Welcome back to another episode of the start of therapy. Podcast. This is Ryan Rutan. Joined by who else Will Schroeder, startups dot com CEO and founder. Eso Just for context, depending on when you dig this out of your podcast archives. We are still in the middle of co vid 19 cases later. And there's another one. God, I hope that's not a thing coated 20 covert 21 degree. Uh, okay, so we're in tow Cove in 19. Um, and, uh,

we're facing a you know, the likely onset of, ah, us recession. And so we thought we would spend some time talking about what it's like to build, start up or grow, start, run a start up during a time of recession. Um, no. We talk a lot about running startups, but not everybody has is old enough to have been through one of these before. Uh, yes, it will. Tell us what that's like. I have no idea. I have no idea. Common theme were old.

You tell us being old, all right, back in my day. Um, yeah, you know. So here's there. If you've been in this long enough, you've been through at least two epics you've been through post on 11. You've been through post 2000. 17,000 A financial crisis. Skin. These are both Ah, us based recessions. Andi, There were many more before that. But what they're hadn't really been before.

Those is a startup recession. A lot of people don't think about this, but we really didn't have. Ah, startup economy in told the 19 nineties. Not in the way we have it now. Um, and so, you know, VC became particularly big. The rise of small startups. MVP's. You know, all this stuff that kind of change the game of it. Uh, so again,

if you've been doing this long enough in the startup world, you've been through at least two major recessions. Um, and maybe you've been fortunate enough or unfortunate enoughto have had toe navigate your start up through those recessions. But there's a part that people don't talk about. We all understand the part. We're going into the recession. Kind of the world melts down. Right is kind of where we are right now. And people are having to let people go and they're losing customers. And they're worried about whether the business will sustain what a lot of people don't talk to you about. You know what? I love to talk with you today, Ryan. Um is what do you do to find the opportunities in a recession? See,

Sure, we've had the opportunity in our lifetimes to actually have gone through the full cycle a few times. So we actually know that there is another side to this kind of like when the stock market implodes. There's a part where you can buy stock cheaper than you could have ever bought it before. Yeah, and do really well without outcome. So while the recession, everything leading into it is always horrible, it's not necessarily the end of days for startups. If they really understand the long kit.

Absolutely. So let's let's talk about a few of the aspects that, you know, were there obvious down sides to this, right? So we're not saying, Hey, it's a recession. Everybody rejoice. But we are saying is there are opportunities. You know, you talk about the the ability to buy stocks on the cheap, right? There's certainly a lot of that going on right now. Um, asked real estate investors who were sitting in cash in 7 4008 How much fun they had when the housing market started to collapse. And certainly a lot of opportunities there.

Right? I'm and and you know, the the analog czar are not Oneto one. But there are a lot of these kind of things that come up in the start of space as well. So let's let's talk through some of them. What do you think, Thea? What's the biggest one for you?

Well, okay, so I think part of the two is I think we can start to use a comparison. This will be helpful for folks that have been building their startups in a good economy toe. Understand some of those big hurdles that we didn't even realize we were dealing with in a good economy. Like trying to find talent, training, access, capital, etcetera, um, actually go away in ways you wouldn't think of. For example, if in heading into prior to the recession there was tons of competition for what we're doing right in this weird one fell swoop, competition goes away. I mean again, I hate to use This is an example,

but look what has happened to Amazon. I mean Amazon was already eating a lunch of its retail competitors. But overnight, not only did Amazon become more important because of its delivery infrastructure, but all of his competitors literally got shut down. Whole retail hold stop number. The option? The only. And so But let's use that, I think it's got a good, broad context to it. Sometimes the fastest waited toe run faster than your competitors is for them to stop running at all. And I think what happens is in a recession. A lot of that competition goes away. And even if it doesn't go away, ah,

lot of it gets horribly distracted, right? Obviously the some bizzare. We don't really have a lot of direct competitors at start ups dot com. We have people that kind of do some of the same things that we do, but we don't have like a one for one competitors like a uber lift kind of thing. But if we did, I would be laser focused on how well that competitions leadership was navigating that that team through through a recession, because I can tell you the folks that haven't done it for the folks that aren't good at it get absolutely throttled, which is the fastest way for us to grow outside of our competition. It means all of those customers aren't getting served. It means there's

new opportunities there. Yeah, it was interesting. I was I was without being able to kind of sit on the on the in on a board meeting or something with another company. There are some interesting indicators that you can pick up on. One of the things I was keyed in on strongly and, of course, is because, you know, I handle marketing for us. But I was watching closely marketing of not just our competitors, but other people in the same in the same space, complementary products and trying to understand, at which point they had crossed over into desperation. Marketing, Right? All started out.

So some Hey, how can we support you through cove it to 99.9% off covitz sales? And it's sad and, you know, right, And so you know, you can kind of watch this play out, And it was really interesting to see which of the company's gonna got their first, which I've never got there. Um and it was a great indicator right? Without being able to be a fly on the wall in the board room. There were still some really interesting takeaways just from watching how people were communicating even through their marketing right, Which you would think you could You could sort of disguise or mask some of the desperation or the internal struggles. But in this case, some of that came through very, very clear in the marketing messaging. It was interesting to watch.

Well, sure. I mean, think about it to like, ah, in the middle of a recession, as you're having to make really tough decisions as leadership. You know, speaking of your competitors in this case, um, and you're gonna have to lay people off. You're gonna have to lose clients, etcetera. There's nothing internally that's thinking in your mind. Let's go play offense, right? People have to curl up a no ball,

and they become so internally focussed. I mean, think about it when, When you're growing, you have an internal focus because you want to maintain culture. You want to maintain scalability and infrastructure, etcetera. But it's generally positive stuff, right? There's company announcements about how many new people you hired when it goes the other direction and you start having to let go of people, Then all of your focus becomes this quagmire of internal politicking of, you know, just bad morale. Um, it becomes, ah,

self inflicted torrent within the company that sucks all the energy and drive out of the company. It's one of things Ryan that we can make Edouard staff in the beginning of all of this is we have to stay focused. Yes, because the moment we lose focus, the ship starts going down and again, to everyone's credit, decided, incredibly focused.

Yeah, we've done a great job, I think, and get goes back to the previous episode, which we didn't listen to. Check that out. Now, Um, I think it dovetails nicely into this phone. There's some very, very similar lessons to be taken away from, but with different context. Um, having that clear communication and staying focused and giving that strong focal point was was really important for us and not trying to go to broaden out saying, Hey, let's just keep everything the same as it was like Here's the new context. Let's focus on this instead.

Now let's narrow things down. Um and I think that that's a big part of We're talking today about how to uncover these opportunities, what opportunities exist within within a recession. If you don't have that focus or said differently, all of your focus is turned inward and you're looking at those you know, the communication breakdowns or the internal strife. You're not going to see the external opportunities. And if you see him, you're not going to be position to execute on them. So you're absolutely right. The that internal communication peace. Making sure that everybody stays focused is going to be, uh, hair amount in in terms of creating the situation that allows you to capitalize on those opportunities. So eso yeah, competition being distracted is a huge one on and

also right. It's one of the few times where actually happens, right? I mean, think about it up until the recession, or up until, like a cataclysmic event like that, the last few we've been through all of your competitions focus on taking you up right there, right there, folks on taking your customers, you, sometimes your people etcetera. All of a sudden they're no longer focused on that right. It's like basically being in the middle of a boxing match in the person that you're boxing is checking their text messages because there's some

things happened, just starts listening to his corner, man.

Yeah, yeah, I mean, like right, right left. But it's It's such an interesting opportunity because at that point that team is no longer focused. They become easier to defeat. I'm not saying that, you know, it's all about winning or losing kind of thing. Well, what we do have competition and this is a unique opportunity, the middle of a recession, to capitalize on that, that that different stance. And I think as founders, if we don't do two things like I mentioned earlier,

if we don't rally our teams that we're still focused on the match, so to speak, but also start to pay extra close attention to what's happening with our competitors, to see where there might be an opportunity to there to kind of get that extra punch in, we're missing if if we don't recognize how critical this is, so money cos. Could make dramatic leaps again, going back to the Amazon example just by properly understanding how to execute at the right time, Yeah, this is it.

And it's obviously others. There's more to it than just the competition slowing down, quieting down. In my case, one of things I'm closely tracking is how are the competition spending compared to us, right? If we're looking at are paid absolutely budgets, how are they spending compared to us? Right? And so, as we saw spending drop offs that does open the door for opportunity to spend more, it does. You still need to be careful that, like you can still convert right. If it turns out the reason nobody's spending is because nobody's buying, that's a good signal to take two. Right?

So right, you do need to, you know, move with caution, right? Sometimes there's a reason that everybody else pulls back, right? Eso yet? So don't get rope a doped going back to the box analogy here and just swing away, swing away, swing away and burn all your reserves. But yeah, Do you look for these opportunities? Do do keep an eye on the competition and kind of try to evaluate from as many points as you can. Uh, what's going on around them and you know not just what is an opportunity go after the competition.

But what opportunities? They're gonna benefit you most in the long term. Certainly displacement of ah, competitor or even just a short term cash gain by picking up customers that otherwise would have been, you know, highly competitive in a paid marketing context or something along those lines. Um, you know, this could be a great opportunity for that s So what else? Well, what else Ah, you know is we

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

I want to. I want to key in on something you're saying there, which is which is noise. And I think I also heard you say the word signal. And I think this is the really important point here. Guys there there wasn't necessarily a lot less noise. In fact, in some ways there was more noise when when Cove, it really started going. All of a sudden, you're getting all these messages about Kobe policies, you know, years cancellation Every Airbnb is was like you just started getting flooded, right? So there was a ton of noise, but the noise to signal ratio got so far out of whack that on the rare occasion that something came through that looked like it wasn't Kogan related. I was like,

Oh, please, some of that, whatever that is and even care. At one point, I half jokingly posted on lengthen the next person to market something to me without using Kobe. It is the hook is going to get my money. I didn't even really care what it was. I was just Please send me something with some signal to it. Um, yeah, that's something that in something like a recession or in the crisis that we're in now, it's really, really important to think about how you convey IOL in that, that signal to noise ratio, how you can be a bit more focused in terms of what you're delivering and make sure that it is actually gonna resonate with the people that are listening to it because there is so much noise around this right now.

There's so much information of misinformation. But sometimes all it takes is just not going that same direction as everybody else. Going against the grain a little bit, just standing out a tiny bit, um, and thinking about you know, the ways in which you do that, what's going to resonate with folks now, what they actually need, right? I don't need one more reminder that this is a big disaster and that people's businesses struggling. And that, of course, you're there to help me in any way you can, as long as that means clicking on the link in your email on buying something from you. Sure,

Um, right, So I think this is a good a good time to, um, kind of dial up the empathy, Um, dial back the sales rhetoric and think about, you know, how can we actually get through to people right now and what will be meaningful for them?

Yeah, you said dial up the empathy. What do people care about right now? Okay. So ah, six months ago, let's say I was competing with lots of other messages. I was competing with a message that says we're the best place to work. I was competing with the message that says we've got the best product was competing with a message that says we have the best content, you know, follow our social whatever. Now, because my competition is dramatically more focused, Um, if they're even gonna be around at all, if I just start isolating my message to your point of signal and I start saying, Hey,

we're hiring? Yeah, by the way, maybe we're not hiring a time. They were just like a bunch of people, right? I mean, again, obviously, in a recession, things aren't going particularly well and were not necessarily hiring a ton of people. But how many people that we couldn't talk to before might be open to a conversation now, right? Right. Whether their partners, whether their clients,

whether, whatever. Um, when when the recession hit, you know, after 9 11 in the U. S. Ah, we lost clients at an epic rate, right? Was just unbelieving. Yes. Yeah, But at some point I started thinking about it. I'm like, Well,

so is our competition. And those clients have to go somewhere. In other words, they, like, you know, we were two major brands like BMW and Best Buy and stuff like that. And I thought, If we're losing clients, it means other people are losing clients. If they're losing clients, those clients are gonna have to, you know, their conversations that I have never been able to get before agency of record opportunities. Let me go call in those folks, right?

And maybe there's no opportunity today. But no one else is calling on him because every else is worried about losing all their clients. Right? There was just a bunch of counter strategies that I started to learn that when everyone's running away, there is some opportunity in running toward because nobody else is doing it right. And I think, um if we zoom out a bit and we started to really think critically about the landscape but everything that just changed and stop thinking entirely about defense in just saying okay, we gotta spend less on this or you cut the expense, etcetera. It's okay. We're gonna do all that. By all means, we're you know, we're going to circle the wagons and play defense. But then what? What is offense look like?

You know, where the new counterpunches that we can start the land that no one else is thinking off, I think for folks. Ryan, I think for folks who have never been through this before, um, it's hard to think about anything but defense right again. I don't want to underplay that. It's

watching clients leak out the door, watching your MRR numbers trends down and trend down getting closer and closer to, um, you know, kind of hitting the red in terms of the cash flows or going further into the red, depending on, you know, kind of where you are in life cycle. The company, uh, those things I'll do require focus, right? And there may be circumstances in your business that don't allow you to play as much offense, but at some point you have to turn the corner on that right. There's no version of cost cutting that grows the company. Long term, you can play defense.

Well, you want, Um at some point you gotta turn the offense back on, and I think that that's that's probably the part of this that is as much art as science is, knowing when those times are I went to get aggressive with the marketing again on their strategies around that, right. We've been deploying that for the last couple of months where you know, we cutback budgets on, Did you push a little harder Time to time and you see to the conversions hole to do, click, stay where we want him to be, Um, and this strategy around that right. But obviously, depending on what your situation is, there may be more defense required,

right? You may not be in a position where you've got any cash to spend your cash Negative. I'm in those cases. It's ah, it's tough. Um, what? What are some things you can think of? Well, I've got a couple in mind, and you touched on some of them already, Um, in terms of, you know, uh, clients going into the wind from other other competitors people you can pick up more easily.

Um, And I think there is a big difference to between, ah, big company and a start up company, too. And I think they're right for an opportunities for them, right, because a small company may be able to afford to be more nimble or take on a project that you know is so small for, ah, larger competitors that it just wouldn't be economically feasible or worthwhile. And so I think that at times where you know your your ability to grow is severely hindered by, you know, an economic recession. You need to think about what are the unique capabilities of your particular company, right? And get if you're if you're small and nimble.

Um, maybe that means being able to go after some larger clients. He wouldn't be able to get you before whose budgets are now so that small that their agencies don't work with him, right? Right. Or things like if you know, if you've got a more flexible staffing line, for example, in a big companies with the tone of fixed salary overheads don't have a lot of options, right? In terms of you know what they can do legally, how they can, you know, even just ethically, How how do we How do we ride through this? You know,

a very small company, one that's that's largely contractor driven or relies on service providers to fill in some of those things. Traditionally, the overheads, um, can leave you in a really interesting and beneficial position. So I think it's always worth turning the lens back around and saying, OK, what about this situation can be perceived is beneficial for us, right? So are we more nimble? Um, you know, or are we so conservative that we've always sat on cash? Um, which has limited our growth in the past,

but now leaves us in a cache flush position? Right. Let's talk about the case for a ton of people, but But it's an option, right? And it can happen.

Well, let's talk about the ah, you don't What are cash? Unbiased? Because I think that leads us to the next logical thing. Is the world's about to go on sale? Yes. And if you've never been in a start up when the world goes on sale. It's awesome, you know, similar to the noise issue. All the things that we're spending so much money on all of a sudden become awfully cheap. Yes, in a way that it fundamentally changes the economics of our business, forcing us toe actually rethink. What could this business be given these new economics? And I'll give you just really a life changing example that you know that I went through ah,

post 9 11 or leading up to 9 11 It's the go go nineties. It's the dot com boom, all those things. Everything was bananas expensive? Yes, everything. Everything right off the space people like I'll never forget

even hosting Do you ever were used to pay

for hosting? Oh my God. Right Hosting marketing. I mean, little everything you could come up with was crazy, expensive, like, as expensive as it's ever been. And, uh, one of the things I thought about when when everything kind of went south was Well, boy, like, where's all this stuff gonna go? In other words, right? If if,

ah if magazines at the time were selling every add up until the bust, they still have to sell ads, but now no one's gonna buy them. So I want to order and add costs these days, right? So much less right, um, or hosting our office space or, I mean, people you name it. Everything all of a sudden becomes a fraction of the price. Also definitely worth noting. Everything becomes re negotiable. Your office lead contractor

Get's a huge one. It's not just new things. You're gonna go by. It's everything.

You're already everything gets re priced. Yeah, And so what happened was like up until called, like 1 4002 If you wanted to do a start up on my knee, the world was very different. Um, not just because of the nineties, because of cost structures. We didn't have MVP's yet, you know? So there's, um But if you want to start a startup, you actually did need millions of dollars. There was no way around. You couldn't start it on your credit card, so to speak. In most cases,

because media was different, there was no performance marketing it you couldn't buy per click. You had to just by a giant spot and hope somebody collect. Um and so you didn't have nearly the freelance marketplaces. The gig economy is all these things you can tap into, but that's where it started. That's where all of this started to come to come to fruition. And as I was exiting the agency, I was starting to look at all of these different things that were coming down in cost hosting, performance, marketing all of these things. And I started to have a little bit of a light bulb moment, and I said, Well, if all the stuff is cheaper, we'll what kind of businesses could I build in the wake of everything being a fraction of the cost?

And for me, that turned into, you know, an incubator where I started to build SAS based businesses at a time when those weren't really a thing yet? Um, not at a small scale. And it was awesome. Um, I could fund a company on my credit card that would have cost me millions of dollars a year prior. I mean, think about that Delta in that opportunity. And that was, you know, that was the dawn of, like Web 2.0, on all of that

stuff, right? And I mean, it was that it was that reduction and costs that I think allowed a lot more entrance into the market, which is what really put start ups on the map in a much bigger way. Got him outside their traditional geographic boundaries, Traditional meaning it like that seven or eight years prior to that. Because, as you said, they don't go back that far into history. Not in the sense that I think of them now. And yeah, I think that was eso again. There are opportunities to be had, and that was one that was less of an opportunity. Just more of a global change that opened the door for future entrepreneurship. Right?

Had we not gone through? Ah, you know, the 9 11 disaster in the subsequent recession? Um, who knows? I mean that it is strange that is to think about that may have set startups back 78 10 years. Yeah, because if things hadn't gotten re price, the things that stayed where they were, um and it could have been cemented the system into something quite different than it is now. It may not have absolutely all it may have stayed in that position Because if you know, a couple of a couple of big breakout businesses occurred, uh, kind of minting a couple of veces, um, and consolidating that power more than it is now that could have dramatically changed the landscape permanently. Which is it's fascinating to think

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

No, Mike, wait. What's commercial office space? What's that

right now? What's what's about to happen? Commercial office space is essentially what happened post 9 11 We're all of a sudden it just never came back right Once you had post 9 11 you had the entry of ah, performance marketing particular PPC and traditional marketing never recovered from that. Just kind of took over because it became more cost effective, etcetera. Ah, we're seeing the same thing now with office space where, you know, we just cancelled our office lease. You know, we've we've had the same in the same building for 10 years. Yeah, and all of a sudden my new were opposed to work from home, but we're, like, so needed anymore.

And I've got imagine, just don't need him if we didn't need a lot of other people who were doing layoffs and you really trying to shred cost hard core, whether they need or not are gonna pay for it, that's mentioned. Retailers have been put out of

business. So on and so forth. Yeah, the commercial space is about to get very, very interesting.

Yeah, and then the banks behind them and everything else like that. But I guess my point there is, um if we go through the progression, we look at every line item on our income statement and we start to say, Could this be re negotiated or What is the world look like now versus when we bought this service? Yeah. If this was circa 2001 ish 2002 and I started to go through that same progression, I would say I would start with the media budget. How sick? Man. We're running ads on Yahoo. Think banner ads and Yahoo. You know, we're in fast company. We're you know, we're all these different journals

were on highway billboards, right? I mean, it sounds ludicrous, but that was part of a media budget. Yeah,

Yeah, let's kill all that said, let's move everything online, which is essentially what I did. But, um, we did look at all the contractors who were working with our recruiters fees that we're paying our accounting fees that we're paying. We look at everything and say everything gets free price. And the truth is everyone else's re pricing stuff, too. Your clients are re pricing you as well. Of course, if you don't adjust your stock with everybody else's stock, you're you. You're in a tough spot. And so the other side of it is you can start, say,

when things were so expensive, we kind of had a relative measure in our minds off what a cost of goods sold look like. And I'm not just being the traditional cox where you're saying, you know, here's the manufactured cost of this product, but just in general are objects like what it took to run this business. Maybe this is a way more profitable business if we're 33% down in total sales, but 50% down in total optics, Right? Right. And so I think looking at, um, the business not just today because we're trying to cut costs toe match up with what just happened, but also looking 123 years down the road in, Say, what is V two of this business model look like now that the world has changed so much?

Yeah, that's a great point. Well, I mean, we have to at some point, turn the corner and and start to be a little more forward facing right. We got to start to think longitudinal. We got to start to think down the line. Inasmuch as we're re pricing, um, you know, products and vendors and and all the things that we're using, I think there's something else that's important. We do, which is to kind of re price and maybe reset our baselines in terms of what does this business look like, right? It's not.

It's not a temporary situation, which we say, Okay, whether the storm and then, you know, re emerged two years from now, and we're just back to being the same business we were, uh, you know, like we said, with with the agency world, it changed in 2000 and early two thousands, and it never went back, right? Things didn't go back to being what they were before. That absolutely on.

So you have to consider. And what the what the long term outcomes there are. And how does the business fundamentally change? Um, over that next 234 years,

I think people have a hard time, particularly founders, but really even the entire staff understanding that not every business has a straight line trajectory, right, And fundamentally, Canterbury differences over decades, right? Is that

this is very few

do, in fact. Yeah, very few do in what I mean by that is, um especially among startups. There's nothing wrong with a start of hitting peak and then valley and then peak and in Valley. By the way, it sucks, Right? There's no version when I say nothing wrong like it's not painful. What I'm saying is, if if we're killing it, let's say we became $7 million business at our peak before the ah before Corbett and post Kobe would become a $3 million business. If our mentality continues to be, why aren't we a $7 million business anymore? We failed. That's the equivalent of saying we lost the last game.

Why? Why don't we have that same score now? You know, why are we not improving it in the truth? Is that cames over that you lost right? Let's focus on the next. That's exactly right.

Yes. What is the best version of the business? We can be in the new context, right? That's what your mindset needs to be.

Absolutely. And I think the longer we try to hold on to the conditions of the past and this is this is the biggest mistake from big companies too small, so long as we keep trying to recreate the past, which is all of retail for last 10 or 20 years, all of media for last 10 or 20 years. Oh, my goodness, way will fail. The only way that weaken truly rebuild this thing and personal is back on a growth arc is to reset the chains in, say, Okay, at this point, we're $3 million company. Let's be a bad ass $3 million company as a $3 million company. Here's what topics looks like. Here's what revenue looks like. Here's what competition looks like.

Now here's a rollover vendor costs look like. Now let's just reset the entire board right And stop talking about what happened last month or last year and focus on 100% on what the new growth plan looks like. I don't I just I don't see a lot of startups doing that. I don't see a lot of public companies doing that, Um, because especially public companies there so hung up on last year stock price for last quarter stock price. I think right now, if every startup of every founder we're just a dig deep in se Ah, what's past is past, what is present look like? I think I don't really tell me. I think the opportunities would become far more vest if people just recalibrated probably.

I think they are even even just mentally and emotionally, The way it changes, how you feel about the situation. I think that, you know, to your point, if you're just looking back at the past, if you're the guy who's just recounting that one touchdown he scored in high school, over and over and over again, just wishing that was the moment for the rest of his life. That sounds pathetic. Rate. Um, right. It's the same thing with with your start up, and it's a little bit harder to recognize. And there's probably some version of some cost fallacy at play here where you're saying,

Damn, I was so hard to get to where we were. We worked. We worked, you know, our fingers to the bone and late nights and all that we invested. We finally got to that $7 million rate, and now we're back to three. Like, how can that be? How can that be? Um, you know, there's not much you can say to really create comfort in that situation other than maybe we'll room that competitive years. It's no longer even around it all. Makes you feel better,

right? Not really. I mean, the relative measuring stick very rarely actually makes you feel any better. But, you know, it's the case that if you dwell on that right and you think about you know, how that business was in that context. Um, you know, hindsight being what it is. Of course, it was better to be a $7 million business. Um, just based on, you know,

the dip, your, uh, math of the thing, but not necessarily right. And we can probably pull some examples together of businesses that became a better business. After leaning down a bit, I think about companies like base camp. Right base camp went far broader. That wasn't a recession that caused that. But they built out a bunch of other products that turned out not to be court what their users wanted. And at some point, they paired that back, and they became a better business there. Now a Brager and financially stronger business, based on having cut back what they were doing so smaller does not necessarily mean,

um worse And and, you know, less revenue doesn't necessarily mean less. Well for the founder, I That's something else really important to think about. um, sometimes being forced to go through in these situations where you say, like, hey, how were we spending all that money? Right? Right. At $7 million right. If I was only putting, you know, 4 500 k in the bank each year based on a $79.1 way,

and I could do the same thing at a $3 million. What did actually lose, right? I didn't lose anything from a founder Well standpoint, I'm still paying. My people were still providing good service clients A. Some point, you've got to lean back and say the metrics are important in the context in which they were created and not after that, right? They don't matter anymore. If the situation changes completely. The validity of those metrics, the value of those metrics changes completely with the context,

right? Absolutely. And I gotta tell you, I think the faster that we reset our own mindset more than anything. Ah, but certainly that of the team and kind of investors. Everybody else that might result in the company. The faster re Purcell's on the right trajectory. And again, I'm gonna go back to this how we're operating in the midst of how everyone else is operating. If Ryan, if we have our shit together right now, if we stay focused, if we could stay positive to the extent that we can, if we keep everything going like in a push for a direction, even though the world is pushing back, yeah,

that makes us so much stronger because everyone else is retreating right, And that's That's the essence of what we're talking about here. Ryan. I think at what point as a business, we can determine what our future is going to be, what the president exists, like in a realistic sense and couldn't focus on nothing. But okay, let's grow from here were 100 X further ahead than everyone around us, and I think that's the core of the opportunity here. Yeah,

you know, I don't take the step further and say there's not really a wrong time to do that, all right? I think that you're forced into these situations or into that type of reflection because of external situations. But is there really a wrong time to think about your business in that way and to make sure that you're kind of constantly re contextualizing understanding the current situation. Um, you know it Certainly in my case. And I think this is true of a lot of entrepreneurs that I know we can get pretty myopic. We can put blinders on. We can go heads down and just keep plowing away. Um, and sometimes it's exactly we need to do. But oftentimes there's a cost of that. We've talked about it in the context of moving too fast. Or, if you're growing really fast, you may miss an appropriate turn or pivot simply because your heads down and focused on on a particular type of growth.

Same thing, even in a stable and mature business. Um, and maybe even more so. You don't think about the need to optimize. You don't think about the need to kind of reset baselines because it's working well enough, right? And sometimes that can. That can bring huge costs to the overall health of the business because you're not forced into into looking at some of the underlying factors that could be could be holding you back.

There's another piece to that which I always think it's fascinating. Whatever the business has to strip down and rebuild it almost never rebuilds the same way, which there is a lot to be said for that. Right? You know, I've been watching major companies like uber and Airbnb in all these folks lay off massive amounts of people, right? Let me hear these darling businesses. You know, a $1,000,000,000 business is etcetera, just laying off people in the droves, right? Unprecedented numbers, By the way, it's not their fault. I mean, literally,

the whole world shut down. But my point is there's no version where they're going to say, Look, when things get better, we're gonna hire every single one of those people back. We're gonna, you know, start up. Every single one of those initiatives were started. You know, that never happens. It never happens, because maybe that's those weren't the people you are supposed to really have to begin with, right? Maybe there's one thing that was in the cost structure. Maybe,

you know, there's there's an infinite amount of things where resetting and restarting, Yes, sometimes the healthiest thing you could do long term. And it actually allows you to build the business in a proper context, not just because there's a recession, but because now you know, uh, who you should have hired where you should have gone when you go to build a business again,

Yeah. No, it's It's a great point. I think some of that's driven by the fact that when we're making decisions in the normal course of business, right, So outside of a crisis outside of a recession, were often building kind of bottom up right towards the strategic goal. But we're building bottom up. You know, the new costs tend to come from from downstream. Um, you know, somebody needs a new machines and it needs more marketing. Spend some. You need something right? And we tend to look at those in a fairly siloed fashion, right?

We look at those and we say, Okay, what is the value of this thing that's being proposed? Does that make sense in the current context and yes, right, Two months later, that context may be totally different. And if it wasn't considered sort of in a global sense than when you're forced to look at these things in a recession in some moment of crisis, we tend to look top down, right? We tend to say like Okay, what's most important, right now. All right, Which we are rarely forced to consider. Um,

I think good leaders, dio, but I don't think that everybody always does that. When were forced to do that and look top down, I think that we puts it into that broader context. We get out of the silos, we get out of the vacuum decision making, and we say, Okay, off all the things we gotta cut a bunch of stuff we got. We have a clean a bunch of things we got to reduce spend. We got to do whatever. Um, you look at that in a more global way when you're forced into it, as opposed to, you know?

Okay, We want toe, you know, increase marketing spend by 15% next month. We don't necessarily look at how that threads through the entire organization. We're making that decision. Of course. A normal business. Um, which is an interesting, interesting insight, right? Maybe we should start to do more of that, but that could be tough to write, because you can sort of endlessly analyze, and that leads to paralysis.

But I think that in in the right context and given the appropriate attention, things Laker recession. Things like a crisis can be really healthy for the business. If nothing else, it rings that bell that says, Hey, pay attention to everything right now it's Let's go back through it. Let's reset. Let's figure out how we move forward from here. That's a wrap for this episode of the start of therapy podcast. This is Ryan Rutan on behalf of my partner, Will Schroeder and all the start ups dot com family thanking you for joining us, and we hope you'll continue to join us. Be sure to subscribe rate and comment on iTunes or wherever you love to listen. To start up there, you can find all of our episodes at start ups dot com slash podcast.

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