How To Unlock 8-figure Growth: 4 Crucial KPI's Revealed — Leonardo Caracas | How to Tell if a Business can Scale, Why Product-market Fit Matters Before Scaling, How the Repurchase Rate Shows Growth Potential, Why Optimize Finances before Scaling

In this podcast episode, we discuss why growth brings different challenges at various revenue stages and what areas are most affected when scaling an e-commerce company. Our featured guest on the show is Leonardo Caracas, managing partner at jumpventures.co.

Topics discussed in this episode:  

• Why product market fit is crucial before scaling: Reviews and customer feedback indicate if you've achieved the right fit
• How KPIs determine a company's scalability: Reviews, repurchase rate, average order value, and conversion rate
• What makes marketing the biggest challenge for growing ecommerce brands: Many founders excel at product but struggle with growth strategies
• Why solving a real problem or having true differentiation is essential for scalable growth: It protects against easy replication by competitors
• Why analyzing and optimizing a company's financial structure is a critical first step: A profitable structure is necessary for scalability
• Why Shopify is the preferred ecommerce platform for scaling businesses: Its ease of use and robust ecosystem support rapid growth

Links & Resources

Website: https://www.jumpventures.co/
LinkedIn: https://www.linkedin.com/in/leonardocaracas/

Get access to more free resources by visiting the show notes at
t.ly/DbFbZ

In this episode we talk about:  Business Expansion, Business Growth Challenges, Business KPI, Ecommerce Growth, Ecommerce Marketing Advice, Ecommerce Scale Up, Ecommerce Strategy, Ecommerce Tips, Entrepreneurship Tips, Financing Business Growth, Growth Hacking, Managing Supply Chain, Market Validation, Product Market Fit, Scale Your Business, Scaling Online Businesses, Shopify Growth Tips, Startup Funding, Startup Scaling, Supply Chain Optimization, Team Structure For Growth, Venture Capital

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Transcript

Claus Lauter: Welcome to the e commerce coffee break podcast. On today's episode, we talk about the proven playbook to take your company to eight figures and what it takes to get there. Joining me on the show is Leonardo Caracas. He is the managing partner at JumpVentures. co. So let's get started. A 

Voice Over: top rated Shopify growth podcast dedicated to Shopify merchants and business owners looking to grow their.

Online stores, learn how to survive in the fast changing e-commerce world with your host Claus Lauter, and get marketing advice you can't find on Google. Welcome, welcome to the show. 

Claus Lauter: Hello, and welcome to another episode of the e-Commerce Coffee Break podcast. Today we want to talk about gross. Now, growth is a big topic and every company, every merchant out there wants to have as company growing, but with growth.

There have come different challenges along the way. So it's a difference between you growth from a hundred thousand to a million, from a million to 10 million. Different challenges come up along the way. And we wanna dive a little bit deeper into this. So with me on the show today, I have Leonard Leonardo Caras, he's partner at Jump Ventures, at Jump ventures.co.

And they have developed a proven playbook to take your company up to eight figures. I wanna 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, Claus. 

Claus Lauter: Good to be here. Leonardo, 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 give an overview.

What kind of areas within a company are affected when it comes to growth? 

Leonardo Caracas: Yeah, of course. Uh, when our scope in jump, we are always trying to think of how to grow a Use case, which is an e commerce company, um, all the way to eight figures. And usually these companies are within the six figures. Uh, so they have a very minimum infrastructure.

And, uh, once you get to this, uh, growth, which if we want to simplify, it's going from 1 million to 10 million, uh, Um, the biggest, uh, problems that arise are of course, supply chain and how you can, uh, continuously, uh, cope with the growth that you are, that you're having the financing sites, how are we going to finance this growth?

And of course, which are the skills and, and, and team, uh, structure that you need to actually fulfill this growth. Yeah. So these are the, I think the three big, uh, 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 you have specific KPIs, or what do I need to look at to find out where I really struggle to make my business grow?

Leonardo Caracas: Yeah, so 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 one to 10, and I don't think every business can, can go from 10 to 50 or 50 to a hundred. So there are different use cases, there are different companies that have a potential to actually scale, scale exponentially, scale, uh, gradually over time, but we look at four KPIs.

to, um, 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 a product market fit, and this comes in reviews. So basically when you look at the reviews, uh, review rating, uh, and the star review rating from, 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 scale. Yeah. 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, uh, reviews.

Um, second, we try to understand what is your repurchase rate. So if a company has around. 30 percent repurchase rate. So 30 percent 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, uh, um, purchase from, from, from customers.

And there is a path to continuously grow the profitability of the company as you actually grow the, the scale of it. Yeah. The third, um, the third AOV. So nowadays we try to find companies that have a, an AOV that has potential to go up to 75, uh, US dollars or euros. Yeah. So even if companies are nowadays not at that range, if they're 15, 30, 40, we try to see if their portfolio and the way that they are, um, Basically situated in the marketplace, they are able to come up with rescues are able to come up with bundles and products that can take this 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, um, purchase from customers. If you don't have the right AOV, yeah, just the cost just keep getting up and up for, for Meta or TikTok and et cetera. So you need to be well situated in the AOV side and the fourth and last one is the conversion rate.

So the conversion rate is a thermometer to kind of, uh, 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, uh, When we see that a company is in the six figures and they have a conversion rate of 3 percent and above, it means that they have space to acquire a lot of traffic and still be in a comfortable position, um, in terms of conversion rates.

Claus Lauter: I wanna go a little bit deeper into these different areas. Um, 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, um, the back end, the back office on how to grow, how to have stock.

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

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

So they really understand the product, the customer and the experience. But they really struggle, uh, thinking about how to grow, uh, this, uh, user base, how to go, uh, their, their plans for, for multichannel growth, how to create content, how to create merchandising, how to create offers, bundles, so on and so forth.

So the biggest struggle we see, and the one that is very complimentary to our skills is founders or a company that, uh, really has. A big focus on the brand and the product, but is really, uh, um, yeah, has a lack of skills on trying to grow the company. 

Claus Lauter: You talk to me about a case study or a, um, a project that you were working on that you have grown massively.

Um, give me a bit of an example on 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, uh, within the, the frames that I posed to you on, in terms of KPIs, they were, Making roughly, uh, $1 million of revenues in 2021.

And in 2022, we finished with only 20 million, uh, US dollars. So it was a stellar growth in a one year time. Uh, they really had a good, uh, product feedback. They had a, uh, a OV that was in the low range, $35, and we took it all the way to $70. Um, 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, uh, messenger, so on and so forth. Um, 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, uh, acquire customers at the fast pace. How can we think about their merchandising? So pricing of the products, bundling of products offers for, for, for new, uh, for leads and for returning customers and little by little, uh, work on the different KPIs and, and maintain a sustainability throughout the growth.

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

Claus Lauter: You talk about the product market fit.

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

Leonardo Caracas: Yeah. So We are very, uh, industry agnostic with our playbook. So we don't really care if it's a sporting, uh, um, sporting brands or a arts and craft brands or a medicinal brand.

Uh, we see that there's opportunities in all the, the verticals, but, um, 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, uh, 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 who has a much bigger budget than you do, cannot copy you in a matter of two to three months, how can you clearly show that you're solving a problem and that customers are delighted by it? So this is, this is more or less where we try to differentiate, uh, um, how a company can grow and a company that will struggle to grow.

excessively if they try to, to get to a, to eight figure kind of, of level, right? So if we look at the feedback, we can clearly see, uh, nowadays and reading throughout the qualitative feedback of customers, if they are solving a problem, if there's a good value for money, um, if they have, uh, something that they could not find in the competition.

And that's why they bought this product. If they see a clear, uh, um, use. For a repurchase on a, 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, to work on.

And it's really for us industry agnostic. It really doesn't matter. 

Claus Lauter: Hey, Claus here, just a quick one. If you like the content of this episode, sign up for our free newsletter and become a smarter Shopify merchant in just seven minutes per week. We curate content from more than 50 sources, saving you hours of research and helping you stay on top of your e commerce game with the latest news, insights, and trends.

Every Thursday in your inbox, 100 percent free, join now at newsletter. ecommercecoffeebreak. com. That is newsletter. ecommercecoffeebreak. com. And now back to the show. 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, um, going into these, um, roadblocks that they can't grow any further.

Now they approach you. What, what's the first step? 

Leonardo Caracas: Yes. So basically we have a, a three step, uh, um, approach with companies. Uh, how we actually started Jump Ventures. It was a, project for me. Uh, I got to, to a stage where we, we have grown, had grown our own e commerce, a company called go case. And we took this bootstrap to a, to a very high level, uh, in terms of revenues.

And I was looking for a new challenge and a new way to, to think about a business. Yeah. And then. I got a lot of coaching and mentoring throughout my, my years, uh, growing go case. And I thought, okay, 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, uh, companies to see if I could just scale them with the knowledge, uh, tools and network I had acquired, uh, throughout the years.

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

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

We, we think let's do a coaching program, a structured coaching program of, uh, average six months where we really try to scale your company by actively, uh, uh, coaching in different areas and, and trying to see if you're able to execute. Yeah. So these first two steps are basically a pro bono, uh, approach from us to, uh, understand, get to know, uh, 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, into the, into the company and yeah, try to scale them.

Uh, our first objective is always 10 X the company in one year. 

Claus Lauter: Okay. Let's talk about, about the financial structure of companies. Um, are there situations where you need to completely change the financial setup of a company, not only going into money, but maybe the company setup, or do you just take what comes in?

Leonardo Caracas: Yeah, that's a great question. Um, 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, uh, for ad spend. We understand what should be, uh, 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 PNL together with the interpreter and see where's the fat, where is the areas that you can really optimize and how can you view your business differently? Sometimes, um, they just struggle to see that, um, 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, uh, 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, a, a proper, uh, um, uh, profitable structure, you won't be, you, you won't, won't be able to scale anyways. 

Claus Lauter: Mm-Hmm. . And we touched on coaching, mentoring, financial, um, structure and help there.

A lot of merchants come to, um, or have questions about finding the right partners. Might be a marketing agency that might be a software developer, um, 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, the eight years that we were growing Go Case, we have gone through the same pain.

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

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

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

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

Leonardo Caracas: And the perfect customer, as I mentioned previously, is that founder who's really passionate about the product, the brand and the experience. Yeah. Uh, 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. Is trying to solve, but they are really, um, yeah, they don't have the experience or the knowledge to take on the, the, the growth side. So they don't know how to do Facebook advertisement.

They don't know how to do email, uh, planning and campaigns. They don't know how to create unique content. They don't know how to think about. Product, uh, 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 create it and, and how they, they, they talk to customers about it.

So this is the, the, where we have the biggest synergies. 

Claus Lauter: Let's talk about going international. Uh, 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, uh, of companies that are based in, in the U S or based in Europe.

Uh, when we talk about European companies, uh, one of the first things you have to consider is already go international because the markets are quite small and they met, might be saturated fast. So you can really think about, uh, going to, to the markets where, uh, 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, it's still a little, a big, uh, uh, 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, uh, scaling. Uh, sometimes it has to be very early because of the, the size of the home market, but we definitely, it's definitely on our playbook on how to do it.

Claus Lauter: Now, 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 like to, we have built our, our first company go case on a custom platform. Uh, we learned a lot with it, but it was very painful. So we don't want to replicate that.

We love, uh, the easiness that Shopify brings to, uh, build a business. To integrate apps to, uh, yeah, I have a whole ecosystem that supports it. So when we talk about the platform, we're really, uh, 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.

Claus Lauter: Okay. It 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, their figures right, uh, and understand, uh, and present to us what is their, what is their financials, their, their case, what, uh, what type of, um, 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, uh, um, 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. Yeah. So, um, if they want to, to, to reach out, we would love to talk to, to other interpreters and understand, uh, how to help them grow.

And we 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. Uh, but we, in, 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, as a venture partner, um, 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, um, 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 percent and how can we achieve targets?

To unleash those stock options of 20%. So we of course make, uh, contracts and commitments to say, this is what we plan to do, and if we hit those plans, we will be, uh, untapping, uh, potential stocks of up to 20 percent at first, but case by case, depending on the, on the, on the, um, on the type of operation, on the potential of the operation, we might as well come as a majority shareholder and buy, uh, more than 50 percent of shares.

But our usual case is really thinking how. Can we, uh, be first a minority shareholder that supports their growth and, uh, and let the founders, uh, operate the company. Yeah. 

Claus Lauter: While we operate their 

Leonardo Caracas: growth. 

Claus Lauter: Okay. Give me a bit of an idea about the timeline. How long does it take from getting in touch with you guys before really, um, the growth kicks in?

Leonardo Caracas: Until the growth kicks in. That's a good one. Um, we start definitely, uh, having mentoring coaching sessions. Yeah. So the first things we try to do, and that takes around one to two months is just getting the basis, right? Understanding the company, understanding which assets do 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, if we had this type of offer, if we have this type of bundle, if we, if we start. Creating this type of content. Let's push that out there and see what is the feedback we get from, from potential clients. Yeah. So we wanted to monster, try to get, uh, 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, uh, but, um. If they're just getting coached, it will highly depend on the execution of the 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. So, um, In the coaching period, we can definitely see a lot of impact within two months, uh, but really feasible impact within three. And when we're accelerating companies, it takes one to two months to already see, uh, uh, a good impact.

The, the last company we, we started, uh, uh, growing, it grew five X in two months. So it's, it's really, uh, it's really depends if we have the base right as well, if we are ready for a 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 more about you guys? 

Leonardo Caracas: Yeah. So if they would like to get in touch and understand a little bit how we work and, and meet us personally, uh, to be evaluated for, for mentoring. And for coaching, um, they can just reach out to us at, uh, jump ventures. co. So jump ventures. co. Um, they can also reach out to me on LinkedIn.

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

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

Claus Lauter: Hey Claus here. Thank you for joining me on another episode of the e commerce Coffee Break podcast. Before you go, I'd like to ask two things from you. First, please help me with the algorithm so I can bring more impactful guests on the show.

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We create content from more than 50 sources, saving you hours of research and helping you stay on top of your e commerce game with the latest news, insights, and trends. Every Thursday in your inbox, 100 percent free. Join now at newsletter. ecommercecoffeebreak. com. That is newsletter. ecommercecoffeebreak.

com. Thanks again, and I'll catch you in the next episode. Have a good one.