Meta vs. Margin: Why Reasonable Goals Win Long-Term transcript

Do you actually know what it means to be successful in your business? Do you know the goal you are trying to achieve? And are you sure you've defined success in a way that actually makes sense and is critically good for your business? Because how you define success is going to dictate a lot of your behaviors and actions in your business. So getting really clear about that is important. On the show today, I'm going to talk through something that I think is sort of sneaky important in a lot of businesses and is driving lots of entrepreneurial anxiety, lots of entrepreneurial decisionmaking and probably your decision-m in ways that you don't even realize.

And that's the question, what actually is success in your business? How do you define it? And is that definition serving you well? I'm going to get into it right now. So Patrick Kadoo, my COO and I Patrick was was building uh we were we were together in Texas recently building our multi-year vision for success at AJF Growth as we've committed to working on this business together. He's joined me as a partner in the business.

And the thing about uh that exercise, we're using EOS, right? So we we've entrepreneur operating system EOS a sort of a framework and a way to scale the organization up. We we aren't um we're in the early stages of adopting it in some ways, but we're using EOS to do this. One of the things the OS forces you to do is create sort of a 10-year vision for where you're going and then a three-year vision and then a one-year vision and then a quarterly vision basically.

Right? So essentially the idea, right, is you pick your large scale goal and then you work backwards from there to see how your shorter term goals ladder up to your large scale goal. It's a really sort of intuitive exercise. Uh I've liked this kind of way of thinking before. People do this even if they're not using EOS and it's really good. And so as Patrick and I talked, we put together a three-year vision and we put together a sort of a put that in terms of a profit number that we wanted to reach per year.

Okay? And um and then and then as a follow-up to that, right, we started to try to put that into reality where we said, okay, if we want to get to X dollars, and probably at some point I'll share that. I'm not going to today, but at some point I may share sort of what that is going to look like, then we need to have um you know, this many new clients next year and this many new clients the year after that. And anyway, I looked at I looked at the actual framework after we had agreed on the vision.

I looked at the sort of like financial forecast that would get us there and the shape of the organization that would get us there, right? And Patrick had laid it out. And when I did when I looked at that, I noticed I my immediate reaction was this vision is not aggressive enough. We are we are being too slow to grow. We we're just not being ambitious enough about these goals. And if you've listened to my content for a while, or if you've watched my content for a while, you might be surprised to hear that.

You've probably heard me say that I'm not a particularly ambitious person. I'm not a person super driven by building a giant business or or anything like that. Something about it just didn't sit right with me because I thought like like ah man, are we just being too conservative about this whole thing? Are we sure we're sort of pushing hard enough to to grow the ways that we want to? And I expressed that to Patrick and he said, "Well, but hold on." Like, we just agreed that this is the number we want to get to.

This gets us there. We also agreed that we want to resist a culture of chaos and of shiny object syndrome. We want to stay lower stress. Patrick and I both are right around the same age. I'm 41. Um, you know, we both have have young kids. We both are involved in our our churches and and local communities where we have, you know, we don't want to work 80our weeks or anything like that. And so on we're expressing both these values at the same time which is this value around resisting chaos in an agency resisting always on culture and at the same time growing the business etc.

And and and we had actually picked the number and Patrick had had built the ladder to get to the number. So we said what what do you what are you concerned about? Like why would you have a problem with this goal? You know it also gets us to plenty of money. Like it gets us to plenty you know more than we need by far. So it's like okay what what is the concern here? And uh I think I realized in that moment that there was nothing that was pushing me towards that bigger higher goal.

There's nothing that was pushing me there except for some kind of little internal sense that I should be more aggressive that I should grow faster that I should go faster and like why why did I have that sense? Now, part of that is like a problem solving instinct and and you know, I don't know, some something that is probably good, right, is all I'm saying. It's probably not a totally bad thing there, but uh but I think as I've sort of examined what was going on for me as I had that reaction, part of it is just this sense that like, well, people who are successful build bigger things than what we're describing here.

And so, you know, so we should build a bigger thing that and that that was it. It was just this sort of external thing that I wasn't coming from an internal value of mine. It was just an external pressure of what I ought to be doing to get there. And I think that thought pattern is one of the most common thought patterns in e-commerce and in probably entrepreneurs and business in general, right? I don't really know how this looks in other industries because I've really never been in other industries, but so in our space, it's just extremely common that people do this.

And so here's the here's the main point of what I want to say in this episode that I've come to believe is is actually like critically important, okay? And it's this. I've come to believe that for most brands, for most businesses, agencies, brands, software companies, everybody, uh having reasonable expectations and goals is critical to success. Uh like like what I mean is had had Patrick just said you're right we should go faster that would have then made us accountable to a goal that was going to make us pursue this big huge giant thing.

When I go back to like my time at 4x400 we had this idea that 4x400 was going to generate $150 or $250 million depending on when you asked uh valuation at some point. That was the goal of the business right that was that was the idea. And so we went and and uh and tried to acquire all these brands and do all this stuff. And you know, I mean, our pathway to getting there and doing that was dumb even like even assuming the goal was fine.

But it it it forced us because we had put a vision on the company uh that was really really big. It forced us and obligated ourselves to investors by the way. It forced us to then behave in line with that kind of thing and and force us to go make decisions that probably were not actually best for for running the business and for for letting the business be the kind of business that it could be. I talked to another entrepreneur recently who was talking about needing to grow their business because they had raised at a valuation that was just bigger than they were going to be at anytime soon.

And so even though their business was actually doing pretty well on the whole, they couldn't accept it. they couldn't go sell the bit the the business for a number that made sense because the expectations they had created for themselves in this case formally in the process of evaluation uh where they raised at a certain number. So if they sold at the number they were getting offered investors would actually lose money even though it was a very good offer relative to the state of the business.

Right? The state of the business it was a great valuation relative to where the business was at but it was a bad valuation relative to what they'd raised at. And so this external constraint in this case again formally had done something to their behaviors and actions that actually caused them to make a decision that was sub-optimal. And what I'm saying here in this episode is partly that is that that happens, right? Part of it might be an external constraint.

If you raise it too high of a valuation, this happens to you. Okay? But beyond that, there actually may be a sort of informal external constraint. Something that is just your own psyche telling you you must build a bigger business. But here's the thing. When I look around e-commerce and when I look at the businesses that I really admire, most of them actually were built around uh over a long period of time with much more reasonable expectations.

So to repeat my main point here, having reasonable expectations for most businesses is actually critical to your success. And it's when you get outside of those expectations that you start making all kinds of bad decisions and bad and bad behaviors come out of it. And I've watched great businesses and great brands do this over and over and over again by by getting this trade-off really really right. Uh, you know, let me just rattle off for you a few brands who I've known pretty well and who I really admire.

Okay, Born Primitive. Born Primitive. I've had Bear Handling on the show a bunch of times. You've heard him on CTC's podcast. An example that's come up a lot in our space. I started working with Born Primitive as a growth strategist at CTC before I was even executive there, right? Um, when they were doing like a couple million dollars a year. Bear was still deployed as the CEO. he was still deployed as a Navy Seal, like you know, uh he couldn't tell us where he was taking meetings from.

It was crazy. And because he was taking them while he was deployed and it and uh and it was like a couple million dollar business at the time and now that business, as Bear has said publicly on my podcast, it's like a mid 8 figureure business. But do you know when that was that I was first talking to him? Like I don't know 2016 or something like that. It's 2025 now as I record this. That means it's taken the better part of 10 years for Bear to get to that stage of things. uh for it to be now was a really really really good business spinning out a bunch of cash and uh really high profit like it's just a really good business now uh but it didn't happen overnight there were a bunch of mistakes along the way and they built steadily and slowly over time right um in fact I think one thing bearer would tell you is that at some point as they were pursuing potentially external capital in the business selling off part of the business that sort of thing as they went down that process that actually caused them to make a bunch of sub-optimal decisions because they stopped having this long view of success etc.

Uh, Simple Modern, Simple Modern is a huge business and is by all accounts has grown at an incredible trajectory, but it was it's a nine figure business and you can learn a lot from those guys, but it was founded 10 years ago like it didn't h it didn't they didn't go to nine figures in a day, you know, and so they've had very rapid growth and yet that kind of outcome didn't happen and that didn't didn't happen overnight.

And if you are listening to the simple modern story and to what they are doing because they're great people to learn from and I love learning from them at even at their scale even though their scale is much bigger than most businesses you know if you're trying to say like well how come we can't get to this size at this timeline like you're just fooling yourself that that's just not how most business work. Natural dog company I've had Billandra on the show multiple times.

Natural dog company recently sold like it's a really good story of a great exit in our space um where Bill built and sold natural dog. Well, that again happened over I mean at least 10 years that that is like one brand. At some point Bill had an aggregator, a holdco with like eight or 10 brands or something like that on his portfolio. I can't remember. It was called Elements Brands and he sold off all of them slowly but surely put his time and effort into natural dog got natural dog to where he got it to had an exit and that was a long steady process of continual building.

It did not happen overnight. resulted in this great thing. And we can also talk about one of my current clients which has not had an exit but um and I can't name this client but early 8 figures um like strongly profitable really good business at early 8 figures and they have realized in their business now that if they're going to grow again it's not going to happen on some rocket ship with the next best ad and the next best tactic.

They're going to get there through great product development, channel expansion, uh like you know, a couple of those things. And it's probably not going to be a doubling year-over-year. It's probably going to be steady growth over a very long period of time. And this operator, to his credit, understands has embraced that. And now it's a business I really love. I think it's a great business, a great brand that has some steadiness to it and that I think should continue to grow into the future and should should be able to keep being like a really profitable, very good business.

And he has no plans to exit it. So, I have no idea if like what evaluation of that business would be, but it would be good. If you are building an e-commerce business and you want to do the thing I'm talking about in this episode, build a great business over time. Part of that is getting your supply chain right, which is very hard work. You need help with it, and that's why you should work with my friends at Move Supply Chain.

Move Supply Chain is a Philippines-based supply chain agency headed up by my good friend Laura Govaro. You've heard Lara um on this podcast multiple times before. Lara built the supply chain for my brand that we're just about to place our first POS on. We're going to have margin profiles better than at or better than our targets when we went to build the brand in the first place. She sourced uh reached out to identified 60 packaging manufacturers.

Uh packaging is a really important part of that product for a bunch of reasons. So whole bunch of packaging manufacturers, 20 actual product manufacturers, narrowed it down across both of them. Sent emails to like 45 of those packaging manufacturers. just went way above and beyond what is possible for me to do on my own as I try to build that business. And the net result of that is a product that we think is great with packaging that we think is great and that is all coming at a cost that we love.

The thing is building and working on your supply chain and your e-commerce business is critical work for building a great business. And most people just don't know where to start. So many e-commerce brands that I talked to um they they really just have barely talked to very many manufacturers at all. They don't know where the opportunities are for things like faster turnaround times, faster lead times, better terms, uh lower prices on their products, uh thinking about how to navigate tariffs, u new product development.

There's all these elements of it. But Lara and her team have been building e-commerce supply chains for a whole bunch of years. The business was actually born out of their work running supply chains as executives in the supply chain parts of US-based e-commerce businesses. They know what they're doing, what they're talking about. They can help you or at least you should get on a call and check out and see if they can.

And Laura tells me that on so many calls, she kind of starts giggling right away when she hears about the supply chain of the business she's on because it's so underoptimized and she thinks she can help so fast. Um, they're great people. They're affordable because they're built based in the Philippines. They can represent you in East Asian countries very easily. It's a very short flight to China and Vietnam, both from the Philippines.

No visa issues for either one of those. Uh, and and uh in all kinds of ways. I just think they're awesome. It's a very high level of service with people who are great and at the same time extremely affordable because your dollars go so far for attracting uh Filipino talent into your business, including in a situation like this. If you want to get on a call with them, go to moveupplychain.com or follow the link in the show notes to this episode.

Movesupplychain.com to get on a call and see if they can help your business today. Even Even Patrick Kadoo, my my COO, right, built and sold supply razors, he built that business and sold that business. Again, that's the if you go all the way back into the archives of the Interfaires podcast, I think the very first episode on my podcast feed, it's not even on YouTube um because I wasn't putting on YouTube then, but is is my interview with Patrick when he sold supply and that was in 2022.

And that episode, you know, he talks about that, you know, it wasn't like it was like a $100 million company when he sold it. It was a good outcome at the time, was a life-changing outcome for Patrick and his family and all those things, but it's not the biggest business you've ever heard of, but it was a really good outcome. You could talk about Common Thread Collective. Common Thread Collective, again, another brand where Taylor and I talked about them, you know, um, uh, selling a majority share of the business and to somebody else.

So, having an exit basically incredible outcome. Well, look, I when I was working with when I started in e-commerce in 2014 with Taylor Holiday and others, Taylor was working on the very beginnings of Common Thread Collective back then. So, it's at least a dozen build to get to this kind of an outcome. And as Taylor said on the episode with him, getting an actual exit uh for your business, selling your business is like a 1% of a 1% outcome for businesses.

Like it's it's or or whatever it is. It's a very small number of businesses actually get to that kind of stage. So it's a surprising and remarkable outcome and it happened over 12 years like just statistically probabilistically it just doesn't happen for most businesses. Okay. And so that the point of this uh the point of this is that reasonable ex most of the great businesses that I look at look at admire the most and I'm closest to have built steadily over a long period of time.

It didn't happen overnight no matter what you read on Twitter. There are counter examples to this and I I think it's and it's important to talk about them, right? like uh like there are rocket ships that truly are rocket ships and I've had many of those people on my podcast and talked about with them about what makes their businesses so good so fast. Some of them by the way are capitalized extremely differently than your businesses, which is really important uh as as part of this discussion.

But like like you know the rocket ship story is a real story. And so I'm not saying you shouldn't listen to that. I'm going to continue to interview those people because a lot of those people are having sort of best-in-class outcomes in amazing ways and and there are things to learn from them. But um but the thing about rocket ships is that when they blast off and launch into space, it's amazing. It's visually stunning.

It's powerful. It's incredible. But we also have to recognize that the attempt to blast some rocket ships into space occasionally leads to exploding rocket ships, right? And and maybe in our space, if we look at that analogy more, it's more than occasionally. And in fact, again, to use the example of born primitive that I mentioned before, where bears talked about this a little bit, the closest they got to exploding was when they started to go try to do something more rocket shippy than their than their uh than their timeline had previously suggested.

Okay. When they tried to go do that, Common Thread Collective tried to mega super fast grow at one point and it almost destroyed the business. Again, go back and listen to my most most recent episode with Taylor uh about it's the the titles like Taylor Holiday sold CTC, here's everything he learned. Okay. One of my most popular episodes ever. Taylor talks about being on the phone with the bank during Christmas break calling like forcing them to decide whether or not they were going to foreclose basically on CTC because they had tried to grow too fast.

It went really poorly in a bunch of different ways and all that. And why why they tried to do that? There's all kinds of reasons they tried. I mean Taylor was just trying to grow a good business like but but like rocket chips explode is the is the point right sometimes okay another one of my recent clients what like thanks to the brilliance of one guy there is rescued from the brink of insolveny okay u but uh but bec and that's because the expectations for growth it here's the reason why it happened the reason why this brand almost was insolvent like very very close uh to to being shut down was because they could not accept a very good outcome in their business because their goals were for a crazy monster outcome.

And so they kept pouring cash into something that was never going to yield uh the out the results they want. They got undisiplined with their growth and that was that. And and so we can and should learn from rocket ships. Okay? But here's part of what I want to say. We also can and should learn from the brand that just got to four million bucks or three million bucks and is steadily growing and is building well and is profitable and is optimizing and is learning and all of those kinds of things.

Those stories are important. In fact, I intend to feature more of them in the future than I probably have in the past. I I I feel a weird thing here, right? because like I know what content of mine gets the biggest numbers or whatever, but I I just think we have to keep highlighting the stories of good businesses built steadily over time and non-kaotically over time because it's a really good outcome. The the the the monster rocket ship story is both rare and doesn't need to be everybody's goal and it doesn't need to be your goal.

And in fact, if it is your goal or or even if it's a informally your goal or sort of subconsciously your goal like I was expressing about my sense of my own, you know, business earlier where it's like suddenly I'm just have this weird subconscious desire to push harder and faster on the business that doesn't come from anything realistic like like it doesn't even come from my values really. It's just like it's just this thing that's there that you should check that in impulse because it's actually super dangerous.

And by having that impulse, you may put yourself into decision-making patterns that are in fact very bad for the business. Now, I'm not saying you shouldn't be ambitious. I'm not saying you shouldn't have big goals, and I'm not saying you shouldn't capitalize on moments when they come. There are times to do all of those things, and I sometimes can be overcautious actually in some of those ways and not react strongly enough.

But, you know, when I look around at really good brands, there's a survivorship bias here for sure. But, you know, as much as you hear about this like concern of like, oh, competition is going to come kill us and that happens for some brands for sure. Um, or you know, the economy is going to change or whatever, whatever reason you think at some point your business is going to just like be in a terrible shape. Like in many cases those concerns are actually uh over wrought.

Like they're not actually as the the a lot of times those things are not actually what happens to businesses and businesses do fine for a long time just growing steadily and especially if you're not trying to grow a $300 million business or $500 million business or whatever. Like it it works perfectly fine to do this. And Sean Sean Frank has said this recently too like most people shouldn't try to build a ridge $100 million plus business.

It's not that good of an idea. Sean is really cleareyed about this. um and and understands that like what he's doing is not the path for everybody. And so, you know, I think I think that's good advice that we ought to be listening to. So, what does this actually look like? What what does this mean? How do businesses actually grow? Because this is where it gets to brass tax. The reason that I think these goals matter so much is because it should by maintaining some sense of realistic um growth for your goal and saying that's good enough.

That's good enough for you. like it it should hopefully put you into directing your actions towards the things that matter most. So at AF Growth, right? Like we're talking about like building really good process and product, not just chasing revenue. Okay? If we wanted to grow faster, we would have to blitz through our training, our recruiting and training process to hire more strategists. We'd have to blitz through our onboarding process for those people and for our and for brands.

We'd have to go set up a big a big giant, you know, uh sales blitz as well, right? where we'd have to go try and get a bunch of new brands, solve a bunch of problems as they come, etc. And almost for sure, we would make our product worse in the process. Now, again, there may be times where it's worth doing that or investing a bunch of capital to do that and hiring people or whatever. I probably honestly I'm just not a skilled enough entrepreneur to go build that way.

And this is another thing that's underrated here. Some of the brands that are like blitz scaling, you know, that are just rocket ships, to keep using that word, are run by people who are more talented than you. And that's all right. They're more talented than me, too. you know, I'm just not really that good of an operator uh to be able to go and like build this massive thing on top of the fact that I just don't have the ambition for it.

And and so again, it it can be okay to do that and to recognize that the talent level is different. I I Sean Sean Frank's a great example of this. Like when I listen to that guy talk or even Taylor, like they just get it. They live and breathe this stuff in a way where the reason they're so insightful with their content all the time is because they're smarter than most people, you know? They just are. They're really good at this kind of output and they understand it and they're able to think really clearly about their businesses and about the sort of macroeconomic moment and they reflect on those things really well and that stuff shows up in their business and that's hardearned.

It's partly just uh you know instincts and intelligence. It's partly hardearned over a bunch of years working at it etc. But you should just recognize if you whether or not that's actually you and it's okay if it's not right. It's okay if it's not where you are and there's some sort of honesty about that and you can build a great business without going to those kinds of lengths and those kinds of heights. There are a lot of reasons you should consider switching your customer service help desk software to rich panel.

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But it just does it's not just that. It's not just that it's cheaper. It's also that it is a really great piece of software. So they also see an average of 30% reduction in customer service tickets. That's because their self-help customer service portal is so effective at getting customers answered to their questions in part powered by AI because Rich Panel was built from the ground up with AI. They didn't incorporate AI into legacy software.

It's an AI first piece of software. And uh and that is really critical because if there's any part in your business where AI can make an immediate impact and you just know right away you should be using AI to make the experience for your customers better and to make your costs go down, it is in customer service. so clearly and obviously a place where AI can make a big impact fast and rich panel was built like I said with AI from the ground up and that's why brands of all sizes are using it and using it effectively including very large brands like um Ridge and like uh Pila and Lomi businesses that are frankly probably much bigger than yours right uh on top of that rich panel also promises to get you transition to their software in two weeks they know you don't have time to waste on this especially this time of year so you can go do that and it can make a big difference now you're about to go into Black Friday Cyber Monday where very likely your ticket volume is going to spike.

Now is the time to do it before that happens. Get those customer service agents trained. Like I said, in two weeks using that software before that bill gets to its biggest point of the whole year. Go do it right now. Go to richpanel.com. richpanel.com. Follow the link in the show notes to do this. Tell them I sent you. Richpanel.com to get started with it today. So, what does it actually look like? Like I said, I I think when I look at the businesses that are growing consistently and steadily over time, adding a few million dollars a year in revenue, growing steadily in profit, getting that profit percentage up, here's what I see those brands doing.

Okay, it is not actually primarily unlocking funnels with new ads and new landers, etc. I I really want to maintain a focus on that. I mean, at AJF Growth, we're we're working really hard to create high converting ads and offers and things like that for our clients because we think we can make an impact on their business there. But I but I'm just telling you when I look like commitment to great product and and commitment to your customers is like it just really goes super far in this.

It really really does. I just watch brands that do that well do great. I I I just recorded an interview. It isn't out yet, but um with the CEO of Fier Cosmetics, which is actually a brand I'd never heard of, but our friend Sam Mendlesson connected us. Stan Carnett is his name. And I was so struck by the commitment that this brand had to like really caring about and serving their customers, doing really rigorous testing with their customers on new product releases because they he cared so much about and the way he said it was not betraying his customers trust.

You know, that shows up in your P&L and it doesn't happen at rocket ship speed a lot of times, right? It happens actually more steadily over time. So commitment to your product and customers, it's so easy. Again, great brands that I look at just like relentlessly care about this. They think about it all the time and they just constantly think about how do we make a better experience for our customers at the level of at the level of product.

Sometimes people will say you know oh your package your package is the only um is the only thing you do that has a 100% open rate as it and then the implication of that they draw is like make better packaging. It's like well maybe but the actual implication of that is because the customer bought your product and wants your product. So the real implication is make better products, care about your customer experience more at the level of the actual product because that's the thing that they care that's the central to the relationship and it's central to the transaction.

So um so do a great job there is really really helps. I know that's obvious but I'm just telling you makes a really big difference. Um secondly, developing new products. This is another muscle that I've talked about some, but that I think really is important that for many, many brands, the continuing work of product development. For one thing, it actually does help with this element of making great products because the more you develop new products, the better you get at it.

The more you understand the process, the more you can um think through what's actually happening at every level of your supply chain, your suppliers to your suppliers, all those things, and how to each element as you pick apart the bill of materials, like you know, all of the different things that are going into your product and making it good. like each time you go develop more products, you're going to get better at it and you're going to get better at making products people like and understand how to release them better and all those things.

So, it's a muscle that builds, but also it's a way to reach new people in your business. And the thing about developing new products is it's slow. Again, uh to preview this episode with Dan, you should subscribe, by the way, wherever you're watching or listening because this is a really good conversation with Dan that you're going to want to hear from Fier Cosmetics. He mentions in that episode they have 20 new products in development right now.

Okay, 20 new products right now. And he said it's because it's a very long process. We test rigorously. We care about it a lot and so we just have to get the the pipeline going early and that's how we do it. Somewhere in there great brands seize moments but they don't overlever themselves. So they care a lot about maximizing key moments not just sort of uh endlessly iterating on their evergreen creative but actually maximizing key moments right and at the same time they do that without sort of betting their whole business on it.

I've watched bad operators with too big of goals go and try to like go make BFCM bigger than it needs to be instead of instead of be okay with having a very big BFCM but not necessarily truly maximizing the reach and the volume because it would be too risky on inventory buying or something like that, you know, or go sell a bunch of product you don't actually have, put it all on pre-order and piss off a bunch of your customers because your goals are just like we have to go bigger bigger bigger bigger bigger.

Like it just that just doesn't serve people very well. And often what happens there is it hurts uh your brand's reputation and it can actually be something you can't get out from under. So uh so seize moments but don't overleverage yourself. There's a there's a way to do that with excellence but not overlever yourself. Like I said, resisting shiny object syndrome was another part of this. It's like be careful about how much of my podcast you listen to or watch of X you read of um you know whatever whatever forum or whatever group you're in you you read and and keep an eye on because uh you know just just notice just try to do everything you can algorithms are going to float the most impressive stories uh to the top more more than uh than uh probably they should, right?

Uh this is where actually forums can be really really helpful like my friends at workspace 6 or something like that because it's going to give you a broader view of what's actually happening in industry than just the stories that get the most replies on on X where the algorithm gets a signal of engagement. Okay. If you go on X right now and say we built a $3 million business and we plan to grow by by uh 50% next year.

Nobody's going to be amazed at that. You know that you might even hear that and go really only grow 50%. Like it's like yeah but but that actually might be the path to doing that steadily in your business that really really works. And so might be the path you should take and can actually you keep doing that kind of thing year over year over year and you can build a great business. Once again then some of this just comes down to math and the the little phrase I like to use so often which is P&L design.

Okay, how do you build a great e-commerce business? Like your CAC as a percentage of revenue going down creates more profit in your business or allows you to invest more in growth, one of the two. Okay, so you can actually speed up growth over time. Part of the way that happens is that returning customers become a larger and larger pool of your revenue. And that's a function of time. Uh the the more returning customers you have as a percentage of your revenue, the less you're spending on CAC as a percentage of your revenue.

Those two things go hand in hand, right? Because you're mostly spending ad dollars on new customers mostly. And therefore that creates margin expansion in your business. And that's a factor of time. So let that factor of time happen. Uh let let yourself get there. Um, another thing is like, you know, hammering away at your supply chain and and financially engineering it. Again, this is not going to happen overnight, but like hunting down great suppliers.

Work with my friends at Move Supply Chain. Like, go go go like source additional suppliers, get backups to your suppliers, get the bill of materials like Roman Khan talked about on my podcast a long time ago and absolutely uh like uh what's the word I'm looking for? Interrogate it, right? Understand your suppliers to your suppliers. All of that stuff. Go to China, fly there yourself, right? right? Or send a representative from your team.

Like those things all again take time and they take relationship building and they take effort and they take size. The bigger your business gets, the more uh leverage you're going to have with your manufacturer and the more your value you create for your manufacturer. And so the more your relationship can grow in those ways, you can get longer terms, all those things, maybe you can spin off more cash. That takes time, but it's the it's the hard work of building a great business.

It's unsexy work, but it but it really is a huge difference in e-commerce because of the way that inventory eats up cash in an e-commerce business. Okay? And of course, keeping your opex lean. Uh, keeping op your opex lean sounds really easy in theory, right? Just don't overhire. Don't get too much SAS uh that you don't need. You know, don't pay for too much SAS that you don't need. Hire, you know, work with um hire remotely.

All those things definitely help. But do you know what you also have to do to keep your opex lean? You have to build good operational processes. And I can just tell you as somebody in a business right now that is thinking a lot about our operational processes. and in fact that operational processes are core to our business and to how we create value for our clients. It's hard work. It doesn't happen overnight. The promise of AI is awesome and it's real and there's going to be all kinds of ways that AI keeps helping your business.

But I'm still not at a point where I can just like natural language prompt AI. Please give me all of my spreadsheets now, you know, every week at exactly this time and it works. Like if you're going to go build that AI workflow, it's going to take some time. If you're going to have somebody else build it for you, you're going to have to show them what it is and document it and all those things. All that stuff takes time.

If you're going to implement EOS, it requires a bunch of work and effort up front. All those things matter. And so, if you're going to run a lean opex, you can do it, but it takes time and continued effort. And so, the point is all of these things in the design of your P&L, they matter a lot in creating the kind of business you want to create. And yet, at the same time, none of them happen fast for most businesses. For most businesses, they don't happen fast.

And so you shouldn't if you give yourself a long view of success in your business and you can think I don't have to win today at this crazy scale. If you can think about that, you'll give yourself the freedom to behave methodically and deliberately around optimizing the business in the way that you ought to business over a the way you ought to optimize it over a long period of time. And if you do that, you'll set yourself up for a really for a whole bunch of success and for actually having a great business that's really profitable whether you keep it or whether you sell it.

Okay? That spins off a bunch of cash over time. Again, actually another way to spin off cash in your business is to not grow too fast. Okay? Uh because fronting cash for inventory is really expensive if you're growing too fast. Uh in all of that, this is the point that I'm making, right? It's not just good for you emotionally and psychologically to have reasonable goals, though I think it is. Okay? Um, it's good for your business.

It's actually, I think, good for your business. It's when you get outside of realistic expectations and goals for your business that you end up making a bunch of bad decisions. And as much as people express fear that if they don't keep the pace growing incredibly fast, things will fall apart and they'll miss the moment, they don't express enough concern that if they go too fast, uh, that they will break their business or that they'll never be satisfied because they're going too fast and they're not actually reflecting on what their real goals are.

They don't really think of those things. Here's the way I here's the way I think about this um for AF growth and the way the place that I've come to and the goals for our business and and also for for Resolute the the e-commerce brand that I'm starting. Okay. Um the one of the core things that's happening for me personally is I'm really actively trying to think about I'm not always great at this but I'm actively trying to think about keep in the center of my target here the idea of growing the business from a place of contentment not from a place of discontent.

And what I mean is right now I have this amazing life where I have a family that I love and I my job makes plenty of money like you know we're taking care of our needs are there. I have great friendships. I'm involved in my community here in ways that I care about that I love. I don't work a bajillion hours. Um it's great. My life is awesome. So why do I need to grow a really really big business really really fast? Well I don't I don't need to.

And so I can practice joy and contentment in the business right now. And what that frees me to then do is approach the business that I have from a place of the pursuit of excellence and the pursuit of growth and wisdom. Uh which is something that matters to me. Like I I think that uh doing the hard work of trying to grow a business will form my character and form my um form form me into the kind of person I want to be.

It will help me develop skills that will help me navigate life as I continue to age. Right? I'm 41 now as I continue to look towards the second half of my life. Like by by caring about these things and doing these things well, I will then have all kinds of outcomes. It will produce additional financial uh outcomes for for me, right? Uh and I don't the point is not that I have need there, but the point is that I can do these things in ways that are important to um to all the things that I actually want and care most about and produce the most joy in life.

But because I have a goal of optimizing my life for joy, I can ask the question honestly, do I actually have that kind of joy and contentment now that I really want to have? And if I do, then what is actually motivating me to grow the business? It's not discontent. Uh it's not a I'll be happy when my business gets to X amount. It's instead a sense of okay, I care about doing this thing well because I care about doing anything well. and and so I'm going to hold myself to that and hold put myself in accountability with Patrick and with and with my team and I'm going to create opportunity for my team members in the Philippines and and and in the US and and those kinds of things that are values of mine that I care about.

If I do that, then my re my expectations become reasonable. The the work itself produces all kinds of value in my life beyond just financial and uh and it becomes a goal that I can really get behind. And at the same time, it's not it it makes it so that I don't feel this need quite so much to say, "Come on, Patrick. We got to go faster." Instead, I can say, "Uh, no, we're growing at a good pace right now. We're going to do as good of a job as possible.

We're going to serve our customers as well as we possibly can. We'll make mistakes along the way, but we'll care about them in the process as humans, as businesses, and everything else. And and we'll just do a great job." I think I think what will happen is that I will be more joyful in the pursuit of growing my business. I will have the kind of life that I want. And critically, I will grow a better, more durable, more valuable business along the way.

That's the bet that I am making. I think it's the bet you should make, too. All right. If you liked this episode, you should subscribe wherever you're watching or listening. You should like it wherever you're watching or listening. You should leave a comment. Tell me what you liked, what you didn't like, argue with me, yell at me, tell me why my goals aren't big enough, whatever you think. It' be just fine. or you can email me directly at podcastfgrowth.com if you do want to work with us when we open up for adding new clients in our uh growth rate with with our uh manageable and uh only semi-ambitious growth rate.

Um you can do that. That'll be next year. We'll start taking on new clients. Uh so you can go to afgrowth.com, fill out the intake form. We'll get a conversation started, talk about whether or not we're a good fit. Um and and I may have a a good recommendation for you. Even if we are not, I'm happy to refer out to other agencies that I trust. Uh there's plenty of fish in the seat. So, afgrowth.com. Like I said, fill in that uh intake form there.

Give me a little bit of information about your business and then I can uh get talking with you about that. Uh you can also reach out to me on XA and Ferris. Would love to hear from you there. Love to have conversation publicly with you. Um I think that's pretty much everything. Oh, I've got so many good episodes coming up. I might my calendar is probably as full right now as it has ever been in the history of my podcast with great um great interviews on the docus.

I've got Taylor Holidayiday coming soon. I've got Jordan Menard coming soon. I've got um Katie Mari, the founder of Kaden Lane coming soon. Um just a whole bunch of really really good businesses. Those are some big monster businesses. Uh and and I've got a bunch of other ones as well that are that are more um uh middling sizes in in keeping with this episode. So, uh middling sizes, there's like still mid figures. They're monsters.

But uh but really good businesses built over a long time. The kinds of businesses that I'm talking about in this episode that have been really effective. That's it. You know how podcasts work. You know where to subscribe. You know how to do things like that. Let's be done. [Music]