Neil Patel and Eric Siu's Biggest Business Mistakes

I wanted to actually discuss your biggest marketing mistakes or business mistakes in the last 12 months, and I'll discuss mine as well.

Okay, great.

Where have you really failed? I would probably say the biggest area we failed with our ad agency, NP Digital, we went from pretty much being in a handful of countries, and when I say a handful, India, US, and Brazil, to then all of a sudden in roughly like a year period of time, we expanded to a total of 19 or 20 countries, somewhere around there. I think it's 19, it's the exact number. And we started burning a lot of money, not like $1 million a year or $2 million. I mean like burning a lot, like substantially more. And we're not venture-backed, so we're using our own money. And when I started looking at the economics of some of these things, like I look at in Southeast Asia—

Wait, no, by the way, you have business mistakes and marketing mistakes. This one's business mistakes, right? Just confirming.

Yes, business mistake.

Cool.

And we were a little bit arrogant because we're looking at our leads and our traffic in these regions. We're like, okay, if we take our closing rate in the US, we divide it by 2, we, you know, adjust the price, the revenue per region, we started calculating how much money we can make. And it just didn't work out. Like in some regions, you know, their sales processes were different. Mike had to get involved, fix a lot of the sales. People, a lot of the team is doing great, but just educating them on our systems and processes helped a lot. But when we look at some of the burn, some of these regions are costing us like $100 grand a month. Okay. We're in 19 of them. So when you start losing like $100 grand a month on a region, you have a lot of them, it adds up. So then—

$2 million a month.

That's what?

That's $2 million a month if you do times it by 19.

Yeah, but some of the regions are profitable, right? So it's less than that, but it is a big burn like that. So when you start looking at the numbers, you know, we started then buying in some of these regions. We're like, huh, it would've been cheaper for us to just buy agencies in these regions, add our people and grow them than it is to— Build from scratch. Than it is to build from scratch. Because the profit from the agencies we bought would've paid for the debt payments and it would've cost us very little to nothing. It would've just been cheaper and our revenue would've grown way faster. And that was probably one of the biggest mistakes. And the arrogance was, is looking at Google Analytics and Salesforce, be like, look at all this traffic we get in regions like France. Oh, 500 companies are hitting us up a month.

Yeah.

Based on their GDP and how much people can pay and the average spend for marketing and for consulting, here's how much revenue and profit we'll make within 2 years, right? Spreadsheet math doesn't always work out the way you think when you're operating a business. They're very 2 different things. Yep.

Well, that's a big one. Would you say that's the biggest one? Do you have anything else?

That's the most costly one that I've made in probably the last year. It's probably going on 2 years now, but I'm still happy with the team and we're still chugging along with the burn. So now we're buying and then we're adding in the EBITDA and still having the losses from the regions that we're expanding on. But eventually we'll figure it out and figure out where there's overlap and stuff and merge and, you know, do whatever's necessary. But that's been going well for us. The other big mistake that I made in the last year, and it really hit me, is I'm traveling a lot, right? Eric and I are recording this. I'm in India right now. It's late at night. But you're talking about this month alone, maybe I'm home 3 or 4 days, 5 if I'm lucky, but 3 or 4 days. And I'm going to all these conferences. And it's much better now than what it used to be. It took me a long time to learn this. I'd be like, okay, you want to pay me $50 grand to speak? I'll show up. All right, you got $75 grand? I'll show up. You got $25 grand? Eh, probably not.

Yeah.

But I was doing the math and I was like, huh, making good money doing speaking. So we're picking and choosing. And on an average month, we get around 11 companies hitting us up for paid speaking gigs, right? That's our rough number that we get when you average it out through the whole year. And we would pick the ones that would generate the most front-end revenue from speaking, but we changed it up in the last year or so, a little bit less than a year. where we're now picking and choosing the ones that have the most ideal customers in the audience, but it doesn't matter if they can pay or not. If they can cover some of the costs, that's great. So then we're not paying out of pocket. And like my team hit me up today when I was at dinner like, hey, we got this gig in Brazil. You're already going to be there. It's great for branding. I'm like, well, we've already spoken there. They've paid us in the past. Do we ever pick up customers? Like, no, it's not the right fit. And they're like, we can talk to them. We can ask them for money. I'm like, but if it's not the right fit, I'd rather be home with my family. And we're still facing some of the ramifications because some of my speaking spots are booked up like a year and a half in advance, usually not more than a year and a half. So I'm still going on some speaking spots that I shouldn't be. And that's probably one of the second biggest mistakes. But on the flip side caveat, every once in a while when I go to some of these random events, I'll meet some interesting people. They'll be like, oh, I'm part of the QIA. I'm like, what's QIA? Qatar Investment Authority. You know, we fund companies. We love you. We've been following you forever. Would you be willing to come to Qatar? If you bring employees here, we'll pay for 40-something percent of all your employees and subsidize expenses. I was like, ah, probably not going to bring employees there because I don't think a lot of my US employees would want to move. But you know, you meet some interesting people from some of these events. And that is the benefit of speaking at a lot of events. But when I weigh the pros and cons, you're just— I would have been just better off speaking at the events that drive real revenue. Like today, I spoke at Sequoia Capital India, which is now called Peak 15. The amount of unicorn companies that they have, and I'm talking about unicorns in today's valuation, the amount of companies that they have that generate hundreds of millions in revenue that weren't you know, heavily funded. It's amazing that the number is astonishing. It's just like, you know, people are— not only did I give a presentation, then I had one-on-one meetings with the portfolio companies talking about how we can help them with their marketing and what are the next steps, right? Like, didn't get paid, don't need to get paid. That's ideal event because you're picking up business and that business makes you way more in profit Than what you would get paid, $50,000 or $75,000 from a speaking spot.

Dude, you must be so tired right now then.

I am, but it is what it is.

I got to take a minute to tell you about the Agency Owners Association. This is a peer group for agency owners. Think YPO or EO, but for agency owners. And I just wanted to read you a couple of testimonials. So this first one comes from Carrie, and we asked her, what do you like most about the group? She said, having a group of people to discuss and bounce ideas. The leads are great too. Yes, we share leads in this group as well. This one from Aliyan, he says, the ability to really post whatever I want and need and the group responds. Great experienced members. Getting a lot of insights from conversations with other members. Getting a lot of value from sessions from Eric. Getting advice from others as well. And so if you want to grow your agency faster and you want a peer group to do so, just go to marketingschool.io/agency. This is a group that both Neil and I created, and our hope here is to create a vibrant community of agency owners and do a lot more with it in the future. So again, marketingschool.io/agency, and we'll see you inside. Side note, this is interesting for me. I was looking at Neil's personality test yesterday. I was looking at mine. Your energy is 99% out of 100, right? So that's your work energy. Mine's still pretty high, but not as high as yours. It's 85%. So if I were you right now, I'd probably be going to bed. So that's the difference, right? But so for me here, we can continue. We can pull on the M&A thread a little more. I mean, I would just say the mistake that finally we've cleaned up, right? The M&A mistakes that have been made in the past where we didn't do enough due diligence, where we didn't vet the people, we didn't vet the clients, right? We moved too fast on them and we did them too close to each other. Just having to pay for that for the last 2 years or so. And really, I would say in the last 12 months, I've been focused on the business for maybe, I would say, the last couple of years or so. I've gotten more involved than I've ever gotten involved ever in this business, right? In the last 12 months. And like people will say, oh, you know, let your people learn it and they'll figure it out and get out of their way. I'm like, at this point now, I've read so much of that stuff. I'm just like, fuck all of that, right? So I'm just like, things will move if the founder's there. And you think about it, guys, like if you're the founder, you're the most incentivized to make things happen, right? So Neil's not necessarily, he's not managing people per se, but he's super involved. He's calling people all the time. That's the one thing he's really good at. I'm just— I'm going to say it again. If you want to have outsized incomes, you have to be maximum involved. And there are people out there, it's like, oh yeah, you know, by the way, you probably can't see them right now, but Warren Buffett and Charlie Munger have done a great job. They're also freaking geniuses too, right? And a lot of these people right now, last couple of years, they've been talking about building a holding company and all that. A lot of the chickens have come to roost now and the holding companies aren't as beautiful as you think they are, right? Not everyone could be Warren Buffett and Charlie Munger and just, You know, hire amazing operators and get out of the way. Now, I think that works. You definitely should hire exec team. You definitely should hire operators. But if you are truly the one that's actively learning, you're going to all these events, you're the one that's constantly getting a lot of information from outside, it would be a shame for you not to put that knowledge to use to help your team get even stronger so you guys can move faster.

Yeah. So going back to your first mistake that you made, You talked about buying too many companies too quickly and not doing enough diligence. How quickly did you buy the second one from the first one? Like what was the spread in time? Was it months, years?

2 months. Oh wow.

So you had to deal with 2 integrations at the same time?

Yep. And not only that, not only that, because I subscribed to the, oh, you know, yeah, you know, get out. So we hired a GM at the same time. I'm like, okay, I'm going to get out of their way, right? And yeah, probably that part was the worst. Getting out of the way was probably the worst because I think had I stayed maximum involved, I would've figured out a way to make it all work.

So you would've made at least one out of the two work.

Guaranteed. Yeah, guaranteed. Yeah.

It's funny. So I've known Eric for a long time. He used to have this old philosophy, and I'm not saying it's wrong or right, and it was very different than mine. his philosophy was, you know, the IBM philosophy, oh, I'm not going to fire the person. They just made a $100 million mistake. You know, that was training and learning. So he would get out of people's way and let them learn and give them feedback and just watch them improve over time. I've always been the believer of, I don't have time for this. You either do it right or you're gone. And I'm going to end up finding someone else who knows how to do it. I know that's really cutthroat, but what I found in business, if you really want to grow, You just hire people who have done the exact same thing you're looking to do. So then that way you're not wasting time and energy spinning your wheels.

By the way, that's something Neil's always been really good at. I remember one time he hired someone to be a, let's just say a leader of something. And within like a week and a half, he fired him.

The guy with the stash, right?

Yes, yes, yes.

Yeah. Eric introduced me. The guy is really good. He's really smart, amazingly book smart. He knows all the right answers. He was one of the worst executors. And I'm like, well, I don't give a shit if you went to Harvard or Stanford or anywhere. If you can't execute, who the crap cares? Like, I'm not going to make any money from this. I'm just going to end up paying you. It's a waste of time.

And to Neil's point too, it's not right or wrong necessarily. I've just realized that that doesn't work for me. I think it might work for somebody else. It just doesn't work for me, right? And going back to the personality test again, I looked at your thing, Neil. We're both So I'm like maximum, I'm creative. I think you're kind of in the middle. The way you do things is you typically will follow rules and go by the book. And I'm on the total other side. I like to do things in original ways. And so it's really important to understand yourself. And going back to personality tests for everyone, this is completely free. You can go take it. It's principlesyou.com. So principles, plural, you.com. It's Ray Dalio's personality test and Adam Grant does it as— they did a partnership. And it's always good. Sometimes I'll look back at it because You know, Neil and I will agree on things, we'll disagree on things, and it's important to understand how people work and you can compare each other, so it's great.

So use it for dating too.

Hey, Eric. Yeah?

Yo, hey, you used to do the personality test with girls you would date, right?

I mean, used to.

You still do? Wait, by the way, how does that work?

What do you mean? I show them, I, you know, I typically show them your personality test compared to mine. I'm like, look, I do my podcast with my friend over here. Look, we're so different. And then all of a sudden they become really interested in it and then they want to take it themselves.

Back up, back up, okay? So let's start from the beginning. Have you gone on a date with a girl or not at this point?

What are you talking about?

When you have them doing a personality test, like, have you already been on one date with a girl or no?

Oh, many! I've done this, like, this is years.

No, no, I know, but I'm saying, let's say you meet a girl. Do you have her take the personality test before you go on the first date?

No, no, no, you can't do that. No, no, no. You have to build some rapport first. It's like, you can't go for something that's— especially because it's going to take 15 to 20 minutes. No, you can't do that. You have to meet and then you show them and then they incept themselves into wanting to take it, right? And then I'm like, oh, okay, share the results with me afterwards. And then everything like— and then I get to basically like, you know, I get a sense for how they are in person, right? That's more qualitative. And then this is a little more quantitative. And so, yeah, it's good in that respect.

And you would get them to take the personality test on their first date?

Yep.

And what happens if you connect with them, it's amazing, but you know the personalities are very different?

Well, you know, there's one example. We're not going to name names here, Neil. There's one very entertaining one, uh, one very entertaining gal. Okay, let's just call it that. And, um, everything that was said in the personality test was validated. Not humble, very not composed, um, very not calm, very not poised, and, um, and like low energy and like not like doesn't want to take responsibility for it. So it's like it was all validated and, um, Yeah, that's why I say that personality test is like 90-95% accurate.

Was this the one that works at the hedge fund?

Yes.

Okay, so, and then you still went on dates with them after this many times.

I mean, you know, we have another mutual friend. We have another mutual friend that enjoys chaos and I tend to like to run towards chaos as well. You know what I mean?

No, so this other mutual friend of Eric's and I's will both text Eric being like, hey, How's your dating life going with this girl? Because Eric's stories, you know, it sounds bad.

Don't tell the stories. Don't tell the stories.

We won't tell the stories, but it's amusing for us to hear. So we like the chaos that she throws Eric into. We just find it funny.

I mean, I laugh when it happens to me too. But yeah, I want to take a second to tell you about my podcast co-host's agency. So NP Digital. So Neil Patel Digital. What they do is they do a whole host of marketing services and they are global. They're worldwide. They have SMB services as well. They have mid-market to enterprise services as well. They cover the entire gamut. So you can just go to mpdigital.com to learn more about it. And now back to the episode. So I would just say in the last year specifically, again, I think, look, if you're going to be chairman, okay, or in Neil's case, he's CMO of the company, but he's still very much like an active founder. I believe the founders need to be involved in what's big, what's broken, and what's new, right? You need to have someone that's on that and then you're in the best position to solve those things, right? So I would say that. I would say also not— and Neil, I don't know if this was an issue for you, but oftentimes we figured out a decade ago the things that work in B2B marketing, right?

Mm-hmm.

It's a wonder to me how we've already figured it out, but we're not doubling and tripling down on it. For example, basic things like webinars and partner webinars. We bring it back, oh my God, it's working amazingly, right? It's like, why weren't we just doing this like 10 years ago or so? So sometimes you just got to look at, hey, what actually worked and how do we double and triple down on that? Very basic, but people forget to do that. So I'll just leave it at that. All right, everyone. So that is it for today. Please don't forget to rate. Go ahead. Yes.

Make sure they go to marketingschool.io/agency.

I was going to do that. So Please don't forget to rate, review, subscribe first. And then if you're an agency owner and you want to grow faster, go to marketingschool.io/agency. That's where we help agency owners grow faster. A lot of people have been saying the community has been great, that they're— they've actually got a lot of resources, templates, and a lot of coaching that's helped them sidestep mistakes. So that's the group Neil and I have. Please join it if it seems like it's fit, and there's no long-term commitment. That's the cool thing about it. So that being said, we will see you tomorrow.