Uncovering the Power of Core Values: How Microbe Formulas Transformed its Culture | The Fifth Hammer Growth Podcast - EP 3
Welcome back to another episode of The Fifth Hammer Growth Podcast! In today's episode, "Uncovering the Power of Core Values: How Microbe Formulas Transformed its Culture," we are diving deep into the success story of Microbe Formulas and the key decisions that made it all possible.
We are unpacking the importance of defining your company's identity and core values and how documenting them can have a powerful impact on your organization.
Join us as we explore the journey of Microbe Formulas' growth and the pivotal moments that shaped our path to success. So, grab your headphones and get ready to find harmony in imperfection as we explore the world of business and personal growth.
Transcript
In today's session, we're excited to talk to you about three moments in time and
Speaker:decisions that really added up to a lot of the success at
Speaker:Microformulas. And we'll dive deeper into
Speaker:the formula that we talk about what that means and what it can do for
Speaker:you and what it did for us and what it means and looks like to
Speaker:be an education first and media first company and the difference between
Speaker:documenting core values and creating them and how those can
Speaker:impactful for you and your organization.
Speaker:You are listening to the Fifth Hammer Growth podcast, where we help you
Speaker:find harmony in imperfection as you journey towards success
Speaker:in life and in business.
Speaker:Earlier, we shared moments in time kind of decision making
Speaker:frameworks of what brought us to Microformulas. And now let's
Speaker:jump in. In the season of running, grinding,
Speaker:building the company, growing it, what are some key moments in time
Speaker:or decisions or focuses that really helped us
Speaker:navigate our way to the growth that we saw there?
Speaker:And we'll just start teasing some of these out. Yeah, it's
Speaker:interesting. As we were thinking through this,
Speaker:one of the things that early on kept coming
Speaker:up, kept coming up, kept coming up was, who are we as a company? Who's
Speaker:our identity? And I remember certain individuals
Speaker:were saying, we need some core values, we need to figure this out. And
Speaker:I was always like, Hold off, it'll
Speaker:come. And it never felt like because I've been in situations
Speaker:where there was a mission statement and that mission statement, mission. Vision,
Speaker:values, how many times do you hear that every business needs it? And it was
Speaker:always forced so robotic. Yeah. And to
Speaker:me, this was a Fifth
Speaker:Hammer moment because I was pushing back and I'm like, we're not ready for it.
Speaker:It'll manifest, it'll come, it'll show. Right.
Speaker:Really, I think the thing that was the catalyst
Speaker:to it is we started a Book of the Month Club, right.
Speaker:The first book we read was Extreme Ownership. And extreme ownership
Speaker:became almost our company bible for our
Speaker:culture in a lot of ways. So much
Speaker:for when we started documenting what our core value was. Extreme
Speaker:ownership was a core value. Right. But it was interesting
Speaker:because it got to the point where we were growing, where we were
Speaker:knowing who we were, we were starting to understand our own personal
Speaker:behaviors. And the idea of sitting down
Speaker:and documenting our core values was important. Yeah. And what I love
Speaker:about that, too, is the business mantra of the world
Speaker:is you got to have a business plan. You got to have all this documented,
Speaker:you got to have all this in place before you see success, before you go
Speaker:out and play. And we kind of flipped that backwards a little bit of like,
Speaker:hey, we were operating a successful
Speaker:seven figure business, growing it to eight, and we weren't
Speaker:documenting what we wanted it to be. We just documented how
Speaker:we were already operating, right? The core values, the personal core
Speaker:values that Dr. Tod Watts had, that Dr. J had, that you had Ryan,
Speaker:and that as a company, we were striving for
Speaker:not perfect in, right? But that we wanted to try to adopt and
Speaker:scale across anyone in the company and any new person potentially
Speaker:joining it. And I think there was power in that exercise of just thinking
Speaker:through what are we already doing as individuals and as a
Speaker:collective, because that's what culture is. Culture is not what you put on a wall.
Speaker:Culture isn't what you put in an employee handbook or in an onboarding
Speaker:process. It's how you actually act every
Speaker:day as an individual and as a group.
Speaker:Well, I'm glad you said that, because my first day on the
Speaker:job was a leadership meeting where we were in
Speaker:part, refining these core values. And coming
Speaker:from I worked for a $4 billion supplement company or a Fortune
Speaker:1000, and there's all so much cliche
Speaker:organizational bureaucracy and things that people just say,
Speaker:you guys were actually and I didn't know this at the time, but I remember
Speaker:kind of rolling my eyes that we were doing that, I'm sure.
Speaker:But then very quickly, within the first couple of weeks, seeing that, oh, you
Speaker:guys are just documenting the culture as it is.
Speaker:And there were many times I leaned on those to either
Speaker:give me permission to act in a way that I thought I needed to act
Speaker:to lead. Like, I remember the extreme ownership kept
Speaker:and that was another one that I thought was so cliche because people talk about
Speaker:that all the time. You guys actually did it, and our CEO really did it.
Speaker:If you were wrong about something, you were the first person to raise your hand
Speaker:and say, I was wrong. Right? And then extreme
Speaker:ownership all the way up and down the chain by allowing us
Speaker:to be collaborative in how we developed our plans. I think that's actually the
Speaker:real gold nugget in extreme ownership. It's not decentralized. It's not,
Speaker:I was wrong, because that can actually be a crutch, by the way.
Speaker:It is the collaborative nature of building the plan with the team
Speaker:all the way up and down the chain. So there's full buy in. That's what
Speaker:extreme ownership, I think, really is to me. And you guys didn't mean
Speaker:to hijack the topic, but that's what I saw you guys really doing.
Speaker:But it's important, too, because the other side of it, taking
Speaker:extreme ownership, is one of our core values. The other side of
Speaker:it was cover and move. I'm glad. Yeah, I was about to say that.
Speaker:You know what I mean? You want to talk about a book that you can
Speaker:open up and just any chapter has impact on you. Cover
Speaker:and move, leading up and down the chain of command. These were phrases
Speaker:and terms that we use daily within the
Speaker:and we lived it. And that's what I loved about how we
Speaker:documented and I love the word that. And
Speaker:Spencer, you said this first, is we didn't create core values. We documented
Speaker:core values. Right. And the fact that
Speaker:those ideas of COVID and Move and how do we lead up and down the
Speaker:chain of command, it was always there. I think the other one,
Speaker:that was so cliche, but we lived it was people
Speaker:first. Yeah, right. And that was a challenging one. They're
Speaker:all challenging. Well, at the end of the day, core values create a
Speaker:framework for your employees and your team members to hold you accountable as
Speaker:a leader. And you're not perfect, and the company is not going to be perfect
Speaker:and other people aren't. And so it creates tension. It
Speaker:creates natural
Speaker:dissonance. Right. I
Speaker:remember that one being so challenging because how do you define people first.
Speaker:And what person are you focused? Because here's the problem,
Speaker:right, is if you're truly people first across the board, how do you
Speaker:put your customers first and your customer support team first?
Speaker:When there's a conflict, right? Conflict
Speaker:challenges people first because, yeah, we want to put the
Speaker:customer is always right, but not really, because freaking customers are wrong. They're freak
Speaker:flat out, like, 90% of the time, they're wrong. So the
Speaker:idea is, and we use this constantly,
Speaker:is how would you want to be treated if it was you?
Speaker:Right? I get where you're coming from, but how would
Speaker:you want to be treated? And that's the idea of putting people first is how
Speaker:would you want and then you came in and I love this one. Spencer
Speaker:was in the realms of people first is we always
Speaker:talk about the Golden Rule, but what's the Platinum know? And then it's like,
Speaker:dude, you got to treat people the way they want to be treated, which
Speaker:is challenging for know, because
Speaker:I don't know how you want to be treated. Right? And it's hard to know,
Speaker:and it's hard scenarios where those two things, they're opposite beliefs.
Speaker:The Golden World, treat others how you want to be treated, and the Platinum Rule
Speaker:treat others how they want to be treated. Those are opposite opposing beliefs. But there
Speaker:are scenarios and situations where one works and one
Speaker:doesn't, and the other one works and the other doesn't. Right?
Speaker:And we could talk all day, but. Can I drop a quick side note, though?
Speaker:If you think the book extreme ownership is cliche, go pick up
Speaker:Jocko's. It's still jocko, but go pick up leadership, strategy
Speaker:and tactics. It wasn't until I read that book that I
Speaker:understood Cover and Move. I had a team at the time that was very
Speaker:combative and disagreeable,
Speaker:and we were kind of running loosey goosey. And then I
Speaker:remember texting you guys one morning on, like, a Saturday, because I was reading that,
Speaker:I was like, oh, my God, I know what I haven't preached as a
Speaker:leader is cover and move. But it came out of that book, so I just
Speaker:wanted to drop that real quick. No, I appreciate that. And that's the thing about
Speaker:core values, especially if you could document them for your company,
Speaker:that they don't really mean anything
Speaker:unless you internalize them, unless you figure out. And I think that's the one thing.
Speaker:That we do, and even when you do, and even when you try
Speaker:and you will fail and you won't live your core values all of the time,
Speaker:you have to be prepared as a leader, as a business owner
Speaker:for people saying, you're not living up to these quarterbacks. Yeah, they're going to call
Speaker:them and. It'S going to happen even no matter what your intentions and
Speaker:your efforts are. Yeah. You'll think you are knocking it out of the park
Speaker:and you'll find out from your team, actually, some people will use them against
Speaker:you. Oh, absolutely. And that's the thing. As part of that,
Speaker:Spencer, you told me constantly that people hear
Speaker:you like you're talking through a megaphone and they watch
Speaker:you through a microscope. Right. And that's that concept
Speaker:is how true are you to the core values that you freaking put up
Speaker:on the wall? Because they walk by them every day, they read them, and
Speaker:they're going to either hold you accountable and they analyze you under a microscope
Speaker:or hold them against you. Right. And so as a
Speaker:leader right now, as a leader, if
Speaker:you're not willing to live up to the core values that you've set for your
Speaker:company, then get them out of your freaking company. Because they don't just don't even
Speaker:have them. Just don't even have them. Totally. So I think that was one of
Speaker:the first things that we did really well, because it set the stage for the
Speaker:culture. I think the other thing that we
Speaker:did very well early on
Speaker:is we acknowledged that we had
Speaker:mega influencers in Jay and Tod. Right.
Speaker:There's this whole influencer marketing is
Speaker:there's a lot of good and bad about the term and phrase of influencer marketing.
Speaker:There's a lot going on about how do you truly manage influencers and how do
Speaker:you get it? And I believe that influence
Speaker:marketing has its place, but in
Speaker:order for it to truly, truly work, those
Speaker:influencers need to be a part of your company in every way,
Speaker:shape or form. Jay and Todd were the best
Speaker:influencers that I've ever seen in any company. But they were
Speaker:owners. They had an equity stake, so they were
Speaker:all in. But they also approached it with the
Speaker:mindset of, like, they knew it
Speaker:was necessary, but they didn't necessarily
Speaker:want the fame and the accolades, right. And the
Speaker:attention. They weren't counting their freaking likes or their
Speaker:followers. I watched Todd shed a tear, a genuine tear and
Speaker:multiple tears over customers. That's how it was
Speaker:genuinely to help. And you can't fake that. And that's
Speaker:what the customers saw that and they were attracted to that. And that was the
Speaker:other mindset that pervased the culture. But it was a conscious decision
Speaker:that we are an education company and a media company.
Speaker:And it was those two things that came from you and from Dr. J that
Speaker:those were decisions and those were things we said that impacted
Speaker:thousands of. Other little I mean, you think
Speaker:about that concept when you have the power of these two amazing influencers.
Speaker:And I joke about I pimped them out like freaking crazy. Every
Speaker:time we could turn around we had them on camera. Every time we turned
Speaker:around, we had them creating content. And we
Speaker:became that media company first, right? We became
Speaker:that education company first. We happened to sell supplements.
Speaker:Supplement selling was a byproduct of what we were truly doing. If you
Speaker:look at the day to day activity of the company, it was
Speaker:all around building content, creating
Speaker:content, like. Telling the stories, telling the story and
Speaker:educating the audience. And it was the weekly live with the
Speaker:docs from the D to C side. We had customer after customer
Speaker:after customer. They would come on and answer questions. Yeah, and again, this
Speaker:predated me. So thinking about coming in from the outside, looking
Speaker:in, I heard you say we're a media company first. And I rolled my
Speaker:eyes because I've heard Gary Vee say that since 2006.
Speaker:And I've been a part of many companies that say that and they just don't
Speaker:do it. So the proof is in the actions. If
Speaker:you're listening to this and you're thinking about where do I go next? And you're
Speaker:thinking about your criteria for what makes a good company, just look at the
Speaker:actions. Don't listen to as much as what they're saying. You guys
Speaker:were genuinely flying to locations,
Speaker:creating documentaries around the
Speaker:customers, telling the stories, but not just telling the stories.
Speaker:Man, this wasn't like a testimonial. This
Speaker:was like a full emotional story. And the reason why I say emotional story is
Speaker:because I think as marketers we miss this point. Emotion
Speaker:is what creates the flywheel of belief because it
Speaker:lowers the barrier, that skeptical barrier low enough to
Speaker:get over top of it and really pay attention and make a connection.
Speaker:So I don't know, I just think that's an important distinction because we
Speaker:talk about stories in education. I think the stories come first because that's
Speaker:what raises the belief and opens the mind enough to pay
Speaker:attention to the education. Well, and the education got so big to the
Speaker:point where we decided we were going to do our own
Speaker:event, our own practitioner event. And we opened up
Speaker:a to this day
Speaker:I don't even remember Eco being how eco came across, but it was
Speaker:extraordinary clinical outcomes. Exponential,
Speaker:exponential clinical outcomes. And it was the concept
Speaker:of our own event. And we had this vision of we're going
Speaker:to have 5000 doctors on this thing. Right? And
Speaker:our first one was standing room only because Tod kept saying yeah, just come, just
Speaker:come, just come, just come. And we had 90 people in the room
Speaker:by the time we had our event and exited.
Speaker:We had 800 people in the room with another three or
Speaker:2500 on virtual. This last one that they just did this
Speaker:last year, it hit 5000 numbers and we
Speaker:grew. Education was a huge part of how we grew. And I
Speaker:think companies need to realize the importance
Speaker:in today's environment of educating their
Speaker:and taking an active role in that education
Speaker:and having somebody that that customer, whether it
Speaker:is a D to C or practitioner in the health
Speaker:space industry. And I think it's the same across the board where they can find
Speaker:trust. Because I remember
Speaker:sitting outside of an event waiting. We just got to this
Speaker:hotel and location was in place and I was sitting there talking with
Speaker:somebody who showed up early. They got there the night before and they were getting
Speaker:their hotel room and Todd walked around the corner
Speaker:and it was a Beatles effect. This girl, this
Speaker:woman, grown woman started hyperventilating because she
Speaker:saw Todd and that dude, the biggest
Speaker:heart that he is, walked up to her, gave her a hug,
Speaker:said thank you so much for being here, knew her name
Speaker:and she almost fainted. And I was like,
Speaker:that right there is the impact when you start putting
Speaker:education and media and you start creating relationship with your customers
Speaker:that I've never seen in any other company. Yeah, and it was so
Speaker:powerful for these people too because they had been told so many times nothing was
Speaker:wrong with Know. And then Todd and Jay
Speaker:basically affirmed the feeling that they had
Speaker:and made them feel whole, know, put them on a path and it was
Speaker:so powerful. It's unlike anything I've ever seen and it's hard for other
Speaker:businesses to do something like that. But I
Speaker:still think there are lessons in the story and then the education and then the
Speaker:education not just around your product but the education to help
Speaker:them solve a problem that is, by the way, related to the
Speaker:solution your product provides. And let's maybe
Speaker:talk about one more. The education focus and the
Speaker:core value focus really spanned across the two channels we had
Speaker:in both D to C and in wholesale and
Speaker:was a powerful tool. But there was other powerful tools, powerful decisions and one that
Speaker:you brought in, some of those were you kind of came in the middle of
Speaker:the core values. You came in after really the focus on education media,
Speaker:but one that you really brought to the table, Dave, was something we call the
Speaker:formula, right? And we talk about quite a bit and leveraged
Speaker:a ton. But tell us about what the formula
Speaker:is and we can talk more about how that was a decision to really implement
Speaker:it in the company and how that helped our success. Yeah, so,
Speaker:man, I wish I invented this, but I swiped it from Drew
Speaker:Sanaki, who is now, I think, the CEO of Postpilot.
Speaker:He's had multiple, like, nine figure been CEO of nine figure e
Speaker:commerce businesses. I think he got it from Jay Abraham, who said, there are three
Speaker:ways to grow a business. Get more customers, get them to buy more, and
Speaker:get them to buy more often. Well, the funny thing about that is it actually
Speaker:breaks down into a formula where if you take your customer
Speaker:volume, so the total volume of customers repeat and first
Speaker:time, and then you take your average order value across all
Speaker:those. And now we can break down how valuable these metrics are.
Speaker:But just know, we scaled to a $50 million business pretty fast
Speaker:on the back of this. If you take those two customer volume and
Speaker:AOV, and then you take your buyer frequency, which is how many times over
Speaker:the course of a period of time somebody makes a purchase, let's just say in
Speaker:a year in this example, and you multiply those three together, you will
Speaker:get a revenue number. If you do it right now, you will actually
Speaker:get your current revenue number. And it will maybe plus or minus a few thousand
Speaker:dollars. But I had brought that to the
Speaker:table for almost ten years to different founders and
Speaker:CEOs, and nobody really embraced it. And to Ryan's point, you guys not only
Speaker:embraced it, it was everything for us.
Speaker:And the beauty of that formula is it's not
Speaker:really a forecasting tool, although it can be used as that.
Speaker:It's a focus tool. And I've tried to
Speaker:think, there are some really smart people in e commerce. Taylor
Speaker:Holliday at Common Thread Collective is like one of my favorite
Speaker:people to follow. I just love how he thinks. He's just so brilliant. And he's
Speaker:got a version of this that I think is really great for forecasting in general.
Speaker:But this was our formula. Customer volume
Speaker:times AOV times buyer frequency equals revenue was a way for
Speaker:us to catch the
Speaker:wind without wrecking the ship. And what I mean by that
Speaker:is, in an environment where you're growing so exponentially
Speaker:fast, it's all you can do someday is just to hang
Speaker:on. In those environments, your
Speaker:plethora of opportunity can sometimes wreck you as well and cause
Speaker:bottlenecks. And it was like the perfect marriage of Ryan as
Speaker:the CEO, and his belief and core value
Speaker:of extreme ownership, but also giving us space to operate, allowed that formula to be
Speaker:successful. Because I would just go to my team and
Speaker:say, they would say, well, what are the goals? And we would sit down together
Speaker:and collaborate on this formula. We would set targets for customer volume, for AOV, and
Speaker:for buyer frequency. And because we hired people that were
Speaker:experienced enough to understand how to execute against those, tactically, they would
Speaker:just run. And then I would turn around and. Report what we did to you
Speaker:guys, and we would be like, cool. And it kept us focused because
Speaker:at any given time, it wasn't like, we need to do influencer marketing.
Speaker:We need to do YouTube ads. It wasn't like a tactical discussion. It
Speaker:was, we need to increase customer volume by 20% this
Speaker:quarter to hit this revenue goal. Oh, and by the way, if we
Speaker:increase buyer frequency by zero point 25, we can blow that
Speaker:goal out of the water. Okay, what's that mean, guys? That means we need to
Speaker:work on our acquisition funnels. We need to work on our offers, we need to
Speaker:increase our ad spend by X, and then we might need to run a couple
Speaker:of promos towards the middle goal of each month to increase buyer frequency. And
Speaker:then it really just guided everything we did.
Speaker:Also, for me, the cool thing about the formula is
Speaker:that
Speaker:most people don't believe me when I say this, but I actually am
Speaker:a pretty logical person. Your
Speaker:optimism overcomes your but when it. Comes down to it, it's
Speaker:like, math makes sense to me. Math
Speaker:just makes sense to me. It's the chess player in my mind. I love playing
Speaker:chess. I grew up playing chess with my dad. And when you introduced the
Speaker:formula and tied revenue to that
Speaker:structure, it just opened the
Speaker:entire concept of marketing to something that I could make
Speaker:sense. Simplifies it. Yeah, well, it turned it into an engineering exercise for you.
Speaker:I think it really did. And not only that, but then you could turn around,
Speaker:because with a formula, from a programming standpoint,
Speaker:I can tie in algorithms to each of those individual
Speaker:formulas and start playing with different
Speaker:structures and constructs that are built around this
Speaker:formula. So it's like, okay, today we're going to write a
Speaker:function that will increase buyer frequency. And how
Speaker:do we do that? What functions can we iterate on
Speaker:that will increase buyer frequency, and
Speaker:it becomes a program, a code structure
Speaker:that allowed me to really understand what the
Speaker:marketing team was doing and how they were doing it. Right. And the other
Speaker:thing that I think the formula had a huge impact on was in the AOV
Speaker:side of things, because initially we were selling individual products
Speaker:and we had products that would work together. And until
Speaker:we saw and understood, how do we increase average order
Speaker:volume, that's when the idea of kits came into play.
Speaker:That's when the idea of protocol came into play. Because if you could bring these
Speaker:together, when we
Speaker:initiated the protocol and the product protocol,
Speaker:our average order volume went through the roof
Speaker:because the people understood
Speaker:most customers will have the product that they love.
Speaker:Right. But they don't understand how the whole thing works together. When
Speaker:we introduced the protocol,
Speaker:initially, it was like an $800 package. I mean, it was
Speaker:expensive, and we broke it down into month structures and you could
Speaker:buy this, but it dramatically
Speaker:increased our average order volumes. And it was those
Speaker:exercises based on that formula that
Speaker:allowed us to take the company to the next level.
Speaker:And it was the marriage of the formula and the education talk
Speaker:about the roadmap to health that Dr. Jay and Dr. Tod kind of introduced and
Speaker:mapping protocols to, that the marriage of those two things
Speaker:created, that Flywheel created, made the wave
Speaker:even bigger. But there's probably dozens more of
Speaker:pivotal kind of moments in time or decisions that were made throughout the course of
Speaker:the five years of growing that business. And I'm sure we'll talk about more,
Speaker:but I think we should leave it at that for today. And also just tease.
Speaker:There were plenty of mistakes we made along the way, plenty of things we did
Speaker:wrong, and we're going to be sharing those, too, because we don't want this just
Speaker:to be like roses and butterflies and like, hey, look at us, we did something
Speaker:cool. But we hope we can also share some of the things we
Speaker:didn't do that we should have or we did and were wrong
Speaker:that you can avoid and learn from, too. I'll just put a plug in there.
Speaker:The biggest mistake I made early on was not
Speaker:hiring a chief financial officer
Speaker:CFO initially. We'll dive in. Yeah,
Speaker:early on, if anybody's starting a company, running company, if your
Speaker:financials aren't dialed and you don't have a clear picture of where things are
Speaker:going. I had a good framework. Yeah, you had constraints. I had
Speaker:constraints and a good framework. And when we hired
Speaker:a CFO, we were working on building those constraints in there. But I
Speaker:wish we would have been able to hire him earlier or a
Speaker:CFO earlier so that we had a better, clearer picture and really did
Speaker:forecasting, really did some of the things that. We didn't do, especially if you're going
Speaker:for an exit, which you weren't really going for at the time. But yeah,
Speaker:that was the biggest. So three really positive ones. One big
Speaker:mistake was I would have hired if doing it all over again, I would have
Speaker:hired a CFO earlier. Love it. That's a
