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Why Most DTC Brands Overhire (And How to Stay Lean) · Scalability School

• 0:05
  Andrew Foxwell: Alright, and.
• 0:09
  Brad Ploch: Is it? Episode? 4. Yes.
• 0:11
  Zach Stuck: Yeah, yeah.
• 0:14
  Andrew Foxwell: Welcome to episode, 4 of the Scalability School. Podcast I'm Andrew Foxwell with Brad and Zach. What's up guys.
• 0:22
  Brad Ploch: Living the dream. I think I said it last time I should value coming.
• 0:24
  Zach Stuck: So, yeah, we need better lines for this.
• 0:26
  Andrew Foxwell: The dream. The dream is living currently. We are here today to talk about organizational structure, of growing, of a growing brand. And really, what we're going to get into is talking about. You know what is building a lean team look like? Who do you hire? And where do agencies and contractors fit into this.
• 0:45
  Andrew Foxwell: You know, trying to give you actionable ideas of you know really what you need to operate at a high level, but in a lean way, and and what that looks like, and and our experience with that
• 0:58
  Andrew Foxwell: so so let's go ahead and get started and talking about, you know, what does it look like?
• 1:05
  Andrew Foxwell: So what does lean mean? 1st of all, like Brad? What does that actually even mean in in your opinion in terms of
• 1:12
  Andrew Foxwell: numbers, and how you define that.
• 1:15
  Brad Ploch: Yeah, I probably won't have a great like percentage of revenue number here, Zach, you might have a better kind of breakdown for that. But I think in general this is, this has kind of changed a lot over the last
• 1:27
  Brad Ploch: several years of like how people look at it. And I think you know, with the way that things are changing with AI. I think people are kind of coming to the terms that they can be leaner and get a lot more done for their dollar. So, to give you kind of a internal example, we started an internal brand last year, and with 3 people effectively paying ourselves nothing. We went from 0 to 1.4 million dollars in revenue.
• 1:52
  Brad Ploch: And we had basically next to 0 Opex. Obviously, most people have to pay themselves something. But that's just a quick example of that, Zach. Do you use like a percentage as a benchmark for how you roll that.
• 2:05
  Zach Stuck: Yeah. So we try to stay below 10%, like from an opex perspective, which obviously includes a lot more than just team. But opex at like 10% or less, I think, is like a healthy, healthy spot for for Dtc brands to be in.
• 2:18
  Zach Stuck: I think the biggest thing there, too. I was just talking with Jacob, my head of finance, and we were discussing, like the difference between opex between our our internal brands, and how
• 2:31
  Zach Stuck: one of our brands has 70% margin. One of our brands has 85% margin. And it's just obviously that that delta is 15%, which is a massive piece, right? So having, you know, you can have higher opex if your margins better. So I think that's 1 big thing like when we're saying, Hey, 10%, or even when we're talking about revenue per employee, you have to really take into consideration, like where your margin is for your product for the brand for the stuff that you're selling.
• 2:59
  Brad Ploch: Yeah, I think generally, people kind of float this number of like a million dollars per full time. Employee. Does that like resonate with you or.
• 3:09
  Zach Stuck: So that actually feels like, slightly under what I think, like the goal should be cause, that would assume.
• 3:15
  Zach Stuck: I mean, okay, I'm going to kind of overshoot here a little bit. But stateside domestic employees, that's what a lot of these d 2 c brands are. Kind of like. The core teams are run by. Obviously, there's an opportunity to have a huge offshore team. We utilize that as well. But usually the core hires. Core people, you know, are going to be domestic.
• 3:33
  Zach Stuck: Assuming that you're hiring people that aren't just junior fresh out of college. Assuming that you're not hiring like the craziest, craziest top tier person. Let's just assume it's a hundred k.
• 3:43
  Zach Stuck: for a salary for someone on your team. Maybe one of the 1st hires you make is kind of in right in that 100 K range. Maybe it's a little high. But I mean, if you're doing a million a month, that's 10% already without any software expenses and other things that get baked into opex. So we originally had a target of like 3 million in revenue annually per employee. Now we try to target like 5 to 6, which that's very aggressive. I've talked to, you know, a lot of like the big 9 figure brands
• 4:11
  Zach Stuck: and they don't hit those numbers. Some of them do, but most don't even come close to those numbers. So I mean, I think, as far as like when we're talking about the lean side of things, it's possible to hit 5 million in revenue per full time employee. But
• 4:27
  Zach Stuck: that's also like a rare case. So I think what'll be fun today is to get into like, how can you stay lean? How do you actually get to that threshold like, what does it take to get there? How do you you know? How do you hire for that? What is the process in the hiring? Who do you hire all that good stuff. So
• 4:44
  Zach Stuck: again. One thing that I will will surface. We are not at these numbers right now, so we've you know spring has been a little rough for Dtc. And we've dropped kind of slightly above that 10% opex on like a couple of our brands. And then the 5 million revenue per employees, not like right now per month, but annualized, is how we kind of think about it. So obviously big. Q. 4 is what kind of what everyone expects, so that that helps offset it quite a bit. So
• 5:09
  Zach Stuck: for what it's worth like not to like fake flex. Those are not our numbers right now, but the goal is that by the end of the year that's kind of where we land.
• 5:16
  Andrew Foxwell: So in looking at this. You know, talking about staying lean and kind of getting to what you were saying. So let's just talk about
• 5:24
  Andrew Foxwell: investigations that you guys have done right in in running brands and looking at other brands.
• 5:30
  Andrew Foxwell: What have you seen in opex for those that are saying that they're lean, that they're not like what mistakes are being made or what are they not doing that you guys potentially are doing? Or, Zach, you're in the process of doing to become more lean. That you feel like a lot of people overlook.
• 5:47
  Andrew Foxwell: Yeah.
• 5:47
  Zach Stuck: Brad. I don't know if you wanna I mean I can kind of hit on it from our side. From what we've seen like at the agency at Homestead.
• 5:54
  Zach Stuck: there's usually like very, very heavy operation, no hires. And like product hires so for what it's worth, I mean our brands right now. We just hired our 1st product person. Otherwise it was just like the founders of the brands myself, my business partners
• 6:11
  Zach Stuck: running like product. So it's like concepting products, sourcing products, getting samples, finalizing that and then handing off like the Po and forecasting to like the Ops and finance team. I've seen huge product teams for some brands. And I understand, like apparel is a big category where, yeah, you might need designers. And you might need more people. But
• 6:33
  Zach Stuck: that is like the one area product and Ops, that I feel like is always over indexed and has been historically. When we look at these brands. It's rarely oh, they have a huge creative team like that's almost never the case, Brad, do you feel like you've seen the same.
• 6:46
  Brad Ploch: Yeah, about the same. I can think of a couple of examples from like years past. I mean, kind of like into, I mean, Covid is obviously a great example of this, where people were scaling really fast, and they weren't sure how to keep up with everything. Inventory is one thing. But even just like team structures. Another piece of this. And we had people who just like they felt like in order to keep up, they needed to put, they need to throw more people at it, instead of like figuring out what were the systems in order to like? Follow along
• 7:11
  Brad Ploch: along with this. And it's tough when you're going fast, like you feel like there's this pressure to try to keep up. But I think, as I kind of reflect on
• 7:19
  Brad Ploch: those couple of scenarios. I think it yeah, in the exact same places that you're suggesting. But it probably it's also probably important to reflect as a brand with like
• 7:27
  Brad Ploch: what actually makes my brand grow to your point on apparel, like, if if it's
• 7:33
  Brad Ploch: coming out with new product releases is like a function of how you grow, because that's what actually builds like, there's tons of like launch based brands. Right?
• 7:40
  Brad Ploch: Have a couple.
• 7:41
  Brad Ploch: Yeah, exactly like you need people in the product department. Maybe you don't need as many people on it somewhere else. So I think that's important to consider. But yeah, several times we've seen people just like growing fast, and they're just like shit. We need to throw people at this. And that's the solve.
• 7:56
  Zach Stuck: That's the number. One thing I feel like. That's where
• 7:59
  Zach Stuck: I find myself even doing that. We just hired a a couple of people and not to like, take, take away from that. But we were planning to hire even more. We brought in a few people. And I'm like, Okay, we gotta put pause on this like, we don't need this many people. This is just like a inefficiency lack of systems thing than it is actually. Oh, we don't have enough resources internally. So
• 8:18
  Zach Stuck: totally. I think that's where a lot of brands start to make mistakes versus just like looking internally versus.
• 8:24
  Zach Stuck: Yeah, saying, you need more help. Need more people.
• 8:26
  Andrew Foxwell: So let's talk about the let's talk about systems as it relates to to sort of like the lean operation of this. I think that there's a lot of different ways. People think about
• 8:35
  Andrew Foxwell: systems in the organization of okay. You know, I know I need to systematize myself as the founder in in these areas, in terms of product vision, in terms of marketing, in terms of you know, whatever it might be.
• 8:50
  Andrew Foxwell: what are. And then the other thing, I think with systems a lot of times is
• 8:55
  Andrew Foxwell: people feel like
• 8:57
  Andrew Foxwell: if they establish a system, it needs to be followed all the time, and there's no room necessarily for letting that that person think entrepreneurially in terms of the innovation around that system. So the reason, I say all this is
• 9:11
  Andrew Foxwell: what systems that are in place in lean brands have helped them. Stay lean or in Zach. Your example, or you know, Brad, yours, too, like
• 9:20
  Andrew Foxwell: that has helped. You guys stay lean. That is something that's actually useful.
• 9:24
  Andrew Foxwell: That are like that are pieces that you're like, I'm really glad we built that system because that is working well, and it allows us to see up, you know, make it easier, and it allows us to not have to hire someone and we've helped other people figure this out in our agency, and they're doing it well, too.
• 9:40
  Brad Ploch: Yeah, I probably I won't start on the system side. But there's there's a couple of things that that stand out to me. I think one of it. One of those is like.
• 9:47
  Brad Ploch: I think it's generally like a mindset. You just like operating lean is just kind of something that I think people get. You have to kind of develop that mindset and get comfortable with the idea of doing that. And then, I think, kind of adjacent to that maybe a little bit more closely related to the system piece is like, I think it's as a founder. It's important to know
• 10:06
  Brad Ploch: what makes the brand grow to the point that we were just making about drop based brands right? Like it is coming up with the next product. And that's if if that was your sauce as the founder you were coming up with those things like, it's important to know, like what success looks like in that role. So that way, you know, like, okay, I can continue to do this, or you know what success looks like. And you can hire for that. Specifically. So, not quite, not quite system things, Zach. Maybe you have more system, specific stuff. But that's kind of what came to mind, as you're saying that Andrew.
• 10:33
  Zach Stuck: What makes the brand grow is such a good way to look at it, Brad, like, I feel like, that's what people aren't.
• 10:38
  Zach Stuck: This is where you know us as marketing. People were like creative team hire more creative people invest in that like, if you're running ads and you want your business to grow, and as are your are, your platform to growing? What feeds ads that? So I think that's a great way to look at it. It could be drops, it could be product releases. It could be product expansion. Right? I mean, I think we're seeing that now, more than ever, like even
• 11:03
  Zach Stuck: like the brands that everyone looks up to the ridges of the world. Whatever product expansion, everyone's starting to do it right. So I think that's kind of where you need to start and think about that first, st what leads to growth
• 11:15
  Zach Stuck: as far as like systems go. I mean.
• 11:19
  Zach Stuck: we are a hundred percent responsible for messing this up for what it's worth. But this is something that we're doing right now. So every single employee at Easy Street as of like this week next week is getting a document that basically is their role, their responsibility, and their their output per month.
• 11:36
  Zach Stuck: This is what you are responsible for. This is what you do. Just abundance of clarity we just hired. I don't even know 5, 6 people now in the last, like 2 months. And that just broke every system that we had. Internally, it's because we were not doing this. We had like 8 people. We just went up to 14. Now, it's like every. There's kind of repetitive rules. Now, we have like 2 head of growths. We only had one before.
• 12:02
  Zach Stuck: So this is. This is the biggest thing is having a role, responsibilities and output document. That is abundance of clarity for every single person in your company. I think that is like where you have to start. Who does what? Who's responsible for what? And then putting this publicly like right now, we build all this stuff in notion.
• 12:19
  Zach Stuck: so that everyone in the company will be able to see this. You can go look at any other person that you report to, or that reports to you. You can see that. So I think starting there is like the the surface level. You have to. You have to have that. And if you do not have that
• 12:33
  Zach Stuck: start there, because I think that will start to define, like even the gaps of other work that needs to be done. Or if you need to hire more people.
• 12:41
  Andrew Foxwell: Yeah. So so let's talk about. Let's talk about this. I think that traditionally, you know, you're you're lean, you're you're getting things going. Things are going well, you're growing, and it's you're the founder, and you are. You know, the 1st hire. Traditionally, you see, a founder making is a head of growth.
• 12:57
  Andrew Foxwell: Right? And you guys can tell me if you if you've seen this as well. But like typically, it's alright bringing in ahead growth. And it seems to be that the expectations for ahead of, like the head of growth role is, you're gonna be this absolute rock star that's gonna rocket ship us. And that's and there's so much responsibility that's placed on that head of growth.
• 13:17
  Andrew Foxwell: And there's a whole bunch of ways to think about
• 13:21
  Andrew Foxwell: where that goes wrong because I've seen it right? And typically it is around expectations and defining roles. But have there been any before we get to to commenting on what you said, Zack, have there been any examples that you guys have seen of
• 13:34
  Andrew Foxwell: the 1st hire or early hires that were made for lean teams that actually were better. And you wish you would have done it, or you, you know, or that you feel like we're really optimized like an example would be like
• 13:47
  Andrew Foxwell: instead of hiring ahead of growth. What if you got the mark? What if you got the the founder, like a really great executive assistant, for example, right like, if you freed up more of their time away from admin, you know, like what I'm just trying to think about, like, what are the routes you've seen here from lean teams that are really successful.
• 14:05
  Zach Stuck: There's kind of 2 ways to think about it from my perspective. And it's based on the founder or founders. And the CEO, are you a product person and a brand person? Or are you a growth person? So myself, being a growth person?
• 14:17
  Zach Stuck: We hire. I hired an operations person first.st So this is someone to talk with manufacturers to work on, you know, purchase orders to get basic kind of very light accounting financial stuff put together. That is the direction. If you are a growth minded person. And you know, ads, and you know how to sell stuff through through Facebook. And you kind of know what you're doing in the email and stuff like that.
• 14:39
  Zach Stuck: That's the 1st hire that you bring on. If you are the opposite of that, if you're an Ops product, person, head of growth, right? So I think that's like the distinguished path that I think is like the best route is go hire the person for the thing that A you hate doing. B, you're not good at doing
• 14:55
  Zach Stuck: like, see? They can probably figure stuff out that you weren't doing that can even make the business run smoother and better, which is less stress for you. So you can focus on the thing that's important. So I think, like you have to distinguish those that kind of which one you are, and this is where, like co-founders are great, right like, if you can bring in a co-founder. That is the opposite skill set as you. You might not even need to hire someone right away.
• 15:16
  Zach Stuck: because one might be a growth person. One might be a product person. So I'll stop there, Brad, I'll kind of let you take it from there.
• 15:22
  Brad Ploch: Yeah, it's interesting. I maybe this is just a reflection of our clients. But a lot of them don't hire head of growth first.st And I mean, we definitely have people where we have a handful of clients where they have somebody who's leading marketing, generally speaking, but a lot of times like we are kind of the quasi head of growth. And I say that that way, because, like, it's hard as an agency to be that for a brand, and in the way that, like a full time person can be for the brand.
• 15:51
  Brad Ploch: So I think, to Zack's point, that's probably generally a reflection of the fact that the brands either don't have the. They either started organically. And now they're looking to ads as a way of expanding. So like they, the founder is a product, slash, organic
• 16:06
  Brad Ploch: kind of person, and they don't have the the ad sauce. Maybe. So that that's kind of where where we've seen. So it's interesting that we generally don't see. Head of growth is like a 1st thing, which is maybe just kind of a reflection of like where we fit in currently, from a positioning standpoint.
• 16:21
  Zach Stuck: I think that's normal, Brad, I think that's normal. I think if if we look at even just like the earlier days of Homestead, when we would have clients that would come
• 16:27
  Zach Stuck: with us, that we're doing $10,000 in revenue per month like just getting started. They never would have that right? 10,000 all the way up to even a quarter 1 million a month in revenue. I think it was usually like the founder, and then they would maybe have an Ops person or a product person that they'd bring in, and they'd be looking for an agency or a freelancer to kind of help them because they could not afford the head of Growth person. Yet that's usually, I think, what it comes down to more than anything else is. Can you afford that. So like.
• 16:55
  Zach Stuck: yeah.
• 16:55
  Zach Stuck: for us, we actually hired like a Junior Ops person. That was the 1st time I couldn't hire. I couldn't afford to hire like a head of operations. So I think, like, that's the normal path is like, kind of where you start. So I don't know if we want to go from there what the next level is. But I think that's pretty standard. It's kind of defining. Are you a product person? Are you growth person? Who is the 1st person to help you
• 17:16
  Zach Stuck: by that.
• 17:17
  Andrew Foxwell: Yeah, yeah, definitely. I think you know, it's I think it's really what I'm trying to point out is in from what I've seen. And it's good to hear that it's not necessarily what you guys have seen as well in terms of where do people go? And it's really about finding the skill set and the opposite skill set, which is great.
• 17:32
  Andrew Foxwell: So if you're looking at, you know, who do you hire talk, let's talk about defining roles and these expectations.
• 17:39
  Andrew Foxwell: How did you go about this process Zach, in terms of defining these for people, and that you wanted it done? And and then I have a whole bunch of questions after that, or I have some of my own thoughts about how to to do this as well. But I'd be.
• 17:54
  Zach Stuck: Yeah. So again, 1st person I hired her name is Mary. She's still with us today. On the brand side. She came in. She actually had, like a Google Ads background. Wanted a job at the agency, and I was like, you seem awesome. Why don't you help me with the sock thing. So Mary's incredible shout out to her, She's our chief of staff now. She's incredible. Anyways, Mary had no e-com background at all. 0. So I think, like, there's something to be said about bringing in good people that can solve problems like that was the one thing that she showed to me like in her interviews, and just like just her attitude
• 18:24
  Zach Stuck: having someone that you can hire. That's a more junior hire out of the gate
• 18:27
  Zach Stuck: that's excited about what you're building and is down to solve problems, I think, is like, probably the most important thing. If they're on the growth side, or if they're on the upside. So that would be the 1st thing that I would tell anyone to go do is find that person, because likely, if they are a problem solver. They will grow with your company as you kind of come up with new problems as as things progress. But so that's where we started. And then, because we are.
• 18:52
  Zach Stuck: you know, I'm a growth person myself, and I have obviously had access to homestead I didn't necessarily need like a growth team right away. But we did need like design help. So packaging whatever ship boxes all the way to like website, landing pages, more ads, stuff like that. So I actually brought in like a designer pretty early.
• 19:14
  Zach Stuck: and that was my second hire was a designer. So that is like a really important piece, I think, like getting your brand established, and having, like the visual stuff nailed down and having someone that can kind of work across all of those things so just like a generalist designer, that kind of gets Ecom.
• 19:28
  Zach Stuck: This could be offshore. This could be domestic. Ours is a domestic hire, I think, is like the next thing. So like, so you kind of have like, do you need a growth person that's junior, that can help you solve problems? You need an Ops person that's Junior, that can help you solve problems. Then we get into like, how do we produce more of what we need, which usually it's design. So that was our next hire. And then I can kind of go down like the list here. So we started with that. And then it was basically just like what's the biggest problem in the business.
• 19:53
  Brad Ploch: That's what I was gonna ask is like, how did you determine even who those people were? It's a bit you're kind of explaining like it was problem related. So I'm interested to know more about that, too.
• 20:01
  Zach Stuck: Yeah. So I mean, we got to. There were 2 employees, and we got to. We did a million in our 1st year for hollow which is great. Some brands definitely don't hit that in their 1st year we were excited about that number. But
• 20:15
  Zach Stuck: that kind of got us that stage. The next year we wanted to push up, and we pushed up to 8 million, but I knew I would need more help on the growth side. I would need more help with the website, shopify apps, random stuff. I would need more Cx help. So we brought in 3 people. We brought in customer service team we brought in an actual head of growth, and then we brought in a head of Ecom
• 20:34
  Zach Stuck: and head of Ecom is kind of just this random role that's really hard to define. It's basically someone that can just like help with shopify apps, help with updates to the website help update inventory in the website, someone that can maybe plug in details between like email and the website, potentially even look over retention.
• 20:53
  Zach Stuck: So yeah, we brought in this incredible person, Chad Ross, who's basically had an E-com background. He was like a brand owner himself. He was looking to kind of go internal at a brand next. And I was like, Okay, cool. You've seen all the little details that like it takes to run a brand which is just very hard to teach.
• 21:09
  Zach Stuck: You can help me kind of plug all those gaps. So that was my, that was the next hire. And then the head of growth was really just someone to help me get more out of the day to day of just like running the ad account. Plugin, in Ads. And Ads manager
• 21:20
  Zach Stuck: thinking about landing pages we need to make. So that was kind of the core team of 5, and that got us to 8 million in revenue. So I think, like thinking about what the problem is. What's the number one thing that's causing you pain, or that's slowing down your your business from growing and just trying to pick a person to like assign to that problem is the best way to think about it. And that's kind of what we did.
• 21:43
  Andrew Foxwell: Yeah, it's interesting, you know, when I so one of the things that I I think about when talking about people and talking about people Ops, so much is
• 21:50
  Andrew Foxwell: we, as employers often think about defining the role of yes, like these are the problems we need solved. And we need help, and I think that's super helpful. I think that a big one is unlocking.
• 22:03
  Andrew Foxwell: you know, sort of the the understanding from the employee side as well, so that you are positioning them to do like the best work that they can. And I think a lot of it goes to.
• 22:14
  Andrew Foxwell: How am I
• 22:16
  Andrew Foxwell: ensuring that we? There's a there's a you know, a feedback loop between the employee and myself, or I'm getting an idea early on, as I'm setting expectations and roles
• 22:27
  Andrew Foxwell: or expectations for these roles. With this person in terms of what do they want to be doing? Because ultimately like.
• 22:35
  Andrew Foxwell: And I think you've done a good job of this, Zach. Obviously, people are still with you, and they stay around for a long time, but I think a lot of people struggle with. I'm bringing this person in, and I I hand them this like Manila Folder, you know, metaphorically, of a whole bunch of shit that they need to solve. And and there's never a discussion of like, what do you want to be doing in a year like, you know?
• 22:56
  Andrew Foxwell: what would make you interested in this. What would make you feel great about the work that you're doing, because ultimately
• 23:03
  Andrew Foxwell: you become in the business of making them happier to make sure their position. Because if they can be doing the best work that's gonna make you more money, right? So
• 23:12
  Andrew Foxwell: I mean, how do you guys think about that like, do you? I mean, how have you considered that and how have you done that, Brad? Or seen that done in other other companies that you've worked with. I just think that's a really important thing that we don't consider enough as the employers.
• 23:29
  Brad Ploch: Yeah, I think I mean, that's a great way to end. That point is like we don't consider enough is like, I think I just had to force myself to reflect and make make sure. I'm asking the question when we're interviewing people is like, Where do you see yourself going? Because if it's like
• 23:43
  Brad Ploch: in a year from now, you have a very different expectation of what you think you should be doing versus what I think you should be doing is like, let's not even get started. And so I think, just like quite literally asking that question, and maybe it is a year from now 3 years from now, and you kind of help paint that picture. It doesn't mean that it won't change over time. But I think just asking that question is, is something that I've done a better job of recently. But like the 1st 3 years, they didn't. I probably never asked that question. I just didn't, didn't know it was important. So.
• 24:11
  Zach Stuck: Yeah, I think I think, having
• 24:14
  Zach Stuck: like a roadmap of where someone can go in the company as you're as you're growing. I mean, that's kind of part of your job, as the founder, especially in the brand side, is to like, Sell the vision. Where are we headed with this thing? So, taking the time
• 24:26
  Zach Stuck: as the owner to just like, sit down and think that through. Okay, if I hire a Junior Ops person, what could this person become one day if things keep going to plan right. It's your, you know, operations assistant, and then your head of Ops and your Vp. Of Ops, and then maybe your coo one day, right? So I think, trying to like paint that picture of like what it could look like if they stay within the company and keep progressing
• 24:44
  Zach Stuck: while telling them, hey, there might be someone that ends up coming in, that is, has more experience, because that's what we need at the company at the stage that we're at that will actually fill a role that you were hoping to fill, that. Maybe you know, maybe we have to pivot, or maybe you replace them at 1 point. But
• 24:59
  Zach Stuck: that's a hard, that's a hard conversation to have, but I think that trying to lay out that like timeline of like, okay, every year you could potentially progress like one stage in the company, even if you have 3 employees. Now, just kind of lay it out as we grow the business. This is kind of how much money we can afford for a team cost. Here's how we think about that. I mean, you definitely have to be very, very intentional. I think that's the that's the thing is when you're the founder, when you're running a business. Sometimes it's very hard to like. Pull back
• 25:24
  Zach Stuck: and be intentional about that.
• 25:26
  Zach Stuck: The good. The benefit of it is like having Homestead homestead was kind of my like playground to learn this, and like make a bunch of mistakes. You can go talk to like any of the early team at Homestead. I probably didn't do the perfect job of like managing expectations with this kind of thing.
• 25:41
  Zach Stuck: tried to make it work. But I think this time around, we've kind of learned. Okay, you need to set that trajectory for people. You need to kind of help them understand from a compensation standpoint per role and what that could look like.
• 25:53
  Zach Stuck: And then the biggest thing that's really helping us. We're doing quarterly reviews now. So we brought in a fractional Hr person. He's helped me roll out a system where we do quarterly reviews. You basically punch in expectations for the quarter set goals for the quarter by employee. We review it at the end of the quarter. And then that's kind of how we talk about how they're progressing, what they're not doing. And I think doing that, even if you have a small team like me as the founder some days. I'm like, I don't want to do this. I don't want to like
• 26:17
  Zach Stuck: do a bunch of like reviews. I know how people are doing. And there's this pressing problem for the day that I would rather focus on.
• 26:23
  Zach Stuck: But I learned every single time that I slow down and have those conversations with the team, and actually understand where their head's at and try to reset expectations. Sometimes it's like the progress that gets made on that is, fixes way bigger problems in the future that we could have had. So I think it's just more about the intentionality and taking the time to do that.
• 26:38
  Andrew Foxwell: Yeah, I think. And that's I think that's so true. Right? People don't spend a lot of time doing it. And I think when you're running at the pace that a lot of lean teams are. I think that this doesn't feel like a lean move. Necessarily right? It's like I don't have the time to sit down and go through this and and like we, we've got to do these other 5 things, but or 50 things. But but the reality is, I think that if you sit down and I've seen this so many times is why I bring it up, which is like, if you sit down and align expectations like we talked about
• 27:06
  Andrew Foxwell: and also align incentives. Right like this is what it looks like. If you do this well from a financial standpoint, or from a career progression standpoint, or from a vacation standpoint, or whatever like, you know, that has to be aligned. And and I think we don't necessarily. And I I see it happening a lot where people aren't taking enough time to actually just listen to what that person wants to be doing
• 27:29
  Andrew Foxwell: and what they find valuable, and what really fills them up.
• 27:32
  Andrew Foxwell: And also they might not be taking the time, because every day they come into work, and they're just slammed with a whole bunch of shit. They have to do so, I think, giving them that time to go through, even when you're lean and you're operating. You're like, really need this person to be good? Taking the time to say like, Look, take an hour, take 2Â h, and go. Think about this and come back to me about what what you want to be changing in the way that we're operating, you know, and and that can mean a lot of different things, but I think that
• 27:59
  Andrew Foxwell: you will get more out of that employee by doing this, even though it feels like it's anti to the the lean way that you're operating things. And I also think you know that what you you raise an interesting point about like
• 28:13
  Andrew Foxwell: sharing information with these employees like. I think it's important to share certain financial information with them. But like this is how you're contributing to the overall mission. I don't think that necessarily they have to contribute, or you have to like share every you know the entire P. And L with them about like how it works out. But I do think that it's important to be like, look like, if we are here in a year. This means that we'll be doing X number of dollars. And like that's really meaningful. And that means a whole bunch of other cool stuff for you. That means XY, and Z, right? So sort of
• 28:43
  Andrew Foxwell: I don't know what you guys think about sharing that kind of information. But I think that's really important as you start to to look at these hires. And the way that you're you're trying to find people. I also would be curious what you think about like, I generally feel that finding people with experience for certain roles is fantastic, and in other places it's people like Mary, where it's like, you're better in Ecom. If you find someone that doesn't know Ecom. But.
• 29:08
  Andrew Foxwell: Hustler.
• 29:09
  Andrew Foxwell: I find that tends to be because I have done some recruiting, you know. Last year we hired 4 heads of growth and 6 or 4 Cmos, and like 6 heads of growth, essentially.
• 29:19
  Andrew Foxwell: and and the people that were the bet, like, I think, that are gonna do the best, and that are doing the best like a year in or 6 months in are the people like kind of had Ecom. But they're just like absolute hustlers, and they just won't take. No, you know what I mean, and they can be 60 years old. They could be 30 like it's it kind of is all over the place, honestly, and I think that that's interesting. So I'd be curious. What you guys think about that.
• 29:43
  Zach Stuck: Yeah, I think that how open you are about your financials, I mean, I will share a lesson, a mistake that I made. I was very open in Homestead early days of our financials of kind of where we were at, and we started to set up a profit share component for the team, and I mean, honestly like it worked great
• 30:02
  Zach Stuck: for a period of time, and everyone made a bunch of money, and it was awesome. And then we had a downturn, and we needed to hire more people, and things got tough, and I regretted being so open about things.
• 30:14
  Zach Stuck: and then there's then there's the opposite side of that when things are going really well, where you're like, well, shit, you know, team members are seeing numbers, and you're like, I don't know if I want them seen how much profit the business is doing and things like that. So I think the biggest thing about that side of it the like when things are going well side of it.
• 30:30
  Zach Stuck: It's just having a lot of education with your team about what that actually means. Right? So you know what is? What does it actually mean to do? $100,000 a month in profit like, what does that actually mean for the business? And you know that doesn't mean that owner A or owner B. Is taking $100,000 a month home every month. Very, very likely a lot of that is staying in the business, if not, all of that is staying in the business, or a big portion is going to taxes. And all these other things right? So I think, taking the time to educate your team about that, especially if you're going to be open about financials.
• 30:59
  Zach Stuck: This is something that we do internally. So for what it's worth, we for hollow, we have a profit share component any employee that's like a senior employee.
• 31:08
  Zach Stuck: In the company. And we share this with everyone in the company has an opportunity to get part of the profit share. We have a 10% pool. So basically 10% of the profits goes into this profit share component. But we have a monthly minimum profit that we have to hit to do a quarterly distribution
• 31:22
  Zach Stuck: for the team to do this. q. 1 was a little rocky for us. We basically caused a bunch of problems in Q 4. By scaling too hard and ran out of inventory, and we didn't hit our profit goals that we needed to hit to do to do the quarterly distribution for q 1 this year, and my team is like frustrated for sure. They're like pissed off about it. They're like, Damn it! Like we've worked so hard in q 1. And we still didn't get it. But they understand why we didn't do that. They understand that, hey? We missed the profit per month.
• 31:49
  Zach Stuck: That doesn't mean that Zach took all the rest of it. Home, or the other owners of the businesses took this this much home. It means that we had to reinvest that money back into buying more inventory to fix the problem that caused the whole issue. Why, we couldn't do it in the 1st place. So I think, being open about financials, I think, depending on who you are and what your perspective is.
• 32:10
  Zach Stuck: you just have to know, like the recourse of it. You just have to know that team's gonna have their own perspective on it, different numbers being different things to different people. There's just a lot of education that goes into it. If you're going to go there.
• 32:20
  Andrew Foxwell: I mean when I when I talk about finances with our team. Usually it's in the back of my Bentley.
• 32:26
  Brad Ploch: Yeah.
• 32:26
  Andrew Foxwell: Right like that's that's the best place to do it for me. You know.
• 32:31
  Brad Ploch: You rented Lambo.
• 32:32
  Andrew Foxwell: Yeah, it's just people they. It's like, I'm an everyman, you know.
• 32:37
  Brad Ploch: Of course.
• 32:38
  Andrew Foxwell: Which is ultimately what I'm going for the okay. So so we're talking about. We've talked about lean teams we've talked about, you know.
• 32:44
  Andrew Foxwell: looking at how much revenue per employee. We've talked about what it looks like in terms of sort of building out the initial team on a lean side. Let's talk about agencies and and contractors a little bit. So.
• 32:57
  Andrew Foxwell: How? Of course, we all have a lot of opinions about how to do this. How do the best lean teams
• 33:07
  Andrew Foxwell: develop the 1st relationships with a contractor or an agency, or both? Brad.
• 33:12
  Brad Ploch: Yeah, I'm curious what Zach's going to say. But I think about like our client relationships. And like, I think it's important that if you're going to go. The agency, I mean. This is true of contractors or agencies, or really hiring somebody in general, but I think particularly agencies kind of held to the standards like you're supposed to be the expert as the agency right? But as a founder you kind of need to know, like
• 33:32
  Brad Ploch: how to measure the success of that person or that team, and so like you have to know, going into it like what that kind of looks like, or at least have an idea, or
• 33:42
  Brad Ploch: you need to like, tell the agency that, and help like, have that have them explain that to you, which probably is a little bit of a weird position to be in. You probably want you probably want to know it going in what I tell basically everybody what I find myself saying this in in like new client. I guess pitches recently is like when you go to hire an agency, you're hiring their systems and the shared knowledge. And so my goal as an agency in these pitches is to say, here are those things.
• 34:09
  Brad Ploch: and it's up to you to make a decision whether you believe I can fulfill on that promise or not, or and or if that's the thing that you need in this moment,
• 34:17
  Brad Ploch: is kind of like how I've been going about that.
• 34:20
  Brad Ploch: Zach, I'm curious. Yeah, what do you think.
• 34:24
  Zach Stuck: This is one of those topics of many thoughts about, but I mean.
• 34:29
  Zach Stuck: I think that the I'm just going to kind of like derail this for a second, but I think the number one issue when it comes to hiring agencies and when to hire agencies is just not setting expectations properly from the brand side from your side. What are your expectations of the brand for the agency? And as the agency setting those expectations with the brand.
• 34:48
  Zach Stuck: this is where 99% of the issues between brand and agency problems come from is just the expectation, setting or lack thereof. So that is, that is the one thing that I feel like I mean, even today Homestead will definitely botch this from time to time. I'm sure we will. I'm sure we have in the last like month, potentially. But that is one thing that we've hammered, hammered, hammered into our team is like we need to set expectations properly, so that they know
• 35:12
  Zach Stuck: if that they're not happy, we can go back to the expectations that we said the very beginning sign the contract that said, this is how much work we're doing. This is how fast we're going to respond to messages. Are we gonna respond to calls on the weekends or not? All of these fun things that we we do as agency owners and and working in an agency. So I mean, I think that's that's that's the key piece is like starting. There is is the kind of like the whatever the bedrock, the glue of the relationship between brand and agency.
• 35:40
  Zach Stuck: anyways, that I just wanted to add that sentiment.
• 35:42
  Andrew Foxwell: Yeah, I mean, I think I think on that note. The the biggest
• 35:47
  Andrew Foxwell: key to that is where I've seen a lot of issues is agent client is growing fast.
• 35:56
  Andrew Foxwell: They're going really fast on a whole bunch of stuff, or late lately it's been they were growing fast. It has slowed. They don't know what to do. They need someone.
• 36:09
  Andrew Foxwell: and where things get really messy is. If the brand hasn't done the work to understand
• 36:19
  Andrew Foxwell: Opec Opec's contribution margin like their actual numbers. Yeah. And so I know.
• 36:26
  Zach Stuck: Bizarre.
• 36:26
  Andrew Foxwell: You as the agency, you know. You may have to do that work
• 36:31
  Andrew Foxwell: to to start things on the right path. Right, Brad, I mean. I know you're you know. You obviously contribute a lot of discussions about this in the in the founders community.
• 36:40
  Andrew Foxwell: But like, I think that's 1
• 36:42
  Andrew Foxwell: of the teams that go so so like
• 36:45
  Andrew Foxwell: let's make sure like. Let's say that that's solved. Let's say that you do know your numbers going through. I agree with you. That expectation sack is is a huge one, you know, like this is what we hope happens, and you know all of that.
• 36:58
  Andrew Foxwell: What are the
• 37:00
  Andrew Foxwell: like it does it make sense to is an agency the best hire out of the gates? Necessarily, if you're scaling in your opinion, or do you guys think it's better at this point to hire a outsource creative strategist first.st if you have a decent handle on the media buying or like, what do you think is the leanest choice the 98% lean
• 37:25
  Andrew Foxwell: choice.
• 37:27
  Zach Stuck: Yeah, I mean back to back to Brad's initial point, or what we were talking about earlier, which is like, what is the what is the driver of growth?
• 37:34
  Zach Stuck: What is the driver of growth and like? What is the actual problem in the business that's blocking you from growing more, being more profitable, or whatever that is, when you hire, that is who you hire. Right? So I think, depending on who you are and what your number. One problem is, that's who you make the decision around. So like us. Right now, for example.
• 37:53
  Zach Stuck: we had a we have a head of performance, creative.
• 37:56
  Zach Stuck: one individual who's just getting rocked with like, just a ton of work just absolutely bombarded. And we're like, okay, we need to start hiring more people. We need to hire more creative strategists. We need to hire more editors. We need more output. So we went and hired. We have currently 2 creative agencies that we hired in the last 30 days that we brought in to help offset that problem and basically like amplify it while we get our shit together internally as a brand.
• 38:18
  Zach Stuck: This is a very good way for brands to hire agencies for and for all I know, one of these, one of these agencies is going to work out great. We signed 3 month contracts minimum with them. One's going to work out great. We're going to keep them like great, fantastic. I think that
• 38:30
  Zach Stuck: it needs to be a resource or a constraint before you go hire someone versus just hiring someone, because you think you need to hire someone. I think that like starting at that at that problem is actually like the best way to think about it. And that's where to me, like some of the service offerings, and one of the big ones that we offer at Homestead, and I know Brad offers it at work
• 38:51
  Zach Stuck: is the retention email and SMS offering.
• 38:54
  Zach Stuck: There's a lot of brands that are small that like don't need an email and SMS agency. But if you're a brand doing 10 million a year in revenue, and you're just kind of winging email like, there's a very good chance that, like an email and SMS agency, will drive incremental profits, not even just revenue, but profit for your business. So I think, like thinking at the stage that you're at, and what the real problem is is when you should bring in the right resource, right partner.
• 39:17
  Andrew Foxwell: Welcome to our podcast where we all can we convince all of you that you should have? We should have all started an email agency first.st
• 39:25
  Zach Stuck: Yeah, pretty much.
• 39:26
  Brad Ploch: I think it's this is a little bit off topic, but I think it's really interesting, like, just this kind of brings it back to the top. So we definitely have to spend too much time on this. But like, when you were going through the roles that you hired for you heard like very different things like it wasn't like there was overlapping stuff, which is a little bit different from the agency experience. Right? Like we're doing media buying. It's media buying, maybe a growth lead and then a creative strategist, and they all have some kind of crossover. But I just thought that that was like an interesting distinction, not to totally derail us here, but like you went and got head of growth, cx. And head of Ecom
• 39:55
  Brad Ploch: among a couple of other things, and those are just like very different things. So anyways, I just thought that was interesting.
• 40:01
  Zach Stuck: I think it's back to the point of like what was my problem at the time? Right.
• 40:04
  Brad Ploch: Right.
• 40:05
  Zach Stuck: Thing that Zack is doing that's like wasting his time and driving me nuts. It's that thing, or what is the problem. So I think hiring agencies, hiring teams should always go back to that.
• 40:16
  Zach Stuck: What? What is the one thing that could solve the next stage of of your business, which is, you know, for us going from 8 to 20. Right?
• 40:23
  Zach Stuck: What do we need more of? We needed more growth. We needed more creative. We needed more focus on other channels besides Meta. So we brought in a head of growth, and we brought in a head of performance. Creative like those are the 2 things I knew, like, okay, we got to feel more ads. And we need to go figure out how to run Google ads, we need to figure out how to run Youtube ads, we need to maybe mess around with apple oven. Right? So it's like, I can't do all those things. And now it's time to bring in that head of growth.
• 40:46
  Zach Stuck: Oh, hey! The head of growth is like maxing out our internal designer and homesteads. Video, you know, capacity of what we can get as a client of our own agency. Like, let's go get some more production of creative. Okay, go get ahead of performance creative. Now. So
• 40:59
  Zach Stuck: yeah, that that's kind of how I've thought about it. At least, so pick the top.
• 41:03
  Zach Stuck: Pick the person to solve the problem.
• 41:05
  Brad Ploch: Totally yeah. And I think maybe bringing it back to like what we started with is like the idea of staying lean like we just been talking about like hiring more and more and more so like, how do we? How do we bring this back to the point at the top is like, how do you know when?
• 41:19
  Brad Ploch: you need to? Maybe consider letting go of an agency, or a contractor, or even a team member? Because it's you're kind of starting to get beyond your skis a little bit, and what you anticipated to pay? I'm just yeah like, is there? Is there something that you use to to think about that because it yeah, I mean, it's easy to feel like in the moment you maybe need to throw a cumin at it.
• 41:38
  Zach Stuck: Yep.
• 41:39
  Brad Ploch: So how are you reflecting on that.
• 41:40
  Zach Stuck: So I mean, I think the biggest thing is like you can't tie every single hire internally to revenue or profit. It's very hard to do right. Hiring an Ops person not necessarily is going to drive you more revenue or profit. They might make you more efficient and help you cut like, hey? What's the cost of shipping or hiring a different 3 pl. Or these other things which can make you more money at the end of the day. So I think, still tying that it might be like saving money versus like making more so like, are they going to save you more money? Are they going to make you more money and kind of like making that distinct decision?
• 42:08
  Zach Stuck: But then, like choosing when to let go of someone, when to hire someone being in the agency space for whatever it's been 7 years now at Homestead, or I think it's 6 years at Homestead. We've had so many brands that. Let us go because they're like, we can't afford this service anymore. This doesn't make sense because we can't afford it.
• 42:26
  Zach Stuck: So what we started building internally is like an Roi calculator of an agency, or of a freelancer of whoever right can. If I hire this agency for 7 grand a month, or 10 grand a month, or whatever it ends up being, what is the amount of revenue that they need to drive for us an incremental contribution margin, an incremental profit that they need to drive for us, for me to justify the cost of paying them 7 or 10 grand a month, or whatever it is.
• 42:50
  Zach Stuck: If you don't do that math, and then you get upset at the agency because of their fee is high. It's very, very hard for the agency to have any like recourse or anything to say back. So I think, like starting with what is my problem? Who do I need to go hire? Is it a freelancer. Is it an agency as a full time person? But then, thinking about.
• 43:09
  Zach Stuck: where's the Roi? I have to get out of this relationship and starting there, I think, is like no one does it. No one does this, but like, if you take the time to do it, we've cut contractors very fast, like
• 43:22
  Zach Stuck: I won't name names or putting anybody out there, but we hired a contractor in the last like 45 days brought them in. They were supposed to help on like the creative side of the business, and they came in 30 days in not meeting expectations, and we canceled contract, and we knew our contract well enough that
• 43:37
  Zach Stuck: we paid them for a month and a half, and we were amicably left, and they only did like a 30 days of work, and it worked out for both of us, and it was so be it. But like we knew the Roi that we had to get out of this person, and we knew that if we kept paying for that same bad Roi it wasn't going to back out. So I think, knowing those numbers is just so crucial to making smart decisions. So I'll pause there.
• 44:00
  Andrew Foxwell: Yeah, I mean, I think, looking at it, this is sort of one of those other things about. I think that's that's thematic across what we're speaking about here, which is
• 44:08
  Andrew Foxwell: taking the time to go through and do that Roi calculation and taking the time to go through and think about that which feels like when you're running at 100 miles an hour as 7 to 9. Figure Brand. Not a lean decision, but it actually is one that can be that requires you to to be really thoughtful, and it will save you money and make decisions a lot easier, and allow you to be more lean, like slowing down to speed up. Almost, you know.
• 44:37
  Zach Stuck: Is literally a phrase that we've used internally for the last like 60 days. So intentionality is. I write it every Monday morning. Intentionality, intentionality, intentionality. You can't be a lean brand, and you can't run lean without being intentional about it. So I think like that. If there's any summary of this. It's that it takes time to slow down. It takes time to like assess things. It takes time to do the work that you don't want to do.
• 45:00
  Zach Stuck: but if you do that you can set an roi in your agencies. You can hire the right person at the right time versus just like winging it and trying to solve problems with more people like that is how you make these decisions is being intentional.
• 45:14
  Andrew Foxwell: Yeah, I agree. This episode is brought to you by Openai.
• 45:18
  Zach Stuck: Thanks for our sponsor.
• 45:21
  Andrew Foxwell: Yeah, that can make you even leaner with AI but actually, that's probably true.
• 45:30
  Andrew Foxwell: the yeah. So, Brad, any closing thoughts.
• 45:33
  Brad Ploch: No, honestly, I think it. No, I don't have anything additional to add. I think it's just important to keep it at the forefront of like how you're looking at this. If you're not sure if your opex is too high or not, you can send me your P. And L. And I'm happy to look at it and tell you I'll be very honest if you're spending too much on stuff. It may or may not have had to do that several times in my in my last few years of of existence. So no, I'm happy to look at it if you're willing to send it.
• 45:58
  Andrew Foxwell: Yeah, I think that's awesome. And you can also send it to me. And I'll send it to Brad, since he doesn't get his email publicly and send us anything with questions. Of course, Andrew at Foxwell. Digital com, I'm happy to hear from you. But yeah, I mean, and if you're dealing with this. If you're thinking about this, you're 7 to 9, figure Brand, and you're thinking about, how do I get more lean? These are hard times. There's a whole bunch of stuff happening. Shoot thoughts across right? We're here for you. And and we really mean that we want to
• 46:22
  Andrew Foxwell: figure out how to help and that's something that's in, you know, sort of the servant mentality of what we're trying to do here right? Because we we didn't get to where we are, but without asking a bunch of questions to so many other like hundreds of people. So
• 46:36
  Andrew Foxwell: we're all in this together. So, gentlemen, always good to be with you. Thank you.
• 46:41
  Brad Ploch: Thanks, Wendy, I'll see.