What 8 & 9 Figure Brands Have (That You Don't)

Speaker A: Welcome to the Brand Builder podcast presented by capitalism.com I'm Max Kerwick and I advise physical product brands on, um, identifying their most profitable customers, finding their most compelling brand story and scaling that brand as quickly as possible. A physical product brand is arguably the most predictable path to a seven figure business. I advise those brands scaling to seven, eight figures and beyond on how to build scale across all different channels and eventually sell for the highest multiple possible. The show goes behind those brands, tracks their success and hands you the keys to what's working. Let's dive in. Hey brand builders. Welcome back to this week's episode of the Brand Builder podcast. Thanks for sticking with us and thank you for listening to this week's show. I'm going to jump right in today. Today we're going to be talking about uh, some of the key differences that I see between seven figure brands, ah, and eight figure brands and then even nine figure brands. So I think there's a number of key differences. There's a lot of ways to get to seven figures basically with a product brand, right? That's why a lot of people get in there. Relatively low barrier to entry. If you're going to start a million dollar business. You, uh, know quite a bit simpler when uh, you're selling physical products than it is. You know, for example, if you're starting software and you have a lot of development costs up front and you know, the sales cycles tend to be longer and all that kind of stuff. Um, you know, with products, you know, people buy products all the time, a, uh, huge need, you know, easy to get into niches with modern data sources and things like that. So that's why people get into product businesses, right? And then over time they want to become product brands. Now my work really centers on a couple of different things, right. I work with businesses that are in kind of the mid to high seven figures that are trying to get to that eight figure range, right. So I've seen the differences there between those, the businesses who make it there and the businesses that don't. Right. And there's a number of common threads that I think are useful to think about even if you're early in your journey, right. Even if you're just starting out, even if you're at six figures, low seven figures. I think there are things that you can start thinking about now and start implementing in your business that are going to put you on a better track for eight figures of revenue and potentially uh, eight figures of exit value if you seek that. Now my work also centers on a Couple of nine figure brands and these are much larger companies, uh, valuations in the billions of dollars. And you know, that's a completely different game, right. Most seven figure businesses, if you do, you know, a certain list of things correctly have eight figure potential, right. Unless you're working in a super niche market with a very limited buyer base and there's no clear kind of like product extensions that you can go into and stuff, you can probably, you know, even worst case, just kind of muscle a seven figure brand into eight figures by executing. Not all eight figure brands have anywhere close to the potential needed to get to nine figures. There are a number of things that make a nine figure brand completely different. Um, but again, I still think that they, some of these things are things that you can, you can work towards and find a version of even early days, right. And I also think it's useful to go through the exercise of figuring out what do you want from your business, right? Do you want just a 7 figure cash flowing business that helps support your lifestyle and give some personal financial freedom? That's great. Okay. Um, do you want something that is really a big exit opportunity, right. That you could grow to eight figures with a relatively lean team, um, and without having to, for example, go into retail or something along those lines or are you really making a big play? Do you really have something that you think has the potential to, to exit for, you know, $100 million? That's what we're talking about when we talk about nine figures. You know, that's, that's multi generational wealth right there. Um, or even bring in $100 million in revenue, right. Which would, which would have the potential for a much higher valuation. So again, I think it's useful to, to kind of think about the ways that we get to seven figures and then the ways that we get from there to eight or even nine figures. So that's really what today is going to be about. Um, should be a, you know, pretty simple one. But again, I think these concepts are important and as with anything, right. I will reiterate, I try to, I try to say this every time I try to say this when I'm with clients. You need to have a vision of where you're going and you need to have that kind of North Star so that you can, you know, work your way there and kind of take the steps necessary to do that. But you also need to focus on the next step as much or more than the vision, right? So when you listen to this and you're thinking about, hey, you know Daydreaming. I could have an eight figure empire. I could have a nine figure rocket launch business that is just headed to the moon. Um, that's great, but listen to this and think about, okay, what is the next thing that I can implement that's going to help me get on that path? Thinking about a seven figure business. A lot of people listening to this podcast have a seven figure business already or have built one and exited in the past. A lot of people that I talk to on this, you know, have built and exited seven figure businesses, you know, maybe multiple times. But there's two primary paths to um, a seven figure business that I've seen and the most common one is what I'll call product channel fit. So you hear a lot, you know, especially if you come from like a business school background, you hear a lot about product market fit, right? That's where, hey, we've got, you know, there's a need in the market and we've got a product that satisfies that need at a price that people are willing to pay for it. That's kind of a broad conceptual thing, but more tactically, right, product channel fit is, we've got a channel where there's demand for this product that's not being filled, right? It's not the whole entire market. We're not launching a net new product that's totally different, right? We're looking at a channel like Amazon for example. This is the most common thing. But if we're looking at Amazon and we're saying, hey, there's a clear spike in demand, right? Keyword volume on certain terms or whatever, and, and for whatever reason, there's not supply there to meet it in products that are specifically geared towards that keyword, all that kind of stuff. So that's a very common way to find product channel fit, right? To see the signal, right? Where there's, hey, we have this increasing keyword volume, whether that's through Google Trends or whether that's through Amazon search traffic or whatever. And we're gonna release a product that fits that search volume, right? Really optimize it for that and you can build a seven figure business very quickly that way. The same thing actually works in retail as well. Uh, though it's a little bit harder. You know, launching retail is much, much more difficult and cost intensive as compared to a platform like Amazon or selling on your own website or something like that. But um, you know, I have a client, a past client since exited, but they were the first clean beauty brand to uh, launch in Whole Foods, right? And at the time, um, you know, my client was running an agency. They did a lot of work for Whole Foods. Whole Foods is based here in Austin where I'm based. And um, you know he, he saw that in every category, uh, people were going for clean ingredients, they were going for natural foods, they were going for natural ingredients, all that kind of stuff. But when he looked at the beauty section, there really wasn't something that was kind of high performing clean beauty. And so he really started this brand, it's called well People since it's been acquired by elf. But he really started this brand with the idea that hey, there's a clear need, you know, looking across all of the, you know, types of products, um, and categories that Whole Foods serves. But there's a clear need for a good clean beauty brand here, right? And so they, you know, worked over time to build some great products and stuff like that. When they launched in Whole Foods, they pretty much became a seven figure business overnight, right? So it's a slightly different approach than hey, there's some Google trends that we can take advantage of, um, or there's a, um, you know, some, some Amazon trends that we can take advantage of. But it's a very similar play with a little bit of a different um, you know, kind of cost and uh, lead time model. But that, that product channel fit is probably the easiest way to get from zero to seven figures, right? Finding that demand, capturing that demand, serving that demand and getting there. Now it's pretty hard. You know, there's a kind of a natural cap, um, at that product channel level, right? Because there's only a certain amount of demand on that single channel. So in order to, to continue to scale that, you either have to launch new products, right? Which is often, you know, kind of the Amazon game is to just like continually launch new products and you know, maybe each one is worth $100,000 a year or $500,000 a year, maybe even a million dollars a year. But you know, going from that, you know, seven figure range right up to eight, you really have to kind of scale horizontally at that point, right? You have to um, continually launch products, you have to find new channels maybe to launch your existing products, things like that. And that's really kind of how you muscle your way into the mid to upper seven figures, uh, and sometimes even into the eight figures. But it's pretty work intensive at that point to scale that horizontally. The other path, which is kind of the brand path, a lot of people, when I talk to them about brand will, they're really talking about kind of like venture capital backed product companies and things like that. They're not as interested necessarily in product channel fit. That's something that they think that they can get down the road. But really they're looking at uh, what I call message audience fit. So it's less about the product necessarily though. The product obviously plays an important role in any product brand. But this is really about kind of like the mission and the cool factor and kind of all of the intangible aspects of brand and how that matches with audience. So this would be a lot of, you know, kind of like influencer launch products. This would be a lot of VC backed products, right? Where it's not immediately clear what the channel is, right? Where they're going to really efficiently acquire customers, right? They're probably selling on their own website, they're probably direct to consumer, all that kind of stuff. But it's really, you know, it's powered more by a message, right, that meets with an audience and, and then when that message clicks and is matched with a good product, then that has a real, real quick growth opportunity. Um, but those are, those are kind of the two, two things. So even without a great product, right, if you have a really strong message and you have that strong kind of like intangible brand that matches with um, you know, kind of the audience that you're serving, you can have a seven figure business that just grows out of that. Now that's not a very sustainable, neither one of those is a super sustainable model, right? If you're just looking at product channel fit without a clear message, then you know, you're super, super, super vulnerable to competitors coming and either squeezing you on price or squeezing you on story, right? If you've got a really strong message that really identifies with the audience, but your product is not super up, uh, to, you know, up to stuff, then you are also at huge risk, right? Because people are gonna buy the product and they're gonna be like, you know what, I like this brand. You know, I like the spokesperson, I like the, you know, the colors, I like the story behind it. It makes me feel good when I buy it. But you know, this product is nothing to write home about, right? And so that's where that starts to fall off. So the difference between those seven figure brands and those eight figure brands, most of the eight figure brands that I've worked with, right, is most eight figure brands have figured out some amount of both of those things, right? They found both product channel fit and they have some amount of message audience fit. Right. They're able to acquire customers, um, outside of the confines of just the single channel selling products. Now, like I said, there is a way to get around that, right? Specifically with product channel fit, where you can really just expand horizontally, continue to launch more and more products, right? Scale the systems that you have that work, and you can probably kind of claw your way to 10, 11, $12 million, right? Really get in at that kind of like basement level of eight figures, right? Which, again, if your main goal is just kind of personal financial freedom, that's an amazing achievement, right? You probably do that with a team of five to ten people. Um, you know, it just. That is a really, really, really valid way to grow a lifestyle business, right? But for it to really be a brand that has, you know, potential beyond that, like that, that has, you know, in some ways less complexity, in some ways just different complexity, you need to have that message fit too. And that's really the brands that I try to work with, right? Are the ones that have something, have some clear product channel fit, uh, going on that has allowed them to grow to that 5, 6, 7, $8 million, but are not just setting their goals on $10 million. They're not trying to go from 8 to 10, they're trying to go from 8 to 20. And in order to make that jump, in order to really scale at that level, you need to have that message piece as well, right? So you need to have product channel fit, right? You need to have a clear channel to acquire customers. You need to have a clear place to sell, you need to have good products. You need to have a message that resonates with kind of your core audience, that allows you to advertise effectively, that allows you to spend money on marketing in a way that's efficient, that brings people in beyond just kind of like what you're able to get in Whole Foods from people walking by or on Amazon from people who are searching that keyword. So you need both of those things. And then at eight figures is when operational efficiency really starts to become important, right? You need those systems and processes to help you run your business effectively. Um, you know, some people will talk about acquirers really, you know, think that that's important and stuff like that. That is true. You need to have a baseline level of systems and stuff. But a lot of people who buy brands do so under the assumption that they can improve the efficiency themselves. So, so you need to have some sort of baseline level of systems, processes, all that kind of stuff. But really what they're going to be looking for the right acquirer is going to be much more interested in, you know, what's that product channel fit and what is the message audience fit? Because those are the things that they can scale with, with more money behind them, with a bigger team, all that kind of stuff. Um, so really if you want to get beyond that kind of like just, you know, if you want a $10 million business, there's a couple of different ways to do that. You don't necessarily need that message part as much, right? But if you want to go beyond that, if you really want to kind of start to really scale the business, you need to have product, channel, message audience and that uh, kind of like systems and operations piece figured out. Now let's talk about a nine figure brand, because this is a totally different beast, right? Most seven figure brands have eight figure potential if everything breaks right. Very few $10 million brands have hundred million dollar potential without some fundamental things being true about their business, right? But in addition to that, you need a huge market, right? The nine figure brands that I've worked in with, um, you know, either currently or in the past, right. Are in markets like pharmaceuticals, right? Direct to consumer pharmaceuticals, or they are in, uh, online grocery delivery, uh, you know, on the east coast in really geographically dense urban environments, right? These, these are huge markets. These are multi billion dollar markets where you can carve off $100 million and still be a small player, right? If the market is only $100 million, you need to own it completely to be a nine figure brand. And that is going to be almost impossible, right? The same things that make it easy for you to launch a niche brand, make it easy for other people to launch niche brands, right? And make it very difficult to consolidate the entire market. So you need to be playing in a massive, massive, massive market to have that nine figure potential, right? You also need sticky products. You need things that people come back to again and again and again. The two examples that I just gave, right, Pharmaceuticals. You get a prescription, you're getting that continuously, you're ordering again and again and again. You have a relationship with the, you know, the online doctor and all that kind of stuff. Those are all things that make it very, very sticky. When you're buying groceries, that's something that you do on a weekly basis. If you want groceries delivered to your house. Even if it's not your only grocery acquisition channel, it's not the only place that you shop for groceries. Again, that's super sticky. There's lots of different things that you can buy and connected to that you need to both know your numbers. You need to know how much it costs to acquire the customer. But the lifetime value of that customer needs to be way more than the cost to acquire them. And this is where you see a lot of kind of like VC backed brands stumble, right, because they, you know, they raise $5 million cash on a, on a, you know, $15 million valuation or $20 million valuation, they've got all this cash to plow into acquiring customer. But let's say you're selling beverage, right? And you know, you're selling, you know, 30 bucks a case, 36 bucks a case, something like that. You know, with Facebook costs the way they are and ad costs the way they are, you need someone to buy a lot of those beverages. They can't just be trial pack ordering a 12 pack and getting it sent to their house. You need someone who's there buying a lot and it needs to be very profitable. So their lifetime value has to be in the hundreds of dollars for that strategy to bear fruit. And so this is, uh, an area, again, it's not just a big market. It's a market with the type of margins that you can command to, to say, hey, every time I spend $150 to acquire a customer, right? Which is at scale, kind of where those costs will be 100 bucks, 150 bucks, 200 bucks, 300 bucks, right? I need to know that that person is worth six or $700 to me, right? Because then you can spend money to the moon, right? You can, you can acquire customers all the time, right? If I'm, if I'm acquiring a customer for grocery delivery, they might be spending $300 a week, right? If they got a family of four that, uh, they're feeding, they might, you know, even if, you know, it's just kind of a secondary grocery option, they might be spending $150 a week, right? I can very quickly make that money back. Um, so big markets, sticky products, uh, you know, related to those sticky products, you need that high lifetime value, right? And you need to know your numbers. You need vision, right? At this scale, you need a big team, you need, uh, you know, a board of directors, you need all of these things that you don't necessarily need at a $10 million business, certainly don't need at a $5 million business, right? Um, so you need vision and then you probably need investment at that level. There are, uh, businesses and brands that are bootstrapped to nine figures, but it's few and far between, right? And again, you need um, the cash allows you to go faster, right? The cash amplifies what you're doing. And if you are growing from 10, 20, $30 million to $100 million, chances are you have kind of a window of opportunity where you can grow into that very quickly before competitors jump in, right? To take advantage of that, you probably need investment, right? You need investment for the money, you need investment for the connections that those types of people can give you and all that kind of stuff. And so really this is to say, you know, there are many ways to get from seven figures to eight figures, right? There are some things that need to be true for you to get from eight figures to nine figures. So some people that I talk to say, you know, I want, I want a hundred million dollar business, right? And that's a great round number. But you need to be really honest with yourself about if that's your goal, what's behind that goal, and do you really has the business that you picked really, does it really have the opportunity to get there? Right? And so that's really what I kind of encourage you as you sit here and say, hey, what do I really want out of this? If I'm just starting out, do I want that seven figure business? Do I want to grow to eight figures? Do I really think that this can grow to nine figures? And am I the person to do that? Right? If you've got a seven figure business, what do I need to add to get to eight figures? And that's really what I want to kind of end this with is again, earlier in this pod, I said something along the lines of, you know, you need to focus on the next action that is going to get you to the next spot, right? And I really believe that, right? So there's a lot of things in here, hopefully that you can kind of start to turn over and think about, hey, what do I want out of my business? But if you found that product channel fit, you know, if you're selling in retail, if you are, um, you know, crushing it on Amazon, all that kind of stuff, then the next thing that you need to do is really think about that message audience fit, right? That's going to be the easiest path to get you from where you are now to eight figures, right? That's going to be the easiest place. If you can combine both of those things, that's a very reliable recipe to eight figures. That doesn't, you know, just include expanding operations horizontally until you get to the point where, you know, you claw off enough revenue to get to $10 million. If you found both of those things, right, and you're already kind of singing, that's really when you start to build in those systems and those kind of operational efficiencies that allow you to kind of stay at that, you know, kind of 10, 11, $12 million and kind of continue to grow that, right? And then if you've built systems, that's when you really focus on, okay, now, you know, what are the numbers, right? What are, what are the, what's the payback period? What are the numbers that allow me to scale? You should, you should be focusing on your numbers much earlier, right? Like even at the seven figure range, you should be really trying to figure out, you know, what are my acquisition costs, how much is a customer worth to me and all that kind of stuff. But that's the piece, you know, having a really, really firm idea on that can be pretty difficult at early stages, right? Both just because the data is not really available and, um, you know, your marketing spend might fluctuate, you know, pretty significantly from month to month, quarter to quarter, all that kind of stuff. But when you get to the eight figure range, you need to have that stuff super locked so that if you were to raise money, for example, you could confidently say, hey, this, these are what these dollars are going to give me, right? Or if you're going to fund it with debt, you would know exactly what you're going to get back, all that kind of stuff. So all that to say, you know, hopefully, you know, if you're listening to this and you already have a business, this gives you an idea of like, hey, what's the next thing that's going to help me get to this, this, you know, kind of aspirational level. And if you're just starting out, then you can listen to this and say, hey, okay, here's some different things that I think about. How do I want to start out? What's going to be my easiest channel to acquire growth? Um, so hopefully this is helpful. If you have any questions, as always, you can reach out to me directly. I always put my email at the end of this. Maxandbuilderstrategy.com um, I'd love to talk to you, love to hear more about where you're at and, um, which of these strategies you think is going to be most effective. M. Have a great week everyone, and thanks for listening. Hey, brand builders. We hope you enjoyed this podcast by capitalism.com. check out our website for upcoming events and additional content about building businesses, building brands and investing. My name is Max Kerwick. And my mission in life is to transform businesses into brands. If you have any feedback about the show, any guests you want to see, case studies covered, topics explored, or frankly, just any questions about branding in general, just shoot me an email@maxmaxrandbuilderstrategy.com Again, that's maxrandbuilderstrategy.com um, and I'd love to hear from you. Uh, one quick note. If you could subscribe to the podcast or even leave us a review on itunes. These things really do make a big difference in helping us book amazing guests and then also helping people just like you find the podcast. So thanks, and we'll see you next time.