The Top 14 Things I Learned Working for Groupon Founders Eric Lefkofsky & Brad Keywell
- Posted by chicagosean
- on June 6th, 2011
I hit a rough patch in my trading at the end of 2006 and decided I needed to take a hiatus. The daily stress was getting unbearable and I thought it would be beneficial to my mind and my balance sheet to earn a steady salary and learn some new skills for a while until I could regain my trading confidence. In January 2007, this led me to join a start-up company in the transportation logistics space named Echo Global Logistics ($ECHO), where I eventually served as the Business Development Manager for a small group of Salespeople who were tasked with selling million dollar enterprise solutions to companies with large budgets for transportation spend.
Incidentally, this experience began to plant the seed for my minimalist approach to trading. Though I had a day job, I still kept tabs on the markets everyday, and still placed trades. But instead I was putting on positions that didn’t need to be monitored intraday (because I couldn’t), and only occasionally needed to be tweaked. And in fact, I had one of my best runs in the market in recent years in the spring of 2008 while still employed by Echo.
Anyway, the two men who ran the show from behind the curtain were Eric Lefkofsky and Brad Keywell, Chicago’s soon to be newly-minted billionaires. For those of you living under a rock the past 2 years, Eric and Brad along with CEO Andrew Mason are the co-founders of Groupon – the game changing, crowd sourcing, daily deals machine that has completely transformed the retail landscape and has been one of the leading drivers of the Social Media froth bubbling in financial circles.
Before Groupon, Eric & Brad were two of the driving forces of Innerworkings ($INWK), Media Bank, and Echo – all of which are housed in the same building, the former central warehouse for Montgomery Ward.
When I joined Echo, I was something like the 40th employee hired. By the time I left 20 months later, Echo had north of 500 employees in Chicago, with several smaller field offices spread out around the country. Rapid expansion was the name of the game.
While very infrequently working directly with Eric & Brad, their influence and leadership where felt throughout the company and I feel lucky to have learned a little bit from them. Eric is the hard-driving, details orientated guy, while Brad is the friendly, inspiring guy who makes deals happen.
My favorite Eric Lefkofsky quote came during a company-wide meeting shortly after Echo had filed its S-1, announcing their intention to go public via an Initial Public Offering (IPO). Addressing the employees gathered in the company lunch room, he strongly warned us not to talk to the press or answer any questions posed by anybody outside the company about anything that could be considered “material information” during our quiet period. He finished his warning with this cryptic line: “I don’t mean to scare you – I mean to FUCKING scare you!” Laughter ensued, but he was deadly serious.
My favorite Brad Keywell moment was one day when I sat in his office waiting for him to finish a phone call. While he chatted away, I perused his book shelf and was surprised to see “Trading to Win,” by Dr. Ari Kiev on his shelf. When his call ended, I mentioned that I too owned that book and considered it one of the best trading books out there. He then went on to tell me stories about how he and Dr. Kiev were friends, and often spoke at conferences together. He then went over to his shelf and pulled a copy of Dr. Kiev’s “A Strategy for Daily Living” and asked me if I’d read it. I hadn’t, and then Brad handed me his copy – which happened to be signed by Dr. Kiev – and told me to enjoy. I have, and today, this book resides in my wife’s purse as she references it often.
Here are some things I learned working for Eric and Brad, in no particular order:
1. If it works… Get. Big. Fast. This was the mantra from Day 1 when I started at Echo. Soon after I began, Echo began an aggressive hiring campaign – cycling through training classes of 20-30 people nearly every month.
2. Fake it ’till you make it. Most of the employees that were hired were recent college graduates, with little experience in the corporate world – let along transportation or logistics. After arming their new hires with just enough information and tools to be dangerous, they were sent out into the brutal cold calling world to drum up business. You may not technically be an expert, but you became one on the job – one mistake at a time.
3. Cast a wide net when hiring. Promote the best. Once scale is achieved, bring in the ringers. Echo had tremendous success with this method. By rapidly hiring so many people, they inevitably hired a few duds, but also accidentally found a bunch of superstars. The superstars allowed the company to achieve scale, and then once this was in place, they then had the wherewithal to attract top proven talent – often away from established old-economy players. No doubt, given Groupon’s rapid hiring, this same practice is propelling them forward again.
4. Dangle the carrot just beyond reach. Incentives are important. They get people to strive to do better. Echo had a commission bonus comp plan that was at best, confusing – at worst, misleading. But for the stars that strived to make it work – they were ultimately rewarded with higher base salaries and better comp plans. So in the end, the company and the best employees both made out well.
5. Bill for services quickly. Pay for services slowly. Echo didn’t invent this strategy, but it certainly benefits them. And according to the press surrounding the recent Groupon disclosures, sounds like its alive and well there as well. At Echo, they made it the responsibility of every sales rep to ensure prompt receipt of payments for services. When the company significantly benefits (survives?) by “the float,” it becomes a huge priority.
6. Locate your office in an area that has few lunch options. Buy everyone lunch in-house. Then create a business around it. I write this jokingly. One of everyone’s biggest complaints about working in Echo’s location in the city of Chicago was its lack of proximity to lunch venues. You basically had three restaurant options, only one of which was cheap. This became a much bigger problem in the winter, as Chicago weather made any long walks for lunch a dubious endeavor at best. But a few enterprising individuals at Echo began organizing group lunches by inviting local restaurants to come serve lunch in the company cafeteria for affordable individual prices. Out of this, Fooda was born, financially backed by – you guessed it – Eric & Brad’s Lightbank venture capital firm. (more on this below).
7. Unethical Behavior must be dealt with swiftly and brutally. One episode I won’t forget involved an Echo employee who was suspected of engaging in some unethical behavior that may or may not have been cheating the company and/or its customers. I’m not clear on the details, but the suspected employee was asked to join a meeting that was taking place in a glass-walled conference room that was in full view of the majority of the employees. In the conference room, this unlucky employee was joined by the majority of the top company executives. In full view of everyone, we could all see (but not hear) Eric Lefkofsky screaming at this employee and clearly sending a message that whatever took place would clearly not be tolerated. The message was delivered – to everyone. I felt bad for the employee, but I also admired Eric for this move. It had to be done.
8. Use or create synergies wherever you can. In addition to Echo, Eric & Brad had also started Innerworkings and Media Bank in the same building. And all of the companies mentioned in this blog post have at one time or another shared office space with each other. And as the needs of each enterprise dictated, executives where often moved laterally to different companies where needed, or employees were promoted to new positions at other companies. CEO Andrew Mason was one such employee. He worked for Innerworkings where he caught Eric & Brad’s attention with his idea for The Point, which was the precursor to Groupon.
Side note: I’m the proud owner of perhaps one of ten (?) The Point t-shirts which was handed to me directly by a young Andrew Mason as a favor for participating in a survey about The Point. (Clearly he liked my ideas for creating revenue out of social activism to create Groupon. Just Kidding)
9. Revenues Matter. Everybody involved in Sales (which was the majority of employees) was urged to generate revenue. We achieved scale by volume. The higher our volume, the cheaper our costs, and therefore the larger our spread (Gross Profit). This was the core of our business model.
10. What’s our Gross Profit? Every time a sale was negotiated, the employee was urged to focus on the “GP.” GP was the number you had to report at the end of each day to your team leader. Everybody from the top down was focused on GP. When everyone at the company is focused on profits, good things happen.
11. Allow people to grow into positions. Task people with the right attitudes with projects that they might not be obviously qualified and see what happens. Occasionally, magic happens which far outweighs the times when it doesn’t quite workout. It’s one thing to take financial risks, but take risks in people as well. You never know where the next Andrew Mason will show up.
12. In sales, always be closing new accounts, then spend 80% of your time on the 20% of your accounts that offer the most promise. It’s simple math. 80% of revenue and profits typically comes from only 20% of your accounts. Invest most of your time with them. Spend your free time prospecting for new accounts which might earn their way into your “top twenty.”
13. Sincerity and humor closes deals. Keywell is the master of this. One time I was working an account to take over a large piece of business. We were attempting to re-negotiate their shipping rates with UPS or FedEx (I can’t remember which). The contact at the company recognized the value we brought to the table, but for whatever reason wouldn’t take the leap with us. When big deals were close but needed to be pushed over the edge, this is when we’d walk over to Brad’s office and call for backup. We filled Brad in with the particulars then set up a conference call with the prospect. Once the call began, objection after objection was deftly and respectfully handled by Brad. He spoke to him man-to-man, made him feel important, and offered real value. Nothing shiester, or cheesy. Just good, honest conversation. Brad wasn’t giving the hard sell. He didn’t need to. He spoke the truth. The best part about the call was at one point Brad told the prospect he didn’t sound like the kind of guy who had to ask his wife for permission for every little thing, so why the hesitation on making a decision here? It wasn’t rude, it was spoken tactfully and respectfully, yet we all had a good laugh and Brad won the prospect’s respect.
14. Figure out a way to make it a Yes! Then do it. Brad was a big proponent of this. If the customer asked for something unusual. Don’t say no. Figure out a way to make it happen and turn it into a yes.
I’m bullish on Groupon. Will it make a good investment for individual shareholders who buy the IPO? I have no idea. I’m more bullish on what Groupon means for Chicago. The money that Eric, Brad, Andrew, and many early employees will earn will be a good thing for Chicago. These are entreprenurial people who take risks and have a vested interest in seeing the tech scene in Chicago prosper. And everyone knows Chicago and Illinois could use the tax revenue ;)
Just like the small investments in Fooda (mentioned in #6) as well as another firm sharing office space with Groupon – Sprout Social – I expect to see many more investments locally that will create far more value, wealth, and collateral benefits than any temporary bump from the latest government handout or new mortgage tax credit will ever provide. And these investments will be led by the Groupon winners. This is the path to creating true, permanent wealth. Eric & Brad have a proven track record of success and I look forward to more great things to come from them.
IMPORTANT: None of the statements made in this post should be taken as straight facts. These are just my opinions and/or recollections, many of which are murky as my memory begins to fade with age and distance ;)
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Sean McLaughlin - Editorial, Curation, & Investor Relations Solutions at StockTwits. Also, former Member of the Chicago Board of Trade who trades his own account in Boulder, Colorado. More »
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