in the bank. And I was like, “Oh, damn, like, we’re going to go down.”

And, you know, it’s me that’s kind of responsible for revenue growth because it’s a subscription-based product. So long story short, I came in, I was like, “Everything’s a mess. I’m going to shut down the advertising.” And a month into it, you know, the CEO pulls me aside, and he’s like, “Eric, 48 people, their families, they’re riding on your shoulders right now, and if you can’t hit numbers in the next month, we’re going to have to let you go.”

And I was like, “Well, shit. Like, you know, I’m 25 years old and, like, you know, you want me to make shit into sugar.” Am I allowed to cuss on this podcast?

Nathan: Yeah, yeah. Of course, man. It’s fine, bro.

Eric: Okay, cool. So here’s what happened. I mean, you know, he was like, “Yeah, we’re going to hit numbers.” And the thing is we didn’t hit numbers for the last two years before that, and I was like, “How am I supposed to hit numbers?” So, basically, I looked at our YouTube ads account, and I saw that there are some semblance of traction. I took all our budget, I pushed all the chips in the middle, and I said, “We’re going to go all in on YouTube advertising.”

And then, lo and behold, the numbers blew up, you know. Everything just started clicking. You know, I fired the PR agency we were working with before, hired someone that was paid for performance. He got us on a couple of things, and things start to take off from there.

Nathan: Yeah. And what…so I’m curious with Treehouse, were they bootstrapped, or did they have venture funding?

Eric: Yeah. I’ll share the numbers with you, because Ryan is a very transparent guy, and maybe he’ll come reprimand me later. But, so. Yeah, Treehouse did raise money in the past, from people like Kevin Rose, Mark Suster, really popular investors, and then also Greylock Capital, which, you know, Reid Hoffman’s, or was…I think he’s still involved, and Josh Elman, who is involved with growing Twitter.

So a lot of, like, kind of marquee investors, right. Also Chamath Palihapitiya from Social Capital. So A-list, right? So they raised the series A for, I think, it was about, you know, $1 million or $1.5 million. It’s not a lot of money. At the time, it was good, it was about 2011 or so or 2010. And our revenues were about, I think, we’re hitting about $2.5 million a year.

But, again, we’re burning cash because we’re hiring like crazy. So that’s kind of where we were at.

Nathan: Yeah, I see. And, you know, what was CAC to LTV ratio? Like, why YouTube, why not Facebook, at the time? Like, Facebook was much more easier back then. Why did you choose that channel? YouTube, as well, I know, SaaS products, like what sort of videos?

Eric: Yeah. So great question. And I actually think this applies to you because of the education stuff that you’re doing right now. So we’re looking for a three to one kind of LTV to CAC ratio. And, at the time, I mean, you know, the SaaS stuff that you’re reading around the net now, like, SaaStr and things like that, wasn’t as prominent but that was kind of, you know, we’re aiming for that number.

And so what we did, why we chose YouTube was because Facebook wasn’t nearly as robust as it is now. The types of ad formats were not that good. The targeting was way too broad. You just didn’t have the power that it has now. YouTube made a lot of sense because we were teaching people through video, right. If you’re going to search on how to code, you’re probably going to go to YouTube and search for, you know, “How to learn web design or HTML tutorial,” and things like that.

And so we started bidding on those keywords. And the video that we used was a very inspirational video, almost think of, like, Apple video, where the CEO is in the front and then you have a white background. And then, you know, Ryan is talking about how coding is like, you know, the new kind of learning to just read and write. And, you know, there are some case studies, like one guy didn’t know how to code, and then now, he’s paying off his mortgage, right, so it’s very, like, inspirational.

And we just started cranking on a bunch of signups that way. And, you know, the price point wasn’t that bad, and so things started to really blow up there.

Nathan: Yeah, wow. And were you guys, like, aiming to make that money back in how long? Like, because you wouldn’t acquire a customer out of profit, you would essentially break even or lose upfront with your YouTube, or you’re profitable on the front end.

Eric: Yeah. So we’re definitely not profitable on the front end. And even at the time, so 2012, right, nobody was in the SaaS world. Nobody was really talking about payback period, which is, you know, uber important. It’s talked about way more now. But, you know, we would be happy, I mean, if we can get, you know, the payback within, let’s say, like three- to four-month period. Then we’d be profitable on it, right.

The challenge is, and I’m sure it’s, you know, way different for them now, you know, it’s been, what, six years, the challenge is the price point. To me, in my opinion now, if I was to go back, I would say the price point is too low and you know, it’s time to figure out how we can repackage the thing. So pricing is always an interesting lever to pull.

Nathan: So you talked about the payback period, can you just delve a little deeper on that? Because I think that’s really important that I’ve never talked about, anyone’s ever talked about this, is when you’re using Facebook ads or YouTube ads or Twitter ads, or you’re using any kind of, I guess, Facebook direct response kind of play, where you’re spending, let’s say you spend $1,000 a day, and you aim, like a lot of tech companies, especially SaaS companies, with physical products, if you have a physical product, you aim to be profitable on the front end.

But with technology products, especially SaaS products, most people usually spend, you know, $1,000, and if they break even, they’re super happy because they know that they could make it all in the back end, in the long run. But some people wait over, like, a 12-month, 18-month, 24-month period, which is why they raise so much capital.

But when they do this, they scale, like they want to bring on as many users until there’s nothing left. So we could be talking thousands, tens of thousands users a day.

Eric: Yeah, 100%. So when it comes to payback period, I mean, what I talk about with Neil on the Marketing School podcast is we have this one episode where we talked about the difference between a seven-figure business versus eight- or nine-figure business. So you just mentioned, most seven-figure businesses, they’re trying to make the money back on the front end, right.

But, you know, you and I both know ClickFunnels, which is a fantastic tool, they raised no money at all, and they are just constantly growing through paid advertising and also other channels too. But look at it this way, they are bootstrapped, they came onto the scene, I believe, in 2013 or so, maybe 2014. Now, you know, last year, they did about $60 million ARR. They’re on their way now to $100 million ARR.

And the reason they’re able to do that is because they have their numbers locked down. They are willing to perhaps even break even or lose money on the front end, right. So let’s say, you know, when they first acquired email or even like a pre-trial in the beginning, they’re going to lose money. But they know that their funnel in the backend is so locked down that they can upsell people on, you know, their mastermind or other bundles, things like that that will drag that, you know, the worth of an email or a customer way higher, right.

As long as you have your numbers locked down, you can afford to do that. So the payback period is important, because, basically, well, it’s the length of time required for an investment to recover the initial outlet, right, in terms of profits or savings, right. That’s kind of the textbook definition. But what you want to do is, like, let’s say it takes you 12 months, let’s say you paid $1,200 to acquire a customer, well, you know, if you’re getting paid 100 bucks a month from that customer, it’s going to take you 12 months, right.

But if you can somehow, you know, increase that price to 300 bucks a month, it’s going to take you 4 months. Well, what are you going to do with the other cash? You can take it back, reinvest it, and you’re going to grow a lot faster. So the final thing I’ll say around this is Tomasz Tunguz, so that’s T-O-M, you just type T-O-M T-U-N-G-U-Z, Tom Tunguz, type in “payback period,” and you’re going to find this crazy…he’s like a venture capitalist.

Click on the blog post, you’re going to see the economics of why payback period is so important and why a lot of VCs or private equity people, or SaaS people in general, look at that.

Nathan: I see. And so, at Treehouse, you’re, like, what? Like, you blew up the company to, at least, you saved the company, like, did you double revenue, and you revenue triple? Like, what was saving it?

Eric: So let’s put it this way. I mean, you know, we had five months of cash left in the bank. So saving it was basically, you know, originally, I think we’re getting maybe like 500 new subscribers per month. By the time I left, we’re getting about, I think, 3,500 or 4,000 new customers a month. So the machine was really cranky. And from then, we raised, you know…I left by that time, but I left in, like, eight months coming to this company.

So I didn’t even get my first year, you know, one-year cliff of investing. But, you know, they are now…they went from $2.5 million, and they’re now doing about $25 million ARR, annual recurring revenue, a year. So they’re fantastic now, and they’re just building on top of everything that they’re doing.

Nathan: Yeah. Back then, were they using that gamification? I thought that was really smart.

Eric: Yeah. You know, when they first started, they did use gamification, they have like a little progress bar, almost like a waiting list to get people to join and drum up the excitement. That worked well, and then they have a lot of, when I was there, we started to add badges, and the badges started to get people more engaged. But I left, basically, when the badges were first rolled out.

Nathan: Yeah, that stuff is genius. Awesome. So what happened next, man? Like, why did you decide to move on? And, yeah, what happened next?

Eric: Yeah. So, basically, what happened was Neil Patel, my podcast co-host, reached out to me at the time, and the story is pretty public too. His cousin was writing in this company called Single Grain, it was this SEO agency at the time, and I really had no interest in going back into the agency world.

I’ve kind of been there once, working for a company. But I thought the challenge of saving a stagnant company was really interesting, because I think you and I both, you know, played a lot of games growing up, and I just see every challenge as like a game, right. It’s just fun to play. So the challenge of saving a stagnant company, but, you know, Treehouse, great product, great people, we just needed some marketing power, that’s one thing, right but going to a company that I thought had a lot of problems, that I thought was house of cards, that I thought was going to be a big trouble, that was a kind of different challenge that I thought had a lot of opportunity, right, because they’re offering me, like, salary and, you know, percent equity in the company.

I was like, “Okay, fine, I’ll do it,” because I have nothing to lose, right. So it was more of a challenge to myself. And then, basically, you know, came into the company, there’s four other partners. It was Neil, and then Sujan, and then two other guys, and then, from there, yeah, it was a massive challenge. I’ll tell you, I’ll probably never do it again, like a turnaround, or even going to a stagnant company.

I’ll just probably rather, I don’t know, start my own thing from scratch.

Nathan: So what was wrong? Like, can you tell me, you had customers, like, where was the business at? Can you break it all down? Because I think this would be really interesting for our audience.

Eric: Yeah, absolutely. So we, at the time, I mean, I believe, we’re doing about $1.1 million a year, and the company is completely based on SEO. So everything was just, you know, based on link building for the clients, right. So, you know, we had the Salesforces of the world, had some other clients like Warby Parker, and the problem is the Google update happened, the Penguin update happened.

And this is right before I joined, so I was well aware of what was going on, and I was like, “Man, Single Grain is going to get decimated.” And that’s exactly what happened, because the work that the company was doing was no longer having an effect. So customers just started churning left and right, and that’s when, you know, we had to basically make a change. And that’s when I bought it.

Nathan: Got you. So did the Single Grain, at the time, have any, like, 12-month contracts with any of these big providers or big companies? Like, did you have any booked recurring revenue at all or anything?

Eric: Oh, dude, okay. So let’s put it this way. I think, you know, we had almost no process coming into it. I was pretty shocked. Everything was, you know, month to month, there were no term agreements. So coming into it, it’s like, “Man, we have to have, you know, a lot of processes to build as well.”

So, yeah, clients could just say, “Okay, we’re not going to pay you anymore,” or they can just disappear, and that’s exactly what happened. So things just started cratering.

Nathan: Got you. And how big was the team? Like, how many people? Was there a remote company or have a local base presence?

Eric: Yeah, dude. The company was based in San Francisco, and it’s a pretty nice area. It’s on Market Street. We had, in the office, I think in the office, maybe there are 14 people or so, and then there’s a lot of remoters as well. And, yeah, I mean, that was back when the rents were kind of reasonable in San Francisco.

Now, it’s just insane.

Nathan: Yeah, Jeez. That’s a decent size head count compared to the revenue. Yeah, in the agency…well, sorry to interrupt, but this is a good question I’ve never asked anyone. Like, one thing I often think about is, you know, like Facebook and Google, they say that per employee is worth, I think it was between $1 million and $2 million.

And in the agency world, a good kind of…what is a good kind of metric? I don’t even know what the term is. Is there a term for this what I’m talking about? You know what I’m talking about, right?

Eric: Yeah. So it’s basically, you know, it’s revenue per employee. Ideally, you know, you’d be above 200k or so. That’s in kind of my perspective. Two to three hundred, you’re good, and then, like software companies, you know, it’s going to be way higher.

Nathan: Yes, got you.

Eric: Yeah.

Nathan: Okay. So Neil asked you to come in and basically turn this company around, because this company was struggling.

Eric: Yeah, exactly what happened. So here’s the thing, like, being a marketing leader of a company is completely different from, you know, going into operation and just trying to set a bunch of things up at the same time, right. So, basically, when I came in, everything was on fire. I had to start laying some people off because their roles were no longer relevant. At the same time, you know, it was like, “Okay, what do we switch into? Because SEO is no longer working, what can we do?”

Well, the next logical step is content marketing, right. And what happened was, you know, I didn’t know how to, you know, I was recommended to hire someone. I hired a head of content marketing, and this person was actually really toxic and caused, you know, four or more clients to leave and would basically yell at our client sometimes, two employees quit, and then just the morale was really low.

And then, ultimately, you know, I’ve got to blame myself because… and I think most people need to realize that, you know, if you’re leading a company, at the end of the day, it doesn’t matter if you hired someone bad, you can point your fingers at them, but it’s on you as the leader because your process was broken. So, you know, I wasn’t really about process in the past, but now it’s all just about building the right processes. So that can help people succeed.

And, you know, hiring the wrong person really costs us. That costs us about 800 grand in revenue.

Nathan: Yeah, wow. So why did you hire this person, and how long, like if you knew what you knew now, how long would have you let what was going on go on for like? Because I think, from my personal experience, sometimes, when it’s not the right fit for the company and also that person, you just kind of let it linger.

I don’t know why, but you just do.

Eric: Yeah, yeah. So I think this is from good to great, but it’s important to have the right person in the right seat. So in this case, we had the wrong person in the right seat. So, you know, she had the skills, but she was extremely toxic, right. So I let it linger because I think, sometimes, you always think they’re going to turn around.

Like, you make this big decision, you’re going to hire this person, you’re paying them a six-figure salary, and this person was highly recommended. It’s almost like you just don’t want to accept, like, the fact, right. So, you know, knowing what I know now, the way we run the business, there’s this book called Traction, it’s the entrepreneur’s operating system. I’m sure you’ve heard of it too.

Nathan: Yeah.

Eric: Because, now an EO member. So everyone is based on their track, based on certain scores, KPIs. Everything is just tied to a specific goal. So that’s now irrefutable. You cannot argue whether you hit the goal or not. And then we have this tool called 15Five, that’s the number 1, 5, and then spell the word, Five, we can just check in with everyone every single week just to see how they’re going, you know.

Between having 15Five, the one-on-ones, running, you know, these traction meetings, not just with the management team but with each team as well, that’s helped make us into a well-oiled machine, and everyone’s, you know, much happier now.

Nathan: Okay, now, can you go for the depths of, like…because I really want to go deeper on, you know, you said everything’s running like a well-oiled machine now. So you brought on this head of content marketing, didn’t work out, what happened next?

Like, you still obviously had some clients, and did you just do a full pivot? So your existing clients, you said, “Look, SEO,” like all the, you know, maybe gray hat tactics or whatever, you didn’t even say gray hat, but whatever tactics you were using, “they’re not working now.We need to move towards a focus of playing the long game, producing really, really great content.”

Eric: Yup. So that’s exactly what we told them. We said, “This is where things are going. This is how we’re going to build you for the long term.” So that was the pitch. But also, at the same time, like, okay, think of it this way, we’re trying to transition it to a new service. All of our leads, and Neil will speak to this, all of our leads were actually coming from Neil. So the entire business was based on Neil.

And when I first joined, our site was getting maybe 4,000 visits a month with just nothing. So we had no inbound strategy, all our leads were coming from one person, and then, at the same time, we’re pivoting services and had to lay people off. And, you know, we had, like, no process, like, no financial process, everything was just crazy, right. Then, at the same time, one of the partners was trying to do this other business within the business. So everything is just, like, it’s a shit show, right.

And then we have this person just, you know, flinging things around too. So, yeah, I mean, in terms of what I had to do at the time, honestly, I have to say, the best answer I have for you is I didn’t know what the hell I was doing, and I think a lot of times, when it comes to business or just when you’re starting out, honestly, I think it’s okay to say like, you don’t know what you’re doing. You don’t know what you don’t know, but, eventually, like, you’ll figure it out if you keep going.

And something Neil and I talk about all the time, we’ve had a couple episodes, like “How Billionaires Think,” and then, also, you know, we talk about “How Successful “entrepreneurs” Think.” And, honestly, it just comes down to being able to take…the more shit you can take, the more successful, I think, you’re going to be in the long run, because it’s just a lot of shit that’s running and you just endure it.

Nathan: So how did you get the company back on track?

Eric: Dude, I almost…okay. So the content marketing thing at the time, well, I basically almost lost the business. The first year when I took over the business…well, this is going a year, so let’s rewind a second, almost lost the business because, you know, we were basically about to not make payroll. I had to actually take out a personal loan.

So I’m proud to say we’ve never missed a payroll, just to make sure, you know, people get what they need and like, “Oh, shit, man,” you know, when people talk about missing payroll like, “This is how it is.” I think I actually took out two loans. And then, yeah, it’s really bad, and I just didn’t know how I was going to make it happen. I think I was just kind of coasting like a zombie. And then, you know, we decided, “Okay, this content marketing thing is not going to work.”

And, well, that’s when the five of us were like, “Hey, like, should we shut this thing down?” And, yeah, I guess that’s where we landed, and, you know, you can decide where you want to take this next.

Nathan: So, yeah, what happened next?

Eric: Yeah. Okay, so here’s what happened. Imagine this, right, you have Neil, you have, you know, three other power players in the business, and then you have myself. And then the four of them are like…you know, Sujan and I, we’re living in Santa Monica at the time, we walk over, and then we go eat breakfast, and then Sujan’s like, “Hey, like, you know, I don’t think I want to do this anymore.”

He’s like, you know, “It’s either I can hop out or we could do this together.” I was like, “Hey, like, you know, why don’t I give this a shot on my own?” And he was more than happy. Like, he quickly said, “Okay,” right? And, you know, so here’s what happened. Like, the other four partners basically thought the company was worth nothing. One other guy want to just go to these other companies, like these publishing companies.

Sujan wanted out. Neil and this other guy just totally didn’t care anymore. So the deal I negotiated was I said, “Hey, guys, I will buy the company. I’ll take on the load. I’ll put it on my shoulders. I’ll see what I can do with it.” My deal was this, “Neil, I will offer you $1 for 10% of your shares in the company. And then the other guy, I’ll offer you $1 for 10% of your shares.” Okay, so $2.

And then the rest, for the other two, Sujan and the other guy, I said, “Hey, I will pay you guys through the profits of the company,” so it’s a buyout, but the contingency is, if the company fails, I will owe nothing. So we signed an agreement, got it done, and, you know, it was off to the races. But I think the challenge was the company was negative when I took it over.

Nathan: Got you. And how long did it take for you to turn it around and where is it at now? Like, what did you do next? So you took it over, what did you do? Like, what happened next? How did you repositioned it, get clients, build a marketing engine, systems, processes, get great results, all that kind of stuff?

Eric: Yeah. The thing I didn’t mention, and I guess there are so many nuances here, I told you we were getting 4,000 visits a month. So it’s like a nothingburger. So, basically, I cut up our leads from Neil when I took over the company, right. So I basically cut up our lead source. But what was good was I had already started to do the Growth Everywhere podcast. So, as the company was failing, as things were going up in flames, I was doing the Growth Everywhere podcast, so spending six hours a week on it, you know.

You know, how, when you started this podcast, you’re probably doing all the editing, you’re doing the show notes, right, you’re doing all that stuff.

Nathan: Oh, man, I’m guilty. I’ve never really done that stuff.

Eric: Okay. So I was like 10 times worse. I didn’t delegate it. I was like, “I’m going to figure out this podcast thing, whatever.” And then, after one year, so imagine, I was spending six hours a week on it, how many downloads do you think I was getting per day after one year?

Nathan: Man, I got no idea. But I remember you did reach out to me, and I remember thinking, I thought you get more, maybe a couple hundred a day or something?

Eric: No, no, no. I was getting nine downloads a day, man, nine downloads a day.

Nathan: After a year?

Eric: After a year. But here’s the thing, you just keep going, right. And then, now, the thing gets, you know, anywhere from 70,000 to 80,000, which is fine, but that led to the other podcast with Neil, which gets, you know, up to 600,000 downloads. So point being, just got to keep going, right. That’s just another thing. So here’s what happened. So I was like, “Okay, this Single Grain thing, like, you know, I’ve been slugging away at it.

This thing’s not working. I want to kind of throw in the towel,” right. So, basically, I got the idea. I was like, because we started getting leads, like, we started to build on our organic traffic and started creating content. So we’re actually, at the time, we’re ranking for the keyword, like some marketing agency related keywords, and we started getting leads from that. I was like, “Okay, great, we’ve got something going.”

So what I did from there, I was like, “You know what, I’m going to take the leads that we have, and I’m just going to refer them out.” So, you know, I started working out some referral deals with some other agencies, and I was getting 25% to 30% of the lifetime of the customer. And, you know, keep in mind, this is when the company was negative, so, you know, a lot of people either let go or a lot of people had left already. So you can imagine how my morale is at the time.

So building company, took it over, bought it for $2, had nothing going on, and I was referring the leads out. So, and at the same time, you know, I was trying to start a senior living website with two of my high school friends, which we still have today, that generates leads. But this is what happened for, like, basically the next couple months. I was referring the leads out. And, yeah, sure, you know, the referral income ended up generating about 250, 300 grand a year, great.

But what I found was that the agencies actually were not retaining the customers and they were not able to, you know, upsell the customers either. So, you know, long story short, I was trying to get away from the agency. So the SEO didn’t work, right, when I took over. Content marketing did not work, total disaster, tried to refer out, okay, it’s making money, but, like, you know, well, we can probably do better. So, you know, the kind of competitive spirit in me is like, “Okay, I wonder if we can build this thing up to be a paid advertising agency,” which is what we are today.

So we experimented with one person, and we noticed retention went way up, clients were way up here, we got referrals from them, our traffic, you know, was stacking from, you know, that one podcast, also, organic traffic was stacking as well, and then me speaking at different events. Things were just really starting to roll. And, now, the company, we have 34 people today. You know, we have the…our office is in downtown L.A.

I live in downtown L.A. And, yeah, everything is just starting to compound now, right. I just mentioned the numbers of the podcast. You know, the website, we started with 4,000 visitors a month, and now, you know, for an agency site, it’s not bad, it’s got 80,000 or so, and I think we can get it up to half a million pretty quickly.

Nathan: Yeah, that’s awesome. And when it comes to…you know, you said the office and the team was based in San Fran, did you ask the existing people left to move from San Fran to L.A.?

Eric: Yeah. So here’s one of the massive mistakes I made. Because, at Treehouse, 60% to 70% of us are remote, and that company is still like that today, I was like, “You know what, remote works really well.” And I just made the culture remote. I shut the office down in San Francisco. I was like, “Hey, guys, we’re going to go remote.” So what I learned was I cannot, as a leader, just make these blanket decisions when, A, I have not built a rapport up with these people, and, B, I don’t know all the intricacies, all the relationships these people have with each other, I just blanket statement, like didn’t even check in with other people and said, “We’re going to make it remote.”

Just because my gut feeling was remote would work, and that totally devastated the culture in my mind. And I think when it comes to, like, a services-based business, you know, like this work requires a lot of creativity and collaboration, it’s tough to have a completely remote atmosphere. Like, I know there’s agencies out that that do that, but I just know that, when we’re in the office, you know, we come to the office three days a week, but we just get so much done that way.

And, you know, I found that’s how it was born, and that’s why we have an office again today.

Nathan: So you guys only come into the office right now three days a week.

Eric: Yeah, three days a week, we work remotely two days a week, and people I’ve found out to be just this incredible benefit. So I think we’ll probably continue to do that, just because, you know, some people drive like an hour and a half to work sometimes.

Nathan: Yeah, because of L.A. traffic, right?

Eric: Horrible, man. Never wish it upon anyone.

Nathan: Got you. So one thing I notice with Single Grain as well is you guys actually, you have a lot of, like, well-known clients. Like, when you go to your website, you’re just like…this is just what I think. I’m just like, “Oh, wow,” you know. Like, “This is, you know, this is a legit company. They’ve got a lot of great clients.”

So, you know, we got Uber, Intuit, Mint, DigitalMarketer, Alexa, Random House, Salesforce, Trustpilot, Amazon.com. First of all, how did you get all these clients? Like, is it organic? Do you have people doing Biz Dev? If people right now want, you know, to get net,like, customers with a great, like a big business, or as a customer that you could use to, I guess, build rapport or have a social proof, what was your tactics and strategies there?

Like, where do they all come from?

Eric: Yeah, dude. So you know what’s interesting, you know, we spend a lot on content marketing, and I’ve had people from my management team challenge me, saying, you know, “Eric, we’re spending all this money on content marketing. Like, what’s the ROI, right? What’s the ROI?” And in my head I’m like, “Dude, are you kidding me?” I just want to get…I was like going to explode but, obviously, not going to explode.

So, basically, what I did was, I was like, “Okay, let’s look at all our clients.” I did a breakdown for them, and we looked at every single client, where they came from exactly, right. Podcasts, organic search, you know, relationships I’ve built up with people, or speaking, for example. It was all basically content marketing. Every single client that we have, whether it’s Uber, or Lyft, or Trustpilot, whatever it is exactly, all came from content marketing.

We do no outbound. We just start to build our outbound team right now just to kind of have another layer, but everything we have is inbound, it’s from content marketing. And, you know, the funny thing is we’ve tried to make sales work a couple times. I’m not a natural-born salesperson. I’m just a very good consultative seller. But, you know, what’s always worked for us time and time again, that is just stacking content marketing on top.

And, you know, you, more than anybody else, you know what that is like.

Nathan: Yeah, got you. And when I look at the site now, it seems like you guys have gone, like you do do a lot of PPC, but you do do CRO as well, and you do do content. Like, you do have that. Like, is that a big part of your business, or is it mainly PPC?

Eric: Yeah. So 60% of our revenue comes from paid advertising, the rest is kind of mixed. So what I would say is I find that, you know, the people that are…let’s say you’re trying to start any kind of service business, or let’s say you’re trying to start a SaaS business, or even like an education thing like you’re doing right now. We talked about earlier, before even when we started, like it’s important to focus, right.

So, you know, you think about Apple, when they first started, they started with a computer first, right, and then, now, they have all this other stuff. So it’s really important to focus in first, and we focused in on paid advertising. And not only that, we focus more on SaaS companies and then, you know, also education too, because it has a, you know, soft spot in my heart. And from there, we were able to, because we specialized, we said, “Hey, you know, we’re going to jack up our prices from, you know, $1,000 a month, for example, to $5,000 a month, because we specialize in it, and we have a proven framework for it.”

So I think, if anybody’s trying to sell anything, when people ask you like how you’re different, the more you can niche down at least in the very beginning, the more you can charge premium prices, and the more you can focus in, I think you can grow faster.

Nathan: Yeah, I like that. I think, yeah, really knowing your customer avatar, we’ve learned some good lessons around that, really knowing your customer avatar is so extremely powerful, especially to just get your marketing more dialed in in the positioning of whatever product you’re trying to focus on, you know.

Eric: Yeah, totally. And here’s the thing, like, when you have clients coming in through inbound or content marketing, the sales cycle is much shorter. So instead of waiting two to three months for something to close, they close in like a week to three weeks or so. The lifetime value is a lot longer, because when they read your content, or they hear your voice, or they watch your videos, they know you. You’re kind of indoctrinated, right. So that’s the other thing that I would have.

Like, if they know Nathan Chan, great, you know. It feels like they’re buddies with you already. So it’s going to last longer.

Nathan: Yeah, that makes sense. So I’m going to ask you a few questions around the operations side and the hiring side and just what’s working, what’s not. But I’m going to ask you a question, just from personal experience. Like, dude, I’m going to be 100% honest with you, I’ve worked with quite a few different agencies and just never have much luck. And I’m sure you are familiar with this story.

So how do you combat that, man? Because, like, shooting 100% straight, I’ve had a lot of trouble with agencies.

Eric: You know, what’s interesting is I did the main businesses in agency, but I actually really don’t like agencies. So, in my Treehouse days, I sat with a couple agencies using the, so I sat with a couple of agencies just because I thought like, “Man, they’re incentive is just to kind of set things on autopilot and just keep going, just rack up more hours or rack up more accounts,” and then that’s the name of the game, because that’s how that business runs, right.

So my thing that’s always left a really bad taste in my mouth, so what I tell people was like, “Hey, if you’re going to work with us, our goal is to get you to eventually graduate from us, so you guys can hire a team in-house. And then what we can do if we’re still with you is we can just focus on innovation, trying new things. And we are just basically an extension of your team. We’re a partner. But if we can’t be seen as a partner, and we’re more of a vendor, we’re probably not the right fit.”

And having the power to say that is really liberating. So that’s kind of how we look at it. And then my thing is, you know, from time to time, I’m looking at the accounts myself, because, like, I do a daily marketing podcast, I have another one, I just create a lot of content around marketing, and I do this stuff. So I kind of, it’s on me and also the team too to be accountable to hitting numbers for the clients, and I’ll check in from time to time, making sure that, “Hey, you guys have all the ideas you need. You have what you need to be successful. Great.”

You know, if so, great. If not, then I’ll jump in and help.

Nathan: Yeah, no, that’s good. I think, because I know, just being straight, I think it is tough when you do have an agency because in a sense, you know, you can only service so many clients with so many people, right. So you want to be, obviously, the best by your business, but at the same time, you know, you have to be the best by your customer.

And sometimes that can be a little blurry around what success looks like. And, yeah, if you have not…

Eric: Well, you’ve got to find a healthy balance too, right, because some agencies I seated in the past, you know, they’ll have 20 to, like, 60 clients, you know, per manager, right. We keep it at around, like, to 9 or 10 or so, maximum. Because once it goes past a certain point, you can’t maintain the quality anymore. So it’s just really important to kind of, you know, you have to know the extent of, kind of the limits of the people on your team.

Also, at the same time, this is why I keep saying over and over, like, whether it’s SaaS or whether it’s service, whatever it is exactly, pricing is the biggest lever. And then, you know, even with our SaaS product right now, we thought, you know, maybe we’d start…the option was to maybe go with, like, $50.99 a month. But, instead, we’re going upmarket, and it’s actually working really well. So, oftentimes, you know, you got to think the pricing really hard, and I really recommend reading the blog, “Price Intelligently.”

Nathan: “Price Intelligently.” Is that…who does that?

Eric: I think his name is Patrick Collison? Patrick, something.

Nathan: Okay, got you, yeah. Yeah, I think I’ve read that one. Okay, awesome. So, yeah, let’s talk about pricing. Like, you know, because most people, majority of people would just pull a price out of the hat.

Eric: Yeah, totally.

Nathan: So you’re launching a SaaS product, and you said to me offline that it helps people with CTR for organic search, right?

Eric: Yeah.

Nathan: So you said that you started with, you know, the $50 a month but now, you’re going more upmarket, that is because you want to go for the enterprise market or because… yeah, because why?

Eric: Yeah. So going for midmarket to enterprise, that’s kind of where we’re going. The reason is this, the tool that we have specifically helps larger websites. We’re talking sites that have, you know, at least 50,000 searches from Google, with traffic coming per month, ideally over 100,000 at least. The thing is, when you’re able to make changes at that kind of scale, let’s say you’re getting, like, millions of visits a month, well, you make a couple of changes, you’re able to increase your organic click-through rate, you’re going to get more traffic.

That can be additional seven figures in revenue, right. It’s a very big thing. So if I help you make $2 million more, what’s to say I can’t charge you 20 or 30 grand?

Nathan: Hundred percent, yeah, it’s a no-brainer.

Eric: Yeah, it’s a no-brainer. So I think, when people think about like, “Oh, just because these other SaaS companies are doing 99 bucks a month,” well, you know, there’s this really good chart from Christopher Janz about how to build $100 million company, and he shows if you price at, you know, $10 or $99, you have a lot more work cut out for you and plus, you have, you know, a lot more churn problems.

The final thing I’ll add around this, happy to go anywhere you want, is one of my buddies, Syed, who is the CEO of OptinMonster, his view is, you know, go really wide, you know, go low on pricing, and then you can have a couple enterprise customers. So I think it’s really dependent on what you’re comfortable with. But because we’ve charged more with the paid advertising agency, I’m happy to wait and see what the midmarket contracts.

And we’ve closed a couple already.

Nathan: Awesome. So, look, we have to work towards wrapping up, Eric. But you mentioned a few things that I’m curious around. You said that you assumed that I was a gamer. How did you know that I played, like, games and stuff, man? Did I tell you that in our interview or something?

Eric: You know what, I think we’ve talked about it before, and I think I’ve listened to maybe another one of your podcast, where you were talking about it too. So we did have a conversation around it though.

Nathan: There you go. You know, when it comes to…and I want to ask you as well, I’ll come back to game, but when it comes to…you’ve also mentioned EO. How did you know I was a member of EO?

Eric: Because I listened to another podcast, and then I was like, “Oh, he joined.”

Nathan: There you go. Wow, man, you know your stuff. Awesome. All right. So couple other questions that we’ll work on. On the operations side, you said that your things are running like a well-oiled machine. So, like, one thing is, like, you know, you’ve got these awesome clients now, and you have to maintain.

Like, you know, and you’ve got, using only your time, and so you want to really build a great sort of team to produce, you know, great results for your clients. But sometimes, and I, you know, I feel this myself, finding really, really great talent is very, very difficult. So what exactly are you doing to find great talent and then also foster that talent?

Eric: Yeah. So I think it’s, you know, even though people say this is, “Oh, it’s cliché. He’s talking about core values again, it’s one of those things.” I think it’s really important to establish those first. And what we also do when we hire people, and this is kind of becoming table stakes now, but, you know, we make sure that we’re assigning homework at the end too, right.

You know, this is very specific process that we follow, where they will come into our applicant tracking system, which we use. It’s called Workable. And then, from there, it’s like we have people commenting on it, and then, you know, we’ll do a phone call first. Or it might be, if it’s a more junior role, and I don’t know how granular you want me to get, but, you know, I’ll go into it, if it’s a more junior role, we’ll use a tool called Smart Hire, which will do a video interview, because the thing is, with a lot of junior roles, you’re going to get a lot of noise.

But, you know, through a video interview, it’s more asynchronous, so I can look at it whenever I want, or my team can, or if it’s salesperson, we’ll run them through our test called objective management group, which has been fantastic. Anyway, so we’ll do the interview. It’ll be with, you know, some people on the team. I always make sure I’m at the tail end of it. So whether it’s intern or anybody else, even if it’s a remote person, I get to talk to the person.

I get to make the final call, because then I can kind of own the position at the end to do and say, “Hey, it’s ultimately my fault if something goes wrong.” And, you know, those are kind of the main things that we look at. And I’m trying to think what else we do. Let’s see. Well, if I recall anything, I’ll let you know. But the homework assignment is really important too, because it shows, you know, at the end of the day, like, how serious they are about doing it, you know, are they really timely as well, and then how detail-oriented they are.

And we had this one guy that’s joining our team as video intern. We had him, we said like, “Hey, just do a blog.” This guy goes like crazy, like, it’s the best blog I’ve ever seen. It can compare with Casey Neistat for example, probably even better editing. And that’s the kind of talent we’re looking for. So the final thing I’ll say, actually, is here’s the thing we ask for someone, it’s very subjective, right.

Like, if this person is not a fuck yes, then it’s a fuck no. So in your gut, like, if you feel it’s a fuck yes, like, yeah, I would admire this person, I think this person is smarter than me, then it’s a go. And the final thing on top of that is, when you do the reference check, what I really look for is, are those first three references really, like, excited about that person? Because if they’re not excited, they could say, “Oh, you know, he’s a 10 out of 10.”

But if they’re not excited about that person, and those are the top three, that’s the first line of defense. They should all be really, really excited about that person.

Nathan: Got you, yeah, reference checks. That’s key. Yeah, a lot of people don’t do that.

Eric: Yeah. It’s because, you know, it seems like you’ve fallen in love, you’ve invested so much time in that person, you’ve dated that person for so long. But we’ve gone through the reference check point, where, you know, we actually pulled off, or we’re about to make an offer, but we pull it away, because it’s like, “Okay, there’s something wrong here,” and we dig a little deeper, and we find out, can’t do it. So it’s really about disconnecting yourself and not falling too much in love and obsessing over that person.

Nathan: So talk to me about the operations side. You said you’re using some tools, 15 by 5. Is that kind of like a check-in kind of automated app that’s asking people, you know, like how they’re going, and they can honestly give feedback, and you can kind of just get a pulse of your culture?

Eric: Yeah. So here’s how it works. So it’s 15Five, so it’s the number 15 and then spell out the word Five, 15Five together. And what I like about it is it can, you know, it shows you how people are feeling, like one through five, right. And you can also see the answers, like, you know, what are your important priorities, what did you do this week.

And, also, we can set a company goal that’s up top, that everyone’s checking in with every week. And, also, you could check in on their individual goals too. So it’s basically like end-of-the-week kind of thing, and it shows where the entire company is at. And what I really like about it is that, like, let’s say you and me are working together. Like, I think you did a kick-ass job, I can give you a high five. And one of our metrics in our traction meetings is the number of high fives given each week, so we can see how engaged people are.

And that’s one of the main core drivers. Because 15Five allows us to see, even if you’re filling out a five every single week, you’re filling a five out of five, we can see in your answers. We can read between the lines to see how you’re really feeling, and we can check in on the in-person one-on-one on Mondays.

Nathan: Love it. Yeah, this looks like an awesome tool. Finally enough, I’m just looking at it now. I’ll looked at it at some point in time, I just can’t remember, because I’d already clicked the link, it’s purple. But, yeah, this looks awesome. It’s awesome, man.

Eric: It’s solid, dude.

Nathan: And you can integrate it with Slack. Yeah, wow. This is good. So you said 15Five to keep a pulse of your culture and how everyone’s performing. You can even put in and align everyone to okay hours. All right. So then, tell me what’s next?

What else are you doing?

Eric: Yeah. So we’re using another tool. So here’s the thing. I don’t like time tracking, but as an agency, you know, a service-based business, you kind of have to track your time to see how profitable you are per account. What I recommend is everyone Googles labor efficiency ratio or the LER, then you’re able to calculate kind of profitability for each client too.

So we use Hubstaff for time tracking. It’s kind of Big Brother-y. It does take a screenshot, a blurred screenshot every five minutes or so, just to make sure, you know, that no one’s just messing around. I personally don’t like that kind of stuff, but I think it’s really important, especially if we have contractors from time to time.

Nathan: Yeah, okay, awesome. Yeah, the LER, you learned that from the Scaling Up. You’re a member too, there you go. Awesome. So last question, or a couple last questions, what is next for you in Single Grain? You said you’re working on a SaaS product, which I think is really, really smart. How big do you want to grow the agency?

What’s next there? And, yeah, just where is the best place people can find out more about yourself and your work?

Eric: Yeah, absolutely. So I guess these two questions tie in. So, you know, the SaaS product I’m working right now is called ClickFlow. So if you go to singlegrain.com/demo, you can actually get free access to the, you know, 30-day free trial. Yeah, it’s a private beta. And so that’s kind of the main thing. I think, you know, ones that relates to the audience, like, right now, it’s really starting to scale, we’re doing a lot of user testing, that’s really exciting to me.

And I think, for the agency, you know, what I’ve heard in the past is, and this really resonated with me, and probably will with you, is, you know, you ultimately don’t have a business until you can step away and it’s growing on its own without you. And, you know, right now, I read the book Rocket Fuel, which is from one of the EO guys too, about the concept of having a visionary and an integrator.

So, right now, we have an integrator on the team. You know, I’m the visionary. I throw all these ideas out. He helps kind of make it happen, right. So that’s the agency. I just want to continue to grow. Now, the grand vision, without going too deep into it, is, you know, I’m writing a book called Leveling Up, which you’re going to be in too.

And, you know, I played a lot of competitive gaming growing up, or games competitively growing up, and I just think this entire thing as a game, right. We’re just plugging things together and making systems work, making it all, like, happen. And Leveling Up, to me, is like, if that book can take off, great. You know, I can help recruit people, educate people on marketing, maybe even recruit them to the agency or some other company or refer them out.

But that’s kind of the first step. And then, from there, it’s like, you know, we have the agency, we have the SaaS product, you know, going to do more live events, and then we have the educational component around marketing too. So I think it all kind of plugs in together, and I think the ultimate goal is just to, you know, give back and invest in education, because that’s what I love.

Nathan: Yeah, amazing, man. And just finishing on that, dude, I reckon gamers are good people to hire, because they got good problem-solving skills. This is…I make no claim to learning this. Somebody else told me this, and I found it to be true.

Eric: You’re right. There’s this book called SuperBetter, and she actually does a lot of research on these gamers and sees how they are. But here’s the thing, like, you and I, we probably type a lot faster than normal people.

Nathan: Yeah, I used to play video games back in the day. Good times. It’s awesome. Well, look, thank you so much for your time, Eric. It was an awesome conversation dude. So, yeah, people who want to find out more about your agency too, they can go to singlegrain.com.

Eric: Yeah, singlegrain.com. And then if you want to reach me, just eric, [email protected]