Why Most Small Businesses And Startups Fail In The First Year

Clate:

As the company starts to get a little bit bigger. You’ve got to document what you do. You’ve got to get it. You’ve got to get your processes on paper. You’ve got to get your checklist and the things that make effective lead generation lead conversion, client fulfillment. You’ve got to get that on paper. And if you don’t do it, what happens is, um, everybody’s starts to be left to their own devices and their well-intentioned they’re doing the best they can. But before long, the entrepreneur walks in and says, what the heck’s going on? Why are we doing it this way? What happened?

Chris:

What’s up everyone. I’m Chris Ronzio founder and CEO of Trainual. And this is Process Makes Perfect. As always, we’re talking with experts in process automation, creation, delegation, basically the people that know how to make business easier. You just heard Clate Mask. And this episode is all about the process of growing a small business. Now Clate is one of my mentors, advisors and he’s on trainials board. But before I knew him personally, I admired him from a distance here in the small business community in Arizona, because for 19 years, clay has built Infusionsoft and now Keap from a struggling startup into an eight time inc 500, 5,000 winner. So he’s been through this himself and serves thousands and thousands of other small businesses. He’s recognized community-wide worldwide as a visionary leader. And his passion from small businesses just extends from doing this himself. Now keep or formerly infusion soft has landed four rounds of venture capital, including the latest round of $55 million round led by Bain capital ventures.

He was named an Ernst and young entrepreneur of the year finalist and a top 100 small business influencer by small business trends. He’s a national speaker co author of the New York times bestseller conquer the chaos, how to grow a successful small business without going crazy, which is something we all need. So what I loved about this episode is Clate gets so specific with outlining the different stages of business growth that you go through. And at each of the stages, there’s kind of a revenue marker that he points to. And there’s a key problem that you need to solve. So, clay I know from experience is very tactical and surgical about the advice he gives. And you’ll get to see that here in this episode, I hope you enjoy it.

Chris:

Hey, everyone, and welcome to Process Makes Perfect. I’m your host, Chris Ronzio. And as you heard in the intro today, we’re talking with Clate Mask. Clate, thanks for being here.

Clate:

Great to be with you, Chris. Thank you.

Chris:

So everyone that’s listening is a pretty special interview because when I was starting train, you’ll hear in the Phoenix Arizona area. Clate is like the Michael Jordan of the startup scene. Like everyone talks about plate. Everyone has a story of the heard cleat speak. And so I was so determined to meet him. And I’m very fortunate that now he’s a part of Trainual You’ll first as an advisor now as a board member. So Clate, thank you again.

Clate:

Oh, thank you. I appreciate the kind words you’re doing. Great stuff. Happy to be a part of it.

Chris:

So Clate, Infusionsoft or now Keap has been around for, is it decades? Can I say decades yet? It’s getting close.

Clate:

Yeah, we’re getting there almost 20, 19 years.

Chris:

It’s crazy. So you have been a pioneer in this sort of SaaS industry and serving small businesses. The thing I love about your focus is that you’ve got a more, more dedication and passion to small business than I’ve seen from, I think, any other software company, which is what drew me to you. So, so closely. So I want to talk today about the process of growing small businesses since that’s what Keap does, right.

Clate:

That’s right. Well, thanks. We are very committed to helping small businesses grow our purposes to help small businesses succeed. Our mission is to simplify growth for millions and, uh, yeah. You know, for good or for bad, we’ve always been totally committed to small businesses as people have given me crap for that said, we should move upstream, but that’s not what we’re doing. We’re totally focused on helping small businesses grow

Chris:

Well. That’s great. And I hear the same thing. You know, everybody says you maybe, you start with small business and then you move mid-market and then enterprise. So it takes a lot of courage, I think, to stick with a target customer that you’re really passionate about.

Clate:

Well, thanks. Courage your stupidity. I think I get accused of both.

Chris:

So for anyone that, for anyone that doesn’t have the background, or I guess lives under a rock, can you just share quickly what Infusionsoft did and now Keap does?

Speaker 3:

Yeah. Infusionsoft is the leader in sales and marketing automation software. The name of the company was infusion soft. Um, and then about a year ago we created a lighter, easier version of our software and recognize that that would be the product that most customers would start with and the bigger numbers would be on. So we decided to name the new product, something easier, simpler. Uh, we named it Keap its and then we decided, you know, let’s have the company be the same name. So Keap is all about the tenacity and perseverance that’s required for small businesses to succeed. If you know our brand, we’re very much a champion of small business growth, cheerleading. We know how hard it is. Most, most entrepreneurs at some point want to quit our messages to keep going, keep serving, keep growing.

Chris:

I love that. So as you were building Infusionsoft, what kept sticking out to you about your customer base that led you to want to create a simpler product?

Clate:

Yeah, and we still have the Infusionsoft product, it’s the high-end version of our software. It’s a super powerful sales and marketing automation for small businesses. If you can flowchart it, you can automate it in our software. And, it’s an awesome product. What we did is we recognize that many people didn’t need all of that power yet. They needed, they needed light, simple automation. They needed an intuitive, easy experience. Uh, you know, we had heard that forever. Everything from the learning curves really tough to my favorite, Oh, it’s confusionsoft. You know, we heard it all. And we recognize that for people who weren’t ready for that power, it was confusing. You know, that’s exactly right. But for those who want the power, it’s, you know, it’s, it’s beautiful and it’s amazing. Uh, so we recognized we needed a line of products and we needed to start simple for people.

Clate:

So we created our Keap Grow product. And then we have our Keap Pro product, which has our, our campaign builder that is kind of, sort of the crown jewel of infusion soft, but it’s got, uh, not, not as many, as many of the bells and whistles. It’s a lot lighter, easier in interface, very much mobile first. So, you know, we had just heard Chris for a long time that people needed they, they weren’t ready for all of that power and the marketing and sales automation capabilities. So while they wanted our CRM software and they wanted email marketing and they wanted a little bit of automation, they didn’t need the whole enchilada. That’s why we created keep. And now we have keep pro and infusion soft

Chris:

Makes total sense. So wherever they are on this life cycle of growing a small business, now you’ve kind of got something for them from the very early stages. And then as they get bigger, do they graduate into the bigger products? Is that how it works?

Clate:

That’s right. Yeah. So, and that’s, that’s exactly the point we had heard forever. Gosh, don’t you have something for me, I’m just getting started, you know, and that sort of thing. So that’s why we created keep, and it’s really fun to have a product line of a family of products now, and we’re having a blast serving more customers now being able to appeal to small businesses that want part of what Infusionsoft offers, but they are not ready for the whole whole thing.

Chris:

That’s so interesting because we see the same thing, you know, with Trainual, we have people comment on ads saying, you know, I want this, but I don’t need this. And is there a cheaper version? And so that’s probably the echoes of what you were hearing over the last 19 years, right?

Clate:

That’s right. Exactly.

Chris:

So on this life cycle of entrepreneurship of small business, I’ve heard you talk before about the stages that people grow through. So could, could you break it down to the earliest, to the more mature stages?

Speaker 3:

Yeah. We refer to the stages of, of small business growth, and there’s really interesting, really, it’s really interesting how this evolves, you know, about 10 years ago, Scott and I had been running the business for nearly a decade. We noticed some really interesting, almost predictable trends in small business, in their growth and evolution. And we could see that when, when the entrepreneur would overcome certain obstacles, they would get to a new stage of their business. And we were about, you know, we’d been in business about nine years. We wrote our book, conquer the chaos. And in the process of writing that book, we did a bunch of research. And a lot of that research was in the census Bureau data around businesses. And we started to see that not only were we recognizing in our day to day experience with businesses, a very predictable trend of growth and plateauing of growth, but we could see it in the aggregate data of the census Bureau.

Clate:

And we started to recognize that there were clear stage changes of business that occurred on certain intervals. And as we really dug into it, what we found over time is that it happens at the ones and threes of revenue. So when you get zero to a hundred thousand, at a hundred thousand, you hit a new stage. You get out of the stage of kind of being a job and sort of a, uh, a side business or a, uh, an, uh, a solo preneur business. Now you get into where you start employing people. And so from a hundred thousand to 300,000, that’s another stage. And then when you get past 200,000, you start to move into a new, a new stage from 300,000 to a million as a stage. And you get the idea, a million to 3 million, 3 million to 10 million. And we really focus on these five stages. Stage one, two, three, four, five, that’s zero to a hundred thousand hundred thousand to 300,000, 300,000 to a million, a million to 3 million, 3 million to 10 million. Now I can tell you from personal experience, the stages continue 10 to 30 million, 30 to a hundred million, a hundred to 300 million. And I imagine as I experienced it will continue to go beyond that. There’s something about those stages where your people process and systems need to change. And if they don’t you plateau at those stages.

Chris:

Wow, I’ve never heard it so clearly stated with the ones and threes. I love that. So, as, as they’re progressing, you know, I imagine the team dynamic changes the tools that they use change, the way that they serve their customers changes. So how ahead of the curve do small businesses need to be like, when, when do they put the new systems in places that they wait until they crossed $300,001, and then they have a meeting about it? Or

Clate:

How does this work? Yeah, it’s a great, it’s a great question. What I’ve found. And I, you know, as I’ve, I’ve coached a lot of entrepreneurs on this, uh, we, we created a business called Elite Entrepreneurs that I think you’re familiar with. And we spotted out a couple of years ago so that we could just stay focused on our software, but we, you know, we coached hundreds of businesses and I’m still involved to a certain extent and advising some of those businesses. What we found is it’s not so much about this magic market, 300,000 it’s first and foremost, about the awareness that you need to be working on your people, process and systems as you approach those points. If you’re, if you’re constantly working it, then what I’ve found is entrepreneurs can, can glide through those stage changes and continue their upward trajectory. If they’re, if they’re unconscious to those stages, they get stuck and they get frustrated and they wonder, why are we, why are we S you know, we were growing so nicely and now what’s happened.

Clate:

And so the first thing is an awareness of the stages. The second thing is to be working on the team. That’s probably the most critical thing. Particularly when you get past a million, what you find is a lot of entrepreneurs can sort of hustle and grit their way through the business, up to a million, but then you’ve got to really start working on your leadership team. So getting to a hundred thousand, by the way, the big obstacle there is time. You just don’t have enough hours in the day. So it’s, it’s literally a matter of midnight oil, um, getting to a hundred thousand, getting to 300,000, the critical thing is the sales skill to be able to close leads and turn them into customers and clients, and then getting from 300,000 to a million it’s marketing, it’s the ability to, to reach out and do lead generation, and then turn those leads into sales opportunities that you can convert.

Speaker 3:

When you get through that sales and marketing in time, a series of hurdles, then it becomes about people. And so when I talk about the change with people, process and systems sub 1 million, it’s really about your sales and marketing process. That’s the critical thing. And the reason why most small businesses, you and I are big Michael Gerber fans. The reason why most small businesses don’t make it to, to a million and they die is that they don’t have good lead generation lead conversion process in place. That’s really what it’s all about and getting to a million.

Chris:

Now I’ve talked to some entrepreneurs that they say, maybe they want a small business, so they want some kind of lifestyle business. So do you think it really depends on the person to which threshold they build through or past?

Clate:

Yeah. I’m glad you brought that up because what I say all the time, when I teach this, as I’m not giving you a prescription, I’m giving you a description. You know, I’m not saying you need to do this. If, you know, in order to, I’m saying, if you want to go to a particular stage, I’m describing the landscape so you can understand what it looks like. And then the other thing I’ll say is, Hey, if you want to settle in as a $500,000 business and, you know, a handful of employees, you know, two, three, four employees, great, just be aware of what the, the systemic issues in business. And then most importantly, be aware that you can create greater efficiency and therefore greater profitability as you understand these dynamics. So, in other words, you might say, well, I don’t want to worry about the people issues that are required to have a company that’s over a million dollars.

Clate:

Um, or you might think that you’re going to have a business that’s over a million dollars and it’s going to be only you. And for the most part, I’m going to say, that’s a pipe dream. This is not going to happen. Generally speaking, you’ve got to have people in order to grow. It’s a very, very rare situation where you find somebody that can be a solopreneur, solo, preneur millionaire. It’s just very, very rare. Um, so understand the dynamics because a lot of times people will say, well, I don’t want to have a lot of people, but they want to make millions. And I’m like, yeah, that’s not going to happen. You’re going to, you might have them as contractors. You might have them as you know, in different, different ways, but you’re going to be working with people. So you might as well learn to come to grips with that.

Clate:

The other part is if you want to be profitable and efficient, well, you can put automation in place. You can, you can put systems and processes in place that enable you to be very efficient and you can start to push the bounds of revenue per employee and the dynamics that typically exist. And you can be, you can, you can become an outlier where, you know, we do have, we do have customers on infusion soft that have million dollar businesses and it’s them and an assistant. So it’s not that it’s impossible. It’s just very improbable, particularly if you’re not aware of the dynamics.

Chris:

So this next question I’ll ask, you can answer it through the lens of your own experience with infusion soft and keep, or through the lens of your customers. But I’m curious, how does the product or service offering change as you grow through this from, from when you’re the solo preneur doing it yourself, or are you still doing the same thing as the business 10 is inside

Clate:

Really, really great point. So let me just make sure. So when you say, how does the product change do you mean? How does it, how does the entrepreneur’s product change?

Chris:

Yeah. How does the, how does the offering change? Is it, is it the same thing and you’re just teaching other people to do it, or do you get a much more complex product to try to serve more customers?

Clate:

Yeah, really great question. So your product does change and evolve as you go through these stages. Um, you know, I said people, processes and system change product does as well. A lot of times what happens is people get stuck on an offering that they can deliver with their time, but their people can’t deliver it with their time. And so you have to begin to productize a service. In that example, many times the entrepreneur is a service based business and the business is them. And that works when they’re solo preneur. It works when they’re getting up to 200, 300,000 revenue, but then there are only so many hours in the day. And so you’ve got to either digitize your solution, or you’ve got to create consultants that work for you that can deliver the solution, or you’ve got to create a product around what you have that can deliver the same benefit. So it’s a really good observation you’re making without a doubt in order to go through the stages, particularly at what I’ve found is that if you’re going to make two stage changes, meaning essentially that you’re growing 10 X, you’re going to have to adjust your offering. Many times you have to adjust it to make a 3X change, but you definitely have to do it when you’re making a 10 X change.

Chris:

Great point. So if you’ve got ambitious growth goals and you’re listening to this, you might have to think about what the offering is today and how that changes to get to that 10 X place. So the thing that holds a lot of people back going from solo into a more scalable business is delegation or passing off certain responsibilities. So in your experience, how do people break through that challenge of handing off how to do things?

Clate:

Yeah, that’s part of why I love what you do at Trainual, because that, that is, I would say it’s the biggest challenge at the million dollar entrepreneur level. The biggest challenge is the entrepreneur has at that point, usually a team of people around them, but it’s a fairly small team. And they, they usually, at that point are all reporting up to the entrepreneur. And so the entrepreneur has got, you know, five to 10 people. And the challenge of the people around the entrepreneur who can read the entrepreneur’s mind is getting bigger and bigger. When there’s just a few people, there’s very fluid communication. People can see, they know what the entrepreneur wants as, as the company starts to get a little bit bigger, you’ve got to document what you do. You’ve got to get it. You’ve got to get your processes on paper. You’ve got to get your checklist and the things that make effective lead generation lead conversion, client fulfillment.

Speaker 3:

You’ve got to get that on paper. And if you don’t do it, what happens is, um, everybody’s starts to be left to their own devices and their well-intentioned they’re doing the best they can. But before long, the entrepreneur walks in and says, what the heck’s going on? Why are we doing it this way? What happened? And who’s this person what’s, you know, you start to lose this, the control, and you lose the ability to deliver for your clients. And you start to run into all kinds of clients, fulfillment issues, you’re dropping leads, left, and right, there are issues that are happening in the business and the business plateaus. And a lot of times the entrepreneur can’t figure out why they’re stuck at a million dollars. Well, it’s because they haven’t documented and put the processes in place that enable other people to execute.

Chris:

Right. I love that. I always say there’s a link between training and trusting, because if you can show someone how to do something and sign off on it, you can leave them alone. You don’t have to jump back in. So as, as we wrap this up, we always like to end with these five questions. So I’ll go rapid fire, say whatever comes to you, but first what’s a brand you think has perfected its process that you admire

Clate:

Disney. Nice, I love the Disney parks.

Chris:

Perfect. Who’s someone who’s coached or mentored you.

Clate:

Uh, let’s see, I’d say, uh, Michael Gerber, uh, Jim Collins and, uh, my personal, uh, executive coach, Steve Hardison.

Chris:

What’s your favorite book or podcasts other than mine and yours?

Clate:

Uh, The Power of Positive Thinking by Norman, Vincent Peale,

Chris:

Great most entertaining person. You follow online.

Clate:

You know, I’m not a big social media followers, celebrity follower, but I am an NBA fan and I love Charles Barkley. He’s very entertaining. And what’s one app that you couldn’t live without Slack. Yeah, me too.

Chris:

All right, clay. Well, thank you so much for coming on. If people want to connect with you, where should they find you or reach out to you?

Clate:

Keap.com is a great place to learn and connect and see the resources we’ve created. Especially during, you know, the coronavirus. We created a bunch of keep going resources for small businesses that can get that on our, on our website, on our, on our blog. Or you can follow me on Twitter. Awesome.

Chris:

Keep going, keep growing. Clayt I love it. Thank you so much for coming on. I think the, the, for everyone that’s listening, pay attention to the ones and three is, and the changes happening in your business and Clayton amazing resource through his company. So, uh, thank you again, clay for being here.

Speaker 3:

Thanks, Chris. Great to be with you and thanks some good luck, probably doing a train. You

Chris:

Hey, thanks for listening to process. Makes perfect. If you’re listening on your earbuds on a run in the car, we also have a version on YouTube. So if you want to see this in color video with me interviewing all these great guests, check it out on YouTube, just search Chris Randazzo, and you’ll find my channel on there. If you found this helpful, we’d love for you to leave a review or rate the podcast. If you found the information valuable, please share it with a friend, a family member or anyone else you think could benefit from the information. Remember to connect with me at Chris, Ron Zio on all social media platforms or the company at train UIL. That’s train you a L like a training manual, everywhere that you want to follow us. Thanks again for watching or listening. And we hope to see you next time.

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