Directive Consulting Revenue (2021)

[00:00] Hey folks, my guest today is Garrett Mehrguth. He's building a tool and a company called directiveconsulting.com. It's the customer generation agency for SaaS. He's running it as CEO. It's an award winning performance marketing agency for software companies headquartered out in Irvine, California. Launched in 2014, the company has expanded the team of 2,095 people across three global offices, LA, New York City, and London. Garrett, you ready to take us to the top? [00:25] >> Yeah, man. Let's have some fun. Yeah. [00:27] Yeah. This is interesting. [00:28] So so what got you into this? Were you sort [00:30] of a, you know, top sales rep at one of these SaaS companies and then left or how what got you into SaaS? [00:36] >> No, man. I never did anything with SaaS, actually. I I was selling $5 social media calendars on Fiverr. [00:44] >> Honestly. I was selling $500 social media calendars and then I got my first client was like a shawarma shop, and I helped them out. I was like, I didn't know anything about search or digital yet. I was mostly just doing like Yelp and Facebook pages. And then from there, essentially I just tried to do my best. I came back to get paid on the thirtieth day, said come back tomorrow, and the whole place was boarded up. [01:10] >> So that was our very first client. And then I got a hookah shop, did their SEO. He asked me, I did a website and he was like, Hey, you do SEO? I was like, I've never done it before, I'll figure it out. I ranked him number one for everything in a couple months. What And then from there, I just kind of [01:25] kept plugging, brought my best friend [01:28] year was that? [01:29] >> That was probably 2014. [01:31] 2014. And guys, I don't want to bury the lead. Don't you to stop the episode now. The reason I brought Garrett on is because he's now working with some of the brand name SaaS companies, whether it's Sendoso or post IPO companies like BlackLine, even folks like bill.com. Obviously, guys heard Alex Bean come on from Divvy right before bill.com bought those guys. Sumo Logic. We're gonna dive into all of that today. So, Garrett, fast forward to today. [01:54] How are you helping somebody like, you know, Zacly or Sendoso or ZoomInfo? [01:58] >> Yeah. So there's a big problem we're trying to solve in the market that every marketing leader is getting their butt kicked by, which is most SaaS organizations exist today because they solve a specific problem in a specific niche. And search, which is the default, I have $100, I'm going to spend it, let's go to Google Ads, is somehow this default mentality. But the problem with Google Ads is it has intent but not firmographics. And so what [02:25] >> happens is it's very difficult to scale while controlling your life cycle stages down funnel. And so what happens is people try to go to LinkedIn, but then the problem with LinkedIn is it has firmographics but it doesn't have intent. And so we developed our own methodology here called customer generation, which is essentially looking to build upon the promise DemandGen forgot about, which is how do I actually increase revenue? And so we help organizations move from MQLs [02:51] >> as like the signposting to SQLs so that everything we do is filtered through sales and then essentially deleted the go to market function the playbook everybody uses on LinkedIn. So the playbook on LinkedIn, let's say, if you're bill.com, it's like the ultimate guide to AP software, decreasing accounts receivable, whatever that is. They have this guide and then you do lead gen, right? You download an asset and then you try to send it to an SDR and [03:18] >> the SDR hates your guts because they call them and they've never read the asset before and the timing's not right. And so what we figured out how to do is how do you get people to commit to a sales meeting directly from LinkedIn at scale? That can completely change your pipeline amongst a bunch of other tactics. [03:34] So let's start with results and then work back to how you got some of these results via case study. Everyone knows Sendoso really, really well. They just did a big round there. Basically, corporates and really the leading corporate sending program, whether that's gifts or things like that. Can you talk about the results you drove for them and then backfill how you did it or at least tease us a little bit? [03:53] >> No. Mean, every account's different because some clients are going to want to do certain tactics and they're not. So it's not that there's a universal playbook you can apply. It's like we have ZoomInfo as well. Right. So like all the kind of the top marketing softwares you think about they're either in our pipeline or they're clients of ours, amongst other industries. Right. A lot in cybersecurity, lot, frankly, everywhere. I think we have about 125 accounts and [04:14] >> they all are, you know, over a 100 employees, 25 plus million in funding. [04:18] Okay. If someone's listening right now with under a 100 employees, you're probably not going be the right fit. They need a 100,000,000 in funding and more than a 100 employees. [04:24] >> 25,000,000 in funding. So we do help like, series A type companies, but they're usually, let's say, The it companies, if you know what I'm talking about. Like they usually have a little bit more funding. They have a little bit more maturity in their marketing organization, but the results wise, I can just use myself as a case study. I think it's more appropriate because I actually do this for myself. I think if you're gonna hire an agency, [04:45] >> you should hire someone who can do it for themselves. [04:47] Can we, Garrett? So I really so I just I disagree with you. I really wanna make this episode viable for software founders listening. And if you give an example of how a software company works with you, they will take them. They will learn from it even if they don't ever pay you for anything. Can we can we use a software company as an example? [05:01] >> Yeah. I'll use this like a metaphorical one. So the the with software, the way we like to look at it is kind of short term and long term at the same time. And so most software companies have actually a blessing in review sites. And so, most companies have to try to grind out for years to become number one or number two or number three in their category. But what review sites let you do and what most [05:25] >> people don't realize is you can essentially pay to be number one. And so what we help do is we help to look at it holistically because the buying journey requires multiple, a lot of times these SaaS companies are buying center. So you have to figure out how do you get someone from apathy to action. So on LinkedIn, we're running Convo ads. On review sites, we're positioning them. [05:42] What's Convo ad? [05:45] >> Yeah. So a Convo ad is a new ad unit on LinkedIn. And so Convo ads are really, really special. A [05:53] >> LinkedIn user can only receive one ad every thirty days. Now, the problem with Convo ads is they recommend the default bids to be like 30¢. And so, a lot of people send them, but they never get received because they get outbid. We don't ever do a bid for less than $5 for example, because it's this valuable real estate and it's about 70% cheaper than sponsored content. It functions like a lead gen ad, but the key to [06:16] >> this is gift cards. So, what we help people do is use gift cards with a full LTV CAC model and then base that off of opportunities or deals to drive revenue. So, let's say we're working with Sendoso and actually ironically sending gift cards with their platform. [06:33] >> The goal here is to look at all your channels in the LTV CAC model, and you take into account your gross margin, retention rate of customers, churn, all your KPIs, and you actually build out your life cycle stages, and you can start to answer the question, Hey, if I raised another $1,000,000,000 in funding, where would I allocate it? And so we help our clients get really good with capital allocation, and then within the actual convo ad, [06:58] >> we're writing the copy and then using gift cards to get people to a meeting, and then we're using tools like Chili Piper to get it to be scheduled, you decrease your no show rates, and we're essentially helping them drive pipeline, whether it's through convo ads, organic, or even, let's say, Google ads. [07:17] Kara, let's stay on this real quick. The client is Sendoso. They're paying you to help them get leads. Give me the copy. Let's say I was one of the target audience. I was the head of HR at a big company that Sendoso wants to get me to send gifts out to my employees. So I'm a target customer. What's the actual text of that combo ad that you might send me and what's the gift card size? [07:37] >> Yeah. So we've tested millions of dollars of gift cards. The most effective price point is $100 I don't use $100 because I like everything we do to be shockingly memorable. So, the copy would go like this. Hi, Nathan. Twenty nine minutes, dollars 105 gift cards, and gift giving technology you've never dreamed is possible. That's the hook. And then we help brands like X, Y, and Z deliver gifts and delight in a new modern era. Take twenty [08:07] >> nine minutes, hop on a call with one of our team members, at the end of the call, we're going to send you a $105 gift card. Sound good? And then it goes into conditional logic. And so, the way a convo ad works, it uses yesno, and so we can qualify them still. So, we'll say, Hey, do you manage gift giving at your organization? Let's say, yes or no. And if they say yes, we can put them [08:30] >> into our sales funnel. If they say no, we can put them into like a Slack community or some type of bridge where they can still interact with the brand even though they're not ready to buy. [08:39] That's interesting. Give us a couple more examples. Let's say you're doing this for bill.com. What white what might their copy say? [08:45] >> You can do the same thing there. [08:47] It doesn't have to be Well, well, no. It's so it's 29 is $10.05 gift card, but but you just said, do you leave corporate gifting? Right? That's obviously Sendoso specific. What would, like, a billspecific.com sound like? [08:57] >> Do you manage ARAP or something like that? So you're just taking it into that value prop. Now, the bigger mistake is actually not The copy you can play with and get better at. There's a bigger issue of what happens at SaaS organizations when they go to market. They're not disciplined. And what I mean by that is I can't tell you how many organizations, let's just say honestly, frankly, like 99% of them, have too small of a [09:22] >> budget for the amount of verticals and personas they're trying to target. It's like the number one plague is killing them. And so essentially what they do is, let's say they have 50,000 a month to spend. They'll then want to spread that out across healthcare, government, whatever those industries are, let's say five industries. Then we all have this lie that we've been told that we need to market to decision makers, and that's BS. So, the biggest problem [09:50] >> in SaaS is they all think the C level and the V level is how you market digitally, and it's actually not true. I have a saying that I believe the champion is more important than the decision maker. So what we help our clients do is we'll go through their client list, we'll work with their finance organization, their sales organization, and we'll start to pull out which vertical has the highest close rate, which vertical has the best [10:11] >> gross margin, which vertical has the largest LTV. Cool. Can I go through your clients and see who your point of contact is in all those engagements? And then I'll enrich it with their title. Now, all of a sudden, I've started to get who's truly their persona because it's never what the marketing and sales org thinks. It's always bill.com, they would always sell the CFO. The truth is your person is actually the accounting manager, it's not the [10:37] >> CFO. [10:38] Everybody That's valuable. Give a couple more examples of that. So who did Sandozo think they were selling to and who did you discover they were actually selling to? [10:46] >> I don't know that one, to be honest. Mean, [10:48] I don't What about Sumo Logic? [10:50] >> So I don't know. I have I mean, I've got, like, a 150 employees, man. I don't run the campaigns personally all the time. I mean, [10:57] can you can you give can you give one or two other examples? [10:59] >> Oh, SaaS companies? [11:00] Yep. [11:01] >> Yeah. So, like, let's say ZoomInfo. You might think at ZoomInfo that maybe the sales org buys it, but you might find that a lot of your buyers could actually be the IT org because they're the ones actually doing the data mining. Another way you can figure this out if you're an organization is you can use the LinkedIn pixel. And so, what the LinkedIn pixel does is you can put that on the footer of your website, even [11:25] >> if you're not running ads, and you can set up your event tracking, and you can start to understand which personas and titles and functions are actually buying from you. It's another way to do it. My favorite way is just going through your client list and then trying to identify who your point of contact is, and then it's a lot easier to buy. [11:42] Okay, tell me more about you as a founder. How do you make money doing this? Do brands pay you to run this? [11:48] >> We have pretty decent rates. I'd say right now we're about a percent of spend, it's like, let's say 15% of spend. But average engagement is probably 150 plus. [11:59] Over what period of time? [12:01] >> One year. We only do annual engagements just like our clients. [12:04] Okay. Got it. [12:05] >> Yeah. [12:05] So $150k, which means we have to multiply that times what times six, right? Because that's basically 15% of whatever the total spend is? [12:13] >> No. I mean, that just depends. I mean, a lot of our clients are spending 2,000,000 a month. So, I mean, would cap it. [12:19] It's not always 15% then of spend. [12:22] >> It'll go down. Yeah. Like the more you spend with us, it'll go down just depending on the engagement, the channels. Like, we running Connected TV for you? Are we running programmatic? Are you in EMEA and APAC? Like there's a lot that goes into it. I would just say like 150 is like our low end average, to be honest. [12:38] And how many customers did you work with, I guess, last year in all of 2020? [12:43] >> Right around probably 150. [12:44] And is that sort of the max? Don't want to go more than that, need to dilute it and less than that, you have to fire people? [12:50] >> No. We have a really strong people ops function here. We got a lot of recruiters. I'm essentially a people business, right? Like my product is my people. So, I've got a lot of investment in learning and development, in recruiting, people operations. We also have our own product function here. How do you standardize deliverable? Because if you go get a world class strategist from another organization, they might be super talented, but we don't use third party data [13:14] >> when we advertise and everyone else in the world does. So there's nuance to how we go to market. We have a genuinely different approach. So 99.9% of people who advertise on LinkedIn use the industries to target. Know what I'm talking about when you're running a LinkedIn ad, it's like industry computer software. What I've found is 50% of that data is incorrect. And so most of our clients come to us and I would argue almost 50% of [13:39] >> their budget is wasted pre impression. [13:42] Yeah. Yeah. Just wrong targeting. [13:44] >> Yeah. It's really important to get that right. [13:47] I wanna focus more I wanna get so we we got, like, the user story, how you're helping. I wanna dig more though you as the founder. So you got this one in 2014. You go from hookah shop. You end up with, like, Sumo Logic and Sendoso. There's a lot of journey happening in between there. I guess so 2014, take me through when was your first million dollar year? Do you remember that year? [14:07] >> I'm not a huge money guy, but I'd probably say, like, 2016, 2017. [14:11] Okay. Cool. And what did that feel like as an as a founder? Was that a mo big moment for you, have you done this many times before? [14:16] >> Oh, no. I just started this straight out of school, man. I never done really anything. I had, five jobs. I was, like, doing [14:21] So what that must what did take us in your head 2016, 2017? How'd you feel? [14:27] >> Motivated. I don't know, man. I'm not, like, I'm not nearly where I wanna be, so I'm, a pretty driven dude. So I I still work, you know, all day every day, to be honest, like for eight years straight. Like, I mean, I tore my Achilles twice and I'll go to work the same day after surgery. I'll go in and lead the exact team. Like, I'm not one of those, like, people who like my whole thing is [14:46] >> I'm here to become a better man and individual and leader. You know like if I wanted to go make a bunch of money I could probably just go to independent consulting and charge a bag of money to whoever I wanted to. So to me, it's not really all money related. It's more like culture and leadership related. So like, I'm more proud that knowing that my organization makes less than $70,000 We have 100% healthcare. We have really, [15:11] >> really, really strong values that are fully integrated to the rest of the organization. To me, the money is just a signpost. It means you're doing well. The problem is a lot of people in the agency world, they like to make their blog, they like to make their brand about how successful they are, but the money you make as an agency is indifferent from the results you drive for clients, and they're usually not correlated because the quickest [15:35] >> way to make money in the agency is you just kill your people. Essentially, you just increase your capacity, but that creates burnout, you have poor retention. [15:43] How many people do have today full time? [15:45] >> I think we're at 135. But I think I've hired 150 people in the last six months. I mean, it's pretty [15:55] Wait, sorry, I'm confused. You're at 135 full time right now, but you hired 150 in the past twelve months? [16:00] >> Well, because you have churn. You don't get to keep everybody, unfortunately. I wish we could. [16:05] Oh, interesting. That's a lot of churn though. [16:09] How many? [16:10] >> 150 minus 15? [16:11] You you have four fifty right now? [16:14] >> No, I only have 135 and I've hired like 150 in the last six months. [16:19] Basically, the whole team has churned in the past six months? [16:23] >> 15 people? [16:24] 150 minus 135? [16:28] I'm so confused. You've hired 150 people in the past six months and today you have 135. So you hired your whole team in the past six months? [16:38] >> A lot of it. Yeah. [16:39] Oh, you've exploded. [16:41] >> Yeah. [16:42] Okay. That okay. Yeah. So I'm just missing part of the story here. Got you are you how many people did you have in, twenty nineteen? [16:50] >> Forty, thirty five. [16:51] Okay. Got it. Got it. Got it. Got it. Okay. There's been a lot of growth in the past twelve months. [16:55] >> Yeah. In the last since, March. [16:57] I see. Okay. What what happened? Post COVID, everyone has budget now? [17:02] >> COVID was tough. Was about sixty to seventy five people in 2019, 2020, and then we downsized in COVID right in the beginning, but then we held really strong. We grew about 1% last year. And then this year, we're up, geez, I have no idea, it's an insane number. Mostly because like I was saying, our methodology is different. Everybody's getting their butt kicked on LinkedIn and they can't scale on Google Ads. Like, genuinely, it's a really, really [17:30] >> bad problem. [17:31] Mhmm. Because what everybody's doing on LinkedIn is they're still slaying asset downloads, and then they're trying to send, like, MQLs to SDRs. [17:38] >> Yeah. Guess I took [17:39] I I so I wanna keep focus on you because we get it. I mean, everyone listening understands, like, they're wasting money on LinkedIn and you have a better way. I get that. But so you scaled down to forty five during COVID, you scaled back up to one hundred thirty five today. Will you guys be profitable this year or are you breakeven, you're going reinvest everything back in business? [17:52] >> No. So I usually run us a little leaner on purpose because we spend so much on sales and marketing. Think that's what's kind of cool. I don't know, in my world agencies don't actually spend on advertising despite that's what they're supposed to be good at. [18:07] So [18:10] >> for us, we reinvest almost all of it but we're kind of starting to go into that next phase where we have to kind of prepare to have the right trailing twelve months, the right trailing twenty four months of EBITDA. And so, us, we are profitable and we have a really nice business model. Just depends on how aggressive I'm pursuing top line revenue. And that also depends on our capacity, our recruiting function. The job market is hell [18:36] >> right now, to be honest. It's really, really difficult. [18:38] That And [18:39] so most of what we're doing right now is building for 2022 and then re staffing and reorging because we scale so fast that it's not makes sense. We're running out time, just to be clear, 135 people and you said everyone makes more than 70 k and you're profitable. So 70 k times one thirty five is about $9,000,000 in revenue. Is it fair to say you're doing more than that? [18:59] >> Yeah. Definitely. [19:01] Okay. And what do you think you'll break in 2022? [19:04] >> Oh, I don't share revenue, man, to be completely honest with you. But [19:08] Okay. Well, you just you just did. Right? So you're above you're above $9,000,000 in revenue because you told team size and 70 k is is minimum. [19:16] >> Yeah. [19:17] >> I don't really share numbers, man. Sorry. Okay. [19:21] Well, you shared a bunch of numbers. What what I'm I'm totally fine not answering, not asking you things that you're not comfortable sharing, but you just shared certain more than $9,000,000 in revenue. What is your growth target for next year? Are you trying to grow a 100% year over year? You wanna stay flat and stay consistent? [19:33] >> Well, you right now we're good about, we're trying to grow 10% month over month. So I try to use month over month because the cool part about using relative numbers when you think about OKR setting is your team can always reset. Most people set goals in quarterly functions and they use absolutes. So we want to get X amount of revenue this quarter. Now, the problem is if you have a bad month to start the quarter, you [19:56] >> have to reset, and then it's like you're losing. So then you spend the next two months where your culture and the growth and the organization, how your team's approaching it goes down. So what I like to use is relative numbers because even if you miss, let's say in July, you only grew 8%, actually it's easier in August to grow 10% because it has diminishing marginal returns. Got it. [20:18] And so just to be clear though, when you said you had 150 customers earlier and that the average pays $150,000 a year, that would be $22,000,000 in revenue. [20:28] >> Does it do people come in for lower than $150k per year? [20:32] >> Not much lower. Okay. I think our minimums are about 10 a month. [20:36] Okay. Okay. Okay. So okay. Got it. So 10 a month, that'd be like a 120. So I mean, guys are doing more than $20,000,000 a year than in revenue right now. [20:42] >> I mean, you could some people could argue that. Yeah. [20:45] Yeah. Well, I mean, I'm just I'm multiplying your numbers. If the average customer pays $10 a month and you said you had 150 customers, I can multiply those, right? [20:52] >> Yes, you can. [20:53] Okay. Cool. Well, congratulations. That's great. You've done all this bootstrapped or you raised? [20:59] >> No, I did bootstrapped. I'd never put any money into the business. I don't I'm like, I come from like blue collar, like both me and my partner. So now, yeah, we don't have any money. We don't have any parents with money. We don't have any experience. We just work hard. [21:10] I love that. Working hard is good. Let's wrap through with the famous five here. Number one, favorite business book. [21:15] >> Oh, I like good to great. [21:17] Number two, is there a CEO you're following or studying? [21:23] >> I always find what Elon does with PR interesting. [21:25] Is there a strategy there or is it off the cuff? [21:30] >> I [21:33] >> think he knows how to move public markets with his personality. [21:37] Number three, what's your favorite online tool for building the business? [21:40] >> Oh, I like Fathom. Nobody really talks about that one. Fathom's pretty cool. I still run a lot of our finances actually just because I'm hiring for a new head of finance. So I like Fathom, it helps. I've been using it for about six, seven years. You can start to model out like, hey, if I wanted to get my gross margin to 65%, what do I have to do with my variable cost or my price right now? [22:00] >> And you can start to model out scenario planning in a really easy way and they do a good job educating you if you're not a finance person. My background was economics, so I kind of enjoy modeling and things like that. But yeah, I love Fathom, it's a pretty cool tool. [22:15] Number four, how many hours of sleep do you get every night? [22:19] >> Like, I don't know, it would be about like 08:30 last night. Woke up at seven, so a lot. [22:22] Okay, that's good. Yeah. And what's your situation? Married, single kiddos? [22:26] >> Married, family of, I got two under two and I got a third on the way. [22:30] Two under two and a third on the way. [22:32] >> And a half, like, I guess two under [22:35] Busy guy. How old are you, Garrett? [22:37] >> Just turned 30. [22:38] 30. Alright. Last question. Something you wish you knew when you were 20. [22:42] >> Everything. You don't know anything when you're 20. I still don't know anything. [22:49] >> I would probably just say like industry you choose, none of that really matters. Just do it longer and work harder than everybody else. Like if you do that, you can make more money and be more successful, whatever you kind of use as your signpost. So like me, I never really tripped on what I got into. I just kind of keep working hard and kind of go from there and just enjoy yourself. Everybody worries too much, you [23:11] >> know. [23:12] Guys directiveconsulting launched back in 2014, started with SEO at a hookah shop now over 135 folks on the team. Took a bit of a hit during COVID. He went down to 45 folks but hired a bunch over the past twelve months. Lots of growth. Now working with a 150 brands. Many of them the big SaaS brands you guys know, Sendoso, SumoLogic, ZoomInfo, etcetera. Folks can get started at $10,000 per month. So $120,000 in ACV. Doing well [23:33] over $10,000,000 in revenue as he looks to scale 10% month over month. Garrett, thanks for taking us to the top. Thanks, David. [23:41] One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live, and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM [24:06] Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM Central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button and then click the little bell notification to make sure you get notifications when we do go live. 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