Building a Moat to Protect Your Startup

This week, Colin C. Campbell shared some ways entrepreneurs can protect their businesses early on, right from his book Start. Scale. Exit. Repeat. Colin emphasized that the startup phase is a “necessary evil” to get to the fun part – scaling your business.

Colin emphasized that the startup phase is a “necessary evil” to get to the fun part – scaling your business.

He explained that picking an idea with strong scaling potential is critical early on. Colin shared his 1-5 rating system to assess an idea’s scalability, with brick & mortar businesses rating a 1 and digital/SaaS models rating a 5. He stressed that subscription and recurring revenue models, despite requiring patience to profitability, are extremely lucrative long-term with their predictability and built-in customer retention.

Colin advised entrepreneurs to get strategic with defensibility too, building protective “moats” like secured distribution channels, branding, patents and exclusivity around their ventures early on. With the right scalable concept and defenses to threats, startups can explode growth by implementing the many scaling playbooks Colin details later in the book. 

Listen to the full session above!

  • Read the Transcript

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    Start Scale Exit Repeat Serial Entrepreneur Club here on Startup Club.

    And we’re so happy to be able to be here today. Actually, Colin and I are at an EO conference. Which is part of the book launch Start Skill, Exit, Repeat, um, here in Tampa, Florida. Um, we’ve been presenting, he actually did an amazing presentation about actually start skill, take money off the table. So Colin, can you hear us?

    Yes, I can. And I’m on Wi Fi now. Can you hear me? Like a hundred times better. Oh my gosh. So I was actually just, when I opened the show, I was talking about how this isn’t a typical podcast. This is a live show that we do every Friday on Clubhouse. And sometimes it gets a little buggy. Sometimes we have some issues with the app.

    You know, so just, I said just bear with us. But I don’t know if that message got through or not. But it is a live show. And it’s a live studio audience that if you want to come on stage, you can actually join us on stage. So if you’re listening to this in podcast, think about joining us every Friday at 2 o’clock Eastern.

    Today, we’re talking about scaling your business and building a moat, two very important concepts. And if you have not started a business, this show is actually really good for you because we’re going to talk about that concept of what ideas you pick and how scalable those ideas are. And we even have a rating system, one to five.

    And then we’re going to talk about building a moat. How defensible is your idea? So if you’re in the ideation phase at this stage, this is a great topic for you. How scalable is your idea? How much of a moat can you create with your idea? How much can you protect and defend that idea? So that’s what we’re talking about today.

    We’re going to get right into it. Michele is our moderator. Let’s make you a moderator there, Michele. And, uh, I’m looking forward to this conversation. And yes, we just delivered, uh, two, uh, conferences back to back. One in Orlando, one in Tampa. Uh, we’re now getting on the road and doing some live, um, events.

    Which is very, very, very good. Uh, the one we did yesterday was Start, Scale, Exit. Take some money off the table, repeat. And that was really about changing your perception of who you are. As a founder, as a startup person, are you a, are you a CEO of a company or are you a trades person, an entrepreneur, and can you perfect your trade?

    Can you master it? And the one before that was about the X factor and that one was really interesting because that’s probably the number one thing you can do to scale your company is find an X factor. And when you’re starting a business. The book, you know, we talk about this in the book, we really encourage people to think about what their X factor could be, which is something unique and different that you have that nobody else has in your industry.

    Find that little niche, find the white spaces as Joe Foster, who’s founded Reebok. Find that place where no one’s playing in and own that space and you’ve got something unique and different. And that can help you scale, especially if it can solve a problem or address a bottleneck in a particular industry.

    The show today though is all about scale and building a moat. Mimi, Kyle, Michele, let’s have some fun. If you’re in the audience, I see Shadow, you’re there, we’d love to have you on stage, we always do. If you’re in the audience, please join us on stage to talk about your ability to scale or build a moat.

    As well. All right. Well, we’re going to dive right into it. This is actually a chapter in the book It is in the start section. It’s actually chapter five So i’m gonna, you know say this is one of my favorite chapters Um, and i’m going to tell you why everyone all the members here is because it gives very you know subscript, uh, very specific information And almost like a checklist, I’m going to say, Colin, like you said, where you can rate yourself.

    And I, I personally, I love those kinds of things when I’m reading through a book, um, because I like to feel like I can just like take something away immediately and actually use it right away. So I’m going to start by reading a little bit here and then we’ll just dive right in the conversation. Um, you know, Everyone here in the room should, you know, if you want to come up onto the stage, please just let us know.

    We’re happy to bring you up because we want to hear your experiences and your questions. All right. So, there are a number of moat building activities, right? So, by the way, moat building by that we mean. You know, competitive, building a competitive strategy. That’s what a moat is like a moat around the castle.

    You can do it early on in the life of your startup that can make a huge difference down the road and help you scale the business. So this, uh, you know, ties very well into scaling, right? We’re spending all this time. We have this great idea and, um. If we don’t start thinking about this at the beginning, we could get ourselves into trouble right down the road here.

    We have Michele. I like the way you’re going with this because I was going the opposite direction. I was thinking scale 1st and then protect later where you’re going into protect 1st. Think about protection and then scale. So I like the way you’re rolling with this. All right, cool. Thank you. All right.

    So you may come up with ideas that are not immediately defensible, but you can still launch them and build moats around them after the fact. Okay. So Collin just commented on that. So we’re going to talk about how you do it before, during, and after starting, right? Cause you know, things change, especially in today’s environment with technology.

    So he says, that’s exactly. What we did with paul. com. We were far from being the first in the dog bed space, but acquiring the domain name was an example of a moat we’re building to create to protect the brand. So in fact, every entrepreneur should factor the price of a strong domain name into their marketing funds.

    So I’m just going to skip a. A little bit ahead of here. A very practical moat, for example, is to pursue patents, trademarks, and copyrights. All right. So of course there’s many different ways, right? I think we all know this. There’s legal protections, but I, um, you know, legal protections work when you have a very unique product and that’s not always the case.

    So we’re going to talk about that. It could be your supply chain. It could be a product. It could be, you know, a strategic relationship that you have, there are a lot of different ways to do that. But here is one, um, quote I want to take. Perhaps you can scale your idea, but can you defend it long enough to allow you to scale it?

    So I think that is a great question for us to talk about as we start this conversation, is how do you You know, maybe your idea is not completely unique, right? Colin, maybe is an evolution of something that might be novel. There are a lot of different ways to build remote, but let’s just talk about that a little bit first.

    And then I, I want to get into, um, this 5. Defensibility rating scale that you have developed in the book, and it also is very, uh, synonymous with different stages of a startup. So, Colin, you know, so I’m a startup, um, you know, maybe I don’t have something unique, right? In this case, we were talking about dog beds.

    Like, how do you go about? You know, building that defensibility, that moat, like, does it have to be something that’s big, like game changing, like chat GTP, or could it be something little and incremental? Like, what are your thoughts? All right. So first of all, even before you start your business, you want to be a, begin to think about the defensibility of that business.

    Okay. So your idea itself, we could actually pick and choose ideas to launch a startup. That are scalable and that also are defensible. Okay, we’re gonna talk about scale second because Michele sort of set the direction here, but we’ll focus on the moat right now. If your idea itself is unique and difference and it’s not, there’s no ability, even for large companies to copy it, then you have a natural moat built in and you’re probably saying, well, that’s not possible.

    There’s no, you know, how can you ever do that? Well, we did that. We did that with club, c l u b, which was another extension, uh, similar to com, net, org. We had club. And Amazon and Google, uh, both registered for a number of TLDs. I believe one registered for team and one registered for group. But even if they were to give their TLDs away for free…

    There was still value in people owning dot club. It was a unique domain name. We’re not going to call it a monopoly But we will call it more of an oligopoly Where you have you have this something unique and different and you can actually grow that business Without anyone taking it from you. Yes There could be some who they promote dot team or dot group or something else unique and different But you still got dot club.

    There still is only one dot club. If you own wine dot club, that’s one domain name. And there are no one else owns wine dot club. So you can begin to think about your idea and building a moat. Does it have a natural moat? You know, I, I look forward for new spaces. We’re getting into the 2020s, which we were seeing quite clearly a paradigm shift with AI.

    And the opportunities are huge. So, how can we build products or services that have an embedded moat in them? Now, a number of you already have your startup. So, because you have your startup, don’t panic. There’s techniques you can use to build that moat. Michele just brought up one, which is the domain name, the branding.

    Right now, 95 percent of our business comes from paw. com. People know us as a brand. Yes, we’re expanding on Amazon. But the reality is most of our business is through paw. com. And because of that, we have a little bit of a moat. Yes, we compete with Wayfair, we compete with Costco, we compete with Petco. Uh, although a lot of those are, most of those are, uh, distributors of our products, ironically.

    Uh, but yet we have this brand, and if somebody knows paw. com and they… Go to paw. com, type it in, they can see that we have the best collection of unique products for dogs and for homeowners who want a design forward products. We, we invented the memory foam pup rug, uh, we invented the waterproof blanket protector, we invented the memory foam car seat for your dog.

    Excuse me, I have been talking for two, three days straight. In conferences. It’s four days now. I think I think I’m losing my voice. Um, so we’ve invented these products and not only that, we applied for utility patents and design patents for these products. So that’s the most obvious way to create a mode is file for your trademark file for your copyright file for your patents.

    You don’t have to follow your patents immediately if you just want the U. S. Protection. You can do it up to a year following the launch of a product. So you can actually get the product out there and see if it’s successful, and then invest your money in filing that patent. I always, when I always talk about legal advice, I recommend you do connect with your lawyer to ensure that you get the correct legal advice.

    But one of the techniques we use, sometimes, we did one utility patent where we got global patent rights. We thought it was going to be such a hit, and it was a hit product. Uh, so we actually filed for that patent and, uh, and we got that one, uh, once, as long as you file before the launch of the product, uh, you can get global patent rights.

    Uh, so that’s, that’s, that’s one way, branding legal, that’s two ways actually, right? Branding legal. Third, and this is pretty cool, distribution. If you have all the distribution in the marketplace, even if someone tries to copy you, you can distribute the product. Much faster and quicker. And trust me when a distributor like Wayfair or, um, QVC who distribute our products, they’ve already got our products.

    And if you come in, they’re not going to kick out their existing vendor to have a copycat vendor. Uh, you know, deliver the products to their market. They want they want to try to intrude the tested even on Amazon. I called this This one, the King of the Hill. You know, if you’re selling e commerce products on Amazon.

    Do you remember that, Michele, remember that kid’s game where you’re the, I’m the King of the Hill, and then someone would try to push you off, you know, push you off, and then they would say, I’m the King of the Hill now, because, you know, they got, they got that top position on the hill. Uh, that’s what it’s like on Amazon.

    You go on Amazon, you know what your mode is? Reviews. The most reviews in a product category. So if you come in with something unique and different, You’ll be on Amazon and you’ll be getting those reviews and it’s very hard to displace a leader on Amazon. You’re building that moat. So there’s three or four or five ideas around building them out, Michele.

    Yeah, I love those, you know, um, So yeah, so what you’re saying is, you know, this is doesn’t have to be like a revolutionary thing It could be an evolutionary thing, right colin? Your example with paw. com is a really good example of that. Of course There’s like millions of dog beds in our example use case here but yet This company was able to, you know, pivot, listen and kind of meet a need, right?

    You’re, you’re meeting a need and you’re pivoting. And it’s, I think we find these ideas. I know we talked a lot in the past. Podcasts about ideas are everywhere. I think a lot of detecting and honing in on what this mode is. It’s just really like just every day. I like to call it micro moments, like these micro moments when you’re, you know, throwing your dog bed out and you’re like, Oh my gosh, that looks so horrible.

    Right. That’s a micro moment where you stop and you think, Oh my gosh, maybe I could make a better looking one or one that has a higher utility. And those little simple things are things that build a moat. Yeah. I’m just going through the book right now. And one that I forgot was build a moat through exclusivity and laser focus.

    Okay. So we have a company launching probably next week. It’s called Pensilla. Uh, and. This is a company, it’s run actually by my nephew, and we, the incubator, the startup club, we invested in this company. He’s actually created AI, it’s an AI platform for e commerce companies. And it replaces the staff, marketing staff, so it becomes your AI marketing staff for your company.

    But it’s exclusive to e commerce companies. There are a lot of companies working on platforms. Like, obviously, the big ones, like Canva, let’s be quite frank, you know. So how are you, how is this company, Pencilla, going to compete against Canva? And the answer is, it’s going to be a laser beam. Very focused on one particular market segment, and do it better than anyone else in the world.

    That helps you create a moat. And that’s something you should think about as well. You don’t necessarily need to be… And I always get this analogy wrong. It’s sort of like there’s the blue, the book, the blue ocean, Michele, maybe you can explain that. Cause I think that’s relevant for this topic. Yeah. So that’s an amazing book that I’m sure many people have heard, but, um, the blue ocean strategy is basically the whole concept is, is that you don’t want to be in the red ocean, the red ocean.

    Means that you’re where the sharks are attacking you and it’s bloody. It’s bloody competitive. It’s just a horrible scenario. You’re competing on price. You’re driving prices down. Just everything becomes, let’s just say. Commoditize so the idea is you kind of map it out and you figure out where there’s blue ocean.

    Colin also refers to it as the white space really looking at the competitive landscape in terms of what people want and what you’re offering should be so you can play. And an area oftentimes it’s very oftentimes it’s the niche, right? Something specific that you can really sell in and that it’s not massively overpopulated with, um, competitors.

    So you’re really strategically looking where there’s a need in the market and where you can serve it without millions of, you know, others. Competing against so that you can super excel and, and even grow and grow your market from there. Yeah. And then, so, and you talked about earlier, Michele, the defensibility rating.

    So in the book, start, scale, exit, repeat for, I know a few people are coming in and later here in the room, uh, for the book, start, scale, exit, repeat. Uh, we talk about many different concepts and one of them is all about how do you create a moat for your startup? And we actually come up with sort of a rating system, and I think this is useful mentally if you’re, if you, if you’re just coming up with the idea, because when I opened, I talked about, could you have a natural moat, a moat that exists within a company or an idea that as you continue to expand it, uh, it actually, um, can be defensible because it’s, it’s got a natural moat, just the topography of the castle is designed in such a way that It’s very hard for someone to attack that castle.

    And I use the example of club, which is a very unique and different domain extension, as opposed to com, net, org. So here’s, here’s sort of how we broke it down. We have, so I have defensibility rating 1 to 5, and we have a nice chart in the book. One, I don’t have any ways to build a moat. You’re pretty much, you’re in trouble.

    Um, if you’re in that stage, I think you can at least get to stage two. We got to, we got to think that through and hopefully the show will help you. Um, or this podcast that you’re listening to, um, to, I have an idea of how to build a moat, but haven’t taken any actions yet. So you’re starting to get there.

    Number three, I know an idea of how to build a moat and I have taken at least one action. So I patented my product. Okay. That’s my first action that’s done. Number four, I have multiple ways to protect my idea. Example, received a patent, exclusive distribution agreements, etc. So now I’m, I’m getting branding up.

    I’m getting, you know, distribution up. Number five, I have an ironclad moat with supporting defenses in place. Example, owning multiple patents, distribution agreements. And dominating search engine results or dominating Amazon. I’m leader in the pack. I’m king of the hill of Amazon. I have the most ratings and it’s hard for someone to take me down.

    Now let me talk about this one about dominating search results. This is owning the first page. You own the very front page of Google. We know from statistics, by the way, that if you’re on the second or third page, you’re like in the decimals, okay? If you’re on the first page of Google, that’s consuming 98 percent of all the traffic.

    So, it’s better to be on the first page of Google in more of a long tail fashion. So, it’s called long tail, where, let’s say I run a, we do run a school, my wife and I, in Fort Lauderdale. So if we try to say we Montessori school, Florida or Montessori school, then Google’s not going to pick up on that. You know, we’re not going to get the front page of Montessori school.

    If we say, if we add a geo to it by saying Montessori, Fort Lauderdale, or even another word like the word best, we’d like to, I tend to like to add that word into the title tags. If we do that, then we can dominate on the front page of Google. I had a company, I set up a real estate business. It was rentals.

    And I couldn’t get Rentals Fort Lauderdale, so I, I, because we were in East Fort Lauderdale, I typed in East Fort Lauderdale Rentals. And we called the name of the company East Fort Lauderdale Rentals. And we were able to get the top of the search engine. We’ve sold that company since. But that being said, if you can own the top of Google, if you can have the most reviews in Amazon, if you can have the broadest distribution, if you can own the brand, if you can patent.

    You can trademark, you can copyright, man, you’ve built some moat and you’ve, you’ve, uh, protected your company and all the hard work and investment that you do to grow it. It’s much harder for people to take that away from you. Great to see you again, Augustin. Uh, we love having you on our show every Friday and you contribute so much.

    Really appreciate it. Michele is, uh, our moderator today and the show is all about creating a moat. and then scaling your business. We’re doing it backwards from the book. I actually wrote the book, the chapter scale, scalability and the idea of scaling before the chapter on building a moat. Thinking, you know, you want to build your business and then protect it.

    Versus what Michele has done here today, she sort of reversed that and said, well, we’re going to talk about the moat first and defend it, and then we’re going to scale it. And I think that actually might have been a better approach. Well, let’s um, you know, I, I, I’d love to hear from the members, any questions or their experience about building this defensible moat.

    So, Augustine, you’re here. And we’re going to put you on the spot if that’s okay. We’d love to hear your thoughts on this topic. Oh, thank you very much. And I appreciate it. Um, thank you. Um, yes, building the moat. By all means, I believe is and I like the way that you have positioned it, look at it 1st and then scale and build around it.

    Well, not around it within it, because you’ve already built the moat. Yes. Patterning an idea is great. All those ancillary things that we don’t think about, uh, yes, we should have a checklist and we should, wherever possible, address them. Um, another thing that, you know, in my scope of things that we work with, sometimes you’re working with, Ideas that not necessarily are unique, but ideas that the way that you present them and the networking opportunities that you have are the ones that are going to give you that scalability.

    And having the opportunity to, as you partner, be top performers, pop up in searches, get the disability of others before. And that the way I look at it is when you have an idea that can be, or may be replicated, you need to make sure that you corner their market, get that market share first and. Later on, if somebody wants to copy that idea, um, at the end of the day, you already have the network and you have the individuals, you’ve created that credibility around your product and servicing one topic that I talk a lot about because I’m in the financial side is how many companies out there have a remittance product or are looking to launch a remittance product.

    But if you don’t have a user base, if you don’t have. That, um, vision with ancillary products and services. That’s a product that it’s a dime a dozen. If you think about it, just like a debit card. So what is it that you can do in creating an ecosystem that will not be replicated as easy?

    Yeah. I like the way of term that like ecosystem, you know, that. It’s so, like, if you can really build something, and it can’t be replicated. Now, obviously, a lot of things in this world can be replicated, though. But if you have the legal protection in place, if you have the distribution, if you have the branding, you know, think of Tide, for instance.

    Like, what a phenomenal brand. It dominates the space, it’s dominated it for many, many, many years. And, you know, it’s really all about branding. You know, I think there probably are superior products on the market. I don’t know, I’m not an expert in that. You know, think of wine. You know, Michele and I, we, we’re traveling for four days now, we’re on conference, and we go to the bar, and like, every bar we go to, we ask for like a Pinot Noir, and they say, oh, what would you like, Miomi?

    Miomi, if you’ve ever drunken this wine, is very sweet. And, uh, it’s not something that if you’re watching your calories, or you’re being careful, that you really want to consume a lot of. It’s like it’s like sugar wine. It’s I don’t know why it’s so popular, but constellation brands. They’ve done a great job of positioning their products and by the way, I’m a member of their employee buying products.

    So I know all their brands. They’ve done a phenomenal job of positioning and all the restaurants and distribution. And by doing that, they’ve created these sort of massive wine brands, which then permeate into the stores. And so when you go to the stores, you can actually see and I know that brand I’ve tasted that wine and that’s how they’ve done it.

    They did it through the restaurant distribution channel. We had someone was going to add some comments there. Yeah, I’m going to add on because you’re making me really think about something. Um, Augustine and Colin is, you know. Sometimes it’s the compilation of several factors that give you the most, maybe the product is slightly different.

    Maybe your distribution is 25 percent better. Like, I think sometimes, you know, you know, just like look at all the different factors that can give you that defensible moat. It all adds up to a stronger. More defensible, you know, strategy. So I would say, you know, for me, at least when I’m thinking about these things, I’m not just like, okay, I have to create the perfect product that’s so different.

    Um, I think there’s a lot to be said about looking at all these different components and trying to get an edge. And it, it evolves to a, you know, comprehensive kind of defensible, competitive product. Absolutely. Well, now that we have all agreed on all the action items we need to do and to focus on to create a moat, let’s go to scale.

    Let’s, that’s the fun part. I always love scaling. So in chapter five of the book, it’s titled pick an idea that can scale. And by the way, this is just around the ideation process we’re, we’re, we’re focused on right now. We actually have a, the second section of the book. The largest section of the book, Start, Scale, Exit, Repeat, is on scale.

    And I’m here to tell you that scaling a business is simply about implementing systems to scale. 99 percent of small businesses remain small businesses in the United States. But if you choose to scale your business, you can scale it. Some businesses are more difficult than others. I will admit to that.

    You know, my wife and I, we own a school. In Fort Lauderdale a Montessori school. It’s actually the highest rated. We get the highest reviews on great schools dot org. It’s a great school and we hit 110 students a few years back and my wife and I were like, what can we do? Um, it’s really my wife’s school and there’s another lady who runs it as well with my wife.

    And so what can we do to get that 111th student? Well, we can add a floor, talk to the contractor. Let me Very difficult, difficult and 2 million. Okay, what if we bought the properties around it? Well, we gotta get municipal approvals, which are almost impossible to get for schools. It’s very, very complicated.

    And on top of that, you gotta spend millions and millions of dollars. So to go from 110 to 111, that idea itself is very hard to scale. So when, if you have not chosen your idea to run a business, or if you have not chosen, you’re in the process of ideating, Trying to figure out what your next idea is. I encourage you to look at this chapter because this is all about understanding the scalability of your idea, and of course we have a 1 to 5 rating.

    Again, which we’ll talk about in a few minutes. I’m gonna make this case, Michele. Because she and I, we run a number of companies in our incubator. We actually have a day job, by the way. Agustin, uh, and, and uh… Dr. JS, like to see you again. We actually have a day job. It’s not, we don’t make money from the clubhouse.

    This is just a way of giving back. Our day job is running an incubator. companies in that incubator. Some of them are physically there. Some of them are virtually there, I call it. Like they, a couple of them in Canada and whatnot. Uh, and we work very hard on them and some of them have grown quite big. You know, when I was running Hostopia, we had 600 employees.

    Geeks for Less, the company we still own today, is 800 employees. I’ll tell you right now, my wife works so hard on this small business with 16 teachers running a school of 110 students. She works so hard and she’s so stressed out and it’s just such a challenge. It’s easier to run a larger company than a smaller business.

    And if you’re in the audience and you run a small business, you’re probably nodding your head saying, Yep, he’s right. It’s fricking tough because you got, when you’re in a small business, you’ve got to solve all the problems yourself. You’re the one is, is the jack of all trades. You have to be an amateur accountant, amateur lawyer, amateur whatever.

    I mean now we got AI, thank goodness. And I’ve actually written two contracts on AI on ChatGPT already. I think the thing is phenomenal. And by the way, we’ve done a lot of shows on AI. This is, we won’t, we won’t turn this show into AI. But you want to scale your business? Use AI. Figure out how you can use AI every which way to scale your business.

    That is a game changer. I would also say BPO, Business Process Outsourcing, combined with AI, through foreign countries, virtual assistants, those kind of things. These things can really help you scale your businesses. Uh, we talk a lot about this in the scale section of the book. But today, right now, we’re really focused on just picking that idea That can scale when selecting your startup idea, you need to determine your comfort comfortability with scaling.

    We actually have over 200 callouts in the book and it was written for ADHD entrepreneurs. We really, we really did. It’s 58 chapters, 30 illustrations, 200 callouts. And so I just read that call out right there. One of the concepts of businesses that can scale is that the more you can scale them, the more global they are, the more competitive.

    So there is a point where you have to think for a minute. Do I want to own the Fort Lauderdale Montessori education market? Or do I want to own, uh, a Montessori products development company that ships nationally or internationally? Or like paw. com, we own the dog beds, rugs, blankets, uh, memory foam car seats, that kind of stuff.

    You know, we, we compete in the North American market. We don’t compete outside of, outside of the North American market. In fact, we don’t even ship outside the North American market, which I think we have to fix. But the fact is, we don’t. We said, this is going to be our space. This is where we can win. And we are dominating it.

    The company has been on the Inc. 5000 three years in a row. I told you we had a day job. Wasn’t making that one up. So, how comfortable are you? Like we could go global with PAW, but we’re talking about substantial investments, uh, and you’re increasing the risk. So when you pick an idea that can scale, do you pick an idea that is a global business?

    And like Dot Club, by the way, was a micro global business. Michele and I traveled to about 30 or 40 countries. We went to China 13 times to get approval. It took us four years to get approval in China. And we were up against a global market competitor like com, which was in the marketplace. But we were unique and different.

    We managed to get up to a million domain names before we sold to GoDaddy. So, but that’s competitive, right? You can see that when you, when you pick an idea that’s highly competitive or, um, highly scalable, there are lots of companies around. There are people, there are companies in India competing with you.

    There are companies in Ukraine and, and, um, Europe and, Canada and all over the world, it’s a competition, so you want to think about how comfortable you are with that, and especially if you get into a digital platform or anything like that. You are in a global marketplace and it is ruthless. So be careful with that.

    Any thoughts on that from our panel on the stage, Michele and Augustine and anyone else want to come on stage to to ask a question or to Comment on how they scaled their business. Please raise your hand. It’s a live show. Start with you, Michele. Yeah, I think, um, you know, I would say too, I would encourage people like, don’t wait for the perfect idea or what you think is, um, you know, so unique in the market.

    This is something that I personally have always had an issue with myself in my brain. Like I’ll come up with an idea. And just be okay. I can almost like talk myself out of it immediately because I’m like, Oh, somebody else is already doing it. And I’m sure, you know, a lot of people here have that kind of reaction to themselves.

    You know, it’s a bit of analysis paralysis. Um, I think what we’re trying to tell everyone here is it’s not just about the product has to be so different and it’s the first time ever. There are a lot of ways to be competitive. Without that, so Augusta, what are your thoughts on that? Well, it is very competitive.

    It’s a doggy eat doggy world out there. Um, scaling and part of the process that. We go out and we look at our target audience, allows us to get a general idea, of course, knowing what our competition is doing. But when you go out there to launch your product, one of the things that we focus on is different segment groups.

    And deploying certain features and function, but functionalities, uh, based on your target audience, obviously, you’ve done a little bit of, of surveying and understanding, uh, what are the needs, but in that process, you continue to develop your idea. Developing your idea brings in new products, new features, new functionalities.

    But what I’m saying here, it’s, it’s a never ending story. Um, if you want to stay in a growth potential. Now, uh, when do you want to stop? Do you want to stop? Uh, I looked at what, uh, Colin had mentioned about, um, the Montessori. The effort to build for one more can translate to, okay, that one build out. We’ll basically put my product in a new tier where I’m going to be now servicing maybe 200 more.

    So the cost associated to that in that new tier, it’s the effort that you have to put into it anyway. The question is, are you ready to do that or not? Because of all the potential new items that you have to incorporate in the process, and at the end, is it cost effective? Is my return on investment going to be there, but in every item that you do, you know, one of the things that we like to focus on and the different, um, um, ventures that I’m involved with right now is scalability.

    How do we position this and sometimes, depending on the product, we may focus on the 1st, 500 customers than 1, 500. Then 5, 000, uh, that’s the scale that we normally just look at it initially, and there we gauge it as we move forward. Um, so hopefully I’ve given some insights to, um, the question you’ve asked.

    Yeah, and I think that in today’s market, we have a unique problem. So if we, if we do want to spend 2 million, we could probably add an extra 100 students. Um, but our unique problem, which is not unique, I’m sorry, it’s, it’s everyone has this problem. Is interest rates, you know to get a commercial loan yesterday.

    I’ve had a loan We thought we were going to get it at 7. 9 percent. I got a call from the bank yesterday They’re moving it to 8. 6. Oh my gosh Interest rates are just killing these the startups and small businesses and it’s a shame And so that becomes part of the equation. It has to become part of the equation, you know, two million dollars uh invested to get a hundred new students and Uh, the interest alone on that, you know, that’d be more commercial oriented.

    That probably be in the area of nine to 10 percent you’re talking 400, 000 a year in interest. You know, when it was three, 4%, it was a very different game. So that’s, that’s something to think about as well. It’s like, it’s, you know, how do we scale our businesses in a high interest rate environment? And I know a lot of entrepreneurs here are in the real estate business.

    We’re one of our businesses in real estate. As well, that’s why we just last night, I just got the call literally at 730 at night, um, about this loan that they had to raise the rate to 8. 6 percent from 7. 9 and it was like, yeah, but we just, we agreed at 7. 9 only 30 days ago, all your lock expired and the interest rates went up.

    I mean, it is what it is, you know, let me talk about the scalability rating of your idea. So if you have not picked your idea, I just want you to think about or if you’re thinking about a particular idea, How scalable it is. So I’m going to start with one again. I’m going to go from, so, one to five. And we’re going to start with one.

    And I use an example in the book. And we have a nice chart that lays out in the book. Uh, brick and mortar based. So brick and mortar companies tend to be high infrastructure costs. Examples, schools, restaurants, retail, store, medical offices. The growth challenges, limited scalability, high fixed costs, location dependent.

    So let’s see if we can step it up a bit. So I got two. Time and Materials. Consulting. Marketing Services. Customer Service Provider. Limited Scalability. Labor Dependent. And lots of competition. You know, it’s interesting in the time and materials business because we had one for ten years. We had a company called Brisk Mobile.

    And we started it with a million dollars. We sold it ten years later for one million dollars. We never made one, we never took one penny out of the company. It’s a tough business. I was talking with another entrepreneur last night about this at the, we’re at the, uh, Entrepreneurs convention at, at NERF, called NERF.

    It’s an EO convention and I was, uh, one of the speakers at this convention and I was talking with this entrepreneur about time and materials business, how tough it is to scale, but it’s better than blick brick and mortar if you want something that’s a little bit more scalable. So a third, number three, so let’s go to scalability three.

    A product or service based, you know, e commerce, business, online training, costly inventory, high internet costs, production constraints. So one of the challenges, so we’re actually, Michele and I, it’s amazing what, like, the life we frickin live, unbelievable. We’re at HSN this morning in Tampa, uh, pitching the idea of taking our paw.

    com products and selling them on HSN. And, um, It’s great, but then we have to fund the inventory. So we sell 10, 000 units. We got to come up with the money. And remember we got that high interest rate problem. We have to come up with the money to fund those, those, that inventory. Scalability rating number four.

    Business type. Recurring revenue business. This is probably one of my favorite businesses. I just love this. Subscription boxes, accounting, software, cloud computing, growth challenges, high build and personnel, personnel costs, competition, customer retention, and I didn’t have this in the book, but it should really have said, years of losses, because I’m telling you right now, when you get into the subscription business, it is in my absolute favorite type of business, we lose money year after year, at Hostopia, we lost money for the first five, six years, at Dot Club, we lost money for the first six years, seven years, ten And then the year after that, we at dot club, we went up a half million the year after that we went up a million the year after that we went up another million in profit and it just keeps going and going and going.

    It’s the most beautiful thing you can see. It takes a long time and very patient investors. If you pick an idea like that. Uh, number five, digital businesses. This is what I call them. Digital businesses, AI content, domain name registry. Software as a service, high growth costs, got the same problem, very, very high growth costs.

    Here’s where it gets interesting. High growth costs requires lots of distribution, market saturation, and global competition. You’re in a global marketplace. It is a fierce environment. Which if you go back to the moat, if you can remember when I said focus, if your idea can focus, Like a laser beam. If you can own a particular market or niche or something small enough that you can be the best in the world at creating that mode, then when you do compete globally, you are in a great position.

    And I think probably one of the, we had two companies. We have many companies, sorry, but two that we sold off recently. One was Hostopia, which was a web hosting and email platform sold to telecoms. We dominated that space and we owned it. And, uh, it was a global marketplace that we actually won. And if you read the book, we talk about how we won in a global marketplace.

    We won primarily, I believe the number one thing was. Finding our X factor. Don’t want to go into that in this show. We’ve had different shows about that. We’ll have another show about the X factor, but it’s basically something unique and different that you have that nobody else has. Then the other business was dot club.

    And in that particular business, we were, we were in unlimited inventory. You would give us 10 through GoDaddy. You buy a domain name, you give us 10 and we give you a name. Now, don’t get me wrong. It’s not cheap to be able to get your own TLD. Especially if it’s a good one like dot club. We raised 12 million dollars to launch that business.

    So so it’s not necessarily cheap But when you get those digital businesses, oh my gosh the recurring revenue those kind of businesses They can be absolutely amazing and very scalable any thoughts on this rating or any other? things we might have missed That you might want to add on Michele or Augustine,

    I’ll let, um, Augustine, if you want to go, you can go first and then we’ll start to, um, wrap up the session, Augustine, I think, uh, calling you, you’ve hit many of the points out there. The 1 thing that I would mention is, as you continue to move forward, there’s going to be new challenges. There’s going to be new surprises.

    That are going to be popping up and you have to make the sound decision on how to best address them. I don’t want to say tackle them, but how do I address something that it’s either a new market entrant? Um, is it something that is going to set me back? Uh, does the competitor have a better offer that I do because they just launched a new product and feature?

    And marketing is very important. And, uh, I think that that’s one item that once individuals do, um, position their product, they slack because they don’t want to invest their dollars and you tend to lose oversight because that’s the first thing to cut back when, um, you have to start cutting expenses. Uh, so I just would caution.

    You know, you have to have a plan and you have to have ongoing revenue to continue to support and maintain the business. Well, thank, thank you. Yeah, thank you for that. I, I, I totally agree. And in the book we talk about in the start phase, a four sticky note business plan. I think it’s very important to try to have a plan.

    I mean, we literally, I do this with, um, at NSU and FAU and we do these cohorts, and they’re absolutely free, by the way, and. We write a business plan in 30 minutes. And why sticky notes? ’cause you can, they’re sticky, put ’em up there and you focus on it. You know, one thing about the many entrepreneurs, we all, a lot of us have ADHD and it’s sort of sometimes very hard to, to focus, but you put four sticky notes and, and it’s four to four headings for each one on the story, the people, the money, and the systems.

    And it’s really about locking those things in. We go to, in detail in the, in the book, you know, scale. This quote is a section of our book as well on page 143. This is the intro to this section. I hate startups. Period. Space. New line. Believe me, as a serial entrepreneur, I know that sounds ridiculous. For me, the startup phase is a necessary evil so I can get to my favorite part of the process, scaling.

    The reason I hate startups is that they grow very slowly. Remember the flywheel effect described by Jim Collins in his book, Good to Great? At the beginning, it’s difficult to turn that flywheel, and anyone who has launched a startup can attest to how slow things can be in the early days. Scaling, on the other hand, is where it gets fun.

    And so, that’s what I’m going to leave everybody with on this particular show. Uh, we have not touched scaling at all. Really, it is a huge part of the book and is, there are so many methods you can do to scale your story, your people, the money, and the systems, and we go in all of it, we touch all of it, you know this book, 30 years as a serial entrepreneur, 10 years writing a book, 2 years, and Mimi knows this, Mimi’s been writing, Mimi’s been doing the blogs on Startup Club, If you haven’t checked them out, like, we have all the episodes on Startup.

    club and she does blogs, she writes the blogs for them as well. But, two years with a group of six people interviewing 200, uh, interviews with about 50 that actually made the final cut for the book. We have experts, authors, uh, and serial entrepreneurs who we talk about in this book. And we interviewed people like Vern Harnish, who wrote Scaling Up.

    We interviewed him twice. John Mullins, he’s actually in the, uh, customer funded startup, uh, customer funded chapter. He wrote Customer Funded Startup. Uh, we interviewed, um, Joe Foster, who founded Reebok. He’s 88 years old, and he’s actually coming to my book signing. If you are in South Florida, next Tuesday at 6pm to 7pm, uh, we are doing a book signing for the book.

    At the Fort Lauderdale branch of Barnes and Noble and Joe Foster, who I’ve become good friends with over the last two years as we’ve worked together on multiple projects, including I gave him. I wrote a chapter for his book that’s going. It’s called the Golden Nuggets. Uh, and, uh, he’s coming to the event.

    That’s this Tuesday this Tuesday. If you’re listening to podcast, you probably missed it. But you can’t. But you know, if you miss these, we have these events all the time. I’ve got new signings. And speeches that I’ll be doing all over the United States and Canada. I’m really trying to focus on North America right now, based on what I talked about earlier.

    I mean, I just can’t stretch it out too much, right? And, uh, but if you want to know about that, you can go to startup. club and sign up to our email list. We have four or five or six authors and experts coming on over the next six next shows and you’re not going to know who they are unless you sign up to that email list startup club.

    We announced the authors. We’re now starting to do videos as well. Uh, short 30 second video tips through that mailing list once a week that you’re going to get. That’s just totally information to help you with your startup. We do that on LinkedIn as well. I can see our community. We’re very new by the way, outside of Clubhouse, but I can see our community on Instagram, LinkedIn, uh, even Facebook.

    Uh, Twitter is, is, is, and, and, um, TikTok is starting to grow. We’re StartupClub underscore HQ is, is, is the name of our club. You can join all of those. And if you did love the book, if you got the book, pay it forward and please, we would love a review. That makes all the difference. You know, we talked about reviews earlier, right?

    Augustin, thank you. I know you got the book, you talked about it. Last thing I will say, this app is a little funky, okay? It is hard to sometimes find us. If you liked… The talk that we gave today, we do this every Friday at two o’clock Easter. And if you are so inclined, and I’m going to do this to you, Augustine, uh, I’m going to click on Augustine’s face.

    You can click on notification settings and I already did that. You’re already on. So, and you can do always sometimes and never ever click on Michele’s face, click on Augustine’s click on Collins. If you like what you’re hearing, what will happen is if you’re on the app, then it will let you know that we’re here so that.

    Because I noticed a lot of people came in the room, but they came in the room almost a half hour after we’d already tackled a lot of great content, building them out. Please click on our faces, and um, and click on the three dots on the right hand corner, and click on always. That’ll, that’ll make certain that you’re informed when we start the room.

    By the way, I have followed as many people I can in the audience. Because again, this app’s wonky. Um, and I’ve added back that Tony Sun there, thank you for following me. Um, we want to follow as many people as possible who are on Startup Club. It’s such an incredible community. There is no way this book could have ever come out without the benefit of Alexis, thank you.

    Alexis Resha, Resha, Alexis, Resha, beautiful name. Uh, there’s no way this book could have ever come out without the community of Clubhouse. So thank you very much. We shall see you next week on Serial Entrepreneur Secrets Revealed.

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