The Proven Playbook to take your company to 8 Figures | #210 Leonardo Caracas

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Claus Lauter: Hello and welcome to another episode of the e commerce coffee break podcast. Today we want to talk about growth. Now growth is a big topic in every company, every merchant out there wants to have his company growing, but with growth, there come different challenges along the way. So it's a difference between your growth from a hundred thousand to a million, from a million to 10 million.

Different challenges come up along the way, and we want to dive a little bit deeper into this. So with me on the show today, I have Leonardo Caracas. He's partner at Jump Ventures, at jumpventures. co. And they have developed a proven playbook to take your company up to eight figures. Want to dive a little bit more into this?

And Leonardo is an entrepreneur who has structured and scaled over 50 companies worldwide in the e commerce space. He's now a partner at Jump Ventures and looking for ambitious entrepreneurs to take them to the next level. So let's welcome Leonardo to show. Hey, Leonardo, how are you today? 

Leonardo Caracas: Hi, all good.

All good, Klaus. Good to be here. They're 

Claus Lauter: not all growing a small company into a medium sized company into a big company has different challenges. And we want to talk a little bit deeper or go a little bit deeper into this topic. Just keep an overview. What kind of areas within a company are affected when it comes to growth?

Leonardo Caracas: Yeah, of course. , when an hour scope in jump, we are always trying to think of how to grow a company. Thank you. Use case, which is an e commerce company, , all the way to 8 figures. And usually these companies are within the 6 figures. , so they have a very minimum infrastructure. , , once you get to this, , growth, which if we want to simplify is going from 1Million to 10Million.

 The biggest problems that arise are, of course, supply chain and how you can, continuously cope with the growth that you are, that you're having the financing sides. How are we going to finance this growth? And of course, which are the skills and team structure that you need to actually fulfill this growth.

Yeah. So these are the, I think the three big problems entrepreneurs face when they are trying to grow from one to 10. 

Claus Lauter: How can I define these different challenges within a plan? Do we have specifically KPIs or what do I need to look at to find out where I really struggled to make my business grow?

Leonardo Caracas: One of the things that we really try to focus is understanding how scalable a company actually is. So I don't think every business can go from 1 to 10 and I don't think every business can go from 10 to 50 or 50 to 100. So there are different use cases, there are different companies that have a potential to actually scale exponentially, scale gradually over time, but we look at four KPIs.

to measure the health of the business and see that we've, that we want to work with them in the future to try to scale them. The first one is trying to understand if there's a brand and the product market fit, and this comes in reviews. So basically when you look at the review rating and the star review rating from zero to five, you have something that is around 4.

7, 4. 6. You basically have achieved a sort of product market fit. You have enough feedback to say people love the product, love the experience. And you are, your basis is ready to try to scare you. If you do it beforehand, it's going to go back and forth and you're going to have a lot of pain. So first and foremost, we look at reviews.

second, we try to understand what is your repurchase rate. So if a company has around. 30% repurchase rate. So 30% of their revenues is actually coming from repurchases is me. It means that the company has somehow a portfolio that can be reused for a second, third, fourth time purchase from customers.

And there is a path to continuously grow the profitability of the company as you actually grow the scale of it. Yeah. The third the third KPI is the AOV. So nowadays we try to find companies that have a, an AOV that has potential to go up to 75 US dollars or euros. Yeah. So even if companies are nowadays not at that range, if they are 15, 30, 40, we try to see if their portfolio and the way that they are basically situated in the marketplace, they are able to come up with SQs or able to come up with bundles and products that can take this AOV all the way up to 75.

Why do we need that? In the landscape of paid advertisement nowadays is continuously is increasingly difficult to have a profitable purchase from customers if you don't have the right AOV. Yeah. Just the costs just keep getting up and up for Meta. Or tick tock and et cetera. So you need to be well situated in the site.

And the 4th and last 1 is the conversion rate. So the conversion rate is a thermometer to measure if you have a current operation that wants to start pumping a lot of new traffic. A lot of tests into the website. You're still able to maintain certain level of performance. Yeah. So nowadays we, it depends from context to context.

So if you just acquire organic traffic, you have a very high conversion rate. If you already do a little bit of paid media your conversion rate might be way lower than it was in the early stages. But when we see that a company is in the six figures and they have a conversion rate of 3% and above, it means that they have space to acquire a lot of traffic and still be in a comfortable position, in terms of conversion rates.

Claus Lauter: I want to go a little bit deeper into these different areas. Obviously we have marketing, then we have conversion rate optimization, which is a mix between psychology and technology and to get this right. And then we have the part of, back end, the back office on how to grow, how to have stock.

What are the areas where merchants that come to you have struggled the most with, is it marketing? Is it operations? Where's the biggest issue? 

Leonardo Caracas: The biggest issue is definitely on marketing. So what we, the use case for us is getting founders, a founding team a company that has figured out a product market fit.

So they really understand the product, the customer and the experience, but they really struggle, thinking about how to grow. this user base, how to go, their plans for multi channel growth, how to create content, how to create merchandising, how to create offers bundles on so forth. So the biggest struggle we see, and the one that is very complimentary to our skills is founders or a company that, really has a big focus on the brand and the product, but is really has a lack of skills on it.

Trying to grow the company, 

Claus Lauter: you talk to me about a case study or a project that you were working on that you have grown massively. Give me a bit of an example on how a real life example on how it works. 

Leonardo Caracas: Yeah, so last year we had a case study, one of the companies that we accelerated they were exactly at this due to NDA, I cannot say the name specifically, but they were exactly within the time within the frames that I posed to you on in terms of KPIs, they were Making roughly 1 million of revenues in 2021.

And in 2022, we finished with only 20 million US dollars. So it was a stellar growth in a one year time. They really had a good product feedback. They had A a O V that was in the low range, $35, and we took it all the way to $70. They had a purchase rate that had a lot of potential to grow.

If we. Work on the right channels for repurchase like email, SMS messenger, so on and so forth. And their conversion rate was really at a great level. So when we look at the company, we saw this has potential to grow, but we need to really think about how, what are the channels we can grow them? How can we create a content machine?

To acquire customers at the fast pace. How can we think about their merchandising? So pricing of the products, bundling of products offers for new for leads and for returning customers and little by little work on the different KPIs and maintain a sustainability throughout the growth.

 As I mentioned we, it was almost a 20 X growth in one year. And this was just supported by thinking about the growth channels, the content strategy, the merchandising strategy, and the tech and data stack we had for the company. 

Claus Lauter: You talk about the product market fit.

Now we are in a recession, inflation, all of these topics are coming up. Do you see specific verticals or specific industries where growth is still a huge opportunity for 

Leonardo Caracas: merchants? We are very industry agnostic with our playbook, so we don't really care if it's a sporting brand or a arts and craft brand or a medicinal brand.

we see that there's opportunities in all the verticals, but what we definitely see is. A lot of entrepreneurs creating brands that don't have any differentiation or don't solve any problem. So it's very easy to spot when you are trying to understand from the interpreter, okay, what really differentiates your company from the market?

How can people not copy you? Or if someone has a much bigger budget than you do cannot copy you in a matter of 2 to 3 months. How can you clearly show that you're solving a problem and that customers are delighted by it? So this is more or less where we try to differentiate how a company can grow and a company that will struggle.

Excessively if they try to get to eight figure level, right? So if we look at the feedback, we can clearly see nowadays and reading throughout the qualitative feedback of customers. If they are solving a problem, if there's a good value for money if they have something that they could not find in the competition and that's why they bought this product, if they see a clear use.

For a repurchase on a frequent basis. So this can all be taken from the feedback, but it goes back to these two points, is your product differentiated or does your product solve an actual problem? If you have one of those ingredients, then you have something to work on. And it's really for us in this diagnostic, it's, it really doesn't matter.

Claus Lauter: give me an idea on how jump ventures works with a client. When they come to you, obviously there will be a, I don't know, a small team going into these roadblocks that they can't grow any further. Now they approach you. What's the first step? 

Leonardo Caracas: Yes. So basically we have , a three step approach with companies how we actually started jump ventures.

It was a pleasure project for me I got to a stage where , we have grown, had grown our own a commercial company called go case. And we took this bootstrap to a very high level in terms of revenues. And I was looking for a new challenge and a new way to, to think about business. Yeah.

And then. I got a lot of coaching and mentoring throughout , my years, , growing go case, and I thought, okay, well, it's time for me to give back and do the same to other interpreters. So as a pleasure project, I started doing pro bono mentoring and coaching to, , companies to see if I could just scale them with the knowledge, , tools and network I had acquired, , throughout the years, so.

It is with this same approach that we continue to build a funnel within jump, which we have basically three three steps. The first step is, interpreters getting contact with us constantly via our website and, filling an intake form where we evaluate if we can help them. With our knowledge with the things that we think would be replicable and with the current status of their figures.

Yeah. And we go through a mentoring session. We tackle topics that they have as pain points, obstacles, and objectives that they might want to reach. So we do mentoring sessions that might take three, four, five one off mentoring sessions. Yeah. If we believe that after having a good, Relationship over the sessions, we believe that the business has a scalability and we believe the founder or founding team really has, the right mentality work ethic and is really synced with us.

We think let's do a coaching program, a structured coaching program of average 6 months where we really try to scale your company by actively coaching in different areas and trying to see if you're able to execute. So these first two steps are basically a pro bono approach from us to understand, get to know new businesses and new founders and see if they have a business that can be scalable and they have a high match with us.

Once this is actually validated and we pass through this coaching program and we believe this business is highly scalable. We love working with the founders. We see a long term partnership. Then we actively invest. We have different stock option deals and revenue share deals. And this is when we financially get into the company and yeah, try to scale them.

Our first objective is always 10 X the company in one year. 

Claus Lauter: let's talk about the financial structure of companies. Are there situations where you need to completely change the financial set up of a company? Not only going into money, but maybe the company set up or do you just take what comes in?

Leonardo Caracas: Yeah, that's a great question. This is one of the things we analyze first with the entrepreneurs is trying to understand how does their P and L look like, how does their cashflow look like, because we have a very clear picture of what a great P and L should look like from an e commerce business. Yeah, so we understand what is a good gross margin.

We understand what we can do with a good gross margin. We understand what should be a target for MER for ad spend. We understand what should be a limit for your logistics costs, for your payroll costs, and overall try to have a company that is highly profitable. So the first thing we do is try to analyze the P& L together with the interoperability, where's the fat.

Where is the areas that you can really optimize and how can you view your business differently? Sometimes they just struggle to see that they can change the game by changing pricing of their product or change the offering that they're doing in terms of bundling. And this could completely change their gross margin structure.

So we definitely is one of the first things we do is look at their financial and see how we can optimize and guide them to make the changes. Because if you don't have a proper, profitable structure, you won, you won't be able to scale anyways. 

Claus Lauter: Now we touched on coaching, mentoring, financial, structure and help there.

A lot of merchants come to or have questions about finding the right partners. Might be a marketing agency that might be a software developer for tech and whatsoever. Do you have a network that you supply them with or how does that work? 

Leonardo Caracas: Yeah, so basically throughout the eight years that we were going go case, we have gone through the same pain.

We had to try to find freelancers, people to work internally with us agencies and so forth. So we have gone through a due diligence of finding the right agencies, the right freelancers and the right people to work with. So nowadays we have a mix of people that work for jump and actively accelerate, execute the growth of the companies that we are Insight.

We also have agencies and freelancers that we bring in the business or propose for the company to hire for certain tasks. We have a selected few that we really like to work with and we believe that they are good to be referred. So there's nothing better than a good referral, right?

So we use our network to try to get the most out of it. 

Claus Lauter: Who's your perfect customer when it comes to, become a customer of Jump Ventures? 

Leonardo Caracas: The perfect customer, , as I mentioned previously, is that founder who's really passionate about the product, the brand and the experience. And they believe they had found product market fit.

They believe they have something different in the market. They believe that they might solve a problem that no one is trying to solve, but they are really they don't have the experience or the knowledge to take on the growth side. So they don't know how to do Facebook advertisement.

They don't know how to do email planning and campaigns. They don't know how to create unique content. They don't know how to think about product, development in a portfolio kind of way, not just develop products, but how to develop a portfolio and a merchandising. So they really don't have the playbook to grow a brand online.

But they really are passionate about what they created and how they created and how they talk to customers about it. So this is where we have the biggest synergies. 

Claus Lauter: Let's talk about going international. Are most of your clients are in a local market and want to go international?

Or are they already internationally selling? How does that work? 

Leonardo Caracas: So we have a mix of companies that are based in the U S or based in Europe. When we talk about European companies, one of the first things you have to consider is already go international because the markets are quite small and they might be saturated fast.

So you can really think about going , to the markets where you are very close by and you can ensure a good experience of deliveries and so forth. For companies that are in the U. S. until they cap out the U. S. market, it's still a little, a big time frame. So we First, try to understand how we can scale as maximum as possible.

The U S then cap out and think about international markets for European companies, we think about, okay, saturation is going to come. How can we plan for it? How can we plan and test new markets that this product might be a fit for? So internationalization is always one of the last steps we do with any, scaling.

Sometimes it has to be very early because of the size of the home market, but we definitely, it's definitely on our playbook on how to do it. 

Claus Lauter: Now with our listeners are e commerce merchants. Are you focusing on specific platforms like Shopify or are you on other platforms as well? 

Leonardo Caracas: Yeah. So we really liked it.

We have built our first company go case on a custom platform. We learned a lot with it, but it was very painful. So we don't want to replicate that. We love the easiness that Shopify brings. To build a business, to integrate apps I have a whole ecosystem that supports it. So when we talk about the platform, we're really thrilled to work with companies that are on Shopify already.

And if they are not, we try to have a plan to transition them to it. Okay. It 

Claus Lauter: sounds like a good plan. What kind of homework does a merchant or an entrepreneur need to do before they approach you? 

Leonardo Caracas: They really have to get their figures, right. And understand , and present to us what is their financials, what type of market they are trying to approach and how do they view that their product is different.

So this is what we're trying to look. In companies and in founders that are really passionate about the story that they want to tell us, but they also have done their homework and understanding to a very good level of detail how they are currently operating. If they want to reach out, we would love to talk to other interpreters and understand, how to help them grow.

And Get a lot of energy from this. So this is why we still do it as a pro bono way to mentor and coach them as well. In return, we ask for very committed founders on trying to get the best out of our time. 

Claus Lauter: No, when you go into the partnership as a venture partner, when you touch a little bit on it, can you give me an example about the pricing structure?

So what kind of, I don't know, shares or dividends, or I don't know what, how it works do I need to think about as an entrepreneur? 

Leonardo Caracas: Yeah, so we usually think about how can we become long term partners. So how can we actually have stock options in a minority shareholding at first. So we think about something around 20% and how can we achieve targets.

To unleash those stock options of 20%. So we, of course, make contracts and commitments to say, this is what we plan to do. And if we hit those plans, we'll be untapping potential stocks of up to 20% at first, but case by case, depending on the type of operation, on the potential of the operation, we might as well.

Come as a majority shareholder and buy more than 50% of shares. But our usual case is really thinking how can we be first a minority shareholder that supports their growth and let the founders operate the company. Yeah. While we operate their growth. 

Claus Lauter: Give me a bit of an idea about the timeline.

How long does it take from getting in touch with you guys before really The growth 

Leonardo Caracas: kicks in. Until the growth kicks in. That's a good one we start definitely, having mentoring coaching sessions. Yeah. So the 1st things we try to do, and that takes around 1 to 2 months is just getting the basis, right?

Understanding the company, understanding which assets that they have in hands and trying to gear that up for a possible scale and making small tests. Okay. If we change the pricing here. Yeah. If we had this type of offer, if we have this type of bundle, if we start creating this type of content, let's push that out there and see what is the feedback we get from potential clients.

Yeah. So we wanted two months to try to get that feedback. And in the third month, we already trying to push a lot for scale. That depends of course, if we are accelerating them but if they're just getting coached, it will highly depend on the execution of the founders, how they are really going crazy on trying to implement the changes that we're proposing, because at this point in time, we're just doing coaching.

We're not really pressing buttons and it really depends on how eager and hungry they are to grow. In the coaching period, we can definitely see a lot of impact within two months but really feasible impact within three. And when we're accelerating companies, it takes one to two months to already see, a good impact.

The last company we started growing, it grew 5x in two months. It's really depends if we have the base right as well, if we are ready for scale. 

Claus Lauter: Okay. Yeah. That shows you the impact of a good coach or a good partner that has the experience that went through the whole growth process and can implement that into a new company.

Where can people find out 

Leonardo Caracas: more about you guys? Yeah. So if they would like to get in touch and understand a little bit how we work and meet us personally to be evaluated for mentoring. And for coaching they can just reach out to us at jump ventures that call. So jump ventures that CEO, they can also reach out to me on LinkedIn.

If you want to have another channel in case something goes wrong with the intake form, but. Please just try to fill in the intake form and we will try to get back as soon as possible with a date to meet you for our introduction. 

Claus Lauter: Excellent. Leonardo, I will put the links in the show notes as always, and to our listeners and viewers on YouTube.

If you are at a point where you think about massive growth and you have the product market fit, then reach out to jump ventures.co and I'm sure that you will have a good partner there to grow your company to the next level. Thanks so much for the call today. 

Leonardo Caracas: Thanks Laus. Thanks for the talk and for everyone out there, happy sales.