Looking to take your enterprise level software company to the next level? Or are you just starting out in business and seeking valuable insights to propel you forward? Tune in to this episode of Remote Start Podcast with Jim Doyon, as he chats with Garrett Mehrguth, the President... See show notes at: https://www.remotestartpodcast.com/e53-unpacking-customer-generation-strategies-for-software-companies-with-garrett-mehrguth-president-and-ceo-of-directive/#show-notes
Looking to take your enterprise level software company to the next level? Or are you just starting out in business and seeking valuable insights to propel you forward? Tune in to this episode of Remote Start Podcast with Jim Doyon, as he chats with Garrett Mehrguth, the President and CEO of Directive. Founded in 2014, Directive Consulting has bootstrapped its way to becoming a leading customer generation agency for software companies. Garrett will share how Directive helps marketers exceed their lead opportunity deal and revenue goals through customer generation. Don't miss out on this informative episode packed with actionable strategies to help you achieve your business goals.
Learn more about Garrett Mehrguth at:
Personal Website: https://garrettmehrguth.com/#/home/0/
Learn more about Remote Start Podcast at:https://www.remotestartpodcast.com/episodes/
Jim:âRemote Start Nation, if you're leading an enterprise level software company or you're striving to get there, you won't wanna miss this episode. And for those of you listening who are just starting, regardless of your business sector, we're going to be unpacking a lot of value from our guests that will help you on your journey. I'm Jim Doyon, your host, and on today's episode we're gonna be talking with Garrett Mehrguth, president and CEO of Directive. Garrett and his partner started Directive Consulting in 2014 and bootstrapped it to what it has become today. Directive is the customer generation agency for software companies where they help marketers at software companies to exceed their lead opportunity deal and revenue goals through customer generation. We're going to learn about how they do this on today's episode. Without further ado, I'd like to welcome Garrett to the show. Garrett, how are you, man?
Garrett: Good, good. Thanks for having me, Jim, excited to be here.
Jim: Absolutely. So to get this started, tell us something that you wouldn't know if we just met you.
Garrett: I was homeschooled all through pretty much through college.
So that part's I think, a little interesting, it was helpful, I got like a kind of old school classical education. I think it really helped to be honest, I learned a lot about things like, Dante's Allegory and Latin and all the classics and all that stuff when I was really young, and I think I took harder classes when I was, pre-high school and junior high than I did frankly in high school or college. So I think that kind of taught me how to study and stretched my brain and gave me new information on worldviews and how other, organizations operate, and then I grew up a missionary kid, like traveling the world. So I got to see so many different cultures, but not like in the main city, like out in the kind of the boondocks and got to see how different civilizations and people and ethnic groups live and how they operate. And I think it was really helpful.
Jim: Yeah that's an incredible journey. Did you, when you got to college, were you able to, did you know like you wanted to have that lifestyle, when you, as you got older and graduated college or was it did that come to you afterwards?
Garrett: No, I've always liked traveling all that stuff just cause I grew up traveling so much. And I'm comfortable doing it, but no, for me, I just always wanted to build a business, do business, I like, I think I could I just felt like I could see a business and make it better, if that makes sense, I didn't really have a tangible skill. I just felt in my gut that like I could see something and improve it and that was like what drove me, to a certain extent.
Jim: Tell us a little bit with that said, tell us a little bit about your background with, on your business journey.
Garrett: Yeah. So I trying to play pro soccer actually, I was that was my passion, I wanted to be a professional soccer player probably since I was little. So I trained a lot, every day I was training and practicing a couple, usually double days, since I was in junior high school. So took be pretty serious, I take most everything in my life fairly serious to be honest and just really try to apply myself. So I was just training a lot, got private coaches, just worked really hard. I was on the top team of the country, got D one scholarship offers, went to a Christian school, graduated from there in three years in economics, and then my fourth year I did my masters and I was captaining the team and trying to go see if I could play pro or anything like that. And then I hurt my knee and I was just, I'd seen for years the guys who like just weren't quite good enough but didn't give up on their dreams. They'd keep coming back to practice and I'd keep working it, but eventually they're just getting older and you can just tell it's never gonna happen, but then they're not getting started on their next thing, I don't know, I just didn't want to be that guy, I could just see it. And I was self-aware enough to know, like I just didn't have enough of the God-given natural talents. To get, like I had the mentality, I had the athleticism, I had the work rate, I just didn't have the actual soccer skill to be a truly like elite, sustainable professional player, it's just another level. Yeah. And I'm not exactly bad, I'm just not 10 million a year. Once I that, and I didn't have the right sustainability in my body. I was injured too often, like my makeup, my body composition wasn't quite right. So I went on fiber and I started just doing $5 gigs, so I was like working a lot of jobs, trying to get a job anywhere, I couldn't get a job at Northwestern Mutual, which says a lot, maybe I'm just the worst interviewer everywhere, but I couldn't get a job there, I couldn't get a job at any of the consulting firms, I couldn't, I tried to apply and I couldn't even get one, like McKenzie, Boston, BAE, Deloitte, whatever, I couldn't get one. So I was just like, all right. And so I got a couple family friends I knew had like small businesses, so I invited them to my graduation and I was. Selling them at the graduation party on hiring me, and so I was just independent contractor work for some of them, I was doing like brochures. I had no actual skills yet, I had like brochures I would do, I would set up like Yelp or Facebook, I was working at the Chamber of Commerce. I was working with facilities management at the school. I had my fiber gig and I think there was something else. But yeah, so I was doing all that just to pay my bills, âcause I've been on my own since I was 18. And then I got my first consulting customer. So I was on my little 1978 Puo 103-SP in East LA and I was driving around and got a swar shop. So I told her like I liked his SMAs and I was like, Hey, I could help you like set Facebook page, yelp, all that stuff. So I did that for him, I'll still sell $5 gigs on five of us, bet my buddy, I can make a grand a month on there. And then, Got that account, did it for 30 days. I came back on the 30th day to get my check. He said, come back tomorrow, I came back the next day, whole place was boarded up and that was my first story consulting customer, yeah.
Garrett: Yeah, so that's how it started, and then I just then I got a hookah shop. He asked me to build a website, I built one for my uncle, like two years before on Genesis Framework and WordPress, I would just Google in the forums, find the code, copy it. I was using the theme builders, so built on a website, and then he asked me if I could rank it. I was like, never done it before, but I could probably figure it out. So I just went online. I tried to read everything I could on SEO, so I like read all the blogs, MAs that are in, watched all the videos I could find on YouTube. I'm like a nut when it comes to consuming content. So I just went through everything, I came up with a little mantra called Learn, engage, create. So the concept was if I could learn something new every day and engage with it proactively by applying it, then I could create more value for myself or for my customers, and so I just did. Every day just grinded, I've been working probably 10, 12 hours a day since I was 21, 22. And then just keep going, and then eventually, you just get better than everybody, not âcause like you're more talented or anything, you just worked longer for more years without getting distracted or pivoting. And then, you're pivoting within like your industry, but you're not pivoting like a lot of guys who are on agencies, they're like, Ooh, I should start a product or I should build a brand or I should, yeah, and I've done that too, but I think I always stayed disciplined enough to know that it was a distraction. We all wanna chase those little objects, but if you stay disciplined enough in your field, you can be pretty successful at anything.
Jim: So who won the bet? The fiber bet.
Garrett: Oh I definitely won the bet, thought it was good, yeah. But I got the hookah shop filled up with hookah. They were all, they was smoking it and I was like, crap, this is pretty powerful, like I ranked him number one in the area. So I went to my best friend who was my room mate, and he was gonna go to law school and I was like, Hey, introduce me to your dad. I could probably, he was a plumber and he had one truck and I was like, I could probably help him. So next thing he had three trucks, âcause I ranked him number one in his area and I was like, damn, I'm pretty, like I'm pretty good at this, this is pretty cool. And you that like moment of power as a consultant when you're like, I can help a business and change it, this is it feels very cool, unfortunately I don't get to do any of that anymore, but that feeling was great, when you're first getting. And then I got him to join me, I was like, I'll pay you like three bucks an hour, you'll have equity and why don't you come knock, go to law will join me, and then him and I started, I think formally that partnership together in like 2014. I started in 2013 and then, yeah, it grew from there.
Jim: So was it, you guys were just doing stuff for people and then all of a sudden you came up with the name of the brand and started to like?
Garrett: No, I was always directive and I was doing all the same stuff, I had two customers and he joined me and then, he became a partner yet.
Jim: So at that point, what was your goal and, how has that changed today?
Garrett: Hasn't changed one bit. I wanna build the largest marketing agency in the world.
Jim: That's awesome. Do you feel like your drive towards becoming a professional soccer player, did you instill a lot of those skills in your business and has that helped you to be where you are?
Garrett: Yeah, I think everything helps. I think it's probably mostly my parents in the sense that my parents like are exceptionally hardworking, like we don't come from money or anything, like they didn't, I didn't grow up with money, like they went into missions right before the Great Recession and we were a hundred percent on donations. So we did have anything to be honest with you, but they worked really hard, like just, yeah, they still work more hours than I do. So I think I just saw that and it was just in my blood, and then my grandpa, he came to this country from Germany, his whole family got bombed, he was an orphan, my grandma was an orphan they came here with, 10 cents in their pocket and then they built, our family up from there. So just seeing that, I think work rate and that work ethic, was big for me. I don't know if and I'll, they know this, they're not as maybe like they don't know how to apply that work rate in the same way I do, âcause I don't think they had all the same education and opportunities they gave me. So I just try to take the God-given gifts I have plus the nurture nature debate. So getting to see the nurture of how hard they worked and I think nature wise, I got given some gifts and then if you put the two together and you work real hard, you can do a lot, to be honest.
Jim: I love that. Tell us more, I know I talked a little bit about, in the intro about directive and you've hit on search a couple times, tell us more about what directive does, who your clients are and where your locations are.
Garrett: So we're global now, we're like formal, international entities and the Europe, Asia-Pacific, North America, Latin America. We got over 150 people, we're fully boots, we did over 20 million plus last year very profitable, it's profitable, I wanna be at Renaissance, zero profit, first 10 years, we serve tech companies, so we've got, snap as a customer, Amazon's a customer, Uber as a customer, so biggest tech companies in the world, as well as all the IPOs. A lot of the ones were doing all their marketing. So Sumo Logic is a DevOps company, we did all their stuff for a couple years before they went public. 7 0 1 cybersecurity companies, see them on like F1 and stuff, did all their stuff for I think four or five years before they went public, all State. I got when I was like 22, 23, I still have them as agency are record. So you know, a lot of the big brands and then, but mostly just funded tech startups, the gongs of the world. Those people, they all trust us to do all their marketing.
Jim: There's a million marketing companies out there. What sets you apart?
Garrett: I work really hard, like our comp, like if the CEO works really hard, everybody, the organization works really hard. Like we, you, we just really give it like a damn, and I don't think that's it's a hard thing to explain or what makes it different, but the culture, it's the culture, the culture here is, you asked earlier about sports, I would say that's what's different about directive, I run it like we're the number one sports team in the country, and if you want to be in that type of environment, you have to constantly getting better. You have to be constantly being able to pay your employees more, you have to be constantly able to offer better benefits, you have to be able to create more opportunities from them. But I can proudly say, if you leave this organization, you'll be the hardest worker at whatever organization you go to, and you will rise exceptionally quickly in your career after going to directive. We're like the Navy Seals of marketing and if you want to be that, we're great. If you don't want to be that, I mean you hate my guts and I don't work you weekends or nights, it's that eight to five, but when you're here, I mean it's go time baby, like we're working we're pushing boundaries, we're trying to improve. We're, very disciplined about self-improvement, we have what I call commitment, culture. So if you want to be successful and will work at our organization, you have to, number one, be exceptionally committed to your own potential, I think that's the most important thing is you have to be committed to oneself. And then secondarily, you have to be committed to the team you serve or the team you serve on, and then lastly, you have to be, really committed to the organization as a whole and it's collective vision. And as long as you have those three things, you got a job for life with me.
Jim: Have you, in the, since starting and to where you're at now, have you seen a lot of turnover of people that come in and they don't fit that mold and it's an easy goodbye or is it something that you do so much upfront to make sure you're bringing in the right person, that there isn't that turnover?
Garrett: No, we still struggle with turnover, I think we're getting better, every day we manage it exceptionally well, we care really deeply about the people, we don't fire people willy-nilly, we try to never really fire people, I don't like firing people, to be honest, I really don't like it at all. It's not really so much about that, I usually, what I'm love about running an organization is I like to be able to see an individual for who they are. And I can see usually who someone is, I know I don't think I get seen very often as who I am, but I can usually see who someone is. And my goal is, when they look in the mirror, they see the person I see, and I wanna pull them up to that image of themself where they are powerful and capable and talented and passionate about their life and their work. And to me, I live to work, but it's not just this, I apply the same energy to my wife, to my kids, to my hobbies. It's just, if you're gonna do something, why not try to be the best you can possibly be at something and just, really apply.
Jim: And are you had mentioned that you don't get to do some of the stuff you got to do, like hands on in the beginning. And is that because you're working so hard to build the culture that you've created.
Garrett: Have a massive executive team that all has a specific role and responsibility, and it's not my role or responsibility to do their role and responsibility. So you gotta learn to be a, you gotta not I never wanted to be an entrepreneur, I'm not an entrepreneur, I'm not an owner, I'm not an operator, I'm a CEO. I wanna be the best CEO I can possibly be.
Jim: I love that. I know now your focus is on SaaS companies and tech. You had talked about, the first client being a swarm co client and hookah client. How did you know that your customer persona was, these SaaS companies and that's who you wanted to work with?
Garrett: I didn't, I'm not like some genius or anything like, I mean I was only charging 200 bucks a month. I was, I remember distinctly, I was in an Uber and I was like talking to this guy, they always wanna talk. I'm not a huge like talker, but they always wanna talk, and so we're talking and oh, what do you do? I'm like, I do SEO and stuff, âcause I only did SEO when we started, that was my technical thing I taught myself was just SEO and he's yeah, I do SEO too, and I'm like, okay, cool. We start talking and I can tell he doesn't really know much to be, and I'm like, okay, but then I go if I'm curious, like how much do you charge? What's your minimums? And he goes two grand. I was charged like 400, 200 bucks. I called my partner immediately, I was like, bro, we gotta raise her rates, what are we doing over here? This guy's doing nothing and he's got all these customers, he's terrible, what do, like he's driving Uber what the heck? Like I mostly learned like that, like I was reading a book, I don't even remember the name of the book, it was like a super like branding, like for idiots type book. I was on a plane and it was like, when you want to grow your marketing business or your, whatever you're doing, or your business in general, it's figure out who paid you the most, who you get the best results for, who you like working with. And I was like, software companies yeah. And I was like, all right, cool, and that was it. So that's I didn't, I've never worked at a software company and I was just like, they pay me the best, I get them good results, let's just do that, and then I think within two years I was the biggest software technology marketing agency in the world.
Jim: So it took that to understanding and then did you just start going after and was it picking up the phone and dialing? Was it, digital marketing?
Garrett: No, no.
Jim: What helped you to get there?
Garrett: I came up with a completely different way of advertising than anyone else, I think, in the world, and it works. And so now, I bring that methodology to our customers and then I coach CEOs and business owners just how to grow their business, and I'm pretty good at I'm not a big lifestyle business guy. I'm not great for those people, but if you want to like, really build something large, I'm pretty helpful, and so I help with those people, that's how I answer your earlier question, Jim. That's how I stay still in the coaching and consulting side is I coach and, train my exec team and then I like to work with, my fellow CEOs and stuff. And then if they're really talented or something, maybe, I'll, and they wanna sell, maybe I could acquire them or something, but when it comes to my growth and what drives it, it's the advertising to be honest. I taught myself SEO. I ranked as number one globally for SEO agency, I was in the top three for PC agency. I've always grown, and what I am actually genuinely I think, pretty good at is marketing. So I do a lot of I take our marketing very seriously and I treat it as research and development. So before I ever take a penny from anybody, I make sure it works for me. I'm really passionate about that, I don't like to mess with people's money or their reputation, right? When someone hires, they put their reputation on the line at their organization internally to say, I'm recommending we work with this vendor, I take that exceptionally seriously, and so I wanna make sure everyone who hires us looks like a genius for doing so. And at our size and scale, I need an approach that works regardless of the consultant, âcause I have very talented people, but not every person is gonna be perfect 100% of the time. So you need to, some type of methodology or viewpoint that's structurally different than the market, not better than the market, but different than the market, âcause people don't pay more for better. They only pay more for different, I've found it's very hard to convince someone you're better, it's very easy to convince someone you're different, and then you're selling apples and other people are selling oranges, so you have more price elasticity. And so what I do is I really focus on essentially my own marketing, what I came up with the way of advertising, so there's this thing like ABM that was really big like five, six years ago and it's still popular today, it's account-based marketing. You might say these are my top 100 accounts or top 500 accounts and I wanna go get them. What I found with that is the number one thing of why people choose something, it's all timing dependent and there's a lot of tools that try to show you intent and timing, but they're all crap. To be completely honest, they're not very good. And so what I had to figure out was then how do I, like what if I could advertise to a total addressable market, not just like a couple hundred accounts. So what I figured out how to do was like take every tech company in the world and then manually verify them that they were really what I wanted. So I got a list at first of, I'd say 10,000 tech companies in the US that fit my buying criteria, right? That X amount of headcount, maybe they're using Y amount of technology, maybe they had Z amount in spend. So I built my own dataset and then I enriched the dataset with SpyFu a Hfs, SEM, rush Data, and all this data so that I could essentially estimate their investment into search, and if I pay a percent of spend, I could say, if they're spending X on search, then they could spend Y on their retainer, hit my minimums, and now they're a qualified account. So I essentially qualified 10,000 accounts at scale, then I just upload them into LinkedIn and I offer them a gift card to take a meeting with me. First 18 months of doing it, I took 68% market share. So I held sales calls with 6,800 of those accounts in the first 18 months, and yeah, I haven't seen this year, I gotta get the data, but two years ago, I gave away over $350,000 in gift cards, but I was able to grow the company, tens of millions of dollars.
Jim: So it, that's incredible, dude. So for someone who's just starting, for someone who you know, is on fiber right now, for someone who's walking around trying to find their first client, what's some advice that you would give them to, put into place right now in their business?
Garrett: Yeah, I think one of the things I've realized that holds everyone back that I never had to deal with, not cause of some special thing or anything, it just actually doesn't really occur to me, but it's that self-doubt, that fear. I've always been of the belief that nothing can stop me other than myself. And so I don't create external obstacles to overcome, I don't have external obstacles, I have internal obstacles, but I got this weird thing where I didn't realize that I don't really like, the thought of failure or the fear of failure, or the fear of I'm not good enough for that, never actually enters my brain. So I don't have to overcome that at all, which I actually realized was like a gift, it's not something I've ever developed or anything. So I would say what stops us as humans is just usually like self-doubt, it's not like external forces. There's usually a solution for everything, if you just work hard. Yeah, to be honest, and there really is no ceiling if you don't run outta drive. So like most people, they get where they want, and then they get complacent âcause they've arrived at where they wanted to be, and then they're usually very happy, I wouldn't say I'm a NA, like the happiest person either. So I wouldn't say like that it's all, roses and rainbows when you have this like makeup. For me, I'm genuinely usually a fairly unsatisfied, unhappy person because of just how driven I am, I want more. But that's just how I'm wired, I'm not trying to be that way, if that makes sense, that's just who I am. So I would say whoever you are, just be your, you know what I mean? And if you want to be more than you are and you're struggling, just remember the only thing that can stop you is yourself, and then, try to just overcome those self-doubts. If you need a therapist, get a therapist, get a business coach. Get someone who can encourage you so you don't feel alone, âcause I do get the feeling of aloneness sometimes when I'm trying to grow because when you grow really fast, your execs get super busy and they don't have any time to innovate. All they have time is to operate, and so it doesn't matter how big you get and how much you pay an executive, if you want to keep growing, a lot of times you have to be the one still driving the growth, there is no fairytale land and I get frustrated, because I still wish there's a fairytale land, right When I get that top exec, I get that really? âCause I have some really talented executives that are, yeah, make a lot of money that come from very top shops. But when you're growing 50% year over year, if you're going from 20 to 35 million in a year, people just drown, and so you go, it doesn't matter how big you get, if you want to grow fast, you gotta still do a lot individual. And there's just no fairy tales in business, there is no, there's no magic hire, there's no magic, no, there's no fairy tales. And so once you get honest about that and you just realize it's hard work you can become more successful, in my opinion.
Jim: Yeah, that's great advice, I wanna go back to how you grew so much with the gift card and your approach where you like really honed in on the client that you wanted. And then second thing you, what your price point was right, before you offer them the gift card. So for someone that's looking to really scale their brand looking to grow I love your approach, how would they get started? Go in and like really understand their customer first?
Garrett: Yeah, yeah. So is this like financial modeling? So my background was economics. So I got a little lucky in that, like when I started the business, I wanted to be the best at every aspect of the business. So I did all of our finance like as CFO, till we got to 17 million, for example, I did all the bookkeeping, the first three years, I reconciled every single solitary expense to the charter of account and closed the books, I built up the recruiting function, I built out the sales function, I built out the marketing function, I built out the people ops function, I built out accounting, everything, I wanted to be all the services we offer, I could genuinely do for you as a customer. I wanted to be the best at all of it. So that helped a lot because you get, you have a lot of confidence, then when you hire an executor, you're working with others, you know how long things take, what good looks like, what your standards are, and you can really disseminate that information. But when it comes to like growth, obviously I think you need a good, you have to, be a certain level of ability to grow, you have to be able to consume a lot of information and you have to be able to make a lot of decisions, and those decisions the majority of the time have to be good ones. To be honest, that's the recipe, you have to be able to make a lot of decisions quickly and more often than not, you need to be right. But when it comes to the capital, I think the way a bit organization grow is through positioning and capital allocation, okay. So positioning wise, like you want to make sure you're in a, in an industry that has economic potential, so like I got the Allstate account when I was young and we were, already one of the top local SEO firms in the world when I was like 23, 25 years old. We weren't, we were already like pretty good at the local SEO game, but what's happening is like I would get Allstate and then State Farm would submit me for an RFP, but I had a non-com. So I was really struggling, I couldn't have Allstate and State Farm, and I'm super driven, and I was like, what the heck, man? Like I just ranked the number one for car insurance, auto insurance, life insurance, and I think they still rank today if you wanna check it out. It's pretty cool, we were, they're still a customer, I was like, yeah. I'm like, I'm creating like a billion dollars of value for this organization, but I can't go out and then they won't raise my rates. Good luck trying to grow your retainer with Allstate, it's not exactly the world's, they're an insurance company. That's why they're Allstate, so they're very risk averse, it's very hard. So the local game got tough and then what happened was like, let's say you get, you always wanna get multi-location businesses when you're in local, âcause that usually means larger accounts, problem is they want a discount for every net new location, even though the work isn't discounted every net new locations. So you have diminishing marginal returns on your largest accounts. So I got out of that space, so what I found for me was technology's great because everybody in that space is spending other people's money. Nobody spends money better than when it's somebody else's. And when you're a third party vendor, you need people that are willing to invest, people are always willing to invest when it's someone else's money, and the sole purpose of that person's money is to create top line revenue growth. That's what I'm great at, is creating top line revenue growth. So SaaS and Directive are a perfect fit for each other, because they want to accomplish and grow and be the biggest in their industry, and I wanna accomplish and grow and be the biggest in my industry. So how I'm doing that for my organization fits perfectly for how they should do it for theirs. So that was how I got the positioning, right? Yeah, and then you want the structure to be right. So many businesses are operating on one time revenue, to grow a business, very large, let's say I'm a project based business and I get 10 projects. For me to grow my revenue, I have to get 11 projects the next month or magically get bigger ones. But it's not so easy going up market, it's actually exceptionally hard, and then the next month I gotta get 12 while delivering still on the 10 and the 11. Eventually it just becomes unsustainable and project-based businesses flat on. So I always want to be recurring, so I said no, a lot when we were young, my partner would come me, Hey bro, like this company, they need us to do websites. We could totally do it for them, and I'd said yes a couple times, eventually I'm like, dude, we don't do websites no more. Hey bro, like they need their HubSpot set up, I'm like, we don't do HubSpot anything, that was one time we didn't do for the first seven, eight years. And so we said no to a lot, we got the positioning right. And then on the financial modeling, if you go on my YouTube channel, or check out any of the content I do, I give away everything. So I have all my LTV CAC models with full video walkthroughs online, and you can download them and use them. And the key is really when you do business, in my opinion, the most important KPIs, gross margin, everybody focuses on ebitda, but EBITDA's like the dumbest thing to focus on when you're small, yet everybody does because everybody's smart, air quotes, tells us to it's not actually how any big businesses are ever been built, is a focus on ebitda. Because if you have ebitda you're not reinvesting your operating your OPEX back into your business. So to have ebitda, to me, what you're essentially saying is you've ran out of areas to create growth. So now you're focused on being a cash cow, which is fine, but you can only have as much ebitda as your top line revenue Allow in other words, if you're a 3 million business focused on ebitda, you're never gonna have ebitda, the most you could ever have is 30 to 40% of your top line revenue, which to me isn't very much. So what I did, and for the first nine years of running the business was I paid our partner distributions monthly as a percent of revenue. And then we take very low salaries. So if I wanna make money, the company has to make. Yeah, so I make a 30th of our revenue, when I go to acquire agencies that are doing five to 10 million, most of these dudes are making a six of their revenue to a 10th to their revenue. They're essentially draining their business for their own financial gain, but they aren't building an asset, and so what I always focus people on is gross margin, gross margins, what creates your culture? Gross margins, what creates your results? Gross margin is what allows you to reinvest into top line revenue growth. So if you have a gross margin of less than 50%, you can't have any advertising budget or marketing budget, so there's not gonna be enough left over. There's just not, unless you're exceptionally high-volume business, but the industry I'm in is not a high volume. So you need more gross margin, and but if you have too much gross margin, you struggle with renewals, retention, and churn because essentially you're not investing enough in your cost of good sold. So it's a fine line between being, having too much gross margin and poor retention or having bad gross margin and not enough money left over to reinvest in top line revenue, so you have to find that line, and once you find that sweet spot, you can essentially have your cake and eat it too, in the sense that you have money left over to grow the business and you have enough retention that the business can organically grow on its own. And that's when you get to that multiplicative state and you start really knocking out your goals.
Jim: That's huge, that's so much value. Did you said you stopped everything, you said no to so much in the beginning, and you just focused on what you wanted to do. Are you now taking on different areas or are you still just focused on the one segment?
Garrett: Yeah. We have we have more service lines, but we still focus on just our, we try to focus on singular persona, like I exist to serve a director of marketing at a tech company. So if I don't have a service that human can buy that human owns and operates, that is vital to their promotion, their retention, their own career goals, I won't offer it. So that's really just how I put it through that, everybody has these personas, it's so silly, right? Most of us just have one person we work with 99.9% of the time just focus on that person, like it's so funny, like plumbers, like I would argue most of the time they're actually working with the wife, not the husband yet. They try to advertise in a way though, to attract a husband, but the wife is usually the one running point. So people, like everybody wants the CFO and yeah, the CFO signs, but the CFO doesn't buy, like I have a saying that the champion is more important than the decision. So I've always obsessed over being the best option for the champion.
Jim: That's huge. What are the biggest brands out there doing that others are not?
Garrett: Their product is better. They're not doing anything, they're just, they actually have something people want, that's it. Like the, we all forget that we all think there's some magic bullet. The biggest magic bullet just don't suck, and most of us suck, like myself included, like I still suck way too often and that's why I'm not, if I got results from my customers a hundred percent of the time and I measured, I get results from my customers 75% of the time, right? If I got it a hundred percent of the time, I'd be at 50 million on it. I just don't, and that's what I'm working on, it's exceptionally hard. Most agencies, they get past 10 million and they lose their soul. There's an inverse correlation between revenue and quality of work, and I always wanna be able to look at our work and be proud, and I think a lot of these agencies, like if they were being honest, like they wouldn't refer a family member to their own shop because they don't trust that they'd have a good experience. And I always wanna be able to refer a family member to my business, and I'm not always there to be honest, but I'm working my butt off to try to be.
Jim: I love that, I played soccer at, I played junior college ball, but like growing up and playing a sport and learning and always pushing myself and the team and, so much of what you've talked about today. I keep, I just keep going back to that athlete, that mindset, like even like you're go, you're 75%, like you're incredible, you're way above what most marketing agencies probably are and the fact that you're not happy and you're constantly pushing yourself, that's huge.
Garrett: Yeah, we gotta be at a hundred, man. It's not easy though, like we do track it, so it's called North Star Metric. So essentially the reason it's so hard is like we don't get hired to do things people have already done before, I'm getting hired as like the fifth agency, everybody else failed, they're finally willing to, they're like, we gotta figure this out. And Directive's not cheap, but they say they're the best, I'll just give them a shot, then I gotta try to figure out how to do something. Nobody else has been able to pull, and I'm able to about 75% of the time, but not a hundred.
Jim: Going back to that, being a fifth on their list, are you sent out the gift card in LinkedIn, the opportunity to meet with you, is it, a lot of times they have a call with you and they're like already with somebody else and you just keep following up until they're ready or how does that work?
Garrett: Yeah, that's like a big part, I think one of the keys is like you have to get value out of every moment. So like one of the things I try to teach to sales org and we aren't great at right now, we gotta get better at it. We were better at three years ago when I was more hands on with it is like, when's your next contract up? So remember I talked about timing. So in your Salesforce database, if you did 6,800 calls, let's say with tech companies, like we'll probably do over 10,000 calls with tech companies this year. If on every one of those calls you can map their contract optout date, you could get timing, for your entire total addressable market. So now you can essentially have your Salesforce instance set up in such a way that you have alerts and reminders that, Hey, yo, like the outreach contract's coming up in two months. Let's engage them in a playbook, let's send them a bottle of champagne to, toast to our feature success, let's fly out in person, let's like have a handmade proposal package that we ship, like I have a saying that no one does more free work in the world than, there's all this win business without pitching crap, I've never read the book, the title just turned me off, âcause I pitch like hell, like I wanna win every business I ever get and I want to make sure I'm like, when I die, or when I'm like done with business or whatever, I don't ever wanna think, I could have tried harder or I could have done more to get that account I wanted. So every customer I want to treat like it's the last customer in the world and try to win them. And so I think that competitive nature is big for our success when it comes to sales, âcause, we work really hard to win business.
Jim: That's yeah, that's huge. How there's a lot of current, there's always some different event happening and things out of our control, how, from a marketing strategy perspective, how are shaping what you're doing based on current events?
Garrett: I'm not I don't think humans care about anything other than themselves, to be honest. So I just focus on their self-centered nature of all of us, and I just try to speak to the things Jim wants and Jim needs. I don't get distracted, I didn't do covid 19 campaigns, I don't do recession campaigns, I try to be a light in a world of darkness when it comes to my messaging in the sense that yeah, there was a lot of stuff going around, but you still gotta hit your numbers. I just keep it real yeah, the world's burning, but you want to, you don't want to get let go, you don't want to, you want to get promoted, you want what's next in your career, let's be a partner with you and like we try to, I don't know figured out yet, but for me, it's not like a lifetime value of an account, it's lifetime value of a point of contact. So what I'm really proud of is like a lot of people go to three different, like I can't tell you how many points of contact leave one company in our portfolio, go to another company in our portfolio and they're still with directive, like we've gotten to that size where I'm more focused on the relationships I have with these marketing leaders and in 10 years they're gonna be CMOs and I will be positioned to be the largest in the industry. I just gotta be patient.
Jim: Put in your work and grow with them and take care of them.
Garrett: I mean you gotta stay loyal to them. Honor them and if they get in a bad situation at their organization, I always try to tell our team we should be the first person to fall on the sword for them, let them save face, we'll eat it for you. And if we lose that battle, hopefully, we built some trust and we win the war.
Jim: We've seen that. I do, my agency does a lot of merchandise for different accounts all over the place, and I couldn't agree with you more on what you said about the account and or the contact at the account and, taking that on for them and making sure that they look the best regardless. And Yeah, it's, there's a lot of times like the communications last minute I need something tomorrow, we're gonna do whatever we can to get it, and if not, we're gonna say, Hey, we should have had a different situation set up to get that for you, or offered a different product, or whatever it is. Because in the end, you're right, man, they're going to go onto somewhere else, they're going to grow, and it's our responsibility to continue to build that.
Garrett: A hundred percent, man. The worst part of a vendor is the ones that make you feel like it's your fault, those people suck, those people, it was the worst, don't ever be a professional service provider who blames your customers. I have the, some of those people work for me sometimes and we have to try to change that, I call it like a victim mentality. It makes you weak and powerless and it doesn't help you retain or grow customers, the key to that is you gotta stay powerful and own everything, there is nothing that you couldn't have controlled as a consultant.
Jim: That's, yeah. So true. Before we go end this conversation, where can the Remote Start find you.
Garrett: Yeah. I'm on Twitter, I like gmehrguth, on Instagram, YouTube, LinkedIn. I'm not great at social like we post a lot, I got like a team that helps me, but I'm trying to get better at it. But I try, I love to help people and share things. So if you wanna, or you can check out my website, garrettmehrguth.com. I coach founders, I love doing it, I look to acquire agencies under 10 million and then I run Directive.
Jim: Awesome. I'm a big believer in community and it's something I stand behind and, something I noticed that you do a Directive is you've created a Slack channel. That's a community for tech marketers. And I know that's like your biggest client and you created this for your team. They ask questions, something, they can't figure something out, they slack, you and your team figures it out, that's incredible. Like to me that isâ¦
Garrett: Oh yeah, I answer the questions on there all the time, it's called society. Yeah, it's called society, you can DM me any question you want for free. Y'all answered.
Jim: So that's incredible man. Have you seen that help with, nurturing a client and getting them to understand like you guys really know what you're talking about.
Garrett: Yeah, and hiring, like a lot of these directors are marketing and stuff, they'll like, they'll apply for jobs with us cause we help them so much in the community, and then, yeah, a lot of people like I think I got the Zoom Info account from there. So just like big accounts that everybody wants, we've been able to win just because the directors will go on there and ask my team questions that they didn't like the answer they got from their agency. And then we'll give them, I think, the right answer and we'll do all the work for free, we'll tell you exactly how to do everything for free, and then people eventually, they're like, all right, we'll hire you. So it's just about helping people, I really like to give back and help, to be honest, I'm passionate about that. It's just hard, people like, people don't really ask me a lot of stuff, but whenever they do I try to get back to them, with as much value as I can.
Jim: I love that Remote Start Nation you heard where Garrett, dropped his Twitter, his other information, where to find them. Definitely reach out. Reach out, and learn as much as I did today. It's been incredible. Garrett, one more thing before we let you go today, I want to know if there's one thing, the biggest takeaway that you can give the Remote Start Nation that we either hit on and you want to emphasize it, or maybe we didn't even get to it, but you wanna make sure as starting a business or scaling a brand, like what's the one biggest takeaway that you can give?
Garrett: Keep your soul, just keep your soul. The money is enticing, and just keep your soul, what I mean that is don't sacrifice your values. Don't sacrifice your quality of work, don't sacrifice anything. Hold on to everything for dear life, âcause the bigger you get, the harder it is and just try to keep your soul. And if you keep your soul long enough, I always say that eventually when someone competes with me, they make a values mistake or a money mistake. And as long as I keep my values straight and I don't run outta, I can usually win over an extended period of time, and just keep your soul and then you'll do all right.
Jim: That's great. Garrett, thank you for joining us today, I appreciate it, man.
Garrett: Cool. Thanks for having me.
Jim: Absolutely. Remote Start Nation, I hope you learn as much as I did today and can put some of what Garrett shared with us to work for you. Thank you all for joining us, and remember, leave a comment, subscribe, but most importantly, share this episode with your community who you think could learn from what you heard. Until next time, go start something, start today and go build a lifestyle you desire by taking action.
Garrett Mehrguth is the co-founder and Chief Executive Officer of Directive, a search marketing agency for enterprise brands headquartered in Irvine, California. Mehrguth, fascinated by the role search marketing plays in empowering companies and people to connect, has dedicated the past five years toward that passion. Since its establishment in 2014, Mehrguth has led Directive in its expansion globally including, London, LATAM, Australia and Canada.
Directive’s year-over-year growth rate has increased by 300 percent and now boasts a team of more than 130 people over nine nationalities from its headquarters and home of operations in Orange County. Garrett has recently launched a podcast called Original Marketing with his co - host Brady Cramm. As a thought leader, Garrett has been published by Salesforce, Marketing Land, Moz, Marketo, Search Engine Land, Ahrefs, Convince & Convert, Search Engine Journal, and more. He also speaks at Digital Summit, State of Search, General Assembly, MozCon, etc. Additionally, he has been a guest speaker on the following podcasts: The DigitalMarketer Podcast, Salesforce, Mixergy - Startup Stories with 1000+ entrepreneurs and businesses, The Growth TL;DR, Edge of the Web and more.
Outside of work, when he’s not writing or reading up on digital marketing and the latest trends, Garrett spends his time indulging in his passion for the ocean, sailing, and fishing with his wife.
My name is Jim Doyon. I'm a father to three awesome kids, husband to an incredible wife and the oldest sibling to a large split family.I'm currently on a mission and I can't wait to share with you. We sold our house back in 2020, and we've been traveling this beautiful country in a 42-foot Travel trailer ever since. We visited 34 states, and are about to embark on our second loop around the country, stopping at some of our favorite spots again, but also getting to see new areas that the US has to offer.We are trying to experience this life to its fullest spending quality time together. I'm running a business and building brands along the road. We've been fortunate enough on this journey to meet new friends, catch up with old friends and family on many of our stops. We love exploring each City from downtown's to the natural resources it has to offer. I'm passionate about mountain biking and it's not only in my way to get out and explore but to exercise, clear my head, think, and strategize.
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