John Jantsch (00:01): This episode of the duct tape marketing podcast is brought to you by the salesman podcast, hosted by Will Barron and brought to you by the HubSpot podcast network. Look, if you work in sales, wanna learn how to sell, and frankly who doesn’t check out the sales podcast, where host will Barron helps sales professionals learn how to buyers and win big business ineffective and ethical ways. And if you wanna start someplace, I recommend the four step process to influencing buying decisions. Listen to the salesman podcast, wherever you get your podcast.

John Jantsch (00:44): Hello, and welcome to another episode of the duct tape marketing podcast. This is John Jantsch and my guest today is Bob Glazer. He’s the founder and chairman of the board of global partner marketing agency, acceleration partners. He’s also the co-founder and chairman of brand cycle. He’s been a guest on this show for previous books, but today we’re gonna talk about as newest book moving to outcomes. Why partnerships are the future of marketing? So Bob, welcome back,

Bob Glazer (01:12): John. Thanks for having me.

John Jantsch (01:13): So you’ve written a book called performance partnerships, as I recall. So let’s define, well, let’s do two things. Let’s define partnerships in your view because there’s a lot of definitions. And then also, you know, what are you offering new in the area of partnerships in this book?

Bob Glazer (01:29): Well, I just retitled it figured it’d been a while and, and, and released it. So yeah, I, there there’s some confusion around these terms, partner, marketing partnership, marketing affiliate market, and you have influencer and B2B. I, I think there is this convert urgents where affiliate marketing was a model that used technology to, to work with partners at scale. I think it became known as like a certain type of partner set who were like professional affiliates. And then as the technology kind of became available more to, you know, to own than, than, than to rent people started to look around their organization and say, oh, there are other things they weren’t using their affiliate network for business development partnerships and closely held partnerships because it, it just the economic model of paying, you know, couple percent of revenue or 20 or 30% of sale, or sort of sending people off to a third party site didn’t feel right for that. So there was always the affiliate program and then all this other and business development, I think now it’s all coming under one roof under one platform. So I just consider affiliate marketing, part of this greater ecosystem of partnership marketing now, which includes influencer and B2B and aspects of business development. What makes it scalable and more of a marketing channel is that it’s managed using software.

John Jantsch (02:44): The partnership, of course, for a lot of people at least implies some sort of affinity. I mean, we are truly in business together, whereas yeah, I think a lot of affiliate thing was like, I don’t care. You say you’ll pay me 10 bucks. Sure. I’ll promote. Yeah.

Bob Glazer (02:55): I agree with you. I don’t like the word for that reason. In fact, you know, we have an event every year for outside of global pandemics for like the top 20 programs in the world, the people that are running them sort of like a mastermind. And that was one of the things like when they say, look, I need this for an affiliate versus I need these things for a partner affiliate just implies a loose connotation. And that’s probably how things were 20 years ago. It was like, don’t ask, don’t tell, right? Yeah. You get me the sale. I have no right to ask you how you got it. That was before companies with brand departments got involved with eCommerce.

John Jantsch (03:30): So is there, would we create that distinction as two levels of partnership? I mean, so like, could you, could you make a case for people saying, well, yeah, we it’s okay to have that low level top of the funnel maybe kind of affiliate thing, but then for a deeper relationship on a, maybe a higher ticket sale, we need something different.

Bob Glazer (03:48): Yeah. I mean, I, I think it’s generally good to know like what it is that people are doing to your brand and how sure they’re doing it. You know, McDonald’s has a franchisee, like, it’s not like, Hey, well just open that store wherever you want it and serve of whatever you want. Right. It’s very control. And I, I consider this sort of a, a franchise thing, but I think you can have different types of partners that have different levels of engagement otherwise. But again, if you put them all on the same software platform and you start doing that with people, that stuff that was going through business development, or otherwise you start to have a lot more data around what’s, what’s converting, what’s doing well, partners find out how they’re doing in, in, in real time too. And all the, all you don’t need blockchain for this, but you know, a lot of the pro all the contracting and payment and everything is all handled sort of in real time too.

John Jantsch (04:36): So in some ways the idea of moving to outcomes, which is of course the, the primary title of the book is that sort of juxtaposed to say, advertising or sponsorships, that you hope you get outcomes, that this model is performance.

Bob Glazer (04:50): It’s two things, right? So the biggest thing that’s changed since performance partnerships came out for years ago is, you know, continued to see direct to consumer companies shift from and to performance budget. So, so what I don’t understand, and, you know, we’ve got our little clever graph here of, you know, jumping over all the hurdles. Yeah. But is if we’re measuring all this stuff and we’re tracking it and all this stuff, why are we still paying for inputs? Why are we paying for impressions? Why are we paying for clicks? Like, why are we paying for, you know, other things that are not the old outcome that we want when we have the ability to do that. And I think as budgets continue to move, you know, as Gillette goes from, you know, spending money on billboards to getting people to its subscription razor club, uh, I, I think they start to be, there’s a lot more budget available for channels that prove the right outcomes than just the inputs

John Jantsch (05:42): Is, is as opposed to just another channel. Would you say this is potentially a complete point of view shift for a lot of marketers?

Bob Glazer (05:50): Yeah. Like it’s a methodology more than a channel, right. So when I’m buying from Facebook, Amazon, Google, which is like 60 to 70% of the market that people do today, I am buying single source of traffic, right? Yeah. That, that stops work. They are the partner and the supplier are all in one. If I can build a partner program using software with a thousand different partners, with a thousand different tactics, I, I have inherently a, a diversified portfolio. It’s also not something. I mean, you know, we talk about the, the Tripoly where that, like, it’s the world’s biggest auction. We talk about that in the book. It is a real time auction and auctions benefit sellers. If you read all kinds of auction theory and data, and someone did a study, we talk about in the book that the stuff on the auction side of eBay, the same product, we’re going for 70% more than on the fixed price side. So you know that you can’t come into a partner program and just outspend someone in a day. I mean, eventually you can, but it it’s kind of like SEO versus PPC, right? One pour the money into gratification, the other, you do the work and you build a moat and you kind of collect results.

John Jantsch (06:59): So I think there are a lot of businesses out there that instantly say, yeah, this is for me, this makes sense for my business model, but I, I’m sort of guessing that you’re saying, no, everybody needs to do this. This will work for any kind of business. I mean, so is this expanded, do you have a limited range of who this expanded version works for? Or do you think that this just every business now?

Bob Glazer (07:19): I, I, I think it’s, every business needs to add the sort of activity to their portfolio. I, I think about it like stocks, right? And you know, if, if, if you own Tesla, apple, any of these things over the last decade, you made a lot of money. Chances are, you won’t make as much money open in those stocks over the next decade as finding the next blockchain company or crypto or someone who’s gonna, you know, 10 X, I, I think the large digital marketing channels are now bonds. Like they’re gonna produce a very low, predictable, not a great return, may not even, you know, beat inflation. And, and, and you’re gonna have to find something else that, that, that is your sort of growth engine in stock. So you look, this is much easier for some businesses, but I think all businesses should be thinking more about how they can use technology to, to scale partnerships. Now they can be, there are tons of hundreds of thousands of different ones that they can do, but you know, the amount of CEOs I’ve talked to who in the last five years built their business on a Tripoly or on social media or whatever, and say they could not possibly do that today. That the economics just aren’t the same as they were five years ago.

John Jantsch (08:26): Uh, that’s true. I mean, you think of a lot of marketers, there are a lot of, uh, influencers, you know, that jumped on Twitter early. You know that, I mean, jumping on Twitter or starting a blog today is not what it was 15 years ago. And no,

Bob Glazer (08:38): Everyone I know is I everyone’s podcast. Maybe, you know, except for yours are all on hiatus. Now, everyone jumped in late thought it was gonna be super easy and, you know, they reach out or they schedule something and they’re on break or on hiatus, you know, look first, first mover advantage. But, but this is like a, the thing about affiliate or partnership has always been cool is that there’s always new publishers every year. Like there that’s the new within the, even if you have a program, but you have the same publishers for 20 years, you’re missing out on, who’s doing cool, new, innovative stuff with who has influence that you, you know, wanna partner with em.

John Jantsch (09:11): So you led right to my next question, which was gonna be, how do I find partners? Or before you answer that, is that the first step

Bob Glazer (09:19): There, there are probably a few first steps. I mean, if you’re gonna build a new program, you wanna pick the platform, you wanna figure out how you’re gonna staff it, which we talk about in the book, which is, is a challenge. But look, recruiting’s a life, but of any program, the way a lot of people have operated their program is inbound only, right? A if you had a sales team that just sat around, waited to see who called them, like that’s not gonna be a high performing sales team. So, you know, to have a robust program, you need people who are, are recruiting and know where to look and are constantly calling and finding new partners. You know, the programs that we see, they high performing are reaching out to hundreds of people a month, you know, and they it’s like a sales funnel. They might get 10 that are really interested and then five that convert and become, and then, then they move on to the next thing.

Bob Glazer (10:01): So yeah, the there’s, you know, the tech, the, how you staff the team, you know, whether you’re gonna spend a fit of your, these programs have been largely overlooked too. The other thing is, I, I mean the amount of times that we get introduced to someone who’s managing the channel, who’s never, or been in the channel before, to me is fascinating. Like you don’t usually get introduced to, Hey, here’s John, our new paid search manager. And just so you know, he, he has not done paid search anymore, but he’s excited to figure it out. Like that happens in this channel every day. Cause there isn’t a barometer of talent. There isn’t a Google certification. There isn’t a lot of that stuff. There’s a lot more demand than supply right now.

John Jantsch (10:42): So you mentioned a word spend. I mean, so that, I mean, that’s obviously a piece of, this is if you’re gonna look at this as a channel and a platform, and obviously there might be some tech, I mean, it’s a budget item, isn’t it? It’s not just, we pay for performance.

Bob Glazer (10:56): Yeah, it, it is. And one of the tricks is that, I mean, we try to argue that it should be a budget list item. And I say that a little tongue in cheek, but it, you know, the way most teams work is they set up budget for the quarter. If one channel’s under over it, borrows, begs and steals from the other channel to try to get the number. And then they revisit the next quarter. You know, this is again, sales. Like you, you have a budget for commissions, but if your sales team doubles the performance, you don’t say we’re out of the budget for commissions. Like that’s crazy. You say like great for every dollar we’re selling, it’s costing us five. So, you know, there needs to be a new discussion with the finance team around looking at quality, you know, making sure there’s not fraud, but saying, look, as long as we are getting what we want.

Bob Glazer (11:37): And we just decided that we’re willing to pay 7 cents on the dollar or, you know, we should spend 7 cents on the dollar or 7 million on a hundred million. It, it really shouldn’t matter. So it has been hard for a lot of teams to, uh, I just seen some really poor decisions, particularly around Q3 or Q4 where people shut down their program. Cause they ran out of budget. Yeah. And that’s like firing your sales team because you’re outta commission and saying, Hey, well you guys can’t make any money into this quarter, but just stay around and you’ll make money with us next quarter. Like there would never fly. Right.

John Jantsch (12:11): Right, right. Right. And now let’s hear from our sponsor. Look, if you’re tired of slowing down your teams with clunky software processes and marketing that is difficult to scale, HubSpot is here to help you and your business grow better with collaboration tools and built in SEO optimizations. A HubSpot CRM platform is tailor made to help you scale your marketing with ease, integrated calendars, tasks, and commenting, help hybrid teams stay connected while automated SEO recommendations, intuitively optimize your webpage content for increased organic traffic ditch the difficult and dial up your marketing with tools that are easy to use and easy to scale learn how your business can grow better @ hubspot.com. So, so let’s go back to that and maybe it’s best done through an example, but we never really fully touched on it. How do you find good partners do, is there an example, um, case that you’d like to maybe run through with us that you’ve worked with or that that was in the book that can kinda says, Hey, here’s what they did. Here’s how it worked. Here’s how they went about it.

Bob Glazer (13:18): Yeah. There was a, a case in the book around, again, thinking outside about working with Valpak on a performance basis to get to small businesses and, you know, using them and having them use their reach and paying them on a conversion basis for getting people to sign for a food delivery program. So again, looks more like a traditional business development deal, but executed across using the tools and technology and sort of, you know, outreach of a partner marketing campaign.

John Jantsch (13:49): Was that a new initiative or a new innovation from Valpak or is that actually a, an off to shelf product? Did they? Yeah,

Bob Glazer (13:56): No, I, I, you know, I, that, I don’t know, it was our team reaching out and saying, Hey, how could we work together with, uh, this food delivery service? You know, you have reached into these things. We have budget to spend on this. I, I, I think, yeah, one, you know, on the flip side of the coin, there are a lot of people out there, you know, who even are retailers looking to be publishers saying, Hey, how else can I make money? Look, you just bought, you know, something from my baby store. And then I show you four baby subscription services afterwards for which I get, you know, 30% of the first year revenue, if you sign up for them. What’s interesting is cuz obviously a lot of folks, we deal on the marketing. They’re not normally the task with generating revenue, but we’re like, Hey, if you put this in and you make money, you could take that money and then increase your budget for your own acquisition. And then they’re a lot more interesting.

John Jantsch (14:46): So let’s talk about mistakes that people make. I I’ll share one that drives me crazy is, you know, you go and you make a, I FTD, I, I ordered some flowers off the FTD site recently and before I could actually get off of the site, you know, they offered me eight other things that were unrelated to my purchase. And it just felt like they were craming crap down my throat.

Bob Glazer (15:08): Yeah. That

John Jantsch (15:11): Is that an example of how not to do it.

Bob Glazer (15:13): Yeah. I mean, you want it to be relevant. You want it to be helpful, be much better if you were buying a ticket to Seattle and the post purchase it, preloaded concerts in Seattle restaurant reservations in Seattle hotels in Seattle where you’re like, oh, this is all the stuff I wanted to do anyway. They’ve helped me with that. So yeah, to me, that’s just more of, you know, the USF good. That’s like the interruption marketing stuff and just like how many swings can we take at it? And they’re probably paid for impression. I mean that stuff doesn’t no one likes that stuff. Yeah. Let’s be honest.

John Jantsch (15:44): Yeah. So, so how, how would somebody’s listening to this? They’re thinking I’m gonna go pick up a Bob’s book. I mean, how would they get started? I know it’s impossible to answer cuz every business is different, but essentially how would somebody go about, you know, initiating something like this?

Bob Glazer (16:00): Not, not to be self promotional, but look, the reason why a lot of agencies like acceleration partners exist is cuz people want to do this, but they don’t know how to do it. Generally, if you have no idea how to do something, I find it’s better to talk to someone and add it before. So whether you’re recruiting someone to help launch a program in house, I, the thing to do of saying, we wanna do this, let’s pull someone off our display team. Who’ve never done this before. We’re not amended here. So let’s figure it out ourselves. Like, I don’t know that’s you never wanna make mistakes on your own. So I mean, there’s a big industry of agencies. That’s special. I, as in this, they work with all the platforms. It’s not necessarily outsourcing. They might work with the in-house team, but handle a lot of the externally facing aspects of the program, including how to use that software recruiting to people like getting them their there’s almost a customer service function. If you have a program with a thousand partners in it and it’s cyber week. Yeah. They need stuff and have requests on Saturday and Sunday and weekend. Most companies aren’t staffed to really support that. So I, I, I look, there’s some great in-house teams or people do stuff in house. Generally, if you have no experience in something, I think it’s good to find someone who does.

John Jantsch (17:08): Yeah. I, I guess in some ways, would you say that not apples to apples, but in some ways this is like a sales force. How are you gonna support this sales force? Right?

Bob Glazer (17:18): Yeah. We’re like systems integrators too. We’re experts in these platforms. People on our team know how to use these platforms. If you’ve never used them before again, you can learn how to use it. But from the company’s standpoint, your digital marketing jobs, they high turnover, 18 months is a career these days. So you get some one who knows the software, learns it, trained up, builds relationships. They leave in 18 months. Then you’re kind of like starting over from zero again.

John Jantsch (17:43): What are some of the platforms that, that people would probably encounter?

Bob Glazer (17:48): Yeah. So like on the network side, you’d have the Eun CJ Rockton, a more traditional, a smaller side share sale in the SaaS play. That’s growing, you’ve got impact partner eyes, uh, partner stack. And there’s a whole host of ones in the B2B space. So there’s been kind of explosion in the software that allows you to track, measure and pay in the partnership arena with some, you know, better in some verticals or countries or regions or stuff than others. But you know, one of the main thing, you know, paying out people in a hundred countries or something is not trivial. So the large global companies that have figured out how to do that. Yeah. You can just have your program globally and people can join from wherever in the world and your account team and finance team does not have to deal with that.

John Jantsch (18:31): Have you seen examples of service companies that may not, I mean, use you, for example, how would a company like yours acceleration partners create a partner?

Bob Glazer (18:40): Yeah. You know, we just did cuz the cobblers had no shoes. So we went to look like for an example, we went to like a lot of people that we know like other agencies, right. Publishers who see a lot of programs and they struggle and we’re like, look, if you’re trying to work with a program and the management sucks or they don’t have any management, like, Hey, you can use this link, send it to us, we’ll track it. And you know, we’d love to pay you for that. So yeah, it could be used really in any context. And the technology now can track through Salesforce in addition to tracking through a cart, that’s where some of the more B2B stuff comes, you know, it’d always usually be add to be through a cart. Cause I had to know you bought something. Right. But now I can send that into your Salesforce instance, attracts it when someone on your team closes in Salesforce that says, Hey, that was Bob’s, you know, lead, you know, we owe

John Jantsch (19:25): Him something. Yeah. So it’s a, a pipeline deal at that point almost so. Yeah. But I think the point of that really is I do think a lot of people, when they think of affiliate, they think of, you know, build a landing page, have an affiliate sign up, you know, kind of thing. Yeah. But I think in this it’s all old.

Bob Glazer (19:40): Yeah. Overall when, when all the, the, when the affiliates were just professional marketers yeah. Versus they were like people who have access to the audience that you want. Right. Right. So imagine like a, just an it shop and people are always asking about, they kind of the reseller stuff they’re always asking about, you know, Google apps or this, or otherwise they just say, Hey, here’s how you sign up. You send it here, you use our code, it’s all tracked. And, and then, you know, instead of being like a traditional kind of reseller partner, it’s just, it, the whole thing is more automated.

John Jantsch (20:10): But I love that idea of the, of going into your CRM though, because it, then it becomes more of a true sort of curated network, you know, as opposed to just, Hey, you know, all comers. And I think that there are a lot of companies out there that haven’t considered it because that’s their view. I think of partnership marketing.

Bob Glazer (20:28): Yeah. Again, marketers standing up landing pages verified to told you, you know, that Craigslist was a massive publisher and you know, yeah. Years ago, like when we were working with a ride share service, you know, we did a deal with job boards where they’d say, Hey, one set of a job. Do you wanna ride for Uber? And they’d make a fair amount of money when a driver signed up. Right. I think that’s a very different, yeah. And that’s where partnership marketing is very different than what people remember as their sort of father’s affiliate marketing.

John Jantsch (20:56): Yeah. Yeah. ClickBank comes to mind, for example. Yes. Um, as one of the early players in that,

Bob Glazer (21:02): A lot of this ACI E Barry and all this stuff, look it, if you’re talking about stuff, that’s five to 10% margin, you know, then that’s pretty normal. The stuff where people were paying 50% affiliate commissions would imply that like it’s a junkie product. That’s being Mar like it’s a cream that’s being sold, you know, a $5 cream being sold for $50 a month. So they had that much margin to play with, like when someone’s paying you a 6% commission that would imply like normal margins, you know, in, in whatever that product or services.

John Jantsch (21:32): Yeah. Yeah. Good, good point, Bob, uh, tell people where they can find out more about your partnership work as well as pick up a copy of moving outcomes.

Bob Glazer (21:41): Sure. You can find out more about acceleration partners in our work. We’ve got a lot of also free resources, 1 0 1 guys, if, and just learn more how to acceleration partners.com moving outcomes is available. Everywhere books are sold and you can learn more at Robertglazer.com/outcomes.

John Jantsch (21:56): Awesome. Well, thanks again for taking time to stop by the duct tape marketing podcast. And hopefully we’ll see you one of these days soon out there on the road.

Bob Glazer (22:03): Thanks Jo hn. I

John Jantsch (22:04): Did you know that you could offer the duct tape marketing system, our system to your clients, and build a complete marketing consulting coaching business, or maybe level up an agency with some additional services? That’s right. Check out the duct tape marketing consultant network. You can find it at ducttapemarketing.com and just scroll down a little and find that offer our system to your clients tab.

John Jantsch (00:00): This episode of the duct tape marketing podcast is brought to you by the salesman podcast, hosted by will Barron and brought to you by the HubSpot podcast network. Look, if you work in sales, wanna learn how to sell, and frankly who doesn’t check out the sales podcast, where host Will Barron helps sales professionals learn how to find buyers and win big business ineffective and ethical ways. And if you wanna start someplace, I recommend the four step process to influencing buying decisions. Listen to the salesman podcast, wherever you get your podcast.

John Jantsch (00:42): Hello, and welcome to another episode of the duct tape marketing podcast. This is John Jantsch and my guest today is Marcel Petitpas. He is the CEO and co-founder of Parakeeto a company dedicated to helping agencies measure and improve their profitability by streaming their operations and reporting systems. He’s also a fr action COO at gold front and a speaker podcast, host and consultant specializing in agency profitability optimization. So Marcel, welcome to the show.

Marcel Petitpas (01:11): Thanks for having me, John. It’s a pleasure to be here.

John Jantsch (01:14): Do, did you like how I nailed that French?

Marcel Petitpas (01:17): I, you know, you didn’t even ask me how to pronounce my last name, which is the mistake most hosts make. And then I see their eyes just filled with fear as they realize, oh my God, I have to try and pronounce this thing. That’s on the bio introduction, but you nailed it. I’m impressed.

John Jantsch (01:30): Well as somebody whose last name, uh, ends with five consonants, you know, I’m very, very aware of people’s last names. Actually, my mother’s maiden name was da Sonia and my, uh, wife’s maiden name is Duval. So I’m also maybe a little French too, that might have helped.

Marcel Petitpas (01:46): I like it. No, you did a great job.

John Jantsch (01:48): All right. So a lot of agencies track revenue, some actually even track profit, but you, if we’re gonna optimize, um, profitability, what, what should we be measuring?

Marcel Petitpas (02:00): That’s a great question, John. The first thing that I, I think the first opportunity that almost every agency owner has is just making a couple of tweaks to the way that their accountant or bookkeeping team looks at their financial statements so that they can understand two important things that they’re probably not seeing right now, or might not be obvious to them, where to look to see it. The first is understanding their agency gross income. So this is the understanding that you have the total amount of money that comes into your business, but you’re not responsible for the efficiency or the profitability of all of that revenue. There’s a certain amount of that for a lot of especially digital agencies that is passing through you onto other vendors. Simple examples of this would be things like advertising spend print budgets. Sometimes you might be using white label or outsource partners.

Marcel Petitpas (02:42): And so the way I would frame this question is it, if you’re trying to determine what is pass through revenue and what is your revenue it’s like, are we responsible for the margin on this revenue? If the answer’s no it’s probably pass through. And so the important thing that I think a lot more agencies should be paying attention to, especially if that’s a factor for them is when we strip out all that past through revenue what’s left over because that’s a really important figure. That’s the actual size of your business. That’s what you should be benchmarking your profitability against. And it’s what you should be using to benchmark other spending decisions in terms of, you know, how much we spend our office and our team and sales and marketing, all this other things. So isolating, AGI or gross income on your financial statements is kind of the first key thing that I think a lot of folks should do.

John Jantsch (03:24): And, and I’m guessing from your experience, that can be all over the map, right? I mean, wildly varying from agency to agency, right? Even, even if one says I’m a $10 million agency, there’s a lot of 10 millions, right?

Marcel Petitpas (03:37): And that’s, I think one of the powerful things us about our approach, this is how we level the playing field and actually benchmark agencies across each other. And when we put everyone on this level, AGI playing field, it’s amazing how consistent the patterns and benchmarks and percentages of spending across different areas become. But until we do that, it’s really hard to compare one agency to another. And so, yeah, I think that’s a really important thing.

John Jantsch (03:59): I work with a lot of agencies as well. And one of the things we try to get ’em to do is obviously have some key performance indicators and because we can get so much data today, sometimes they have, you know, 273 of them. So, which I find is not very useful. So, so how do we get strike the right balance between, you know, too much information, really the right things to track?

Marcel Petitpas (04:22): Yeah, it, it’s a really tough question because so much of this comes down to the nuance of the business model, but the way that I encourage people to think about this is number one, focus on four key areas of the business. So there’s your core financials that of course includes AGI, which we’ve just talked about. It also includes what I call delivery margin, which your accountant we’ll call gross margin, or maybe contribution margin. We don’t use accounting terms cuz accountants get mad at us, um, for, you know, not doing everything G but for

John Jantsch (04:49): Izing their profession,

Marcel Petitpas (04:51): That’s it right? They cause. And this is the funny thing about general accounting practice is our way of looking at a service business. And it’s ironic because accountants run service businesses, it kind of flies in the face of general accounting practice. And it’s important to understand that like general accounting practice is meant to satisfy a certain compliance around taxes, reporting to investors and shareholders and things of that nature. It’s not necessarily designed to give you insight as a business owner. And so you kind of have to understand that there’s a separation there. So when we strip out pass through, and then we measure the margin on that pass through, it’s almost like we have two layers of cost of good sold, which is a concept that a lot of accountants kind of struggle with. So the second thing that we wanna do in core financials is understand what is our margin on AGI?

Marcel Petitpas (05:35): So for every dollar of AGI that I earn, how much did I have to spend to earn that? And that’s mostly gonna be the labor cost of the work that we do for clients. So all the salaries and payroll that’s allocated to the delivery function in your business, and then what we like to call, share delivery expenses, which would be some of the software or tools that you’re paying for that aren’t necessarily for one specific client, but you need to do the work. So your Figma, your stock footage, library, you know, your tools for managing ads and things of that nature. And generally you want to be aiming for 60% or higher delivery margins. So you don’t wanna spend more than 40 cents on every dollar in AGI that you’re earning. If you’re lower than that, it’s gonna be challenging to have a good bottom line profit without squeezing overhead spending kind of making a lot of cuts to the, I guess, the lifestyle expenditures of your business. So definitely pay attention to AGI, pay attention to delivery margin, and then pay attention to what percentage of your AGI is going to overhead. And you generally wanna keep that under 30% with eight to 12% going to admin eight to 14 ish percent going to sales and marketing and somewhere between four and six to going to facilities and rent.

John Jantsch (06:39): So, so, so do you have, is there somewhere we can send people to say here what you just said, if you wanna find like the checklist or the sheet for that?

Marcel Petitpas (06:48): Yeah. Yeah. We have a agency profitability toolkit, which we put together. It includes training videos, spreadsheet, templates, checklists, cheat sheets, with all these benchmarks. You can grab that@perketo.com for slash toolkit. So yeah, if you’re listening to this in the gym or in the car and you’re like, oh crap, I need to come back and take some notes. Uh, don’t worry. It’s all for you. It’s all there for you in the toolkit.

John Jantsch (07:06): So one of the, probably the hardest units, I think that people have to measure, particularly when they have in a lot of internal, uh, staff working on various accounts, you know, how do you spread that? I mean, they’re not spending every minute of their time, you know, in billable hours, so to speak, if we can use that ancient language, but you know, how do you spread that kind of unit of labor across where it should be expended, I guess?

Marcel Petitpas (07:31): Yeah. So I think this is where a lot of people make the mistake of trying to measure earning efficiency, purely using financials. And the reality is like, I think at the agency level using your financial statements is always gonna be the most accurate and truest form of measurement. But when we start slicing down to the client or project or phase or task or however your agency is structured and that’s where there’s some nuance where you really want to think about, you know, do I have distinct departments within those departments? Like what is the S of your business, because that’s gonna inform what does your data need to be structured, like to get you good reports. But when we start getting more nuanced than just the agency level, I think using your accounting tool and your financial statements to try and measure profitability on clients is generally not the best idea because it’s gonna require a ton of expense and time and investment.

Marcel Petitpas (08:18): The easier way to do that, the easier way to measure what I call earning efficiency is using what I like to call average billable race. And it’s a very simple formula. What is the AGI in that bucket? And it could be a time period. It could be a subsection of the business or both, and how many hours were worked to earn that AGI. And so simple example, I have a $10,000. I spent a hundred hours on that client. I made a hundred dollars per hour on that client doesn’t matter what it said on the rate card that I gave them or on the proposal, I made a hundred dollars an hour because I had to invest a hundred hours of my team’s time on that using that metric, you can very quickly start to compare one time period to another one, client, to another one type of service to another.

Marcel Petitpas (09:02): It makes it very fast and easy to on a tighter time horizon, get a sense of what’s more or less efficient than another service offering. And as long as you understand roughly what your average cost per hour is on labor, then can get a sense of how close is that to my target, you know, delivery margin or gross margin or contribution margin, and use that to much in a much simpler way, get touch points on earning efficiency. And that’s how I would encourage people to do it on, you know, tighter time horizons or more specific subsections of the business, cuz it’s just so much less expensive than trying to do. Cost-based accounting on projects in your accounting tool.

John Jantsch (09:37): And now let’s hear from our sponsor. Look, if you’re tired of slowing down your teams with clunky software processes and marketing that is difficult to scale, HubSpot is here to help you and your business grow better with collaboration tools and built in SEO optimizations. A HubSpot CRM platform is TA made to help you scale your marketing with ease, integrated calendars, tasks, and commenting, help hybrid teams stay connected while automated SEO recommendations, intuitively optimize your webpage content for increased organic traffic ditch, the difficult and dial up your marketing with tools that are easy to use and easy to scale learn how your business can grow better @ hubspot.com. Yeah, well, and it, it actually informs billing, right? I mean it informs what proposal should say in the proposal. It performs. If we’re on a, a retainer, it informs how much we can actually do that month, you know, for the call.

John Jantsch (10:36): And I think that’s where a lot of people get stuck is they’re thinking our, you know, internal rate is X. And so we’re gonna propose, you know, this. So, you know, how do you suggest that first off? How do you suggest billing? I mean, I’m a huge fan of retainers. A lot of people like projects, a lot of people like hourly. I like actually selling results. Like here’s what you get matter. You know, how many hours we put in or, you know, what it takes to get you there, you get the result and here’s what the result costs, but what’s your advice or what do you see as maybe the most useful sort of way to do consider billing?

Marcel Petitpas (11:11): I’m gonna give you an unpopular answer, which is I think all I there’s four ways of pricing for my perspective. And I think that there is a room there’s room in the industry for all four. And it has to come down to what we evaluate this through a value and risk lens. And I have a, a podcast that people can go listen to how to price your agency services, where I kind of go into more detail, but I have this pricing quadrant that I think of. So if you can imagine you have a vertical access on that access, you have high value at the top. You low value at the bottom. So that’s a question of asking what is the value of this service in the market? And generally that comes down to two things. How commoditized is your positioning around that service? So are you a graphic designer or are you a graphic design firm that specializes in helping B2B SaaS companies communicate visually like through their complicated data systems for enterprise customers like same service, graphic design.

Marcel Petitpas (11:59): One is clearly more scarce and more expert than the other. The other thing with value is sometimes it’s relative to the client. So to your point, if I’m increasing the conversion rate on apple dot com’s website, by 1%, that’s worth hundreds of million S of dollars to apple. My aunt Shirley who sells, you know, handmade goods on Etsy, it’s worth 10 bucks to her. It might take the same amount of work, but it’s just not as valuable to aunt Shirley as it is to apple. So understanding the relative value is important. The other thing is risk. So how risky is this work? Are we building, you know, a website from a template for a legal client and we’ve done hundreds of them and we know kind of exactly how long that’s gonna take that’s low risk or are we trying to land a rocket ship on a barge in the middle of the ocean and building control systems for that on a new technology stack?

Marcel Petitpas (12:44): That’s not very well documented. Well, it’s impossible to scope how much time it’s gonna take to do that work. So understand where your service falls on that value, risk continuum. If it’s low value and high risk, you’re probably gonna want to go towards some kind of time and materials billing model so that you can share risk with the client, build them for the hours that you’re working. Because if you can’t estimate how much time it’s gonna take, then you need to try and create some protection in the contract for that. And then it becomes a game of billing for as many of the hours that you’re working as possible. And just try to keep your average cost per hour, a level where you have enough margin in that hourly rate to be profitable, if you have high value, but still high risk. This is where I like what I call abstracted time materials.

Marcel Petitpas (13:23): So you’re not talking about hours. You’re saying, Hey, you need this enterprise website. I’m gonna lease you this, you know, cross-functional development team. It’s 10 grand, every two weeks. We think it’s gonna take 16 to 20 a sprints to do this, right? This is what companies like media monks for example are doing. It’s the contract structure is time materials. So it helps absorb and share some risk with the client, but we arbitrage the value to level the conversation up from an hourly rate. So I like that model for high risk high value work. If it’s low risk, low value, I like flat because John, if you asked me to build you a website and I told you it was gonna be 500 bucks an hour, you’d probably tell me to go pound sand. But if I said it was gonna be five grand and I could get it to you in two weeks, and it was gonna be blazing fast, SEO, optimized, prove it to convert for your industry, whatever you might say, that’s a great deal.

Marcel Petitpas (14:09): I might still make $500 an hour because I know the risk and I can arbitrage that in the flat rate. And then if it’s high value, low risk, that’s where I really like value based pricing. So we can start anchoring the price to the value to the client and arbitrage the fact that we have low risk and really start to stretch the upside. But you could see how I think different pricing models for different moments and time for an agency. And as their products and services mature, they should migrate up into the left and ideally graduate to forms of pricing that allow them to arbitrage more value in that conversation with the client. So that might be the nerdiest way that’s ever been explained, but that’s how I think about it.

John Jantsch (14:47): Well, you know, as I listen to you talk about that high risk, you know, I think there’s a huge amount of communication with the client that has to go in that too, because yeah, there may be a client out there that’s trying to get a flat rate bid. Well, it’s like remodeling a kitchen. It is never gonna be what that flat rate bid told you. Person told you it’s going to be. And then all of a sudden it’s like, well, yeah, we had 30% cost overruns, but I think that communication in that risk, you’ve gotta have a client willing to say, yeah, I’m, I’m in for part of the risk too. Right?

Marcel Petitpas (15:16): Yeah. And, and that is a challenge with time materials, billing models, right. As you’re asking the client to share some risk, but that should be rooted in this conversation of, you know, a couple of ways to spend that number one, the process we need to use to solve this problem appropriate for you requires us to iterate together and learn together and change. So like, we, we can’t predict this or putting the onus on the client to say, if we’re gonna take on this risk, I need you to more clearly define what the deliverable is here. Yeah. And, you know, we need to be really aligned on what the scope of work is. And so those are kind of some of the things, but I, I think you’re absolutely right. The, the scope management and expectation management becomes critically important when you’re talking time materials, because you are asking the client to take on more risk. Yeah.

John Jantsch (15:59): All right. So you get a one word answer to this next question should pretty much everybody in the organization be tracking their time.

Marcel Petitpas (16:07): Yes. Short answer. Yes.

John Jantsch (16:10): No, that’s now the follow up, cuz I knew you were gonna say that. That’s why I only gave you one word, but it’s a pain in the, but now go ahead.

Marcel Petitpas (16:19): Yeah. So the first is the why and why should be because that’s your best insight into the efficiency of your own business. So I think the misconception with time tracking is it’s something you do for the client. It really should be something you do for your own organization so that you, yeah.

John Jantsch (16:32): Even if you’re not billing hourly, you’re not even billing hourly. That’s right.

Marcel Petitpas (16:36): Yeah. It’d be like, if you were running a restaurant and you had no idea what your food costs, you that’d be absolutely insane. That’s what running an agency without time tracking looks like. But then the question I get is like, well, my team hates time sheets or pain in the ass. The software sucks, whatever cool. I understand that I don’t like filling out time sheets either. So there is, is a way to adapt your business model and do this without time sheets. And it’s called resource resource plan based time tracking. And this is again what companies like media monks are able to do, but it’s because the way they staff their team is never working on more than a handful of projects at a time. So what the, that, what that gives them, the ability to do is have a project manager create an updated resource and on behalf of their team of eight, nine direct reports and do that through a series of weekly touch points.

Marcel Petitpas (17:19): And then the team doesn’t have to fill out time sheets, the project manager, who’s probably the person who’s most excited about this. Anyway, they get to do it. And it, it maintains a high enough level of fidelity that you get insight, but you get, you’re able to do that because you’ve reduced what I call client dilution, the amount of clients that a single person has to work on in a given day, which makes that a feasible model. So you can do it without time sheets, but it does require you to be very deliberate about how you resource plan people and try not to have one person working on a billion projects at a time.

John Jantsch (17:51): So a lot of organizations today have been able to scale their businesses, especially in the digital age, using third parties, white labels, you know, freelancers, some sort of mix of, you know, there’s three of us sitting around here pulling all the levers, you know, 47 people all over. What does that do? What kind of challenge does that add to the sort of pure optimization model?

Marcel Petitpas (18:15): Yeah. There’s benefits and there’s cons to it. I can tell you that some of the most profitable agencies that we have ever audited were running a, like almost fully outsourced white label model where all of the high risk work was being done by external vendors. And they typically retained account management and some form of strategy. So they retained the highest value services and those companies were extremely profitable. However, they have an entire part of their business that they don’t really have any direct control over and it’s, you know, all of the execution. And so it requires you to have very good partners. It requires you to have some redundancy. So several of them that you can balance work between. It does require you to have somebody hovering over them and managing them very closely. And it does take a lot of the process and quality control out of your purview.

Marcel Petitpas (19:07): So those are some of the risks to watch out for. But I do think it’s a model that can work well. If it’s done intentionally, you apply enough margin to what those white label partners are charging. You have a contract structure in place that really does help you take downside risk off the table. Like if you think about you’re doing high risk work, there’s two ways to decrease the risk. Number one, you have to find a way to get better at scoping that whether that’s tightening up the scope of work or getting better data, getting better estimating, or it’s like just don’t be responsible for the risk anymore. Give that to a white label partner. So it is a fast track to decreasing risk, but it does still leave you with a lot of responsibility for over service for overseeing that vendor. So I think the mistake a lot of people make is well, like I won’t need to track time. I won’t need to pay to profitability anymore. That’s not true. You will still need some level of internal team and you still need to measure their efficiency. It just tends to be easier to make that efficiency very high when all the high risk stuff is off your plate.

John Jantsch (20:04): Well, and it would probably, as I listen to you talk about a resource plan, it would probably, why wouldn’t you use a resource plan with your white label partners to some degree?

Marcel Petitpas (20:12): Yeah. I mean how that relationship is managed it, yeah. There’s a lot of opportunity there to get it tighter, but like certainly there’s still gonna be management required there and measurement of efficiency,

John Jantsch (20:22): You know, as a marketing agency, one of the things that we’ve learned over the years is to really scale with our clients. We actually have to help them operationalize some of their marketing as well, because I mean, it’s not just a matter of yeah, we got your leads, you know, it’s like we build onboarding for them. We do a lot of things for them that, that actually retain those clients and turn those clients into repeat clients because they’re happy how much, and this may be outside of the area that you end up working with, but you know, how much, um, responsibility do you think that marketing agencies have to really get that deep inside an organization? If they, I, I, responsibility’s probably the wrong word. Where do you think? I, I think there’s a huge opportunity if they are willing to ago that deep. I’m curious if, because you do a lot of operationalizing of agencies, you know, if that’s sort of a byproduct of doing that.

Marcel Petitpas (21:14): Yeah, I would agree. I think one of the things that often gets overlooked in the agency space is really deeply understanding the job the agencies being hired to do. We, we tend to think of what we do in terms of the or deliverables that are being rendered, but I really encourage listeners to zoom out and think about like, what’s the problem we’re solving. What’s the job we’re being hired to do. And how can we do that job better? And the deeper you go into this and the more creative you get with how much of a scope of responsibility you can take on the harder it becomes to fire you, the more context you build with that client, the easier it is for you to retain and expand the relationship you have with them. And it also puts an onus. I think there’s another really important part of this, which comes down to client communication, which is the number one place that I see agencies falling short is just not communicating proactively enough with clients and managing expectations well, and in a proactive way. And I think if you can do those two things, well, it will, it’ll set you apart from every other vendor that they work with in a big way and dramatically improve your retention, which you and I both know, John, it, it has a massive impact on the ed economics of your business. And of course, uh, can’t be overstated in terms of its importance. Yeah.

John Jantsch (22:27): The, my longest running client, uh, has been a client since 2004. So I don’t, I don’t know how many millions that adds up to, but it’s a lot. Yeah. But fortunately they’ve continued to grow, but I, I think you’re absolutely right. I mean, we work with a lot of founders, business owners, direct owners, and you know, a lot of times I think making their life better is actually part a big part of our job. I don’t think any of them actually ask for in a deliverable, but I think that’s the problem in a lot of cases we’re solving by helping them get some control over their marketing. So to your point, that’s how we view it as well. So, so Marcel tell people where they find out more about per keyto and, and the work that you, uh, do on behalf of agencies.

Marcel Petitpas (23:08): Yeah. Parakeeto.com is, uh, the, the place where you’ll find the most information. Also, if you’re listening to podcasts and you like podcasts, we have a show called the agency profit podcast. John’s been a guest on there. He’s gonna come back for round two here soon. Um, so make sure you tune in there. If you want to nerd out some more with stuff like this. Um, and if you wanna connect with me directly, you can find me on LinkedIn. I’m wearing a shirt with birds on it. I’m not hard to spot, and I’m always happy to nerd out with you on agency profitability. If you got questions.

John Jantsch (23:34): So Marcel, thanks so much again for stopping by take time to stop by the duct tape marketing podcast. And, uh, hopefully we’ll see you, uh, one of these days out there on the road.

Marcel Petitpas (23:41): Thanks, John.

John Jantsch (23:45): All right. That wraps up another episode of the duct tape marketing podcast. I wanna thank you so much for tuning in. Feel free to share this show. Feel free to give us reviews. You know, we love those things. Also, did you know that we had created training, marketing training for your team? If you’ve got employees, if you’ve got a staff member that wants learn a marketing system, how to install that marketing system in your business, check it out. It’s called the certified marketing manager program from duct tape marketing. You can find it at ducttapemarketing.com and just scroll down a little and find that tab that says training for your team.

John Jantsch (00:00): This episode of the duct tape marketing podcast is brought to you by the salesman podcast, hosted by Will Barron and brought to you by the HubSpot podcast network. Look, if you work in sales, wanna learn how to sell, and frankly who doesn’t check out the sales podcast, where host Will Barron helps sales professionals learn how to find buyers and win big business ineffective and ethical ways. And if you wanna start someplace, I recommend the four step process to influencing buying decisions. Listen to the salesman podcast, wherever you get your podcast.

John Jantsch (00:43): Hello, and welcome to another episode of the duct tape marketing podcast. This is John Jantsch and my guest today is Steve Hoffman also known as captain Hoff. He’s the CEO of founders space. One of the world’s leading startup accelerators with over 50 partners in 22 countries, founder space was ranked number one, the number one incubator for overseas startups by Forbes and entrepreneur magazines. He’s also the author of surviving a startup practical strategies for starting a business overcoming obstacles and coming out on top. So Steve, welcome to,

Steve Hoffman (01:18): It’s fantastic to be here. Thank you for having me.

John Jantsch (01:20): So I have to admit surviving a startup doesn’t really make starting a startup. Very appealing. Does it?

Steve Hoffman (01:28): Well, the truth is that the majority of startups fail and right, what every entrepreneur wants is to succeed. And so that book, the book is designed to give entrepreneurs really practical and concrete advice on how to avoid all the pitfalls of doing a startup and act and come out on top. So I’m super optimistic and I believe entrepreneurs, if they are educated, if they know the right things, they can succeed. But I, what I wanna do in the a book is tell entrepreneurs, you can’t just dive into it. You have to prepare.

John Jantsch (02:08): Yeah. Yeah. I, I mean, that’s obviously that’s the real message is this is not a walk in the park. I mean, this is something you have to take very seriously.

Steve Hoffman (02:15): Yeah. We read about all these unicorns and people being successful, but you don’t hear about the hundreds and hundreds of entrepreneurs who hit dead ends, who, you know, fell off a cliff who, where it didn’t go as they planned.

John Jantsch (02:29): So I’m curious, how did you get into the business of advising startups? Well,

Steve Hoffman (02:34): First of all, I did three venture funded startups in Silicon valley and two bootstrap startups. So I know what it’s like. I was, I’ve been in the trenches, I’ve been two doing this my whole life. And you know, after my third venture funded startup, my friends started to come to me and my nickname is captain H. So they’re like, captain, can you help me? You know, how do you raise capital? How do you put together an investor deck? You know, could you look at my business plan? See if the business model works, all these questions. And I started to get these entrepreneurs together in groups. We called them founder space, round tables, and we’d meet, I’d introduce ’em to angel investors and marketing experts and lawyers, and really try to help them get off the ground. And after that, we decided we’d get our own space. So we got a space in San Francisco, we launched the founders space accelerator, and it just spread from there. Now we’re like all over the world, working with entrepreneurs.

John Jantsch (03:32): I I’m cur this is probably more of a personal curiosity question to hear your answer to this. There’s obviously a lot of buzz about startups. A lot of people start businesses. The term startup seems to apply to a certain approach or kind of business. I’m curious, how, how would you define the difference between a startup and somebody starting a business?

Steve Hoffman (03:52): So they’re different types of ways to be an entrepreneur. They’re all entre, they’re all entrepreneurial. So it doesn’t matter if you’re starting a local restaurant, a laundromat, you know, the next Google or Facebook, you are starting a business. It’s a lot of work. So a lot of the basics are the same, but the big difference between what would be, you know, a local business, as opposed to a potentially global international business is growth. Potential. How big is your vision? Can, what you’re starting grow? Do you have something unique? And it doesn’t have to be technology. It could be like Lululemon. They didn’t have a lot of technology. It was a unique approach at a specific time to target the yoga market, which other big players were overlooking. And they targeted it did a really good job and they are, they grew enormously. So it really doesn’t matter could be a restaurant, but are you going to franchise it? Do you have big plans? How are you gonna grow this chain? Or are you happy to run just the local restaurant that is differentiator.

John Jantsch (05:03): So in the beginning though, even with the bigger vision, are there different challenges

Steve Hoffman (05:09): There are. And there are, I often tell entrepreneurs it’s as much work, time, effort, and risk to run a small business as it is to run a potentially incredibly large business. And that’s because you’re just operating on different scales and you need to focus on different things. So if you’re running a small business, usually what you’re doing, if it’s a consulting business or any type of business, you are doing something similar to what other people have done in the past. So you are your, your business model. Isn’t gonna be totally innovative. You aren’t taking technology and using it to solve problems in a new way that other people aren’t, but you are just focused on building your business and the challenges there are, it’s a competitive world. You have to compete against all these other people. And if you, for example, open a store and it’s in the wrong location, really tough to succeed.

Steve Hoffman (06:08): If you don’t get the right people on board, you know, hire them really hard to succeed, marketing, getting your name out. How do people find you? How do you differentiate yourself? All these things are, if you’re running a small business, they’re huge challenges. Now, if you’re running what we call a high growth startup, usually what you’re doing, but not always, like I said, is using technology. You don’t have to invent this technology. It can be a mobile app on a phone. You didn’t have to invent the iPhone and invent applications. You just have to use the technology in a way that provides value to people that they aren’t getting elsewhere. And in addition to that, and this is the really hard part, you have to find a market. An untapped pool of demand is waiting for this to come along now, right? This is why I tell entrepreneurs who wanna run, you know, wanna start the next big Google or next big business.

Steve Hoffman (07:08): Your, your most important task at the beginning is to be a demand hunter to go into the market. It’s not to think of some crazy new idea because most is don’t work in the real world. They sound good, but you know, you put ’em out there and somebody’s already doing them, or they don’t work for various reasons. But the hardest thing to figure out is where is the, these pools of demand that are always forming new pools of demand that aren’t being met by the marketplace. And if you can identify one of those and tap into it that and provide a solution for that power of that demand will just drive the growth of your business.

John Jantsch (07:45): So as somebody who helps these organizations get funded and grow, I mean, is that kind of your first question is that when somebody comes to you and says, I’m gonna make blah, blah, blah, that is that your first, you know, thing is if we can’t figure out where that demand is, then, you know, go away, uh,

Steve Hoffman (08:01): Bottom line for most smart investors. And I’m an investor and I try to be smart. It’s yes, it’s honestly. Yeah. If so we look at a couple things, one just right off the bat. If we’re looking at their concept, their investor deck, we’re saying, where is that demand? Show us that demand. Do people really need this? Because you can say anything you want, but if, and you can build the best product you want, you could spend year building like the most perfect product with all the features and no bugs or whatever it is. You put it out there. If there’s no demand for it, it just dies like invariable, nobody. So we as investors, most investors, we call it in Silicon valley, but really what it is, it show us that people need this. And are there a lot of them out there, if, if you can prove that to us, and there are a lot of them and nobody else is doing this, or they’re not doing it as well as you are, you’re using technology to do it in a much better way, a much more efficient way, deliver a lot more value.

Steve Hoffman (08:59): Woo. You got something. Then we get really excited. And the next thing we look at, honestly, after that is the team. Like you can have the best idea and the biggest demand in the world. But if you have a crummy team, like they’re not up to par, they can’t execute on the idea. You’re still go. You’re gonna fumble the ball. Somebody else will pick it up and run with it. So you need those two things are the most important thing when it comes to funding high gross startups.

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John Jantsch (10:12): Yeah. Now you kind of answered my next question. I was gonna say, I was gonna ask you, you know, what are are the secrets to raising money, but I think you just answered it right. There have a team that shows the experience that they can pull this off and have a ability to show demand. So you probably get this question. I think a lot of people assume, oh, I wanna go out and get funded. Should everybody

Steve Hoffman (10:30): Get funded? Absolutely not. So, first of all, there are many types of businesses and certain businesses are right for certain people. Like a lot of people, they are naturally not foreign leaders. They don’t like it. They don’t like managing people. They don’t want to hassle with it. They are individual contributors. They tend to be much more happy doing their own thing. And when they step outside of that, who they really are, they, they don’t even perform well because they’re, it’s just not to them.

John Jantsch (10:58): It’s a drain.

Steve Hoffman (10:58): Yeah. So I tell those people, pick a, what we call lifestyle business, pick a business, what you can run with you and maybe a few other people or by yourself, and be really happy and earn a good income. You will be much more successful that way. And then other people they really are so that they really have great leadership skills, as well as the love and desire to engage people, to go out into the world, to pull in resources. If that is in your DNA, if that’s who you are, then you are in a good position to start one of these high growth businesses that you build, not by yourself because we, the CEO’s job. Number one job, you know, is just find the right people and find the right resources. That’s all you need to do. Because if you get the right people on the team, they’re gonna build your product, the right people on the team, they’re gonna market your product. The right, you know, they’ll do the right. People will do everything, but the CEO needs to set a vision and then needs to go out and get these people committed. Even when you have no money or very little money, get them committed to you, get investors committed, get customers committed. That is the role of the CEO in an early stage company.

John Jantsch (12:11): That’s interesting. I’m sure there may where, you know, the founder made the thing or, you know, did the tech or knew how to do the tech once I grew about 10 people, they crashed. Yeah. You know, because it was like, you know, that, that became, you know, the real challenge. So

Steve Hoffman (12:24): Yeah, if you can’t lead people, organize people, motivate people. You should take another role in the startup. Like if you wanna do a startup and you’re really just like, love the coding, do the coding and get somebody else. Who’s that superstar in that area.

John Jantsch (12:39): So I know in the book you talk a lot about managing people. And, and in my experience, that’s prob I don’t care what kind of business. That’s the biggest, in many cases, that’s the biggest challenge as they grow. So what are some of the secrets to effectively growing a team? So,

Steve Hoffman (12:53): First of all, don’t pick second rate people and it’s so easy to do because it’s so hard to find great people. It’s really hard, but especially in the positions where you want them to innovate where you want them to think beyond their job description. And this is true for like startups that really want to grow. So if you have person and all, they have to do sit at the cash register or take, you know, orders, you don’t need a super innovator. You could, you know, get, just get a reliable person. But if you are going to have somebody who’s developing a product, developing a new technology, designing, or going out into marketing and figuring out new ways to market, you really need a thinker. So that’s, so you have to spend a lot of time looking for this person. Like literally when you first start your company, I tell people something counterintuitive.

Steve Hoffman (13:41): I say, don’t worry about the idea. Like there are a million ideas out there there’s a million ideas you have. They’re probably not exactly right. You will figure out your idea later, but what you can’t figure out later, what you need to start with is the team. So put 80% of your time into like, who are these amazing technologists, this amazing marketing person, this amazing designer that you can bring on to your team at the beginning. And then as a team, you start to go into the real world and run experiments to try things out. You might have 20 different ideas between all of you and you’re gonna try all of them out. And usually you pick a direction. You usually say, you know, we want to remake the restaurant business and we have all these ideas on how we can do this. And with this team, we’re gonna go into the restaurant business. We’re gonna talk to chefs. We’re gonna talk to owners. We’re gonna talk to waiters. We’re gonna figure out what their problems are. And we’re gonna figure out how to do things differently. Use new technology, new business models to, to solve their problems. If you approach it this way, your chance of success is so much higher.

John Jantsch (14:46): So Steve, you, you’re still in San

Steve Hoffman (14:47): Francisco, right? I am actually near San Francisco. Now. I used to live here city. Now I live outside this year.

John Jantsch (14:54): So, so you probably occasionally drive by some very large buildings that are at about 10% capacity, you know, because employees are distributed now or not coming back to the office ever again. Do you think that the no headquarters model is going to impact startups going forward or, or is it really just a different form of delivery of, you know, employee services?

Steve Hoffman (15:16): I think it’s a positive and a negative. So for some people it’s a, you can tap a workforce of talented people who might not be able to come into the office, who can save a lot of time by not doing the commute. But it’s also a big disadvantage because having people in the same room, collaborating, talking on their downtime, you know, all these serendipitous moments that you have when you’re with a team of people, those don’t exist. So I, what we’re seeing now in Silicon valley is a lot of startups are itching and big companies to get people back in the office. They wanna get people back in the office. It’s hard because people, a lot of people like now, they got used to working remotely. They have control over their time. They have more control over their life. Uh, they don’t necessarily want to go back.

Steve Hoffman (16:01): So we’re gonna see this push and pull over the next several years. But my gut feeling is that when, you know, barring another pandemic, which we hope hasn’t happened, you know, assuming we’re, we’ve gotten over this and now we have vaccines. If that is the case, I think we’ll start to revert back to the way it was. Now. It’ll never go as far back, like to the point where, you know, we expect almost everybody to be in the office. It will never go there again. We’ll always have this blend, but we will see a lot more people being expected to go and, and be there in person.

John Jantsch (16:38): Yeah. Yeah. I know a number of people in San Francisco that I, I know and have spoken with recently, actually left the city.

Steve Hoffman (16:45): It’s a little harder for those people. And that’s what I mean. It’s never gonna go totally back, but, and they’ll be compromises or they’ll have to make compromise this, but I will tell you, you know, some, a lot of startups I work with, we, we wanna see people face to face. It’s just not the same when you’re distributed and talking remotely.

John Jantsch (17:05): If, if you were gonna have every potential founder or founder come before you ask for money and they could give you all of the standardized personal personality tests that they’ve taken. Are there any traits that you would look for that, that you think need to, that make somebody more likely to succeed as

Steve Hoffman (17:20): A starter? Yeah, I will tell you, so when you are faced with a real challenging problem, even something that seems impossible, hopeless, like it’s just like, it, it, at a certain point, everybody says you can’t do it. It’s not possible. You believe actually what might not be possible, but the entrepreneurs who just dig their heels in and just go at it, like they just go at it relentlessly. Those are the ones who tend to break through it. And if you have that type of dogged determination in your personality, there’s a good chance. You’ll make it. You might not succeed on your first try or your second try, but you will get there.

John Jantsch (18:01): Yeah. You won’t give up, tell us a little bit about the founder’s space, how it operates. Does it, you, the typical incubator, or do you feel like you have, uh, some innovations that you’ve brought to this?

Steve Hoffman (18:13): Yeah, so we’re a little different, we’re not, we have evolved actually through the pandemic. We used to be much more like a typical incubator. We were early on in the ecosystem in San Francisco. We grew really fast internationally. Now we’re more like a distributed innovation hub. So we work with other incubators all over the world with different governments, with different, uh, tech, technological companies, big tech companies. And what we do is we are really into education. So we run programs all over the globe, both online and offline. Uh, we used to do a lot more offline and we plan to do that again. Now that we’ll be traveling much more where right,

John Jantsch (18:54): We,

Steve Hoffman (18:55): Uh, really focus on giving entrepreneurs the, what they need to know to kind of break through and helping them in detail, like analyzing what they’re doing, where they’re running into problems and getting those we’re less focused on running a traditional accelerator program where we have take equity. We have demo days. We do all these things. Those our programs tend to be. They’re not like you have to be in them three months or whatever, and then have a demo day. Our programs tend to be more compact, really try to, uh, focus today. What are your problems today? Let’s see in, in, in a week, if we can get through over the major hurdles, if we can have some breakthroughs for you, new ideas, things that will take you to the next level, and then you can go on and run your business.

John Jantsch (19:43): So it’s almost like a more of a sprint model in some ways,

Steve Hoffman (19:46): Yes. As sprint at just the right time when entrepreneurs need that help the most. So they come to us, you know, we hit this roadblock or we, we can’t get beyond this point. What can we do? What, you know, since we’ve worked with hundreds of companies, we start to see patterns. We start to see things, oh, well, you’re, you don’t have this on your team or you’re headed in this direction. Or you haven’t really validated your model. You think you have, or you wanna believe you have, but this is what you need to do to really know if this is gonna work. And if it’s not, we need to pivot. We need to, uh, go a new direction.

John Jantsch (20:20): Steve tell people where they can find out about your programs and obviously the books and everything else that said that you’ve, uh, got yourself

Steve Hoffman (20:27): Into. Great. And so if you wanna reach me for any reason, just go to founders, space.com. So it’s founders based.com. I’m there all my books, surviving a startup. I have a number of other books. They’re all there. And you can contact me at founder space. You can also reach out to me on virtually any of the social networks, just search for Steve Hoffman or founder space. A good one is LinkedIn. I respond to everything. So reach out and get in touch.

John Jantsch (20:54): Awesome. Well, thanks for taking some time to stop by the duct tape marketing podcast. And hopefully we’ll run into you. Uh, one of these days out there on the record.

Steve Hoffman (21:00): Thank you. It’s been wonderful.

John Jantsch (21:02): All right. So that wraps up another episode. I wanna thank you so much for tuning in and you know, we love those reviews and comments. And just generally tell me what you think also did you know that you could offer the duct tape marketing system, our system to your clients, and build a complete marketing consulting coaching business, or maybe level up an agency with some additional services. That’s right. Check out the duct tape marketing consultant network. You can find it at duct tape, marketing.com and just scroll down a little and find that offer our system to your client’s tab.