Guillaume: Hello everyone, Guillaume Le Tual here, host of the E-commerce Wizards Podcast where I feature top leaders in e-commerce and business. Today’s guest is Vinnie Fisher, CEO of Fully Accountable. He’s a very accomplished entrepreneur. He’s built some eight figures health company and almost nine figure web hosting company called Brain Host. He’s also the author of The CEO’s Mindset book and another book called False Profits, which you see a copy in the back if you’re in the video version of this podcast. Today we’ll be talking about a few different topics, some very interesting things for sure. We’ll start with what’s the difference between regular accounting and e-commerce accounting for a merchant to be more successful and how this can benefit an e-commerce business. And we’ll be talking about a lot of other things for sure as well.
Before we get started, we have a few things. First, I want to give a shout out to John Corcoran of Rise25 Media because he introduced us, making this podcast today possible. And the second thing, this episode is brought to you by MageMontreal. If a business wants a powerful e-commerce online store that will increase their sales or to move piled up dormant inventory, free up cash reserves, or to automate business processes to gain efficiency and reduce human processing errors, our company MageMontreal can do that. We’ve been helping e-commerce stores more for over a decade. Here’s a catch,we are specialized and only work on the Adobe Magento e-commerce platform. We do everything Magento, support, design, development, maintenance. If you know someone who needs Magento services, we got their back. Email our team, [email protected] or go to magemontreal.com.
Alright, so Vinnie, thank you for being here today.
Vinnie: Thanks for having me. Your energy is amazing. I love that you have this show and I love the Rise25 guys, I’m so thankful we got connected. Thanks for having me today.
Guillaume: Please tell us a bit about yourself. You have a very nice resume there.
Vinnie: Yeah, I’m most proudly a husband of 26 years to Debbie, we have four beautiful children. I’m sure every dad says that but I’m like glowing. I’m raising little adults right now, 14 is the youngest up to 20. I’ve been joking lately that my full-time job is being a dad and my side hustle is running our eight-figure enterprise and so it’s just been that kind of life. I live in this e-commerce and digital world. I’ve had the wonderful privilege of having a few enterprises that have done quite well. I broke one tragically in front of the world and wrote a book about it and I sold one and here we are doing it again.
Guillaume: Okay, very interesting. Family, life balance, maybe we can even talk about that later on, would be definitely worth it. Let’s start with what I said would be the main topics that we fulfill that part of this discussion here. What’s the difference between regular accounting and e-commerce accounting and how can this benefit an e-commerce business?
Vinnie: When I got rolling and selling products, I started as in your intro, I did web hosting and it was selling really more of a service. It didn’t actually have a physical product, the physical product was the server. But when I moved into e-commerce, consumer packaged goods, we ship a lot of things and we send stuff to people which is natural, but in order to make those businesses really work effectively, you’ve got to have some volume coming through the doors. In order to withstand the cash flow needs and the acquiring of the customer, there’s so many transactions that fly through the door of that type of business. When we were running our health company shipping out hundreds and some days thousands of bottles out across mostly North America. There were so many transactions going through that.
Accounting and finance as we knew it, didn’t have the technology or the tools to really allow us to effectively operate the high transactions business with getting information as close to the day we needed it to make some decisions. When I looked into the industry to see if that even existed, it didn’t. I was like I’m a problem solution marketer, I needed to solve a problem I had. So, we set out to solve that problem and next thing you know, we start doing it for other people and here we are in our 7th year and we’re like this overnight success.
Guillaume: Eight years in the making overnight success. I like overnight success, always like a full lifetime of preparation as an entrepreneur and then overnight success. You are bringing up some very interesting points, it reminds me of something I was impressed with when I was on a cruise ship.They have like 6,000 guests and their accounting is done daily. And at midnight, they adjust a special thing and by 2:00am the next day 6,000 guests’ accounting is done and it’s perfect. I always thought this was an amazingly well oiled machine. What you’re telling me here is that when you’re scaling up in volume with your e-commerce store, you sort of have no choice to have better accounting, because otherwise you might be headed toward a train wreck, and you don’t even know it.
Vinnie: Yeah, the sad stats are 82% of companies closed for poor management of cash flow. When you’re running blind in a high transaction business, when the furnace breaks, so to speak, you don’t have the cash reserves to withstand the heat. When you’re running blind, you might make it, but the odds are extremely against you, because it requires such fiscal management. I was running our health company we had about an 8% profit margin, then when I found out we should have been around 20% to 23%, I became this ferocious animal who wanted my 14 points back.It wasn’t really about the eight, we were a razor thin margin. We attacked the leaky bucket, because we got real information. I didn’t need to be a financial expert, I just had them. But that gave me access to dollars and cents every day. So that we can drive down our acquisition cost, manage our inventory, and battle against acquisition cost of other competitors for just getting our good product out into the marketplace.
Guillaume: Okay, let’s talk about that because that’s very interesting. You gave a very high level, super quick overview on this. But going from 8% profit to 20 something is huge. You mentioned fixing the leaky bucket and a few things. Let’s talk about that, let’s share a bit about this life story of yours. How did you bring that company from 8% profit to 20 something?
Vinnie: I wrote a book about this, and all of our guests, whether they’re watching or listening, I want you to know that, go ahead and pay attention to our discussion. I also want to give you a whole set of gifts because the difference between me and you is that I just have a whole team that does this. But you can do this, if you want to invest the energy. I want to give you all the resources to do that, including something I’m going to mention in our books. If you go to FullyAccountable.com/ecommercewizards you will find all the stuff and access to all of our materials, or ask dropping your emails, so we can get it here and we’ll figure out a way to get you any of the information you want. But one of those things Guillaume, is I wrote a book called False Profits. The most important chapter, every book has a chapter, is chapter two, and I call it solving for x. I reversed the formula, I started and found out whether our health company should be benchmarked against the industry. A benchmark is like where you stand against yourself and everybody else. I found out that the type of model of business we were growing, 22% was the margin. I took that and ran it through a formula called solving for x. I kind of scratched on a little notepad, I really wanted to know what’s it going to cost me to actually get traffic? What’s it going to cost for me to get the bottle in my hands to ship it to you? What’s it going to cost to have the lights on?
I got all that information, and whatever was left between my margin, and what I actually had left is what I could spend to acquire the customer. So that became the variable, my cost per acquisition became my variable, not all the other things that look more like fixed cost. When I started running the business like that, everything changed. We actually achieved that 22% margin, we actually had a business that wasn’t razor thin on cash. We had just enough cash coming through back then before all that but it was actually not that much fun to run, it was hard. It was wakeup nights wonder if you’re going to make payroll. As soon as we really started plugging in holes in that leaky bucket, because we managed it from the bottom up, everything changed for us. We just felt this massive burden to start doing it for everybody else, this business is fully accountable. We help a lot of people, it’s hard because we’re helping people with cashflow problems and growing amazing businesses but I wouldn’t want it any other way because we’re helping a lot of companies.
Guillaume: You’re talking about something interesting here. The cost of acquisition for customers became your variable, you said that changes everything. What was the variable before that?
Vinnie: Whatever I needed it to be. Most of the variables honestly were cash on hand. Who could I pay? What vendor could I do? The variable was do I have enough inventory? Instead of making things that were constant, I knew how much I was paying for my cost of goods, how much it was going to cost to operate the fundamentals of the business. Once I realized that in this solving for x equation, I found out that for that model, that 40 cents of every dollar was my magic number for what I could spend to acquire the customer, I found a lot of cases where I was spending 52 cents on the dollar. In some cases, I was spending 34 cents on the dollar. But as soon as I removed everything above 40 cents, I found out I was just chasing revenue that wasn’t helping us. Actually, that became like our wall, when we made that our wall, and we had to have a justified reason as to why we would spend above 40 cents of every dollar to acquire the customer, it actually allowed us to have sufficient margin to operate the rest of the business.
Guillaume: Totally makes sense. Let’s say you are shipping your product or even if you’re a service company, you have to pay salaries, or you have to pay the physical goods, you need the margin.
Vinnie: Benchmarking is the key there which is why I spent a lot of investment in building out our enterprise software for Fully Accountable, because what we do is we benchmark the company against itself and against its industry. So you know where you stand and you see where you are spending dollars the way you design your business? And how can you change those things? Because if you can actually focus on those elements, you can massively impact the overall net income of the company.
Guillaume: Okay, you said that in your business, the benchmark was 22%. I’m guessing this is net profit after taxes before any kind of interest and all that stuff?
Vinnie: Yeah. We would say net income. I’m not referring to [inaudible-00:11:30]because that has some add backs and some other things. But what we would shoot for, is raw, good old net income at the bottom at 22%.
Guillaume: And that’s what’s left after paying taxes?
Vinnie: That’s correct.
Guillaume: Okay, do you have top of mind, a few other industry standards like this?
Vinnie: Yeah, every industry has this, that’s the beauty of it. Stats exist, you don’t have to guess at this, eat until we’ve gotten quite good with hundreds of companies that we were able to internally benchmark based on your category. If you’re an agency, no different than what you guys do, we would know how your agency is modeled. From a margin standpoint, service companies have a different structure and their net margin product companies by category. If you’re just in a marketplace like Shopify or Amazon, you have a certain margin different from them if you have other channels in the way you acquire customers. So each type of model in the category they sit in, for example, nursing homes have razor thin margins at like 5% and you can go all the way up to service companies that are north of 35% in their margins. You have these ranges that exist, but you don’t have to guess, it exists. The competitors of where you live in your industry, those are all real benchmarks.
Guillaume: Let’s talk a bit more about this because if you start from scratch, truly reaching seven figures is one hell of a journey. I remember it took me like a decade and it was painful. Let’s talk about that journey from seven to eight. You got me intrigued, what are the key things in your personal experience if you share some of your personal stories, were the key factors going from seven to eight?
Vinnie: A good thing for our audience to know is 6.94%, that’s the number tracked of the amount of businesses out of all of the 28 million active ones that actually get to seven figures of revenue a year. Less than 7% of companies make it to a million dollars. That’s a big deal. Anyone who’s trying to do the work to get there, I’m not trying to skip over the 93% of companies that are trying to get to that number. But the discussion for the people who are looking at seven figures and wanting to get eight figures, there’s two things. I think it’s fair to say going from zero to seven figures, it requires an irresistible offer where the marketplace has proved that they want your product.
When you get into that seven-figure category, you have an offer, just like Fully Accountable that people want, and it’s growing. And then you have to shift as the leader and change a giganto habit. You hear people talk about this, but the reality is, the offer is established, you have lots of customers, if you’re not doing that kind of revenue don’t. In order to get from seven to eight, it has to switch to the people internally and the processes which you run as a company. Each stage from 1, 3, 5 up to 10 million all of the improvement, the process, organizational improvement that has to happen within your people and in the way you run and optimize your business is actually the core focus. Because the reality is, as you continue to improve your service offering or your product, you have already established that customers want to buy it. Now, in order to stick around and really be able to get to that eight figure, it actually requires you to do something you may not have signed up for as a leader. I didn’t first time, it was actually work on improving the business itself, not on necessarily adding more clients.
Guillaume: Okay, and let’s look them up in whatever way you want, say1 to 3 million, 3 to 5, whatever split you want. If you recall from your own story of personal growth of the company, what was the focus when you went from 1 to whatever number you want?
Vinnie: 1 to 3, it’s a big deal. You start adding personnel, and you start adding some real numbers there.Whatever things you bought, cool, they were there for your people.Get to things you run up against, either the people you hired, were they running around helping you get your work done, and you might you might lack some talent on your team. Or you might have to add some talent, or you might have to upgrade some of your people, they might have not been able to grow with you. So first and foremost, usually, it’s not a systems problem, it’s usually a people problem. What happens is that kind of scary range where salaries are expensive, and people are expensive. In that 1 to 3, most people run into a people problem first, then in there, you actually have to make some investments, because the system you run is probably being held together by duct tape and gum, and your systems are going to start to stress out when you get near those $3 million range. We didn’t do the same thing, we had to kind of grow up into another system and that actually happens again, at $5 million. Your talent level has to continue to improve.
For us, we spend our energies continuing to train them, even you guys do in your organization, stick to your industry because it gets a lot easier to train the people around you when you only do Magento.It gets a lot easier to train somebody, one.Two, you can develop that expertise. Three, you don’t have to go chase a whole bunch of resources that otherwise you may not need. I believe that niching down and standing for an industry is one of the most cost-effective ways to help an early stage seven-figure company break through some of the most expensive barriers as you reach that $5 million number.
Guillaume: We were talking 1 to 3 million, how much time did that growth take?
Vinnie: It’s funny, you know, that was our hardest jump. But that 1-3, we kept getting up to like 2m and back to 1,000,000, 5,000,00 then up to 2.2m, and back to 1,000,000, 7m and up to two, we had an overhaul of some people at the executive level, we had some overhaul of managers. The part we almost mentally gave up would have been in that one to 3 million range. When we broke over three for us as an organization, five, eight figures, those were different things because we need to invest in it. But we actually stood through the endurance of almost breaking this for us. And I’ve seen it with a lot of companies that 1-3 million is probably the hardest part of business, as I’ve experienced that in the organizations I’ve grown.
Guillaume: Was that even worse than the zero to seven figure, zero to one million?
Vinnie: So the zero to one million is mostly us, the people who start it, it’s our side hustle ability to create an irresistible offer, do you actually have something people want? The value proposition. To me, that’s where all that energy is spent. You’re validating whether you actually really have a real offer, is there a value proposition? To me, that’s an entirely different thing than actually building out a mature operation. I don’t think it’s hard. First, in all fairness, most think tanks will say less than 2% of the time someone hits it with a converting offer 1.8-2% or something. So I don’t want to be arrogant or dismiss how really hard it is to make an offer work in the marketplace to accomplish a value proposition. But assuming that part is met, which is only 2% of the time, the growth part of building the business side is so ridiculously exhausting, especially for someone who may not have signed up to actually operate a business.
Guillaume: Yeah, you often have accidental founders in a way, you have a lot of books about that. The great technician guy or whatever it is. Fine, I’ll just start a business. What are those pounds doing in management over there? Finally, you realize that we’re not that much of a clown over there, it’s very challenging.
Vinnie: You know I don’t say probably someone who’s creative and had the privilege to create more than one working offer for value proposition in the market. But I recognize that that’s a talent and God given talent that I have. I’m so thankful for that. Lots of people have some other talents. But the gauntlet of growing and mature operation, it really takes one secret. If I could give one secret away today it would be, you just got to outlast everybody else.
Guillaume: I agree with that one. Because there’s so many hardships here and there, you will feel like giving up here and there and life throws you a brick in the face. Everybody says it. Great intrapreneur like Walt Disney said, once in a while life will throw you a brick in the face.
Guillaume: And that everybody believed that they just need to not quit. Just keep improving. Keep working [Inaudible-00:20:47].
Vinnie: I know it’s such simple, but really hard advice to follow because every attack comes at you is the responsibility of leading that organization. And so if you’re one of those people listening right now, I just want to encourage you that tomorrow has enough to worry about today. Stay footed where you are, because so many people bail on what they want tomorrow to look like and they forget about it.
Guillaume: Okay, so the power of now, the present moment?
Vinnie: Yeah. By the way, I am somebody whose mind is always worried about tomorrow. And I’m actually worried about tomorrow so much that I’m mad that it doesn’t come fast enough. So I’ve spent my career really, really dialing into the benefits and gratefulness of today. And so I recognize my job is to be a kind of strategic visionary and look at things as how the markets are going to move. And I’m thankful for Debbie, the kids, for helping me stay grounded in the moment.
Guillaume: Yeah, well, everybody has that like a personal path around that. I did like Becker Kelly’s book, and like Michael Singer’s book and so on, did help with this kind of like, to not always be living in the present or the past and try to live in the now. You know, it’s very challenging.
Vinnie: Extremely, for someone the way the Lord built my mind, I am always drifting into the future. I have a great job, kind of not lamenting into the past, but there’s a lot of my friends who struggle with looking at past stuff. And so each of us have where we are, on that. So for someone like me who thinks in the future, I have got to be careful about dreaming, and actually making sure I’m executing and not over-dreaming things that may or may not ever come into reality. And so if I dream too much, I get mad at what we currently have. And for people who are stuck in, some of my team, or even one of my owners, founders, he gets stuck in the past a lot. And he’s always like, well, we’re not going to be anything more than this. And so wherever you are on that, my advice is just stay on it. If people want what you’re doing. That’s evidence and validation enough that it’s working.
Guillaume: Right. And did you implement any kind of operating systems for the business? There are a few out there like EOS and printers operating systems that are scaling up from Verne Harnish who wrote the Mastering the Rockefeller Habits, but did you have any kind of system like this that you sort of implemented in the company?
Vinnie: You know, I came to learn about some of that later in my career. And so what Gino Whitman wrote there to us and what Vern did for scaling up great stuff, I highly recommend all their stuff. I wrote a book CEOs mindset. Well, interestingly, later on, I learned some language that my three owners, me and the other two, we fill each one of the visionary managers in the technician role. So one of the mass of secret weapons that a lot of people who know me are, is I have an amazingly dynamic, CIO personality, that perfectionist. She doesn’t really want to be the one to come up with something, but whatever I hand her, she’ll make it better. It’s amazing. And then my other partner is the technician that we built this around. And so that language that kind of identifies those roles, we just happen to build that around that which started with our partnership. And so we were to learn that terminology later. We just indulged in our partnership then built out the elements of our organization around it.
Guillaume: So in EOS terms, you’re the visionary, your CEO is the integrator that is going to make the stuff happen. And all this is built around an amazing mission that brings forth that technical expertise, or you could have a great scientist and a different kind of business or whatever like that.
Vinnie: That’s right. And so then we would have built out that framework, and then as we were talking about it and doing it and living it out which led to that CEOs mindset. People were like, hey, have you ever read Geno’s stuff or looked at Verne’s stuff. I shared a green room with Verne once as I am speaking, their stuff are amazing and all of that stuff. And if you want, we have our link, you can have our book for free about how I would have walked and built a six to seven to eight figure enterprise in CEOs mindset.
Guillaume: Right. Okay. So you were saying that if we go back to that 1-3 million growth path, that we were talking about. It’s mostly a people thing. And then of course, you have to rehaul all your processes, especially, let’s say a visionary in the business, you might have not signed up for spending so much any hour, just aligning your processes together. Say, I wanted to do the big business stuff, big relationship with the big things happening there. Do you remember any other kind of key elements that you’ve lived, that you’ve implemented, that allowed you to finally get out of that one to 3 million that you found so difficult?
Vinnie: The biggest thing that happened to me is I wanted to be very fair, thank goodness, for Rachel on our team, who’s our CEO, who loves processes, he likes to improve things. So we have a wonderful weapon on our team. But one of the things that was huge for us, this happens to a lot of entrepreneurs, not just myself, when I honestly looked at our business, and why we were being held back, it actually was me chasing some other distractions that looked like good ideas for our business. See, distractions are usually not your bad ideas. They’re your good ideas, dragging you away from your core focus. And so when we looked at our business, and we saw the three or four little things that I thought were clever ideas for our business, and they were good ideas, they were taking us away from our core. I took some honest feedback from the people around us, and then took the maturity to stop those things. That’s when we actually really broke through all that. It was there, our ability to do it was there. And I had to be honest and with great humility that I was on hold at the time.
Guillaume: Right. Generally speaking, almost all the other ideas that you have outside of your core focus are shiny object syndrome, in general, for everybody, I believe for entrepreneurs, but once in a while there might be one of those through powerful synergy ideas, and that’s challenging to know, is this another shiny object or is this truly the next huge synergy to try to build something? But that doesn’t happen often. You see it with Tesla and SolarCity, and then the SpaceX stuff or with Apple, it’s easier to understand you have that whole ecosystem being built. You start with the iPhone, and then maybe you want to watch the iOS, and maybe you want the iPad and the Apple TV, and they’re creating that ecosystem that reinforces itself as it is growing up. But the question is, are you going to truly have something powerful that’s truly going to have synergy like that? Or are you having a shiny object, just distracting you from the core? I believe there are some challenges there.
Vinnie: One of the great books that I would encourage someone who would resonate is the CEO or the founder of the organization is Good Strategy/Bad Strategy by Richard Rummelt, and continue to reread it. It’s really intellectual, it really requires you to pay attention when reading it. But his point is, it was what you made, there are a lot of ‘lasso the moon’, things that happen in a business, as a matter of fact, the opposite is true. You have to guard against chasing too many things that aren’t that. And if you do, you have a greater likelihood of maybe discovering the one or two things that are the most innovative things. And so he gives you kind of a framework, think as that person with innovation inside of your own organization, and it really is a discipline, more than just like this guessing stuff, and so strategy is hard work.
Henry Ford said, you people critically think, which is why it’s hard. And it’s true. And I know my job is to do that. And I actually got rid of what I call Andrew Carnegie’s dribbles of income, and really focused on innovation and strategy. We’re happy it has happened to us right now. There’s a couple things that have happened inside of our business that are extremely innovative. And the stuff we’re doing with our enterprise software benchmarks. It’s going to rip the doors off again, another level of growth for us. And that happened because of taking away other distractions.
Guillaume: Yeah, there’s a similar quote from Napoleon also, I’m paraphrasing, ‘thinking is the hardest of all activities, the most valuable’ something along those lines.
Vinnie: He got that from Henry Ford. Right?
Guillaume: Timeline doesn’t work. He came first.
Vinnie: Henry got it from Napoleon, that’s a good point. It’s interesting how all that lines up, but that goes back even farther than that.
Guillaume: Very likely. And I’m curious about Andrew Carnegie, he said, dribbles of income getting rid of, I didn’t quite get that. Like what did you mean by that?
Vinnie: So interestingly, you know, all of us have seen things like the Pareto principle where you put all your efforts in. 20% of what you do produces 80%. And so what Andrew Carnegie would have added into his thing, there’s always these clever little ideas that are true in business 5% here, 5% there. The mistake is that what we learn as a leader is that those are the dribbles of income that take you away from 80% of your core. So what you have to do is be careful to not let those little dribbles come in and stay focused on your core. And if you can do that, then you have a greater likelihood of having an enterprise that’s not only innovative, but sustaining.
Guillaume: Right. And this is a lot of hard decisions. Because you say, we could be making money with this thing. Yeah, but that’s a distraction.
Vinnie: I’ll give you a great example, my company, every day, we get people that want to sign up with us. But if you don’t fit within the industries we serve, we say no. People are like why would you turn down the revenue? Because I believe it’s what’s led to this amazing growth of our organization.
Guillaume: Totally true. And which industry do you serve right now?
Vinnie: Well, we would say there’s like six of them, but they all fit within this category. We say we speak digital, right? So, e-commerce, also people calm consumer packaged good technology companies, which also do software, tech enabled businesses, and digital agencies.
Guillaume: Okay, yeah, the digital world.
Vinnie: The digital world where we live.
Guillaume: Okay, cool. And if anybody is above the $3 million mark, they’re probably still left there on their appetite, because we’ve been talking about zero to seven figures, one to 3 million, okay, what’s the next one, three to five, or something else?
Vinnie: Some businesses can actually depend on their design goal right in this thing, or three to five and three to ten, they look very similar. So to me, what happens to us now, for the third time there, you probably have to be honest with yourself that you created some innovation, and a runway, where you had a business that gets you to three to 5 million and you kind of possibly ran out of runway. So it’s time to take a deep breath, and look at your business, and understand what things either need to be removed from it.
So that you could actually invest more dollars in acquisition of customers, because you have a substantially working offer. And so adding some new parts to the offering, what’s interesting, big thinkers to set up these 10 year strategic plans. And you know that less than 1% of businesses ever have a 10 year plan, they redo it. And so I think when someone’s crossing over that three and $5 million mark, these businesses are having to look strategically, their marketplace. They’ve learned a ton, and they actually have to reset that strategic plan, probably the hardest thing to do. And it’s the thing that that size of business needs, that’s going to get them up into eight figures and beyond that.
Guillaume: So that your ads are removed from the offerings so that you can truly just scale the vertical of customer acquisition. So if this was a venture capital kind of world, you’d be saying, we’re ready for VC, we’re ready to scale up, everything is in place, the structure, the foundation is in place, now is the time to scale up massively.
Vinnie: Yeah. To deploy capital in the acquisition of your consumers. And so your marginal pick is a hit for a bit because you know, that range in there is your trying to get ahead and buy more real estate of clientele. That’s right.
Guillaume: Right. And also, while we’re talking about accounting today, finances, might as well talk about this as well. Some businesses, especially those that are venture backed like this with huge capital, often appear to be losing money, if you just look superficially at their statements and that they have companies like Lightspeed with a $10 billion stock valuation. But if you do the proper analysis, they’re making plenty of money if you do an analysis per cohort. So you say customers acquired in 2007 [Inaudible-00:34:13] are profitable at that amount, in 2018 by that amount, in 2019 by that amount, but they’re losing money because they know that they’re actually making money per customer or per cohort per year, but they’re just investing like crazy to grab shares in the market right now. And they know they’ll make that money back after.
Vinnie: I think that what principle should be there for us small businesses right there. I actually had the privilege, a good friend of mine, Roland Frasier introduced me to the founder of LegalZoom and I asked him a question. I asked him a question when we were alone and I asked him a question in front of a gigantic conference. What’s more important, growth or profit? His answer was great. He said, if you’re sufficiently capitalized, okay, go for it, grow. Otherwise, everyone else should be focused on profit, because if you’re not, you’re never going to get it.
I think small and medium owners have to be very careful about looking at sufficiently capitalized organizations who are playing such a long game. If you try to play that game with your own bootstrapping dollars, you’re probably never gonna get there, because you’re going to run out of money.
Guillaume: That is so true, makes perfect sense. And growth, especially quick growth sucks a lot of cash, everybody says that. I hear Verne Harnish saying that often the intrapreneurial law of gravity, that growth sucks cash.
Vinnie: We’re about to enter another stage right now, where we know we’re going to have to invest a bunch of cash for this next. We’re no longer the little guy, we can’t play the David and Goliath story. And so some of our next growth will take the deployment of capital and we’re prepared to do that for ourselves rather than really, at this point, looking for outsiders. But you know that at a bigger enterprise, when you want to go play at a bigger level, you’ve got to be able to look longer down the road. And it’s expensive to do that.
Guillaume: Yeah, totally. And what worked at the previous level, like you were saying, will not work necessarily at the next you might need to re-hold the whole ERP enterprise resource planning software, or all kinds of other systems in the business and the equilibrium of what was making you profitable at a smaller team now doesn’t work with all the additional overheads you’re adding, and you need to scale as well your revenue and keep that in balance, not getting a ton of customer anger. So at the service level, of course you stay there.
Vinnie: You take all of that, and then there’s your secret to how to go viral with a video.
Vinnie: I’m just kidding. Like, that’s the reality of the secret to growing a business that’s complicated. And they each have their stages. I love how you framed these questions through that journey. And one of the things I see often from our friends Guillaume is that everyone’s focused on a version of a story, that isn’t the journey there anyway. So try to make sure the season you’re emulating in a company represents where you are not where you wish to be. It can really be hard to get there. If you’re not focused on the current season of what you’re looking at, not season three of what you hope to be.
Guillaume: That is so true. And it’s difficult. And you also need to work on yourself and very likely on your ego as well as an entrepreneur. I remember, in my startup year, I wished to be bigger and more successful and whatever and to be like already three steps ahead of where I was. But the reality was, well, I was a start up, I had not the money yet for an office back then. So I was living upstairs and my living room was transformed into an office. So that was year one then. And it’s sort of to have to accept that this is the stage you’re at. And well, one day we’ll get to the real office. It’s step by step like this to truly accept where you’re at. And to really optimize for this and to work on this, then, like don’t try to flash, don’t try to get bigger when you’re really and all that, it goes step by step into growth.
Vinnie: And all that’s really hard. And everyone is like, you’re the center of the world. Usually as an entrepreneur of everything around you. And you get all caught up in the hype of that, we were rocking with our web hosting company, you got our health company, we were like these little internet rock stars, we were making a bunch of cash flow. You get caught up in your own ego. I’m thankful for some of the massive strikeouts that our public got to see. Because I think I’m acting as a better CEO today than I was capable of being back then with those enterprises.
Guillaume: Alright, so let’s talk a bit about your other business. Because here, you have a service company that we’ve been talking about, that eight figure for a while. And if you’re a product company, it can be quite different with your living. So you said that your previous business was almost nine figures, was a web hosting company, like what allowed you to scale all the way to all those nine figures? We’re quite away from just 10 million a year of breaking the eight figure mark.
Vinnie: Yeah, it needs to be set because everyone thinks there are some other versions of the formula. But if you do not have an irresistible offer, you’re not going to have that kind of growth. Well, we had one. We were able at that time, with that configuration, to build out a web building offering that allowed people to have a real time flat four page site built almost on demand for them. We came up with a tech to make that work in servers before the concept of cloud even existed. We built this round robin thing we came up with an offer to get that website out there. This is before all that tech existed. We created an irresistible offering. What part of a rock do you grab to be safe?
Guillaume: Well, hopefully they sit inside the habitat.
Vinnie: I don’t know, just whatever part you can hold onto. Well, that’s what we had. Like. I don’t walk into a conference room and we are hiring 25 people at a time and we were just going crazy and irresistible. I remember like goal month, we did like 214,000 in sales the month before. And then our goal month we did like 2.8 million in sales the next month. Listen, there’s no system that’s ready for that kind of growth. There’s no bank that likes you. There’s no way to methodically structure a business. And what I learned is that almost all businesses really grow at a two and three acts, aggressive methodology, this rocket ship stuff, that unicorn things, it’s all irresistible, offer things super hard to get. And when you get one, you shouldn’t do what I do and break the company, you should actually run it and hold on. And if you can get there and get out of your own way, because someone wanted to buy it from me. I was just so arrogant. I wanted to take it into nine figures and then in the process [Inaudible-00:41:01].
Guillaume: So that’s the part of the tragedy that I didn’t know about. So tell us about that story. What’s the life story behind that?
Vinny: You know, we were just rocking it. We built some tech that worked, I could get you some fancy programming terms around what was working for us and how we were able to densely put customers onto a shared server and all these cool things that back then weren’t there and I just kind of pulled my own crap. I’m on a list, you can look me up as I bought one of the most expensive domains ever for purchase, and I’m on this list probably forever. We just decided we were [Inaudible-00:41:39] our web builder and go build our path, and then let the shared hosting company be would it be and in all of that arrogance, the board and I was obviously the majority in there, we decided to hand off the leadership of our shared hosting company to somebody else. And in all that, what was discovered was, I really hadn’t worked at building a business around me. I was more of a lever puller than what was realized. And so is the disappearance from my own company. By the time I got back in and realized we were nosediving, what was this great enterprise, I ended up selling it [Inaudible-00:42:18]
Guillaume: Right? So if you were going for the peak, then what would you have done? Would you have sold it when it was worth almost nine figures in revenue? Or do you think you should just have stepped away from management from day to day operations?
Vinnie: I think three things could have happened. I’m so thankful for the one that did happen. Because I’m a far better husband, I’m a far better leader. I learned so much so it was one of the most expensive PhDs one will ever get. I really don’t look back and want to change a thing. But if I’m honestly assessing what could have happened in that moment, I think one of the three things you address could have happened. One, I could have accepted the letter of intent, sold it off for less, took some risk off the table. Two, probably even more importantly, we could have been maturing the operation behind us as we were growing and building stability there. And three, I could have stepped out of the way and actually had some more effective leadership who wanted to focus on item number two. So one if not all three of those things should have happened.
Guillaume: It often happens when the founder goes away it doesn’t mean that this business will go well, you’ll have another apple very often.
Vinnie: It was all my hype in keeping everyone excited through all the hard stuff, when that got removed when I required all that stuff to happen, well, it was parts of the secret formula were fixed through process and improvement. So since they weren’t, what got exposed was a whole bunch of Genie behind the curtain stuff. Even though that ball wasn’t like a week, it was multiple months, it was quite expensive for the cash flow to fix our huge mistake. So this is what started this whole idea of Fully Accountable because we thought we were fine. There were always razor thin margins, but you get long time customers and so we thought we were 5% profitable. But because we were so blind in our numbers, we were off. We were 5% negative with so much cash running through that we didn’t know this gigantic tsunami that’s coming behind us. And so my huge, it’s so huge people don’t even believe me at times, gigantic deferred bill to the IRS is what ate us alive. Now thankfully, we didn’t stiff anybody. We were able to pay all of our bills, but we just ate ourselves with errors.
Guillaume: Okay, so that was a lack of visibility in your true profits. You’re saying like day to day I’m paying my bills, I have great cash flow, but your accrual accounting says that well, you’re going to be hit by a tsunami pretty soon.
Vinnie: Yeah, well, we owed $10 million to the IRS. And like we had business declining because the group that was now charged with doing that had no ability to do that. And I’m off building off another venture with the dollars and I am eking out of that business and acting completely arrogant about the idea that everyone should have a mid eight figure company, and that perfect storm just broke it.
Guillaume: Wow, ouch! And sometimes, there’s like that one idea that now in hindsight is 2020. You see what it should have been. But there’s that one concept called Profit First by Mike Michalowicz, have you read that book?
Vinnie: Oh, I know, Mike and I have been on some shows together. He’s great. I love how he’s helping our initiatives. He’s great.
Guillaume: Yeah. There’s that one idea from Profit First, that they put the profit aside first in the different banking accounts, so you don’t touch the profit. But you do the same with a tax account. So then you take the taxes, and they’re getting out of the checking account. So this way, even if the accounting is sort of a little late, or whatever, we cannot touch that money. It’s just been removed already. And whatever’s left is what you’re allowed to spend.
Vinnie: I think you’re no different than Dave Ramsey, the way he talks about debt. I think, in a very simple sense, what Mike’s helping people see is in the basic function of running your business. Get those things away, so you can’t spend that money. But later on, you don’t get nailed by it. Now, it’s a simple part of it, you got to mature above that as an organization starts to get a little bit more mature. But what a great principle for again, if most businesses never see seven figures, most businesses will never grow out of this simple advice that Mike offered.
Guillaume: That is so true. It is way safer. And some accountants or people will not even understand the difference and what it does change, if you put the expenses first. So if you put the profit first, what’s going to change, it’s going to change everything. Because the psychology of human being we’re not robots. So you’re going to see that there’s no money left, or there is that much money left in the checking account, and that’s what you’re going to spend, because you put the profit in the taxes away, as the first thing that you pay off, and it makes a whole difference psychologically. Okay, um, all right.
Vinnie: You are so fun Guillaume, you’re enjoyable. I can see why your audience enjoys your show. I’m having a blast, so thank you.
Guillaume: Oh, well, thank you. The same here, we’re almost reaching the hour already. Any last thing you’d like to discuss before we finish?
Vinnie: There’s one thing or things that is interesting going on right now, that’s kind of my daily life. You know, before all this, the world shut down, and this health stuff we’re all dealing with. But the online acquisition, and adoption rate to a consumer, most direct response companies and digitally based organizations, were spending so much money to acquire a customer to convince them of adoption to buying on the internet. Well, in the introduction of the shutting down of our world, the consumer through technology was forced, or called, or shown how to buy correctly on the internet. We have sped up five, if not 10 years of consumer adoption on the internet, which is amazing.
And so my bit of advice to my fellow digital friends, before you would spend money just to beg people to show him that buying off the internet is safe. Well, that’s been solid freedom. So now we need to kick into gear as a consumer packaged goods company. There is a thinking that profitability, no longer just getting an eyeball, they already know how to buy. So you need to be focused on the quality of what you’re giving them, as well as the profitability of how you’re acquiring them. No longer you need to convince them to buy from the internet. They already know how to do that. Now your mindsets have to change to do acquisition costs. And really, how do you competitively bootstrap your business and play with the big boys and girls as it relates to competing correctly for your space?
Guillaume: Yeah, I totally agree with what you’re saying. In the first three months of COVID there was 10 years of progress for the normal pace of progress for the industry of e-commerce. So from March 2020 lots of sources that published studies on this including the BDC Development Bank of Canada so the growth for e-commerce was just incredible. So there’s that mindset shift.
Vinnie: Our mind doesn’t think that way. Still have this habit, like I’ve got to convince people to buy on the internet. I don’t do that anymore. It has been given to us and as a result of that, habits have to change. We live this. A great example would be, we provide this outsourced solution, Fully Accountable, and so our number one objection was always, I love what you guys do, we’d love to have that in our building. Shut down the building for a chunk of time, that’s no longer our thing. No one says we need to have that in our building.
So we have to change our thinking and no longer be like trying to defend against that objection, because that objection is gone? Well, when you’re acquiring customers as a product business, you have to get rid of this adoption, objection in your head and your materials. That’s no longer the issue. Now, the issue has to be things like supply chain, make sure you’re managing your inventory correctly, are you really re-engaging your consumer? Because the re-engagement might be more profitable than the primary …
Guillaume: Virtual world, the lifetime value of the customer and so on. Some businesses that accept, go to breakeven with the first one and say we’ll make money on the second order. You need to know your numbers very well to go for that.
Vinnie: Amen there buddy.
Guillaume: Yeah, all right. Well, if people want to get in touch with you, what’s the best way?
Vinnie: You know during all this, we created an email. We carried FullyAccountable.com. And we do care. So go ahead, drop us an email. You know, we don’t work with everybody, but it will help you. If we’re a good fit we’re going to walk you down through our onboarding process. If we’re not, we’ll help land you somewhere and you can just go to FullyAccountable.com and [email protected], you can find us. If you can’t find us, you’re not looking.
Guillaume: Alright. Well, thank you for being here today Vinnie.
Vinnie: Thanks for having me.