How a Poor Ad Almost Tanked Josh Snow’s 8-Figure Company

Zach Johnson

Dylan Carpenter

Josh Snow

Episode
01
|
Season 1

Josh Snow

,

CEO and Founder

Snow Teeth Whitening - trysnow.com

Listen in on -- and learn from -- this eye opening discussion with 27-year-old, monster online-brand-builder Joshua “Snow” Elizetxe about how he turned Snow Teeth Whitening into the #1 oral care brand in the world without raising a cent in outside capital and carrying $0 debt. The anatomy of a “ripple effect ad campaign” that has generated a virtually unchurnable customer base. Why the oldest, tried and true offer in the world nearly assassinated his business -- and what he did to dig himself out of the mess. How to cash in on the customer converting power of celebrity endorsements -- using $0 of your own cash...and more.

Key Takeaways

  • How Josh got insanely rich earning $60,000 a year.
  • The anatomy of a “ripple effect ad campaign” that has generated a virtually unchurnable customer base. 
  • The priceless financial lesson Josh  learned from a company that sold bologna to Walmart at a breakeven price -- and ended up being bought for $1.3 billion.
  • Why the oldest, tried and true offer in the world  nearly assassinated his business -- and what he did to dig himself out of the mess.
  • How to cash in on the customer converting power of celebrity endorsements -- using $0 of your own money..

The Transcript

Season 1
,
Episode
01
Transcript

Host: Zach Johnson

All right, all right, all right here we go! Dylan, you ready to kick up another episode of the Rich Ad, Poor Ad podcast?


Host: Dylan Carpenter

Yeah man you know I'm honestly a little cold but I feel like it may be Snow!

Host: Zach Johnson

Yes, we have an amazing guest, an amazing entrepreneur on today I'm so pumped to introduce. You guys have probably all heard the brand.  You've seen it everywhere online. It's the number one oral care online brand. TrySnowcom. These guys are killing it.  if I could overuse that term, 10s of millions in revenue, nine figure valuation, 2.6 million visitors in traffic in April alone. And a phenomenal entrepreneur. So I'm so excited. Welcome to the show, Josh Snow. How’re you doing?


Guest: Josh Snow

Hey, what's going on guys?

 

Host: Zach Johnson

Yeah, man. We're so excited to have you. You are like the epitome of a “Rich Advertiser” that has taken paid ads to the next level man. So we're excited to dive into not only the winning ads, which you obviously get to talk about all the time, but like what sent you to the poorhouse.  I want to  hear about the losers today. So tell everybody a little bit about you. For those that may not have heard about Snow, give us a little overview of the brand and your entrepreneurial story as well.

Guest: Josh Snow

Yeah, absolutely. So we're on Instagram as Snow.  Snow is essentially an oral care company. But we like to think that we've reimagined the oral care space and really met at the intersection of oral care and beauty. So we consider ourselves as much a personal care brand as we do as a beauty care brand. 

And so you can see from the products we create -- we create every single product ourselves.  It's something that we hold very close to us when we're thinking through which products we're going to provide to our customers. There's a reason why we still only have a handful of products years into it. It's because we are focused on developing hero products that we can sell for the next 50 years and feel comfortable about. We also make iterations upon our products, but at the end of the day we are an oral care, beauty care brand,  

We're primarily direct-to-consumer. We've got about a million social media followers --  we're really close with our customers. And they now pretty much dictate what we do in terms of which products they want to see us come out with next.  We've been kind of coined is, like the “Apple” of oral care in the sense that not just from our packaging and the quality product we produce, but the anticipation and the excitement from our customers of what is Snow going to reimagine next. What are they going to do next?  And so that's exciting. 

There's also a lot of pressure on us.  That's a good way of making sure that the products we do come out with are something that not only that we would use on a daily basis, but something that we could recommend at the highest level. 

My background has been for more than half of my life now, in terms of years in the online marketing space.  So I stumbled into entrepreneurship when I was 13 years old, literally. And I've got websites sitting on my old computer that date back to when I was 14 years old. And so I'm 27 now, so I started 14 years ago, building websites, designing websites.  I've self taught 100% through books and YouTube and Google.  I kind of learned all that myself and was fortunate to discover search engine optimization, which led me down a path of online advertising and then into paid advertising, once I had a little bit of money to do it. 

And so by the time I was 16 or 17 years old, I was managing a lot of money for clients --  just paid ad  management.  Nobody knew how old I was. 

Host: Zach Johnson

What kind of ad budget did you get to manage on a yearly basis when you had your agency?

 

Guest: Josh Snow

So when I was just 16, 17 years old, I was in charge of millions of dollars of management at that point.

 

Host: Zach Johnson

That's awesome. Good way to bring it in.  So one of the things we're all about at FunnelDash is helping advertisers deal with more cash and more liquidity. One of the things that I'm particularly impressed about from the outside looking in is how much Snow has been able to not only handle the day to day, just insane level of growth, but we all know that growth is expensive. It requires a ton of cash right? And so margins are typically super small in D2C and ecom.

I want to talk to you about how you've done it. Inventory.  How you manage cash flow, and at the same time invest so much into R&D. I mean one of those is typically the one to give right?    And most ecommerce brands don't have that much cash to invest into R&D. 

So you’ve clearly done a great job, because you're self funded, right? Like, that's the beauty of this whole story is that you've gotten this level of scale, which means you have to be incredibly disciplined with your cash management and the investments that you make. 

So how have you done it, man?  Open up the kimono Josh and and shed some light on some of the tactics, tools, strategies on how you finance the growth so quickly.

 

Guest: Josh Snow

Yeah, you bet. I feel like that's something that typically when I'm on when I'm doing an interview or on podcast or on the news or anything, there's always an excitement around the celebrities that we get to work with. 

It's which, duly so, it's the incredible caliber of celebrities that have not only purchased and used our brand, but also endorse and talk about our brands. So when we're talking in front of a group of other entrepreneurs or other people in a position where they're thinking about cash flow management, particularly in a bootstrap or self funded scenario.  Because I find the media sensationalizes -- so and so raised 100 million dollars, so and so raised 50 million bucks. It's kind of like, what about that company that didn't raise any money and they're still making leaps and bounds?

And we're now, in April and May, just the last two months, you know, we became on multiple metrics, the number one oral care brand in the world,particularly online. We're an online company for the most part right now, in terms of web traffic and social media, metrics, all of that.  And we've done so in a short amount of time carrying zero debt at the moment. We haven't raised any outside capital. And that takes an extraordinary amount of discipline but it's also not my first rodeo. 

So I want to preface by saying, it can be your first rodeo to be able to do something like this. But, it's not an overnight success story. I think the first thing is that I pay myself $60,000 a year. That's what I paid myself for a long time, right. And that's the only money that I was taking out of the business. And so that meant I had about 40,000 a year to live on. 

But luckily, I've been doing this for so long, I've been fortunate to build and sell a few companies that I essentially decided to live off of my savings and not have to put the pressure on Snow paying for my Ferrari. It's like, for me,  Snow is not a vehicle for me to get a nicer house or for me to get a nicer car for me to spend lots of money on dinners and First Class flights.  It's about proving something to the marketplace and doing something for other entrepreneurs showing what you can do if you look at things at a different angle.  And so, to answer it tactically, the job of an entrepreneur is to make the next best affordable step. 

So, what's next? Is it the best next step? And then, lastly, is it affordable? And is it affordable right now? So I'm constantly prioritizing on and using my form of judgment to to understand -- and it's not a perfect science, I'm wrong. Sometimes it feels like I'm wrong way more times than I am, right. But the ones that I'm right on, count for something. 

And so, for me thinking through, whether it's leveraging our credit lines... so, you know, American Express.  We've got significant credit lines we've built up over time with American Express just by spending so much and paying that off over a long period of time.  And also calling them up and understanding what it might take for us to get more credit extended to us.  So whenever we have an opportunity to expand our credit lines, we take advantage of that even if that means that we're breaking even on some of that spend, it allows us to have the buying power.

I think that I learned something when from one of my buddies I was hiking with. He founded a company called Bar S and they're I think they’re the second largest manufacturer of bologna, processed bologna and, and hot dog meat in grocery stores.   Oscar Meyer is number one. But anyway, he sold the business for $1.3 billion cash to Mexican food conglomerate.   

While he was going through that process, we went for a hike. And he said, “You know, Josh, we sell to Walmart at a breakeven.” 

And I go “Why would you sell to Walmart for breakeven? It doesn’t make sense.” 

He goes, “Our hotdogs, our bologna has cost $1 since, like 1996.  Our price has never gone up. In many ways, we're considered a necessity for the public. When times are rough like during the recession, our sales skyrocket because people aren't buying the expensive brand name or they're buying our brand.”

But he goes, “We work with Walmart because Walmart buys so many cases of our Bologna in our hot dog meat, that they allow us to gain economies of scale that are unimaginable when applied to our other retail accounts”. 

So they might be selling to another account, another grocer, and making so much more on the margin point basis because Walmart is allowing them to buy 1 billion pounds of bologna meats. They're doing that at breakeven, but it allows them to make money in other places.

So what I try to do is I try to zoom out and think through and at a very basic level, this is not some ad recommend, but if you broke even on all your advertising spend, and your sales and maybe you made 5% profit, but you had a 2% cashback card or you had points etc, you know, but it gave you buying power for you to be able to leverage that later on. 

That's  kind of the extreme version of my thinking.  Profit first. So it's very important when you're self funding and bootstrapping a company, make sure that you're making money on that first sale.  Make sure you're understanding exactly how much did you spend? 

When we got started. It was me. Still at that point, I was crafting the Facebook ads.  I was managing the media. And it was one plot from Facebook ads. And it was one plot from Shopify. And I can see very clearly, what did I spend today? What did I make today? What was the cost of goods? What was the refund rate? And I could see day by day, week by week, because it was so simple.

 At that time of Facebook ads, Shopify knew exactly how much money I was making. Now it's become extremely complex, being omni-channel retail, being on everything from TikTok to Snapchat. So it becomes a little bit more difficult, a little bit more complex to gain the granularity and the specificity around how much we're making on a day to day basis. 

We have those numbers as close as we can, but I'm also thinking about the business in it perhaps a different way than some others might think about it. For me, I understand that it's incredibly... the oral care market is pretty much the hardest. I would never recommend anyone go into oral care. It's incredibly difficult. There's a reason why there are only a few of us. 

 I needed that challenge where I was at in my life, I needed something to keep me busy. I needed to spend 50 years on something. But for me, I'm thinking about market share, mind share. So first, I think of mind share, then I think of market share, and then I think of mouth share. 

And when I think about market share is, how can we carve our place in this deep seated marketplace by having uniquely differentiated products...products that work...products that are at a higher quality, higher aesthetic that carry our brand forward? 

Then mindshare is at the top of the funnel, is how can I control the conversation around oral care online? How can I control that kind of theory, that thesis that I'm trying to push forward? How can I do that? Paid advertising is one of the fastest ways to do that. 

Because we’re seen  by 32 million people a week in our ads, over 2 million a month who shop with us. That's a captive audience. It's like having your own TV show that you can craft the narrative in order to own that conversation in the consumer’s mind. And so mindshare is very important because mindshare leads to market share. Mouth share is something that I've been talking about internally at Snow, which is how do we own more of the mouth?  Meaning, instead of just a teeth whitening kit. 

Now we have our toothpaste, which is sold out right now.  We have our floss, which is almost always sold out. We're thinking through what are the other products to gain more mouth share. So once we have mindshare, we can gain market share. Once we have market share, we can build out our mouth share with those customers.

 And so that's how I'm thinking about on a long term basis of how do I build brand equity. So utilizing things like loans, working capital, credit cards, etc. As long as I know that I'm making a few percentage points, I'm paying all my bills, and we're good. I can operate because I understand my data intimately. I can operate for a long period --  metaphorically eating ramen noodle soup in that aspect. Because I know that if we do this even a fraction of the way, right, those people come back and we realize the incremental cost for acquiring customers. 


Host: Zach Johnson

I love it. So, I mean, the first thing I want to assume all the way back is is just more sound fundamental principle of like, you're not raping and pillaging your own business for cash to fund your own lifestyle. That needs to really be celebrated, especially in our entrepreneurial community where the second they're hitting eight figures  they're just pulling profits out and it's really preventing their scale to nine figures and not right.  So that's awesome. 

You use this term, ” buying power” in terms of your relationship with Amex.  I think that's really interesting.. I want to highlight as well... is you're looking at advertising In the sense that like, this is just an entire engine. Most people use customer acquisition like, yeah, if I can break even, I'll make it up on the LTV. But you're the first person that I've ever heard, say, if I can build an engine and put it on, and I'm just breaking even on the ads, but ultimately, I'm building out like a massive buying power and massive,  credit lines with Amex so that you can leverage in whatever ways and opportunities pop up. But that's incredibly,  a different mindset shift to really push somebody to a level of scale that you're adding.  Is that a fair recap of what you're saying there?

 

Guest: Josh Snow

Yeah, I think that I when I discovered that your capital is the highest form of leverage and capital can come from intellectual capital and come from relational capital, relationship capital.  And so, if I've got $5 million of a line of credit, I've got another $5 million of working capital.  I've essentially got $10 million at my fingertips at any point that I utilize to pivot the business to be able to do whatever it is I need to do. And I think that, instead of looking at it on a day to day basis, I'm thinking about, I'm willing to lose a few battles to win the war. 


Host: Zach Johnson

Sure, yeah. So what are your thoughts on I mean, obviously, Amex is very short term debt in terms of capitalizing a business.  There's all kinds of rabbit holes, you can go down and get yourself in a dangerous spot pretty quickly, right? So you've got your short term, obviously, you haven't raised any equity. So what are your thoughts on some of the revenue based financing options out there? How have you funded some pretty substantial inventory purchases?  Do you just negotiate with vendors and talk to us about the different tools that you've used? Or has it all just been Amex cards? Like is it that simple? 


Guest: Josh Snow

Well,  I remember before Snow when I was starting other businesses...I can't do it anymore because I have all of them... but I typed in zero percent APR credit cards for business and personal.  And I literally got every single one that I could utilize.  I remember back in the day, it got me that 150,000 hours of buying power that I'd have to pay back for up to 18 months. 

So that was powerful back then.  For Snow, I thought about it  in a very simplistic way. I utilize the holding company of Snow is not called Snow and the reason why is because I had existing credit lines built with another company I had that I utilize to give me a head start of building that foundation of credit worthiness.  So that's that's one tactic I utilized. But now when I look at working capital, when I look at revenue based kind of payback which essentially is the modified version of working capital. 

You know, in many ways my take on it is for example, Clear Bank has figured out how to  sell working capital loans which I call “ loan dolphins”. There's loan sharks and there's loan dolphins . Loan dolphins are friendly.  You want to pet them but they're much more quick, they're very fast and they'll hang around you a lot more often.  And then  you've got the loan whales like the big banks and the lines of credit on those guys you don't want to mess with because one flick of their fan, they'll destroy you. They kind of control the currents in the water and the dolphins are friendly in the sense that Clear Bank is like  “Don't give up equity, get money here.”

In reality it's very secure... like if I could own Clear Bank right now. That's one business I would love to own because I bet you they're making hand over fist with money, and profit. 

I think that Shopify’s Working Capital that they came out with. There's a reason why these guys, PayPal Working Capital. There's a reason why they're doing this. And it's because it's making a lot of money.  So, I just try to understand what percentage of profit are we making on a monthly basis? How comfortable can I feel paying off these things.  And a lot of times, what we'll do is we'll forecast when it's going to be a slow time for us. So let's say July, August and September, we're going to be slow for us. In fact, let me flip this the other way, we know that Black Friday and Christmas are gonna be big for us. So what we'll do is we won't utilize working capital during those times. So then, when January 1 hits we’ll utilize the last three months of bank statements and all the tractionwe have to get a huge working capital loan.

 

Host: Zach Johnson

Yes. I love it. Basic, right?  Basic cash flow planning principles here is like I see all too many ecommerce companies having an awful Q3 and they're trying to ramp up come November.  And they're hitting us up for capital in late August. I'm like, dude, you had phenomenal numbers in November, December, January.  Why couldn't you hit us up then? And it really limits their upside potential, you know, and Q4... so brilliant strategy. And I couldn't have said it better myself. It's awesome.

 

Guest: Josh Snow

Yeah, I mean it's useful in the sense that... I want to go back to this buying power principle because we have case studies with Facebook themselves. And we're able to, because we have access to capital, we’re able to do a big deal or we're able to negotiate with... for example, you make your money on the buy, and you make your money on the sell. 

And so when we're looking at vendors who are our manufacturers who produce our products for us, we can forecast what we're going to sell for the year we've at least have an idea.  And then we double that and say if we were to essentially pre purchase or pre allocate this amount of inventory, what type of unit economics in terms of discount.  So instead of paying $50  per product, can we get it for $40 per product. If not, how much will we need to buy in order to get it for $40 per product?  And I try to understand those unit economics intensely because when you're selling 100,000 units a month, and you're saving 10 bucks, there's a million dollars straight to the bottom line. 

There's also things about supply chain management in the sense of, if you're sourcing anything  from overseas, like electronics, for example. You're either choosing to put something on a plane or choosing to put something on a boat. And the better off you have that forecasted, the more you can save. You know, we could save a million dollars a year, without even blinking, straight to our bottom line by utilizing more efficient supply chain planning. 

And this is not like rocket science. It's literally a Post It note. It's like how much do I sell in the last 30 days.  Multiply by 12. Double that. Go to my manufacturer and say, 

 ”Hey, if I promised to purchase at least  1X of that --- your 30 day sales multiplied 12  -- say if I'm going to stick with you exclusively for 12 months and at least purchase this, what can you do for me?”

 And then he says, “Okay, I'll give you this, I can do this.”

 And then you go back and say, “Okay, if I doubled that, just saying, if I was able to, we don't know. But if I was able to do that, what could you do for me then?” And then saying, “Do I have to pay 100% of the inventory up front? Or can I get terms Can I pay 30%?  You make the product, pay another 30%?  It's in my hands, and I've got net 60 to be able to pay you back.”

So now you start the flow.  What happens you start to stack your terms. You've got vendor terms that you're paying out for your product.  You've got a credit line with Facebook ads, so you've got 60 days to pay them. And then you're paying them with a platform like Melio payments, which allows you to send an ACH using your credit card. So now you've got Amex floating you another 60 days, but you're really sending them a wire transfer they're getting as an ACH.

So I can essentially, artificially or not, create my own payment. So I can create up to 180 days of cash flow management where I don’t have to pay that back for 180 days -- which allows me to do so much in the meantime.  

Now you have to be careful, because if you go too crazy, you end up not making money, you’ve got to pay that money back some way, shape or form. But there's ways for you to talk to the manufacturers you work with, even if you're only ordering 1000 units.  Or even if you're a service based business, there's an opportunity for you to ask for prepay for example, or whatever it might be. 

And we negotiate terms on every single front. So that way, we protect our cash in our bank account, like no other. It's like a newborn baby. We try not to have too many people touching it because it can get sick. And so we try to preserve that as much as absolutely possible.



Host: Zach Johnson

Yeah, I think just to highlight that, again -- you're nailing on point like if you can stack your flow and you're spending a million a month on ads and you don't have to pay that bill for 180 days. I think that's pretty extreme and very dialed in. 

For most people, they're paying off their ad bill every 30 days. It's like dude, if you can even accomplish like 90 days or 120,  you're talking about three to $6 million of operating capital that you didn't have to go get a loan for just by being strategic on stacking your cash flow strategies. So I love that. 

Well, dude, this has been awesome. Love all the education you're giving everybody here on the finance stuff but I want to get into the good stuff. If we can switch gears here and dive into the Rich Ad, Poor Ad segment. Dylan, you ready to kick this thing off?


 Host: Dylan Carpenter

Oh, yes. Oh, yes. I'm sweating. Right. That was intense.

Well, sweet, man. So yeah, I know. You mentioned some campaigns that didn't go so hard to campaigns that went pretty well. Would you prefer to start with the campaign that did not go so well? Or the one that went well?

 

Guest: Josh Snow

Let's go with the one that went well.

 

 Host: Dylan Carpenter

Let's go with the Rich Ad. All right, here

 we go. Go ahead and storyline behind it and dive in.


Guest: Josh Snow

So for the one that went well, okay, so that it's more of a strategy in the sense that

when you visit our website you're gonna get retargeted right? So something that has worked well for us and continues to work well for us is that I brought on Rob Gronkowski as a partner for the American football player. He's got a few million fans online, but people buy from who they like and trust and that necessarily that you know, doesn't mean that that's you at that point as a brand. 

And so, you're fresh, you're kind of a stranger to them. So what we've been doing is across our influencers, including our own customers, we've been utilizing user generated content, whether it be a celebrity like Rob Gronkowski, or a smaller influencer that has 10,000 likes on Facebook. We're getting them to try the products, we're getting them to talk about the products. Even on their iPhone, they're holding their iPhone, they're using the product, talking about their results, how much they love it, etc. And we're running these ads from their pages. So you'll see an ad running from Rob Gronkowski’s page talking about what he loves about Snow and why he uses the products etc. And so you're not just seeing retargeting from our brand, you're seeing a sequence of retargeting from different pages. 

We also work with our editorial partners. So if it's someone like BuzzFeed, for example.  We're talking to any blog that is writing about us and are willing to write about us and say, “Hey, can you give us advertiser access to your page, so that we can pay we'll pay 100% of it, we'll give you 2% of the ad spend” or something like that. So that we can run ads from your page regarding this content, your page will grow from it, your website will get the traffic etc, will pixel it.  But now I'm running that against lookalike audiences from a blog like ILoveTeeth.com, and that's someone else's blog. It's not ours. 

But when someone visits our website, they're now getting retargeted. From an article that says why Snow is the number one choice, we recommend. And it's from a third party page on a third party website. And then they might also see Rob Gronkowski’s from his page showing a video of how he uses it when he's working out. 

And you say, wow, all of a sudden, it creates this ripple effect. You've got user -generated content, editorials, celebrity influencers, and then our brand stuff on.  It significantly decreases the cost to acquire that customer. And they also retain for a lot longer, because the trust factor is built into it.  They're seeing third party referrals, talking about your products.  It's that sequence of ads that does really well for us. 

Typically, in that aspect, it's talking to the exact points that that influencer is talking about, I'm talking about, you can literally hit up your customers. Or you can hit up your friend who has 5000 likes on Facebook, and say, “Hey, would you be willing to get some free product, I'll pay you a few bucks.  Make a video and then just add me in two seconds to your ad account?” 

And I'll start running ads from your page. So running ads from up your pages, whether it be another person or another blog or another celebrity has been very effective in amplifying the success of our marketing.

Host: Zach Johnson

So one of the things,  just to highlight that Josh, HubSpot did a study, he said that coming from influencers and celebrities they retain longer and they're worth more. And ultimately, they don't churn.  So HubSpot did this whole study on why are some customers worth more and stick around longer? 

And most marketers, I would say. start with the products or the follow up sequence, or the rebill was too pricey or  they start with all the tactics. And HubSpot did this study. And they found out that the biggest driver of retention and LTV was not any of those tactics, but it was how they were sold and on which funnel they were sold. 

This is very true in the world of finance.  Like when we fund somebody’s ad spend with AdCard or AdCapital. It's actually the same.  A part of why we strategically sell and partner with digital ad agencies is because they're the ones that manage the ad budget, right?

And then they refer the client in and they're a trusted adviser. So the default rate in finance is way lower because it's coming from a trusted advisor and influencer. I think that this is absolute gold for anybody selling subscriptions, selling financial products, somebody that's really relying on LTV post-30 days.   Not only the conversion aspect on the front end, but the LTV aspect on the back end of selling with user-generated content influencers and third party endorsements. Would you agree?


Guest: Josh Snow

Yeah, no. So, it does help a ton. They're not going to necessarily buy right out of  the gate from a Rob Gronkowski ad yet, but it might capture their attention.  Or just seeing it, even if they don't click on the ad, just seeing that it starts to build in FOMO seeing it six to seven times.   Not just from yourself, of course.  If it's coming from your page, you're going to say the best things about it. But if it's coming from other pages and you're being really open and honest with them, they may even say something like, “I was super skeptical to order, but I did”. And it showed up, here's how it's showing up. That genuine nature of it works really well.

 

Host: Dylan Carpenter

Now, I do have a question. Man, I think you brought this up back at I-Stack in Vegas. I don't know if it was last January or January before that. But you mentioned sending products to your friends.  Essentially running ads from there paid as an advertiser. But when it comes to getting some  guys like Mayweather, like, I remember you mentioning, he's got all the money in the world. He's not like the pressure of money, but it was more something very relevant to him or his own line.  He could essentially flex on that rather than getting an extra  percent of the sales. How do you kind of go about that scenario, if I explained it, right, which I may not have.



Guest: Josh Snow

Yeah, we do. We do a myriad of contracts depending on the celebrity, how big they are, what they're open to what we're open to.  But for example, Rob Gronkowski  is an equity partner in the business, he didn't put any money in but he's a part of the business.

He's essentially lent his social capital to the business and became a huge fan of the products before he became a partner. But, there's the equity scenario, which people revert to that, because well, it’s a piece of  my company.   It’s “The Rock” Johnson.  He gets pitched out all day long.  Doesn't mean that he's interested in it. You also want to be very careful where you just doling out equity in your company. 

So what we try to look at is, how can we structure it so that it's much more akin to a licensing deal and endorsement deal over a long period of time -- if it's the right celebrity.  If it makes sense for certain of our products for certain of our audiences, whether it's a younger audience and those that are coming back to buy again.

So we try to understand where in the funnel does this celebrity make sense?  If it's someone that has mass appeal, like a Justin Bieber, we would want to put him at the very front of it to grab that awareness and to get people interested into it, and then wrap them around everybody else. 

In that scenario, we've done everything from equity to just straight up cash, to royalties on the sales of those ads and the sale of those products to licensing fees so we can continue to utilize the licensing of that content and the imagery.  Ongoing payments. We've done all kinds of different structures, we've done mixes of those sometimes. 

So it becomes more and more complex, but there are luckily a lot of books out there for people that want to become managers of talent. And so I started to read up on what happened in the 1940s. If I was a celebrity agent and Coca Cola wanted to do a deal with them. How would I help my client structure something like that where it's a win win? 

There's a lot of literature out there. It's simply just the online version of that. So instead of a 360 deal where you're, you know, getting your brand, all over their clothes and stuff, it's like, “Okay, if I were to run Facebook ads from this person's page, utilizing their face and then holding our product, how would we justify paying them? And what does that look like? “

In general, you can find out if you, if you take a look at some of the smaller celebrities or influencers that you say, while making 3X, return on ads pend versus 2X for an ad spend, and there's some longevity behind it, you could run it for three months.  

You can make 50 grand in profit three months running off of this kind of D-list celebrity. Imagine if I had an A-list celebrity that was like them, but a much more popular version of them.  A lot of times we'll work with celebrities that used to be A-list or B-list celebrities and are now D-list celebrities to just to understand what that type of celebrity might do for our business. 

The types of deals are all around the table. Now whether it's up from cash or it's a royalty or it's a percentage of ad spend that we use with their face on it. It's like a licensing deal.  Or we're creating branded products with them where they get royalties. 

There's a lot of different types of deals we do now. But that's more for the bigger guys in terms of  the bigger celebs, but anyone is willing to do a deal if the deal is right. It’s not about the price. If the deal structure is right, a lot of celebrities are looking to make money on the back end, not just upfront cash anymore, they post on their feed. So a lot of times we're paying  them to not even post on Instagram or we don't want them to post or  don't even post at all. We just want to be able to license that content to us for our audience.


Host: Zach Johnson

Yeah. You know, we're talking about stacking the different cash flows. Do you ever  ever negotiate net 60 net 90 terms?  You know, 160 terms? Or do you not really use that on the influencer side of things?

 

Guest: Josh Snow

Yeah, we do but so for example, let's say a celebrity wants it let's say it's ... just for sake of simplicity $100,000.  You’re like, “Oh my gosh, a hundred thousand dollars cash.  Like, you know, I've got it, but I don't want to risk it .” Because you should never risk your business on celebrities that you don't make money on when they post for you.  At least we don't. It's not the good old days where you could pay him 50 grand, they post, you make 100 grand the next day and you just keep doing it. 

Now you have to be really thoughtful around how you're utilizing that content and stuff. But if it's like a $100,000 deal, I might say, hey, okay, let's do the hundred thousand dollar deal. But let's do $25,000 upfront. And now let's do it in tranches, which some performance bonuses at this content as well you can make up to $150,000. 

There are ways that, as long as the agent is able to bring the celebrity a deal that is in that six figure range, the totality of that deal, then it's able to slide through. A lot of times you don't have to put all the cash up front, you can essentially take the profits you're making from running as an ad and pay for itself over time.

 

Host: Zach Johnson

Yeah, so money, okay. All right. Let's dive into this Poor Ad here, shall we?

 

Host: Dylan Carpenter

Yeah, I'm curious on this one. It sounded pretty enticing. But yeah, you want to kind of give us a spiel here, I believe it was a try-before-you-buy offer.

 

Guest: Josh Snow

Yeah. So we decided sometime last year to do that.  We are a premium brand sso it's not the cheapest product in the world in terms of cost for people to try out our products.  We said, “Well, you know, what if we gave them an opportunity to try before they buy, which is like a free trial model.” 

It's like Warby Parker -- take three glasses home.  The ones you return we'll refund you.  The ones who keep will assume you want to keep and  charge you for them. We went with that model and said, let's do it.  We know our product is phenomenal. We love our product. Our customers love our product, but there's friction. People don't want to necessarily spend 100 bucks on something they don't know it's going to work for them. 

So we said okay, what about this, we'll just charge them shipping. They'll get the product to use for 21 days. And if they end up keeping the product, we're going to assume that they started to see results and they want to stick with it.

We know that we have a very low refund and return rate. So we know the product’s great. But it backfired because our product is not a mattress where you can try a mattress at home. Once you unbox that mattress and you lay on it a few times, it's pretty much yours and trying to return that thing is a nightmare. 

Our products are very small, and they are higher priced. So when someone's taking that leap of faith to try the product, they're a lot more likely to say “I never got to even trying it.  I'm just going to send it back because I don't want to pay for it right now.”  And so because it's small, you can send it back very easily. So that backfired in multiple ways. 

It also backfired on the look-alike audience side of things. What was a rich audience set that our Facebook was finding for us in terms of rich, I mean in terms of a very deep layer of data.  Like these are people that spend over 100 dollars with Snow, let's find more of them. 

It started to go and find people who were looking for free products, people who maybe never would become a Snow customer to begin with. So the look-alike audience, the pixel started to turn on us within seven days. It started to find a lot of people who are “quote unquote”, bargain shoppers. And as a premium brand that's kind of the last kind of cohort of customers you want to spend money acquiring. 

Not that we discriminate. In any case, we have customers all over the spectrum. We set up literally 160 countries in the world, but it's something that the look-alike audience said, “Oh, okay”.  We're driving a ton of conversions. Because by the way, our customer acquisition cost was cut by like, 90%. 

We were driving credit card signups  for pennies on the dollar. We're sitting here saying, “Let's scale it to the moon, because even if a fraction of them stay on with us, we're going to make a lot of money off of this”.

So we scaled it prematurely. And what ended up happening is that people started using these pre-loaded cards, prepaid cards so that when we rebilled them, it wouldn't work. They started ordering 10, 20, 30 of them with different names. So they're getting all these kits for free.

 It really just backfired on us. People were really commenting in the ads saying, “Just use the prepaid card. That's what I did. they put $5 on and then they can't get you haha.”

It started to snowball in the wrong direction and it ended up getting us in trouble with PayPal. And that could get us in trouble with our payment processors. It became such a nightmare. And then everybody was like, “Hey, I didn't know that we were going to get charged for this. I thought it was a total totally free product”. 

The messaging wasn't done correctly. So what we thought was our knight in Shining Armor with the try- before-you-buy ended up really becoming something that nearly assassinated our business.

 

Host:

Get yourself out of that man like that. That puts you back pretty far it sounds like

 

Guest: Josh Snow

Well, in many ways, shapes and forms, we're still getting out of that. So that was like a year ago. There's still a lot of collateral damage from that in terms of merchant processing in terms of chargeback rates in terms of a lot of things 

We just shut it off.  As soon as we recognized what was going on, we shut it off. What it did though, is we ended up sending out like 25,000 products that we only were able to charge for maybe a fraction of those. 

So it depleted our inventory. We weren't able to recover very quickly from that. We lost all the money on the inventory.  And we got in trouble with our payment processors. Ee started to get a bad feedback score on Facebook because people were irritated because they didn't understand that it was a try-before-you-buy, not a completely free product. 

We had to just realize like, okay, that doesn't work for our business. We're going to focus on driving sales on the front-end.  People have to pay for this product.  We can do discounts but they're gonna have to pay for it. So we had to essentially just revert back to what we were doing before that.  But it took about six months to  dig our way out of that mess. 

 

Host: Zach John

Wow. Yeah. Oooh That puts you to the poorhouse. Oh, yes.

Don't do-try-before you buy. You heard it first here.

 Josh it has been amazing. Thank you so much for just opening up and being so transparent and sharing all these insights. You're the king of oral care but also,  just a monster at cash flow management. So, congrats on all the success you've had. Tell everybody what's next. And, how can any of the listeners support you?

 

Guest: Josh Snow

Yeah, you know I am very, very deeply invested on multiple levels, on brand -building.  My life on the entrepreneurial side has become focused on brand building. I love the direct to consumer space. I love the commerce space. I love the SaaS space as well, but I just love the brand building aspect of business and what that can do over what is sometimes a short period of time, but certainly over a long period of time.  So you can find me... I'm very transparent with the business...everything that I'm doing. You can find me on Instagram at Josh Snow, and then anything Snow related,  we're on Instagram with the username snow and our website is trysnow.com.


Host: Zach Johnson

Awesome. Awesome.


Host: Dylan Carpenter

Thank you so much, much appreciated, man. 


Guest: Josh Snow

Thanks, guys.

Resources

  • How Josh got insanely rich earning $60,000 a year.
  • The anatomy of a “ripple effect ad campaign” that has
    generated a virtually unchurnable customer base.
  • The priceless financial lesson Josh learned from a
    company that sold bologna to Walmart at a breakeven
    price -- and ended up being bought for $1.3 billion.
  • Why the oldest, tried and true offer in the world nearly
    assassinated his business -- and what he did to dig
    himself out of the mess.
  • How to cash in on the customer converting power of
    celebrity endorsements -- using $0 of your own money.
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About The Podcast

Jason Hornung is the founder and Creative Director at JH Media LLC, the world’s #1 direct response advertising agency focusing exclusively on the Facebook ads platform. Jason’s proprietary methods for ad creation, audience selection and scaling are responsible for producing $20 million + of profitable sales for his clients EVERY YEAR

Zach Johnson

Zach Johnson is Founder of FunnelDash, the Agency Growth and Finance Company, with their legendary Clients Like Clockwork solutions. Under Zach’s leadership, FunnelDash has grown to over 5,000+ agency customers managing over $1 Billion in ad spend across 41,000 ad accounts on. Zach’s private clients have included influencers such as Dr. Axe, Marie Forleo, Dan Kennedy, Dean Graziozi to name a few. Zach is also a noted keynote speaker and industry leader who’s now on a mission to partner with agencies to fund $1 Billion in ad spend over the next 5 years.

Dylan Carpenter

Dylan Carpenter will be diving into what he and his team are seeing in 200+ accounts on Google and Facebook when it comes to trends, new offerings, and new opportunities. With over $10 million in Facebook/Instagram ad spend, Dylan Carpenter had the pleasure to work with Fortune 500 companies, high investment start-ups, non-profits, and local businesses advertising everything from local services to physical and digital products. Having worked at Facebook as an Account Manager and now with 5+ years of additional Facebook Advertising under my belt, I’ve worked alongside 60+ agencies and over 500+ businesses. I work with a team of Facebook, Google, and LinkedIn experts to continue to help companies and small businesses leverage the power of digital marketing.

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