Bonus Episode | Why Complexity Kills Businesses
With Guest Rand Fishkin
Distractions, however tempting, can be the silent killers of a company's competitive edge and momentum.
The How To Sell More Podcast
October 11, 2023
In this BONUS episode, we focus on focus. Rand Fishkin, a mastermind in marketing, shares that having a clear vision can be the key to business success.
What will you learn today?
- The unmatched power of keeping a laser-like focus for business growth.
- Why distractions, though tempting, can derail your success story.
- The role strong leaders play in steering the ship with clarity and purpose.
So, get ready to unlock the secrets to thriving in business!
Meet Rand Fishkin, the brains behind SparkToro, a leading name in audience research software. Dedicated to bettering marketing, Rand shares his wisdom through writings, talks, and his book, "Lost and Founder."
Links to This Episode
- The Power of Singular Focus in Business Growth - A clear focus reduces the cognitive load on decision-makers. When the overarching goal is clear, it becomes easier to prioritize tasks and make decisions aligned with that goal.
- Distractions Make You Less Competitive - In today's fast-paced business environment, distractions can cause businesses to lose their edge. The time lost in addressing non-core issues can be better spent on primary objectives.
- The Role of Leadership in Maintaining Organizational Focus - Leaders play a pivotal role in defining the organization's direction. By setting a clear vision, they can guide their teams toward specific outcomes and ensure alignment across the board.
Top 3 Reasons to Listen
Expert Insights: Gain invaluable perspectives from Rand Fishkin, a luminary in the marketing realm and CEO of SparkToro.
Real-world Examples: Hear concrete examples and anecdotes that showcase the impact of focus in the business world.
Avoid Common Pitfalls: Understand the risks of distractions and how they can subtly derail a business's trajectory.
Follow Rand Fishkin on Social
Checkout Rand's amazing book! https://www.amazon.com/Lost-Founder-Painfully-Honest-Startup/dp/0735213321
Learn more about SparkToro! https://sparktoro.com/
More About Today's Guest, Rand Fishkin
SparkToro cofounder, author of Lost and Founder, husband to @theeverywhereist, feminist, pasta-based life form
Rand began his career in 2000 as a web designer at his mother's marketing firm after dropping out of the University of Washington. In 2004, he launched the SEOmoz blog which quickly evolved into Moz, a leading resource for search marketers. By 2014, as CEO, he had expanded Moz to over 130 employees, $30M+ in revenue, and an annual traffic of 30M+ visitors. Rand co-founded Inbound.org and later embarked on a new venture with SparkToro in 2018. He's authored and contributed to several notable publications, and despite his vast professional achievements, he holds his marriage to Geraldine DeRuiter and mentions in her book, "All Over the Place," closest to his heart.
A Transcription of The Talk
Mark Drager: So Rand, while I have you, and we just finished recording the main episode, but I wanted a bonus episode because your bone loss and founder bonus, your book, your book loss and founder, you are so open and honest about the struggles that entrepreneurs faced as they're scaling, VC-backed, especially SaaS companies. And when I read this book two years ago, it was at a point in my business where I realized that you were actually sharing the lessons that I had experienced but didn't realize that there were lessons I should learn. And that's sometimes more isn't more when you start a niche company, especially if it's service-based. But you start a niche company, and you're good at one thing, and you keep the main thing, the main thing. But then you want to grow, and you're like, "Let's do a second thing. Let's do a third thing. Let's do a fourth thing. Let's move on to new audiences. Let's grow, grow, grow, grow, grow." And then suddenly, the main thing that you had isn't even good anymore. You experienced that at Moz? If I'm correct, and can you share about your experience? And really why we should stay focused, stay niche, maybe not just expand for growth's sake?
Rand Fishkin: Yeah. So my fundamental belief, Mark, is that this problem of always wanting more and needing to grow at all costs, especially at very high rates of growth, to be able to raise your next round of funding, or to be able to, you know, pay your team and make payroll because you're out over your skis. And you don't have a profitable thing, but you have a growth mindset. I think that is why the rate of startup survival is dramatically lower than the restaurant survival rate in the United States. So I did some research for the book, right?
Mark Drager: Almost all restaurants fail, though. Like, that's crazy. Yeah. That's what...
Rand Fishkin: I really like using restaurants as the example because they're this business model that everyone's like, "Oh, my God, never invest in a restaurant," right? They never survive. Let me tell you what, Friends, the five-year survival rate for restaurants in the US, you know, overall average, I think this is like 2015 to 2020, was a little over 45%. It's like 47%, or something like that. The survival rate for a startup that successfully raised venture was just under 15%. The rate of survival for companies that attempted to raise venture but did not, I couldn't calculate because most of those people don't even register with the Small Business Administration. But my small-scale survey suggests that the rate of survival is less than one in 200. Right, that'll be around five years later, which is no surprise, right? If you are building a business, and you're trying to raise venture capital, and you are unsuccessful, which almost everyone who tries to raise is unsuccessful. And the crazy part is almost everyone who tries to raise is unsuccessful, almost everyone who raises is unsuccessful. If you go and look at the model of venture-backed businesses, it's essentially that in order to have a statistically significant average that beats the market rate of return, you have to invest in 500 companies. And in that 500, less than 40 will survive to an exit that's meaningful. And of those 40, only four will provide you the, you know, 10x return that you're aiming for. Usually, it's one or two that will make the whole fund because they have like a 500x return. Right.
Mark Drager: One of the greatest books that I've read this year is a book called Small Giants, because it's about 15 years old. Yeah. Bo Burnham, so Barnum, Small Giants, great book,
Rand Fishkin: Burlingham, Burlingham, Burlingham. And he,
Mark Drager: he his his, it's about 15 years old, but his assessment is that most of
Rand Fishkin: For those of you listening, I just ran to my bookshelf and held up the book, I knew what color it is, I have a color-coded bookshelf, I would like credit for this.
Mark Drager: I organized my bookshelf based on impact. So I have a special shelf where the highest impact books live; your book is actually there, along with "Mindset" and a few other things. But his assessment is that almost all of our thinking as business people and entrepreneurs either come from large publicly traded companies or from VC-backed startups, and his approach or his assessment is like, "Hey, there's tons of companies that are flying under the radar." So if you are listening to this, and you're like, "Well, that's interesting, Rand, but what if I'm not SaaS or I'm not tech-based, or I'm not VC-based, or I'm not bicoastal, or what have you?" The feeling of being behind, the feeling of needing constant growth, the feeling of wanting to throw money at the problems as some kind of solution does permeate into our thinking simply because we're learning, and our whole culture, whole entrepreneurial culture and teaching and training is shaped by these, you know, Harvard Business Review things on publicly traded companies or on these tech VC-backed startups. But, but you're less than when you were building Moz. I mean, whether you're VC-backed or not, what I want, what I want to get to is, is whatever it was in 2010, 11, 12, or whenever that was when you started to move from your main product to introduce additional products and what happened? And what did you learn through that?
Rand Fishkin: Like a lot of companies, VC-backed or not, we were desperate for growth, right? We wanted to find more growth. And we believed that our core market was not going to be big enough by itself. We served SEO professionals, which, you know, in retrospect, obviously, that market can produce several billion-dollar companies, with SEMrush and Ahrefs being the two most obvious ones, but there are several others too. And we just didn't have confidence. We didn't believe that our market, that our audience was big enough. And I could not convince my board of directors or my executive team of that, especially after I stepped down as CEO and sort of developed this reputation of like, "Well, that's the founder who you shouldn't listen to." And that experience actually tanked the company's growth. It took Moz from, you know, in 2013, several third parties did large-scale surveys of the SEO and search marketing field, and they said, "Who do you use for SEO software?" And Moz was number one by a wide margin. From like 2010 to 2014, we were still there. But by 2018, Moz was like number four or five. And it was because the company fundamentally didn't believe in its core market. It didn't believe that the SEO market could grow big enough. And so we pursued all of these other paths, took its eye off the ball, just at the time when competitors were building products that were as good and eventually better than Moz's own. And so even though, you know, Moz sort of dominated in terms of content marketing, dominated in terms of community, in terms of brand recognition, even affinity, right? A lot of people would have said even in 2015 as they were switching to Moz's competitors. I heard this from so many of our customers, you know, "I love you guys, I wish I could, you know, if you did these things, if you were like this company, I, I would stick with you, you know, I'd much rather give you these dollars." What a heartbreaking lesson to learn. So that is not the only thing that I learned from that experience. Because when I wrote the book, I went out and talked to a bunch of other entrepreneurs, right? Folks like yourself at agencies, I talked to a lot of folks in the creator world, I talked to plenty of folks who ran more like software types of businesses as well. And I heard that our experience was not unique, that essentially, folks who looked for growth by trying to approach new audiences rather than first making sure that their core audience was beautifully served and that they continue to invest in them until they really reach that saturation and maturity point and then started small with one new audience and one new product or feature that helped that new audience and expanded it out that way. Those are the folks who had success, and the ones who tried to multitask simultaneously just failed. I would urge folks focus is a superpower. I think that might be the title of the chapter. But focus really is a superpower by concentrating on doing that one thing well, building that loop, that continuous loop of, "We learn what our customers want more of, we learn what they don't like, we continually refine and improve the product, we message those refinements and improvements to customers, we make sure they're adopting them, and then we go market that to more customers who are like the customers who already bought in the places where they pay attention." That process for growth and for delighting audiences and customers is so powerful, and I just don't think it's possible to do that while serving multiple masters at the same time.
Mark Drager: But on top of that, what also happened as you move from one product to another is, and this was my error. So, up until 2016, I had spent 10 years building a video-focused agency. Now, when I started my agency in 2006, video, corporate video production was what it was called back then, it was before YouTube, like it was a very different world. So I had the head, I guess the luxury of entering a market that was pretty old, and then riding the social media wave and riding broadband and riding all kinds of things. But by 2016, I found that our value prop was commoditizing. And so I thought, well, you know, we're moving up market so the answer is just more like more services, more areas of focus. So I pushed us to becoming a full-service digital agency, not quite realizing how hard it is to be an expert at every software, every CRM, every email communication channel versus like everything.
Rand Fishkin: And did you find that for a decade after you tried to make this change? Everybody still thought of you as, "Oh, video? Let's go to Mark."
Mark Drager: Surprisingly, yeah, like our video revenue almost doubled because people were so... This was the interesting thing. People loved all the conversations about everything else, and it actually increased our perceived value because we could speak to all these other things. We could not just speak to production and creative and strategy, but we could speak to distribution. And we understood how the platforms worked. And it made us better at our core competency, but at what... At what distraction, what cost, and it cannibalized our market. It moved us into much lower margin businesses that did have monthly recurring revenue, which is great, but there's a whole bunch of reasons I did it. But what you hit on with Moz, especially, is that they're like, "Oh, I didn't really quite realize that the shared services would be stretched across all these different areas, or that accounting or legal or that we can't negotiate for this big, huge move and also balance these other big, huge moves." And I didn't realize... It sounds like you may not have realized, but the way I look at it now is every business activity or initiative is almost like its own little company. We've launched the How to Sell More podcast, and that has taken so much of our focus at our agency, Sales Loop, that it's like... The thought of launching a second or third podcast or launching this or like, this podcast has its own team, its own business, its own focus, its own KPIs. And so I think too many business owners or marketers, marketers especially because they want to touch everything and do everything. I don't know what the question I have for you, quite honestly, is other than other than I learned so much from you.
Rand Fishkin: It's not just the distraction, right? Folks think like, well, I can manage the distraction by hiring another team to do this stuff, right? We hired a team to do Moz Local, we hired a team to do Moz Content, we hired a team to do Moz Social, and we thought, well, you know, surely, they can just kind of operate independently. And this was not the case. Every single new team required new support, required new complexity, required reporting, required management layers. We had to build a new management layer. As opposed to, "Okay, well, the CEO is the product leader, essentially, for the whole company." No, now we have product leaders across each of the division. Okay, but should product leaders also be the manager of each department, and you just get tons of complexity. That complexity in organizational design creates complexity in being able to accomplish tasks because of communication, because of reporting, because of competition internal competition between teams, who's doing which better? "I want that engineer." "No, you can't have him. I need him." All that stuff. "Why is HR helping that team recruit? I need HR's help to recruit." Well, the reason I couldn't hit my KPIs for my team is because HR didn't help me recruit. Infighting. Lack of trust, all that is affected sales, though, right? Yeah.
And this is the other thing that happened. So SparkToro right now has a call to action on its website. This is related, I promise, stick with me. It has a call to action on its website for our annual conference, right, our event, it's an online event, it's called SparkTogether. Amanda runs it. It's outstanding. I love it to pieces. It's coming up in November. And so it has a little banner across the top of the website. Whenever we put that call to action up of like, "Go check out SparkTogether," people do, like some people will click on that thing. If they've heard about it, they'll check it out, whatever, which brings down the conversion rate of visitors to new signups on regular SparkToro. And every single new thing you add to the website does exactly that. So when you went to Moz's website, and you saw Moz Social, Moz Content, Moz Local, Moz for Enterprise, Classic Moz, the SEO thing that many people used and were used to, you were sort of like, "What? I wonder which one is for me? Should I do... Do I need to check out all four of these? Ooh, what's MozCon? Oh, apparently that's their conference. I should check that out too. Well, they have an email list. I should check that out."
Mark Drager: People would argue that landing pages and targeted traffic would be the answer to that.
Rand Fishkin: Yeah. People would argue, and they would find that it does not work the way you think it does. It's not just one plus one. It will always be divisive. It will always draw attention away. Right. When Expedia wanted to create a corporate travel program, they launched a new website, they put the team in a different building, they had to do all their own hiring, they had their own HR. They were like, "You don't get to distract and detract from the attention and awareness that we're building. So we're gonna keep you entirely separate." And I think that there's a lot of wisdom in that. It's extremely hard. You don't see any ads for AWS on Amazon. Not a one, no. Right? It's a different audience, different customer, different thing. You're serving them with all that kind of thing. I haven't seen a Blue Origin ad for like, "Send your ship to space in our rocket."
Mark Drager: So with the answer simply different brands, different P&L, different teams. Oh, guess what, they're different companies. I mean, at that point...
Rand Fishkin: Here's how I feel. I think, very frankly, it is above my paygrade and expertise. So if you are a company that's scaling from $50 to $100 million in revenue, and you get to north of that, and you could reasonably IPO with your one product and that kind of thing, fantastic. And then you want the complexity of multiple products, you go for it. I think it'd be great. I talked to Chris Savage recently, right? Which is a company that's doing very well with Wistia. They're in the video space. I'm sure you're very familiar with them. We use them at Moz. For my portfolio, we use them at SparkToro for all my videos. Great company, fantastic. My co-founder, Casey, worked there for a little bit. Wistia tried to launch this, what was it called? Soapbox. They found that Soapbox was quite successful, and also that it distracted and detracted so much from Wistia itself and made things so complex that they were like, "Ah, god damn it, two products are so hard. Why is two products so... Are we even serving the same people with a really similar thing, but the thing with thing one is detracting from thing two? This is just the way it is." I mean, I kind of feel like, this is why people talk about you can have two or three things in your life, but not four or five, right? Like you can have kids, and a marriage, and a business. Or you can have a marriage and a business. And you can be very responsible about working out. Or you can have a hobby, and a marriage, and no kids, and a side hustle, or you know, whatever it is like, they always talk about those. You can probably manage up to three, and anything more than that, if you really want to focus on it, that thing will sit by the wayside. This is why a lot of therapists talk about how divorce happens when those three things turn into four, right, or like the intensity of the process, because the marriage is often the thing that falls to the side. Frankly, I think the same thing is true in organizations.
Mark Drager: And so if you had to do it again, which I know you're doing now, what's the answer? Just like be comfortable with it because growth takes as long as it takes. Don't try to force it too much. And just keep the main thing, the main thing.
Rand Fishkin: I really think that doing better at the one thing, or deciding if you really decide if you're like, gosh, this one thing is not right. Get rid of the one thing. Go to the other thing. One of the reasons we chose the name SparkToro is literally because it had no association with anything. So if at some point we were like, "You know what, we thought this audience research thing was going to be great, but it didn't work out well." I mean, obviously now, you know, the brand is established. But in those first couple of years, we were doing a ton of R&D and customer interviews and research and trying to figure out whether this thing was going to take off. I think I even showed you the product at one point, right, like in those early days, Mark. And what I would say is, we named it like we named it this thing that had no other associations so that if we wanted to change to another business entirely, we could. And that is fundamentally about getting the design of the business dialed in, finding that right customer that can grow to a size that you're comfortable with, a market that's that size to your appetite for risk and reward, and then investing in that thing until you sort of have the success, rather than, "Well, we're doing a little bit with this. Let's do a little bit with that. Let's try another thing here. It's all going to sit under the same company umbrella. We're going to try and run it all as one org." I think that is... I don't think no one's done it. But I think so few people have done it that you take it as a cautionary tale and try to avoid that.
Mark Drager: Such good advice. So now you mentioned SparkTogether a little bit earlier, can you just quickly because I know you gotta go. But can you just quickly tell us about this because I came to last year's event. We are a sponsor of this year's event. I am super, super excited about your community.
Rand Fishkin: We love that support, Mark, right? Like it's extremely meaningful to all three of us. But so SparkTogether is very, very unique. It is not recorded, and it is intentionally not recorded so that the presenters can be vulnerable and transparent to a small audience of a few hundred people who join this event and are online. And that's the only time you'll ever hear that story. They will never tell it on another stage. They don't tweet about it. They haven't written about it. There's no books about it. You will get some... I mean, last year, stories, there were some absolutely wild ones, right? Like, you know, the founder, CEO of Glowforge telling some really painful stories from the start of the pandemic and how that affected their business and what they did to try and turn that around. And folks, there were there was a presenter from an agency. I won't go in, I won't reveal details, but who talked about essentially a campaign that completely failed, like and why it bombed. It was a diagnosis of why the campaign bombed. You will never see a talk like that anywhere else. And this year is no different. Right? We're gonna see some failed launches. We're gonna have some very vulnerable experiences, folks talking about like, how they came around to prioritizing their personal happiness over the raw size and success of their business. Personally, I find those stories so much more valuable. More than like, let me give you these 10 tips for how to optimize your PPC campaign. There's nothing wrong with that. I don't think that belongs personally on an event stage. Like for me, Mark, I want to read that in a blog post. Right? I want to have that information so digestible, I can go through, I can do the tips and tactics. When you get up on that stage. I want to hear a story and hear it anywhere else. That's real. That's the stuff that sticks with me. I find that is not just interesting and sort of, you know, attention-worthy, but it also makes the lessons learned stick with me when I hear it in that story format. So that's what SparkTogether is all about. And I think it's November 15. If I'm not mistaken, you can watch it online. It's US time, but if you're in other regions, it's fairly friendly to a lot of time zones. And we keep it about five, six hours.