Ep. 28 Why I No Longer Work With Young Startups

AUG 15, 2020

00:19 Welcome to episode 28, Why I No Longer Work with Young Startups. So folks, this is a tough episode for me because it was a tough decision I recently had to make in my business. I normally dread sharing the why behind my own business, because you’re not here for that. But in this case, I think it will be helpful to anyone listening at any stage who has never hired a paid consultant for their business.

00:45 Look, as you know, I began this podcast series with a truly dark discussion of something I’m morosely call the death funnel. What is the death funnel? It’s the years spent fighting to get from a zero bucks to half a million in trailing annual sales. Folks, it generally sucks unless you starting off with millions in launch capital and happen to be launching something with keto on the front panel.

01:10 My episode on the death funnel was not purely click bait. I promise. It is a very data driven reality check for do CPG founders, especially in food and beverage where 80% of brands never make it to this threshold, half a million dollars in trailing annual sales. If you ever look at revenue ranked brand lists and almost any CPG category, in Nielsen or IRI or spins data, you’ll notice the long tail of brands selling under a million bucks in retail sales. Which is basically the same as my death funnel threshold.

01:40 It’s startling in scale, this long tail, in some of the more popular categories of food and beverage. I get companies moving through the death funnel contacting me on a regular basis. Honestly, it’s where most CPG companies are at any given point in time.

01:56 Whenever I’ve worked with these very, very young unstable companies, I’ve encountered two problems that combined reinforced my now clear stance on, I hate to say this, but letting them fail a lot first before we work together. One is a lack of coachability, and two, is an inability to see the long term financial gains from avoiding critical errors.

02:14 Now, on the second topic that I just mentioned, I, literally folks, have a 30-minute, free on-demand video on my website that you can go watch right now. If you watch it, you’ll avoid some very painful business ending mistakes that should have been public knowledge long ago. My gift to you. It’s on the founder resources page on my website. No, I’m not going to spell out the URL for you. Because if you need that much babysitting, I don’t actually want to help you at all.

02:37 But the second big barrier to making use of someone like me, is something I can’t do anything about at all. Lack of coachability. If you are uncoachable and you hire a consultant, you’ve most likely wasted your money. Not because the consultant sucked, although he or she might, but because you probably won’t hear much of what they say as your brain shuts most of it out potentially in defensive ranting.

03:07 Again and again, when I used to take calls with new startups, I quickly sensed as a professionally trained interviewer that I am, that these founders were simply looking for validation of their current approach. They weren’t really looking for an objective evaluation. Even when they adamantly claimed they were looking for an objective value evaluation.

03:25 Humans are very, very good at deceiving themselves in these kinds of situations. Any therapists will be happy to explain how this works in the domains of sex, drinking, dating, love, careers, you name it, basically 99% of the topics of Hollywood films. I have repeatedly found that the average CPG founder, even one with a business background, does not understand the value of highly trained expertise in a poorly regulated, but very competitive, industry that they know little about.

03:55 Perhaps more importantly, they generally, these younger CPG founders with the newer businesses in the death funnel, they have little experience overall, and estimation and vetting potential advice. It’s why I just uploaded last month, an episode on startup confidential on how to filter advice. Please listen to it. Even if you stop listening to this annoying episode.

04:19 I don’t care if you hire me because of that episode on how to filter advice. That’s not a sales job. It’s not a Zingale what-da-da-da. I care more that you’ll learn to ignore the free advice that is just bloviating white male ass babble. We literally invented the practice, folks. This ocean of shit advice I’m referring to is often coming at you with decent intentions. That’s the ironic part, but is largely the fault of our broader society, a society, which does not regulate business advice or advisory services, but chooses only to regulate a super narrow range of industries that might kill us or distort our life savings.

04:58 When we as adults seek advice, folks, in an unregulated sector of our lives, there is a fundamental assumption underlying our behavior. It’s that we are the expert, we make ourselves the arbiter of expertise and that unregulated domain. This is not by itself bad, except when we misuse this power by baptizing ourselves unconsciously as experts.

05:29 See, there’s a difference between making ourselves the arbiter of other people’s expertise, which is making ourself the expert. So when we misuse this power and make ourselves the expert, we proceed to look everywhere we can for confirmation that we’re right, as opposed to looking for expert input. Man, it’s a very fine line folks between being the final arbiter of wisdom and accidentally pretending to be the expert.

05:53 I hope to God, I’m making sense. I personally have screwed this up in my life many times because when you’re an expert in one field, ask my wife, it’s very hard to admit you’re still a newbie in hundreds of other domains. My point is that confirmation bias is much, much worse in a semi-regulated industry like consumer packaged goods. So when founders starting out reach out to be advised, they don’t realize that deep down in their belly bone, they’re not looking for professional critique of what they’re doing, which it often needs a lot of. They’re just looking for validation, for some extra confidence to get over the jitters for a friendly bro backslap, whatever it is.

06:35 Again and again, it is only when I meet founders who’ve made it through the death funnel that their interest in real expertise and business strategy awakens fully. They now have scars. They’ve seen the corruption of distributors and far too many brokers, shitty branding agencies that don’t use data to make decisions, trade shows and conferences bent simply on selling tickets and add-on’s more than generally helping you.

06:56 More importantly, they have seen the consequences of their own mistakes, and of taking advice that was not filtered properly, or honestly filtered at all because it confirmed and validated what they were already doing. They have finally learned what they don’t know, and it’s terrifying. They have reached what counsel is called the stage of, conscious incompetence, and they now really, really want to get to the next stage, the stage of conscious competence. Real badly.

07:28 Yes, I do meet professional founders, ready, both emotionally and intellectually to work with top consultants or right off the bat and who are very coachable. Generally, they have used business consultants in the past, which is why there is a fit. But almost all the time, I get very strange reach out, like this recent email, which I am blinding for obvious reasons.

07:51 “I have had everyone I shared my magical product with tell me that it’s the best product they’ve never had. I’m so pumped to bring this to market, but I want to run a few things by you as I do.” This is but one of hundreds of emails I’ve gotten that fit a theme of someone seeking validation, not professional advice.

08:12 You can tell because there’s a complete lack of humility upfront, which is generally a nervous defense mechanism built on a wobbling foundation of terror. How do I know this? When I push back with these folks, and I have before and say, “Look, I only offer paid advice,” they literally disappear. I’m not joking. These people just vanish. James, who? Dr. What the? I’m actually not offended because I know what happened. I get it. No one pays for validation.

08:45 Look, validation is something we honestly believe we should get for free as human beings because we’ve been getting it from human beings for free all our lives starting with mom. Then our girlfriend or boyfriend, then our wife or husband, then our work wife and on and on and on. Consulting is not validation. Let me say that again. Consulting is not validation.

09:07 If it’s worth anything, it’s worth paying for a fresh pair of eyes with no skin in the game at all who’s willing to tell you shit you need to know even if it makes you poop your panties. If it’s the best advice around, it’s definitely worth paying for is early in the life of the business as possible. That’s the deep irony of this episode of Startup Confidential.

09:29 Remember folks, be safe out there.