Lessons - From Gang Member to $2B in Sales by Age 36 | Ryan Blair - ViSalus Co-Founder & #1 NYT Bestselling Author

In this lessons episode, explore how unconventional business models can create explosive growth when incentives are designed effectively. Discover how strategic innovation can revive a struggling company, understand the risks of scaling too quickly without operational discipline, and uncover why strong leadership and compliance are essential when managing growth at scale. And help me understand the business model for Vizales. So help me understand like when you say direct selling model, how does that differ from like a CPG company or a direct consumer company now where they're going online or they're going to retail like what does that direct selling model look like? Because I recognize that direct selling model from like an enterprise B2B space because you're going pure outbound. But this is a consumer product at its core. So how did that work? Well, you're recruiting affiliates basically. So the way to describe it would be an affiliate model. And you're recruiting affiliates to basically sell that product. And our unique innovation was our marketing was a challenge. And now you'll see on the internet everyone has challenges. And we brought challenges to social media. So we launched a thing called the Buy by Buy 90 Day Challenge. When you joined the Buy by Buy 90 Day Challenge, you were encouraged to bring three friends with you. And when you brought those three friends with you, we gave you your product as free. We built into our economic model and incentive structure for our cost model. We built in the structure where we could bear that burden where the more people that brought in three people, the more free product we were shipping. And at one point, we're shipping out tens of thousands of free kits, free product kits per month as a result of that marketing initiative. On the other end of that, we had an incentive structure, a compensation plan that compensated our sellers based on them helping more people receive their product for free. And the more that they did that, the more we unlocked additional incentives. We had a BMW program that we put 18,000 BMWs into our seller's hands through the BMW program. We had a million dollar cash bonuses if they did enough of the activity that we just described. And so we built a very complicated, multifaceted, multi-variable compensation plan. And that was one of the big primary reasons for the fact that we were able to grow and scale to the size that we did. So walking through numbers, too. So when you joined, where was it at versus? Because you won awards, I think, for turning this company around, no? That's at some point. So it went through. When I bought it, it was doing about 20,000 a month themselves. And then I scaled it to, and I do have to say I had a fantastic team. It wasn't just me. I hate even the fact that I say I, because it was a wee. I had great investors, great business partners, great founding team members. And my primary role was handling the finance, raising the funds, providing the strategic direction, and organizing the operation of the team. But there were some great contributors along the way. But for the sake of explaining how it went, about it, 25,000, built and scaled it. And this was in 2005. And then built and scaled it to the summer of 2008, where I sold it to a publicly traded company called Blythe, which was on the NYC. I was doing about 25 million a year at the time, a couple million a month in sales when I sold it. Immediately upon the signing of the deal, the great recession hit, I sold it on 8 4 2008. And by September of 2008, the great recession hits, the company basically goes into severe debt. I went from two and a half million a month roughly down to 600,000 a month. I had accumulated a ton of debt to try to stay afloat. The business was burning cash to the tune of like $600,000 a month. Business was burning 600,000 a month. We were down to about our last 600,000. The public company that bought us, wrote us down to zero. And so the games that I was able to take off the table as a result of their acquisition, because it was a multi-year earnout that was structured as part of the acquisition, I had to put back into salvage the deal, which myself and my co-founders and one of my other investors did. And we kept the deal alive. We re-engineered the company, came up with the challenge idea that I had mentioned. And then from there, I scaled it in a new economic environment, post recession, where we were able to take a lot of market share and we were able to. While our competitors were retracting, we cut our losses, re-engineered our compensation plan, re-engineered our product offering, re-engineered everything, and we were able to expand while everyone else was retracting. And we took the number one share in shake during that time. We got to a 23% market share, and we were number one over Costco, GMC, and everyone during that time based on the innovations that I've described. That's amazing. Now, I know that there's been like, as you built this up, obviously, the business model was successful. But there was a lot of, you got a lot of pushback. There's a lot of shit about this business model that didn't vibe with people. Obviously, it's come up again and again. So what went right? What didn't go right? Why was there so much press around how you grew the company? Why was this something that, I guess, it seems like there's a lot of companies that do direct selling models. Various companies do affiliate, multi-level setups. But in particular, you were covered by tons of news outlets. There was some legal issues that came up from this as well. So I'm curious as to why this all came to be. Well, one, I could tell you I made a lot of mistakes by all means. I was hyper competitive, and I got into a lot of competitive oriented situations and lawsuits that, you know, in retrospect, I should not have. The other thing is I sold to a publicly traded company and we became the most meaningful portion of their revenue. And so all of a sudden, we started getting a ton of press around that. Every time the public company released earnings, their stock would blow up basically because, you know, the publicly traded company, which was basically a sleeper, endowment, was zero growth. And in fact, was going downward and retracting. All of a sudden, now I had hundreds of millions of dollars in revenue, you know, on a quarterly basis and significant sums of profit. And so all of a sudden, all eyes were on us both from the media and from Wall Street. And, you know, we were not a fortified business model by any means. The other thing that occurred that was a big mistake was the publicly traded company couldn't afford to pass the urn out. So they persuaded us to go public. And as a result of that, now the sudden, my company has opposed to, you know, accelerating our growth and building fortification and building a strong infrastructure. My entire management team and everybody was focused on ringing the bell. I myself included, you know, there's such a gratifying idea that I would, you know, take this company from near bankruptcy to ringing the bell. So we lost our focus and lost our, you know, our discipline to building a company and fortifying. At that time, we should have had done nothing but, you know, four to five four growth and continued to invest in growth-related initiatives, not try to ring the bell and go public. We weren't ready for that. So there were a lot of things that we did wrong. There were a lot of mistakes that we made, you know. And, you know, some of the negative activity that we had was a short seller enticed in that there was a, we were the number one most shorted stock in all of Wall Street for over a year. And so, you know, there were so many people that were trying to stimulate negative activity against us. And then there was plenty of things that we did that were, you know, just, you know, just the perfect storm, a perfect storm of everything. It was working mistakes. It was public too soon. It was short seller activity. It's all this shit coming together that probably caused you a few great hands, too. Yeah. The second thing is, is when, you know, all of a sudden you're putting up a hundred million in profit, like every attorney in the world is looking to figure out a way that they can squeeze you. So the bigger you are, the bigger the target that you are. So I had short sellers going after me. I had ambulance chasers going after me. I had competition going after me. And then I was, you know, also, I was not ready for that onslaught by any means. We had class action lawsuits that all eventually got settled, but a ton of them, like there was class action lawsuit after class action lawsuit after class class, class action lawsuit over a billion dollars of class action lawsuits against us at one given time. One was for texting incorrectly. I had no idea that you weren't allowed to text people. Another one was for product efficacy that we ended up winning. And another one was for the way the IPO was handled, which I didn't know that I couldn't cite, you know, like you see Elon Musk trouble that he's going through, like every time I tweet, I would have an SEC filing and another, you know, citing in a lawsuit. So I had no idea how to conduct myself as a publicly traded company and as a public figure by any means. Yeah, that's not that's not easy to say to land. And do you still stand by like the core business model, like the direct selling multi level affiliate, because that also has gotten just a lot of negative. So how do you do that model right? Yeah, you, you can. So I will tell you, you, you can very much do that model right. And there is a lot of good that comes from that model. But you have to be very careful because compensation drives behavior. And as you know, human behavior is very hard to calculate. And so you might very well be creating, you know, great ideas and great incentives and support that create behaviors that aren't an alignment with your personal values and brand. And when you have a million people out there marketing your company on your behalf, which we did, you're going to have a lot of of chaos. And you're going to have a lot of people that are doing it in a ways that are not an alignment with your values and an alignment with the brand's values. And so you have to have a strong compliance. You have to have strong policing of this. You have to be very rigid and tight. And it's a very difficult environment to do correctly. It's highly competitive. And, you know, it's, it's kind of like the wild wild west of sales. So I learned a ton from it. I'm no longer within the industry at all. So I can speak very objectively about it. And, you know, and I can tell you that there's some, there's some great things that come as a result of the industry. But then there's also some, you know, some, some chaos that it's a result as well. If you're not correct. If you're not disciplined and you're not forward-thinking enough to understand the various things that could come your way, some of these companies do create, you know, vehicles, marketing campaigns, messages, sales systems, and compensation systems that are not great for the consumer.