Leadership + People:
Episode 02 - John Pestana - Part 2 of 2
We welcome, Co-Founder of ObservePoint, John Pestana, back for Part II, to guide us through creating and executing your billion dollar idea.
- Do you have a billion dollar idea? [0:56]
- “John, I’m making money while I’m sleeping.” [2:57]
- Do a “whole bunch of” market analysis [4:28]
- Continually pivot and focus [5:27]
- There’s a lot of delusion involved in being an entrepreneur [11:02]
- The fundamentals to getting $100 million in revenue [16:39]
- The Illuminati secret to success! [18:58]
This episode of Leadership and People
was originally released on:
September 07, 2017
Welcome to Leadership and People. This is a series that pulls back the curtain on leadership by interviewing CEOs, senior executives and entrepreneurs who had large exits. We ask these experts about how they built trusted networks to rapidly grow their companies and what advice they wish they knew if they could do it all again.
00:22 HOST – JESS LARSEN: Today on the show, we’ve got John Pestana.
GUEST – JOHN PESTANA: Listen to your customers that are paying you and figure out what you can continually be doing better for them and you conti—you will make it to more money, so one of our interesting metrics at Omniture, is, we actually have very high customer retention. We’re about 97 percent logo retention, but we’re actually 105 percent, or no, sorry, I think it was maybe 110 percent revenue retention, meaning that if I got a dollar from a customer from one year, in year two, I would actually a dollar and ten cents from them.
Do You Have a Billion Dollar Idea?
00:56 JL: We’re on Part II. If you didn’t catch Part I, please go back. It was great. We learned all about how he was able to be a co-founder and grow Omniture to over 1200 staff and take it public and then sell it to Adobe for $1.8 billion, and John, thinking about people out there who ha—have a decent company, but they really haven’t got into the, the hundreds of millions in revenue or, or whatever. What do you feel like it is about sticking to a plan or, or, planning and structure that all these, you need to lead all these people to do what, what makes that difference at that level?
JOHN PESTANA: Well, I think probably the biggest thing, difference, is, do you have, you know, a, a billion dollar idea, right?
01:37 JL: K.
JOHN PESTANA: I do think that it, it’s very common for people, I especially see this with like student/entrepreneurs and people who are starting some small businesses. They, it, I always say, it’s just as hard to start a company that could only get to a million dollars in revenue as it is to start a company that could potentially get to a hundred million dollars in revenue. You know?
So, I think you’re really trying to vet your idea and understand, will somebody pay me for this? I mean, the, the example I always think of is like, you’ll have a student come to you and he’s like, “I’m going to deliver meals to the students studying in the library.” You know? [laughs] I’m like, I don’t know how big of a business that can become. You know?
So, even if you’re in your current business, you know, are you looking for, listening to those customers, can you figure out what they’ll really pay for? What really can kinda take you to that next level in, in your business? And, and every company pivots when I think back at Omniture, we started off as a company called JP Interactive. And we were just a web development company.
And, so people would hire us to just build their websites. Well, as we were doing that, we started to realize that, man, you know. We enjoyed the business, but, we’re like, our income is completely tied to how many hours I can work building a website, for somebody [JL laughs].
Making Money While You Sleep
JOHN PESTANA: And so then that’s where I had a, a, a great friend named Steve Jenkins, I don’t know if you remember Steve or ever knew him. He ran a company called Windows95.com. And he had this website and I actually helped him design part of his website. And so he was making all kinds of money by selling ads from people who were visiting the website. And he used to always joke with me, you know, and he’s all like “John, I’m making money while I’m sleeping.” You know?
And so, Josh and I, we’re just like, man, we want to make money while we’re sleeping. And that’s where we came up with the idea to do Super Stats, which is what became Omniture, which was just a little web tracking program so we launched this program where if you put our code on your web page, we would get an ad banner on your web page and we would then give you stats about that website.
Well, that started to grow like crazy, and, you know, soon we had basically a program that was kinda like that where we were selling these ads, and you know while we’re sleeping, ads were being displayed and we were making money and kinda started down that path.
We started off it, I mean, it gets more complicated on how we eventually transitioned into the enterprise analytics that we do, that we ended up doing, but, you know, it was kinda always looking for how we should be focusing the company to, to, you know, be able to grow it, to make more money, to look at our market cap. I was very specific when I, when I was starting ObservePoint, I did not want to start any company that I didn’t think I could grow to a hundred million in revenue. That was kinda my number in my head.
04:28 JL: Mhmm.
Do a “Whole Bunch Of” Market Analysis
JOHN PESTANA: And, and so I, I did a whole bunch of market analysis, talked to tons of people just like, “Hey, would you pay for this? Would you do this?” And and the, and the answer was “Yes” and then I did some backend calculations ’cause I knew how many people, you know, how many customers we had at, at Omniture and then how many people use, let’s say Google Analytics, all these other things and I’m like, ok, I’d have to sign up X number of customers to try and determine what the total addressable market was, and then I always like to say, ok, “What if I could, do I think I could take five percent of that market? And is that at least $100 million?” [laughs]
And so that’s, that’s how I kinda backed into, “Ok, this is a good enough business.” And, and one thing that is hard, you know, as I mentioned in the, in the previous episode, we were, we were talking being ADD a little bit, is most entrepreneurs, I describe them as puppies, you know, you throw out all of these little shiny balls and they just go nuts and they get so excited about every little idea that they see.
Pivot and Focus
JOHN PESTANA: And it, and they can get distracted. Actually, I’ve watched several companies just go under because they, they, got extr—excited about the new shiny thing. And, but, it’s ok to always be exploring your options because you need to obviously progress forward ’cause we’ve also seen the opposite. We see these big companies who never invent anything new and they just go into obscurity, right? But, if you’re looking at them with an objective eye and say “Ok, is this something where I need to pivot the whole company.” I always say you pivot and focus.
So like at, when we started Super Stats, which was the, the, you know, JP Interactive, we started that Super Stats program which then became a company called MyComputer.com, and all of these are just names for Omniture, it’s just we transitioned as we were pivoting and figuring out what our market was, and, and who we were selling to, we kept, we changed the name, or we’d change our product a little bit, and we keep selling.
But, focusing, once you decided this is where we’re going, I always like ok, forget everything else we’re doing. We’re, we are focused 100 percent on this. And because that focus is also so important but it, but it can be hard when there’s so many pretty shiny balls floating around.
06:39 JL: Yeah, is there anything you tell yourself. I mean, I, I feel like I fall prey to that and I, I have like a personality type aptitude to, to, you know, do the Pixar “Up” movie of the dog who’s like, “Squirrel!” Right?
JOHN PESTANA: Totally, totally.
When I’m Tempted to Chase Another Project…
06:53 JL: Is there anything you’d tell yourself when you get tempted with that?
JOHN PESTANA: You know, I think that’s just one of the things that just came with time for me, where I’ve just learned through the school of hard-knocks that I cannot let myself do it. And I, it’s funny because even some, I, I have some of my VPs even now at my company, they’ll say, “Oh, we should do XYZ.” And all I’m thinking, you know, is “squirrel”. You know, that’ kind of thing. And, and I’m, I’m just like, no, what we’re doing right now, our initial vcheck should no problem get us to 50, 100 million dollars. We should not be thinking about anything, you know?
But, most, most people, it’s funny, most people think in order grow a business they have to expand their product line, right? And that’s just immaturity because what’s interesting, so, when we were we were called MyComputer.com before we were called Omniture even though it’s technically all the same company. MyComputer.com sold to small businesses and we had, like, nine different products. We had from, like, you could put a guestbook on your website to putting the stats on your website, to, you know, all these little different products we offer to a webmaster.
The Importance of Focus
JOHN PESTANA: And we were not growing very much, you know, we were the kind of the masters of nothing, in some ways. But, it was funny, once we, once we focused on just the analytics and especially once we focused on just enterprise analytics, we were getting, we were selling less stuff is when we started making tremendous amounts of money. I mean, we really started just doubling everything single year and we did that for like five years in a row. I mean we were even doubling when we’re doing over $100 million a year. And, and it’s just—
08:29 JL: I feel like that was, I feel like that’s a really important comment. Can you say that one more time?
JOHN PESTANA: Yeah, that, that overall, I believe, focus is normally how you make more money so listen to your customers that are paying you and figure out what you can continually be doing better for them and you cont—you will make it to more money so one of our interesting metrics at Omniture is we actually have very high customer retention. We’re about 97 percent logo retention but we are actually 105 percent, or no, sorry, I think it was maybe 110 percent revenue retention, meaning that if I got a dollar from a customer from one year, in year two, I would actually a dollar and ten cents from them.
And, and so that’s what made our growth so exponential and so fast ’cause not only were we keeping these customers, they were paying us more money every year. And that’s just by listening to them and, can, you know, we didn’t, so, instead of thinking to myself, oh, I should probably, you know launch an eCommerce server to sell along with these analytics, right? I just would, kept listening and saying, well, what more do you need in the analytics? And, you know obviously tons of people who have made lots of money selling everything, right? Jeff Bezos, what officially became the richest man in the world last week or whatever, right? Because he sells everything to everybody.
You could probably argue that in a lot of ways he has, he’s very focused on a platform that empowers that so maybe he is super focused. But he’s also trying to launch things into space, which isn’t focused. But, but he’s a billionaire [JL laughs] so he can do those things. [laughs]
10:03 JL: Yeah.
JOHN PESTANA: But I guarantee every single one…
10:06 JL: But, but, but maybe it’s just like, yeah, but maybe it’s like going to art school where it’s like until you can graduate basic drawing, you, you don’t get to go to oil painting class. Until you’ve reached your first billion, at least first billion…
JOHN PESTANA: Well, and I would, I would say is that behind all those billionaires who have lots of things going on, I guarantee you, they all, they have heads of each of those organizations completely focused on just that, you know? So.
10:29 JL: But.
JOHN PESTANA: I don’t know.
10:30 JL: I, I, so I struggle with this one like crazy, as I said, and I, I loved to use somebody like Richard Branson as my justification [JP laughs]. Right? But then when I’m honest, it’s like, well, you know, he did build Virgin Music before he went to the next one, right? And then it’s not like he goes and runs Virgin Airlines and Virgin Trains and Virgin Mobile, like, like you said, he builds a business model that’s robust enough that he could afford professional management to run it for him. He’s not doing…right?
JOHN PESTANA: Well, what you also don’t know is he even just leveraging his name, right? So.
10:58 JL: Hm.
JOHN PESTANA: Who knows.
Delusions of Being an Entrepreneur
11:02 JL: So, you know there’s, there’s a lot of delusion involved in being an entrepreneur, right? [laughs]
JOHN PESTANA: Yeah.
11:09 JL: Like, people looking at the stats and say “I’m going to be the one.” [laughs, JP laughs] Right? There’s mo—[laughs] is the first one, but when you think about someone who is trying to say how do I know that this is the billion-dollar idea or not? What kind of guidance would you give for somebody who says “Ok, yeah, I’m willing to, I’m willing to rethink, you know, is this really the one for me?” How do you, what kind of advice would you have about what that test would look like? Of how, how to know, how to have confidence that you really are playing the kind of game that could get reached that level of duplication?
JOHN PESTANA: Sure. I’ll kinda give you two answers here. One, I actually recommend every single person to go do John Richards Startup Ignition, I don’t’ know if you’re familiar with that program.
11:56 JL: We ju—we just had him on the show. I, I love that guy.
JOHN PESTANA: And so John Richards was the, was the, he used to work at BYU over kind of the Center for Entrepreneurship. And he had always have tons of people coming needing advice. He basically got tired of doing one-off sessions with everybody and kinda did a boot camp for entrepreneurs where you can go there, he’s gonna, he helps you know how to vet your idea, how to grow your idea, and, and honestly, I think any entrepreneur who’s thinking I’m, I’m gonna start a business absolutely should do his little course. It’s, it’s like, what is it, like, two months or something like that? It’s, it’s two or three months, something like that. And…
12:34 JL: And I don’t think it’s that pricey.
JOHN PESTANA: No, it’s like $2,000 or something. I mean, you for sure get more than $2,000 of help and advice out of this. And because, ’cause that is very difficult, it’s a difficult process to know if you’re being honest with yourself. I find that most people are not honest with themselves. They come up with some little idea that they really love and actually do not want real validation. They just want people to tell them their [JL interrupts] idea is good.
12:58 JL: They want rat—they want rationalization.
JOHN PESTANA: Yeah, they want rationalization.
And they even get mad at you if you say, “Well, I don’t know. I don’t think people are gonna buy, you know, corn dogs made out of rubber,” you know, it’s like [laughs] you like, eh, but it’s funny the ideas that you hear people tell you and they’ve convinced themselves that this a great idea, but the one, but John helps them run through like, ok, is this actually gonna make money? Is somebody actually willing to pay for this? ‘Cause there are a lot of ideas that are really fun, but nobody’s gonna pay you for them, right?
Are they financially, you know, no barriers to entry or, or whatever the, you know, the problem is with the idea. Unfortunately, I, I ha—I fell into that boat sometimes too where I’m like, I don’t really want to know. I ju—I just wanna do it, right? And, it, it takes discipline to expose yourself that way and, and help people question your ideas.
But, you know, that’s probably, I think, when I look at an idea, at least talking with a few people and having them would you buy this? Will you buy this? If I make this, will you buy this? Because, normally if you talk to your friend and you say, “Hey, this, what, I have this product, does XYZ, do you like it?” They’ll go, “Oh, that’s a great idea!” But if you actually said great, I’m gonna build it. It’s $20. Will you be my first customer? All of a sudden, they’re like, “Well, I mean, I don’t really need it,” right?
14:18 JL: Yeah [laughs].
JOHN PESTANA: And so asking that person to be your customer is truly the key if it’s a good idea. Now, and then you have to extrapolate, ok how many of those people are there? How big is this market? And if I can sell, you know, 10,000 of these, am I making enough to pay myself?
14:36 JL: So, two things that I feel like are so genius about what you said is, there’s a ton of folks who are like, no I went around and asked people if they’d buy it and they said yes and then when I built it they didn’t
JOHN PESTANA: Yeah.
Customers Will Give You the Best Feedback
14:46 JL: Right? But I feel like, and maybe I’m putting your wor—words in your mouth here and you tell me, but, it sounds like you’re saying like “Would you buy it? And can we talk about presale?”
JOHN PESTANA: That’s right.
14:55 JL: Like.
JOHN PESTANA: That’s right.
14:55 JL: Like, where it starts get real real.
JOHN PESTANA: That’s right.
14:59 JL: ‘Cause that money on the line thing, like, can I commit you now? Can we do presale, something like that, all of sudden like all sorts of rationality kicks in and…
JOHN PESTANA: Yeah, well…
15:07 JL: Right?
JOHN PESTANA: I, it’s, what’s funny is, you know, we analyze every customer we lose at ObservePoint, you know, ’cause we’re always trying to understand why did somebody cancel their contract. And I always laugh when my product people kinda tell me, “Well, we interviewed them and this is what they said.” And I’m like, dude, those people aren’t honest with you. They don’t want to hurt your feelings. They’re not going to tell you the product’s total crap. Every single time, it’s “Oh, we lost budget, we lo—” you know. And what they really mean is you didn’t bring enough value for me to fight for this product, right?
And, who you really need to talk to is the people who love your product. So, talk to the people who love your product and understand why they love it because they will be honest with you. But when you lose a customer, man, they’re, it’s very rare that you get somebody who’s so, you know confrontational in some ways that they’re just gonna tell you all the reasons you suck, right? ‘Cause nobody wants to make somebody feel bad.
16:01 JL: Yeah. Well, [clears throat] it’s funny how people think that the fundamentals are probably different when you’re some big giant company or when you’re, you know, when you’ve had a $1.8 billion exit that you’re gonna do business so differently, right?
JOHN PESTANA: Yeah.
16:15 JL: So.
JOHN PESTANA: Yeah.
16:16 JL: [laughs] And I’m not different. I get on these phone calls, you know, I feel like podcast is like a great excuse to meet people I wish I knew, right? And…
JOHN PESTANA: Sure.
16:24 JL: And you’re always kinda hoping for this like, they’re finally going to tell you the Illuminati secret that makes it easy or something, right?
JOHN PESTANA: We, we can, but that comes in podcast three.
16:34 JL: Oh ho ho. And we only have the two episodes so, apologize, people, right?
JOHN PESTANA: [laughs]
Fundamentals to Getting $100 Million in Revenue
16:39 JL: But to kinda, to kind of close off here. Thinking about the fundamentals that you feel like, are, are required to potentially become, you know, company doing at least 100 million in revenue. I mean, we got Number 1 of, he—you need to have an idea that objectively this is a reasonable goal. What would, what would you say are any other basic principles that need to be in somebody’s recipe?
Have the Right People
JOHN PESTANA: Well, definitely it’s having the right people with you, you know? People who can grow that company and, and, and in that is, you know, when you don’t have the right people making sure that you’re replacing them with the right people very fast. The other thing that I think is really critical for most companies, ’cause we see, you know, so many companies go out the business because of this is control your expenses. [JL laughs]
Control Your Expenses
JOHN PESTANA: Yeah, entrepreneurs get so excited about their idea that they’re gonna instantly become a billion-dollar company, right? They just, they think somehow everybody in the world is gonna hear about them magically, right? And so they get the 80,000 square feet of office space because they’re gonna have to hire so many people so fast, and right? And then a year later, there’s six people sitting in that 80,000 square feet of office space. Um. It, it especially you see this in companies that can financing, right?
17:52 JL: Mhmm.
JOHN PESTANA: And so, so controlling your expenses. I like to have, instead, I’d rather grow revenue and then hire. You, you can al—I’ve, I’m just a big believer that you can always hire after the fact, you know? If you think you’re gonna do this big deal with a partner, I don’t hire everybody before I do the big deal with a partner. I hire everybody after that part when they’re signed up [laughs], you know? Just especially in the enterprise space that I’m in, I mean, things just move slow. Always slower than what you think just ’cause enter—big enterprise companies don’t, don’t know how to move fast. And as a small, nimble company, I can always move faster than them.
Listen to Your Customers and Keep Your Team Motivated
JOHN PESTANA: But I think those are, you know, a, a few big things. I mean, we talked about, you know, obviously, listening to your customers, and, in, and though they’re definitely a big key to their success and, and then keeping, keeping your, your team motivated, the culture that we talked a little bit earlier and the, in our, I guess the previous podcast. And, and making sure that you’re keeping everybody informed, you know, so they all feel like they’re part of the team and moving forward.
18:53 JL: I love it. Well, we really appreciate you spending so much time with us here today.
JOHN PESTANA: Oh, it’s no problem. It’s my pleasure.
The Illuminati Secret to Success!
18:58 JL: So, you know, I think everybody listening [laughs] who needs to get more customers needs to know if their online marketing works should definitely be going to ObservePoint.com and connect with you guys there. And, you know it’s fun, you know, even though I wish for the Illum—Illuminati secret, right? Of how to do all this, it, it’s really fun to hear that, that the fundamental scale.
JOHN PESTANA: Actually, Jess, I will, sa—give one thing that I really do think is a little bit the Illuminati—
19:27 JL: Ok.
JOHN PESTANA: —secret.
19:27 JL: Ok.
JOHN PESTANA: And it is that patience.
19:29 JL: Hmm!
JOHN PESTANA: Because everybody wants success instantaneously. But I, I describe it, your entrepreneurial journal—journey is like a funnel and you start on the outside of that funnel and every single year you look towards the center of the funnel and you see all these successful people and you’re like, man, how do I get there? And as you just keep moving forward, year after year, literally ten years down the road, you’re in the middle of the funnel and you’re looking back on the outside and going, “How did I ever get here?” You know?
You now are the person because you just kep—you had the grit. You just kept moving forward because so many people just do it for three months, six months, a year, they try and do their business, right? I made a business a whole $8,000 my first year in business.
20:12 JL: Mm!
JOHN PESTANA: You know. It took me 13 years to go through the funnel the first time. This time, I’m already eight—over eight years into my new business.
20:20 JL: Mhmm!
JOHN PESTANA: You know? And so if, I really think that’s the secret. Just keep moving forward and you will get there.
20:26 JL: The right idea, the right people and the patience to keep going forward, huh?
JOHN PESTANA: Yeah.
20:29 JL: Love it.
Again, this is great. Thanks so much!
JOHN PESTANA: Alright! Thank you.
20:33 JL: Ok, bye.