So many brands go wrong before they have ever started and it's because people work on the wrong
problems. This is true. And basically every business, but there is so much leverage to be had
an opportunity selection. And I want to give you some examples today of places and businesses
that I have seen recently that illustrate how valuable it is to get the right people working
on the right problem. Because if you do that, that's the path to actually maximizing your profit
in your business or maybe quitting your business and doing something else. Let's go into it.
Somebody pointed out to me a long time ago that there is just so little thought given to the problem
of opportunity selection so much of the time that people will think really, really hard about
what to do and how to make a brand better and how to make a business work better and all these
things. But they won't actually stop and think, put real time and effort into thinking,
what problem should I actually be working on because you just kind of get the idea in your head
and you go after it. And you know, I would say I have not always been great at this. I'm sort of
prone in some ways to just going and chasing things that are not actually the best opportunity
for me because they're interesting or whatever. So yeah, speaking of myself here as much as anybody
else, including in my service business. And if you listen to my last episode of me and Patrick
talking through this in our business, you can hear me wrestling with this question of like, where
should we put our time and effort given the basic different margin profiles of the things that we do.
But I'm thinking about this specifically for e-commerce operators because that's most of
who's listening and who's watching. And I just seen recently a few different businesses I've
looked at where taking all of the efforts that the team was putting in and applying them to
better opportunities within the business was going to create a better potential outcome,
even if that was different than what people planned on. And that principle is really important,
right? The idea of like the same amount of leverage applied against a better opportunity
creates a much better outcome than the worst opportunity. It makes a huge, huge difference,
but it's really hard to do that because people start working on a problem and they get sort of
their hearts are tied to it or whatever. Having the willingness at points to say, here's a better
opportunity over here. I'm going to blow up my plan and go do this. Sometimes it's a good idea.
That can also be shiny objects syndrome, but sometimes it's a really good idea. So where do I see
this happening? I want to give you a few places in businesses right now that I think reflect parts
of brands that I've looked at recently where there's really, really big opportunity for getting this
really, really forgetting things really right. If you can actually apply yourself to the right problem,
I want to give you some frameworks to how to think about how to find the right opportunities in
your business. And some of this came from one particular client I was working with that looked
at their business and said, we have this one product and this one program that 10 years into business,
they had come up with the idea like this last year and 10 years into their business they went,
wait a minute, this has legs that are, you know, much more significant than anything that we
thought. And maybe we should basically change what kind of business we are completely to support
this product. Businesses are doing pretty well, but they were so impressed with the opportunity
that they thought about, they're thinking about literally changing. I was at an in-person,
today in-person, you know, off-site kind of planning a couple days. We do that with all of our
clients. We take a couple days and get in a room with them a couple times a year. And we basically
dedicated the entire thing to this one part of the business that in the last six months has proven
itself to potentially be really valuable. The weird thing about it is it would really overhaul how
the whole business operates. So it took us a few months of seeing some really impressive numbers
to start doing that. And now more and more of those organizational energy around what happens if
we take everything we're doing and apply it to this specific thing, okay. And they should do that.
We are going to do that in this business. It's just hard to find those. So I wanted to give you a
framework to think about where to find the best opportunities in your business to apply leverage to
to go make it happen. And I'm thinking really especially on the marketing side here, one of the things
you should always be thinking about in your business is how these things play out at the supply
chain and operational side. Like, you know, all of the energy is moving towards AI is basically this.
It's basically people saying if we put a lot of energy into AI, it's possibly going to be a
gigantic multiplying factor. Like you can run your business just fine without any AI. People
have been doing it for a long time building really good e-commerce brands. But there is this possibility
that AI is this gigantic multiplier of everything you do. And because of that, people go,
I'm going to go, "Woop, I had never had in my plans using LLMs to generate large portions of
what I do." But now there's so much opportunity in it that I'm going to go do it, okay. And that's
actually probably the right consideration with AI. So it's so revolutionary that it probably should
change your plans. But these things happen all the time, sometimes more thoughtfully and some not.
And so on the supply chain side and on the operational side, you should be thinking about that as you
go. It's just I'm thinking especially on the sort of marketing and product side as a way to do this,
okay. And so, opportunity, how to think about opportunity selection in your business, okay. I'm
going to give you four main places to look in your business to see if you have anything here.
And then some thoughts to help you think about what to do if you don't have any of these. And so,
let's talk about the first of those. The first is gross margin, okay. Number one, gross margin.
I have seen this repeatedly where brands have different margin profiles for different products
and therefore and just for whatever reason they hold on to multiple of those products when in fact,
more energy ought to go towards higher gross margin products. And this is really obvious in one
respect, but it still gets missed all the time. And I know because it just happened with the brand
that I was working with, we're looking at one of their products and realized that they had an
ability to get that product to their customer at 87 points of margin landed to the customer.
Now, there's a number of unique things about why that number is so high and I can't really go into,
but 87 points of landed margin to that customer. And that had been sitting there in this business
for a while. And just nobody had noticed it because people thought for a number of reasons that
it wasn't really scalable. That it was like, okay, well, we're doing all the things we can to
scale it, but there's sort of a limitation how much this we can do. But I didn't even know
that that margin was so high when working with the brand until we uncovered it in a meeting recently.
And when that happened, it made me stop and go, whoa, why don't we put way more of our advertising
firepower on this product? Because when you are building ads for a brand, one of the first things
you have to do is ask the question, what product am I going to advertise? And you can ask that question
a whole bunch of different ways, but you're going to put creative effort or landing page effort or
whatever towards a certain product. What happens if that product just has a much lower threshold at
which you are successful? 87 points of landed margin means that you're making money at a 1.3 on
first purchase, at a 1.3 loss. So your 1.3 loss is profitable on first purchase. If you have that,
man, you don't actually have to be that good at it to like make a bunch of money. Now, like,
it gets the most ridiculous margin I've ever seen. And again, it's hard for me to explain why that
number is that high without giving away some things I can't give away. But that was, and that's not
normal, right? That number is extremely high. But I have another brand that has is now looking at like
75 plus points of landed margin, still like extremely, extremely good that I was talking to recently.
And that occurs to me that when I think about that, there is this strong incentive in that business
to explore how do we deploy as much money as possible into an ad account because your possibility
of making of like blowing money is really, really low. So now you have a strong incentive to go
and spend a lot of money on a lot of creative fast because you just, again, don't have to
perform that well to make money on first purchase. If you have any LTV at all, it gets really,
really good down the line. And that allows you to like scale really, really fast and really
aggressively and changes the way you think about it. So whereas if you have sort of 50 to 60 points
of landed margin, you're going to be in the world where you need to get a 2 to 1 row ass all the time.
In fact, this gross margin thing is so significant that for some brands, I would look at them and say,
for your D to C business to grow more, you might even say, are there products that we could develop
that could generate higher margin for us to go and take a bigger swing at because right now,
we're going to be limited in our growth by the margin profile. So this is the first thing to look
at, really closely examine gross margin and then go the next step and make the efforts you can
to improve that margin because it is really a cheat code. And again, if you've identified gross
margin as important lever in your business, if you can go get a bunch more of it somehow in your
business, man, you can really, really, really improve your outcomes without making your ads a single
moment better. It just does everything else. And this is definitely possible. Again, one more
example, I talked to a brand recently that for a long time had existed at basically after
net of returns and everything else, something like 50 points of landed margin to their customer,
they were able to move their manufacturing to a whole different country. And when they did that,
they're going to get that number up to like 65 to 70 points, like dramatically, dramatically,
dramatically, better by by overhauling their manufacturing. And again, what that is creating for
them is an opportunity to grow much, much faster. And so sometimes what you need to do is go look for
the high gross margin opportunity in your business, particularly if you're an advertiser and say,
here's where we're going to expend our efforts. But then on the other side, if you're the operator
itself, you may actually go look at your products and say, man, if we had more margin on this product,
it would really help. I need to go do everything I can to go chase down my supply chain and see if
there's any places I can make that better because it just makes a really, really big difference.
You should be efforting your supply chain. You should be doing it with help from my friends that
move supply chain. If you hear these stories that I am talking about, people shaving real gross
margin from your business, the way they do that is really simple. Part of it is negotiating with
their present suppliers, but really a lot of it is going and finding new suppliers who can make
their products. That's what happened in the story that I just told a second ago. Somebody found
a new supplier that was a better fit for their brand and they did not know existed before and they
went through the sampling process and they got their products back and everything came back really,
really good and so they can move to this new supplier and it can save them a whole bunch of money.
That is the process for generating better cogs and better relationships, especially if that
if your business already is growing some and you can, you know, you're in that mid-seven figures
It's sort of stage of business and you can actually go and
Bring somebody some some the beginnings of some real volume to their business
Well, then they're going to be interested in working with you and the thing is finding new suppliers is very hard-slow work
Go to move supply chain calm get on a call with them and have them do it for you
This is what they specialize in helping you find new suppliers will help you shave costs get you know better payment terms
Faster turnaround times all of that kind of stuff that makes your supply chain work better
And they do that in your business move also is there to supply chain agencies functionally what they are they they're like an ads agency
But for your supply chain just experts in this one area of business that been working on us based e-commerce businesses for forever
And of course they are as I probably as I've told you before
based in the Philippines and so not only is it a very short flight to Vietnam and China and other places in East Asia and Southeast Asia
So they can actually go and represent your brand in person for you. That's awesome
But it's reasonably priced because you can attract great talent to work on the problems in your business and the Philippines for a really reasonable cost
So go to move supply chain dot com start talking about this. They've done inventory planning really tighten up inventory operations for brands
That have needed that kind of help as well. They just understand everything about what makes a good supply chain
If you're struggling in that part of your business if you feel uncertain about it get real expertise from people who've done it before and who can do it at a reasonable price
Without it is eating up more and more of your time. It's a big opportunity in your business
You should go chase it down. Go to move supply chain dot com right now. Okay number two
LTV lifetime value retention rate however you want to frame it and LTV is probably actually the wrong way of saying a retention rate
Probably is the right way of saying it because you know
If you're selling a $3,000 product and most customers only buy one of them ever you have a really high LTV
But really low retention and so what I'm talking about here is retention rate is the idea of
Okay, are there products where you can get an extremely good retention rate on this particular product or program again
Recently I've seen this with something interesting where a brand found in their business a subscription product that worked really really well
That that initially people were not really subscribing to but what they discovered as they as they were able to get subscribers to it
Was that actually the customers really had an appetite to subscribe to it was not a supplement or anything like that and what they
Discovered in that was that actually customers love subscribing to the product for a bunch of reasons and it was this really really
The opportunity and the retention rate was massive and suddenly the entire retention profile of their business could shift if they put efforts there
And that is another thing where you look at it and say if you can find different parts of your business that has this then great and
Further if you can generate them then that is great now retention rate on its own is not actually always the best metric
I've worked with one business that had really actually pretty strong retention overall isn't a subscription business or anything
But you know it was it was really like customers came back at a pretty high level. I don't remember the exact number the problem was that the average order value on the
Second purchase was like half to less than half of the average order value on the first purchase because of the way the product works and
Therefore even with a strong retention rate the actual amount of dollars they got back over time was kind of a problem
And so if I was in that business one thing I might consider is is their way for me to maintain something like this product relationship
But just get the AOV on second order up because now I can acquire a customer for more money up front
But if I can make that with good retention rate and better AOV I can make every customer's downstream
Value a lot a lot higher and if I can accomplish that I can really get somewhere
I was suggesting to that brand they consider sort of limited edition versions of their products and finer materials or something like that
And you know who knows if any of that would have worked
But this is the point the reason to go take on a project that big is because there was potentially an opportunity
To create really high retention value after that first purchase and if you can get that if you apply a bunch of effort
And you solve that problem
Okay, then you can generate a whole bunch more value in the business at an operational level at an ad level then
There's a similar thing for this business that had a sneaky high retention rate on a subscription product
That they didn't know anybody would actually want okay if there's more opportunity there
If there's more tam no then they first thought you know
They thought it was like a little subset of customers who would like this little subscription product and that was it
But suddenly we've realized wait a minute the retention is so good here that they're thinking about how to launch more subscription products and say
All right, what about this customer over here that interacts with the brand totally differently than our subscription products
Could we get them to do it and we had the conversation where I said I don't think it's going to work
I don't think offering this second subscription product in this very different way
It's going to work. It just doesn't seem to me that the customer's going to want that
But you know what I think you should do it anyway because this is a subscription metrics in this business are so freaking crazy
That if you can make it work that it is going to be worth a tremendous amount of money to the business and therefore
You ought to take the crack at it because look even if you strike out you struck out trying to solve the right problem trying to hit the right pitch
So to speak okay, and that's the way to think about these kinds of things because again
This is going to require product effort. It's going to require website effort
It's going to require advertising effort. It's going to require photoshoots all of those kinds of things video whatever and it's and it's gonna
It's gonna require the brand to work really hard
But the reason to do it is because if you have a monstrously high retention rate on some part of your business or monstrously high sort of
Returning customer value. Let's just call it that okay, then then it's worth doing and so look for that in your business as well
Is there somewhere somewhere where you can create this now?
There's also a mistake in a trap here which is that business is sometimes because everybody wants to have a subscription business
We'll go get create a subscription product or a membership program or whatever it is that nobody actually wants and that's that's the challenge here
Right, is that if you can't figure out how to do this in a way that nobody actually wants then it can actually sort of be a black hole
Where it syncs all of your all of your efforts into it because that it's so tantalizing and this is the trick with all of these
This is the challenging thing you probably have to time limit the effort in some way or another but yeah
If you if you can't find that but you can sometimes get sucked into this idea of going and finding this even if your business doesn't actually
Lend to it you have to actually serve the customer and the reason I've seen this this particular example work the reason why I think
This like for both brands. I was talking about the one that sort of discovered a subscription product in their business that that was better than they thought
Where it was insane retention actually and the one where I was suggesting that they ought to go develop the limited edition or that kind of thing was in both cases
I thought there was a that it turns out in the one case for sure
There's there's a subset of customers in this business who absolutely that the product serves beautifully
It plays a beautiful role in their lives like it is I mean that word it is lovely
It is it is a great way that a consumer brand has created something that provides real meaning and value to people and it turns out
The customer's had a real appetite for that to show up at the door every month, okay for that kind of value for this other brand
Where there's this like limited edition push or or find our materials push my thought was I think customers would actually really like that
I think they would find that really cool and it would fit into this now
You have to solve some things but that you know and actually the operator who didn't do that
Basically said no because he couldn't see that he couldn't see the vision for that in the same way that I could and I think that's okay
I think when he looked at the customer and the product he thought I don't think they're gonna care about that really and
Therefore, I'm not gonna try to force this because I don't think they're gonna care about it
And that's I think that a good filter for this does it actually serve the customer in some way
This is the reason supplements of the subscriptions work so well by the way is that if it's a pill
It actually is great for it to show up at your debt if it's like I have to take this every day for 30 days
It's really nice for it to show up every day every 30 days
Excuse me every 30 days for it to show up so I can take it like that
I never have to go to the store to replenish it. It just shows up. I take my pill every day and I move along
And if it really works or whatever it's awesome the mechanism of delivering to my house is actually a great way from a customer
Perspective to experience a supplement. It's awesome. The replenishment timeline is obvious and easy
And I can skip if I need to some month
But mostly it just shows up on a unit too and that's great and therefore supplement subscription works awesome
And there's a reason there's a million of those businesses now, right? Because they because it actually is great for it to show up like that
Okay, so serve the customer when you do this. Otherwise, it's not actually going to work
That's the trap of chasing subscription. Okay, before we go any further you should make sure to subscribe wherever watching or listening to this
I'm doing mix of these sort of more strategic and more tactical episodes and if you like this content
You're gonna like all of it. So subscribe wherever you're watching or listening leave a comment give me your thoughts
What do you think? What did I miss here anything that you would look for with an opportunity selection framework?
Sort of opportunity selection
Identifier that that I should be passing along leave it in the comment. I read and reply to basically all of them
So okay, let's keep going by the way like it also share it. You know you know what to do. Okay, here we go number three
Tam this is an underrated one if you were looking for what opportunities are your best opportunities in your business
Don't underestimate tam total addressable market and total dress market starts at the level of product
I have also seen brands who have really really good gross margin and solid LTV
Lose out on growth because there just aren't enough people who care about their product
And this is a marketing problem to be sure
But also I think sometimes there's just like a nitchy a nitchy challenge here a nitchy problem where people just might not like it
You know, I've talked about the business said the e-commerce brand that I'm starting and it is a people vastly about this by the way
It's like it's we're still working on it's very much a side gig
But but it's still working on it anyway the idea of solid cologne. I've talked about the idea of solid cologne
I'm confident in gross margin. I think the LTV will be decent
Actually, I think the place where this becomes a real problem to make this business really strike out in scale is that it's just
It's just possible that not enough people want solid cologne the Tam is just too low and therefore
It's actually not that good of an opportunity
I think that's one of the most obvious ways that that business goes wrong if we can actually sell it and
I know we can do it at a high margin like that's just like kind of locked in if we can do that
There will be at least some LTV in the business
I don't know that it will be spectacular, but I think it will be pretty good and it will be very high margin
LTV high margin retention, and so I think that will be pretty good as well
I just don't know if enough people want it and that would be the argument against that whole category now
If you look at that and if you apply that same kind of thinking in your business then you should be thinking about this
Then then you should be trying to identify as well the products and the materials that actually work at real real scale and so
Again, I have another brand right now. I've mentioned them before they they have basically two businesses one of them
cells like inflatable like lake toys like docks and stuff like that are called
solstice really really cool brand and I'm really confident that we can
sell it a solid amount of things for like great days on the lake because
they're really awesome products and people love them and they're really
softly designed and all those things but they have another brand also called
swimline and swimline sells pool float type things. Now in some ways neither of
these these brands fits the typical e-commerce margin profile that you would
really want some of them can be kind of expensive to ship even though they're
deflated the LTV is not particularly good etc right so it's in some ways like
it's not it's not the perfect e-commerce business but what I can tell you is
there's like a lot of people with with pools and a lot of people with who have
lake houses and boats and or just live near river or whatever it is and when I
look at it I think man the game for these businesses is to keep finding ways to
just get those products in front of the right people over and over and over again
whether that's pool floats or whether that's lake toys or whatever else I'm
pretty confident that if we just put our heads down and keep efforting and so
far this is proven out with basically every effort we've had we will be able
to get spend to go forward materially over time if we can just keep doing this
because there's just a lot of people who want this stuff and so if you can make
a great product that a lot of people want you can get really really far and if
you can find more ways to put it into people's lives you can also go really far
so sometimes even a business that does not have spectacular margin or
retention can work really well just because a lot of people want it the other
example of this in this category I think it's really obviously like all the
drinkware brands it's just like everybody needs cups and water bottles and so
you can just sell a whole bunch of them a whole bunch of different ways because
of this I think there's just a lot of examples like this you know I used to work
with feelers choice goods FC goods while it's made out of old baseball gloves
really really cool brand that I absolutely love working on but among other
problems there's actually a relatively limited market for people who want to
spend $200 on a wall it made out of an old baseball glove like it's a really
cool product but there's just not going to be that much tam and therefore was
never going to be that big of an opportunity no matter what we did and so now
the baseball collectibles market is very big and so if you could sort of use that
as a way to get into there then maybe that's the way you drive the product
development in a brand like that but tam is just this really really big factor
that people often don't think about and tam also sometimes implies competitiveness
and I want to talk more about competition in a minute and how this creates
problems because at some point if everybody wants it and if it's reasonably
simple to make then it's going to be really really competitive to get
attention and to grow in that world but tam can just go extremely far for you
there's another way of thinking about tam though which is not just about sort of
how many people generally want to buy the product but it's more like how many
different ways are there to talk about the product. Zach's talk made this point
about Marsman when he was on the marketing or on the operators podcast
talking about that business he said if you could sort of build one of the things
he loved about the category that he was in of you know test out like a
hormone supplement or whatever is that there were just a million ways to talk
about the value that it provides to people just brain health and heart health
and physical training and getting stronger whatever it was and so there's so
many entrance points category entrance points some people have used that
language CEP to talk about the product that it makes the tam really really wide
because it just does a whole bunch of different stuff and so it's a good
category to play in because it reaches really far and there's other things
that are compelling about that business as well but that basic idea I think
allows you to generate more scale really really fast because there's just a
lot of ways to talk about the product so same thing look inside your business and
ask the question how many ways are there to talk about this product or how
many people can I reach with this product and how many different ways can I do it
if you can ask that question and answer that question and the number is like oh
really big go put a lot of effort towards that because it's a that's that's what
creates a really big opportunity even again if the margin in the LTV are not
actually incredible in fact sometimes the very fact of large tam drives down
margin and that's because of the competitive at because of the competition factor
this is one of the first things I want to say about competition if there is
actually a huge market for something it tends to drive the price down you know
because it creates so many entry points there are so many entry points for that
that it becomes really really hard to get much margin on it and can work
against gross margins this isn't always true you think about beauty or something
like that where price signals value really strongly and you just will be high
margin no matter what because if you price too low people will think your
product is bad it's not always the case you know apparel is like this in
certain ways but but sometimes in some categories one of the things that can
really harm margin is tam because especially if there's no real way to
differentiate as being as it being a good thing that you're the high priced
item okay tam is worth considering I think you get the idea everything I am
saying this episode applies as much to what you do with your marketing efforts as
to your sort of operational and product efforts that includes what kind of
things you are testing in your business and I love so much that intelligence is
released a tool where you can go plug in your website and you can go and they'll
give you an audit of like the three biggest highest leverage with AI that
three highest leverage tests you can make on your website right now go to
inteljums.io/audit and just go check this out so an incredibly cool tool you
go go to the tool tell it basically like what your business is and it will tell
you here's what tests you should be running right now and here's what the
opportunity is for your business if you go run these tests and that's because
intelligence is built all around being a not just a split testing tool but way
more than that a profit optimization tool that has everything from you know the
split testing CRO stuff you've known about for a long time to post purchase
upsell in checkout upsell and cart upsell a whole bunch of other things that it
does that a lot that makes it a really robust tool for making every click that
gets to your website every person gets to your website create more value in
your business by setting up the right funnels the right audits the right
prices the right upsells all those things in your business so inteljums.io/audit
go check out that tool or just go to inteljums.io and check out the the tool
yourself Ferris 20 F.A.R.S 20 to get 20% off your first three months you should
be using it to do real profit optimization on your website to one of those
things that has a really big impact go check it out today number four also related
to the issue of competition et cetera and this is something that that fits a
lot of things we're saying but I'm gonna call this unique mechanism or unique
product basically is there something actually awesome about your product and
this is so underrated like like one of the great challenges for some
businesses and the reason they don't do that well is because their product
actually just isn't that interesting or good and I go back to my friends at
Solstice and in some line like their products are really really cool if you
have a lake house if you have a boat go to SolsticeWatersports.com right now and
buy some stuff it is cool it is great well-designed thoughtful products I
sent some some of that stuff to my friends recently who were who are the
people it's also said sent me some product and I I sent it with my friends who
went to the river for the week you know and I said hey take these with you tell
me how tell me how you like them with these these docs that you like hang out
in floating docs inflatable docs and they came back and said it made the week
they were so cool they're so sturdy they were like easy to use they were inflated
they're inflated really fast and they we just like absolutely loved them we
thought they were really really really cool products the whole experience the
entire vacation was better because we sat in those things for eight hours a day
and it was amazing and our feet were in the water and it was great you know that's
if you have that in your brand like you have so much of it soft and so much of
ecom like is a generalist game where people you know find a manufacturer get
into it and go and fine fair enough I'm an opportunistic and capitalistic as
well right but one of the things to look for in your businesses is there
something actually awesome about it whether it's like something as something
unique about the the construction of the product or the design of the
product or just a mecha or you know an ingredient that does something
amazing you know is there something actually amazing about it that does
something and can you then make a compelling case going forward about that if
so you have a good opportunity there because if it's really great people will
want that again I have another brand right now that's looking forward that is
about to enter is about to enter into a space that where they have an
element of their product that they think is sort of on the rise trend wise that
is different and unique in a very large-term category and they're saying we're
pretty confident that everybody's gonna be really into this really soon and we've
worked really hard to make this awesome about our product and therefore even
though they function differently than a lot of brands in their category they've
done something that they think is really great and that's a compelling case
because now in a very large category with something that does something really
well it was real innovation in the product etc you can just get really far so
look for that in your product mix as well do you actually have something better
in your category and if you do and you're in a large category and especially if
you do that and you have a reasonable LTV and could margin you have now the
making of a monster brand now an incredible opportunity most brands frankly are
not gonna have all four of these they're just not right and so if you have even
two of them I think you're probably on really really good shape and some brands
get away with one because they're just so good at the e-commerce game but if
you have two plus of these identifiers you can just get extremely far a product
that is unique in some way that does something really cool at a reasonably high
margin or or LTV or both and that does something in a large category that is
the fray that is the recipe for a great e-commerce business you know unique
mechanism is is a more subjective category but it really matters it really
matters a lot if you do something really cool in a really different way it can
really matter you can do that now what about if you have none of these okay so
if you look at your whole business your product mix right now and try to
identify you know which of these apply to you and you say okay we put more
effort into product A instead of product B because product A fits more of these
that Andrew is saying that product B great but what happens if you do that
exercise and you say we don't have any of these that great or we have a big
tam but the margin is not that awesome the LTV isn't that good and I'm not sure
our product is actually that much better than the competition what do what
happens okay there's a couple possible
The first possibility is that you need to go make some new products and you need to be honest about that.
You need to go and figure out how to add products into your business in a way that is going to create additional opportunity.
And you need to develop those products with some vision like this opportunity selection vision that I'm giving you.
I'll give you a great example of this. I had a brand that was kind of stalled out.
It was actually the brand I was talking about before that was thinking about kind of a limited addition product or whatever.
And they realized like they have incredible margin decent LTV, but their tam seemed pretty limited.
No matter what they did in the map, they played them massive amounts of diverse creative game.
They had a product people like, but they just seemed to be hitting a ceiling in their business.
Even though they were doing all the right things from a financial and creative standpoint influencer, all that stuff, they just hit a ceiling.
And they said like, well, what do we do here? Because if I just keep going the way I'm going, if I take all of this effort and I keep applying it to the same opportunity, then it's just not going to work very well.
And so they turned around and said, we're going to put a huge amount of effort into new really, really cool products that are in the same categories our core product that are going to take a bunch of work to get going on.
But we think it's a really big opportunity. Okay, if we do that, maybe then we can sort of expand things.
Now, I don't know how it's going to work for this brand, but it is the right kind of thinking.
They have spent months and months and months, maybe over a year at this point, designing with incredible detail and incredible thoughtfulness with a real product development lead.
Beautiful, really cool product to try to expand their reach. They're still going to be extremely high margin.
They did it with this whole idea in mind. We're going to go go maintain super high margin. And we think it'll have a good LTV profile and this, but we're going to do this with a really different product that is going to push our economics in these different ways.
And so it's a big, big job, but they're doing that because this is where the opportunity is in the business. To me, that is the right move.
So they could either sort of accept where they're at and say, "No, this business is just going to be what it is I'll start a new business," or they're going to say, "We're going to put a bunch more effort into a new product line in the business and see if that's something that can be."
Now, again, they're doing that and they're not just making a cash graph. They're putting a lot of effort into it, but that's the way they're thinking about the problem. I think that's really right.
That's one possibility. Another possibility, and you need to be honest about this, is that it's possible you should just stop working on that opportunity altogether.
You're just like, "I'm not doing it anymore. It's just never going to be that big. That's one possibility with it."
So possibility number one, develop new products, possibility number two, quit. Stop. Go put your effort into something else.
Sean Frank, a while back, tweeted something about how backpacks are an extremely hard category.
He said, "No matter what you do, zippers are just pretty expensive to make. Zippers are relatively high cost, supply chain wise.
The category is extremely crowded. Everybody likes cool bags and there's a lot of people who have entered into it. It's really hard to make much margin. It has very low LTV. It doesn't ship that cheap.
So even though there's a very large tam, it's really hard to stand out. It's hard to make a backpack that much better than any other backpack.
And Rich makes bags and backpacks and stuff, but he just said, "It's just really, really tough. I looked at brands that came to me and said, "What do you think about this?"
And I said, "You're just playing the game on hard mode because you're in this category. Even if your product is really, really good, then you're just going to have a hard time standing out in this category.
It's just really tough for these reasons. And what they needed to hear and what I told them was, I think you should put your effort into something else.
Run this as lean as you possibly can, but put your effort elsewhere or find a way to make this effort work better here by doing the following things.
But I'm not sure this is really the best opportunity for you're going and you need to be just really honest about that. It's possible. It's possible that you need to do that.
And the best thing you can do to generate the best outcome for yourself now is stop working on that thing. It's very possible.
Nobody wants to hear that, but it's very possible.
Number three, you have the opportunity. This is the other possibility. So right, it's make new products, stop working on it altogether.
Or number three, sometimes there is a sneaky way in which the deck being stacked against you is actually the best opportunity.
So you might have, and you've got to be careful with this, but you might have the opportunity. No one else will take.
Okay, you might have that right now. All this money is flooding towards supplements and all these supplement brands are starting for all this reason.
And that's understandable, because if you look at the opportunity selection framework, I just gave you this episode supplements of the perfect brand. Extremely high LTV via subscription. Very good gross margin. Big tam.
Some of them make real claims around unique mechanisms about what makes their product different or better, though that I think is the sketchiest part of that.
And it just looks like an area where where there's a whole bunch of opportunity. So all his money floods towards that because people are rationally responding to the exact kind of framework, even if they wouldn't put it in these terms.
That that I've been laying out in this episode. But what it makes me wonder is what about for those brands that are actually really different from those kinds of that kind of category.
And that look at these and say like, how can we do something unique in a category that is large, but crowded and difficult is there some way in which basically the fact that it's hard makes it harder for other people to come and chip away at us.
One of the things I'm very concerned about in supplements and I'm concerned about this for my clients as much as anybody else is that it's just going to be so competitive on the CAC level and everywhere else that eventually it's going to be very, very hard to make the economics work because you just won't be able to do it at any scale.
At the same time as you trying to compete with people for the same number of feeds, basically feed placements and real placements and whatever. It's just going to be too expensive. It's going to be too hard.
I also think it's possible that some of the LTV timelines don't work out the way people think for a bunch of similar reasons. No, I don't know. I think it's also possible that I should just go start a supplement brand right now because it's an amazing opportunity.
But I also look around and say, man, there is maybe an opportunity here for somebody to think what is the category that is so stinking hard that actually if I could do something unique in it, it would keep everybody else from going away because the new supplement brand starts every three seconds.
What about, and this happened in skincare before, before everybody realizes the supplements, there's a new skincare brand all the time. And it's for the same reason, for exact same reasons, it's because of this opportunity selection framework.
So what category can you go play in or what can you do is really different in your category that makes it so that actually the deck being stacked against you is your opportunity.
That's my question. Is there a way to do something really, really difficult because it keeps other people away from it?
That's a hard road, but it can be something that can happen. I sometimes think back to simple modern going on Amazon and just pricing much lower with a much lower gross margin, specifically as a strategy to stand out on Amazon, especially like it's a really smart move and that allowed them to build a really, really good business.
Okay, so that's kind of one of the things I think about really, really competitive category in the most competitive possible marketplace. And that's exactly why it worked because they were able to take all the search volume in a very large tab, apply it to something where they took less margin and I was up front, created more colors of the people up front and that became starting place for a really good brand.
So, okay, what about other other opportunities like that? Are there places you can go where you can actually take the deck being stacked against you and make it into the opportunity?
You have to have a real thesis for why that works, but it can be done.
Alright, I hope that was helpful to you in some way or another. Put your effort into the best places to put it, examine your business right now and think about the question, how, where is the actual best place for my efforts?
It's a really, really important question in your business. As you go and do that, and the answer might surprise you by the way.
As you go do that, subscribe to this podcast wherever you're watching listening. Hopefully I can help you in the journey along the way. You can also email me
[email protected] or leave a comment and tell me a little bit about what you thought of this episode or ask any questions that you have.
I even respond to every one of those comments. So, do that. And if you want to work with us along that journey as well, go to ajfgrowth.com.
If you want to take form, tell me about your business and we'll see if we can be some help to you. Think thanks to my sponsors and this episode moves, supply chain and intelligence. They are both great. I have a really cool idea coming up for this podcast. I'd actually love your feedback on this.
I'm thinking about having less guests, like a less of a range of guests, but having the same guests come back more often.
So, I've just been thinking about who my favorite people to talk to are, who I think are really, really good guests. And what if I got those same guests to come back not every week, but every couple months, and it was the same rotating cast of people hitting different themes that they're really, really good on.
Because there's just some people who are so smart that every time they come out, like I've done this with Taylor Holiday for a long time, and just I just love talking to Taylor about this stuff.
Every time we can do an episode together, I think it's great. So, okay, how do I create more great content by just having less guests, but my favorite ones more often.
So, that's one of my ideas. Tell me what you think about that. Okay, thanks so much for watching listening. I'll see you next time.
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