How to Create a Growth Engine for your Business

Hey everybody, welcome. We're really excited to be doing a webinar on probably one of the most important topics facing startups around the world today. That's creating a growth engine, not a growth hack, okay? A growth hack, of course, is something you do to get a little bit of growth. A growth engine is something that you do to grow over time. We'll talk more about that in a moment. I can tell you as a seasoned entrepreneur, growing your business sounds great and it's a lot harder than you might possibly expect. Let me introduce myself and the Founder Institute very quickly. My name is Adeo Ressi, I'm CEO of the Founder Institute. The Founder Institute globalizes Silicon Valley. We take some of the best practices and best ideas on how to build a business, and we'll be talking about some of those today, and we open different chapters around the world and help local entrepreneurs really capture some of the growth mentality and action that happens in Silicon Valley in their local communities. I know we have entrepreneurs literally from all across Europe, all across Africa, the Middle East, etc., who are on the webinar today, as well as America and various other places around the world. I want to welcome everyone. If you haven't had the opportunity yet, please do me a favor and sign up for one of our local programs. We're recruiting in dozens of cities around the world by going to fi.co/join to If you're a more experienced CEO and you want to build a chapter in a city and we're not operating there, you can go to fi.co/lead and learn how to open a chapter in your city. We have over 2,000 people registered for this webinar today. Okay, so let's go to the topic, and I'm going to give one more thing. If you have a question as we go through the topic, you can type it in the chat. I have a team in the other room, they're monitoring everything, and they're going to do their best to get your question answered. I'm very excited to bring on screen right now Justin Wu. He's co-founder of Growthly, a leading growth as a service company that uses the latest techniques to help businesses get more from their customers, more customers and more revenue. And he's also the resident growth hacker at the Start Engine Accelerator. Justin, why don't you come on screen and do a quick intro of yourself, add anything that I might have missed in your bio that you want to talk about, please.

Okay, hey everybody, my name is Justin Wu, and I think Hideo kind of introduced me very well there. I am the founder of Growthly, and we're based here in Venice Beach, Los Angeles. Think of Growthly as kind of your outsourced growth team or like your CMO, because marketing takes a lot of time, experience, and resources. What if we could handle that bandwidth for you? And we call that kind of growth as a service or GAS. A little bit more background about me on how I got to founding Growthly and getting into the growth marketing, internet marketing, and in general space. I studied information architecture at the University of Washington. I combined my computer science background with internet marketing. People like to call that growth hacking now, but I just saw this intersection between marketing becoming more technically driven with software automation, and internet marketing in general always has been data-driven marketing. It hasn't gone anywhere. As he said in the past, I founded several startups with various failures and success, but I kept moving forward and founded Growthly. Other projects I've done in the past, one of them was called Side Vision, which was invested by Warner Brothers, went through the Warner Brothers accelerator. That project got finished, and then afterwards joined as a resident growth for the Start Engine accelerator. Then I went to go found Growthly.

That's great. Well, today we're going to talk about, and welcome, 3 things. How do you define your marketing funnel, right, super important, channels you should look to for growth, and how do you test your different channels to optimize growth. We have a great turnout, we have almost 700 viewers right now. Again, a reminder to everyone, if you have a question as we go through some of these things, type them into the chat and we're going to do our best to answer them. With Justin as we go through. So first one, the first step and the first topic is defining your marketing funnel. So, you know, everyone's always thinking, I just need users, I need users, I need users. But users usually come through a funnel. Can— and assume right now that most of the people here are somewhat sophisticated, but fairly novice, you know, if you could outline what a funnel is, how you think about it, how to define it, that would be great.

Yeah, so the marketing funnel essentially is, you know, a lot of people always think on the very top, which I think most people start with, is just creating general awareness of your business and acquisition of customers. I mean, everybody just needs to bring customers to the door.

Right, so just, let me not interrupt quickly, so The funnel basically, for example, might be the very top awareness of the business among a cloud of people, and at the bottom might be a paying customer, right? Just to give an example.

Yeah, so from point A to point B, from somebody walking in the door all the way up to conversions. And then actually more beyond the funnel is even after the sale, what are you doing with that customer or user? And that's something that people also forget is that after the sale is done, they don't recognize that there's more beyond that, just that too as well in terms of your marketing funnel. But being able to— that's essentially identifying how the flow of customers come to first recognize your business all the way up to the conversions. That essentially is just the overall flow in a nutshell of the marketing funnel.

And how do you— what would like— so I'm a new founder, let's say I've got an app or a website and I want to define my funnel. What would be the first step that you would recommend that I do?

Yeah, what I would do is just first map out the customer journey throughout your whole kind of product service and kind of the whole customer lifecycle, you know, from them initially coming to your website all the way down to signing up, and then what happens after the signup or purchase, and then after that too. So kind of just like story map your customer journey and build that whole roadmap for you, for the customer, and then you'll be able to start identifying and keep that in mind on the whole flow of the traffic that's coming inbound or the installs are coming in or the customers who are walking into your retail store or even your e-commerce shopping cart. And so it's like kind of a combination of understanding your product heavily and then understanding how your customers are going to go through that whole journey. And from there— yeah, yeah. So give me—

so let's maybe use something specific. So you brought up a store, so you can have a funnel even in a physical location, which is something that people sometimes don't think about. But, you know, for most of the people on the webinar, I'm sure they're building more digital products, some hardware, but mainly technology-oriented. So you hear about the product possibly through an ad or some PR, you come to the website, you might sign up, you might get some sort of prompt, you might pay, and then another interesting thing you brought up is that you should be thinking about the customer after they pay as well, so how to keep them engaged. Like, what are some— you know, there's a lot of talk out there about, oh, you know, don't have too many steps in your funnel. If there were any sort of like quick tips you could give when designing your funnel, because, you know, I could see someone new saying, oh man, and coming up with a funnel that has like 50 steps, or what are some of your quick guideposts for how to think about doing a funnel well?

Yeah, I mean, just start with the basics. The thing with marketing and even just funnels and just marketing in general is that it can get pretty complicated, especially if you add in more different marketing channels and different acquisition strategies.

And different user types.

Yeah, user types too, and different product types too, so it's like it gets more complicated as you go and, you know, I would just start simple first. Just think about customers coming in and then purchasing a product and then thinking about how to deal with them after that. Just keep those 3 simple steps first, then anything in between—

Okay, so the 3 are customer coming in, getting them to give you money.

Yeah, exactly.

And then once they've given you money.

Yeah, and then what you can do when you want to start building out more of your funnel is to start looking at those 3 big sections and figure out, are you bringing a lot of people in the door and not selling? Then you know there's something in between both the awareness and acquisition side and the actual conversion. There's a velocity issue, or there's like a wall obstacle. Not getting people to purchase. Then at that point, then you would go back into that part of the funnel and figure out what's stopping that person from buying. And then same with the purchase, after the purchase, the other way you could take a look at are people buying more products from you, are they staying with you long enough, or are they referring more people. And then from there, it's going to fill the gaps in between the whole funnel in general.

Well, so we're getting some questions coming in, but before we get to them, I want to also cover one more thing just about funnel itself. You said 3 big things, right? Customers coming in, customers paying or becoming paid, you know, whatever the value that you want from them, and then retention. And there are metrics that are common for each of these, I guess cost of customer acquisition, conversion, and retention and churn. Maybe we could talk about each of those quickly and then start getting some of the questions. But you know, at the very top you have what's called cost of customer acquisition or CAC. Do you have any quick thoughts on that?

Yeah, I'd say the number one startup or business killer is not paying attention to how much the cost to acquire a user is versus the actual lifetime value of the customer itself. Some people are spending a lot of money just to acquire customers, and they actually aren't worth it in the end, and they're just burning— you're literally bringing customers to your door, but they're actually not going to be worth a lot of value to you. But before I even get deeper into all the different metrics, I just want to put it out there, it does really depend on the type of business you run, whether it is like a SaaS subscription-based model to an e-commerce/retail or an app. But overall, there are still very common metrics, and I think I could do a quick bullet point for each. Type of business and kind of the metrics that you should look at. For like a subscription or SaaS-based business, you want to look at things like your churn rate— how many people are leaving your product and service. You want to look at the CAC versus your lifetime value. Basically, if you have a subscription or SaaS-based business, if you're paying $50 to bring somebody in, and they're only staying for 1 month and your subscription is $50, then you're just washing that out. But if you pay $50 to acquire somebody and your service is only like $25 worth a month and they leave after a month, then you've got an issue there. You're actually paying money to have somebody come in the door and actually leave, which is a huge issue. Other things to look at in terms of a SaaS-based business or subscription-based is kind of the average revenue per user. Are you bringing more revenue and upselling and trying to sell more customers to multiply the dollars per spend on that customer? And then another big thing is just your monthly recurring revenue. In terms of apps, you want to look at your cost per install. You want to look at overall retention, how many people are logging in every day. Every month, where is the drop-off of what— where people are using different parts of your app, and also taking a look at kind of different channels and where you're spending your ad spend. If you're buying ads on Facebook versus Pinterest and they both install your app, are they both equally the same type of user? You'd have to track that and take a look at that. Another thing too is just not even talking about the type of business. This could be just even just your sales funnel too, which sales and marketing has been going kind of hand in hand. It's just what is the average deal time that you have talking to a customer. Every time that you spend talking to a customer on the sales front is time utilized that you could have sold another person and kind of measuring the prospect to close time and also the percentage too is also another important metric.

So, but at a high level, at a high level, because there's a lot of questions coming in and I don't mean to interrupt. Yeah, open. So, on this, hey, I'm getting a customer, it's called different things in different, you know, cost of install, etc., but it's essentially your cost of customer acquisition, or CAC is the abbreviation, highly. Then you've got these quote-unquote prospective customers and you want them maybe to buy your product or subscribe or whatever else. That's usually your conversion rate, and it's just the percentage of those acquired customers that actually purchase the product, right? Then last but not least, you've got the retention and churn, which is something that you measure, you know, how many people drop out, how many people do you retain, and they vary also because you might have your daily active users or DAUs or monthly active users or MAUs if you have a website or app. So just measuring all that, and your lifetime value is How much, or LTV, which is another word, how much value are you extracting from them over their lifetime? One of the key questions that keeps coming in is, what are some, like, all these are, you need tools, right, to figure out. What are some of the tools that you recommend, Justin, to deal with these issues?

Yeah, so A tool that we've been using is called Baremetrics. Baremetrics is an analytics tool that sits on top of Stripe payments, and what Baremetrics does is it tells you your monthly recurring revenue, it tells you your churn rate, it tells you— it essentially tells you everything you need to know for if you're doing kind of an online payment system or a SaaS based business. So, Baremetrics is made by Stripe too, I think. That's also just a great tool. If you're looking at your sales and your sales whole pipeline, then it just depends on your CRM or your outreach tool. So it could be like HubSpot CRM, which is completely free. You could take a look at your whole sales funnel of people coming in and flowing into your business if you're driving a sales-driven organization, or you can use other tools like Close.io or Outreach as well. Anything that will help kind of move the velocity. That's the biggest thing that you want to look at with any type of business that you have is that you're looking for statistics that can monitor essentially the velocity and people going through your whole app, product, service, or even store.

Was it Bear Metrics of Spain?

Yeah, Bear Metrics. Let me see, I can type that out.

And then you also mentioned Close.io.

Yep.

And some people were asking about— and what was the third one? Sorry, the—

Oh, there's like— The CRM system that was HubSpot CRM is—

HubSpot CRM, great. Some people were asking about Google Analytics and KISSmetrics as tools. Do you find them useful or—

Oh yeah, for sure. So Google Analytics is really great to overall track where your traffic is coming in inbound and measure all that. But sometimes Google Analytics is only good to just show you people coming to your website and what channels they're going through, but if you want to get a little bit more deeper into how your users are actually coming into your app and where they're dropping off, then there's two things that you could— two tools that are good is Mixpanel. Mixpanel.com is the tool. You can map your website and see where customers are kind of dropping off. Or another one, if you built an app, it's called AppsFlyer, which is appsflyer.com.

Do you know Kissmetrics? Do you like them? So Google Analytics is good, but it's kind of simplistic compared to these others.

Yeah, I know Kissmetrics has been good. I just haven't utilized that too heavily. I mean, there's a lot of tools out there, and so it really depends on, you know, there's a ton of emailing tools, there's a ton of customer service tools, there's a ton of analytics tools too. You know, there's a lot of them have trials. It really just depends on trying it out for your business and seeing what integration works with your app and also other services too, and see if that fits with what you want to do.

Ayana was asking, how do you determine the lifetime value of a customer? Do you have some best practices there? And then there's another question we have that's coming in.

Yeah, so for the LTVs, you know, when tools like Baremetrics or even AppsFlyer will monitor overall, the moment somebody purchases something from you, you should be able to track their, every single purchase history or the length of time of them being a customer for you. And then from there, you should be able to determine how long that customer and how much they purchased from you, and that will help you determine the overall lifetime value of the customer. You could do that internally too, but I think it gets super complicated if you're not using tools like Baremetrics or AppsFlyer Mixpanel to think about all the different customers and the overall LTVs, especially once you start rolling out different product lines.

So building it yourself could— right, because there's so many things to factor in. Churn.

Yeah.

Payment timing, etc., that using off-the-shelf tools is really a big differentiator.

Yeah, and that's the beauty about a lot of APIs and tools that exist out there. There's people building services on top of services to help you, which Baremetrics is, to help you offload that bandwidth. Otherwise you have to spend You're going to pull your developer to go and try to map that all out? No, they should be focusing on building the product and service. And so there's a lot of tools out there that can help you assist that, because what will happen is, let's say you bring in a customer from Facebook, and you have to find out if their LTV is different from somebody that's coming in from Pinterest, which could be. If you're not properly tracking that, you don't know how to track that, then there's other tools that will be able to help you realize that.

So one of the questions I saw here from Alex is, you know, if you're gonna go out and raise money, can you use the CAC and LTV of a competitor to say, hey, we're gonna get a good CAC and LTV because I know those guys got a good CAC and LTV. You know, I can answer that one as well, but I'll toss it over to you, Justin, first.

Yeah, so on the fundraising side, you know, I've had experience up to seed round at least. It's good to mention, at least from my perspective, and when we did fundraising, it's good to mention kind of the industry stats, but at least the investors that we dealt with, they want to see it actually in practice versus seeing it, you know, it's like, unless you're doing like really, really early stage angel funding, then yeah, I mean, and you don't have the actual acquisition in place, then yeah, you know, understanding what your competitors in the industry is, is good to get for that early stage, but once you're moving beyond that too, then actually looking at your real numbers and comparing that to the actual.

Right, and I agree, and one thing I would add is a lot of the things that you would do to figure out your numbers, you can test. So you can do what are sometimes called painted door tests, where you create like a landing page and you buy Facebook ads or Google ads to drive traffic, and you might even have them buy something but immediately refund them, and then that would at least give you a very good sense of your CAC and your conversion rate. And so do you recommend doing these painted door tests?

Oh yeah, definitely, definitely. And I think that just goes to the point of you just demonstrating that you are going to hit similar numbers to your competitors, or— right, because, because that's the biggest thing with investors is that Yeah, like anybody can talk about getting similar results to competitors, at least we would love to believe, but actual execution is the hardest part, and most investors, at least the smart ones, will know that too, and they would just want to put your money where your mouth is.

Right, so on that point, if you say, hey, I know the CAC of my competitors is $1.50 and the lifetime value is $10. And then you went out and did some painted door tests and got the $1.50 CAC, but you said, look, I don't know what the LTV is yet. That would say— the investor would believe you more, right? Because you got the $1.50.

And you running that small test, then you can go to your investor and say, look, I did get customers at this dollar, so if I got your investment money, It's just math, you know, I can just put more dollars to this, I'm able to achieve this cost per acquisition, therefore I know that this cost per acquisition is going to be this cost.

Yeah, great. We got to move on because we got a couple more topics to cover, but one last question on this. Biggest mistake you see people make with their funnel, or biggest two mistakes, and then we'll move on to once you have a funnel, looking at channels. Go, Justin.

Well, besides people not actually defining their whole funnel, you know, and you'd be surprised, you know, for the companies that we helped, which has been over like 100 different companies through the lifetime of our company, and these are companies that have been seed to even like Series B and C, like revenue-generating companies too, and it's just because that, you know, as a startup you're always trying to like be on go mode, and you will throw more dollars on the acquisition side, and you're not actually realizing what's going on throughout all the different parts of your whole funnel. But I think the biggest thing that I've seen in terms of a mistake when defining your funnel is that you want to assume that every customer that comes into your funnel is all the same. Which gets a little bit complicated and pretty advanced once you start getting into that, that deep level.

So you're saying that they're not all the same and the mistake is thinking that they're all the same. So a Facebook user may be different than a Pinterest user, may be different than a search.

But even then, it's like two Facebook users could be different too. So whenever you do, when you do your initial marketing and you just start one by one and maybe laser focus on one target demographic or segment first, and then as much as possible, and then move on to the next. Because once you start throwing out ads for, like, you know, I've seen it for, like, somebody's trying to target veterans as well as young millennials, and then they're, like, bringing it to the same landing page, then your data is just all muddled all together.

So, oh, so that's a really good tip, and that's a good segue into the next topic, by the way. So, which is Now that you have a funnel defined, how do you start marketing and what channels should you look to? And so let me just carry that point in, and what you're saying here, correct me if I'm wrong, is that you should not sort of blanket but actually try and do some really specific targeting. And you brought up, for example, veterans as an ex— as a maybe if it's appropriate for your product, and then roll out so you can get very specific data. Hey, Facebook veterans, Google veterans, LinkedIn veterans, right? Is that what you're saying?

Yeah, yeah. And what I was saying though is that I've seen people buy ads to both, like, two different demographics and sending to the same website or landing page and expecting them to be the same user coming inbound, or customer, and that's not the case, you know. Everybody— there's differences in those types of customers, and being able to just segment that correctly will help you understand. It's really just understanding your users and who they are and where they are in the funnel.

So really, as a first step of the different channels, it sounds like to me, and correct me again if I'm wrong, but you're saying you really want to start defining different user groups first.

Yeah, I would do that before you define the channels, because channels are always going to be there, and if you want to determine what channel, you know, and just, you know, what people might ask, what is our different type of channels? You know, the PR is a channel, all the different social platforms, Email, search, ads, influencers, print, TV, you know, so everything is a different channel. And before you go out and actually go and like, just because social media like Snapchat or like Instagram is popular, you have to ask, who are your customers and where are they congregating before just going into the platform blindly and thinking that that's the best channel to use for your business. And the easiest way to do that is look at your competitors. You know, they've done the homework for you, and you can take a look at the different channels and places.

So that's the channels, but can you look at your— how can you figure out which audiences your competitors are going after?

Yeah, I mean, just looking— I mean, there are tools out there that you could look at kind of what ads they are running. One of them that we do use is kind of a— let me see here.

While you look at that, let me show— so this is a tool to look at your competitors. There's a really decent book out there called Traction, and it outlines a lot of the—

yeah, that book I always recommend to everybody.

To your point about channels, and then tell us about the tool, basically the gist of the book is it lists all the channels in here pretty much, and then you create a quote-unquote bullseye and you keep testing them, right? Essentially. What you're saying is a little more detailed. Think of your target audience first, and then you can figure out what channels that audience uses. And one of the ways to help you do both is by looking at the competitor. So what tools did you say is good for that?

Yeah, so there's this one called just Rival IQ. Rival—

How do you say it again? Do you want to type it in the chat? Rival IQ.

Yeah, Rival IQ. Let's see if— I don't know if that turned— that didn't turn into a hyperlink, but Rival IQ lets you monitor and take a look at your competitors. Even monitors kind of the different changes that they do on their social. Or even on their website content. So it kind of just sits on there and just monitors your competitors from everything that they're doing. So you can see what messages that they're doing. You can see a lot of different things, the keywords. It's a pretty clever tool.

I mean, the tools that exist today, like, you don't have to do anything. Get Rival IQ. It's like, he's crossing the street.

Yeah. Yeah. And usually, you know what? That's the thing about marketing and tech in general. And people always ask, like, what tools should I use, or how do I even think about the tools to use? Again, first think about your customers and where they're possibly congregating. Then once you've made a decision that maybe, like, Pinterest is a place that you should go, then go Google and just do research on tools for that platform. Don't go chasing tools first and then thinking about how that can all fit in your equation.

Right, okay, so define your audience, pick your platform where that audience is, and then find specific tools for that platform third.

Yeah.

Okay, awesome, yeah. So, and to that point, would you say like right now there are really great tools for almost every platform?

Yeah, I'd say so, maybe except for like any— well, not every platform because, you know, there's— like on the social platforms, you're limited to the API, whether they allow you to have access. But if you're talking about different channels, yeah, almost every single channel has a tool.

Right.

But if you're playing with a channel that is on— living off of like the iOS store, Obviously, unless you really hack the system, you're not going to be able to— there's not very many—

I heard that even the iOS store now is having some good tools that are coming out for it, and it was pretty closed beforehand. Let me just tangent on one thing as well. I've been playing with some tools for social platforms, and one of them, like, now of course Buffer is one of them that I was playing with. One thing that I've realized, and Buffer is great, except Facebook is penalizing any external users of those that don't use their own tools. If you post something through Buffer on Facebook, it basically will never be seen by anyone. Are you seeing some of that happening?

Yeah, I mean, because everybody wants you to use their platform natively for whatever they're doing because one, you just visit Facebook, you're getting them money from the ads just from visiting Facebook. And then two, people on platforms like Facebook, Twitter, all these social platforms, Buffer does sit on top of it, but they also don't want automation and people just blasting out ads or content consistently without actually going onto the platform itself. That's the thing that people have done is usually marketers will make platforms terrible because they overdo it, and there's a lot of marketers that are just trying to create a lot of noise, and platforms get angry and then they'll pull back from that. And you're seeing that with every platform from there, like Instagram to Facebook, and then Snapchat, they just do not have an API. Maybe they're going to open up their ads API because you're paying them money, but they're we saw Facebook become like the Facebook Open Connect, and then they pulled it back away from everybody because everybody abused it.

Right, right, you're right. Careful and probably use these platforms directly. Couple questions coming in here from the audience I want to get to. So, you know, yeah, Rival IQ is great if you have competition, but Kate was asking Well, how do you know the best channel if you don't have any competition? How do you figure out what the right channel is for you to do that one first?

But if— there's another thing too is look at 10 gently related businesses to your business too. So let's say you are targeting people who like golf. You don't have to go to all your— and you have like golf balls, for example, as your product. You don't have to look at all your other competitors. You can go look at golf magazines, golf news publications, and see what they're doing, because all you care about is the audience. And I think people often forget that all you need to do is think about who else has your audiences. It could be even another topic that is not even related to your business, right? And I'll give you another, like, a use case example. Is let's say you run— and I see a lot of questions people asking how do they do kind of growth for their own agency, SEO and all that stuff too. If you know that business owners are your customers, then go after accountants, go after law firms, go after any of these other services-based businesses that are attracting your audiences and see what they're doing to attract them. You can work a relationship with those people as another channel or figure out what they're doing for marketing to those people because sometimes they will give you the answer because the communication strategy is going to be very similar because they are hitting the same segment or customer demographic.

So what about Cat Key, sorry if I missed the name, is should the channels change based on the stage of the startup? And you know, there is a more complicated, and I'm going to add to that question, you know, and even say how often should you change your channels and strategies, and should your channels change based on the stage of the startup? So I'll expand the question a little. Justin?

Yeah, so when you go, let's say, you know, a good example would be like Facebook ads, that always changes and dies, you always have to keep monitoring that. Yeah, you know, I think channels, I wouldn't say channels would change based on the stage of of your company, maybe if you explode then yeah, you could throw more dollars in other channels that you couldn't have reached otherwise. So maybe that change can exist, but I don't think, the only time when you really need to change a channel for you is whether you exhausted that channel or there's like fatigue that you've exhausted all. [Speaker:ROBERT_LEONARD] Right.

That's a really good point.

Each?

Okay, so let's stick with that for one sec. Sorry, what were you going to add?

Yeah, but otherwise, you know, if the customers are still coming in and you have the monitoring tools and you're looking at that, there's no reason to change, but you should add— maybe if you want to explore, you should add more channels, not change and switch, unless that channel itself is costing you a lot of money. And you don't want to pay for that cost of customer.

So that was a really good point you brought up. So each channel has what I would call a utility, and it spends so much and then it just doesn't produce any more volume. Sometimes that utility will also decline over time. So you start spending on a channel, you optimize, you get to your maximum utility, and then you exhaust it, and sometimes it even declines. I don't know if that's been your experience as well.

Oh yeah, for sure. And this goes to the point though of why you should be focusing on your whole marketing funnel instead of just acquisition, because channels can die, right? And what do you have left if your channel— let's say, you know—

Channels do die.

Example, like print, right? If your business was fully on print and that channel dies, so what are you left with? You're left with your existing customer base, which might leave if you don't service that, but that's where the marketing funnel comes in is what can you do to remarket to their existing customers, or what can you do to kind of re-tap into that channel too, just like internally.

So really, I mean, you got to look at customer acquisition and the funnel and optimizing and finding things is really an ongoing effort, right? And then to your other point, which was a great one, keeping your existing customers happy is also an ongoing effort. Right, maybe so talking about this ongoing effort because this is the purpose of the call, you know, how are you going to be continuous, how do you build into your organization that, that, that the focus necessary in the third subject today to continuously test and optimize channels and your funnel. Like what are some recommendations you have there?

You know, I think this was a good segue. You know, there's never a set-and-forget method at all, and kind of, you know, as entrepreneurs, we're always trying to move fast, break things, and move— we're all focused trying to grow our startup, right, and trying to focus on the product and service. The thing that I've seen that organizations have failed to do is to have, you know, kind of just a proper roadmap in terms of their overall marketing plan and kind of setting milestones that they should be hitting. And if you don't hold yourself to milestones in terms of the goals of your marketing funnel or campaign, for example, monthly you should— I'm trying to generalize as much as possible, but if your monthly milestones is to get this much amount of users, and you don't hit that, then that should force you to go back and look at the funnel. Setting those bars of whatever metrics that you have for your business, and if you're not the marketer and you hired a marketer too, you should sit with your marketer or whoever you're going to hire and set those milestones, because if you're an entrepreneur or founder or developer and you're focusing on the sales, the actual forefront, the other stuff of the business, then you let a marketer go free rein, then then you're not holding each other accountable. And I've seen it done before, people just set and forget. They hire a growth hacker and they think that everything is done, and then they go, the founder would go and just run their business and then come, "What happened? Why is this not working?" And so kind of saying that—

Yeah, set and forget. So let me dive into a couple things because I see questions coming in the chat here. So set and forget is not realistic. One of the questions is like, what percentage of money do you think a startup should allocate to marketing? And I would take it and extrapolate one other question from that, like what percentage of time— because time is money in a lot of startups— should an early founder be thinking about marketing, especially considering your statement that set it and forget it is not realistic?

Yeah, yeah, because I've seen set and forget has done so many different things. People, when you do set and forget, you buy a marketing tool, an app, and then you actually never launch it and it just actually is recurring cash on you. Or you buy Facebook ads, you never turned it off, and it has a drop-off, then that's just spending more money for you. Or another set and forget is hiring a marketer and setting and forgetting them and thinking that they have responsibility and not having any milestones and goals. And that also becomes burn. And when you're any startup and any founder, or just even— if growth is the number one thing that you want to achieve, whether that be more users or moving forward to your product, and so what you want to do is make sure that you can— make sure that you're just being diligent in auditing yourself, your team, and anything that's happening. But backtracking, I guess I forgot the question. Oh yeah, yeah.

So what percentage of time and what percentage of money to get out of that set it and forget it?

The answer to this is that it depends on the stage of your company, realistically. If you're in the early, early stages of your company, I do not recommend that you spend a lot of time and money initially on spending a lot on the marketing side, and the reason is because without a product and service, which I've seen a lot of people do, people just jump straight into marketing without— at least stage, whether it be like seed to even like your early Series A, you're still testing and validating and finding product market fit, and if you're in that stage, there's no reason to get 1 million users and you can't even—

Yeah, you have no conversion.

And no conversion, or your funnel isn't— you have no funnel. That's pointless, and that's where a lot of people are getting caught up with the growth hacking side where you get boosts on like Product Hunt or Reddit or whatever, then you have spikes in traffic and then it just collapses immediately. That means your product wasn't sticky. and your product wasn't able to handle that type of growth. So, you know, always what I say, before growth, make sure that the product and service is good enough before you can actually start spending more money and bringing in more customers in the door. If you're early stage— So let me—

can I just, before you get off that point, so you're saying like pre-Series A, possibly pre-seed. It's really a game of product-market fit, but we did talk about doing some painted door tests and some other testing to make sure you have at least your CAC and maybe an estimate of your LTV figured out with some backup data. So it's not zero, right?

Yeah, it's not zero.

It's not like 50%, right? It's somewhere—

nowhere near close to 50%. What I'm saying is you should definitely run tests. Ads, but don't go like the full, like spend all your money on marketing ad spend unless you know that spending money on ads or any type of marketing channel, if you calculated it and it actually does generate you profit or revenue or even just revenue in general and you need that metric, then I think that is So if you can't even figure that out, then doing the paid door tests will be crucial. I'm saying is just don't go—

Use your marketing spend to figure out the channels and the CAC as almost tests in that very early stage, but don't be like pumping it to get users that are in a bad product, right? Spend your limited time and resources on a great product. So in theory, what you would be doing is like, and correct me if I'm wrong, test, this sort of works, improve product, test, this works better, improve product, right? You're kind of test, improve product, test, improve product until, and then you can start spending when you've got that perfect product market fit.

Yeah, yeah, exactly, because what will happen is You will spend money on marketing and you'll bring people through the door, and then what will happen is the retention part. If your product and service can't even hold that customer, then it's going to create actually a negative growth potential in the future because when you bring in customers to your door and let's say your product and service is faulty and you took people's money, they could leave you negative reviews. Then in the future, that's going to negatively— you're going to have to— you're fighting an even more uphill battle. For your growth.

Yeah, so right, exactly. That's a super big point. If you have a bunch of like 1-star reviews on the App Store, you even in a previous version, that's going to make it so hard.

You're going to climb up an even higher challenge, a mountain. That mountain is going to be even more higher to climb than it already is. It's going to be more harder than it already is.

All right, we have some great questions, Justin. Let me get through some of them with you. So we discussed CAC, this is from Sarah, we discussed CAC and LTV, but how much did customer retention costs play in, and would you consider that part of the CAC? Interesting question.

Yeah, in terms of customer retention, the metrics you want to look at is your, you know, churn rate on how many people are actually leaving on top of kind of the lifetime value of your customer. So taking a look at those two measurements and seeing how many people, percentage, are leaving. And I think every industry has its own acceptable percentage too, but looking at that churn rate versus the actual inflow of customers If you have a high, insane amount of churn rate, that shows you that you have to bring in more customers. You could lose half your customer base every single month, and that adds on for every single month that you're—

Right, so your churn does affect CAC in the sense that you may need to spend more money to get customers at the top of the funnel.

Yeah, and I would say that from our talks with investors, churn That churn number is a— everybody leans on that churn number very hard because it does mean that you have to replace those lost customers if that churn number is high or low, you know, depending on that churn number. And you have to multiply that for the whole year.

Right, so one of the big issues, back to your previous point, if you're pumping in volume and your product's not that good, you're going to have a high churn rate. The investors will look at that, which was a previous question, and be like, oh, this isn't a good business, right?

That's a pure indicator that your product is not sticky, does not hit product-market fit, or there's something wrong with you.

So you want to be super careful about pumping the volume when you're going to have a business that you know has churn. There's a couple other questions. Ganesh was asking, what modifications do you recommend that you might use to accelerate the timeline from customers coming from the top of the funnel to the bottom of the funnel? Like, are there any hacks, and then is there any sort of recommended timetables? I would guess as quickly as possible.

Yeah, quickly as possible, definitely. Let me think how to answer that question best. To get people from point A, from sales to actual— from acquisition to actual sales, You have to identify what are all the touchpoints you as a business are doing to that, and this could be for your sales or even your whole signup processes, right?

Are you—

let me think how to answer this. Identify all your touchpoints to your customers from getting them that journey from point A to point B, and then figure out what is taking the most time. Whether it be from you as a business. So let's say you're running— let's say the most easy example is maybe like your sales pipeline or sales funnel. The moment that you have a customer come in and call, how long is the call length? How long do they go from closing? And is there a lot of back and forth? Measuring all that.

Well, if it takes your sales guy 2 days to reply to a customer inquiry, Turning that into 10 minutes might actually— because, you know, that initial reply sets the schedule of follow-up. So, oh, every 2 days, that's not good. If you can bring that to 15 minutes, 15 minutes, 15 minutes, you could help time buy up a lot.

It really is a logistics thing. So first identify all the touch points that you have that will get people, all the dots between point A to point B, then you have to figure out how you can either cut corners or make each of the process much more efficient throughout each of the stages, whatever that roadmap is. It's a little bit hard to explain for every single use case because every business has—

Right, well, but—

But what I'm saying though is just to—

I think you're awesome. Think about when you touch the customer and then shrink it or make it happen faster or even better, eliminate it. Right, it was funny, I was on a growth panel at the Global Entrepreneurship Summit and one of the guys on stage literally said, we had an epiphany where we took a 29-step funnel down to 3 and it had the same conversion rate. Right, and you know, his company eventually got acquired by one of the big Silicon Valley businesses and they I still use that funnel today. So, one, we're running out of time. We've got a detailed process here, and we've outlined a lot of things to think about. Are there any habits or tips that you can provide people going forward, say like, you know, don't go with the— you know, big habits or tips that you can leave people with?

Yeah. A big point that, you know, throughout kind of my whole internet marketing career and growth in general is it is a pretty bad habit for anybody that is going to go out and look at growth tips, growth marketing, and growth hacking in general to get so ingrained, like so deep into reading all these articles and constantly— because there's Marketers love to create these lists of top 10 tools, and there's so much content out there. And if you— the best habit to do whenever you go think about how to go about learning about growth is going back again to your customers and then the platform, then go search and research how to do that. Don't go sit out there— I mean, you could go to growthhackers.com, you could go to inbound.org, But it's going to be like Facebook, you're just going to sit there, you're going to see feeds and every day it's going to be something new and something blows your mind and amazes you. There's always cool things.

But it doesn't reach your customer, right? So it's customer channel tool. Yeah, customer channel tool, be religious. And then you brought up dedicating the time and not letting the channels go, post in and forget it. Any habits or final tips about how to avoid that? Just regular meetings, regular—

Yeah, I mean, for us personally, we just have quick stand-up meetings just to report what everybody is doing and just getting in sync. That also keeps you accountable to tell you what you've done yesterday. And what you're doing today, and if there's any blockers for what you're doing. So I'd say just communication and keeping yourself accountable is key, whether that be using a tool or software to kind of monitor and give you alerts, because sometimes you don't have that, or there's too much data, or having other team members help keep you accountable. And if you're like a solo entrepreneur, then building your network of other entrepreneurs and keeping, having regular chats, just holding yourself to metrics I'd say is the best habit to do, which I think—

In marketing these days, metrics-driven.

Growth in general, like, you know, we're, if you're running your company and growth is your number one thing, then you have to get metrics. You want to get it for your investors, you want to get it to actually know how your company is performing month by month, and if you're a sole entrepreneur, don't be. I mean, it depends, man, it really depends.

Well, if you're a sole entrepreneur, you can join the Founder Institute and we'll keep you true to your metrics. Justin, this was awesome. We should do it again maybe dive into one of the subjects alone because we covered 3, but there's so many more. We could probably just talk about, you know, figuring out your customer channel and tools. Really lovely. Thank you so much. For all the great entrepreneurs out there, you should definitely take a look at Justin's business. It's fantastic. If you're thinking of launching a business, you can speak with him. Groove.ly. If you're thinking of starting a business and you need help, you should apply to the Founder Institute, fi.co/join. We have programs literally all around the world. Thanks for tuning in. Thank you, Justin. This was awesome.

Thanks, everybody. I know there's a lot of questions all around. Feel free to— I'm always open to chat no matter what stage and all that stuff, trying to give my pointers around too.

So great, thanks everyone. Thanks, bye guys.