The Best Marketing Is Free. Almost Nobody Does It.

0:00Eric Siu:So anyway, by the way, I was listening to this podcast with, you know who DHH is? 37 Signals?

0:12Eric Siu:David Hansel. David Hennemeyer or Hennemeyer or something? Yeah, something like that. Or maybe David Hennel, because I know David Hennel, so I'm just putting that there. David Hennemeyer or something. I just know he likes sports cars, and I think he lives in Malibu. Yes, he does. So he was actually talking about it. when they raised money from Jeff Bezos, the first thing he did was to buy a sports car because he's like, you know, I deserve it and we're gonna make the money for it, right? That was his take on it. So it was an interesting podcast, but there's one thing that sticks out to me and I think you have a point of view here, right?

0:39Eric Siu:He's like, it's always better to out-teach versus out-spend when it comes to marketing. Out-teaching is the best way and that's how we grew in Basecamp. You know, we did all these blog posts, blah, blah, blah. But the interesting thing is later he's like, well, you know, the blog posts aren't working that well today anymore because dah, dah, dah. So I'm like, don't get me wrong. I love teaching, but I don't necessarily agree that out-teaching is the best way to out-spend. If you have a lot of money and just spend on ads and you have a good offer, you have good messaging behind it, I still think that's better than out-teaching.

1:08Yeah.

1:09Neil Patel:On a side note, you want to hear something interesting about Basecamp? What? So, Basel's Expedition did the investment. I don't know why they did it. This was years ago. I talked to Melinda, who runs Basel's Expedition. I don't know her well, but I've had a few phone calls with her over the years. they ended up investing in Basecamp. Did you know Basecamp does distributions, but they've gotten paid all their money back plus a lot more over the years. It's been a great return for them. Do you know why Jeff Bezos invested? I think it was something to do with design or principles or some of the stuff that they're doing that he liked.

1:42Eric Siu:No, he was just curious. He was curious and he liked working with founders and he liked what they were doing. And they had reached out to Basecamp a few times. So Amazon, his team had reached Jeff. It's like, Jeff wants to meet you. They're like, no, we don't need VCs, right? And he's like, well, no, Jeff really wants to meet you. He's like, well, fine, it's Jeff Bezos. Well, they'll meet, right? So that's when they took on money. But DHH, by the way, when he came to the US, he only had 50 grand and he spent all that money on an Audi. Clearly couldn't afford it. And he said it himself. So sometimes, by the way, you know, if you want to, I've seen entrepreneurs where it's like they clearly can't afford something, but they will buy the thing and that will inspire them to work harder.

2:18Eric Siu:So, you know, to each their own.

2:21Neil Patel:I have a bad habit of pushing people in sales to spend more money so then that way they close more it actually works really well so you don't have to name names but you can give an example i'll give a real life example um and i'll be pretty public about this it's actually worked out for my co-founder my co-founder oh yeah well bought a home in las vegas years ago it was a big home it was three levels it was expensive it was expensive even for los angeles you pushed him so hard that you helped it helped but then he sold it for a profit and then he bought a home at that time in the community i lived in or a piece of land and then he was building uh and that's turned out really well for him as well but what i find is when people do transactions that make them uncomfortable a lot of times specifically with good people i don't do this with people who suck but with good people, it brings out the best in them.

3:20Neil Patel:And you see that fire being lit all over them and they just perform really well. And I never push people on things that are bad decisions. So like example would be a car. I wouldn't tell someone to go spend money on a car, even if they were doing well or not doing well, but a home, like things like that. I had a friend this morning who called me about a home. It's a little bit out of his reach, but I know he can afford it. And I said, you should do it. And he's just like, you sure? And I'm like, dude, you have a view of a golf course. You have a view of the water. This is amazing. You got a good price.

3:58Neil Patel:The seller needs to sell because they're in a jam. So they're willing to give him a steep discount. And I'm like, rates are high right now. You're taking on a mortgage, but within five years, rates should drop. I don't know what they will. I doubt they'll go back to where they were, but they'll drop. and as rates drop in theory and the market starts turning around in theory his property should balloon up and he's getting a steal of a price right now in which the seller's so desperate they'll do things like give him furniture, reduce costs. They even said, oh, if the appraisal comes back different let us know, we're flexible.

4:32Neil Patel:They just have to get the transaction done and they're willing to lose money just because they're in a job.

4:38Eric Siu:That's good. Again, I think the pressure, the good people can take the pressure it's a booster the bad people that you don't want to pressure them because they already couldn't take the pressure anyway totally agree and even with

4:48Neil Patel:him when he was going through the process he's like this is a little expensive i'm like you have two cars right he's like yeah he's like the other one is a collector's car i'm like are you losing money on the collector's car he's like no it's up does i'm like does it go up a lot he's like no i'm like sell it he's like yeah people hit me up all the time but i'm like sell it use that money towards the house and i started going through all the things he has in his life that he doesn't need and I bet you he'll pick up another like 80, 90 grand, which will then make the property more feasible. And then his current home that he lives in, he's gonna, he wants to sell it.

5:21Neil Patel:I said, why do you want to sell it? He's like, then it'll be really easy on me. I'm like, dude, you got a property with I believe a 2.25 % interest rate. I'm like, rent it out. He's like, I won't cash so much, maybe$1 ,000 because he's on a 15 year mortgage. I was like, take the thousand thousand dollars cash flow, use that money to pay down the current home you're in. Have both because then when you retire, you'll have a rental property that's paid off that's also producing your income.

5:47Eric Siu:That's good. So, by the way, when you called me yesterday and you had talked about somebody's agency. Right. So I want to talk about that. The hairy part about agency M &A today, because last week you had we had talked about another thing that I brought to you. and then you brought something to me and it was a good price, right? Well, you know, for the revenue, it was a good price, right? And I gave you my thoughts around it. And so I wanna share my thoughts here without revealing anybody's identity here. So let's say, you know, this deal was, let's call it like, you know, they're doing 10 million a year in revenue, okay?

6:23Eric Siu:Neil's like, okay, you might be able to get this for like a million dollars or something like that. Good deal, right? But my immediate reaction was, I spent so much time getting my team AI native this year, right? We talked about the 10 to 55, 60 % or whatever it is. And I know how much pain it is. And I am not willing to have to go through that calling right now with this, with this business, right? So there's just a lot of work to do. And it's a very people intensive business. And like hearing from my team today is like, dude, this is what I stayed for. Like this moment, like the traction we have now, like, like everyone's like collaborating, all that.

6:56Eric Siu:Like, I don't want to bring in a completely different culture and then have to cull and then like ruin their, their time and all that. And so I'd rather just not deal with it. And similar to, to the thing that I brought to Neil, I'm like, Hey, you can get this thing over here for, you know, maybe you can work something out. And Neil immediately within the first five minutes of talking to that person, he was like, no, you know, I think you should go do a deal over here. It's just cause it's a lot of work. Right. And so at least for right now, you know, there's, I think what isn't being talked about is the, the, it's really hard to discern.

7:27Eric Siu:It's not really hard. With these M &A deals, you need to figure out who you actually want to keep and who you don't. And I would say a vast majority of people who are AI-pilled in a company, it's very low.

7:36Neil Patel:I'm going to word it in a different way. With a lot of deals and transactions, whether you're buying a company or not, everything comes down to if the juice is worth the squeeze. When you start derailing from your main vision, or you have to deal with a new problem that you weren't planned for, if it's worth it and the outcome can be amazing and it can be life-changing for you it may be worth taking the derailment but a lot of times in the example here with the M &A deal that Eric mentioned when I was looking at it and I was looking at it on the way when I was driving to Laguna I randomly called them up just catching up because they did a text intro for them for someone else that could just that may need their services and they're telling me how a deal didn't go through that they're trying to do.

8:23Neil Patel:And I was just like, Oh, cool. Uh, what's the business? And then, or not what's the business. I knew what the business, what are the numbers? They sent me the access to the data room within three hours. Uh, team reviewed it really quickly. We quickly learned it wasn't for us. It's not that it's a, it's, it's a bad business. I would actually say it's a good business. The problem is, is the amount of time that my team would need to spend to fix that business would cost us way more revenue and profit than if we just focus on our core business because of the size and scale of that company. That is why I referred it to Eric.

8:57Neil Patel:I don't mean that in a bad way. I know the revenue is meaningful for most companies, almost every company. But Eric quickly figured out that revenue, even though it's meaningful, the headache that it creates and the distraction that it creates goes away from where he's trying to take his company in three to five years. And he doesn't want to be a quote unquote, traditional agency. So he decided to back away from it.

9:23Eric Siu:All right. So I wanted to take a moment to tell you about my podcast co-host Neil's agency called NP Digital, and they work with a whole host of global companies or a global organization. Also, Neil has SEO tools such as Ubersuggest and Answer to Public. All you have to do is go to npdigital.com to learn more, and we'll see you on the other side.

9:43Neil Patel:And Eric's already done two deals, right? You did two agencies that you already bought three if you include single grain three let's not count single grain but let's count the other two doesn't really count single grain was pennies on the dollar single was two dollars yeah that's why i don't count that yeah you still bought it and you had to take on the losses and all the issues that's an example of a hairy situation yes and then like i wouldn't even

10:04Eric Siu:blame your so neil's cousin was the founder it's it's not on sujin it was i it was not a good situation but i made it go worse but that's for a story that i've told before so listen to an old

10:13Neil Patel:podcast yeah yeah and to summarize eric learned that you just don't let uh a lot of people have this style in management where oh people made a mistake they'll learn on their own and they'll get better over time and eric quickly learned that um that doesn't work for him i want to say it's quick i took me a while to learn that neil learned that lesson quickly i took i learned it very quickly yeah but i think it's also personalities and i don't think there's a right or a wrong way. IBM had that philosophy for many years and they're a much bigger company than I am in which people learn from their mistakes.

10:46Neil Patel:So why would you fire them? Let them keep learning and getting better.

10:48Eric Siu:I don't know about that. There's a whole other thing I'll talk about in a second, but finish your point.

10:52Neil Patel:Yeah. I've just always been a big believer, either good or you suck. If you suck, bye-bye. I know that's cutthroat, but it really is a reality for most entrepreneurs. If you're good, great. And if you're not good, but you have potential and it's very obvious, Most organizations are willing to put in the time and energy to make you great. But crappy people who just suck, it is very hard to turn them around because they just don't have potential.

11:15Eric Siu:And there's a lot of them out there. I'll just say this. The more cutthroat I've become, and I'm not saying you should be cutthroat, but I'm saying that the tougher I've become, the easier time it's been with business, right? Yeah. And it seems counterintuitive to people listening. You might be younger listening to this right now, but I'm telling you, we have both been younger at some point, right? Right. What you're doing is when you're tougher, like if you don't apply pressure, pressure is going to be applied to you. What ends up happening is that if you are able to move someone out quickly, they're able to do their best work somewhere else.

11:43Eric Siu:Right. It's not. And you're also able to help your team, too, because your A players want to work with A players. The problem is, if you have a bunch of B and C players, the A players have to take on that work and it becomes unfair. And all this resentment starts to build up. And there's a lot of pressure that you feel from the company and you don't know what to do. Right. You still want to be this like this nice guy. You want to be this the boss that's cool and all that. It doesn't pay the bills at the end of the day.

12:04Neil Patel:Yes. And one thing to note about A players, Eric sent me a CMO the other day and he's like, you should hire this person. Someone's A player could be your B player and your A player could be someone's B player. It doesn't mean your A players are better than someone else's. A lot of it also has to do with cultural fit, your industry, and some people are just a better fit for your company than someone else's company.

12:29Eric Siu:Yep. So by the way, because we're talking about agencies right now, I want to talk about a tale of two agencies, Neil. So we just, you know, we like to test out these contractors for the brand team, right? One is doing well on LinkedIn right now. The first post you put out like 500 comments on it, right? You put out another one today, like 300 comments already, right? And so I'm like, oh, this is pretty cool. Like, you know, I'm like, hey, I'll refer you to like my friends and all that. And like he, the way this guy operates. So this is a LinkedIn, you know, we'll call him a LinkedIn agency. Okay.

12:55Eric Siu:Then another one is like a short form content agency. Okay. Okay, so this guy, let's talk about this guy over here. He shows up, he's always trying to talk to us inside of Slack. He's always trying to learn about the business, right? He's very AI forward. He's trying all these things. He's only 18 years old, by the way, but he's got a bunch of staff with him already, right? Like he knows his stuff, right? So he's proactive, he's very AI forward, and he's always trying the newest things, okay? And he's very communicative with us. The other side, the short form agency, which I fired in like a week, and I had let them go before, but let them go in a week ago.

13:24Eric Siu:They're like -

13:25Neil Patel:Wait, you let them go? So this is the second time you hired a short form?

13:27Eric Siu:because like I believe in the founder, like she's very strong strategically, right? Very good with the short form formatting. Like that's important. Like I saw Neil record a video, by the way, recently. You have the SEO, AEO, GEO one. I'm like, Neil has the formats now and that one did really well. I'm like, I'm for sure that one's gonna do better than it was. So the formats matter, right? So she knows the formats, like the background. I think she's one of the strongest. So she gives us account manager, cool, right? And then there's an account manager under the account manager, okay? So the account manager is like, oh you know uh we don't we don't do slack you know um and then when we sent them a riverside link right because we use riverside to record stuff like oh we don't use riverside can you put it all into google drive and we're like can you just one of our guys like can you just do it yourself like you just set up like a thing like oh no that's out of scope blah blah blah and then like this and that i'm like at this point man like like what are you even doing like as an agency right what we do is we help people solve problems we take things off their plate okay you're putting more and more shit on our plate.

14:26Eric Siu:And then it's coming all the way up to me. And I'm already, I have enough stuff going on. I'm like, how is this even getting to me? I'm like, just cut it. Right. This other guy is just going, growing, growing. He's like, we should try this. We should try this. My point is the difference between these two is one person that cares and one person that is biased to action and loves learning. The other one, they're not adapting quickly enough. And that's, what's going to cause a lot more churn because I was willing, I referred her to a few other companies. And then I had a poker game the other night, right?

14:56Eric Siu:With a handful of entrepreneurs. And they're not going to work with them anymore because they heard of this experience. And so word travels fast too. That's all I'll say.

15:04Neil Patel:Yeah, word travels fast. And because Eric referred her out to a few agency or a few of his friends, he's going to notify them on his experience because he doesn't want his friends to get burned as well.

15:13Eric Siu:Like he's trying to grow his brand. His company does like 160 million a year. That would have been a great client, right? But I referred and I had a bad experience.