3 Reinforced Lessons From Hanging w/ Ben Francis (Gymshark) | Ep 793

0:00Man, oh man, do I have a podcast for you today. I've been waiting to make this one. I think two weeks ago was the Olympia here in Vegas. Ben Francis, who's the founder of Gymshark in the UK. So it's UK apparel brand. I think they were valued at a billion plus one or two years ago. And I think they've doubled in size since then. So really, really great entrepreneur. And I had the fortune of being able to hang out with him for the day. He came a day early and hung out here in Vegas at my headquarters. It was such a wonderful conversation because he's my age and he's achieving really big things. So it was very like rarefied air for me.

0:37So this is me just, I'll show my cards barrel, try to, you know, hedge my self-aggrandizing comments, but I was very pumped to hang out with him. And what I want to do in this podcast is break down some of the lessons I was reminded of in my conversation with him that I think would benefit honestly everyone who's an entrepreneur or wants to be. And so I wrote down a bunch of bullets from the conversation that I had. And I want to walk through a few of my biggest takeaways. One is AI versus IRL. All right. And you're like, what the hell is that? So AI is like all these big tech companies and all the hot software, whatever is talking about AI, it's metaverse, decentralized, web three, whatever, right?

1:18All that stuff. And so there's this interesting and very large push with lots of capital behind it for people to go into these AI digital spaces, right? He and I were both talking about our shared consideration for the value of in-person, IRL, which is Ben told me the story that the reason that their company was so successful is that they built an online business offline. He told me, I'm pretty sure he shared this in podcast, and I'll probably run this whole thing by him to make sure that I don't share anything that was like too proprietary. But for everybody else who's listening, then you can tell the heat that we're going to be dropping, which is when his first couple of years, he went to every single fitness expo across the world that he could afford to go to.

2:04At those fitness expos, they would, you know, sell apparel and they would, you know, meet people and shake hands and kiss babies, all that stuff. And so what was interesting that he shared with me was that years later, the cities that he went to, they weren't going to be doing millions and millions a day or something like that in sales. You're talking, you know, 20K, 50K, maybe 100K, you know, a day in sales. And that may sound like a lot for some of you, but like big picture for a company that size, not huge in terms of needle moving. But what was interesting is that when they overlaid their sales across the whole organization on a globe, the hotspots, the concentrations of customers were in those cities.

2:48And it was disproportionate to the amount of sales that they were able to generate on those days when they were there. And so to me, I have the same kind of thesis that we work off of, which is I'm a big IRL guy. I'm a big in-person guy. I think there's huge value in that, especially now. I think that there's a higher demand for real experiences, real community, real connection that we try to approximate with technology, and we simply fall a little bit short. Now, it's kind of like eating vegan meat. It'll get you by, it'll keep you full, and I'll probably offend the six vegans who listen to my podcast, right?

3:29It'll keep you going, right? But it's not a steak. It's not a burger, right? And so we keep trying to improve beyond meat and make the fake thing closer and closer to the real thing, but it's not the real thing. And I think that what's happening is we're actually still, there's still this, this starve, right? This, this deprivation for more and more people because more and more people are eating the beyond meat of connections, the beyond meat of conversation when they could be getting the juicy real steak of a thing. Like Ben and I met in person and we hung out for a day, IRL. And it was awesome.

4:07And I would consider that because of that, we will probably maintain a friendship for years to come. Or I hope so, right? Unless I sucker, who knows. So that's kind of like big shift number one, that I was reinforced. And it was great to hear somebody else, another business leader, kind of share that thought with me, or that same direction, which is like, whenever possible, we're trying to create in person IRL in real life experiences. And that's why we decided to do like the workshops we do at our headquarters, just because I was like, OK, how can I how can I facilitate that kind of experience, even though it's quote unscalable?

4:41Right. Of course, it's quote unscalable. Of course, there's more people in my audience than I could possibly. If I'd have been every single day for the rest of my life, I still wouldn't be able to meet every person in Mosey Nation. But it still creates a way where if you hang out with 50 people, those people, if they have an exceptional experience, talk to another 50 people each and those people talk to 50 people. and then you're at 50 to the third and all of a sudden it's like wow we touched 75 ,000 people not 50 and I think this is fundamentally one of the reasons that Jim Clark has been and continues to be successful like now they're going and opening these in-person shops they're doing these these big meetups with athletes and they're doing that because they're not stupid they know that they have a higher return and so what happens is most advertisers most marketers look at the return on these these small you know IRL relative IRL in real life experiences relative to kind of the digital footprint or digital views and engagement and things like that that they can get online.

5:35But again, it's the same as like feeding people, you know, tons and tons of Beyond Meat burgers. But like you still remember that one juicy burger that you had when you were starving better than all of them. Brian Chesky talks about this founder of Airbnb. He said one of his mentors said, it's better to have 100 people who absolutely love you than to have a million people who just like you because those hundred will tell another hundred and those hundreds will tell another hundred and keeps going, right? And it's like that potency of the real meat, of the real meat conversation, the real meat connection outweighs the fact that it costs more to make those connections.

6:16But I also believe that if you do a good job in those instances, which obviously Ben has with his, when he would go to attend those expos and he has these meetups with his athletes and the influencers and things like that that he runs, that it's worth it if you do a good job because I think that those connections become permanent. I think those connections permanently change the way people see you, see your products, see your brand. And so that was kind of big, big thing number one that I took away that was a great reinforcer and a reminder. Kind of felt like, right Pat, like just it corroborated kind of like some of the conclusions that I came to.

6:51So the second big one was we were talking about growth rates. And so I think this will be really, really helpful for a lot of you guys here. He was talking about, and we brought up some big influencers that we both knew who started brands and had explosive, just crazy numbers in terms of their annual revenue, etc. And he said, you know, I don't know if that kind of growth is, you know, sustainable long term. Now, mind you, these guys have Mondo brands and all that kind of jazz. But his point was, he's like, yeah, but if we look at 20 year horizons, do we still think that they're going to be number one?

7:26And I thought it was a really interesting, you know, perspective. So I'm obviously a big, you know, long term thinking guy. And I talk about long term thinking and patience around goals so much because honestly, it's just something that I've struggled with. I tend to be a very like I want everything now guy. And so it's like I push so hard on on long term stuff because it's so difficult for me. And for any other entrepreneurs who listen to this, if you're like me, something that has helped me with this, and I'll continue back to what I was saying in a second. Something that's helped me a lot with this is understanding that I can feel impatient and act patient anyways.

8:02Meaning as long as I do not change my behavior and act like an impatient person, I can have this deprivation where I'm like, I want these things. I have these desires and they are unmet. but as long as I don't change what I do, I act as if I am patient. I figure out other things to do in the meantime. And so people, it's funny because like, I'll get described as patient. Like so, Cale, who's currently the CEO of Gym Launch, I've heard him on a couple of podcasts be like, Alex is incredibly patient. And I find that fascinating because every single second of every day, all that I feel is impatience.

8:36And so I think for me, it's been helpful to delineate how I feel and what I do, which is why I have such an emphasis on behavior rather than thoughts and feelings. Because fundamentally, for me, I don't think they matter as long as they don't change what you do, right? Back to the patient's thing with the long-term time horizons. And so one of the things that Ben has oodles and oodles of is that he wants to build an iconic brand. He wants to build a brand that endures after he's dead. And he talks about everything in terms of a 50-year brand. He has a number of brand heroes that he looks at. He looks at Range Rover.

9:14He looks at Harley Davidson. He looks at Ford in the US, for example. And so these are these companies that create iconic products, Burberry, right? That create iconic products, which create iconic companies, iconic brands. His emphasis on this honestly was very refreshing because a lot of times the reason that our goals feel big is because, or rather, our goals feel impossible is simply because we attach too small of a time horizon to them. I'm going to say it again because I think it's really important. We as entrepreneurs, myself included, a lot of times I create undue anxiety and stress around the goals that I have because I attach a timeline to them that's simply too short.

9:57Oftentimes, I mean, and Bill Gates said this, and I don't think he's the first one who said it, but it's entrepreneurs underestimate, so they overestimate what they can do in a year and they underestimate what they can do in a decade. And a decade has been a really good kind of like measuring stick for me. And I'll explain why. A decade, it's like around seven years is where it's like the sweet spot for a lot of companies to go public. So there's, you know, there's these studies where they put these scatter plots of what year companies go public relative to their long-term performance. It's basically year five to 10, seven-ish is kind of the sweet spot where, you know, companies do that.

10:29But I think about this meaning that like at any point in time, any person in 10 years can radically change the world in 10 years, but probably not 12 months. For me, that's kind of freeing and empowering because it's like you're just 10 years away from changing the whole world, which I think is really cool. He has this outlook on brand of having a building 50 year, a 50 year iconic brand. And he was here with his, his right hand man, Noel, he's director of brand. It was interesting because some of the words that they used was like, we want to build a brand, not a business. And obviously, to build a brand, you need to build a business.

11:08But what they meant by that was like, if you look at a lot of e-commerce that exists today, they're just arbitrage businesses. They're just what they call bottom of funnel, the ROAS businesses. All they think about, all they obsess about is dollars and dollars out, dollars and dollars out. the problem with that. And I'm going to I'm going to segue into probably the most significant takeaway that I have from the day that we spent together was this story. So Noel told me the story. They met the CMO of New Balance. For those who don't know, New Balance has had this massive resurgence. You know, it used to be only a dad shoe.

11:42And now you see all these like Gen Z and 20 year old chicks wearing these things, right? These big, clunky, ugly shoes. But now they're like in. And so what happened was they had New Balance had 15 years of year over year decline. They literally just went down 15 straight years. Okay. So they got a new CMO in, which is the guy I'm referencing. And the guy went to the CEO and said, can I just swing for the fences here? And the guy said, sure, we need to, we need to, you know, we really need to change it up. At the time during the 15 years of decline, they had a 70-30 split between bottom of funnel, meaning they spent like just direct response, you know, dollars and dollars out, conversion rate optimization, that kind of stuff.

12:22And they spent 30 % on top of funnel or brand awareness associations, etc. Things that were not direct, they didn't have direct attribution of sales. And what this guy did was he came in, and he flipped it. He said, we're gonna spend 70 % on top of funnel brand awareness associations, and only 30 % on conversion. And here's what happened next? The next 18 months, they continued to lose even more money, which is why a lot of times business is more about having a strong stomach more than a big brain, right? They kept losing money, kept losing money, kept losing money. And then on month 19, it started ticking up.

12:58And the next month, up again, next month, up again. And then it just started going straight line up like a rocket. From that mini little less, that mini story, I have taken away so many things that I want to share with you. Number one, in terms of thinking, this is again, if you want to build something big that endures, if you don't, then you can just stick with the arbitrage business. But most of you who do this are always wondering, why is it that the moment I turn off my ads, my business dies, right? It's because you don't have a brand. You don't have a cult-like following. You don't have an audience of people who want to continue to buy your stuff.

13:36You don't have people who would miss you when you're gone. To create that missing, you need to build brand. You need to build positive associations between your stuff and what customers and your audience love and know. Here's some of the takeaways that I have from this story because I think they're pretty profound. Number one is that branding takes time. And so like this is a big company that has a big budget that was able to spend a lot of money and it still took them 18 months. And so I would posit, I would hypothesize that for most of you trying to do this, it will take you two years or three years for a brand to really start yielding dividends, start paying you back.

14:15And I bring this up because I think, and this is because this was such a fundamental misunderstanding of me in my earlier career, is that I didn't understand the value. I didn't understand what brand actually provides. Brand provides three amazing things. One, actually four. One is you get higher response rates to everything that you do. So think about in an advertising perspective, it means you get more clicks. A higher percentage of people will click your stuff because they have a positive past history with your company products brand. Number two, they will convert at higher percentages for the same reason, because they have a positive past history of it.

14:50You get more clicks and a higher percentage of those clicks convert. If you had only those two things, you'd already be printing. But the third thing that comes into play is that they will do both of those and they're willing to pay a price premium. They're willing to pay more than they can to buy your thing that otherwise is the same besides the positive associations that you've made with your brand. So they buy white t-shirt, white t-shirt with swoosh mark. They're willing to pay five times more, 10 times more, right? For the white one with a swoosh mark. And then number four, finally, it is more likely that they will buy again and that they will not buy from a competitor.

15:24And so brand, if you think about it from this, what more valuable thing could you do than something that increases your clue through rates, increases your conversion at higher prices and increases repurchase rates. Almost nothing. And yet people don't want to invest in it. And so it's funny because like, I feel like I can share all the secrets of branding in the world, but I never have, I sleep great at night knowing that no one's going to do it because everyone, like no one can think long-term. Part of that is obviously being able to get yourself right. Meaning if you can't feed yourself, do that first, right?

15:56But this is where having a more modest lifestyle is an advantage because it can allow you to think long. I think it's one of the biggest outcomes of saving money and living below your means is that your time horizon that you're able to think on expands. And the longer time horizon is, the bigger the goals that you can pursue. Because even if you do expand your time horizons in terms of how you think through things, if you act as though, if all your actions are aligned with somebody who can only think about payroll this week or next month, then you're never going to build that thing because you're never going to put time into something that you're willing to lose money on today.

16:34You're never going to make investments because most of the biggest things that really change the world take time. They take extended periods of time of investment without any return. I have this tweet that got shared a lot, which was the world belongs to those who can do without seeing the result of their doing. They can keep doing without seeing the result of their doing. And you have to be able to do it for a very long period of time, which is why the extended time horizon is so important with this story. So number one takeaway that I had was just like the increase in horizon from this story.

17:06Number two, branding takes, it might take you two, three years in order to really see the return. Number three was the ratio. And I thought this was actually really valuable. Many of you who are listening to this, you're thinking, oh, okay, I'll spend 30 % on brand. 30 % on brand is what was losing them market share. It was losing them market share. And so you think about that give to ask ratio. Like I talk about this in my leads book, right? For content. I would posit that 75-25 is probably the right, is the actual precise right ratio. Now, the story that we told was 70-30. And it also depends on how good, you know, I'm sure that in doing that 70 % shift, like I didn't get to double click and talk to that CMO.

17:43And maybe someday I will. And if you know that CMO of New Balance, please introduce me, right? But I would bet that when they made the shift from 30 % being brand first to 70 % being brand first, that not only did they make that shift in terms of spend, he also probably reallocated that spend to the places where they get even more for it, right? He probably updated their strategy, got the right influencers on board, who had more reach, etc. We do know that the give to ask ratio, which has been studied, is three to one minimum, is that for every kind of neutral kind of interaction where maybe you make an ask or whatever, you have to have three positive ones.

18:17This is why the ratio of TV to commercials in a mature platform is three to one. And sometimes you want to be even more than that if you want to be growing. This is the investment of brand. And this is how you, it's like you basically are always digging your well before you're thirsty. And you have to keep digging that well forever. Basically, you always want to be ahead of your ask. You always want your goodwill, your positive position, your brand strength to be in excess of the ask that you make. And so that brand strength, the nice thing is that it can compound. So a 10 % growth over and over again, like that 10 % at year 10 is an enormous amount.

18:55So that when you do have that ask of this significantly bigger audience, you still are always in equilibrium, basically. Like you always, you're actually really out of equilibrium because you're under asking relative to the goodwill that you have. I was talking to a different friend of mine who has another, is a multi-billion dollar company. I was talking to him about the conversation that I had. He's like, no one gets it. He's like, even my CEO, because he is a CEO of his company. He's like, he doesn't get it. He's like, I always have to go in and be like, no, man, we got to spend this money on this brand stuff.

19:22But he's like, but dude, we're not getting anything back for that. But look at this bottom of funnel metrics. He's like, the reason we have these bottom of funnel metrics is because we spent money on this stuff 18 months ago. And this is why it's so hard for people to grasp. And so it's also difficult, by the way, this is why publicly traded companies get into trouble when founders leave. If you're optimizing for the quarter, you're already screwed. because anyone can come in and immediately look like a genius by cutting all branding and then putting all of it in direct response. But the thing is that you erode the brand over time.

19:50And if you don't have a brand, then it means that you basically have to put all that money into the brand first, not make any direct response, you know, asks, withdrawals, whatever, ROAS shit. And you have to wait and you just have to keep waiting. This has been just a really wonderful, hard, quantitative number that I can go to, which is that when I look at our advertising, that we do at the portfolio level, at the holdco level at acquisition.com is, are we three to one? Now, obviously, I want to be clear. It depends on what your goals are. If you want to build a 50 year iconic brand, then you have to be there.

20:22You got to be three to one even more, right? Four to one, five to one, six to one, right? In that ratio. If you're looking for like a quick, you know, wham, bam, thank you, man, exit, then you're just going to do arbitrage. You're going to hope to sell to an investor who doesn't understand how this works. It should be real. I guess that's what it is. You're just going to sell that you know what your LTV to CAC ratio is. And you can spend, this is TAM, and this is how much more of the marketplace you can get. And this is what your retention is, whatever. And that's fine. There's nothing wrong with that, to be very clear.

20:49I'm not saying any shoulds. You can do whatever the hell you want. But the biggest brands exist and function this way for a reason. It's because they get superior returns on advertising, superior returns on investment because they always reinvest in the brand. If you have, for example, free cash flow that comes out of your business, then some of that you might want to consider investing in those top of funnel relationships, in those top of funnel brand awareness things where you associate your product with things or people or experiences that your ideal customer loves. And then long term, you can reap the benefits.

21:29Big themes here, right? So big theme was number one, AI to IRL. So you know, like this whole tech metaverse, whatever shift to IRL, the demand for in person experiences. The second one was kind of the 50 year time horizon. The third was around the ratio of branding of the give to ask ratio being confirmed at a higher level being corroborated by other companies. So that was just like a it was a fun thing for me. The next one, and this is probably like a sub-brand point, what do those investments look like? And so we were talking about this. The thing is, is like you want the brand to be aspirational.

22:06You want the brand to be something that is overkill in a way. So let me explain what I mean. So you think about Red Bull. They're jumping a guy from outer space to the ground. That's overkill. But the thing is, is you're like, well, shoot, if they're that extreme, then like this drink will help me like stay awake from my meeting. To take another equal opposite example, like North Face, if you've heard of them, it's a jacket company. And the reason they, you know, have those guys climb Everest and use their, you know, their sleeping bags and their tents or whatever with the North Face logo on it is that you're like, well, if he can climb Everest in that jacket, then it'll keep me warm on my way to work, right?

22:44When I'm walking outside in like, you know, 40 degree weather, whatever. You know, Ben brought up the Range Rover, the Defender, which is one of their best off-road vehicle for a Range Rover. And you're saying they continue to build some of the best off-road vehicles on the planet. Now, the vast majority of people who use those products don't drive them off-road literally ever. But it's kind of this overkill idea. I'm using the word overkill, but it's like this over-indexing. It's like, well, if it can do that, then it'll suit my needs. right if you're if you're building a brand around something it's like what big brand reference point can i create that we're so far above what the need of the consumer is that they're like oh oh well if they could do that then they can definitely do this and so these are the things that kind of like act as gravity like these gravity bombs for the brand what demonstration because this is the key thing is what demonstration and a lot of this comes from the products you build right and products are like okay well i'm a service it doesn't matter Like if you're a lawn care person, for example, right?

23:48Like I'm just taking the extreme here. You could go and find a house and do like the ultimate transformation to their landscaping, right? Just do this crazy before and after. Absurd. Like you're willing to front all of the money just so that you can show it. So people are like, well, man, if they did the Hermosi mansion, you know, gardens, then they can definitely mow my lawn, right? There's always an extreme version. What's that crazy version of what you do on a daily basis that you can do one time that can anchor the brand in your customer's mind so that they're like, oh, okay, well, then they can definitely handle what I've got.

24:26All of these things are an effort to shift people's perception of your products in their mind. And one of the other pieces that's kind of like underneath of that, the ideals is what's the primary use case? Who buys your product will affect your brand as well. And so one of the things that they were telling me about Gymshark that they want is they always want the motion shaped person at the gym to be the one who's the Gymshark athlete. They're like, we want the people who you'd go up to and ask for form advice. We want that person to be wearing Gymshark. And we have to create the person. So it's like sebum, right?