Andrew: Three messages before we get started. If you’re a tech
entrepreneur, don’t you have unique legal needs that the average lawyer
can’t help you with? That’s why you need Scott Edward Walker of Walker
Corporate Law. If you read his articles on Venture Beat, you know that he
can help you with issues like raising money, or issuing stock options, or
even deciding whether to form a corporation. Scott Edward Walker is the
entrepreneur’s lawyer. See him at walkercorporatelaw.com.
Do you remember when I interviewed Sara Sutton Fell about how thousands of
people pay for her job site? Look at the biggest point that she made. She
said that she has a phone number on every page of her site because, and
here’s a stat, 95 percent of the people who call end up buying. Most
people, though, don’t call her, but seeing a real number increases their
confidence in her and they buy. Try this. Go to Grasshopper.com and get a
phone number that will make your company sound professional. Add it to your
site and see what happens. Grasshopper.com.
Remember Patrick Buckley who I interviewed? He came up with an idea for an
iPad case. He built a store to sell it and in a few months he generated
about a $1 million in sales. The platform he used is Shopify. If you have
an idea to sell anything, set up your store on Shopify.com because Shopify
stores are designed to increase sales. Plus Shopify makes it easy to set up
a beautiful store and manage it. Shopify.com. Here’s your program.
Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the
founder of Mixergy, home of the ambitious upstart. How does a guy who
starts off making websites for a few hundred dollars, how does that guy end
up building a business that generates over $5 million a year? Ilya Pozin is
the founder of Ciplex, a digital marketing and creative agency. His
customers include Holiday Inn Express, Dell and Century 21. I invited him
here to talk about where the idea came from, how he built up his business
and how he got to where he is today. Ilya, welcome.
Ilya: Hi, Andrew. How are you?
Andrew: Your mother saw an article about you in Forbes Magazine and cried.
Why did she cry?
Ilya: That goes back to, I’m a Russian immigrant. We came to America when I
was eight, about 21 years ago. My parents had this dream for my brother and
I to live the American dream. When we stepped [??] here, we literally sold
everything we had back in St. Petersburg. We had $5000 in cash, my parents
had in their pocket. I was eight years old at that time. Both my parents
had Master’s degrees. My mom, her first job when we stepped foot here was a
cashier at a grocery store. My dad [??] repairing coffee machines. Well
below the kind of job they had back in Russia but they literally gave up
everything they’ve had to take my brother and I into a better life.
Throughout my childhood, my parents wanted me to go down this security
path. They said, “Let’s get you a good education. Then you go to college.
Then you’ll land some job where you’ll stay there for 30, 40 years and
you’ll get a raise every couple of years and move up. At least you can
raise your family and live a happy life.”
I surprised them a bit and they weren’t too happy when I started going down
the entrepreneur path. My parents, my mom and my dad were very scared for
me, very upset. It was definitely against their typical path for me and the
one day when I actually started to “make it” and started appearing in some
publications, like Forbes, that’s when my mom called me and was literally
in tears and the whole thing. Her mentality shifted. That was one of my
biggest turning points is when I realized that. I know my parents were
freaking out this whole time, but at that point, I knew that they trusted
me and they believed in what I’m doing and they now gave up their whole
fight for me to go down the corporate path and were happy with where I am.
Andrew: You guys came here with so little. The car that you got when you
got the U. S. came from where?
Ilya: We were a Jewish immigrated family, and we had a Jewish sponsor here,
and they gave us an old broken down Nissan, Datsun. For us, we couldn’t
afford to buy a car, so it was donated to us. Even the first school I went
to was a Jewish school. It was a private school, but my tuition was
completely paid for. To this day I hate my parents for taking that route
because I didn’t know a word of English, but then I had to go into a school
to not only learn English but also Hebrew at the same time, which I didn’t
know a word of, either. Talk about brand new country, no friends, don’t
know the language. Here’s a brand new school. You can learn two languages.
Start. It was insane, but it was definitely a good learning path.
Andrew: The Jewish Community Center donated a car to you and a computer,
which you told Jeremy, our producer, became your friend.
Ilya: Yeah. It did.
Andrew: Because you had no friends. Talk to me about, like, do you remember
trying to make friends? Do you remember sitting on the outside watching
people interact and saying…
Ilya: Yeah. Yeah. Sure.
Andrew: Tell me about that.
Ilya: Yeah, I mean, look. When you don’t know the language, what people
around you are talking, it’s very hard to communicate. And your culture is
so different. Looking around school, people were hanging out with their own
groups of friends, and cliques, and so forth. This was third grade. Even
then I was trying hard to make friends. I would go to the playground and
things like that, but it was difficult. I wasn’t able to communicate them.
When my parents got me this computer that they’d got from the Jewish
Community Center, it gave me something to do, and it became my hobby. I
could close my door and not feel… I don’t know if kids in third grade
feel depressed, but looking back the equivalent would be stuck in a hole,
but, at least, I was there with a computer. That became my obsession, my
hobby, and kind of my best friend.
Andrew: You come to the U. S. at 11. At 12, you get a job at the Montgomery
Journal. Doing what?
Ilya: Originally, I saw my parents working really hard for my brother and
me, taking the lowest end jobs even though they both had a great education
and job history. At first I started delivering newspapers, but then quickly
I switched to selling them. I was going door to door selling subscriptions
to the Montgomery Journal when I was 12 and did really, really well with it
and was making probably more money than any other 12-year-old I knew for
sure at that time.
Andrew: How? How does a guy who comes to the U.S., doesn’t know English,
suddenly has to figure out Hebrew and English and is struggling with both
and with making friends, suddenly become one of the best salesmen going
door to door selling newspapers? What did you do?
Ilya: Yeah. Just a small correction. I was eight years old when I came
here, not 11.
Andrew: I see.
Ilya: Over four years I did pick up enough watching Tom and Jerry and other
cartoons. That’s how all of us learned. I took ESL and so forth. By the
time I was 11, I was done with the Jewish school. I started going to a
regular school, so Hebrew was definitely checked off the list. I didn’t
have to learn that anymore. Then, I don’t know what it is. I think it’s the
struggles that my parents went through and how hard they were working. I
didn’t give up. I was passionate, and I knew that this was the way I was
making money. There was no “base salary”. It was a commission type job.
Andrew: What did you do that made you such a good salesman? Did you have a
couple of techniques? Did you have a mindset? Did you talk to more people
than other salespeople did? Were you more diligent about…
Ilya: Honestly, I don’t believe in sales in the same realm of, I think, the
way people explain sales like a used car salesman. Sales, to me, happens
naturally if someone knows the product really well and builds trust. I knew
what I selling. I knew in and out. There was no BS. I knew the Montgomery
Journal in and out. I knew its history and so forth. When I came and they
dropped us off in these neighborhoods… Looking back, I probably would
never do that again, but it was fun.
Going door to door, I built trust. People seemed to … well, that’s what I
thought it was, but maybe I was just a cute 12-year-old kid and they
couldn’t say no to me. At that point it was what it was, but I did well. I
did better than every other kid in that van that they dropped us off with,
so it’s got to be something.
I continued on that path. When I started working at CompUSA a little bit
later, I was also the best salesman there. It was because, like I said, I
grew up as a computer nerd. There, for me, it was knowing the product in
and out. When people came to me they actually realized that I knew what the
hell I was talking about. That’s why people bought from me. It wasn’t
because I was a good salesman. I just, they believed me.
Andrew: You banked, by the time you were in high school, $15,000. I
remember when I was in high school I banked $20,000, later in high school,
and I felt like great, I can go and invest this money and do something big
with it. No one took me seriously. I couldn’t go to the next level with it.
It was really frustrating. With $15,000 there’s a lot of, a lot of pride
that comes from that, but you also want to do something with it. Were you
able to do anything with that?
Ilya: I think investing and taking risks at that point wasn’t something
that was in my blood. Saving was so I wanted to just, you know, know that I
had this money so if I needed to spend it on something it’s there. It was a
great feeling to be able to, I think Guy Kawasaki said this, the feeling of
entrepreneurs to do what you want, when you want, wherever you want, right?
That was just what I had. You know? There was no, it wasn’t like you. I
didn’t look for investments. I didn’t look, even though I bought one stock
with my mom’s money and it tanked. I think from that point on I just, I’m
never investing in stocks. I still haven’t to this day.
No, I wasn’t looking for investing that money. It was nice to have. It was
nice to be able to graduate high school with some cash on hand and feel
independent from my family rather than always relying on them. I knew that
if I wanted to go get my own apartment I could. If I wanted to go out with
my friends I didn’t have to ask for money. Those kinds of things were just,
you know, it’s a great feeling to not be relying on others.
Andrew: Did you date in high school?
Ilya: No.
Andrew: No.
Ilya: Not really. A computer nerd that is known to, you know, be the
neighborhood computer and the (?) computer nerd. Even in middle school, I
don’t know what it is, Andrew, but the formula just doesn’t add up to
girls.
Andrew: Did that drive you, by the way? Did that make you say I am going to
channel all this energy that can’t go into meeting and dating girls and I
am going to put it towards something else. Learning computers, building a
business, playing chess. Did it drive you?
Ilya: Well, I mean obviously looking at my friends and other people around
me and the “popular” kids in school and what they were doing. Then I was
always very kind of extracurricular about those things. I was in the chess
club, I was fixing computers. I always tell the story that, you know, I’d
be called to the principal’s office on multiple occasions. And typically
when people are called to the principal’s office they’re clearly in
trouble. Definitely, the popular kids. But when I was called everyone knew,
and I knew, that it was because their computer was broken. It wasn’t
because literally I had done anything because I didn’t do anything wrong,
you know, in that sense. But I don’t know, I mean I think…
Andrew: But was there a moment where you remember seeing everyone else pair
off or go to the junior prom or the senior prom and you said one day I will
have my chance. It’s obviously not working for me here. It didn’t work for
me at the last school. One day though and I’m going to build towards that.
Ilya: Yeah, for sure.
Andrew: You did.
Ilya: And, you know, when you’re looking back at, you know, and all the
things you’re doing, the computer stuff, the chess stuff, you never. Being
in middle school and in high school you don’t know where that’s going to
take you. Everyone always says that those kind of guys and nice guys always
finish last. But whatever. It sounded like a bunch of BS because I saw all
the other kids have fun and, you know, their life looked nice too, right?
But I stuck to what I was good at and I continued with it and I knew that
eventually it was going to end up driving somewhere.
That’s, you know, what really instigated me to start my company when I was
17. It’s because so many people were coming to me for fixing their
computers and then all of a sudden they started asking for websites. I saw
a demand and I said look, you know, it’s time to take this thing to the
next level. Let’s turn this into a real company. I had a mentor at that
time that, you know, helped me incorporate.
Andrew: Who was this?
Ilya: This was Tom Antioch.
Andrew: OK. Tom you met when you were working at Comp USA. He walks in and
asks who can I talk to about computers? Who’s the smartest guy essentially?
Everybody points to you. He talks to you for a moment, slips you a piece of
paper that says you should come work for me. What did you do when that
happened?
Ilya: Yeah, so Tom actually came to Comp USA with a list of questions. He
didn’t even care for the answers. He just wanted to find the, he was
looking for what he called a propeller head. He was looking for a computer
nerd to be his right hand man, to help him with his business. He was going
around and every single time he asked any associate a question they would
point to me. He came and I answered all of his questions on the spot. He
slipped me a piece of paper saying I’ll double anything you’re making here,
come work for me.
Andrew: He did this for hiring purposes?
Ilya: Yeah, this was…
Andrew: Oh, I see.
Ilya: This was his way to find his “computer nerd propeller head” to work
with him. Tom is a self-made millionaire, kind of an entrepreneur, public
speaker. Just one of those guys . . .
Andrew: He teaches Internet marketing, right?
Ilya: He teaches Internet marketing, he speaks all over the world. He is
just really, really smart (?), lives in a giant mansion, very
inspirational. Tom really inspired me and I still talk to him probably at
least once or twice a month, to do what I am doing and drove me to be an
entrepreneur in the real sense and to take the skill sets that I had at
that time and develop them to further.
So, when that opportunity came (?) I always follow what seems to make sense
as an (?) and being young and working at Comp USA and somebody saying “I’ll
double your salary come work for me” and I did it. I took the chance.
Andrew: At that time, were you doing computer jobs for people like your
high school principal and others, did you have this little side business?
Ilya: No, this was around when I was about 16, there was not company yet.
Andrew: I see. What kind s of things did you do for Tom then before you
founded . . .?
Ilya: I found out quickly that Tom taught Internet marketing so, I started
by setting up his computers, his servers doing what I normally did in high
school and in my neighborhood, for him. Setting up software, automating
tools making his day-to-day easier by creating some automation things. But,
at the same time, I was also participating in his classes.
So, when he started teaching his students he had a bunch of products he was
selling I started learning alongside. That’s when it really kind of hit me
that “look, the next step obviously, isn’t fixing computers all my life
it’s marketing,” and let’s take the next step which is Internet marketing
and learn it and see how that could help me because I have seen him helping
hundreds and hundreds of other businesses.
Andrew: I was watching his video online, the one promoting his education
sessions at his mansion. I think it’s something like $8,000 you come to his
mansion, he gets you the cookies that you like right down to the specific
kind of chocolate chip that you like. That’s which chocolate chip, he’ll
get you that and basically he sets up this environment for you but you come
into his office and you sit and you learn from him directly and that’s what
you got to watch?
Ilya: Yes. One-on-one. When I started with him he wasn’t in a mansion.
Actually, he freaked me out because when I first went to work for him it
was in Landover, Maryland and literally his house looked like a double long
wide. I walked in and it was literally like watching one of those shows, I
don’t know if it’s on Bravo or whatever, where there are pack rats and they
have crap everywhere.
There was paper all over the place and I was also 45 minutes from my house
when I drove out there I am like “God, what am I getting myself into, like
you know salary is one thing but is this guy nuts, is he going to murder
you what’s going to happen.” But, later I found out that he was obviously
legitimate. I Googled him a bit, I don’t know if there was Google at that
time, maybe I Lycosed him, and checked him out, found out that he was
actually credible and started to learn alongside him.
Later, fast-forward a bit we can get there he moved to Virginia Beach and
after college I went to work for him that’s when he got his real mansion
and put his house kind of where his mouth was and his money was and started
bringing people in. There is no way he could bring anyone to his Landover
house, nobody would . . .
Andrew: (?) for a while. I have to ask you this, since you brought that
up, what you called the double wide or it looked like it. Clearly he grew
from there but, on his website right now greatinternetmarketingtraining.com
this thing looks like it’s from the Lycos days. What happened?
Ilya: Yes. He actually, it’s funny because I obviously went down this path
where I now have an agency and we are making real websites to be more
expensive real, you know, for businesses corporations thinks like that.
But, he has always taught that the way a website looks doesn’t speak to how
much money it makes. It’s not about the actual site but, it’s about the
content and the product you have, the way you sell and position and the way
you write your copy.
As living to what he teaches he is sticking to this old fashioned look
because that his proof in the pudding this site, even though it looks like
it was made in 1990 something, and it probably was, and I probably put it
together for him back in the day, still makes millions of dollars every
year. If you redesigned it made some more money, would it work? Probably.
It would probably bring up his credibility and value but, looking like this
it actually builds more credibility and value for him because it says it
doesn’t have to look like a million dollars to make a million dollars.
Andrew: Do you remember one or two things that you learned from him back
then about marketing as a guy who is new to it and hungry to learn?
Ilya: Yes. One of the things that he teaches that literally is the formula
that I work in any kind of business nowadays is that if you can automate
your marketing, if you can create a stream where business is knocking [??]
your door, whether it’s SEO, or pay-per-click, or article marketing or
doing videos, whatever it is, if you can automate that, you’ll have plenty
of opportunity to figure out what your business is and what it needs to be
the most profitable and to grow.
Andrew: So automate the way that traffic comes to you?
Ilya: Traffic or leads or inquiries, in general. One of the things that
we’ve had at Ciplex to this day is no matter if it’s a shitty time of the
year people are always knocking on our door. We don’t spend time or money
going after business. By not having to focus your attention on trying to
acquire new customers in business, you could focus on the actual product
you’re delivering and on how you’re operating the business and the team
behind it. One of the biggest struggles people have is how to generate
leads and how to generate sales, but if that’s removed from your focus, you
get to focus your mindset on building your business rather than building
market [??].
Andrew: How do you do it at Ciplex?
Ilya: These days I write a lot. I’m a columnist for Inc., Forbes and
Huffington Post. I have built up a self brand and Twitter [??], but in a
combination of that, being out there and writing and then some SEO that we
do and the great work that we’ve done and all the awards we’ve won. We’ve
built up this credibility where before we used to get leads, when I first
stepped foot in L.A., we were ranked number one for Los Angeles web design
and a bunch of those terms. I think we still are, but it’s not as important
anymore because we now [??] and people Google Ciplex specifically, not just
those terms. There’s definitely a sheer number of leads that we still get
from people that have [??] heard of us but now we’ve built a brand and
people have heard of us. It shifted but from the beginning days it was a
big focus on search engine optimization. It was 100 percent of it and when
I was still living in Virginia, what triggered me to take my business fully
on its own and leave Tom and do this full time as a focus was I literally
started getting lead after lead and I couldn’t meet with anyone, being on
the east coast, from L.A. so I ended up moving out here. Lead automation
was amazing. The kind of sales people and talent you can bring in when you
say you don’t have to go door to door and find business, we’re actually
going to hand you [??] leads that are looking for a business and you focus
on perfecting your pitch, your product and everything else. You’re in a
different world. The caliber of people is very different.
Andrew: Let’s continue with the story. Going back to the narrative. He
comes in to Comp USA, finds the right guy, the propeller head, as he says.
You go work for him setting up servers and you’re learning from him. At
some point you start your own business. What got you to start your own
business?
Ilya: He did. He encouraged me, even from the first day I stepped foot in
there, he said, ‘I can hire you as a full time employee and you can do tax
withholdings or let me help you start a corporation and I’ll teach you
things about writing things off. You’re driving 45 minutes each day, you
can write off gas and your car.’ That intrigued me. I wanted to learn. He
encouraged me to start my own business right there. It was right around 16.
He paid my business, I started doing tax deductions. That’s what got me
going from then.
Andrew: What other [??] did you take on?
Ilya: What’s that?
Andrew: What other work did you take on in the beginning?
Ilya: Having my own company and going back to my regular high school life,
people started asking me, even though I was working [??] computers, people
started asking me for web design. I didn’t know a thing about it but it got
to a point where I started to see opportunity. It probably came from Tom’s
inspiration of creating [??]. I started to see demand. I started to take on
[??] design leads. I had a friend that was a programmer. I had another
friend that was a designer. I said, ‘I’ll take on all of the business. I’ll
manage all the products. I’ll sell everything and I’ll give you a [??] to
do the work.’ It was all under my corporation. I started to take on
business checks and had an account separate from my personal account and
started to run Ciplex, still on the side. I was still working full time for
Tom or [??], at that point. I was going to high school but then I started
to take on these web gigs and it was a few hundred bucks here and there but
it was nice.
Andrew: Give me a sense of what a few hundred bucks got a customer. What
did you do and what’s a typical customer [??]?
Ilya: [??] that point it was all over the place. It was a lot of my
friends’ parents that had side businesses or needed a website for their own
business to create one. It was very early Internet stages there, so it
wasn’t redesigns, it was more brand new, whether it was a start-up or an
existing business. I think I was making sites for $300-$400 at that point.
It got probably a 5-page website that looked pretty decent. No content
management system. Nothing like that. We probably used maybe even Microsoft
Front Page back in the day to code them, or Dreamweaver or something like
that, and put them up. It was more informational.
Andrew: I see. So a local DJ needs a website so that anyone who wants to
find out about him can go there and see it.
Ilya: Exactly.
Andrew: He hires you. You give him a 5-page site, all static HTML.
Terrific. He doesn’t have to do anything. People now know about the work he
does and how to contact him.
Ilya: [??] business card. Yeah.
Andrew: One of the things that Tom taught you was to get traffic, use
search engine optimization, and from what I read in Jeremy’s notes from
your conversation with him, you started optimizing for keywords like L.A.
Web Design, which is phenomenal phrase to rank for. You figured out about
inbound leads, and you got 1-2 leads a day. What did you do with those
leads that were coming in from search engine optimization?
Ilya: At that point I was … let me rewind back a little bit if you don’t
mind. Do you want me to go over what happened after high school, the whole
college path?
Andrew: Yeah. Hit me.
Ilya: Sure. As soon as I graduated high school, my parents wanted me to go
to college. It’s the American dream and the path that they wanted me to go
along with. I already had my business. I was definitely more of a rebel at
that point, and I didn’t really want to, but there was nothing I was going
to do that was not going to please my parents, so I wanted to go to
college.
I ended up visiting a friend of mine who ended up going to Florida State,
out of all schools. When I went to visit him, this was summer break, I got
a liking for the school. It was probably at that time because there were
about, I think, five girls to every guy. Being a computer nerd in school,
like we talked about earlier, girls was not something that was in the books
that much. I saw an opportunity that if I was going to go to a school, it
might as well be one where I have the best odds, right?
I started to reflect back actually last year on, why the hell did I do
that? Probably it circles back to conversion rates if you think about it,
as funny as that sounds. I knew that in a place where I was outnumbered by
girls, even if I was the biggest nerd in the world, there has to be some
sort of chance that one of them would fall in my lap, right?
I ended up going to that school. It was a great time. I took on a full-time
job while I was there. I was still running SciFlicks on the side. My last
two years of college was all online. I just saw it as an easy way to
continue focusing on making money in a job and running my company and
didn’t have to spend time going to class. I graduated really well, got
really good grades, which is surprising because I didn’t do so well in high
school.
As soon as I graduated, Tom calls me and says, “Hey, I live in Virginia
Beach now and [??] I want you to come work for me full time. Here’s a
$65,000 a year salary. I also bought a house for you which you can live
rent free in.” At that point I actually had a girlfriend, who is now my
wife, from college. By the way, a little funny saying that we say at
Florida State. If you don’t leave with a wife from Florida State, you’re
screwed for the rest of your life. Because there’s no way you have that
kind of experience.
Anyway, fast forward. I moved to Virginia Beach with my girlfriend and
moved into this house and didn’t have to pay rent, started working for Tom
full time, and continued down that path. At that point, that’s when he
moved to a mansion, a huge house. I think it was close to 10 bedrooms.
That’s when he started bringing in students to learn from him there, and
that’s when I started to work with him much closer with those students,
because everything back in Maryland was more remote than anything else.
A funny story happened. As soon as we moved into our house, about four
weeks in, we come home from work. Our work was at Tom’s mansion, so we got
to go to work at this giant house every day. We come home, and our entire
second floor was on the first floor. The whole ceiling collapsed. The house
had old PVC piping, and they burst. Our kitchen [??] was on the floor. It
was a mess. It was like when if you get in a car accident, you know that
car’s totaled, I thought that house was done. It wasn’t a little flood, it
wasn’t a little leak, it was a mess. The next day we ended up, my
girlfriend and I ended up moving into Tom’s house, which was [??]
experience in itself. We ended up living in this mansion for many months
while our house was being repaired. Tom and I were jokingly saying,
“There’s got to be a sitcom here like ‘Living with the [??].” Something,
because literally you wake up and I’m still in my pajamas and I go
downstairs and I’m now at work. Maybe a little too close to [??] work.
Andrew: What were some of the perks of living in that mansion?
Ilya: My girlfriend probably hated me at that time for that, but I would
spend a lot of time with Tom. We would hang out in his living room watching
TV. We became literally best friends, and once the normal business hours
were done I got to spend a lot of one on one time with him learning and he
truly became my mentor at that point and started helping me, giving me
advice. I started to buy into what he was doing and asking some specific
questions and start to apply that for myself.
Andrew: He opens up his books to you. He shows you the financial. Tells you
where everything is.
Ilya: Very [??]. He knew that eventually I was going to go out. He was
molding me to be his, whatever you call it. He knew eventually I was going
to go out on my own and he wanted to make the best out of me that he could.
He was a teacher.
Andrew: He would make breakfast for you at this mansion?
Ilya: He did.
Andrew: He did or they had people who did it?
Ilya: Students came, once a month they came for a weekend. The whole thing
was catered. At that time his girlfriend was making breakfast for everyone
including my girlfriend [??]. It was cool. Living in a mansion almost had
full service treatment. I couldn’t ask for more.
Andrew: Now you’ve got your business. Why’s it called Ciplex, by the way?
Ilya: Completely made up. Why is Xerox Xerox? It came. It sounded like a
techie, cool company, short name and just ran with it.
Andrew: Here’s something else you told Jeremy. You said, ‘Work our way up
from $300 clients to $500 clients, $1000 clients.’ But when you did sell a
site for 1000 bucks, you spent 1500 bucks to build a site. Why?
Ilya: Let me lead into your previous question and I’ll follow up with this.
Once I was working for Tom I decided to start optimizing Ciplex for the
L.A. market. This was in Virginia. I knew Virginia wasn’t the place for web
designers. I did my research. There wasn’t a big market for business, so I
chose L.A.. It was between L.A. and New York. I loved New York, but I
wanted to live in L.A. even though I’ve never stepped my foot there. It was
that American dream. That was my California Dream. I started to optimize
Ciplex for L.A. terms and I started to get one lead a week. Two leads a
week. Three leads a week to a point where I start to get one or two calls
every single day. I couldn’t meet with any of them and I literally was
saying, “I can do your business here from Virginia.” They’re like, “No. We
want to meet you in person.”
I saw the demand, and at that point I came to Tom and I said, “It’s time
for me to go out west.” Got on a plane, found an apartment, came back, got
my wife and, at that time, the dog and all our stuff, moved [??] across
country. At that time I was getting a lead or two a day and I started to
continue doing websites on my own there. I started to work from home,
meeting at Starbucks or whatever coffee shop was around at that time. Then
I got a little shared office space and my clients were about 400, 500 bucks
for a website then, but I started to realize that I [??] a bigger business
but why wasn’t the bigger business calling me? It was because my portfolio
screen that I was doing $400 or $500 websites. What I started to do, I
started to see other bigger companies and what they were doing is they had
better work. In order to get better work you have to hire better talent. In
order to hire better talent, you have to spend more money.
I started to make a little bit of an investment and when the clients came
at me and wanted to spend $500, $600 on a website actually spent $1000
sometimes, 1200, 1300, 1400, $1500 to make their website way better than
their original expectations. I did this to build my own portfolio and to
create leverage to be able to get higher clients. I did that for probably
five, six, seven times. Got a couple of great pieces. I think one of them
at that time, even won an award. I put those in my portfolio. Removed all
the lower priced ones I did in the past and all of a sudden the phone calls
I got were very different. The same people that were coming to my site as
before they were just not inquiring because they saw the work. I started to
create better work, show better work and all of a sudden people called for
better work. At that point I started to get $1,500, $2,000 clients. Of
course, I saw the potential to keep going. The $1,500, $2,000 clients often
I started to spend all of their budget. Not worrying about what I make at
that point because I knew I wanted to get to that $5,000, $10,000 mark. To
this day our average website’s probably around $7,000, $8,000 to $10,000
even though we’re as low as $5,000 and we’ve worked as high as half a
million bucks on projects. Our core sites are probably around there, you
know, in the more common platforms for small businesses.
Andrew: Who built the sites for you?
Ilya: What’s that?
Andrew: Who built the sites for you? You weren’t doing it.
Ilya: I subcontracted all the work out. I found a couple of good people in
Serbia, of all countries, even though I’m Russian. Right, kind of, I guess,
close to my roots. Really great programmers. I didn’t use them for design.
I find that Eastern European countries and even countries in India that to
find a really good designer there is very tough. I started contracting out
the design work to people here in the states even though they lived in, not
in LA because LA designers needed a lot more money. So they were in more
smaller towns. But for programming I went to Serbia.
Actually, that leads to kind of my next chapter at Ciplex which is when I
started working with programmers in Serbia I started to look for even more
programmers in Serbia when I started to get more and more business. At that
point I found a company in Serbia that it turned out that the owner of that
company actually lived here in LA. I said well, that seems like a perfect
match. I have to meet with this guy. Long story short he became my business
partner.
I met with him and, to back up once again I don’t know to this day how to
build a website. I don’t know a lot of code. I know how to look at it and
make the right assumption but I don’t know how to design it and I don’t
know how to develop it. But Nick, my partner, did. He went to Harvard for
computer science. He was running his Serbian business. Taking on clients
here in LA and sending the work there. Along with he was doing a lot of the
design work himself.
I said look, you know, if I have all these leads, I have all the marketing,
I’m a great sales person. I can manage these projects but I don’t know
anything about what I’m building, whether it’s good. This guy actually had
a company that could fulfill all the work, that seemed like a great
partnership. At that point I approached him. I said look, this is my plan
for Ciplex. Do you want to be on board? Do you want to be on board? Then we
went forward.
Andrew: I actually read about a partner in one of the Forbes articles that
you wrote. It said Nikkola Niketch, am I pronouncing his name right?
Ilya: Niketch, yeah.
Andrew: Niketch. Talented designer, developer with comp sci degree from
Harvard. I eventually took owner of the company. Did you, you have him a
big piece of the business and then you ended up taking that back? How did
you do that?
Ilya: Yeah, I mean essentially in the beginning I gave him 40% of Ciplex
and now we’re 50/50 partners. I did, at a certain point in our business we
were sending so much work from Ciplex to his shop in Serbia that it, he
actually came to me. I didn’t even ask him and he said look, you know, this
is what’s happening. You’re obviously helping build (?), my business. I
don’t think it’s fair so I think you should be a partner in that business
as well.
Andrew: I see. He said take my business inside of Ciplex and then you and I
will own this joint business together.
Ilya: Exactly. And honestly, you know, web design gets such a bad rap. Our
whole industry is mostly made up of people that take on work, or middle
people, and then they outsource it, right?
Andrew: Right.
Ilya: They’re just taking on work, skimping off, slicing off a piece of the
dollar. Putting it in their pocket and then sending the rest of the work
out to a company they have no oversight, no control over and hoping that it
comes back good enough of a product to pay their last invoice. That’s
predominantly how our industry is formed. I knew that in order to make a
good product I didn’t want to just continue outsourcing to this shop in
Serbia, that I wanted them under our wing so they became part of our whole,
you know, whatever you want to call it. You know, partnership and it was
our company. The interests were aligned. It was no skimping on quality
because it was the same shop.
Andrew: OK. Sales, at some point you hired a sales person to help you grow
the business. Can you tell me about that?
Ilya: That was accidental. I wasn’t even looking for a sales person but the
same way people Googled, you know, LA web design, Los Angeles web design to
find us for our services at a certain point I guess a sales person that was
looking for a job did the same Google search. This guy shows up in my
office and I thought it was a potential client. That’s when I was in a
shared office space with another company. He came and he opened up his
laptop and he had this whole PowerPoint on why I should hire him, which
blew my mind, because I never even thought to hire a sales person. I was
doing all the sales on my own and didn’t think that I wanted to spend money
and do that, but he did such a great job selling himself to me that I said,
“Look, if this guy can sell himself to me, he’s got to be a great sales
person.” So, I hired him. He told me what he wanted. I couldn’t afford to
pay him, but I said, yes, anyway. Don’t count that against me, and
literally Monday of the next week we started working together. I started
giving him leads. We started to parallel and sell at the same time, and our
sales start to scale up.
Literally, I was selling and he was selling, and we were getting enough
volume of leads that our volume of business was just going up. It was the
best meeting that could have happened. He’s still with this company to this
day. This was about seven years ago.
Andrew: So far, we’ve been talking about everything getting better, better,
better, and better, but there was a big challenge that happened where at
one point you weren’t able to make payroll. Why not, and how did you handle
it?
Ilya: Well, we always made payroll. We never had a point where we just
failed to make it. It was never that kind of issue because… Probably a
lot of entrepreneurs can relate to me on this, but we always get paid last.
Everyone we hire, we pay them first and we put everyone else ahead of time.
So there have definitely been situations where numerous months in a row I
didn’t take anything for myself. I just lived off savings, some credit card
debt and so forth. I made sure everyone on my team got paid. I’ve always
made payroll, but definitely our company, like every other company, has hit
bottom.
We’ve never had funding. All the revenue we’ve ever made we’ve reinvested
back in the company, and at certain points we probably got a little too
aggressive on taking the majority of our profits and investing too much of
them in the company and took on a lot of work simultaneously and had to
fulfill it. And it was more a cash flow issue. We had all of these open
projects, and we were relying on new business to come in and do them, but
there’s definitely points where it’s stressful. I had many, many, many
sleepless nights and took on a lot of the work myself and started to do
what I can to offset some of the costs.
Andrew: Well, it does happen to a lot of companies. I think the way you
handled it though is interesting. Did you get people into a room together
and you said, “Look, guys, this is our situation, and you opened up the
books to them and shows them what?
Ilya: Yeah. About a year ago, we started to have a very different culture
in our company. A couple of years ago, I went down this path where I wanted
to take myself out of the day-to-day business so I could focus on the
business. I hired a CEO, and that person hired a head of sales, head of
production, head of this, head of that; created a really top heavy
management organization which seemed to work. We had over 30 employees and
I didn’t know a thing about managing people, so that’s the path I went
down.
What we realized is that actually it ended up costing the business a lot,
and we took on a lot more work than we could handle and started to use up a
lot of our savings and profits. That model went away. We now don’t have
that CEO. We now don’t have heads of departments. Our culture is very
different now. We actually don’t have bosses and managers. We can talk
about that if you like, but to answer your question specifically, part of
our culture was being very open and autonomous and direct with our
employees.
One of the things that I realized is that people who work for a company, if
they’re passionate and believe in what they do and give it their all and
truly give a shit, the output from them is night and day against when you
tell someone to just come in at nine and leave at six. When you remove
rules and hours and give people unlimited PTO and let them pick their own
titles and let them run their own systems and give them trust to do things
in a way that they want to do it, even if you think they’re a little bit
wrong or whatever, you still empower them to lead on their own. That’s kind
of what Tom did to me. Those people become almost like entrepreneurs within
the company [??].
As part of that culture and mentality we [??] as a way for what, we need to
put our foot forward and we opened up our [??]. Whenever we had a great
month, we let everybody know. Whenever we had a terrible month, we let
everyone know. We sat in a room and literally brainstormed with everyone as
if everyone was an owner of the business of how to fix problems. When you
create that kind of culture, it’s amazing what a group of people can do in
a room to fix problems and it’s amazing the way people change and everyone,
all of a sudden, starts showing up early and staying late and you don’t
even ask them to do that because they truly have heart and believe in what
you’re doing. Don’t look at their job as a job but look at them as
entrepreneurs and as part of your business.
Andrew: Let me unpack that because one of the concerns you had is a concern
that anyone who’s listening to us would have if they were going to do this.
The idea is, you say to yourself, “If I open up my books and show people
that we’re having some tough times right now, they’re going to think,
‘What’s going on here with my salary? I have a family to feed. I have a
life to live. I took this job because I wanted them to take care of me
financially and I’ll take care of their interests day to day. They can’t
hold their end of the bargain.'” That’s a big concern. It’s a legitimate
concern. Why didn’t that happen? Or did it happen to you?
Ilya: It didn’t happen because of the kind of culture that we set up in our
workplace. One of the first things that I did in order to set up the right
culture is, at a group meeting, this was shortly after we parted ways with
our CEO and our heads of departments and we started to undo the typical
hierarchy. I said, ‘I want to make sure that you guys are here because, (1)
[??] not feel like you have to.’ I feel like the common job in everything
my parents taught me is get a 9-to-5, go regular job because you have bills
and you have to pay them so you have to do that. I feel like the true
passion and what drives people isn’t money and isn’t coming to work at a
certain interval and following rules so they [??] get a paycheck so they
can pay their bills and look forward to going home. People spend a majority
of their time of their life at an office, at work. Why would you want to be
in a place where you don’t love it [??]?
What I did, I went around to every single person and I sat with them and I
said, “What is it going to take for me to take [??] off the table? What do
you [??] to get paid so that that money isn’t your driver, and that we’re
working on other things that [??].” Giving [??] freedom to come in and
leave whenever you want, giving you full autonomy. What Daniel [??],
autonomy master and [??] is what drives [??] when you remove money. I
started to follow him and Simon [??] and a lot of what Tony Shay [SP], was
doing [??] and that kind of culture I looked at and I really believed in
it. I looked at and saw what [??] people isn’t [??], so let me remove
money. I took money off the table. I went through, some people said, “I
make enough. I don’t need more [??].” Other people said, “I’m short about
500 or 600 bucks a month and because of that, I take [??]. If I didn’t
have to take [??] I would [??] committed and [??] to you.” I did that. I
[??] everybody off to [??] needed to be in order to [??] off the table.
Almost like a father/son mentality. What do you need [??] to pay your
bills?
At that point when you establish that kind of culture, it no longer is
about money and to this day we have people that get job offers, all the
time, for way more money than we’re paying them but they turn them down
because they don’t work for money. We gave people everything they wanted to
be entrepreneurs, to drive them passionately. They love what they’re doing.
We give them full freedom. If they come to me and say, “Look. I want to
[??] this way, will you let them code that way?” We remove all those
barriers to get what people really believe in and drive forward to and
create that kind of passion. When it came to opening up our books and even
if we had a really terrible month, it created that trust and that other sun
[SP], mentality where even if we’re going through tough times, they weren’t
letting us die out. That is exactly when they gave more and started to turn
away even more of those jobs and don’t [??] anything else and focus
completely on our company.
Andrew: The other thing that I wanted to talk about, based on what you
said, you said, “If you have smart people who are passionate about their
work and you let them basically run their part of the business like it’s
their own business, they’re going to be passionate about it. They’re going
to grow your company and you’re going to have an entrepreneurial business.”
How do you avoid a situation where everyone is running their show, their
part of the business, their own way. Where they’re clear process that
unites the company,
Ilya: Yeah.
Andrew: you know that…how do you do that?
Ilya: That’s a great question, so our company, our agency now is over 40
people, but, you know my partner and I sat down and we looked at our books
and analyzed the last seven years of being in L.A. and we said, look we
were most successful when we were doing about a million in revenue, right?
Why? We had a much smaller team, we were able to focus on better quality,
better product, we had more personal passion and attention from my partner
and I to lead the team in the right direction, right but when the company
scaled and it grew to over 30, 40 people it was hard to operate in the same
way and efficiency started to go down. So we said okay, well how do we
create that same small agency feel within a bigger company? So what we did
was we broke people up into teams we almost created little agencies within
our agency. We worked at that time on three development platforms, and I
don’t have to go into the technical stuff, but we worked on WordPress,
Magenta, and Drupal. WordPress was our small business platform, Magenta
was our e-commerce and Drupal is our more custom web application.
We broke people up into teams by platform, and we separated departments so
we used to have sales, we used to have design we used to have production,
we used to have QA, we used to have marketing, now all those people are one
team. So there is no sales department, there is no design department,
there is no production department. What we have our teams of about 4 to 6
people and those teams are intermixed with people from different, used to
be, departments and they all work together to meet goals of the company.
So we’d go to a team and we’d say, “your goal” for example “is $60,000 this
month.” Or “your goal is $80,000 this month” we don’t give them individual
goals. We don’t say your goal is to do this or this or launch this
website. We don’t say your goal is to come in at 8:00 and leave at 5:00 or
work this weekend. We remove all aspects of individual goals and we say
you as a team, this is what you need to accomplish. And by doing that,
people started working together within the team, naturally, a leader
evolved within each team and those leaders started to take on more
responsibility for the team meeting goals and driving the team forward,
once again, they’re not managers they’re not bosses, that’s not how it
works, but the team started to work together to create their own rules and
processes and iterate.
So every two weeks the team meets back together and says what did we do
these last two weeks, how can we be better this next two weeks. Right, and
they work together continually improving and each team runs independent of
the other teams. But there is definitely some sharing like a team leader
would go to another team leader and would say “hey we did this these last
two weeks and it helped us be more efficient by 10%, you guys should try
this,” things like that. So that’s what we did. When you break people up
into small teams and natural leaders evolve, that’s when you don’t need to
worry about individuals kind of running amuck, and doing their own things.
Andrew: All right, I want to congratulate in a moment, someone from my
audience and then I’ve got to come back and ask you a question that I know
has been on everyone’s mind since probably the top of the interview, since
maybe the first sentence that I said. But the person I want to
congratulate is Nicholas Thomas. I was looking at all my customer emails,
that were coming in, and Nicholas says to me, “thank you for all the
courses that we have on mixergpremium.com, and he says, “for better or
worse I decided to jump in and try it myself” and here’s what he launched.
If you guys want to see what people who take mixergpremium.com courses do,
I urge you to check out pdfzen.com, pdfzen.com, where you can upload a
PDF, a word doc, an excel spreadsheet, whatever, share it, embed it, and
whoever you share it embed it with can highlight and sections of it, they
can annotate it, they can print it out, they can send it around, it’s a
really well designed sight, and it’s a first version, so you guys can see
if for yourselves. You can even send faxes cheaply, I’m looking at his e-
mail, from your browser, IPhone, or IPad, no apps to install. Anyway,
pdfzen [?] is his new site and if you’re thinking about taking
mixergpremium.com courses, I urge you to go and sign up right now. These
are courses taught by real entrepreneurs the kind of people who I have on
here to do interviews, they open up their system, and they show you how
they build IPhone apps, how they get traffic, whatever they do especially
well, I invited them on here to teach you and as a MixergyPremium member
you get access to all of it. So go join at mixergpremium.com, I guarantee
like thousands of people, including Nicholas Thomas of pdfzen you’re going
to love your membership, so go join now. The faster you join the sooner
you’re going to get results, and congratulations to Nicholas for his
results. So here’s the thing, actually, at the top of the interview I said
over 5 million a year, how much exactly are you guys doing?
Ilya: We’re right around there. The last full plan, that’s where we’re
right around.
Andrew: So we’ve seen in interviews like this is the kind of business that
you run leaves very little net margins, right, because there are so many
people involved? It’s a time based business, too, so you can’t really scale
it up by getting more people in your pipeline. So net margins must be
really low, right?
Ilya: We’re doing well. I’m not interested in disclosing them publicly at
this time, but we’re not doing badly. We’re growing year after year, so our
net margins aren’t horrible. They definitely hit points when they were at
bottom, especially when we were investing too much and growing too fast.
Recently we’ve stopped trying to focus on top line growth and really start
to focus some more on efficiency; how to do things better, smarter, faster,
and in turn obviously . . . Look, our number one goal, and this isn’t just
a sales pitch, is client satisfaction. The byproduct client satisfaction is
revenue, margins, and profit. If you do things fast, and often faster than
you promised clients, you’re going to make more money. Before, a lot of the
drivers that took away a lot of our margins were scaling top line growth
because, like you said, we needed to hire more staff and scale up the
business. Now all of a sudden you need a bigger office and you need health
insurance for everyone and so forth. We’ve slowed down the focus on taking
on more, more, more, more, and started focusing on working smarter and
being better at what we do. So our margins aren’t bad.
Andrew: Have you been able to take a million dollars off the table so far?
Ilya: Personally? Over time? Potentially. I would have to do the math and
see how . . . I didn’t write one check to me for a million dollars. I don’t
really need it. In the same form that my goal is to take money off the
table for our staff, money’s off the table for me. That’s not what drives
me.
Andrew: I see. So you take enough of a salary, or enough out of the company
year to year that you don’t have to worry about money.
Ilya: Right. I feel . . . [??]
Andrew: Is your ultimate goal to sell the business, then?
Ilya: I don’t know if a business like this is sellable. Being in a service-
based company, it is very hard to exit. What we are doing is building some
cool internal products, that I would love to talk about in the future, that
are helping us streamline our business and turn us more into a tech company
rather than a service-based company.
Andrew: And that’s ultimately the exit for a service-based company. You
want to find a product that scales really well that you could then keep
building. Maybe even get outside funding for, maybe not, but that’s what
you run and then the consulting company . . .
Ilya: Honestly . . .
Andrew: [??]
Ilya: Honestly we are doing well. We are growing really well. I don’t
believe that every business needs an exit. For us if the business is
profitable, and there is cash on the table, and there is cash available to
do things, my next strategy is a little bit different. We’ve build, over
the last seven years, over 2,000 websites. We’ve seen many clients succeed;
many clients fail. We’ve done every sort of online marketing technique you
can think of. We know what works and what doesn’t. We know how to study
analytics, we know social media in and out, SCO, MediaByte, [??]
Everything. We know how to bring really good value, and we know also when
sites fail and what gets them to fail. One of the things we’re going to be
doing is being a profitable company. Having a great team of people that’s
able to build great products and know what works and what doesn’t allows us
to take some of those projects internally. So looking almost like the ideal
app model. We’re going to start incubating some projects internally with
some of our core team players and building out businesses based on what
worked, and not doing what didn’t work for our clients. We’re almost taking
an education experience that we’ve gone through over the past seven years
and going to use that to build start-ups and profitable businesses that
could very easily scale. So for us this is more . . . I don’t think I’m
interested right now, or maybe even in the future, to sell Ciplex. I don’t
think exit is the path for that company.
Andrew: You have talked to me privately, and I won’t reveal what you said,
about an idea that you are working on. One of the things I admire about you
is you reached out to me. You immediately said, “Hey Andrew, I want to talk
to you about this idea. I think you’ve got past experience that could be
relevant.” You wanted to get as much information about my experience as
possible. You do this with a lot of people?
Ilya: Absolutely. Yeah, I mean I was in an organization called The Young
Entrepreneur Council, I got into Inc. 30 Under 30, and that opened up a lot
of doors to be able to reach out to almost anyone. Not to say you can’t do
that without it. I have, it’s just a little bit harder. Still being part of
that organization, for example, made it easier. Some of our top guys are in
there: the founder of Cloud, the founder of Threadless, PoshGlam, a lot of
sites. It gave me the opportunity to reach out to some top entrepreneurs,
and it’s almost like I’ve had a mentor all my life. Not all my life, but
all my business life . . .
Andrew: Mm-hmm.
Ilya: I am where I am because of Tom. No question. But once you get to a
certain point, and my revenues now probably outgrow what Tom is doing, I
need more mentors, right? Who do I look up to? It’s very hard because some
of the higher up people in this organization are very busy, and they don’t
open up their schedule as Tom did to me, right? So, being surrounded by
like-minded individuals, entrepreneurs, almost like what you’re doing with
Mixergy, it’s amazing. I’m really, really… What you have built is
amazing. You have access and you give people access to some of the top
minds in the industries to almost mentor each other, right?
What I found is that mentorship doesn’t have to be by someone that’s doing
more than you are or in a similar business than you. When you’ve come to
this stage of business, a lot of things you go through are very similar to
what somebody else has gone through in a very different path. So being in
an organization or being in a group of people that can share that
experience is priceless. So, yeah, there’s definitely something in the
works I’d love to talk to you about in the future, but I did hat by
reaching out to actually another member of the entrepreneur council. Long
story short, we now have a company together and we’re going to launch it.
Andrew: Well, I admire how you do that. I think it takes a surprisingly –
I’m hesitating as I say it because it sounds ridiculous to say it takes
guts to reach out to someone and ask for information or ask to learn from
them. It shouldn’t. I feels like it’s such an easy thing to do, but I
admire that you do it and I admire how you do it, and I’m looking forward
to seeing the launch.
Until then, I urge everyone in the audience always to reach out to the
guests. If you’ve got anything of value out of it, just shoot them an email
and say “thank you”. You never know what’s going to happen as a result of
it. I hear about people who get together with entrepreneurs because of it,
who end up working for entrepreneurs I’ve interviewed, who end up
partnering with them.
What was it? It was the founder of – Shoot, what’s the company? It was a Y
Combinator company. The name’s not coming to me. It was Olark. The founder
of Olark listens to Mixergy interviews so that he could then do Biz Dev as
a result of it. He contacts the people who he hears from, and he starts to
do partnerships with them, which I thought was especially interesting. I’m
not saying that’s what happens. I’m saying what you first do is say “thank
you” and then you never know what’s going to happen afterwards. I’m going
to do it right now, Ilya, and say “thank you” for doing this interview.
Ilya: Definitely. Thank you.
Andrew: And thank you all for being a part of it. Bye.
