097: Sean Kelly, Snack Nation – How To 15x A Subscription Ecommerce Business (& Why Subscription Will Work For You)
Posted by October 28, 2015on
Are you tired of the chasing down one-time transactions? Do you want more predictable revenue? Then a subscription ecommerce business is what you need.
Just because you sell sunglasses, messenger bags or some other kind of apparel doesn’t mean a subscription ecommerce business won’t work for you. In fact, it’s quite likely that it will work for you…as soon as you make one small mindset adjustment.
This is a special episode for us because it brings us back to our humble beginnings. Both of us planted our entrepreneurial roots and cut our marketing chops at Sean’s company, HUMAN Healthy Vending. Without this experience, we wouldn’t have been able to successfully grow our business in the way that we have.
Sean shares with us how they’ve been able to apply a subscription ecommerce business model to their healthy snack delivery business to grow it 10x in just 9 months, and projections show that it could be 15x by the end of 2015.
What’s even more incredible is that they’ve built a sales team, one that you typically find in standard b2b businesses, and added that step to their subscription ecommerce business model, which they credit much of their massive success too.
It’s a bit counterintuitive when you think about “traditional” ecommerce, but that’s why this episode is awesome. It gives us a chance to learn about new, out of the box ways to grow an ecommerce business.
Take a listen below.
Key Takeaways from the Show
- How and why they chose a subscription ecommerce business model
- Why content plays such a big role in their success and the risks you face by not doing it in your business
- How to use an outbound sales team to grow a subscription ecommrece business by 15x
- How to produce massive amounts of quality content without doing all the work yourself
- Why the “membership economy” is the future of ecommerce
Links / Resources
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Transmitter: Welcome to Ecommerce Influence; where the best and brightest online business minds teach you how to grow your ecommerce company from one million dollars to 10 million-plus. To learn all of the strategies from past experts, download the episodes at ecommerceinfluence.com.
Chad: Austin, welcome to another show, my friend.
Austin: Thank you, Chad. I’m happy to be here, I’m happy to be chatting with you today.
Chad: Yeah, the feeling is mutual and we do this so often and sometimes I think I don’t tell you enough how nice it is to talk to you.
Austin: It is, and we are excited as well today, because we are chatting not just with each other, but with our former employer, and a friend who we spent a lot of time with when growing the company before Ecommerce Influence. So, it’s very interesting to bring it kinda full circle here.
Chad: I think full circle is the terminology that I would like to use because this might be the first time I’ve talked to Sean in-depth in two or three years since I’ve left.
Chad: So, it’s like wow, it’s interesting; now instead of us learning and talking to him from an employee standpoint, it’s now us talking from a same level, a similar level and it’s pretty exciting.
Austin: It is really exciting, and one of the reasons that I am fired up about is because it goes – I always to think about life like a journey and you never know where your journey is going to take you. And I think when we first started this podcast, we did not have in our mind that we would be interviewing Sean on the podcast about ecommerce, but our paths have crossed again, and more specifically due to changes in his business and what they are doing. So, it’s fun to see, you know, alternate paths, different journeys cross again and like I said, bring it back full circle. It’s going to be a lot of fun today; I think you guys are going to really enjoy this episode.
Chad: Yeah, it’s pretty awesome and today we are actually talking about an alternative method to growing ecommerce business, you know, 15X actually, because the business we are talking about is Snack Nation and Sean and his team, Andy his co-founder, they have grown their business 15X and it’s pretty incredible. But they have done that by combining an outbound sales process with ecommerce, which is kind of counter-intuitive when you think about it; we’re all here in ecommerce ‘cause we want to sit behind our screens and not talk to people and –
Austin: Everyone is there because they want to sit behind their screen and not talk to people, not just you and I.
Chad: That’s kind of true. But let’s think about this, there’s a majority of people getting into ecommerce because they can sit and sell online and go and sit on a beach and at least they have these thoughts in their head [Crosstalk] exactly. And that is not always true. But, more importantly, I think it’s a pretty incredible strategy that they have put in place and so –
Austin: Yeah, one of the reasons I said earlier that I think when we started this, we did not expect to interview Sean about this business ‘cause their business has changed a lot and it was not an online ecommerce business about a year-and-a-half ago. But once they made the change and they started focusing on his unique strategy of growing an online business, it really has taken off. So, to mention today’s guest is Sean Kelly, he is the CEO of Snack Nation, formerly, Human Healthy Vending, which we worked for, and they are an ecommerce subscription business. So, we really found their story and their growth story because we were familiar with the way they were running their business and how they are now; incredibly unique and interesting, and that’s why we wanted to bring Sean on to talk about it.
Chad: Yeah, it’s honestly kind of weird considering the fact that just a couple of years ago, we were in a completely different frame of mind with them, and now they are in this type of business and succeeding incredibly well. So, either way, excited to have them on and before we introduce him and get to his background, just want to have a quick reminder that we have put together a free, ecommerce marketing training library, which includes videos, master classes, eight guides, and it’s growing every single day and every single week. A couple of those guides include ‘Four Steps to Hiring A-Players on Elance’, ‘Selling Your Business for Max Value’, ‘Facebook Marketing for Ecommerce’ and much more. And you can get those guides by going over to Ecommerceinfluence.com/insider and when you sign up, you’ll get access instantly.
So, head over to ecommerceinfluenc.com/insider to get all that access and do it after the show because you want to listen to this first. But make sure you do it. So, quick background on Sean, Sean Kelly cofounded HUMAN, which is an acronym for Helping Unite Mankind And Nutrition in 2008 with Andy Mackensen, and for the past decade their focus has been on revolutionizing the industries that make convenient access to food possible, the vending and automated retail industry specifically, so that healthy food can become more convenient than junk food. HUMAN has become an award-winning franchiser for socially responsible healthy vending, micro markets, and now, their new healthy snack delivery service, Snack Nation. In addition to that, Sean also founded the Association of Workplace Engagement or AWE for short, which is dedicated to helping companies approve full engagement, productivity and wellness for the purpose of optimizing the workplace experience. So, put more simply, they assist companies in transforming their traditional work spaces into better places to work or awesome offices. So, we’re pumped to welcome Sean to the show.
Sean: Chad and Austin, it is great to be here, gentlemen.
Chad: Yeah, it’s a little bit of a blast from the past for us to, you know, to be talking to you on our show considering that we actually talk about HUMAN quite a bit on our podcast. So, our listeners are now talking to the man, the myth, the legend, the person that got us to where we are today. So, good to have you man.
Sean: It’s fantastic to be here and as you guys talk about HUMAN, the aura of Chad and Austin forever live on here at HUMAN and Snack Nation and so, much the same right back at you gents.
Chad: Perfect. Well, hey our listeners don’t know who you are personally, so maybe if you could, give us 30 seconds, tell us a little bit about you, your background and a little bit more of your expertise, whether that is in the marketing world, the nutrition space, whatever you feel comfortable in terms of telling us who you are so our listeners know.
Sean: Yeah, absolutely. So, you guys know I’m the CEO of Snack Nation, it’s a primary channel these days of HUMAN – Helping Unite Mankind And Nutrition and although my focus over time has really been on health and nutrition and the distribution of foods and increasing access to healthier items, you know, I really look at all aspects of businesses as being marketing. I mean, I don’t know if there’s any element of business that isn’t marketing and it certainly is the most important. So, when you say and if you ask what is my marketing expertise, I am super hesitant to claim expertise in anything, but I can talk a little bit about where my experience has lied and where I have been trained. My marketing foundation was really built with Dan Kennedy, in the world of direct response.
So, I trained in his Titanium Mastermind, I’ve also trained under the likes of Ryan Deiss, Perry Belcher, Frank Kern, and their Digital Marketer Roundtable; love those guys and their ability to drive traffic and convert online, but if you talk to me about the things I really love and where I think that I have most experience and certainly the most passion, I’d say it’s in content marketing and storytelling and in customer experience. I think in order to be good in those things, you need to know a lot about direct response, branding and online marketing, but those are the things that really stand out to me.
Chad: Awesome. And obviously a lot of that experience, a lot of the things you are passionate about has led to Snack Nation, the topic we are going to be chatting about today; and for those who don’t know, Snack Nation is a subscription snack service and the first question I want to ask, and it may seem obvious to some of our listeners, but I want to ask it anyway: why and how did you choose to go with a subscription service instead of maybe just selling individual products in an ecommerce fashion?
Sean: It’s a great question and a really important one, and one that we thought a long time about. So, before HUMAN, and this is going back before we even met, I ran a company called Fit Fuel and the company did a couple of things: we primarily were an ecommerce store, we are one of the first nutritional supplements and nutritional foods stores online and we did about five million dollars in revenue per year. And in that business, I learned the beauty of ecommerce, but I also learned the pains of one-time revenue and the one-time customer. So, with HUMAN, we focused on a recurring revenue model via the franchise system and with Snack Nation, much, much more so. I know you guys have talked about it on the show before, but recurring revenue is where it’s at.
Let’s say that you do a million dollars in revenue a month, and your retention rates 90%, well, the next month, that means that you already have 900,000 dollars of revenue guaranteed for that next month. You don’t have to go and sell to the new customer, you already have that new revenue, it’s already there for you. And anybody who has constantly been in the trap of selling you know, to one-time and always trying to get new customers knows that that can be difficult and it can be frustrating at times. I personally would much rather have members than customers, I’d much rather be focused on how do we keep those members, how do we make them better, how do we make them better members and better customers than always just looking for new people to join.
Chad: Sure, makes a lot of sense.
Sean: Yeah, so it’s really all about recurring revenue.
Austin: I think what’s interesting is, I’m sure some people who are listening, are going to be familiar with a company called Nature Box, it sells more B2C; can you explain how you’ve been able to set up a recurring business in the kind of more B2B side of ecommerce?
Sean: Yeah, absolutely. So, most people know of a lot of the different snack box subscription services to consumers, but that, I’m telling you, it’s a tough business. You are talking about a very, very high churn rate, I won’t reveal all of the numbers here and there, but a very high churn rate, relatively low retention because it’s just a B2C customer, it’s a little bit less sticky and a little bit more fickle and they have a lot more optionality, there is much lower margins, obviously whereas most of the snack boxes are averaging between 10 to 20 dollars per month, whereas our average is close to 400 dollars per month and so you have a much lower gross margin, and your cost per acquisition is primarily through online acquisition funnels; so, Google AdWords, Facebook advertising, whatever it may be. We’ve taken a similar model of saying, “Okay, what about offices?
Don’t most offices, especially awesome offices and great places to work provide free snacks to offer snacks to their employees?” Well, absolutely, and their average order size is larger, there’s a lot more than you can do to retain that customer, so retention is going to be a lot higher, much lower churn, and your gross margin is healthier, so there’s a lot more than you can do to optimize the product, optimize the service and optimize the experience for the customer. So, Austin, it’s good that you brought that up, you know, B2C snacks subscription service, we just do that but we focus solely on offices, businesses, and organizations.
Austin: Yeah, I think it is very interesting to think about the difference between that consumer when you are talking about optionality; there really aren’t many options for the office to get a subscription snack. It’s brand new. I’d love to dig in a little bit to how the whole process works, right for people who are listening and they are thinking like, okay, great, how do you actually go about acquiring a business as a customer? What’s the process, how do you guys approach it and maybe what is worked, what hasn’t worked as you guys have learned and scaled the business?
Sean: Yeah, so there’s a couple of different ways that we go about acquiring customers right now; from an online demand generation perspective, it’s primarily through content marketing. So right now, about 30%-40% of our revenue comes through lead generation from content that we produce, and we produce a lot of content, and we only going to be producing more and more content as we go along. One thing that is fundamental, I believe, to all companies today and it’s something that we think about day in and day out, is that the companies that win in marketing tomorrow are going to be those companies that lead their customers to experience positive transformation. And so, how do you positively transform your customers?
How do you ask, “What do I want my customer to become?” And I think that’s a fundamental marketing question and I think the best way to positively transform a customer, whether that is philosophically, whether that is externally, whether that is internally is through education and how do you educate? Well, you educate through content. So, I think that marketing and education is actually going hand in hand, and I believe that if you are not producing value ad content and education to your customers, if you are not doing that, you are not going to be transforming them the way you should, and it’s going to end up, if it hasn’t already, it’s going to end up really negatively impacting your business and you are going to end up just paying way too much for your traffic and not keeping customers and not retaining them. So, content generation is a big part of that, that is various blogs, that’s e-books and information packets, that’s our podcast, anything that again, that allows us to positively educate the customer.
And beyond that, what’s the other two-thirds, the other two-thirds of our business is driven through an inside sales team. So, an inside sales team that is fastidiously pushed and tracked and measured against hitting very, very, very, specific activity and results-oriented goals. And how do those inside salespeople get our customers? Well, they start out with social engineering, finding out what are the key verticals, what are the key verticals of the customers of businesses that are most likely to buy from us, I mean, that’s a lot easier for us to sell to, for instance, to a law office or a technology firm, than it is a blue-collar manufacturing facility in Michigan, my home state.
So, again, first social engineering, finding out who the decision makers are, and then very simply emailing all of those decision makers, finding a way to get those emails and then emailing all those decision makers and saying, hey, in a very simple, one or two-line email, “This is what we are offering, are you interested?” And then only those people who reply, and state interest, only are those the people that we follow up with. So, instead of trying to boil the ocean and cold call and hammer everyone out there, we use social engineering and then a process of hand-raising to effectively narrow our lead pool and that allows our inside sales team to not only be more effective, but also to not want to stab themselves in the lung on a continual basis.
Chad: Yes, that all makes quite a bit of sense and obviously, Austin and I have pushed, you know, content marketing so much, especially on this podcast in the last year-and-a-half to two years, but the question remains, you say that you guys are producing massive amounts of content and I know that a lot of people listening, they might not have some of the capacities or the resources to do what you are able to do at this point. What kind of advice do you have somebody who is maybe a little bit smaller than you guys, doesn’t have a large team, but knows content is important. What kind of advice do you have for them to get started to make sure they can get up to that level? Because I agree with you, content is the king of this at this point.
Sean: Absolutely. I mean, that’s one of the amazing things you guys are doing here. The first thing and this may seem to be over-simplified, but I am going to state it anyway, the first thing is to believe it. Change your mindset; and change your mindset so that you are saying, “If I, myself as a solo entrepreneur, or us as a group of individuals working towards a common goal if we are not able to effectively produce content that’s beneficial to our customers, we will fail.” If you set that in your minds, you will figure out how to do it. I think that so many entrepreneurs and especially solo entrepreneurs today, they don’t believe that. They know, they are hearing content marketing but they are saying, “I’ll do it one day.
I’ll do it when I can afford to hire a journalist. I’ll do it when I can afford to outsource.” But if you realize that as a fundamental key and it is essential to your success as a solopreneur or as a big company, you’ll find a way to make it happen. So, that’s the first thing, to really, really believe it and the second thing is, I don’t – if you are working towards a common goal, if you are working on a business, you have enough time to produce content. You need to produce content, if not every day, at least once a week. Okay, maybe you are not a great writer, all right, well, set up a quick little video, or learn to become better at writing.
And by the way, you don’t need to be a phenomenal you know, grammatical wizard or a great English writer to produce content that’s worthwhile for people in education online. And also, you are not going to become good at managing people creating content, or creating it yourself if you don’t get going. So, create content for you, create content – if you were the customer, what is the type of content that you’d want to receive and just get going on it. So, those are, I’d say the first two things and then also lastly also look at outsourcing. You’d be really surprised at how cheaply you can hire fantastic journalists especially in today’s day and age, where more and more journalists are out of work or really don’t like the work that they have, and while that industry of journalism and news and media has been completely disrupted and turned upside down. It is easier to go and hire journalists, even if it is to write one story or one blog a week than it’s ever been. So, I bet, most people listening to this, you know, could actually hire and could outsource and that combined with a new belief system and you working on it a little bit yourself, will lead to pretty darn good results.
Austin: When I go through the website and I watch your blog, and I go kind of check out what you guys are doing, it really hits on one thing that I always talk to our clients about, which is focusing and spending a lot of time coming up with a clear and very, very compelling offer because you talk about content marketing, you talk about driving people through outbound marketing when you are reaching out with emails, and all of that is fantastic but I think what you guys have really excelled on is that offer. Can you explain how you guys came to the offer, what that looks like and how that transitions into a more long-term recurring sale for you guys?
Sean: Absolutely. And yeah, I don’t know, there’s obviously some essential aspects of converting customers or creating prospects online and I don’t know if anything is more important than the actual offer; what are you offering your customer or your prospects, what are you offering them if they do what you want them to do or what you are leading them to do. So, for us, what we found is, okay, well, you know, at the end of the say, what do we do? We deliver an awesome mix of healthy snacks that constantly rotates, is highly curated and shows up on your doorstep on a weekly or monthly basis, so you never have to worry about snacks again. And that they are new, month over month, so you don’t get bored and you are always introduced to new emerging and innovative brands and so you look cool to your friends and you also look cool to your stomach and your taste buds. So, we are like, okay, well, if that is what we do at the end of the day, and we know that everybody – what does everybody in the world like? Well, everybody in the world, for the most part, likes snacks; I mean, Austin and Chad, do you guys like snacks?
Chad: We love snacks, dude.
Sean: So, most people like snacks and they certainly like free snacks and so for our offer, we have realized that at the end of the day, it’s offering people a free sample box, a really nice sample box of awesome, amazing snacks; an assortment that is very similar to what you’d become if you became a Snack Nation member. And so, everything that we are doing is gearing people to saying, “Hey, do you want a free box of healthy snacks and improved productivity engagement and make you feel great?” And most people and most people are like, “Geez, I like snacks, sure.” So, they opt in, we just do a basic qualification with them, and if they qualify, we send them a sample box, then immediately after that sample box lands, we do a follow up with them, and we look to convert them if it’s a customer in a member, that makes sense for us and we make sense to them.
Austin: Well, I like the way that it is structured because at least from the outside in, looking at it, it gives them the opportunity to like you mentioned earlier, when you email people, you are waiting for the hand to be raised and again, so if they raise their hand first if they are interested, then they can raise their hand again and receive their free sample box. How does that work for you guys? I mean, ‘cause I know a lot of people who are listening are thinking to themselves, “How are they giving away free snacks? I can’t do that in my business.” How does that work for you guys and how are you able to transition to really justify the free snack giveaway, ‘cause that is, you know, a way that you can easily acquire a customer, but a lot of people probably think to themselves, “I can’t give away products.”
Sean: Yeah, and it’s obviously something that becomes more cost-effective over time. So, in the beginning, is when it’s most expensive. You have to understand – first off, Austin, you hit the nail on the head; when you are – if you are going up to a girl that you really like, is it good to go up to that girl that you have never met before, and then you come up to her on the street and say, “Hey, would you like to make out and allow me to get to second base?” I don’t know about you guys, and you know, Chad and Austin, I know you guys are definitely some Casanovas, but any time that I have ever done in my life, I usually get slapped or the girl runs away, or a combination of the two.
Chad: Well, you do that anymore, especially.
Sean: Well, I do that to my wife, and it’s actually typically the same response. She still wants to get warmed up a little bit.
Chad: Of course.
Sean: And that’s the thing, are you warming up? You are going to go up that girl and say, “Hey, you know, wow, you have knockout, gorgeous eyes.” She’s going to giggle and think you are cheesy and then you are going to say, “Hey, would love to chat with you about this, by the way, can I get your number?” Then from the number you are going to call her and after a few calls, you are going to get the date and maybe after the date, maybe you are going to get a second date, eventually you are going to get a kiss, maybe eventually you can get to second base and maybe that leads to marriage.
Well, it’s the same thing with the prospect; is you want to get them, no matter how small those yeses are, you want to get them to say yes, to raise their hand as many times as possible before you ask them to buy something. And so, everybody can do that; it doesn’t mean you have to give something free, but it just is asking how many times can you get your prospect to say yes? Most people think it’s all about having the fewest amount of steps to get them to raise their hands. You know, it’s really good if I can get them to raise their hand twice before I ask them to buy, no. Your goal should be able to get them to consistently make as many yeses and raise your hands as many times as possible because then when you ask them to sell, it’s just a natural occurrence. It’s so easy to get that peck on the cheek after you’ve been on your third date.
And so, it doesn’t have to be free snacks, you just have to think about you know, what is my customer willing to say yes to, and how can I build a bond and in fact, I talk about dating because I think that we should look at prospects like we are dating them. That’s literally how we should look at them. If we were trying to date this individual, how would we sell to them, how would we talk to them, how would we market them? And then beyond that, you need to understand your lifetime value. Once you acquire your customer, what is your lifetime value? What is the revenue and the net profit that you will be generating from that average customer once you acquire them? If it’s a thousand dollars, well guess what, you know that you can spend 500 dollars acquiring that customer and you still have 500 dollars profit on the back end. So, for us, you know, our customers typically stay on for almost an entire year, that’s a long time, and they are on average paying 400 dollars a month. So, that’s why it makes sense for us to be able to send a whole bunch of snacks boxes. If we only get a 20% conversion, that still makes sense because our cost per acquisition is still significantly less than our lifetime value.
Chad: Yeah, you know, this actually, I want to take back another step here because the whole yes concept is extremely important, and I want to hit home on that a little bit because the yes starts with even simple things like your content. We are bringing it back to your content at this point; is your headline getting somebody to say, “Yes, I want to read this,” is the sub-headline saying, “Yes I want to move forward with reading the rest of the post” So, it’s not even just getting to a point where it’s like, hey are you in the product phase of saying yes, I want to learn more about your product, it’s even saying yes on the simplest things that we have been talking about already, which is the content side. Are you having enough content that people say “Yes, I want to be a part of it” and is the copy converting in that sense too because eventually you get to that point of, “Hey, you’ve just looked at my headline, you’ve just read my post, you’ve just said yes to the simple checklist in my post that helps you become a healthier office.” Now I can even say, “Do you want to try a free box?” “Yes, I do.” “Do you want to stick on for – do you want to come on for full membership?” “Yes, I do.” So, I want people to remember that ‘yes’ doesn’t happen to be just the product but also in the simple things of content because that’s where it all starts, as we have already talked about.
Austin: I would love to ask Sean about, so speaking from talking to some of our clients, there is definitely an interest from a lot of people in creating a subscription service. Can you talk a little bit about, I believe you guys are using Cratejoy, I think that’s what it is from going through the website, you talk about the ease of use and whether – ‘cause I think you have gone through a couple of different platforms to get to where you guys are at this point?
Sean: Yeah, I love Amir and his team over at Cratejoy, we used them in the beginning but it just proved that for our very kind of customized and unique solution, that wasn’t going to be a good scaling platform for us. So we actually just transferred off of Cratejoy and are now using a platform that combines Zora, Sales Force, and Marketo to kind of tie everything together. So, we really use Zora along with Sales Force; that’s the platform that we are using today and we will be scaling with for the foreseeable future along with some custom built APIs; but Cratejoy is a really good place to kick off especially B2C oriented subscription models.
Austin: Yeah it seems – looking at it seems like a great – it doesn’t seem as difficult, that’s the main hesitation that a lot of people talk to me, they’re like, I don’t know how to do it, I don’t know how to get – I know that recurring revenue is a very powerful thing, arguably the most powerful thing online, but they are like, “How do we actually get it going?” So, that’s interesting.
Sean: It’s tough, I think there’s a lot of businesses out there that are saying, “Okay, you know what, my product doesn’t work for subscription.” I mean, we have all heard, “It is different from my business” I disagree. I think almost every business out there can either transition their entire model into a subscription business or can have some aspect of their business or certain channel in a certain subscription. I mean, I don’t know if you guys have heard about the book by Robbie Baxter, ‘Membership Economy’ –
Chad: I’ve heard of it.
Austin: But not read it, no.
Sean: I mean, it’s awesome, it’s we are in the midst of a membership economy. Customers do not want to be treated like customers. They want to be treated like members and guess what; it’s not just better for the customers or for the members, it’s better for you as a company too. It’s way more fun to sell to a member than it is to sell to a customer.
Sean: His tag line is, “Find your super users, master the forever transaction, and build recurring revenue.” So, you know, “master the forever transaction” something that is evergreen, it’s something that you can continue to sell to, so regardless of what you are selling, I think the key is you know, is there any aspect of what I am selling today, that could be put into a subscription. So, maybe it’s not the entire thing, maybe you can’t sell every single month, but maybe you are selling sunglasses and it makes sense to offer people a quarterly sunglass subscription; I don’t know about you guys, but I have some friends who absolutely are obsessed with sunglasses and considering how many they lose and how big their collection is, them getting once every quarter or once every six months is definitely feasible.
And maybe if your product doesn’t make sense for a subscription basis, could you sell them or could you bring them in on the content? Could you get them to join on the membership site where you are talking passionately about wherever your core product is? Maybe you are only charging them two bucks, maybe you are only charging them five bucks a month, but they get special access to whatever you are offering. So, I think that every single business out there can have a subscription component and considering that we are in the membership economy, I think it’s really, really important for people to think intensely about what that could be. Survey your best customers, that’s huge, just ask them. Ask them to raise their hands, and survey your customers about what else you would like to provide for them and you’ll eventually find something to sell.
Austin: Talking about the membership side and recurring revenue, I’d love for you to maybe to explain a little bit about how the effect that it’s had on your guys’ business, making this transition ‘cause I know it has been a large transition from when we were working together for three-and-a-half – four years ago to where you guys are at now, and I’d love to kind of paint the picture of the people about why – you are obviously passionate about the recurring revenue in the membership side, but maybe give a picture of how it’s transitioned into your business and the difference between you know, where you guys are at now with that guaranteed revenue coming in, and what it is like to run a business that doesn’t have that.
Sean: Yeah, so, not sure where to begin, but you guys can direct me a little bit, I think you know, one thing is, when you have recurring revenue, you are a more valuable company. If you look at, eventually, if you want to raise money for your business, whether that is equity financing or whether that is debt financing, your valuation is really important and at the end of the day, recurring revenue is going to be valued significantly higher than a one-time revenue. And so, that, especially if you are growing quickly and if you are trying to grow a big business is important. It is, what is your valuation because it determines a lot about how fast you can grow and you big you can become as a company. It’s important to your shareholders, it’s important to your employees especially if they own equity and it’s important to everyone.
So, that’s just a little bit of a change, is that we have everybody on board and just understanding how important it is to make our members, to build that recurring revenue base and to make our members very, very, very happy. And whereas anybody out there, if you are trying to fight for new customers, while making your current customers happy, a lot of times it’s a battle. I mean, Austin and Chad, you guys remember, I mean, it’s like even though we had certain recurring elements, when you guys were with HUMAN and were managing with leading parts of the team here, we were still more reliant on upfront revenues especially in the early stages of business than we were on our existing customers. I mean, it was just the model, I mean, it takes a while to transition and you know, I think that it’s just different. Now today, because of our 90% retention rate, we have 90% more recurring customers than we do new customers that are acquiring in that month. And so our business has just become one that is so much more focused on what is every little and big thing that we can do for our existing customers because the business model has just been flip-flopped. So, yes, acquiring new customers is essential for us to grow and they are still a massive push by our inside sales team of over 20 people to generate that new revenue, but it is not. It literally is not as important as maintaining them.
Chad: And how are you maintaining them?
Sean: So, it’s different, but our average right now is – our average, we are maintaining our average customer of nine or ten months right now and that is going up every month. So, you know, I expect to be having a retention rate go beyond a year in terms of average and naturally some people are at three years and some people are at three months, but it’s right now at that nine or ten-month window. So, I just think that it changes the way that you – it changes the feeling inside your company when your number one goal and your clear cut number one goal is making your customer successful. It’s not tied with other things and you know, when you guys were on board, it was tied and you know, that wasn’t anybody’s fault, it was just the model of being at that early stage of business.
Austin: It’s interesting, we had Mike Michalowicz, he wrote the book ‘Profit First’ come on, he talks a lot about business and how running a health business, he talks about revenue, in his mind, equals stress. So, a company with ten million dollars in revenue, and a company with one million dollars, there’s going to be more inherent stress with the ten million dollars, but then taking it even further, it’s a one-time customer versus recurring, I think that’s almost a higher level when you look at the company with ten million dollars and another company with ten million dollars.
One of them is based on recurring revenue and one of them is based on one-time customers; the difference in stress, because you can’t predict the future, is so much higher on the company that is 100% relying on new customers and it’s interesting to see that transition and know, how you’ve been able to just ramp up, ‘cause what’s happening is, when you hit this new recurring revenue model, you have been able to ramp incredibly fast and that’s what’s really cool and I think for people who are listening, if you can go down that path, it’s going to lead to less stress. It’s going to lead to the ability to ramp even higher because you can plan for the future, which is very, very cool. And if you are on a level where you are just relying on one-time customers, it’s more difficult. And you brought up a really good point, which is for a lot of people who don’t have as much experience on the valuation side, if you really want to grow, you clearly have to have a healthier business for people to want to invest and increase your evaluation.
Sean: Well, and just think Austin, that is an awesome point; I mean, the point of stress, a recurring revenue, first off, stress, yes, that is accurate, more revenue obviously means more stress but I also think stress is more a reflection of your mindset and the way that you deal with yourself in the morning, and a lot of other things than it is probably with some of these external factors. But you are absolutely right, it’s far less stressful I think, it’s a beautiful way to put it. I’d also say with that valuation thing is that you know, maybe you don’t want to raise money and grow a massive 100 million dollar company wherever it may be, well, just think about, do you eventually want to sell your business? Do you eventually, when you are done running it or you want to retire, do you want to sell it? Well, is it easier to sell a recurring revenue business where somebody is stepping in and saying, “Hey, you know what, this revenue is pretty darn predictable, or at least a large segment of it is” or do you want to sell a business that is primarily one-time, and they are saying, “Man, Austin and Chad, they built this awesome business and it’s doing good revenue and it’s healthy and really cool but geez, once Austin and Chad are gone, we’re completely screwed because they are the masterminds.” And so that is just another issue to think about.
Austin: For sure. I know we are going to wrap it up here, we are towards the end of it, I’d love to ask one – a couple of more questions; one of them is what gets you most excited right now?
Sean: What gets me most excited right now? Man, there’s a lot of things. You know, I think one of the things, I love – you guys know this, I love culture, I love just building an awesome company that is awesome for the employees and for the team here. That’s the thing that I have checked out, is are we building a company that people are going to look back on and they are going to say, “You know what, it was tough, it was challenging, HUMAN and then Sean and then Snack Nation, they are so much out of us, but it required me to go through breakthroughs, it required me to grow as a person and I had a lot of fun not just the off sites, but every day was fun, every day was a challenge, but I grew, I got better, I learnt about life” and I want people to look back and reflect positively on their time here. That is what gets me the most excited.
Beyond that, I think we have something here that if we continue to execute, if we continue to bring in awesome team members, if we continue to innovate and try to stay ahead of the curve and if we continue to focus on the success of the customer first and foremost, I think we can build a really influential company in the food and snacks space. It doesn’t just stop there; we have some other ideas in terms of what we can plug into this model, but I think those two things, just building an awesome office and building an awesome company for people to thrive, those are the things that are getting the most jacked up.
Austin: Can you talk a little bit about the Awesome Office podcast and explain a little bit more of what you do in there ‘cause it’s very cool and you are bringing on some great people.
Sean: Yeah, I would love to, I appreciate you guys bringing it up; so we founded the Association of Workplace Engagement, the acronym is AWE, and that’s at awesomeoffice.org and why did we create that? You know you guys have probably heard of that quote from Howard Schultz, the CEO of Starbucks, he said, “We sell coffee, but that is not the business we are in. We are in the business of customer service.” When I heard that on a podcast a couple of years ago, it made me think, “Man, we sell healthy foods but that is not the business we are in, we are actually in the business of employee engagement, of employee retention, of employee wellbeing and employee productivity.”
And so we talked to a lot of leading companies, Google, Steelcase, TriNet in employee engagement and we decided that there really wasn’t an association that allowed for actionable and how-to conversations with the heads of people and the heads of HR to allow them to create the best workplace possible, to create awe in the office, or what we call is an AWE-some office. So, we and one of those things besides throwing creating good content and throwing really fun, live awesome office events, we launched the Awesome Office podcast which is all about leading people, creating amazing cultures and inspiring awesome. So, if you care about leadership, if you care about building an awesome culture whether it’s a team of two people or a team of a thousand, it’s a good podcast for you and you can check us out at Awesome Office Show, just check out ‘Awesome Office Show’ on iTunes.
Chad: Sweet. Definitely check that out. Now, we got to wrap this up, so two last questions, where can our listeners connect with you directly?
Sean: Yeah, you can get me at Instagram at theseankelly, or on Twitter, I am seanpk. So, those are probably the best ways to find me.
Austin: You locked down ‘The Sean Kelly’ on Instagram, that’s a good handle to have.
Sean: The Sean Kelly, the only problem is when you put ‘the’ in front of your name, it’s just – it sounds very pretentious. So, it’s something that I will have to internally battle with for a long time.
Chad: But it works; if you know, you are to the level you should be like ‘The Ohio State University’ that works for them. So, my last question was going to be – Michigan might actually have a chance this year, so, what is your take on the Michigan-Ohio State game.
Sean: Oh man, I think it is going to be a blood bath, an absolute battle –
Chad: And how much money are we putting on it?
Sean: Oh man, we are putting at least seven bucks on it.
Chad: All right, perfect.
Sean: At least seven bucks. I think it’ll be a good game, it’s going to come down to the last possession, I think Harvard has the last laugh and Michigan wins by four.
Chad: Okay, all right, fair enough.
Austin: I think Harva may have an aneurysm, that’s my prediction.
Sean: The vaguest odds on that may be higher than Michigan.
Austin: Even money on the aneurysm there.
Chad: Well, Sean, it was good to have you on man, great talking to you and check out Awesome Office, the podcast for sure, and then check out Snack Nation too, maybe you can get some snacks for your office, your ecommerce office these days.
Austin: Yeah, go check them out. It’s fantastic. Thanks so much, Sean for coming on and we’ll talk to you soon.
Sean: All right buddy. Love you guys, thanks for having me.
Chad: Hey there, thanks for joining us on this episode of the Ecommerce Influence podcast. Just a quick reminder that we have put together a free, ecommerce marketing training library, which includes training videos, master classes, and now eight guides that include a guide like ‘How to Generate 80,000 Per Month in Nine Months with YouTube Influencer Marketing’, ‘Four Steps to Hiring A-players on Elance’, ‘Facebook Marketing for Ecommerce’, ‘Scrum’ Scrum for business really, if you don’t know what that is, definitely check that one out.
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Chad: Austin, welcom...
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