The genius of the Costco $1.50 hotdog, How 'Founder Mode' will shift the tides of business, and Startups that raise less money grow revenue faster

0:00Let's talk about the genius of the Costco$1.50 hotdog. Have you had one recently? I don't eat hot dogs. Oh, you can't eat hot dogs. That's right. But I know they lose money on hot dogs, from my understanding. But it gets people in. This is from Trunk Fan. You know Trunk Fan on Twitter? No. He's a funny guy. He's got a lot of subs. He's like a parody account almost. But Trunk says, this is the image over here. It's Costco founder mode. So talk about founder mode again. Everyone's talking about founder mode now, right? So Seattle Times says, If that price of the hot dog combo goes up, what will it mean?

0:29Costco founder Jim Senegal says that I'm dead. It's amazing how creative we have been to figure out ways to keep the price down It was a sinai sinai hot dog and now it's a kirkland signature hot dog It's actually 4.4 ounces. So it's slightly bigger than a quarter pound now It's a drink and a free refill on the drink for a buck 50. We used to sell the soda in a can We put in soda machines, which took the price down. We improved the cost of the condiments We purchased better on buns and things like that It's the same quality hot dog all beef the best ingredients that you can imagine I know it sounds crazy making a big deal about a hot dog, but we spend a lot of time on it.

1:03Seattle Times says, why is it a big deal for you? So this is the genius of the Costco$1.50 hot dog because everybody talks about it. People look at that hot dog and say,$1.50, that is unbelievable. It's the same thing you'd spend$7 or$8 at the ballpark for and not get the same quality dog. It's one of those things that we're known for. When you get customers who are delighted with something, it's worth your time and energy to make it work. So it is remarkable because the way I talk about it with you, like I've had it before. I'm like, it's a pretty damn good hot dog. And you get the drink too, a dollar and 50 cents.

1:33You can't even get that at like Burger King or McDonald's right now. It's like$5 for that. It is a remarkable marketing strategy. I wouldn't recommend people to eat it because it's probably terrible for your health. That aside, okay, we wouldn't eat hot dogs today. But like that is remarkable marketing. It's remarkable marketing. It's a loss leader. That's what they call it in marketing. You're losing money on something to bring them in the door, and then you're selling them other things that make you an arm and a leg. And if you look at what Costco has done very well, it created this Kirkland brand, and their margins are much higher on it, and they sell it like hotcakes, and it produces billions and billions of dollars in revenue.

2:12Dude, you know what? I think we should talk about how founder mode will shift the tides of business and how it relates to marketing, because this is exactly what we're talking about. because, for example, I'll give a little background on founder mode, but let's just use Airbnb CEO Brian Chesky. So Brian Chesky, maybe a couple years ago, 2020 actually. 2020, he's hearing everyone. It's like, okay, I think they're about to go. 2020, that's when business went down a lot because of COVID, the shutdowns and everything. And he's hearing from everyone. He's hearing from his board. He's hearing from his employees.

2:42He's hearing from all these people. You should do this. You should do this. You should do this. So he started listening. You should do this. So he started doing all these things that didn't feel natural to him. And I think he ended up not liking what he was doing. I think he ended up hating work, right? But he decided at a certain point, hey, I'm going to get super involved with details again. Screw delegating everything. I'm going to get involved with all the details. I'm going to get involved with the product launches. I think we're going to remove layers of management. And we're going to have a cohesive team, right?

3:11Because we had too many silos going on. So with Airbnb, once he started doing that, once he started getting involved with everything again, everything just started moving up into the right. So when Paul Graham wrote a post this past weekend on founder mode, and we've kind of been talking about this. We just haven't articulated this over the last couple of years where it's like, if we're involved, it's just a different company at the end of the day. And if you like, you're really good at this, like you just do what feels right to you. And sure, you might talk to other people, but if other people tell you what to do and you're not listening, like if there's no data or anything, you just don't listen to them.

3:43Right. But point is, if you're following your intuition as a founder, usually you're going to do the right thing. And as long as you're not abdicating and you're getting involved with big initiatives, the new things, the big things, the broken things, things end up working out. Again, this is the fastest we've grown this year versus a couple of years ago. It's like, oh, we were in trouble. But it's not that you and I are special or anything. It's just there's a special blood in founders that make things happen. And then everyone over the weekend was just like, Austin, Allred, all these people, Morning Brew founders.

4:13Everyone's like, yeah. When I started listening to all these people, all these outside stakeholders, my business started crumbling. But when I turned it back on again, business went up and to the right. Well, I never understood about that post from Paul Graham, and you sent it to me. Thank you for sending it to me. And it's just a recap of what he got from Brian Chesky's talk. It's like a three-hour talk, yeah. When he's talking about Founder Mode, I'm like, I don't know what's new about this. This has been old and it has existed for a long time, and now everyone's talking about, oh, there's this new thing called Founder Mode.

4:43There's this new thing. It's not new. It's just you and I have known this, right? We've never really articulated it full. Well, so I think the thing is, Paul Graham has said in that post too, and I recommend everyone reads this. I think we can both say it's a pretty good post. It's that it's the beginning of starting to really push this forward. Because again, people like you, we've known this. It's in our heart, but we haven't articulated it. And now that it's out there, I think there's going to be more and more literature coming around this stuff. And then I think future founders will be more prepared.

5:11Because you and I have been through that pain of just randomly listening to people. You have for sure. I have for sure. I've always been a founder who's very involved and never really stepped away and had a big executive team and just delegated and let them do their thing. No, I will say, I mean, let's go back to Kissmetrics. So Kissmetrics in that scenario, I could feel it from a mile away, right? You and Heaton, you guys are used to kind of running your own thing and really not. That was one of the first times you guys raised money, right? Yeah. It didn't feel like you guys. That's my point.

5:43No, but we had a lawsuit and an FTC investigation. this was a long long time ago we won the ftc investigation the lawsuit funny enough insurance yeah it was cheaper to go through and set insurance and sell it then fight it and beat it in court because insurance paid most of the money we were just out 50 grand which is way cheaper than our legal bills yeah and what happened with kiss metrics is is they put in a new ceo it wasn't we chose to not be in control of the company that's not what i'm saying i'm saying before the lawsuit, because I know the lawsuit came a little while later, but even before that, my feeling was because I was observing from afar.

6:21We're still in our mid-20s, right? I felt like it wasn't you guys. You know what I mean? I think it was. We cranked hard. I would go into the office all the time. We would do our off-site meetings. I was heavily involved. I was even writing blog content and managing the team. Both of you were working really hard. And the business was doing financially well. After we raised a million first, then three more million, we were financially profitable and we had cash in the bank account. Cool. So you feel like you had full control in that situation? We did. Investors were happy with us. They were telling us to burn more money and we didn't.

6:56And we were really scrappy. Things were going really good. It was the moment the lawsuit hit, everything changed in the business and we lost control. Got it. Okay. Yeah. I mean, even in that situation, you lost control, right? But I mean, the lawsuit is like the lawsuit. It's like you could have foreseen that. Well, we lost revenue right then and there. We needed more funding. And then with the dilution came loss of control over the business. And I don't think this is the investor's fault. At the end of the day, it's our fault as founders. And eventually we lost control. CEO got put in. CEO didn't understand the product.

7:31New CEO eventually got put in. He hired his girlfriend and spent$50 ,000 redoing a logo. and a lot of things like that just happened that made the business crumble. Then I went in there and I scooped up the domain name kissmetrics.com for a half a million bucks. That's a good buy. And I was just like, give me the traffic. You don't know what you're doing. It buys you more runway. He was really happy with the deal. I closed it really quickly and took over the domain name and had more traffic and monetized it way better than they could. I got to take a minute to tell you about the agency owners association.

8:00This is a peer group for agency owners. Think YPO or EO, but for agency owners. And I just wanted to read you a couple of testimonials. So this first one comes from Carrie and we asked her, what do you like most about the group? She said, having a group of people to discuss and bounce ideas. The leads are great too. Yes, we share leads in this group as well. This one from Alian, he says, the ability to really post whatever I want and need and the group responds. Great experienced members, getting a lot of insights from conversations with other members, getting a lot of value from sessions from Eric, getting advice from others as well.

8:31And so if you wanna grow your agency faster and you want a peer group to do so, just go to marketingschool.io slash agency. This is a group that both Neil and I created. And our hope here is to create a vibrant community of agency owners and do a lot more with it in the future. So again, marketingschool.io slash agency and we'll see you inside. I think one of my takeaways from all this, just listening to the KISS metrics and to the founder mode stuff is when you have, the more and more stakeholders you have or the more money you raise, the more you're susceptible to outside forces, right? You've got a strong will where you'll take things in, you'll listen, but you probably won't listen to a lot of things.

9:07I think more early stage founders are more susceptible to listening to outside force. Oh, you have more experience. Oh, yeah, maybe we should hire people with experience. Oh, I have a board over here. I should listen to them. Oh, I have these experienced employees, right? The more stakeholders you have again and the more junior you are, the more susceptible your business is. Yes, and I also have a personality where I'm stubborn. it's hard to persuade me to do something else unless a you have a ton of experience in the field that i'm exactly in and b you have stats and data as long as you do it's more number two than anything yeah it's more number two if you have stats and data i don't really care about what i think or how i feel i i'm typically one who makes decisions based off of data versus gut but yeah dude this morning i was talking to my co-founder and we're in 19 different countries some of the countries are struggling with sales not that they're not generating sales but if you look at how many leads they're getting versus how much they're closing the numbers are just not as great as they should be so i was talking to him i was like you know how we have a really good 2025 he's like what i'm like you should go to europe and help a lot of the teams with sales and he's like yeah i got my summer trip i'm like i know no we already talked about you going next summer the whole year no and i said how about you go now i'm like just go now he's like i just had a baby I was like cool what do you need to get your baby and your wife to go along with you and how much cash do you need that simple and then he called me back he's like I actually figured out a better way instead of me going there for a month or two or three I'm going to have everyone meet up with me in London have people fly to me and do just hardcore training for one week I was like cool and then you should go back the next month and follow up with people let them know that this is happening so they improve their metric numbers throughout the whole funnel and then let them know you're coming the month after and you're going to go over and you expect to see improvement.

10:59So he's going to go once a month for a week at a time? For three months. Okay. And he's like, cool, done. That's not what you wanted originally though. I think you wanted him there longer term, no? No, but this works out because he's going to go, they're going to go and implement and then we should see results but they know that he's going to end up coming back within 30 days. Yeah. So their feet are held to the fire. Yeah, but it's still very different than having someone full time there. it won't make a difference for this role. He's pretty much going over the sales process. Not actually selling, but the process of how many calls you need to make a day and just checking in.

11:36I thought this was a much higher level, executive level. No, this is actually for the people working on sales, not the CEOs or managing directors. That should be fine. But yeah, I'm a big believer. You have to be involved. It doesn't matter how much you raise or you don't raise. If you're involved, shit just is better. if you're not involved, it's not as good. And if the opposite is true, that typically means you're not a good entrepreneur. I just think that the people that tweet about this stuff saying, oh, all I did, I have a holding company and I just hired these operators and I just got out of their way.

12:07And you end up seeing these operators, they end up like quitting in a couple of years or so. Even a snowflake CEO, as much as like we've, I've talked good about him when things started getting tough, he resigned. Right. And so like, there's a place for CEOs for sure. But I think there's magic when you have the CEOs and the founders involved. Yes. And some people aren't meant to be CEOs. Like I'm not the CEO of any of my companies. I never have been. I'm a terrible manager. I tend not to want to be a CEO, but I work very closely with them and I focus on what I'm good at and have them focus on everything I suck at.

12:37Yeah. You're a good chairman. Yeah. That's what you are. All right. Quick note. This is about my company. It's called Single Grain and Single Grain is an ad agency where we're focused on driving innovation. We'll talk about a couple new strategies. And if you need help with marketing, great. If not, here are a couple of new strategies that you should try out. One is programmatic CRO. So we are doing programmatic conversion rate optimization on our site. So it's building products that will automatically optimize your site to increase conversion rates. We're also auto-optimizing, auto-updating from an SEO standpoint.

13:05And we're constantly thinking about what else we can do in terms of enriching the visitors that are hitting your website and also tailoring custom messages for them using AI. And so there's a handful of things that we're doing from a marketing standpoint. And our mission is just to drive more innovation. So if you want to learn more, just go to singlegrain.com, grain like rice. So singlegrain.com to learn more and we'll see you inside. I actually have the graph over here, Neil, on startups that raise less money, grow revenue faster. So this one is from, it's actually a Silicon Valley bank thing, but you can't see it.

13:36I'll read it to you. So it says that other than the smallest startups, companies that raise less than 12 months of runway generally experience substantially more revenue growth than those raising more than 18 months worth of runway. It's impossible to infer too much from a few bars on a chart, but one implication is that less is in fact more when it comes to funding. Why might that be? Because if you have 12 months of runway or less, then you have neither the time nor the money to be complacent. Getting a little gritty might just be the key to survival. So sometimes, you know, it's like you wake up in the morning, you go to the gym, you're putting some stress on your body, you go to the sauna, you maybe do the cold lunch, right?

14:13You're getting your body ready for battle. But when you raise too much, you get fat and lazy. That's what happens sometimes. The Black Friday Cyber Monday weekend is where systems get stress tested. Traffic surges, inventory moves fast, and every second counts. You need a platform built for the moment. That's Shopify, the commerce platform behind millions of businesses and 10 % of all US e-commerce. With Shopify, you can launch fast with thousands of templates and tools that make your site not just beautiful, but conversion ready. Shopify is packed with helpful tools that write product descriptions, page headlines, and even enhance your product photography to increase your reach during the busiest time of the year.

14:48You can also stress less knowing that Shopify's award-winning customer support team is on standby 24 seven to help with any issues that arise, allowing you to get back to business as fast as possible. This black Friday joined the thousands of new entrepreneurs hearing for the first time with Shopify, sign up for your free trial today at shopify.com slash marketing school. That's shopify.com slash marketing school. Go to shopify.com slash marketing school and make this Black Friday one to remember. And I believe that when people say you need money to build a company is a bunch of baloney. I do believe there's some businesses, like if you want to build something like open AI, yes, it requires too much server power and resources to do it with agency, low cap X.

15:34Yeah. And with our agency years and years ago, we had a really good call with Sequoia Capital. And at this time, Sequoia Capital invested in a company called Pilot Accounting, which their goal was to automate accounting. And we were telling them our goal is to automate marketing. Is that still your goal? No, it's adjusted. And when we were talking to them, and it was just a casual conversation, we didn't need money. At that time, Pilot raised money at a billion-plus dollar valuation, and Bezos Expedition, which is Jeff Bezos' company, just put in money. so when i was talking to sequoia there was like yeah we're sequoia we can help with x y and z and you know they're pitching me and i'm not saying we're a good fit for sequoia or anything like that or that they would give us a check or not give us a check it didn't get too far um but when they were into breaking down pilot and their numbers were public because there was news articles about pilot and during the conversations i'm like yeah so we're a year younger than Pilot and we're generate more revenue than them.

16:38And we didn't raise any money and we're profitable. No. At that time I had a call with Sequoia. I think we were at that time, not the quickest, but one of the quickest startups from zero to a hundred million. We achieved it in roughly four-ish years, a little bit more than four years in revenue. And I was like, yeah, we bootstrapped it. And that is kind of a lie, but it's kind of the truth. I say it's kind of a lie because I put in, I injected over time, you know, originally it was very little money, hundreds of thousands. Then it was 3 million. And then I put somewhere close to five total, but I was taking money back out.

17:16But in total, I put around$5 million max of my money into the company. So that's why I was saying it's technically bootstrapped because it's my own money, but it's kind of a lie because not too many founders are willing to put up to 5 million of their own money. injecting that amount, because it's five million, let's not take it away. It's a lot of money, but at the end of the day, it's not a lot in the grand scheme of things when you're backing a business. I think that little injection goes a long way, but when you put too much, people start to get lazy. They start to get cavities because you're eating too much candy.

17:47It's like when you give your kids too much candy. I've never heard of that one. People get lazy like cavities because they're eating too much candy. That is it for today. please don't forget to rate, review, subscribe go to markingschool.io slash agency it is now application only so you can't even pay to get in if you wanted to get in now you have to apply and so that is it for today but other than that we'll see you tomorrow