Grayson Lafrenz was the most requested member people in our chapter wanted to hear from and he's had a banner year! This year includes Acquisitions, an exit, reaching Inc. 500/5000 for the 4th year in a row, an EY Entrepreneur of The Year Finalist, Entrepreneur Organization (EO) CEO of The Year Award Winner, Most Admired CEO Finalist not to mention the 20 awards for his company, Power Digital Marketing.
Learn a bit more about Grayson and how he's growing Power Digital.
Tell us a bit about yourself, your role at the company, and your business?
I am Grayson Lafrenz, CEO at Power Digital Marketing, which is a tech-enabled growth marketing agency focused on working with industry leading brands to help them acquire new customers and increase the lifetime value of their customer base. At Power Digital, we basically plug into brands as an extension of their marketing team and create strategies to help drive top line revenue growth and increase profit margin around customer acquisition. We take it a step further than just strategy and consulting and help them execute on these initiatives bringing highly technical and channel specific resources to their online marketing initiatives. Simply said, we help brands make more money!
Tell me about your growth over the last 3 or so years? How much growth? What has it been like?
As a company we have had a lot of growth over the past 3 years in terms of financials but also as a team and culture...
With that said, I had to look up these revenue numbers because I pay no attention to revenue. For our business it's all about EBITDA and that is what our team is held accountable against and what all our KPIs focus on. The Profit margin has grown each of these years so in addition to the top line revenue growth the margin has increased which is something we are very proud of and what really matters for driving the value of our company.
Historically, our financial growth has always been organic through being laser focused on the 3 Pillars of Growth for our business which are:
1) Client Retention (inverse of churn): pretty simple and when we do great at this, its very easy to grow our biz because our model is heavily reoccurring so the next two pillars provide compounding month-over-month growth with we retain the base at a high level. Our churn this year is really healthy at around 3.45% and a good benchmark of great churn in our space is anything under 10%.
2) Up-sells (same customer different product): when we do great work, our clients give us more opportunity and responsibility and in turn the contract value grows. We have clear data that shows the more services per client the more profitable the engagement, the higher the retention rate we have and most importantly the better the results the client gets! Our average client now has 4.5+ services and this is a metric we track in real time and focus on. We try and always have the monthly up-sells exceed the churn so its a net positive. When we do that the new biz revenue goes directly to growth and we get compounding growth quarter-over-quarter.
3) New Business (aka Sales): our sales team is currently a team of 5. This time last year it was 1.5 with me being the 0.5 :) I am no longer involved in sales and the team is doing great and thriving. Every sales consultant has a quota to sell 4+ deals a month and / or $36k+ monthly ROR (we care more about the $36k+ but the 4 is important as well to avoid Pareto issues which can cause risk and hurt our future valuation). That allows us to drop $180k+/- (5 sales people x $36k = $180k) a month to the top line and when we annualize that it pretty substantial! As this monthly target compounds with our initial contract duration at 8 months+/- and our average client retention over 2.5 years it is pretty easy to grow. Our sales process is heavily tech enabled with our own IP (BlackBox Portal and RainMaker) making it very scalable and its heavily inbound based in terms of lead flow so our sales team is more consultants helping people find problems to their solutions than selling anything. Of the 5 sales people only 2 have sales backgrounds, the other 3 are great marketers we converted to sales consultants which help us make sure deals are sold the right way (driving great results and client retention) and avoid the common issues of tension between the sales team and fulfillment teams withint our companies which tends to really get exasperated in times of high growth for brands where there is more pressure on the machine.
The growth has been a blast.... For me personally I have been really stretched and had to change the way I show up as CEO and as a leader. I have gotten my ass kicked plenty of times but I am surrounded by amazing people so keep coming back for more :) The reality is, we have always seen that as we hit growth milestones and new levels in scale the skills, leaders, processes, etc. have to be reinvented and improved. We are a living testament to "what got us here, will not get us there" and that is something we keep top of mind across the entire org on a regular basis. Just cause something is working for us or worked before doesn't mean it is the best way to do it.... We encourage all our team and especially new team members to challenge these things so we can improve and adjust before something breaks (working to be more proactive as a company).
You mentioned the Channel Partners/Resellers strategy as being one of the most valuable for PDM. Can you explain this a bit. How is it helping you grow? What could other members learn from you and apply in their business?
The channel is a great thing for B2B and even applicable in a Joint Venture fashion to a lot of consumer businesses. This is a big focus of mine personally and I really focus on the "demand generation" or "top of funnel" for the sales team. It is one of the 4 core pillars I work to be laser focused on as CEO. For us with channel partners it is all about helping them win and accomplish their goals. We keep our ear to the ground for great partners that are doing awesome work that is adjacent to what we do for the same customers we have or want to have. Basically businesses that don't compete with us but target same customers...
We then learn how these companies grow and what is important to them and try and find ways that we can help them get more biz through what we do. For example... We have had many successful partnerships with some of the most highly respected branding and creative firms in the world by simply helping them report back on real results from their work and in turn green light a ton more design and creative work for them. Doing so made them look great and now they bring us into their clients and introduce us daily to help leverage our data driven approach to drive more business within their current customer base where they have lots of influencer and ability to help Power Digital (Win / Win). There is no cost per lead on that ;) and in the cases that we work in a referral partnership fee it is built into the budget and does not substantially impact margins for any party involved accept for the partner receiving some nice mailbox money.
A few things I have learned about winning with partnerships:
1) Easy Starting Point: talk to your best customers, they are likely working with adjacent service providers that can be great partners and if your client vouches for you and connects you, that is a great starting point and your probably already on your way to making $
2) They can be a big time suck... I see people working on one partnership and having 20 meetings and no action. Get to action quickly or eject... Easy to get fluffed around and no action. I like to push the tempo and ask for the order (introductions to customers).
3) Align financial interests and if you can do so on a recurring basis it will keep you top of mind so that they think about you every month and not only when you ping them or see them. Potential referrals are hidden in plain site but you will never be top priority for a channel partner so you need to stay in their head somehow. Having a check show up in their mail every month is a good way to do that.
4) Understand who holds the keys to the relationship at these partner companies and start there, learn what motivates them and help them win - often times in larger companies it is the sales people and not the C-level (unusual I know but CEOs are busy and prob have bigger fish to fry while sales people are scrappy, money motivated and $1k per month might just pay for that fancy car they wanted). A good example would be a company that wants to partner with Power Digital and thinks they can offer their service to our customer base. As CEO, even if they showed me how I can make another 20k a month by helping them get 10 customers, I would not give a shit as it would seem like a distraction and that would not move the needle for us at all. With that said, if you showed my head of sales how he can make $5k a month by simply introducing he would be all over it :)
5) Put the partner first before any deal. Be loyal to the connector, put the partners success above yours and it will pay off. I have seen many people do a poor job of this and as a result the partnership creates two great opportunities but that it is. I want channel partners that I can do deals with every month and over many years.
What are some of the top learnings you’ve had based on your fast growth? What recommendations, resources or things do you have regarding things that helped you grow so quickly?
If you have the best talent, play to their strengths / passions and care about them, it is really easy to win
Sales solves a lot of things and provides resources to fix other things - be great at acquiring customers and driving deal flow or new biz.
Move fast and iterate - whenever I spent a ton of time in advance to build really detailed plans they would quickly go out the window as we grew quickly. I learned to have a plan but to be nimble and iterate as we go. Saves time and works better for us.
The company will outgrow people. It is hard to face but it is reality. The skills and people that thrive in a 10 person company are different from a 50 person company and much different than a 100 person company. I love the book "The Hard Thing About Hard Things" and how they talk about this and have followed a lot of that approach. Every time we have slowed in growth, the key change has been optimizing the talent, roles and seats people are in and then the growth takes off again. I have also been way too slow to make these moves and stunted our growth and annoyed the shit out of our team because of it :) so I can tell you first hand how hard this can be. I love the people I get to work with and view them as friends / family so hard to do but its part of the growth process in my experience.
Tell me a little bit about how 'selling' (or however you want to say it) and bringing in an equity partner has been. How has your life changed? What learnings would you share?
We ran a formal process in 2018 with a banker and had a bunch of offers which was a great experience and competitive environment for our transaction
We decided to go PE route because we felt that we were just scratching the surface of what we can do and wanted to 1) take some chips of the table while we felt the economic environment was strong 2) take bigger risks that we would have been too conservative to do with our own money 3) Get our people equity so they have a life changing experience when we sell the platform.
Our deal closed in January of this year and it has been pretty much the same as before, not much has changed really other than we are now buying companies so in addition to the organic growth we are growing through acquisition. We closed our first acquisition in early October and our EBITDA grew by about 50% overnight, which was pretty cool!
I have been really challenged as CEO because we have hired about 50+/- people this year and when we started the year with 60ish people and now at 110+ people it's a very different role and we have had to mature as an organization. Some of that maturing or professionalizing I don't like but also lots that I do and lots of learning and growth that is happening for me and our leadership team which is always motivating and fun.
It has been really cool to sell the company and buy another all in one year - sitting on both sides of the table has given me a very good perspective on how acquisitions work, companies are valued, synergies created and a lot of wealth is generated. I feel a lot more dangerous now having that experience and plan to put it to use in the future!
If you had to trade places with any other EO San Diego member and run their company, who would it be and why.
Josh Volen - because he is next level and a world class entrepreneur and human who I learn a ton and often reach out to for advice. Josh is so much smarter than I am haha. I also want to be rich like Josh someday :) both monetarily and relationship wise.
What practices, habits or things helps you perform at your best?
1) Peak Productivity Time: I know this well and for me it is from 6:30AM - 9AM. I get more done in that time than I do the rest of the day so I protect that tie. I do my most important and impactful work during those hours.
2) Alway "Sponging": I intentionally pay very close attention to my environment and the things happening around me to learn from the people I work with everyday. I find that what works in business has almost always been done before and is just being iterated on so I look for smart people and smart things that are working and put my spin on it.
3) RGA's (revenue generating activity): when things get hard I always go back to the basics and make sure that I am laser focused on things that drive revenue for the org.
Lastly, what do you value the most about being in EO San Diego?
The people and community... I have learned so much from so many smart people. It is such an advantage being a part of this organization. For me the forum experience is the driver and getting to really rapidly gain experiences from forum mates and learn from there wins and losses without having to go through them yourself. Additionally, the trust that the EO community has where I can meet with a another member outside of forum and feel very comfortable sharing very specific and private metrics, info, etc. because of the confidence and respect that goes along with confidentiality and wanting each other to win. That has been a huge driver for me over the past 5 or so years and really expedited my learning process as a person overall.
You can connect with Grayson Lafrenz on LinkedIn or in person.
Look out for a bunch more Member Spotlights coming in the weeks ahead! Several of the fastest growing EO companies and the most requested EO'ers will be sharing nuggets of wisdom for us all. Feel free to reach out to me if you have questions or members you want to hear from!
EO Member since 2009