Next Step China: How To Save A Company From Shutdown – with Derek Capo

I got an email from an early Mixergy viewer who told me that if it weren’t for these programs, he probably would have shut down his company. Instead, the company that he bootstrapped is now profitable and growing. So, I invited him here to tell us how he did it.

Derek Capo is the founder of Next Step China which offers China study abroad programs for both students and professionals seeking to take their next step.

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About Derek Capo

Derek Capo is the founder of Next Step China which offers China study abroad programs for both students and professionals seeking to take their next step.

Raw transcript


Mixergy’s audio transcription is done by Speechpad

Andrew: It’s Andrew and I’m recording the intro on my iPhone because I do not trust my computer. It let me down several times in this interview and I don’t even trust my backup computer. Even this computer let me down today. With the whole setup over here, I have a lot of trouble with the software. But the quality of this interview, I am sure this is going to be one of the best interviews on this site. You know why? Two things. First of all, a guy who is down, almost shut down his company and turned things around. How did he do it? Well, we’re going to break it down in this interview and you’re going to see specifically what he did to get customers, to improve the quality of the site and so on.

But that’s not what I want to point your attention to. See down here? Always at the end of my interview, I have a big, bold question that I want to try to get to. This is the thing that if the guy is so insulted that I ask it that he wants to leave, it doesn’t matter. The interview’s over. This question right here, why he had roommates barge in in the middle of the interview, I think is going to give you one of the best answers. I’m not going to reveal it, but I think it’s going to show you how he understands his business and why he understood what his customers were looking for.

All right, so there’s that question, there’s this coming up and it’s all sponsored by this company sweetprocess.com. What SweetProcess does is, you know how you’re supposed to document what you do at your company, so you can teach other people how to do it and have them do it for you, so you can move on to different parts of your business. Well what SweetProcess does is it helps you document what you do at your company and then it helps you pass it on to other people in your business. Sweetprocess.com, it’s created by Mixergy Fan (?) and I’m really proud of the work that they’ve done on this.

And the second sponsor is and you probably know it, Scott Edward Walker of Walker Corporate Law. If you are an entrepreneur here, let me show you a video. Let me show you his face. This is the guy you want to work with. It’s your tech startup entrepreneur because he understands the startup world, he understands the tech world. He lives in it, he blogs in it, he reports in it and he gets testimonials from people like these guys right here. People who you know and respect are already his customers. All right. Let’s get started with the program.

Ni hao, freedom fighters. My name is Andrew Warner. I’m the founder of mixergy.com, home of the ambitious upstart and I got an interview here from China. I got an email from this guy, he’s a Mixergy viewer, one of the early ones, who told me that if it weren’t for the programs I’m recording here and that you guys have been watching, he probably would have shut down his company. Instead, the company that he bootstrapped is now profitable and it’s growing and I invited him here to do an interview about how he did it.

Derek Capo is the founder of Next Step China which offers China study abroad programs for both students and professionals seeking to take their next step. Derek,welcome.

Derek: Ni hao.

Andrew: How did I do with that one? We practiced a little bit.

Derek: It was good. It’s great. We should get you to come to China to do a program.

Andrew: I’d love to come to China. Every time I try to go to China, something stops me, but we’ll make it. You know the question I’m about to ask you as a long-time listener. What’s your revenue now at Next Step China?

Derek: We’re a private company, so I don’t want to say that number, obviously, for competitive reasons, but we’ve been growing really fast. We haven’t hit the million-dollar mark, so I guess that’s one tidbit. But we will get there pretty soon, actually.

Andrew: All right. And you did give me your revenue numbers like many entrepreneurs have and you asked me, like some, not to reveal it. Of course, I won’t reveal it. I’m going to go through the story in chronological order, but first, it was something that I cut you off as we were talking before the interview started that I want to get into. Which is, you were saying that it was dire there for a period and the “Failure” series of interviews inspired you. I think a lot of people didn’t listen to my series of entrepreneurs who talked about why they failed because I guess they just couldn’t relate to it. It doesn’t sound like a hero’s story. What were you going through there and then let’s talk about why that helped you.

Derek: Well, at the time period, I was really thinking about, maybe it was around that time period, shutting down the business and I really wanted to talk to somebody. I didn’t have an entrepreneur community or mentor. I didn’t seek one out. I had my father that I speak to a lot. My grandfather had passed away, I talked to him about stuff. And there was really nobody out there that was my age that I could actually talk to and relate to, some of the problems they were having. So, you know, when you’re starting a business, you just want jump about the window and at that point…

Andrew: Did you really want to kill yourself?

Derek: I mean, I think it crosses your mind, it doesn’t mean I literally stood on a ledge and looked down and said I’m going to do this. It’s more like wow, why am I doing this? Why am I going through all this stress? But, it crosses your mind as in like, wow it’s so easy. All you have to do is do this and you’re done. I had a couple friends pass away, once at 12 once at 24 and I thought, well they would never do that. And I thought you know, they didn’t live a full life and so I should live a full life, I’m sure they would be envious of that. I know it sounds silly but, my grandfather had passed away and when he fled from Cuba in 1966 he was in the ocean stuck for 3 three days, to get to Miami and to start a business as well. To do that, I kept on saying to myself, if he can do it why can’t I? So I just kept going back to that.

Andrew: At your low point, what was going on in your head? Like, when you were really feeling bad about yourself and the life that you created for yourself what was going on?

Derek: You know, I thought I was a smart guy and I thought if I’m so smart, why am I so stupid? Why am I failing? I think people go through this and I think people don’t realize that part of the process of starting a business is really just humbling, being humble and adjusting and adapting and adapting. I didn’t realize that I thought no, no this is the strategy and we’re just going to go and it makes sense because we’ve seen these people do it, and these people do it. When you realize you’re so smart but yet you’re stupid and you’re failing, you just say, at that point I didn’t want to go home. I didn’t want to go back home, I said I cannot fail I don’t want to fail. If i go back home it would be a total disaster and I have to explain to all my friends, oh I started this business and it failed oh poor me and I just didn’t want that. I just didn’t want that pity of having to go through that.

Andrew: Derek, well you’re like me, I know you read a lot of biographies of successful people. To me they all felt like this piece in Vanity Fair about the founder of Instagram and how he failed a few times before he made it big. But if you really look at the failure as it’s described in the story, he failed to stay at Facebook where he could have made millions of dollars. He failed to stay at I think it was Twitter, Twitter I think is where he was an intern and he failed to cash out with shares there Then he eventually made it big with Instagram which sold for roughly a billion dollars. That’s the kind of story that I kept growing up listening to, that’s the kind of story that I see in the media. Then when Iran into trouble I thought, hey I figured I was a genius but now I’ve failed. I clearly am not a genius because I’m not like these people who I read about. Is that what was going on in your head?

Derek: Yeah, you know for us my industry was completely different. My family business back home was furniture retail, there’s no, nothing about tech fare. I went into the finance industry, again nothing about tech. I mean I read every boo you could think about Warren Buffet, I read tons of biographies of all these major investors and all these tycoons. You know Ray Crock, [SP} cause I really wanted to understand business cause I. {??} Then one of the reasons I think I wanted to jump out the window was like I literally studied the wrong thing. Everybody’s here doing computer science and going to California and starting all these tech companies. Here I am doing this financial track or doing the study abroad business. I’m like what, how is that exciting ? You know That’s not some sexy thing where I’m going to sell for One point something billion dollars like Tumblr did. You know, I just felt like my gosh man I’m going to be 30 now. These guys are like billionaires and here I am stuck, smart all this stuff. I was knowledgeable but had nothing to actually prove it. It’s frustrating.

Andrew: That’s why I like to do interviews like this where we talk a little bit about the failure. I think that when I end up with setbacks I say, well you know what Derek had something similar. It didn’t just work out for Derek. When I think well all these people, unless you’re 22 you’re going to fail. You’re over the hill if you’re 25 and I think well Derek did it. He clearly did it later in life. So, you started out at a hedge fund in Miami of all places. What was life like as a hedge fund guy?

Derek: Really normal actually. I graduated from Florida international University in 2003. I got the job because I was really aggressive. One of the speakers came in to speak and he was actually one of the workers. I went up the guy and I said listen I’ll do anything, I’ll do whatever it takes to work into your company. In the time process I was actually reading like 5,000, 6,000 annual reports on my own. That was one of the reasons why I really loved it. Warren Buffet suggested I did it so I said OK I’ll do it. Luckily they just called and they said ,”hey would you be interested in an interview, we want to give you a shot.” I had the best grade in the class so the teacher actually told them, “yeah, you should probably hire this guy.” So I went into the interview it was like 8 hours long. They did a one week trial period because they didn’t know who I was. They put me in a room and asked me like a ton of questions and stuff after I got the job, but it was a pretty boring lifestyle. It wasn’t anything crazy. I do remember having dinners at the Bear Stearns boardroom, having management meetings with the Wendy’s CEO. I’m 22, 23 years old having meetings with, literally, the management teams and telling them, in my own way, that they were stupid for making that investment decision.

I liked it. I liked talking to the staff and the management teams. I liked analyzing stuff all the time. One of the things that got me interested in (we’ll go into later) China was looking at the China market and looking at [inaudible]. I thought, “Oh, wow, China. It’s interesting,” so they opened me up into the whole global mindset.

Andrew: What was it about China that caught your attention?

Derek: Well, the story. The story is there was at one point, three, maybe 1.4 billion people in China. The story about China is not that they’re a mining country, they’re an agricultural-based country in the sense that that’s how they’re growing their economy. They were an economy that was growing pretty fast at that time: 10 to 15 percent. They still had a long way to go. If you looked at the infrastructure and where they were, it was like 1950, 1960 United States. It was a booming time, probably the best time to go and start a business.

Obviously, a lot of manufacturing was there, but I believe the next boom is the service industry, just like the States was going in the 80s and 70s and going forward. That’s one of the reasons it drew me into it. It’s not a developed country. It’s still developing.

I thought, “Well, Warren Buffett got rich in the 50s in the States, maybe I should probably get rich in China in the 2000s.”

Andrew: That makes sense. Did you initially plan to move there, or were you going to take a short trip?

Derek: I quit my job in 2007 at the top of the stock market. It was pretty close to the top of the real estate market. I said, “Hey, now is a good time to leave.” I was planning to get an MBA in a year. I said, “Well, OK, let me just take some time off and study Chinese.” I wanted to do something where I would learn a skill, not just go and travel.

I was there for five months. The first month I was there I said, “I don’t think I’m going to leave. I’m going to extend another semester just to learn and we’ll see how things go. Maybe I’ll get a job in China or something like that.” That’s basically what happened.

Andrew: Alright. Did you sell everything too?

Derek: I sold my car. I sold most of my stocks. I didn’t have a house because I was too expensive to buy— in fact, I got my real estate license when I was 18, 19, but I didn’t do anything with it because even when I was younger I was going to build skills. It was kind of like the Batman utility belt. It’s important to build skills because you never know when you’re going to use that [??] or whatever it is.

The thought process was always to build skills. Even at 15 I had bought the Series 7 stock broker exam book and I read it. I didn’t know when I was going to get the test, but I knew I was going to be ready for it when I did. I did pass my Series 7, actually. It was always more about learning. I was always learning and curious.

Andrew: You got to China and used this service. What is this service? I’ve never heard of this before I met you.

Derek: This service is actually what we’re doing now. They were a company that basically helped you go to China, to basically just transition, make sure you had everything paid for. If you were going to a university program, they would make sure your tuition was processed and you had housing, whether it was a nice apartment, a regular apartment or a dorm.

Andrew: Why do you even need a service like that? Olivia and I moved to Argentina. All we did was look online for an apartment to rent, and a flight, and we were ready to go. Why do you need a company that does that?

Derek: I think it’s more that in China nobody speaks that much English specifically certain parts of China. If you are a beginner and you know you want to take this adventure and you’re not doing it through a university study abroad program and you do it on your own, you’re probably going to hire a company to do it for you, specifically China and Asia. I probably wouldn’t do that going to Spain, obviously I speak Spanish, or even France. I’m sure most French people there probably have English, if not, there is a ton of English science.

I think that was it. They also knew there were a lot of people that went through the university directly to apply, and it was a pain. To actually get your application processed, it was just a pain. People wanted to pay for knowing that things were going to get done.

Andrew: It is kind of tough, you were giving me an example with what happened with a friend of yours who is an entrepreneur in China, just to give us an example we can relate to about the difficulty of being there. There is a lot of opportunity, but there is also a situation that happened to your friend that is indicative of the system there. What did he do?

Derek: He started a language school, so he’s kind of a competitor, but not really because we’re not a language school. He was boasting about how many staff he has. He has 25 staff members. I said, “Hey, whatever happens in a situation where you have to cut staff?” He’s like, “Well I have to pay them.” I said, “Has there ever been a situation where anything has happened with the staff?” He’s like, “Yeah, one time this staff member left voluntarily,” and I quickly interrupted him and said, “Did you make her sign a paper saying that she left?” He’s like, “No.” [laughs] His face was totally, like, “no.” What happened was a lawyer called him a year later saying, “Oh, that staff member that left? By the way, she just went to her Bureau of Labor office and said that you didn’t file the right paperwork, so you have to pay her one year, from the day that she left to the date it is today, of full salary, plus one year of penalty.” The guy had to pay all this money for a staff member that didn’t even do anything, just left voluntarily. That’s pretty stressful.

Andrew: That’s the kind of stuff that we were talking about can happen, entrepreneurs who aren’t prepared. There’s, also, the usual stuff that could happen to tourists and people like you who are visiting with any eye towards living there. This service was supposed to pick you up at the airport, but…

Derek: They didn’t pick me up. [laughs]

Andrew: You were supposed to go to a dorm. Did you get the dorm?

Derek: No, I actually had picked a nicer apartment because it was pretty cheap. In fact, the company was really unethical. When I paid [TD] a year into the process of me deciding to go. I submitted my application on the day of my birthday. I’m like, “OK. This is it, I’m going on my birthday. I submit the application, and the price was $6,000 or something for a semester. A week later, I get a bill for $9,000. I said, “Listen that price was on this day 6,000, and you just jacked it up 3,000, and they’re like, “No we have to talk to the boss about it.” I’m like, “No, you’re not talking, you’re giving me this price.” They had to give in, but that’s the ethics that some of these companies have, and that’s why people get scared because things like that happen. If we mess up on our price on our website with our company, we just give it and say, “You know what? My mistake for not being on top of that.”

Andrew: I’m glad you didn’t mention their name. I want us to be open, and I think that if we don’t mention the company’s name we could be a lot more open. You then created your own business. How long did it take you to start a business in this country that you’re not even sure you were going to live in?

Derek: What I did initially was, November 2008 I registered in the States because I was very comfortable with the system. Open up a website, you didn’t really need to be in China, even though it was operated in China. I wanted people to understand that even though we were operating in China that we would abide by laws, standards and ethics in the States. We had refund policies that were very State oriented. United States is still gold standard in conducting and starting a business. We incorporated the business, and then I wrote the website. By March 2009, I officially launched the website, but it didn’t take until May or June 2009 where we officially got our paperwork from the Chinese government. It takes three months to do. The corporate structure that we set up made it easy for us to operate, so that I could get a visa, my co-founder could get a visa. She was from the Philippines, so it was very difficult for her to get a visa. That’s a different story.

Andrew: How did you get this co-founder?

Derek: She was on the same program I was when I first came in the spring of 2008. It just happened to be that she was there. I met another good friend of mine who lives in Singapore, actually got into the investment banking business. His father was the vice president of ADB, Agent Development Bank, which is like the IMS in Asia. I met all these really cool, interesting people. When we were both in second semester when I started to extend, she was also interested in doing something. She didn’t want to go back home. She could have taught English here in China, but I didn’t really want to teach English in China. Personally, I didn’t have the patience for it, so we decided let’s just start this company. What shall we call it? We’re both taking the next step in our lives so let’s just call it Next Step China.

Andrew: The idea came to you because you saw this service that you used, and you said, “I could do that, and I could, definitely, do it better?”

Derek: Yeah, that was the mindset. We can do it even better, we can serve different markets, we can attract more executives. We’d just do a better job, obviously, we did it the first year.

Andrew: You had this idea, it’s time to get started, and one of the first decisions you made was a mistake. It was the platform you chose to build you website on. What was that?

Derek: Newsflash, and the main reason we used Flash is because it was a template we used, we got it for fifty-some dollars. Really good website, by the way, that we bought it. We used it and it was beautiful. We were trying to be different. We wanted to cater to a certain market, but at the same time we were trying to be different. You know? And it was really funny because cause when I met with some people they were like, “Oh, it’s great! It’s great!” But behind my back they were like, “What an idiot.” You know? And you know. So it was just a bad decision; cheap, but bad decision, for many reasons.

Andrew: I’ve been there. There was also some logic to choosing Flash. You wanted a template look right. But you also said, “This is going to get us a certain kind of customer.” What kind of customer?

Derek: Yeah, well, we thought that if you had a pretty decent laptop, with the big screen or a really, really high quality laptop, that if you saw this website on Flash, you would actually have a really good experience with it. In fact, you can still see the website if you type in br.nextstepchina.org you’ll see the Portuguese version of that website. So if you see it now, it’s still nice, but it definitely attracted an affluent kind of customer. Attracted parents that definitely had the income to get these kids to come over and spent the prices that we had. So it was a filter, but the problem was that when you’re spending so much money on advertising and you’re not getting that volume that you need in order to break even, you start to realize, well we need to adjust something. Do you need to raise your prices or do you adjust something? So…

Andrew: Speaking of customers, you now have this site that we know in retrospect was a mistake to build the way you that did. But you also had some customers. How did you get those customers?

Derek: We got those customers through Google adverts. And it was really, really funny because – I didn’t mention this to you in the pre-interview – but one of the cofounders of that other company that I used was kicked out by one of the owners. And it was all because of a law. It was a Chinese guy who got kicked out, so a guy got kicked out of his own company.

Andrew: What was the law that got the founder kicked out?

Derek: Yeah what happened was an American guy that started the company formed the corporation in Hong Kong but didn’t put the Chinese guy as a partner. And they didn’t form a corporation in China, so the guy had basically no rights whatsoever. So the American guy has a spat with this other guy and says, “You’re out.” And the guy like, “OK, give me my share back.” The guys like, “What share? There’s nothing legal.” And so the guy’s like really mad. So this Chinese guy from the competitor literally sends me everything: the financials of the company; every Google ad-words, keywords that they used; the financials; like literally everything, all the customer names. I was like, “Wow.” Imagine a competitor literally coming in and saying, “Here’s everything. Go attack.” And it was pretty impressive actually.

Andrew: Derek, I’ve known you for a pretty long time. I love you. I have a sense you’re going to ask me to edit this out. I don’t edit. It’s cool, right?

Derek: It’s OK.

Andrew: I say that because I don’t think the audience understands how much of my time goes into telling interviewees “We do not edit. It’s OK.” Most of the time I publish and they go, “I’m sorry I even bothered you afterwards.”

Derek: No, no. That company, I thought it was really wrong what they did to that guy and with us. We just think that that’s unethical and we thought- and in fact we approached the company to buy them out. It’s just curiously to know, because I have a website and I have a pretty strong keyword. And I wouldn’t trust anything they provide in financials. I wouldn’t trust a single thing, because I know what it is. You know, at least for a certain date, you know? But-

Andrew: So here’s the thing, though. You looked at that and that gave you an indication of how much and what you should be buying. What kind of ads you should be buying. Right?

Derek: Right. It was they gave us the keywords, the exact keywords. They even showed us how much they were paying. Doesn’t mean they were doing a pretty good job at it. So the problem was you can’t just copy and paste that and assume that you’re going to be successful. And when you see the revenue that you got, you’re like “It’s going to work. It’s going to work. We’re going to just do this, and this, and this.” And it wasn’t. It was just not going to work. And there’s a reason why it worked for them. It was the website, the products they had were different from ours. So.

Andrew: I have a situation like that back in the Bradford-Marie days. I knew what someone’s ads were. I knew where they placed their ads and so on. I said, alright we’re going to copy it. We copied almost everything and it still didn’t work because there’s always one little piece missing. And if you copied everything that we had at Bradford-Marie that was going for us, something would still be missing and it wouldn’t necessarily work for you. And I know because many people have and it didn’t work for them. Strange how that works out. And one of the mistakes that you made was copying their ad-spend. What kind of money were you spending on advertising and where were you advertising?

Derek: We weren’t able to afford what they were spending at the time. I had been talking to the guy, one of the guys that were there in February or March 2008. They were spending probably $15-20,000 a month and we couldn’t afford that. So we were spending a third of that; we were spending $5,000. And then when we started seeing that things weren’t really working out that well, we were like, “Oh my god! What’s going on?” We spent five and thought’s what got us our first customers in the summer.

Andrew: $5,000 a month?

Derek: Mm-hmm. (affirmative)

Andrew: On ads, sending people to your flash site, which basically means everyone was going to the exact same page, the home page. You were getting customers, but obviously not $5,000 worth. This is the period in 2009 where you were saying, “I think I might want to shut this down, maybe end the whole thing.”

Derek: Yeah. What happened was in July of 2009 my mom calls me at 2:00 p.m. China time. She tells me, “Hey, your grandfather just passed away.” He was in the hospital, but came back. Reports were that he was going to do well. [??] was actually on a trip in China which is actually a different city. I saw him on Skype right before he left. So she called and it was really emotional. I had to go back home. It was really, really emotional.

So I really contemplated, do I really want to do this? Do I really want to continue doing this? I should probably be back home with my family. [??] oriented, we should stick together. He was telling me even over the phone, “What the hell are you doing in China? Come back. Help your family with their business.” It’s just hard, really hard, because I loved him. I loved my family and everything else. It was like, no, I have this goal. I need to do it. I feel better doing something on my own.

It was really depressing. Going through all that, the website was all bad, not making any money, not having that many customers in the fall of 2009. I was just like, I can’t do this, but things turned around.

Andrew: What about the feeling of there’s a lot of opportunity in China, but you’re also away from home? I remember wanting some comfort food. I got home late one night and I just wanted some comfort food. I went out and I ordered pizza from the one place that happened to be open. I put my money on the table. The guy puts the pizza in the oven, brings it out in front of me, and it’s just this oily piece of cheese on top of bread. It was so disgusting. I even tried because I was adventurous. I couldn’t swallow it. I got home, I was so pissed. Everything, I hated. Did you have a situation like that?

Derek: Yeah. Every once in a while there was a bunch… Beijing is a really big international city. If I really wanted to go out and get something that’s pretty [??] I could. It’s not going to be the same as the states, but there is like KFCs and McDonalds opening up left and right here. There’s a huge consumer story and that’s one of the things. But yeah, I miss my Cuban food, which there’s none. Very, very little Cuban food here. I think that’s probably what I miss the most. Not the American food, it’s kind of easy to get a burger. Pizza actually was not bad here, but getting Cuban food, you can’t replace Miami’s Cuban food.

Andrew: No way. One of the other things that happened to me was my one connection to the world was my iPhone. I used to read books on my iPhone there. I used to talk on the iPhone there. I used to just browse the internet there. It was the computer for work and the iPhone for everything else. Then my phone broke. I forget… Oh, I know why. I was running in the rain listening to a podcast on it. It broke and I was so miserable. I couldn’t get another phone there. I think I ended up with a Blackberry, which was even worse than having nothing. I was just miserable and I talked about it in an interview. This guy Jason King heard me and he said, “I have a friend who is going there. I can get it to you.” He saved me with that phone, but those little things I couldn’t get over there. I remember even when I landed, I tried to get phone service, with an iPhone they wouldn’t give it to me. I tried bribing. I went to the bank and I got all the bills I could out of the ATM, and I put it in front of the guy, and he still couldn’t do it. He couldn’t give the foreigner the phone service he wanted. Those little things bother me. It doesn’t seem to bother… that, that was part of the issue for you?

Derek: No. I think with us, I was obviously really into tech. I like phones, but I had a Blackberry. I still have the same old Blackberry from about 2009.

Andrew: I’m sorry to hear that.

Derek: I can see it’s kind of still old, right?

Andrew: That’s the one I got. [??]

Derek: You know what it is? It’s like having an iPhone here, it’s highly stolen. So I usually leave things on the table, because I’m so focused about stuff, people will literally just [??]

Andrew: Is someone coming in there?

Derek: Yeah, yeah, just my roommates from England and Cyprus. They’re just eating breakfast. You know it’s 8:00 in the morning, right? They’ve got to go to work. My roommate is like this PhD guy, super genius guy. Every once in a while I get roommates to help cover my costs. I can cover it, but you know, lower down my costs, because I’m still an entrepreneur and saving money. He brought his girlfriend here from Cyprus. It’s really cool, because you kind of…

Andrew: Can they get on camera, or not?

Derek: Huh?

Andrew: Can they get on camera, give a little color for the interview?

Derek: They’re okay. They’re still in their morning clothes. [??]

Andrew: Okay, then we’ll continue here. I get a sense of your misery. Apparently I would be even more miserable, but little things like pizza disturb me. So you’re better off without that.

You now have to dig yourself out. You decide that you’re going to go back to business anyway, because why? Why are you going back?

Derek: I think part of it was ego in the sense that I didn’t want to fail. I didn’t want to go back home and say I failed…and I think another part of me was like, “this is impossible.” This company is doing this and this company is doing that, and it was really frightening as well because at the same time we find out a huge company that was bigger than the company I had used failed. Literally ran out, so we were like “Oh my gosh!” Are we doing the right thing? But it just seemed right, it just seemed the main reason why a lot of the companies were failing was poor management, high cost structures, getting into all those bad situations where they hire people and they don’t know how to fire and they get all this bureaucratic stuff. And we thought, “No, if we are going to do this, we are going to do it our way, or we are going to do it this way. We control as much as we can and we’re going to just do it and keep on trying.”

Andrew: Alright and you needed some help so you went to Elance the outsourcing company. What kind of help were you looking for when you went there?

Derek: Number one was SEO, so I found an SEO company there but that didn’t work out. The second thing was they kept on talking about the flash. I should have just listened to them. In fact one of my best friends who designed our logo, he told me, “Do not get a flash website.” But I listened to my brother and he says, “Yeah get a flash website.” My friend is a major designer so he is a really smart guy he’s actually a DJ to. And He’s like “No you need to get WordPress, because you can do this and that.” And I didn’t think about it, probably the stupidest thing I ever did.

Andrew: Because several times as you were building you said, “I’m to smart, I’m smarter than they are.” And that is one of the dangers. I’m pointing this out based on our conversation before the interview and in my sense it’s one of the dangers of reading as much you have, of knowing as much as you did, right?

Derek: That’s a huge part of it. You start thinking, “Oh I get it, now I’ve got more information.” Somebody once said to me, “The more information you know, in fact the less you know.” It was like, I’m trying to find the actual quote, but yeah you start reading and reading.

Andrew: It closes you off to other people because, it’s not that it’s bad to know more, it’s bad to not open yourself up to other people because it seems like your saying, “Look, I’ve read all these Warren Buffet books, I’ve read all these financial statements, I’ve talked to the heads of companies like Wendy’s. Who are you? A DJ is going to tell me to use what? WordPress? A blogging platform for my business empire? Get out of here.” So you close yourself off because you know more than they do, right?

Derek: Yes, and I think over time what I realized was that if I met somebody that was a friend or I would go to Mixergy and I would listen to an interview and I would be like, “Oh no, this person probably has done this. They have done this for five, seven, or ten years.” I will not put in my brain a percentage meter of who do I listen to more and say, “Oh I should listen to this guy more.” Versus some guy that just gave me a random opinion. So it’s just like weightings right? You decide, “OK. I’ve got five people that have given me five different decisions.” Well four of them have no idea what they are doing, but this one guy is telling me something that I don’t feel comfortable doing, but he’s been doing this for a very long time. Guess what? Maybe I should talk to that guy and find out more about what it is he or she is doing? So what I decided to redo is calibrate the weightings system of how I make decisions or who to listen to and I think that was important. In the beginning I was just listening to everybody and trying to please everybody and this and that. I didn’t want to insult my brother by picking something that he didn’t pick and not noticing that I shouldn’t listen to my brother about some things. You know what I mean? So I think it’s important to recalibrate.

So we went on Elance, in regards to AdWords we were trying to find a guy to help us improve our AdWords. Because we thought, “Oh maybe our problem is the AdWords, it’s not the website.” So we go in and this is after the second revision after the other company decided to redesign our website. He comes in and he trashes the website. He said, “it’s crap, this wrong, this wrong, this wrong, this wrong.” At that point I was giving up, even before I hired him I was like, “This is my last shot. I’m hiring this guy, if this guy can’t save me, I don’t know why I’m putting my faith in this guy, but if this guy can’t save me I don’t think I can go to anyone.” I didn’t have an entrepreneur community, I didn’t have Mixergy yet and I just thought, “You know what if this guy can’t do anything I’m just really going to shut down.” He came in, trashed my website and I was so happy. I was actually happy that he trashed my website, because people would tell me “Oh your website is great!” Friends and family are going to say nice things to you and I would always tell them, “No tell me what’s wrong, I want to know what’s wrong because I want to improve. I really want to improve.” This guy was just like, “No this is wrong.” And I was relieved that the guy was telling me all the things that were wrong. So I changed it, I changed it and just kept on.

Andrew: Did you change it or did he change it?

Derek: No I had to change it. He got me a friend of his to actually redevelop the WordPress coding because the coding was a mess. If I changed the post, it would edit another page. That’s how bad the coding was on Word Press. And it’s crazy. How can you mess up Word Press, but this company that I hired messed up Word Press. And so I got this remaining guy to help us to relaunch the back end of the website and it was able to allow us to adjust and make a lot of adjustments. When he told me OK when this is done you can do this, this, and this, and so we started adjusting and adjusting. All of a sudden people can have more pages to open and would get different pages and AdWords can specifically (?) a specific page. All of a sudden the quality of the traffic increased.

Andrew: And this is even before he did AdWords. He just needed to cite the work well before he can start buying ads for it.

Derek. Yeah, yeah. We didn’t realize it. You think advertising is the problem and you realize, no, no, it’s the storefront. It’s like saying, you have a store and there’s like, the doors are cracked, dirty. You walk in and it’s like something’s wrong right here. You’re spending a lot of money on a billboard across the street to get you in the door. No one’s going to go in there. So, I think that’s what I realized. I thought, oh this is beautiful work. Oh sure, it’s beautiful. It’s like having my (?) look at you and oh it’s great. In reality it’s horrible. So, yeah, that guy basically trashed the site. We improved our website. We started improving AdWords and it’s growing. We’re still not breaking even. We’re still losing money. So we thought, OK, what else do we need to do? So we started making adjustments.

Andrew: You didn’t just not listen to your friends who were telling you about WordPress. You also at the time were not listening to your customers when they were telling you what the product should be. And then you started listening to them. One of the things that they were telling you was that there was a certain kind of place that they wanted to stay in and a certain kind that they didn’t, right?

Derek: Yeah. One of the things I noticed was that in our products we didn’t offer a dorm pricing, a double dorm pricing which was actually the lowest, lowest price point. And so when we didn’t have that, it was really frustrating because people would ask for that and no, we didn’t do that. And what we were thinking was that, oh, we’re going to shield them away from this experience because if they go to a door in China they may not like it. And if they don’t like the (?) they’re not probably going to like us. We’re not giving them the right advice. So we were thinking we were afraid that if we give them something that they ask for and then they weren’t happy with it, then we didn’t do a good job of giving them advice.

So I had just finished a workout and I got really angry. I listened to really angry music when I work out because that’s how I got some energy, and I just remember walking out of that and I decided I was going to stop listening to my co-founder about business ideas. I’m going to basically listen to my heart and listen to the customers. If they tell me they want something, I’m going to adapt and make a product on the spot. OK, you want this? Let’s see if we can figure it out. If it makes sense, does this price make sense, OK, so we started doing that, adding, and adding and adding stuff. And it was the right thing to do. Just the right thing to do.

Andrew: What was it about the dorm that even though they wanted it I’m not going to give it to them?

Derek: First of all, there’s no mattress in the dorm. The mattress is literally this thin. So you’re going in. You’re thinking this is a nice mattress, all comfortable and soft. Nope, it’s like sleeping on a hardwood floor or whatever and so we thought people aren’t going to like that and dorm room is not like in college where everybody has a door open and you’re drinking and you’re partying, going from dorm to dorm. And everybody’s like Asian in the dorms, and they close the doors and they study all day. So it was like an experience that just was not good in regard to the residents. The good thing about the dorm is that there’s a lot of people and downstairs they’re talking and they go out but we didn’t see that. We didn’t really connect that social side, that actually was the selling point.

Andrew: So you started off renting the dorms which also reduced the price which made your business more approachable, easier for more customers to do business with you.

Derek: In fact, this summer we’re going to have a ton of kids and I want to say more than 60 some percent of the kids chose double dorm. And it’s one of those things where it’s like there you go. That’s what happens when you have a lower price point. I didn’t get that, and the reality is we also sell tutoring so they can study Chinese after the university program or whatever. What happens is we make more money selling the tutoring so that actually offsets the lower margin cost of having the dorm which is a luxury apartment. So we figured it out. There’s a way to get something cheap and eventually get people to buy something more to get more money out of it.

Andrew: OK. And they were other things that you did that I don’t know. . . You tell me if there were other things included in here. There are things like adding more video, adding more pictures to the site. I’m looking here at my notes, pricing.

Derek: Exactly. One thing that I learned about Google AdWords was the amount of crack [SP] clicks that Google loves to send people and I really didn’t like, obviously we copied the competitor’s website and we didn’t think Well, they’re smart. The reality is they weren’t smart, they weren’t very efficient with advertising.

So what we did was, one of the first things we did was I literally got negative keywords and I’m talking about tens of thousands of negative keywords to avoid our ad being shown on different impressions. So we added that and our CTR went from 1% to like 2% and I was like Oh, wow, great. At least I limited half the crap out there and it just kept on every time.

So I would add things like if I’m not serving a certain market, like if I’m not serving a certain country, I would put the name of the country as a negative keyword because the ad group was based on the States. Why would I serve somebody in France? So that would be there. I put every porn, literally every porn keyword that would not relate to our business, I put it on there. I put every verb and noun that had nothing to do with our business. So I’m telling you audience specific things that I picked because if we’re selling widget A and there’s a lot of other widgets that don’t work, well, put it on there. Don’t hesitate.

So Google does not tell you whether there’s a lot of traffic on a keyword that you put on negative and you can dismiss it. Oh, you know what? I made a mistake. Maybe I should have kept that keyword there.

So that’s one specific that I didn’t. Regarding the website pictures, video testimonials, I got the Better Business Bureau credited rating which is a huge [??]. People obviously have their opinions about the BBB but for us it was huge because people were sending me, you know, $2,000 to $25,000 to send their kid overseas. So they want to be able to have some form of protection. So for us it was huge. I don’t know what the audience would pick in this scenario but being obviously in the media and getting that actually helps a lot.

Andrew: OK. Somewhere around this point you discovered Mixergy and you said you learned a lot, it helped you build your business. I thought we could talk about some of the specifics.

Why don’t we start the Noah Kagan interview where he thought about how to hire interns. Why did that help you? And let’s, I’m sorry, just for the audience that’s thinking this is a commercial, let’s not make it a commercial. Teach so much of this that people almost don’t, not almost. If you can teach so much that they don’t even need the course, give them whatever is useful.

Derek: I think what I want to say, the reason why I kept on [??] Mixergy with all the stuff is I didn’t have anybody to talk to about starting this [??]. I didn’t know anything about webs, I didn’t know anybody in the market, I didn’t know anything about recruiting. It’s just a finance guy reading a report. Nothing. I mean, I knew about HR because I’d already my girlfriend at the time was an HR person. [??] small business is completely different, right? It’s different from a corporate company, a huge company.

So I think that’s what got me addicted and I just wanted to listen to all these classes and I probably thought my stupid self Oh, I’m smart. I know what he’s going to say but no, stop it, Derek. That was stupid. You did that last time and that didn’t work out so let’s keep on listening to other stuff, even if the topic is not that great on the headline of the interview, just listen to it. Because if you can get 5 things or 1 thing it’s totally worth that 1 hour that you spent listening to it.

So I believe it was a Premium class with Noah Kagan. He was talking about filtering for better interns. And I though Wow, that’s a pretty good idea, you know? And so he starts going over through his process and how he gets [?] before people actually, you know, to get the job. So I’m like wow, that’s actually really good idea. Like why didn’t I think of that? Usually just go in, do an interview, OK, if you like this person. No. If you’re going to use 30 minutes, might as well get really efficient 30 minutes or whatever you can.

So I think that’s what helped me with that and believe it or not our interview process now is insane. To the T, like, [??]. We send out a post, we get the post, look at the resume. We like it, we have like check marks. We have like 6 steps. We reply back, we set up questions. People reply to each question and we determine whether the reply actually fits what we want. Then we check, check, check.

Next step, we get a phone call. How do they sound over the phone? Did they sound nice? If they’re in a bad environment, in a bus or whatever it is because you’re in China, everybody’s on a bus, are they polite? Do they say I’m sorry, I can’t really speak to you right now? Blah, blah, blah, blah, blah. Or we set up a time that’s convenient for both of us.

Then, we give them an interview or a take home task. They do the take home task, which is something that Noah Kagan did and we determine whether they were accurate with the take home task they did, did they follow our directions. So there’s a manner that we got from the [??]. We make them see if they follow it. Then we do an interview. Go through the interview. Do we like it? Yes, we do? OK. Should we hire them? Yes or no. And it’s literally a process so by the time we get the intern we got some tests on. Sometimes they’re needed, sometimes they’re not on purpose. And then we decide, OK. This is the right intern. Earl Kagan was the seed that got us to that. They coalesced this really fine-tuned interview process

Let me highlight that one part you said. That’s the most important part of that interview with Noah. Don’t use the standard interview process, give people a task that’s related to the job you want them to do. When we were hiring writers who would pull out the key points of our courses and turn them into articles I gave the first batch of writers a task of finding the key points. Some of them said how dare you make me do this work. Hundreds of people who wanted that job pulled out the key points in a course that I gave them. You could see how they were thinking and did they understand the key points. Then you give them a second task that is more in depth and take the key points that you found and pick three to write about in depth. Some people complained but writers that like to write we got tons of them. If you’re going to hire someone give them a set of tasks that has something to do with the job. The people that want it want to see the internal working of your company. If you’re hiring an editor and gave him a task, how is Andrew editing these interviews so quickly?

Andrew: For us it’s right on. If you’re able to do a certain task and if we go deeper into that process we make everybody take a test that my professor invented. This preference is called the war preference indicator. It asks 150 questions and it categorizes the type of worker you’re going to hire. Are they results oriented? Are the manual oriented? Do they like to talk? What’s their time management like? If the report said they’re not really efficient you’ll find out. What communication style do they prefer? If you’re going to be interacting with a manual writer on a regular basis and they can follow directions then that’s the person you want to hire. You have to align your priorities with what you’re really looking for.

Derek: is this a test you can share with the audience for someone who wants it?

Andrew: You can purchase it at gilberts.ems.com. And the test is called the work preference indicator. I took the test three times and the results did not change, results oriented 70%. I got staff members that ask, “Can you tell me about this employee?” We’ve known this employee for two years but you were right on. It really helps people out. I’m not plugging it on purpose and I love the guy.

Derek: let’s just say this, we’re asking people to do a lot of work for the opportunity to work with us. None of this would work without prizing the job. No one is going to fill this out; you have to be a sucker to work there. You showed how he was writing his own help wanted add. But you have to make it worth the effort. 2: when you make it too easy people don’t really value it. What we did was ask, “Do you want to work in an international environment and improve your English, do you want to work for a foreign boss to understand to work in a foreign company, and people want that.”

Andrew: That’s exactly it, most people would say do you know how to work in word press, do you know how to work in excel. What you’re saying is no, do you want this benefit for you the benefit is not just this hour. Another program that you got a lot out of was the interview with Derek Sivers what did you get out of that?

Derek: I think there was a lot of stuff that was related to us in regards with his frustration with having to do the same thing over and over again. I think it’s important that when you’re starting a business, the founder has to go through some of this crap over and over again. The question is whether this is something we should automate. I think we were too quick to automate some stuff when they shouldn’t. They should fine tune it and once they’re done something 20 times in a row the same thing then automate it. What I learned from derrick was his frustration of having to repeat himself and basically setting up the company at fixing guidelines and values. I think what I got out of that interview was basically making a process for if there’s a thing that I want people to know about I want to make sure that its straightened out somewhere so people can go to it and not bug me so I can focus on the bigger things

Andrew: That’s something in the interview I debated with him, I was frustrated with, I didn’t understand. I don’t want to create this manual because the manual means a very bureaucratic thing. He convinced me to do it. What did you write down in your manual that helped you save time?

Derek: the problem was that he wasn’t very specific. He was saying that you’ve got somebody to write down everything in a question and answer and categorize but wasn’t doing the other stuff we wanted to do which was automating stuff to improve efficiencies. Even if I said something maybe it wasn’t the best way. Maybe somebody else had a better idea. I think I got that seed to write stuff down. Of course we write stuff in word but how do we find stuff, how do we categorize it, how do we know it’s going to the right person, how do we know if the right person is seeing it. When I saw Sam Carpenter’s interview, and read the book.

Andrew: you read the book before I interviewed him did you hear of him before?

Derek: no I saw your interview and got the PDF and sent it to family and friends. For us the personal story he had, the fact that he was sleeping in the floor 17 hours, not making payroll. This guy obviously got this problem and we’ve got the same problem so we should do the same thing. So we should automate our systems, step by step. From coming to the airport to leaving let’s put it on a timeline. What are the 5 things we do in these steps?

Andrew: Give me a breakdown, just like you learn from Derek Sivers the importance of automating your business so other people can run it for you and improve it. It wasn’t enough and you wanted something concrete. Give us an example of a process you automated or systemized and because it’s now systemized you can focus on growing the business.

Derek: let’s say we have somebody to pick up at the airport. That manual goes over step by step what they are supposed to do to be prepared for that. Step 1: make sure the flight information is correct, step 2, make sure the flight isn’t delayed, step 3: did you book the van to take you to the airport, did you print the sign with the person’s name on it. Literally putting things in a checklist. Make sure everything is done. The manual has everything someone is supposed to do before they go in there. When they see the manual, do the task and if you see any improvements add to it. If there’s a way to take out inefficiencies from there add to it, if you can avoid some big things from happening put it in there. If you have many manuals with different things and they should become somewhat related. You have to tie that in somehow… quickly through the book and I’m trying to think of one. Oh like traffic, we have a manual for when is the right time to go pick up a customer from the airport or from traffic. That is a system I created, a grid that says if this person arrives at five pm we need to leave our office by three to avoid getting stuck in traffic. I made sure I got that manual and I stuck them together so that when they are there they can say, ‘OK, I went through all this’ and I get it done.

Andrew: I have a couple questions with that. The first is; you’re telling someone to do everything from check that the flight is not delayed to check their clothes. I understand the value of making sure before you head out that the flight is not delayed. But I can also look at this list of things like check that the flight is not delayed and feel like this is so tedious I am not doing it. How do you keep your people from disregarding the whole thing because it is so detailed and it is so tedious that they feel almost like cogs in your machine?

Derek: Because if they don’t do it and the customer has a bad experience they are fired. That’s straight up because if I was picked up at the airport and that process was not done right. You have nobody there to pick them up at the airport that’s going to be a really bad impression. When I look at a customer I don’t look at them like this is one time your here for a month then after that see you later. No, no, no I’m thinking this customer is potentially going to give us a million dollars’ worth of business. People are like how do you think like that because this person only gave you $2,000. I’m like not what we did was we got this diagram, this is part of our training, we use circles and the first circle is really small because it’s our first customer and we connected it to 2 circles. 1 being really big and 1 being medium sized and the size of the circle represents the amount of money they gave us.

Then we connect a bunch of circles to each one and we ask the staff which one is the most important customer. Of course nine times out of ten they say the one with the big circle or they’ll say the first one because if you don’t have the first one you don’t have the other one. I say to them they are all important because if you mess up with the tiniest circle and that tiny circle got us five others that means we are losing out on that branch of five other customers. That’s what I would say; every manual, every process that we have is basically avoiding from a bad experience from happening to that future million dollars coming into our business. It’s just a thought process that we have to explain to the employees. It may make sense to some people, in the States, at least to some of the entrepreneurs but for me I have to go to basics. I literally have to say that this is important. It worked, I’m talking about one customer that we got she brought us $70,000 worth of business and it doesn’t stop because it talks, it keeps on going. So I tell them that story, I connect it with a real story, I say this is a chart and this is what really happened.

Andrew: The second question is more practical. What software are you using that they can see your steps and improve it?

Derek: Actually, we use Word Documents to write the manuals but we use Box.com to have all the file systems. Basically we have a folder that says NSC Staff, you know Next Stop China Staff. In there we have it by categorize. Remember I talked about the steps, that there are eight steps to the whole process. Each step that the customers hear is the minor stuff. So step one is prior to arrival. There are folders in there saying. zero, one, two, three, four, five and the manual is inside. My goal as a CEO is: How can I digitize some of these manuals? How can I eliminate them completely? How can I make sure we can invest in some software to take out the inefficiency? Because that is really why you are writing all these manuals because when you see 1,000 pages or a 1,000 Word documents you’re like ‘ oh my God how do I get this to 800? How do I get this to 500? What is it worth what is it going to cost? $10,000, totally do it, let’s do it because I’m going to save time, money, you name it. So first thing is get it all done then you realize I can take this out and this is out. You’re improving efficiency.

Andrew: That’s a good point. Once you actually see it all laid out you can say I can get a system, a computer to do this for me. I can create software that will take it off my people’s hands. Alright, how about HitTail Rob Walling?

Derek: Alright, obviously my frustrations with Google Adverts was pretty high. I was like how do we beat Google? I think a lot of people think how can we gain Google? You can’t gain Google. Google is going to figure it out faster than you are. His service was that most profitable keywords aren’t the short tail they are actually the long tail. I just kept on listening to his videos; at least his interview plus his website. So I signed up for his service and basically it was showing us the results coming in, they were very long tail. It makes sense, when you have long tail stuff people are more into getting that service.

A non-service, somebody typing and studying China is probably less focused about going to someone and saying, studying Chinese in China, in Beijing in the fall of 2014. Like that’s an awesome customer. I want to make sure I got that guy on my website with the right price infrastructure and the right service and make sure that my chat guy is talking to them and engaging with them, if possible. Because I know a lot of Christians probably in, versus someone typing and studying in China. So that was really a good idea to go in there and look up my search terms, see what’s good, maybe we can write about it and some articles and it worked out, man. And it worked out really well, exact, we got 13,000 more visitors from that once we implemented that. So you’re saying the revenue that that’s worth to you or do you feel uncomfortable sharing that publicly?

I’m sorry, I think it was $150,000 of revenue that we actually generated from using that strategy. And the way I calculated that potential revenue is if I use this money in AdWords and what our budget is, whatever and how that relates to our revenue now on that run rate then obviously is it what it would be and these are keywords that I specifically wanted, to have specific keywords geared to my business that I want so it’s not random keywords to track traffic. It’s specifically, study Chinese in China, in Beijing in the fall of 2014, that’s somewhere in there and whatever it was, the articles, whatever, it is.

Andrew: Let’s do one final one, I love this one, she was so good. The Fee Fighters of course is how to get PR.

Derek: Yeah, we had no PR before her, we installed Fee Fighters and she basically talks all about pitching, pitching, pitching. You know I pitched [??] I can pitch to clients, why can’t I pitch to reporters? I just didn’t go anywhere, I didn’t know where to go, I didn’t know who to talk to. She was so, she mentioned Haro and I’ve talked to Peter Shackman from the Herald, I communicate with him once in a while and it was awesome, awesome, I just kept on pitching and at the beginning we didn’t get any feedback. And I just got really addicted to it to the point that I stopped. They think if you get three meals a day you’re fine. And I just started pitching and I just got pretty lucky, one time we, I was in the airport heading to New York for an interview with a radio station and I got a request from the Herald saying, hey would you be interested in someone living abroad or left the states to go abroad for better opportunities. I’m going, oh my god, that’s me, the flight was boarding in 20 minutes, I kind of [??], that’s it, traffic Blackberry and I lose who wrote the email, like pitch, pitch, pitch, right there in the lounge or whatever, like right before the gate and I go in and I’m standing, I’m thinking alright maybe I got it, the reporter called me back and so I wrote her and it’s a huge, huge [??] story.

When I wrote that pitch I basically say, so I have a guide line and hey I saw your inquiry in the Herald, I think I would be the perfect fit for this article. Okay, then I would write, this is my story, blah, blah, blah and then give me an overview of my company. My company is this, this, and this. We do this, this, and this. We help, this, this, and this. And so the reason why you want to do that is you want to make it easy for them to just copy that. They really don’t want to talk to much you when you’re around until they really have you. If they can just get and copy it, put it in there, they think your job is easier then somebody else. So the normal one pitch with reporters, especially the Herald you got to reply back. You got to reply superfly. Number two you got to make sure that the article that you pitching you got to make sure it is perfect, you can’t just say, oh and I’m doing an article about something else. You got to sell yourself, I am perfect, I am the one, it’s like bating someone, you want to say, I am the perfect man for you, I can cook, I can sleep, I can, you know, I am perfect, and that’s what you have to do with your reporter.

Andrew: Well said, and that’s in case audio didn’t come in clearly enough, that’s Haro, Help A Reporter Out, you don’t need to be premium member to get access to that. Just go to helpareporterout.com. I think I’ve got everything actually, I give a quick list to the other programs that you liked, talked about Hiptail Rob, oh, PR course with Fee Fighters Stella Damon and who’s no longer with Fee Fighters because they sold it to Groupon and they refused to do an interview with me why they sold to Groupon or how well they did with it, but there’s still a good company and good peoples, Stella Damon, PR course, you guys will love it.

Derek: Was it good? They are actually bad though…

Andrew: I’ve heard that the founders did really well.

Derek: Okay, but she did it again?

Andrew: Sorry, no, no. I’ve, from what I could tell, the founders did well.

Derek: Okay.

Andrew: But apparently there’s more to it and I’m not, a natural what? Grasshopper, their interview is great. Wistia, they’re all over the place and competing with YouTube, we’ve got an interview with their founder, Kelly—

Derek: I saw his interview four months ago, just to get more stuff out of it. Grasshopper, I kept on listening to it and I didn’t think to get it. I was just using Skype and a recording system and it would just be direct. I thought, “Oh, I really don’t want our calls to be [??],” but then I started realizing, “I’m getting a lot of calls a day. How can I filter this? How can I start delegating?” It’s part of the whole system, the whole thought process.

I said, “No, no, no. Let me have a voice recording.” So I have my sister go in and do the voice recording. She has a really good voice, she’s a singer. I go in and I said, “OK, let’s filter it.” Step one, this program, step two. When I get the call at three in the morning, which I still do. This person interested in high school. Awesome, great. “Click.” Somebody will get the call and hang up.

If it’s an operator, there is a just 50 shot I’m going to pick up. It could be some Indian company that wants to sell me some service.

Andrew. Oh, I see. You used them for filtering. You were willing to take a call at three in the morning as long as that call has been filtered properly?

Derek: Yes.

Andrew: I see. They are really good for that, actually, and I use them for that too. If you call me and I’m not around a lot, it will go to Andrea, but there’s some process there, I see, that you’re using way more intelligently than I am to make sure you get the calls that you want right away. The others go to voice mail or maybe they don’t even get talked to at all.

Derek: The thought process is if they leave a message, they’re really interested in your service. If they don’t leave a message, it’s OK, I’ve got your phone number, I can call you back, it’s in the system. Even if they press 0, I’m going to call you back when it’s a little bit more convenient or I know you’re probably from that area code. Then I call and if it’s a service, I think, “Alright, great, thank God I didn’t get that call.” If it’s a family or a parent, I say, “OK.” Older people, they do press 0, it’s just a culture. They think, “Let’s press 0, I want to talk with somebody. I want to see if they’re real.” That’s a problem if they’re 50/50.

If people are really interested in the service, they will leave a message, because at the end of the day they want that. They understand that not everybody is available all the time. We’re in the States so we sell the service [??] the States. They don’t expect talking to the guy at three in the morning, and I tell them that. I can’t say “Oh, I’m in Beijing! Why did you call me at three in the morning?” I just say, “Thank you for calling Next Step China, how can I help you?” I just let them talk, and I wake up while they’re talking. OK, a little bit too much information!

Andrew: You also use Plainly Simple Studios because Derek Sivers recommended it? That’s who does your animation on your site.

Derek: Yeah, a great guy, I actually mentor the guy. I use Mixergy and now I feel I’ve learned so much that I feel like I’ve got to give back. This guy started the animation company. I told him, “If you want to get known, make an animation of Andrew with Mixergy or something.” I said to him, if he puts it on his website, he’ll get a ton of traffic.

This guy is a 22, 23 year old kid from the Philippines, and he has no idea. He literally comes to me and says, “Derek, if I can just find somebody to help me run the business so that I can do as it as anime, I would give 50 percent of it away.” I’m thinking, “Oh my God, this kid, he really needs help.” I told him he about Mixergy. He needs to look at Mixergy, he’s going to learn a lot but I’ve learned so much from Mixergy that I’ve started to help other smaller businesses around me, whether it’s in China or the United States. My lawyer friend, he’s got a business, I say, “No, you have got to do this.” So I feel like you’ve got to give back. Thank you Andrew.

Andrew: You started out as a customer of his, then you ended up becoming the guy who mentors him.

Derek: Yes. Absolutely. It’s nice in a way because I really want to help him, but in return he gives us a pretty good rate for some of the stuff we do, but that was never my intention. My intention was, always: “We really want to help you,” because it’s frustrating being 22, 23, or in my case, 25 with nobody helping.

It’s really funny because I said, “Nobody helped me. I know it sounds crazy and I’m giving you this advice, but please listen to what I’m saying, because it saved me a lot.”

Andrew: That idea of doing video for Mixergy, this guy Michael Byer, whom I met here actually in the office this week from [??] Media. He pitched me on creating a video for Mixergy. I said, “Alright, let’s try it. He did it, I blogged it once, I just saw him on Monday. He said he got a lot of business, just from that one post. Go figure.

Derek: I told him, I told the animation guy, I sent you guys an email about putting an ad to have [??] studios. I told the guy. I told him he should advertise on Harrell and advertise on your website, because he does all the “Simply” stuff. He did Derek Sivers’ video. He got a lot of business from Derek Sivers. I don’t think he realized who he was until he started connecting the dots later. “Oh you have no idea, this guy sold his business for $22 million and put it in a trust, pays himself a certain amount, and lives in Singapore. Pretty good life.

Andrew: That’s a great memory. Let me do a quick plug, and then, I want to ask you a question which I think might have been rude earlier. But, now that we’ve recorded everything and we said we can’t edit, what do I have to lose? The plug is going to be short because we talked about it so much today: if you like this program, go to mixergypremium.com, I think that you’ll get a lot of value out of it. Just as Derek was talking about all the programs that he learned from and how he applied it to his business, I have dozens, if not, hundreds, of emails from people who have done the same thing over the years. Some of them, like Derek, started out saying, “Who is this guy Andrew? Maybe he’s going to quit on this whole thing. Maybe he won’t be around.” Right? That’s one of the things you told me in your e- mail: that you weren’t sure you wanted to sign up because you thought this guy Andrew might disappear.

Derek: Well, we see Andrew interviewing people from Groupon when Groupon was getting [??] that were billions of dollars. And I thought, whoa, Andrew’s got this amazing network of founders. He’s one day going to close up shop. But, let me take advantage of the fact that I’m learning what I can from on his history. Because even that’s amazing. But, for me …Andrew: This is it forever. I am so committed to doing this and doing it forever, which is part of the reason why I’m especially upset that the software is still failing me. But, other than the software failing me, I love it. I hope to never stop. I hope to be a 90-year old man doing these interviews with the same kind of energy. You’re the modern version of Charlie Rose. Let’s put it that way.

Andrew: Yes. Look at Charlie Rose. He’s been doing this for a long time.

Derek: He’s great.

Andrew: Anyway, if you guys like all this and you want more, go to mixergypremium.com; you can take the courses that we talked about and so many others that will have, I believe, in fact, I know, equal impact on your life, and I can say 100% I guarantee that. Because if it doesn’t have that kind of impact on your life, I’m right here. I’ll give you your money back, guaranteed. Alright, here’s the final question: I saw your revenues; we’re talking about how successful your business is. Why roommates? And you can’t even say, “because, Andrew, it gets lonely here in China. I’d like to talk to someone who could speak English with me.” No, because you said it’s to save money. Are you at a point where you still need to save money?

Derek: There’s a lot of reasons for that. One of the reasons is: I personally like to save money, always like to save money. Even when I buy something it takes me a while to buy it, and I think, can I use this product every day? If I can use this product every day, at least for two or three hours, and it makes me productive, smarter, faster, or whatever, then I make that decision. For me having a roommate, there’s a lot of factors to that: #1: costs; they’re able to save me a lot of money. It’s always nice to save money. I always like to save money. Second, my staff. If they see me living with somebody else, and I get them to cut costs or to be thrifty in certain processes, and they see that I’m not: that I have a dog (I have a Siberian Husky); I live in this big apartment; I’ve got no roommate and I’ve got this, nice laptops, and an iPad, they’re going to be like, “you’re doing all this stuff, so why should I do it?”.

So, it’s all about that thought process and getting to think that, hey, if I’m cutting costs, and I’m living like this, there’s no reason for you to give an excuse that you can’t do it. Our business is in apartments; I’ve got about 15 apartments, right? So, we give them to our customers. The fact that I have a roommate makes sense. And, in fact, when that room is empty (because they’re only here for three or four months), I’ll say, OK, well, do we have a customer coming in? Yeah. OK, well, we’ll put him in the right place, because I don’t want to put him somewhere else when I know I can put him there. And, I’ll grill that customer. I get him there: I have this big white board that I got from Whiteboard, and I just like, “what do you think about this? What do you think about that?”. and it’s actually changed our business model.

I was telling you before: we’re going to spend almost $30,000, in fact, it’s going to be more when you factor in for a brand-new web site. In fact, you know how I was talking about how we didn’t have a double dorm product? Well, now we have a product where, if you want to register at the university, it’s only $200. So, now we just opened our market to the whole world. It’s things like that: talking to the guy from Europe, why do you do this? Why do you pay this little for this? Because we are cheap, and we don’t want to do this. And, we think that we can do everything ourselves, and we don’t need to service. Like you said: we don’t need a service to pick us up at the airport. We’ll just get the plan and get in the taxi ourselves, and we’ll figure it out. That’s part of the fun. That’s part of the fun in the experience of getting lost and getting ripped off. And, I’m thinking, goodness gracious. There’s a lot of people out there doing this, and we’re not catching our market. So, I use the opportunity to have roommates, believe it or not, to learn, to show my staff that I’m here saving money, and I personally get to save money.

Andrew: I’m so glad that I asked that question. It’s one of those questions that I would have kicked myself for being too much of a wimp to ask. And, I’m glad I did. And, I’m glad I did this interview with you. I hope I get to meet you in person sometime. I think I missed an opportunity to meet you in person when I was living in DC. Is that right?

Derek: Yeah, that’s correct. That’s OK.

Andrew: I apologize. It’s on me. I got to make more of an effort next time. I appreciate you doing this.

Derek: Come to China. Come to China. Duck dinner is on me. Look, you just got to do it. You got to just do it. I know we just keep on saying you just got to do it. You can do it in a week. I don’t know what kind of travel stuff but you’re missing out, man. You’re missing out. I’ll take you to a $6 foot massage for an hour. We’ll go have duck dinner at a really nice place. I mean there is so much, I mean, you’ll see it and you’ll understand why. You’ll understand why I’m here. It’s frustrating because, like I said, you’ll see all these entrepreneurs getting huge businesses, getting sold for [this] and I’m here like, you know, doing this stuff and you’re looking around like oh, man, this is going to be huge. But it’s an experience. You’ll have a great time with your wife here. You won’t regret it. You won’t regret it. Guaranteed. Seriously.

Andrew: I’d love to. And if there is someone in my audience who happens to be there, is there a way for them to say hi to you and maybe get together with you. I think that you may have even got together with someone from Mixergy in the past, right?

Derek: No. I will. I have [Kelly] [??] potentially coming over the China because I hired her for some marketing stuff. So I am going to bring her over. I’m trying to see who else I got. Oh, I was trying to meet that guy from [Hoop Street], [??] [Gile]? [??] Anyway, that guy from [Hoop Street], he was one of the cofounders but he couldn’t make it, he was in Hong Kong.

Andrew: What city of you in?

Derek: I am in Beijing.

Andrew: Beijing.

Derek: Yeah.

Andrew: Well, thank you for doing this. I am looking for to meeting you in person and I hope that people in the audience are going to find a way to say hi to you whether it is online or in person. And if they do, what is a good way for them to do it?

Derek: They can just email me at derek@nextstepchina.org or on LinkedIn, just search my name. I am number 1 if you search my name. Just go to our website. Who knows, I will probably reply to your contact form. No big deal.

Andrew: Thank you so much for doing this. Thank you all for being a part of it.

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  • Melvin Emilio Cedeño

    Loved this interview, I always love hearing what interviews got the guest hooked on mixergy. As soon as he mentioned the noah kegan interview I knew exactly the feeling he got, I use the test task concept all the time. You find out a person”s process if they make the cut, I don’t want portfolios, I wanna know how a person works. and if they’re willing to adapt to the system. I even remember the work the system pdf, I’d love to see a resource section where we can find any files guest’s have shared in one place. That book is gold!!!

  • http://www.JiansNet.com/ Jian

    Interesting story, listened to it half-way through but couldn’t resist to add my comment here.

    So I am from China and what Derek mentioned about various difficulties of being in China as a foreigner, I could totally understand. I actually sort of envy Derek since I am stuck in the good ol’ USA, due to work/family reasons. So right now I couldn’t go back to China to do a business :-( But I hope down the road, I could go back to my hometown Beijing with my site ;-)

    Anyhow, contrary to Derek, I am starting up a business here in the USA. Definitely went through the ups and downs and speeding up this year with our site. We are mainly targeting Chinese living in the USA. I guess it is exactly like what Derek did for foreigners in China, we are helping Chinese folks to study/live here in America.

    One other thing different is, we don’t buy any ads and the site just grows organically through good/targeted content and effective marketing methods.

    Keep up the good work Derek, maybe someday I would visit your company when I am back in Beijing, hehe. Thanks Andrew for this interview, I am loving it.

  • Derek Capo

    ??Jian!

    ???????????????????????????????

    Derek

  • Derek Capo

    Hey Melvin?

    Thanks for the comment it is always nice to hear other people get that “epiphany moment” and how it leads to execution and success. Please reach out to me if you need any help and guidance.

    Derek

  • http://www.JiansNet.com/ Jian

    Dude, your Chinese rocks Derek! ???????????????? ;-) ???????????????(JiansNet.com)????????????, ???? ;-)

  • Eric Nam

    Hi Derek! A friend of mine gave me a flyer from Next Step just a couple days ago! I remember thinking to myself “Finally a service other than CUCAS.” I never even bothered to use their service.

    This is actually the first interview I’ve seen so far on Mixergy, and the reason I’ve decided to sign up!

    First off, What an inspiring interview! I am currently enrolled in Shanghai Jiao Tong University studying in the Chinese Bachelors program, so I know first hand the agony that comes with dealing with the administration in China. It is great to see someone like you catering to that need, and building a successful business out of it! I aspire to do the same someday.

    It’s also good to see that you are starting to advertise to international kids that are already here, I believe there’s quite a bit market need there. I can already think of a handful of of my own friends that will need your service once they graduate, especially with the new visa law this year.

    I will be graduating in a month, and I hope to one day create a successful business here in China just like yourself. I am 23 with no technical background, and the more I read, the more I realize I don’t know much at all. I am hoping this website will give me the necessary tools to begin testing out and executing on an idea in the most effective way possible.

    It would be great if you could give me some advice on starting an e-commerce site in China. What are some of the main differences between doing business on Google and Baidu? Which payment system do you use for foreigners in China? Also, are you familiar with the ICP e-commerce license here, and will it be necessary for a “Minimal Viable Website” to apply for one?

    Any other generalized advice for starting a website in China would be greatly appreciated!

    Thank you for this interview! I really learned a lot!

    Regards,

    Eric.

  • http://twitter.com/jdeprato Jeremy DePrato

    really enjoyed this one. Really practical!

  • Derek Capo

    Hey Eric!

    Thanks for the kind words!

    Lets chat on skype to go more in depth about your questions etc. :)
    Please email me at derek@nextstepchina.org. Also I will be in Shanghai in August we can also meet in person.

    Derek

  • Derek Capo

    Thank you Jeremy I appreciate the feedback.

    Derek

  • Damian

    I would suggest adding SweetProcess.com to your Sponsors section. Your inline intro ‘pitch’ was enough to remind me to hit the site and look up the company name, while still listening to the rest of the episode back in the car.

    Just another note – Thank You. I really appreciate your interviews and your honest approach to the conversation.

  • http://mixergy.com Andrew Warner

    Good point. Done and done.