How to Use Traction / EOS (Entrepreneurial Operating System) to Scale Your Business

Colin and Brent discuss implementing Traction / EOS (Entrepreneurial Operating System) at their software company.

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[00:00:00] Colin Keeley: Hello and welcome back. This is Colin Keeley here, and

[00:00:03] Brent Sanders: I'm Brent Sanders.

[00:00:04] Colin Keeley: We are two guys buying and building wonderful internet businesses.

[00:00:08] Brent Sanders: Yeah. And it's the new year. So we did some some goals, some reorientation of our, of our plans for the, the coming year and wanna record an episode kind of about that, about how were, we're kind of.

Looking at 2024 for at least one of our portfolio companies. Um, you know, at the end of each year. I don't know if you do a column, but like, I usually do like a goals setting. I, I set goals like, I don't know, every other month or so, so it's not like a, but at the end of the year, I, I feel like you're typically like very retrospective and looking at.

Our portfolio companies. I got the sense and I got the feeling like, hey, things feel a little, like, it'd be nice to tighten up what everyone's accountable for. I don't know if like why accountability came to me as like the main thing, but like, I thought , we could use some organization around the team, around where we're going around, trying to improve and become more autonomous.

So I was searching. And I found, based on a bunch of different people mentioning it, and I think you may have already read the book, but it was called Traction by Gina Wickman, which is this whole like EOS the entrepreneur, ent operating system. I've heard a bunch of people talk about it and I actually know some people, firsthand who've used it and seen them use it.

And so I was like, Hey, why don't we read the book? Let's go through it. And so we're gonna, we're gonna record a little bit of, of this podcast around like, what we came up with. And how we're gonna kind of reorient, I guess our, our management style and, and what we're managing towards. I don't know, how would you phrase it?

[00:01:48] Colin Keeley: Yeah. Subtractions the book, EOS Entrepreneur operating system is kind of the system. I think the concept roughly behind it is like. All business tastes like chicken to some extent, where it's like just putting an operating system in place. And I think a lot of people come to it 'cause they feel like they're just, putting out fires and like running around without, real plans in place or the ability to be more proactive about things.

And so I've been asked. Dozens of times whether we're using ES and I, I know people that use it from everything from like accounting practices to, big law offices. A lot of like small boots, stepss software companies. But yeah, I, I've read the book long time ago. We haven't really implemented it.

I think the two different ways people get to it is like they read the book, which is easy, and it's like, a $10 book or something. Or as they get bigger, they pay for fancy consultants, which are super expensive. And then I think traction is the easiest one to start for small businesses. And then there's like scaling up in different versions or different flavors for bigger businesses that are also

[00:02:49] Brent Sanders: popular.

Yeah. And I think like. We're not gonna bore our listeners with like every little detail of what we've done and, but there, there is a, a prescribed process and, and a lot of that starts with, getting your vision down, which I feel like, didn't take us too long. I feel like we're pretty aligned just from working together for as long as we have.

And, but I, I did feel like it was good to, just re br up on like, why are we doing this? What are our core values? What's our focus? What's our, our target? And then, 'cause one thing that I feel like we have done like last year and looking back was like, we, we set some crazy goal and just missed it.

Right? It was just like, okay, well that was a crazy goal and what did we wanna do? Basically like triple the size of, of Scout. And it's like, well, it didn't exactly happen. I mean, good things happened. We grew it, but it wasn't exactly where we wanted to. And, and I think. There's been a lot of, like, we set a goal, we work really hard, but it's not necessarily, you're not on track for that goal.

And so the big thing that I, I felt like at least at step one that we got outta this was getting that vision down of where we wanna be in 10 years, then five years, three years, and then like, okay, you can work backwards and understand where do you gotta be each month, each week in building a scorecard and, and basically getting into.

Measurable steps to know if you're like, if things are working, and it is a good organization system for that. In my mind, it seems like that that alone has given me a lot of confidence in like, oh, this, this, this can actually work. And so what I wanted to talk about in some of this episode was more so like, what were the metrics that we came up with that we want to use for, so there's a concept of a, like basically a scorecard, which I think is.

Helpful for folks like us that do spend time on multiple businesses where you can get the scorecard and understand how the business is doing and not have to like, go around and ask everybody, Hey, how's this? And then hop into Stripe and understand churn or see profit. Well, it's like you want to see everything all in one place and get the health of the business.

So I've seen other entrepreneurs use these and they're very helpful. But building them is, is kind of interesting. And so what I wanted to focus on for this episode is like Forest SA business like we have, or businesses like we have, what are some, some of the metrics that we decide to throw on our scorecard and, and why?

I. Yeah,

[00:05:16] Colin Keeley: I, I think we could talk about, I guess the process for us, like what we've actually done is there's a, it's a one pager front and back that you kind of fill out, and so it's core values, core focused, and then like a one year target, three year target, and 10.

Yeah. And so you're kind of visualizing what the future looks like and to some extent working back from there. And like how you actually achieve it. And they have this concept of rocks, which really is goals. It's kind of confusing that they call 'em rocks and they're supposed to be specific, measurable, attainable, realistic, and timely.

And so you kept knocking. I was coming up with goals and they were maybe. I mean, attainable in some sense, but it's more like a, a lofty attainable, not like a, realistic projections of sorts. And so we, batted them down to be more realistic projections.

[00:06:06] Brent Sanders: Right? But even still, they were, when you do break 'em down, they, they get clear.

Like if you look at, hey, this, within the one year and then within the quarter, here's what you gotta do. Here's what we need to be adding to MRR. So, I think. Some of the things that we, to, to just understand our structure a little bit. We have. Sort of a support layer that I would call, it's like support customer success and like software testing, right?

It's like this three-prong team that is spread all across the world, right? We have some in Argentina, we have some in the Philippines, and then some here in the us. And then we have, content and sort of marketing capacities that kind of fall under, under your purview. And then technology, which is, folks here, folks in South America and myself, and looking at like, okay, we have these participants in the business. How do we, how do we A, figure out how they're gonna help us get to these goals? And then b, how do we measure and communicate to them like how they're doing and, and understand if we're on track with our goals.

So this is where it. Like before doing this, you and I would have a weekly call talk about like, okay, how do we get more, how do you get more customers, how to improve churn? How do you improve activation rates? Like very, every SaaS founder, entrepreneur is doing the same thing, right? They're looking at their funnel and criticizing it and coming up with some, okay, well maybe we'll add this or maybe we'll do that.

And it was like, yeah, we'll do it. And. Three weeks go by, we do it. And it's kind of like unclear how it's doing. Like yeah, the numbers, but the numbers are muddy, right? Because it's like there's more than just the one thing going on, or more than just like, well going back, like, like, let's reflect a little bit.

So we tried like a different signup process. You had hired a marketer to kind of come in and try like a, was it ClickFunnel or something like that where it was like a different way of signing up. That would get their email and, and try to convert them. I mean there's all, all sorts of these different ways to convert.

And then it was also in combination with like paid and, and we were like, okay. At the end of that, it didn't work. It wasn't worth it because there was like a, a metric that, we were spending more than we were necessarily getting in. Right. So what I think that this is giving us a little more clarity is it's not like, Hey, we're gonna try a thing.

It's like everybody's going to. Be accountable to these things kind of at all times. And, you're tracking those week after week and whether it's like this initiative or that, it's more so like the constant never ending improvement of those metrics only. Right. It's like, I don't know if you could reflect a little bit on last year of some of our growth initiatives or just anything in general.

I just felt like it was a little untethered. Would you agree?

[00:08:53] Colin Keeley: Yeah, I mean, what's tough is I think it's really easy once the business is pretty established and you're just like, have certain metrics and you just move those metrics. I felt like we were noodling a lot. And just kind of trying different things and seeing if it's working, which I think is more the correct approach when it's early days.

But maybe we think we're more, I guess, established now and we kind of understand the flow of the business and it's not gonna change dramatically. Mm-Hmm. And so instead of like. In org chart, which is roughly how we've governed things. I'm in charge of certain sectors, you're in charge of certain sectors, and then we have people beneath us.

This is more like a scorecard and everyone has kind of their KPI, which is attached to the name. And that's probably, I mean, it's definitely is a better way to approach things as you get more and more people and you're kind of more established. And much not quite as loose as we were kind of playing it before.

I still, I rebel against it a little bit because. I don't know where we're gonna be in a year if we fix like conversion rate. I think that's our biggest issue right now. And, if we fix it, I think, revenue could be four x from a year from now. 'cause we're just starting from such a low base.

Mm-Hmm. That's not like, dollar for dollar such an unbelievable growth rate. It would be once you're like, 10 times the size, but when you're small it's, not absurd.

[00:10:09] Brent Sanders: Yeah. And by the way, like as of this year, we've started. A a completely different model, this premium model, and I don't want to say whether it's working or not, but it does seem like.

The, the conversion progression, right? Like, what do we call a conversion? It, I think it takes a lot longer than we ever thought, right? Like we had this idea that you get a two week trial. That's just how it's always been. We, in coming into the business, that's what the old owner did. We've had businesses where we just, there is no trial, right?

It, and so we've tinkered with these different ideas, but I think the way that from. Going into scouted least like that is, I think a, a great example of somebody. It, it takes somebody like maybe six weeks to really embrace this new software. And that's, I think what we're finding is we're seeing user sessions and we're seeing, at least on my end, I'm starting to see more and more like, hey, they went from one walk a week to three, to six to 12, and then finally they're, they're actually in business and they're never gonna leave.

Right. Like, that's the, the thing I think you're right on, is like this. Once we figure that out, then it's a whole different ball game. But until then we have to kind of, it, it feels a little bit less predictable. But, that's why we're working on it because it is unpredictable. If it was in that future stage, we probably wouldn't be working on this business, frankly.

So yeah, let, what I think like, I don't know if we defined all 'em, we did do this for rocks, but some of the things that I wanted to, to think about are, or like share with our audience is kind of like. What we came up with in terms of like our metrics, because I think that's right there. What's the old ad adage?

Any number that you track, you improve. Like inherently, it's like if you're tracking it, you will improve it. And, and so as of now, all we've really been tracking is what MRR, that's like the guiding light of, okay, how are we doing? And everything boils down to that. But. What the book says is like, well, that's kind of a, a, a trailing indicator, right?

Like, that's how you've done, not necessarily how you're, you're going to do or you're doing in the future. So, I guess on the tech side, like I. Some of the things that I, I think we're, we're talking about feature rollouts. We're talking about, stability, there's stability metrics we can use, but then on, on, like customer happiness, which is a big part I think of, of, having word of mouth.

And then what we want to do as, owners, is have our team be accountable to certain things that they can be, they can push and be proud of. Is. Adding some ability to allow customers rather than NPS scoring them every week or every month is like having some sort of scoring within our, like intercom.

So in our support chat being able to just be like, Hey, how, how, how are we doing? And keeping, customer happiness at a certain point.

[00:13:00] Colin Keeley: For sure. Yeah, I guess. How do you wanna tackle this? Oh, I'd say we roughly ma mapped out a customer journey, and then we put names to like each step in the funnel.

And then we have a number of I, I guess NPS type things. So like customer happiness. And then on the system end you have like, yeah, I don't know what you wanna call it. Stability metrics. Yeah. That you're somewhat accountable to. And that actually flows into customer happiness and

[00:13:25] Brent Sanders: quite a bit. Yeah. In churn, I would say like churn, I feel like.

Tech and customer happiness or customer success, that's like intri, intrinsically tied. It's like, you know, one leads to the other and the other leads to your customer staying and being happy and using it, or they get frustrated and leave top of funnel. That's been a pretty easy one. And it's funny, I was, I was looking around just randomly, signing up for competitors products and.

Like, I think that's one thing in looking back over the last year that it has gone really well is like the amount of SEO ranking and, I mean this is, again, I'm not, I know you're tracking it, but I haven't really been looking at it. You search for dog walking software. We seem to come up first in a lot of different contexts, so that that's pretty cool.

[00:14:13] Colin Keeley: Oh yeah. We are actually, I think number one. Yeah. Awesome. It's all working. Yeah,

[00:14:18] Brent Sanders: no, I mean, like the certain things are working, so, it's not all bad. I mean, so like big credit to you. I feel like that's all you were mainly focused on for the first, what quarter of owning that business. So that was, and it's like the long tail that, right?

You work on it for three months and then eight months later you actually see something. Yeah, for sure.

[00:14:40] Colin Keeley: It's also a nice part of buying a established business like that SEO effort. Yeah. Pays off quicker. 'cause it's already has a domain authority. Yeah. So yeah, I mean that's been by far most effective channel.

I'd say word of mouth is definitely picking up. I monitor, there's a lot of these Facebook groups and you see Scout mentioned more and more, which is super nice to see. I think with the freemium model we'll see that uptick as well. Yeah. But I guess you could say I am accountable for trials. And then website visitors.

So that's like the top of the, top of the funnel. I, I have a part in it, but we have a, an SEO writer and so he is accountable for that. Yeah. Then going down the list, trial conversion rate.

[00:15:20] Brent Sanders: Yeah, so that would be Paula, our, our customer support lead customer success lead. I think one of the challenges with, with this is like, like we, we have her reach out and, and I'll sit on all these calls as well, is like, do coaching sessions and it's yeah, I think this is something that when I.

People adopt it. They stay forever. But it is what I'm, I'm finding in so far this year, it's only been, what, two weeks in? But we've had a couple calls and they've been great, but they're people that are so resistant to change and they're not even using other software and they know they need to use software and they're like, God, I don't want to do this.

This isn't how I work and I have to change how I live and how I work. And it's like, I'm just realizing this is, it will, like once they stick to it, they will stick to it forever, but. It's going to be slower. And I think it's a reflection of, I think, where our expectations were last year of like, whoa, these are real businesses and they're very really not technical generally, and they don't want to be on the computer.

They're on their phone only, they're on the go. They're walking dogs. Right? So it's that is though our, our most important growth metric is that trial conversion rate. And so. We've made it easier by going freemium. But yeah, that is like the main thing. And on the other side of that is churn. So it's like the same person is also accountable to that, but also I think dually with our tech team like that.

That's an important part, is that they're both kind of hand in hand.

[00:16:49] Colin Keeley: Yeah, that those two are tough because trial conversion rate, I mean. I've been working on a bunch. You've been working on a bunch. It's a little tough to be like, all right, Paula, best of luck. It's yeah, like I'm writing a bunch of series.

I'm trying to pinging 'em as much as possible to like hold their hand and Paula's trying to schedule meetings and you're trying to help out as well. Yeah, so I. It is a little funky to be like, all right, this is, you're accountable of this. And some of it's outside of her control, I'd say. Mm-Hmm.

Like, if they run into product issues during the trial, they're just gonna not convert. That's not really her fault, but I mean, it's nice to have one person that's, in charge of it. Yeah.

[00:17:25] Brent Sanders: Yeah. But yeah, I think like once we go down that list, building a scorecard, being able to kind of easily look at this each week.

I do think there's like the missing thing that we've had, and maybe this is my management style of the, the folks that I manage, which is like I'm a little more rolled with the punches versus like I, but I do hold people accountable and I want there to be accountability, but I want that accountability to be sort of like shared and understood by also, it's not just like, okay, Colin and I are getting all the information and having to like then manage that down, manage that information of like, Hey, MRR is dropped and.

Here's why and here's why we think, and therefore we need to do these things. I think, this is, this approach seems to be a good opportunity to just kind of open the books in, in a way that everybody can see the numbers that are important and for everyone to kind of know, okay, these are the things I'm accountable for and whether they're performing or not.

Like, I think it, and correct me if I'm wrong or if I, if I'm gonna jinx this, but like, I think it's going to make. Managing and growing the team a lot easier. So it's, it's, that's my hope with this process. And that's what I'm hoping we will, where we'll be a year from now.

[00:18:40] Colin Keeley: Yeah. I guess, how do we do that?

So me and you got together, we filled out this two page worksheet effectively, and then we're gonna present it to the team, and then we're gonna have meetings where we basically review everyone's KPI going forward. And then the whole business is pretty transparent to everyone that wants to look at the data.

Is that roughly the next steps?

[00:19:00] Brent Sanders: Yeah, my hope is every week or every two weeks, a scorecard just comes out over Slack. Like it's an automated thing, it gets all the data it needs from, our various systems. And I guess setting that up is gonna take some work, but I think that's where it's just every Friday or every other Friday, whether whatever period we want to use.

It's like these are the numbers tails of the tape, right? It's like. Nobody's massaging it. No one's having to put it together. It just is an auto-generated dashboard that everybody sees in our general Slack, and this is how we're doing. And, meet on it after, see how it is, think about what, what you can do.

And that I think that will help. oNe is like, we don't really have good reporting beyond, you and I see everything, but I don't really feel like, like our team, if they wanted to, they could go and seek out what our Mr. R's looking like. I don't really. It's going up. So I don't think that they have much of a, a sense of like where we want it to go.

And so again, sharing these goals and being like, okay, our goals, we wanna be adding, we wanna add 600 customers this year. Like, that's our goal. Um, you know, how are we doing 17 days into the new year? I mean, in order to do that, what, what did like 80, 80 something. 80 KA quarter that we want to add to MRR.

It's like if we break these things down on a weekly, monthly basis, we can see how we're performing against them and 'cause otherwise it just seems like a really big number that's like, okay. Which, I don't wanna be negative, but we didn't hit it last year and, but it, we didn't really measure every single week.

And I think that's the, the thing is like, if you're measuring it, you can move it and that'll get us there closer. So I love

[00:20:42] Colin Keeley: the idea that it's just automated and it just populates in Slack. So we talked through a number of 'em. The other ones on the list are customer happiness, customer support, happiness new mobile app out chat rollout, stability metric, and then development tickets found as bugs after a release.


[00:21:02] Brent Sanders: That's, that's very important to me. I, I I have been haunting our team to test, test, test, test. 'cause every time we release something, there's like some customer that comes outta the woodwork, they're like, you just broke X, Y, Z. It's like, we didn't even know X, y, Z was a thing. So a year in, we have no excuse for that.

So, we have to test everything. We've gotta, we, we know the system well enough now that that can happen. And like. It, it, it doesn't like disrupt business, but it's like a reputational thing where I want people to be excited about when we re release code. Not scared because they're nervous, like things are gonna be unstable.

So, I think customers on chat is, is a good one. That's like a big feature that we've completed. And just like the, the labor of rolling it out is, is is difficult. So we're rolling. That's in my mind, that's something that's really gonna differentiate ourselves across all the other. Nobody else offers this like a realtime chat, like Slack like experience in our app.

And so we're, we got our first, actual company that's going to really embrace it starting next week. And I think the number of customers on that will be a. A key indicator of, I mean, we'll see if it's reflected in happiness and other things. And, and I think we may want to consider, monetizing that further depending on, how much it, it goes.

'cause it, it could entirely replace somebody's Slack or GroupMe or whatever they use internally. It's, it's really powerful. But we're keeping it as part of the subscription for now. I don't wanna get ahead of myself.

[00:22:34] Colin Keeley: Yeah. And there's some cost to us. It scales with, messages and users and everything.

Yeah. So there is a reason to charge more, but yeah, that's not the intention right now. Yeah. How about a stability metric is something I think you've been noodling on. Yeah. You thought of

[00:22:47] Brent Sanders: how you I think approach it? Honestly, I think it's response time. So we, we have a couple that we know like are just bad, but have always been bad and we've been slowly improving them.

But there's some changes coming out that I think will get us into a new ballpark that's like actually healthy response times. 'cause there's just some. Businesses that are huge, and nobody ever really sorted that out. And so we've done that. But then, yeah, just like having response times. There's a thing that New Relic gives you, which is like a monitoring software that has like an app deck score.

So just like a, it's kind of like a, a, a uptime. Not even uptime. We, we want to achieve a hundred percent uptime as much as we can, achieve that. But response times, I think like having a response time that's in what they consider, they're like 80% and above I think is what I'm shooting for, which, we've had to throw servers at it, so it's getting expensive to achieve that.

But I think with the updates that we're making to both, the clients and the servers. That's getting a lot easier and like, I think we'll be maintainable, but yeah, average response times, especially during, like, you can just see, it's like a, what is it? A circadian rhythm of, of our traffic. It's like the US starts at 8:00 AM and it goes up and until about 3:00 PM and then goes down and then up and down and up and down every day.

So, we want those response times to be just like flat, like nothing was happening.

[00:24:17] Colin Keeley: Cool. What else did you wanna talk through here? I think that's it. I

[00:24:20] Brent Sanders: think I just wanna introduce like this concept of, of trying this EOS model, our journey, going through it. Like we're at step one, right? Like we're at, just finished off the vision part, we're gonna introduce it to the team and start doing the reporting parts of it, and.

And then just, we'll, we'll keep our listeners up to date. I mean, I think this is more of like an operational episode. This is not about acquisitions, it's not about much else, but it's like, this is when you do the acquisition. I do think, like we all have, we both have the desire to like, be able to step away from it and have teams that are self-governing and self-managing.

And, we don't necessarily have, the most experienced team and we're, we're like trying to level these people up beyond their typical what they'd be asked typically at a business.

But I think we're trying to apply a process and, be great managers, be inspiring in whatever else we gotta do to get them to be. Treating the business like owners, incentivizing the right way. We just wanna make this so it's not us throwing it on our shoulders and like driving it up the hill.

It's the whole team doing it. And it's easy because, many hands make small work.

[00:25:34] Colin Keeley: Yeah. I love that. I think this gets more important as we have more businesses just have like standardized systems Yes. That we could just throw all businesses on. And then it makes it easy to compare across them.

This is definitely what the bigger, holding companies of software companies do for sure.

[00:25:49] Brent Sanders: I, I couldn't agree more. And like, we gotta nail it. With one first. Like we've, we've, we've had successes with the businesses that we've had, but it's felt a little bit like spinning plates. This starting to feel like, okay, we're on rails and we're, we know we're what the next step is and the next step and the next step.

It's not like, okay, let's just see what happens in next week's meeting and then we'll make some other decisions. This is like, feels like it's far more, contained.

[00:26:18] Colin Keeley: Cool.

[00:26:19] Brent Sanders: So we'll let everybody know how it goes.

[00:26:23] Colin Keeley: Yeah. Take care everyone.

[00:26:24] Brent Sanders: Thanks for listening.

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