Dan Martell - How To Build An Award Winning Company

00:00:00.160 The value of your product is not in the effort

00:00:02.280 that you put into it,

00:00:03.720 but what the customer gets from it

00:00:06.640 and is willing to pay for.

00:00:20.880 So today's video, if you don't know who I am,

00:00:23.280 I'm Dan Martell, serial entrepreneur, investor,

00:00:26.500 creator of SaaS Academy, but most importantly,

00:00:28.760 just a hardcore entrepreneur.

00:00:31.220 I love business.

00:00:32.300 I've been building businesses since I was 17.

00:00:35.180 I've built and exited my own companies,

00:00:37.640 became a multimillionaire at 27,

00:00:39.880 and continue to invest in some of the fastest growing

00:00:43.820 companies in the world.

00:00:45.740 One of the principles that I use, not only in my companies,

00:00:48.940 but in the companies that I work with,

00:00:50.360 is this fundamental belief, this mindset,

00:00:53.080 I'm gonna share it with you,

00:00:53.900 and it sounds simple, but it's not easy,

00:00:55.700 is to work backwards from your customer.

00:00:59.340 It's literally the secret weapon to Tesla,

00:01:04.340 Amazon, Facebook, and every great consumer product.

00:01:08.460 If you have a product on your desk,

00:01:10.000 it's probably because the company has built

00:01:12.920 a almost religious approach

00:01:15.020 to always get feedback from their customer.

00:01:17.220 And I remember one of my favorite stories

00:01:19.660 to tell around this is my brother Pierre.

00:01:22.160 He started off as a home builder.

00:01:23.900 came to me and was like sick of being a mechanic,

00:01:26.500 wants to start a home building company.

00:01:28.280 And I gave him everything I had in my bank account.

00:01:31.240 I wanted to support him.

00:01:32.080 We were, he was 20, maybe three at the time.

00:01:36.000 I was like 25.

00:01:37.880 And he started this home building company.

00:01:40.200 And he went all in.

00:01:41.600 He bought two lots.

00:01:42.740 He built these two, these semi-detached.

00:01:45.400 So he built two units, there's four units.

00:01:47.080 And six months into it, I get a call

00:01:49.380 and I show up at his house and I walk in

00:01:51.320 and there's like no furniture in his house.

00:01:53.520 And I'm like, okay, where's all his furniture?

00:01:55.780 And I walk into the living room on his way to his office

00:01:58.280 and I'm like looking around,

00:01:59.360 there's no furniture in the living room.

00:02:01.000 And I'm like, yo, bro, are you here?

00:02:02.700 And he's like, yeah.

00:02:03.520 And I go, I think somebody stole all your stuff.

00:02:06.520 And he just goes, come here, I wanna talk to you.

00:02:08.400 And then I walk past his bedroom

00:02:10.640 and in the bedroom, there was no furniture,

00:02:13.900 no bed, nothing where it all was prior

00:02:15.700 except for an air mattress.

00:02:17.600 And I just look over, he's in his office

00:02:19.440 and I'm like, yo, what happened?

00:02:22.620 And he starts to tell me the story

00:02:24.300 that essentially he built these two houses.

00:02:26.440 He wanted to sell them based on price.

00:02:29.760 He negotiated all the best trades.

00:02:31.640 He did all the work himself.

00:02:33.120 I was looking at like a skeleton of my brother, super skinny.

00:02:36.780 If you meet him today, he friggy looks like the Incredible Hulk.

00:02:40.820 But because he was working every day

00:02:43.240 trying to build these things for the least amount of money

00:02:46.220 because that was his belief.

00:02:47.520 I'm going to sell it without real estate agents,

00:02:49.500 direct to the market cheapest price out there and because of that when you looked at the house and

00:02:55.020 ask him why he hadn't sold any yet is because he built houses that had what's called um no curb

00:03:01.660 appeal in the real estate industry there's this thing called curb appeal which is like

00:03:07.580 does it look attractive and unfortunately he built the ugliest houses on the street i mean

00:03:13.260 it's crazy and what he realized is that even though he was trying to appeal to the

00:03:19.180 you know the budget conscious buyer of a house he underestimated that the truth was is that for

00:03:24.780 you know the man who he thought was making a decision was really the wife she wanted to have

00:03:29.900 the right house okay and this is not a man versus woman thing this is just 90 of the time if the

00:03:36.620 woman does not love the house for whatever reason the design the vibe the feel i know that's true

00:03:42.220 for mine okay i i love the house i live in but my wife 100 dictated it okay she wanted that house

00:03:49.180 that's the house i got her okay i got i got my office i got a few other spaces but it's her

00:03:53.820 decision and and what happened is because he couldn't sell he was sitting on these houses and

00:03:58.220 he was you know like just construction mortgages and just pulling he remortgages house he maxed out

00:04:03.660 his line of credit and he was at the end and i came in and i said all right i don't know anything

00:04:09.260 about building houses but i know a thing or two about building software and products and we

00:04:13.900 immediately flipped the whole thing okay the fun fact is i actually called my little brother mo

00:04:18.940 and i said hey dude you're now a home builder we had to deal with the houses we had to get mo to

00:04:22.940 buy he bought the first one this ugly no curb appeal looking house it was a good deal i gave

00:04:28.940 him the down closet to buy the house and we got him a mortgage he was like 22 years old paying rent

00:04:34.540 so he got a house he moved in that was one get the second one dealt with third and then we had

00:04:39.340 one left and we figured we'll figure it out but what we changed was the process for designing

00:04:44.380 the next house and what i recommended my brother and this is what he executed against was

00:04:49.180 he went and got you know six people that was his perfect target market okay people he went to high

00:04:55.740 school with these are it was a first time home buyer women i think 28 to 32 is the age bracket

00:05:03.100 And what he did is he brought them around

00:05:05.240 as a secret shopper on a Sunday,

00:05:06.880 went and looked at all the open houses

00:05:09.180 and told them to take photos

00:05:10.480 and write down things on a notepad

00:05:12.540 that they liked about these different houses.

00:05:14.440 And that's what they did.

00:05:15.680 And they did that for a whole day.

00:05:16.680 And at the end of the day,

00:05:17.620 he gave them all some drinks, some martinis, some wine,

00:05:20.960 and had his designer sit down with them

00:05:24.260 and essentially take all this input

00:05:27.020 and show them what they had taken photos

00:05:29.320 and why they liked this and why they liked that.

00:05:31.320 And then the architect, the designer,

00:05:33.540 designed the new house

00:05:35.520 that he was gonna go to the market with.

00:05:37.960 And once he not only designed the house

00:05:40.400 and did 3D renderings and put some marketing collateral,

00:05:42.840 he ended up selling, pre-selling 16 houses

00:05:46.080 in the first 12, in like the next 12 months.

00:05:48.520 Okay, from almost going bankrupt

00:05:50.940 to now becoming the largest home builder in Eastern Canada.

00:05:54.600 Martell Home Builders, if you go online, they've won awards.

00:05:58.080 They are the premier home.

00:05:59.580 And they even moved up market,

00:06:01.120 So they used to be like the first time home buyer

00:06:03.500 and over the last 10, 15 years have become

00:06:06.880 the premium home construction company,

00:06:10.020 building some of the most luxurious homes

00:06:12.860 on the east coast of Canada.

00:06:14.360 And I share that story because of that philosophy

00:06:17.360 of working backwards from the customer.

00:06:20.160 And when I think of like how to do this right,

00:06:22.940 there's a few things that come to mind.

00:06:24.080 Number one is, you know, on my team,

00:06:27.380 anytime somebody has a good idea,

00:06:29.380 especially around like a feature or a product direction,

00:06:32.060 I always ask, who said that?

00:06:33.460 And I got this from, not like in an aggravated way,

00:06:36.940 but just like, which customer did you talk to?

00:06:39.880 How did they say that?

00:06:41.660 Can you show me that email?

00:06:43.540 Did you record that conversation, right?

00:06:45.880 Like a lot of stuff is done online.

00:06:47.780 So a lot of it's recorded.

00:06:48.820 Can you show it to me?

00:06:49.880 And the reason why, and I got this from my buddy,

00:06:51.520 David Cancel.

00:06:52.440 So he built a company called Drift, amazing company.

00:06:55.180 And there's a philosophy that every customer

00:06:58.180 has an internal employee sponsor.

00:07:00.920 And so that means that there's a voice of a customer

00:07:03.240 that they can at any point talk to their sponsor

00:07:05.320 to get problems resolved, which I love.

00:07:06.940 But most importantly is any product person,

00:07:09.340 any technical person, any marketing person,

00:07:11.200 they're always talking to their customer.

00:07:13.460 They don't pretend like they have the answers,

00:07:15.600 they work backwards from their customers.

00:07:17.500 So that's a big one.

00:07:18.420 Number two is the opportunity to co-create.

00:07:21.560 I love to build innovation,

00:07:24.520 but I also know that at scale,

00:07:27.380 When I build companies, I am not my customer, okay?

00:07:30.200 I may have been my customer, but today I am not.

00:07:33.280 You may be so far removed from the problems

00:07:35.340 that your customers are facing

00:07:36.340 that you don't have the judgment you used to have.

00:07:38.780 And what I'd rather do is sit down

00:07:41.420 and co-create the right solution

00:07:44.060 for the biggest problems my customers have.

00:07:46.820 And the way I've done that with Clarity

00:07:48.440 was clickable prototypes.

00:07:49.740 You can literally, in today's world, it's even fancier.

00:07:52.340 Back in the day when I was building my last tech,

00:07:55.480 you know, venture-backed tech company, Clarity,

00:07:57.380 I mean, we would just use like this software called Balsamiq.

00:08:00.640 It would let you create these clickable interfaces

00:08:03.740 to simulate the software.

00:08:05.100 And then you could like show it to a customer

00:08:06.560 and get feedback.

00:08:07.700 Today, you can do high fidelity,

00:08:09.840 pixel perfect mockups and simulations.

00:08:12.280 I mean, it's amazing what you can do today.

00:08:14.700 But the beauty of it is, is that you know the solution

00:08:17.060 is gonna solve your customer's problem

00:08:18.300 without ever investing time and energy development resources

00:08:22.120 and building it because you can show it to them.

00:08:24.340 Very low cost, very low risk.

00:08:26.500 It's how people, you know,

00:08:30.060 create models of a house they're building, right?

00:08:33.620 So that's number two is the co-creation process.

00:08:35.340 Number three is the idea of pre-selling, okay?

00:08:38.920 Working backwards from your customer

00:08:40.340 to pre-sell the solution, to get buy-in,

00:08:43.140 to get what's called validation,

00:08:45.380 to test your riskiest assumptions.

00:08:47.480 The riskiest thing you could ever do

00:08:49.000 is build something that nobody wants.

00:08:50.940 And when people say to me,

00:08:52.500 yeah, Dan, but you can't do that with enterprise software.

00:08:55.540 Yeah, Dan, but you can't do it with toothbrushes.

00:08:58.020 Yeah, Dan, you can't do it with this.

00:08:59.980 It's not true.

00:09:01.420 It's not true.

00:09:02.260 My brother does it with houses by getting deposits.

00:09:05.060 My buddy Matt at Pila,

00:09:06.780 which I'm blessed to be an investor and I sit on the board,

00:09:09.800 came out with a product called Lomi,

00:09:11.380 which is the world's first home compostable machine.

00:09:16.980 It's like the coolest thing.

00:09:18.340 You throw in all of your food scraps

00:09:22.940 and anything like that could be kind of like

00:09:26.080 put into a compost bin

00:09:27.220 and it turns it into dirt overnight, okay?

00:09:29.240 It was the largest crowdfunded ecotech in the history.

00:09:34.120 I think they sold 22,000 units and continues to just grow.

00:09:38.320 And I share that because, you know,

00:09:40.760 they didn't have the ability to just fund

00:09:43.400 a bunch of hardware and to assume

00:09:45.300 that they had the right product and sell it to the market.

00:09:47.300 But what they did is they took the 3D drawings,

00:09:49.160 they created a video and they did a crowdfunding campaign,

00:09:51.640 which is like crowdfunding,

00:09:53.260 I think is like a seven or $8 billion market.

00:09:56.120 So when people say like, you can't pre-sell this,

00:09:58.280 I go crowdfunding.

00:09:59.960 There's literally no category of business

00:10:02.660 that has not pre-sold what they are about to build

00:10:05.900 before they build it.

00:10:07.320 And it's available to all of us.

00:10:09.200 And when we do that,

00:10:10.400 we're truly aligning with the customer's problems

00:10:13.500 to build the absolute best solution.

00:10:15.660 Tesla does it.

00:10:16.840 Look at what Tesla does with their cars.

00:10:19.080 They pre-sell, they get deposits,

00:10:20.880 they tweak, they get feedback,

00:10:22.440 they have early beta releases.

00:10:24.520 I mean, they're self-driving everything.

00:10:27.120 It's, I'm gonna let it go because I think some people

00:10:31.100 on the receiving end of this message is gonna go,

00:10:33.400 yeah, it won't work for me, it's just not true.

00:10:35.600 It's a belief that you have that's holding you back.

00:10:38.000 And when you fight against what the market wants,

00:10:40.400 you know, Buffett says, he has this great quote that says,

00:10:42.700 when a competent manager meets a declining market,

00:10:46.380 the market always wins, something like that.

00:10:48.380 Like you can't beat the fact

00:10:51.000 that if you're working backwards from,

00:10:52.840 you're not working backwards from a customer

00:10:54.260 that it's very easy to build something that nobody wants.

00:10:56.820 And I wanna leave you with a quote

00:10:58.400 that hopefully wraps this all up, okay?

00:11:01.020 What I learned working with my brother,

00:11:02.620 what I've learned building my software companies

00:11:04.660 and helping hundreds of other clients

00:11:08.040 work backwards from their customer

00:11:10.500 is that the value of your product

00:11:13.200 is not in the effort that you put into it.

00:11:16.080 A lot of people think like,

00:11:17.340 but I put so much time into this.

00:11:18.740 Go look on Shark Tank or Dragon's Den,

00:11:20.560 whatever country you live in,

00:11:21.620 and go see these entrepreneurs

00:11:23.340 that have created board games, okay,

00:11:25.800 or products and invested their life savings

00:11:28.660 and all their time and energy,

00:11:29.760 and they're pleading with the sharks,

00:11:31.620 like, but I did all this work.

00:11:33.580 What, you know, it's worth more.

00:11:34.980 And it's like, look, and this is from Peter Drucker,

00:11:37.860 one of the smartest management minds ever.

00:11:39.780 He said, the value of your product

00:11:41.700 is not in the effort that you put into it,

00:11:44.020 but what the customer gets from it

00:11:47.040 and is willing to pay for.

00:11:48.880 That's Peter Drucker.

00:11:49.960 And that to me summarizes the whole thing

00:11:52.480 is that if you don't work backwards from the customer

00:11:54.340 to figure out what they find valuable

00:11:56.100 and they're willing to pay for,

00:11:57.460 then your effort going into it does not matter.

00:12:01.020 That is how the market works.

00:12:02.640 And that's my philosophy.

00:12:04.900 I hope this finds you incredibly well

00:12:06.900 and I'll see you next Monday.

00:12:08.560 Peace.

00:12:09.400 Later.

Dan Martell - February 28, 2022

How To Build An Award Winning Company

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