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Nội dung được cung cấp bởi Stephen Semple and David Young, Stephen Semple, and David Young. Tất cả nội dung podcast bao gồm các tập, đồ họa và mô tả podcast đều được Stephen Semple and David Young, Stephen Semple, and David Young hoặc đối tác nền tảng podcast của họ tải lên và cung cấp trực tiếp. Nếu bạn cho rằng ai đó đang sử dụng tác phẩm có bản quyền của bạn mà không có sự cho phép của bạn, bạn có thể làm theo quy trình được nêu ở đây https://vi.player.fm/legal.
Reverse engineering the success of established business empires.
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190 tập
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Nội dung được cung cấp bởi Stephen Semple and David Young, Stephen Semple, and David Young. Tất cả nội dung podcast bao gồm các tập, đồ họa và mô tả podcast đều được Stephen Semple and David Young, Stephen Semple, and David Young hoặc đối tác nền tảng podcast của họ tải lên và cung cấp trực tiếp. Nếu bạn cho rằng ai đó đang sử dụng tác phẩm có bản quyền của bạn mà không có sự cho phép của bạn, bạn có thể làm theo quy trình được nêu ở đây https://vi.player.fm/legal.
Reverse engineering the success of established business empires.
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190 tập
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×1 #188: Walmart – Big Dreams for Small Towns 17:55
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17:55Sam Walton left JC Penny and realized that people in rural America had to travel to shop in department stores. He changed all that. Dave Young: Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is… Well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those. AirVantage Heating & Cooling Ad] Dave Young: Welcome back to the Empire Builders Podcast, Dave Young here alongside Stephen Semple. And Stephen just told me the topic for today’s podcast, and it’s Walmart. Stephen Semple: That’s it. You’re so excited. Dave Young: Oh my gosh. We’re finally going to talk about Walmart. Stephen Semple: Walmart’s just one of those companies that they’ve been unbelievably successful, and I’m going to defend Walmart here, but they’re hard to love. Dave Young: They’re hard to love, but man, if you live in a small town, they’re hard to avoid too. Stephen Semple: Yes. Dave Young: And you got to hand it to Sam Walton. Stephen Semple: Yep. Dave Young: I’ve read his book. It is actually the one that was ghostwritten while he was dying in the hospital. And it’s a really good read and it’s got some great lessons, so I’m anxious to hear what you found out. Stephen Semple: It’s a great read. It has some fantastic lessons in it. I think there are a few things that Walmart as a corporation has started to deviate from those ideas that if they had kept closer to them, Walmart is a company that would be deeply loved. There’s a few things I think they’ve moved away from, but here’s one of the things that I’m going to say I admire about Walmart is that if we did not have a Walmart in the marketplace, I think it would be far easier for prices to increase for consumers on certain products, groceries, and things along that lines, Walmart being in there, to a degree, has managed to keep prices for certain commodities at a certain level because Walmart is dedicated to that, keeping prices down. And I think having somebody in that space is good. And this was stats from a couple of years ago was over 10,500 stores in 24 countries, that number surprised me. I didn’t realize it was 24 countries, and it was started in 1945 by a former JCPenney employee. I didn’t realize that Sam Walton had worked for JCPenney, and the first thing he did when he left JCPenney is he bought a branch of Ben Franklin stores from the Butler brothers. So he started with those stores, and what Sam saw was retailers were putting a few large stores in big cities, but those big stores in big cities was inconvenient for rural shoppers. And what he decided to do was open a large department store in Rogers, Arkansas. Now, here’s the crazy thing is, this was a place with a population of 6,000 people. So one would go, “This is nuts. Why would you open a store in a town of that size?” So it’s 1962, and he opens basically the first Walmart. And his primary focus was to sell products at low prices, higher volume sales, lower profit margin, and really do this crusading for the consumer. And the funny part is the name Walmart was derived from Fed Mart, which was, if we remember when we did the episode on Costco, was the first version of Costco that was done by Saul Price, was Fed Mart. And Walton has also stated he liked the idea of calling the chain Walmart because he really liked Saul’s name, Fed Mart. He even talks about how a lot of his really good ideas came from studying Saul. So it’s really, really interesting. But within its first five years, the company expanded to 18 stores in Arkansas and was 9 million in sales. So it really did this… Really, really, really, really successful doing this nutty idea, this nutty idea of putting large stores in small locations. It was years until Walmart had a location in a large urban area. It took a long time before they did it. But here’s the thing that really made Walmart successful. And at the time, stores organized all their things by category. So it was like category, category, category, category, everything was put together by category. And what Sam Walton observed is there are certain items that are very price sensitive and certain items that are very popular. So he created what he called Action Alley, which is a big alley right behind the cash register, which has the highest traffic. And he would put trendy, seasonal, and discount items with large signage in this alleyway. And what he found is it dramatically drove sales. It dramatically drove sales to the stage where people would come in and all of a sudden the amount that was in the shopping cart dramatically increased. Later as the company became more sophisticated, they got really good at managing cart. In other words, knowing that these are the two items that should be put together because these are the two items that are bought together, and they may not be of the same category. So that was a completely, completely innovative idea that Walmart brought to the table of retailing. Dave Young: Do you have an example of that? I’m thinking like hot dog buns and ketchup, or put the buns over near the hot dog somewhere. Don’t make me go down the bread aisle. Stephen Semple: Yes. It would be things a lot like romaine lettuce, croutons and Caesar salad dressing should all be put together. Dave Young: We’ve seen that in their stores, right? Stephen Semple: Yes. Dave Young: They’re good at it. And some of those items, they’ll be in multiple locations in the store. You’ll have the croutons and the dressing near the romaine because that’s got to be in the produce aisle, but you’ll also find those same things when you go down their regular aisle. Stephen Semple: Correct. Dave Young: So it’s a matter of not just having one location in the store for one item. Stephen Semple: Correct. Dave Young: Yeah. Stephen Semple: And there will be ones, because I know people who have worked with Walmart, and there’ll be ones that aren’t obvious. You won’t necessarily realize that boy, light bulbs and batteries go together. But it may be one of those ones that through their studying of the shopping cart that they go, “Oh, isn’t this really interesting? A really high percentage of people who buy light bulbs also buy batteries. Let’s put those two together to stimulate the purchase of one or the other.” A lot of people don’t realize Walmart has one of the largest computer systems on the planet. Dave Young: Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. [Empire Builders Ad] Dave Young: Let’s pick up our story where we left off. And trust me, you haven’t missed a thing. Stephen Semple: A lot of people don’t realize Walmart has one of the largest computer systems on the planet, how they study consumer behavior and shipping and things along that line. It’s really quite remarkable. Another innovation that Walmart did was this concept of cross docking where they try to keep actually as little as possible in the warehouse that literally trucks are coming in one side of the dock, stuff’s being unloaded from those trucks not even stored in the warehouse and loaded in trucks on the other side. So basically their inventory is either in a truck coming to the store or sitting in a store. Dave Young: They don’t even call them warehouses. They’re distribution centers. Stephen Semple: Yes. Yes. Dave Young: Someone very close to me worked at Walmart for a number of years. And so the truck is packed with specific size containers for each store. Stephen Semple: Yes. Dave Young: So wherever the truck’s coming from on its way to the distribution center, it’s already got the things that are going to a bunch of stores, but it’s not going to make the rounds to all those stores. At the distribution center, everything for the stores that that distribution center services comes off the trucks coming from the suppliers and then gets loaded onto the stores that are bound for the individual distribution center. So all the- Stephen Semple: Very sophisticated. Dave Young: It’s just a giant, logistical, sorting place. Stephen Semple: And here’s the thing, if you’re going to be low cost, if you’re going to be low cost, you can make a lot of money and you can be successful being low cost. But what it means is, everything in your business has got to support that. So you’ve got to be very efficient. Dave Young: And that’s the part of it that, as you said, that’s the part that people don’t see. Stephen Semple: Correct. Correct. Dave Young: And even to the point of you talk about their computer system, as the employees are stocking shelves, you wander around and you decide to take something out of your basket and put it in a place that it doesn’t belong, they need to find that out because as they go through and count things on the shelf or the computer knows that six of these have sold, that’s how many get reordered. And it happens automatically, and so it’s just this constant battle inside the store about making sure that things don’t get scattered or the computer’s going to just not… It won’t get reordered because it’s all still in the store. Stephen Semple: So there’s two other things I wanted to cover that I find interesting, actually three things. So one is Sam Walton was very big on, if it’s not on the shelf, you can’t sell it. And so they don’t let things go out of stock. They will run the risk of over ordering because if you run out, you can’t sell it. And I think a lot of retailers today don’t have that philosophy. They’re happy to sell out. And his whole thing is, don’t sell out because if it’s not on the shelf, you can’t sell it so it always has to be on the shelf and I think that’s really interesting. But the other one is he was very famous for asking the question, instead of how many more could we sell at this lower price? Instead of it being $10, it was $8. How many more could we sell? How many more do we think we could sell at that price? And really thinking about that as their methodology. But this whole thing of this aisle and this whole thing of grouping products together, when you think about it, is also about eliminating friction for the customer. Because it would be really tempting as a retailer to say, “Well, it’s way better for me to get you to wander around my store. So if you buy romaine lettuce and Caesar salad dressing and croutons together, I should have them in three different sections because as you’re wandering, you might see something else,” which to a degree is true, but is inconvenient. When you put those things together, it’s actually a better shopping experience as well because I came in for these three things I’m not having to wander around everywhere to look for. Look, you are also doing a stimulating purchase because if the croutons are right there, you might go, “oh, right, I forgot. I also need croutons.” But it’s also a convenience for the consumer. Dave Young: Getting back to the notion of their approach to buying is always an interesting one to me as well. There’s a story I think in the book about the lawn mowers. Do you remember that one at the- Stephen Semple: No, I don’t remember that one. Dave Young: Early on in his development of the Walmart idea, and it might’ve been in one of those first stores, one of his competitors had a bunch of… Late in the summer season, this guy had ordered too many lawn mowers, and Sam Walton bought them all from him. He’s like, “Well, you can’t sell them. I’ll buy them.” So he bought them for a really low price and traditional retailer mind would go, “Okay, I’m going to buy them and I’m going to figure out how to sit on them till next season, and then I’ll sell them really low as spring starts to warm up,” and that’s not the way he thought. He thought, “Okay, I get them for this price. I’m going to line them all up on the edge of the road outside, even if I only make 10 bucks a piece on him, I’m not going to do the regular markup because it’s the end of summer, but I can make some money selling all of these.” and that’s what he did. And so when his buyers are at the shows and the presentations for buying things, the question isn’t how much can we make per item? What’s our profit going to be by taking this widget that we buy for $5 and selling it for 10? It’s how many can we sell, not what is our margin going to be, because it’s all about the volume. And we have enough stores that if we sell a gazillion more of them than everybody else, even at a lower margin, we’re going to make more money in the long run because our turn is going to be bigger. Stephen Semple: They have a huge turn, and they’ve dedicated the way the stores are designed, the way the warehouse is designed, the way their systems is designed to be operationally unbelievably efficient at doing that. And so I’ve always said, there’s two places you can make money as a retailer, you can make money at the low end and you can make money at the high end. At the low end, you just have to dedicate yourself to being really operationally excellent, and Walmart is operationally excellent. They really are, and that’s why they’re able to do what it is that they do. Dave Young: I’m going to substitute the word efficient. Stephen Semple: Sure. Yeah. Dave Young: Because honestly, I don’t think it’s excellent that I have to ring up my order now and bag my own groceries, and there’s nobody… In the store that’s near me, and I don’t go very often, but there is nobody there that can ring you up and bag your stuff. It’s all, “No, you’re the Walmart employee now.” Stephen Semple: I’m just going to say- Dave Young: I’m sure it’s efficient. Stephen Semple: Well, I’m actually going to give you a different look on that. You’re going to see that in more and more retailers and it has nothing- Dave Young: Oh, yeah. Stephen Semple: But here’s where I’m going to tell you, it has nothing to do with whether or not it’s cheaper, it has to do with the fact that they can’t find people. Speaker 6: Sure. Stephen Semple: That’s the problem. That is ultimately the problem. We’re going to see more of that type of technology being used in restaurants and stores and things along that lines simply because of the shortage of people, which we’ve talked about in past demographic ones. Sam built a massive empire, and what we have to recognize is he did a couple of unbelievably crazy things where you would go, “You’re building a store of what size in a place of what population? You’re buying lawnmowers and you’re going to sell them into season? You are lumping these products together in this way?” All those things, which are now common practice, people would’ve thought they were nuts, and it was an innovative idea that built an empire. Dave Young: You can’t deny the innovation and the sheer determination, and you can’t deny the success. Right? Stephen Semple: No. Dave Young: You look at how many billionaires live in Bentonville, Arkansas that are related to Sam Walton. Stephen Semple: Yeah, that’s it. Dave Young: That tells the story right there. Stephen Semple: It sure does. All right. Thanks David. Dave Young: Thank you, Steven. Thanks for listening to the podcast. Please share us, Subscribe on your favorite podcast app and leave us a big fat juicy five-star rating and review at Apple Podcasts. And if you’d like to schedule your own ninety-minute Empire Building session, you can do it at empirebuildingprogram.com.…
Stephen and Dave stroll down memory lane to discover just how the Willy Wonka bar came to be. Dave was a little disappointed. But you won’t be. Dave Young: Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those. [Waukee Feet Ad] Dave Young: Welcome back to the Empire Builders Podcast. Dave Young here alongside Stephen Semple. And the topic whispered in my ear this morning was one that Stephen reminded me that I requested because we’ve- Stephen Semple: And you’ve remembered so well. Dave Young: That’s the fun part of being me is I like to hide my own Easter eggs. We have talked about so many brands of chocolate, and I think I mentioned that sometime we need to talk about Wonka. Stephen Semple: Yes. Dave Young: And I kind of wish you’d told me beforehand because I’d go back and watch the movie just for the fun of it. I haven’t watched the latest one, the Timothée Chalamet or whatever. Stephen Semple: I watched it on a flight recently because it was one of those ones where I didn’t want to run the risk of spending the money and going to the theater for it. Dave Young: Sure. Yeah. Stephen Semple: So I was on a flight and it was one of the movies, and I thought, “Oh, I’ll watch this.” And it was actually a good rendition. It’s the prequel, is how it’s set. Dave Young: Oh, it’s the origin story. Stephen Semple: It’s the origin story, and it’s good. Dave Young: Oh, cool. Stephen Semple: It’s good. I enjoyed it. Dave Young: I’m going to have to watch it. Stephen Semple: I thought they did a nice job of it. Yeah. Dave Young: Well, we’re actually recording these on a Saturday morning. Maybe I’ll talk to Julie and see if we can watch Wonka this afternoon. Stephen Semple: I think you’d enjoy it. Dave Young: It might be kind of fun. Stephen Semple: I think you’d enjoy it. Dave Young: So what’d you find out? I’m dying to know. Was there really a golden ticket? Stephen Semple: Well, you’re just going to have to wait and see. Dave Young: Did he really dress that way? Stephen Semple: It’s the late 1960s, and the candy business is in a bit of a slump. There hasn’t been really much innovation. It’s completely controlled by Mars and Hershey at this point. Dave Young: Probably the American Dental Association had just formed. Stephen Semple: And what we’ve got is we’ve got this food executive, Kenneth Mason, who’s looking to shake things up at Quaker Oats. He’s an executive at Quaker Oats. And Quaker Oats is famous for oatmeal and Cap’n Crunch cereal. Dave Young: And the old Quaker dude in the hat staring at you from the box. Sure. Stephen Semple: Yeah, that’s it. And Kenneth Mason sees a bigger opportunity. Now, he graduated with a degree in English from Yale before going into the food business, and he has aspirations to become president of Quaker. And he’s about to head into candy. So he goes, “You know what? I really want to make a big splash in this division.” Because in the 1960s, candy is boring, there’s no new innovation, there’s no advertising going on. Mason believes, “This is my opportunity to create the next new thing, make my mark, and become president of the company.” But he needs a launching pad to create that splash. And he’s read the book, Charlie and the Chocolate Factory, and it inspires him what to do. And this idea went on to become a $2.8 billion business. Wonka is a big deal. But it starts with this book that’s about to become a film, and he wants to tie in to the movie. He basically convinces Quaker to finance the movie. So they give the movie company like $3 million, which is like $23 million today. And they want to get Wonka candy out at the same time. New candy in the movie, tie the two together. These two things has never been done before. This is a brand new idea of literally making a movie for the candy that you’re about to launch. And the film industry is really excited about this because the film industry is at a low point. There’s been lots of box office failures. Over half the homes in the United States now have a TV. And here’s what’s happened to weekly movie attendance. In 1963, weekly, so people going to a movie once a week, was 44 million people in 1963. By the end of the decade, by the end of the 60s, it’s down to 20 million people. That’s a huge decline. Dave Young: Television. Stephen Semple: Yeah. So basically, the industry is also looking for new blood and new ideas. So this idea of Quaker coming along and fully financing a movie, Hollywood’s like, “Woo-hoo, This is awesome.” But there’s one thing they want to do. They want to change the title, not Charlie and the Chocolate Factory, but they want to change the title to Willy Wonka. Dave Young: Yeah, sure. Stephen Semple: Because they want to do the Willy Wonka bar. But they got to come up with an idea really quickly because the movie’s being made, they don’t have any product right now. So the easiest and fastest thing to make is a chocolate bar, but that’s a crowded space and it’s a risk. It’s got to be a hit. Well, the movie’s a hit today because it’s become a classic, but at the time that it came out in the box office, because it was released in 1971, it was a flop. That year, they were competing with Dirty Harry, Clockwork Orange, The French Connection. It was really hard to stand out. It was a musical. Musicals have been declining. So the Wonka Bar did not get the lift it was hoping for from the movie. But Mason is still trying to create ideas for the Wonka brand, and he still wants to stay true to this idea. He still believes that there’s something here. So he doubles down and he wants to come up with new candies that were not on the market. So the first idea was the Everlasting Gobstopper. Dave Young: I remember it. Yeah. Stephen Semple: Right? Because it was like the- Dave Young: The jawbreaker that never ends. Stephen Semple: Yeah. It was a new manufacturing technology, and he wanted to make the candy look like the candy in the film and make it last longer than anything in the market. So it’s the mid-1970s, he’s still trying to make a hit in the candy business, and there’s lots of pressure from the board. And there’s these jawbreakers being made by Breakers. And basically, that’s what they did, is they took that idea and they turned it into the Everlasting Gobstopper by tripling the layers with each being a different flavor. So basically, as you’re having it, the flavor changes. Dave Young: Changes. Yeah. Stephen Semple: Yeah. Five years later, they launched the Gobstopper, it’s mid-1970s. And here’s the interesting thing, the movie starts to take off. Dave Young: Because it’s the reverse of what they intended to happen. Stephen Semple: Yeah. The movie starts to take off. Guess what ends up happening? Dave Young: Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. [Empire Builders Ad] Dave Young: Let’s pick up our story where we left off. And trust me, you haven’t missed a thing. Stephen Semple: Guess what ends up happening? It takes off well enough that Kenneth Mason gets his dream and he becomes the president of Quaker. Dave Young: Oh, it all works out happy in the end for him. Stephen Semple: Well, and he passes Wonka over to Bob Anderson. And Bob Anderson was a guy from Wrigley. And Bob does a really cool innovation. So they take a look at, there’s these gravel bits of hardened sugar at the bottom of the Gobstopper machine. So they’re taking a look at these things, and they make them sour. So they’re these little granular things, they make them sour. And Bob takes a box that was originally designed for cigarettes, and he puts them in it. And basically, when you shake it, it drops out two flavors. So two little bits will come out. And he’s wandering around, and there’s doodles from one of the designers that the food scientists saw, and the doodles looked like the candies that they were making. Dave Young: Good. Stephen Semple: And they asked the artists, “Well, what do you call these little characters?” “I call them Nerds.” Dave Young: Nerds. Yeah. Stephen Semple: So Nerds, which were basically made from the waste from the Gobstopper machine, put them in this little cigarette package, and 215 million boxes of Nerds was sold in the first 18 months. And it was one of the first candies to use a character. So that was one of the really big innovative things of this character on the side of the box. Dave Young: I’m familiar with Nerds, but I guess I don’t tie Wonka to them. Maybe I don’t look at the package enough, but yeah they’re Wonka Nerds. Stephen Semple: They’re Wonka Nerds. And in 1988, Nestle buys Wonka. And then later it was bought by the Ferrara Group. So Wonka was always part of a big company. But the thing I really found interesting about the approach of Kenneth Mason is his desire was to become president of Quaker. And then he has this little division that’s kind of being ignored. And what he realized was this was an opportunity for him. And the opportunity was, be super innovative, stand out, roll the dice, take that risk, and if it works, you get the prize. In business today, I think not enough people who are running divisions or particular departments think that way, that it really is this opportunity to do that innovation and take that risk and do those different things because you’re in this little corner where you can be a little bit more innovative. Dave Young: Sure. It’s a cool story that he did do that, he won for taking the risks. Stephen Semple: Yeah. Dave Young: You’re never going to win by just sitting back and doing the same thing that you’ve been doing. I have to admit though, that I am- Stephen Semple: I know you’re a little disappointed. Dave Young: … a little disappointed that it’s not a true movie. It’s a candy made after a movie, not a movie made after a candy. Stephen Semple: Well, yeah. Dave Young: But that’s okay too. Stephen Semple: That’s okay too. But the thing I found also that’s quite interesting, and I think this shaped a little bit of the way Kenneth Mason looks at the world, is before entering the food business, his degree was in English from Yale. And I believe today, well, I know today, we underappreciate people who have fine arts. I don’t know would you define English as a fine art, but more those soft skilled- Dave Young: Yeah, just a liberal arts education of some kind. Yeah. Stephen Semple: Liberal arts education is undervalued in business today. We’re looking for people with MBAs and engineering degrees. And look, all those things are important. Heck, my degree’s a business degree. But a lot of innovation comes from people who approach problems from a different angle and look at the world in a different way. And those are the people who come with these more liberal arts degrees. And it’s amazing how much innovation is driven from folks who look at the… Heck, Steve Jobs had a degree in calligraphy. And I think business far too often is just hiring people looking for, “Do you have a math degree? Do you have a science degree? Do you have a business degree? Oh, you’ve got a degree in English? Yeah, we’re not interested.” Dave Young: Yeah. Honestly, I’ve been thinking about how big AI has become, and I think there’s probably an advantage to having a broad-based liberal arts degree if you’re trying to figure out how to talk to an AI and get it to do what you want to do. Stephen Semple: Yes, especially in terms of training it. Dave Young: Especially if you’re trying to get it to do something creative. If all you speak is analytical phrases, that’s what you’re going to get back, right? AIs tend to echo. It’s not strictly an echo chamber, but they’re going to try to please you and meet you where you are. And if where you are is analytical, that’s what you’re going to get back. Stephen Semple: Well, and that’s what it’s actually designed to do. If you ask a question in an analytical manner, it’s going to give you an answer in an analytical manner. That’s what it’s actually supposed to do. Dave Young: Exactly. Stephen Semple: So, Dave, you asked the question about Wonka. Dave Young: There it is. Stephen Semple: There’s your answer for Wonka. Dave Young: Yeah. Let me put out a request because I’ve been saying this. At the Wizard Academy, we’re a vice chancellor, we have an elevator in our wizard tower. Any modern wizard tower has an elevator. And I always say, when I’m giving a tour, “Above the fifth floor button,” which takes you to the star deck, the roof of the tower, it opens up in a little vestibule on the rooftop, “I’d like to have a button, a Wonka button, an elevator button that sits right above the number five.” So if any of our listeners, if you’re a designer and you do 3D printing and that kind of thing, man, make me a button and send it. I’ll glue it to the inside of the elevator and we’ll have a Wonka button in our elevator. Stephen Semple: There you go. That’s awesome. Dave Young: Does it sound like a deal? Stephen Semple: Sounds like a deal, Dave Young: All right. I don’t know how to make a Wonka button. I know somebody does. I’ve been asking for this for years. Nobody sent me one yet. Stephen Semple: Well, it just shows you how great our listeners are. They’ll get right on it. Dave Young: Absolutely. I can’t wait. Stephen Semple: All right. Awesome. Thanks, David. Dave Young: Thank you, Stephen. Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app, and leave us a big fat juicy five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at empirebuildingprogram.com.…
1 #186: Rolex – How To Promote a Premium Brand 21:02
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21:02Affinity marketing at it’s very, very finest. Rolex has made Mariners, Aviators, Drivers, etc, seek out and own a luxury time piece. Dave Young: Welcome to The Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those. [Bonney Home Services Ad] Dave Young: Welcome back to the Empire Builders Podcast. Dave Young here alongside Stephen Semple. And Stephen whispered in my ear, as we all know he does at the very beginning of the show, but he whispered in my ear that he’s not going to tell me the topic. He’s going to keep it to himself and tell a little story. Stephen Semple: Yeah, I’m going to rob you of your preparation time. Dave Young: See, it’s the thing that my brain loves is to hear the thing and remember my story about whatever the product is. So you go ahead with your little story. Stephen Semple: And you go into your imaginary world and ignore me. Dave Young: I’ll be over here just doodling. Let me know when we’re ready to start. Stephen Semple: So what inspired this was I was in Vegas recently and I was speaking at one of these big international cleaning conferences- Dave Young: As one does well. Stephen Semple: And these things are huge. Like Vegas is so big, man, it’s crazy. But what I did each morning is there’s a coffee shop I really like in the Bellagio that has just great espresso. So my morning routine was get up, go over to this coffee shop, grab an espresso. And if anyone’s been in the Bellagio, the retail outlets in the Bellagio are phenomenal. Dave Young: Oh, God. Stephen Semple: They’re Harry Winston, and Tiffany’s, and Cartier, and Rolex. They are all the big fancy brands. Dave Young: I am so clumsy. I can’t afford to sneeze if I go into one of those places. Stephen Semple: And what’s incredible actually, if you’re a retailer, and I’ve said this a lot, if you’re a retailer and you’re looking for ideas on how to do store displays, spend two days wandering through Vegas. The store displays are just phenomenal. But here’s the thing that stood out to me. Each morning I was there just before the retail stores would open, and there’s one store that every morning had a lineup, and that was Rolex. Dave Young: Rolex? Stephen Semple: Every morning there was a lineup at Rolex. Not at Cartier, not at Tiffany’s, at Rolex. And I went, “Wow, that says something about the power of Rolex.” So I looked at it and said, we all know Rolex is a super powerful brand. People who have Rolex stores can’t keep Rolex in stock. But that just really did it for me. Dave Young: It turns out Rolex means coffee in Italian or something. They were just in the wrong place. Stephen Semple: Might’ve been. Might’ve been. So what I want to do with Rolex is we’ll talk a little bit about the early innovation of Rolex, but the big thing I want to talk about is how Rolex promoted its brand. Because they did some really interesting things how they promoted the company. So Rolex was founded by Hans Wilsdorf, and he really was a pioneer in taking the pocket watch to the wristwatch. And legend, whatever has it that the name Rolex, as he describes it, the name Rolex was whispered in his ear when he was in a horse-drawn carriage going through Cheapside in the City of London. It was just this inspirational name. And it didn’t mean anything, but he just liked the sound of it. And the first breakthrough came in July. He was given Class A Observatory Certificate was awarded to the wristwatch, which was basically the certificate saying, hey, keeps really amazing time. And then it was in 1926 that they created the Oyster Shell, which is that hermetically sealed watch. But basically, the company was founded in 1905 in London. And they started first of all by importing Swiss watch movements and placing them into quality watch cases. Dave Young: Okay. Stephen Semple: So they get the movements from Switzerland, put them in the case, and these watches were sold to jewelers who then added their names to the dials. So they were originally really a white labeled product. Dave Young: Interesting. Okay. Stephen Semple: And then it was in 1908 that the name Rolex was registered. Because they wanted this short, easy name, and there was this inspirational moment. And then in 1910, they became the first wristwatch in the world to receive the Swiss Certificate, a chronomatic precision from the Official Watch Rating Center in Bienne. Look, this was a groundbreaking moment because up until that point the only watches that were considered accurate were pocket watch. Dave Young: Okay. Stephen Semple: So it was the first wristwatch to keep really great time. And then in 1914, the Kew Observatory in England awarded wristwatch this Class A Precision Certificate. And this was previously only reserved for marine chronometers. Dave Young: Wow. Okay. Stephen Semple: So, again, big deal for establishing Rolex’s reputation for accuracy and reliability. In 1919, they moved the headquarters to Geneva because Geneva is really the place that’s known for fine watchmaking. And Wilsdorf wanted to really make sure that they had the highest quality craftsmanship. And then one of the big things that happened in 1926 is they introduced the Oyster, which was the world’s first waterproof wristwatch. So it was innovation, it was this hermetically sealed case, which also protected the movement from water and dust. And they did a ton of testing actually with the military to show its durability. Dave Young: Wow. Okay. Stephen Semple: And in 1927, Rolex got a lot of publicity when the swimmer Mercedes Glitz wore the Rolex during her attempt to swim across the English Channel. So over 10 hours in the water, and the watch remained in perfect working condition, really highlighting its water resistance. And the last part of this is, that a lot of people I don’t think realize, is that Rolex actually owned by a charity. Dave Young: Yeah. Stephen Semple: It’s owned by the Hans Wilsdorf Foundation, which it became owned by the charity in 1960 when Hans Wilsdorf passed away. Dave Young: Is it an orphanage? Is it a- Stephen Semple: Yes, it is. Dave Young: Okay. Stephen Semple: Yeah. So very similar to Hershey’s. We need more of these companies passing to charities in my mind. But that is a whole separate topic. Dave Young: Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. [Empire Builders Ad] Dave Young: Let’s pick up our story where we left off. And trust me, you haven’t missed a thing. Stephen Semple: So yes, Rolex did all of this innovation, but here’s what I found really interesting, especially when I was really taking a look at the Submariner. So the Submariner watch brand is the one that I dove into to take a look at how they promoted it. Because the Submariner is the one that is the hermetically sealed. And what they did in their advertising was first of all they advertised the English Channel. Then they advertised the work that they did with the British military in terms of proving how great the watch is. Then they attached it to skin diving. And then Jacques Cousteau. And if you think about at the time, a couple of interesting things happened coming out of World War II. Coming out of World War II you had an emergence of a new middle class, people who had money and wanted to do aspirational things. You had emergence of new technology, scuba diving and skin diving was a new technology and something aspirational. And then also attached it to celebrity. And I think people would just go to, oh, celebrity attachment. But it was more than just celebrity attachment. It was very specific. It was, here’s a cool guy who’s representative of this new technology and this new idea doing this cool thing that actually relies on a watch being durable. Dave Young: Yes. Stephen Semple: Because now it’s not some fancy, expensive watch that I can only wear to dinner. It’s actually a watch that I can wear every day. And that led to the explosion in the Submariner. This was not an accident, because guess what they did? The Daytona, automobile racing a new technology, Steve McQueen. Cool endorsements. Dave Young: Sure. Stephen Semple: Durable watch because racing cars is tough. Mountain climbing. Sir Edmund Hillary. Dave Young: Yeah. And we know that story. They were able to get their products to be identified with groups of people that are man, active and aspirational and competitive. And they made their watch the prize. Stephen Semple: Yes. And they did this in race car driving, diving. They have the watch line for pilots and yachtsmen. They’ve got the yachtsmen. Each one of them, this is what they’ve done. They’ve said, there’s this group that I identifies themselves as being a yachtsman. They’ve got the cool yachtsmen using the watch. They’ve made it durable and put some special features on it. This was not accidental. This was not a, Oh, I did it once. No, they’ve done that over and over and over and over again. And I found it really, really interesting that they’ve just done this rinse and repeat on it. And you know who’s taken a page from their book? Red Bull. Dave Young: Sure. Stephen Semple: If we go back to the early days of Red Bull before F1, what did they do? They went to these crazy sports. Dave Young: Ex sports, and yeah, yeah. Ex games. Stephen Semple: And the guy flying with the weird suits and all that other stuff and said, okay, Red Bull is for people who aspire to be these extreme athletes doing these cool niche things. And they sponsored them and attached their product to that. Dave Young: Well, and the really interesting thing about that, and Red Bull didn’t need to do this is the snowboarders version of Red Bull. They didn’t need to separate different products for it like Rolex did. But it’s a niche marketing that attaches your product to a tribe. Stephen Semple: Yes. Dave Young: To a group of people that identify with each other and with the sport or activity that they’ve chosen. Stephen Semple: Yes. Dave Young: And they were brilliant at that. The product line reflects it. Stephen Semple: Yes. Dave Young: If they were weak, and you tell me if I’m wrong here, it was in helping their retailers tell the Rolex story. Stephen Semple: Yeah. And what’s interesting is Rolex is even changing much of how they’re doing their distribution. It’s all now going actually out through Rolex stores. Dave Young: Were the people in line waiting to see if the store got any new watches in overnight or something? Stephen Semple: Well, I didn’t interview them, so I don’t know. But what I’m going to guess is the average Rolex watch owner owns three. They don’t own one, they own three. And yes, there are certain really sought after Rolexes. So I wouldn’t be surprised if that’s probably what was going on. But to me, I was just amazed every day that’s where the lineup was. But coming back to the promotion of Rolex. Dave Young: Sure. Stephen Semple: If there was a weakness, that’s where the weakness sat. And at the end of this podcast, I’m going to drop in the radio ad that our partner, Roy Williams, created for Woody Justice hugely successful and really speaks to that whole idea of the watch being a reward. In fact, we’re going to insert it right here. So let’s just take a moment and play that ad. [Roy’s Rolex Ad] “You are standing in the snow five and one half miles above sea level gazing at a horizon hundreds of miles away. It occurs to you that life here is very simple, you live or you die. No compromises, no whining, no second chances. This is a place constantly ravaged by wind and storm where every ragged breath is an accomplishment. You stand on the uppermost pinnacle of the earth. This is the mountain they call Everest. Yesterday it was considered unbeatable, but that was yesterday. As Edmund Hillary surveyed the horizon from the peak of Mount Everest, he monitored the time on a wristwatch that had been specifically designed to withstand the fury of the world’s most angry mountain. Rolex believed Sir Edmund would conquer the mountain, and especially for him, they created the Rolex Explorer. In every life there is a Mount Everest to be conquered. When you have conquered yours, you’ll find your Rolex waiting patiently for you to come and pick it up at Justice Jewellers.” I’m Woody Justice, and I’ve got a Rolex for you. Stephen Semple: So, yeah, that ad speaks to the whole idea where you’re saying that it is a reward. Dave Young: It’s a reward. And cool thing about that ad also is the use of first person. You are standing in the snow. Stephen Semple: Yes. Dave Young: So it puts you at the top of the mountain. Stephen Semple: Yes. Dave Young: It puts you in the place where you have achieved victory over your goal, whatever that is. And later in the ad, it talks about that in every life, there’s a Rolex. It also in 60 seconds transferred ownership of that watch to you. Stephen Semple: Yeah, sure did. Dave Young: It’s your Rolex and all you have to do is come down and get it. Stephen Semple: We could do a whole episode just talking about the magic in that ad. But here’s the interesting thing. Today, this technique that Rolex used of finding a group and speaking to that group, finding the tribe, is easier today than it’s ever been because social media immediately congregates around tribes. Dave Young: Yeah. Stephen Semple: And what Rolex did with people like Steve McQueen and Jacques Cousteau is expensive. What Red Bull did, where you’ve got an athlete in this weird niche sport that probably has never had a sponsor, probably not that expensive. Dave Young: Not to get started, until they started airplanes and- Stephen Semple: Yeah. Until they started airplanes and F1 and all that other stuff. But in the early days, it was like guys skating down hills and crap like that. It was really crazy, crazy stuff they were doing. So this technique that Rolex did, this technique that Red Bull has done, and we’ll do an episode on Red Bull in the future, people can do in terms of finding that tribe, attaching into that tribe or finding a spokesperson in that tribe. But the cool thing is, that I loved about Rolex was it over and over and over and over again. I’m amazed that they have not created one yet for the space industry. Dave Young: Sure. Well, you’d probably sell at least three or four to the billionaires that are building rockets. Stephen Semple: Well, again, it’s that here’s the watch that wet to space. It’s the aspirational. Dave Young: Yeah. There’s plenty of people out there that would buy whatever Elon Musk has on his wrist. Stephen Semple: Yeah, yeah. Dave Young: So this method, it’s actually a method of targeting. And most people get targeting wrong, they target with demographics. So we need 50-year-old males who have achieved something in their life. It’s like, well, how are you going to sort that out in an ad? Where do you find that audience? And the more powerful thing is to target with your copy. Stephen Semple: Yes. Dave Young: You just make sure your ad resonates with the people that you want to sell a Rolex to, and then you let everyone hear the ad. Stephen Semple: Yes. Dave Young: And the people that fit the niche will self select and go, oh, well, yes, this is the one that I need. Stephen Semple: Yes. Dave Young: Even the Walter Mitty’s, if they have the funds, they’re like, I haven’t ever climbed a mountain, but in my head, man, wouldn’t I love to be on Mount Everest. Maybe I’ll just get one of those watches instead because that seems safer. Stephen Semple: And there’s an interesting extra thing here, especially when it comes to luxury brands. I was having this conversation last week when I was in Houston with Jeff Sexton and we were talking about this. And one of the other benefits that happens, especially when you make something like a Rolex well-known, popularized, and aspirational, is there’s a self-identification that comes when somebody puts a Rolex on because we all know what Rolex stands for. So the fact that everybody knows what Rolex stands for when I wear a Rolex, carries that prestige. When I wear a Patek Philippe, which is a more expensive watch, only watch people and people in the jewelry industry know about Pateks. Dave Young: Yeah. Stephen Semple: The common man doesn’t. Dave Young: Yeah. Stephen Semple: And so that’s where some of the extra power of the mass media approach that Rolex has done is everyone knows Rolex is a fancy-ass watch. Dave Young: And the Patek is targeted to a way more tightly targeted group just in the fact that it’s targeted to people that are watch lovers. And it’s not connecting the watch to some- Stephen Semple: Correct. Dave Young: … External group. Stephen Semple: Correct. Dave Young: The tribe that you’re a part of. Stephen Semple: Correct. Dave Young: It’s just, oh, you’re a watch nerd. Here’s a watch. Stephen Semple: Yeah. Dave Young: Really expensive. Yeah. Stephen Semple: Yeah. And look, they do well, but they don’t have the same cachet as Rolex. So anyway, sort of finish this off. They can’t keep Rolexes in stock. There’s certain Rolexes where years on a waiting list getting it. And here I am in Vegas where there’s all of these places, and the one store that has the lineup is Rolex. And the more I studied it in terms of their marketing, what I realized was how purposeful… And look, this is another lesson for people. When you find a marketing process that works, rinse, repeat. And they did it. Dave Young: Yeah. Stephen Semple: They did it in diving, flying, race car driving, yachtsmanship. They took that idea and they rinsed repeat, rinsed repeat, rinsed repeated it. Dave Young: Yeah. Yeah. Well, thank you for sharing the Rolex story. And I forgive you not whispering Rolex into my ear the way, who’s the guy that founded it? Somebody whispered it in his ear. Stephen Semple: Yeah. Hans Wilsdorf. Yeah. Dave Young: He got to have the Rolex whispered in his ear moment and I didn’t. Maybe I don’t forgive you. Stephen Semple: Well, on that note- Dave Young: Let’s see on the next episode. Stephen Semple: … On that note, thanks, David. Dave Young: Thank you. Thanks for listening to the podcast. Please share us,. Subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at empirebuildingprogram.com.…
1 #185: Dirty Dough (part 2) – No Money? Invest Time. 25:18
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25:18Bennett Maxwell continues by explaining how, when you are starting out, it is critically important to invest time and win peoples hearts. Dave Young: Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector and storyteller. I’m Stephen’s sidekick and business partner Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those. [ASAP Commercial Doors Ad] Rick: Told you, Brian. Brian: Told me what? Rick: This is part two of last week’s episode. Brian: Oh, yeah. And it was getting good. Rick: If you missed it, go back and listen to part one first. Take it away, fellas. Stephen Semple: It’s very compelling. I could put my business hat on and go 500 square feet, one oven timed single employee can do this and if the product’s really great, that’s quite compelling. But you still got to pound the pavement to find those franchisees and you still got to have a pretty good pitch. So if I’m a potential franchisee, what’s the pitch? A Dirty Dough franchise? Bennett Maxwell: I think I would kind of reiterate with just what you just told me as well. So it’s hitting on the team first. We have a really experienced team. Now our CEO, Jill, who I mentioned is now our president and our CEO is Gregg Majewski, who was the CEO for Jimmy John’s during all of their rapid growth and now he owns another X amount of brands. So okay, here’s the team, but that’s one thing. The other thing is cost. How much does it cost to open up us versus a competitor? And we’re going more towards the how do you lower the barrier of entry to entrepreneurship by allowing new people to become entrepreneurs? Well, what does it take to become a business owner? You need time, money, and expertise. Well, we’ve taken away the expertise out of it because you don’t need to be a baker. All you have to do is learn how to use an oven. Stephen Semple: Right. Bennett Maxwell: The time it takes to run a business is generally correlated pretty closely with the number of employees. Stephen Semple: Yes. Bennett Maxwell: If a competitor requires 50 employees before opening day and we require 15, which one is going to take more time? Stephen Semple: Correct. Bennett Maxwell: And then the money it requires, well if you only have a 500 square foot build out or even a thousand square foot build out in only one oven, you don’t have to buy all the mixers, nor do you have to have all the storage for all your raw ingredients because I’m shipping you a finished product. Now you no longer have to have all of the same amount of capital. So it’s less capital, less expertise, and less time required backed up by a really good product. Generally speaking, we get a little bit better reviews than anybody else. I mean a 4.8 star and some of the competitors are 4.6, but it’s also more by unique product. Go try to make a three layer cookie at home or in Insomnia Cookies or Crumbl Cookies store by hand and you can’t do it. So we corner the market on having a unique product and the barrier of entry to competing with us is you go spend a few million dollars like the idiot that I was before you even have a freaking franchise open. You know what I mean? It was a high risk, but now I think it’s paying off because we’ve allowed our franchisees to sell a more unique product and nobody else has broken into that space yet, probably due to the cost. Stephen Semple: So what’s the typical investment that somebody would require to open up one of your franchises? Bennett Maxwell: 250, 275 is average. If you get a good space that’s a second gen and your construction cost is low, you can open it up for less than 200. Stephen Semple: Right. Bennett Maxwell: That’s what we’re looking at. Stephen Semple: But in the grand scheme of things, not a massive investment? Bennett Maxwell: Especially if you could do an SBA loan with 40 grand down or something like that. And to my knowledge, and I haven’t checked in a little bit, but we hadn’t been denied or maybe one franchisee had been denied an SBA loan because they like the model. Because banks are also looking at risk and what’s higher risk? 50 employees out of 1800 square feet or 15 employees out of 500 square feet. Stephen Semple: Right. Bennett Maxwell: $700,000 opening investment or a $300,000 opening investment. Stephen Semple: And you’re also saying your cost of operating is going to be lower as well because you can run it with one person. You don’t need three people in the store at a time. I can see lots of advantages to it. So what have you guys been doing on the marketing front to get the name out there? Because it’s one thing to give people the operation and the name and the logo. What have you been doing to promote Dirty Dough to the world? Bennett Maxwell: The thing that’s been the most effective was definitely our response to the lawsuit. Stephen Semple: Right, right. Bennett Maxwell: I’m going to a franchise conference next week in Philadelphia, and the first time I went was two years ago and I went with my Dirty Dough shirt and I got stopped by dozens of people like, “Oh, Dirty Dough.” I’m like, “We just opened our first franchise two months ago, how do you even know who we are?” But it was for sure because of the Utah Cookie Wars, whatever. That definitely helped us out. Outside of that, what’s been mostly effective has honestly been sampling, going to businesses and just showing up because you have amazing product. I just did that a few weeks ago in San Diego with my little brother who just opened up a store. You go to seven businesses and say, “Hey, can we give you free cookies that you can hand out on your behalf of your customers after a karate class?” And you could say, “Hey, free cookie, no purchase necessary on us. All you have to do is download the app and Dirty Dough is three doors down.” Seven out of seven said yes because we showed up with four cookies. So it’s like, what’s your cost for four cookies? And then we went to a handful of schools with a dozen cookies, warm cookies cut up, and you show up anywhere in the world with a box of cookies, warm cookies, and you get let in and you have great conversations with people. It’s like just get your product in front of people. Stephen Semple: I’m going to encourage people to go back and listen to episode 61, which is Fields’ Cookies. Bennett Maxwell: I listened to that episode and now I’m like, I just copied her. Stephen Semple: Right? Employee number one is from Mrs. Fields. And what did they do? Now they did it differently because back in the day that Mrs. Fields started, there was huge foot traffic through shopping malls. So what did they do? Gave away warm cookies in the mall. But it’s the same idea. You’re just going, we’re not in the mall, we’re not in a foot traffic location. I’m assuming you’re probably decent visibility location so people can find you. But we’re going to walk up and down the street. We’re going to go into every business. We’re going to go into every craft store and art store and karate studio and ballet studio and give away warm fresh cookies. It’s the same idea. Bennett Maxwell: Yes. And going back to our CEO right now, he came on at Jimmy John’s when they were like 28 stores and he left them when they had 300 open and 700 additional sold. And he is like during the whole time, you don’t really have a marketing budget. Your 3% that you’re paying doesn’t really even cover for your website and your tech and all that. So he’s like, it was just samples. And the advice that he gave everybody was, you need to give 50 samples a day, get your sandwich, cut it up to whatever pieces you want. And sampling is great. We did that, something similar with a hair cutting franchise, a kid’s hair cutting franchise. “Hey, will you give out free cookies to all of your clients on us. All they have to do is download the app and come into our store.” They gave out however many coupons, 360 people, unique visitors, kids with their parents because they’re only getting one coupon showed up to the store to redeem it. So your product cost and everything on that is a few hundred bucks. It’s like, how else can you pay a few hundred bucks and get 360 people plus their parents to come in, download the app and try a cookie? You can’t. Now, the issue with that is bandwidth and how much can you do that and the good thing about ads is you just turn it up and down and it’s a lot more passive, and I think they both play hand in hand, but that boots on the ground, guerrilla marketing, getting out there and you’re on the high school, buy one, get one free discount card or whatever. Those are, at least initially when franchisees are opening, that’s what making a big impact. Stephen Semple: And here’s what I’m going to say that I think that you did brilliantly. There’s two things that I want people to take away on this. It’s probably three things actually, now that I think about it. I keep adding things because it’s so amazing. But one is when you don’t have money, you got to spend time. In other words, your guys are not sitting in their shop doing nothing. You’re like, no, here’s the model. Get out there, get out in the community, give cookies away. You can’t sit in your store, so if you don’t have money, you got to do things. But here’s what I’m also going to say that I think was really right that you did, and I think it’s better than giving two for one coupons because when we discount things, we tend to create price sensitivity in our customers. There’s lots of studies on that, but that doesn’t apply when you give things away for free because no one expects a second one for free. But when we get a two for one, we expect two for one again in the future. So I think what you guys have done that’s brilliant is the free. I’m giving it away for free. And yeah, there’ll be some people who will never come back because they’re not cookie people and whatnot, but for each one of those, there’ll be a few people who go, “These are amazing. I’m going to go buy a box.” Bennett Maxwell: Yeah. And even of those 360 people that came in, it’s still accounted for. I think they did a pretty terrible job at upselling, but they still made way more money than it cost them to make those coupons. Stephen Semple: Sure. Bennett Maxwell: Because you come in for one cookie, but it’s the mom taking out two of their kids, only one of them’s getting a haircut, and you can’t just buy one kid a cookie. Stephen Semple: Yeah. The free thing is brilliant and great and proven, so fantastic. The other thing I think that’s been really good again, and it shows your boots on the ground, is the calling out, reaching out to people and saying, “Hey, I’m thinking about franchising. Can you give me feedback on it?” And learning all of that. I think is something again that people can learn from. You didn’t sit back and just get on the computer and research things and whatnot. You spent time in front of people. That’s what guerrilla marketing is all about. Bennett Maxwell: So I was living in San Diego and there’s a brand called Everbowl. They’re probably around a hundred locations. I just cold matches the owner, and I’m like, “Hey, I don’t live that far from you. I’m starting a franchise. I would love to sit down and talk with you.” I didn’t think he’d respond. He did. Jeff Fenster, great guy. And I’m like, “Hey, here’s my model. I’m going to sell franchises in packs of five. So your first location is going to be 2,500, 3000 square feet, and that’s where you’re going to house your machine. And then after you get that up and running, then you can open up 2, 3, 4, and 5. You buy a sprinter van, whatever, and then you’re delivering cookies.” And this guy looks at me and just as serious as can be, he’s like, “That’s going to fail.” He’s like, “You cannot hope that your franchisees are now machine operators and then you’re going to tell me that you’re going to make them deal with insurance and vehicles and driving? No, no.” And I’m like, “Well, why not?” And he goes through it all. I’m like, “Okay, you need to do all that for them, and you centralize everything to one location. Then you get even better economies of scale on all your ingredients.” That was a hundred percent pivot from what I thought I was going to do, but me just messaging somebody on Instagram to meet up with lunch, and then he changed my whole business model in 30 minutes. Dave Young: Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. [Empire Builders Ad] Dave Young: Let’s pick up our story where we left off. And trust me, you haven’t missed a thing. Bennett Maxwell: That was a hundred percent pivot from what I thought I was going to do, but me just messaging somebody on Instagram to meet up with lunch, and then he changed my whole business model in 30 minutes. Stephen Semple: It’s interesting because founder of the Wizard of Ads group, Roy Williams, very early in his advertising career, what he did is he went out and he interviewed businesses, and it wasn’t like a podcast interview. This is back in the days where you just sat down and said, “Hey, tell me about your business. I’m wanting to learn about business. What have you done that’s really successful? What have you not done?” But again, it was collecting of all that knowledge that he then put together, the piece said, “Wow, the people who are really successful probably did it this way. So that’s what I’m going to take out into the world.” And yeah, I think we’ve lost this art or this psychology of going out and talking to people and yes, it’s harder today because you don’t have big board of trade meetings and things along that lines, but you still can. It goes to show that you can reach out to a bunch of people and there will be people who will say, “Yeah, I’ll talk to you.” Especially if they don’t feel like you’re trying to sell them something where it’s just, “I’m thinking about starting something. Can I run some ideas past you?” Sure. Bennett Maxwell: Yeah. I’m going to be juicy again. Our current CEO and the Jimmy John’s CEO cold messaged him on LinkedIn a year and a half ago or two years ago. It took me six months to get him on the board and then a year to get him as CEO. People ask and they’re like, “It was a cold message?” I’m like, “Yeah, we’ve also raised 8 or 9 million pretty much all off of cold contacts or asking a warm contact for a referral.” And they’re like, “Oh, you didn’t have any connections before then?” I was like, “No, but I sold Cutco and I did door to door and I’ve knocked tens of thousands of doors and I served a mission.” I’ll just keep going until I find it. Stephen Semple: Right. It’s that amazing training of just learning how to do that. And I think it’s a skill that is being lost this whole how do you get out there and how do you get to know people and how do you create that community and create that interest? It’s just even the reaching out on LinkedIn, most reached outs on LinkedIn is the person’s trying to sell you something or is saying, “Hey, I would like to talk to you.” It’s like, look, I know you’re just trying to sell me something. It’s not, “I’ve got this idea and I’d like feedback on it. Could you help me?” That’s a different reach out. Bennett Maxwell: It has been absolutely mind-boggling to me how many people will say… Because you have two groups of people, you have more of the hustle, go earn your key, your time’s valuable. If people want to pick your brain, tell them to go to hell because you’re worth so much money and blah, blah, blah. And I bought into that flaw. And then I got into the John Richards, he was our first advisor, the founder of InfoSpace, which IPO’d for $30 billion. You talk to somebody that’s a different business world than guys running a coaching program or whoever’s giving different advice. And he’s like, “No, no, no. You give other people your time and you network for free and then other people network for you.” Right now the decisions that I’m making, we have a deal on the table, an investment I was like, okay, should I take it or not? I sat down with the owner of a company called Savory Fund out of Utah. They own several hundred restaurants, and he just sat down with me so I could lay out the deal, and he gave me his unbiased feedback on it. I’m like, why did you do that? You know what I mean? But he is like, “Oh, well it’s because this person this or that, and I know that you’ve talked with this other person that works for one of my stores.” And it’s just like everything is very well-connected, and as soon as I got rid of your time’s valuable, charge other people if they want to pick your brain, said, no, I’m not going to charge people, I’m just going to give it back. And other people seem to give it to me. It’s been so powerful for networking, even if nothing comes from it, at least I know that person and I maybe could have added some value to them, hopefully. Stephen Semple: Yeah, well, that’s not much different than my philosophy because I structure as kind of a 90-minute meeting that I’ll do if people want to talk about marketing and there’s a little bit of prep work I ask them to do just so that I can show up actually with a bit of an intelligent thing to say, yeah, I’ll meet with anybody because my attitude is why not? And if you can help somebody out, it just seems like it comes back in some weird way to help you in the future. I think there is that, and yes, people can be a little bit too much, and you do have to balance it. There is only so many hours in the day, but at the same time, yeah, there is a little bit of that give back that I think is a good mentality to have. Bennett Maxwell: And it is important. Yeah, don’t get lost in giving free phone calls. That’s not what I’m saying. But it’s like if you’re like, oh, I got three hours a week to go meet three new people. And I’m going to pick who those three people are this week, or whether it’s me outreaching to somebody else or other people outreaching to me. Kona Ice is a brand that has over a thousand locations. Somebody that owns a franchise called me for some advice, and then after they’re like, “Hey, can I share your information with Tony?” And then I got to meet Tony and they have a thousand locations. And it was just because I’d helped somebody and he was asking of something else about cookies and desserts and it was like, oh, it’s cool how quickly sometimes you see it and sometimes you don’t see it quickly, but it doesn’t matter. I do believe that if you have a problem, either it’s because you lack knowledge to solve it or you lack somebody with knowledge to solve it. And the bigger you build your network, the greater capacity you have to solve your business issues. Stephen Semple: And the other thing I think that you’ve done, and I can just hear it in the way that you’re talking, even when you got bad news, that won’t work, and here’s the reason why. There’s two things that you did. One is you didn’t let that defeat you. So you went, okay, I got to rethink this model. But the other thing is you listened to the advice of this person who was highly knowledgeable. I’m amazed at the number of times that we’ll sit down and talk to people and they’ll be like they want the way that they’re doing it to be true, even though there’s no way it’s going to work out, that’s fine. It’s their life. They can drive that way. But there’s a certain point where it’s like, no, if this person really and truly is an expert and often experts will point out that thing that’s like, yeah, this won’t work for this sets of reasons. And again, it’s not to say don’t do it. It’s don’t do it that way. Bennett Maxwell: Yeah. When I go on the phone with our current CEO now, the first time it was probably the second person outside of the Jeff Fenster guy from that first story I told that was just as blunt as can be. And I’m getting on the phone all excited. I’m like, “We’re doing this. We’ve sold X amount, a hundred of franchises and we’ve opened up four stores already.” And he’s like, “You’re an idiot. You’re doing this, this, and that.” I’m like, okay. And it was a potential investment call, but it wasn’t a good fit. And then I’m like, but he was so blunt, and that’s what I like. I want somebody to call it and be like, that’s bullshit. And I know why. And here’s the reason. So it wasn’t going to go down the investment side, but I’m like, well, what does it take to get you on as a board of advisors? And then we build on that relationship because of him just telling me how all the mistakes. And I know all the mistakes that I make, and it’s kind of like, okay, well, you can have short-sighted selfishness or long-sighted selfishness. The short sight is like, no, I need to be right because I need to feed my pride. And it’s like, no, I want to be right in the long term and to be right in the long term, it’s because I’m listening to people who are smarter than me. Stephen Semple: Yes, yes. Now, here’s one of the things I’m going to say that I admire about what you did is you very quickly got above that 50 franchise space because what a lot of people don’t realize is 50 and under is Death Valley. It’s an awful brutal place to be because you’ve got to support all these franchisees and it’s not enough franchisees to make money. Bennett Maxwell: But the franchisees don’t know that. Stephen Semple: No, no. Bennett Maxwell: They have no idea. Stephen Semple: And it’s also not their problem. I bought a franchise, you’ve got to support me. But at the same time, you’ve got to build a business and you’ve got to recognize, you’ve got to get above that. And I think I’m right on the number. I don’t know, am I pretty close on the number? Bennett Maxwell: Yeah, yeah. And obviously if you’re a full store restaurant, the number’s a little bit lower. If you’re a snack brand, the number would be a little bit higher. Stephen Semple: Sure. Bennett Maxwell: What I was speaking to in that though was it makes it even harder because you have 40 locations and all your franchisees think you’re just loaded with money and they’re like, “What are you doing with all my marketing dollars?” You’re like, “What marketing dollars?” 40 stores, that’s nothing. What do we do with that? How do you put up billboards if you’re getting 3% from 40 stores? You know what I mean? Stephen Semple: When do you think you’ll hit 250 stores open? Bennett Maxwell: Man, I’d have to go look at it again because I feel like it always changes. Stephen Semple: Give me your guess. Bennett Maxwell: We’ll end this year with about 90, next year I think it was 170. So in year and a half to two years. Stephen Semple: Okay. What revenue does somebody need to do out of one of the little stores to become profitable? Bennett Maxwell: It’s going to depend on a few things. Mainly just the lease space, if you’re in San Diego or if you’re in Oklahoma. But I’ve seen break even’s 20 grand a month. Some are a little bit more than that, but when you compare it to a Crumbl, they disclose their financials and their lowest store, I think was doing like 50,000 a month and lost almost 20,000 a month on that. Stephen Semple: Yes. Bennett Maxwell: It is drastically different. Stephen Semple: But it’s not a big number. Bennett Maxwell: A quarter million to 350 is where we were hoping our break even is going to be. Stephen Semple: It’s not a big number, which I understand. So I get why you guys are successful. You’ve got an easy business to run. It’s a low cost to entry and not a big hurdle to get to that profitable space. So for me, it’s going to be fun watching growth that you guys go for. So if somebody listening just us and says, wow, this sounds like an opportunity I want to get in on, what do they do? How do they get started? Who do they reach out to? Bennett Maxwell: With probably some cookies. Make sure you like them. And then, if and when you do, dirtydough.com you can get information on franchising, videos, and all of that apply there and go through the process or reaching out to me. Bennettmaxwell.com is my website that just has links to all my social medias, LinkedIn, any of that, if you have any other questions outside of the do I want to buy a store? Because usually that’s not why people are coming to me. Stephen Semple: That’s awesome. And again, it’s going to be exciting to watch what you guys are doing. Now, last question. If you are going to give somebody advice who’s an entrepreneur and is looking to grow their business, and of course this is kind of a bit of a tough one because all sorts of industries listen to this podcast. What should they take away from this conversation and what would you tell them? Bennett Maxwell: Don’t get caught up in the fancy Nancy glamour of entrepreneurs. Some people want to be an entrepreneur, just to be an entrepreneur. I own a business, but what are you after? So I’ve been focusing a lot in the last few years on you always set material goals. My goal is to have a $10 million business. My goal is to have 50 franchisees open, but then you hit those marks and it feels good for a little bit and then it doesn’t. And it was because my real goal wasn’t to have 50 franchises. My real goal is how I thought I would feel when I had 50 franchises open or when we had 10 million in revenue. So it’s whatever you’re going into, whatever your goals are, if your goals don’t include, I want to grow this business to do XYZ because I want to feel this way more often or this often. And a lot of times you’ll see that you don’t need a $10 million business to have more time with your family because guess what? You could just be with your family every day. You know what I mean? But set the right goal. And if it’s not emotional based, you’re not to the end point, because there’s nothing that humans do that we do without the intention of feeling a certain way. That’s what I think. Stephen Semple: That is so awesome. Thank you for sharing that. And I know, just given the fact that you said that you and I are going to become friends long term because I love that philosophy. I love that philosophy. Hey, thank you so much for your time. This has been awesome. And folks, check out Dirty Dough. It’s pretty cool. And you know what we’re all looking forward to? We’re all looking forward to when we see Dirty Dough as a billion-dollar business. Bennett Maxwell: Here we go. Me too. Stephen Semple: Thanks, man. Bennett Maxwell: We just need to survive clubbing. Stephen Semple: You will, it’ll be great. Dave Young: Yes, please share us, subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute empire building session, you can do it at empirebuildingprogram.com.…
1 #184: Dirty Dough (Part 1) – A Chairman’s Story 19:38
19:38
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19:38Bennett Maxwell understood that to run a successful company he needed to know the business and be the least important person in it. Dave Young: Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us. But we’re highlighting ads we’ve written and produced for our clients. So here’s one of those. [Waukee Feet Ad] Stephen Semple: Hey, it’s Stephen Semple here, and we’ve given Dave another break. Dave Young has been getting lots of breaks lately. But he’s a hard-working guy, so it’s good that we can give him a week off. And I’m really excited. I have with me Bennett Maxwell, who’s the CEO of Dirty Dough. And I’m going to let him explain what Dirty Dough is. And in fact, I’m even going to let him explain what a CEO is, because we were talking earlier about whatever the heck that is. Bennett Maxwell: You can write it chairman over CEO, because we’ll probably get it in the story that I have a CEO, which is why I don’t know what the hell a chairman is because I’m like, it’s the title you get when you have a CEO and they’re like, get out of my way. Here’s a title. Stephen Semple: Even better. Even better. Right out of the gate, I made a mistake. But it’s not about the titles, it’s about what you’ve built. And it’s pretty cool what you guys have built and how you found yourself in the food business. Because one of the things that is remarkable about so many of the stories that I’ve come across for the Empire Builders Podcast is how many of the businesses have been started by people who are not from the industry. And you’re the same. You’re not from the food business. So tell us a little bit about the beginning, and then how you ended up stumbling into Dirty Dough. Bennett Maxwell: Yes. The beginning of me or the beginning of Dirty Dough? Stephen Semple: Beginning of you. To me, that was really interesting. Bennett Maxwell: Okay. Beginning of me. Raised in Utah, one of nine kids, to a single mom. And there was seven boys. So me and my brothers were always hustling to make some money, selling everything from lawn aeration door to door, to discount cards for the schools, to shaved dice. My first real job, I would say, was Cutco, which is all sales as well. Learned a ton of good referrals or referral based sales from that. I served a two-year Mormon mission in Tijuana, Mexico. Stephen Semple: Because Cutco, they do door to door knives, right? Bennett Maxwell: Not door to door, or at least not how I was trained. It’s sit down with your close friends and family, tell them that you make $15 an hour presentation or commission, whichever one’s higher. But they don’t need to buy anything. And just go get practice. And then at the end of the presentation, you say, “Okay, Stephen, whether you bought or not, who are 10 people that would be willing to listen to our presentation?” And you’re like, “Oh, yeah, I could think of them.” Like, “No, I need you to think of them right now. And now I need you to call them.” So that was a really good practice of ask for referrals, and unapologetically ask for referrals. Really good. And I think that’s led to a lot of success with Dirty Dough, which we might get into. But a two-year Mormon mission. And then I did a lot of door to door sales, pest control, satellite, direct TV led me to do solar. Started a solar company, and then that kind of led me into the Dirty Dough side, which, going from solar to cookies is a little bit of a stretch. Stephen Semple: Now, if I remember correctly, when we were talking, you had built the solar business up to a stage where you were able to sell that business and exit out of that business. Isn’t that correct? Bennett Maxwell: Yeah. Right from the get-go, I was lucky to partner with my brother who’s 13 years older than me and has been in business since, I don’t know, his early twenties he bought a franchise. So he had us sit down. And it was just me and him starting the company. We did our whole organization chart and put our heads in all of it, like what we want the organization to look like in three to five years, whatever it was. And then within a year, we were able to both replace ourselves pretty much completely out of the org chart. And then six months later, it set us up really nicely. When the time came to sell the company, it was like, oh yeah, me and my brother, we’re not really involved in the day-to-day. So it made it, I think, a lot more attractive. And I’ve tried to use that same strategy with Dirty Dough, hence the chairman title, not CEO title. I’m trying to replace myself as quickly as possible with people who’ve been there, done that and are much smarter than me. Stephen Semple: Right. So you’re in the solar business. You’ve sold the solar business. I’m going to assume you’ve sold it for a nice amount of money, but not so much money that you’re kicking your feet up in some sunny beach somewhere not having to ever do anything again. Or maybe you did and you just got bored. I’m not sure which. But nevertheless, you sold the business. Did you go straight from the solar business to Dirty Dough, or was there anything in between? Bennett Maxwell: So Dirty Dough started actually before the solar business. It was a buddy that I went to high school with. Moved to Arizona. He wanted to be the first gourmet cookie company in Arizona because he saw Crumbl and Chip and these other companies out of Utah. So in order to do that and move fast, he just started selling cookies out of his apartment. And he was selling out most nights. And then he posted on Facebook, out of all things, looking for an investor. I invested. He opened up the first storefront in 2020. And at the beginning of 2021, I’m like, “Dude, let’s franchise it. I’ll be your first franchisee.” And he said, “No, I’m actually looking to get out.” So I bought it from him when it was a single location, open for less than a year. Stephen Semple: Single location. And where was it again? Bennett Maxwell: Tempe, Arizona. Stephen Semple: Tempe, Arizona. Okay. All right. So he was like, “I want to do this cookie thing.” He was looking for investors. You invested. He opened it, ran it for a year. You saw the potential in franchising it. And he was like, “No, I’m out. I don’t want to do it.” And you bought him out? Bennett Maxwell: Yes. Because I was honestly scared that I was going to lose my investment. I’m like, “Who are you going to sell it to?” The store, it had been open maybe eight months. It wasn’t doing amazing. It wasn’t doing bad, but it wasn’t doing amazing. He didn’t have capital to keep growing. It wasn’t doing marketing. I mean, what I bought to what we have today, other than the name Dirty Dough, the colors, the logo, the branding, the recipes, the process, the branding, the messaging has all been redone. But it’s really nice that I had something to go off of in order to make those changes. Stephen Semple: Did he create the name Dirty Dough? Bennett Maxwell: Yes. Stephen Semple: So was it already the name Dirty Dough when you invested into it? Bennett Maxwell: Yes. Stephen Semple: All right, awesome. Awesome. Do you know why it was called Dirty Dough? Bennett Maxwell: Yeah. I actually had lunch with him again yesterday. Dirty Dough is just a sound catchy. But what it means today, since I’ve taken it over, a customer walks in and says, “What’s up with the name Dirty Dough?” And one of the employees at that Tempe store said, “Oh, it’s called Dirty Dough because the dough is dirty, because we focus on more mix ins.” And that’s when I’m like, oh, I like that. I want to separate myself from the competition, primarily being Crumbl, which is a plain cookie with a lot of dressing on the top. So I’m like, oh, let’s do a plain looking cookie, with all the goodies on the inside. And that led to developing the world’s first three layer cookie, which has been fun. Stephen Semple: Right. Okay. So what’s a three layer cookie? Bennett Maxwell: You could have three layers of dough or a mixture of dough slash hot fudge injection. So one of the cookies that we have is the Reese’s Reverse or something like that. It’s a peanut butter dough on the outside. And then you break it open, there’s a chocolate dough in the middle, and there’s an injection of hot fudge. So it’s already three different flavor profiles all built with special machines. And then we ship those to our franchisees. And all they do is put them into the oven to get a very one of a kind type of cookie. Stephen Semple: So this is cool, and we’re going to come back to this. So your buddy who wanted to be a world-famous cookie maker, did he create the idea? Had the idea already been created, of the three layer cookie, before you stepped in? No, that happened afterwards? Dave Young: Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. [Empire Builders Ad] Dave Young: Let’s pick up our story where we left off. And trust me, you haven’t missed a thing. Stephen Semple: Your buddy who wanted to be a world-famous cookie maker, did he create the idea? Had the idea already been created, of the three layer cookie, before you stepped in? No, that happened afterwards? Bennett Maxwell: Correct. When I stepped in, the only way that I saw this expanding was to do a centralized production model. I thought Crumbl was crushing it, and other cookie companies in the category. But they were all doing, you order your own flour, sugar, butter. So there’s no bulk discounts. You’re ordering 50 pound bags, and then you hire teenagers and college kids to make 60 cookies at a time in a mixer. And then you weigh it by hand and portion it by hand. I still don’t think that’s any way close to being sustainable. So it was, let’s do a centralized production model. And none of that existed. So the first step was, okay, we’re going to build a production unit and become a food manufacturing company. In order to do those, how are we going to make unique cookies? And I went and found the machines and started testing them out and develop that three layer cookie. Stephen Semple: Okay. So you’ve got one store and you decide to build this production model. And you’ve got one store. So was that store, how did you do that in terms of, was there a significant investment required into that one store? How did you do the proof of concept on that? Bennett Maxwell: Yeah. So for the one store, we tested the machine at the manufacturers facility and just brought dough out to them and we’re like, “Okay, this works.” And then we bought one and we threw it in that location. So we were running the process in the machine in that location, but that wasn’t the model yet. It was like, okay, does it work? That was kind of the next step. And then it’s like, okay, this machine works. It hits the numbers that we need, everything. Now let’s get a warehouse. So we got a warehouse, I think it was like 8,000 square feet, a month before we started signing on franchisees. And we’re like, out of this warehouse, we could probably produce cookies for about 30 stores. Well, within maybe three months of franchising, we’d already sold 60 stores. So it’s like, oh crap. So then we had to go get another warehouse. But yeah, timing the growth has been really hard. And then we jumped into a 40,000 square foot warehouse because we’d sold 400 franchises. But then it’s like, we don’t have 400 franchises operating. We’re up at like 80 something. That has definitely been a big money loss learning experience. Challenge, more than anything, is trying to be like, how much in advance do we need to prepare ourselves? Especially considering, I think we were into it $2 million before we opened our first franchise and building the facility, recruiting the team, redoing branding and all of that. Stephen Semple: Yeah, this is a thing that a lot of people underestimate. Fast growth costs money because if you’re going to go to 80 stores really quickly, you can’t slowly build the production facility. It just doesn’t work that way. You got to build it in advance. But that’s really interesting. You very quickly went to, I think I heard the numbers, you went 60 sold. And then how many do you have sold now? Bennett Maxwell: 450/460 some odd locations. Stephen Semple: 450. And when did you sell the first one? How long ago did you sell the first one? Bennett Maxwell: December of ’21 was the month we franchised. So coming up on three years. Stephen Semple: So basically, three years and we’re at 450 sold. And how many open now? Bennett Maxwell: 85 maybe. We’ve been opening up one a week for the last quite a bit. Stephen Semple: So you had this idea, and you had one store. So it was really just the one store would be a bit of a proof of concept. But it’s not like you had built a major brand or anything like that. How did you end up selling those first 60 franchises? Because I’m going to tell you, people I know who’ve gone out there pounding the pavement on franchises, that is no small feat. How did you end up doing that? Bennett Maxwell: I think it’s, as I was creating the model, I am like, okay, I have a cookie company, but it’s not what I’m going to franchise. What am I going to franchise? I went and talked probably to 100 potential people to buy a franchise. But now, I didn’t say, “Stephen, I’m thinking about franchising. Are you interested in buying a franchise?” It’s, “Hey Stephen, I’m thinking about franchising. Do you mind if I bounce some ideas and I tell you about the model that I’m creating?” And then it’s, “Okay, this is what I’m going to do. If I could ship you a frozen cookie, all you have to just put it in the oven. You can operate with one employee out of 500 square feet. Every cookie cooks for the same time temperature, fan speed. Ovens are programmed. How does that sound to you?” And then you’re like, “Oh, that sounds great. But I would like this or that.” And then the model, as I was developing it, I was getting real-time feedback from a lot of different potential franchisees, and then was able to create probably 90% of the feedback. And then I went back to all of them and said, “Hey, I created that. Do you know of anybody or yourself that’d be interested?” And a lot of them were. And a lot of them were interested in buying multiple. Now, I can’t discredit the timing and the luck. I mean, I don’t know what else to call it. Crumbl, I think, has been the first restaurant to open up a thousand locations from founding, in history of restaurants, and they’re a cookie company, because they were doing so well. And Crumbl’s sold out of so many different territories. Then it’s like, okay, well what else is there? And we were kind of the next option or one of the options out there. But I do think we had the most simplistic options in the space. And I think we had the best team. Right from the get-go, I hired a CEO that had ran a company called Maui Wowi Smoothies and Coffee. She founded it in ’83, grew it to over 650 open locations. Exited. So Jill Summerhays came on as our CEO, and we had one of the founders of the largest property management franchisor in the nation on our board. And then the former CEO of Jimmy John’s on our advisory board. So it was, we’re new, but we have a really good model and a really good team. And then we hit the market timing very luckily, which also, I don’t know if you know much about it, but we’re also in a very public lawsuit with Crumbl. They sued us before we even opened up our first franchise. And we made fun of them for it. We threw up a billboard saying, “Our cookies don’t crumble with competition. And cookies so good, we’re being sued.” And things like that. We made professional videos making fun of how stupid the lawsuit was. And we made it on CNBC and CNN and whoever else, and a lot of other local news channels, Good Morning America. And that gave us all the eyes we needed. And then the model and the team was already there. Stephen Semple: But instead of rolling over to it, you used it as a way of creating some real strong word of mouth. That’s amazing. So you managed to get these pretty impressive folks on board for helping you build this, which also, let’s face it, those people also help you open doors in terms of finding locations and finding people and finding suppliers and all of that. There’s no question. One of my early podcasts, one of the ladies was in the fashion industry. And one of the things that really helped her, because she had no background in fashion, was the fact that she was able to find a designer who came on board because they were bored in their job and looking for some new challenges and whatnot. And she was able to convince her to come on board and do designs for her. And frankly, for M.M.LaFleur, that opened up all sorts of doors because it’s like, “Hey, you know this famous designer? We have them designing our clothing.” “Oh, well, if she’s involved, we’ll take a meeting.” Didn’t get you the sale, but it got you a meeting you probably weren’t going to get. Bennett Maxwell: Yep. It’s the old bandwagon approach. It’s knocking on your door to do pest control. “Hey, do you know that Jones’s two houses down? We’re coming to spray in their house in about 40 minutes. If we can squeeze you in today or tomorrow, instead of $99, we’ll do the first one for a dollar.” It’s definitely on that bandwagon approach. And because I was in that door-to-door world using that so much, it was just so natural. Like, okay, the first hire was a former Mrs. Fields employee. And she worked at a bunch of other major brands out here in Utah. Nobody wants to buy franchise from Bennett because Bennett doesn’t have experience. But it’s like, oh, well look at this person with all this other experience. And then I used that, the bandwagon effect of her name and experience to go recruit our first advisor, who was the best advisor I could have ever dreamed of, a guy that had a 30 billion company when it IPOed in 2002. It’s been a little bit. And then he brought in Steve Hart, who owns the largest property management franchisor. And then I was trying to get my third advisor, and I went back to that Mrs. Fields person and said, “Hey, who do you know?” She said, “Jill Summerhays. She started Maui Wowi. It’s very similar to your company. Have her be an advisor.” She connected me with her. And then Jill’s like, “No, you need me to run this.” And I’m like, “If that’s an option, I will take it.” But every step of the way, it’s leveraging that other person’s name with that bandwagon kind of effect of, hey, this person is interested. This person believes in it. This person’s an advisor. This person’s a CEO. So there must be something here. Stephen Semple: Right. Interesting. So when you’re approaching people, I get part of the appeal of the franchise of this because it’s really simple to operate. And today in the restaurant space, finding things that you can operate literally with a person is pretty compelling. Speaker 8: Oh, no, no. Speaker 9: What? Speaker 8: I was enjoying this episode. Speaker 9: Don’t worry. Part two’s coming next week. Speaker 8: It better. Dave Young: Thanks for listening to the podcast. Please share us. Subscribe on your favorite podcast app and leave us a big, fat, juicy five star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at empirebuildingprogram.com.…
1 #183: Talking A.I. – Terminator or Jetsons 15:06
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15:06Stephen talks about how embracing AI is the best way for the world to head into the future. It will be brighter and more creative. Dave Young: Welcome to The Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients, so here’s one of those. [No Bull RV Ad] Dave Young: Welcome back to The Empire Builders Podcast. Dave Young here, with Stephen Semple. And Stephen told me that today he wanted to talk about AI, and I’m just assuming that the hammer’s about to drop and that this podcast is now just going to be replaced by some kind of chatbot. Is that what you had in mind? Stephen Semple: How do we know it hasn’t already been [inaudible 00:01:52]? Dave Young: Well, gosh. Good point. Stephen Semple: At the core of this podcast is this idea that we need to be looking outside our space and looking for opportunities and kind of being open to things. Dave Young: Mm-hmm. Stephen Semple: And I wanted to put a little bit different look on what I think the AI opportunity is and bring a little bit of historic perspective to a couple of things. So that’s kind I wanted to do here. So here’s the interesting part. Let’s go back a hundred years. Dave Young: Okay. Stephen Semple: We’re in the 1920s. We’re in that period leading up to World War II. The Industrial Revolution is really getting going at this point. And if there was an economist out there looking forward and looking at the Industrial Revolution, here’s one way that they could look at it. At the time, one out of three people worked directly in agriculture. A third of the people were farmers, and not support the agriculture, farmers. And today, it’s like 1.5%. It’s like out of a hundred people, there’s a couple people who are farmers. None of us even meet farmers anymore. So if you were an economist and you called that correctly, you would say, “Wait a minute, the Industrial Revolution is going to wipe out one of the largest employers in the economy,” it would be really easy to make the call, the economy is going to be a disaster. Our biggest employer is going to go from 30% to 1.5% of the workforce. So it’d be an easy way to call the Industrial Revolution. And it did work out that way, except, it didn’t. Because here’s the other part that’s interesting is according to a study by MIT, now, this one doesn’t go back to 1920, it goes back to 1940, 60% of the jobs that we do today did not exist in the 1940s. The vast majority of the work that we do today, almost 2/3 did not exist. So the economy created a whole pile of new jobs. But here’s the interesting thing, it’s not just high-tech jobs, it’s ancillary jobs to that. So for example, heating and air conditioning repairman did not exist in the 1940s. Dave Young: Sure. Stephen Semple: While there was plumbing, a lot of homes did not have indoor plumbing. Being a plumber was not a huge thing in the 1940s. So it’s not just these changes bring, you got to look at, “Oh, well, what are the jobs in AI?” there’s going to be all sorts of opportunities that are going to present itself that we haven’t even dreamt of or thought of that we got to keep our eye open to. Dave Young: I agree with that. I agree. I’ve not dived in headfirst into ChatGPT and all of the other AI things like so many of us, many our Wizard of Ads partners have done. And I’m not sure what it is about it that when I have dabbled, it’s been a pretty good experience, pretty eye-opening. I’ve gotten some ideas, things like that. I’m not going to ask it to write anything for me, but I am asking it for some ideas, and it’s pretty darn good at coming up with some ideas. Stephen Semple: I find it good for first drafts of something. So again, that’s looking for ideas. Or sometimes, it’s I got this thing and I want to change it. So for presentations, I’ve got this idea and I want to turn this idea into a presentation, and it has to be a five-minute presentation. I want to follow this arc. It can give, again, that first draft where I can then look at it and dig into it and make some changes on it. So I’ve definitely been using it, there’s going to be opportunities of being an AI coach and all this other stuff, but those are on the nose ones. When we take a look at brand new technologies that have come in, whether it’s the commercialization of flight, which created a huge opportunity for Marriott, and the opportunity Marriott was to provide food to the passengers on planes. So many of the jobs are not the ones that are on the nose, it’s ancillary things that this technology then creates. Dave Young: Sure, yeah. Stephen Semple: Right? That’s actually where most of the work is. The explosion in the airline industry created all these opportunities that were outside the airline industry, which were hotels and resorts and providing food to the airlines and that were outside of the creation of that technology. And so, what I’m suggesting people to do is don’t just think about AI, yes, think about AI from the standpoint of how can I use AI, think about AI from the standpoint of what’s maybe some of my opportunities on AI, but also recognize, the biggest opportunities are going to be on a fringe, around it that we probably haven’t even imagined yet. Dave Young: Yeah, I agree. It’s hard to imagine the things that you’re talking about right now, right? Stephen Semple: Yes. Dave Young: In a way, it’s sort of like when Jeff Bezos decided he was going to start selling some books on this little website called Amazon, and nobody knew the revolution that he was going to start in even things like distribution and having enough warehouses within miles of people that you could start ordering things that would be delivered the same day, not just books. There’s this butterfly effect of new things like that that we can’t envision what that’s going to mean. Stephen Semple: Absolutely. Well, it’s hard to believe that the iPhone was launched in 2007. Dave Young: Yeah. Stephen Semple: It’s not 20 years old. And think about all of the opportunities and changes. It was 2000 is when the first e-commerce, well, I think it was actually 1999 the first e-commerce transaction happened, but let’s say 2000. Dave Young: Sure. Yeah. Stephen Semple: E-commerce was not a thing before 2000. And it’s funny, I remember back, my oldest daughter when she was in middle school, and we were sitting down with a counselor, and the counselor was going through helping her figure out what she should do in high school because you got to pick the right things in high school because it’s the right things in high school that set you up for getting the right degree in university, and getting the right degree in university sets you up for work. And Crystal was cratering in that moment. And I ended up having to look at the counselor going, you are trying to pretend that you know what’s going to be in demand 15 years from now. Let’s recognize we have no idea. But here’s the key to this, I think, it’s really hard to be creative and open and able to seize these opportunities when you approach it from a place of fear, very, very, very hard. Dave Young: Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. [Empire Builders Ad] Dave Young: Let’s pick up our story where we left off. And trust me, you haven’t missed a thing. Stephen Semple: But here’s the key to this, I think, it’s really hard to be creative and open and able to seize these opportunities, and you approach it from a place of fear. Dave Young: Mm-hmm. Stephen Semple: Very, very, very hard. I was reading about Nintendo. Nintendo is one we’re probably going to do in the future. And Nintendo, they’ve gone through a couple of difficult periods. They actually gave their creative team bonuses even in difficult periods because what they’ve recognized is if you’re in this place of fear and worry, it’s hard to be creative, the mind just… And there’s all sorts of physiology. We know that the parts of the brain doesn’t get as much blood flow and all those other things. So if we get fearful about AI, cannot create the opportunities. Dave Young: Yeah. I love that story about Nintendo because the gut reaction from most companies is we start cutting the creatives because we can’t put a dollar figure exactly on how much time they spend on our payroll versus a return on that. Stephen Semple: Right, yes. Dave Young: It’s like high schools, “The budget is hurting, so let’s cut out all the creative programs, let’s cut out the band, let’s cut out the art program. And let’s put more money into…” I was going to say football, might as well, but that’s not creating the kind of people that are going to find something revolutionary. And I don’t know, I’m just rambling now, Stephen, rescue me. Stephen Semple: No, but there’s an important point you’re making here. So let’s even tie it back to AI. AI, as it exists today, and again, we don’t know what it’s going to be five years from now, but as it exists today, AI is not creative, it’s iterative, it’s predictive. Now, it can create some pretty cool things because of that, and if you put the right constraints on it, it can be interesting. But true creativity, it’s not going to see, it’s see those brand new ideas that don’t exist, it’s not there yet. Dave Young: It can show you all the things that have been done before. Stephen Semple: It can show you all the things that have been done before and all the things that have worked before. And it also can’t tell you why something has failed, it can just say it failed. And it could tell you other people’s interpretation of why it failed. So I think what’s going to end up happening is true creativity is going to become more and more valuable moving forward. And to stay in that creative state, we can’t fear it. And let’s face it, it is an inevitable that’s going to come. We are going to have to create rules around it. There’s going to have to be new ways of looking at things and copyrights and all that other stuff. Yes, I agree with all that. And we are going to need some legislative environment around it, I agree with all that. But we can’t fear it. What we have to do is we have to embrace it. And then, what we also have to do is recognize there’s going to be a boatload, unbelievable boatload of new opportunities created both directly from it and on the fringe all around it that we have never thought of or contemplated before. And it’s approaching it with that mindset that I believe will create success and opportunities and growth and a better economy and all those things. Because going back 100 years ago, agricultural jobs got wiped out, but 2/3 of the jobs we are doing today did not exist. That’s where the opportunity is. What’s the 2/3 that’s going to now start to happen as we go through this evolution in our economy? And that’s just how I want people to think about it. Just don’t fear it because that will kill us. We need us to all be creative about it, to create that opportunity. Dave Young: Good point, Steve. I feel better about it already. Stephen Semple: There you go. And it’s just this weird philosophical thing, but I think it’s important. Dave Young: Well, and I think if you’re going to understand it and try to keep up with it, dabble. Set yourself up with a ChatGPT account or find some other AI and play around with it. In fact, one of the best ways to find out what it can do is ask it what it can do for you. Stephen Semple: Yeah, that’s actually very interesting. Dave Young: Right? Stephen Semple: Yeah. Dave Young: Because you get some interesting answers. And I think it’s worth spending some time. And honestly, there are probably people that have never played with it before that are going to come up with something that’s even cooler than a lot of people that are already just becoming great AI trainers. Because I feel like the people that are becoming great AI trainers are not necessarily the creatives out there right now because the creatives are being a little bit scared. But once they start figuring out things that they can do to bolster creativity or to use an AI in a way that is creative, I think that’s exciting times. Stephen Semple: Yeah, it is exciting times. It is very exciting times. All right, awesome. Dave Young: Thank you, Stephen. Stephen Semple: That’s just what I wanted to share. I think it’s important in terms of seeing those opportunities and embracing this technology that is, it is an inevitable that’s going to occur, so let’s figure out how to use it. Dave Young: All right, well, I’m looking forward to the next time we talk. Stephen Semple: All right, thanks David. Dave Young: Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big, fat, juicy five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at EmpireBuildingProgram.com.…
Dave Young: Welcome to the Empire Builders podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner Dave Young. Before we get into today’s episode, a word from our sponsor, which is… Well, it’s us, but we’re highlighting ads we’ve written and produced for our clients, so here’s one of those. [Out Of This World Plumbing Ad] Dave Young: Welcome back to the Empire Builders podcast. Dave Young here along with Stephen Semple. And as we record this, it is the morning. Stephen Semple: You’re not excited on this one! Dave Young: Dude, come on. Come on. It’s the morning of November 4th. Stephen Semple: And what happens tomorrow? Dave Young: Tomorrow we have a little election in the United States. The topic that Stephen whispered into my ear just as we started was Twitter. Let’s talk about Twitter. Stephen Semple: Twitter. Dave Young: And I go to Elon Musk. I’m like, oh God. So please, let’s do talk about Twitter and let’s talk about their origins and not their demise. Stephen Semple: See, I thought you would be more excited. Because the real driver behind Twitter is a guy by the name of Evan Williams, and he grew up in Nebraska. Dave Young: Did he really? Stephen Semple: Yes! You didn’t know about that. Dave Young: I thought he was a New York City guy. Because he started it with… It was like an emergency alert thing. Stephen Semple: Well, that’s one of the things that kicked it in the high gear. But no, he grew up in a farm in Nebraska. Dave Young: Where? What town? Stephen Semple: Oh God, of course you’re going to ask me that. I don’t know what town. Dave Young: Because I know people everywhere. Stephen Semple: I automatically assume that you would know this part. Dave Young: I didn’t know that. Every Nebraskan knows someone who knows every other Nebraskan. That’s just like, it’s a third degree of separation. Stephen Semple: But I figured in a place like Nebraska, everyone would know where this dude was from because of how big Twitter is. Dave Young: No, I don’t. Please do tell. Stephen Semple: Okay. So the primary driver was Evan Williams, but also Jack Dorsey and Noah Glass and Stone played very, very big roles in the starting of Twitter. But Evan grew up, as I said on a farm in Nebraska, and he wasn’t into sports, but he always knew he kind of wanted to do a business. And because of that, he read a lot of business books. And in particular, he read some marketing books, and he decided he wanted to learn more as he read a book by pretty famous marketing guy named Gary Halbert. And he said, “You know what? I want to learn more.” So he literally drove to Key West Florida and basically walked into Gary’s office and said, “I want a job working for you.” Dave Young: I’m telling you, that’s a bit of a drive from Nebraska. Stephen Semple: Yeah, it is. It is. So here’s this farm boy from Nebraska showing up at Gary Halbert’s office. And Gary basically gave him a writing assignment, said, “Fine, here, do this writing assignment. See how you do.” And it was so good, Gary actually thought he had someone write it for him. He’s like, no, no, no. Dave Young: This is before AI. Stephen Semple: Yeah, exactly. Actually, if it was written by AI, he wouldn’t have accepted it. But anyway, that’s a whole different issue. So Gary hires him, and he works there for about seven months. Learns a whole bunch of stuff and returns to Nebraska. And he returns Nebraska, it’s the early nineties, and he decides he wants to start a website business. So he’s trying to sell websites to local businesses. Now, at this point, he’s in Lincoln, Nebraska. I don’t know whether that’s where he’s from, but that’s where he moved back to. Dave Young: That’s the big smoke. Lincoln and Omaha, you’re headed off to the big city. Stephen Semple: Okay, so here he is in the early nineties. Remember what websites were like in the early nineties in terms of how many businesses even had that. Dave Young: Oh, yeah. Stephen Semple: It’s early nineties. He’s trying to sell websites to local businesses, Nebraska and into the farm towns around Lincoln. And guess what? It was not working so well. Dave Young: Really? I’m aghast. Stephen Semple: I know. I know you are. I know you are. So he’s not paying the bills. It’s not really working out, and he keeps hearing about all this stuff going on in the Bay Area in the mid to late nineties. He’s scared to kind of make the plunge, and his girlfriend at the time is moving to California, and he decides, what the heck? He would move out to California with her. Dave Young: Here’s the side note about Nebraska. Stephen Semple: Okay. Dave Young: This is the never-ending story. Anybody bright and talented from Nebraska moves somewhere. Stephen Semple: Right. Yeah. Since you are in Austin. Dave Young: I live in Austin. The state has more law schools and medical schools and dental schools than would ever be needed. It turns out more of those people than you’d ever need in the state of Nebraska. Stephen Semple: So you would just basically export them. Dave Young: They go somewhere. Stephen Semple: So it’s ’97, finds himself in California. And no degree, some experience with basically failed businesses. And he gets a job at a company called O’Reilly Media, and it’s a marketing company writing copy. Of course, you had the experience with Gary Halbert, right? But he discovers that he’s not so good in the working environment. He does good work, but he’s not a good employee. Just sort of one of those scenarios that we often see with entrepreneurs. Dave Young: May be a little neuro spicy. Stephen Semple: Yeah, probably. Probably. And while he was at O’Reilly Media, he had started his own website, and he started to post his thoughts and essays onto the website. Now, it wasn’t called blogging at the time. It was just something that he was doing. Dave Young: Blogging hadn’t been shortened from the word web logging, which was just basically keeping a journal on a website. Stephen Semple: And really even at the time, what it was called was personal homepage. So he had this personal homepage, and he even wrote one of his favorite posts, because he was saying not all of them were good. One of them was he did a post on why Amazon should not expand beyond books. Dave Young: Oh, okay. Yeah, good advice. Nailed it. Stephen Semple: But at the time, it took a lot of coding to publish something, right? You had to do it in HTML and all this other stuff. So he decided to create some software where it would make it easy to publish to a website. Where you could write something, push a button, and suddenly it’s on the top of the website. And for him, that felt this really new and different, felt like this new thing. This whole idea where you could go from thought, to publishing, to it being out in the world was really exciting to him. So he left O’Reilly Media, and he had met this woman, Meg Horan, and they started to start a business together. Now, he also got hired as a contractor for doing some things on the side, and they started this company called Piranha Lab. But he also continued to work on web logging while he was doing this, because he thought this whole web logging thing could become a product, but in some ways it was almost too simple. And he created a product called “Blogger”, it was at blogger.com. And in April, 2000, he raised half a million bucks. And if we keep mind April, 2000 in the tech world, that was right before the big tech crowd. So in six months, they’re out of money, because they’ve been giving away the product for free. So in the fall of 2000, things are really tight. Software companies at the time, what they started to do were all pivoting to commerce solutions, because this is how they figured they could make money, is suddenly pivot these things to business products. And they thought about this, Williams thought about this, but he didn’t really want to build that. He was still excited about this idea that anyone in world, this whole blogging stuff, could share their idea for people. And so they came really close to going out of business, was not able to make payroll. It’s 2001, and he sits everybody down and he says, “I don’t have any money. If we come up with some money, I can pay you.” And so basically everyone left. But he couldn’t imagine himself stopping working on this idea. So he finds himself by himself working on this. And in some ways it’s like… I heard some interviews with him, and it was kind of interesting because in some ways, it was a very lonely time. But in other ways he found it very liberating, because he could do just what he wanted to do. Didn’t have to explain to anybody, didn’t have to justify it to anyone. And so he’s working on this blogging product, and it’s growing and things are happening. Then September 11th happens. And September 11th explodes blogging, right? Dave Young: Sure. Stephen Semple: Even with the .com bust that goes on, because all of a sudden people are like, what’s going on? And they’re discovering this whole idea of sharing their own experiences and all this other stuff. And that space explodes. And by 2002, he’s able to start charging for the service. He starts taking ads, because there’s enough traffic that he can take ads. And then he sold the service where you could have this without ads being posted on your blogs. And he launched Blogger Pro. And the space is growing so quickly that in February of ’03, Google comes along and buys the company. Dave Young: Yeah. And I think it’s still a product in Google, isn’t it? Yeah. Stephen Semple: [inaudible 00:10:34] It’s a radio show. It allows anyone to have a radio show. We now have a radio show. But Noah keeps arriving on his doorstep saying, “Hey, can you help me with this? Can you help me with this?” And so he finally decides, you know what? I’ll build a company. I’ll build a software platform that’ll basically collect feeds and make it easy to not only publish a podcast, but make it easy for a podcast to be found, make it possible. And so he builds odo.com is the company he starts, and they actually raise 5 million bucks for creating this. And right after they launch, out comes iTunes. Dave Young: Okay. Yikes. Stephen Semple: Which basically obsoletes them. All of a sudden you’re like, “Well, that was such a good idea, Apple did it.” Dave Young: Yeah, Apple thought that was nice. Sure. Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. [Empire Builders Ad] Dave Young: Let’s pick up our story where we left off. And trust me, you haven’t missed a thing. Stephen Semple: And so they’ve got this money. They’re looking for other ideas. There’s a young programmer there, Jack Dorsey, who is working at ODO. And Jack on the side had wrote this installable pod catcher, he called it. And it was a service that could send a message. But what it was, it would send a message to phones, but you could send it to multiple phones at the same time. Again, you got to remember back in that day, if you were doing a text message, it was one text message at a time. Dave Young: Right. There’s no broadcast text. Stephen Semple: Right. So Jack had created this idea where you could send it out. And the idea to actually come out of this thing that they did called One Day Hackathons. Because when Apple launched iTunes, all of a sudden they were like, “Well, what are we going to do?” So they just basically spent a day, hey, what are things that people have been working on? What’s an idea? And Jack had come up with it, and they already had the idea that it was going to be called Twitter, that had come along with it. Just for whatever reason that fit with it. Dave Young: Did they have the bird and everything? Stephen Semple: I don’t know. I just think it was, we’re Twittering here. Dave Young: I like that. Stephen Semple: It would’ve been really easy… This is one of the parts that I found that was quite interesting. It’s a couple of things Williams learned in this, is it would be really easy to dismiss this idea because it was really small. It was small, but felt like the right thing to him. And it felt a lot more important than the metrics. So even when they started rolling it out, it was not catching on the way everyone thought it would be catching on. Because by 2006, there was still only a few hundred on the Twitter side. And when he got talking, when Williams got talking to the investors, because remember, he had $5 million had been invested in it, they didn’t really like the idea. Because again, they’re looking at the metrics, looking at the numbers, looking at metrics. And so basically what Williams did was bought the company back from the investors. Dave Young: Wow, okay. Stephen Semple: He basically bought ODO for Twitter back from the investors. He said, “You know what? I believe in this idea so much I’m going to buy it from you.” And because what he found was, from a numbers perspective, he couldn’t defend it. But just in his heart, it felt right. Dave Young: Sure, I get that. Stephen Semple: So he went after it. And the other thing is, what he also discovered was the folks were far more interested in some other things that ODO was working on, but it’s not where his heart was. And it was not something that he was using. Because even when they developed the podcast stuff, feel as right for him because he wasn’t a podcaster. Where this whole idea with Twitter went to that original idea of you could create a thought, and you could take it out into the world right away. So it’s the end of 2006, it’s definitely growing. There’s now 60,000 users on Twitter, but that’s still not a big number. And it’s March, 2007, and this is where they sort of get their breakout moment. It’s at South by Southwest. So they’re at South by Southwest. And he feels like, you know what? That is, our audience. People at South by Southwest are the ones who we believe would really love something like Twitter. And what he had noticed from being at previous South by Southwest, people hang out in the hallway. It’s a lot of hanging out in the hallway, a lot of chatting in the hallway, a lot of people trying to connect with each other and sharing ideas in the moment. And so he thought, well, why don’t we set up screens in the hallway? It would just show the tweets scrolling by. And it would be tweets from one person to another person is what people would be seeing. And that’s what they did, because it was very engaging. There’s a lot of journalists there. There’s a lot of bloggers there. People started talking about Twitter, and that basically hit a tipping point. It went hockey stick following that. Now, a lot of businesses, because it went hockey stick, they had some scaling issues and things along that lines. And they now also had investors knocking on the door, because now it was this thing. And then there was all sorts of drama. He and Jack Dorsey had a following out. Jack became the CEO, but didn’t have enough management experience. Jack was pushed out. Jack came back later. All sorts of things happen. In 2008, Facebook approached them to buy Twitter. And I thought this was really interesting, because Evan Williams recommended not taking the buy out from Facebook. And here was his reasons. I think this is really, really good reasons when thinking about selling your business. Why would you sell? Now maybe you just want to sell it, that’s fine. Done with it. You want to move on, whatever. But basically, here’s the reasons why you sell a business: you want to sell it. You’re in trouble. It’s no-brainer money. In other words, it’s so much money, it would be dumb to say no to. But if it doesn’t fit those things, you shouldn’t sell it. And he looked at it and said, I want to keep doing this. We’re not in trouble. It’s a lot of money, but it’s not no-brainer money, so we shouldn’t sell. Dave Young: Sure. Stephen Semple: And I thought, when I read that, I thought, that is really good criteria. Dave Young: It really is. There’s a lot of small business owners that sell because there’s a feeding frenzy of private equity money out there that… Let’s not go down that rabbit trail. But yes, it ends up being what feels like no-brainer money. Stephen Semple: Yeah. But he’s even okay with it. If it’s no-brainer money, take the no-brainer money. But what I love is: make sure it’s no-brainer money. So in other words, it’s not a few million dollars. It’s like life changing. Dave Young: Let’s say Elon Musk comes to town and… Stephen Semple: And wants to throw, 44 billion is what Elon threw at the company. Dave Young: Turns out that’s no-brainer. Stephen Semple: That’s no-brainer money. That’s no-brainer money. Now also, by the time Elon came along, Evan Williams had been pushed out of the company. Because there was all sorts of drama around the business, and then of course, Elon comes and buys the company. Dave Young: I’m guessing Evan’s doing okay. Stephen Semple: Oh, yes. Dave Young: I’m thinking he’s probably just fine. Stephen Semple: Well, if you think about it, to the point, it wasn’t until they had had that breakout moment. He was the sole owner of Twitter. Dave Young: Yeah, Evan sold it. He’s fine. I’m not worried about it. Stephen Semple: He’s fine. Dave Young: He’s a Nebraska boy. He’ll be good. I got into Twitter so early that I am @DaveYoung. Stephen Semple: Wow. Yeah. Dave Young: But I never got into it. It was a service that never tickled my interest the way others do. And I don’t know what it is about it, what it was. And I know other people that are just die-hard Twitter people. And I could never Twitter. Stephen Semple: You know what? I’m the same. I’m @StephenSemple. And I did it for a little while, and it just wasn’t my thing. So there’s a couple of lessons out of this I like, but one of the things I’m going to say, I think Elon Musk changing the name to X was a massive mistake. Dave Young: Of course. Stephen Semple: And here’s how much of a mistake it is. It’s been quite awhile now, and people still refer to it as formerly known as Twitter. And here’s what he didn’t understand, and here’s what we understand as marketers. The most powerful words are verbs, remembering things. And Twitter became a verb: tweet. What am I doing? I’m sending out a tweet. Dave Young: There’s no corresponding word for X. Stephen Semple: Well, here’s even the weirder things. The expression was, “I’ve tweeted it out. I’m tweeting something out.” Well, now it’s, “I’m X-ing something out.” Well, if I’m X-ing something out, it means I’m removing it. And we see it. The marketplace is still struggling with calling it X. Dave Young: And even using it. I think if there was a viable thing that everybody could just jump onto, they would’ve. Stephen Semple: Yeah. Dave Young: Yeah. It was pure vanity. Stephen Semple: The part that I found that was interesting about this whole thing is, it was this whole idea of feeling that he had that moment of being able to create an idea, share that idea with the world- Dave Young: Throw it out there. Stephen Semple: …that lived with him through all of these iterations that he went through that just felt so special to him. That’s what he chased down. And there is something magical about that. Dave Young: Absolutely. And it’s, you have an idea and you follow it. Right? You follow this passion for a thing that you have, and just keep pulling on that string and see where it takes you. Yeah. Stephen Semple: Yeah. And other people comment on it. And it is this interesting idea that he chased down. And the other part that I found was, he chased it down because it felt right. Even though the metrics didn’t support it, it felt right. And it’s always a hard thing, because how do you know whether the right feeling ends up becoming something? It can be a difficult thing. So I’m not saying completely ignore metrics, but also don’t ignore the feeling. And then when he went to South by Southwest, I think far too often when people are doing a trade show or whatnot, they don’t have a strategy for the show. What am I actually going to do? Most people are like, “I got a booth. I show up, and I set up my booth.” Dave Young: And hope that enough people come by to pay attention to me. But as you said, he did this because it is what he was interested in. And the thing that South by Southwest allowed him to do was find other people that thought that was a cool idea. They’re out there. They’re out there. Everybody says there’s no such thing as an original idea. The question is: is your idea powerful enough that other people are going to like it as well and want to make it part of their idea? They’re incorporated into their world. Stephen Semple: Yeah, exactly. Dave Young: And he found those people at South by. Stephen Semple: Right. And again, it wasn’t just show up. It was like, what can I do now to engage these people, and demonstrate it, and meet them where they’re at, and do something unique to pull them into my world? Dave Young: And show don’t tell. Stephen Semple: Show don’t tell. Exactly right. Dave Young: Let’s show what people are saying on Twitter. Not just say, “Oh, lots of people are saying lots of things.” No, here’s what they’re saying. Look at this. Yeah. Brilliant. What a fun story. Stephen Semple: I thought it was. Yeah. So you see it worked out okay in the end. Dave Young: My angst is… I’m not saying all of my political angst is gone, but I’m glad that we didn’t spend 20 minutes talking about us. So, thank you. Stephen Semple: You’re welcome. My gift to you. Dave Young: See you on the other side of the election, Stephen. Stephen Semple: All right, thanks. Dave Young: Bye. Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app, and leave us a big fat juicy five star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute empire building session, you can do it at empirebuildingprogram.com.…
1 #181: Rebecca Cassel – Part 2 – Partnerships Take Work 27:50
27:50
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27:50Rebecca and Lon build out a coaching empire that takes full use of the manuals and techniques they developed building successful home service companies. Dave Young: Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector and storyteller. I’m Stephen’s sidekick and business partner Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those. [Seaside Plumbing Ad] Rick: Told you, Brian. Brian: Told me what? Rick: This is part two of last week’s episode. Brian: Oh, yeah. And it was getting good. Rick: If you missed it, go back and listen to part one first. Take it away, fellas. Rebecca Cassel: Yeah, so, Lon, as I said, he was my business partner, and it was funny. I would say, “That sometimes you really like your business partners and sometimes you don’t.” And I think Lon and I went through the, hey, I don’t like you very much, but we really respect each other. We had very different strengths and weaknesses. I am very operational, strategic, and accounting. He was sales and marketing and relational. And so the combination was pretty fierce. And he called me one day and said, “Hey, we’re going to start an organization. I just got invited to join a group of investors in St. Louis to start an organization that will help more contractors.” And he said, “We’re going to actually branch out of just doing HVAC. I think we’re going to do plumbing and maybe eventually electrical.” I go, “Wow, that’s really exciting.” He goes, “I’m moving to St. Louis, so I’ll keep in touch with what’s going on.” I was living in North Carolina, and he was living in Illinois at the time. And I thought, wow, what a cool thing. I go, “Well, if I can be of help, obviously I’m here doing it, writing operations manuals or procedures, or obviously I’d love to be a client. So when you get this all up and going, that’ll be exciting.” About three months later, he called me, and he said, “Hey, I think you should be a part of this.” And I was like, “What do you mean? I’m running an HVAC business in a completely different state.” And again, before all the technology where you could do everything remote, he goes, “I think what we’re going to do is going to really change the industry dramatically, and I know you would want to be a part of that.” And he said, “Why don’t you find a way to develop our comfort advisor into the general manager, and let’s get this going to where maybe you could come be a part of this operationally.” Stephen Semple: And which business was this, Rebecca? Rebecca Cassel: This was Success Group International. Stephen Semple: This was Success Group, okay. Rebecca Cassel: Yes. At the time we had an umbrella name called BenVest, but it’s what became, we started Plumber Success first, but it was Success Group International. And so I went in and talked with some of the other founders about what we’re going to do, the CEO, Jim Abrams and Lon was already employed, and I got to meet Patty Myers, who is their VP of Finance, and I ended up being the fourth employee. We started in St. Louis and said, “Hey, we’re going to build an organization that helps home services be successful. We’re going to impact lives by helping these business owners become more successful.” Stephen Semple: So I want to step back and cover just a couple of other things. It’s amazing you had the opportunity to work with Jim so closely, with Jim Abrams. And anybody in the home services or the marketing space knows that name, like a famous, famous guy. So you had a chance to learn a lot from him, but you also had a chance to learn a lot from another marketing person who has a lot of fame in the home services space because I believe it was when you and Lon went to see Roy Williams, it was about one hour, wasn’t it? Rebecca Cassel: It was. So what happened, Jim Abrams and John Young were partners. Lon was an original investor. And so as a fourth employee, Patty always felt like we were founders too. Stephen Semple: Hey, according to this interview, we’ll take out the felt like, you were founders. We’re going to edit that. Rebecca Cassel: And we’ll edit this part too. But it wasn’t at the moment that we started the business. So I became, and not by marriage, by the way, I was my own coder, and then Lon and I get married. We’ll edit all that little piece out. So, yeah, I had the wonderful opportunity to learn from John. Yeah, John was fantastic marketer, really great at direct mail. And as we grew helping contractors, we did plumbing, we did HVAC, we did electrical, and we did roofing. Some of our plumbing members said, “We’d really like to have national advertising, and we’d really like to have a national-looking truck.” And we started to kind of play around with this concept of having a national brand. And John Young was really excited about that because that made some of the marketing techniques and strategies easier when you’re doing it just for one brand, right? And I do remember in the conference room, one of our attorneys said, “Hey, this kind of starting to feel like a franchise here, so if you guys are going to do this, you probably need to form a franchise.” And that’s kind of how Benjamin Franklin, The Punctual Plumber was born, is that our members were asking for this national brand, this national advertising, this ability to do that. And so we started with Benjamin Franklin, but The Punctual Plumber, I believe was actually coining by Rory Williams. I mean, John was looking for unique selling propositions and ways to get our message out and got introduced to Rory’s just whole thought process on building market share and brand awareness. And in our space, no one had ever really done that before. There weren’t contractors that were building brands. You would go to the Yellow Pages and look for somebody, but you weren’t hearing them on the radio or seeing them on TV at that point in time. And so I know John was coming back all excited and talking about Broca’s area of the brain and all these… and iambic pentameters and all these things we had to do as a result of him meeting with Roy. So Benjamin Franklin, The Punctual Plumber, that rhyming that came out of some of those meetings with Roy. And so we started first with Benjamin Franklin and then decided to also then do the HVAC franchise. It was one hour heating and air conditioning, always on time, or you don’t pay a dime. Stephen Semple: Yep. Another one. Rebecca Cassel: Mr. Sparky Electric came from Patrick Kennedy who was our partner on the electrician success side and had a wonderful brand, and we began franchising with his brand. And so that became kind of our next generation of portfolio companies that kind of came from Success Group International. Stephen Semple: Which were look powerhouses. I didn’t realize, it’s funny how many times I’ve heard the story because being a partner with Roy and hanging out with Roy, I never realized that Benjamin, Franklin Plumbing was the first one. I had always thought it was One Hour, then Ben Franklin and then Sparky. So thank you for educating me on it. I’ve had the order wrong this entire time. And it’s funny, now that you say it, there’s certain conversations that I think back to and I go, “Oh, okay. There’s a couple of things now that make more sense that that would actually have been the order.” That’s cool. But one of the things I want people to also understand is willingness to do some things that are really out there, and the successes come from that. And there was one story you shared about the newspaper ad. Now I know this is going back a little bit, but it also speaks to when something happens, and if it’s different, it has a power to it. And you know the ad I’m talking about, I don’t have to give anything away here. Rebecca Cassel: It annoyed me for a really long time, and it’s now funny. Stephen Semple: At the time, it really wasn’t. Rebecca Cassel: Yeah, at the time that Lon and I were business partners, and he said, Look, I’m going to give you a couple different newspaper ads. We’re going to try some direct mail, but I’m going to tell you right now, these ads are going to probably get you 30 to 40 leads.” And I was like, “No way. Come on, really?” And he goes, “Yep.” He goes, “They’re written in a specific way.” They were written by John Young actually. And so there’s a newspaper ad that he sent to me, and it said, the headline was, “How to buy a heating and air conditioning system for as little as 13.99 a week.” So that was the headline. And John always had this theory that you need to put a picture of a person and give them a cool title underneath so that people like to look at other people’s faces. And it wasn’t just all copy. And so we put it into the newspaper in Winston-Salem, and I don’t know if I didn’t proof it right or if just they thought it was funny or if they were messing with me a little bit because I wasn’t exactly well received in the good old boys contracting network in Winston-Salem, North Carolina at the time. So the ad came out, and I was supposed to have my picture with queen of comfort underneath of it, and instead of it, it had 13.99 a week under my name. So we were getting phone calls of, “Yeah, I like the girl in the ad for 13.99 a week.” I was so embarrassed, and I thought it was horrible. Of course, when I talked to Lon, he goes, “That’s awesome. Keep doing it that way. You’ll get so much attention from it.” And I was like, “Are you serious? This is horrible. This is just demeaning.” So anyway, we did correct it, and eventually I became the queen of comfort. But it was a fun story to tell that it got lots of attention for 13.99 a week. Stephen Semple: Yeah. And the interesting thing is sometimes it was a mistake, but sometimes these mistakes actually, as you say, “Catch a lot of attention.” And when you shared that with me, I was like, “Man, I could feel your discomfort,” but at the same time, it’s sort of one of those ones proofread the ads a little more carefully. So you’re now at Success Group International. You’ve also been doing the things with the brand, so you’ve got a franchise going on. You’ve also got the training systems, which frankly lend well to a franchise, because building a brand, and you’ve already got systems and operations. Well, that’s natural for a really successful franchise. You guys build that up, it’s doing amazing. And then what happens? Rebecca Cassel: Yeah, so the whole thought was, hey, we’ll get him ready here at SGI and then those that would want to convert to franchise would. And then eventually we started acquiring and having company-owned franchises. And so I had the opportunity through my career to always progress. I got to be the president of the franchise of operations, and then I also got to be the president of all of our retail operations. And we were acquiring companies all throughout the US and in Canada, which ended up to be about $180 million in HVAC, plumbing and electrical revenue. And so- Stephen Semple: When 180 million was a few dollars more than today. Rebecca Cassel: Yeah. Yeah. This would’ve been ’08, ’09. Yeah. And so it was exciting because I got to be back more in of a operating. I was operating then the helping contractors and franchising contractors. And then back in my retail experience, it was like back in the trenches of remembering what technicians are supposed to do in the home, and how do we answer the phone, and where are the market, right? So it was really exciting to be able to do that. And then in 2010, our CEO and board decided that it was time for us to sell, and we ended up selling to Direct Energy all of the things that we had built through Clockwork Cloud services. Stephen Semple: So it was the franchise, it was the branding, it was the systems, it was everything? Rebecca Cassel: It was. Stephen Semple: And then there’s a interesting twist in this story, because this story’s not over. Dave Young: Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. [Empire Builders Ad} Dave Young: Let’s pick up our story where we left off and trust me, you haven’t missed a thing. Rebecca Cassel: I look back and go, “Gosh, if I would’ve made any different decision any point in my life, I would definitely not be sitting here talking to you today.” So when we sold in 2010, some of the executive team wanted to retire, some wanted do other things, then I thought, you know what? I want to stay. I’ve never worked for a $36 billion organization before. I liked a lot of the people that were there. I thought maybe I could learn some things. And so I decided to stay on as an employee of Direct Energy. And I was responsible for the training, the group buying our software at the time called Successware, and then also Success Group International. It was a great run, but I could also tell that Direct Energy, their focus really wanted to be on the franchisees and really figuring out that brand with their energy play. And so I was kind of really concerned and questioned what’s the direction that they’re going to do with Success Group International. I was going to happen to SGI. Then as an entrepreneur, I was kind of having that entrepreneur itching in and my husband and I, we ended up going in 2013 and buying another heating and air conditioning business. And by the way, my husband is now a Lon Cassel so that’s a whole other podcast even. Lon and I, business partners did end up getting married, but we decided to be operators again in 2013, and then an opportunity kind of fell on my lap, and I was at the right place at the right time at Direct Energy. My boss came to me at the time and said, “Hey, we’re not really sure that Success Group International really fits with our long-term play. Would you and Lon like to buy it back?” And I about fell over. Dave Young: Right because they were struggling with the whole fact that you could kind of have all the systems and things without a franchise. So I think they were struggling with, well, how do we position these two things. Like in your mind and my mind, they don’t compete. But in their mind, they were kind of competing, but they also knew that there was a lot of value in that. So they approached you and saying, “Hey, do you want to buy it back?” Rebecca Cassel: Yeah. And I said, “I’m surprised that you would sell it.” That was exactly the words that came out of my mouth. And they go, “We think if we unsell it, because we’d sell it to you and Lon, and we think you’ll help us figure out the best way to be partners as we unravel all this because there’s a lot of overlap between- Stephen Semple: Oh, gosh. Rebecca Cassel: Service [inaudible 00:16:28] and I mean one big accounting team and one big HR, right? Stephen Semple: Right, I hadn’t even thought about that. Rebecca Cassel: We had to figure out, it took us two and a half years of transition to just be independent. But we decided, hey, this is how we’re going to do it. I help work through that and figure that out. Many, many people on the DE team that helped with that. For me, I wouldn’t probably have the opportunity if it wasn’t for Dan Kipp and maybe Scott Boose, the guys at Direct Energy at the time who really said, “We’re going to figure this out because it’s the right thing to do for us and it’s the right thing to do for you.” So in April of 2014, and it’s so weird that it was here in Dallas, we actually had our expo in Dallas and we were headquartered in Sarasota, Florida. I got to announce, “Hey, we’re independent and Lon and I are going to continue to grow SGI and focus on the independent contractor.” I also invited several of our members to become owners with us. I wanted other members to have the opportunity to influence who wanted to get back. And so people like Jimmy Dale and Gus Antos and Tim Bolden, who are all still members today, were instrumental in helping put together this group that is still SGI slash CertainPath today. Stephen Semple: Yeah. Here’s the part that I find, and I’ll go back and recap in a second, but here’s one of the things I also find that really speaks to the value of the service, that what’s now CertainPath today delivers. Is you knew the value in all of these things, and you knew the time it would take because you had a choice. At that point you could have said, “No, we’re not going to buy it. We’re going to rebuild all this stuff,” and you didn’t. You wrote a check and you bought it back, which is a testament to your belief that there’s value in this. Because if you didn’t believe it, you wouldn’t have wrote a check to buy it all back. And in fact, you were shocked when you were given the opportunity to buy it back because you’re going, “This is worth way more than you guys understand. I will absolutely buy it back because you’re giving me a deal. You’re giving me a bargain here because this is really super valuable.” And I think one of the things that really impressed me when first spent a day together and you were sharing this, that I was like, “You really believe in the value of this and you really experienced it.” Look, you experienced it from stepping into somewhere for operations, which suddenly took them from not making money to making money. To then starting from scratch your own HVAC company, growing it to a million dollars, to then creating systems and processes and brand to create this national thing that all of a sudden have a hundred plus franchisees, or sorry, doing $108 million, that then sold to a multi-billion dollar business that you then work at. I mean, every step of the way you’ve touched this, and I don’t think there’s anyone around in the HVAC industry that has that depth of knowledge of experience running a franchise network, working with a multi-billion dollar company, doing a startup, being the outside person brought in as the employee. Doing sales, like those hard sales, right in day one. It’s really quite an incredible journey that you guys have gone on. How many members are there now today with CertainPath? Rebecca Cassel: We have almost 1,200, which is phenomenal for us. No, it’s been an area of focus, and it’s exciting to see the number of people. Steve, when people ask me all the time, “Why do you do this?” And the stories that come out from the results that people get after joining our organization, it’s almost like you can’t even believe that. Stephen Semple: Yes. Yeah. Rebecca Cassel: I get people come up and hug me at expos and say, “I got to put my kid through college because you guys helped me run my business better,” or “My wife and I got to take vacations we’ve never got to take.” Or “I finally help my employees who wanted to buy their first home.” I mean, just the trickle-down effects of the lives that we impact and the lives that we have transformed by just simply helping someone with their business is pretty amazing. It’s very infectious. It’s like, what other job can you do and feel this rewarded and this grateful and thankful to such a great group of people? Stephen Semple: So I have a confession to make, although I believe I’ve made this confession to you before. So when we first started working together, we spent a day together and then we spent another day together putting together a strategy and all those other things. And what really impressed me was, yes, this passion and this belief, and yes, it’s a business, but like you and Lon and your entire team, Abigail and everybody really and truly do get excited when they hear these success stories. And it is just great working with a business that has that leaf. But I want to talk about Expo for a second because you were like, “Oh, you should come to this. You should come to the X number of day Expo.” And I was like, “Oh, well, you are a customer and you are asking me, another conference. I’m going to go because I kind of have to.” And I’m going to be really frank. That’s how I approached it. And the job you guys do at Expo, the quality of the presenters, the things that are done, look, everybody says, “Our members are enthusiastic.” Everyone says, “That the true enthusiasm and passion that your members have and the team have towards your members surprise the hell out of me.” I was like, “Wow, this is way better than I thought it was going to be.” It was a really super high quality event to the degree where the members on my team that I put together to help you with the account that were unable to make it to Expo last time are coming this time in the fall. Because I’ve said to them, “No, you really do need to see this and experience it, and it’s totally worth the time.” But I think it’s also a testament to the quality and the care that you put into this. It’s not just the informational thing. It is something to celebrate the transformations that these businesses have gone through. And the stories that I heard over and over again were incredible, and I was hearing them when you weren’t around, right, so I know they were true. Rebecca Cassel: No, I got to tell you, my entire team, we pull those off by ourselves. We only hire security and audio visual people on those. That team has traveled with us for 17 years and- Stephen Semple: Incredible. Rebecca Cassel: All the content, and all the presentations, everything, it’s my team and they’re fantastic group of people who passionately care about our members having the most amazing experience at Expo. This business is hard, and we do it twice a year or get together twice a year because every six months you need a little pick me up to go, “I know what it’s like. This is hard. Be around a bunch of people who are doing a bunch of hard stuff all the time. Let’s all talk and network and share ideas and train and learn and grow together, and then get motivated to tap into another six months.” Stephen Semple: And I think this is what’s special about what you’ve built at CertainPath is the senior management team at CertainPath, when you say it’s hard, you’re not just saying it. You experienced it, you experienced the long days, you experienced the stress, you experienced the rejection, and you’ve experiences the challenges of every step. It’s not that the challenges go away when all of a sudden you have a hundred franchisees, they just change into a different set of challenges. But you’re one of the few people in the industry that have experienced every step of the way of that, and most of your senior management team have had that as well. And I think that that brings a very, very different perspective when you’re helping these people with their transition because it’s not just theoretical what you’re saying. You did it, you’ve lived it, you truly have the empathy for it, and when they succeed, you truly have the excitement for them because you’ve been there and you’ve walked in those booty covered shoes. So, Rebecca, this is fantastic. Thank you for taking the time to share the story. It is a remarkable and fantastic story. I’m really honored to be part of the next evolution in terms of making this really the thing it deserves to be, which is way better known in the industry than it is. But if somebody wants to reach out to you guys and find out more about CertainPath, what should they be doing? Rebecca Cassel: No, we would love to chat with them. They can go to our website at www.mycertainpath.com. There is a couple of different ways to engage with us, our phone number is there on our site. You can also do a starter session. You click on the button and say, “Hey, I’d like a starter session.” And this is just basically a 90-minute opportunity to understand what it is we do. You’ll get value from it. We’ll give you some things that you could immediately go back and implement into your business and see success with. You can also just book an appointment if you don’t want to actually speak with somebody, you can just book with an appointment, an advisor. We also do events all throughout the country and in Canada at our Profit Day, and this is a full day workshop where we are sharing with you about the things that we have seen kill companies. And helping you understand what can you do to kind of fight these things off and then share with you a little bit more about what we do and how we could help. So any of those ways, we’d love to engage with you. Of course, if you’d love to just come see our office, we’re in Addison, Texas. We have a fantastic training room, and we would welcome you with open arms if you walk in and say, “I’d like to hear more about CertainPath. Where’s Rebecca Cassel?” We’d love to share everything that we could. We’d love to help more contractors. That’s our mission, is to continue to help independent contractors grow their brand, be successful, achieve their dreams. Stephen Semple: If you’re a contractor, I’m going to really encourage for you to reach out to CertainPath because, look, there’s other training companies out there, and what I find a lot of it is it’s a business and it’s theoretical. You guys are the real deal. You’ve walked the walk, you’ve faced the challenges, and you really know what it takes to be successful. And your track record with helping folks is fantastic so I highly encourage people to do that. And, Rebecca, thank you very much for taking the time out of your day. It’s an amazing story. You’ve really been on quite a journey, and it’s going to be fun to see what the next chapter unfolds. Rebecca Cassel: Stephen, I’ve really enjoyed it. Dave Young: Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big fat juicy five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire building session, you can do it at empirebuildingprogram.com.…
1 #180: Rebecca Cassel – Part 1 – Helping Contractors Succeed 26:43
26:43
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26:43Rebecca meets Lon and they build an empire of home services companies that lead to the best Contractor Coaching Program. Dave Young: Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick in business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So, here’s one of those. [ASAP Commercial Doors Ad] Stephen Semple: Hey, it’s Stephen Semple here with the Empire Builders Podcast. And we’ve given Dave Young the week off. So, he’s sitting back and chilling and relaxing and drinking drinks by some pool somewhere, I’m hoping. I’m really excited. I have Rebecca Cassel with me. And her story, when I first heard it was just one of these ones where I’m, “How is Rebecca, especially in the home services space for what she’s accomplished, not a household name?” And for full disclosure of the business that Rebecca has now, which is certain path that does this amazing training for people in the home services space is a customer of ours. I’ve got a team of people working with Rebecca and their group to promote their business more. But one of the things that was exciting is when we got together for the day and you started sharing some of these stories, I was like, “This is an incredible journey that you’ve gone on, let’s face it, especially as a woman in the home services space.” So, I guess what I want to do is go right back to that beginning when you first got exposed to the home services space. And please, don’t forget to tell the story about the wearing of the booties. That’s one of my favorite ones. Rebecca Cassel: Great. Thank you. Stephen. I’m excited to be here. I can’t believe it’s been 25 years of CertainPath. And obviously, we used to be Success Group International. And my story is unique. I graduated with an accounting degree, SAT for the CPA exam, thought I was going to go into public accounting and realized really quickly that I didn’t like it and was looking for opportunity to use my financial degree to help small businesses. And I actually answered an ad. And this is okay, so ’90s, this is how you found a job back in the ’90s is a newspaper and there’s this amazing newspaper ad. And it did tell me exactly what the company was. But it said, “If you want to use your accounting degree or your financial experience, if you want to help implement systems and processes in a small business and help them operationally expand, this is the job for you.” Such a cool written ad. I decided to pick up the phone and schedule an interview. And at the end of the phone call, of course, they give you an address and there was no way to Google it back then. And so, she’s like, “Turn here by the McDonald’s and then go down.” So, I was like, “Okay. Great.” And I really don’t remember if in that call I heard the name of the company because I was so excited that I got the interview. So, I pull up for the interview and I quickly realized maybe I’m not in the right spot because on the sign it had a name of a heating and air conditioning company. I was like, “Well, surely, this is not the company that put the ad in the paper.” Because I just thought appearance of the building, the sign that was cracked, the weeds in the parking lot, did not screen professional, professional. But I kind of thought, “Well, I got to go find out if I’m in the right place or not. And if I’m here, so it is.” So, I walked in. And you got to remember back then, this is when women were pantyhose and I was in my black patent heels and my gray suit, totally looking super corporate. And I walk into this little … Stephen Semple: Did you have shoulder pads in the … Rebecca Cassel: Yes. They both match [inaudible 00:05:03] and my briefcase. So, I looked all official. I walked in and there is a lady who’s smoking a cigarette, sitting behind this old walled paneling, 1970s looking office and stacks of papers everywhere. And I’m like, “Are you going to talk to me? I’m standing here.” And I quickly realize she was on a personal phone call and she waved me over to a chair in the corner that’s one of those old orange plastic chairs, half of the chair was broken off. Stephen Semple: Oh, man. It just gets better. Rebecca Cassel: Yeah. I’m sitting here going, “Wait. I’m so confused. Why this professional, really cool ad describe my dream job?” And I feel like I was walking into the Twilight zone. So, I sit down. I wait for her to finish her phone call and she says, “Are you here for the interview?” And my heart sank and I quickly realized I was in the right … Stephen Semple: Oh, my God. Oh, my God. I’m actually in the right place. Rebecca Cassel: I’m just observing because I’m like, “Wow. Super professional, really cool marketed job advertisement.” And a gentleman comes out and he actually looks like he’s close to my age and he asked me if I would go into the office and I did. And he asked me a few questions. I had a resume. But I was like, “Surely, this cannot be the owner of this company.” I mean this … I would say as a kid, you know me in our early 20s. And I quickly realized it was the son. So, then I got introduced to the owner and really cool people, just salt of the earth people who are really working hard, providing HVAC service, and they were looking for someone to come in and help them with their operations and get their systems and processes and their accounting in order. And they had told me, they said, “We joined this organization and they’re the ones that wrote the ad and they’re the ones telling us that we need someone like you to help us fix our company.” And I said, “Do you mind if you can tell me the name of the organization?” And they did. And I said, “Well, how much did you pay to join this organization?” They said, “Well, it’s $25,000 upfront and then we have to pay a monthly fee and we have to go to training. So, this is a big investment for us.” And I was shocked. I was like, “This is a scam. This is not for real. Someone took advantage of these poor people who are innocent trying to run their business.” And I just said, “Look, I don’t know if this is the right thing for me.” I thought I was walking into something different. We actually had a little bit more of a conversation. And I found out they did a lot of new construction where they were trying to get into the residential side of HVAC and that this organization that they joined was going to lead them down the path and that was going to help them know exactly what to do. So, I kindly excused myself and said, “Look, I just don’t think this is for real, and I’m sorry that you spent this kind of money. But if I were you, I would rot.” So, I decide to leave. Stephen Semple: Which is wrapped in so much irony right now. Rebecca Cassel: Exactly. I decided to leave and the next day I got a phone call. They asked me if I would come back in for another interview. Like, “No. You don’t understand. This is really not what I thought I was going to do with my career. I don’t think that you could probably even afford me. I think this is the wrong thing.” And they go, “Well, you talk to the person who is actually going to teach the class in Houston that we want to go to, that we want you to go to if you would take this job.” And I said, “Okay. I will.” So, I took the gentleman’s phone call and his name was Lon Cassel. Stephen Semple: So, there’s the beginning. Okay. Rebecca Cassel: And Lon had owned seven different heating and air conditioning companies and was a part of selling some of them to service experts in the mid-’90s and then had a passion for helping contractors. He had a consulting business. But at the time, he was doing some classes for the training organization that this contractor had joined. And he said, “Look, I’m going to tell you right now, this is for real. This business really does help contractors. We give them a business model, a path, we give them training, we give them coaching, we give them everything that they need to succeed, but what they need is somebody to help implement all these things with their business. And if you come to this class, it will change your life.” And I was like, “I don’t know. HVAC, I’m an accountant. How does this work?” He goes, “I guarantee you. You will see and you’ll understand, but you’re going to have to take a leap of faith. Take the job and get to the class.” So, I called the owner back and we did another interview. And I found out in the interview, too, that they really hadn’t been making any money. So, then it made me even feel guilty about saying, “Hey, I got to make money here myself. I am young. I got to have a job.” But that was on a Thursday I took the job. On that Sunday, we flew to Houston to attend this class, and really my first day on the job was at this training class in Houston, Texas. And I went through the first week of training. The whole concept of it was go to the training a week, go back, implement, come back a week, go back and implement. So, it was this ongoing thing. The owner went with me. And so, we were learning it together and deciding what we’re going to go back. And it was eye-opening. I was amazed. It was as close to giving someone exactly how to start a business from scratch in the HVAC world as I had ever seen before. And I thought, “Wow. Every small business could use a playbook like this.” Dave Young: Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. [Empire Builders Ad] Stephen Semple: Let’s pick up our story where we left off. And trust me, you haven’t missed a thing. Rebecca Cassel: The whole concept of it was go to the training a week, go back, implement, come back a week, go back and implement. So, it was this ongoing thing. The owner went with me. And so, we were learning it together and deciding what we’re going to go back. And it was eye-opening. I was amazed. It was as close to giving someone exactly how to start a business from scratch in the HVAC world as I had ever seen before. And I thought, “Wow. Every small business could use a playbook like this.” Stephen Semple: Right. So, you suddenly went from this skeptic, how is this going to help anybody, you’ve overspent, run away to suddenly you’re exposed to it and realizing people in the HVAC business are taught the technology. They’re taught the how to do this, but not how to run a business. And this was a playbook that literally could be followed. And I remember you telling me that that had a huge impact on this business. Rebecca Cassel: Absolutely. So, I was excited. The owner was excited. We ended up going back and had great plans of what we were going to implement, everything from getting price right to the marketing, to getting the sales in place, to systems and procedures, measuring KPIs, getting their accounting fixed. And one of the hard things was when we get back, we were excited, but no one in the company was excited about all this change that we were getting ready to do. It was a family business. I found out the wife was the one behind the desk that day that I went to interview. I did not know that. The son was the salesperson. The uncle was the installer. So, there was a lot of resistance to really doing what we needed to do. I worked with Lon a lot to figure out ways to get people excited about the changes. And so, over a period of time, a little less than a year, we got that business on track. They started making money. We were growing in the residential repair and replacement. It was a really exciting time in my career to see that implementing these key business things could really completely turn a business around. Yep. Very exciting. Stephen Semple: Yeah. And then following that, if I remember correctly, so you got these guys going, following that was the next step you went into become then a coach with Lon. Isn’t that what the next step was? Rebecca Cassel: So, Lon Cassel had Cassel Consultants and there was a lot of opportunity for people who said, “I want to improve my business, just like what you did over here.” And Lon said, “Look, if you’re willing to get on the road, I’ve got more contractors and more business that I can handle.” And so, I worked for Cassel Consultants next, and I went to 27 different companies over almost a two-year period of time helping them implement and understand the systems, the processes, the KPIs, all the business things that weren’t in place, and then help put them in place. And then we would go back and touch base with them and see how they were doing after we implemented and transformation galore, which got me so excited that I went to Lon and I said, “I can do this myself. I can have my own HVAC company,” right? Stephen Semple: Right. This is one of my favorite parts. Rebecca Cassel: Yeah. It’s like doing all this for everybody and I see that I can do this and I would really love to start my own HVAC or make an acquisition. Would you be my business partner? He agreed to be my business partner. In 1997, we started Airco Home Comfort in Winston-Salem, North Carolina. And the greatest and hardest experience of my entire career, probably, because North Carolina was completely different place. I lived in Tennessee. But also starting from scratch is a lot more difficult than until you acquired something. And we wanted to be there for numerous reasons, but we wanted to have access to these systems of processes. The whole system that we knew worked. And so, I started from scratch. And in our first year, we just did a little over a million dollars. Stephen Semple: Which is amazing. Rebecca Cassel: I was call-taker, dispatcher. I was a salesperson. I did everything except install and repair. I knew enough to get the right technical people on my team and had some really sharp people. I would go out on job sites. I would get in crawl spaces and attics, had no problem doing that. But from the technical perspective, we always had really, really great technical people and it was great. Lots of challenges that come along with running your own business, but feeling, knowing exactly what it means to generate calls, make sure that the jobs get done right, make sure they pass inspection, customer’s happy, making payroll, growing the business, doing all the things was really a great experience. Stephen Semple: Yes. It’s one thing to experience it as a coach and as an employee and as a mentor and all those other things. And it’s something completely different to experience having done it your own and starting it, as you said, from scratch. One of the stories I want you to share, because you went out and you did sales, and I remember you saying one point where if you didn’t make the sale, you had to call. At the end of each one you had to call Lon and say, “Did you get the sale or not?” Which I found really interesting. But there was one in particular that you talked about where you came up to the house and you’re like, “This sale isn’t going to happen.” Rebecca Cassel: Yeah. Yeah. So, I mean, it’s one of the things that I told Lon, I was like, “I’ve known a salesperson.” He goes, “The moment that you step in to being a business owner, means you need to know how to do all of it. You may not be the best at it, but you have to know how to do it. How else can you hold someone accountable?” And so, sales for an accounting person was completely out of my comfort zone. But the system that they thought, the tools that we use, things that we still teach contractors today, was easy for me to pick up and figure out. And so, Lon goes, “You can’t hire a salesperson until we generate X amount of revenue because it’s just adding more costs to the business. So, you need to generate the first million dollars of sales, and then after that you can get a comfort advisor.” So, I was highly motivated. I could go hire somebody else. There’s two very, very specific leads that I’ll never forget. One, I pulled up to the house at 7:00. We go through the whole thing of confirming husband, wife at home, all the decision-makers going to be there. But I pull up to the home. And after every single call for accountability, Lon would debrief, “How did it go?” And I’d have to beep him. We had beepers back then. And he just code it. So, the codes on certain things, and I hated the one code, which meant I didn’t sell it. If I didn’t sell it, had to go back to the office, pick up the phone and tell him why. But anyway, he wanted [inaudible 00:18:35] I got in the lead, got to the door. This is Winston-Salem, North Carolina. The guy opens the door, and I could tell he was either riskily high drunk, on something and he was flirting. And I’m in my mid-20s, blonde female coming out, and I’m like, “Yeah. 7:00 at night.” I go, “Is your wife home?” He is like, “Yeah. I know my wife’s not home, but you can come on in.” And I go, “I think I’m going to reschedule.” Go back to the office, beep Lon knowing that I have to have a conversation. And I talked to him and he goes, “What happened at the lead?” I go, “Well, the guy was on something. He was high. He was way flirty.” He goes, “Go back. You can close that. People who are high or drunk are the easiest people to call.” And I said, “Are you serious? I am a female. It’s not safe. It’s 7:00 at night. It’s already …” Stephen Semple: And by the way, we’re not condoning this today, but it’s a fun story. Rebecca Cassel: Long time to ago. And let’s just say that on that phone call, I coined the term Asshole Cassel. So, I can [inaudible 00:19:42]. I did not go back and didn’t go back in that house. So, anyway, yeah, lots of accountability though for what we’re supposed to be doing in this and great experiences there. The other one that we were talking about, the other lead is sometimes as salespeople, you drive up to a house and you make pre-judgements about how the call’s going to go. And Lon always told me, “Do not make judgments. You go in and you run every call. You do all the steps. You do everything I’ve taught you to do. You’ll be surprised how people will surprise you.” So, I drive up and I’m literally going … Stephen Semple: So, true. Rebecca Cassel: I’m going to put the shoe covers on to protect my feet to go into this home, not to protect their home. It was that kind of … Right? Stephen Semple: And you’re going to burn the shoe covers when you’re done. Rebecca Cassel: Exactly. Like, “Oh, my gosh.” And of course, the lady says, “You don’t have to put those on.” And go, “Oh, no. It’s policy. We’re good. Thank you.” Anyway, I did the whole thing. And we spend 90 minutes in the home. So, I walked through a whole presentation and then at the end she says, “I love you, honey. I think it’s great that you’re a female and your about this business.” And I’m like, “Okay. Great.” She gets up. She walks out. She comes back. She’s got a shoebox. And she just starts counting me cash. My installer’s probably fainted the next day and said, “This is a crazy job.” I go, “I know it. But she paid. This is the system she wanted and we’re installing it and we’re going to guarantee it like we do all of our others.” So, it’s just a lesson to me. Every homeowner deserves a shot. You can’t judge where people are. And it’s been something I’ve been able to teach other salespeople. It’s like, “Hey, every lead counts. Every lead matters.” Stephen Semple: And we judge both ways, and we’ve all had it happen. You pull up to the home that’s palatial and every blade of grass in place, and you can’t even get them financing. Rebecca Cassel: Exactly. Stephen Semple: You’re like, “What the heck?” But I also am going to guess, I think part of the reason why she bought from you as well is because you didn’t judge her and anybody else would. And when somebody comes into your life like that and doesn’t judge, treat you well, treat you like how you treat everybody else. You’re like, “They give that respect back.” But I just love the whole thing of don’t judge, because I think too often we do, and it completely messes us up when that happens. So, those are two fantastic stories. But the fun part that I still like is the realization that you made at a certain point. And I believe it was with this business where you suddenly realized that as much as you had done the coaching, that when you’re in the business, there was a certain point where you realized you actually needed a coach. Rebecca Cassel: Yeah. I mean, I would never have been successful or able to do what I’m doing if I wouldn’t have had a mentor and Lon. And then the systems, the process, the tools, the coaching behind what to do. There’s always the “I think I know what to do, but I’ve never done this before.” And so, I need someone to call. I need someone to say, “I’ve been there, I’ve done that. I’ve made a ton of these mistakes. Don’t make that mistake. I can help you faster.” And I really think, could I have maybe taken 4 or 5, 6, 10 years to do a million dollars in revenue? Absolutely. But because I had a coach, I had a mentor who was telling me exactly what to do, how to do it, and to stay the course with the system, the system it doesn’t fail. Yeah. A huge epiphany for me, and especially as a female. I mean, in the ’90s, there weren’t too many women running HVAC businesses, let alone in the trades. And so, I would often go to association events and conferences and be the only female in the room. And so, talking about being judged or intimidated in that particular role, I think that really helped me go, “I’m going to approach this a little bit differently and I’m going to do the things I need to do, and I’m going to follow the system exactly like my coach is telling me and implement as much as I can and prove that women can do this.” And so, super exciting time. Stephen Semple: So, you grew the business to a million bucks. You ended up getting salespeople and you go through it. But let’s talk about the next evolution of growth. You ended up taking this way beyond the single HVAC company in the Carolinas, right? Rebecca Cassel: Yeah. So, Lon, as I said, he was my business partner. And it was funny. I would say that sometimes you really like your business partners and sometimes you don’t. And I think Lon and I went through the, “Hey, I don’t like you very much.” But we really respect to each other. We had very different strengths and weaknesses. I am very operational, strategic, and accounting. He was sales and marketing and relational. And so, the combination was pretty fierce. And he called me one day and he said, “Hey, we’re going to start an organization. And I just got invited to join a group of investors in St. Louis to start an organization that will help more contractors.” And he said, “We’re going to actually branch out just doing HVAC. I think we’re going to do plumbing and maybe eventually electrical.” And I go, “Wow, that’s really exciting.” He goes, “I’m moving to St. Louis, so I’ll keep in touch with what’s going on.” I was living in North Carolina and he was living in Illinois at the time. And I thought, “Wow. What a cool thing.” I go, “Well, if I can be of help, obviously, I’m here doing it, writing operations manuals or procedures, or obviously I’d love to be a client. So, when we get this all up and going, that’ll be exciting.” About three months later, he called me and he said, “Hey, I think you should be a part of this.” And I was like, “What do you mean?” I’m running an HVAC business in a completely different state. And again, before all the technology where you could do everything remote. He goes, “I think what we’re going to do is going to really change the industry dramatically and I know you would want to be a part of that.” And he said, “Why don’t you find a way to develop our comfort advisor and into the general manager, and let’s get this going to where maybe you could come be a part of this operationally.” Stephen Semple: And which business was this, Rebecca? Rebecca Cassel: This was Success Group International. I went in and talked with some of the other founders about what we’re going to do, the CEO, Jim Abrams. And Lon was already employed. And I got to meet Patty Meyers, who was their VP of finance, and I ended up being the fourth employee. Brian: Oh, no, no. Rick: What? Brian: I was enjoying this episode. Rick: Don’t worry. Part 2 is coming next week. Brian: It better. Dave Young: Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app, and leave us a big, fat, Juicy five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at empirebuildingprogram.com.…
1 #179: Banana Ball – Frictionless Baseball 21:43
21:43
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21:43The Banana’s asked one fundamental question to revive a defunct minor ball team. What do fans hate about going to a game? Dave Young: Welcome to the Empire Builders podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick in business partner Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients, so here’s one of those. [ASAP Commercial Doors Ad] Dave Young: Welcome back to the Empire Builders podcast. Dave Young here alongside Stephen Semple, and as you know, this is the time when we usually have Stephen whisper the topic of the podcast into my ear. But today I’m turning the table, Stephen. Stephen Semple: You are? Dave Young: Uh-huh. We’re going to talk about one that I’m sort of interested in right now. Stephen Semple: Yeah, and I’m excited. Dave Young: I did tell you what it was. I mean, honestly, I will admit I told you what it was before. Stephen Semple: Well, we had a conversation last time I was in Austin and you mentioned this business, and I started doing a little bit of looking into it and I thought, “Wow, we should talk about this.” But since you had already had a lot of knowledge on it, I was like, “Dave, we should talk about this.” Dave Young: I mean, cool, huh? Stephen Semple: Yeah, Dave Young: It’s really kind of interesting. Stephen Semple: So let everybody know what we’re talking about. Dave Young: We’re talking about baseball, sort of. Sort of baseball. It’s a new form of baseball called Banana Ball. Stephen Semple: Just before you had told me about it, I’d heard about someone else had mentioned it to me and I thought it was pretty fascinating. But give us a background on Banana Ball. Dave Young: So this guy named Jesse Cole and his wife buy this summer baseball league team in Savannah, Georgia that had gone belly up, I think before maybe they were called the Sand Gnats or something like that. Stephen Semple: Okay, so basically it was a defunct, bankrupt out of business junior baseball team. Dave Young: I think the kind of league that plays summer times with college kids. Stephen Semple: Right. Dave Young: So it came with the stadium, right? Stephen Semple: Okay. Dave Young: Whoever owns the franchise gets use of the stadium. So they spent a couple of years just trying to figure out how to make baseball more interesting. Stephen Semple: Right. Dave Young: Here you’ve got this weird little baseball team that nobody’s been able to make succeed. Stephen Semple: Okay, before you go any deeper, Dave, how sold out are they? Dave Young: Dude for the 2025 season, they’ve got more than a million people on their waiting list. Stephen Semple: On their waiting list. Dave Young: These are people that are saying, “Please, please let me buy a ticket.” Stephen Semple: Right, right. Think about this. Wouldn’t you love to have a baseball team that not only is sold out, you have a million people on the waiting list hoping for tickets. And this is not a major league team. Dave Young: This is in Savannah, Georgia in a stadium that’s just basically, it is not even fully surrounding the field. Stephen Semple: I just wanted people to understand the success this team is having. Dave Young: Here’s the really cool thing. Their success is not based on wins and losses. Stephen Semple: Right. Dave Young: It’s based on entertaining people. This guy understands customer experience to a deep, deep level. And what he was looking at, and he’s a baseball player, he coached. Baseball flows in his blood, but he looked at it and he is like, “What are the things that people hate about baseball?” Right? And this is actually one of the little social media snippets that really got my attention was when he said, “What do your customers hate? What do your customers hate about doing business with you or doing business in your category? Find out those things and get rid of those things.” Stephen Semple: Right? In marketing parlance, we call that friction. Dave Young: Right, you get rid of the friction. So he looks at baseball, number one, what do people hate? You buy a ticket to a baseball game or a concert or anything else, and there’s tax listed on it and there’s ticketing fees listed on it. And you’re like, “Just tell me the price of the damn ticket.” Stephen Semple: Right. Dave Young: So he said, “We’re going to cover that. We’re going to cover the tax and we’re not going to have any fees because we’re going to put our own system in.” Stephen Semple: Right. Dave Young: Right? So now you can buy a ticket with no fees and things like that attached, so you’re cool with that. You hate buying food at a ballpark, right? So they started, every ticket you buy was all-inclusive, all you could eat. Stephen Semple: Wow. Dave Young: So you go to the ball game and you want a hot dog here, have an extra one to take back your seat with you, right? Have a couple of hamburgers, whatever it is you want. It’s part of the ticket price. So you could take your whole family there. You know what the tickets are going to cost, you know what you’re going to spend on food, which is zero additional dollars and have a good time. And then they started looking at what do people hate about the game? And baseball games are too unpredictable, and they may go way longer than you anticipated spending watching a baseball game. Stephen Semple: Right. Dave Young: Right? There’s extra innings. The batter always just takes a steps back out of the batter’s box right when the pitcher’s ready to pitch and then the manager goes out to the pitcher’s mound or the catcher goes out to the pitcher’s mound, and they have a little conversation. Maybe they’re going to swap out pitchers and just it’s all this time suck. Stephen Semple: It’s interesting because I was just looking up these guys started in 2016, and I’m not a huge baseball fan. Dave Young: Me either. Stephen Semple: But I seem to recall it was a few years ago that they changed some of the rules in baseball to sort of speed the game up. Dave Young: Oh, yeah, we’re getting there. Stephen Semple: Okay, all right. Dave Young: We’re getting there. Stephen Semple: Okay. Dave Young: In fact, two years ago they dropped the college baseball team. They’re like, “No, we’re not going to participate in that league anymore. We’re doing our own thing.” Stephen Semple: Wow. Dave Young: They became an independent. Stephen Semple: Completely independent. Dave Young: And they don’t play baseball anymore. They play Banana Ball, right? And there’s a difference. And there are some diehard baseball people out there that hate this. Now we also say, right, if you have detractors that are just as vocal as your biggest fans, you’re doing something right. Stephen Semple: You are actually. Yeah. Dave Young: Right? And so the kind of baseball nerds that sit in the stands and keep score on their own scorecard or watch TV, those are the baseball nuts that love the game for the statistical relevance and the order and the beauty of the numbers, right? Stephen Semple: Yeah. Yeah. Dave Young: And the rest of us are like, “I just want to see a fun game.” Stephen Semple: Right. Dave Young: Right? I want to go out to the ballpark. I want to have a good time. I want to forget my troubles. I don’t want to sit there and watch some guy do practice swings and step out. And I’m doing this all from memory. They created the rules of Banana Ball, and Banana Ball is just played a little bit differently so they have a strict time limit. Stephen Semple: So going back to your whole thing, what do people hate? One of the things they don’t like is the unpredictability of when it starts and when it ends. They want it to be more like a movie. Here’s when it starts. Here’s where it ends. Okay. Dave Young: If I go to a baseball game and it goes into extra innings, right, I may be there for three, three and a half hours. Stephen Semple: Right. Dave Young: You don’t know. So these guys put a time limit. If the game starts at seven, it’s going to be done by nine. Stephen Semple: Right, so it starts at seven ends at nine, done. Okay. Dave Young: No extra innings. They have their own means of breaking ties and things like that, but also, runs scored is not the metric that they use to determine who’s going to win the game. It’s points. It’s almost like match play in golf. Stephen Semple: Right, okay. Dave Young: So you win an inning based on having more points than the other side, and the points are scored by runs. They’re also scored by things like trick plays, so for example, you’re in the outfield and somebody pops a nice fly ball out, and you catch the ball while you’re doing a back flip. Stephen Semple: That’s extra points. Dave Young: So you’re in the air, you’re doing a back flip and you catch the ball, you get trick play points. And that adds to the cumulative. I haven’t quite figured out the whole score keeping thing, but there’s an incentive to do that and it doesn’t always go well. These guys, they’re all good baseball players, but they’re not major league baseball players. Some of them have several years of minor league experience. They’re all athletes that play baseball and are good entertainers. Stephen Semple: Right. Dave Young: Right? So think Cirque du Soleil more than think Major League Baseball. Stephen Semple: Well, what came to mind to me is we’ve seen this before, and this is the Harlem Globetrotters. Dave Young: Oh, so Jesse Cole, the guy that started this, appreciates the comparison, but he also rejects it for a couple of reasons. So the Harlem Globetrotters, anybody that ever went to a Harlem Globetrotters game, man, it was like the circus coming to town. The circus shows up and you buy your tickets, you go into the stadium or the arena and the Globetrotters play against their captive loser team, the Washington Generals or whatever. I think it was the Generals, right? They had this team that traveled with them that always just got the snot kicked out of them by the Globetrotters because the Globetrotters are the stars. Stephen Semple: Right. Dave Young: And what Jesse Cole did is for the first season or two they were playing, they would just divide the team up into a yellow squad and a green squad. But in the last couple of years, they actually started another team. Stephen Semple: Oh, wow. Okay. Dave Young: So they have a team called the Party Animals. And so when you go to a Banana Ball game, they play the Party Animals and you don’t know who’s going to win. They’re pretty evenly divided. Stephen Semple: So it’s a real competition? Dave Young: It’s a real competition. Stephen Semple: That’s the difference. Okay. Dave Young: And the players don’t change teams. Stephen Semple: Right, okay. Dave Young: The Bananas have their own team and the Party Animals have their own team, and the recruitment process is separate for each team. Stephen Semple: Right, interesting. Dave Young: For the coming year, I’m not sure if it’s happening in 2025, I think they’ve got two more teams coming on board for 2025. I’ll get to what their 2025 plan is, but there’s going to be a Texas Tailgaters team, and I forget the fourth team, but no, these guys play a straight-up ball game at every game. So you’re not just watching the Savannah Bananas showing off, right? That’s sort of the gist of Harlem Globetrotters was you’re going to see Curly and Meadowlark Lemon and these guys are going to do their thing and they’ve got to have these not so good players to play against. Stephen Semple: One of my favorite rules that they added, I looked up a little tiny bit of this, but if a fan catches the foul ball, it’s an out. I love that. Dave Young: So this is really cool. And it’s an effort to speed up play. Stephen Semple: Yeah. Dave Young: Right? So it’s not just to foul the ball. No, you’re out. If a fan catches the ball, sorry, buddy, you’re out. And they celebrate it, right? They’ll actually bring the fan down onto the field. Stephen Semple: That’s cool. Dave Young: And it also, when you’ve got two competing teams, you have to make a decision. Are you going to catch the ball and make your batter out? Stephen Semple: Right. If it’s the team I’m rooting for and a ball comes right to me, what do I do? Dave Young: Swat it to the ground, man? Another thing that they do that speeds up plays, you can’t have a conference on the mound. You can’t send the manager out. You can’t send the catcher out. You can change the pitcher, but you can’t just go out there and have a little chat out on the pitcher’s mound. And to speed up the batting, if the batter steps out of the box, he’s out. Here’s the really funny one, if you bunt, if you bunt, you’re not just out, you’re ejected from the game. And I think sometimes maybe they do that just to have the ref, you’re out of here, right? He’s doing the whole arm pointing out of the stadium. Stephen Semple: So what I’m understanding here is what they did, and I love how you put it because we often to talk about friction. And I think it’s a poor word. I don’t think everybody understands it. Dave Young: Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. [Empire Builders Ads] Dave Young: Let’s pick up our story where we left off. And trust me, you haven’t missed a thing. Stephen Semple: So it seems like the first iteration was, and I love how you put it because we often talk about friction. And I think it’s a poor word because I don’t think everybody understands it. Dave Young: It’s hard to understand. Stephen Semple: But this whole idea of what do people not like? And let’s eliminate those things. So what do we not like? Dave Young: Yes. Stephen Semple: We don’t like the fact we don’t know when the game is going to end. We don’t like the fact that we don’t know how much it’s going to cost us because there’s going to be concessions and all those other things, especially if you’ve got a family. We don’t like all these little extra charges that are on the ticket. So iteration number one is get rid of all that crap, which I really admire them for, especially the concession one, because what I’m going to tell you is that’s really bold. Dave Young: Oh, yeah. Stephen Semple: So that’s awesome. But then it sounds like what you’re saying to me is they did a next iteration and the next iteration on it was, let’s now look at the game. Dave Young: The game itself, yeah. Stephen Semple: The game itself, and eliminate all the things that people don’t like about the game. Plus add extra entertaining factors to it. Dave Young: Add extra things. So their philosophy is, it’s really simple, it’s called Fans First. And in fact, Jesse Cole wrote a book, I just finished the audiobook last week, and it’s called Fans First. And it’s a great listen. I really enjoyed it. And so when you start eliminating the things that people hate about the game of baseball and want to make it fun, I mean, if you’ve ever been to a Cirque du Soleil, there’s something going on all the time. Stephen Semple: Oh, absolutely. Dave Young: And there’s something going on before the game starts, right? So these guys have a pregame. There’s entertainment happening from the moment you walk into the ballpark till the time the last inning or whatever is over. And it ranges from things like almost every batter has their own walkout music or sometimes a walkout celebration. Right? Some of them have a marching band that brings them out to the plate. Stephen Semple: Wow, that’s fun. Dave Young: The referees do tricks. They’ll do a back flip while they’re calling you safe or out. Stephen Semple: Right. Dave Young: The referee behind home plate is this sort of big heavy guy, and he’ll be twerking while the music’s playing and the pitcher’s going. Batters can steal first. Stephen Semple: Okay. Yeah. Dave Young: This is baseball. Batters can steal first base. Anytime you think you have a pitch goes wild. And the catcher’s got to run after it and chase it, you can take off for first and steal first. And in fact, you can’t walk. There’s no walks in this game. So ball four, you take off for first, and now you’re a runner, but you’re live. And the only way they can get you out is the ball has to be handled by all seven of the fielders that aren’t the pitcher and the catcher, all right? So they have to throw to the right field, the center field, the left field, third base shortstop, second base. All seven of them have to touch the ball before they can make a play on the runner. So if you can get to second base before they’ve thrown to everybody, you can get to second on a walk. Stephen Semple: Right. Dave Young: It’s pretty interesting to watch. They all start running towards second base, right? So they don’t have very- Stephen Semple: They would practice that. Yeah. They would practice. Dave Young: Yeah, they don’t have very far to throw the ball. But you’re almost guaranteed first, just as if it were walk. But you have the chance of making it further. And there’s an entertainment aspect to watching the team throw the ball around to see. If one of them makes a bad throw- Stephen Semple: That’s it. Dave Young: … and someone doesn’t catch it, right, you’re going to have an extra base. One of the players on the Bananas is a guy named Stilt, and he plays the entire game on six foot stilts. Stephen Semple: Wow. Okay. Dave Young: He pitches. He bats. It’s nuts. Stephen Semple: And so here’s the interesting thing about all this is, and I find it fascinating and I’m going to have to look more into this team, is that here you had a failed junior team. And let’s face it, junior teams, there’s a challenge in every sport to have junior teams making money. He just put the rules right on its head from the standpoint of at its heart, this is entertainment. And yeah, what he’s rejected is this whole idea of my job is to be a farm team for the major leagues. Dave Young: Yeah. Well, I don’t think these guys ever were. Stephen Semple: Right. Yeah, they’re one of- Dave Young: They’re not controlled by- Stephen Semple: Right. Dave Young: They had a million people on their waiting lists when they were just still in Savannah. And then two summers ago they did their first world tour and they played one weekend game, a couple of games in Mobile, Alabama, filled a stadium there for two games, okay? And then this past summer they played at five or six other places besides Savannah, Major League ball fields, and filled them. Stephen Semple: Right, so big fields. That’s incredible. Dave Young: Big fields. They announced their schedule for 2025, two new teams. So the games will be sort of round-robin between these four teams. Stephen, they’re going to play in 30 Major League stadiums in 2025. Stephen Semple: Wow. That’s incredible. Dave Young: And they’ve got a waiting list that will sell all of them out. And one of the places they’re going to play is Clemson University’s football field. Stephen Semple: That’s a big field. Dave Young: Which holds like 90,000. Stephen Semple: That’s incredible. Dave Young: And they’re going to turn that into a baseball diamond somehow. They’re going to put nets up. And- Stephen Semple: So we already know what the lesson is here, which is both this thinking differently, leaning into the entertainment, everything else. And there’s the book that you recommended people should read that you said is fascinating. But to wrap things up, I think you had also mentioned that you’re thinking about doing a course at the academy on this. Dave Young: Yeah, it’s going to be next spring sometime. I don’t have the dates nailed down yet, but I’m going to do a two-day class on Banana Ball. Stephen Semple: That fabulous. Dave Young: And basically, I mean, I can tell you the outline of it right now is we’re going to use Jesse Cole’s book as our textbook, and we are going to just do some lessons and workshop some ideas for how do you do in your business, whatever your business is, right? Maybe you’re an acupuncturist, maybe you’re a plumber, but how do you get rid of the things that people hate and start thinking about your customers as your fans and do more of what they love and be more entertaining in everything that you do? Stephen Semple: You know what? Sign me up. I’m going to be there for that class, Dave Young: Okay. By the way. Go to go savannabananas.com and get on their ticket list. Here’s the thing, one, you’re on the list for one stadium. You have to pick which town you want a ticket for and put your phone number in, and you’re only allowed to be on there once. Stephen Semple: Wow. That’s cool. Dave Young: So they’re playing two games, one in San Antonio and one in Round Rock just north of Austin next year. So I’m excited about it. Like we said, I’m not a huge baseball fan, but I am a fan of somebody taking something like baseball and flipping it on its head. Again, diehard baseball fans don’t like this, but they turned it into a circus. The circus is coming to town. Stephen Semple: I love it. Dave Young: And Jesse Cole is the new P.T. Barnum. Stephen Semple: So I have to now take the Dave one. Thank you for sharing this story with us, Dave. Dave Young: As you can tell, I’m kind of excited about this, so- Stephen Semple: Yeah, yeah. And hey, people should go check out periodically, wizardacademy.org, watch for this course. I’m going to be there. It’ll be fun. Dave Young: Get on our newsletter list. Stephen Semple: Yeah. Dave Young: Create a free little account on wizardacademy.org, and that way you’ll get our emails and when we announce the dates of this class, hopefully by the time this podcast airs, the dates will be. Stephen Semple: That’d be awesome. That’d be awesome. Dave Young: All right. Stephen Semple: All right, super. Thanks David. Dave Young: Thank you, Stephen. Stephen Semple: All right. Dave Young: Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute empire building session, you can do it at empirebuildingprogram.com.…
1 #178: Spin Master – Yep, The Toy Company 19:17
19:17
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19:17Going from public domain toys to Spin Master Originals was a must. How did Harari, Rabi and Verity do it? It wasn’t with the devil sticks. Dave Young: Welcome to the Empire Builders podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Simple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. Here’s one of those. [Seaside Plumbing Ad] Dave Young: Welcome back to the Empire Builders podcast recording live this morning from the North Patio at the Wizard Academy classroom tower. Stephen Semple: I always get turned around. So this is north, is it? Dave Young: That’s north. Stephen Semple: Okay. All right. I always get turned around here. Dave Young: The causeway, the ditch thing that runs- Stephen Semple: Oh, right. Of course. That’s east-west, of course. Dave Young: No, that’s north-south. Stephen Semple: Oh, right. Dave Young: North-South. Stephen Semple: Right. Dave Young: If you stand in the middle of it and look up, you can see the North Star over the, and so we’re on the other side. Stephen Semple: Right. Of course we are. Okay. Dave Young: Yeah. Stephen Semple: I always get turned around. Dave Young: Yeah, that’s okay. Stephen Semple: Okay. Dave Young: It has taken me a while. Anyway, we’re recording a podcast. Stephen Semple: Yes. We talk. Dave Young: And we’re sitting outdoors. And just as I was hitting the record button, you said Spin Master. Stephen Semple: Spin Master. Dave Young: This is an exercise bike. Stephen Semple: Toy company. Dave Young: Toy company. What am I thinking, spin cycle? First of all, I don’t play with toys and I don’t ride exercise bikes, so I’m at a loss. Stephen Semple: They’re best known for Paw Patrol. And you wouldn’t know about that either ’cause you don’t have any little kids in your life. Dave Young: No, my little- Stephen Semple: Anybody who’s got little kids in their life know Paw Patrol. Dave Young: All right. Well, I am all ears. Stephen Semple: Give you an idea how big the Paw Patrol franchise is, 14 billion. Dave Young: Wait. 14 billion? Stephen Semple: Billion in sales when you add all their stuff up. Dave Young: Wow. Okay. Stephen Semple: Yeah. Dave Young: And these are toys? Stephen Semple: Yes. Dave Young: Okay. Stephen Semple: They are toys and they are a Canadian company, and my niece used to work for them. Dave Young: Really? Stephen Semple: Yes. Dave Young: Okay. Stephen Semple: This was actually a little extra fun to do. Dave Young: Some insider info. Stephen Semple: Yeah. Well, not really, but yeah, they’re a Canadian company in quite a little success store. Dave Young: Little, yeah. Stephen Semple: Then we’ll talk about later, they also went on to have bought some other brands such as Rubik’s Cube. They now own Rubik’s Cube. Dave Young: All right. Stephen Semple: Yeah. It was founded by Ronan Harari, Antoine Rabi and Ben Verity. They started the business in the late 1990s. And around that time, patterns of play does not change. Dave Young: Okay. Stephen Semple: Toys may change, way kids play with things, the way even adults play with things don’t change. And so the key is to find things that fit into those play patterns. That idea has basically led this company to be one of the greatest success stories in the toy space in the last 20 years. Yeah. And this whole idea, the key to find things that fit in those play patterns basically led to the creation of Paw Patrol, which is their biggest success is it was built very intentionally. Dave Young: [inaudible 00:04:01]. Stephen Semple: It was very thoughtful, very intentional in terms of what they did. As you listen to this story, it all led to the knowledge that built Paw Patrol. In the late 1990s, toys really started to change, but the pattern of play did not. The key to their success on Paw patrol was recognizing these play patterns, which is what made them, quite frankly, the most successful toy brand in the last 20 years. And it was built very intentionally. Dave Young: Play patterns didn’t change. Kids are playing the same as we- Stephen Semple: Yes, as they always have. The toys have changed, but the patterns of play have not. Dave Young: Really, we never really needed to depart from just sticks or… Stephen Semple: Well keep that in mind when we’re going through this. There’s an interesting stick story. Dave Young: Okay. Stephen Semple: One of the founders, Ronan Harari. He moved to Toronto when he was five from South Africa, and his dad ran a carpet business. And he was an average student, but he had a learning disability, dysgraphia. And dysgraphia is where the hands cannot keep up with how the brain is thinking. Dave Young: Okay. Stephen Semple: And basically, it’s almost like he describes, there’s this constant rebooting that’s going on in the brain. It’s wired slightly differently, but for him, visual detail is very hot in terms of his attention to those details. He went to the University of Western Ontario, and he knew from a young age he wanted to own his own business ’cause of that endless potential. He of course took business in college, and while in college, he started this little poster business where what they would do is take pictures of frosh wheat, print these collages and sell advertising. Went to five different universities, basically made a hundred thousand dollars doing it. Did really well. Dave Young: Yeah. Stephen Semple: Then he saw this item that his mother brought from Israel, and it was a knockoff of the Chia Pet. Remember the Chia Pets? Dave Young: Sure, yeah, yeah. Stephen Semple: Yeah. Except this one was more like a ball of sawdust that you immersed in water and the seeds would grow. And his mother had read that in Israel that this was a big craze in the country. He decided I got to make a version in Canada and call it Earth Buddies. Dave Young: Okay. Stephen Semple: He goes to Kmart, buy some seed, pantyhose, gets some sawdust. It’s 1994, and then make 5,000 of these for Mother’s Day. That was the plan. Dave Young: Okay. Stephen Semple: And his sister-in-law made- Dave Young: Wait, so pantyhose with sawdust and seeds. Stephen Semple: And seeds. Yes, yes. Dave Young: Okay. Stephen Semple: And he also, they made this contraption that would allow them to make it at scale. They found this small factory space that they could use the three of them, and they set up on the street and they sold it on the street. And they basically sold 800 of 5,000 that they made. Dave Young: Oh, man. Okay. Stephen Semple: But they then also through their mom found a gift distributor. The company sold toys, Samco Sales, and in a couple of weeks they had an order for 26,000 pieces at Walmart Canada. Dave Young: All right. Stephen Semple: They’re off to the races. And they had this fun idea where they would go to homeless shelters to find people to work in the warehouse, ’cause it was like this really simple job. Then they got this massive order from Kmart, and it’s really funny how they got this Kmart order. It’s a real story of luck and persistence. Antoine, when he was backpacking, a year before this in Europe, met this guy who was really connected. And Antoine called this guy when they had this product going on, especially when they sold it into Walmart. And he said, “Do you know anybody at Kmart?” At the time, Kmart was big. Dave Young: Yeah. Stephen Semple: I know Kmart’s a big [inaudible 00:07:29]. And he said, “Sure, I can introduce you to a guy.” He introduces the guy and they travel down to meet him. Turns out that the contacts not a buyer, just a guy who works at Kmart. Dave Young: Just a guy, just runs the blue light special light, that’s it. Stephen Semple: But instead of leaving, they wander around the building and they find the buyer. And then they say to the buyer, “Hey, could we meet with you?” The buyer says, “Sure, you can meet with me at 3:30.” And they’re like, okay. They still choose not to leave the building ’cause they may never get in again. Dave Young: Yeah. You got to just wander around a bit. Stephen Semple: Now, what they also noticed was she had eight other versions of Earth Buddies sitting on the desk at different names. Dave Young: Oh, the buyer did? Stephen Semple: Yes. Dave Young: Lots of other people selling the same thing. Yeah. Stephen Semple: Immediately Antoine was like, yeah, I’m going to need to drop the price to beat out the others ’cause he suddenly realizes she has lots of different options. They decide to start with an order of 48,000 pieces, and pretty soon they’re doing 500,000 pieces through Kmart. They had to move to a bigger facility. At the peak, they’re doing 17 and a half thousand orders a day. Dave Young: Holy moly. Stephen Semple: Yeah. Dave Young: Sawdust, pantyhose, seeds. Stephen Semple: Yes. Dave Young: Okay. Stephen Semple: That’s it. So they make $1.8 million in year one. Dave Young: Packaging probably costs more than the ingredients. Stephen Semple: It’s 1995, and they decide, you know what? We’re going to focus on toys. We’ve had this great success with toys. And they saw these things called devil sticks, which is basically where you’ve got a stick, you’ve got two other sticks. Dave Young: Oh, sure. You’re keeping the third stick in the air. Yeah. Stephen Semple: Whole thing about playing with sticks, Dave. Dave Young: Yeah, yeah, yeah. You’re not juggling till that third stick’s in the air. Stephen Semple: Yeah. Saw them being played with, so they decide to package up these devil sticks. And they go to a big toy fair in New York, and he’s doing the demo himself ’cause he played with them in high school and Toys R Us picks them up, and it was just great timing. And again, it was another public domain product. Dave Young: Mm-hmm. Stephen Semple: They wanted to start doing things that were not public domain. And it turns out that Ben and his girlfriend’s are member of the Irwin family, Irwin Toys. Dave Young: Okay. Stephen Semple: And what they found out was that there’s this whole network of toy inventors out there. We’ve talked about some of these in our podcast. Dave Young: The Secret Toy Inventor Guild. Stephen Semple: Right? No, but remember how many of the toy inventors that we talked about in past podcasts? Dave Young: Sure. Stephen Semple: Right? That don’t work for Mattel. They take ideas to Mattel, and he was like, what? There’s these toy inventors out there? Yes. They start traveling around meeting these toy inventors. Now, of course, the first thing if you’re going to meet a toy inventor, they’re going to bring out is a dusty old idea that they were never able to sell anyway. Dave Young: Uh-huh. Stephen Semple: But they come across one that they think is a really great idea. Dave Young: Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. [Empire Builders Ad] Dave Young: Let’s pick up our story where we left off. And trust me, you haven’t missed a thing. Stephen Semple: Now, of course, the first thing if you’re going to meet a toy inventor, they’re going to bring out is a dusty old idea that they were never able to sell to anybody, but they come across one that they think is a really great idea, and it’s this airplane that you pump up, pump it up with air, and it flies for about 45 seconds and has these pistons and everything that go, then it makes this really cool sound. And they went, this is great. They basically licensed that and they call it Air Hogs. Dave Young: Air Hogs, okay. Stephen Semple: And they also did discover that basically every toy company on the planet had turned it down, and it took them two years to create a prototype ’cause it actually was hard to make. Dave Young: Now- Stephen Semple: They go to China, they find a factory, and in the first year they do great. 1998, they launched Air Hogs, 35 million in sales. Dave Young: All right. Stephen Semple: And one of the keys is that they managed to convince people to do, because the sound was a big deal, was have it somewhere where it was set up that kids could pump it up and hear the noise that it made. Dave Young: Oh, sure. Stephen Semple: It was this really creative display that really helped people hear the sound of the motor. And look, this now kicked open the door for lots of other future products ’cause now they’ve had this success with one. Toy inventors are really interested in talking to them, and they figured they could do more with flying toys. And they literally, they’re getting now pitched a thousand products a year. Dave Young: From the toy makers- Stephen Semple: From the toy creators. Dave Young: How cool. Stephen Semple: Yeah. And look, they also had a bunch of products to fail. They did this small little BMX bike thing that didn’t work. But what they realized is toy business is very iterative. In other words, it’s like you create a toy and then you create a variation of the toy. The play patterns don’t change. Dave Young: Sure. Stephen Semple: And there’s 11 categories in toys, and they all have a way that they’re played with. 2001, they create this thing called Key Charm Cuties. That totally bombs. And the problem is it’s up against Polly Pocket, up against Mattel. And it was not as good, not designed as well, didn’t have the Polly Pocket story. And they started going to Japan to look for ideas ’cause here’s the other thing they noticed, boys in Japan are years ahead. Japan’s really good at things that are strange, that may not be normal to us. They’re very good with different, and so what they decide is they literally move somebody in 2005 to Japan to basically create licensing. They want to come up with something from Japan. And they come up with this cool game. Now it turns out game was created in North America, but they need to go to Japan to figure out how to make it, Bakugan. Dave Young: Bakugan. Stephen Semple: And basically it’s marbles meet transformers. Essentially there’s this metal card, and if your marble hits the card, the marble pops open and the little figure appears. Dave Young: Wow. Okay. Stephen Semple: It’s like Pokemon, right? Dave Young: All right. Stephen Semple: Basically it’s an action figure inside of a marble. It was invented here, but they had to go to Japan to figure out how to make it because Japan’s really good at the micro toys. And they sit down with the president of Sega who speaks no English, and they end up partnering with them. But what they figure out is, here’s one of the things that they learn from looking at us. They need to launch a cartoon with the game. And it became a billion dollar franchise. It blew up. In 2008, essentially they changed their company into a media company because you do the cartoon along with it. Dave Young: Yeah. Stephen Semple: But here’s the problem. 2010, Bakugan is half of their sales. They hit 950 million in 2010 as a business, 2013 they’re $500 million. Dave Young: Oh. Stephen Semple: Yes. And the product lines that followed did not connect. They’re losing money. They need to come up with another hit. Now, ’cause here’s the interesting thing when you’re in a business and we see this, no one builds a business plan with the expectation that sales are going to go down. Dave Young: Mm-hmm. Stephen Semple: Sales are always going one direction, and that is not, right? Dave Young: Mm-hmm. Stephen Semple: That’s always the case. But they realize looking at toys out there, the most successful toys have a cartoon with them, have a story to go with. Dave Young: Okay, yeah. Stephen Semple: They start before making the toy, they start sending out the businesses an RFP for a cartoon, story first. Dave Young: Story first. Stephen Semple: And the guy who created Bob the Builder, Chief Chapman, responds with this idea that has these dogs that are these rescue dogs that go do these adventures. Dave Young: Okay. Stephen Semple: And they look at it and go, okay, that’s a great story. Kids would connect with that. But how do we make it a toy? Well, transformation is a big thing. Let’s add backpacks that transform and a dog house that transforms. Now we got a toy. Dave Young: All right. Stephen Semple: They launched this in 2013, takes off quickly, 2015, Spin Master goes public. They doing two billion in sales. They decide with this also go out and buy existing brands. They buy Etch-a-Sketch, they buy Cardinal Games, which has got things like Rubik’s Cube, they bought Swim Ways, which company that does swim toys. Dave Young: Wow. Stephen Semple: They now have 20,000 different products and do all this media. Dave Young: Acme conglomerated industrial galactic toy company. Stephen Semple: Yeah. Out of Cannon. Dave Young: All right. Stephen Semple: We’re taking over the world, man. Dave Young: Yeah, you are. Stephen Semple: But here’s the thing that I thought was really interesting. Their biggest success came from looking at it and going, wow, the toys out there that have done really well have this story to it. Dave Young: Yeah. Stephen Semple: Transformers, Teenage Mutant Ninja Turtles, right? Dave Young: Well, Lego didn’t take off until they started having stories with them and building iconic things that had story tied to them. Stephen Semple: But think about this, they said, okay, we’re going to create a really great story. Let’s send out an RFP, create a cartoon, and we’re going to send out to these top storytellers, and then we’re going to look at it and go, which ones can we turn into a toy? Dave Young: Yeah. Yeah. Stephen Semple: I just looked at it and said, this is how systematic and thoughtful and strategic they were on launching Paw Patrol, which is now a $14 billion franchise. Dave Young: Sure. That’s a great story. I’ve got a question for you that might be a little side trail off into the weeds. You mentioned there’s 11 ways to play. Stephen Semple: Yes. We’re not going to go through all 11. Dave Young: No, but cite a source for me. Tell me what book to read about these 11 source. Because I like seeing things like this and saying, okay, well if I read about that, maybe there’s 11 ways to interact with customers for even a service business that is related to these 11 ways people play. Stephen Semple: It’s interesting, I just heard him talk about it in an interview, just heard the folks from Spin Master talk about it and they walked through what the 11 were, how it shapes things and whatnot. Dave Young: Well, maybe this is a future episode we’re talking about. Stephen Semple: Maybe because you know what, that would be interesting is just to go down and explore that. And what I’ll do is I’ll reach out to Robin, my niece and say, hey, this 11 play pattern thing, because no doubt part of the spin master culture. I’m going to explore that. Dave Young: Awesome. This Spin Master, what an amazing company. Stephen Semple: Yeah. Dave Young: Canadians, aye? Stephen Semple: Canadians, aye? Yeah. Dave Young: Yeah. Stephen Semple: But it’s just interesting. It’s story, cartoon, transformation, and that is the direction that they went thoughtfully ahead of time saying, this is what we’ve got to do. Dave Young: I think what’s really cool is that there are some things that just have some basic patterns that are maybe skewed in a slightly different direction depending on the industry. Our partner, Roy Williams, the guy that published his books, is a guy named Ray Bard. And his philosophy of business books has always been, every successful business book has four characteristics, right? It’s nuts and bolts, a big idea, entertainment, lots of it, and hope, right? If you could deliver those four things in a book, then you’re going to more than likely have a successful book. In toys, there’s this same pattern somewhere, right? Stephen Semple: Yeah. Dave Young: It’s buried in there. And if you can find it, you’re going to do all right. Stephen Semple: Yeah. Yeah. Dave Young: Very cool. Stephen Semple: It’s cool. Awesome. Dave Young: Awesome. Well, thank you for sharing that story. I look forward to our next episode, wherever we record it. Stephen Semple: This has been fun. Dave Young: It’s been fun sitting outside recording, even with the leaf blowers and the helicopters. Stephen Semple: Yeah. Dave Young: Same thing. Helicopter, leaf blower. Stephen Semple: Yeah, pretty much. Dave Young: Yeah. Stephen Semple: But it’s been nice weather too. It’s beautiful. Dave Young: Yeah, it’s beautiful. Stephen Semple: All right. Dave Young: Thank you, Stephen. Stephen Semple: Thanks, David. Dave Young: Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big fat juicy five-star rating and review at Apple Podcast. And if you’d like to schedule your own ninety-minute empire building session, you can do it at empirebuildingprogram.com.…
1 #177: Lip Bar – All Natural Happy Place 23:08
23:08
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23:08This is how you go from not wanting to be unhappy to working your passion to Shark Tank to Lipstick Empire. Way to go, Melissa Butler. Dave Young: Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is … well, it’s us. But we’re highlighting ads we’ve written and produced for our clients. So here’s one of those. [No Bull RV Ad] Dave Young: Welcome to the Empire Builders Podcast. Dave Young here along with Stephen Semple. And today you may say, gosh, they sound a little different. And maybe I hear birds or- Stephen Semple: We have no idea what these mics are picking up. Dave Young: We don’t know what you’re going to hear, but we’re sitting outdoors. We’re sitting on the north patio of the dining hall in the tower at Wizard Academy in Austin, Texas. And for the first time in, I don’t know if we’ve done this before or we’ve recorded a podcast face-to-face in the same room. Stephen Semple: I don’t think we have. Dave Young: We’re always on some either Zoom or Riverside FM or some magical internet based thing. Stephen Semple: Yeah, no, I don’t think we’ve done in person. I don’t think so. Dave Young: Well, welcome to my world here. We’re at Wizard Academy. I’m the vice chancellor, by the way, and also one of Stephen’s business partners with Wizard of Ads. And you’re here to teach a class this week. Stephen Semple: Yes. Dave Young: Which is exciting. Stephen Semple: Very exciting. Dave Young: I don’t know if people are going to hear this long after the fact. Stephen Semple: Yes. But we’re going to do it again. Dave Young: We’re glad that you’re here and excited about the class. Stephen Semple: Yes, yes. It’s going to be very exciting. How to market professional services, so it’s going to be awesome. Dave Young: It’s going to be fun. I didn’t even ask you as I started the countdown, what the topic is. Stephen Semple: I know. Because we’re used to the countdown thing being on the screen. Dave Young: My countdown was, I’m just going to hit the go button and see if this is sticking to the tape. I think it is. Stephen Semple: We’re going to lean into a category you know really well. Lipstick. Dave Young: Lipstick? Is there a particular brand? Stephen Semple: Yes. Lip Bar. Dave Young: Lip Bar? I’m a total blank. Stephen Semple: Well, they’ve done pretty well. Lipstick’s a huge market. Lipstick itself is a $9 billion business. Dave Young: Trust me, we wash a lot of it off of wine glasses here. Stephen Semple: But Lip Bar was founded by Melissa Butler, and today they’re in like 500 stores, Target and things along that line. They’re a private company, so I had a really hard time finding actual sales figures for them. But when you’re in 500 stores and growing, you’re making things happen. Dave Young: Mm-hmm. Stephen Semple: Yeah. Dave Young: 500 stores. Stephen Semple: But what was really cool about learning this story is Melissa Butler started making her own lipstick in her apartment. Dave Young: Really? Stephen Semple: That’s how this all started. Dave Young: I’m trying to think of how, if I set out … First of all, I’m not going to, but if I set out to make lipstick, what would I even …. like what’s on my shopping list? Stephen Semple: Oh, you’re melting waxes and you’re getting color agents and you’re pouring it into tins and you’re having to cure the tins and then you’re having to get it out of the tins and into the packaging. It’s quite a process. Dave Young: Do I have to go kill a whale? Stephen Semple: I don’t believe so. Dave Young: Okay. Stephen Semple: I don’t believe so. Dave Young: Because that’d be awkward. Stephen Semple: So what started Melissa on this is she’s a woman of color, and what she noticed was it was hard to find lipsticks in these really bold colors that would work well for women in color. Dave Young: With a darker complexion? Stephen Semple: Yeah. Dave Young: Yeah. Stephen Semple: And so this is what- Dave Young: Some contrast. Stephen Semple: That’s right. Dave Young: Yeah, I like that. Stephen Semple: Yeah. Dave Young: Okay. Stephen Semple: So this is kind of the path that she went down and when you take a look at the stuff from Lip Bar, the colors are wild and crazy and lots of fun. Dave Young: Oh, awesome. Stephen Semple: Now, when Melissa was growing up, she grew up in her single mom household. Her mom was a crane operator and worked at a steel factory. So it’s not like they had this big fashion background. And her mom worked a lot and she grew up in a really rough neighborhood in Detroit, but she managed to get into a competitive high school. One of those university prep schools, Cass Tech, especially at the time, this really amazing school in the middle of this blight is almost how it’s described. And she knew she wanted to go to a black university. So she went to Alabama State for a little while, and then Florida AM and she did a business program, because business had interested her. Because while in high school she worked in a cousin’s clothing shop. She basically learned business from him. And really what she learned was a higher education is about getting into business and getting into business is about making money. That’s kind of the path she was on. Dave Young: Sure. We can talk about that for a minute. Stephen Semple: Yeah. She does business finance and her dream is to work on Wall Street. But one of the things that she did that was interesting before hitting Wall Street is she had a chance to go to China for a little bit. Dave Young: Okay. Stephen Semple: So here’s this young lady who grew up in a rough black neighborhood, only attended black universities, suddenly in China. And she was like, “It was this unbelievable culture shock.” Dave Young: It’s a whole new world. Yeah. Stephen Semple: A whole new world. She’s fairly tall. She’s this tall black woman in China. People are literally coming up to her and touching her face. Dave Young: Oh yeah. Stephen Semple: Right? Dave Young: I believe it. Stephen Semple: Life-changing experience. She returns and she’s working at Barclays Bank on Wall Street as an analyst. And here’s the thing she noticed. No one was happy. All of her co-workers were unhappy. And she said, “If I stay in this environment where nobody’s happy, I’m going to be unhappy.” Dave Young: Isn’t that the truth? Stephen Semple: And frankly, the pit was not that great and it was exhausting. And so she wanted to find other things to keep herself busy. And she had this soap that she really liked at Whole Foods that she would buy, and it was a $6 soap. And she’s talking to her mom about the soap, and mom’s just busting her chops over $6 for a bar of soap. Are you nuts? Are you crazy? So she decided to start making her own soap, and it became a hobby. And natural soap has this curing process [inaudible 00:07:03] either takes time or putting in the oven. Dave Young: And I’ve heard a lot of people making soap. Stephen Semple: Making soap. Yeah. Dave Young: Yeah. That’s a thing. But lipstick? Stephen Semple: Right. And of course it was all natural ingredients. And what she started doing was putting all sorts of things into the soap. She was inspired by Lush. She wanted to get into the soap business. So she started with the soap bar and all the soaps would be named after a drink. And one day she’s speaking to a supplier. … Here’s the crazy part in this story. One day she’s speaking to a supplier about pigments. And the supplier says to her, “Do you want lipstick pigments or soap pigments?” Dave Young: Oh … Well. Stephen Semple: And she literally went, “Wait.” Dave Young: You have lipstick pigments? Stephen Semple: She never thought about lipstick. And in that moment she instantly pivoted. Done with soap. I’m doing lipstick. All simply because the supplier said, “What type of pigments do you want?” Dave Young: Wow. Okay. Stephen Semple: Yeah. Isn’t that crazy? Because lipstick was one of the few things that she wore. And again, she found she loved purple and it was super hard to find. She decided, I’m going to do this lipstick stuff. But the first thing she needed to do is find lipstick molds. And I guess they’re really, really hard to find or tied up by all the big companies, but she was able to find a couple of used ones from the laboratory that was going out of business. Dave Young: Oh, nice. Stephen Semple: But they were still like $1,500 bucks a piece for these molds. So here she is working 60-hours a week at Barclays. She comes home, she works till like 3:30 in the morning on the lipstick business. Gets up at 7:00 heads off to work. But she wants to create these wild and crazy colors, and she wants them to feel good. So she starts also experimenting with doing things like shea butter. Because there was a particular feel that she wanted them to have. She wanted them to be all natural. There’s this delicate balance of ingredients to get the feel right, the color right, getting it to stay on. So she does a lot of experimentation. And she would give it to people at work. And she suddenly knew it was working well when people started asking for more. Right? Dave Young: Yeah. Stephen Semple: And that’s when she decided to start to sell it. Once she got to the stage where people would ask for it. So she would make the lipstick at home, and she got the packaging from China and it was all hand poured and all hand packed. And she knew that the packaging had to be interesting. And so she did same thing as what she did with the soap. The lipsticks were all named after a drink and called the company, Lip Bar. Dave Young: Lip Bar. Oh, like a bar? Yeah. Okay. Stephen Semple: Yeah, like a bar. And you would get a little card with the recipe drink with each one of the lipsticks that you got. Dave Young: Oh, nice. Stephen Semple: So if you got pina colada, there’d be a little recipe for pina colada with it. And the packaging was inspired by old Victorian cages. She really loved the look of old Victorian. Dave Young: Like those old bird cages things? Stephen Semple: Yes. Dave Young: Look like mansions and castles. Stephen Semple: Yeah. If you take a look on the website, her design, the cap that goes on the top has this really intricate pattern, and that’s what inspired it. To get started, the minimum order for packaging is like 12,000 units. Dave Young: Oh, gosh. Yeah. Stephen Semple: So she’s got boxes of … Fortunately, lipstick is small. Dave Young: Yeah. Stephen Semple: But still her living room is full of this stuff. And her plan is to sell it on the web. And again, it’s all hand packed, all hand poured. Starts off with 12 shades of color. And her plan is she wants to sell it all in the first year. So she does this big launch party. Literally spends $30,000 on this launch party. Dave Young: Wow. Okay. Stephen Semple: And a beauty editor from Teen Vogue is one of the first people to land at the party. So they get lots of attention from that. And it gets exciting enough for her that in 2013, she decides to quit her job and do this full time. And her mom thinks she’s nuts. Dave Young: Well, that’s classic. Any entrepreneur that sets out to do something different and go out on their own, your family just starts thinking you’re out of your flippin’ mind. Stephen Semple: Your unholy mind. Yeah. And one of the reasons why she does it, is she feels she’s far more comfortable with failure than regret. She’d rather fail than regret not doing something. And the other thing is, she figures her superpower at this point is being naive. Dave Young: Okay. Stephen Semple: It’s one of those ones, this is going to work out somehow. And she feels like … I heard her in interviews talk about if she really knew everything that was happening, maybe she might not have done it type of idea. Dave Young: Right. Yeah. That’s so American too. Stephen Semple: Yes, it is. Dave Young: It’s not a mental disorder, but it’s a- Stephen Semple: Are you sure? Dave Young: Well, not really. It’s a form of optimism that is just, “Oh my God, we’re going to go out and do …” Like the settlers of- Stephen Semple: Yes, we’re just going to make this happen. Dave Young: … who went across the country on the Oregon Trail were like, “I don’t know what we’re going to find, but it’s going to be great.” It might’ve been an arrow in the chest. Stephen Semple: Yeah, exactly. Here she is. Naively quits her job. First year she sells $26,000 of product. Dave Young: Okay. Stephen Semple: She’s doing this with a friend of hers. They’re dead broke. They rent out a room in their apartment on Airbnb to make money. Dave Young: Just to make some money back. Yeah. Stephen Semple: Year two, $56,000 in the products, still making this stuff in the kitchen. The first group of people … She had a bunch of friends who joined her to help her out on this, kind of fizzles out. And in 2014, she decides to move back to Detroit. Because 2014 is interesting time in Detroit. Detroit is starting to revive at that time. There’s cool things going on. Shinola, the watch company is opened in Detroit, and she wants to be part of that renaissance. And she knows, just she senses, that she wants to be part of this. And she also knows that ultimately she eventually wants to be in retail, but she’s not ready. But here’s what she knows. When women try this product, they love it. Wants to try to bring the lip counter to people. Here’s what she does. She builds a Lip Bar truck. Dave Young: A Lip Bar truck. Stephen Semple: Yes. Dave Young: Like a food truck kind of thing. Stephen Semple: Food truck. But inside there’s mirrors and lipstick and all this stuff. Dave Young: Oh, wow. Stephen Semple: Isn’t that cool? Dave Young: That is cool. Stephen Semple: And takes it on tour. Dave Young: Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. [Empire Builders Ad] Dave Young: Let’s pick up our story where we left off. And trust me, you haven’t missed a thing. A Lip Bar truck? Stephen Semple: Yes. Dave Young: Like a food truck kind of thing? Stephen Semple: Food truck. But inside there’s mirrors and lipstick and all this stuff. Dave Young: Oh, wow. Stephen Semple: Isn’t that cool? Dave Young: That is cool. Stephen Semple: And takes it on tour. Dave Young: Just in Detroit or? Stephen Semple: No. Dave Young: Or everywhere? Stephen Semple: No, she travels around. But here’s the thing she discovers when she first goes to do it. She goes, “Oh, I’m just going to take this truck and park it on city streets and it’ll be all great.” You need a permit. Dave Young: Oh, yeah. I suppose you do. That’s another angle on that naivete. Stephen Semple: Right. Well, she doesn’t let that defeat her. Here’s what she figures out. If she can find a store that she can park in front, it’s all good. Dave Young: They have the permit. Stephen Semple: Right. So she basically goes around and finds stores where she sets up this deal that she’ll park this in front of their store. And one of the best ones that she did was Urban Outfitters in DC. Dave Young: Okay. Stephen Semple: That one worked unbelievably great. And people get intrigued, because here’s this thing that looks like a food truck, but it’s a- Dave Young: Lipstick truck. Stephen Semple: Yeah. And it’s all mirrors. And inevitably what she found is people will go inside and they would buy something. Dave Young: I hope she had a sound system like an ice cream truck. Stephen Semple: I don’t know about that. I don’t know about that. She did two tours in six weeks, and she made enough sales that she paid for the tour and paid for the truck and everything. It was so good that they created a second tour. And the second tour they went to black colleges and it did super well. But then here’s the problem. Truck started to break down. Dave Young: Oh no. Stephen Semple: Because it was this old beater. Dave Young: Yeah. Stephen Semple: And then the other thing that she did is she applied to be on Shark Tank. Dave Young: Oh. Okay. Stephen Semple: She was on Shark Tank and she submitted this video that was talking about the product while hula-hooping. And she had a terrible Shark Tank experience. They ripped her apart. But she did get two big benefits from it. One was from Mark Cuban. Mark Cuban said, “Your story is cool. You need to step into the front.” And Melissa did the thing that a lot of entrepreneurs … “Well I don’t want it to be about me.” Dave Young: Well, no, it is about you. Stephen Semple: But it is about you. Mark convinced her that that’s what she needed to do. Needed to make it her in the forefront, tell her story. Mark did her a great service, because I don’t believe it would be as successful today without that. But the other thing is, when it aired, of course drove tons of traffic. Dave Young: Oh, absolutely. Yeah. You can’t lose on Shark Tank. Stephen Semple: And they started getting so many orders that she needed to find somewhere else to make the lipstick. She needed to bring in people to help pack it. But now it was time to find a retailer and Target was her goal. She started to reach out to Target buyers. She searched them on LinkedIn. She did this eight month process. And when she finally did connect with a buyer, here’s what she did that I thought was really brilliant with Target. Now, Target, first of all, turned her down at first saying that she was too small. But what they did was, she convinced them that the Target customer is not buying cosmetics at Target. So you have all these Target customers shopping in your store and they don’t buy lipstick there. So this is net new sales for you. Dave Young: Oh, there you go. So that’s her pitch to Target? Stephen Semple: That was her pitch to Target. And it worked. And initially Target turned down for the stores, but said they would sell it on the website. So it was enough that opened the door. And then here’s the other thing that she did. She did a PR campaign and she drove every set, every sale to Target. In other words, even people who would buy directly from her, she encouraged them to buy from Target. Now, most people go, “Well, you make less money.” Yes. But blow it up there. And all of a sudden they go, “Huh, maybe what we need to do is sell it in the store.” Dave Young: Yeah. You deepen a relationship. That’s the price of- Stephen Semple: Yes. They became the number one selling lipstick that month. Dave Young: Nice for her. Stephen Semple: It’s now in 500 stores. They’ve since … in 2018 they had to bring in outside investment because they needed money for inventory and things along that lines. 2019, they opened their own brick-and-mortar store in Detroit. And COVID initially, was really tough on them, but come back because again, what happens in [inaudible 00:18:25] lipstick is actually one of the things people see. Dave Young: Oh, yeah. Sure. Stephen Semple: And there’s this lipstick effect. It’s this small novelty feel-good item. Dave Young: Mm-hmm. Stephen Semple: That is one of those things that we know does well in tougher times. Now they do more than lipstick. They also do some mainstream colors, of course. But I just love this whole her going, “I’m more comfortable with failure than regret.” And this whole idea of just naively diving in. I love the pivot where all of a sudden, “Wait. Lipstick?” Dave Young: Yeah, well, you get a vision and then … Naivete is an interesting one because you know there are going to be hurdles. Stephen Semple: Yes. Dave Young: You just don’t know what they are yet. Stephen Semple: And sometimes you’re never going to know until you get to it. Dave Young: And you’ll never know until you run right up into the face of one. Stephen Semple: Yeah, absolutely. Dave Young: And then you either figure out how to go over it or around it or through it. Stephen Semple: But there’s four brilliant things that I think we can learn from that she did. Number one is the Mark Cuban lesson. People bond with people and people bond with movements and people bond with ideas. They don’t bond with products. They bond with what that product represents. And we’ve seen this often. “I don’t want it to be about me.” Really, it needs to be about you. Dave Young: Well, and people bond with an experience as well. And this is a product, as you said in Zoom meeting, soap … I can’t look at you on a Zoom meeting and see what soap you used. Stephen Semple: Yes. Dave Young: Right? I can’t see what the antiperspirant you did or didn’t use. Stephen Semple: Right. Dave Young: But I could see your lipstick. Stephen Semple: Yes. Dave Young: And so I think that’s brilliant. Stephen Semple: Yeah. Dave Young: And great timing. Stephen Semple: Yes. I love this creative idea of making the truck and taking it on the road. Because again, to that experience, what she knew is when people tried it, they liked it. Well, how do I take it to people when I don’t have a retail shop? Park in front of a retail shop. And then even that insight into the Target product, because your customers are not buying lipstick in your store. Dave Young: So she saw that truck for what it was, which was another step up. And I guarantee you there were dozens and dozens of business experts that said, “Well, that’s just not scalable. That’s not scalable. You can’t buy trucks all over the … “ Stephen Semple: Right. Dave Young: Right? But that’s not what it was about. Stephen Semple: No, it was she always knew she wanted to be in retail. It was that step forward. And again, every time she parked in front of a place, if it did well, that’s further to the story. Dave Young: Yeah. Yeah. Stephen Semple: And getting the product in people’s hands and all that other stuff. Yes, her goal was always to be in retail, but yes, it was a step up. Dave Young: It makes me think of the Saturn V rockets of the Apollo system. Right? It’s like the goal is to get these guys to the moon. And if you look at that giant rocket ship, the part that’s going to the moon is at the very, very tippy-top. Stephen Semple: Right. Dave Young: Right? Stephen Semple: Exactly. Dave Young: The great big giant bottom piece that’s just to get them part of the way out of the earth’s gravity. That’s what that truck was. That’s what the friends … all of that. You’ve got to look at the stages of building an entrepreneurship based business. Stephen Semple: And the last thing, and this is I think probably the biggest one that I was going to say to people to take away, because I meet with people all the time who will be all excited that they’ve gotten into Target or Costco or whatnot. And I’m like, “Okay, great. Your job has only just started.” They go, “Well, what do you mean?” You got to stay there. It’s not going to automatically sell. You actually need to have a strategy for how to drive sales. And so when she got on to target.com, she was immediately like, “I’m going to create this PR campaign. I’m going to drive sales to there so it becomes top-selling, which will then get me into the store.” And then we have things that they also did to make sure it sold in the store. It’s like you can’t just sort of go, “Ah, my job has done. I’m in Target.” Dave Young: Yeah. Here we are. Made it. Stephen Semple: Here we are. No, you’ve really only just started. Dave Young: Yeah. Great story. Lip Bar. Stephen Semple: Lip Bar. Dave Young: What’s her name? Stephen Semple: Melissa Butler. Dave Young: Melissa. Well done Melissa. Stephen, thank you for sharing the Lip Bar story. Stephen Semple: Yeah. Cool story, right? Dave Young: Yeah. Yeah. Stephen Semple: Go to the website. The colors are fun. They are really, really fun. Dave Young: Maybe next time we do a video … we’ll have to be … maybe not. Stephen Semple: Well, you’d look good in purple. Dave Young: Surprisingly, blue is mine. Stephen Semple: Well, there you go. Okay. Dave Young: Thanks Stephen. Stephen Semple: All right, thanks David. Dave Young: Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app, and leave us a big fat juicy five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at empirebuildingprogram.com.…
1 #176: Mars – Part 2 – The Best Chocolate Union 16:01
16:01
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16:01When you need the chocolate you find creative ways to make the deal work. See the best of both worlds. Dave Young: Welcome to the Empire Builders podcast, teaching business owners the not-so-secret techniques that took famous businesses from Mom and Pop to major brands. Stephen Semple is a marketing consultant, story collector and storyteller. I’m Stephen’s sidekick and business partner Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those. [ASAP Commercial Doors Ad] Stephen Semple: Welcome to part two of the Mars episode. If you haven’t listened to the first part, I suggest you go back and give it a listen because those are really the early days of Mars. But the Mars story was so interesting we had to break it into two parts, and there’s some really fun and surprising things that are going to happen in Phase 2 of this story. The Mars Bar was this big success. He’s now had a couple failures. He needs a success. It’s 1934. His father, Franklyn, passes away. Dave Young: Okay. Stephen Semple: At the age of 50, and the future of the company in the U.S. is now in doubt, and there’s a small number of shares go to Forrest. But most of the shares go to his stepmother who does not like Forrest. Dave Young: Ouch. Okay. Stephen Semple: Forrest is pissed. And basically he decides that what he needs to do is just go on a vacation and cool off. So he takes a vacation to Spain, and he saw these chocolate candies made by Rowntree that are called Smarties. Dave Young: Um, okay. Stephen Semple: That don’t melt, and he had never saw a candy coating on chocolate. So he decides to take Smarties to America. He returns to the U.S., leaves the UK company in the hands of the number two, but he needs a supply of milk chocolate. And where does he need to get that is Hershey’s. Dave Young: Okay. Stephen Semple: But he’s brand new. Hershey’s is not super interested in doing it. So what he does is he knows the president of Hershey’s. His son Murray, is never going to make it in the Hershey’s business. So he offers Murray. He says, “Hey, you guys, sell me this chocolate. I’ll make Murray, I’ll give him an executive position plus 20% of the company.” Dave Young: Wow. Okay. Stephen Semple: So they go, done. Murray’s now set up. Dave Young: Murray’s out of our hair. Stephen Semple: Murray’s out of our hair. Dave Young: Not our problem anymore. Stephen Semple: What they do is they create this candy based upon Smarties. Dave Young: Wait a minute, wait a minute. Murray? Stephen Semple: Murray. Dave Young: Mars. Stephen Semple: Mars. Dave Young: MM. And the candy-coated chocolate? Stephen Semple: Is M&M’s. Dave Young: M&M’s, yeah. Oh, wow. So it was the son of Mars and the son of Hershey’s. Stephen Semple: Yes. Dave Young: Who knew? Stephen Semple: Right. Dave Young: That’s amazing. Stephen Semple: So they need to build a factory and they want to make it stand out. So how they first package M&M’s is instead of in a little bag, remember where they used to always come in a tube? Dave Young: Oh, I remember them coming in a tube, but not in my childhood. That was sort of a theater thing later on. Stephen Semple: But that’s how they first came was in a cardboard tube. That was how they first came. Dave Young: Oh. You know, I kind of do remember that with like a folded wadded piece of paper at the end to hold it shut, yeah. Okay. Stephen Semple: Yeah, it was first in this… In Canada I remember them with a little plastic thing on the end, but yeah, they’re originally in the tube. So it’s 1941. War breaks out in the United States. Factories all across, all industries are dedicated to the war effort. And Hershey’s has a real problem here because their chocolate bar for the war effort is a horrible prop because it melts and all this other stuff. Mars proposes to the U.S. government M&M’s because it doesn’t melt, and they’re literally doing 200,000 pounds a week of M&M’s to the U.S. war effort. Dave Young: Wow. Stephen Semple: Now, I want to pause for a moment because there’s a couple of interesting things that I observed in all of this with Forrest. Not only was he a go-getter, he was really observant. And we’ve seen that over and over again with a lot of folks who’ve built empires. First of all, he looked at something familiar, the malted milk shake, and said, “Everybody loves this. We should make a bar that tastes like this.” Brilliant observation. Dave Young: Um-hum. Stephen Semple: Then he learns from Cadbury that they would do things for local markets slightly different. Dave Young: Modify it for the locals. Stephen Semple: So what he looked at was the Milky Way. He went, “Well, I should modify that for the UK market.” Dave Young: Um-hum. Stephen Semple: So not only that, he observed this idea from Cadbury and he observed that the UK market had a slightly different taste. Made a bar for that. Fantastic. Then when he tried to do a couple of things using his own ideas, they failed. And then he observed when in Spain, the Smarties and went, “Hey, I could make my own version of that.” But it’s this whole idea, and we’ve seen this so often with empires is this looking at the market, this observing these things going on. And in his case, it was things going on in other markets, right? Dave Young: Yeah. Stephen Semple: But nevertheless, just observing those things and then creating his version of it, which I think is just underappreciated. Dave Young: Do you think his instinct was… Boy, this is a weird one because I’m not sure of the mindset. Is the instinct to say, “You know what? I just got to get out of here for a while.” Or is the instinct, “I got to get out of here so I can see new horizons and find something new that I can take advantage of.” Stephen Semple: That’s really… Dave Young: I think they both end up kind of in the same place. And if you’re stuck, if you’re stuck and you can’t find the answer, get out of your own space. Stephen Semple: Yes. Dave Young: And be open. Stephen Semple: Yes. Dave Young: Not even necessarily looking, but just open. Stephen Semple: Just be open. We do this with our customer in reviews in the Bold Idea Day, because we make them travel to a different place. Dave Young: Can’t be at your place, yeah. Stephen Semple: When you travel into that different space, it puts you into a different headspace. How often have we seen things where somebody somewhere else and yes, it’s a combination of seeing those other things, but as you said, it’s that different headspace. So I think it’s a combination of the two. It’s really interesting. I’m in a coaching program called the Strategic Coach run by a guy by the name of Dan Sullivan, hugely successful program. And Dan tells a story of an early business that he had that predated Strategic Coach that went through all sorts of things that created this big challenge, and the business was failing. And I never believed this story when I first heard it, and I now believe it. I heard it. I was young. I was stupid. I was naive. Now a little wiser. The business is failing and one of the first things he did is he and his wife Babs, went on a two-week vacation. Dave Young: Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. [Empire Builders Ad] Dave Young: Let’s pick up our story where we left off and trust me, you haven’t missed a thing. Stephen Semple: One of the first things he did, the business is failing. And one of the first things he did is he and his wife, Babs, went on a two-week vacation. And when he came back from the vacation, he was like, “Here’s what I need to do.” With this instant clarity. Here’s what I need to do. But I just wanted to pause and recognize that, because that’s the early history of the Mars Corporation. So World War II comes to an end. Here’s the interesting thing. Mars kicked the crap out of Hershey’s during World War II. Hershey’s still sold a lot of chocolates to the Army. Dave Young: I’ve got to say Hershey’s probably did a better job at product placement in war movies, right? There’s always the GI giving a Hershey bar to some kid. Stephen Semple: Yes. Okay. So here’s one of the things I’m going to suggest people do to go back to the Wrigley’s episode, Episode 4. In terms of what did Wrigley’s do during World War II? Because remember, Wrigley’s continued to advertise through World War II. Dave Young: Um-hum. Stephen Semple: And then what happened as soon as the war ended, their sales exploded. Mars did not advertise during World War II. The war comes to an end, sales collapse. Dave Young: Did anybody even know what M&M’s were? Stephen Semple: Like I really don’t know what their success was before World War II. They were released pretty soon before World War II. So I’m going to say probably not. Forrest buys out Bruce Murray, and he hires an ad agency, Ted Bates & Company to create an advertisement for it. And here’s what Ted Bates & Company recommended. Again, radical idea in the late forties, early fifties was the customer is the kids. Dave Young: Oh, okay. Yeah. Stephen Semple: You need to appeal to the parents. It’s a two punch you need to do here. Dave Young: Yeah. Stephen Semple: And what do parents dislike about chocolate bars? Dave Young: Yeah. Cleaning it off their kids’ faces and hands. Stephen Semple: Melts in your mouth, not in your hand. Dave Young: Not in your hand. Stephen Semple: While the customer’s the kids, you need to appeal to the parents. They launch this campaign. Melts in your mouth, not on your hand. Hershey Bar is messy. M&M, no mess. Brilliant friggin’ message. Dave Young: Sure. Stephen Semple: 1954 Forrest rolls out a national campaign. And look, it also fits that image of the 1950s where everything’s supposed to be everybody’s perfect and clean and pristine and all that other stuff. So sales start to improve. They immediately launch a peanut M&M’s and in this one, they do something also really fun. They make the candies the spokespeople. Dave Young: Gotcha. So this goes way back. Stephen Semple: This goes way back. This whole idea of the candies being spokespeople, while it happened recently, it was a relaunch of an old idea. Ads run on kids program. 1956, they’re selling 40 million dollars and they become number one in the United States. Dave Young: All right. On the backs of the M&M’s. Stephen Semple: They’re now three times the size of the old family business. But Forrest now needs to go back to his sister, because remember, most of the shares went to the… Dave Young: The step-mom. Stephen Semple: So he wants to go back now and buy the old Mars company back. Remember, he’s been writing this under his own name. 1964 he takes over Mars, merges the companies, does a complete overhaul. And at this point, they’re still number two to Hershey’s. But one of the things, they now are big enough as they start making their own chocolate and no longer buying from Hershey’s. Expand the product line but they’re always looking to Europe for inspiration. So here’s one of the things he remembered. His best ideas came when he was looking at other markets. Dave Young: Sure. Stephen Semple: He’s constantly looking to Europe for inspiration, and they create this whole idea of a product called Fruit Chewies. So they see these chewy, fruity candies in Europe, and it fails, and he admits that it’s a mistake and he pulls it off the shelf. But you know what? He still thinks it’s a good idea, but he felt like it was maybe mispackaged and mismarketed. So they change the formulation a little bit, and they re-release it, but they re-release it fitting into an idea, an obsession that’s working at the time. You know how we talk about this whole idea of looking at the marketplace and if something is really going on in the marketplace, trying to tie into that. Dave Young: Sure. Yeah. Stephen Semple: What was going on in the late fifties, early sixties? What was the big obsession? Going to the moon. So what does he call it? Starburst. Dave Young: Starburst. Stephen Semple: And it explodes. Dave Young: Wow. Okay. Stephen Semple: Right. He then finds another candy, again that’s going on in Europe, and I forget what the name of it was in Europe. He takes it and he rebrands it as Skittles. Dave Young: Ah. Okay. Stephen Semple: What somebody else in Europe was doing and he bought the idea and rebranded it. But what Forrest recognizes, “Oh, wait.” Again, anytime he tried to create something brand new, didn’t work. When he saw something and kind of reformulated it, it’d work, when he saw something that needed rebranding, he could do it. He became very conscious of where his success lie. Dave Young: That’s really cool. Stephen Semple: I think that that’s really quite amazing. But when you’ve got a company that you have five of the top 10 in your space, man, you’re doing something, right? Dave Young: Um-hum. Stephen Semple: The only stumble he had is he should have learned from Wrigley, but of course he couldn’t learn from Wrigley because Wrigley was doing it at the same time. But isn’t it interesting that we talk about how Wrigley had this success because they advertised during the war. So as soon as the war was over, their sales exploded. Well, one person could argue, “Well, do we really know that that was the impact?” Well, let’s take a look at M&M’s. Dave Young: Right. Stephen Semple: Didn’t advertise during the war, sales collapsed. And they actually ended up with a problem, but they bounced back with melts in your mouth, not in your hands. Brilliant, brilliant campaign. Dave Young: Yeah. Well, that’s really cool. I didn’t realize that one guy was responsible for all those ideas. Stephen Semple: Isn’t that incredible? Dave Young: Yeah. Stephen Semple: The dude was brilliant, especially as he understood kind of here’s what led to his success. And in many ways, he kept doing the things we talk about doing, repeating the success. This is what led to success. This is what led to success. He kept repeating that success. Dave Young: Yeah. Very cool. Stephen Semple: So a really, really, really cool thing. Power of renaming, power of local markets, all of those things is the lessons to be learned in there. Dave Young: Awesome. Oh, I’m glad you brought us the story of Forrest Mars. Stephen Semple: Forrest Mars. Yes. Dave Young: And his Mars Bars. Stephen Semple: Yeah. And isn’t it cool that they are still family owned? Dave Young: I’m glad to hear that. Maybe they’re the Wonk and not the Slugworth. Stephen Semple: Yes, that’s it. Now look, there’d still be a lot of bureaucracy around there when you’re doing that with billions. Dave Young: Is Wonka a brand owned by a company like Mars or is Wonka its own thing? Stephen Semple: You know what? We are going to do an episode on Wonka. Dave Young: All right, I can’t wait. I’ll get a hat. Tee, tee, tee. Hee, tee, tee. Stephen Semple: It’s one that sits around on the edges on a few of these things. And the Wonka story is kind of interesting. Dave Young: Yeah. Like is Willie real? Is Willie a real guy? Stephen Semple: Willie’s not. Dave Young: Okay. All right. Stephen Semple: But the Wonka part is kind of fun. Dave Young: Sure. All right, well I’m looking forward to it. Thanks for listening to the podcast. Please share us. Subscribe on your favorite podcast app and leave us a big fat juicy 5-star rating and review at Apple podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at empirebuildingprogram.com.…
1 #175: Mars – Part1 – Like Father Unlike Son 14:19
14:19
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14:19Franklyn Mars bails his son Forrest out of jail. Then Forrest decides to build a bigger company. Mars is an absolute empire. Dave Young: Welcome to The Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is … Well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those. [Travis Crawford HVAC Ad] Dave Young: Welcome back to The Empire Builders Podcast. Dave Young here talking to Stephen Semple, and we’re going to talk about business empires that went from nothing and turned into, as we say, empires. Stephen Semple: Yes, sir. Dave Young: Right? That’s the premise. Now people know the underlying premise of the podcast. Let’s get on with it. You whispered in my ear, as you hit the countdown button, that today we’re going to talk about the Mars Corporation. The Mars Corporation. Stephen Semple: Yeah. Dave Young: But we’re not talking about Percival Lowell and his telescope thinking that there were canals on Mars. Stephen Semple: No, no we’re not. Dave Young: We’re talking about candy bars. Is that right? Stephen Semple: Yeah, we’re talking about a lot of candy bars. Dave Young: So I at least got that going for me. I figured out that this is not the Bugs Bunny villain. This is … Stephen Semple: Dave, you’re not feeling well, but you still bring it. I like it. Dave Young: Yeah. Just in this day and age, full transparency, I’m doing this with COVID. Stephen Semple: Yeah. Yeah. Yeah. Dave Young: But fortunately, we record over the internet. Stephen Semple: That’s it. Got our virus protection on. Dave Young: I’ve got a mask sitting right next to my microphone. Stephen Semple: Yeah. Mars is massive. One half of the top candy bar names on the planet are part of Mars: Mars, Snickers, Skittles, Milky Way, 3 Musketeers, and M&M’s. Dave Young: All right, so how far back does this go? Stephen Semple: Well, we’re actually going to do two sections of this. We’re going to go right back to the beginning, and also we’re going to do something around the time that they added some of these extra names that was really kind of interesting. Dave Young: So how many years back? Is there a Mr. Mars or a Mrs. Mars? Stephen Semple: Oh, yes. It was Franklin Mars. Dave Young: All right, all right. Stephen Semple: 1911, Franklin Mars. Dave Young: 1911. Stephen Semple: Yeah. Dave Young: Because what I picture the Mars Corporation full of now is a bunch of suits that are like Slugsworth in Willy Wonka. Stephen Semple: Well, they are $45 billion in revenues. Dave Young: Yeah. Yeah. Stephen Semple: They are 130,000 employees. Dave Young: Dang. Stephen Semple: And they’re still owned by the Mars family. Dave Young: Oh. Well, that makes me feel good. Stephen Semple: There you go. Dave Young: That actually does because I just picture that big of a company, nobody in the boardroom actually cares about chocolate, but I’m glad to … So let’s dive in. I’m all ears now. Stephen Semple: And they’re literally one of the top five privately-owned companies in the world. But yes … Dave Young: Amazing. Stephen Semple: It’s really remarkable that they’re still family-owned. So as we were talking about earlier, founded in 1911 by Franklin Mars in Tacoma, Washington. And the reason why we’re sort of taking two looks at this company, there’s kind of what Franklin Mars did to start the company, but it was really his son, Forrest Mars, who made it huge. Dave Young: Okay. Stephen Semple: So Forrest grew up as a little bit of a hustler. When he was young, he was not close to his father. In Chicago in 1923, Forrest is 19 years old and he’s hustling to make a living. What he’s doing is he’s illegally plastering billboards all around town. Dave Young: Oh, okay. Stephen Semple: And he gets arrested and needs to be bailed out. So he hadn’t talked to his dad in a decade, but he picked up the phone and called dear old dad and said, “Hey, can you bail me out?” Dave Young: Wait, whose billboards was he plastering around town? Stephen Semple: I have no idea, but it was like companies would hire these kids to plaster up billboards … Dave Young: Oh, okay. Stephen Semple: And it was illegal. Dave Young: Okay. Stephen Semple: So city ordinance against it and all that stuff. Dave Young: Just any blank wall, huh? Stephen Semple: Exactly, exactly. So Forrest calls his dad, and his dad at the time was a candy salesman. They were not close. Forrest Mars was selling candy, but he was also trying to crack into the business. He had been making a few little candy things and really trying to get into the chocolate business, which if we remember, the early days of the chocolate business in the United States was heavily dominated by Hershey. In the 1920s, there was no rival to Hershey’s. It was Hershey’s and nothing else. Frank had started a chocolate bar called Marrow bar, and he had had a little bit of success. Dave Young: Wait, marrow? Stephen Semple: Marrow. Marrow bar. Dave Young: Like bone marrow? Stephen Semple: Yeah. Yeah, like bone marrow. Marrow. Dave Young: He didn’t consult us on the name. I just want to point that out. Stephen Semple: I guess not. Dave Young: Not on this one. Stephen Semple: So Frank and Forrest are sitting having a malted shake, and that’s a really popular drink across the country, and Forrest suggests to his dad, “You should make a bar that tastes just like this.” And Frank likes the idea and they decide the team up and they make Milky Way. Dave Young: All right. Now we’re talking. Stephen Semple: Now we’re talking. And they go all in and they need a steady supply of chocolate, milk chocolate, to make this happen and they get that from Hershey’s. So Hershey’s was also supplying other small chocolate makers. Dave Young: Okay. Stephen Semple: Now here’s one of the things. When you look at a Hershey’s bar, it’s a little, thin bar, right? When you look at a Milky Way, it’s big, right? Big, it’s fluffy. It looks way bigger and it’s a huge success. They launch it in 1924 and in 1944, 20 years later, it’s basically doing what’s equivalent to today would be $12 million in sales. Dave Young: Wow. Okay. Stephen Semple: So his dad is happy. His dad is like, “This is awesome. We’re making money. This is a huge success.” Dave Young: And Milky Way sounds way better than a Marrow bar. Stephen Semple: Yeah. Yeah. And again, it stands out because it’s larger and it tastes like a malted shake. Dave Young: Yeah. Stephen Semple: So his dad’s happy, but Forrest wants more. So Forrest encourages him in moving into new markets and they want to create new products. And the business is growing quickly. Becomes national with the Milky Way, then they launch Snickers, and then they launch 3 Musketeers. All huge successes. Dave Young: Wow. Still huge successes, yeah. Stephen Semple: The profits are now over $2 million back in the 1920s. Dave Young: So father and son are reconciled. Stephen Semple: Well … Dave Young: Well … Stephen Semple: They’re doing business together. Dave Young: Okay. Stephen Semple: So it’s 1932 and they hit $25 million in the sales, and they’re second only to Hershey so they’re now the number two candy bar maker in the United States. Dave Young: All right. Stephen Semple: And Forrest still wants more, Frank’s really content, and they get in a lot of fights. Forrest, the son, basically demands of the dad, saying, “Hey, these are my ideas. These are my vision. You should give me 30% of the company. I should have ownership in the company.” Frank doesn’t agree. Forrest leaves because he thinks he can do more. Dave Young: Wow. Okay. Stephen Semple: And what he decides to do is learn more about the chocolate business. So he goes to Europe, goes to Switzerland, and he basically convinces Nestle to hire him. Dave Young: Okay. Stephen Semple: Because he wants to create the first international candy company. He wants to learn everything there is to learn from a large company and Nestle, at this time, is the largest in the world, absolute largest in the world. And candy companies at the time were very, very secretive. There was lots of R&D and everything from packaging and manufacturing. And Forrest gets a job in the factory and he learns all he can, just basically is a sponge soaking it all up. And once he’s gotten all the knowledge he needs, he leaves and he sets up shop in Slough, England, invests all of his money. Dave Young: Stay tuned. We’re going to wrap up this story and you how to apply this lesson to your business right after this. [Empire Builders Ad] Let’s pick up our story where we left off. And trust me, you haven’t missed a thing. Stephen Semple: He sets up shop in Slough, England, invests all of his money. And his first idea is he wants to change the Milky Way to local market, and he learned this idea from Nestle. So basically what Nestle was doing, how they made their chocolate for the Italian market and how they made the chocolate for the English market and how they made the chocolate for the French market was all slightly different … Dave Young: Okay. Stephen Semple: Because all three of those markets have slightly different preferences in terms of sweetness and milkiness and things along that line. So he takes this idea and he makes a version of the Milky Way for the UK market. And guess what he calls it? Dave Young: The Mars bar. Stephen Semple: The Mars bar. And it’s funny because I’ve always thought that the Mars bar and the Milky Way bar were kind of similar, but different. And I never knew until researching this that basically they’re the same bar, just modified for markets. But he finds himself now going against Cadbury, and Cadbury’s no slouch. Dave Young: Sure. Stephen Semple: Cadbury’s from the UK. This is a big challenge. And one of the things that Forrest decides to do is claim that his health bar has nutritional benefits. It has all these nutritional … “A meal in a Mars” is kind of the slogan that they do. Now it’s interesting because I think he got this idea from Guinness. Dave Young: Oh, sure. The meal in a pint. Stephen Semple: Right, but Guinness used to advertise “Guinness for Strength.” And a number of years ago, I was in Dublin and I went to the Saint James Brewery, which is where Guinness started, and they show all these old Guinness ads there and one of the ones that you saw this whole line of was “Guinness for Strength.” And this whole idea of advertising, “You should have a Guinness at lunchtime for the extra nutritional benefits.” Dave Young: Okay. Stephen Semple: So I don’t know this for certain, but I know the timeline is parallel. This “meal in a Mars,” he might’ve got that idea from Guinness. Dave Young: So yeah, I may go have a beer and a candy bar for lunch. Stephen Semple: There you go. For lunch. Dave Young: I can’t think of a better way to take a nap at 2:00. Stephen Semple: Two great tastes that taste great together. So basically, he does really well. He sells a million bars in the first year and he expands quickly. And by 1934, he’s the third-largest candy bar maker in the UK. Dave Young: Wow. He’s a go-getter. Stephen Semple: He really is. Now one of the keys that he really felt that the success to Milky Way and the Mars Bar was that they looked bigger, that they were a bigger bar. So what he decides is to launch a new bar called Big Bar. It’s really big. It’s a really big bar. But here’s the problem: It’s too big. People don’t finish it. Kids don’t finish it. And if you don’t finish it and you got a chocolate bar and you put it in your pocket, it melts. Dave Young: Yeah. Stephen Semple: And it failed. It failed terribly. Now around this time, tropical fruit prices drop. And so he decides to create a pineapple-flavored, like adding pineapple flavor to his chocolate bars. Dave Young: Okay. Stephen Semple: Fails. The Mars bar was this big success. He’s now had a couple failures. He needs a success. It’s 1934. His father Franklin passes away … Dave Young: Okay. Stephen Semple: At the age of 50, and the future of the company in the US is now in doubt. And there’s a small number of shares that go to Forrest, but most of the shares go to his stepmother who does not like Forrest. Dave Young: Ouch. Okay. Stephen Semple: So Forrest is pissed. Dave Young: Yeah. Stephen Semple: And basically, he decides that what he needs to do is just go on a vacation and cool off. So he takes a vacation to Spain and he saw these chocolate candies made by Rowntree that are called Smarties that don’t melt, and he had never saw a candy coating on chocolate. So he decides to take Smarties to America. He returns to the US, leaves the UK company in his hands of the number two, but he needs a supply of milk chocolate, and where does he need to get that is Hershey’s. Dave Young: Okay. Stephen Semple: But he’s brand new. Hershey’s is not super interested in doing it. So what he does is he knows the president of Hershey’s. His son, Murray, is never going to make it in the Hershey’s business. So he offers Murray, he says, “Hey, if you guys sell me this chocolate, I’ll make Murray … I’ll give him an executive position, plus 20% of the company.” Dave Young: Wow. Okay. Stephen Semple: So they go, “Done.” Murray’s now set up. Dave Young: Murray’s out of our hair. Stephen Semple: Murray’s out of our hair. Dave Young: Not our problem anymore. Stephen Semple: This Mars episode was so interesting. We needed to break it into two parts. So tune in next week where you’re going to hear about the origin of M&Ms and a bunch of other things that may surprise you. Dave Young: Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app, and leave us a big, fat, juicy, five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute empire building session, you can do it at empirebuildingprogram.com.…
1 #174: Daniel Whittington – The Chancellor, The Myth, The Legend 21:30
21:30
Nghe Sau
Nghe Sau
Danh sách
Thích
Đã thích
21:30Daniel Whittington spent 7 months crafting the perfect message and a mere 10 minutes on the the plan of attack. How did it turn out? Dave Young: Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom-and-pop to major brands. Stephen Semple is a marketing consultant, story collector and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those. [Seaside Plumbing Ad] Stephen Semple: Hey, everyone. So we have a special surprise today. We’ve given Dave Young the day off because Dave works really hard. Actually, Dave works for this guy, so we know why Dave works so hard. So I’m here with Daniel Whittington, and Daniel is the Chancellor of the Wizard Academy and basically created the Whiskey Marketing School at the academy. Last time I was down in Austin, Daniel and I were sitting in the vault. We are doing a tasting, and Daniel shared a thought that just like rocked me back on my heels, which doesn’t happen that often. What I loved about it is he compared the marketing of whiskey to the promotion of a band. And the more he talked about it, I said we need to share this idea on the podcast because I’m constantly going down this idea of looking elsewhere. So Daniel, tell us more about this revelation and the journey you’ve been on. And at the end, let’s make sure we talk about why everyone should actually take a course at the academy and learn about whiskey. Daniel Whittington: My explanation of it now sounds just as good as it felt like it did when we were drinking whiskey in the vault together because those two don’t always line up. So thanks for having me on, Steve. The origin of this whole idea was I’ve got a background in music industry. I spent 20 years as a full-time studio and touring musician and, during that time, did a lot of booking, did a lot of traveling, did a lot of promotion of bands, actually worked with bands, promoting and touring and growing their fan base. Then I got out of that and stumbled backwards into Wizard Academy where I’ve spent the last years, 11 years, actually. Stephen Semple: Wow. Has it been 11 years? Daniel Whittington: Been 11 years. Stephen Semple: Holy smokes. Daniel Whittington: Basically getting a graduate-level super masters in actual marketing and communications and, during that time, started the Whiskey Marketing School and have now started working with my own clients that are whiskey-related right now. One of them, they are poised for explosion and growth. They’re well set up. They’ve been winning awards. They’ve already got a huge fan base that’s kind of localized to where they tend to travel to most, not just their town, but in their region. But we’re ready to grow them. They’ve got some investment, they’ve got some money, they’ve hiring, they’re ready to explode. So we spent seven months building the marketing strategy, the ethos, the brand voice, the architecture of the personality of the brand and who they are and what they’re trying to accomplish. During that time I was thinking, I don’t know how to grow these guys because… In other words- Stephen Semple: I’m glad this is taking so long because I need more time. Daniel Whittington: Yeah. Yeah. Because so much of the way that I’ve helped grow people has been very particular to my skill set, or it has been brands that could use traditional media. And this distillery, there’s no need for… like I’m looking at it, I’m thinking the worst thing we could do is use traditional media because you’ve already owned your localized areas. And a whiskey bottle isn’t just a local business, isn’t HVAC where they can only service customers in a certain mileage, right? A whiskey bottle travels around the world so they’re going to have… I mean, they’ve got a huge following in New Mexico and Arizona, a huge following in California. They’re all over. So if we did a radio campaign, we’d have to figure out how to buy into markets in LA and Phoenix and Dallas and, no, we would bankrupt them in like two weeks. Stephen Semple: And these guys are Texas-based that you’re talking about. Daniel Whittington: Yeah, Texas-based, and I’m thinking like what do we do? And social media, this is coming from somebody who built no longer, but originally, the largest whiskey-focused YouTube channel on YouTube. I think I’m now like fourth or fifth because people are kicking ass out there and doing a great job of growing the whisky YouTube kingdom. But I know social media real well, and it’s not a way to grow a business. It’s a way to augment a growth plan. It’s not a sword that solves all problem. You know what I mean? It’s just not, unless you’re specifically a personality and that’s your venue of growth. But if you’re just a business that’s going to actually have stuff people can go buy on the shelf, that’s not your game that you play. Stephen Semple: I just want to clarify this because it’s really interesting. So what you’re saying is like if I am building myself as a person, like I’m a consultant or I’m a celebrity or I’m something like that, absolutely social media, you can do that. But if you’re selling a product or a service, basically it’ll augment your existing plan, but it’s not the lead of the story. Daniel Whittington: Yeah, I would say that, I mean, we’re going to start really nitpicking here, and this is a different conversation, I feel like. There’s a fine line where it’s like, yeah, if the shit that you’re selling is like under $100 or under 50 and you can turn and burn a million of them, then yeah, maybe you can do a whole bunch of Instagram and funny YouTube ads and sell a bunch of it. But if you’re selling an HVAC system or real products, that’s a losing market. It’s really noisy. So I was sitting there- Stephen Semple: And that’s a good distinction. Daniel Whittington: Yeah, widgets, if you’re selling a widget. Stephen Semple: Perfect. Daniel Whittington: But whiskey is about community. I mean, it’s treated as a commodity, but it’s really about the community and the people and the story around it that matters. So we can use social media, but that can’t be the only way that we grow. There’s got to be another way to reach people. Then one day, I was talking with some of the tasting reps that travel around and go into these physical stores and do tastings and go to whiskey events, instead of tables, and I realized I’ve seen this pattern before. This is band street teams. Stephen Semple: What do you mean by band street teams? Daniel Whittington: So like I’m a rock band. We start off in Austin, we play a little coffee shop, then we get into a club, and then we start selling out the club, and then we start playing theaters in Austin. Now every show has 500, 800 people. It’s time to go on the road. We need to go into Dallas. Well, you can drive into Dallas and you can have your people start going around and putting up flyers, but if none of your band lives in Dallas, that’s tough. So what do you do? You find a fan who lives in Dallas, and you make them part of your street team, and they go around putting up flyers. In exchange, they get tickets, and they get merch, and they get backstage access when you come in and show. They could hang out in the green room with you when you play the show in Dallas. And then, “Oh, you want to break into Phoenix? All right, let’s do the same thing. Let’s find a fan in Phoenix and let’s go,” right? But the way that that works is you cannot build a fan base in a town unless you’re willing to show up regularly. So you can’t show up in Dallas once every two years and expect to grow your audience. You got to show up in Dallas once a month, once a quarter, minimum once a quarter, until you’ve got legs and you’ve built it. Then you get in danger of saturating your market. So then you back off to twice a year, you hit Dallas, right? Then you use that space that you gained to try to crack into a new city, Phoenix and so on. Then when you’re big enough, you can sort of do regular circuits where everyone knows you’re coming through on a regular basis, right? But at first, you have to do all the hard work to carve out awareness, and the way you carve out awareness isn’t getting on the radio in Dallas, isn’t getting the DJs to play all your music. That’s helpful. The way you get on the radar in a town at first is play the clubs, meet the bands, meet the promoters, meet the owners of the bars, meet the other bands that are playing in town, get them to book you when they’re doing multiple headliners, meet the fans, get to know them, and you just grind it out. And I went, holy crap. We could absolutely do that if we take all the money we would’ve spent on radio or magazine ads or whatever and, instead, we start paying tasting reps, and we grow our two-legged army out of the whiskey brand into the world, then we can start making our presence known. We can hire a local who can hit all the right bars that they know would pour our whiskey and would love it, and a local that can go to the local whiskey events and the local whiskey meetups and introduce and speak for our brand. Then they can book an event where one of the owners comes by once a quarter, and you get to meet the head distiller or meet one of the owners of this brand. It’s a real special thing because they’ve been prepped for it, and they’re all excited because they all love your whiskey now. Then you just keep growing like that. And it’s not near as expensive because you don’t need a full-time person. You need to pay someone with part-time money and perks, right? Stephen Semple: Right. Daniel Whittington: Then make them feel like a true insider of the brand, and that’s it, you could take over the world, one major city at a time. And even better than a band, you can do it faster because we could have five reps doing that simultaneously in five major cities. Then once a quarter, you hit all five major cities with one of the owners or one of the headliners. You know what I mean? Stephen Semple: Yeah. Daniel Whittington: I was like, oh my God. I ran the budget on that, and it was a fraction of a radio account. And because we had spent seven months, while I was mildly panicking in the background, but while we had spent seven months so carefully crafting the message, it took me 10 minutes to write the manual that you would hand to these street reps that would have them speaking on message, on brand and in character at every level. Stephen Semple: But thank you for saying that because one of the things that we’re always talking about as Wizard of Ads partners, and I’m always talking to customers and prospective customers about this, it’s message first. What I think is really important, what you just said right here was it’s a tactical idea that will work and is brilliant and is amazing, but the reason why it’s going to work is- Dave Young: Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. [Empire Builders Ad] Dave Young: Let’s pick up our story where we left off and, trust me, you haven’t missed a thing. Stephen Semple: The reason why it’s going to work, look at it, seven months on the message and a short period of time on the execution. And, in fact, I’m going to argue how to execute that message emerged out of the creating of the message. Daniel Whittington: Oh, hundred percent. Hundred percent. That’s why I stumbled over the idea in the first place. Not only that, but if we took that same money without a message and we launched people who just happened to already be fans of the distillery, the message going out into the market is going to be chaos. Because everyone’s going to be talking about their own preferred why they like that brand that may or may not have anything to do with the culture and brand we’re trying to create. It would be detrimental to the brand. Stephen Semple: Yeah. That’s so interesting because it’s funny, I’m going out to California in a week or two and basically doing an uncovering by the client, and the client was like, “Hey, could we start rewriting the website before you guys have got the media plan put together?” And it’s like reason why I don’t have the media plan put together is I haven’t got your message plan put together. And if I don’t have your message plan put together, how the hell do we do a website? Daniel Whittington: Right. Stephen Semple: And while that seems so obvious, when I meet somebody and they hear I’m in marketing, what’s their very first question? “Well, should I be doing YouTube? Should I be doing…” And I’m like, “But what’s your message?” “Yeah, yeah. Well, we got our message, but…” It’s like, “No, you don’t. No, you don’t. You need to be spending 10 times the amount of time in messaging than on the strategy.” But anyway, but I do grasp what I’m hearing from you is as you were creating this messaging, that’s when this idea emerged. Daniel Whittington: Yeah, absolutely. Across the board, what we were able to find is that I wrote medium-specific messaging. So I’ve got it broken down to if you’re talking in Instagram, here’s how you deliver. If you’re talking in your newsletter that goes out to your fans, here’s how you deliver. If you’re talking at a generic public event, here’s how you deliver. Then I also had, for all the individual reps, here’s a 90-second, 60-second, 30-second, 10-second versions of the story. So depending on how much time you have with people, you just pivot to the long version or the short version. Stephen Semple: That’s brilliant. You’ve given them those tools, which a lot of times people don’t. They just sign up a rep and go, “Here’s the product.” I just had a thought about marketing of whiskey, and correct me if I’m wrong on this, because it’s weird to me. Whiskey is much more of a commitment, feels like a commitment when I buy a bottle of whiskey versus a bottle of wine. Daniel Whittington: Yeah, because it takes so long to drink it. Stephen Semple: Right, because it’s not just about the price. I’ll buy $100 bottle of wine, and it’s a different feeling buying $100 bottle of whiskey. Because I can’t bring myself to drink a quarter ounce of that whiskey and go, “I don’t like it,” and pour it down the drain, where a bottle of wine is like, “What the hell? We’ll finish it.” Daniel Whittington: Yeah. You will hear that in the language in social media. You’ll hear this phrase, “Man, I got stuck with this bottle,” right? No one says that about a bottle of wine. They will say, “I didn’t like it,” but no one says, “I got stuck with this bottle.” Because after you’ve opened the wine, if you tried it, the worst case scenario, you dump half a bottle of wine down the drain and that’s actually… It’s like, “Eh, it’s a bummer,” but it’s not as bad as dumping most of a bottle of hard liquor down the drain, feels way worse. Stephen Semple: It feels very different. But isn’t that interesting? It’s not about the financial commitment. It’s this different type of commitment to whiskey, which is what makes it like that whole tribal involvement so much more intense. That’s really interesting. Daniel Whittington: Absolutely. Stephen Semple: I hadn’t thought about that until just now. Daniel Whittington: Yeah. Stephen Semple: That’s cool. That’s cool. But the other thing I think that I like that’s really interesting is how you made a plan to make people feel like they’re an insider. Daniel Whittington: Yeah, and I couldn’t have done that, except that this brand already does that to its fans. Like that’s a core marker of who they are. They don’t put themselves on a pedestal. They’re not these like special people, who you don’t really get to hang out, they’re artists who don’t really meet the public. These guys are feet-on-the-ground, talking to people, showing up and doing tastings in people’s living rooms. Like these guys are connected to their customers, and so it works because of that. Stephen Semple: Right. So you’re leveraging something that was also already part of their DNA. Daniel Whittington: Yeah. It would not have worked for the guy who wants to be the secret artist behind the closed door. Stephen Semple: So it’s pretty obvious if somebody is a distiller and they’re looking for marketing ideas that they should give you a telephone call, which breaks my heart, because I’ve always wanted to work with a distiller, so you’ll have to call me and break it down to the team. Daniel Whittington: I used to [inaudible 00:17:24] Stephen Semple: But most people involved in this podcast are not distillers. So if you are an HVAC company or a retailer or something like that, what lesson could they take away from this observation that you have? Daniel Whittington: If I was just improv-making shit up, the only lesson I can pick out of it is that your solution may not be in your market. Stephen Semple: That’s a good observation. Daniel Whittington: But I don’t that I would take this strategy and say, “Here’s how you use this as an HVAC company.” I would need to think that through more. Stephen Semple: What I really liked was the whole idea that you started unclear in terms of what the medium was going to be and what the tactic was, and through the process of creating the messaging that that became evident. Daniel Whittington: Right. What’s funny about that is that you keyed in on my pain point in that, because for me, the fun part of the story is that I solved the problem. Part of the story you wanted me to talk about is how I spent seven months carefully crafting the message, the whole time freaking out that I didn’t know what we were going to do when we were done with that. Stephen Semple: Yeah. The reason why it really parallels with me is this client that we’re going out to see in California in a couple of weeks, we’ve done a one day, we’ve done a starter session, I still don’t know what media we’re going to use. I’m, literally, living right now what you are living where I’m like, “Okay. Well, as we figure out the story, I’m sort of really hoping that something will emerge because I’m still not sure.” Daniel Whittington: That’s funny. Stephen Semple: So I feel it. I feel it where you were, and I hope that I could do it in less than seven months. Daniel Whittington: Yeah, yeah. No, that would be nice. Yeah. Stephen Semple: But it’s a little bit less complex than the storytelling around a whiskey brand. So before we finish up, we got a couple of minutes, tell us a little bit about the Wizard Academy and why people should do a class there. And what I’m going to sit there and say to folks how I first got involved with the Wizard of Ads was through attending Magical Worlds. That was my first exposure. It changed so much in terms of the way that I thought about things. It was entertaining course, is amazing course. There’s so many fantastic courses. But you’ve sat at the back of many, many, many of these courses and you’ve seen so many people transform. What’s your pitch for the academy? Daniel Whittington: I would say that to do what you did. I would say specifically, come to Austin, take Magical Worlds of Communication. It’s a fundamental communications class that goes through all the arc table ways that the brain works and how we communicate with each other and how to apply that to business and business marketing and business writing. It will fundamentally alter how you see the world around you. I’ve never seen it fail. Stephen Semple: It really does. So the extra thing I’m going to say is you go to wizardacademy.org, go to classes, sign up for Magical Worlds, sign up early enough that you’re able to stay on campus. And here’s the thing I’m going to say, and I say this to my customers, I say this to my friends. When you go to that class, do not plan on doing work that night. Daniel Whittington: Yeah. Nu-uh. Stephen Semple: Plan on hanging out and talking about the class. It is so immersive that you will not want to do that. In fact, my recommendation is don’t even plan on trying to boot out of town at the end of the last day. Stick around and you’ll thank me for taking your time on it and really letting yourself experience it, and it’s so absolutely worth it. Daniel Whittington: Yeah. Rock and roll. Stephen Semple: All right? Awesome. Daniel Whittington: All right. Thank you, sir. Stephen Semple: Thanks for your time, Daniel. This was awesome. Daniel Whittington: Cheers. Dave Young: Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big, fat, juicy five-star rating and review at Apple Podcast. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at empirebuildingprogram.com.…
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