Sunday, July 24, 2022
The Path To $100M In Revenue
Growing an eCommerce to $100M in revenue and his plan to sell it for $1B in 2026.
This week's conversation is with Sean Frank, the CEO over at Ridge Wallet, an eCommerce business he’s grown to over $100M in revenue.
To reach 9-figures in revenue, the company used a precise marketing playbook - something very few can do at scale. We explore this playbook during our conversation.
There is a career’s worth of business lessons crammed into these 20 minutes. You could ponder for a month and still have an excellent way to go to get to the bottom of it.
Fair warning, some of the concepts are contrarian to most of the gurus out there. Feathers will be ruffled. “How dare you!” will be uttered more than once.
I would not bet against him. Let's get after it!
In Today's Expert Session:
- Meet Sean: Growing an eCommerce to $100M in revenue and his plan to sell it for $1B in 2026.
- Operator Playbook: A unique take on influencer marketing and the strategy that Sean used to partner with over 2,000 influencers in just 1 year - generating 50% year-over-year growth.
- Portfolio Review: Sean hedges his high-risk equity bet on his eCommerce business with low-risk stable investments - he shares his portfolio here.
- Business Idea of The Week: There’s a huge opportunity to purchase distressed eCommerce assets. If that doesn’t work, you can make Intergalactic Moon Wine.
Video Length: 45 minutes
2015 to 2017 - Developing His Marketing Skills At Hawke Media: Sean started his career at a marketing agency. Although he was only there for a year, this time at Hawke Media allowed him to learn the ins and outs of the agency game and the unique marketing problems that companies face.
Sean soaked up these lessons that would hold him in good stead for the years to come.
2017 to 2018 - Becoming An Entrepreneur & Starting Top Hat Ventures: Entrepreneurs gotta be entrepreneurs, or this wouldn’t be much of a story.
Sean left Hawke media to help start his agency - Top Hat Ventures. This gave him more leverage and increased the value of his skills.
The business steadily grew. They began to make a name for themselves in Los Angeles and built a roster of exciting clients.
One of these clients was a small eCommerce company called Ridge Wallet, which was doing a few million in revenue at the time.
2018 to Today - Building an eCommerce Brand to $100M in Revenue: Here is the pivot point. Sean and the team at Top Hat Ventures were doing a fantastic job for Ridge Wallet. So much so that the team at Ridge wanted their marketing talents full-time.
Ridge decided to purchase Top Hat. As part of that acquisition, Sean took over as COO and eventually CEO at Ridge Wallet.
Today, Ridge does over $100M in revenue and is regarded as a thought leader in influencer marketing.
See that Zoolander-looking fellow below? That’s PewDiePie, one of the most followed YouTubers in the world with over 100 million subscribers.
PewDiePie is so famous that Google Docs knows how to autocorrect his name. That, my friends, is when you know you’ve made it.
When 100 million plus followers see their favorite influencer holding the Ridge Wallet, it becomes a force multiplier on steroids. Sean took influencer marketing and turned it into a core strategy. Then, an art form.
The Influencer Marketing Playbook:
Sean built a $100M+ revenue business through continued marketing experimentation. Something that has worked exceptionally well for Ridge is partnering with influencers on YouTube.
In 2021, he partnered with over 2,000+ influencers, generating tens of millions of dollars in revenue for the company.
In this section, we’ll cover the strategy & tactics behind this playbook.
The Strategy Behind Influencer Marketing
Unlike Crypto, NFTs, gambling, or info courses, the Ridge Wallet is a real thing. Influencers can hold it in their hands and talk about it. Live. While other people watch them.
What used to be known as a commercial now is known as “influencer marketing.” Foundational principles never change because, well, they are foundational. If you have a flagship physical product and aren’t using influencer marketing, you might be living in Q1 of 2015.
It's essential to recognize that influencers are a top-of-funnel play. Meaning you should treat your campaign the same as you would Facebook (Does anybody other than Zuckerberg call it Meta?) ads or other paid social media advertising.
Think of your marketing spend as 1 to 1. $100 Facebook ads are the same as $100 influencer spend. Analyze the metrics the same way. CPM cost per 1000 views is a helpful statistic, for example.
The Step-by-Step Tactics You Can Use:
1) Picking The Talent - This is the tricky part. Sean didn’t start his influencer marketing journey by paying millions of dollars to partner with the world's biggest names. He started small, working with influencers in his niche - the folks he liked to watch.
View this as a test. Pick 2-3 small channels (micro-influencers) with 100,000 followers or less that fit your product's niche. This small handful of influencers will give you a few data points to compare your results (e.g., This influencer phrased it this way, which led to different results)
Once you have your ideal influencer avatars picked, you’re ready for step 2.
2) Authentically Reach Out - All influencers want multiple income streams of income. They don’t want to depend on the ad revenue from YouTube alone. Give them what they want.
Your approach can be as simple as a DM or comment on content. If you are already a fan, you will know the best touch points to open lines of communication.
Reach out to them and let them know that you’re a fan of their work and believe their audience would align with your company's mission. Extra credit if you use words like “pay upfront” and “long-term partnership.” These phrases are influencer catnip.
3) Develop A High-Converting Script: It’s essential to give your influencer a few bullet points to drive the value of your product or service, but provide them with the freedom to make it their own.
For example. This is Marques Brownlee. He’s a YouTube influencer that discusses new consumer technology to his 16M subscribers.
During this feature, Marques uses phrases like:
- “This ain’t your dad's wallet?”
- “Folding wallets of the past look and feel ancient”
- “Lifetime warranty - you can buy 1 wallet and carry it for life.”
These terms were provided to Marques on a script. But Ridge trusted him to put them in his own words and make it feel authentic.
Authenticity is KEY.
4) Create Long-term Partners - This is how you supercharge your strategy. If the first partnership drives results, double down and get influencers integrated into your marketing. Scale alongside one another.
5) Be Aware of Your Reputation - The community of YouTube, TikTok, Twitch, and Facebook influencers is small. If you can cultivate an image of fairness and a roster of clients you’ve worked with in the past, you will stand out.
In short. Be nice. People will notice.
3 Key Principles To Building A $1B eCommerce Brand:
Principle 1: Ethos First, Channel Expansion Second
You can have the best distribution channel in the world, and it will not matter if no one buys your product.
Sean talks about YETI as a primary influence on his thinking. No one ever thought people would pay over $200 for a cooler. But they do!
Sean points out that YETI initially targeted the tier-one hunter survivalist-types first. People needed an industrial cooler that could survive the elements. Once Yeti won over this audience, consumers who wanted to emulate these survivalists also began to buy their coolers.
High-level Ethos, or Radical Brand Identity if you are the business school type, naturally expands the customer base.
Sean also admonishes entrepreneurs not to buy the “Direct to Consumer” hype. Removing the middleman is not a strategy. It is a tactic.
Ethos trumps channel. Every. Single. Time.
Principle 2: Sell A Product With High Margins
When planning out your product line, instead of focusing on high-ticket versus mid-tier or max volume, think instead about what you can spend to acquire a customer.
For example, you may sell a $500 chair, but if it has 15% margins, you’ll only have $75 to spend on marketing and acquire that first customer. That's an uphill battle.
Ridge sells its wallets for between $95 and $150, at 80% profit margins, giving them ample budget to spend on marketing.
If you can outspend your competitors to win a customer, you will never lose at business.
Principle 3: First Order Profitability
Conventional wisdom places a large value on revenue forecasting - meaning how much revenue you can drive over the lifetime of a customer relationship. They call this metric LTV (lifetime Value).
It’s fun to geek out on the lifetime value of a customer, but it's a terrible way to build a business. You can’t spend “future value.”
Instead, focus on driving profitability from the first purchase - meaning you earn enough revenue to pay back your product costs and marketing spend and drive a profit.
If you ignore these principles, you may be in a painful situation if the market turns.
Principle 4: Launch New Products To Your Current Customer Base
Going back to the Yeti example, when it first started, most of its revenue was driven by its hero product - its $200+ coolers.
But today, most of its revenue comes from collateral products - merch, cups, and YETI lifestyle accouterments.
Ridge is applying the same strategy by expanding into men’s accessories.
The strategy here is that your “hero product” creates distribution profitably. For Ridge, this means they can profitably sell millions of wallets per year and develop an enormous customer base.
Over time, these customers return and purchase other products - like their notebook, keychain, pen, or field knife.
This is the simple, repeatable path to a billion dollars in revenue.
Business Vehicles: Sean is hyper-focussed on building Ridge into a billion-dollar business. Because of that, he doesn’t have any other business ventures.
- Ridge Wallet - High Risk
- Salary: Sean takes a salary from the business in-line with his day-to-day responsibilities as CEO.
- Profit Share (%): Key members of the Ridge team are incentivized via a profit-share agreement, in which they each take home a percentage of the profits.
- Equity: Sean owns an equity stake in the business. This equity position will drive the bulk of Sean's net worth when the company exits (is acquired or goes public).
Investment Holdings: Sean subscribes to a low-risk public markets investment strategy to offset the high conviction bet he’s taking with Ridge.
- 90% - Public Markets (S&P 500): No time or inclination to pick stocks. Sean does not make the mistake of thinking that topical intelligence in one area translates to another. Allows dollar cost averaging to do its thing and never worries about it.
- 10% - High-Risk (e.g., Startups, Crypto, Other): While not exactly a fun money approach (who has time to do that anyway), his VC funding and crypto strategy can be summed up in one sentence “If you are coming to me for funding, you are f*cked.” Little to no emotional investment. Any gains are an unexpected win.
Logic Behind The System: Barbell Strategy. It is the black turtleneck finance plan to avoid decision fatigue (I don’t have to explain that is a Steve Jobs reference, do I?). Sean is taking his super risky moonshot with Ridge. His life is already a speculative investment—no need to max out risk any further.
That said, his business will have the highest potential return of any other investment platform. He is leveraging his expertise and time to make it more valuable month over month. No thought or risk left over to spare.
This Ones For the Visionaries...
The Context: Mankind is expanding to outer space. Elon Musk says he will put a million people on Mars by 2050. Yes, the man misses deadlines, but he still delivers.
Space tech as a category is snowballing - with billions of dollars worth of investment into the sector. But it's crucial to remember that we’re early in this wave.
The Problem: Manufacturing (pick any product at random and put it here) will be the most expensive endeavor of all time. Companies like Varda Space, which raised $50M+ to improve the frequency at which we bring manufactured products back from space, are hoping to improve that, but still. Prices are high.
The Idea: Mood Wine - Grow wine on the moon and sell it to mars, colonists, and billionaires.
Ok, this was a joke. But for real, there are opportunities at the intersection of space and manufacturing.
But Sean does believe there’s a real Opportunity in turnaround eCommerce
The Context: One person's problem is another person's opportunity. Many eCommerce companies will not make it through the onslaught of market shifts happening right now - the recession, supply chain challenges, IOS updates, etc.
If you’re exceptional at execution, there is a genuine opportunity to turn around eCommerce businesses.
The Idea: Instead of starting an eCom brand from scratch, focus on getting the capital together to buy one. There will be thousands of distressed brands that you can purchase for 10-15% of their annual revenue.
For example, a friend recently acquired an eCommerce business doing $100M in revenue for about $15M in equity. Not bad!
Here’s how you could dip your toe into this strategy:
- Step 1: Create An Opportunity Funnel - Reach out to eCommerce lenders and lawyers. They’re often the first to know when a company is about to, or already has, defaulted on a loan.
- Step 2: Create A Set of Diligence Criteria - Look for eCommerce companies that have MANAGEABLE risks. Meaning the problems aren’t insurmountable (e.g., Cash flow, bad financing terms, etc.).
These could be non-commoditized businesses with diversified acquisition channels (e.g., Not 100% facebook) across digital, retail, and wholesale channels. Bonus points if this product is a subscription product.
- Step 3: Run A Growth Playbook - Make sure you have a specific playbook that you can run to turn the business around. If you’re targeting businesses with cash-flow issues, you should have a tight cash flow playbook you can implement to solve the problem and execute.
I hope this got you thinking. See you next week! ✌️