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In this lessons episode, explore how unconventional business models can create explosive growth
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when incentives are designed effectively. Discover how strategic innovation can revive
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a struggling company, understand the risks of scaling too quickly without operational discipline,
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and uncover why strong leadership and compliance are essential when managing growth at scale.
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And help me understand the business model for Vizales. So help me understand like when you say
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direct selling model, how does that differ from like a CPG company or a direct consumer company
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now where they're going online or they're going to retail like what does that direct selling model
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look like? Because I recognize that direct selling model from like an enterprise B2B space
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because you're going pure outbound. But this is a consumer product at its core. So how did that work?
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Well, you're recruiting affiliates basically. So the way to describe it would be an affiliate model.
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And you're recruiting affiliates to basically sell that product.
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And our unique innovation was our marketing was a challenge. And now you'll see on the internet
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everyone has challenges. And we brought challenges to social media. So we launched a thing called
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the Buy by Buy 90 Day Challenge. When you joined the Buy by Buy 90 Day Challenge, you were encouraged
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to bring three friends with you. And when you brought those three friends with you, we gave you
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your product as free. We built into our economic model and incentive structure for
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our cost model. We built in the structure where we could bear that burden where the more people
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that brought in three people, the more free product we were shipping. And at one point,
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we're shipping out tens of thousands of free kits, free product kits per month as a result of
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that marketing initiative. On the other end of that, we had an incentive structure, a compensation
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plan that compensated our sellers based on them helping more people receive their product for free.
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And the more that they did that, the more we unlocked additional incentives. We had a BMW program
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that we put 18,000 BMWs into our seller's hands through the BMW program. We had a million
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dollar cash bonuses if they did enough of the activity that we just described. And so we built a
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very complicated, multifaceted, multi-variable compensation plan. And that was one of the big
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primary reasons for the fact that we were able to grow and scale to the size that we did.
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So walking through numbers, too. So when you joined, where was it at versus? Because you won
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awards, I think, for turning this company around, no? That's at some point.
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So it went through. When I bought it, it was doing about 20,000 a month themselves. And then I
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scaled it to, and I do have to say I had a fantastic team. It wasn't just me. I hate even the fact
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that I say I, because it was a wee. I had great investors, great business partners, great
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founding team members. And my primary role was handling the finance, raising the funds,
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providing the strategic direction, and organizing the operation of the team. But there were some great
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contributors along the way. But for the sake of explaining how it went, about it, 25,000,
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built and scaled it. And this was in 2005. And then built and scaled it to the summer of 2008,
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where I sold it to a publicly traded company called Blythe, which was on the NYC.
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I was doing about 25 million a year at the time, a couple million a month in sales when I sold
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it. Immediately upon the signing of the deal, the great recession hit, I sold it on 8 4 2008.
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And by September of 2008, the great recession hits, the company basically goes into severe debt.
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I went from two and a half million a month roughly down to 600,000 a month. I had accumulated a ton
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of debt to try to stay afloat. The business was burning cash to the tune of like $600,000 a month.
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Business was burning 600,000 a month. We were down to about our last 600,000. The public
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company that bought us, wrote us down to zero. And so the games that I was able to take off the table
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as a result of their acquisition, because it was a multi-year earnout that was structured as part of
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the acquisition, I had to put back into salvage the deal, which myself and my co-founders and one of
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my other investors did. And we kept the deal alive. We re-engineered the company, came up with the
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challenge idea that I had mentioned. And then from there, I scaled it in a new economic environment,
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post recession, where we were able to take a lot of market share and we were able to. While our
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competitors were retracting, we cut our losses, re-engineered our compensation plan, re-engineered
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our product offering, re-engineered everything, and we were able to expand while everyone else was
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retracting. And we took the number one share in shake during that time. We got to a 23% market share,
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and we were number one over Costco, GMC, and everyone during that time based on the innovations that
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I've described. That's amazing. Now, I know that there's been like, as you built this up, obviously,
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the business model was successful. But there was a lot of, you got a lot of pushback. There's a lot of
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shit about this business model that didn't vibe with people. Obviously, it's come up again and again.
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So what went right? What didn't go right? Why was there so much press around
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how you grew the company? Why was this something that, I guess, it seems like there's a lot of companies
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that do direct selling models. Various companies do affiliate, multi-level setups. But in particular,
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you were covered by tons of news outlets. There was some legal issues that came up from this as well.
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So I'm curious as to why this all came to be.
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Well, one, I could tell you I made a lot of mistakes by all means. I was hyper competitive,
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and I got into a lot of competitive oriented situations and lawsuits that, you know, in retrospect,
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I should not have. The other thing is I sold to a publicly traded company and we became the most
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meaningful portion of their revenue. And so all of a sudden, we started getting a ton of press
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around that. Every time the public company released earnings, their stock would blow up basically
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because, you know, the publicly traded company, which was basically a sleeper,
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endowment, was zero growth. And in fact, was going downward and retracting. All of a sudden,
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now I had hundreds of millions of dollars in revenue, you know, on a quarterly basis and
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significant sums of profit. And so all of a sudden, all eyes were on us both from the media
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and from Wall Street. And, you know, we were not a fortified business model by any means.
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The other thing that occurred that was a big mistake was the publicly traded company couldn't
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afford to pass the urn out. So they persuaded us to go public. And as a result of that, now the
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sudden, my company has opposed to, you know, accelerating our growth and building fortification
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and building a strong infrastructure. My entire management team and everybody was focused on
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ringing the bell. I myself included, you know, there's such a gratifying idea that I would,
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you know, take this company from near bankruptcy to ringing the bell. So we lost our focus and lost
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our, you know, our discipline to building a company and fortifying. At that time, we should have
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had done nothing but, you know, four to five four growth and continued to invest in growth-related
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initiatives, not try to ring the bell and go public. We weren't ready for that. So there were a lot
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of things that we did wrong. There were a lot of mistakes that we made, you know. And, you know,
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some of the negative activity that we had was a short seller enticed in that there was a,
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we were the number one most shorted stock in all of Wall Street for over a year. And so,
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you know, there were so many people that were trying to stimulate negative activity against us.
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And then there was plenty of things that we did that were, you know, just, you know, just the
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perfect storm, a perfect storm of everything. It was working mistakes. It was public too soon. It
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was short seller activity. It's all this shit coming together that probably caused you a few
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great hands, too. Yeah. The second thing is, is when, you know, all of a sudden you're putting up
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a hundred million in profit, like every attorney in the world is looking to figure out a way that
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they can squeeze you. So the bigger you are, the bigger the target that you are. So I had short
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sellers going after me. I had ambulance chasers going after me. I had competition going after me.
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And then I was, you know, also, I was not ready for that onslaught by any means. We had class
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action lawsuits that all eventually got settled, but a ton of them, like there was class action lawsuit
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after class action lawsuit after class class, class action lawsuit over a billion dollars of class
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action lawsuits against us at one given time. One was for texting incorrectly. I had no idea that
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you weren't allowed to text people. Another one was for product efficacy that we ended up winning.
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And another one was for the way the IPO was handled, which I didn't know that I couldn't cite,
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you know, like you see Elon Musk trouble that he's going through, like every time I tweet,
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I would have an SEC filing and another, you know, citing in a lawsuit. So I had no idea how to
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conduct myself as a publicly traded company and as a public figure by any means.
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Yeah, that's not that's not easy to say to land. And do you still stand by like the core business
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model, like the direct selling multi level affiliate, because that also has gotten just a lot
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of negative. So how do you do that model right? Yeah, you, you can. So I will tell you, you,
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you can very much do that model right. And there is a lot of good that comes from that model.
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But you have to be very careful because compensation drives behavior. And as you know,
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human behavior is very hard to calculate. And so you might very well be creating, you know,
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great ideas and great incentives and support that create behaviors that aren't an alignment with
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your personal values and brand. And when you have a million people out there marketing your
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company on your behalf, which we did, you're going to have a lot of of chaos. And you're going to
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have a lot of people that are doing it in a ways that are not an alignment with your values and
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an alignment with the brand's values. And so you have to have a strong compliance. You have to have
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strong policing of this. You have to be very rigid and tight. And it's a very difficult environment
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to do correctly. It's highly competitive. And, you know, it's, it's kind of like the wild wild west
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of sales. So I learned a ton from it. I'm no longer within the industry at all. So I can speak
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very objectively about it. And, you know, and I can tell you that there's some, there's some great
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things that come as a result of the industry. But then there's also some, you know, some,
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some chaos that it's a result as well. If you're not correct. If you're not disciplined and you're
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not forward-thinking enough to understand the various things that could come your way,
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some of these companies do create, you know, vehicles, marketing campaigns, messages,
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sales systems, and compensation systems that are not great for the consumer.
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In this lessons episode, explore how unconventional business models can create explosive growth
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when incentives are designed effectively. Discover how strategic innovation can revive
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a struggling company, understand the risks of scaling too quickly without operational discipline,
4
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and uncover why strong leadership and compliance are essential when managing growth at scale.
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And help me understand the business model for Vizales. So help me understand like when you say
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direct selling model, how does that differ from like a CPG company or a direct consumer company
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now where they're going online or they're going to retail like what does that direct selling model
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look like? Because I recognize that direct selling model from like an enterprise B2B space
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because you're going pure outbound. But this is a consumer product at its core. So how did that work?
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Well, you're recruiting affiliates basically. So the way to describe it would be an affiliate model.
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And you're recruiting affiliates to basically sell that product.
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And our unique innovation was our marketing was a challenge. And now you'll see on the internet
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everyone has challenges. And we brought challenges to social media. So we launched a thing called
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the Buy by Buy 90 Day Challenge. When you joined the Buy by Buy 90 Day Challenge, you were encouraged
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to bring three friends with you. And when you brought those three friends with you, we gave you
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your product as free. We built into our economic model and incentive structure for
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our cost model. We built in the structure where we could bear that burden where the more people
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that brought in three people, the more free product we were shipping. And at one point,
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we're shipping out tens of thousands of free kits, free product kits per month as a result of
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that marketing initiative. On the other end of that, we had an incentive structure, a compensation
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plan that compensated our sellers based on them helping more people receive their product for free.
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And the more that they did that, the more we unlocked additional incentives. We had a BMW program
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that we put 18,000 BMWs into our seller's hands through the BMW program. We had a million
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dollar cash bonuses if they did enough of the activity that we just described. And so we built a
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very complicated, multifaceted, multi-variable compensation plan. And that was one of the big
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primary reasons for the fact that we were able to grow and scale to the size that we did.
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So walking through numbers, too. So when you joined, where was it at versus? Because you won
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awards, I think, for turning this company around, no? That's at some point.
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So it went through. When I bought it, it was doing about 20,000 a month themselves. And then I
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scaled it to, and I do have to say I had a fantastic team. It wasn't just me. I hate even the fact
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that I say I, because it was a wee. I had great investors, great business partners, great
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founding team members. And my primary role was handling the finance, raising the funds,
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providing the strategic direction, and organizing the operation of the team. But there were some great
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contributors along the way. But for the sake of explaining how it went, about it, 25,000,
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built and scaled it. And this was in 2005. And then built and scaled it to the summer of 2008,
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where I sold it to a publicly traded company called Blythe, which was on the NYC.
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I was doing about 25 million a year at the time, a couple million a month in sales when I sold
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it. Immediately upon the signing of the deal, the great recession hit, I sold it on 8 4 2008.
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And by September of 2008, the great recession hits, the company basically goes into severe debt.
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I went from two and a half million a month roughly down to 600,000 a month. I had accumulated a ton
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of debt to try to stay afloat. The business was burning cash to the tune of like $600,000 a month.
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Business was burning 600,000 a month. We were down to about our last 600,000. The public
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company that bought us, wrote us down to zero. And so the games that I was able to take off the table
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as a result of their acquisition, because it was a multi-year earnout that was structured as part of
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the acquisition, I had to put back into salvage the deal, which myself and my co-founders and one of
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my other investors did. And we kept the deal alive. We re-engineered the company, came up with the
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challenge idea that I had mentioned. And then from there, I scaled it in a new economic environment,
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post recession, where we were able to take a lot of market share and we were able to. While our
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competitors were retracting, we cut our losses, re-engineered our compensation plan, re-engineered
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our product offering, re-engineered everything, and we were able to expand while everyone else was
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retracting. And we took the number one share in shake during that time. We got to a 23% market share,
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and we were number one over Costco, GMC, and everyone during that time based on the innovations that
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I've described. That's amazing. Now, I know that there's been like, as you built this up, obviously,
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the business model was successful. But there was a lot of, you got a lot of pushback. There's a lot of
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shit about this business model that didn't vibe with people. Obviously, it's come up again and again.
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So what went right? What didn't go right? Why was there so much press around
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how you grew the company? Why was this something that, I guess, it seems like there's a lot of companies
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that do direct selling models. Various companies do affiliate, multi-level setups. But in particular,
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you were covered by tons of news outlets. There was some legal issues that came up from this as well.
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So I'm curious as to why this all came to be.
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Well, one, I could tell you I made a lot of mistakes by all means. I was hyper competitive,
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and I got into a lot of competitive oriented situations and lawsuits that, you know, in retrospect,
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I should not have. The other thing is I sold to a publicly traded company and we became the most
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meaningful portion of their revenue. And so all of a sudden, we started getting a ton of press
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around that. Every time the public company released earnings, their stock would blow up basically
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because, you know, the publicly traded company, which was basically a sleeper,
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endowment, was zero growth. And in fact, was going downward and retracting. All of a sudden,
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now I had hundreds of millions of dollars in revenue, you know, on a quarterly basis and
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significant sums of profit. And so all of a sudden, all eyes were on us both from the media
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and from Wall Street. And, you know, we were not a fortified business model by any means.
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The other thing that occurred that was a big mistake was the publicly traded company couldn't
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afford to pass the urn out. So they persuaded us to go public. And as a result of that, now the
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sudden, my company has opposed to, you know, accelerating our growth and building fortification
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and building a strong infrastructure. My entire management team and everybody was focused on
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ringing the bell. I myself included, you know, there's such a gratifying idea that I would,
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you know, take this company from near bankruptcy to ringing the bell. So we lost our focus and lost
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our, you know, our discipline to building a company and fortifying. At that time, we should have
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had done nothing but, you know, four to five four growth and continued to invest in growth-related
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initiatives, not try to ring the bell and go public. We weren't ready for that. So there were a lot
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of things that we did wrong. There were a lot of mistakes that we made, you know. And, you know,
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some of the negative activity that we had was a short seller enticed in that there was a,
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we were the number one most shorted stock in all of Wall Street for over a year. And so,
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you know, there were so many people that were trying to stimulate negative activity against us.
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And then there was plenty of things that we did that were, you know, just, you know, just the
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perfect storm, a perfect storm of everything. It was working mistakes. It was public too soon. It
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was short seller activity. It's all this shit coming together that probably caused you a few
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great hands, too. Yeah. The second thing is, is when, you know, all of a sudden you're putting up
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a hundred million in profit, like every attorney in the world is looking to figure out a way that
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they can squeeze you. So the bigger you are, the bigger the target that you are. So I had short
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sellers going after me. I had ambulance chasers going after me. I had competition going after me.
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And then I was, you know, also, I was not ready for that onslaught by any means. We had class
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action lawsuits that all eventually got settled, but a ton of them, like there was class action lawsuit
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after class action lawsuit after class class, class action lawsuit over a billion dollars of class
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action lawsuits against us at one given time. One was for texting incorrectly. I had no idea that
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you weren't allowed to text people. Another one was for product efficacy that we ended up winning.
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And another one was for the way the IPO was handled, which I didn't know that I couldn't cite,
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you know, like you see Elon Musk trouble that he's going through, like every time I tweet,
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I would have an SEC filing and another, you know, citing in a lawsuit. So I had no idea how to
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conduct myself as a publicly traded company and as a public figure by any means.
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Yeah, that's not that's not easy to say to land. And do you still stand by like the core business
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model, like the direct selling multi level affiliate, because that also has gotten just a lot
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of negative. So how do you do that model right? Yeah, you, you can. So I will tell you, you,
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you can very much do that model right. And there is a lot of good that comes from that model.
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But you have to be very careful because compensation drives behavior. And as you know,
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human behavior is very hard to calculate. And so you might very well be creating, you know,
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great ideas and great incentives and support that create behaviors that aren't an alignment with
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your personal values and brand. And when you have a million people out there marketing your
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company on your behalf, which we did, you're going to have a lot of of chaos. And you're going to
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have a lot of people that are doing it in a ways that are not an alignment with your values and
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an alignment with the brand's values. And so you have to have a strong compliance. You have to have
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strong policing of this. You have to be very rigid and tight. And it's a very difficult environment
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to do correctly. It's highly competitive. And, you know, it's, it's kind of like the wild wild west
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of sales. So I learned a ton from it. I'm no longer within the industry at all. So I can speak
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very objectively about it. And, you know, and I can tell you that there's some, there's some great
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things that come as a result of the industry. But then there's also some, you know, some,
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some chaos that it's a result as well. If you're not correct. If you're not disciplined and you're
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not forward-thinking enough to understand the various things that could come your way,
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some of these companies do create, you know, vehicles, marketing campaigns, messages,
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sales systems, and compensation systems that are not great for the consumer.
