How Yong-Soo Chung Defines the Five Growth Channels for Online Business

[00:00:00] Hector: Hello, and welcome to another episode of the 'How to Scale a Business' podcast. My name is Hector Santiesteban, and I'm your host for today. We're here with Yong-Soo Chung. He's the founder of First Class Founders. We're going to talk about leveraging, scaling, and all the ways to get there. Yong-Soo, thanks for hanging out with us today.

[00:00:16] Yong: Thanks so much for having me Hector. I'm going to make sure that your audience gets a lot of value out of this one.

[00:00:21] Hector: What's nice about what you are doing is that you're out there, creating a lot of value and knowledge for a lot of businesses that are at the same stage as our listeners. And so I'd love for you to share a little bit about how you've got to the stage in business. I know you've had a variety of experiences as an entrepreneur. So take us back wherever you think is relevant and catch us up a little bit on what you're doing now.

[00:00:40] Yong: Sure. I started about eight years ago and e -commerce is my first venture into entrepreneurship. I was working at a cryptocurrency startup in San Francisco. This is back in 2015, before Ethereum was ever a thing. I was pretty early, but then all the regulations started hitting the company pretty hard.

[00:00:56] Yong: And so at that point I was like, "You know what? I gotta do something on my own". I just hate sitting still and not being able to progress in my journey of continuously learning. So, decided to go off on my own. I probably over, emphasize the autonomous nature of how I wanted to design my life because of the regulations, because we had a pretty big team at the company that I was at and nothing was ever getting done. And so I wanted to keep it really small, pretty much bet on myself to get this done and grow successfully. Over the last eight years, I've grown a company called Urban EDC. It's a everyday carry shop where you can find flashlights, multi tools, bottle openers, pocket knives, this kind of stuff. That company has been growing about 50 percent year over year. That's still going strong. And then in 2017, my wife and I brought home a French bulldog and we just started posting really cute videos and photos, and his Instagram really blew up. And this is right around the time when Instagram was getting into video, so we were posting a lot of videos and it was just taking off. We started an online dog boutique called 'Spotted by Humphrey'. It's a play on words of his handle on social media, which is 'Spotted Humphrey'. We use the same formula- essentially e commerce brand. People were asking us, "Hey, where do you get your harness?", "Where do you get your leash?" And we decided to just essentially, instead of sending traffic to Amazon, send traffic to our own site, build our brand. That was in 2017. A few years later, we had a lot of issues with our fulfillment. We had an incident where, we had people at our 3PL who are stealing gear and then shipping out an empty box to our customers. The way we found out about this was literally the customer would email us and say, "Hey, is this a joke? why did you ship me an empty box?" That's how we found out about it. We knew that that was a real pain point for us and for a lot of store owners. So we decided to launch a third party logistics company, at three pl for e commerce brands. And so that's our growth jet and we decided to become climate neutral certified. That was a big value for us.

[00:02:48] Yong: That was in 2019 and that's grown pretty nicely as well. Now we just moved into a 39, 000 square foot warehouse. I'm in North Cal, pretty expensive real estate here. But yeah, 39, 000 square foot warehouse and it's growing pretty quickly. And then recently, back in November, I started First Class Founders, which is the podcast and newsletter. This is an area for me that I want to continue to grow probably for the rest of my life because I'm just really into learning about Different founder stories, and entrepreneurship, and , I just love building businesses.

[00:03:17] Yong: So, yeah, that's where I'm at.

[00:03:20] Hector: I'm excited for our listeners because usually our guest has one business that we can draw from. You've had a variety of them. And so the first thing that I will ask is that were you able to carry or were there things, systems that you built that first run that you were able to apply and stack on to the second ones? Were there things that carried over and carried through?

[00:03:43] Hector: And then to make the question even more difficult, was there anything that was different as those businesses kept getting started?

[00:03:49] Yong: Yeah. So I'll address both of them. So the first question is going from one e commerce shop to the next, there's a lot of similarities there. So Urban EDC was the first e commerce shop. And then Spotted by Humphrey, completely different markets, like totally different demographics, but they're very similar on the back end.

[00:04:04] Yong: We borrowed a lot of strategies from urban ADC to grow Spotted by Humphrey. Now going from there to growth jet the 3PL, that's not as straightforward, we had to learn on the fly. Obviously it's still in the e commerce world, so we kind of still know how things work, but the operational side of shipping and all that stuff is very different from just running an e commerce website. So, definitely had to learn a lot there. We did hire some operators that really knew the space well. And so that helps a lot. Then going from the 3PL to a creator business now, to be honest, there's not a lot of similarities.

[00:04:38] Yong: It's very different, but it's very interesting because, the creator business has extremely high margins, unlike e commerce. In terms of cashflow, it's actually a lot better, but, I would say on the other hand, it's a very up and down business. I feel like sponsorships is a very common way to monetize for podcasters and newsletters and sponsorships dry out really quickly when the economy is, not doing as well.

[00:05:00] Yong: So, high margins, but at the same time, the creator business get hit really hard when the economy starts to take a little bit of a downfall. Those are similarities and differences and I can dive into more specifically, like different areas.

[00:05:12] Hector: Yeah, I'm wondering for you as a leader in an executive, what's your mindset or even, I don't know if it's a transition plan, but maybe, now is a good time. I don't think we've mentioned it on the recording, but you have a framework for delegating and offloading stuff. And I would imagine that when someone hears that, they go, "Whoa, geez, now you're running four different businesses!" And maybe you are, but can you speak to how operationally you're able to keep all of those things afloat? Just practically speaking.

[00:05:41] Yong: Sure. This is a really good question. I get asked this all the time, by the way, because from the outside, it seems like I am a crazy man and how can you possibly do this, right? The key thing is, to find the right operators and put them in a place to succeed.

[00:05:54] Yong: This framework that I use is called "I- we- they" Essentially, when you start a business, you're the one who's doing everything and so it's all on you. It's like you have a new baby and newborn baby and you have to take care of it. Like literally the business can die. It's very fragile. But then as it grows, you get really busy and then maybe you need to hire someone for something very specific. And when I say hire, I don't mean actually hiring an employee. It could be a virtual assistant or a contractor or whatever it is. But I'm literally just talking about some other person doing some of the work that you used to do. You work with this person and then initially you're doing it together. You're trying to figure out SOPs together - Standard Operating Procedures. Once you have that in place and you get it rolling really well, where it's like a whale -oiled machine. Then at that point, you let them take the lead and you have to trust that they're gonna do what they say they're gonna do and not drop the ball. And so that's a really difficult part for a lot of people because obviously it's your baby and you feel like you want to micromanage it almost like, "hey, why didn't you put a period at the end of that sentence on a newsletter?" Like small things like that. But, you have to let people make mistakes, and that is a really difficult thing.

[00:06:58] Yong: Sometimes, I let my team make some mistakes because I know that them learning that lesson is more valuable at that point in time than me going in there and fixing it myself. You're essentially delegating decision making, which is very different from a very specific task. Like you can delegate a very specific task, but then decision making is on a whole different level of delegation. When you come to the point where you can delegate decision making, then at that point you can take a step back and you have more time to work on other things.

[00:07:27] Hector: yeah, it's such a great framework. Is there any mistakes or pitfalls that you've either experienced or seen other people make when it comes to this delegation process? Because it seems so simple and I'm like, well, but I'm wondering if there's perhaps a blind spot that we may not be seeing.

[00:07:43] Yong: I would say that I have a tendency to give benefit of the doubt to the operator. A lot of times it depends on the person and the personnel and this is why it's so important to find the right people. That's honestly partly why I'm building a personal brand now, because I need to get into the right rooms. If I can't find the right personnel, then my time is not being used effectively. So first of all, find the right people and find people that you want to do business with for a very long time, because that's when the compounding is going to happen in like year two, three, four or whatever. I'd say the biggest downfall with this is giving someone too much benefit of the doubt. This happened with growth jet, the 3pl. When we first started, I found someone who had a lot of experience and I had worked with him before, so I hired him and he was taking over a lot of the operations and I was letting him lead that.

[00:08:30] Yong: Then one day, I get a message and he's really upset for some reason. And he's like, "I can't believe I'm shipping these orders out for you. I'm doing all the work myself, you're not doing anything." And I'm like, "well, I delegated that decision making and that entire ownership of that business to you. Like you're taking care of it." But he got really upset. He actually went rogue and emailed our clients and it's like, "Hey, by the way, I'm starting a new company and you're coming with me." That's the email that you wrote out to these guys. They all reached out to me. They're like, "Hey, I just got this email from this guy." They know him, but they were like, "So strange. Are you shutting down?" Like, that's what the email said. And I was like, "No, I'm not. This is a crazy situation. I had no idea this is happening. I'm going to talk to him."

[00:09:07] Yong: Basically, he left the company and I had to go in there and learn everything myself again. Cause he knew everything and I didn't know. And so that's one other downfall. If you have a key player, that's really strong and you've delegated a lot of that stuff to him or her and they leave because they are unhappy, then, you're a little bit screwed. It was a very stressful time when I had to go in and I was shipping orders till midnight one a. m., trying to figure out all these systems. But we made it and found an even better manager for the business and now he's rock and rolling.

[00:09:34] Yong: Yeah, you're right. That's a good point to bring up, which is there are some downfalls to this, system.

[00:09:38] Hector: Well, it just speaks to what you talked about in S. O. P s. and having things documented and man, I'm going through that with one of our head of operations. Even if in the positive sense, they want to take an extended vacation or maybe, God forbid, gets sick or something, the business can't go down with them necessarily. So, great point.

[00:09:54] Hector: Young-Soo, when we get back from break... There are a few other systems that you have up your sleeve and so we're going to get into those right when we get back from break.

[00:10:06] Hector: Hey y'all. Thanks for tuning in today. Today's episode is brought to you by Amplafy Media and we are a podcast and content production company. And so chances are if you're listening to this, you have a mission, a message, a passion, a purpose, something that you want to get out to the world, but you probably don't have the time, the tech skills of the team to be able to do that.

[00:10:21] Hector: And so if that's you, we might be able to help. Go to amplify media dot com. That's A M P L A F Y media dot com. You can check out the details. You can also check the show notes for info. And with that, let's get back to today's episode.

[00:10:36] Hector: So Young -Soo. You mentioned this great framework, "I we they", and I think it's great because it's easy to remember, it's simple, and there was one caveat that man, people can take that and run. Are there any other systems that you fall back on or look to, to be what I call 'your no matter what sir', your principles, pillars, if you will?

[00:10:57] Yong: I have this thought that every single business is just product and distribution. That's it. There's nothing else! Everything falls under those two categories. When you start a business, you have, I like to call it ' value delivery'. So you have a value delivery system where you're actually delivering on what you promised to your customers. Let's say you're a pizza shop and someone comes in and orders a pizza. Your job is to make sure they get that pizza and it's delicious and it's just the way they expected it. Customer service is the misalignment of that expectation versus what they actually received. That is what customer service is, right? You have value delivery and then there's value awareness. Pizza might be your product, right? Just going with the pizza example. But you need to have awareness because no one is going to come into your pizza shop if no one knows about it. Right? So let's say you hire an intern and they're going around the neighborhood just posting flyers and telling other businesses that you exist and then now they're cross promoting and they're bringing new customers. That is a very simple way of looking at value awareness.

[00:11:58] Yong: So now we have value delivery, value awareness. One other system that you should build into place is this operational layer that oversees both systems. This is typically, the operator. this is typically the founder or the CEO. The reason why is because... I don't know if you read E Myth, the book, but, this position, where you're overlooking both value delivery and value awareness, is you're working on the business, you're not working in the business, right?

[00:12:23] Yong: It's more of an operational thing where you build dashboards and you look at metrics and you're making sure that your numbers are being hit, your profit and loss is good, all that stuff. If you're really advanced, you can also delegate that position to a general manager. That's what I always try to do and what I've done, with some of the businesses that I have. But once you find someone who's really strong with numbers and who knows your business really well, they can actually be this person who can monitor both the value delivery and valued awareness. That way, you're actually stepping aside from that entire business. So that's a really good way of thinking about 'what is a business?' It's literally just product and. awareness and essentially distribution. So those two things, and then there's an operational component to it, which typically you yourself will, be the person for that, but you can hire someone if they're really good at it.

[00:13:06] Hector: This is a really good framework. What I'm hearing is that the systems are interdependent, right? They work together to feed each other. You've got your value delivery and then your value awareness. But they've got to be able to talk to each other, they've got to be able to be aligned and sync up and similarly, with these other things where you're working on and in the business. I feel like before we hit recording, you said that there was three or four systems that you really like to have. Is there one more out there that you're really fond of? Or is there any other things that you feel might be beneficial to add on to the conversation?

[00:13:37] Yong: I think this is the one that we were talking about off the record. In terms of scaling the business, I could talk about growth levers that I see. In my opinion, there's really five growth channels that exist for online businesses. For e commerce, and let's say you have physical products, you want to brick a mortar.

[00:13:51] Yong: That's its own separate thing. That's like a sixth growth channel. But basically the five growth channels are,

[00:13:56] Hector: Just for clarity's sake, do you loop services into that?

[00:13:59] Yong: What do you mean? Oh,

[00:14:01] Hector: What you're saying, would you differentiate a service based company, even if it's a digitally service based company? Would you think there's a difference?

[00:14:07] Yong: Yeah, I think this is the same. I think it's the same, yeah. So the five growth levers is 'Organic Content and SEO'. There is 'Direct Sales'. So this is hiring a sales team or having someone to do cold reach outs. There's 'Partnerships and Collaborations'. So, finding another person who wants to cross promo with you, for example. There is 'Paid Advertising', which is performance marketing. And this is actually the most predictable way of, getting leads because you can actually measure it, whereas the other ones are hard to measure. And last but not least, you have, 'Virality', which is earned media. So earned media just means, people talk about you and you're not telling them to talk about you or they're just doing it because your stuff is so good. For a lot of content creators, if your product is really good and your content is amazing, your tweets or whatever is really good, people might retweet it, people might talk about it on their newsletter or whatever. That's earned media and virality. And so typically, the creators only use those two, I would say as growth levers. But I encourage a lot of creators to think about the other growth levers, partnerships and collaborations. Get into the right rooms, talk to people who are in the same field as you, lift each other up, promote each other's stuff.

[00:15:15] Yong: So that's cross promo and partnerships. And then I would say, the paid ads is actually a really interesting thing that I don't think a lot of people... I don't know, there's some weird stigma against paid stuff in the industry, but I have no problem with it because when Twitter went down, when Elon took over, the ads were so cheap. I grew my newsletter through Twitter paid ads. it was crazy. People were just like, "Oh, I can't believe you're paying money for all this stuff." And I was like, it doesn't, it's just one of the growth levers you can use. So I think paid ads is something that a lot of creators don't use, which is really effective.

[00:15:44] Yong: And then the last thing is direct sales. Once you start building your audience, in my opinion, you should get one person or work with an agency and do some sponsorships. And that sponsorship piece is essentially the direct sales team that you have. You're basically contracting out a sales team on behalf of the media team.

[00:15:59] Yong: So those are the five growth levers. And like I said, if you sell physical products and you get into brick and mortar, that's a physical location and that's a separate sixth channel. But since we're talking about online business only these are the five growth channels.

[00:16:11] Hector: Yeah, and what's great about what you said is that there's nothing really new necessarily. You handle a lot of excuses, which I think is great.

[00:16:19] Hector: I've got one more question to round us out here. But before we do that Yong-Soo, where's the best place for people to follow up? Or you mentioned there's a newsletter. I know you've got a podcast, where's the best place to get connected with you online?

[00:16:29] Yong: Yeah, so I'll make it really easy. It's just first class founders dot com. That's the website for the newsletter. That's the website for the podcast. And then I'm also pretty active on Twitter and I just started using threads, which is interesting. You can just search my name, Y O N G S O O C H U N G and I'll pop up.

[00:16:47] Hector: My last question, Yong-Soo is, in your opinion, what is the. Secret or key to scaling a business?

[00:16:56] Yong: I'm sure most of your listeners will probably already know this, but I really think it's systems. It's the predictability of what to do when something unexpected happens. The only way that you can scale is to be able to predict what's going to happen in the future, have your systems running the business, and then hiring people to manage those systems. I think that's the secret to, scaling up a business.

[00:17:22] Hector: Well put. I want to thank all of you for sticking with us and be a part of the how to scale a business community. If you got any value out of today, which I got notes full, I'm gonna have to go back and re listen to this myself, we'd love a rating or a review wherever you get your podcasts. If you know someone who is in the midst of scaling their business, thinking about starting one, please send them this episode and then take something that you learned today, implement it and reach out to Yong-Soo on Twitter and let him know how it goes.

[00:17:48] Hector: We appreciate you being part of the community. We'll see you on the next one. Later, y'all.