5 Metrics To Track Now That Will 10X Your Brand — Leonardo Caracas | Why Marketing Becomes Your Growth Wall, Which Four KPI's Show Scalability, What Blocks $1M To $10M Growth, What Fuels 20X Revenue Growth, Why Good Finances Speed Up Scaling (#412)

In this Ecommerce Summer School archive episode, we explore the challenges of growing an e-commerce business from small to big. 

Leonardo Caracas, Partner at Jump Ventures, shares proven strategies for scaling companies to eight figures. He discusses the key metrics that show if a business is ready to grow, common problems entrepreneurs face, and real examples of massive growth. 

Learn about the four important numbers every business owner should track and discover why most companies struggle with marketing when trying to scale up.

Topics discussed in this episode:  

• Why most e-commerce companies struggle with marketing during growth
• How four key metrics determine if a business is scalable
• What it takes to achieve 20x revenue growth in one year
• Why 4.7-star reviews indicate true product-market fit
• How raising AOV from $35 to $75 improves profitability
• What three obstacles block growth from $1M to $10M
• Why 30% repurchase rate signals strong customer value
• How Jump Ventures' three-step process transforms founders
• What financial changes support rapid e-commerce scaling
• Why most businesses need growth expertise to break through

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
https://tinyurl.com/3dw9576a

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Transcript

[00:00:00] So one of the things that we really try to focus is understanding how scalable a company actually is. So we look at four KPIs to, um, measure the health of the business and see that we've, that we wanna work with them in the future to try to scale them. The first one is.[00:00:20] 

Hello, and welcome to another episode of the E-Commerce Coffee Break podcast. Today we want to talk about growth. Now, growth is a big topic in every company. Every merchant out there wants to have as company growing, but with growth, there come different [00:00:40] challenges along the way. So it's a difference between your growth from a hundred thousand to a million, from a million to 10 million.

Different challenges come up along the way, and we wanna dive a little bit deeper into this. So with me on the show today, I have Leonardo Caracas, he's partner at Jump Ventures, at Jump Ventures Co. And they have developed a proven playbook to take your [00:01:00] company up to eight figures. Wanna dive a little bit more into this.

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? Hi. All good. All good.

Claus. [00:01:20] Good to be here. Leonardo. Growing a small company into a medium sized company, into a big company has different challenges. And we wanna 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?

Yeah, of course. [00:01:40] Uh, what in 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 minimal infrastructure. And, uh, once you get to this, uh, growth, which if [00:02:00] we want to simplify, it's going from 1 million to 10 million.

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 side. How are you going to finance this growth? And of course, which are the skills and, and, and team, uh, [00:02:20] 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're trying to grow from one to 10. Mm-hmm. How can I define these different, um, challenges within a a plan? Do you have specific KPIs or what do I [00:02:40] need to look at, um, to find out where I really struggle to make my business grow?

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 [00:03:00] 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 wanna work with them in the future to try to scale [00:03:20] 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 start review rating from.

From zero to five, you have something that is around 4.7, 4.6. You basically have achieved [00:03:40] the sort of product market fit. You have enough feedback to say people love the product, love the experience, and you are, your basis is ready to try to scare you. If you do it beforehand, it's going to go back and forth and you're gonna have a lot of pain.

So first and foremost, we look at, uh, reviews. Um, second, we try to understand what is your purchase rate. [00:04:00] So if a company has around 30% repurchase rate, so 30% of their, um, revenues is actually coming from Repurchases has me, it means that the company has somehow a portfolio that can, uh, be reused for a second, third, fourth time.

Um, um. Purchase from, from, from customers. And there is [00:04:20] 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 KPI is the A OV. So nowadays we try to find companies that have a. An A OV that has potential to go up to 75, uh, US dollars or euros.

[00:04:40] Yeah. So even if companies are nowadays not at that range, if they're at 15, 30, 40, we try to see if their portfolio and the way that they are, um. Basically situated in the marketplace, they're able to come up with sqs or able to come up with, uh, bundles and products that can take this a [00:05:00] OV all the way up to 75.

Why do we need that? Uh, in the landscape of paid advertisement nowadays is continuously, uh, uh, is increasingly difficult to have a profitable, um, purchase from customers if you don't have the right. A OV. Yeah, just the cost just keep getting up and up for, for meta. Or TikTok and et cetera. So you [00:05:20] need to be, uh, well situated in the a OV side.

And the fourth and last one is the conversion rate. So the conversion rate is a thermometer to kind of, uh, uh, measure if you have a, uh, current operation that wants to start pumping a lot of new traffic, A lot of, uh. Tests into the website, you're still [00:05:40] able to maintain certain level of, uh, 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, uh, your conversion rate might be, uh, way lower than it was in the early stages, but. When we see that a company's in the six [00:06:00] figures and they have a conversion rate of 3% and above, it means that they have space to acquire a lot of traffic and still be in a comfortable position, uh, um, in terms of, uh, conversion rates.

I wanna go a little bit deeper into these different areas. Um, obviously we have marketing that we have conversion rate optimization, which is a mix between [00:06:20] 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 merchant that come to you, you see have struggled the most with? Is it marketing? Is it operations? Where's the biggest issue? The biggest issue is definitely on marketing. [00:06:40] 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, [00:07:00] how to grow, uh, their, their plans for, for multi-channel 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, or, or a company that, uh, really has [00:07:20] a big focus on the brand and the product, but is really, uh, um, yeah.

Has a lack of skills on trying to, to grow the company. Mm-hmm. 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 [00:07:40] a real life example on how it works. Yeah. So last year we had a case study. Uh, one of the companies that we accelerated, uh, they were exactly, um, at this, uh, due to NDAI cannot say the the name specifically, but they were exactly with within the time, uh, within the.

The frames that I I posed to you [00:08:00] 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, I. Uh, they really had a good, uh, product feedback. They had a, uh, a OV that was in the low range, [00:08:20] $35, and we took it all the way to $70.

Um, they had a repurchase rates that had a lot of potential to grow if we work on the right channels for purchase, like email, SMS, uh, messenger, so on and so forth. Um. And their conversion rate was really at a great level. So [00:08:40] 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 a fast pace? How can we think about their merchandising? So pricing of the products, bundling of products, offers [00:09:00] 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 was almost a 20 x, uh, 20 x growth in one year. Um, and this was just supported by thinking about the growth [00:09:20] channels, the content strategy, the merchandising strategy, and uh, the tech and, and data stack we had, uh, for the company. Mm-hmm. We 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 [00:09:40] is still a huge, um, opportunity for, um, merchants? Yeah, so for, we are very, uh, industry agnostic, uh, with our playbook. So we don't really care if it's a sporting, uh, um, sporting brand or a arts and craft brand, or a [00:10:00] 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 [00:10:20] the entrepreneur, okay, what really differentiates your company from the market?

How can people not copy you? Uh, or if someone who has a, 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, uh, customers are, are delighted by it. So [00:10:40] 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 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 [00:11:00] qualitative feedback of customers, if they're solving a problem, if there's a good value for money, um, if they have a, 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 reaper chase on a co on a frequent basis.

So this can all be taken from the feedback, [00:11:20] but it goes back to these two points. Is your product differentiated or does your product solve, uh, an actual problem? If you have one of those ingredients, then you have something to to work on. And it's really for us in this diagnostic, it's, it really doesn't matter.

Okay. Now gimme an idea on how Jump Jump Ventures works [00:11:40] 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? So basically we have a, a three step, uh, um, approach with companies.

[00:12:00] Uh, how we actually started Jump Ventures was a, uh, pleasure project for me. Uh, I got to, to a stage where we, we have grown, had grown our own eCommerce 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 [00:12:20] to.

To think about, uh, 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 entrepreneurs. 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 [00:12:40] knowledge, uh, tools and, and network.

Uh, I had acquired, uh, throughout the years. So it is with this same approach that we continue to, to build a funnel with in Jump, which we have basically three um. Uh, three steps. The first step is, uh. Entrepreneurs get in contact with us constantly via our website [00:13:00] and, uh, filling the intake form where we evaluate if we can help them with our knowledge with, uh, the things that we, the thing would be replicable and with the current status of their, of their figures.

Yeah. And we go through a mentoring, uh, session. So we, we tackle topics that they have as pain points, obstacles, and, [00:13:20] and objectives that they, that they might wanna reach. So we do mentoring sessions that might take. 3, 4, 5, uh, uh, one-off mentoring sessions. Yeah. If we believe that after having a good, um, um.

Relationship over those sessions. We believe that the business has a [00:13:40] scalability and we believe the founder or founding team really has, uh, the right, uh, 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, every six months where we really try to scale your company by actively, uh, uh, coaching in different areas and, [00:14:00] and trying to see if you are 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 [00:14:20] 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, and revenue share deals. This is when we financially get into the, into the, into the company and yeah, try to scale them. Uh, our first objectives is always 10 x the company in [00:14:40] one year. [00:15:00] [00:15:20] 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? That's great [00:15:40] 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 a e-commerce business.

Yeah. So we understand what is a, a good gross [00:16:00] margin. We understand what we can do with a good gross margin. We understand what should be, uh. A target for MER, uh, for ad spend. We understand what should be, uh, 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 p and l together [00:16:20] with the intimacy. Where is 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 bonding.

And this could [00:16:40] completely change their, their gross margin, uh, 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, 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 [00:17:00] scale anyways.

Now 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 software developer, um, for tech and whatsoever. Do you have a network that you supply them [00:17:20] with or how does that work?

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 [00:17:40] 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 [00:18:00] tasks and, um, yeah, we have a, 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. Mm-hmm. Who's your perfect customer when it comes to, um, become a, a [00:18:20] customer of interest? The perfect customer, uh, as I mentioned previously, is that founder who is 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 [00:18:40] are really, um. 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, 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 [00:19:00] way. Not just develop products, but how to develop a portfolio and merchandising so they really don't have the playbook to grow, uh, brand online.

They really are passionate about what they created and how they created and, and how they, they, they talk to customers about it. So this is the, the, where we have the biggest synergies. Mm-hmm. [00:19:20] 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? So we have a mix of, uh, of companies that are based in, in the US or based in Europe. Uh, when we talk about European companies, uh, [00:19:40] one of the first things you have to consider is already go international because the markets are quite small and they might, might be saturated fast. So you can really think about, uh, going to, to the markets where.

You are very close by and you can ensure a good experience of deliveries, so on and so forth. For companies that are in the [00:20:00] us, uh, until they cap out the US market, it's, it's still a little, a big, uh, uh, timeframe. So we, uh. First try to understand how we can scale as massive as possible in the us then cap out and think about international markets.

For European companies. We think about, okay, saturation is gonna come. How can we plan for it? How can we [00:20:20] 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.

Now with our [00:20:40] listeners, uh, e-commerce merchants, are you focusing on spec specific platforms like Shopify or are you on on other platforms as well? Yeah, so we really liked, 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 wanna replicate that.

We [00:21:00] love, uh, the easiness that Shopify brings to, uh, build a business, to integrate apps to, uh, yeah, have a whole ecosystem that supports it. So when we talk about the platform, we really, uh, thrilled to work with companies that are on Shopify already, and if they're not, we try to have a plan to transition them to it.

Okay. [00:21:20] What kind of homework does a merchant or an entrepreneur need to do before they approach you? 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's, uh, what type of, [00:21:40] um, market they're trying to approach, and how do they view that their product is different?

So this is what we're trying to look, uh 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 [00:22:00] operating. Yeah. So, um, if they want to, to, to reach out, we would love to talk to, to other entrepreneurs 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, on [00:22:20] trying to get the best out of our time. Now 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 dunno, shares or dividends or, I dunno what, how it works. Um, do I need to think about, as an entrepreneur, I. [00:22:40] So we usually think about how can we become long-term partners? So how can we actually have stock options, uh, in a minority, uh, shareholding at first. So we think about something around 20%, uh, and how can we achieve targets?

To unleash those stock options of 20%. So we of course, [00:23:00] make, uh, contracts and commitments to say, this is what we plan to do. And if we hit those plans, we'll be, uh, untapping, uh, uh, potential stocks of up to 20% at first, but case by case, depending on the, on the, on the, on the type of operation, on the potential of the operation, we might as well come as a [00:23:20] majority shareholder and buy, uh, more than 50% 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. While we operate their growth. Okay. Gimme a bit of an idea about the timeline. How long [00:23:40] does it take from getting in touch with you guys before really, um, the growth kicks in?

Until the growth kick 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 [00:24:00] basis right, understanding the company, understanding which assets that they have in hands. Trying to gear that up for a po uh, possible scale and making small tests.

Okay, if we change the pricing here, if we have this type of offer, if we have this type of bundle, if we, if we start creating this type of content, let's [00:24:20] push that out there and see what is the feedback we get from, from potential clients. Yeah. So we, one to two months we try to get, uh, uh, that feedback.

And in the third month, we're 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 [00:24:40] coached, we will highly depend on the execution of the, of the founders, how they're really going crazy on trying to implement the changes that we are propo proposing.

Because at this point in time, we're just doing coaching. We're not really, uh, pressing buttons. Uh, and it really depends on, uh, how eager and hungry they are to to grow. So, um, [00:25:00] in the coaching period, we can definitely see, uh, a lot of impact within two months, uh, but really feasible impact within three. And when we are accelerating companies, uh, it takes, uh, 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 [00:25:20] 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 scale. Okay. Yeah. That shows you the impact of a good coach or 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? [00:25:40] 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. For coaching, um, they can just reach out to us at, uh, jump ventures.call, so jump ventures.co. Um, they can also reach out to me on LinkedIn if you want to, to, to have another channel to, [00:26:00] 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. Excellent, Leonardo. I will put the links in the show notes as always, and to our listeners and viewers on YouTube, if you are at a point where you think about [00:26:20] massive growth and you have the product market fit, then reach out to, um, john 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. Thanks Laus. Thanks for the, for the talk and uh, for we're not there. Happy sales. Hey Claudia, before you go, I would like to invite you to become part of the e-Commerce [00:26:40] Merchant Pro community to get actionable advice from other Shopify merchants who already have achieved what you are aiming for.

Our community is a safe place to actively grow your online retail business with the support of the most amazing and helpful group of e-commerce entrepreneurs behind you. Running a Shopify business is tough. Don't do it alone. Join us now. You will find [00:27:00] the link in the show notes. Also, if you think your online store has conversion or marketing issues and you would like to have a fresh set of eyes on your business, then drop me an email at Klaus at klau com and let me know a little bit about your business.

It might be beneficial for you. To have me look over your store, offers emails and ads, and get an unbiased [00:27:20] outside perspective and guidance to help you make your online business. Thank you as always for tuning in today. I appreciate you. Until next time, and I talk.

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 [00:27:40] impactful guests on the show. It'll also make it easier for others to discover the podcast.

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