The Nathan Barry Show

Codie: I mean, I remember I was with my chief economist back when I was at First Trust. We were giving a presentation to a bunch of investors. Somebody in the audience asked him, it was 2008 or 2009. They were like which stock should I buy? He was like yes. Any stock. Pick a stock.

Attention is power, and creators harness it better than anyone else. But they're not using that attention to create the biggest impact possible and are vastly under monetized.

Hi, I'm Rachel Rodgers. My co-host, Nathan Barry, and I believe you can be a billion dollar creator. Sound impossible? Over the last ten years, we followed each other on our own quest to build billion dollar companies. We've studied creators and seen how entrepreneurs build traditional audiences and use them as a launching pad for a massive business. It got us thinking, if it can happen for them, it can happen for us. If it can happen for us, then why not you?

Billion Dollar Creator is a show teaching creators how to capture attention and turn it into real wealth. We will deep dive into brands, celebrities, and entrepreneurs who have done it before and show you how you can apply it to your business as an everyday creator.

Join us weekly as we learn from both the wild successes and the missed opportunities, the grand gestures and the integral mistakes. Through that, help you become an expert at building your audience on your journey as a billion dollar creator.

Nathan: Okay, so Codie, you've built a pretty epic content business, and I want to start talking about that of how, as a creator, you've actually staffed your team and built the logistics and flywheels behind the scenes to create the amount of content that you do.

Codie: Well, it didn't start out that way. It started out with one person. I ran the business not as a business, just as a hobby. It was a blog for about a year plus. Then I got my first hire, that first hire’s name was Nikki. Shout out Nikki. She basically was a jack of all trades, did everything and helped me figure out was this actually a business? Should we sell something? Or was this just a newsletter that we were going to grow called Contrarian Thinking?

Rachel: Can I pause you for a second? How were you making money during this time?

Codie: Zero. Oh, like otherwise?

Rachel: Yeah.

Codie: I was running a private equity fund with three other partners.

Rachel: Okay. You still, you had another business basically?

Codie: Yeah.

Rachel: Because I feel like people always have that question of how are you doing this for free? You know?

Codie: I think it's the best way to do it, honestly. It's really hard to ask for people's attention and their money up front. You’ve got to choose between the two.

Nathan: Okay, that's interesting because we talked about, when we talk about flywheels in these like workshops and everything we teach where a flywheel can only have one goal. If you try to have two goals, and most people are trying to grow an audience and make money from the same flywheel, and it never starts spinning well.

Rachel: You know what's so interesting? I tell my audience all the time we're not building an audience right now. Like when you're starting at like what I call H1, which is the beginner stage, that we're not building an audience. We're getting money. So you have professional skills. What can you sell? You only need like five clients to be able to pay your bills. Okay, now we have some money and your bills are paid. Now we'll go build an audience next.

So I always teach them money first, audience second because they have professional skills where they can sell something for five grand, ten grand, right, with those skills. That was my path as a lawyer too. I was just get this money, pay the bills, then build the audience.

Codie: Yeah, there's so many ways to cut the apple. I have this saying with my husband, Chris. Apparently, this is a real thing where I'm American, but what's that called? Where there's it's raining cats and dogs? What's the word for that?

Nathan: Oh.

Codie: It’s not an analogy.

Rachel: Euphemism?

Codie: Euphemism. There's apparently a thing where some people can never get them right. So I'll go tigers and bananas. They say what the fuck’s wrong with you? Are you a Russian agent?

Rachel: That’s so much more interesting.

Codie: The second that I think of a euphemism, I forget entirely what the verbiage is. So just that'll be fun. But I think you can do it six ways from sideways. The only thing that I would say up front is you need to be really clear on your goal.

So, for me, I knew that I wanted to have trust more than anything up front. So because I wanted trust I said let's do like a year of free, nothing. So I think a lot of people now, somebody was just texting me. Who's your agent to get on all these podcasts? I'm like I don’t have an agent to get on podcasts. Like that doesn't work. You can't proactively reach out to Joe Rogan go sup bro, I want to get on. You can't reach out to big people and do that.

They see your body of work. They think that it's interesting and would serve their audience, and they will reach out to you. It is the attract as opposed to chase model. So the one downside, I think, to using your audience to make money in the beginning is your audience immediately loses a tiny bit of trust because you're asking for something from them. Now what I like about your model is if you're like get your five super fans to pay you 5,000 to 10,000 for real value that you can 10x as opposed to try to get your entire audience to buy a $99 XYZ thing.

Rachel: Yeah, I hate starting that way because then it's like three people buy it. Now you’ve got to deliver this thing for three people. You're still okay, how am I going to pay my bills? So now you’ve got to launch something else. Then you start to erode trust when you're just launching things nonstop. Every day it's a new thing.

Codie: That's right.

Rachel: Like it's services. Deliver services, get paid to deliver services. You can build trust that way because there's a relationship. Also in the beginning like I can't serve a lot of clients intensely with the amount of time that I have. But in the beginning, I had a lot more time than money. So I could really go deep. That was your model too with ConvertKit. Like recruiting those big money and spending time with them.

Nathan: We spent so much time for like a $50 a month account. Okay, so the hourly wage on this is actually probably like $3.50, but it compounded from there.

Rachel: Yes.

Nathan: I think what you're both getting at is that it doesn't matter too much if you go audience first or product or revenue first. But you have to go one or the other.

Rachel: Yes.

Nathan: If you say like I want both simultaneously then you're not going to get past that cold start problem.

Codie: Yeah, I think you're exactly right. Also, if you haven't read 1000 True Fans by Kevin Kelly, critical for creators. Because you think about it, what a lot of people do is you don't have faith in yourself when you're first starting out charging for anything on the internet. So you undercharge pretty much categorically, but your 1,001st purchasers have the highest purchasing intent and the highest level of trust.

So because of that, they are the ones that you should actually be charging more to. You know who they are. They already like you. Because of that, they will pay. What a lot of people do is they get those 1,001st people to buy something for $50. Then they've already committed to you. Now you've also set a price range for yourself that is that $50 creator.

Rachel: Exactly. You're probably over delivering for $50.

Codie: Yeah, maybe. The split side of that is I live in Austin, Texas, which is like the land of coaches of spirituality and shit that isn't real. So I do think that you should have real skills if you're going to charge people for things. So slight asterisk, you know.

Rachel: I remember one of my first coaches. I was trying to grow my law practice. She was like well, at least you have something real to sell. She was like the people with the crystals, God bless them. That’s what she said.

Codie: They don't need God. They’ve got crystals.

Rachel: Trust me. There are very successful spiritual coaches that clearly people are getting value. So. But yes, it is. It's funny sometimes when it's feels so esoteric. It's what is the tangible thing? Whereas being a lawyer, it's like no one wants to hire you but they have to.

Codie: I want good attorneys. I bought a company yesterday. I was in a nine hour back and forth trying to acquire this company. Having a good attorney when you need one is the best. So you guys can have a high value upon your time.

Rachel: Okay. So I just wanted to add in a euphemism because I actually remember.

Codie: Cats and tigers. Yeah, tell me.

Rachel: Chase two rabbits catch none is what we're talking about with the audience versus money, right? Pick one. But now we can change it to like chase two rabbits. No, chase two horses, chase two tigers.

Codie: Also catch none.

Rachel: Exactly.

Nathan: And catch both of them. Wait, no.

Rachel: That’s wrong.

Codie: Welcome to my brain.

Nathan: Okay. So building, what I think is interesting if we decide we're choosing audience first or product first. In this case, you chose audience first. That's what you're going to do because you're making money somewhere else. A lot of people might say hey, I can do audience first because I'm using my tangible skills. In my case, as a designer freelancing to that's paying the bills. Now, over here, I can just focus on audience growth.

But what I'm curious about is as you get to this bigger scale, right. If you want to reduce the amount of content that's going to get, like I imagine Joe Rogan still scrolls his phone on Instagram reels like a bunch of other people do. So probably a lot of guests come from people that show up in that feed. So I'm curious what the team looks like that you ended up putting together in order to produce the body of work that you do.

Codie: Yeah, there's basically two levels we had. So after we went with one person, the next level is the generalist level. That's the same in every business. First, you hire generalists. Well, first you do everything, then you hire generalists, then you hire specialists, then you do nothing and let the specialists replace the generalists. That's how every business I've ever run typically goes.

So that second level was we had a team of generalists. One of them was like a content head at the time. One of them was in charge of the actual operations of the business. One of them was in charge of the product. So at that point, I think we had a community.

So basically, for all intents and purposes, head of content, head of product, and head of operations. Then I would say we did that for about a year and a half. Under those people, we started to hire underneath them. I always hire my highest two first and let the highest two hire those underneath them. Every time I haven't done that, I've regretted it. So I would never do that again.

Today, it's a pretty big team. So today there's a head of content. We have individuals who specialize in each platform. We have a team for YouTube. You guys met Lindsay. She's on that team. We have a team, a head of product team that runs our community, our courses, also some of the tech companies that we've bought and integrated into the business. Then we have a finance team. Then we have a head of portfolio.

The head of portfolio deals with a bunch of businesses we've bought, and also starting to think about how can we integrate those better into the content? Because we actually don't do that well enough. Then we have a head of ops and head of marketing. They're the same person at this time.

Nathan: Yeah. The head of portfolio is interesting. Because if you think about the pushback that you get on your content. Because as people, when you put something out on the internet, people are like that's not true. You're like no, that's the 45 second version of what's actually going on. So. But that's interesting of the more you can integrate those businesses and be on location at businesses that you own and tell those stories, the more people be like oh okay. She does actually own all of those businesses. Here's how it works.

Rachel: Or people just say that you're lying about.

Codie: That I own nothing, and I was a secretary at Goldman. Yeah, for sure.

Rachel: Well, you're a woman. So you must be a secretary. What else could you be?

Codie: That’s lots of fun. I know.

Nathan: It's so frustrating.

Codie: Yeah, it used to frustrate me. Now, it doesn't bother me that much. The only thing that would bother me is if real humans thought that. If some dude in his underwear in his basement is talking shit, I don't care that much. Typically, what happens is what I've realized is the people that you will trigger the most are those who did the thing you are doing now successfully and failed. So you are a mirror to their biggest failures.

So I tried to, in the beginning, I was a little mean. I was like I hope you own as much real estate in real life as I do in your head mother fucker. Then otherwise, I've got a course to sell you. Then I started having some empathy because I think the truth of the matter is business is hard. It is so hard. Small business is hard. Failing is awful. Also, truthfully, I think men have it hard in a lot of ways. Like seeing a woman who's young and successful relatively saying it's not that hard. I did all these things. My portfolio is so much bigger than you. I think that triggers a lot of men.

Rachel: Well, that's their problem though. They should deal with that.

Codie: Yeah.

Rachel: They should explore why am I triggered? Then they should go do whatever they need to do to handle that.

Codie: Yeah. I agree. I think, I was a journalist before I did all this. So I can have a lot of empathy for somebody without taking on their crap, their stuff. So I see it. What's wild is I've met a few of these people in real life, and they're very different.

So when you meet people on Twitter, and you can also clout chase a lot by punching up and then that gets addictive. It's happened to you. It's happening to pretty much all of our friends. Sam Parr who you had on the other day. We had a friend, Sam Parr and I had a mutual friend that we almost, Sam Parr and I almost both independently looked at buying his business, you would know who this is, who did an awful acquisition process.

He just didn't run it very well. He's a nice guy. I think he'll be successful long term. He went from being somebody we knew to really going hard at Sam about a couple of things on the internet. So it's so common as to be laughable.

But I do think anytime there's that little bit of feedback, I tell the team, because my team immediately goes fuck those guys. I'm like no, how can we be better? Yeah. How could we? Like one time they took a video of ours, they chopped it up to change it, and they cut out the end where we said all these numbers, and we go but by the way, we would never do that deal. Here's why. Because we don't actually believe these numbers.

So they took the whole video and chopped the end. So of course, we don't look good. I said well maybe we should think what would happen if somebody only watched the first 30 seconds of our video? So how can we like internalize some of this. That's something I'm thinking about a lot more.

My last little tangent on this is I think that it's fucking criminal that we have normalized in this country that it is better for me as an investor to take your money at two and 20, which is the rates, and invest it and make me rich and you 10% as opposed to teach you how to do it yourself, take no percentage over the long term, and you can go and grow.

We on one hand say yeah, fuck Harvard, fuck universities. They're so expensive. They don't teach us anything. Then on the other hand, we say no, please don't teach us things. Please don't have people pay to teach us things. Instead, take my money and give me 10%. So to all those people, I just say let's look at the math. You guys are into math. The math shows that categorically.

Rachel: Sometimes they're not into math, and that’s the problem.

Codie: Twitter math. Categorically, you are better off if you can learn to fish than if you get handed a fish. This shouldn't be rocket science. Yet for some reason, it is.

Nathan: Yeah. I think there's going to be one part of the message that resonates with different people. When like it could be said a bunch of different ways.

Codie: Yeah.

Nathan: It finally resonates when it comes from someone else.

Rachel: Someone they identify with or they they're just ready to hear it now.

Nathan: Yeah. But also some of the criticism that a lot of content creators get is oh you just make money teaching. A bunch of people said that to me. I'm sure that both of you have gotten that a ton. Or another side is oh, this course is so expensive, or this content is so expensive. I'm like most people are paying $30,000 a year or more to go to college for some entirely bullshit class.

Rachel: Where the professor doesn't even care and doesn't have the experience that we have.

Codie: Then at the end, they buy the t-shirt. It's like what?

Rachel: Exactly. Then don't get a job.

Nathan: No content creator is also coming back later and is like hey, could you contribute to the alumni fund?

Rachel: Correct. I'm going to start doing that on Twitter. I've got to stop being so much of a troll. That’s funny. That’s funny.

Nathan: Oh, that’s good. But one thing that I think is interesting is as we go from a lot of these creator businesses focused on content and education, which are amazing businesses. You're doing a lot of fantastic work shifting to look, I want to own these businesses. I want to take this attention into a business that I own. I want to go two different directions. First, I want to hear a little more about how you're doing that in your business. Then let's riff on some ideas of how like we see people long term.

Codie: Yeah, love it. Well, we've bought. So historically, I wasn't a creator until three years ago. I was in private equity and finance.

Nathan: Which is wild, like the trajectory of audience and everything else.

Codie: Right. Yeah, it's been cool. I've had a lot of fun. I found something that I just think is really fun. I ran funds, and we had our last business in Latin America was one and a half billion dollars in assets under management. That was a company called First Trust. Then we grew a growth equity private equity fund at a company called, at the time it was Cresco Capital then it became Entourage Effect to 160-ish million dollars in private equity assets. So I got lucky and worked hard in order to have some success in prior degrees like you did in law too.

Rachel: One thing I want to mention too. That I think there is an art to learning how to work hard. There's like almost maybe there's a graph where it's you’ve got to like start out slow and get better at it. I think if you've gone to law school, you have to work your ass off. In private equity, I imagine you work long hours. You have to work your ass off.

So it's there's certain industries where you have to work. You work long hours. You hustle a lot. In law, I cannot make a mistake. I will lose my license with certain mistakes, especially preventable mistakes, like it's not a thing. So if you're up all night, you're up all night. That's what you have to do. So starting a business becomes a little bit easier because you know how to work hard.

I think that's something we don't talk about enough. Some people have never done that. Not working hard just in general. Like a lot of people put in long hours. I'm not saying that. But I think there's something too like learning how to hustle, learning how to have a high level of responsibility for the work that you're putting out. All of that, I think, helps you as an entrepreneur where it doesn't feel, it's not insurmountable because you're used to that intensely hard work and long hours and high responsibility.

Codie: Yeah, I always chuckle with my team when they're like oh, we've got a tough week. There's a lot of stuff going on. I'm like we’re making TikToks on the internet. Nobody's dying. Everybody's fine. Nobody should be complaining at this company. Compared to what investment banking was, everybody's doing okay. But I think you're right. I sort of think about it as you have this compounding ability to withstand pain over time.

Rachel: Yes.

Nathan: Resilience.

Rachel: That's exactly what I'm speaking to. Exactly.

Codie: So the more pain that you touch means you have a compound inability to withstand it. Sort of like how do people become immune to certain types of poisons? How do vaccines work theoretically? They work because you get small doses of them continuously over time. It doesn't feel comfortable. You usually get sick, but at some point that compounding exposure leads to immunity. So I think that's the same thing with hard work. If you continuously expose yourself to a small amount of hard work and you ramp it up then at some point you become immune to it.

Rachel: Yeah. It becomes easy. Because I remember the first semester of law school. I literally was in the bathroom crying in between classes. Like I was I don't know. I like graduated summa cum laude, and then went to law school was like I'm an idiot. I'm halfway through the semester. I don't know what the hell this guy's talking about.

Codie: Are you even working if you haven’t cried?

Rachel: What is mens rea? I still don't understand mens rea.

Codie: I totally agree. So now I think you're talking about the business ecosystem. So how we started this out is I had all these boring businesses that I have invested in over the years while I was in finance. So we just stacked a portfolio just like you would with stocks.

Rachel: What caused you to buy the first one?

Codie: Like misery in finance generally. I really wanted to leave at some point. I had been at four firms inside of like eight years or something like that, nine. I thought it was the company each time or it was the role or it was the sector. Actually, I just realized I'm unemployable. I don't want to work at any of these finance companies.

So the only way out, because I didn't even think about startups. I didn't have any clever idea was I know how to buy businesses. This is what we do. I know how to analyze them. So I'll just start buying a few of them. So I did that until I sort of by accident grew this portfolio big enough where it started to replace my salary. Then I thought okay well, that's when I can put up my F U card if at any point I can't take it anymore.

Rachel: Yes. Well, see this is what I love about what you teach is like you teach about buying cash flowing businesses instead of businesses that make no money for 20 years. One day, they’ll be valued at a lot. That's so overly glorified, in my opinion. Then the businesses that are highly profitable, it’s like that's not good enough. It's so bizarre. I'm like okay, so money, you don't like money. That’s what you're saying.

Nathan: I do think that's shifting right now. With interest rates being as high as they are, there's a lot of people who are now investing for cash flow. Or they're saying oh, I'm not going to do that particular deal because I can buy corporate debt or do private money lending at these rates. So I think it's shifting with interest rates in the moment.

Codie: Yeah. I think we were part of the normalization of boring businesses, as I termed them, and cash flowing businesses and pushing back on the establishment. Saying no, I don't think you have to sleep on your sofa for five years in order to be successful long term. I think that is a way, and I commend the people who will do that. But I think you can also have cash flowing businesses with a normalized life that is also a healthy life to some degree.

The fact that this had so much pushback that I got on this is actually fascinating from a psychological society perspective of we've turned like American exceptionalism and American hard work into we must have the highest ROI with the most amount of pain in order to be successful, aka unicorn startups and billions of dollars raised.

Well, that's coming to roost right now. We're going to see a bunch of these founders. we're going to be able to pick up a ton of talent. So if you're a creator right now and you have audience to hire.

Nathan: It’s a great time to hire.

Codie: It’s a great time to find founders to insert into your ecosystem. We're hiring right now for the first company we’ll ever have. Really, I bought the company. It's not a big company. We're going to incubate it with a couple million dollars. I'm on a CEO search right now to find the person who's going to run this. This will be try to be my ConvertKit, my big play in my space.

The talent that we're getting is incredible because people are wait, boring businesses, an audience of five million, 100 million views a month. This is intriguing. Because what most people don't realize is 40 cents of every dollar spent of VC money goes to PPC. It goes to Amazon, Facebook, and ads by in large.

Rachel: Pay per click for those who.

Codie: Exactly. So if that's the case and you can replace that with a high intention audience, man that's really intriguing.

Rachel: Exactly. I completely agree. I always hated the hyper focus on startups because I felt left out of that conversation because I never could have gotten in the game if that was the only option. The only option was play this game for five years. Like I couldn't even do internships in college unless they would pay me. You know what I mean?

Like just I was not in a position to not work. I always had to make money since I was 14 years old. So it was not an option to do something where I didn't get paid for long periods of time. I think that's true of my audience as well. I think it's true of a lot of people of color.

So I like that we're shifting and getting more of a focus on how can you make money right away today, even just buying a business that's already cash flowing, that already has customers. You don't have to start it from scratch. So I like that we're looking at what is the easier way instead of always finding the hardest way. It doesn't have to be painful. I also was like having kids from six months into my entrepreneurial journey. So I also was never in a place where I could just only work, you know?

Codie: Yeah, that's a level of respect.

Rachel: Well, you just learn how to be. We were talking about this last night. You learn how to be hyper efficient with the hours you have. You can waste nothing.

Codie: Yeah actually, we employ, we didn't do it on purpose. But oddly in a lot of our businesses and in our media team, lots of moms, lots of single moms. They don't fuck around.

Rachel: Let me tell you something. My sister's a single mom. Like run errands with her and you're going to have everything done in 20 minutes. That woman is a machine.

Codie: Plus they kind of, to be grossly stereotypical, the other day I could see one of my members of my finance team getting a little heated. I'm emotionally incompetent. So I'm like what are you doing man?

Rachel: Are you an Aquarius?

Codie: I don't even know. I'm a Virgo. But anyway, the single mom was great because she looked at him. She like sort of placed her hand on it. She was super empathetic. She's like talk to me about. Like I can see you're feeling a certain way about this. I was oh, those nicely executed.

Nathan: You must deal with four year olds.

Codie: Exactly.

Rachel: She must be negotiating with toddlers all the time.

Codie: Yeah, yeah.

Nathan: Yeah, there's a lot of good skills that come from that.

Rachel: Yeah, parenting, I feel like it matures you in a way. I feel like that about you, Nathan. You're so young. But I feel like part of why you're so amazing is because you had kids young, and you have a high level of responsibility for a long period of time.

Codie: He's got major dad vibes too.

Rachel: Yeah, like cool dad vibes.

Nathan: There you go. There you go.

Codie: You also, interestingly I think, we've talked about it before because I've reached out when like certain people I felt like we're trolling you or whatever. I got you. What do you need, you know?

Rachel: First of all, I love that.

Codie: Oh, yeah, I believe in choosing sides.

Rachel: It's important. It's important. I got dragged when I was a young lawyer, and all of these people who are in my community were messaging me and saying hey, you should back off. They have like their blogs come up right away in Google. I was like really y’all? They're shh, go be quiet. I'm like have you met me?

Nathan: That is the last way to get you to be quiet. That has the opposite effect.

Rachel: I wasn't as Rachel as I am now. But I was finding my way. But that was one of those moments where I was like no, I don't believe in being quiet in this moment. I don't care what the cost is. So, fuck that. I have shit to say. That's actually how I found my audience. I found my people through that because they identified with me. But yes. I mean, there's so much dragging. Then when people stay quiet when you're being dragged and you're like oh, okay. So we're not friends? You're just going to watch me be dragged and say nothing, huh?

Codie: Yeah, I don't like that. Although now it's, I think, we've all realized you don't feed the trolls.

Rachel: Yeah, now it's a different thing.

Nathan: Yeah, we were talking about one circumstance that a thread was just going off, and I just didn't reply to a single thing. We were texting about and talking behind the scenes. In that case, I think was just the right call.

Codie: I think it was totally the right call.

Rachel: So I want listeners to know is that Nathan loves haters. He's very entertained by them. I'm always talking about Nathan is low petty. I enjoy that actually.

Codie: Well, I always liked that idea of chips is fuel. Yeah I do think sometimes I think my haters won. Lots of views from those guys. They're my biggest fans. They're just on there repeat, repeat, pissed off.

Nathan: Well because you know the replies on like LinkedIn, Twitter, all these channels, it just boosts the content.

Rachel: Yeah.

Codie: It's 100% true.

Rachel: They have to watch it a couple of times to like formulate their argument, you know what I mean? So that actually helps. Then they're can you believe this, and sharing it with people. It’s like you're actually helping me. You're doing exactly what I wanted to happen from this content.

Codie: But I think there's something there. Even if you don't have a big audience yet, eventually if you get one, you'll have to deal with this. Probably now you think it's like whatever, who cares? I'll deal with that when I get it. But if you can use whatever chips have been stacked against you to date, you’ve talked about that in your book. I think that's really powerful and underutilized.

So many people now go victim mentality and thus, I am forever going to be the victim. That just yes, you can be. Not going to do much for you. If instead you're like all right because I have a giant victimhood story that is so much bigger than anybody else, I can actually become the Batman.

Rachel: Correct. Yes.

Codie: Who’s a big, huge Superman fan? It’s like he's an alien that's perfect. Nothing touches him. He's perfectly gorgeous. Nothing bad happened.

Rachel: No bashing Superman fans. Or at least not that many. Batman is way cooler.

Codie: You want the person who had like a lot of difficulty to overcome. So I try to think about it from that perspective too. All right, I'm just going to stack the chips, and every one of them gets me a little bit more fuel to the thing I want to achieve.

Rachel: This is what I try to tell women of color all the time. All of this bullshit that we have to deal with actually means that we have a different perspective that is often not representative of whatever industry you want to be in. So now you have an opportunity to cut through and to hit a market that's being ignored in this space.

So how can you talk to just your people? This is an opportunity and not yes, it's fucked up. We need to acknowledge that part. Also you have agency, and you can still make it happen. I'm an example of that. Then every other woman who's doing it or woman of color who is doing it is also an example of that. That's really important.

Codie: Totally. Yeah, one thing I think would be cool to riff on is I'm obviously a big proponent for buying as opposed to starting businesses. I think a lot of times creators go here, the market is this. You go to education, and that's what you do. So you sell info products in some way, shape, or form. We've talked about like the ladder of what is a good business or not. You have your ladder of wealth, which I love.

I kind of have this for step level of business matrix I think about all just based on multiples. What can you sell them for? Info products are one of the worst businesses that you can sell long term. So if it was me, and I was a new creator, I would be thinking how can I grow my audience first? Then I would be thinking what business could I buy using the profits of the business, which is called seller financing, in order to integrate it into my ecosystem? Because oftentimes if you are a creator, you're probably not the best operator. I hate to say. It's just by and large, not true.

Rachel: I am a terrible operator.

Codie: Yeah, you're probably an incredible marketer. You're an incredible visionary, but you're probably not the executor. So because of that, I like the idea of buying businesses. So maybe we can riff on which businesses should we buy? How should they think about that?

Rachel: Yes, and I'm in business buying mode now. Because I want to buy cash flowing businesses just for my own personal portfolio. Then I also want to have some strategic acquisitions because I see that as a faster way to grow my company. Like buying a company that has a whole department.

We need to build an events department. So buying an event business that already has been doing that forever, and those people are highly skilled. I get that team. I get their processes. We don't have to start from scratch. It's like okay, how can I press the easy button here instead of making it difficult.

Codie: Yeah. You've done a ton of acquisitions.

Nathan: Yeah, we've done two acquisitions and started another company. But, for me, it's all about the overlap. I have no interest in buying a business that is completely unrelated. I guess the only thing that I have is an Airbnb portfolio, but that feels like just diversifying.

Codie: It’s more like a passion project for you, I'd say.

Rachel: Yeah.

Nathan: But what I'm looking for is what can I drive attention to? The attention that I have, what can I point to? For example on the agency side, like I know you have an agency with ViralCuts and all that.

Codie: Yep.

Nathan: I've got Paperboy, which is newsletter growth agency.

Codie: Yeah. Very mad I'm not in on that deal. I text Sahil. I was like I really like that business. Nathan's a better partner for you, but I was like next one I want to come in. It's a great business.

Nathan: Yeah. That one, I have never had such an easy time getting deal flow for business, because it's just oh just barely talk about it. Then Shane, our CEO, is like okay, we're not taking more clients on because want to make sure that we can execute really well with like the avalanche of leads you just gave us.

Rachel: Yes. I'm about to do the same thing. I'm partnering with a copywriter that I've been working with forever to do an agency business that's like writing newsletters only.

Codie: Yeah. Okay. But let me tell you why I hate that idea.

Rachel: Okay, tell me.

Codie: Because you should buy the business, not start it.

Rachel: Okay.

Codie: So you already are going to give them an unfair advantage. The first dollar is always the hardest. The first million, definitely the hardest. So you are going to take your giant audience, and you're going to plug it into somebody who, this is an individual copywriter?

Rachel: Yes.

Codie: Who has not run a business before, doesn't already have the infrastructure.

Rachel: Well no, she has run a business for a long time.

Codie: This copywriting business? Or was she an independent contractor kind of like her business was her job?

Rachel: She has her own copywriting business, courses, different things that she does.

Codie: Yeah, I think the better play here wouldn't be if you got in with somebody who already had scale because the biggest issue you're going to have as a bigger creator, which we already have, is ViralCuts is a great business, but we literally cannot handle the demand we have from me.

Rachel: You're going to send a ton of leads, like exactly. We start an agency, it's going to go fast.

Codie: Your reputation is on the line. Your ability to execute on that audience when they have high intention is really important. So if you send somebody a thousand leads, they can only execute on two of them at the time, you have now left a bunch of money on the table with those additional leads.

Nathan: Those leads are you convinced them that they have this problem and then you can't fulfill for them.

Codie: So now they're just going to somebody else. They won't wait for you.

Rachel: No, I completely agree. I mean, the plan was actually to partner with her so that she creates process because she understands that workflow process. Then I'm bringing the audience, she's bringing the process, and then hiring a CEO who's going to be the operator. Like that was.

Codie: I still hate it.

Rachel: I like it. So how would you, so you would buy, what would specifically would you buy?

Codie: Well, we could play this game because you could tell the same. I'd be interested in your take too. I'll tell mine in 30 seconds. Agencies are a dime a dozen. There are so many of them it will baffle you. If you saw the amount of agencies that I get in deal flow every single month, it’s in the hundreds. So the problem with most entrepreneurs is we like things fast. So we're like here fast solution, go.

What sucks about acquisition, you do nothing, but take some pain for let's call it 90 days, six months in your due diligence phase where you're analyzing people. But that three to six months that you wait, if you can then acquire a part of a company, meaningful part of a company, 20/30/40 maybe 50% of the company that already can handle your scale day one means you don't lose any of those additional people.

Now if this woman is awesome, you can plug her into your acquisition. She can be part of it. But if you already have the audience, and we know that right now lead gen and distribution is the most powerful thing. Why not just buy it? Do you disagree with me on any of that?

Nathan: No.

Rachel: This is a great idea.

Codie: All right, well now you can tell her it’s Codie’s fault.

Rachel: I will write you a check.

Nathan: I totally agree with that. Because it gets into like Michael Gerber's The E-Myth where he talks about the different roles that an entrepreneur plays. If you have someone who is the technician in that business, they're an amazing copywriter, designer, whatever it is. They have no ability to scale the business because it's an entirely different set of skills. So I think that's super, super smart.

That was one thing with Paperboy, Shane, who we hired as our CEO, and brought in as a partner, he had scaled multiple agencies to a few million a year in revenue. It’s like okay, you know how to do this. It's not that you are a technician. You're actually the manager, and you're the operator. That's the only reason that I would start it because we had that person. Otherwise, I think the acquisition makes way more sense.

Rachel: What would be the better route?

Codie: 100%. Yeah, and I even think, I was talking to Austin Reif about it. He's looking at a bunch of businesses like this, and I basically said the same thing. We should maybe find a CEO or really great operator, that's always key. I never do a transaction without having an operator in place because then you’ve got to run it. You're buying a job. But the second that I have that I even want to have them acquire their first clients or their first employees.

Nathan: To make sure it works.

Codie: Right. As opposed to it's just do you want to go knock on a million doors, or do you want to buy the regional developer that already has knocked on all those doors and has the clients? So it's just scale.

Nathan: What's an example of a creator who's made one of these acquisitions? It's like a perfect fit for their audience that's blown up really well?

Codie: Well, it depends on what you consider an acquisition, but PRIME isn't owned by Logan Paul. He owns a percentage of it. He got plugged into a company that already had all the manufacturing, already had all the operations and back end, and he probably owns, I don't know, 5/10% of that. But 5/10% of what will be, arguably, a billion dollar business is much better than a bunch of $1 million businesses.

Rachel: What's prime?

Codie: It's like Gatorade.

Nathan: Energy drink.

Codie: Yeah.

Nathan: Yeah.

Codie: The same thing is true actually. If you dig beneath the soil a little bit for most of these big celebrity companies, they're not cold startups. Like even The Rock, for instance, with his Teremana tequila. I was like God, this is such a successful company. What happened here?

Basically as I pulled beneath the surface, I saw oh, well actually, these two individuals that he started the company with already had a tequila company and a tequila brand. They sort of, I don't know this, I assume that what they did is rebrand part of it.

They were multi-time successful entrepreneurs. I can't remember which other tequila company or alcohol company they sold previously. The other one was like head of distribution for Southern Glazer’s. Somebody will tell me if that's right on the internet, but some portion of it. So The Rock kind of bought an asset and then branded it and distributed it.

Rachel: And added The Rock to it.

Codie: Right. So I think a lot of people do it, but they don't talk about that.

Nathan: Right. I mean so Ryan Reynolds did that with both Aviation Gin and Mint Mobile. He bought a minority stake in each one. Substantial. He's not buying like one or two percent. He's buying, I think 30% of each one. Then these are established businesses. The product works well. It's well loved.

Codie: Yeah. Well, I was talking the other day with my friend, Mike Chandler, who is he was on that TV show with Conor McGregor where they help fighters get ready behind the scenes. Supposedly he's going to UFC fight Mike Chandler. He's a UFC champion and amazing dude. I was talking to him about, I'm like what does your portfolio look like? What are we working with here?

So he owns a percent, I won't say much, of a company called Kram, which is like Uncrustables. Like protein packed Uncrustables, peanut butter and jellies. They're healthy, good for you. He's a really big family man. So I was like this is an interesting model, but we have to make sure that this company can scale enough for you. Because when I was talking to the CEO of Kram he’s like Michael Chandler 5X’ed our online sales in one year.

So I think with a lot of creators and celebrities, making sure they get compensated for what they bring is really hard to do. Companies will not agree with you on it upfront. You need to structure intelligently for like earnouts or milestones based on performance, most likely, and then you need to be really careful what you offer.

I mean I just got into a tiff the other day with a company that I was working with because they wanted a percentage of my royalties for life on one business that we have. I was like I will burn down this business before I do that. No way you can have a percentage of what we do together while we are working together. But the second that we are no longer working, that will not exist. So there's a lot of complexity, like Taylor Swift and Scooter Braun.

Nathan: Right, yeah.

Rachel: There's a lot of deals that I haven't done because I'm an IP lawyer so I read the contract.

Codie: Lawyers are so underrated.

Rachel: I'm telling you, I remember.

Nathan: That’s an unfair advantage there.

Rachel: Yeah. There's a Seinfeld quote where he talks about lawyers as like he’s like lawyers are basically the people that read the instructions for Scrabble. You know what I mean? They know the rules, and then they know how to work around them. I'm like it's so true. So yeah, I read contracts. I'm like yeah, no.

I was just talking to somebody about Creative Live. Back in the day, I did it, and somebody else, they had done a bunch of courses on there as well. You get royalties for a long time. But I read the contract, and I negotiated it. Their lawyer wanted to play hardball. So I was like okay, I'm going to do it, but I'm going to give you nothing. You know what I mean? I'm not giving you any of my good shit because they own it.

Then now for other creators, they're licensing out, apparently. I don't know how true this is, but this is what I've heard. That they're licensing out this person's content, like the content that could be the subject of books, courses, all kinds of stuff. Now she no longer owns it. So I'm like no, I read the fine print. No fucking around.

Codie: Yeah, it’s really smart. A good attorney in anything you do in life whether you do a startup, buy a business, do a contract is probably some of the best money I've ever spent. Every time I go cheap on that, I regret it long term. So if you believe in yourself, believe in the fact that money speaks one language, and that's contracts. If you do not understand the language, you need to find somebody who does.

Rachel: This reminds me of Master P randomly. But he tells a story about how he was like selling CDs out of his trunk and trying to make it. He got an offer for a record deal for a million dollars. He said no. His brother was so mad at him. He's like, “Are you out of your mind? You're turning down a million dollars.” He was like, “Bro, if they're willing to pay me a million dollars, how much do you think they're going to make? We're not doing that.”

So if I recall, he was one of the pioneers of like starting your own record label and producing it yourself. That's more of the long game, but you make way more money in the end. So there's a trend here. This similar to you turning down the Spotify deal.

Nathan: Yeah. Oh, I forgot about that.

Rachel: Yess, there's a lot of money on the table, but there's a lot more money behind that. So let me wait and see what it's going to turn into. So it's about like that delayed gratification sometimes. I have heard from friends of mine who have sold their companies, and they may be sold it for, let's say, 25 million.

I have a couple friends who have sold in that space, in that realm. It's a good amount of money, but it's not I'm never going to work again money. I mean, it can be for some people, but for most creators, it's not. I feel like you have to get to more like 50 million to be kay now I'm done. Because now you’ve got a couple million that you live off of, which is around what I'm looking for.

So I'm not selling my company unless I'm done after that. I'm not going to sell it and then still have to go hustle. Fuck that. I mean, there is something to be said. You could sell it, make some money, let that parlay into the next thing that you then sell for the multiple that gets you free. But I think there's a lot of people who talk about selling their companies, which seems so sexy. It's in the news. It's you've exited blah, blah, blah. But then there's so much regret, it seems, after the fact for a lot of people.

Codie: Yeah. Do you ever regret not taking the Spotify deal?

Nathan: There was a time when things got really hard, maybe six months or so after that. My advisors had told me, “Hey kudos for turning this down. I just want you to know that the next year is going to be very painful for reasons that you don't realize as like team members leave who are not happy that we turned down that deal, like a cascade of things.”

Rachel: Yes.

Nathan: They said this is going to get way harder before it gets easier. They were 100% right.

Rachel: Was it the market conditions? Or was it the fact that you turned down the deal where people on your team were pissed?

Nathan: People were definitely pissed.

Rachel: Because it was a life changing, it could have been a life changing amount of money.

Nathan: Yeah. And there were also people who were absolutely thrilled. Like I would say the overwhelming number were yes. This is great. But yeah, there were people who were definitely upset. But I think, you then end up with all these hard moments in the business?

Also like just in that running an audience, online business, COVID was really interesting. We had a bunch of churn early on, and a crazy amount of growth. Like the highest month of new revenue ever and the highest month of churn ever in the same month.

Codie: Wow.

Nathan: So you have this huge boom. Then there's sort of like this, I don't know, like softening of everything a year later. Shopify talked about that where they thought oh, ecommerce has accelerated by three years like all at once. Then it just basically flatlines and reverts to the mean. So there was that middle time period where every creative folks business that I talked to, they were like we're flat. Like we're not growing month over month.

Codie: I think we're coming back to that, don't you?

Nathan: I mean we'll see. I don't know how to predict it. But yeah, it's going to be interesting. I mean I know I'm hearing that a lot where mutual friends of ours are, I think Amon who's a friend of all ours, he posted that down 20% is the new flat. If you're growing 10%, you should think of it like you're growing 30.

Rachel: Yes, I saw that post.

Nathan: I think that that's really interesting. That's not at all what we're experiencing. Like we actually last month had our best month of net new MRR ever. So it's hard to tell what's the macro environment versus what's within your control.

Codie: Yeah, I think it's too soon to tell. But at least, I mean in our little microcosm of a portfolio, I definitely see the first signs of stress. Some businesses, I mean that's the beautiful part about having multiple ways that you make money. I'm just not a type of person that sleeps well when I think I could go bankrupt. Some people are do one thing, and that's it. You're an idiot if you don't. I'm like the thing is like to sleep.

Rachel: I think do one thing to get to what I tell people is I do one thing to at least get one thing to a million dollars.

Codie: To profitability. Yeah.

Rachel: Then if you want to add other things, that makes sense. But people who try to add 12 things in the beginning, now they're chasing 12 rabbits.

Codie: Yeah. Yes.

Rachel: Catch them.

Codie: Yes. We don't want that. But I do think I'm starting to see the first signs of stress in the portfolio, for sure. But I think as long as you have some diversification then that's how you weather a storm. The beautiful part is since you survived that, I think we're going to see, unfortunately, a lot of these companies shake out. That's also another great time to buy.

The last three years I've been telling people learn how to buy a business. Learn how to do a deal. Don't necessarily do one. Like learn. Because the second there starts to become real shock in the market, that's where you pick up deals. You don't have to be the smartest deal maker in the world. If in 2008 you bought a house, you're probably doing pretty good.

I mean, I remember I was with my chief economist back when I was at First Trust. We were giving a presentation to a bunch of investors. Somebody in the audience asked him, it was 2008 or 2009, they were which stock should I buy? He was like yes. Any stock. Pick a stock basically in the market because it's so depressed that there's going to be this big reversion. I think that might be coming. I'm not sure.

Nathan: Well, I think going like bringing it back to the credit businesses side, we are talking about all these examples from celebrities or friends of ours where it's just like audience, business, rocket ship. There's all these examples that actually don't work out that way. So I'd love to dive into why that happens.

Like Hello Bello, from Kristen Bell and Dax Shepard, that just went bankrupt like a week or two ago. So that was not a tequila from The Rock where it just took off. I think a bunch of people, like you hear about it when so and so celebrity launches this brand. Then many of them just fade off into the sunset.

Codie: Quietly fizzle away.

Nathan: Why do you think like some of them work and some of them just don't?

Codie: Well, we were looking at this beforehand. I think I had invested in a company back in the day who got an offer from Laird Superfood to be acquired. This company, at the time, I told them I think you should probably take it because it wasn't operating very efficiently. They ended up passing.

But what's interesting, if you look at like the Laird Superfood stock chart because it went public from the time that it went public, which it looks like that was in probably five years ago, four and a half years ago, you can basically see the trend line. I mean, this company.

Nathan: Which is down.

Codie: Oh, yeah. It's not up and to the right. I'm no scientist. Basically public listing of 45 bucks, and now it's trading at 81 cents.

Rachel: Wow.

Codie: What's wild to me is I think, one, to me going public, man you better be ready. I mean theoretically ConvertKit could go public, and that'd be your worst nightmare. It'd be the worst thing you guys could do.

Nathan: I would stop sleeping.

Codie: Yeah, you would stop sleeping. It's attractive. I was talking to this with our friend Andrew Wilkinson. I'm like are you sure you want to go public, man? It's going to be brutal. What is going to happen your stock price, which is what happened, is it's going to have a pop because that always happens at IPO. Not always, often happens. Then it's going to come down. It might then rebound incredibly well, but often it doesn't, which is the same exact thing that happened with Honest Company.

Nathan: Yeah. You also can't talk about things in the company anymore. Right? Like talking to the CEO of Thinkific, Greg, or talking to Andrew or these other publicly traded companies. You go hey, how's this going? They're like earnings will be out in the next week. Because you don't want to get in trouble for a whole bunch of things. But yeah, so there's a ton that goes with it. But yeah, with Honest Company, they're also down significantly. That, I have bought a lot of products from Honest Company. I think they're a really good company.

Rachel: Me too. I think they're a really good company. That subscription, I had a closet full. I like was okay, we can stop this subscription now because we’re like really stocked.

Codie: Well, it goes to show, I think, that both companies, I actually liked Laird's products a lot. I think they're really good. I use some of the coffee stuff. Same thing with Honest Company. But there's a real difference between good product and good execution of company management. It's much easier to do, I think, on the private side. Capital can be more difficult.

But once you're public, you are competing with the biggest players out there on a relative earnings perspective. So if you're not prepared to tell the common consumer and your story to Wall Street in a way that is 10x more compelling than somebody else, the market will not benefit you.

Nathan: And you have two customers in that case. You have your actual customers that support the business and then you need to be marketing and selling to investors and shareholders.

Codie: And your employees.

Nathan: So you have three then.

Codie: You have three. It's really tough. So I doubt anybody listening is considering going public, but to me, I would need to be prepared to sell before I went public. We took companies public in Cannabis. You could see how those companies did, not well. We took a company called Harborside public and did an incredible series of acquisitions and mergers into that company. We could look up the numbers and see what's real. I have no insider information. I'm not a part of it anymore.

But at the time, we like tripled revenue basically with these acquisitions, and the stock was down like 75%. Like what the? So I think it is really one, you have to pick the right product. Then you two, you got to understand money. How do you fund it? Then three, if you're not the creator, the operator is so key. Who can be your execution to your distribution?

Rachel: Yes, I agree. One of the things that I love that you've talked about is I feel like this was recently with the economy shifting. You talked about how during when we're doing really well, I stockpile. So it looks like people are why aren’t we spending any money?

Nathan: Yeah, like why didn’t we raise that crazy valuation in 2021 when money was just being handed out?

Rachel: Yeah, exactly. But you're like listen, I've got a nice pile. I'm not worried about this because I know I can fund the company through it.

Nathan: You play your own game. So at one point, you're going to look really dumb for not raising money. Then two years later, you'll look really smart. Two years after that, you'll probably look really dumb again. Then you look really smart. There's just oscillating around as you're just like steady progress in a pretty predictable and boring way.

Rachel: Yes, because the thing is if a market is down now, it's going to go back up. Now you're fortified when you get through that process. You go through that tough time, and you learn how to navigate the company through it and probably get more efficient in that process as well. Get better at marketing because now the lazy marketing is not working anymore. Now you need to turn up the dial.

Then you do those things, you get back to the core basics. Then when it goes back up, you're ready to crush and highly benefit from that swing. So you just got to know that's the game you're playing. I mean I'm not losing any sleep with this economy because I know I have cash sitting. I'm going to be fine getting through it.

Codie: Yeah.

Nathan: I think with a bunch of these businesses, we have to keep in mind as someone with an audience starting buying a business, starting another one, and like directing this attention that we have towards the thing, you have to remember that the default state for every business is dead.

So if we walk in thinking oh, I'm just going to direct my 100,000 people on my email list or Instagram or whatever at this thing, and it's going to blow up. It probably will blow up and not in the positive way. Like the default state is that operators, it's not going to work out. Customers are going to end up unhappy. This is going to blow back on your reputation in some way. All of those things. So you have to go in with a plan for every part of this.

I think the celebrity brands that don't work out are the ones who are just like oh, she did it so I will too. Copy that without realizing that you have to plan for all of these eventualities, or hire a team that has either already planned for it or will plan for it.

Codie: Yes. Yeah, we always joke at my companies about my Sauron’s eye. Like just what a nerd I am. I'm pretty quick. It only really focuses on one area at a time. You’re not going to get that much attention, except if the red flags start coming. Then you don't want this over here because then your life is going to be kind of miserable.

But I think a lot of creators and celebrities, they don't have that anymore. They don't have an easy ability to see into their business. They don't have the crystal ball. The crystal ball is actually really simple. It's like a scoreboard with KPIs that you understand drive your business or don't drive your business and red, yellow green. Is it working towards what you want to do?

As long as you have that as the founder of the business and you're monitoring it, I mean, I'm a crazy person. So I do daily, but daily or weekly at the highest level. Then you can drill down into the underlying businesses. Then you can Sauron’s eye where you need to. But I've never been a good enough operator with my businesses underneath to just set it and forget it for like a year. Like see you. Here's the cash, and I won't talk to you in a year. There's typically always some direction needed, even for the company's I have CEOs in.

Rachel: Yeah, I think you're coaching. Like you're coaching, and you're directing because you've seen things that your leaders haven't seen yet. So you're like hey, this over here, this is a problem. What's your idea to fix it?

Codie: 100%.

Rachel: That’s not a good idea.

Codie: Do you guys have a cash balance that you guys keep? Is there an amount of cash that you guys like to keep on hand? Do you think about runway burn rate? I don't allow it to go below this level. I feel like that.

Rachel: Yes.

Codie: What's yours?

Rachel: It's a couple million.

Codie: But is it a relative percentage to the business?

Nathan: We used to keep a relative.

Rachel: Like yeah, it's a good amount of runway. I can turn anything around in six months is kind of how I see it. So I'm if I have at least six months, I prefer more than that but then I'm good. Because that's enough time to make a pivot if needed, which I've done before.

Codie: For sure.

Rachel: Multiple times. I've been in business for 13 years. So you see some shit, and it makes you a little like you're unflappable because you've seen, and you've gone up and down before. So you know how to navigate it. I'm not saying nothing can take you out. But it's also if it's going to take me out, it's not going to be because it's not going to catch me off guard basically. I have a plan. So that's what it is. So.

Then also I think, like you say, diversifying is important because it's like business over here and then a piece of real estate that there's a lot of opportunity there that I'm like trying to decide, am I going to make a move now or wait for the next upswing? So it's like you have other assets. When you have assets, you have options. So having assets and different asset classes.

It's just like businesses. You have a portfolio of businesses. You can have a portfolio that's business, some real estate, some stocks, some different things that allows you to navigate okay, what moves do I need to make? Trusting yourself that you'll know what moves to make, or you'll have the relationships and the advisors you can call to say what moves should I make? This is what I'm thinking.

Codie: Totally. What about you?

Rachel: Yeah. I worked really hard to get, first it was like three months of expenses in the bank. Because when you're bootstrapping a fast growth company.

Rachel: Oh my God that takes forever in the beginning.

Nathan: Then you’ve got to pay taxes on it. You're like oh man. Especially as we were a pass through entity before. So then, even the things you're holding in the bank, you have to pay taxes on it as if you distribute it. But we worked hard to get that. Then we've basically maintained that all the way until it got to be like giant amounts of money.

So right now we keep eight or nine million in cash on hand, but ConvertKit’s doing 3 million a month in revenue. So that's where we thought about it. I was continuing to increase it, like maintain that ratio. I've actually stopped because I think that there's a bunch of things where the money can be better put to work in the business.

Rachel: 100%.

Nathan: So now it's sort of like the business continues to grow, and I'm maintaining more of a fixed amount of cash and am reinvesting the rest.

Rachel: Exactly. That's the same.

Nathan: It depends on the type of business. ConvertKit is recurring revenue from 51,000 individual customers. Our biggest customer is like .3% of our revenue. So it's very diversified. It's also not a seasonal business. If you were running like a direct to consumer e-com business, and you made half of your money in Q4 from a really good holiday season. Or if you're running a course business, and you do one launch a year or two launches a year. Like you better hold on to more cash.

Codie: Yeah.

Rachel: Yeah.

Codie: Yeah, I think about the same thing. I tend to think in these boring businesses, I really like people to have six to 12 months of cash on hand. So because like 43% of all businesses fail because they run out of cash. So I like a lot of runway for those businesses.

Rachel: Well, the more runway, the more peace of mind you have the better you sleep at night.

Codie: But I think in a business like yours, like a fast moving tech startup, it's not the most efficient use of capital that's for sure. Thankfully, you're private so you can do what you want. You don't get the big pushes to do distributions.

Nathan: I think the other thing is make sure that you are, like you have access to lines of credit. Yeah. Because that's the thing that I've actually been in this position. You get offered lots of lines of credit when you don't need it. Then when we were in that like scaling phase of ConvertKit where it really would have taken the pressure off to have that line of credit, it was like oh no. That offer’s not on the table anymore. You can't get it.

Rachel: Exactly. You have to say yes to capital when you absolutely do not need it and you just say yes and let it sit. We would use it like just like pay these bills through it and then just pay it off every month just to have it and keep it on tap so that when we do need it, it's sitting. I got that advice years ago and thank God I did. Because then when those offers came in, I'm like yes and yes. I'll take it all, you know.

Nathan: You'll pay a little bit to have access to that.

Rachel: Exactly. Exactly. Because it's also part of your safety net, right? You've got like your cash. Now you’ve got certain lines of credit. You got other assets. So you're just kind of creating options. So yeah. I feel like so much of the talk about the economy is just being spooked. I mean, like I worked at Bear Stearns when it went down.

Codie: Wow.

Rachel: I was literally there like the day that they were having the conference call. I was an intern. I was like a legal intern, and that conference call where they were well, so here's what's happening. I was like oh, my God. I felt horrible for everyone. I was not in that position because I didn't actually have a real job there. But I feel like it was really just rumors that create that.

So I feel like sometimes what is your advice to creators and entrepreneurs to not get spooked, and to not let the talk of the economy make them feel. Like it's almost like we can manifest losses, right, when they're not necessarily there. It's like the economy can be doing what it's doing, but it's not necessarily affecting you right now. So don't manufacture that it's affecting you. Maybe pull back on some spending but what's your thoughts on that?

Codie: Well, I mean, I was at Goldman during the crisis. So I definitely still have PTSD from that. I remember the cardboard boxes and the security guards shuttling people out. So I am a protect the house kind of person. I think in environments like this because we do have a venture fund also where we invest in tech companies that basically support boring business infrastructure.

So ConvertKit would be a great example. So old email newsletter business turned sexy with ConvertKit. Or Shopgenie, which basically helps auto mechanic shops come online a lot more easily. So we invest in these businesses. They're usually the tip of the spear for seeing friction in the market. So because they've raised the most capital, and they're most highly levered, they're the first place where money starts to dry up.

So typically, what I'd say is instead of like feeling any emotion about it, I just look at the numbers. What are these companies raising out now? Are they being able to raise as easily? What are interest rates at the banks? Oh, all of that's kind of trending in a negative direction, that probably means that historically we're going to have some sort of pullback. If that's the case, let's just look at what the numbers were.

If you prepared for your business to be down 20/30%, you're probably pretty good. In 2020, some of those businesses had to be closed for a long period of time. That was 40 to 50% down. So I kind of look at historicals and just go okay, if my business suffered. We actually have this cool calculator. I'll get it to you guys somehow so people can look at it. But it's like here's my business today. Here's what would happen if I lost 25, 50, 75, 100% of sales. Here's how long of a runway I would have. Here's how that would start to affect my business.

It's very simple. But sometimes it's nice to just have a calculator and go I want to cut my expenses down to this 25% level because I think that's reasonable. Then I can ramp back up again. The only thing I'd say for creators listening to this is be really careful with fixed costs. That's always the first thing that kills you. Employees, insurance for them, tech related costs, leases, anything where it's fixed, and you can't get out of it. I'm really thoughtful for small businesses.

Nathan: That might be a good place for us to wrap up just thinking about what's coming is just sharing. Rachel, I'm curious if you have any thoughts for creators on assuming that there's a downturn coming that is very significant.

Rachel: Yes.

Nathan: How would you recommend that creators position for that if they're at that say 500,000 to maybe single digit millions a year in revenue?

Rachel: I think they should grow their audience. They should double down on growing their audience and accelerate how much content they're creating, be going to events, be meeting people, do these sort of old school marketing, but grow your audience as well significantly. Because there's always somebody with money.

I became an entrepreneur at a time when the there was a recession and things were down. A lot of my clients were people who got severance packages. So they had money to invest in this new business that they were creating. So those were my clients when I started my law practice all those years ago. So there's always somebody with money. So the bigger the audience.

So it's like let's say you have an audience of a thousand people, and a hundred of them in a great economy are ready to hire you right now. But now, it's not that great of economy. So maybe.

Nathan: It’s ten.

Rachel: Yeah, only ten of them are willing to hire you. So now it's okay, well now 10X the size of the audience, and you still get that hundred. So if you can be reaching more people and thinking about who has money to pay me right now? Who is my ideal client right now in this economy? Who's making a move, or who's the type of person who's going to hire me? Then focus on serving that customer and building your audience with that customer. That's what I would do.

Nathan: I like that. I think just a lot of people are thinking about okay, how do I pull back? How do I almost shrink the business? So realizing that hey, if you're doing it from a position of strength, like if you have that cash balance and you've operated conservatively then like sure. Go look through the expenses and be like okay, we don't actually need that. That was a nice to have.

But then say hey, this is the time when everyone else is being fearful, this is the time for us to really scale. If someone's like hey, I'm not spending in advertising anymore or I'm not going to get out and travel because we're saving on that budget then you're like finally the market is not competitive. Let's go to. I'm going to get much cheaper CPMs. I'm going to scale up.

Rachel: Yeah, exactly. What are the opportunities that this recession is creating for you? This troubled economy, what opportunities is it creating? How can you take full advantage of that?

Codie: Yeah. I also think you really should, every market either has one driving component, fear or greed. If you realize that every market has fear or greed as a driver then your messaging really needs to differ. So in a greed based market, like let's call it 2021. NFTs are growing like crazy. Everything's making all the money in the world. Greed is the driver. So your marketing messaging should be focused on something that is greed based.

In a market like this where there's a lot more fear in the market then you want to lean into that side. It doesn't mean you have to play to some Machiavellian instinct. But it does mean that you have to have context. If you go to a room full of a bunch of people that just get laid off and they go this is how you're going to make a bunch of money today. They're not primed for that. It's like here is how you protect yourself from ever having this happen to you again. That is the same product potentially, two very different messaging.

Rachel: Exactly. I mean that's what we did during COVID. We said okay, so let's talk about how do you grow your business or just keep building your business during a recession. So I'm teaching the same content, but the story at the beginning and the name of the webinar is now different to speak to the experience that they're having right now. So it's basically do the same shit you're doing. Do what you've always been doing and stay focused on your customers because that's where the answers are.

Codie: Yeah, metal is just easier to bend when it's hot. So figure out whether you're in a cold or a hot environment and adjust accordingly.

Rachel: Yes.

Nathan: Yeah. Okay. I think that's good. So thinking about that lean in and grow the audience, and then really read the room and adjust the messaging. Same products, but adjust the messaging for what the environment is. That's good. Codie, thanks for hanging out with us.

Codie: Thanks. This is fun.

Nathan: Where should people go if they want to check out all your content and subscribe to the newsletter and all of that?

Codie: Contrarian Thinking is probably where everything is. On there is anything you want to learn about boring businesses and buying them, and also a free newsletter, two have them actually.

Nathan: I love it. Thanks for hanging out.

Rachel: Thank you for tuning in to this episode of Billion Dollar Creator. If you enjoyed this episode, please like and subscribe, share it with your friends and leave us a review. We read every single one. If there is a company you want us to profile on Billion Dollar Creator, send us a message on social media and we will consider it. Thank you and we will see you next time.