3 Reinforced Lessons From Hanging w/ Ben Francis (Gymshark) | Ep 774

Man, oh man, do I have a podcast for you today. I've been waiting to make this one. I think 2 weeks ago was the Olympia here in Vegas. Ben Francis, who's the founder of Gymshark in the UK, so it's a UK apparel brand. I think they were valued at a billion plus 1 or 2 years ago, and I think they've doubled in size since then. So really, really great entrepreneur. And I had the fortune of being able to hang out with him for the day. He came a day early and Adam Hernandez, who hung out here in Vegas at my headquarters. It was such a wonderful conversation because he's my age and he's achieving really big things. So it was very rarefied air for me. So this is me just— I'll show my cards bare. I'll try to hedge my self-aggrandizing comments. But I was very pumped to hang out with him. And what I want to do in this podcast is break down some of the lessons I was reminded of in my conversation with him that I think would benefit Honestly, everyone who's an entrepreneur or wants to be. And so I wrote down a bunch of bullets from the conversation that I had, and I want to walk through a few of my biggest takeaways. One is AI versus IRL. All right? And you're like, what the hell is that? So AI is like all these big tech companies and all the hot software or whatever is talking about AI. It's metaverse, decentralized, Web3, whatever, All that stuff. And so there's this interesting and very large push with lots of capital behind it for people to go into these AI digital spaces. He and I were both talking about our shared consideration for the value of in-person, IRL, which is Ben told me the story that the reason that their company was so successful is that they built in online business offline. He told me, I'm pretty sure he shared this in podcasts, and I'll probably run this whole thing by him to make sure that I don't share anything that was too proprietary. But for everybody else who's listening, then you can tell the heat that we're going to be dropping, which is when his first couple years, he went to every single fitness expo across the world that he could afford to go to. At those fitness expos, they would sell apparel and they would meet people and shake hands and kiss babies and all that stuff. And so what was interesting that he shared with me was that years later, the cities that he went to, they weren't going to be doing millions and millions a day or something like that in sales. You're talking $20K, $50K, maybe $100K a day in sales. And that may sound like a lot for some of you, but big picture for a company that size, not huge in terms of needle moving. But what was interesting is that when they overlaid their sales across the whole organization on a globe, the hotspots, the concentrations of customers were in those cities. And it was disproportionate to the amount of sales that they were able to generate on those days when they were there. And so to me, I have the same kind of thesis that we work off of, which is I'm a big IRL guy. I'm a big in-person guy. I think there's huge value in that, especially now. I think that there's a higher demand for real experiences, real community, real connection that we try to approximate with technology and we simply fall a little bit short. Now, it's kind of like eating vegan meat. It'll get you by, it'll keep you full, and I'll probably offend the 6 vegans who listen to my podcast, right? It'll keep you going, right? But it's not a steak. It's not a burger, right? And so we keep trying to improve Beyond Meat and make the fake thing closer and closer to the real thing, but it's not the real thing. And I think that what's happening is we're actually still— there's still this, this starve, right? This, this deprivation for more and more people because more and more people are eating the Beyond Meat of connections, the Beyond Meat of conversation, when they could be getting the juicy real steak of a thing. Like Ben and I met in person and we hung out for a day IRL and it was awesome. And I would consider that because of that, we will probably maintain a friendship for years to come, or I hope so, right? Unless I suck or who knows. So that's kind of like big shift number 1 that I was reinforced and it was great to hear somebody else, another business leader kind of share that thought with me or that same direction, which is like whenever possible, We are trying to create in-person IRL, in real life experiences. And that's why we decided to do like the workshops we do at our headquarters, just because I was like, okay, how can I facilitate that kind of experience even though it's quote, "Unscalable," right? Of course, it's quote, "Unscalable." Of course, there's more people in my audience than I could possibly— If I had an event every single day for the rest of my life, I still wouldn't be able to meet every person in Mozi Nation. But it still creates a way where if you hang out with 50 people, those people, if they have an exceptional experience, talk to another 50 people each, and those people talk to 50 people, and then you're at 50 to the third, and all of a sudden it's like, wow, we touched 75,000 people, not 50. And I think this is fundamentally one of the reasons that Gymshark has been and continues to be successful. Like, now they're going and opening these in-person shops, they're doing these big meetups with athletes, and they're doing that because they're not stupid. They know that they have a higher return. And so what happens is most advertisers, most marketers look at the return on these, these small IRL, relative IRL, in real life experiences relative to kind of the digital footprint or digital views and engagement and things like that that they can get online. But again, it's the same as feeding people tons and tons of Beyond Meat burgers, but you still remember that one juicy burger that you had when you were starving better than all of them. Brian Chesky talks about this, founder of Airbnb. He said one of his mentors said, "It's better to have 100 people who absolutely love you than to have a million people who just like you." Because those 100 will tell another 100, and those 100 will tell another 100, and it keeps going, right? And it's like that potency of the real meat, of the real meat conversation, the real meat connection outweighs the fact that it costs more to make those connections. But I also believe that if you do a good job in those instances, which obviously Ben has with his when he would go to attend those expos and when he has these meetups with his athletes and the influencers and things like that that he runs, that it's worth it if you do a good job because I think that those connections become permanent. I think those connections permanently change the way people see you, see your products, see your brand. And so that was kind of big thing number 1 that I took away that was a great reinforcer and a reminder. Kind of felt like right path. Like just it corroborated kind of like some of the conclusions that I came to. So the second big one was we were talking about growth rates. And so this, I think this will be really, really helpful for a lot of you guys here. He was talking about, and we brought up some big influencers that we both knew who had started brands and had explosive, just crazy numbers in terms of their annual revenue, et cetera. And he said, you know, I don't know if that kind of growth Is sustainable long-term. Now, mind you, these guys have mondo, mondo brands and all that kind of jazz. But his point was, he's like, "Yeah, but if we look at 20-year horizons, do we still think that they're going to be number one?" And I thought it was a really interesting perspective. So I'm obviously a big long-term thinking guy, and I talk about long-term thinking and patience around goals so much because honestly, it's just something that I've struggled with. I tend to be a very, "I want everything now" guy. And so it's like I push so hard on the long-term stuff because it's so difficult for me. And for any other entrepreneurs who are listening to this, if you're like me, something that has helped me with this, and I'll continue back to what I was saying in a second, something that's helped me a lot with this is understanding that I can feel impatient and act patient anyways. Meaning as long as I do not change my behavior and act like an impatient person, I can have this deprivation where I'm like, I want these things, I have these desires and they are unmet. But as long as I don't change what I do, I act as if I am patient. I figure out other things to do in the meantime. And so people, it's funny 'cause like I'll get described as patient. Like, so Cale, who's currently the CEO of Gym Launch, I've heard him on a couple podcasts be like, "Alex is incredibly patient." And I find that fascinating because every single second of every day, all that I feel is impatience. And so I think for me, it's been helpful to delineate how I feel and what I do, which is why I have such an emphasis on behavior rather than thoughts and feelings. Because fundamentally, for me, I don't think they matter as long as they don't change what you do, right? Back to the patience thing with the long-term time horizons. And so one of the things that Ben has oodles and oodles of is that he wants to build an iconic brand. He wants to build a brand that endures after he's dead. And he talks about everything in terms of a 50-year brand. He has a number of brand heroes that he looks at. He looks at Range Rover, he looks at Harley-Davidson, he looks at Ford in the US, for example. And so these are these companies that create iconic product— Burberry, right? That create iconic products, which create iconic companies, iconic brands. His emphasis on this honestly was very refreshing because a lot of times The reason that our goals feel big is because, or rather, our goals feel impossible is simply because we attach too small of a time horizon to them. I'm gonna say it again 'cause I think it's really important. We as entrepreneurs, myself included, a lot of times I create undue anxiety and stress around the goals that I have because I attach a timeline to them that's simply too short. Oftentimes, I mean, and Bill Gates said this, and I don't think he's the first one who said it, but It's entrepreneurs underestimate. So they overestimate what they can do in a year and they underestimate what they can do in a decade. And a decade has been a really good kind of like measuring stick for me. And I'll explain why. A decade, it's like around 7 years is where it's like the sweet spot for a lot of companies to go public. So there's, you know, there's these studies where they put these scatter plots of what year companies go public relative to their long-term performance. It's basically year 5 to 10, 7-ish is kind of the sweet spot where, you know, companies do that. But I think about this meaning that at any point in time, any person in 10 years can radically change the world. In 10 years, but probably not 12 months. For me, that's kind of freeing and empowering because it's like, you're just 10 years away from changing the whole world, which I think is really cool. He has this outlook on brand of building a 50-year iconic brand. And he was here with his right-hand man, Noel. He's director of brand. It was interesting because some of the words that they used was like, we want to build a brand, not a business. And obviously to build a brand, you need to build a business. But what they meant by that was like, if you look at a lot of e-commerce that exists today, they're just arbitrage businesses. They're just what they call bottom of funnel, the ROAS businesses. All they think about, all they obsess about is dollars in, dollars out, dollars in, dollars out. The problem with that, and I'm going to segue into probably the most significant takeaway that I have from the day that we spent together, was this story. So Noel told me this story. They met the CMO of New Balance. For those who don't know, New Balance has had this massive resurgence. It used to be only a dad shoe, and now you see all these Gen Z and 20-year-old chicks wearing these things, these big clunky ugly shoes. But now they're in. And so what happened was New Balance had 15 years of year-over-year decline. They literally just went down 15 straight years. So they got a new CMO in, which is the guy I'm referencing, and the guy went to the CEO and said, "Can I just swing for the fences here?" And the guy said, "Sure. We really need to change it up." At the time, during the 15 years of decline, they had a 70-30 split between bottom of funnel, meaning they spent just direct response, dollars and dollars out, conversion rate optimization, that kind of stuff. And they spent 30% on top of funnel or brand awareness associations, et cetera. Things that were not direct, that they didn't have direct attribution to sales. And what this guy did was he came in and he flipped it. He said, we're going to spend 70% on top of funnel, brand awareness associations, and only 30% on conversion. And here's what happened next. The next 18 months, they continued to lose even more money, which is why a lot of times business is more about having a strong stomach more than a big brain, right? They kept losing money, kept losing money, kept losing money. And then on month 19, it started ticking up. And the next month, up again. Next month, up again. And then it just started going straight line up like a rocket. From that mini little less— that mini story, I have taken away so many things that I wanna share with you. Number 1, in terms of thinking, this is again, if you wanna build something big that endures. If you don't, then you can just stick with the arbitrage business. But most of you who do this are always wondering, why is it that the moment I turn off my ads, my business dies, right? It's because you don't have a brand. You don't have a cult-like following. You don't have an audience of people who want to continue to buy your stuff. You don't have people who would miss you when you're gone. To create that missing, you need to build brand. You need to build positive associations between your stuff and what customers and your audience love and know. Here's some of the takeaways that I have from this story, 'cause I think it's, they're pretty profound. Number one is that branding takes time. And so like, this is a big company that has a big budget that was able to spend a lot of money and it still took them 18 months. And so I would posit, I would hypothesize that for most of you trying to do this, it will take you 2 years or 3 years for a brand to really start yielding dividends, start paying you back. And I bring this up because I think, and this is because this was such a fundamental misunderstanding of me in my earlier career, is that I didn't understand the value. I didn't understand what brand actually provides, right? Brand provides 3 amazing things. One, actually 4. One is you get higher response rates to everything that you do. So think about in an advertising perspective, it means you get more clicks. A higher percentage of people will click your stuff because they have a positive past history with your company, products, brand. Number two, they will convert at higher percentages for the same reason, because they have a positive past history of it. You get more clicks and a higher percentage of those clicks convert. If you had only those two things, you'd already be printing. But the third thing that comes into play is that they will do both of those, and they're willing to pay a price premium. They're willing to pay more than they can to buy your thing that otherwise is the same besides the positive associations that you've made with your brand. So they buy white t-shirt, white t-shirt with swoosh mark. They're willing to pay 5 times more, 10 times more, right? For the white one with a swoosh mark. And then number 4, finally, it is more likely that they will buy again and that they will not buy from a competitor. And so brand, if you think about it from this, what more valuable thing could you do than something that increases your click-through rates, increases your conversion at higher prices, and increases repurchase rates? Almost nothing. And yet people don't want to invest in it. And so it was funny because like, I feel like I can share all the secrets of branding in the world, but I never have— I sleep great at night knowing that no one's going to do it because everyone, like, no one can think long term. Part of that is obviously being able to get yourself right, meaning if you can't feed yourself, do that first, right? But this is where having a more modest lifestyle is an advantage because it can allow you to think long. I think it's one of the biggest outcomes of saving money and living below your means is that your time horizon that you're able to think on expands. And the, the longer time horizon is, the bigger the goals that you can pursue. Because even if you do expand your time horizons in terms of how you think through things, If you act as though, if all your actions are aligned with somebody who can only think about payroll this week or next month, then you're never gonna build that thing because you're never gonna put time into something that you're willing to lose money on today. You're never gonna make investments because most of the biggest things that really change the world take time. They take extended periods of time of investment without any return. I have this tweet that got shared a lot, which was, The world belongs to those who can do without seeing the, the result of their doing. They can keep doing without seeing the result of their doing. And you have to be able to do it for a very long period of time, which is why the extended time horizon is so important with this story. So number one takeaway that I had was just like the, the, the, the increase in horizon from this story. Number two, branding takes, it might take you 2, 3 years in order to really see the return. Number three was the ratio. And I thought this was actually really valuable. Many of you who are listening to this, you're thinking, oh, okay, I'll spend 30% on brand. 30% on brand is what was losing them market share. It was losing them market share. And so you think about that give to ask ratio. Like I talk about this in my Leads book, right? For content, I would posit that 75/25 is probably the right, is the actual precise right ratio. Now the story that we told was 70/30, and it also depends on how good, you know, I'm sure that in doing that 70% shift, like I didn't get to double-click and talk to that CMO and maybe someday I will. And if you know that CMO of New New Balance, please introduce me, right? But I would bet that when they made the shift from 30% being brand first to 70% being brand first, that not only did they make that shift in terms of spend, he also probably reallocated that spend to the places where they get even more for it, right? He probably updated their strategy, got the right influencers on board who had more reach, et cetera. We do know that the give-to-ask ratio, which has been studied, is 3 to 1 minimum, is that for every kind of neutral kind of interaction where maybe you make an ask or whatever, you have to have 3 positive ones. This is why the ratio of TV to commercials in a mature platform is 3 to 1. And sometimes you want to be even more than that if you want to be growing. This is the investment of brand. And this is how you— it's like you basically are always digging your well before you're thirsty. And you have to keep digging that well forever. Basically, you always want to be ahead of your ask. You always want your goodwill, your positive association, your brand strength to be in excess of the ask that you make. And so that brand strength, the nice thing is that it can compound. So a 10% growth over and over again, like that 10% at year 10 is an enormous amount so that when you do have that ask of this significantly bigger audience, you still are always in equilibrium basically. Like you always, you're actually really out of equilibrium because you're under asking relative to the goodwill that you have. I was talking to a different friend of mine who has another, is a multi-billion dollar company. I was telling him about the conversation that I had. He's like, "No one gets it." He's like, "Even my CEO," because he has a CEO of his company. He's like, "He doesn't get it." He's like, "I always have to go in and be like, 'No man, we got to spend this money on this brand stuff.'" But he's like, "But dude, we're not getting anything back for that. But look at this bottom of funnel metrics." He's like, "The reason we have these bottom of funnel metrics is because we spent money on this stuff 18 months ago." And this is why it's so hard for people to grasp. And so it's also difficult, by the way, this is why publicly traded companies get into trouble when founders leave. If you're optimizing for the quarter, you're already screwed because anyone can come in and immediately look like a genius by cutting all branding and then putting all of it in direct response. But the thing is that you erode the brand over time. And if you don't have a brand, then it means that you basically have to put all that money into the brand first, not make any direct response, you know, asks, withdrawals, whatever, Row as shit. And you have to wait and you just have to keep waiting. This has been just a really wonderful, hard quantitative number that I can go to, which is that when I look at our advertising that we do at the portfolio level, at the holdco level, at acquisition.com, is are we 3 to 1? Now obviously I wanna be clear here, it depends on what your goals are. If you wanna build a 50-year iconic brand, then you have to be there. You gotta be 3 to 1, even more, right? 4 to 1, 5 to 1, 6 to 1, right? In that ratio. If you're looking for like a quick, you know, wham, bam, thank you, ma'am exit, then you're just going to do arbitrage and you're going to hope to sell to an investor who doesn't understand how this works. It should be real. So I guess that's what it is. You're just going to sell that, you know what your LTV to CAC ratio is and you can spend, this is TAM and this is how much more of the marketplace you can get. And this is what your retention is, whatever. And that's fine. There's nothing wrong with that. To be very clear, I'm not saying anybody should, you can do whatever the hell you want, but the biggest brands exist and function this way for a reason. It's because they get superior returns on advertising, superior returns on investment because they always reinvest in the brand. If you have, for example, free cash flow that comes out of your business, then some of that you might want to consider investing in those top of funnel relationships, in those top of funnel brand awareness things where you associate your product with things or people or experiences that your ideal customer loves. And then long-term, you can reap the benefits. Big themes here, right? So big theme was number one, AI to IRL. So, you know, like this whole tech metaverse, whatever, shift to IRL, the demand for in-person experiences. The second one was kind of the 50-year time horizon. The third was around the ratio of branding, of the give-to-ask ratio being confirmed at a higher level being corroborated by other companies. So that was just like a— it was a fun thing for me. The next one, and this is probably like a sub-brand point, what do those investments look like? And so we were talking about this. The thing is, is like you want the brand to be aspirational. You want the brand to be something that is overkill in a way. So let me explain what I mean. So you think about Red Bull, They're jumping a guy out of— from outer space to the ground. That's overkill. But the thing is, is you're like, "Well, shoot, if they're that extreme, then this drink will help me stay awake for my meeting." To take another equal opposite example, like The North Face, if you've heard of them, it's a jacket company. And the reason that they have those guys climb Everest and use their sleeping bags and their tents or whatever with The North Face logo on it is that you're like, "Well, if he can climb Everest, in that jacket, then it'll keep me warm on my way to work, right? When I'm walking outside in like 40-degree weather, whatever. Ben brought up the Range Rover Defender, which is one of their best off-road vehicle for Range Rover. And you're saying they continue to build some of the best off-road vehicles on the planet. Now, the vast majority of people who use those products don't drive them off-road literally ever. But it's kind of this overkill idea, right? I'm using the word overkill, but it's like this over-indexing. It's like, well, if it can do that, then it'll suit my needs, right? If you're building a brand around something, it's like, what big brand reference point can I create that we're so far above what the need of the consumer is that they're like, oh, oh, well, if they could do that, then they can definitely do this. And so these are the things that kind of like act as gravity. Like these gravity bombs for the brand. What demonstration? Because this is the key thing is what demonstration. And a lot of this comes from the products you build, right? And products are like, okay, well, I'm a service. It doesn't matter. Like if you're a lawn care person, for example, right? Like I'm just taking the extreme here. You could go and find a house and do like the ultimate transformation to their landscaping, right? Just do this crazy before and after absurd. Like you're willing to front all of the money just so that you can show it. So people like, well, man, if they did the, the, the Hermosi mansion, you know, gardens, then they can definitely mow my lawn, right? There's always an extreme version. Like, what's that crazy version of what you do on a daily basis that you can do one time that can anchor the brand in your customer's mind so that they're like, oh, okay, well, then they can definitely handle what I've got. All of these things are an effort to shift people's perception of your products in their mind. One of the other pieces that's kind of like underneath of that, the ideals, is what's the primary use case? Who buys your product will affect your brand as well. And so one of the things that they were telling me about Gymshark, they want is they always want the most in shape person at the gym to be the one who's the Gymshark athlete. They were like, we want the people who you'd go up to and ask for form advice We want that person to be wearing Gymshark and we have to create the person. So it's like Sebum, right? Is like, you know, best, best bodybuilder of our era right now. We have to make the association with Sebum so that that's aspirational for that person who's aspirational for a regular consumer, right? So it's like levels of aspiration. And so if you're thinking about building the brand, the prospects that you choose to sell to also have an effect on the brand itself. The reason that Harvard is Harvard and Stanford is Stanford, because a lot of people, especially in the education world, try and they're like, I want to be the Harvard of this, but you're never going to be the Harvard of that because you never turn anybody away. You saw every Tom, Dick, and Harry that has a credit card. You have no qualifications. If you don't think somebody is very impressive and they say, oh, I use this lawn care service, and you don't have much respect for this person, you might not care about their reference. And that's the crazy thing. You as a business owner might have done a great job servicing a customer, but because the customer isn't respect-worthy with their peers, then that referral actually becomes moot. It doesn't even matter. You can notice how brands happening at different levels, right? It's like, how does guy jumping off of space station or whatever to land on Earth, how does that translate into more energy drink buyers? It's just serious. It's like steps of removal, it's steps of dilution. And I think the more aspirational, the, the wider and more distributed that base can become over the long term. If your aspirational thing is you just have a cut lawn, then you're not gonna get many levels of dilution there. You're like, you're one step away from nothing. And so this is where these extreme demonstrations exist to anchor the brand and the perception of the brand and products in the, the consumer's mind, right? Whether it's B2B or B2C, works the same way. These were some of the takeaways that I had from the conversation with Ben. I also think he's just an awesome guy, really humble, works super hard. He, like me, wears the same thing every day. I have this little test that I run. Actually, I'm not going to say it because it might ruin it for somebody else, but he passed that test with flying colors. I'll just say of humility. He has reinvested every dollar of profit that he made back into the business because he was willing to bet big on the future. Every distribution that you take from the business, If you think about this, if I had to reinvest this money into my business to grow it, what could I do? And sometimes some of the best investments are in brand, which aren't going to show for some time. So for example, if you were to say, I'm gonna spend more money on ads, but you can't because you don't have enough sales guys or whatever, then it's like, that might not be the best investment, but brand comes at a delay. And so it may be worth investing into some sort of brand stunt or something like that. That's a huge demonstration of your prowess, your ability as a company. Because it will come at a delay. And I think that's something that we can kind of all think about as entrepreneurs. Like, what are those crazy things? What are those crazy ideas that move the world? What's that big ask? What's Everest for your customer? And then how can we show them that we can do that so that when they just want to walk to work and it's a little bit chilly, they'll wear our jacket? Those are the big 3. AI to IRL, long-term thinking, the brand ratio, big aspirational associations. Those are the 4 big things that I got reinforced from the conversation that I had with Ben, and I thought I would share them with you. Lots of love, everyone. Share this pod if you liked it. If you don't, then don't share it, I guess. Otherwise, be amazing, and I'll catch you guys on the flip side. Bye.