Latest / Beyond Fulfillment Podcast / Turning Crisis Into Opportunity: Small Businesses Strategies During Uncertainty with Sri Kaza

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Turning Crisis Into Opportunity: Small Businesses Strategies During Uncertainty with Sri Kaza · Beyond Fulfillment Podcast

• 0:05
  Entrepreneurship means trying something, you know, something that other people haven't done before.
• 0:09
  And maybe you've got people who can, who can teach you about it, maybe you don't.
• 0:15
  But you're going to take that risk yourself.
• 0:18
  Today we're joined by Sri Kaza, a leader whose career spans roles at McKinsey, high profile work with companies like Viking Cruises and Bold Hands On Entrepreneurship, turning around and selling ventures that champion small business growth.
• 0:35
  Sree's experience ranges from scaling startups to securing much needed capital for small businesses and guiding them through crises like COVID 19.
• 0:45
  In this episode, Sree shares his pivotal lessons learned from the trenches.
• 0:51
  From how McKinsey's unique culture shaped his entrepreneurial mindset to the emotional rollercoaster of leading a company through a pandemic and ultimately scaling it to acquisition.
• 1:02
  We'll dive into his strategies for helping small businesses survive and thrive.
• 1:08
  We'll also unpack the real truths behind customer acquisition and get a sneak peek in his upcoming book, Unconvention.
• 1:16
  If you're passionate about entrepreneurship, grit and the unconventional paths to business success, you, you won't want to miss this conversation.
• 1:25
  As always, if you found value from this content, please like and subscribe.
• 1:31
  All right, Sri Kaza, welcome to Beyond Fulfillment.
• 1:34
  Hi Dave.
• 1:35
  Thanks for having me on.
• 1:36
  Absolutely.
• 1:37
  We appreciate you taking the time to be here.
• 1:40
  So Sree, let's get right into it.
• 1:43
  How did Your experience at McKinsey Shape your approach to entrepreneurship?
• 1:50
  Great question.
• 1:50
  I didn't really think of myself as an entrepreneur while I was at McKinsey.
• 1:54
  When I, when I got into one of the world's biggest consulting firms, I wasn't thinking of doing something new or different.
• 2:03
  But when I, when I, you know, it's, it's company of a upper out culture.
• 2:08
  And when I started to get to a place, you know, I hadn't made partner yet and it was looking more out than up for me.
• 2:16
  One of the things that I realized was that I was being pushed by the firm, rightly to go be something different than everybody else.
• 2:24
  They don't want partners who are all the same.
• 2:26
  They want partners who have different views, different topics, different relationships than the others.
• 2:34
  And I didn't at the time fully understand it, but I decided I wanted to go after something that nobody was telling me I should do.
• 2:42
  Most people were telling me it's not worth my time.
• 2:44
  I was focusing on smaller clients.
• 2:48
  McKinsey size that would be like a 2 billion dollar revenue client instead of a, instead of a, you know, multi billion dollar Fortune 50 company.
• 2:58
  And when I started doing that, and there was nobody out there who could give me good advice because nobody else had done it before.
• 3:06
  I felt pretty alone.
• 3:07
  And I felt like, hey, this is going to end my career here.
• 3:10
  I'm enjoying what I'm doing, but I'm not going to get promoted because there's nobody looks like me.
• 3:15
  And what I realized only after I got promoted and I got to be made partner was that that's kind of what they wanted.
• 3:23
  They want people to go out and do something new and something that's not the same as, or at least at the time, they wanted people who would do something that's not the same as the rest of the other
• 3:32
  partners.
• 3:33
  And when a good mentor of mine had said, hey, that's kind of what entrepreneurship is.
• 3:38
  You got to go do something where the path hasn't been blazed out, I got, I got really excited about trying some other new things.
• 3:48
  So I actually left McKinsey after being a partner only a couple of years because I was, I was really excited about trying to do something new, something that somebody hadn't done before.
• 4:01
  And it was really the fact that I didn't get fired that showed me that, oh, yeah, entrepreneurship means trying something, you know, something that other people haven't done before.
• 4:10
  And maybe you've got people who can, who can teach you about it, maybe you don't, but you're going to take that risk yourself.
• 4:19
  Okay, and so why did you decide to focus on helping small businesses access capital?
• 4:29
  So part of this kind of fell into my lap.
• 4:31
  You know, I had one entrepreneurial experience where, you know, I worked for an entrepreneur on a massive scale.
• 4:38
  This was a Viking Cruises did quite well with, with the work that I was doing.
• 4:44
  But I wanted to go find something that would be more of my own, maybe smaller, that I could go and drive and scale up.
• 4:54
  And so when I left them, I joined a company called the Tax Credit Code.
• 4:58
  And it was private equity owned, but one division of it was really small, and I thought it had a lot of potential.
• 5:06
  So I was able to take a big chunk of equity and, and work with them to scale up the business and prove out to myself that I could go scale something on my own.
• 5:16
  And what, what I learned there was, you know, most of the small businesses I was working with really were struggling to take advantage of a lot of things that were already out there for them in the tax credit
• 5:28
  world.
• 5:29
  The government put together a lot of different tax credits for small businesses credit for.
• 5:34
  If you, if you hire people who, you know are coming off of government support or if you're conducting business in a zone that, that doesn't have as much opportunity, there's a whole bunch of different credits are out there.
• 5:48
  But these small businesses just didn't have the time or capacity to go after them.
• 5:51
  So in that, in the scale up of that business, I learned a lot about the decision making and kind of how the small businesses get left behind on a regular basis.
• 6:01
  When I left that, we sold that business to Experian.
• 6:06
  But when I left, I joined a different one business that had a mission as well to help small businesses access capital.
• 6:13
  And so that particular business was looking at companies that just didn't have assets to lend to, borrow against.
• 6:21
  So if you're running a business and you go to a bank, want to know, you're either putting up property or you're putting up equipment, or you're putting up your home against a loan.
• 6:31
  And if you don't have those things or if you've already borrowed against those things to kind of, you know, for, for, for getting your business off the ground, getting extra cash to go do a good project or, or
• 6:43
  purchase some inventory or, or hire people is really hard to do.
• 6:48
  And when I saw this company was actually helping these small businesses invest and grow, that got me excited.
• 6:54
  That's why I joined.
• 6:55
  And then me becoming the CEO and leading it to an acquisition was a, was after Covid that that company also got, you know, got hit pretty hard by the pandemic.
• 7:08
  It's, it's clients got hit pretty hard by the pandemic.
• 7:11
  And then, you know, turning it around and, and scaling back up and selling it was, was a, was a big thing for me in inspiring what I wrote.
• 7:21
  So let's talk about that process a little bit more.
• 7:24
  So when you took it to, you know, turn around, like you said, Covid, a lot of companies got hit hard.
• 7:31
  You did there as well.
• 7:32
  And you turned it around and scale it all around all the way up to, to getting acquired, you know, in a short period of time.
• 7:40
  What was that process like?
• 7:42
  It was tough.
• 7:43
  You know, when I was there, before COVID hit, we were, we were, we had a good team, probably seven or eight executives and probably had about 120 people.
• 7:54
  And we were deploying cash to, you know, 200, 300 businesses, you know, every month is quite successful in terms of getting, getting to a, a good size.
• 8:07
  And then when Covid hit, we couldn't make any money because one, our lenders didn't want us lending at the time because it was too risky.
• 8:15
  Two, A lot of small businesses were actually going through lockdowns and they couldn't, they couldn't pay down their loans.
• 8:22
  So we had to go and make some quick decisions and cut as much expense as possible.
• 8:28
  That meant we let go of maybe 80 of the people on our team right away.
• 8:34
  And we let go of most of the people who are really smart and, and, and, and, and contributed a lot in, in that scale up.
• 8:44
  They all had better opportunities too when other businesses were kind of coming back up.
• 8:49
  So we lost another 10, 15 people just for that because we weren't in a position to scale up.
• 8:56
  And, and, and, and the folks who had that experience left us.
• 9:01
  So that left me at the end of the, you know, an executive team of three instead of seven.
• 9:09
  A core team of loyal, hard working folks, but with not as much experience scaling up businesses and very little cash coming in from investors because we'd already struggled because of COVID So that scale up process involved going back
• 9:30
  and doing everything we had done in the prior couple years when we were first kind of building out the company and scaling it up, but doing it faster because we already knew the answers.
• 9:39
  That was good, but doing with less resources and less people and doing it more efficiently just because, you know, we were trying to make up for all the, the time and money lost during COVID It was a slog
• 9:51
  though, because I was a, I was a CFO and a chief Marketing officer and the CEO all at the same time because I just didn't have those people on my team.
• 10:01
  So I had to go learn a lot of new things.
• 10:04
  It was good for me because I love learning, but it was also, it was also very similar to the plight of many entrepreneurs who have to take on every role from chief marketing officer to the garbage man role.
• 10:18
  Taking out the trash.
• 10:20
  When you don't have the resources and you're trying to grow something, you've got to, got to fill every gap.
• 10:27
  Okay.
• 10:27
  And so when you're going through that, right, like, you know, Covid hits you hard, you lose.
• 10:34
  Sounds like about 90% of your, your total employees or thereabouts.
• 10:40
  You're filling multiple executive roles, money's drying up, you know, most of your core team is lost and you have this daunting uphill battle in front of you.
• 10:52
  I mean, what's, what's the day to day like at that time?
• 10:56
  And how did you, how did you get through it and, and turn that into a successful divestiture?
• 11:02
  Yeah, you know, the day to day it goes from, you know, prior thinking about, hey, how Are we going to conquer the world?
• 11:09
  What are we going to do over the next two to three months to grow and get bigger?
• 11:13
  And then it goes to, wait, what's going to kill me tomorrow?
• 11:17
  Like, what have I, what have I not covered?
• 11:18
  What are the things that will cause this business to fail?
• 11:22
  It's tough because emotionally you're worried about something all the time.
• 11:27
  But in the first few weeks or months, coming out and saying, hey, we're going to go and start lending again, we're going to go start firing up the business, we're potentially going to hire again, you start to see
• 11:38
  a few of those what I would call like a sprouts coming up from the ground, like a couple of leaves.
• 11:42
  Hey, there's something alive there.
• 11:43
  We can feed it, we can grow it.
• 11:46
  But that fear of, hey, what's going to kill me tomorrow?
• 11:49
  Moves to what's going to kill me next week?
• 11:54
  And in a few more months, you know, five more months, six more months, you're sitting there saying, hey, what am I worried about for next month?
• 12:00
  What are the things that I absolutely have to get done and solve for so that I can survive another month of this?
• 12:07
  Probably wasn't until year two of saying, hey, how do I survive month to month that we could start to say, hey, can we get to a place where we'll get acquired?
• 12:15
  Can we get to a place where we can, we can get a new investor in here who's excited about the potential?
• 12:23
  But that, you know, that, that's a, you know, I wouldn't wish it on anybody, but if you flip it around and you say, hey, this is my idea.
• 12:30
  This is my, my, my baby.
• 12:34
  I want to give to the world.
• 12:36
  Yeah, you, you fight every, every day to keep it alive, and you fight every day and get it to grow and get bigger.
• 12:43
  And it isn't that painful when you're, when you're, when it's yours.
• 12:47
  Right.
• 12:47
  It was something that you care about and you think you want to, you want to bring to the world.
• 12:52
  Okay.
• 12:53
  You know, and following up on that, right, like you said, that the pain and so much of the challenge and the struggle, it's easier to deal with when it's your idea and your baby, so to speak.
• 13:06
  But what would you say is the biggest misconception people have about the entrepreneurial journey?
• 13:14
  So my personal take on it is we do a lot of celebrating of the biggest winners in entrepreneurship.
• 13:21
  You always talk about the people who made billions, but we don't really talk about the many, many, many people who've Tried and failed more than once.
• 13:33
  The biggest part of that entrepreneurial journey is making something out of what has been lost in that failure.
• 13:43
  My thought is, if I go into something now, go back to that example I gave you about my, my McKinsey career, how it prepared me.
• 13:50
  You know, I was thinking I was going to get fired, right?
• 13:53
  If I continue to go and work with small companies, who knows if they were, they were going to promote me or not.
• 14:00
  But I was mentally preparing for, you know what, when I do, at least I'll be working with businesses that I like and people that I like and in the space that I'm excited about and maybe they'll just hire
• 14:10
  me.
• 14:10
  So my investments in building that, that personal career path were also going to be valuable to me.
• 14:19
  Even if I failed at becoming a partner, I could actually go and work for one of these businesses I was working with and that was something I was going to enjoy.
• 14:26
  So in the entrepreneurial journey, a lot of people say, hey, look, it's great, you know, you failed a company, that's okay, you know, that's not a bad thing.
• 14:35
  Said, look, you have to really take some things away from your success or failure that you can use in the next, in the next month, in the next year, in the next, you know, step in your career.
• 14:46
  So maybe you've started something and it didn't work out.
• 14:49
  What did you learn from that?
• 14:50
  What did you gain from that?
• 14:52
  That are relationships, assets, insights that you can use to go build the next thing.
• 14:59
  The big piece of that journey is as you're making decisions and taking risk, thinking about what happens if you don't succeed, how you can make that valuable anyway.
• 15:10
  Okay, now also you mentioned when we were talking off camera that you've led numerous smaller startups and given mentorship and advice in helping people, you know, grow their own businesses after, after all the different things that you've done
• 15:29
  in your career.
• 15:30
  So throughout that process, what would you say is the most important lesson that you've learned?
• 15:38
  Well, for me it was really on the customer acquisition cost from a business lesson is the customer acquisition cost.
• 15:45
  I mean a personal lesson is you can always gain from working with others.
• 15:49
  I'll tell kind of both.
• 15:51
  I did a startup in between that tax credit business and the financing business that was focused on helping businesses find the right piece, the talent to hire.
• 16:02
  It was a neat technology where we were using some machine learning AI to match candidates to jobs with a bunch of customer data.
• 16:15
  Problem for me was I was getting customers, but I was losing profitability because it cost me so much of sales time and money to bring the customers in.
• 16:25
  I couldn't make it back with my, with my pricing.
• 16:28
  And I had a mentorship group that I had been working with at the time where they were all going through very similar challenges.
• 16:33
  In fact, what I found, at least in the startup community here in Los Angeles, was that everybody had great ideas for product and they'd already proven to people around them that the product had value and it was a
• 16:45
  good product and it would benefit the lives of the people that were going to use it as, as was mine.
• 16:51
  But the challenge that almost every one of us faced was, so I've got this great product and this great idea and it even works, but it costs so much money to get a customer to notice it, understand it,
• 17:04
  and then finally make that decision to buy it.
• 17:06
  And that customer acquisition cost.
• 17:09
  You know, I learned a lot about the other challenges my, my, my, my cohort was, was going through in, in that mentorship group.
• 17:18
  And, you know, only a few of us actually were able to get past that big issue of, you know, what, it costs a ton to get somebody's attention.
• 17:27
  And so now it's given me a lesson too, in terms of, you know, when I'm pursuing opportunities or giving advice, I always ask somebody, look, how, how are you going to get people's attention?
• 17:36
  You know, at the right margins, right, the rate costs, you know, if you, if you want viral marketing, you know, there's, there's a totally different way to go about it.
• 17:45
  But if you just got a good product, you start asking yourself, who's going to help you get that product into people's hands and how are you going to do it, you know, and still make some money on the
• 17:53
  product itself.
• 17:56
  And, you know, with that, where you said almost everyone had the same challenge in terms of the customer acquisition cost and being able to do that at the right margin, why do you think that's overlooked by so many
• 18:11
  people?
• 18:13
  You know, I think it's overlooked because when we, most entrepreneurs, when they have an idea, at least in the, in the space that I've been and spending time, most of these guys are looking at the product and the
• 18:25
  experience and what they're bringing to market and the problem that they're solving, they get really excited about that.
• 18:31
  And I think that's great because you have to be solving a problem to be, you know, sustainable business.
• 18:35
  You can't just kind of make something up, hope people buy it, and expect it to kind of sustain.
• 18:39
  But with, with the products alone, people are so the consumer and, and businesses, they're so busy with so many other things, and there's so many other businesses spending a lot of dollars on marketing and getting their attention that
• 18:57
  for you to get their attention, you know, I'll give you an example, it's an easier example.
• 19:01
  Like, you know, I had, I had a classmate who had done some interesting services for new mothers.
• 19:08
  And the cost of getting the attention of a new mother is astronomical.
• 19:13
  And the reason is because as soon as you might know that person is a new mother, whatever data or whatever place you're getting it, businesses like Gerber and Pampers are also aware that this is a new mother.
• 19:30
  And if you look at the lifetime of money that a Gerber would make or a Pampers would make off of this mother, their incentives to spend money, get marketing attention, and drown that person in their ads is so
• 19:45
  much higher than yours as a product offering.
• 19:49
  And so when you jump in and say, I'm going to solve this problem for a specific group of people, you just have to understand there's other, other businesses pursuing that and then drives up your cost to get that
• 19:58
  person's mind share.
• 20:01
  And, and if you're going to solve a big problem, big global problem, great.
• 20:05
  Now you're, you're looking at different types of, of, of people who are going after that.
• 20:10
  So in each place that you're going, just, you just need to keep in mind your product may be competitive to nothing or maybe unique or different, but the customer is still somebody who everybody else is competing for.
• 20:23
  And mindshare is getting more and more expensive.
• 20:27
  Okay.
• 20:29
  All right.
• 20:29
  Now also you have a new book that's actually coming out in September called Unconvention.
• 20:37
  So can you tell us more about that book?
• 20:41
  Sure.
• 20:41
  Look, I spent, I spent 10 years at McKinsey doing strategy for big corporations.
• 20:45
  And then kind of the last 10 years of my career have been helping small businesses.
• 20:50
  And that, that story I told you about getting hit pretty hard by Covid and us having to go and dig ourselves out of a hole and turn things around.
• 20:58
  One of the biggest things that, that was important to us when we did that was taking care of the companies that had been with us for a long time.
• 21:05
  So we were out working on getting PPP loans for them.
• 21:08
  If they owed us.
• 21:10
  We were modifying or updating loans so they could kind of first focus on getting themselves back to business before they had to worry about paying us off.
• 21:17
  So we did a lot to salvage the business that were still working with us.
• 21:22
  But, but maybe 30% of them still went under, disappeared.
• 21:27
  So we lost a lot of our repeat customers, but we had enough when we came out of it that we could get going again and get into a growing business.
• 21:38
  They were really, really important to us.
• 21:41
  I did a little bit of research.
• 21:43
  We had a lot of good data at the company, did a little bit of research into why some survived and why others didn't.
• 21:51
  We could see in that data that there were a number of them that didn't fit that what I would call the simple, clear strategy of, you know, growth and profit pursuit that you would expect a, a surviving company
• 22:06
  to look like.
• 22:07
  What we saw instead was, you know, what I, what I, what I characterize as maybe stubborn or narrowly focused businesses that seem to have lasted and actually made it through.
• 22:20
  And digging in deeper, you know, I've got some, got some interesting data, but what was more interesting was the stories I got from talking to some of the businesses that actually had stuck around.
• 22:29
  And the, the big element that I took away was that they had customers that valued them to the point where those customers came back during COVID or when the business itself was truly threatened, and customers that went out
• 22:45
  of their way to keep that company alive.
• 22:48
  You, you could probably imagine you went to a restaurant that you used to sit down at, right?
• 22:52
  But during COVID you ordered takeout.
• 22:55
  You just made sure to order takeout probably more often than, than before, because that's a restaurant that you wanted in your life.
• 23:01
  Or, you know, when I was interviewing bookstores, there's bookstores who told me about how their customers rallied around them and put together GoFundMe campaigns or other services like nail salons, where people pre ordered their, and they prepaid for
• 23:15
  their, for their hair styling appointments.
• 23:18
  So a number of different places where people rallied around that customer.
• 23:22
  And, and so I, you know, it drove me to ask the question, why is that?
• 23:27
  And in the research, you know, we found that there's been three things and we've named them, We've named them uniquely.
• 23:35
  We found three things.
• 23:36
  Proximity, positioning, and purpose.
• 23:40
  Proximity is that, you know, you're really close to your customers, you make some adjustments to fit with what they, with what they need or what their, what their trends are.
• 23:47
  But you need to know them really well.
• 23:48
  And as a small business, you can, you can adjust quickly.
• 23:51
  Purpose is kind of, you know, not just focusing on profit, but also having some impact on the community, whatever that might be, whatever it is that, that the individual consumers that they're saying, I don't want to lose, right,
• 24:03
  they're not sitting there Saying, I don't want to lose that small business owner's profits, but there's a purpose.
• 24:07
  So maybe it's the bookstore.
• 24:08
  I don't want to lose access to books.
• 24:10
  I want on the community that they create.
• 24:13
  And then the other one, positioning is being different enough that other people can't copy what you do.
• 24:19
  And it doesn't mean you have to be the most unique thing in the world.
• 24:23
  You have to be special to your community or to the.
• 24:25
  To the customer base that you have.
• 24:27
  So each of those three things in the book, I explore examples and details of small businesses that have kind of demonstrated how to do that really well.
• 24:36
  And I also bring a little bit of my experience from the big corporate world to talk about how these are all the same set of rules and gravity that affect big businesses.
• 24:46
  Affect the small businesses, but the small ones, because of their ability to kind of leverage, purpose, or tighten their positioning, and then because of their proximity to their customers, they can play the game a little differently than the
• 25:01
  big businesses do.
• 25:02
  And so hopefully it's a book that small business owners can pick up, read, and connect with, and then.
• 25:08
  And then employ some of these tactics in their own lives, too.
• 25:12
  Okay.
• 25:14
  All right.
• 25:14
  And, Sree, if people want to reach out to you and learn more about what you're doing, learn more about the book you have coming out in September.
• 25:21
  What's the best way people can get in touch with you?
• 25:23
  Oh, you can find me at my website, the Sri Kaza.coms R I-K A Z A dot com.
• 25:32
  Okay.
• 25:32
  All right.
• 25:33
  And we will link that all in the show.
• 25:35
  Notes for everyone.
• 25:36
  Right.
• 25:36
  All right.
• 25:37
  Well, Sree, thank you so much for taking the time to be here, sharing this wisdom from your journey and the.
• 25:42
  The details about your new book coming out.
• 25:44
  We greatly appreciate it.
• 25:45
  All right.
• 25:46
  Appreciate it, Dave.
• 25:46
  Thank you.
• 25:47
  All right, that's all the time we have for now.
• 25:49
  We'll see you next time.