95% of Ecommerce Businesses Are Worth NOTHING

[00:00:00] Taylor Holiday: If you had to start an ecommerce business. What would have to be true? And it goes this idea of like, I would want to be able to very clearly state my unique value proposition to the world and my unique leverage on the market. And so we think about four quarter accounting and we talk about, okay, do I have CAC leverage?

That usually comes in the form of I have access to organic audience, I have some mechanism to drive non-paid advertising success at a scale that like helps me minimize the amount of marketing costs I have. Do I have margin leverage on the cost of goods, maybe. I have some unique relationship with a manufacturer.

I have ability to monopolize a supply chain. 

[00:00:34] Richard Gaffin: Hey folks, welcome to the Ecommerce Playbook Podcast. I'm your host, Richard Gaffin, director of Digital Product Strategy here at Common Thread Collective, coming to you from a brand new environment here. This is our, our new apartment. We just moved, and of I'm joined as I always am by Taylor, our CEO.

And I was wondering what the bigger changes here, my background or your sort of mustache setup that you have here. So you want to kind of walk us through the thought process there?

[00:00:58] Taylor Holiday: The Costa Mesa Yankees have reached the playoffs, Richard,

[00:01:01] Richard Gaffin: my

[00:01:02] Taylor Holiday: and two games before the playoffs. Started, we were, we were on a bit of a losing streak, and we were, and suddenly I looked in the dugout at the start of our game and our kids had taken the eye block and started drawing mustaches on themselves as kids are known to do.

And so, since they started doing that, we haven't lost. And so I had to join the pistachio magic of the Costa Mesa Yankees as the playoffs started. And we have rolled on, and we are now in the championship next Tuesday. So I can't shave my mustache. Until at least next Tuesday, much to the chagrin of my wife and many people around me.

[00:01:36] Richard Gaffin: Okay,

[00:01:36] Taylor Holiday: Yeah. It'll, it'll get, it'll change

[00:01:39] Richard Gaffin: next Monday then, because that will

[00:01:40] Taylor Holiday: last week. So that's,

[00:01:41] Richard Gaffin: still in it,

[00:01:42] Taylor Holiday: well, no, we play next Tuesday. So if, if we, if we if we win, we get to go onto the Tournament of Champions. So yeah, next Wednesday we'll be the real test of whether it exists or not.

[00:01:52] Richard Gaffin: Okay, great. All right. Well, so this is actually honestly a perfect segue into our topic today, because you're talking about growing a mustache. That causing a team to win. And since we're talking about superstitions here, let's go into a conversation that you were having on Twitter the other day. 

[00:02:08] Taylor Holiday: The day, the day

[00:02:08] Richard Gaffin: Well I

[00:02:09] Taylor Holiday: will,

[00:02:09] Richard Gaffin: goes all all the way back to the account life of Buy who

[00:02:12] Taylor Holiday: each project will.

[00:02:13] Richard Gaffin: 50% of e-commerce businesses are worth $0.

And you had replied to that saying. It's closer to 95%. And of course that ignited the usual conversation that it does. And anyway, it's part of the reason that I kind of made the segue that I did is that if there's a nine, if 95% of e-commerce businesses are worth $0, and this is ultimately feels like sort of a delusional or dare I say, superstitious task despite the fact that we like to think of it in terms of logic and data and all those types of things.

So talk me through kind of what you're thinking in terms of this reply and, and kind of set up the rest of the context for us.

[00:02:49] Taylor Holiday: Yeah. I'm going to do my best to walk a tight rope here between being like perpetually cynical, which I don't actually think is that helpful or, or useful of a position to understanding what I think I've discovered about great entrepreneurs. So let's start with just this baseline idea. About e startup success, we're gonna start broader than even e-commerce.

So I was looking, I pulled some chat GPT numbers for us just to, to level set the expectation of what I'm talking about. So, of startups. So this is data primarily pulled from SBA, which is small business association brand of startups that survive five years. Okay? So just forget whether you ever make money, whether you're worth anything.

What percentage of companies do you think that start up, new companies make it five years

[00:03:37] Richard Gaffin: I would,

[00:03:38] Taylor Holiday: each day? How, where input? Well, no, 45%. Okay, so about half survive, five years. Okay. That's a very low bar. Just

[00:03:47] Richard Gaffin: sure,

[00:03:47] Taylor Holiday: can make it. What percent do you think reach $1 million in revenue?

[00:03:52] Richard Gaffin: Okay,

[00:03:52] Taylor Holiday: Yeah.

[00:03:53] Richard Gaffin: 45 at the baseline, let's say 20.

[00:03:55] Taylor Holiday: Between four and 9% ever make it to $1 million in revenue.

Okay? So think about how small that is. So when I say 95% are worth zero, these same ideas apply in e-commerce, right? Like e-commerce. The vast majority of businesses are a somebody that's registered a Shopify store and tried to sell a few wi widgets that somebody created. Okay? Now, what percent do you think reached $10 million in revenue?

[00:04:18] Richard Gaffin: I'd say 1%.

[00:04:20] Taylor Holiday: Okay. Yeah, between half a percent and 1%, and the businesses that produce $1 million in net profit. Okay, so now we've moved from $10 million to $1 million in net profit. It is 0.1%.

[00:04:34] Richard Gaffin: Yeah.

[00:04:35] Taylor Holiday: Okay. Like that, that that is a remarkably grim benchmark of creating a startup as a mechanism for success, right? So only about 70,000 C-corp returns reported more than a million dollars in net income out of 6.7 million active corporate returners.

But most of those companies are decade old, not startups. So you adjust for age and it pulls it down well below half a percent. Okay, so this is just an important level set that starting a business is a the odds are stacked against you in almost every industry. And e-commerce is not immune to that.

And, and this is where I think it's, it's like my response was as much about that data as it was anything to do with specifically e-commerce. Now, I also believe that there is a. Compounding set of complexities in making an e-commerce business really valuable. I actually think it has a beautifully low barrier to entry to start, and I bet it has a higher success rate than these numbers.

In terms of reaching a million dollars in revenue as an example, I bet you could see a higher percentage get there, but in terms of making it worth money, something somebody would purchase from you, it is a wildly difficult endeavor because. I think this has been well documented. There's such a giant cascade of negative results for people who have entered into the buying process so far in our industry.

So I, I think that there's a combination of what is the general reality of starting a business, and then what are the complexities for e-commerce generally.

[00:05:59] Richard Gaffin: Okay, so the flavor of a lot of the reactions to this particular tweet was this sort of like idea of like, why do we do this? Why one person said like, why do you think so many play the D two C game when there's scarce exit and cash opportunities? Sure, the top 5% kid kill it, but those are unicorns. Why not just go the agency route? Genuinely curious.

[00:06:17] Taylor Holiday: Well, because people aren't making logical decisions, right? Because here, here's the key, like I think the vast, the EV of, let's say, going to be a face, a meta rep,

[00:06:27] Richard Gaffin: Mm-hmm.

[00:06:28] Taylor Holiday: most of the entrepreneurs here in our industry, a lot of it would be qualified to go and get a job like that. I. Where you're talking about a, a baseline of making hundreds of thousands of dollars a year, plus some stock options on a stock.

That's one of the best performing in the history of the world. Like the EV on going to take an employment role at one of these companies, meta Shopify, Google Klaviyo, affirm whatever is so much higher than being an entrepreneur. That is just a baseline fact. And then the agency thing, I think is even like a below that this tier of just being an employee at a high value company is such, is easily.

The, the highest floor action that you could take as a person trying to establish life. But what, what I think is really important to understand is what entrepreneurs are actually after is not the highest EV decision profile. That is not the governing mechanism for how entrepreneurs make a decision and thank the Lord that they don't, because otherwise we would never.

Resha the world, overcome dramatic odds and do things that are amazing.

[00:07:26] Richard Gaffin: Mm-hmm.

[00:07:27] Taylor Holiday: And so I think sometimes it's really important to understand why do entrepreneurs behave the way that they do? And why is that profile of person actually really important? Mix the society. And I think that it's not logic. That's not the motivating factor.

[00:07:38] Richard Gaffin: Yeah. Yeah. Well, okay, so let, let's dig a little bit more into maybe the specifics of what those motivating factors are. Like. Why, in your estimation, is it that most people involved in this do what they do?

[00:07:50] Taylor Holiday: I think there are a number of factors and amongst the entrepreneurs that I've gotten to know and spent a lot of time with it, and even reflecting on it for myself, there are a few things. There's one, there's autonomy. There's this desire to control your life, to feel a sense of, it's on me. I'm going to try and make or fail on my own terms, and there's.

I think especially built into the ethos of the United States of America, a culture of this that is this sort of libertarian, I'm gonna make it on my own

[00:08:21] Richard Gaffin: Hmm.

[00:08:21] Taylor Holiday: that is woven into the fabric of our culture and celebrate it. We look out and the heroes of the business world are these folks. And so I think there's, there's very much a cultural underpinning that a lot of us were brought up in to ascribe to that kind of ideology.

The second is that you have, a lot of these people are visionary in the sense that they have some problem or experience that they've had and they want to change it. They, the world needs to exist differently than it is today, and there's this burning thing inside of them that it just must be so and so it doesn't.

All the logic sort of peels away and this need to resolve this feeling or conflict or issue for themselves sort of supersedes. Everything else that they've experienced. And they get latched on to a sense of the future that they must then bring forth into reality. And so that's like this other big piece of it.

And then. They're gamblers, they're high upside chasers. They, they don't settle for the floor. Where we could agree that working at Meta might be a higher floor, but it probably means you'll never make a hundred million dollars. Now maybe Meta's a big bad example 'cause there's a lot of good stock options over there.

But the idea of being an employee somewhere probably capture earning and people. Like the lottery event of it. They like the, the, the, and their perception of the likelihood that they will themselves achieve it is much higher because they apply an individual sense of skill or expectation or community to what they're doing in a way that it's better.

So I think they're gamblers, they're visionaries and they was the first thing. Oh, they, they value autonomy and independence in their, in their life and decision making.

[00:09:56] Richard Gaffin: Yeah, and I think what you're describing is overall is just sort of the entrepreneurial personality type, and I think one thing that we kind of talked a little bit about before we hit record here was that it is sort of fundamentally delusional, and that's not necessarily a bad thing in any given. I. In any field where our success is sort of, there's such a low rate of success.

So like let's say being a standup comedian or making it in music or whatever, every single one of those people is delusional. David Bowie is just as delusional as the busker on the corner of the street. It's just one happened to make the other didn't.

[00:10:28] Taylor Holiday: That's right.

[00:10:29] Richard Gaffin: this seems like a similar scenario, right?

[00:10:32] Taylor Holiday: Yeah, that's, that, that's exactly right. Is that there are lots of things that we do where the decision isn't this like purely mathematical logical calculation of the most likely thing to occur. And otherwise there's probably lots of, lots of weird things that we would do never do, you know, under that pretense.

And so I think for humans, there's something about the great endeavor, the attempt to overcome odds that is, it's very human in that. Like I think this is a distinction maybe between a machine that would be programmed to behave consistently, logically, and something that sort of is motivated by different desires and wants maybe that are.

Very, very uniquely us. And so I I, and I think this is actually where entrepreneurs should, in many ways, my, my point of talking about all this is that they should block out the tweet threat is that I don't, don't engage that content. It like, it's one thing if you're like trying to sell your business and you're looking for a market assessment of the price that you could expect today, and that's like, then it's worth understanding this context, otherwise.

I'd ignore it entirely because that's not why you got here in the first place. Don't confuse the idea that you started an e-commerce business because you did some market assessment of the viability of the industry for producing long-term exits. That's not why anybody got here, at least nobody that I know.

[00:11:49] Richard Gaffin: Mm-hmm. Yeah. I think it's like the, the, the advice to get off Twitter, I think like, makes, makes a lot of sense in the sense of like the internet. Generally speaking, amplifies edge cases, just in all sorts of, you know, in every kind of facet of life and in entrepreneurship, no less. So I think that there's a lot of, and you've talked about this, a lot of people, you look on social media say, you know, this brand had this exit, they did this thing, they. Employ this tactic and it, you know, kind of blew them up, whatever. And that kind of being noise or just like, like useless data points essentially that just kind of like continue to create this sort of like, this cycle in your head. That's I logical, essentially,

[00:12:29] Taylor Holiday: Yeah, that's right. And, and for me, like the, the, the takeaway here and why people listening is that, and, and even when I think about this as a person running an agency who's seeking out brands to partner with, is that it is forever true that the best partners we have. Are in some ways the most delusional and obsessed with the world they're trying to craft.

Right. And I, I think a great example it's been, I've mentioned on a bunch of podcasts is Josh Shapiro from Baseball Lifestyle, running an Instagram account for 10 years, posting 10 times a day. I. Before he ever sold a thing. Like there's nothing about that behavior that is like a logical pathway to making money, but what it, what it actually builds is a moat.

It's the behavioral thing that no one else will do. That creates the edge over everyone else that will then try to compete with you because you were so willing to behave illogically for so long that you actually offset it. I, I saw a great quote. So Alex Ozzi,

[00:13:25] Richard Gaffin: Mm-hmm.

[00:13:26] Taylor Holiday: was on some podcast the other day and the guy asked a question, which was like, if you could toss out every tweet you've ever written, every book you've ever written, and you were gonna die and you had to leave the world with one sentence, what would it be?

Which I thought was like, you know, like a pretty, pretty deep question. And he stops for a second and he gathers. He is like, figure out what it is that you truly want, and then do so much volume. In pursuit of that thing that failing would be unreasonable. And, and so, so what I think about these odds is that what they don't sort of share is they don't, account for your input into trying to make it work, right? And so not everybody tries the same amount, not everybody efforts the same amount. And so you can really reshape the likelihood of success by the amount of effort and volume that you put forward. And so I think that's where there are people that have lots and lots of successes is because they actually have created for themselves an edge over everyone else by their.

Unreasonable efforts that create a much higher likelihood of success. And so it's, it's the people that can sort of, look into that environment and go, yes, I, I recognize y is because most people won't do X, Y, Z, A, B, C, but I'm actually willing to, and therefore I have a much more disproportionate likelihood of success than everybody else.

[00:14:53] Richard Gaffin: Yeah, I, another hormoz quote that I think applies to this, that is a really good one is, says, one thing you have to accept is that every business idea is a bad idea, except some of them happen to be good and there's, there's a little bit of luck of the draw in terms of what is and isn't good, but I think it would be interesting to kind of pull on that thread a little bit more of like, what are the characteristics that distinguish the 5%.

Obviously there's a little bit of luck and a lot of effort, but are there any sort of like fundamental characteristics of certain businesses that make them more likely to succeed? Or like what, what other factors play a role there?

[00:15:23] Taylor Holiday: Yeah, it, it's a really good question and, and I think it gets into. Sort of the, the concept of like the business vehicle you choose to try and drive, there are some that are better suited for success than others. And, and I think there is wisdom that you can glean in terms of what is this market that I'm entering?

And this goes back to this, this question of like for me, okay, Taylor, if you had to start an e-commerce business. What would have to be true? And it goes this idea of like, I would want to be able to very clearly state my unique value proposition to the world and my unique leverage on the market. And so we think about four quarter accounting and we talk about, okay, do I have CAC leverage?

That usually comes in the form of I have access to organic audience, I have some mechanism to drive non-paid advertising success at a scale that like helps me minimize the amount of marketing costs I have. Do I have margin leverage on the cost of goods, maybe. I have some unique relationship with a manufacturer.

I have ability to monopolize a supply chain. I think about heart and soil. I use that example a lot. I have massive gross margin, but not even just massive gross margin. I. Generally mass gross, gross margin leverage to the rest of the market for some reason. I have a patent, there's something on that side of these things.

Operating leverage. I'm really great at ai and so I'm able to get systems put in place. Like I think there's companies right now that are, you know, being able to create opex leverage where I. I, I think another one is like, I'm willing to work remote and don't need to create these ancillary expenses.

My life is really cheap. I don't need to pay myself a lot of money. These are all sort of lifestyle advantages in the short term that many entrepreneurs leverage early on. So I would need to look out at the opportunity and go, there is something about the thing that I'm doing that provides me unique leverage on the world.

Like when I think, and one of the ways you could create this, I think about this with CTC. Is that my unique leverage on every other agency is actually 10 years of vested network creation. 'cause one of the things that happens for us over the course of 10 years is you get throughout every month in an unpredictable and hard to understand way, people referring US business.

[00:17:21] Richard Gaffin: Hmm.

[00:17:21] Taylor Holiday: And it's just the EndNote of an EndNote of an EndNote of an EndNote, of an EndNote, of a system that has existed for 10 years where people have come into its sphere had positive experiences. Whether it's former employees that now work at brands, whether it's other brand leaders who have gone on to other brands, whether it's friends of brands or friends of people, or like just 10 years of existing in this space means that you develop this system that constantly pushes back towards you that like you couldn't recreate tomorrow.

You just, you just wouldn't have that leverage on me. So there's these things that take time to build and you can, you can effort towards the audience that I've developed takes a long time to build. Like these are all moments that you could create that I think when, if you were to go into a thing, you, you'd have to understand what is that unique value prop.

And a lot of times when I talk to entrepreneurs, I think it's like you have to answer this question if you can't answer it. If you suggest an answer and it's kind of squishy, find someone in your life who will give you an honest assessment of how uniquely valuable that is and show how it's, and, and present how it's gonna show up on your p and l.

And if not, I do think it is worth trying to redesign your business towards such an end. Because it is so hard to make it being very average and mediocre across all of those categories, it likely produces average or mediocre returns over time.

[00:18:33] Richard Gaffin: Yeah, that makes sense. I was gonna say like, this is maybe a good place to plug our diagnostic toolkit product because that, that's the function

[00:18:40] Taylor Holiday: a bit of a mirror. Yeah.

[00:18:42] Richard Gaffin: The function of that tool is to, yeah, exactly. Hold up a mirror to your business or, or like a way to, to do it or think about it is like a 23 and me. Test for your business? Like what is the sort of fundamental DNA of this brand given the product given? Just sort of the way the business set up is set up,

[00:18:57] Taylor Holiday: And.

[00:18:57] Richard Gaffin: what are the things that aren't, are kind of out of your control

[00:19:01] Taylor Holiday: Sort of like the handoff overlap

[00:19:04] Richard Gaffin: you

[00:19:04] Taylor Holiday: between the service and sales,

[00:19:06] Richard Gaffin: I, I don't

[00:19:07] Taylor Holiday: so between.

[00:19:07] Richard Gaffin: the answer if, if you have like a. Low growth potential business. That's not gonna stop you from doing what you're doing, but it's at least important to understand

[00:19:16] Taylor Holiday: is like the main presentation, right?

[00:19:17] Richard Gaffin: that

[00:19:18] Taylor Holiday: Everything. That's right.

[00:19:19] Richard Gaffin: to kind

[00:19:19] Taylor Holiday: Narrative. And I think that that, like I, sometimes I desi like in, in that creative, I'll design this like two by two matrix to have a conversation with somebody, which is if product is like an XXI and the advertising is the Y access, and let's say that the spectrums are from like amazing, unique, and novel to total commodity.

If your product is a total commodity, if you're selling batteries, if you're selling deodorant, if you're selling toothpaste, like in order to win. In a highly commoditized category, your advertising has to be exceptional. Like you have to do something that cuts through the noise so dramatically to gain awareness and market share, and, and so this sort of spectrum exists.

You could apply that same logic along all the attributes of a business Is your gross margin exceptional? Oh no. Well then your marketing better be world class because you need to drive really efficient acquisition, right? So as you think about the business, you can start to understand where you need to behave, like further out on the risk curve and where you can behave more normal, right?

And so if you have like a. Amazing gross margin. Well then you don't need to have the best CAC in the world. So your, your advertising needs to be good, consistent, but doesn't have to be exceptional in order to win the game. But if you look at your gross margin and it's mediocre, and you've got a high return rate on your product, and you look at you know, your, your your opex and it's kind of just normal.

Then your marketing needs to be disproportionately effective. So you better put some time into thinking, how are we gonna be unique? And we gotta take bigger swings and wilder behavior here because we have to be disproportionately better. So I just think that that kind of thinking really helps you understand where you need to behave more dramatically than other people.

[00:21:01] Richard Gaffin: Yeah, no, that makes sense. I think like maybe a good analogy for this is that, An e-comm business is not as less, much less like a slot machine than it is like poker or something like that, where the odds of winning are. There's still a lot of luck involved, but there's definitely a skill level that can you a higher chance of success.

So even if fundamentally you are going in for a delusional reason, quote unquote, there are certain sort of skills that you can work on, there's certain things that you can bring into the running of your business that actually raise your odds and gives you just a higher likelihood of being in that topic.

5%, right?

[00:21:36] Taylor Holiday: Yeah, that's right. And then like even this goes back to the Alex thing on like getting really clear on are you trying to make a hundred thousand dollars? Are you trying to make a million dollars? Or you trying to make a hundred million dollars because your behavior is gonna be very different in every one of those scenarios.

And it's gonna force you into more extreme versions of each outcome. Andrew Derian from ECF shared the other day, like his investment portfolio and he was talking about how. That specific investment for portfolio matches to his desired ambition. Right? And it ended being like mostly investing in index funds was the end conclusion of which I, I hear this advice a lot.

Which is like, awesome. Like, but, but if, if your ambition and there's no right or wrong is to, you know, buy the New York Jets and your Gary V one time, like then investing in index fund is a terrible idea. It will never get you there. You cannot, 8% compound your way to a billion dollars. Like, unless you have some massive baseline of influx of cash to be putting into that.

So you're gonna have to. Take that money and put it further out onto the risk curve to try and generate disproportionate returns at a level that's different. Right? And so, I think as entrepreneurs we have to think about our businesses the same way, which is like, can you 8% grow your way to the desired return that you want?

If so, well then awesome. Plug along. Risk mitigate. Think about diversifying and reducing a, a, any risk of ruin that you can and take really slow, moderate growth for the next 20 years and off you go if that's satisfying to you. But what I see is often a mismatch between the desired return of the shareholders and the behavior of the organization

[00:23:15] Richard Gaffin: Mm-hmm.

[00:23:15] Taylor Holiday: there's actually no pathway to ever achieving the outcome that they desire.

And there's a lot of episodes we have back in the day about the alignment of desire with behavior in terms of inside of a business structure. And I think. These stats are just another opportunity to revisit that and say like. Well, okay. Is your goal to be around in five years? Well, there's a 50% likelihood of that actually.

So let's see how we could get that to 70%. What would need to be true if that's your goal? Is your goal to get to a million dollars in net profit? Well, that's a 0.1% endeavor. Are you clear on that? Okay, cool. In light of that, how do we get that from 0.1% to 4%, which would be a monumental increase of the likelihood of success, but still means you're gonna fail 96% of the time.

So are we conscious of this? Is this what you wanna spend your life doing? Great. Let's go after it and we're here to help.

[00:23:59] Richard Gaffin: Yeah. Okay. So outta curiosity, where do you see the biggest misalignment between and behavior? So my sense would be, it's like the goal is to, I dunno, whatever, become billionaires in five years and then the behavior is more a slow build. But like how, how does that usually shake

[00:24:15] Taylor Holiday: I think, I think that what people really want is if they take a step back, they want personal wealth, financial freedom,

[00:24:21] Richard Gaffin: Yeah.

[00:24:21] Taylor Holiday: out of their entity. And I, I appreciate Sean Ridge is really going hard on this right now. He's like putting on a lot of content about running to your first million dollars. Like get out of the business into your pocket.

And I think entrepreneurs way too often just double down, double down, double down. The cash just goes back into the business, go back into the business and they, they don't. They don't actually think about, okay, my goal is to get myself $5 million liquid in my own bank account. Because there's this like really tempting delusional bet, which is that like, oh, my businesses grew 20% last year, so the best place for my capital is inside of the 20% annual growth thing.

Because if I put it into the stock market, that's 8%. But there's like a huge punitive value to the ill illiquidity of your stock. Like people just don't take into account of how hard it is to actually create that into cash versus when it's in an index fund, you can instantaneously do that. And so that liquidity profile is just such a multiplier of value that I think gets, gets under considered.

And so, I, I think that more people. Would do well to get clear on, okay, I'm trying to get to $8 million cash. How would I do that? And how could I build and design the business to accomplish my personal financial desires? And then how could I, along with that, align that interest with the rest of the pe, the rest of the shareholders, and also stakeholders, which I would consider employees, even if they're not shareholders.

How do we now try to create the best alignment between all of those interests?

[00:25:41] Richard Gaffin: Yeah. I was gonna say, like part of what this, this makes me think of is like I've, I've been thinking a lot about this one YouTube creator who makes golf content. this like South African guy named I dunno, golf sidekick I think. But anyway, his point is, if you are not a scratch golfer, why are you shooting for par every time? And I had never thought of that

[00:26:00] Taylor Holiday: Dude, I, that is such, I think about this all the time

[00:26:03] Richard Gaffin: yeah.

[00:26:04] Taylor Holiday: if I thought about bogey as success, it would completely change the way I played.

[00:26:08] Richard Gaffin: exactly, exactly. If you shot for bogey, if you shot for double bogey, I shot for double bogey. I would have the best round of my life by just laying up twice, chopping it down the fairway with a nine iron and then taking three putts or whatever. And planning to do that will gimme the best success or the the best op or opportunity to get the best score of my life.

Right? And so I feel like that's. Pretty similar here of like set the goal. If your goal is to like, I think a lot of people treat this sort of million dollar or billion dollar exit or whatever as par when in fact that's not for you. It might be something else entirely and you may have a skillset that can actually get you something else.

And I think that's like, that's kind of what we're talking about here.

[00:26:44] Taylor Holiday: That. That's exactly right. That's exactly, that's a great metaphor and something that I've tried to internalize. It's funny, I was buying a. Pickleball paddle.

[00:26:51] Richard Gaffin: Mm-hmm.

[00:26:51] Taylor Holiday: Yesterday my, the, the school my kids go to, like, a lot of the parents do this, so I went to an event the other day and it's like, okay, if I'm gonna do this, I gotta figure out what I'm, what I'm, what I'm doing here.

And I, I found myself in dialogue with Chad GBT about this as, as I often do. And it kind of came down to this question of like. What are you trying to do here? Are you trying to like play recreationally every Tuesday at the parents event? Are you trying to like, and, and I found myself like trying to find the highest end, coolest thing and it's the sort of the same thing with golf clubs of like the worst thing I could do if you're trying to be, I.

If you're a bad golfer, trying to get a little better is to go buy blades to buy like the pro golf clubs. You'll get worse. You will get, you'll be terrible. 'Cause there it's like mastered or engineered beyond your present capacity. And so it was like trying to get more honest of like, oh no, like I'm bad at this.

And I'm trying to be like competitive amongst a group of 45 to 55-year-old parents once a month. Like, now give me a paddle recommendation. You know? And I think that level of clarity though is, is hard. To actually get to.

[00:27:50] Richard Gaffin: yeah, yeah. No, that makes sense. All right, cool. So let's, let's kinda wrap things up here. In terms of like the, the one takeaway again from this whole conversation about, you know, the 95 and 5%. do you think is like the one, sort of most important thing that we can take away from this conversation?

[00:28:06] Taylor Holiday: it's to ask yourself about, I think that value alignment between do you, are you clear on what you're trying to accomplish? Are you clear on how your business gets there? And then three would just be to say, we could help. Like, it's one of the things that we do a lot is to, like you said, whether it's the GQ score or the profit system, these are both tools to say what is likely to occur.

How could we give you a POV on that and how does that actually relate to enterprise value and the desired outcome that you have your capacity to produce free cash flow, put it in your pocket. I would love to be in more conversations with brand founders and shareholders about those things of like, how do we get you the actual return on your capital that you want?

How do we make this business deliver the financial outcome that you prefer? Set aside the odds of the likelihood of your business being worth X, Y, or Z, how could we improve it? Where do we go from here and how do we get you what you want outta this thing?

[00:28:54] Richard Gaffin: That's right. right. Yeah. So everybody listening, if you're interested in us working with you on that whether you're a business that's in the eight figure range or for the service side or whether you're interested in just running our diagnostic toolkit, both of those things are available@commonthreadcode.com.

Just hit learn from us. Select the diagnostic toolkit. You can check it out there. Or if you wanna work with us, as always, just smash that hire us button and we would love to have that conversation. Alright, I think that'll do it for us this week. Everybody take care and we'll talk next time. See you.