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242: Traction to Scaling: The Scaling Series, Part 3

Posted by Austin Brawner on March 10, 2020

 

In part 3 of our Scaling Series, we’re talking about traction to scaling, the period after making your initial $100K to surpassing the million-dollar mark.

There are a number of challenges you’ll face at this stage, including becoming overwhelmed with possibilities, losing strategic focus, wearing too many hats within the business, and more.

Today we walk you through how to tackle these challenges and the things the most successful businesses do at this stage to continue growing to 8-figures and beyond.

Enjoy!

Episode Highlights

  • 4:41 The first problem we see at this stage? Mindset and losing focus.
  • 7:53 Why most business owners lose strategic focus at this stage.
  • 8:53 If you’re overwhelmed and losing focus, it’s time to hire.
  • 10:05 The critical role you have to hire for if you want to continue to grow.
  • 10:42 The second problem business owners run into at this stage? The year-over-year mentality, and why you have to get out of it.
  • 13:40 It’s time to get serious about email marketing.
  • 15:10 Other things you can do to increase average order value and lifetime value.
  • 16:30 The companies growing fastest at this stage all have this in common.
  • 17:38 Why connecting with other successful business owners is critical to your success.
  • 19:51 Challenges with cash flow at this stage, and how you can alleviate cash-related issues.
  • 22:31 More commonalities between companies succeeding at this stage of growth.
  • 25:56 If you’re ready to take it to the next level, it’s time to get some outside help.

Links And Resources

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Find out why, visit klaviyo.com/influence.

Sponsor: Brex

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Got to www.ecommerceinfluence.com/brex to sign up.

Transcript

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Austin Brawner: What's up everybody? Welcome back to another episode of the Ecommerce Influence Podcast. My name is Austin Brawner.

Andrew Foxwell: And I'm Andrew Foxwell. And we are here for part three of the scaling series. Scaling series. Scaling series.

Austin Brawner: We are fired up. I'm fired up.

Andrew Foxwell: I'm fired up. Everybody's been talking about it. It's gone totally viral already.

Austin Brawner: No, this is something that we are... The goal of this, like you just said, this is part three, so if you haven't listened to part one or part two, feel free to go back. We talk about zero to launch in episode one, and then launch to traction in episode two.

Today, we're going to be talking about traction to scaling and what that looks like. That is the range, in our mind when we define this, it's typically the range of like a couple hundred thousand in revenue over a year, up to early seven figures, right?

And when we say the revenue numbers, this can be a varied scale, be based on the size of the market, and we've seen businesses that are in a big market scale really quickly to a seven figures and still be dealing with the same challenges that a company that has less revenue, that's a smaller market, is dealing with.

But we're generalizing here in this stage, so if you're in that stage, somewhere between a couple hundred thousand dollars in revenue and like $3 million in revenue, this is what we're talking about today. And this episode's going to be dialed in for you.

We're going to talk about some of the problems you're going to face, potentially, and the solutions, from our experience. We've worked with hundreds of direct response, direct to consumer ecommerce companies and we've seen, through this period of growth, some challenges, and we're going to dive into that today.

Andrew Foxwell: Yeah. So, that's what we're getting into, so let's go ahead and dive in. So, the first one that we see, and I think we'll talk about problems first and we'll get into some solutions as we go through them.

First, is actually mindset, and actually generally being not necessarily strategic and losing focus. That one is a big one for us in this that we see of people going through and they've become, probably, an expert in their channel, of customer acquisition, they're growing, but then they start to just do a lot of everything and they don't necessarily know why.

Austin Brawner: Very, very common. And it's funny, I'm laughing because this is something that I hear so often. It's like, "Well, this was working. We started selling on Facebook, and then we had some good success there. And now we've rolled out 10 other channels, and we're completely overwhelmed and we don't know exactly what to do. And we rolled out these other channels because we learned about it or we watched a webinar about it, and then we decided we had to have it now."

And I think this is something that happens, too, when you work with a lot of business owners, I find the difference between somebody who is a seasoned operator and has grown a couple of different businesses, and somebody who's in the first time business owner, this is usually where it breaks down a little bit and where there's some more challenges.

The people who are more seasoned operators recognize that if they have an opportunity and they find something that works, they should double down on it. The first time business owner sometimes doesn't recognize that and gets caught up in the shiny object syndrome or doesn't have the mindset, doesn't recognize that there's an opportunity for larger growth because they're almost overwhelmed at where they're at currently.

Andrew Foxwell: Yeah, I think that's very true. A lot of it comes down to what we talked about with Greg McKeown, if you listened to that episode, who's the author of Essentialism. If you've not listened to that episode, I recommend going back and listening to that two part episode. Absolutely full of true, real knowledge bombs. But one of the things we talk about then is a one month, six month, one year, and then a 10 year vision.

And I think this is really where people in this stage start to break down is, they are making decisions that are not strategic, that are not tied to a vision for what you're trying to do, so you lose focus. And look, I get it, I mean, I've done it, too, right? You have this feeling of FOMO, that you're missing out on something that other people are taking advantage of, and it's so much in digital marketing, too, does have first-mover advantage.

So, you want to try to get down on stuff, I think. "Oh, that's interesting. I'm interested in a certain type of marketing, text message marketing." It feels like it's that now, of the moment, a little bit.

Austin Brawner: Sure.

Andrew Foxwell: But if that's strategic to who you are, and what that's going to help you do, or you more have a strategic testing plan for that, that's a good way to go about it.

And a lot of this non-strategic thinking or losing focus does go into, and leads to, issues with bandwidth, which is really a second common thing that we fall into seeing.

Austin Brawner: I think those go hand-in-hand because, often, when you're overwhelmed, it's hard to think strategically, and when you're not thinking strategically, you get more overwhelmed. So, they go hand-in-hand, and that definitely is something that I see in this stage.

Every business owner starts to get overwhelmed because, as we talked about in the previous episode, if you've become an expert in a certain channel, and you're starting to spend more and more money in that channel, and advertising spend or whatever you're doing, it takes up more and more of your time away from the other things in your business. And when you have less and less time, sometimes you can become a bottleneck and you don't see the forest through the trees. And so, that's a big, big challenge.

One solution for that, this is the time when you should start thinking about hiring for what you were bad at and getting the stuff on your plate that you don't look forward to doing, doesn't bring you any joy, you're not particularly good at, but you know you need to do it, this stuff's got to get off your plate.

Andrew Foxwell: Mm-hmm. I have a friend, Sarah, who does life coaching, and she talks about making sure that you focus on what's in your zone of genius. And that's what we're talking about here, hiring for things outside of what you're good at is going to help with bandwidth.

It's one of those things that, financially, looking at the numbers, "Is hiring going to help? Is that something I can do? Is it something I feel like I have the money to do?" That goes back to, really, the earlier parts of scaling, right? Of understanding your numbers that we've talked about in earlier parts of the scaling series, and I think if you understand those as you grow, having a good, clear answer on, "This is what a person would do. This is the responsibilities they would take on," even part-time, initially, helping out with stuff can be huge. Customer service is a big part of that, maybe.

Austin Brawner: If you're not hiring for customer service at this point in the business, you're not going to be able to continue to grow.

Andrew Foxwell: Right. Absolutely not.

Austin Brawner: That's always a bottleneck. You need to get that taken care of, standardize that, systematize that, and get it off of your plate, because, again, your role at this point in the business is to continue to acquire customers. You need to do that. You can't, again, like the last time, you can't outsource growth at this point. You need to be able to continue to acquire customers and take the frustrating aspects of the business off of your plate.

Andrew Foxwell: Mm-hmm. I think the next thing that we talked about being a problem is, really, what we call the year-over-year mentality. And the year-over-year mentality, what we mean by that is, you sit with a business owner and they'll say, "Hey, what we're going to do this year is we're going to do what we did last year with this particular release or with this particular sale, and we're going to add a couple more pieces to it. Then we're going to do, maybe, some Instagram live or we're going to send out a couple more emails and maybe a few more posts, and that's what we're going to do."

So, really where that becomes an issue, I would say, is that it doesn't really give you strategic thinking, going back to the first thing we talked about, thinking outside of yourself for true growth. So, you get stuck in the same revenue numbers, basically, right? You might be looking at... Look, I like conservative growth. I'm in that, but we're talking about scaling here. And when you're talking about scaling and getting bigger, you have to think bigger.

And solutions to that, a lot of times, are coming up with bigger better products, right? It could be a different product line, it could be a product with, maybe, a higher average order value, or something that's going to pad your numbers a little bit in terms of revenue. That's going to add to that bottom line in a really meaningful way.

And it could be, we're talking about promotion in the year-over-year mentality, but thinking outside of that and thinking strategically about product line, about the way that you are just looking at your business as a whole and what you want it to do instead of just thinking, "Oh, we did this last year, we're going to do this again this year."

Austin Brawner: And the reason why this is so important, to get out of the year-over-year mentality, is that as you grow and as you spend more on different channels, the cost per acquisition is going to increase, so if you do what you did last year without factoring in the cost of acquiring new customers is going to increase, you're not going to be able to grow with it. And that's really the crux behind that, right?

To be able to spend $10,000 a day versus $1,000 a day, the cost of acquiring your customers is going to be much higher at $10,000 a day, and so your business needs to evolve to be able to match that, right? And that often, why Andrew brought up product launches, is I've seen this in many examples, rolling out new products is one of those ways that average order value increases. People are buying more, and you're able to continue to grow in a way to take the next step in your business, combined with the fact that you're just continuing to double down on what is specifically working.

Another thing to dive into here at this point is that, this is an excellent, excellent time to get really, really serious about email marketing. Now, if you listen to the previous episodes, we talked about early on you want to set things up, and you want to make sure you're capturing emails for your customers, capturing emails in your website, and continuing to following up with people so that your email list isn't getting stale.

But at this point, you should be going, and for 95% of the businesses we work, they should be going all-in on triggered email marketing, making sure that everything you're doing... that your site is no longer leaky. That as people browse through your site, they're getting browse abandonment emails, cart abandonment emails, that you're launching new products consistently, that you have onboarding sequences, replenishment sequences.

All that stuff is going to help you with this challenge that you're going to be facing during this time of rising cost per acquisition, and the only way to battle that is to increase average order value and increase lifetime value. And the best way, in my mind, to do that is to increase repeat sales through email, which is a low-cost channel.

Andrew Foxwell: Mm-hmm. I agree. I think investing in email, it becomes a foundational revenue backbone to a lot of these businesses at this time, and it's a time if you haven't taken it seriously, it deserves serious attention because you're going to get serious results out of it.

I think other things that you can do to combat some of these challenges that people face are, one, we've talked about this before, but subscription, introducing some sort of a subscription business.

Austin Brawner: If it's relevant to you. Yeah.

Andrew Foxwell: If it's relevant to your business, I think is going to be helpful to you in terms of freeing up bandwidth, probably, hopefully. I mean, in terms of it would help you have more revenue that's not just dependent on acquiring new customers, you're able to keep it going, and it can run on its own, to some degree. It helps with that strategic direction. It helps with understanding that that's there as another revenue backbone.

And then, another solution is loyalty in community and supporting them. What is your play, at this stage, of taking care of those people that have previously purchased from you? What is the way that you're speaking to them? What is the way that you're soliciting feedback from them? What are the ways that you're building community around your brand?

Those are the differences, I think, in brands that we've seen scale into really big places. Is there some way that they are hearing directly from their customers more regularly? This is what I like, this is what I don't like, or even, this is the lifestyle on choosing and these are the things I'm doing and generally understanding what else is on their mind.

Austin Brawner: Sure. And in this stage, the companies that grow the fastest are typically the ones that have a word of mouth component that is facilitating consistent growth. So, they may be increasing their spend on Google or Facebook ads, but all of that is facilitated and expanded by word of mouth. And so, the better your product is and improving your product during this time is, is really, really important.

So, a couple other things I want to dive into here because this is the time where Andrew and I spend the most, probably the most time working with our clients. This is when people call us because they're trying to figure out what... They email us or call us because they're trying to figure out where to go next, and I have a lot of empathy because this is a really, really challenging time in the business and it requires thinking in a totally different way, right?

What gets you to selling a couple of hundred thousand dollars in product is not what's going to get you to sell a couple of million dollars in product. You really have to evolve as a leader, and your mindset needs to change.

And it can be really frustrating when you don't have other people in your immediate vicinity or in your community that you're talking to that have done this. Right? That, I think, is one of the things that holds people back, is they haven't seen it from anybody else.

Andrew Foxwell: Sure, absolutely.

Austin Brawner: They know conceptually it's possible, but they haven't seen it firsthand. And that's why when I get people in the room, at like a Profit Summit event and they're sitting there across the room from each other with all this other business owners who were in the exact same space and some of them are a little bit ahead, some are a little bit behind, it's magical to hear them talk and be like, "Well, this is what I'm doing. I faced that same thing. This is what I'm doing here. This is what I'm doing there." And you see people be like, "Oh, wow. I didn't know that this was possible. And I also feel more confidence that I don't need to do everything."

Andrew Foxwell: Mm-hmm. I think so much of it goes back to... So, touching base with those people and hearing from them is huge. The community support, becoming a leader, and becoming a leader, not just by being an extrovert and saying, "I'm a leader. This is what I think," we're really talking about here is leading your company and becoming a leader and saying, "This is what we're going to do because this is the information I've gathered from these various sources and here's why, and it ties strategically into what we're doing."

You don't get past this stage by just naturally, like luck, necessarily, in my opinion. And I think so much of it ties into, as well, people having fear about making their company bigger. They have fear about making their company increase in size, and so a lot of the things that they're doing, mindset, not strategic thinking, not hiring, and having issues with bandwidth, thinking in a year-over-year mentality, all of those things go back into, "What happens when we make it bigger? I don't know. It feels like it might break if I take it bigger."

And so, hearing from other people, the reason I say this, hearing from other people, that's going to help assuage a lot of those fears.

Austin Brawner: Sure. And from a cash perspective, one of the challenges at this time is running out of cash, and it starts to happen as you increase your budget.

I look at a couple of things when I'm working with companies. One, maintaining at least two to three months expenses plus cost of goods sold in their bank account. So, if you know that, every month, you're going to spend, let's say, $30,000 in expenses and costs of goods sold is like 10 grand, well then take $40,000, double that or triple that, and keep that in your banking at all times in case things go bad and you have the ability to pay for things through ups and downs in terms of sales.

Some great books, at this point, Simple Numbers, Straight Talk, Big Profits! by Greg Crabtree, which I've talked about a lot. Also, in the Coalition, I have a training where I talk about running your finances and doing financial forecasting. It helps people during this time because the whole goal with entrepreneurship is to stay in the game. You got to stay in the game, you can't run out of money, and you continue to double down on the things that are working.

And this time is really, really interesting. It's one of my favorite times to work with entrepreneurs because it's so fulfilling to watch someone to get real traction with their business.

And I mean, think about some of the crazy success stories that, Andrew, this last year, our number one podcast episode was talking about how to go from $500 a day to $15,000 a day, in ad spend. And that's a crazy growth trajectory. It was over how many days? What, 30 days?

Andrew Foxwell: Yeah, it was over about 30 to 40 days. I can't remember exactly. But yeah, it was at $15,000 within 30 days.

Austin Brawner: Which is insane growth. And a lot of the components that come into that are foundational things, and it's mindset, hiring, all of these challenges. One thing to always remember is that the hiring is going to take a lot longer than you expect, and once you decide you need to do it, it's going to take a lot longer. So, getting a good framework and a plan for that is something that's really, really pivotal.

Andrew Foxwell: Yeah.

Austin Brawner: So, you want to go through a... list out some of the things we just talked about, summarize it up a little bit?

Andrew Foxwell: Yeah, absolutely. I'm happy to do that, but I want to comment on one thing, which is, the themes of companies that are in this stage, that Austin and I have seen, that are doing well, and are clearly ready for the next phase of growth or moving toward that next phase of growth. The commonalities between them really are the things that we've talked about as problems, and they have incorporated in them some of the solutions.

So, they have a mindset difference as a leader where they're gaining and acquiring knowledge strategically from trusted sources in the ecommerce space and in their vertical, usually. So, many times I've found it really funny, the companies that I see that are doing well at this stage, they study their competitors like hawks, and they also, to some degree, might be friends with some of them even, where they've spoken and they have ideas. Because they know that they're taking each other's customers, but I have seen that actually a little bit as well. So, it's a mindset thing, I think is one.

The second one is hiring as it relates to being strategic, and that's really what we've talked about today of your strategy is tied into, "Here's what we're trying to do with our vision of a one month, a six month, a one year, five year, 10 year," however you want to list it out, but having your goals and your daily tasks go into that, and you're moving incrementally towards that. And your team is aware of those things as well. Your team is aware of, transparently, here's what you're doing and why it matters to the overall picture. That's a big one.

I think the third thing that we see is looking outside of that year-over-year mentality, as we talked about being a problem, and looking at solutions that are things like new product introductions. If it fits for your business, doing a subscription business or subscription part of your business, building that loyalty and community. There's something that they usually have there where there's a community of people that have talked about it, they love it, maybe they have a Facebook group even or something, or they have a founder that's actually fairly active and is talking about things and people know and love that person.

And you think about former podcast guest, Patrick Coddou and what he does on Twitter with Supply a razor. He's become, basically, the unofficial razor company of D2C Twitter, is because of what he's done there and being a charismatic leader. So, that's interesting, I think as well.

And then you think about there is a not just a strategic investment in email, there was probably earlier on in these numbers that we talk about in this range, a beginning strategic investment, and by the time they're in the higher part of this range, email is their bread and butter and they're great at it. And they've taken your courses, or they've done things in the Coalition that they understand, this is how you do email correctly, and this is how you turn it into a reliable revenue source.

And I think another one that's a clear theme here, too, is there's been some sort of inflection with ad spent. And we're going to talk more about partnering with an agency partner in the next section of the scaling series, but there's some inflection in, they've spent more on that front end of prospecting marketing where there are more people coming in. That could be PR, as well, but that's normally a part of it.

Austin Brawner: And one last thing I'll put in here that I think 100% separates the companies that continue to grow through is, the ones that are really serious about it and the ones that are continuing to grow, invest in themselves and their business at this point by connecting with the best people and figuring out what they're doing and move forward.

So, whether that's hiring me, coming to an Intensive, and mapping out email marketing strategy and implementing that, or hiring Andrew or hiring another expert, somebody else who can help get them to where they want to be.

And they say, "Okay, well, it's better than thinking of it an expense, it's this is where I want to go. Let me find the person who can help me get there fastest, get them on my team, learn as much as I can, and level up." And that is a huge mindset difference between someone who gets stuck at that early range and somebody who's going to be plowing through it and going to the next stage.

Andrew Foxwell: Mm-hm. Yeah. I think I actually, I totally agree with you. I heard a founder recently told me that their marketing person that they hired was like their first big hire outside of a customer support person. They hired somebody to do social media, organic marketing, and then growth marketing and working with an agency and doing some stuff growing it in-house.

And they said that for every week that they came with something new that they learned and taught the team on their team meeting, which was like a five-minute thing that they taught them, within marketing or something new that they could do, they got a bonus, and at the end of the year they cut them a check, basically.

Which is such an interesting idea. I'd never had heard somebody being incentivized for just purely learning and bring something new to the table, because I do think that's a big part of it, as well, in terms of being a growing company, of going through that and incentivizing, continuing to think outside of the box.

Austin Brawner: Sure. If you're at this stage right now, I think the best places that you can look at, the best things we offer right now, would be, if you're not in the Coalition, become a member of the Coalition. It's a great place for you to be.

Consider coming to a Profit Summit event. That is all the people that are in the room for my profit summit events are going to be in this stage.

This is a great time to work with Andrew. If you're trying to scale up Facebook advertising, you've got something that works, this is the time when they should reach out to you. It's like it's a really good time to be like, "Well, what am I not doing?" Right? "I got success here. What am I not doing?"

Andrew Foxwell: Yeah, we do a lot of audits, and we audited $15.2 million in spend on Facebook and Instagram ads in 2019. And that's a big part of it, is we go through people's accounts, "Here's what you could do. Here's what you could do differently," and then move on from there with different training or education or private coaching.

Austin Brawner: So, that's where we can help you out in this space. Hopefully this is helpful. This next episode, we're going to be excited about. We're going to go into growth mode, and that's going to be from the low seven-figure range up to $10, 12, 13 million, that range that we've seen companies go through and some of the challenges that you face there.

Hopefully this episode was helpful. We love doing it. We love you guys who are listening. We'll talk to you soon.

Austin Brawner: Hey guys, it's Austin, and if you've been loving the podcast, you got to go check out brandgrowthexperts.com. That's where I work one-on-one with my clients to help them build faster-growing, more profitable online stores. I've got coaching programs and workshops that we host all over the world. Would love to have you come check it out.

If you are a fast-growing ecommerce business, or you want to be a fast-growing ecommerce business, you got to check it out. That's the spot for you.

We go more in-depth than we do in the podcast, with comprehensive trainings and coaching to help you scale up. Check it out. Brandgrowthexperts.com. See you there.

Austin Brawner: What's up everybody? Welcome back to another episode of the Ecommerce Influence Podcast. My name is Austin Brawner.

Andrew Foxwell: And I'm Andrew Foxwell. And we are here for part three of the scaling series. Scaling series. Scaling series.

Austin Brawner: We are...

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