Drew Sanocki: "You make most of your money on the exit."
Serial entrepreneur Drew Sanocki shares his career learnings after starting, buying, running, or selling numerous ecommerce businesses.
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We discuss:
The Unofficial Shopify Podcast
4/12/2022
Kurt Elster: This is The Unofficial Shopify Podcast. I’m your host, Kurt Elster.
Ezra Firestone Sound Board Clip: Tech Nasty!
Kurt Elster: And today, I’m wondering. How long can one sustain a career in eCommerce? Because looking back at my own career, I’ve been a Shopify partner for a decade now, and I started in eCommerce really directly out of college and in college, so can you make a lifetime career out of eCommerce? And I think the answer is yes, but the number of people who have been in it long enough, because it is such a new industry… Can we count them on one hand? Maybe we have to take our socks off, but it’s just not that many folks.
And so, I’m joined today by a man who’s been an inspiration to me in my career, gave me some valuable advice some years ago, has provided a lot of opportunity for me, and really has just been all over the place in eCommerce, and has even been I think influential early on, ahead of the curve we’ll say on being able to identify some things before they became common knowledge among eCommerce marketers, like imagine if someone was pounding the table yelling about the importance of lifecycle marketing and the importance of customer lifetime value 20 years ago. I think we can all agree that that individual would be ahead of the curve.
Well, in this case, we are joined by someone who did all that for almost 20 years, Drew Sanocki. He has built, grown, invested in, researched, and sold eCommerce, and some eCommerce-adjacent businesses. Worked with him on several projects now, but I don’t know his full story, and so we’re gonna find that out today together, my friends. Drew Sanocki, welcome.
Drew Sanocki: Good to be here, Kurt. I would say 23 years, because I think I start-
Kurt Elster: 23.
Drew Sanocki: Yeah, started-
Kurt Elster: 23, let’s round up to 25 then. 25.
Drew Sanocki: Yeah. I’ve been saying I’ve been in eCommerce for 20 years, but I actually started my first retailer in ’99.
Kurt Elster: ’99, you were selling online.
Drew Sanocki: Yeah. I was unemployed. I needed to make a buck and I stood up a store, and you didn’t have Shopify back then. It was open up Dreamweaver and code something, so I learned to code-
Kurt Elster: Dreamweaver.
Drew Sanocki: Yeah.
Kurt Elster: Or FrontPage.
Drew Sanocki: Or FrontPage.
Kurt Elster: Fire up FrontPage.
Drew Sanocki: And launched a store selling drop shipping furniture.
Kurt Elster: Whoa. Okay, so your first store, you went big. My first experience selling online was making… we’ll say bootleg t-shirts and selling those on eBay. Would have been in 2002 I was doing that. And so, that’s 20 years ago was my first thing.
Drew Sanocki: Actually yeah, man. You were right there.
Kurt Elster: Not at the same level, though. I’m like trying to get beer money. You jumped straight to let’s sell drop-shipped furniture?
Drew Sanocki: Yeah. It was-
Kurt Elster: That does feel ahead of the curve, doesn’t it? Like how many people were really doing stuff like that then?
Drew Sanocki: Back then it was Design Within Reach and us, and then we had a competitor that ultimately became Wayfair, but it was more… You know, I backed into it, like graduated business school and around that time it was dot com 1.0, and everybody was unemployed because of the… There was like a bust in the… You know, Pets.com went under, and-
Kurt Elster: Pets.com just ruined the party for everybody but we all got free-
Drew Sanocki: Yeah. My business partner at the time and I really wanted to do something in furniture. We liked design. And we said, “Well, you know,” we went to a furniture show. We thought, “Hey, there’s enough stuff out here. Let’s just start selling it online and we’ll figure out what the business is gonna be.” Thinking the business was coming up with our line of product. But you know, I remember we set it up, and we hit AdWords right at the right time. We took out an ad and we got a sale the same day and it was exciting. We were onto something.
We kind of pioneered what became drop shipping. So, back then-
Kurt Elster: We’re gonna go with you invented drop shipping?
Drew Sanocki: You said that. You put those words in my mouth. I invented drop shipping-
Kurt Elster: All right, I’ll accept pioneer, for sure.
Drew Sanocki: Yeah. I also invented blogging for a retailer because we started blogging back then before anyone else did.
Kurt Elster: Really?
Drew Sanocki: But I’ll take drop shipping. I’ll own that one. Yeah. Well, maybe… I don’t know if it was… We didn’t invent it. Back then, I think that’s what everybody did. It was kind of like there was no Shopify. My business partner has gone on to start a company called Duoplane, which is like drop shipping for Shopify, right? He was on message boards with the guys who ultimately started Shopify and he’s like explaining what drop shipping was to them, because they didn’t know. They were designing their app to work as if you had everything shipping out of your house, you know? So, he kind of explained drop shipping to them.
And back then, it was the game was like longtail SEO, right? Google’s new on the scene, AdWords is new, both new channels, like you can… Froogle, which was like Google Shopping, was free, so the name of the game was like put a brand online and you’re gonna get traffic and eyeballs, like to merchandise was to grow. So, the more brands you could add to your platform, the bigger you’d get, and so you chose a big category and furniture was certain a decent one, where there are a lot of brands and in modern design furniture, there’s a lot of brands, and then you convince them to start selling through your platform and that grows the company.
And that lasted probably until like ’07, ’08. Certainly, it was taken to an extreme by… There were like a lot of category killers then, like eBags, and CSN Stores, which had a zillion longtail SEO optimized retail front ends that they merged together and became Wayfair. So, yeah, those were the good old days. Once that game was over, which was like ’07, ’08, the new game was Facebook. Arbitraged that channel. It’s cheap to acquire customers and you saw a lot of digitally native brands. Ultimately, in order to get more margin, we’ve gotta have our own product. And I think you’re seeing sort of the end of Facebook. Not as a channel, it just means it’s like it’s an efficient market now. It’s not… You can’t buy clicks for five cents anymore, right?
Kurt Elster: Yeah. It’s no longer… They got us hooked with first like, “Hey, here’s a free way…” Originally, it was like here’s a free way to build an audience, because you could just build a page. And then suddenly it was like, “All right, well, they’re gonna monetize that.” And then eventually they weaned us all into you have to use ads. But the ads worked so well.
Drew Sanocki: Right.
Kurt Elster: And then now, okay, the wheels start to fall off, where we’re just not seeing the same return on ad spend as we used to.
Drew Sanocki: Yeah. You definitely see a lot of the brands that we all know, the ones that have won are the ones that are early on the new channel, like they arbitrage the new channel because they can drive down their cost of acquisition because it’s cheap to do it. So, a number of brands grew on AdWords and Google Shopping in the early days, then there were a number of brands that grew off of Facebook when it was cheap to do so, Snapchat, and now TikTok, and influencers is a channel, like all these things are really just distribution channels and they were cheap when they came on the scene, like the first… I don’t know what the first company was to figure out influencer marketing, but who went to somebody like you who had a big audience and was like, “Sell my stuff,” and that person was psyched to get 500 bucks, you know? And ultimately probably ended up building a billion-dollar brand for some eCommerce brand.
Kurt Elster: I remember the first time someone emailed me and was like, “Hey, will you do a podcast sponsorship?” And I was shocked and I’m sure I charged like 200 bucks for a single ad.
Drew Sanocki: Yeah. Totally.
Kurt Elster: And was thrilled by the prospect of it.
Drew Sanocki: For us, it was Apartment Therapy was like the number one design blog, and Maxwell, the guy who runs it, is a friend of mine, and I remember convincing him in New York to feature us in a couple posts, and it drove our business. And now, of course, he’s like… He’s an empire and there’s like a cost of doing business with someone like that. You know, he’s got his sales team that sells those kind of placements, but it was another new channel to arbitrage back in the day.
Kurt Elster: When you’re identifying these new channels, like today no one would think twice about that story. At the time, did it feel crazy? Like a risk? Like, “Eh, we may be just burning this money?”
Drew Sanocki: No, no. It didn’t. It didn’t. It was cheap enough, right? We knew the game. I think this is what venture capitalists think about all the time, is like what’s the new channel that’s gonna allow everybody to monetize over the next 10 years? And so, no, it wasn’t that… It was probably the reverse. It was probably cheap at the time.
Kurt Elster: What was the name of this first company that sold drop shipped modern furniture?
Drew Sanocki: This was Design Public.
Kurt Elster: Design Public. Is Design Public still around?
Drew Sanocki: Yeah. We sold it to a small private investment group. They did really well with it. They grew it for another eight, 10 years, and they just exited to a public company, so I think they did better with it than we did.
Kurt Elster: And from there, what do you do? Because you sell it, you get the payout, there’s the sugar high of it, there’s the thrill, but the money doesn’t last forever, and you get bored. I think everyone thinks like, “I just gotta build my company and sell it and I’m good.”
Drew Sanocki: Well, it wasn’t enough also. I mean, it wasn’t enough to retire on. At the time, it was like, “Okay, I’m a millionaire in my 30s,” right? But not by much, right? And you’re right, it just gets eaten away, and you just sort of… I think the big realization for me, which is one of the big learnings of the last 20 years, is you make most of your money on the exit, right? And yes, Tim Ferris promoted this idea, this myth of like the lifestyle business, where you can go to Bali and you’re gonna run a business for cashflow and just take gobs of profit off the table while the business is passive, but not that I disagree, it’s certainly possible, but I think you make so much more money when you exit a business. It’s about the equity you have in a business that creates true wealth, and so my mindset shifted at that point to, “I want equity in more things. I want to buy companies. I want to exit companies. I want to iterate quickly as opposed to holding Design… You know, I bootstrapped Design Public for almost 10 years. I don’t think I’d do that again, right? Unless I was truly on a rocket ship.
I think it’s more about hitting doubles and the occasional triple and having a lot of at bats.
Kurt Elster: So, it’s about total number of irons in the fire, but the key difference here is-
Drew Sanocki: More analogies.
Kurt Elster: I know.
Drew Sanocki: Irons in the fire or at bats. Yeah. No, at bats, Kurt. I said at bats.
Kurt Elster: Do we have any other stupid aphorisms we can throw out there? Let’s think up on this. My head is full of them and now I can’t think of any.
Drew Sanocki: It’s at bats, irons in the fire. It has a lot to do with where you are personally, whether you want to… Your appetite for risk. You know, you’re married, you have kids, or you just-
Kurt Elster: It’s true.
Drew Sanocki: You know, can you live off ramen? It’s all those things play into it.
Kurt Elster: I spent so many years trying to figure out my business initially that were I not single, and eating ramen, and entirely without debt because I lived in an inexpensive apartment with four other people, I couldn’t have done it today. It’s just it’s different. But yeah, so it sounds like a mindset shift occurred here from build a business. Once you’ve sold a business, and you say, “Okay, I want that exit again but now that I have resources and I’m a little older, we’re gonna approach it differently and we’re gonna buy instead of build.” This is a thing I’ve heard you say before, buy instead of build. Or buy, don’t build.
Drew Sanocki: Right. If you buy a business that has customers and revenue, just the… It’s a shortcut, you know? Reduce the risk that is sort of endemic to bootstrapping. You’ve already got product market fit, theoretically. You don’t have to deal with the whole, “Is this even a product that people will buy, this thing I’ve conceived of?” I don’t know. It’s just like the ultimate shortcut, I think, is to… You definitely lose some of the pure passion for starting something from scratch, that kind of blue-sky thinking, but I’ve found, and again, this is in the context of me being married with kids and wanting a good life balance and home balance, that the risk return is you can’t beat it. You buy something, it’s got customers. Ideally, you’re buying it with a little bit of other people’s money, so it’s not all your money, or financing. If it’s already got customers and revenue, you can sleep at night. You can go home at the end of the day. You don’t have to work weekends often.
You know, it’s just like it’s a nice balance, so I always encourage entrepreneurs to consider buying before they go off and bootstrap something.
Kurt Elster: Would you recommend it as a good first path? Because both of our scenarios, we built something first and had that experience, and then started considering buying and investing.
Drew Sanocki: Yeah, I would. I mean, don’t… It’s one of those like if you’ve got a day job and you have a couple hours, you can poke around on a number of different sites or brokerage lists and identify something you might want to acquire. And so, I do think you could pick up something like that as a first-time entrepreneur.
Kurt Elster: For you, what do you look for? What makes a business attractive? What has to happen for you to look at a business and go, “I want to own that?”
Drew Sanocki: Good question. I think it has to do… That has to do with the actual strategy you have in mind, and maybe a little bit of what you’re good at, like I feel like I’m really good at marketing, I’m good at digital, right? I’m good at eCommerce. I’m good at lifecycle marketing in particular. And so, when I see businesses that lack those things, I’m just… I start to salivate, you know? It might be like a big manufacturer that hasn’t gone direct to consumer yet. Well, it’s like I know I can take them direct to consumer. I know how to get a Shopify site set up in 60 days.
Or it might be, “Hey, they’ve achieved a certain level of scale, and oh my God, they’ve never emailed their list, or they’re not even doing abandoned carts.” You know, and I know email well enough to know that I can get in there and add value on that side. And you just find… Someone else listening to this might be really good at organic, or good at Google AdWords, and just see something and be like, “This is an AdWords business and they’re not doing AdWords.” It’s a win, right? Or a sourcing person might be able to save money on the sourcing side.
Kurt Elster: It starts with knowing yourself and knowing your skillset, what you’re good at, maybe what you’re passionate about, so you are… You know you’re good at and are passionate at lifecycle marketing, email marketing, eCommerce.
Drew Sanocki: Yeah. And I wouldn’t overthink it. I wouldn’t overthink that either. I think if you’re listening to the podcast, and maybe you have a small Shopify store, you probably are saying, “Well, I’m not really great at any one… I’m not as good at Facebook ads as Ezra Firestone.”
Kurt Elster: Who is?
Ezra Firestone Sound Board Clip: Tech Nasty!
Drew Sanocki: You might be saying that, but in reality, there is a massive manufacturer out there that doesn’t know the first thing about even setting up, like how easy it is to set up Shopify. You could go to them and say, “It costs $500,000 to build out a Shopify store,” and they would be like, “All right. Let’s sign the check.” It’s just like they just lack the knowledge and the DN A entirely, so I wouldn’t overthink it. You don’t have to be Ezra Firestone in any one category to play this game.
Kurt Elster: Okay, so it’s really looking for… It’s a business that doesn’t have… You know there’s a missed opportunity there that they’re unaware of.
Drew Sanocki: Do we want to talk about oVertone here?
Kurt Elster: I do. Is this a good example?
Drew Sanocki: I think we should. This is a great example.
Kurt Elster: Let’s hear. Tell me about oVertone.
Drew Sanocki: Okay, so oVertone is a company I helped acquire recently. It is a hair coloring conditioner product, right? Change the color of your hair in a healthy way. 100% direct to consumer, although they just rolled out at Target, and they were for sale, like we got the deal book in the middle of last year. Company was doing… I don’t know. I’m gonna ballpark these, but say 50 million, dropped in half over COVID because I think it just… They got hit with a lot of the Facebook iOS issues that everybody got hit with last year, sort of overbuilt, overstaffed, and I looked at the deal and what I saw… I looked at it through a very specific lens. They were spending a ton on tech, on IT, and it’s not a complicated product. You look at it and you’re like, “There’s no reason this shouldn’t be 100% on Shopify. What’s going on here?”
And I’m making up these numbers, but it call like maybe they’re spending $3 million a year on eCommerce tech, and that is the shopping cart, and the staff, like they had an entire dev staff to support the shopping cart, which was headless, and then they had hosting costs, and so that’s just a great example. I know Shopify doesn’t cost that much, $3 million a year, or shouldn’t for this business. That’s $3 million in our pocket if we can just replatform this thing in the first 90 days to Shopify. Who am I gonna call to do this? A trusted Shopify organization, platinum partner, whatever you guys call it, like yourself. I call Kurt up.
Kurt Elster: You call Kurt to help you replatform to Shopify?
Drew Sanocki: Yes.
Sound Board:
Kurt Elster: Absolutely.
Drew Sanocki: Yes. I’m trying to think through exactly how the conversation went. It must have happened before we closed the business, but it was probably like a call between you and I, just like, “Look at this site. Am I reading this correctly? Is there any reason this thing can’t be on Shopify?” And you probably asked a couple questions, and you were like, “Yeah.” What’s it gonna cost? Oh, it’s gonna cost this much. Can you do it in 60 days? Okay, great.
So, boom. Right there I had my thesis, like I can take this amount of costs out of the business. We had the same kind of opportunity on email, moving them to Klaviyo. Called my brother’s agency to help on that. Same opportunity on paid, and you just looked at the… Like they were paying what? What are they paying their agency on Facebook? They’re paying them this much? They’re not getting a return on that if you include the costs, like we can do it cheaper. Ezra, who I bought the business with, went in on a lot of the paid, overhauling the paid programs, but it was really just like we saw this opportunity and we knew we could add value across all those digital programs, and it’s worked out. The business is now profitable. We took the top line down even more. We wanted to make it smaller, but more profitable, and it’s worked out really well.
And check out the site. oVertone.co. That is a Ethercycle site. You guys-
Kurt Elster: We did. That is a custom theme we designed and built. It’s really good. It’s really beautiful.
Drew Sanocki: And the team, obviously when you buy a business there’s a lot that goes on internally, because you’ve gotta articulate your plan to everybody. You don’t want to catch anybody off guard. And you know, it’s sort of like this is where we see the opportunity. This is what we want to do. We want to get it on Shopify. And you could see the relief, like the team just had no idea that it was possible. Like, “We’ve wanted this for five years,” and for some reason or another, maybe it was like they were just not tech people, or not eCommerce people, and beholden to certain experts, but for some reason they couldn’t get there. And so, they were thrilled, and they’re really happy with the work you guys did, and it’s like it’s empowered the whole team to actually do their job, so it's a great story, and it’s a great theme, and great company, so I’m excited about that one.
Kurt Elster: I love it. I got goosebumps hearing you just stroke my ego. That’s great.
Sound Board Clip: Whoooeeee.
Drew Sanocki: Yeah.
Kurt Elster: Please, continue.
Drew Sanocki: I love this sound board.
Kurt Elster: I have some more.
Drew Sanocki: Well, we used you on Overlander, which is-
Kurt Elster: Oh, geez. Well, actually, all right, Overlander, that was a property for AutoAnything. You were the CEO of a nine-figure automotive brand?
Drew Sanocki: Yes. I mean, that was… My first CEO gig was bootstrapping Design Public. My most recent one was CEOing AutoAnything. As much as I tried to get out of drop shipping, AutoAnything was a drop shipper too. Just a very big one. And we made a number of acquisitions and incubated a site, that is the Overlander.com site that again, Kurt’s team did, and so-
Kurt Elster: I did. I designed that myself, too.
Drew Sanocki: Yeah. It’s beautiful.
Kurt Elster: I like that one.
Drew Sanocki: It kills me that we… I mean, we exited the whole business in December or November of last year, and that’s the one I wish we had held onto in some way, because I feel like that one is worth so much more than we got for it, essentially.
Kurt Elster: Interesting. So, when do you know to sell? How do you know to sell? What are fair valuations? These things I think are unnecessarily mysterious to a lot of people.
Drew Sanocki: Yeah. And it changes, right? I mean, when I sold my business, eCommerce retailers were getting a multiple of profit, EBITDA, which was like three times, so not a whole lot because as an owner, you’re thinking like, “Well, you mean I could just hold onto the business for three years and I’d get as much as you’re offering me?” Yes. That’s kind of what they went for back then. Something like a content business, a pure AdWords site or content site was probably like two times profits. It was just really low.
And today, depends on a zillion things. How big it is, how fast it’s growing, but you see eCommerce businesses like five to eight times if they’re growing, if they’ve got some scale, and software businesses, multiples of revenue. So, we are definitely in what I feel is sort of a bit of a frothy time. If you’re considering selling, now is probably a good time to do that.
And how do you know when to sell? I don’t know. It just depends on a lot of things. I feel like I could sit here and tell you there’s like a great process, a great disciplined process to figure out how to sell, when in reality it has so much more to do with I think the energy of the team to keep going, you know? Design Public, after 10 years running that, we were tapped. You never want to say that in a sale. Like, “Why are you guys selling?” “Because we’re just burned out on this thing.”
Kurt Elster: Yeah. We’ve done it long enough. It’s time to pass the torch.
Drew Sanocki: Yeah, but it’s definitely like internally, that’s-
Kurt Elster: You’re not supposed to say that or acknowledge it.
Drew Sanocki: No, you’re not.
Kurt Elster: Which I think is weird. But people change careers. In 2022, people change careers like twice a year, and that’s not even weird anymore, but with a… You run a business 10 years because you built it, like now you’re not allowed to sell it or get bored of it? That’s silly.
Drew Sanocki: Right, right.
Kurt Elster: Like why? Let’s normalize being bored of businesses.
Drew Sanocki: Yeah. And AutoAnything, it was a bit of like… There was a bit of that, because it was a tough year last year with supply chain, like we couldn’t get product, so it was constantly canceling orders, and trying to negotiate with vendors to get the products off the boat, be front in line when they come in through a Long Beach port, so you know, it was just like a tough year. It’s a grind. So, I think when the board decided to pursue an exit, no one was really arguing with them. We were just like, “All right, let’s do it.”
Kurt Elster: Oh, man. When it feels like relief, you know it’s the right time.
Drew Sanocki: Sure. Sure. I don’t think… I’m not the entrepreneur that would hold something too long in hopes of a bigger exit. You know, I’ve seen plenty of those. We’ve all heard those stories of like, “Oh, you had a $20 million offer and you said no to it because you wanted the $200 million exit.” And those people, more times than not, I feel get burned, or like they don’t make it. You know, especially if you’re talking about an initial exit for what could be a life-changing amount of money. I think you take it. And that just allows you to swing for the fences more next time, right?
Kurt Elster: Yeah. I think the mistake people get into is they’re not thinking long-term into what’s next. They’re like, “All right, I need to hold out to get the most money so I could do nothing ever again.” It’s like, “No, just take the win and then use that to bankroll the next opportunity you’re gonna make for yourself.” Because that’s what’s going on here. Essentially, you’re thinking long term and trying to set yourself up for, “All right, here’s a series of wins. How do we keep going?” And that’s the career. That’s quite phenomenal.
Drew Sanocki: That’s it. That’s why I like the… I do like the baseball analogy. The at bats, you know? It’s like you’re building momentum, you’re going for doubles and triples, right? It’s a lot of pressure to go for a home run every time, so build that momentum and you’re gonna be successful. It’s a nice path.
Kurt Elster: How do you build that momentum? I mean, is this like we just have to write press releases for everything we do? We need to always be winning on social media? Or we just need to be continuously on top of investing and scaling? What’s-
Drew Sanocki: I think it’s momentum in your career. Where Design Public was a seven-figure business, and you got the exit there, and then try to bite off something a little bit bigger next time, and iterate quickly, right? As opposed to going straight for the billion dollar exit out of college or something. I don’t know. Some people can pull that off, but that’s-
Kurt Elster: But it’s really… I think the saner approach is just steady incremental improvement in all things.
Drew Sanocki: I like that. Yeah.
Kurt Elster: Yeah. That it creates… You said career momentum. I’ve referred to it, I’ve heard it referred… I picked this up from a TED Talk, as a luck sale. In your career, you could create a luck sale where like opportunities will, as you achieve more opportunities and make yourself available for more opportunities, then more opportunities appear. And so-
Drew Sanocki: Oh, yeah.
Kurt Elster: It keeps going. And it’s like part of you’re growing your network, and you’re gaining experience, but that approach works well, and it’s just not that crazy. None of these things could work, these businesses anyway, could work without teams. None of these are solo efforts. You have led teams. You’ve been in the CEO role for a variety of businesses. All digital, quite large. How do you build teams? What’s your approach here?
Drew Sanocki: I think at this point I’m decent at hiring. I always like… You know, you focus on top-down, like who are your direct reports going to be? And I’m a big fan of auditions before you hire someone. Give someone a project, which is essentially like the job. It might be you carve off a piece of the job and see how they do on that before committing to hiring the person full time. But you know, that’s sort of how I go about hiring. There was a book that made a big impact on me called Powerful by Patty McCord, who ran culture for Netflix, and if I had to boil that down it’s like treat people like adults, be completely honest with everybody. If somebody’s not the right fit, you’ve gotta be really comfortable moving on from them, but doing it in as humane a way as possible. Communicate often and I think show you’re human to your team.
It's a great book, so we used that approach at AutoAnything. There’s more in there about goal setting, and how to do reviews, and things like that, but that’s kind of how I start. And I’m often in the position where I have to build a team, because like it or not, like a lot of the opportunities I get involved with are more like on the turnaround side. It's like go in and turn this business around, it hasn’t been functioning, so a lot of that has to do with team and culture.
Kurt Elster: You were in the Navy, right?
Drew Sanocki: I was.
Kurt Elster: Do you think that has had any impact on your career?
Drew Sanocki: Oh, yeah. It has. It feels like a different life but there are just principles around leadership, around things that I think I can identify pretty quickly, like unified chain of command, for example, like you often go into an organization and they don’t know who’s in charge, or like different people are running one team, and it’s like you need one leader here and you need to be clear on what the chain of command is so that people know who they’re reporting to and what’s expected of them. It’s like just very basic, but I think I can identify stuff like that quickly.
Kurt Elster: At this point, you talked about work-life balance earlier, not working weekends, some of the advantage to that. What’s a day in the life of Drew Sanocki look like now? I’m a big wig private equity guy like Drew. What’s that look like day to day?
Drew Sanocki: But I’m not. So, we acquired oVertone, and typically now what a deal… After AutoAnything, I want some time where I’m not the CEO, so if you buy a business, you buy oVertone, we bought PostPilot several years ago, you are focused on recruiting the team to run it, and going hard, private equity does have this thing called like the 100-day plan, or the 30-60-90 plan, which is like everybody wants a return in the first three months. That’s the time. You gotta strike while the iron’s hot. When you have a new acquisition, that’s when you can go in and you can really shake things up, and it’s sort of expected that you will. It’s rare to go… You don’t want to buy a business and then go in and just say, “We’re gonna see how this plays out and in a year from now we’re gonna have major restructuring, or layoffs, or whatever.” That has to happen immediately because you get one shot to go in and do that sort of thing. Hire the new marketing person. Turn over the tech stack.
And so, I find when you have a deal, it is three to six months where you’re sort of full time even though you might not be the CEO, and then it’s like on to the next deal in many ways, like you sort of… You hopefully have the people, the process, everything in place at that company, and the reporting where it becomes more of like a weekly or monthly check-in.
So, as far as what my week is now, I feel like we’ve gotten through that. We’re at the tail end of that 30-60-90 for oVertone, so now it’s about a weekly check-in with the CEO, a weekly check-in with the board, monitoring the company and just seeing… You know, their Google Analytics, does everything look okay? Do we have stock? But I’m focused more on this other venture I own called PostPilot. It’s a software company. Does direct mail for eCommerce. And so, there I’m still in the thick of it. There, we’re hiring, we’re building, we’re raising money, we’re doing a couple other things.
Kurt Elster: And this one you acquired, as well.
Drew Sanocki: Yes. We acquired this one about three years ago and as it throws off cash, we’ve been hiring a team, and then lo’ and behold, last year iOS rolls out, iOS 14 takes the rug out from under Facebook, and there’s just this massive surge of interest in direct mail as a channel, which we have benefited from. So, now it’s okay, this thing is a bit of a rocket ship. What can we do to grow faster and still deliver a great product to everybody?
Kurt Elster: And so, we’ve got multiple business models here that you’re involved in. We’ve got eCommerce, an eCommerce store, versus an eCommerce marketing app, right? PostPilot plugs into Shopify and sends postcards.
Drew Sanocki: It’s Klaviyo for postcards.
Kurt Elster: Yeah. Klaviyo for snail mail.
Drew Sanocki: Yes. Correct.
Kurt Elster: I love that tagline and description. I think it’s a great way to explain it. What’s your favorite business model? Or do you not even think of it in those terms?
Drew Sanocki: SaaS. I love SaaS.
Kurt Elster: eCommerce, direct drop shipping direct to consumer? You love SaaS?
Drew Sanocki: Yeah. I love the software company now. I think it’s eCommerce, the amount of scale you have to get to create enterprise value is just orders of magnitude larger. In other words, we had a $100 million eCommerce business that might be the same value as this SaaS business with 15 people. It’s because of the way the businesses are valued, and you imagine like the heavy lift you need in eCommerce, where I had to manage like 200 people, and a legacy tech stack, and I don’t know. SaaS is just the lifetime values of the customer are so much higher that you can afford to do a lot more to acquire those customers. They stick around. Right now, I’m really liking the SaaS business.
Kurt Elster: And years ago, you were hammering on the importance of lifetime value and lifecycle marketing, and you told us that you want to look for opportunities that speak to your skills was how I interpreted it. It sounds like that’s what’s occurring here with PostPilot, is this really lends itself well to how you approach marketing.
Drew Sanocki: Totally. Yeah, it does. I’ve always believed in the lifetime value side of the equation. There’s acquisition, and acquisition costs, and then there’s how much profit does that customer generate over his or her lifetime, and I always feel like that’s the… That gets the short end of the stick. Everybody’s focused on acquisition. Everybody wants to grow. But the biggest opportunity is to bring on customers that have super high lifetime values, or work to increase the customer’s lifetime value, because that’s where anybody makes their profit. You know, if you ask any retailer, they’re typically like borderline profitable on the first order, but on the second or third, that’s where they make their money because they don’t have to go out and acquire that customer anymore.
So, a lot of my approach to marketing has been modeling out who are likely to be your best customers, how do we optimize acquisition funnels for them, how do we turn a sort of marginally good customer into a great customer? How do we keep a great customer buying longer from you? Because all customers have a lifecycle and the longer they buy from you, the more profits you generate. How do you orient your whole business to increase the customer lifetime value? Because that’s what ultimately trickles through to the value of the company.
And so, PostPilot’s been great because I literally have like one of my top tools in my toolkit, direct mail, and I’ve built the app out in a way where it can help you optimize customer lifetime value. Start with retention is one big thing. When you say direct mail to people, they think acquisition. They think, “Give me a bunch of zip codes. I’m gonna blast them with postcards.” Which you certainly could. You know, you could do acquisition, but I would recommend that everybody think of postcards as like retention first. Who are your best customers? Who’s your best target market? It’s always your previous buyers, right?
But the fact of the matter is now with Facebook unable to track that only like 10 or 20% of those previous buyers actually hear from you and open your email. They may not be subscribed. They may not open the email. How do you communicate with the other 80% of the best single target audience you could have? And direct mail fills that gap. You can mail them. So, anyway, that’s what led me to use PostPilot for years, to acquire it, and now to… We always start customers on retention programs.
Kurt Elster: Oh, so you had been using it to scale these businesses before you acquired them.
Drew Sanocki: I’d been using postcards. Yes. Yes.
Kurt Elster: Okay. And so, you’ve been ahead of the curve in your career on a lot of eCommerce trends that became standard things for an eCommerce marketer’s tool kit. And so, do you think… Are you saying that the future of eCommerce is direct mail?
Drew Sanocki: I don’t know if it… I mean, it’s not the single future of eCommerce, but it’s gonna be in everybody’s tool kit. You think back 10 years ago, I don’t even know if lifecycle marketing was, or retargeting. Nobody talked about that stuff. And yet now you’d be silly not to be doing those things and I think that’s direct mail in 10 years. And it gives me confidence that it predated eCommerce. I mean, there were all… Half the brands we know and love growing up. L.L. Bean. You know, like these big brands started as catalog brands. Lands’ End. Sending physical catalogs to people, mining that customer data in terms of recency, frequency, monetary value. Figuring out where to make profitable drops and then retaining customers through the catalog. And I see no reason why that couldn’t continue, but for eCommerce retailers, as well.
Kurt Elster: You know, my father-in-law worked for a very successful direct mail company that did everything through catalogs, and he helped manage that program, and hearing him talk about the stuff that they were doing in the late ‘80s, early ‘90s, it’s often significantly more sophisticated than what we’re doing today in eCommerce as far as segmentation, like using RFM segmentation, than what people do today.
Drew Sanocki: Totally.
Kurt Elster: So, I think often you can look at what worked half a century ago, and that’s gonna be like the next thing going forward.
Drew Sanocki: Yeah. In ’99 there was no Unofficial Shopify Podcast for me to listen to. I go into the library, I got catalog marketing books out, and I learned about what was called database marketing, which is like how do you crisscross a customer dataset to retain better, to acquire new customers, to essentially do lookalikes, and it’s not… I mean, that stuff comes full circle. It’s like you look at any good email program, they’re doing the same thing, with the same rules, and it’s always around recency, frequency, monetary value, right?
So, for those of you who don’t know what RFM is, I would say Google it. It’s how to segment a customer dataset in order to find your best customers.
Kurt Elster: There’s an episode we did with the CLV Lady, is what it’s called if you Google it. I’ll stick it in the show notes, where we talked through RFM.
Drew Sanocki: Jackson.
Kurt Elster: Juliana Jackson, I believe her name was. I hope I got it right. Penultimate question. What career accomplishment are you most proud of, Mr. Sanocki?
Drew Sanocki: I think it’s gonna be PostPilot. We’re gonna have a great… That’s gonna be a great company.
Kurt Elster: You know, now is the time where I disclose I invested in it, so fingers crossed. I hope so.
Drew Sanocki: It will be. It will be.
Sound Board:
Drew Sanocki: How do you do that so quickly? You have like…
Kurt Elster: What? I don’t know what you’re talking about.
Drew Sanocki: Those of you who are listening, he’s not putting those sound effects in in post-production. He’s doing them in real time. I am very proud of my first year at AutoAnything.
Kurt Elster: Oh, really?
Drew Sanocki: Yeah. We went in, we took that company from 350 people to 150. I’m not proud of that, but I’m proud of like… We had to change the culture. We had to create a team that executed really well and that’s what we did. I mean, it was like we turned over some positions, we found people who were sort of buried in the organization who we promoted, and just like that culture and teamwork for that first year was really rewarding.
Kurt Elster: You know, I talked to someone who worked there during that time, and they said that they miss you at AutoAnything.
Drew Sanocki: Yeah. I miss them. It was like we had a good thing going.
Kurt Elster: All right, final thoughts. PostPilot, do we have a special exclusive offer for our listeners? We set something up here.
Drew Sanocki: Yeah. Happy to. Whatever’s working for you in email will work in direct mail, and it’s like getting more juice from the squeeze. You’ve already done the work. You’ve already figured out your abandoned cart campaign or your win back. You clone it to direct mail and you’re gonna hit that 80% of your customers who aren’t subscribed to your list, so think of it that way. It’s just gonna extend the work you’ve already done on email. Later this year, we’re gonna roll out acquisition, so you’re gonna be able to I think replace a lot of the prospecting you were doing on Facebook with direct mail.
Kurt Elster: Oh, I hope so.
Drew Sanocki: Yeah, so we’re hoping late Q2 to roll that out. PostPilot.com. If you go to PostPilot.com/GFO, that’s the Kurt Elster godfather offer, GFO, and what that means is we’ll do everything for you. We’re so confident in the app that our team will build you the first campaign for you and send it on our dime. So, we build it for you, we’ll look at your business, tell you what’s gonna work, build it for you, and then send the postcards out, and then you can say, “Thank you very much, I’m not interested,” or you can say it’s great. Because our goal is to deliver you that ROI that makes it a no brainer.
Sound Board:
Drew Sanocki: Boom.
Kurt Elster: I love this idea. The godfather offer? I wish I had some Godfather sound effects I could stick in here. Man, this has been phenomenal. I have no closing questions. I love you, question mark?
Drew Sanocki: No, just email me. Drew at postpilot.com if you have any questions. You or any of your listeners.
Kurt Elster: Wow. You really opened a bag of worms with that one.
Drew Sanocki: Yeah. I’ll help anybody. I’m that excited about this business.
Kurt Elster: Wonderful. I mean, I learned a lot here, because you gave me great career advice years ago. I listened to it. I have followed along. And you know, riding those coattails has worked out pretty well.
Drew Sanocki: Awesome. I love that we met years ago at SEMA and hit it off, and I feel like we’ve sort of had a good partnership going since then.
Kurt Elster: It’s worked out pretty well.
Drew Sanocki: Yeah.
Kurt Elster: All right. Well, we’ll wrap it up there.
Sound Board:
Drew Sanocki: Thanks, man.