I built an empire from scratch—here’s how to avoid the mistakes that plague start-ups.
So many entrepreneurs are unable to get the traction they need to grow. As someone who’s scaled multiple 8-figure companies and salvaged dozens of others, I’m often asked about how to scale and go big. Here’s my advice.
Every thriving company in my investment portfolio is the result of a series of small adjustments that make the difference between bankrupt and billion-dollar enterprises. Businesses, and especially start-ups, are not set it and forget it. The environment surrounding your business is always changing. The economy shifts, competitors enter the market, technology evolves, employees come and go. Something is always shifting.
To scale a company with stability requires you to make hard choices and act swiftly. Look at the systems you have in place and make tweaks all the time. If something isn’t working to your advantage, don’t wait to fix it later—do it now. Be proactive instead of reactive .
It’s as simple as ABC - Always Be Consuming! Knowledge keeps your mission on track. You have to research both the problems and opportunities in your business consistently. You have to have more conversations with people and figure out how they are succeeding. Your network does indeed equal your net worth. Entrepreneurs fall into the trap of, “I’m busy running my business and don’t have time to consume more.” I say it all the time, while everyone takes off for the weekend, those of us who refuse to be average use that time to grind out success an extra minute at a time. I promise you that upgrading your education and high-ticket skills will help market-proof your business.
Profit depends on a simple formula: revenue minus expenses. If you’re new to business, you may think the only way to increase profit is to sell more or cut costs, like payroll. There are many more ways to consider it.
For example:
I can go on and on. Grab your profit and loss statement and triage the list of expenses with an eye toward turning them into a profit center. Every profit penny counts.
Great passion does not equal a great business. Over 50% of start-ups fail because they shouldn’t have been in business in the first place. Companies don’t run on passion; they run on profit. (Although I do personally try and find a balance or some harmony of both.)
If you’re looking at creating a start-up or running one already, you have to be able to honestly evaluate if it is a viable business or a glorified job. Do you have a fantastic product or service? Do you have multiple ways to attract paying customers? Are you able to double the revenue without doubling payroll expenses? Are the operating costs in line with profit potential? Do you know what your customer acquisition cost actually runs? These are just a few questions you need to evaluate the answers to and be real about your business.
My favorite line is, “Data doesn’t lie—people lie, and especially to themselves.” Many people lead with their hearts instead of the numbers and then make excuses (or claim burnout) when things don’t pan out. When you know your numbers, everything becomes crystal-clear: who your audience is and where your focus needs to be. Get good with spreadsheets and financial statements so you can properly evaluate opportunities in your business.
Here’s my hard truth: As a CEO, you don’t deserve profit until everyone around you is it taken care of first. Running a business means you are building a micro-community of employees and vendors dedicated to scaling your dream. If your business fails, your micro-community gets hurt.
Too many entrepreneurs recognize flaws in their business models but don’t like the uncomfortable actions required to solve them, such as laying off staff or overcoming their own laziness. Instead, they avoid the difficult thing until the situation blows up. So how do you become responsible? Make sure the company has longevity by learning about the tax laws and building a tax strategy, implementing data-driven solutions, managing payroll against revenue, creating a system of accountability, and continuously developing your management skills.
The hard part of being an entrepreneur is not letting your ideas and passion override tackling your day-to-day operations. The most important thing is to reward those around you for their service before taking a bonus yourself.
Supercharging your business doesn’t happen overnight, but it can be a quicker process than you think—if you’re willing to dig deep and do the hard work starting now. The only thing stopping you…is you.
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All businesses face times of instability. From changes in the marketplace to changes in the economy, there’s pretty much only one thing you can count on: that change is inevitable.
That’s not necessarily a bad thing. The question becomes, will you survive, or will you thrive during times of upheaval? Depending on what you do, it can go either way. If you want to ensure that your company or business not only survives but thrives, here are some steps you can take to make sure you are adding value and helping navigate your company to a profitable outcome for everyone.
1. Upgrade your education. Don’t just sit around waiting for somebody to tell you how to fix something. It’s critical to be proactive, seek out the knowledge you need, and figure it out yourself. If you’re a member of upper management or even the owner of a business and you are not great at accounting, or you don’t know how to read a P&L properly, or how to check your cash forecasting, learn. You don’t want to wait until you have to fire people or things get dire and you’re going out of business to go the extra step and educate yourself and your teammates.
The first step is to find out precisely what you don’t know and reach out for help. You don’t need to come up with all the answers on your own. You can take a course or talk to a mentor or colleague. Practice saying, “Hey, I’m having this challenge and looking for some guidance. What do you think? Can you point me toward some good resources or give me some advice?” When you stretch yourself and your knowledge base, you’re more likely to come up with new solutions instead of recycling what you’ve been doing.
2. Understand where profit opportunities exist. Unfortunately, a business doesn’t run on good feelings all the time. The company has to have profitability. And that takes knowledge (see above). If your profit centers have weakened, then you need to recreate how they operate – DO NOT adopt a wait-and-see mentality because it will lead to potential devastation.
You must be proactive. Look at and modify your product offerings or change how you target new customers, and for sure, reduce fixed expenses where at all possible. Embrace automation where you can and use people-based data companies like Oracle or EpekData to help access the data analytics that helps you identify your ideal customer profile (ICP).
3. Shift from a fear mindset to an opportunity mindset. Everything comes down to mindset. And in times like these, the human gut reaction is to immediately be fearful of the future, whether that be impending layoffs or not being able to count consistent revenue streams. Whatever your situation, you have to look at these shifts and say, “How do I embrace this? How can I reinvent?”
Reinvention, by the way, is different from pivoting.Pivoting is when you make changes to an existing system. Reinvention is when you create an entirely new system. If you’re in the corporate training business and there is a sudden change in demand for large group training, you need to look at ways to make your service valuable. Perhaps you take physical training services into virtual webinars. Maybe you break-up training into smaller, topical video modules that companies can have employees consume at their own pace, or you might even offer your training modules to non-corporate businesses. Colleges and universities are struggling with their sales and systems and changing how they offer classes and course fees.
An opportunity mindset helps you get creative and motivated in new ways, and it is important to realize that if you are facing these challenges, so are your competitors, big and small. And inevitably, some of those competitors will not adopt an opportunity mindset and will instead try the wait-and-see approach, which might mean they don’t survive, and is all the more reason for you to see opportunity in crisis. Fewer competitors means more customers in the market needing your services. You have to shift first and stay the course.
4. Avoid analysis paralysis: Data without insights is useless. You can’t triage a transition, or a reorganization, or an acceleration on data alone. That’s why you need to look for relevant data points in the mix as you’re trying to make decisions about how to transition, how to reinvent, or pivot—whatever catchphrase you want to use.
Any time you’re making critical decisions, you need to find the relevant data—the data that gives you actionable insights. Actual cash burn rate, payroll to sales %, percentage of your digital marketing ad spend that is hitting real customers, the gap between variable and fixed costs, and tax liabilities are all examples of where data is essential. Don’t be afraid to get the ugly numbers; if they’re real, you can’t be oblivious to the obvious. You can’t be irresponsible and ignore them, thinking they will magically get better. They won’t. You have a responsibility to everyone around you, if you are the boss, to be responsible and have the hard conversations and enact a strategy and plan of action that ensures you all survive the crisis at hand or transition in the market. Take action until the numbers look good again.
I often say, “Sell through it.” And, as you review the four tips above and extract whatever tidbits you might find useful, I’ll leave you with one final thought: Topline revenue is the critical lifeblood of any organization.
If you find yourself and your company in a position where everything changed, and people aren’t buying the way they used to, before all else, triage and fix that. If you were an inbound sales organization and calls stopped coming in, figure out how to build an outbound funnel and get on the phone and in front of people. If you find that your product is not “essential” or needed during the current environment, create or find a product that solves a problem and implement a plan to start delivering it. Even if this is a temporary fix, you can’t be afraid to have an opportunity mindset and analyze the data looking for relevant data points on what will generate profit for your company. All that’s left is to consume the knowledge needed so that you can sell that solution and lead your company through the situation with confidence.
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Let's start with a reality check. The reality is that, no matter what business you're in or what position you hold within a company, the many challenges of 2020 and the resulting changes in the economy post-pandemic will not allow for things to stay the same. The key is to accept this new reality and to embrace and implement a simple concept of ABC: Always be consuming…whether that means you are consuming new knowledge, new technical skills, or relevant data points, ABC. It is as simple as that.
A board member at one of the companies we invested in asked where they should focus their ad budget for the next year. I responded that one area that you can consume a new skill set and new knowledge is around the use of Social Media for more than just checking in and catching up. For example, many people don't realize the power behind Facebook Messenger and how it gives brands the chance to interact one-on-one in a direct conversation with their current and prospective audiences on a large scale. And there are several other platforms from Instagram to LinkedIn he could in a similar manner. Still, I suggested focusing on Facebook Messenger based on my understanding of their audience and the demographics behind it.
It's Not Just for Lead-Gen Anymore
Businesses should understand and embrace these technologies as an enhancement to the whole brand's relationship with their audience, not just as a lead generation or customer feedback tool.
When considering a Messenger integration into your company's brand strategy, follow these steps for the highest level of success:
Target new potential customers using a variety of audience data, including Facebook's audience targeting, or by working with a people-based marketing partner, like Oracle or BrandLync. Both use Identity Resolution to build hyper-local and highly-targeted audiences that can be uploaded and focused on Facebook. And the best part is that you can invite these audiences to contact your brand directly through Messenger.
The best part about using a service like this is consumer privacy and security that comes with it. Any matched or targeted data will be returned and encrypted into a secure "SHA256 HASH", which is Facebook's current standard for encrypted uploads, and will make it easier to locate your audience online across many platforms, not just Facebook.
Once you've got all the above pieces in place and the communication begins, the easiest way to win rapport with people who interact with your Messenger is for the chat representative to become their advocate. They need to speak in a language congruent with your brand identity. The chat representative should take the customer's side if there's a support issue to ensure the people messaging you feel heard.
Finally, people are very forthcoming with giving information and permission to market to them in a setting like Messenger. This permission is an excellent way for businesses to interact with people who are often happy to give you their email addresses or phone numbers to be contacted by a member of a sales team. You must send the Messenger transcript or relevant notes to the salesperson who will be contacting your customers. Require them to review it before reaching out to the customer, so they can continue the same dialog and not have to repeat things that have already been asked and answered in the Messenger conversation. Consumers find this very irritating, and it can do more harm than good.
Remember, when consumers feel heard by an empathetic ear or when they are delivered an alternative solution that solves their needs, the brand impressions and micro-moments of relevance are enhanced. The entire interaction leads to more reliable and longer-lasting brand awareness and consideration. And that leads to stronger topline and bottom-line revenue.
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COVID-19 is a bit of a monster. Not just medically speaking, but also from the crushing blows this pandemic has caused in the economy. It's highly likely that business as we knew it will never be the same. Entire companies have “pivoted, changed operations, and made uncomfortable decisions with an hour's notice. This monster is ultimately killing some businesses, but the real question remains: Is there an opportunity to use this time to make your company kill-proof?
You are unlikely never to have a better time to change/fix/reinvent/reimagine your business than right now. Regardless of what people want to think and believe, there will be a very different post-pandemic economy. The way things were before won't be how things are in the future, and with your current success standard, there will be a shift.
Change is a given in business. The faster you accept that, the quicker you'll be able to get back on a track toward success.
Here are eight secrets that will help you take advantage of new opportunities to thrive during and after the pandemic.
1. Forget the Pivot – Reinvent. In times like these, pivoting isn't enough. You also need to reinvent yourself. I like to say that I have no idea how to do whatever it is I'll be doing seven years from now. And you can bet that whatever I did seven years ago is something I didn't know how to do seven years before that.
The first step in reinvention is deconstruction. Break down every part of your current business model and product/services. Look at your ideal customer profile, value proposition, revenue channels, contracts and pipeline, key employees, key partners, and fixed and variable costs. Be brutally honest about what is working and what isn't. Then get creative. Pull together a long list of alternatives for each part of your business. Brainstorm with employees and colleagues.
A good example is my wife's digital marketing agency. She and her team looked at her Facebook marketing product suite and figured out how to use it to help her automotive clients sell cars virtually through Facebook Messenger. Doing this provided an alternative to driving customers from the platform to the car lot.
You must be willing to take all your products and services and have them fill new needs based on unique consumer buying and engagement patterns.
2. Lean More Toward Variable Costs: As a founder of EpekData, I've found that a quick path to changing your business comes from being nimble, and that starts with shifting more of your fixed costs to "variable" ones. Selective outsourcing of certain functions (including significant ones like digital marketing, data services, along with social media management) can help you be more flexible and also gain access to higher-level talent without creating fixed payroll costs.
Never forget that, no matter how great your business is and how smart your team might be, you don't know what you don't know. And a sure-fire way to find out is to explore outsourcing some of these items above and see how you stack up to the rapidly evolving technology vendors are building on top of today.
3. Use Technology to Move Forward: Thinking that you can continue to build your $20-$100 million company without embracing data and technology is—to be blunt—borderline delusional. Data gives you facts. And actionable data gives you results. During times like Covid-19, you can't afford to operate with anything but the facts. It doesn't matter what the crisis is; you have to move quickly and swiftly, using real-time actionable data to analyze things as they're happening.
4. Don’t Hesitate—Evaluate then Act! But analysis isn't enough. You also have to be quick to make decisions. Lingering, staying stagnant, having a wait-and-see mentality—that luxury doesn't exist in today's economy. One example is your digital media ad spends, which up to 30% or more can be wasted on non-human traffic from online bots and other bad actors in the space. In an excellent economy, you might not feel the pinch of this bad data. Still, when changing your business
post-pandemic, you have to consider how that loss of real customer interaction is impacting your bottom line. Investing in people-based, digital marketing agencies, like Oracle or BrandLync, can help protect against these types of fraudulent engagements and ensure maximum ROI.
5. Focus on Customer Value: If you have been relying on the stable revenue of your average customer, ditch that notion now. Instead, now may be the time to identify the ideal market segments that you can and want to serve and create perfect customer profiles and personas for each of the chosen segments. You can't assume that what you did for any client in the past is good enough to earn their business in the future. It's all about seeing the new client needs, then filling them.
6. Embrace Automation: Whether in sales, marketing, or operations, you must implement automated processes both from a controlling fixed costs standpoint and also for efficiency. Automation gives you and your team more bandwidth. Post-pandemic, you will be shocked at the job loss created by positions that can be automated. My prediction is that up to 25% of the US working population will lose their jobs to task automation. I'm not in favor of job loss, but when changing a lousy business model to a good one, you have to reimagine every part of your business.
7. Get the Right Systems in Place. Running a business should be systematic. To thrive post-pandemic, you need to focus on growth and make sure the business systems are in place, so you don't get sucked into the roles and responsibilities of others in the company.
One of the things that set us apart when we were opening our restaurants years ago was that I took the same approach that I used to build software and applications and applied that process to the systems we were using to run our restaurants. It was an assembly line, and there was accountability at every single step. You need systems that work flawlessly at scale and training systems that teach employees how to run and manage those scalable systems. You also need managers who oversee those employees and their training to make sure everything runs seamlessly. My mom taught me a long time ago: "People expect what you inspect." If you fail to inspect every step of the process, ultimately, people will get away with what they can—that's just human nature and business. Once all that's in place, the company will scale as a whole, grow, and get where it needs to go.
8. Remote Offices: You can't ignore the many advantages that have emerged from employees working from home during the coronavirus outbreak. The benefits have been tremendous, and I believe it will have a long-lasting impact. A great example is that the talent pool is now endless because people don't have to commute. You can get better talent and, many times, for less compensation. Many employees are finding that they are more productive working from home, have less stress from commuting, are saving money on gas and eating out, and have less 'in-office' distractions. Business owners see how the company can function virtually and the benefit of eliminating fixed costs like office space rent and office supplies. All of this leads to better profit margins. Covid-19 gave companies the time to reexamine the traditional office and adjust to monetize this productivity.
As a business investor, I'm always looking at companies that have great products or services but weak systems. We invest in their revenue potential, then we go in and fix the broken systems. We add automation and technology where we can and reduce expenses by exploring remote work options and variable cost reductions, all to add profit through customer value fulfillment.
In this time of crisis and reinvention, I believe that evidence matters now more than ever. Data should not only motivate the way you seek to improve your business but should also serve as a filter for the advice that you consider from others.
And remember, data doesn’t lie, people do (and usually to themselves.)
-Matt
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