Blake Johnson | with He Had $7,000 Left… Then Sold His Companies for $1.1 Billion

0:00Blake, after you sold your first company for$97 million. That was my fourth. That was your fourth company. This is my fourth company.

0:04Blake Johnson: But that was the first big exit. I had another big one right prior to that. Which sold for how much money? A little over a billion. Over a billion dollars. Hey, he needs to drop the playbook. I know. Drop the playbook, man. I always say that first company looked like a Ferrari, but you opened up the front hood and there was two sick mice and a hamster wheel in the industry environment. I mean, didn't know anything about running the company. I thought I did. Until you do it, you don't know. You've exited companies for billions of dollars. What goes into that process? Great question. So there's a methodology.

0:33Blake Johnson: There's a playbook. The most important thing on all that is your a***** cost. You went from like 100 people to like 500 people during the pandemic. How do you do that? Again, this is probably a bad theme, but I give the analogy. I give a lot of analogies. Hey, we love the soundbite analogies. We're talking about the soundbite masterclass here. So many people want the answer to every one of the theoretical problems that they're going to face before they start. It's not that complicated. It's a finite checklist which you should be satisfying for day one.

1:04What's going on everyone? Welcome back to the Hard Knocks Podcast. I'm James and I'm here with Jack and Josh and we have an incredible guest for you all today. We are out in Los Angeles with Blake Johnson who's the founder of Byte which sold for how much money? A little over a billion. Over a billion dollars but you're not a one-trick pony because your company before that you sold for$97 million. Correct. You've got a fascinating story. We're going to dive into all of it today. But where I want to get started is people hear those numbers and may assume that you started with a leg up in life. You grew up on a cattle ranch.

1:36Correct. So what was that exact moment in your life when you realized that I'm not going to work for other people. I'm going to build businesses myself. What was that moment? Take us back.

1:43Blake Johnson: It started pretty early on this, this small town that I grew up in, which was technically in California, although, you know, You drive five minutes and you're in Mexico. It has the highest unemployment rate in the nation. And so early on, it was an interesting culture growing up back then in the 80s. But this society as a whole and really the proximity of Mexico really lent itself to a pretty interesting upbringing. Everything was bartered down there. Everything was negotiated. everything was a debate over what things cost or what work you were going to get from x y or z so early on it just got ingrained and not only myself but i saw it in others this kind of ability and comfort of of speaking with people of pushing an envelope of trying to you know negotiate something so there was a few factors that combined early on i was working at a feedlot starting at four o 'clock in the morning, getting up at 3.05 a.m.

2:45Blake Johnson: and, you know, spending just hours in the heat out there all day, specifically in the summers, was grueling. And you quickly surmise that you don't want to be there that long. And so almost in a, you know, daydreaming of like, how am I going to get out of here? There was a few things that lent itself. And then the opportunity later in my life presented to actually get out of there and go to school. But you mentioned the area that you grew up in had like one of the highest unemployment rates. And I think so often people can be, you know, victims or culprits of the environments, right? You're a byproduct of the environment that you grew up in.

3:17Like, I think even in our instances, like our high school, you know, had probably 2 ,000 people total. And I don't know if there was another single business owner that came out, especially because we were from right outside of the D.C. area. Everybody goes into government jobs. So was your environment that you grew up in, was that partially motivating to you where you were like, I don't want to kind of end up, you know, like a lot of the peers or a lot of the people here where I'm unemployed or whatnot? Or was there any bit of it that maybe held you back? Could you kind of talk about how that upbringing had an effect on you?

3:43Blake Johnson: Yeah, it was interesting because occasionally we'd go to Palm Springs or San Diego, which were the big metropolis cities, and you got a glimpse of how life could be like. And there was a number of circumstances in my childhood that I got enough exposure to things that made me kind of put two and two together and realize, yeah, there perhaps is a better way to do it. and as you got older and it became more real, I, you know, got to the point in my life where I'm like, I'm willing to do just about anything to get out of here. Subsequently, you know, that, that, you know, lent to other, other things in life.

4:20Blake Johnson: And I had a chance, my grade school principal early on flag that he, he said, you know, you need to get out of here for, for high school. I'm like, how the hell do you do that? He goes, well, I'm sending my daughter off to this boarding school in California. And so he goes, why don't you go up and interview? It was a seven hour bus ride from my hometown, only three hours by car, but Graham made, you know, countless stops. They let me in to this boarding school. So I went from, you know, covered in shit all day and Wranglers and, you know, working just the god awful jobs that, you know, you couldn't even imagine to, you know, taking a bus and going to a boarding school with, you know, the blue blazer, the tie and the patch on the blazer.

5:05Blake Johnson: And so that really gave me kind of this juxtaposition in life where I was able to see this other side. I didn't know how to get there. I didn't know if it was going to last, but I certainly know and knew at the time that it was much more appealing than what it came from. So anybody that does research on bite and you look at the timeline, you know, Started around like 2018, 2019, around that time, and then sold the company in 2021. Is that correct? Yeah, technically, yeah. The last day of 2020, but yes. Well, that's an even more impressive timeline than I was going to allude to in 2021. So last day of 2020.

5:46And if you look at it, that's like, what, like two, three years?

5:50Blake Johnson: It was technically like less than four, but three and a half years. Three and a half years. So my question is, where did that like, like obviously being able to build a company like that in that amount of time and sell it for that big of an exit doesn't just spur up. Where did that entrepreneurial foundation come from? Like, what was your start into entrepreneurship? Like for the for the viewer to understand, because obviously had a company before by that did very, very well. Where did you learn these principles? What did you what was kind of your first start in entrepreneurship? Sure. And for the record, Byte was my fifth company that I founded from my head, financed all by myself and sold.

6:31Blake Johnson: And so while Byte was only three and a half years, I always say it was a 15 year old startup because I had all the learnings from all the other previous companies. The one prior to that was a company called Currency and it was an equipment leasing finance company. I had a few others prior to that. But you always learn from each company. And I always say that I've done tens of thousands of things right and hundreds of thousands of things wrong. And so you learn from those mistakes and you iterate and you bring those learnings forward to your next company. I'm on six, seven, and eight right now.

7:06Blake Johnson: Hopefully six will be done here in a few months. And then seven and eight are, you know, I swore I would never get to eight. And then something happened and decided I couldn't stop. I need to go to rehab for entrepreneurs or something like that. But it started in accidentally in 2005. I had taken a job out of college, spent five years there, graduated in the late 90s, and did really well at my first job. It was in sales. I completely hacked the system. You know, we were making cold calls all day. And I realized that the receptionist was, you know, she was getting all these inbound calls and kind of sprinkling them out to all the salespeople.

7:49Blake Johnson: So, you know, after a few dinners and a couple bottles of wine, struck a deal. And, you know, she was sending me 100 % of the calls for a cut of my commission forever. And so I went from, you know, 150 in the company to number one in a few months and had done well. Had made a lot of money, had saved a lot of money. And it felt like it was time to go off to grad school. And instead of going to grad school, you know, kind of fate intervened, which brought me up to Los Angeles here. A guy at Citibank asked me to consult for a small fledgling company in Los Angeles during my time off. And I did. And the CEO is really charming guy.

8:27Blake Johnson: And he was persistent. And he, after a number of months, said, well, it's going to take to get you to come to, you know, work for me full time. And I was like, yeah, you know, I just left the, you know, 800 pound gorilla. I was number one. I'm not going to go work for a small company. But he was charming and he was persistent. And I finally, just to kind of end the conversation, said 50 % equity in the company, thinking he was going to tell me to kick rocks. And a few days later, he came back and said, okay, let's do it. And so I abandoned the grad school path and subsequently found myself to be a business owner.

9:02Blake Johnson: And that company grew. I knew the sales side. It was doing$5 million in revenue when I got there and 18, within 18 months, it was a run rate of 180. So you come from a sales background, but that's a lot different than actually being an owner within the company. What were some of those things you learned early on within that first company? Yeah, I always say that first company looked like a Ferrari, but you opened up the front hood and there was two sick mice and a hamster wheel in the interior environment. I mean, you know, didn't know anything about running the company. I thought I did. And, you know, that's really until you do it, you don't know.

9:39Blake Johnson: And made so many mistakes at that company. We were doing really well. There was a gale force wind at our back. And the economy was good. It was 06, 07. It was before the financial crisis. And it was really one of these things that to no credit of our own, we were crushing it. One of the fastest growing companies in LA and all the newspaper articles was all the bullshit. And, you know, parents and friends patting you on the back, you're doing so well, but not really making profit, making a lot of money, spending a lot of money. And then when 08 hit, it was disastrous. I mean, we quickly got kicked in the teeth.

10:18Blake Johnson: My business partner decided he wasn't ever coming back. And I was left, you know, to my own devices to figure it out. And so that became a really true education in building businesses and constructing businesses that were going to get acquired. Because I came to this sobering thesis during really what I call the dark ages of my career that businesses given enough time either get acquired or they go out of business. It's really binary. And so I had just kind of barely escaped going bankrupt on one of them and literally made it through by the thinnest of margins. I got down to my last$7 ,000 to my name and I had a payroll two weeks later,$43 ,000.

11:02Blake Johnson: And it was like, make that or close the doors. And had made$62 ,000 in that two weeks. And I was up to 69 with my seven and I had payroll 43, delta 26. I was like, I'm rich. It went from seven to 26 and it just literally avoided the worst case scenario. But obsessed during those years of building something that was gonna get acquired. I've never raised capital and it was one of these things that I tried to in 08. Nobody in the right mind should have or did provide capital. I made it through that and then felt that there was an equation to be able to scale companies quickly and get to an exit. So I recently interviewed the owner of the Minnesota Timberwolves.

11:50His name is Mark Laurie. He sold Jet.com to Walmart for$3 billion. He sold Diapers.com to Amazon for$500 million. And I asked him about, you know, some of the things, VCP is the mantra, which he really follows as the leader, right? Vision, capital, and people. And I asked him about capital. And he said that his advice to founders is that you should always raise as much capital as you can. That's a little bit contrarian to kind of your viewpoint on raising capital, being that you've never raised outside capital, but yet you've bootstrapped to a billion-dollar exit. So could you dive deeper on why you've never rose capital?

12:24And is there a particular company or a business ballroom which you think it would be a good idea to raise capital for?

12:31Blake Johnson: Yeah, and I'm not adamantly against, you know, raising a ton of capital. I do think if you're going to raise capital, go big and raise so much that you can afford to fail and iterate. You know, fundamentally at each, you know, underlying of each business are the fundamentals, right? There's expenses and there's revenue. And within those expenses, you have a cost of goods, regardless of whatever business. You have a marketing cost commonly known as a CAC or CPA. You have overhead, right? And you have some very quantifiable aspects about a business. And so it's all math at the end of the day, right?

13:07Blake Johnson: And your goal is to sell more than you expend. And that delta is a profit. And oftentimes in a startup business, you're burning a lot of capital to get the wheels, you know, of the plane off the ground. And you've got to be really cognizant about the math. I find that raising capital makes you lazy and makes you undisciplined because when you spend somebody else's money, it hits different than spending your own. And at the end of the day, I've been obsessed with businesses that I can quickly scale with in big addressable markets. And I can acquire the customer for the right CAC, the customer acquisition cost.

13:47But you know what's so interesting about that is you mentioned that, you know, raising capital tends to lead to a lot of lazy founders, right? Because now they have that safety net, right? But to me, I feel like if I was ever in that position, if anything, I'd feel more pressure because you wouldn't want to F up somebody else's money who's, you know, giving you their hard-earned capital. Like, you know, that's reputation damaging. So why do you think that raising capital tends to lead to a lot of laziness? Is it comfortability because they have that runway or what is it?

14:14Blake Johnson: They have that runway. It's less personal. when you spend somebody else's money, it hits differently than your own. I don't care who you are. And I too am very responsible. I've always been so scared to lose somebody else's money. A big driver for me is the fear of losing somebody else's money. I have the stomach to lose my own, but I've given this analogy a number of times that entrepreneurs, CEOs, and business owners are like trapeze artists. And some trapeze artists perform without a net and some perform with the safety net. I always give the analogy of raising capital, of performing with the safety net.

14:51Blake Johnson: You know, if you miss the bar and you fail, you're going to fall into that net. It may be embarrassing. You know, you may have a little bit of a, you know, ego hit to that, but ultimately you're not falling on the hard ground. When you're spending your own money and you're forced to make every decision with a limited budget, it perfects a different discipline. It heightens your senses. It makes you aware of things that I don't think most people are aware of until they're forced with that one decision. If I spend this dollar, I might not have enough to pay something else. You mentioned that you kind of have like a bit of a formula when it comes to like starting a company and setting it up to get acquired.

15:40And I think that that probably attributed to in like the three, three and a half years that you had Byte, being able to make that a bootstrap billion dollar exit within three, three and a half years. What would you say are kind of like the aspects of that formula of setting up a company to get acquired?

15:56Blake Johnson: Great question. And, you know, for me, I think about first and foremost, the math. Again, you know, businesses that spend more than they make go out of business. Businesses that make more than they spend are applauded, right? It's, it's pretty binary. It's black and white. And so when you understand the fundamentals of a business and how I think about underwriting and getting into a new opportunity, I, you know, always layer on the basics and, and the basics really are simple at the end of the day. One, I want a big addressable market. You know, I don't want to sell poodle sweaters or some obscure thing that, You know, you hear people saying, oh, I want to create a business.

16:37Blake Johnson: And you're like, who the hell is going to buy that thing? Right. I want to always talk about the TAM's got to be big. Yeah. The TAM's got to be big. I want a universal. Yes. I want to be able to go into any hospital or mosque or synagogue or church or, you know, school, whatever it is across the world and ask one question to get a yes. Do you want straighter, whiter teeth? Yes. Do you want easy access to money? Yes. Do you want to look better in your clothes? Yes. You know, and so I think about framing it, you know, trying to sell something to the masses. And then it becomes about acquisition costs and infrastructure costs.

17:14Blake Johnson: How much are you going to pay for the product? What's the size of your team? What are those expenses? Where are you going to office? How, you know, and the most important thing on all that is your acquisition cost. who do you have to pay and how much do you have to pay to get your product out there in front of a person who has the willingness and ability to buy it and that for me is the billion dollar question that's the hardest thing to get right and you know marketing is constantly changing methods to market and to go to market depending on industry are very different and also constantly changing.

17:51Blake Johnson: But when you strip something down, I can kind of quickly come down into any business whatsoever and ask a series of 10 questions and understand exactly where they're at. People tend to overcomplicate it. People tend to go down rabbit holes. It's real easy to. I got to constantly tell myself to stay out of the rabbit hole. But when you just stick to a few key lieutenants and a few key principles, it's pretty easy to unemotionally assess, you know, where a business is at and most importantly, where it can go. It's almost like people, they kind of, they, they, I like the rabbit hole analogy. It's just kind of, they, they make it way more complicated than it needs to be.

18:30And you're just like, man, it's simple math. It's just like, Hey, like, uh, how big is the market? Uh, what is it? What does it cost for me to acquire a customer? What does it cost for me to make the product? Uh, and it's like, Hey, how can I market this to as many people as possible? It's a, it's a, just a few key areas and numbers. One number that I, that stuck out to me when, you know, I did some research on, on by it was how fast you guys grew your team, uh, in a short amount of time. I think I read that it was like, you went from like a hundred people to like 500 people, like during the pandemic.

19:01Right. Uh, how do you do that?

19:04Blake Johnson: So, so I give, I give the analogy. I give a lot of analogies. Hey, I love the sound. Yeah, talking about the soundbites. And my office makes fun of me because they're mostly animal-based. They didn't really know this. Well, you know what, though? But it's so digestible. You know what I mean? That's why I love to talk in terms of analogies and soundbites. So you're speaking our language. So, you know, when you talk about growth and you talk about, you know, how do you keep things, you know, balanced as you're, you know, hitting that hockey stick growth, I think about an airplane, right? Right. You know, and and the marketing or the the two engines, you know, on the on, you know, that are really given the thrust when you get that right.

19:42Blake Johnson: And when you have that dialed in and you have the thrust, the right acquisition cost, CAC, you know, that's great. But that's not enough. You know, everything else is balanced on the two wings. So if you think about an airplane that's misbalanced and too much stress, it's going to go off and crash right on either direction. So our jobs as executive CEOs or entrepreneurs or whatever you want to designate that as, is really to be thoughtful about how you're going to keep the wings balanced when you have that thrust. You don't always have the thrust. Startup businesses don't have the thrust yet, but there's a certain inflection point where if everything's done right, you'll get that marketing thrust.

20:21Blake Johnson: And then where does it get tipped off balance? Well, that can come at, you know, supply chain that can come with personnel, sales, customer service, accounting. I've seen all these little things. Everything else is going right and accounting will sink a company. Everything else is going right and supply chain. They didn't think about it, you know, through and through. And so it was really, you know, January, February 2020. 20, I was always in my paranoid state running the bases on knowing what was going to happen, what we were going to react to if acquisition costs went up. I was going to cut everybody and get down to that just to make it through.

20:59Blake Johnson: Lo and behold, I wasn't expecting everybody to be on Zoom at home staring at their teeth all day. Like I didn't plan that and or think that through. But But I did think through and I was ready from a previous iteration of what we should do should we hit acquisition cost numbers. And so during COVID in March and beyond of 2020, our acquisition costs started to come down. We had two big competitors that got wrapped around the axle and messed up and ultimately went out of business, smile, direct, and candid, that I could tell just by watching them how they were operating. I was always looking like a hawk.

21:39Blake Johnson: They weren't ready for that. They hadn't run the fire drills good and bad before. But with us, we knew exactly what to do based upon marketing expense and acquisition costs. So when that started to come down and we were gaining traction, we'd already run all the drills on how much we needed to hire in customer service. I needed to get ahead of supply chain with my manufacturers in various spots. you know we need to hire for sales here in LA they shut all the businesses down we figured out some hack ethical hack that we were supplying medical equipment you know cosmetic aligners but we were we also then pivoted and started 3D printing some actual medical equipment uh equipment to you know to help the first responders which really legitimized staying open but we were able to keep our lights on and keep people in the office which was a big thing.

22:36Blake Johnson: And ultimately we were able to just kind of power through and keep those wings balanced on the plane. Yeah. I think what's really interesting is that theory of every business has different constraints, whether it's a labor constraint, a marketing constraint, every single one has a different constraint. Why did you ultimately decide to get into the cosmetic industry when your background is primarily within the financial, you know, financial services? Like how did that kind of come about? And did you find a business partner? Like, how did you kind of get into Byte originally? And why was that the idea?

23:12Blake Johnson: So funny enough, funny story with Byte, it was December 7th, 2015. And I was helping a buddy of mine who was a orthodontist through a divorce. And he was new to town. And unfortunately, his wife and he split. He was a professor of orthodontics at USC. And, you know, he was, he was telling me one night at dinner is down by LAX at a sushi restaurant. This guy was the biggest, you know, sushi geek in the world. Um, so I'd always follow him throughout the city on, on, on restaurants, but, um, he was, you know, second bottle of sake. He was telling me, he's like, not only am I going to lose my wife, I'm going to lose my business.

23:51Blake Johnson: I'm like, you're an effing orthodontist. People are always going to have, you know crooked teeth i'm like what do you mean he goes well you know technology is getting to a certain point where these these pieces of software can predict the movements of people's teeth better than me and this invisible aligner thing is really like amazing it's it's better for the majority of adults better than the wires and brackets and you know uh invisalign has a patent that's coming off 18 months from now. And I stopped and I'm like, okay. I'm like, well, how do all the dentists, you know, are going to service all these people?

24:28Blake Johnson: And he goes, well, technology is also doing a certain point that you can, you can treat people without leaving their homes. And I'll tell you, the light bulbs went on that night and, you know, it was a couple of bottles of sake into it. And I call my dad from the Uber and I'm like, I'm getting in the orthodontist, right? So, you know, in my current business altar it was it was October 11 2019 also pre-pandemic and I was I was again this is probably a bad theme but I was I was standing out on a beach with a few tequilas in Mexico and it was kind of thinking about some things and had a had this kind of clear idea on on you know what ultimately became the Oura Ring and we have a competitor to that right now which which will hopefully conclude here you know this year so all these things you know and then then And you have these ideas, but then you start to have to backfill.

25:18Blake Johnson: So I had to go recruit the orthodontist and I had to recruit the expertise in it. I later brought on, you know, six, eight months later into the business, my best friend. He was my best man at my wedding, who is just amazing. I mean, talk about like a great compliment, beautiful marketing mind. We compliment each other very well. He's he's different in his approach. He's different in his discipline. And God bless him, he puts up with me. And so he really, it was the one plus one equal three in that scenario is Scott Cohen. And so it was, you know, all the things kind of hit at the same time. Can you share your thoughts on doing business with friends and family?

26:03Because there's a lot of people, a lot of, you know, entrepreneurs advocate for not going into business with friends and family.

26:08Blake Johnson: Yeah, no, I would advocate not doing it. And he, so my company prior currency after I sold it, the then CEO brought him on to help with some stuff. And this guy is a professional. And also, you know, we'd known each other for so long that I knew what I was getting into and I knew his strengths and I knew his weaknesses and vice versa. We also had prior equity in each other's company. I gave him a little piece of mine.

26:41Blake Johnson: He And we were, you know, of the like mind. And, you know, truth be had, we were at a lunch and he was consulting for currency. And he said, what are you going to do next? And I said, I'm going to take a run at this orthodontic company. Tell me about that. And I went through it all. And he goes, good. He's like, let's do that together. And I went, uh-oh. I get in my mind, you know, I was like, this is scary. And I wasn't going to say no to him, but it worked out better than I could have ever imagined. Can you share why you wouldn't recommend it for people? Yeah, it's one of these things where I think people often mistake one person being good at one thing and mistaking it that they're going to be good.

27:24Blake Johnson: Because they're good at that one thing, they're going to be good at a lot of things. And a familiarity or a like with them or a personal connection can often blind the judgment of figuring out who's who and what's what. But I give this analogy of every business is like a professional sports team. He's got the analogy. I mean, I'll keep him coming all day. Sorry. I apologize. But I was at the Dodger game yesterday with my son. And what makes a really good pitcher makes a shitty first baseman. And what makes a great outfielder makes not a great third baseman. And so businesses are like that. You need to understand who your best third baseman is, who your best pitcher is.

28:08Blake Johnson: And I found, and I've done it before, because I like somebody, you know, and they're a good shortstop. I'm like, oh, they're going to make the best pitcher, you know, in the world. Really, we're going to make a horrible pitcher. And I'm setting them up for failure. And so I think, you know, doing business with friends or too close of a connection, you need to be really sober and really agnostic onto their strengths and weaknesses. I think the almost acting like the GM of a sports team is the perfect analogy for how to build a team as an entrepreneur. And it's just so true. It's just like, hey, I would never put my shortstop in to close the game when it's 2-1 in the bottom of the ninth.

28:50And it's so true for building teams as well. It's just like, who's going to be the right person? And it's like, hey, and the thing is, too, it's like you might have someone who's like a great closer, like on your sales team, but you don't want to promote that person and necessarily be your sales manager. Two completely different skill sets.

29:04Blake Johnson: I've made that mistake more than once. Oh, yeah. You're just like, oh, this person's crushing it. They deserve that bump up. And it's just like, man, there's a reason why they're the best closer in the organization. It's the same. And it makes it even harder when you add in the emotional factor of family and friends into the equation. I look at like us, for example. I think this is a unicorn right here. I think for, and probably for you with your friend as well, like it's very unicorn at, um, uh, it's so rare because I feel like so many people that work with friends and family, there's ego involved and they're just like, man, like this person might not really be cutting it.

29:35And you're just like, man, I don't ever want to like cut that because it's going to tarnish the relationship if I fire that person.

29:40Blake Johnson: Yeah. And those historical past friendships, and I've seen this a lot or past connections enable the other person to act and treat you in a certain way that may not be appropriate. Yep. I was dealing with that last night on a completely different matter I was trying to help with. And it was due to a historical relationship. And the interchange and the comfort factor was promoting a really bad behavior. So, yeah, it's tricky. I would say in a perfect world, you try to keep those two separate. Although I would say I was shockingly the one exception in that one circumstance. It's the unicorn. It really worked out.

30:19It doesn't always work out. Blake, after you sold your first company for$97 million. That was my fourth. That was your fourth company.

30:26Blake Johnson: But that was the first big exit. I had another big one right prior to that. The first two were smaller. The third, life changing. He needs to drop the playbook. I know, man. Drop the playbook, man. Was there ever, after selling any of these companies, right? I mean, because assuming the company before the$97 million exit, you're set for life at that point. Yeah. Was there ever any sort of comfort that you faced? Like, did you take any time off from business or was it always just like, I'm going right back into it? I know myself well enough to know if I get off the treadmill, I'll probably have a harder time getting on.

30:57Blake Johnson: So I sabotage myself. I always start the next company about a year prior of selling the one I think is on track to sell. It's just like ring rust in a fight. Yeah. It's just like if you take a couple years off from fighting, you're never going to come back and be that same person. You're never going to come back. You're never going to. And I've seen people age out. I'm turning 50 this year. You're turning 50?

31:21Blake Johnson: I'm turning 50 in October. You guys got to come to the birthday. It's going to be. Yeah. Let's go. Yeah. Um, I think I'm spending my first two companies on it, whatever I made on the first. So no, but in all seriousness, we have, uh, I I've seen, I've been very, again, sober on seeing when kind of men age out and when they hit, you know, 50 early fifties, definitely by mid fifties, they just lose it you know what's so interesting about this is do you know who jesse etzler is i don't he's uh married to sarah blakely sarah blakely was the spanks founder and jesse himself he had you know several exits one to coca-cola he stowed a coconut water private jet company to warren buffett net jets um and uh i was at his house a couple weeks ago in atlanta and uh he was uh talking about how he's like look guys like i'm gonna be honest with you you're you're 24 right now you have the next 25 years because you know he was saying like he was talking about specific people it's like you know they're in their you know 60s and they're still well known but it's like they're not the same person they don't have it anymore you know what i mean and even though like they're still renowned and whatnot so what you're saying is exactly what he was what he was preaching and i see it with myself too and i and uh you know no you got an ego set aside always but But I see it with myself.

32:41Blake Johnson: I've slowed down. I still care as much. I still want it as much. But my ability to process and my ability to kind of run at that pace that's really critical is slipped. It has. And I hate to admit that, but it definitely has. And then you kind of rely on the next generation and try to promote that. But so much has talked about women and how women age. And not as much focus is ever given on how men age. and specifically in business. I mean, there, I had the luxury of having some older friends that were, you know, plus 10, plus 15 and so on. And I saw them during their forties, you know, just punching hard and they just kind of subtly hit this thing in their fifties where they're not the same person.

33:29One of the things that I, I think is fascinating about your journey is obviously like bite was company number five and you're doing six, seven and eight. And you mentioned that You almost see the opportunity a year before you're getting ready to exit that previous venture. How do you see what the next opportunity is? Obviously, the bite came from a conversation with your friend that was an orthodontist. But that wasn't a one-time thing. You've had multiple companies that have spurred up. and I think that for a lot of people that want to be entrepreneurs that kind of one-trepreneur tagline for a lot of people uh that are out there it's just like I think a lot of people over complicate it they're trying to come up with the next sexy hot thing and it's just like you really just need to find a problem in the market and identify a solution for it um how maybe you could speak to that since you've been able to do it several times like how do you identify what

34:25Blake Johnson: that next venture is for you and yes you know knock on wood haven't missed yet um I've always been able to start a company and sell it and it's not that i'm just picking that one i'm constantly thinking about a number of different things um alter the company we have now which is a competitor to aura ring you know had it not been that i would have gone into hearing aids and as obscure as that sounds you know i love hearing aids that is a phenomenal business you know what i think is who's innovating on that nobody's there's no everybody needs it there's always like a constant supply of people worldwide.

35:01It's like laundry detergent. When has laundry detergent been changed? No one's innovating on these boring, simple products.

35:07Blake Johnson: Return rates are low. It's like size. You don't mess up sizing and the technology is pretty easy. That was the one that got away from me, by the way, the hearing aids. I've always been thinking about that one since the last six years. But I'm always constantly having conversations and looking into things. You know, and typically when we're honing in on deciding on one, it's it's a one of, you know, six horses in the race. We don't normally talk about the other five, but but hearing aids was one. Yeah, we are real quick before you like we did a podcast with a gentleman named Mike Sherbakov and he's he owns the veteran fund.

35:47It's like the fund that invests in veteran backed startups or veteran founded startups. and he said that just like, I mean, to be a very successful entrepreneur and even investor, you have to be very curious. And it just, I can see that with your journey. It's just like, you're willing to have conversations with people about anything and seeing those ideas. So, yeah.

36:06Blake Johnson: So, you mean, you were going to add on to that? No, curious and not overthinking. You know, so many people want the answer to every one of the theoretical, you know, problems that they're going to face before they start. I find the best entrepreneurs kind of more have a direction that they're, you know, that they're looking ahead and really, you know, believe that they can pull in the resources and solve the problems. I know you have a question, but I, I guess that kind of segues me, segues me into asking, like, when you started by, obviously you saw sort of those issues when you were talking with your friend, the orthodontist, but I mean, Invisalign was a thing when you started.

36:44And so like, how did you, how did you guys kind of see, like, how could you differentiate yourself from what was like currently happening in the market?

36:51Blake Johnson: A lot of people always, you know, are assessing an industry or a market and saying, oh, there's some really big competitors, you know, that that's going to be too hard to compete against. We're actually the opposite. We like one or two, three big boys in there that have spent the money and done the, you know, spent the marketing dollars to educate the average consumer on the category. You know, if you look at, if you look at marketing dollars, it's like a funnel. The first big layer is category spend to educate. I mean, think about Invisalign. First time they came to market in 1997, 98. Nobody knew what a clear liner was to straighten teeth.

37:28Blake Johnson: The amount of money that was spent to educate people that was not only possible, but a really great solution is astronomical. And, you know, that's one example. And I can give you a number of others in finance and consumer marketing and Oura Ring and everything else. But we all we want to compete on a brand level. It's like, again, another analogy. It's like getting behind a semi on a freeway, right? There's so much drag that's created that you can kind of coast right in between and be much more efficient with your spin. And so when we have a good category, a big TAM, and a big category awareness, then we really get prescriptive on can we compete on a brand level.

38:11Blake Johnson: And that's the fun part. Yeah. Yeah. Are you familiar with Neil Patel? Yes. Yeah, he's a big marketing agency out here, and that's his thing is he likes to go into those big markets where all you need is like a small percentage of some of these massive markets. So in your case, though, when you go into like the industry that you were in with Byte, were there any specific marketing tactics or strategies or brand building things that you did to really differentiate yourself and stand out and take a lot of that market share? Yeah, hundreds, hundreds. I mean, and they're all like little paper cuts, right?

38:42Blake Johnson: And you get obsessed with, you know, once you start to directionally figure out if you're going D to C or B to B or whatever it is, you can quickly surmise the number of marketing channels available to you. And each one has a different rhythm to it, has a different cost structure. And, you know, you're placing bets like on a roulette table and seeing what numbers hit. And then when things start to come to life and showing some promise, then you can get prescriptive on your tactics around that and start to fine tune the different methodologies to acquire a customer. We've gotten really good over the years at taking a lead and converting it at a three times higher rate than any of our competitors.

39:31Blake Johnson: Industry after industry. And that is, you know, your cost per click or cost per lead that you're driving in is roughly the same, you know, when you're in any industry, you know, when you compare it to your competitor base. So where the magic for us has happened and where we're able to get into a net profit scenario much quicker than everybody else is once that lead comes in, what is done with that? And that, to me, is the one thing I've been staring out across the land and being like, you're wasting so many opportunities. Once people come into your doors, you're letting them go. And it's mind-boggling to me that not enough emphasis is placed upon that customer journey.

40:20Blake Johnson: Once a customer knocks on your door and says, I have an interest, they're kind of flagging themselves, grab their hand and walk them through. And so, and I think with the AI is proliferating and becoming more of a thing, it's coming at the expense of companies getting really myopic on how to close a customer, whatever you're doing, whether it be a restaurant, a hospital, a car dealership. I mean, the car dealerships these days are horrible. I mean, I can barely get salespeople to call me back. I'm thinking about all the money that was spent to advertise and, you know, ultimately their cost structure.

41:02Blake Johnson: And it makes me sick to my stomach that most organizations aren't better at that. You've exited companies for multiple eight figures all the way up to billions of dollars. What goes into that process? Because, you know, it's not as simple as, hey, I'm ready to sell my company. You know, these companies are, you need to have your things buttoned up in a line. What exactly are these companies looking for when they're ready to acquire? and how exactly should someone prepare to exit a business? Great question. So you've got to think about who's buying the business, right? It's going to be a strategic.

41:32Blake Johnson: It's going to be, in most cases, a private equity group or a family office on more rare occasion. But there's a methodology. There's a playbook to them underwriting a business and figuring out if it is a viable business to buy. Everybody always says, hey, you know, you time this so well. I never think about timing. I just want to sell a business, you know, when it's appropriate to sell. They say sell when you can, not when you want to. And so when you understand that methodology, and literally I've seen different iterations of private equity, you know, checklist of da-da-da-da-da, but a private equity group or strategic, they want to buy your business with meat on the bone, right?

42:19Blake Johnson: They want to take what you've done, buy it for X, and then dramatically increase the revenue with all their expertise and know-how. And so timing it right shouldn't be a thing. You should build a business that has those attributes that are attractive to the people who have the checkbooks to pay for the business in itself. And so from day one, we've always built these businesses to get acquired. And when you get knowledgeable and sober on what it takes to get acquired and why we've just had so many kind of hit after hit after hit, it's not that complicated. It's a finite checklist, which you should be satisfying for day one.

43:03I think when most beginner entrepreneurs come into the game with little to no resources, they build companies from the bottom up. They kind of put warm bodies in to serve a particular function. Now, with you having resources, do you hire from the top down? Or it's like, hey, I'm going to need a CMO. I'm going to need a head of product. I'm going to need a head of operations. Are you hiring from the top down now when you're starting these new companies?

43:26Blake Johnson: Yes. I would say half my team, we're like a band of traveling gypsies. We just, they stick with. And they have meaningful equity in the company. They've all made a ton of money over the years. And they've been on board. Let's do another one. And so 50 % of my team will typically kind of come with us. What? Okay. Did you guys just hear that? You said you're bringing 50 % of old teams into your new ventures. Yeah. Yeah. Yeah. It's a, you know, it's a, it's a ballet, but yes. That is incredible. I mean, I'm just curious for that. It's like, are you not concerned that, you know, their skillset, similar to what we said is like, Hey, like, is this person's skillset going to be able to apply to the next business?

44:05Blake Johnson: When you're talking about the fundamentals of accounting or legal or consumer marketing, those skill sets transfer well. When you're talking specifics to orthodontics or some kind of software engineering, those don't. We recently started a fashion company that's heavily ingrained in tech and find ourselves now. We're really a tech company that sells women's clothing. and so you have to go recruit and find those expertise and those things but the fundamentals that you need in every business that's typically what's needed well Blake this has been an incredible conversation we like to end these podcasts off with two questions for our guest I'll start and Jack will finish this off so Blake you mentioned that you have a son that's 14 years old yes any other kids or just the son I have an older daughter 17 who's knocked out getting her wisdom teeth removed as we speak.

45:04Two children. We asked all of our guests this question. If we were to die tomorrow and you could leave one last guiding principle with both of your kids and also the younger generation, what would that be?

45:15Blake Johnson: Great question. You know, it's hard to, it's hard to just pick out one. Um, but I feel having the right perspective in life is key. You know, getting, getting a broad understanding of all parts of the world, um, and knowing the bad and knowing the good, that, that, you know, shift of perspective and that, that really the breadth of perspective creates happiness. If everybody knows something nice, you know, we're surrounded by them. They grew up silver spoon. Those are some of the most unhappy people in the world. And, and, uh, you know, likewise, if you only kind of know one thing, it's, it's the, it's the, you know, the deep perspective that creates happiness.

46:00And Blake, you've built some incredible companies in your career. But for you, how do you want to be remembered?

46:07Blake Johnson: I always want to be remembered just by keeping my word. It's like the most important thing to me. If I tell you I'm going to do something, I'm going to do it, come hell or high water. Even when I shouldn't have said and agreed to it, which happens all the time, I will follow through. Blake, this was incredible, man. Thank you so much for your time. I really appreciate you, my friend. Thank you for making the time to meet up with us. For everybody tuned in right now, be sure to like and subscribe for amazing content, amazing episodes coming every week to the Hard Knocks podcast with the most fascinating business owners and business minds, just like Blake Johnson right here.

46:40So like and subscribe. We're going to put the links down in the description for you guys to follow along with Blake's journey. Check out his social media. Check out what he's building because I'm sure before we know it, we'll have exit six, seven, and eight coming here very soon. Knock, knock. Come on. And lastly, we're going to put a link down in the description to get access to the number one entrepreneur community in the world that we built to give you guys direct access to live zoom calls we host every single week with the eight nine ten and eleven figure entrepreneurs and business owners we interview on the school of hard knocks so if you want access go down click the link in the description we can't wait to see you on the inside and with that being said we'll see you in the next episode