Startup Therapy Podcast

Episode #60


Ryan Rutan: Welcome back to another episode of the startup therapy podcast. This is Ryan Rutan joined by, who else will Schroeder startups dot com Ceo and founder. Uh So just for context, depending on when you, you dig this out of your, your podcast archives. Uh We are still in the middle of of Covid 19 case. This is later. And there's another one. God, I hope that's not a thing. Covid. 20 Covid 21. Okay, so we're into Covid 19. Um and uh we're facing uh you know, the likely onset of a of a U. S. Recession. And so we thought we would spend some time talking about what it's like to build a startup or grow a startup, run a startup during a time of recession. Um you know, we talk a lot about running startups, but not everybody has is old enough to have been through one of these before. Uh like yeah, so will tell us what that's like. I have no idea. I have no idea how old you tell

Wil Schroter: us about being old. All right back in my day. Um Yeah, you know, so here's there. If you've been in this long enough, you've been through at least two epics, You've been through post 9 11, you've been through post 2007, 2000 and eight um financial crisis. Again, these are both us based recessions. Uh and there were many more before that, but what there hadn't really been before those is a startup recession. You know, a lot of people don't think about this, but we really didn't have a startup economy until the 19 nineties, not in the way we have it now. Um and so, you know, VC became particularly big, the rise of small startups, MVPs and all this stuff that kind of changed the game a bit. Ah So again, if you've been doing this long enough in the startup world, you've been through at least two major recessions. Um and maybe you've been fortunate enough or unfortunate enough to have had to navigate your startup through those recessions. But there's a part that people don't talk about, we all understand the part we're going into the recession kind of the world melts down, right? It's kind of where we are right now and people are having to let people go and they're losing customers and they're worried about whether the business will sustain what a lot of people don't talk to you about. And you know what, I'd love to talk with you today, Ryan um is what do you do to find the opportunities in a recession? See, we've had the opportunity in our lifetimes to actually have gone through the full cycle a few times. So we actually know that there is another side to this kind of like when the stock market implodes, there's a part where you can buy stock cheaper than you could have ever bought it before and do really well with that outcome. So while the recession and everything leading into it is always horrible. It's not necessarily the end of days for startups, if they really understand the long game.

Ryan Rutan: Absolutely. So let's, let's talk about a few of the aspects that, you know, we're, there are obvious downsides to this, right? So we're not saying, hey, yea, it's a recession, everybody rejoice. But what we are saying is there, there are opportunities, you know, you talk about the, the ability to buy stocks on the cheap, right? There's certainly a lot of that going on right now. Um, asked real estate investors who were sitting in cash in 2007, 2000 and how much fun they had when the housing market started to collapse. And certainly a lot of opportunities there. Um, and, and you know, the, the analogs are, are not 1 to 1, but there are a lot of these kind of things that come up in the startup space as well. So let's, let's talk through some of them. What do you think is the, what's the biggest one for you?

Wil Schroter: Well, okay, so I think part of it too, is, I think we can start to use a comparison. This will be helpful for folks that have been building their startups in a good economy to understand some of those big hurdles that we didn't even realize we were dealing with in a good economy, like trying to find talent, trying to access capital, etcetera. Um, actually go away in, in ways you wouldn't think of, for example, if in heading into prior to the recession, there was tons of competition for what we were doing right in this weird one fell swoop. Competition goes away. I mean, again, I hate to use this as an example, but look what just happened to amazon, I mean amazon was already eating the lunch of its retail competitors, but overnight, not only did amazon become more important because of its delivery infrastructure, but all of its competitors literally got shut down. Our retail was told to stop and so, but actually let's use that because I think it's got a good broad context to it, sometimes the fastest way to run faster than your competitors is for them to stop running at all. And I think what happens is, uh, in a recession, a lot of that competition goes away and even if it doesn't go away, a lot of it gets horribly distracted right oddly. This is gonna sound bizarre. We don't really have a lot of direct competitors at startups dot com. We have people that kind of do some of the same things that we do, but, but we don't have like a one for one competitor, like an uber lyft kind of, uh, but if we did, would be laser focused on how well that competitions, leadership was navigating that, that team through through a recession, because I can tell you the folks that haven't done it or the folks that aren't good at it get absolutely throttled, which is the fastest way for us to grow outside of our competition, it means all of those customers aren't getting served. It means there's new opportunities there.

Ryan Rutan: Yeah, it was interesting. I was, I was, you know, without being able to kind of sit on the, on the, in, on a board meeting or something with another company. There are some interesting indicators that you can pick up on. One of the things I was keyed in on strongly and of course is because, you know, I handle marketing for us, but I was watching closely marketing of not just our competitors, but other people in the same, in the same space, complimentary products and trying to understand at which point they had crossed over into desperation marketing. Right? It all started out with some, hey, how can we support you through covid to 99.9% off covid sales. Right? And you know, right. And, and, and, and so, you know, you can kind of watch this play out. And it was really interesting to see which of the company's kind of got their first, which have never got there. Um, and it was a great indicator, right? Without being able to be a fly on the wall in the boardroom. There was still some really interesting takeaways just from watching how people were communicating even through their marketing, right? Which you would think you could, you could sort of disguise or mask some of the desperation or the internal struggles, but in this case some of that came through very, very clear in their marketing messaging. It was interesting to watch.

Wil Schroter: Well sure. I mean think about it too like in the middle of a recession as you're having to make really tough decisions as leadership, you know, speaking as your competitors in this case um and you're gonna have to lay people off, you're gonna have to lose clients etcetera. There's nothing internally that's thinking in your mind, let's go play offense, right? People start to curl up into a ball and and they become so internally focused. I mean think about it when when you're growing you have an internal focus because you want to maintain culture, you want to maintain scalability and infrastructure etcetera. But it's generally positive stuff. There's company announcements about how many new people you hired when it goes the other direction and you start having to let go of people. Then all of your focus becomes this quagmire of internal politicking of you know, just bad morale. Um it becomes a self inflicted torrent within the company. That sucks all the energy and drive out of the company. You know, it's one of the things Ryan that that we communicated to our staff at the beginning of all of this is we have to stay focused because the moment we lose focus, the ship starts going down and and again to everyone's credit deficit incredibly focused.

Ryan Rutan: Yeah, we've we've done a great job I think, and that goes back to the previous episode, which if you didn't listen to check that out now, I think it dovetails nicely into this one. There's some very, very similar lessons to be taken away from it with different contexts. Um Having that clear communication and staying focused and giving that strong focal point uh was was really important for us and and not trying to go too broad, not saying, hey, let's just keep everything the same as it was, like, here's the new context, let's focus on this instead. Now let's narrow things down. Um And I think that that's a big part of, you know, we're talking today about how to uncover these opportunities, what opportunities exist within within a recession. Um If you don't have that focus or said differently, if all of your focus is turned inward and you're looking at those uh you know, the the communication breakdowns or the internal strife, you're not gonna see the external opportunities, even if you see him, you're not going to be positioned to execute on them. So you're absolutely right, the that internal communication piece, making sure that everybody stays focused is going to be ah fair amount in in in terms of creating the situation that allows you to capitalize on these opportunities. So uh so yeah, competition being distracted is is a huge one. Um And and I

Wil Schroter: also write it, it's one of the few times where it actually happens, right? I mean, think about it up until the recession, up until like a cataclysmic event. Like the, the last few we've been through, all of your competition's focused on taking you out right there. They're focused on taking your customers, you know, sometimes your people, etcetera. All of a sudden they're no longer focused on that, right? It's like basically being in the middle of a boxing match and the person that you're boxing is checking their, their text messages because something's happening. It just starts

Ryan Rutan: listening to his corner man. Yeah,

Wil Schroter: yeah, yeah. Like, like right, right left. But it's, it's such an interesting opportunity because at that point that team is no longer focused, they become easier to defeat. And I'm not saying that, you know, it's all about winning or losing kind of thing, but, but, but we do have competition and this is a unique opportunity in the middle of a recession to capitalize on that, that, that different stance. And I think as founders, if we don't do two things like I mentioned earlier, if we don't rally our teams, so we're still focused on the match, so to speak, but also start to pay extra close attention to what's happening with our competitors to see where there might be an opportunity to there to kind of get that extra punch in. Um, we're missing if we, if we don't recognize how critical this is. So many companies can make dramatic leaps again, going back to the amazon example, just by properly understanding how to execute at the right time. Yeah, this is it.

Ryan Rutan: And, and it's obviously, you know, there's there's more to it than just the competition slowing down, quieting down, you know, in my case, one of these I'm closely tracking is how are the competition spending compared to us, Right. If we're looking at are paid marketing budgets, how are they spending compared to us? Right. And so as we saw spending drop offs that does open the door for opportunity to spend more, but you still need to be careful that like you can still convert, right, if it turns out the reason nobody's spending is because nobody's buying. That's a good signal to take to. Right? So you do need to, you know, move with caution. Right? Sometimes there's a reason that everybody else pulls back. Um, so yeah, so don't get rope a doped going back to the boxing analogy here, and and just swing away, swing away, swing away and burn all your reserves. But yeah, I do look for these opportunities. Um, do do keep an eye on the competition and and, and kind of try to evaluate from as many points as you can. Uh, what's going on around them and, you know, not just what is an opportunity to go after the competition, but what opportunities are going to benefit you most in the long term, certainly displacement of a, of a competitor or even just the short term cash gain by picking up customers. That otherwise would have been, you know, highly competitive in a paid marketing context or something along those lines. Um, you know, this can be a great opportunity for that. So what else? Well, what else? You know, is we

Wil Schroter: okay, sure. So in good times, everybody and their brother is getting into our market, Everyone's trying to get headlines. Everyone's on social. Everyone's trying to basically, you know, claim their space and shout out loud in a recession. Everyone gets real quiet. There's a lot less noise. And if you start to think about how hard we were working in good times to try to break out of that noise through our recruiting, through a customer acquisition, through our press, through our social channels, through every single thing we were doing was so hard because we had so many other voices, not just our competitors by the way. I just mean in general, there's just so many people out there, uh, you know, creating content noise and all of a sudden there's a lot less,

Ryan Rutan: I want to, I want to key in on something you're saying that, which is, which is noise. And I think I also heard you say the word signal. And I think this is the really important point here guys there, there wasn't necessarily a lot less noise. Um, in fact, in some ways there was more noise when, when Covid really started going all of a sudden you're getting all these messages about Covid policies, you know, here's cancelation for Airbnb is just like you just started getting flooded, right? So there, there was a ton of noise. But the noise to signal ratio got so far out of whack that on the rare occasion that something came through that looked like it wasn't covid related. I was like, oh please some of that whatever that is. I don't even care. At one point. I half jokingly posted on linkedin the next person to market something to me without using Covid as the hook is going to get my money. I didn't even really care what it was. It was just, please send me something with some signal to it. Um, and so I think that's something that in something like a recession or, or in the crisis that we're in now, it's really, really important to think about how you can dial in that, that signal to noise ratio, how you can be a bit more focused in terms of what you're delivering and make sure that it, it's actually going to resonate with the people that are listening to it because there is so much noise around this right now and there's so much information and misinformation that sometimes all it takes is just not going that same direction as everybody else going against the grain a little bit, just standing out a tiny bit. Um, and thinking about, you know, the ways in which you do that? What's going to resonate with folks now? What do they actually need? Right, I don't need one more reminder that this is a big disaster and that people's businesses are struggling and that of course you're there to help me in any way you can, as long as that means clicking on the link in your email and buying something from you. Um, Right, so I think this is a good, a good time to kind of dial up the empathy. Um, dial back the sales rhetoric and think about, you know, how can we actually get through to people right now and what will be meaningful for them?

Wil Schroter: Yeah, you said dial up the empathy. What do people care about right now? Okay, so, uh, six months ago, let's say I was competing with lots of other messages. I was competing with a message that says, we're the best place to work. I was competing with the message that says we've got the best product. I was competing with the message that says, we have the best content, you know, follow our social whatever now, because my competition is dramatically more focused if they're even going to be around at all. If I just start isolating my message to your point of signal and I start saying, hey, we're hiring, by the way, maybe we're not hiring a time and we just let go a bunch of people. Right? I mean again obviously in a recession, things aren't going particularly well and we're not necessarily hiring a ton of people. But how many people that we couldn't talk to before might be open to a conversation now. Right? Whether they're partners, whether their clients, whether whatever um when when the recession hit, you know after 9 11 in the US uh we lost clients at an epic rate. Right? It was just unbelievable. But at some point I start to think about it. I'm like well so is our competition and those clients have to go somewhere. In other words like, you know, we were two major brands like BMW and Best Buy and stuff like that. And I thought if we're losing clients it means other people are losing clients and if they're losing clients, those clients are going to have to, you know, those are conversations that I have never been able to get before agency of record opportunities. Let me go call on those folks. Right? And maybe there's no opportunity today but no one else is calling on them because everyone else is worried about losing all their clients. Um There was just a bunch of counter strategies that I started to learn that when everyone's running away there is some opportunity in running towards because nobody else is doing it right. And I think um if we zoom out a bit and we started to really think critically about the landscape, but everything that just changed and stopped thinking entirely about defense and just saying, oh okay, we got to spend less on this or you know, cut this expense, etcetera and say, okay, we're going to do all that by all means. We're, you know, we're going to circle the wagons and play defense. But then what, what does offense look like? You know, where are the new counterpunches that we can start to land that no one else is thinking of? I think for folks Ryan, I think for folks who have never been through this before. Um, it's hard to think about anything but defense. Right? Again, I don't want to underplay that. It's watching

Ryan Rutan: clients leak out the door, watching your mrr numbers trend down and trend down, getting closer and closer to um, you know, kind of hitting the red in terms of the cash flows or or going further into the red depending on, you know, kind of where you are in life cycle the company, I, those things all do require focus, right? And there may be circumstances in your business that, that don't allow you to play as much offense, but at some point you have to turn the corner on that right there. There's no version of cost cutting that grows the company long term, right? You, you can play defense all you want. Um, at some point you've got to turn the offense back on and I think that that's, that's probably the, the part of this that is as much art as science is knowing when those times are like when to get aggressive with the marketing again. Um, and their strategies around that. Right? We've, we've been deploying that for the last couple of months where uh, you know, we, we've cut back budgets, um, and then you push a little harder time to time and you see, do the conversions hold to click stay where we want them to be. Um, and, and there's a strategy around that, right? But obviously depending on what your situation is, there may be more defense required, right? You may not be in a position where you've got any cash to spend, right? You're going to cash negative. Um, in those cases it's, it's tough. Um, what, what are some things you can think of? Well, I've got a couple in mind and you touched on some of them already, um, in terms of, you know, clients going into the wind from other other competitors, people you can pick up more easily. Um, and I think there is a big difference too between a big company and and a startup company too. And I think there are different opportunities for them, right? Because a small company may be able to afford to be more nimble or take on a project that, you know, is so small for a larger competitor that it just wouldn't be economically feasible or worthwhile. And so I think that at times where you know, your, your ability to grow is severely hindered by, you know, an economic recession, you need to think about what are the unique capabilities of, of your particular company. Right. Again, if you're, if you're small and nimble, um, maybe that means being able to go after some larger clients, you wouldn't be able to get to before whose budgets are now so small that their agencies don't want to work with them. Right. Or things like if, you know, if you've got a more flexible staffing line, for example, big companies with a ton of fixed salary overheads don't have a lot of options. Right? In terms of, you know, what they can do legally, how they can, you know, even just ethically, how, how do we, how do we ride through this? Um, you know, a very small company one that's, that's largely contractor driven or, or relies on service providers to, to fill in some of those things that would traditionally be overheads, um, can leave you in a really interesting and beneficial positions. So I think it's always worth turning the lens back around and saying, okay, what about the situation? Um, can be perceived as beneficial for us. Right. So are we more nimble, um, you know, or are we so conservative that we've always sat on cash, um, which has limited our growth in the past, but now leaves us in a cache flush position.

Wil Schroter: Right? Well, let's talk about probably not the case

Ryan Rutan: for a ton of people, but, but it's an option, right? And it can happen.

Wil Schroter: Well let's talk about the, you know what are cash can buy us because I think that leads us to the next logical thing is the world's about to go on sale. And if you've never been in a startup when the world goes on sale, it's awesome. Uh because you know, similar to the noise issue, all the things that we're spending so much money on all of a sudden become awfully cheap in a way that it fundamentally changes the economics of our business, forcing us to actually rethink what could this business be given these new economics and I'll give you just really a life changing example that you know that, that I went through ah post 9 11 or leading up to 9 11, it's the go go nineties, it's the dot com boom. All those things, everything was bananas, expensive, everything, everything right. Office space people like, I'll never forget

Ryan Rutan: even hosting you remember we used to pay for hosting, Oh my

Wil Schroter: God, right, hosting marketing, I mean literally everything you could come up with was crazy expensive like as expensive as it's ever been. And uh one of the things I thought about when, when everything kind of went south was well boy, like where's all this stuff going to go. In other words, if, if uh, if magazines at the time were selling every ad up until the bust, they still have to sell ads, but now no one's going to buy them. So I wonder what an ad cost these days. Right? So much less. Right? Um or hosting or office space or I mean people, you name it, everything all of a sudden becomes a fraction of the price. Also, definitely worth noting, everything becomes re negotiable, Your office leaves your contractor,

Ryan Rutan: it's a huge one. It's not just new things you're gonna go by, right? It's everything you're

Wil Schroter: already, everything gets re

Ryan Rutan: priced.

Wil Schroter: And so What happened was like up until college, like 2001, If you wanted to do a startup, and mind you, the world was very different. Um, not just because of the 90s, because of cost structures, you know, we didn't have MVPs yet, you know, all this other stuff. Um, but if you want to start a startup, you actually did need millions of dollars, there was no way around. You couldn't start it on your credit card, so to speak in most cases, because the media was different, There was no performance marketing yet. You couldn't buy per click, You had to just buy a giant spot and hope somebody clicked. Um, and so you didn't have nearly the freelance marketplaces, the gig economy's all these things you can tap into, but that's where it started, that's where all of this started to kind of come to fruition? And as I was exiting the agency, I was starting to look at all of these different things that were coming down in cost hosting, performance, marketing, all of these things. And I started to have a little bit of a light bulb moment. And I said, well if all this stuff is cheaper, what what kind of businesses could I build in the wake of everything being a fraction of the cost. And for me that turned into, you know, an incubator where I started to build saS based businesses at a time when those weren't really a thing yet. Um Not at a small scale and it was awesome. Um I I could fund a company um on my credit card that would have cost me millions of dollars a year prior. I mean think about that delta in that opportunity. And that was, you know, that was the dawn of like Web 2.0 and all of that stuff.

Ryan Rutan: Right. And I mean it was that it was that reduction and cost um that I think allowed a lot more interest into the market um which is what really puts startups on the map in a much bigger way. Got them outside their their traditional geographic boundaries, traditional meaning, you know, like the seven or eight years prior to that. Um Because as you said, they don't go back that far into history, not in the sense that I think of them now. And yeah, I think that was, yeah, so you know, again there are opportunities to be had and and that was one that was less of an opportunity and just more of a global change that opened the door for future entrepreneurship. Had we not gone through, you know, the the 9 11 disaster and the subsequent recession? Um who knows? I mean that, you know, is as strange as that is to think about that may have set startups back 78, 10 years because if things hadn't gotten re priced, things had stayed where they were. Um and it could have even cemented the system into something quite different than it is now. It may not have, it may have stayed in that position because if you know, a couple of a couple of big breakout businesses that occurred uh kind of minting a couple of VCS um and consolidating that power more than it is now, that could have dramatically changed the landscape permanently, Which is, it's, it's fascinating to think

Wil Schroter: about. Absolutely. And so if you go through your progression and by progression, I mean you just walk down your, your P and L. And you say, hey your income statement and say, hey, you know, everything on this list should be re priced right now, I'm going to make the exception of employees because because I don't want to say, you know re price the the salaries you pay people, you may have to buy the way whether you want to or not. Um, but I'm specifically talking about all the other costs. Um, if we look at our office space, I mean Ryan think about what's about to happen in commercial office space right now.

Ryan Rutan: Oh mike, wait, what's

Wil Schroter: commercial office space?

Ryan Rutan: What's that?

Wil Schroter: Right, know what, what's, what's about to happen in commercial office space is essentially what happened post 9 11 where all of a sudden it just never came back right once you had post 9 11, you had the entry of performance, marketing, particular PPC And traditional marketing never recovered from that. The Internet kind of took over because it became more cost effective etc. Uh, we're seeing the same thing now with office space where you know, we just canceled our office lease. You know, we've, we've had the same in the same building for 10 years and all of a sudden I knew were mostly work from home, but we were like, just don't need it anymore. And I've got to imagine if we didn't need a lot of other people who were doing layoffs and you're really trying to shred cost hardcore whether they need it or not are gonna pay for it. Not to mention retailers have been put out of business, so on and so forth.

Ryan Rutan: Yeah, the commercial space is about to get very, very interesting. Yeah.

Wil Schroter: And then the banks behind them and everything else like that, but, but I, I guess my point there is um, if we go through the progression, we look at every line item on our income statement and we start to say, could this be renegotiated or what does the world look like now versus when we bought this service. If this was circa 2001 ish 2002 and I started to go through that same progression, I would say, I would start with the media budget. I was like, man, we're running ads on yahoo, running banner ads on yahoo, you know, we're in fast company, we're in, you know, we're all these different journals were on highway billboards,

Ryan Rutan: right? I mean it sounds ludicrous, but that was part of a media

Wil Schroter: budget. Yeah, yeah, let's kill all that. Let's let's move everything down line, which is essentially what I did. But um, uh, we then look at all the contractors who were working with our recruiters fees that we were paying our accounting fees that we were paying. We look at everything and say everything gets free priced. And the truth is everyone else's re pricing stuff too. Your clients are re pricing you as well. If you don't adjust your stock with everybody else's stock, you're, you know, you're in a tough spot. And so the other side of it is, you can start to say when things were so expensive. We kind of had a relative measure in our minds of what a cost of goods sold looked like. I don't know, just being the traditional cogs, where you're saying, you know, here's the manufacturing cost of this product, but just in general, like our optics, like, like what it took to run this business, maybe this is a way more profitable business If we're 33% down in total sales, but 50% down in total optics. Right. Right. And so I think looking at, um, the business, not just today, because we're trying to cut costs to match up with what just happened, but also looking 123 years down the road and say, what does V two of this business model look like now that the world has changed so much?

Ryan Rutan: Yeah, that's a great point will, I mean, we, we have to, at some point turn the corner and, and start to be a little more forward facing, Right? We've got to start to think longitudinal, we gotta start to think down the line, um, inasmuch as we're re pricing, um, you know, products and vendors and, and all the things that we're using. Um, I think there's something else that's important that we do, which is to kind of re price and maybe reset our baselines in terms of what does this business look like, Right? It's not, it's not a temporary situation in which we say, okay, weather the storm And then, you know, re emerged two years from now and we're just back to being the same business. We were, uh, you know, like we said with, uh, with the agency world, it changed in, in 2000, in the early 2000s and it never went back, right. Things didn't go back to being what they were

Wil Schroter: before that.

Ryan Rutan: And so you have to consider and what the, what the long term outcomes there are. And how Does the business fundamentally change over that next 2, 3, 4 years?

Wil Schroter: I think people have a hard time, particularly founders, but really even the entire staff understanding that not every business has a straight line trajectory, right? And fundamentally the cannabis races over decades, right? Was that

Ryan Rutan: there's very few do. In fact, very

Wil Schroter: few do. And what I mean by that is especially among startups. There's nothing wrong with a startup hitting peak and then valley and then peak and then valley. By the way, it sucks right? There. There's no version when I say nothing wrong. Like it's not painful. What I'm saying is If if we were killing it, let's say we became a $7 million dollar business at our peak before the before Covid and post Covid would become a $3 million business. If our mentality continues to be, why aren't we a $7 million business anymore? We failed. That's the equivalent of saying we lost the last game. Why aren't why don't we have that same score now or you know, why are we not improving it? And the truth is that game's over that you lost. Right? Let's focus on the next, right,

Ryan Rutan: yep, what is the best version of the business? We can be in the new context, Right? And that's

Wil Schroter: what your mindset needs to be. Absolutely. And I think the longer we try to hold on to the conditions of the past and this is the, this is the biggest mistake from big companies too small. So long as we keep trying to recreate the past, which is all of retail for the last 10 or 20 years, all of media for the last 10 or 20

Ryan Rutan: years.

Wil Schroter: We will fail. The only way that we can truly rebuild this thing and protocols back into growth arc is to reset the chains and say, okay, at this point We're a $3 million $3 million dollar company as a $3 million company. Here's what op X looks like. Here's what revenue looks like, here's what competition looks like now, here's what all of our vendor costs look like. Now, let's just reset the entire board, right? And stop talking about what happened last month or last year And focus 100% on what the new growth plan looks like. I don't, I just, I don't see a lot of startups doing that. I don't see a lot of public companies doing that. Um because especially public companies, they're so hung up on last year's stock price or last quarter stock price? I think right now, if every startup of every founder were just to dig deep and say, uh, what's past is past, what does present look like? I think, I don't know. You tell me, I think the opportunities would become far more vast if people just recalibrated, probably,

Ryan Rutan: I think they are even even just mentally and emotionally the way it changes how you feel about the situation. I think that, you know, to your point, if you're just looking back at the past, if you're the guy who's just recounting that one touchdown he scored in high school over and over and over again, just wishing that was the moment for the rest of his life. That sounds pathetic, right? Right. It's the same thing with, with your startup and it's a little bit harder to recognize. And there's probably some version of some cost fallacy at play here where you're saying damn. It was so hard to get to where we were. We worked, we worked, you know, our fingers to the bone and late nights and all that we invested. We finally got to that $7 million rate and, and now we're back to three like how can that be, How can that be? Um, you know, there's not much you can say to really create comfort in that situation other than maybe we'll remember that competitive years. It's no longer even around at all. It makes you feel better, Right? Not really. I mean the relative measuring stick very rarely actually makes you feel any better. Um But you know, it's the case that if you dwell on that, right? And you, you think about, you know how that business was in that context. Um, You know, hindsight being what it is. Of course it was better to be a $7 million business. Um Just based on, you know, the pure math of the thing. But not necessarily. Right. And and we can probably pull some examples together of, of businesses that became a better business after leaning down a bit. Um I think about companies like base camp, right? Base camp went far broader and it wasn't a recession that caused that. But they built out a bunch of other products that turned out not to be core to what their users wanted. And at some point they pared that back and they became a better business there now a rigor and and financially stronger business based on having cut back what they were doing. So smaller does not necessarily mean um worse. And and you know, less revenue doesn't necessarily mean less wealth for the founder either. That's something else really important to think about um Sometimes being forced to go through one of those situations where you say like, hey, how were we spending all that money? Right. At $7 million. Right. If I was only putting, you know, four or 500 K in the bank each year based on a $7 million runway. And I can do the same thing at a $3 million what did actually lose, right? I didn't lose anything from a founder. Well standpoint, I'm still paying my people were still providing good service to the clients. Um, at some point you've got to lean back and say the metrics are important in the context in which they were created and not after that. Right. They don't matter anymore. If the situation changes completely the validity of those metrics, the value of those metrics changes completely with the context.

Wil Schroter: Right? Absolutely. And I gotta tell you, I think the faster that we reset our own mindset more than anything. Uh, but certainly that of the team and kind of investors and everybody else that that might be involved in the company, the faster we put ourselves on the right trajectory. And again, I'm going to go back to this how we're operating in the midst of how everyone else is operating. If Ryan, if we have our ship together right now, if we stay focused, if we can stay positive to the extent that we can if we keep everything going like in a push forward direction, even though the world is pushing back, that makes us so much stronger because everyone else is retreating, right? And and that's that's the essence of what we're talking about here, Ryan, I think at what point as a business, we can determine what our future is going to be, what the present exists, like in a realistic sense and couldn't focus on nothing, but okay, let's grow from here. We're 100 X further ahead than everyone around us. And I think that's the core of the opportunity here.

Ryan Rutan: Yeah. You know, I would take this a step further and say there's not really a wrong time to do that, right? I think that you're forced into these situations or into that type of reflection because of external situations. Um but is there really a wrong time to to think about your business in that way and to make sure that you're kind of constantly re contextualizing, understanding the current situation. Um you know, it's certainly in my case and I think this is true of a lot of entrepreneurs that I know we can get pretty myopic and we can put blinders on and we can go heads down and just keep plowing away. Um and sometimes that's exactly what we need to do, but oftentimes there's a cost of that, we've talked about it in the context of moving too fast or if you're growing really fast, you may miss an appropriate turn or pivot um simply because your heads down and focused on a particular type of growth, same thing, even in a stable and mature business. Um and maybe even more so you don't think about the need to optimize, you don't think about the need to kind of reset baselines because it's working well enough right? And sometimes that can that can bring huge costs to the overall health of the business, because you're not forced into looking at some of the underlying factors that could be, could be holding you

Wil Schroter: back. There's another piece to that, which I always think is fascinating. Whatever the business has to strip down and rebuild it, almost never rebuilds the same way, which there's a lot to be said for that, right? You know, I've been watching major companies like Uber and Airbnb and all these folks lay off massive amounts of people, right? I mean, here these darling businesses, you know, billion dollar businesses, etcetera, just laying off people in the droves, right, unprecedented numbers. By the way, it's not their fault. I mean, literally the whole world shut down, but my point is, there's no version where they're going to say, look, when things get better, we're going to hire every single one of those people back, we're gonna, you know, start up every single one of those initiatives, we're gonna start, you know, that never happens, It never happens because maybe that's those weren't the people you're supposed to really have to begin with, right? Maybe those weren't, that wasn't the cost structure. Maybe, you know, there's there's an infinite amount of things where resetting and restarting is sometimes the healthiest thing you can do long term, and it actually allows you to build the business in a proper context, not just because there's a recession, but because now, you know who you should have hired and where you should have gone when you go to build a business again.

Ryan Rutan: Yeah, no, that's that's a great point, and I think some of that is driven by the fact that when we're making decisions in the normal course of business, right? So outside of a crisis outside of a recession, um we're often building kind of bottom up right towards the strategic goal, but we're building bottom up, you know, the new costs tend to come from from downstream, um you know, somebody needs a new machine, somebody needs more marketing spend, somebody needs something right? And we tend to look at those in a fairly siloed fashion, right? We look at those and we say, okay, what is the value of this thing that's being proposed? Does that make sense? Um in the current context? And and Yes, right. Um two months later, that context may be totally different. And if it wasn't considered sort of in a in a global sense, then when you're forced to look at these things in a recession in some moment of crisis, we tend to look top down, right? We tend to say like, okay, what's most important right now, alright, which we are rarely forced to consider. Um I think good leaders do, but I don't think that everybody always does that um when we're forced to do that and look top down, I think that it puts it into that broader context. We get out of the silos, we get out of the vacuum, decision making and we say okay of all the things we got to cut a bunch of stuff or we gotta, we gotta clean up a bunch of things, we got to reduce spend, we gotta do whatever. Um you look at that in a more global way when you're forced into it as opposed to you know, okay, we want to, we want to, you know, increase marketing spend by 15% next month. We don't necessarily look at how that threads through the entire organization. We're making that decision in the course of normal business. Um which is an interesting, interesting insight, right? Maybe we should start to do more of that, but that can be tough to write because you can sort of endlessly analyze and that leads to paralysis. But I think that in in the right context and and you know, given the appropriate attention, things like a recession, things like a crisis can be really healthy for the business if nothing else. Um it rings that bell that says, hey, pay attention to everything right now, let's let's go back through it, let's reset. Um and let's figure out how we move forward from here. That's a wrap for this episode of the startup therapy podcast. This is Ryan Rutan on behalf of my partner Wil Schroder and all the startups dot com family thanking you for joining us and we hope you'll continue to join us. Be sure to subscribe, rate and comment on ITunes or wherever you love to listen to startup therapy. You can find all of our episodes at startups dot com slash podcast. If you're looking for more amazing resources to launch or grow your startup, be sure to head to startups dot com and check out startups unlimited. It's everything we have to offer from our online university to our amazing community of experts and founders and even all the tools we've built like biz plan, fungible and launch rock. It's everything a founder needs visit startups dot com slash begin that startups dot com slash b E G I N. You'll thank me later.

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