“How did you go bankrupt?” Two ways. Gradually, then suddenly.”
Life can come atcha pretty quickly. (At least according to Ernest Hemingway.)
And while RadReads is far from bankrupt. And I ain’t broke – in January of 2023 our business got hit by a quadruple-whammy.
Yes, a mere 55 days after my proudest moment as an entrepreneur – offering our employees healthcare – I did the unthinkable.
I let half of our team go. Our team went from six to three.
Our online course industry had cratered.
The usual suspects were to blame – a worsening economy (a “rich-cession”), Zoom fatigue and the return to the office. But upon closer examination, there was a Hemingway gradualness to it all. The warning bells had been rung long before.
Some of these mistakes were tactical. My fair share of rookie mistakes as a first-time CEO. Yet many of them were my own faulty mindsets that I’ve long chronicled. Scarcity thinking, the fear of losing it all, envy and greed and borrowing other people’s goals.
One thing is clear though, I own them all.
And I’m excited to share them with you. I hope that these learnings will help you:
- Give yourself grace during an economic downturn
- Shed some light on career pivots and the “creator economy”
- Encourage you to play multi-decade games
- Help you avoid the mistakes I made
- Provide tools for improving your CEO Mindset
So let’s dig in.
Editor’s Note: I’ll be doing a free live Q&A on all these lessons and learnings on 3/16
Table of contents
1. The “Oh Sh*t” moment
Going into 2023, everything was humming along – until January 16, 2023.
We were experienced; we’d run 11 live cohorts serving 700+ students.
We had a great product – an NPS score of 61 and a startlingly low refund rate of 5.7%. (Which was awesome given our no questions asked 30-day money-back guarantee.)
Our revenues were also growing at a healthy clip.
RadReads as a business was finally getting a taste of profitability
And as a result, we had built a nice portfolio of businesses.
So what was the problem?
We were highly leveraged to our SYP Course since it was a requirement to get into our Membership Community. And thus the two categories combined to nearly 2/3rds of our revenue.
If that product line took a hit, the ramifications would be severe.
And that’s exactly what happened.
We grossly underperformed our significantly lower target for January. And in the world of personal development, January – with its clean slate and New Year’s resolutions – always sets the tone.
And that tone wasn’t pretty.
2. How did we even get here?
Before we continue, I want to give some brief context on my 8-year journey from leaving Wall Street to becoming a creative entrepreneur.
I walked out of the BlackRock offices on May 4, 2015. Without a plan.
(And definitely without an email list.)
What ensued was a series of chapters – many of which continue to be written.
Phase 1: Eat, Pray Love
- May 2015 – Jan 2016
- Primary source of revenue: None
This was the long break our family took to recover from 15 years of Wall Street-induced burnout and exhaustion. The newsletter was a small little side project that kept me entertained as we traveled around Southeast Asia.
Phase 2: Coach Khe
- Jan 2016 – Jan 2017
- Primary source of revenue: Coaching
After 8 months of recovery, I finally felt prepared. I got a WeWork space in Dumbo and started to put more energy into the newsletter. (Those efforts were rewarded via some great press like Oprah for Millenials and The Wall Street Guru).
A key milestone was getting our first dollar of revenue. It was an inbound inquiry from a large Hedge Fund (September 2016) which launched my Executive Coaching business – a throughline for RadReads ever since.
Phase 3: Andrea Sachs (from the Devil Wears Prada)
- Jan 2017 – July 2018
- Primary source of revenue: Coaching + part-time salary
My late friend Lauren Brown got me my first “media job” at QZ.com during the Spring of 2017. The official title was Entrepreneur in Residence, but it was unpaid. I playfully called it my 40-year-old internship. Eventually I became a Contributing Editor and worked part-time launching Quartz at Work – a sub-brand covering the future of work.
Phase 4: Swiss-army knife
- July 2018 – September 2021
- Primary Source of Revenue: Coaching + Online Courses
This phase is when things really started to take off – and revenue started coming in. In September 2018, I created our first workshop The Fulfilling Path to Financial Independence ($10,000 revenue) and then the first cohort of SYP in September 2019 ($9,000 revenue).
SYP began as a training for the popular productivity app Notion and remained app-centric until our 5th cohort. That’s when it pivoted into a life philosophy course anchored by our $10K Work framework. While this made the course significantly better, it also created a huge marketing challenge that precipitated many of the challenges we face today.
I was doing pretty much everything by myself on the courses up until July 2020 when I hired a Virtual Assistant.
Phase 5: Voltron
- September 2021 – December 2022
- Primary Source Revenue: Online Courses
The trend for SYP was looking great and it was time to inject some gasoline into the machine. I hired 5 people. I turned away possible investors. I even spoke to my accountant about restructuring the business for tax efficiency in the event that we sold the business. (In hindsight, it’s where I started drinking my own “Khe is awesome Kool-aid.”)
We had a 6-person team:
- Product manager (SYP)
- Course and community manager (SYP)
- Product manager (Consulting)
- Marketing lead
- Operations lead
- And Khe
We added more products – a paid community (for course alums) and a consulting business (helping companies apply the lessons of SYP). We were a high-performing team that lived our values and things were humming along.
Except for one key issue: because of our growing headcount, our expenses had skyrocketed – but our revenues were plateauing. And therefore our margins were taking a huge hit.
3. What went wrong
Giving ourselves a bit of grace enabled us to realize that we launched a business in the Goldilocks days of the Internet. People were cooped up at home, not spending any money, receiving checks from the government while yearning for self-improvement and more intimate connection.
We were buoyed by the same pandemic-focused forces that propelled Zoom, Peloton, Netflix and Clubhouse (remember them)? And just like them, we had to confront the reality of a changing structural landscape.
Mistake #1: The double-edged sword of Radical Focus
One of the key lessons from SYP is the art of relentless prioritization. It’s about doing more with less. And despite growing a team, we were still extremely resource-constrained. So while we were resolutely focused on building out the SYP business – it came at the expense of revenue diversification.
This wasn’t unique to RadReads, but small companies (particularly self-funded ones) usually have to commit to one product line – which leaves them exposed if (or in our case, when) that product takes a hit.
Mistake #2: Not thinking through opportunity costs
In January 2022 we did make one move to diversify our business, launching a consulting business, The Rad Studio. This business had a dedicated product manager and helped small businesses systematize and incorporate $10K Work into their organizations. It was a mix of systems designs, tech implementation and team-based trainings.
We started this business because we kept getting inbound requests from founders who wanted a corporate and customized version of SYP. I have to admit to y’all that it did feel a bit like “free money” since clients were regularly knocking down our doors for 4-figure engagements.
And we executed with precision (and profitability) – but also missed a few key things.
First, the depth of our client pipeline. The early enthusiasm for this business came heavily from our superfans (i.e. our 1,000 True Fans) and once we exhausted them, we were back to cold selling – which was much harder.
Second, the cost of context switching. Even though I was pretty removed from the day-to-day responsibilities of the business – I was still often needed. It may have been to close a deal, review a contract, navigate a complex problem or handle a one-off client request. The number of hours was quite low, but whenever context-switching becomes a chore, I’m reminded of the tweet below:
Which leads to the biggest oversight we had with our consulting business – scaling it. Consulting is the ultimate $1,000 activity – it’s a clear trade of time for money (albeit at high hourly rates). As we thought about growing the consulting side, we inevitably had to think about salespeople, implementation specialists and “ConsultingOps.” And no one on the team wanted to manage such a people-intensive business.
In hindsight, the consulting business was a bit pennywise, pound foolish. The near-term income and diversification were alluring, but I missed the bigger picture: I didn’t want to own the successful version of that business.
Mistake #3: Underestimating organizational complexity
When you go from 1 to 6 people, it’s tempting to say to yourself:
“Well, six is not that many people.”
After all, by corporate standards most managers have 6 direct reports. You add a few 1-on-1s and then you should be good to go?
This is flawed thinking. I mistakenly assumed that organizational complexity scales linearly. As the chart shows below, with 6 people there are 15 pairs of communication.
And while we had a kind and talented group of colleagues (and ex-colleagues), the permutations on preferences, styles, ambitions, incentives and roles ultimately consumed a lot of my mental energy as a CEO, taking me away from my responsibilities – particularly in product marketing and positioning.
Mistake #4: Forgetting we’re a startup
Here’s where I got hit by the curse of RadReads. Having curated 1,920 articles over the past 8 years (via the RadReads newsletter) I’ve devoured countless articles about building and managing a business. And so when it came to designing an org chart, goal-setting via OKRs, “cutting-edge” corporate policies (30-hour work weeks and unlimited vacation), remote work best practices and financial planning – I tried to do too much, too quickly.
Instead of wallowing in my awkward teenage years as a CEO – I tried to go straight to Jamie Dimon. And it took up a lot of time.
One stark example: performance reviews. Recognizing the importance of transparency, accountability and ongoing mentorship led us to create a detailed quarterly process (which also included 360 reviews). I think it was a thorough one – but for someone who managed 4 people, one week out of each quarter (i.e. ~10% of the year) was spent aggregating, writing and delivering the reviews. While I’m proud of the process we put together (and the impact it had on our team) as the CEO moonlighting as the CMO, CPO and CFO – that 10% of time was a very expensive opportunity cost.
Mistake #5: Avoiding social media
Despite what you may see from me on Twitter – I don’t love being on social media. I’ve got none of the apps on my phone (the web version is also blocked using iOS’ Parental Controls) and schedule most of my tweets. My fear with social is that it violates one of my deeply-held beliefs: that you can never be present and enjoy a micro-moment because it needs to be turned into “content.”
Consequently, our audience growth strategy (i.e. how we get new prospects) was centered around Search Engine Optimization (aka “SEO.”) This enables you to write detailed and targeted blog posts that cater to things people search for on Google (like this summary of James Clear’s Atomic Habits).
The strategy worked decently, as we averaged 30-40 new subscribers a day. But it was also a very slow strategy that didn’t communicate the nuance of our ideas and products the way the “slow drip” of social media can.
This avoidance was also a false belief. It’s actually possible (but requires a tremendous amount of discipline) to run a social strategy without always being on social. And more recently, we’ve started to invest in short-form video (both Instagram and TikTok) and ramped up my Twitter presence (using the scheduling tool Typefully).
Mistake #6: Product positioning
But if we look beyond the recession and the overhiring – the biggest challenge we had with our business is how our product was positioned. Now this is a bit of a jargon-y term, but let me use a simple example to demonstrate.
Let’s talk about almond milk. Almond milk does not need to be refrigerated. Milk does.
When someone sees almond milk on a regular rack at the grocery store, they say to themselves “Eww gross, milk belongs in a fridge.”
So almond milk sales were poor. Until stores wisened up and put them in the fridge, right next to the milk. And sales boomed.
Nothing changed about the product – but the way it was positioned in the eyes of the customer – were night and day.
What does this have to do with RadReads? Well our informal tagline has always been, “Come for the productivity, stay for the existential.” We say this so much it’s become meme-fied.
Ultimately productivity, careers, business and personal finance are merely gateways into life’s trade-offs, our quest for status and our fears of being ordinary.
And that’s a damn hard course to create. And an even harder course to market.
Thankfully, we knocked the first part out of the park. Once students were in, they LOVED the course. Here are a few testimonials from our recent cohort.
But for the second part – convincing prospects that they need this course – we were (and are still) having our almond milk problem. It’s not as easy as renaming the course Supercharge Your Life and prospects will immediately open up their wallets.
This positioning challenge is frustrating – but it’s also what makes RadReads so unique. And has helped us stand the test of time as an 8-year business, that’s still going strong.
Mistake #7: Drinking my own Kool-Aid
Success is a strange beast. It feels good. It feels validating. More and more people come out of the woodwork to tell you how talented you are. And tbh, when you’re in a Goldilocks Economy, everything feels easy.
One can quickly get swept up with the excitement of an easy way to receive external validation. And in my decision to grow the company so quickly, I have to admit that I got carried chasing by that fleeting sensation.
And boy does that sensation disappear, when the economic rug gets pulled from under you.
4. So what’s next?
Here’s where as the CEO, I get paid the “big bucks.”
I’ve got to lead the team into the next chapter of RadReads – and set us up for another 8 years of success.
I don’t honestly know what that looks like, but with a tiny team – we now have ample runway to figure it out.
Here’s what I do know:
We’re delaying the launch of the next cohort of Supercharge Your Productivity
We’ll closely examine the almond milk positioning challenge and will pause the delivery of our live cohorts (the self-paced version of the course will still be available) until January 2024. This should give us ample time to rework how we package and communicate the value of our offering.
We’ll continue to cultivate our existing product portfolio
The product portfolio mix will change. We’ll lean a bit more into sponsorships (via the Convertkit Sponsor Network) while continuing to develop various digital products around $10K Work, career development and building small businesses.
This also leads us back to a through-line for RadReads: coaching.
We’ve refocused around smaller and more targeted coaching offerings
There’s always been a strong demand for CEO coaching that helps people maximize their potential without sacrificing their health, relationships and “aliveness.” I’ve gone from one client to three and that’s a nice sweet spot to be in.
We’re also running a YPO-style mastermind for financial services professionals who are looking to pivot into new careers.
We’ll continue to help you lead more productive, examined and joyful lives
We’re unwavering in our conviction that our quirky style of ideas is impacting people’s lives. We get countless messages from professionals detailing how they opted out of the rat race, improved key relationships, and stopped being so hard on themselves.
The common message from them all these readers – thank you for helping me rediscover my feelings of aliveness.
We’ll continue to innovate and serve our readers with essays, videos, workshops, events and in-person meet-ups.
And though I can’t lay out a methodical plan on what the 8 years are going to look like – our team promises you that we’re all going to continue our learning journeys together.
A special shout-out to our students, alums, $10K accelerator members and Lightning League for always being a beacon of inspiration, vibes and encouragement over the past 8 years. Thank you for trusting us with your hard-earned dollars and for always believing in us. We’re forever grateful for you.
Want to chat about the recession? I’ll be hosting a free live Q&A on navigating a bear market as a business owner/entrepreneur on Thursday, March 16th at 2 p.m. ET.