Austin Brawner: What's up everybody? Welcome to another episode of the Ecommerce Influence podcast. My name is Austin Brawner.
Andrew Foxwell: And I'm Andrew Foxwell. Man, I got a good win. I could share if you're open to that, if you're open to hearing about that.
Austin Brawner: Always open to hearing about wins, man. That's what it's all about.
Andrew Foxwell: Just a quick win that I thought other people might be interested in trying. I tried a little test between… this is really nerdy, but between bid types on cost cap, bid cap and target cost. Now if you've never done this before, these are all different bidding types that you can utilize with Facebook and the newest one is what's called cost cap. And you can Google this and find out more but basically it allows you to maintain the same CPA while you scale. And it's not something I used when it first was rolled out but we did a little test actually on an open targeting, so no targeting any Facebook ads.
You can actually set a cost cap on there and it'll keep the price pretty much the same on an open target if your account has a decent amount of good data in it. Something for you to try that is actually working for us in a couple of different accounts right now, that you might want to give a shot too. I feel like that's a quick win because it's helping us scale and keeping our costs in line.
Austin Brawner: It is. Let's say you just went wildly deep into the weeds, right off the bat.
Andrew Foxwell: Right off the bat… so much value.
Austin Brawner: There's going to be about 5% of our audience who are going to love it and 95% giving me like, “What? What is he talking about?” And that's okay because the rest of the episode is going to transition into a different space, which is a really excellent interview with Drew Sanocki of Nerd Marketing. He's also the CEO of AutoAnything, former CMO of Karma Loop and all around a just brilliant dude who I've had a chance to get to know over a few years. And then Andrew, we've run in similar spaces but this is the first time you've actually talked to him, right?
Andrew Foxwell: Yeah. It was unbelievable. This interview with him was one of these that I was literally taking feverish notes. And I think that in terms of the way that he thinks about running companies, in terms of investing, in terms of the way that he thinks about culture and people and running his own life is so aligned with a lot of the people listening to this podcast and a lot of you out there. I think you're really, really going to like it. And there are so few of us in this online world that I feel like are really in there for a very specific reason and it's about life.
Making money's a part of it but it's also about like… This is something that's motivating to me. This is about my life's mission, what I want to do, and I think Drew really gives off that feeling. You can tell he's doing things on purpose, I guess is what I'm trying to say.
Austin Brawner: 100%. And he's also somebody who provides massive value. And when I look at… When I was first getting into this industry and trying to look for people who were doing things that were interesting to me, I ended up finding Drew in that search and kept being blown by the way his thought process around marketing was, his processes around automation. And it's just been kind of always learning a lot from him so I'm really happy to bring them on the show.
The last episode was a couple of years ago, specific to email. This one's wide-ranging from talking about private equity, buying businesses, buying software companies to ecommerce and management. You guys are going to get a lot out of it. I hope you enjoy it. And without any more chat, I want to welcome Drew Sanocki.
Drew Sanocki: Hey Austin, how are you doing? It's good to be here on your podcast.
Andrew Foxwell: Let's just rebrand it to the Andrew Foxwell podcast featuring Austin Brawner so that everybody knows for a year that it's ours together. But not a problem everybody still thinks it's just Austin.
Austin Brawner: Yeah, I know. Thank you for joining me on my podcast here. The last time we recorded was you and I, February 2017. I looked it up and I was like, “What was the last time Drew and I recorded?” And it was interesting because it was right before… one of the last times we hung out, which was right before we hosted the first Brand Growth Experts Intensive. And I was thinking back to that time and I was like… I remember we got to San Diego and we were prepping our slides for doing the first intensive.
We didn't know it was going to happen and we ended up meeting our friend Chase who owns Blenders Eyewear and we guide into his office on a Saturday. And we had to finish all our slides and we sat there just grinding slides. You were on the tiniest little Mac book I've ever seen in my entire life just grinding slides.
Drew Sanocki: I was doing it on my iPhone.
Austin Brawner: Basically on your iPhone for like six hours in their office on a Saturday. We were going to go kick it off on Monday and then we wrapped it up. It was getting dark and you ran to FedEx and you printed off a huge book, right?
Drew Sanocki: Right.
Austin Brawner: And we had this massive book and we were like, “All right, Sunday night kick it off. We have no idea what's going to happen.” Sure enough, it went really well and, yeah man, it was. It's been two years since that moment and we were like, “We want to get you back on and learn what is Drew… what you've been up to.”
Drew Sanocki: Those were some of the hardest dollars I've ever made at the Intensive. Would you say there was a lot of work that into that?
Austin Brawner: It's a lot of work. It's a lot of work especially for the first one because we didn't know what was going on, didn't know what to expect.
Drew Sanocki: Right. And then you're up there talking to the crowd for… was it two? Yeah, two days, right?
Austin Brawner: Two and a half. We had two and a half days full on. Yeah.
Drew Sanocki: And then did Klaviyo actually just take the slides entirely when they rolled out their own?
Austin Brawner: No. This is very different but we did bring them there and have them involved for a bunch of those.
Drew Sanocki: Yeah, they have take notes.
Austin Brawner: Took notes and then the environment is similar but at the larger scale for sure with different content. It's very much driven top-down for them, the messaging they want to get out about what they're doing.
Drew Sanocki: Sure. Of course, yeah. But that was fun and I can't believe that was two years ago.
Austin Brawner: Yeah, almost two and a half years ago… A little two years and quarter ago.
Drew Sanocki: And now I live here in San Diego, who… I had no idea at the time. I never aspired to live in San Diego. But I walked by that hotel the other day and I thought back to that time and here I am.
Austin Brawner: Yeah. We were in San Diego and then you went off back to New York and then, basically, you kicked off a big trip around the world, right?
Drew Sanocki: Yeah. We traveled for eight or nine months, my family and I, and guess that was late 2017 into 2018. Kids were young. They're still young but this was before they were in formal education so we had a window where we could do it and started in the Caribbean. We just had a one way ticket to, I don't even remember, the Dominican Republic where we started and then just played it by here. And eight or nine months later we flew home from… I think we must have been in Italy at the time. It was like a trip around the world and we got as far as Italy and just stayed because Italy is so awesome so it just stopped there.
Austin Brawner: Well, I remember reading your blog posts which were hilarious. You were in northern Italy talking about drinking wine and you had childcare for your kids, you could go hiking. It sounded like the absolute dream. Then you moved back and you got involved with yet another dropshipper.
Drew Sanocki: Yeah. It was like I went from paradise to I'm going to go run a dropshipper retailer and compete against Amazon.
Austin Brawner: Yeah. So, yeah, that's my first question. What the hell is wrong with you?
Drew Sanocki: Where did it go wrong? Well, I think that one of the… the trip gave me a great time to step back and thinking much like you and like everybody listening to this, probably like you too Andrew. We're sort of multi-tool, right? We can do consulting, we can do some info courses, we like creating content, we like operating direct to consumer brands… you could do a little bit of everything. And when I was on that trip, I had time to step back and think about what do I really want over the next, I don't know, 10 years of my life. I was in my mid-40s at the time and now I'm getting to be in my late 40s.
I knew my kids are going to school. I didn't have it in me to bootstrap something anymore and I was looking to own more assets for the next 10 years of my life. I looked at people like Robert Smith, Robert Smith from Vista Equity Partners. He is the world's richest African American. He's the guy who just gave… I think he spoke at Morehouse and at the end of his graduation speech he announced that he was going to pay off the debt of everybody who was in the audience and it was like 50 million bucks. The guy's probably worth $30 million now. I'm sorry, $30 billion. But I looked at people like that and said, “I think the key is to own more assets, assets that produce cash and you build enterprise value.”
Because I probably only have like 10 years left where I can totally hustle and I want to direct it towards things where I'm just increasing that kind of value. I came back from that trip intent on owning and operating companies, I would say owning, acquiring more properties, diversifying a little bit. And that's, ultimately, what led me down to running this one.
Austin Brawner: Talk a little bit about… I'd love to hear a little bit about how you came back with that mindset that you wanted to do it and then you put that mindset into play and it actually happened. How did you go from returning from Italy to actually having a deal go down for AutoAnything?
Drew Sanocki: Yeah, I wish it were… It was sort of serendipity. I think it was more like I came back and I was open to it. I just said, “Hey, over the next year or so I'd like to acquire some properties, some great businesses.”
And I had been reading a lot of Warren Buffett. He's got this quote, “I'm a better investor because I'm a businessman and I'm a better businessman because I'm investor.”
And I feel like the two go hand in hand. Like, you can do better at owning properties because you know how to operate them, you've operated them in the past, and then you can… and then vice versa.
I came back just thinking like this hybrid owner-operator. Investor-operator is a good model. The first business I ran into was a supplement brand where this guy had sort of built out the brand, it's called ghostsimple.com, and yet he lacked the operating knowledge, the marketing knowledge in particular, to scale that up. And so that was an opportunistic purchase. I just bought it for less than the cost of the inventory. Shortly after that, I started exploring some areas I'm passionate, as you and I talk about a lot, marketing automation. We both love Klaviyo.
We really believe that optimizing the customer lifecycle and a lot of these lifecycle campaigns is the key to unlocking a lot of value. And I knew personally that I had done this a lot using postcard marketing so I said, “Hey, we've got to build a platform and call it Klaviyo for postcards where you can build these campaigns and send out postcards.”
It's something I've done at previous businesses but I've done it myself very manually. Lo and behold, I found a developer who had built a software product that did that and, again, he was kind of struggling with traction. I got into discussions with him and made an offer and bought it and that ultimately became PostPilot which is at postpilot.com.
And the last one was this dropship retailer that you mentioned and that was just through my network of Private Equity Funds by virtue of consulting with these guys, because they're mostly guys… but working with them for five years. I've got a pretty good network and whenever they see a deal that's digital, they may ask me for some help.
A fund approached me and said, “Hey, we found this dropship retailer. It does about $150 million a year.” And I groaned. I was like, “Dropship retail? Ah. I don't want another dropship retailer.” But the company was so big, that was kind of interesting to me what you could do with the audience.
And so I helped them with that deal, went on the board and ultimately slotted in as CEO of that company. And that's taking up most of my time. That's out here in San Diego.
Austin Brawner: Now, that's something I really want to dive into it because you and I have talked a little bit, off and on, about your role at AutoAnything. And I think at one point you said this is going to be… You came in as Chairman of the Board and you've had a series of events that have led you to CEO, the situation has been a little fluid there. How did you go from Chairman of the Board to ending up at CEO? And start there. How did that even happen?
Drew Sanocki: Yeah. When a fund buys a company, funds have all sorts of different models. Some like to leave the management team intact; they're more passive. Others like to boot out the management team and slot in their own people. This fund in particular, Kingswood out of LA, their value investors they like to buy things on the cheap. They were able to get a great deal on buying this company out of AutoZone, so the previous owner. And their model is that they put an executive Chairman on the board to represent the fund and the executive chairman's job is to just manage the company and really backstop it in case the CEO doesn't work out.
That was my initial intent. It was to… They slotted me as executive chairman, part-time, time commitment. I did move out to San Diego to do that. I figured it would be a couple months on the board to just get a sense of what the company is doing, make sure we're executing on the right strategies and then go back to New York to find the next deal. But lo and behold, a month or two in, we decided to part ways with the CEO and… I started a very brief CEO search but ultimately just decided I knew the business at that point better than anybody I could find and bring in so I stepped in to to run it.
Andrew Foxwell: That kind of a journey, what's that even like? What's it like being at the helm of this massive $100 million dropshipping company? What are the big things that you see that you're thinking about on your day to day basis?
Drew Sanocki: Surprisingly, I would describe it as fun. I think we get so hung up on optimizing our work-life balance that… I think I had perfected that. I was traveling, I was running this little agency and maybe I went too far on the lifestyle part of it. I didn't realize what I missed and what I missed was building something bigger, being a part of a bigger team and I underestimated how much I would like running this company. And so that part has been fun and it's the team building and the setting the culture which I found to be really rewarding. And that was unexpected because I didn't realize really I was missing it. We all just opt for lifestyle.
I think everybody who probably listens to this podcast, that's the dream. But just being a part of something bigger has been really enjoying. It has been… I've really enjoyed it.
Austin Brawner: You can compare and contrast a little bit because you've been, obviously, at Karmaloop where you were in a role as a CMO. When you look at Karmaloop and you look at AutoAnything, what are the similarities between number of employees? Was it similar size… is AutoAnything larger or smaller? And then specifically your role that you had at Karmaloop versus your role at AutoAnything where are the similarities and differences there?
Drew Sanocki: Karmaloop, I think, was about 70 or 80. AutoAnything today is about 110 people. There I was the CMO so it was a lot more operational setup, all the marketing programs, let's make sure emails are dialed and content and SEO are dialed and page was dialed.
But here, as the CEO, it's one level above that in that all of my time is on… it's like team, culture, recruiting, strategy, board management, acquisitions. I am not involved at all in the nuts and bolts of marketing. I figured I would be but it's rare if I have the time in any given week to crack open a Google analytics and start poking around and doing the stuff that I did throughout my career.
It's actually drawing much more on my time in the navy when I ran teams and you learn leadership 101. That's the stuff that I feel like I do every day today. And I think a bigger contrast is between Design Public which was my first dropship retailer, $5 million of revenue, versus this one. Because I think the difference there when you're operating a team, running a retailer doing like $5 or $10 million a year, it's still really like the CEO or the founder and probably one or two other people and then everybody else. And everybody else is an hourly employee and all the strategy, all the leadership, all the direction falls on, really at a company that size, two or three people.
And the difference here is we've got the resources and the scale to hire just like a killer CMO, a killer director of content, a killer CFO. There are more resources here to have strong middle management and so it allows you to be much more strategic with your time.
Austin Brawner: That makes sense to me. Yeah, when you're at that $5 to $10 million range, sometimes it feels like a couple of brains with a lot of extra arms moving things around because it's…
Drew Sanocki: Totally.
Austin Brawner: You still can be involved in that progression, I'm sure, up to the level where… I mean, you couldn't even probably get involved if you wanted to, right?
Drew Sanocki: No, I couldn't. Yeah. And at my first company it was like, if you want to figure out lifecycle marketing look at the people who came to our Intensive. It was all the founders, right? They've got to figure it out and maybe they work with an hourly employee to implement it or the person they've hired to run email. But really you're the person who's keeping up on the blogs, you're keeping up with what's state of the art and then you're helping your team or training or team up to implement it.
And here it's just like I throw in the… I throw in the towel. There's just no way. There's no way I can know best practices across IT and marketing and merchandising and finance and sales, right? You just got to make sure that the right people are running those teams. And there's a lot that's been written about agile organizations that probably don't apply as much to a small company. But to middle market company like this one, agile means think lean startup. You want small quasi-autonomous teams that are closest to the action, that are figuring out how to react to the market.
Because the market changes so much that you won't succeed if you're a CEO who comes in and says, “This is how we have to operate the company across marketing, merchandising and operations.” Instead, you really just need those good people who are closest to the action figuring it out.
Andrew Foxwell: I really like that a lot. I read a lot of HBR and thinking about the articles that have been in there in the last six months and so much of is around agile and culture as a big part of it too, what you've mentioned. I guess I'm curious too.
You're running this, as you're calling it, a medium sized business. I think to a lot of our listeners that's a very large business. How do you actually think about culture? Is it small incremental changes that are check-ins with people on culture or are you out loud and proud of like, “This is who we are and this is what we do.” I'm just curious as somebody who runs that and has a lot of employees, how do you both keep people motivated and also set the tone for culture very clearly from the top down?
Drew Sanocki: Yeah, and this is the first thing I had to… Well, the first thing I learned and what I had to educate the board on, the investors on, was that we've got to fix the team and the culture first before we even worry about strategy and before we can figure out how to compete with Amazon. Peter Dracker has this saying that "Culture eats strategy for breakfast" and so the basic idea is you can come up with the best strategy in the world but if you don't have the team or the culture to execute on it you're just dead in the water. I knew that that was job number one. It was, number one, recruiting and hiring the right team in the right positions.
I hired a new CMO, CFO, Head of Sales… just across the business bringing in people who could execute and then wrapping a new culture around the team. And culture is like, it's an organic thing. I guess you could try to be top-down about it and I try to emphasize certain principles. I know I made a list of five or six principles I really believe in and worked with the team in developing those. But at the end of the day, it is an organic thing and you can only hope to contain it and point it in the right direction. It's a byproduct of who you hire and who you let go.
There is a really great book that formed a lot of my thoughts around culture; it's called Powerful by Patty McCord who was the director of HR at Netflix. If you Google the Netflix culture deck, it's like this a PowerPoint presentation that went viral and it's how Netflix built a high performing team. And if I were to sum it up, I would say that the general idea is treat people like adults and assume that the best thing you can give people is the opportunity to come to work and solve really hard problems alongside other high performers. And if it's anything that gets in the way of that, you got to get it out of the business.
If it's bureaucracy, barriers to people doing their job, too much micromanagement or treating people like children, we've just tried to drive that stuff out of the organization and instead treat people like adults.
And so I think that's gone a long ways towards forming our own culture here and increasing execution. When we bought this company from AutoZone, it was a big bloated bureaucratic company. It was over 200 people. Weird stuff like AutoZone took the SEO team, which I think at one point was 10 people, and they brought that down to zero and instead staffed up HR to 10 people.
It wasn't creating a good culture. It wasn't promoting the right people so we've tried to drive that out of the business. We've promoted people who work and think entrepreneurially and it seems to be working out. I think we're executing a lot better.
Austin Brawner: This conversation is… We get so stuck sometimes in the smaller business space. And you mentioned, Andrew, earlier like Drew referred to it as a medium sized company but by the measures that we typically talk about it's a large company. But what I love about the conversation is it just shows the type of levels that you go through.
I was having a conversation with a guy this last weekend who works at Shell and he asked me… He was like, “What do you think Shell's net income was for Q1 2019.” I just took a guess and I was way off. He was like, “$5.3 billion.” Just Q1. And you start thinking about some of the stuff that you're doing and changing culture at a level of 100 employees and then you take it to the next level.
A company like Shell, when you start thinking about market forces coming in and things changing, how difficult it must be to change the culture at a company of that size. I can't even imagine.
Drew Sanocki: Yeah. And this company was owned by AutoZone so AutoZone bought it from the founder, I want to say, five years ago. Paid X $100 million for whatever it was. And they were Shell, right? AutoZone is an $8 or $9 billion company and they imposed their culture on this business.
We bought a company, a dropship retailer, where you'd come in the office every day and people had to do the AutoZone cheer. They were wearing the AutoZone uniforms that you see in the stores. And it's just odd to me when I think of this as a marketing and sales group, an online team.
I think lean, I think of developers just to come into the office and they're doing this cheer and they're wearing the uniforms like they were in the store. And it was… It was very nine to five. It was just weird so I had to kind of, in many ways, undo that culture and try to create a new one.
Andrew Foxwell: Do you have the banner? When you walked in did it say what can you do for the company like from Office Space?
Drew Sanocki: They had that kind of stuff everywhere.
Andrew Foxwell: Is it?
Drew Sanocki: Yes. It was like Office Space all over the place. TPS reports…
Andrew Foxwell: Put up a new message on the Intranet. It's like that's how you solve culture.
Drew Sanocki: You got to do all that stuff to run a big company. I think this might be the biggest company that I am comfortable with because I think if you get any bigger it just gets kind of weird.
Austin Brawner: Then you're riding horses like the DaVita guy, the guy who comes in. If you haven't watched the DaVita CEO, it's one of the wildest things. He likes to ride horses in with a sword and do all this stuff and there's chanting. It's pretty wild. Yeah, that's a crazy next level. But so you came in and you made some of these changes.
Now, tell me… Obviously, it's not like you came in and made changes overnight; it's taken some time. How long have you been there from day one to taking over as CEO? What's that timeline look like and really where are you in the journey? Do you feel like a lot of this stuff you did over the first six to eight months is starting to kick in? Are you in the process of a lot of change? How are you feeling about where you guys are at in that journey?
Drew Sanocki: Wow, lots of questions to think through. Yeah, so as far as timeline we bought the business last March, March 2018. I stepped in as CEO in July and so I've been at the helm for just under a year. And really, for that first year, I would say 80% focused on team and culture and operations and maybe 20% has been on strategy. And now I feel like we're at this point where we've got a solid team here, a really good team, a great executive team. And throughout the business, I think we've gone down to that director and manager level where we're really happy with everybody and so our attention is turning a lot more towards strategies and growing the business. And I guess the second part of your question was that it took a lot longer than I thought it would take.
Austin Brawner: It took a lot longer?
Drew Sanocki: Yeah.
Austin Brawner: You put it in the perspective of somebody running a smaller business like, “Okay, it took a year… a little over a year.” That's a really long time for a smaller business but at your space it's actually pretty fast to turn things around like that.
Drew Sanocki: Yeah. I mean, to find just a good CFO was like six months of recruiting and interviews and you're flying people out and you're visiting them and then they take another job and you hit the reset button on the search and… It's been that kind of thing for the past year.
Andrew Foxwell: The interesting part we talked about earlier was about this lifestyle business thing which I'm interested to get into this a little bit more if you're okay with that. Which is it sounds like you really had dialed in your process of lifestyle business and you took the family out and you'd really figure that part of it out. And I think that a lot of… Certainly, as a millennial, I can say that that's something a lot of people are very curious about; how do I work smarter and travel and that's sort of the ultimate thing that you can do.
Do you think that it was because of the time you were in your life that you had that time to travel, that you noticed there was something missing in terms of running a business? Or was it like you just realized after having the lifestyle business for a few months or six months that you were getting bored? Or what was it that triggered you being like, “You know what? There's just more here.” Do you feel like there was more to figure out in your life professionally too? I'm just curious of how you arrived at that conclusion.
Drew Sanocki: Yeah, I think it comes and goes in waves maybe. I sold my first business and then I consulted and throttled back into the lifestyle thing for a while and then I got involved with Karmaloop. It was another one where I went deep on and then we sold that and it was time to throttle back again and I think I was just ready for it. I was ready to contribute to something bigger, be a part of something bigger. And then the other part of your question was about learning and maybe I definitely am learning things at this business that I didn't know at my previous one. Like, I wouldn't have come off the beach to run another Design Public, my first business. There's just not as much to learn there. Right?
But here it's how do you operate a business of this scale? How do you run a 100 person team? How do you set a culture or build a team? How do you deal with investors, right? How do you make add-on acquisitions? Because these are all things that we're doing now that I hadn't done at previous businesses so that's a big… For me it's like, “Am I still learning?” If I'm still learning, I'm still engaged, I'm still interested and I could see a day when I'm no longer learning as much at this business and it'll be time to do something else.
Austin Brawner: I do love what you were talking about earlier of Buffet's quote about as you become a better business operator you becoming a better investor or something similar to that… that they go hand in hand.
Where are you learning right now? This is kind of a weird question but as you dive into this and you say, “Okay, there's things that I have yet to do," add-on acquisitions for example, how are you learning how to do these things? What are the resources that you're looking for? Who are the people you're looking to right now? Is it books or mentors to be able to go from your position now to, “Okay, I have a plan.”
Drew Sanocki: I think one of the big learnings to me after Design Public was that at Design Public, call it a 10 person team, dropship retailer at the time on Magento, we were playing checkers when other people were playing chess. We were competing against the predecessor to Wayfair, just CSN stores, both boots strapped and spending our days and our case hacking away at Adwords, trying to make sure the site stays up and Magento stays cached and everything. And while we were doing that, while our heads were just down looking at our computers, the guys who ran Wayfair went out and raised $140 million to scale up their business.
And the day they did that, it was game over for us. Right? We either had to raise that kind of money to compete, which we didn't want to, or just sell the business. And to come out of that thinking, “Wow, we were so fixated on keeping WordPress up and some little SEO tweaks while the guy we were competing against was out there just thinking big.” And so that was a revelation to me.
And now that I'm playing around in private equity and work with these funds, I realize the private equity community tends to think like that. There are guys like Robert Smith, who I mentioned earlier on the podcast… the guy who runs Vista, who had a very simple premise. And that was that most software on entrepreneurs under-value their product. He started buying up software companies and doing something very simple, which is doubling the price. He would also buy enterprise software companies and turn them into SAAS. And what do you want to be? You want to be the entrepreneur who's trying to integrate Stripe into your software product and just dealing with the nuts and bolts when Robert Smith comes in and rolls up your whole industry and doubles the value of your business by just changing pricing? It was interesting for me to see how to play chess a little bit more and just to try to do that.
And that's what I'm a little bit more focused on here. Like, “Hey, if we don't have a certain capability we don't have to go try to build it internally. We could go buy it.”
One of the things we're doing now is we're trying to get out of dropshipping, right? Dropshipping margins are crappy so we want to have some proprietary product. What we do have is an audience. We've got a very big audience. 70 million people a year visit the site and we've got a huge email list so what we're trying to do is go out and buy brands and take them direct to consumer and push them through our audience.
Austin Brawner: What are your thoughts on people who are running businesses right now? And you know a lot of our audience is running a small to medium, small-ish-medium sized businesses in the whole scheme of things, what are your thoughts on how that may help them or influence their success as an investor later on?
Drew Sanocki: Yeah, it's back to that Buffet quote that being a good operator will make you a better investor. And it's just about… It's the ultimate scaling up of your talent set. Everybody listening to this, probably, is good at a couple different parts of ecommerce or online marketing. Like Andrew's great at Facebook ads and Austin you grew up with the strong background in email and you could leverage that skill set on your own business, on your own $1 or $2 million business. Or you can consult. You could find other businesses and generate some cash flow.
But I think the ultimate leverage is if you were to buy a much bigger business or get involved in a much bigger business like AutoAnything and do the same exact thing. One thing I've just been surprised about is what we're doing on Facebook, what we're doing on email, what we're doing on paid acquisition or SEO. It's not really that different for the $150 million business versus like the $5 million business. We've got WordPress here for our content, We've got Klaviyo for our email and our sequences are no more advanced than the ones that you and I talked about at that Brand Growth Intensive a year or two ago.
So why not leverage those skills on a much bigger platform because you create a lot more enterprise value? There's just bigger upside there to do it. It's like one thing I would encourage a lot of entrepreneurs, especially those who are younger… first time entrepreneurs in your mid-20s or something, is that sooner or later you might want to explore buying a business. You get involved in buying a business, you drastically cut down on your experimental phase where you're trying to achieve product-market fit and get something to market and figure things out. You can buy something that already has customers, that already has revenue, that ideally already has profits so there's a lot less risk.
And then you can look specifically for those businesses that lack what you can bring to the table. You can find an old school brick and mortar retailer that's really bad at digital and ecommerce or you find the ecommerce retailer that's terrible at content and SEO and then you can come in and immediately apply your skillset, create a lot of value and then drive them towards an exit.
Austin Brawner: I love how you said that I grew up on email, having visions for my parents sending me to Kumon Email Institute, yeah… just learning when they're going to send emails...
Drew Sanocki: Your dad just sat you down on his knee and he told you about a welcome sequence.
Austin Brawner: The visions. When you're talking about leverage, I see it so much when doing… I'll do like a private workshop where we'll sit down with a larger business, one doing $2 million a month or something like that… $2 or $3 million a month or a little bit larger in the ecommerce space than some other ones. They'll come in and they won't do anything with email. It literally just happened last week. They're doing a million or two a month, come in not doing anything with email. In two days, we put in sequences and we start making 10 grand in two days in revenue. Right? And it's the exact same sequences, the exact same stuff, just way more levered up.
Drew Sanocki: Yeah. The ability to sell on Amazon is just this nut that no one has cracked. A lot of big retailers have not cracked that nut and figured out how to do it and yet you talk at any online marketing conference and there's like a thousand kids who can get a shop up on Amazon and they're just sitting on these skills that are so valuable if they applied them to a much bigger company.
Andrew Foxwell: Very interesting and great thoughts. I mean, this is what we do on this podcast. There's just lot of back patting. It's really good… really good stuff.
Drew Sanocki: I appreciate it man.
Andrew Foxwell: But, actually, you're right. I'm mentally actually taking notes here because I am that Facebook ads consultant and there've been opportunities that have been presented in terms of like moving into a business and doing it. And up until that point, it's like I've made the lifestyle choice of running my own shop but I do think that acquiring a business is something I could see. I talked to a guy last week, he bought a natural and organic pet toy company and he bought it from this woman in Wisconsin ironically. And she had like no email. It was all wholesale and no website really.
He built that and now it's generating. He's at first month, like $20,000 a month. He said he's doing a few Facebook ads, it's doing pretty well and it just makes me think about the opportunity that still exists where you feel like, I don't know sometimes, Facebook performance is down or email or I don't know. And it gives me a lot of hope of being like, “You know, there's literally always going to be an opportunity,” which is really beautiful.
Drew Sanocki: I think with a lot of your clients you probably are like, “Okay, they're on Facebook and they're doing X, can I get them to Y?" But what you're talking about, for many bigger businesses, is they're not even doing X. They're doing zero and so to take them from zero to Y is a much bigger win.
Austin Brawner: And it's often easier.
Andrew Foxwell: Right.
Austin Brawner: Which is the weird thing. It's like, okay, you're just getting going. You can gain so… just pick the low hanging fruit. Which actually I think is a really bad saying because there's not that much low hanging fruit out there. Everything you try to do is always going to be harder than you expect.
But back to one of the things you were saying earlier which is I read a quote earlier, I think it was like a week or two ago that hit me, and, it was talking about… I think it was Taleb who said something like, “It takes five years to learn how to make money and then 25 years to learn how to not lose money.”
And when you think about the skill set that you have to develop, it often takes five years to develop the skills you're talking about… that skillset of getting good at email or getting good at Facebook or Amazon. That's an extremely valuable learning experience. You can go deep whether you're running an ecommerce dropshipper or you're selling your own products. You're going to be learning a ton during that time that then will go and translate at a higher level and so it's interesting.
The question that I have, it's the same like you Andrew, is at what point do you make that shift and how did you know it was the right opportunity specifically for you Drew? Because I know you had a really good business going on there, you still have a good business with Nerd. How did you know that this was the right one for you?
Drew Sanocki: I wish I had a better answer but I think a lot of times just I go with my gut. And in this case the private equity person who brought it to me, who brought the deal to me, he took a look at it and he was like, “Crappy dropship retailer? There's one guy who comes to mind who could run this.”
Austin Brawner: It's got Sanocki's name all over it.
Drew Sanocki: Yeah. This has Sanocki written all over it. But that guy and I have gone way back. We've worked on a bunch of projects. I like working with him on a personal level. We were thinking of doing another trip and going to Asia. And so instead of going to Asia, why don't we go to southern California? We'd already packed up in New York and sublet our place and it was just serendipity. I just talked to my wife and my kids and it just felt right. I was like, “Hey, maybe instead of traveling a little bit, we go and I'd like to take a shot at running this thing and running something bigger.
And, so for me it's really been more just like gut feel with a lot of these opportunities. I think you know what you're game for and when you're just starting out, or bootstrapping your first thing, you probably are really into that and it's enjoyable. And you don't even think about buying companies or it doesn't sound appealing to you. But a couple of years after running your own gig, maybe it's starting to be mundane and maybe you're looking for what comes next, and that would be the right time to explore it.
Austin Brawner: What type of a value… I mean, we've had this conversation before, so I have a little bit of an idea, but what type of a value do you put on those resting periods that you have in your life? You've talked about them a little bit, but looking at those and for somebody who's really in the grind and we just recorded another podcast earlier where the founder was talking about how she was living in the grind for a long time. How do you think about rest and what type of impact have those types of times had on your life?
Drew Sanocki: Yeah, I can't, I don't think I can live in the grind. I'm just not built that way. I love my family and at the end of the day, if my wife isn't happy, and I'm not present in that relationship and with my kids, then why am I doing… why am I working? And that's ultimately the engine that allows me to drive anything else. So I make sure to, even when I'm in something like this, I feel like I've got a great work life balance. I set boundaries.
One of the things I've learned, especially at a business like this is if I work 20 hour days, it's not going to change a thing. There's really nothing else I can do if I were to work nonstop on this thing versus what I can accomplish working 9:00 to 5:00, and taking the occasional vacation. So, I don't know, did that answer the question or it was a roundabout way to answer it? But, for me it's just I try to just keep a lot of balance in my life no matter what I'm working on.
Andrew Foxwell: I find that to be so true myself. I mean, Austin and I have talked about this. One of the most popular episodes that we've had on the podcast in all of 2019 was balancing time, time management. And it's so insane, Gracie and I recently traveled to Europe and I would wake up in the morning there and work for an hour, we were gone for like three weeks, and I would work from like 3:00 to like 6:00, 7:00. I mean, it's Europe, so you don't eat dinner until like 8:00. So that's when everybody was waking up and like I swear that that three hours to four hours a day was just as efficient as the eight hour day that I… or a six-hour day that I'd normally do. It's like, and I've heard this from friends too, is like when you have kids, like you exponentially go up in terms of your effectiveness.
Drew Sanocki: Yeah. That's exactly right, because you're forced to prioritize, and there's a big successful venture capital group… sorry, private equity group called ThreeG Capital. They own Anheuser Busch and Tim Horton's and Heinz. And what they go in, they go into a company and typically starve it for resources, and the idea is that you are forcing the management team to prioritize. And it's like having kids. You're not going to prioritize what you work on and rethink your strategy until you're forced to do it.
And so, everybody should be a little bit starved for resources so you know what to focus your limited resources on. And it's not as sexy as Gary V. Gary V's out there like hustle, hustle, you just got to kill it, work harder. And like those are the quotes that go viral on Instagram when people throw them up there and everybody's like, “Yeah, yeah.” But in reality, I think it's more about alignment than hustle. I say often like, don't hustle, align. And we've gotten so much more effectiveness out of just making sure we're focused on the right 20% of things than worrying about the other 80%.
One of the things we've done at the company is implemented these things called OKRs, objectives and key results. And they come from… really, they come out of the ‘80s, Intel pioneered them. John Doerr, the famous venture capitalists champions them in his book: Measure What Matters. But it's like quarterly goal setting. You set the objectives for the quarter, you set the key results that will get you to that objective, and then the entire company aligns around those objectives. And that process, figuring out what those top priorities are is going to get us way more than busting, everybody… me saying everybody here has to stay late and just work harder on everything, right? Like the more we focus, the less we have to work.
So yeah. So, OKRs has been invaluable for us, just aligning around priorities, way more valuable than working long hours. There's another book, Deep Work by Cal Newport that has been great for me. You get more done by focusing for like two hours on one project, then you do multitasking throughout the day. But yeah.
Austin Brawner: You get a lot of kickback on Twitter. If you start putting that message out.
Drew Sanocki: I know, I know, but-
Austin Brawner: A lot of kickback, even from… actually, I almost say like, especially from venture capitalists, and I think partly because they see so many people. I feel like you got to know what season you're in and what inning you're in. And I think a lot of times the people that need to have the really long hours, the grind, that like just can suck in and just absorb the Gary V are people right in the first inning, right, where you're trying to figure it out. But once you get past the first inning and you start to have a business that actually works for you a little bit, and you've got something proven, then you can kick back a little. You can take a step back a little bit and start getting something that… a routine that works for you.
But I always find it interesting when someone comments like that. And then you've got someone like Paul Graham talking about how, it is the hours. It's so polarizing and so interesting.
Drew Sanocki: I have that with my own board. So these are more professional, private equity investors and a lot of them were in investment banking. And that's just the ethos of the investment banker, right. It's like if you have a spare minute, I want you looking at spreadsheets or… but like the average investment banker doesn't have a whole lot of productive time, even though they spend a lot of time on their work. But it's been a process to work with my board to get them to see this.
And realistically, like I can only play that card a couple of times a year to like, “Hey, I need everybody to work overtime on these projects because they're so critical.” Like you can't play that card every day. At the end of the day and the average employee at an ecommerce business, like we're not… they're not making a whole lot. You can't ask them to give up their life to work for it. So yeah, I'd rather get aligned around fewer things.
Austin Brawner: It's very, very good advice. I want to talk a little bit about… shift gears a little bit and talk about PostPilot because I'm interested in what you're doing and specifically, what has you fired up about direct mail in 2019?
Drew Sanocki: Yeah, it's really what's had me fired up about it for years. I feel like it's been a secret tactic I've been using back to 2000 when I ran Direct Mail at Design Public. It's just that it works. I think it's got two things going for it. The first is it's actually cheaper than paid advertising online. This probably wasn't true back in 2000 when Adwords were like 10 cents a click. But now Facebook ads and Adwords, they're getting up there. Whereas the price of postage is kept, right? So it can be cheaper and people notice it more.
I've noticed with email marketing, like inboxes are very crowded. Your Facebook news feed is very crowded, but you got a postcard in the mail and you put it down on the table, you see it, other people see it. There's a lot of statistics showing that engagement and conversion rates off of postcards are higher than they are online. So I found it to be really effective.
And then the question is like, well, what do you use it for? And because I'm such a big believer in email, in lifecycle marketing, ultimately, like the best return you can get on your direct mail marketing is the same as you want on Facebook or an email. And it's like to engage off of user behavior.
Somebody buys once, you send them a related item. Somebody who's never bought before, you send them your top products. Or somebody abandons checkout, you send them a postcard with, “Hey, come back and repeat your purchase.” So you take a lot of the logic and customer intelligence that you've instituted in your remarketing programs and in your email programs, and just flip them to direct mail, and it opens up a whole new channel that people haven't been using. I don't think a lot of retailers use.
Austin Brawner: One question I have is just how are you able to run… because you've got GoSimple, PostPilot and then also the CEO of AutoAnything. How are you dividing your time amongst those things? Have you hired people? How do you manage those three things together?
Drew Sanocki: Jack Dorsey can run what, is it Stripe and Twitter, the dude runs?
Andrew Foxwell: Yeah.
Austin Brawner: Yeah. Yep. But he also wakes everything at 4:00 and meditates for like an hour.
Drew Sanocki: There you go. I just I meditate for three hours and then I can run three companies.
Andrew Foxwell: Smart.
Drew Sanocki: No, I… and I'm actually about to close on another one over the next month. So I'm going to be tested. But I think the answer for me is I need an operator to be running each of these. So you probably, when you're curious about buying a company, you probably buy your first one and then you operate it. But once you do that one or two times, you start to see the power of leverage and, “Hey, maybe I can even run a portfolio as long as I have that trusted general manager/CEO in charge of each one.”
So, I think, I've come to this model through a lot of trial and error, but with PostPilot, for example, I was running that along with my co-investor and then it got enough traction to the point after, maybe after a few months, it got enough traction to justify hiring a full-time growth hacker or marketer type to run it. And that's what we just did. So that person is running that. And now my role there is much more like the board member who, on a monthly basis, we're talking to the management team, which is one dude. But making sure his OKRs are aligned with what we think will drive the business and providing value where we can on a strategic level through introductions and partnership discussions, and things like that.
Same with GoSimple. This other one I'm going to buy also has the CEO already lined up. So I would say the exception's AutoAnything. And even here over the next year or two years, I could see myself hiring or promoting someone to be CEO and then I would go back up to the board. So, that's how I've done it. I think all deals I'm looking at from here on out have the operator in place, but that's how I do it.
Austin Brawner: Awesome. Well, Drew, I know we want to be respectful of your time, man. I really appreciate you chatting and sharing what's going on. It's been super interesting to hear what's going on. If there's anything based on the stuff you were talking about today, if there's somebody listening and they want to learn more about what you're doing, follow along. Yes, nerdmarketing.com is your website, but is there anywhere else you'd recommend them going to learn more about what you're doing?
Drew Sanocki: Yeah, I'm starting to post a little bit more about what we're doing at the company on Instagram. I find that it's been harder for me to blog since I've been running this business, but easier for me to post to Instagram. So that's just Drew Sanocki at Instagram. You could put a link in the show notes maybe because my last name's hard to spell.
Austin Brawner: We can do that. We'll put it in the show notes for sure. And yeah, man, I miss the blog. I miss those long-form essays about FaceTiming your mother in the line of the airport as a productivity hack. I like that.
Drew Sanocki: But every day, I'd like to get back to that because there's so many more learnings that I'm experiencing here and I'm journaling about them, but yeah, I haven't gotten them over the finish line and push them out as like fully formed blog posts. But I would like to get back to that.
Austin Brawner: My last question is going to be, what's the timeline that you can expect for paying off all the student debt at a university.
Andrew Foxwell: I'm curious.
Drew Sanocki: It depends on the university. Yeah. I don't know. I think that's a good question. 10 years, maybe.
Austin Brawner: 10 years. Okay. Are you talking like a JuCo in Southern California?
Drew Sanocki: It's got to be really small.
Austin Brawner: -private, private liberal arts-
Drew Sanocki: No, no, no way.
Austin Brawner: -in the Northeast.
Drew Sanocki: No way, no way.
Austin Brawner: Awesome man. Really appreciate you hopping on here today and chatting with us. It's been a lot of fun. And yeah, man, I miss catching up with you. It's been a… we haven't talked to as much.
Drew Sanocki: Yeah, we should do it more often and if either of you guys ever get to Southern California, let me know. I don't know anybody here, well, to hang out.
Austin Brawner: Sounds good, man. Thank you so much. I'll talk to you later.
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