Terminal Value

The Entrepreneurs Career Path

Janine Bacani

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We have Justin Tan with us today, and what we are going to be talking about is an entrepreneur’s career path, which probably sounds a little odd because most people think about a career path is like having a corporate job, which is where you start coming in, like, say, out of colleges, like, say, an accounting clerk. And you might work up to like a staff accountant and then a manager and then a senior manager and a director, et cetera, et cetera, et cetera. But one of the things that Just and I were talking about in the Preshow, which I think is actually really important to understand, is that many entrepreneurs go through a number of different companies and opportunities, and you typically go through a number of failures along the way. And so that actually kind of turns into a career path where in a lot of cases, you’ll start something, you’ll figure out how to make it work, and then at some point, you’ll exit, either because it goes bankrupt or because you sell it or something else. And then most entrepreneurs will start something new, which I think a lot of people say, well, say you had an exit and you made a whole bunch of money. Why would you start something new? Well, because entrepreneurs are creators, generally speaking, and creators have to create. And also, I think that’s actually an extremely important part of keeping your mind active and avoiding premature degradation of your mental prowess is to be staying active on something that is mentally engaging. But anyway, I am taking this conversation way afield. Justin, please introduce yourself. 

Hi, I’m Justin Tan. I’m the founder of Video Husky. That’s my most recent company. What I think about the most, at least in the past couple of years currently, I’ve stepped away from the company for the past year. Mostly been traveling, spending time with my girlfriend, and yeah, just taking a little bit of a sabbatical. 

Got it. Okay, well, you were telling me in the Pre Show that your entrepreneurial career started at 17, so give us the Cliffs Notes version. 

Okay, so the Cliff Notes version is I wanted to be a professional soccer player that got to a reasonable level, but it’s not a sustainable career path since we’re talking about career paths. And I decided I didn’t want to do that anymore. But when I continued to play a soccer for my high school, one of the challenges we had was sourcing soccer uniforms, of all things. And so I come from a family of my family owns manufacturing facilities. And so my dad said, you know what? Instead of paying this ridiculous amount for Adidas or Nike kits, why don’t you just get it made at our factory? We produce for them anyway, but you can do it for much cheaper and sell to your high school. And so that actually became my first sale, selling uniforms to my high school. That first order went horribly shorts or two shorts numbers peeling off size is all wrong, so I should have to refund everything. But the good thing was orders.

I have many first experiences go. 

Yeah, it’s horrible. But luckily, orders two, three, and four actually did reasonable good from other schools and other old contacts that I had. And so we had the beginning of a business. 

Outstanding. Okay, so you went from numbers peeling off of soccer uniforms to video husky. Kind of walk me through how that transition went.

All right, so starting off with soccer uniforms, which then that factory shut down a couple of years later, and so that transitioned into a wholesale shirt company, which, if anybody has ever done wholesale, they’ll realize requires a lot of cash. And so I didn’t understand how to manage cash at that time. So at some point, we got to like 500, $600,000 in debt off of a business that only generated $300,000 in revenue. So it’s not great. 

I’d like to stop you for a second because people who are in the trade will completely know what you’re talking about, but I want to unpack the dynamics a little bit. The way that wholesaling works is that you purchase inventory at a low cost and then you sell it at a higher price. People say, okay, well, what’s the problem? You have to put out cash for all that inventory upfront. And again, unless you have all that cash in your bank account, which most people don’t, you have to borrow it, which means that you’re paying interest on it, which means that you have to sell inventory in order to make your interest payments. So what happens if you can’t sell your inventory fast enough, you have to discount it? Well, then there goes your profit margins, and you end up in this perpetually increasing business loss to try to keep your trade credit line from drying up and going away. Or at least that’s the thing that I’ve seen. That’s the problem of wholesaling. Maybe you figured out a magic lightning spear to solve that. 

I think that’s the only time in my life where there was $100,000 in the bank and somehow the company itself was many times over that in debt. So it’s a very weird dynamic. Yes, but what that did push me down was thinking about, okay, so what other ways are there to generate cash quickly? And it was around that time that Facebook ads and print on demand drop shipping specifically became popular. So I thought, I’ve sold shirts and apparel before. I can do this online, working with another supplier. And so at the time, I tried a bunch of different stores and a bunch of different niches, and the one that really stuck was selling hiking shirts. Interesting. Yeah. So that eventually transitioned to my second business, a store called I’d Hike That.

Nice. Okay well and so all right, so it sounds like now, were you mostly in the ecommerce space because it sounds like you were in Facebook ads, so you’re probably using Facebook ads for your promotion, and then you were doing kind of essentially ecommerce store hiking shirts, et cetera. At least. Now, again, I’m certainly far from an expert in ecom, but from what I understand, it’s a less intense version of wholesaling, where the difficulty that you have is that you have to acquire your inventory upfront, and then you have to sell it through and then replenish your inventory so the margins can sometimes be pretty good. Although not always. The thing that I would think would be a killer would be your cash costs. 

Yeah, so you hit the nail on the side, because the key difference here is that I was not putting cash up front first again. This was a drop ship operation, which means that I only have to pay for the good after I’ve sold it. My margin is less, but my risk is also much less.

Okay, all right. I’m sorry. I was talking traditional model. You did say drop ship, so shame on me for not listening closely enough. Okay, well, so then how did that work? Because I think that seems like a pretty beautiful model. Except that it would seem that the market will hit the point of marginal efficiency really fast if you get into drop shipping, just because as you get more and more entrance, unless you can find some way to differentiate, it seems like you’d start getting into pretty heavy price competition. 

Yeah, and that’s essentially the problem, is like, when everybody in their mom and their dog can run a Facebook ad, it becomes saturated really quickly. And so we got to the point where I think the store itself would sell maybe ten to 15K kind of profitably, just marginally, maybe 10%, which, once you do the math, isn’t a lot. But once we got to that point, I realized this just wasn’t for me. I personally am not a hiker. So also, it got to the point where I didn’t really know how to relate to my customers. It’s kind of weird when they tell you they’re hiking the Rockies, and I’m like, what’s a Rocky? Not knowing it’s an actual mountain range. But, yeah, I ended up selling that business, and that was my first sale. For whopping twelve grand. 

Okay, so this is actually a unique teachable moment because, of course, you’d think, okay, well, if you’re making $10,000 a month gross, why was the sale price so low? I know the answer, but I want to hear you walk through it. 

Because unlike what every Twitter guru is going to tell you, the amount of money you make on your top line doesn’t actually matter. What really matters is your bottom line, your profit. 

There’s this thing called profits in business, which is what’s left after you subtract out all the costs. And if those aren’t very high, you tend to not get a very big valuation unless you are carving out like a new category. If you’re something like an Uber, then your profits are less important than being the king of the category. If you’re an ecom store, then profits are the only thing that matters. 

Yeah. For the rest of us who live on actual money, not for the rest of the terms, actual money.

Instead of VC checks, then profits are the only thing that really matters. Okay, well, you got a $12,000 check, and so where did you go after that? 

So I said, okay, you know what, I don’t like hiking, that’s fine. But I do now know Facebook ads. And at the time, I moved back to Hong Kong, where I grew up, and I realized that most people in Hong Kong did not know how to use Facebook ads properly. They knew how to do the whole awareness thing, but nobody knew how to use them to actually bring in leads, prospects, and eventually customers. And so I started working with soccer schools and yoga studios, applying what I learned from I’d hike that with Facebook ads and helping them generate exactly that, new students, new clients. And it worked. This was like the golden era of Facebook ads. I just decided to turn it on. And in this particular instance, because nobody else in Hong Kong knew how to do this properly, it was great for me. Could pick up clients quite easily, actually.

Yeah, because I think the cycle because you’re talking about awareness, which that’s basically taking what people used to do on television and transferring it to Facebook. But the thing about Google and Facebook that’s unique that you don’t get on something like television is you can track down to the individual person who clicks that ad. So now what you can do is you can scale direct response and you can set up an ad, you can have that ad linked to an offer, and then if that offer, plus any upsells or whatever exceeds the cost of that ad, you’ve now acquired a client for free. And so if you do that right, you can actually scale a business very rapidly. 

Yeah, and especially back then when Facebook ads were so cheap, it was a very easy way to validate and prove to clients that, look, I can make this work for you. It was a good time. 

Outstanding. Excellent. Are you still doing that now, or did you transition off of that at some point? 

So transitioned off of that. So the good thing about that is you can get to a reasonable good wage. I think at one point, I was earning maybe between six to eight grand pretty consistently for less than 20 hours of work. So I was thrilled. 24, 23, 24 at the time. So I was like, that’s a lot of money this entire time. I still own that first company that’s still in debt. So a lot of that cash is going straight back there. 

So this is actually one of the things that I think I’ve actually heard this more than once, so I kind of want to point it out. It’s funny how sometimes in order to get the motivation to do something that ends up being really profitable, you need to have some other dog that you’re trying to keep afloat. What you try to do is just say, okay, I want to make enough money so that I can unwind this other thing. And then when you’re done with that, you’re like, hey, I actually have a pretty good business. And it was completely and totally not by design. 

Yeah, it’s a very weird path. But even that Facebook ad agency model, one person agency model, had its challenges, which is it relied entirely on me. And so my time has limits for all that. I can run Facebook ads and stuff. It wasn’t something that was potentially scalable or in my mind, it wasn’t a real company. It was just me as an individual, and I wanted that experience. And so it was actually because I was running those Facebook ads that I think it was 2018, video ads became super popular, and Facebook was really pushing them. And so when I was working with my clients, I was saying, we got to do these video ads. But every one of them came back to me and said, great, here’s the footage. What do I do now? And that’s when I realized that there is a rising big need for video editing. And so I think it was 2018. And March 1, I said, all right, I’m going to give myself 90 days to find ten clients for this new idea that I had, which was inspired by. Do you know Design Pickle?

I do not. 

Okay, so design pickle was this core service that I found flat monthly fee at the time, it was $370 for unlimited submission, unlimited requests, and revisions for graphic design so I could get I used them to design all of my clients, like Facebook ads and whatnot. Using that model, I thought, I can use the exact same model, but apply it to video editing. And so that’s what I did. So 90 days from March 1, tried to find ten clients, which I think 86 days in, we were at four. So not great. But by some act of God, by day 90, we had six new clients. And so in my mind, I was validated.

 Excellent, unpack this for me a little bit, because I’m interested in this model, because, of course, I’m familiar with the traditional SAS model, which is going to say, okay, here’s a video editor. We’re going to oversell the features, but they’ll all most likely do the same 20 or 30 basic things. And then you put an enormous feature list on top of that. But basically, you upload the videos, you set up the effects, you edit and then you export. That’s kind of how Adobe it sounds like yours is different. So I’m kind of interested in hearing your spin here. 

Yeah, because we’re not a software. We are outsourced labor, and so we have a team of editors out in the Philippines. Our first editor was actually one of my friend’s boyfriends who didn’t have a job at the time, and I just told him, hey, he told me what he was potentially looking for pay wise, in the Philippines before I even started the company. I said, wait a second. If you’re looking for pay in the range of 500, $600, I might actually be able to come up with a job for you because of all of these needs that my clients have. And so when I realized that was the going rate in Philippines, we tacked on a little bit more, and then we just started to make it happen. And so we took advantage of, I guess, like, wage arbitrage between what was the going rate was in Philippines and what people were willing to pay internationally and became the middleman to coordinate that. 

Got it. Okay, well, I didn’t intend to turn this into a commercial for Video Husky, but I’m a little intrigued now. Okay, so now what’s your primary use case? Is it, like, ads? Would it be like, say, YouTube videos for someone like Mr. Beast or something like that? Or kind of what’s your ideal niche? 

Let’s say Mr. Beast scaled down by about 100, and that’s give or take, our best fit clients. We, generally speaking, work with content creators or business owners who need videos edited but don’t want to edit it themselves. They believe more in spending time in front of the camera rather than behind a computer. Anybody who has tried knows editing is a grind, and so it’s our job to really help you take that away from your life, take that little bit of resentment and negative energy, and turn that into inspiration for new and better videos. 

Got it. Okay. Is it, like, the design pickle, which is where you kind of like you’re looking at view options, or is it more like a statement of work kind of thing? I solemnly swear I’ll get off of the commercial in a minute. I’m just interested in this model.

It’s very simple. You pay a flat monthly fee. I think we have a few packages now. One at 501, at 700 or $750. And for that fee, you submit a request. There are certain parameters. So let’s say if it’s a smaller package, your end video has to be less than ten minutes. The higher one, it’s like, less than 20. You give us the footage, and you give us the instructions. So it’s kind of like imagine a restaurant. You provide the recipe, and you provide the ingredients, and we’ll do the cooking or the editing in this case, so that way you don’t have to worry about any of that. 

Okay. That’s really interesting. How’s that? I know how it’s gone because I think you’ve gotten it to the point to where you only have to talk to your GM once every 90 days. So talk me through how you got to that transition, because I’m sure that was a grind to get that off the ground. 

Yeah, so the first six months was a bit of a grind. We only had the we went from five clients or four clients to ten back down to five, and we were at five clients six months in. Not great. I don’t know why it took me so long to realize that I should be using Facebook ads for Video Husky, but that at the time, well, it unlocked scale for us. And so it took me a while to figure out, but once we got there, that’s what really drove a lot of our growth, customer acquisition.

 Although I’m going to interrupt you just a second and say that I still think that was probably the right thing to do. Because one of the mistakes that I see a lot of people make is they’ll try to scale with something like Facebook ads before they really have their sales flow and kind of sales flow and business development process locked in. So in that case, one of the worst things you can do is scale an unoptimized process because you’ll burn a lot of money. It’s actually probably pretty good that you did this manually before doing Facebook ads because otherwise your conversion rates probably would have been quite a bit lower.

 Yeah. So the good thing on one hand was we figured out the messaging really quickly. The bad thing on the other hand was I still approached all of this from the perspective of a marketer. At this point, I considered myself more of a marketing background than a proper business owner. And so I was reviewing the numbers the other day. What we found was, I think of all the customers that have ever worked with Video Husty, something like a quarter have refunded. And that blows my mind because we have a 14 day money back guarantee. On one hand, of course, the concern is, oh, is that quality of work? Is that our fault? But then once you start to look it into it, you realize, oh, wait a second, it’s because this person wasn’t the right fit. A lot of times we work great with content creators, with business owners, but we don’t work great with agencies. And that was the majority of clients who it just wasn’t working out. And so if I hadn’t actually been so focused on scaling and had paid more attention, like you said, on actual business development, knowing who our best fit customers are, knowing who are what they value, we probably could have grown. Not necessarily faster, but definitely better. I think one key insight that I had kind of reviewing those numbers was while we had a good chunk of people who were funded, one interesting statistic was the top 20% of our customers actually brought 70% of all of Video husky’s revenue ever, which probably means it brought 90% of all of our profit. 

Yeah, that’s interesting. I’m just curious, why were agencies such a poor fit.

Just because it changed the workflow? Because when you’re working, let’s say, with content creators, the end decision maker is the one we’re working with. So things went pretty quickly with an agency owner. It would get delayed because they have to go and talk to their client, they have to download the file, re upload it on their system, and we just weren’t set up in a white label manner. 

I got it. Okay. That completely makes sense. Completely makes sense. All right, well, so what’s next for Justin Tan? 

So, most of this year has been a bit of a sabbatical year. Traveling, a lot of reflecting, learning different things. But in the meantime, just been doing some part time consulting, working with agency or productized service owners, helping them either optimize or scale or systematize their business so that either can grow or the owner can take a bit more time off. 

Got it. Okay, well, good deal. In that case, I may have to reach out in like six months or a year or so and see what’s going on, because this is a unique journey. Because I know one of the things that I believe and that I’ve been reading a lot about lately is the idea of viewing outcomes not as good or bad, but just as neutral. So then the question that you ask from every outcome is, how can I turn this into an advantage?

 Yeah, I think that’s a really good way of approaching it. And simple advice hard to do, but definitely worth striving to do better.

 Well, exactly. Yeah, it doesn’t come naturally, but, yeah, I’ve been trying to train my mind to just think of everything as neutral, and the only question I ask for based on any outcome is, how can I turn this into an advantage? 

Yeah, that’s a good way of looking at it, man. 

All right, excellent. Well, hey, Justin, give us one or two last thoughts and then let everybody know where they can learn a little more. 

Yeah, sure. If you are somebody who wants to go on a similar path, I think Doug’s advice just now was phenomenal. But if there is anything that I think is really helpful, especially once you make a little bit of money or you’re looking to scale a little bit, hiring an assistant, man, that just goes a long way. Whether it’s coordinating travel, groceries, if you have to schedule or administer everything, having all of that off your plate and being able to focus on what you do best, I know it’s often repeated advice now, but it really goes a long way, especially if you can find somebody who really understands you. So 100% recommend doing that. 

Excellent. All right. What’s your, either website or your favorite socials. 

Yeah, so, my website is JustinTan.Me, and I’m pretty active on Twitter, so @jt7th. 

All right. Excellent. Outstanding. Hey, Justin. I really appreciate your time today. 

Cool. Thanks, Doug. 

It was awesome. It was fun. Bye.

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