# How I'm Building a Billion Dollar Company (Episode 1)

Channel: Zach Yadegari
Video: https://www.youtube.com/watch?v=nQVDi79A4JI
Duration: 23 min
Language: English
Words: 4608
Transcript page: https://viewrankai.com/tools/youtube-transcript/nQVDi79A4JI

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[0:00] I'm going to start open sourcing my journey as an entrepreneur. Spent 150k. Things are just looking way worse than I thought. Dude, I've had my eye on the absolute monster, dude. My name is Zach Yadagari. Feels kind of awesome. Zachagari joining us. How much money do you make? Make $1 million every month. Whiz Kids. Zachari. Why not bring out

[0:19] the founder? Wait, is this the founder? What's up, man? I started my first company when I was 13 years old. It was an unblocked gaming website. I called it Totally Science and I sold that when I was 16 [music] for 100K. After that, I founded Cal AI and in just a year and a half, I scaled that

[0:36] to over 40 million in annual run rate. When I was younger, I always wanted to be an entrepreneur, but I never truly knew what went into actually [music] building and scaling a company. Flow is a bigger brand that will [music] have multiple products under it. Our first product is the Flow alarm clock. Your alarm rings on your phone and you can't stop it until you tap your phone to the flow dock. You actually have to get up, get out of bed and go there. So, no more doom scrolling. Pause. How did I get the idea for flow? The idea came when after selling Cali, I was just going to take a

[1:10] rest from entrepreneurship. I [music] was trying to enjoy life for the first time without the stress of running a company, but I got bored extremely fast. I'm just not wired that way where I could take breaks for long periods of time. So very quickly I wanted to work on a new project. I wasn't sure exactly what I wanted to work on, but I knew I wanted it to be something some kind of physical product probably because of movies like Iron Man wanted to build physical devices, but I didn't know exactly what. And so combining the two ideas like all right, big TAM [music] and something physical. I started just

[1:41] looking at a ton of different companies and a ton of different niches. The things with the biggest TAMs are really the things that everyone uses on a [music] day-to-day basis. And some of the biggest companies are just companies that aren't innovating on [music] some of the technologies people use every day. So for example, everyone drives a car. Elon Musk built electric cars,

[1:59] self-driving [music] cars with Tesla. Something I realized was that the actual manufacturing time it takes [music] to build a lot of these products is very long and I'm used to software. I have a lot of ADHD. I want things done instantly. Eventually I came to the idea of okay, something with sleep [music] and a device similar to brick. Brick is great for like blocking your phone for screen time, but it doesn't have anything [music] about like alarm functionality. And I was basically thinking, all right, the brick device, it's very simple. What are other use cases than just screen time? And eventually I realized, huh, it could

[2:29] actually be used as something that helps with your alarm. How did the team come together? Because the team thought about, all right, who do I actually need to execute this vision and make it happen? One, I needed someone to be [music] the face of the brand. someone who was going to be running around, someone that's extremely charismatic, wanted to model him or her off of the guy that runs Carp's ads. Carp, they [music] were this brand I saw at the time where they were just pumping out content and it was super cool. This random guy came up to me on the street and all of a sudden was bombarding me

[3:00] with questions and at the time I was like, "Yo, yo, chill." Like I was just trying to get away from him. He got my Instagram, I got his and I started looking through his content and I was like, "Yo, this guy's actually really cool." We ended up getting lunch and I pitched him the idea. I just knew he would [music] be perfect. He's like down for the craziest stuff. Super high energy and that was Gabe. Then I knew that we needed someone to build the website and the app. He just really stuck out as someone that was a [ __ ] grinder. Like he spends all day working

[3:28] super quick. He was also just killer at product design. But one guy in particular, Nick, the last piece of the puzzle, we needed someone on the team who could run our meta ads. I already knew this guy for a while and brought him on. He's running our media buying and that's a super important piece of the puzzle because so many agencies, so many media buyers, they just you understanding like the core fundamentals, turning off all the extra [ __ ] that Metatries to turn on for you and just keeping it [music] simple stupid. He's just a killer with like

[3:59] getting all of our campaigns set up. This person prefers to stay private for the time being. We started late February. So, the first step was getting the flow dos manufactured. [music] We were like calling up a bunch of different manufacturers on Alibaba and we eventually found one that [music] seemed good for it. They were going to take 3 months to be made because it was Chinese New Year right around the corner. It was super annoying and it was just super frustrating. We decided we're

[4:25] going to [ __ ] rip it [music] anyway. We put a pre-sale, but we did it [music] in a very unique way. Made it feel like there was a lot of scarcity, but we made it clear like your order is not going to ship for a while, but get it now. Otherwise, you're going to miss out. A month and a half in since actually launching, the last 30 days been slightly under break even this entire time. However, our CAC has also went up pretty quickly. One thing that we've been trying to do for a while, but we couldn't, is a subscription. Cuz we've been in pre-sale. Our first customers

[4:56] haven't even gotten their docks yet. When we started the company, I injected 200K in the bank account. We spent 150K. We have 10K left in the bank. Holy [ __ ] I just spent 7.5 of that to pay off the ad bill. I just injected another 100K, but I want to ensure that we achieve profitability off of this next 100K. We are about to roll out this test with subscriptions with Nick today. So we'll also get that data and that ideally will allow us to quickly rebound and scale [music] even past where we are today. We should all be operating under the assumption that like this is all we have. We have

[5:32] 100 and like 5K in the bank right now. We need [music] to achieve profitability off of this 105K. Feels pretty shitty that we have to scale down our ads and lose a little bit of momentum, but sometimes you have to take one step back in order to take two steps forward. It's Sunday now and Nick has really been cooking on the subscriptions. Rolled out some tests where we had the subscription live inside the the website. Under the buy now button, it would basically [music] show an optin where you could check it to get flow premium. The only thing is we had 50% of people opting in

[6:08] to start their subscription. That's like crazy high. I feel like it might be too deceptive by being under the button since it's under the fold of the website. And we're going to try it again, but put the checkbox above the buy now button. Another change is when we released it, we did 20 a month. I want to actually start at 10 a month and

[6:25] then we're going to AB test from there. So, I had a meeting with Nick earlier today and I think he just finished the subscription portal so that the user can change their card or unsubscribe if they want to. But there are also some problems within the actual app. if they download the app and have the subscription. It's actually very

[6:42] confusing how to activate it right now. So, I'm actually going to get my hands dirty right now. There are a bunch of changes to the app that we want to make on the UI side and haven't coded in a while. So, I popped out Codeex and I'm going to get cracking. Codeex working. We got Xcode loading up the preview in the background. We got the Figma designs that I'm working on and beautiful Miami

[7:06] City in the background. and two coconuts. I don't know what it is the last two days. Maybe I didn't get that much sleep, but I've been feeling just like stressed and a little bit down. Like I guess just working alone in the apartment. Like my friends that I'm living with, they're not here. Usually when I'm working on things like Cali in the past, Henry and I were together a lot, but especially when developing, it was always like us side by side. So, I finally gotten to a point where I think I'm done with all of the UI changes that I needed to do. This whole screen, it

[7:39] looked really ugly before. So, we did a whole UI haul in Figma and I implemented that in. So, now setting an alarm is a lot more simple and clean. The only thing I need to do is when you click set alarm now, it should not just set it, but also close [music] this automatically. Recently, I haven't programmed much of anything myself. I made like a small side project just with me and my friends, we have this bet where every day we go to the gym, we have to send a video and if we miss a day, we have to send $1,000 split up among everyone. So, I just coded an

[8:11] iMessage bot with my friend Henry. That kind of showed me the power of codeex. Like, it doesn't feel like coding. I mean, I used to actually handw write every line of code myself. If any of you guys aren't technical, you have no excuse of why you can't be building milliondoll apps right now. Can you just tell the AI what you want it to do and

[8:30] it will do it. One day we send zero emails [music] to the next day sending thousands. Claio is not used to that and the inbox providers aren't as well. So it's kind of like a slight warm-up period. Let's get it. All right, let's [ __ ] crush it, guys. Let's go. First customers are going to get their orders. So,

[8:46] all right, guys. Float to the moon. Let's go. See you guys later. Awesome. See you guys. Thanks. Just ended the start of the week team call. We're able to set the subscription live today, which is awesome because we got the approved on the app store. The CPAs are a lot lower than they were previously. They're at $21 today and we need to be under 29 in order to be

[9:08] profitable. Day before it was like 45. The day before it was like 50. Did lower the budgets a few days ago, so that's why it's dropping. We'll be doing like 300K a month right now profitably, which is good, but it's not good enough. We got to be in the millions. So, what's going to take us to the millions is increasing the LTV, which will mostly come from the subscriptions. Nick just finished implementing the premium subscription on the website upsell flow alarm. Then, if you scroll down, it says add flow plus. It's only been 2 hours, but so far the results are super promising. Seems like half of the total

[9:42] people that see this are actually opting in. Subscriptions usually convert, at least free trials, more convert than not. And retention is also really good, unlike mobile apps, which is the space I'm more used to. Alex, what are you up to today? Finishing some stuff for my new project, and I'm realizing that get to the the finish line, it's requiring a lot more effort than anticipated, but it's going to be so worth it. All right, I'm going to dinner. See you later. I just got back from taking my girl to dinner. What we need to look at is the recharge dashboard and see how many people actually are opting in. 8K. I think we

[10:20] only spent like 7K by now. I don't think that's accurate that there were only 14 orders because there were way more subscriptions that came in. That's going to be interesting how that plays out. I can look into this right now and figure it out or something is just like not set up properly. So maybe the dashboard's right. And if it is, then I don't know what's going on with Recharge because Recharge is saying

[10:42] there were 35 subscriptions started. [music] That doesn't make sense. Nick and I just got to the root of the issue. It was that on the AB test where they did not see the option to buy the subscription. It was just automatically being added to the cart. So on the screen, it will show the price obviously and then box where if you want, you can add Flow Plus for 3 days free trial. And then we're AB testing right now. $40 a year versus $9.99 a year. For the 40 a

[11:09] year, 77% of people are opting in. $99.99 a month, only 45% are opting in. These are both very high metrics. It makes me think like, is this too deceiving? A big issue before that we were having was that the actual overall conversion rate when adding this was a lot lower. But we made this new design before it was a lot uglier. For the $9.99 a month, it's 30% lower. $40 a year, the conversion rate only goes down 6%. Which is [ __ ] incredible. If we make these [music] changes, then we're going to be very profitable right off the bat. This is also very unoptimized. Like, we're going

[11:46] to do some AB testing with the prices. There's definitely a strategy that like we don't try to be profitable for day one. We literally just try to make money off of people that renew a year later. That was part of Cala's strategy, getting as many subscriptions as possible, break even upfront to make money off the second renewal. And given that it's not an app, cuz apps notoriously have like pretty high trial cancel rates. We made $8,720 today. Also, CACs have been going down on Facebook. I've been watching. Let's see what they were today. I think we've been getting close to profitability just based off of um no subscription. And

[12:23] that's just because we lowered budgets to try to do that. Let's see. We spent about $8,000 on ads. Okay. And we made $8,700. So, [ __ ] Definitely not profitable. Huh. It's weird that we're still having such high CS [music] because yesterday the CS were lower than they are today. These are like the uncertainties in business where you

[12:44] never really know what's going on. Sometimes you'll tweak a variable, it [ __ ] something up, so you're like, "Shit, let's turn back." And then you turn back the dial to go to the previous variable, but then it's too late and you never get as good as a result that you once had. That happens all the time. You know what? I think the subscription is

[13:03] going to save us. Good morning, guys. 11:00 a.m. Having the subscription option under the buy now button, we were just getting so many people opting in. It was like 70%. thought like there's no way this could be true. People just might not be realizing. We just moved it above the buy now button. We're going to see if the attach rate holds. I'm going to get ready. Order myself some Dunkin Donuts and maybe just like a hot chocolate and then the egg wrap or something. The flow dock, it's white. It's not gray. So Ununice is our designer. He's currently working on updating this. I just had the

[13:40] idea today. I was scrolling through Instagram and I saw someone launch this like octo pouch product. This would 100 fucking% be a winning product. 1 million%. I mean, my girlfriend uses one of these. All of her friends use one of these. Everyone my age that's a girl uses one of these. So, I think if we ran ads for it, it would go ballistic. I just have to decide. Do we want to stay in the tight flow niche of productivity or do we just want to choose any winning product [music] and run ads for it? I don't know yet. We'll see. We just got dinner and Henry and Alex thought it

[14:10] would be funny to leave a $10,000 tip on my card after I left. So, I got both of their cards and we're going to subscribe them to Abbott's platform. $10,000 that you spent. You can afford $50 a month for the rest of our life. Did I posted their cards on my story, too? What?

[14:26] What? No way. Zach, what do you think about the fact that we left a tip? A lot of people DMing me saying I was really wanting a new necklace. You left the four numbers at the end the same. Yeah. Well, to scare you guys. That's to scare us. Yeah. I've been recording this entire

[14:40] time. Are you going to post it? Oh, please don't post it. I just did our weekly creator call. I like gave them some wisdom and I was looking at the data with Nick. So, the subscription button above the buy now button. The attach rates [ __ ] held. They're the exact same. 69% and 63 and now they're 67 and [music] 69. It wasn't more deceptive. like people knew just as well as they know now. The conversion rate is actually slightly decreased uh with it above. But yeah, so it's like stacked 1 2 3. Um so I think this could be why the conversion rate's down a

[15:16] little bit versus when we put it under the buy now button because they have to pay for the $40 dock which verifies that they actually have money on their card for like apps and the past and other things. You just give a free trial not charging them anything then so many cards will decline. So, like almost all of the trials are actually converting, [music] which is amazing. We're going to make like almost an extra $20 per user, which is an extra $20 we could spend on CAT. And let me actually just show you guys our average order value is

[15:44] something like $44. We spend about $15 per order filling them. That leaves us with $29, which if we didn't have marketing cost, that would be our profit. But we have marketing cost. We could spend up to $29 to acquire a customer. Any more than that and it would be unprofitable. With the subscription on top, $40 a year. Let's be conservative. So, at least 50% of those are actually going to keep their subscription checked. So, that brings us to $20. Out of the people that start a trial, at least like 60% are going to convert, which again, it's looking like it's going to be a lot higher. 60% of $20. $12. And so this $12

[16:27] gets directly added to the $29 number, which takes us to $41. Now, an average business person would be like, "Okay, we have $41. Great. We've increased the amount that we could spend by about 50%. Now, this gives us a lot of wiggle room to spend more, but let's still stay under the 41, and then we'll be profitable." A smart business person would recognize that this $41 is a recurring subscription. the smart business person would spend $41. We'll try to get as close to that number as possible without going past it. In a year from now, I will make money. I will make the profit from the renewals. And

[17:07] also, these are like super conservative numbers. Tomorrow morning, we're going to set a four-way split test live. So, we're going to test $40 a year, $50 a year, $10 a month, and then we're going to try a weekly. We're going to try $4.99 a week, which is common pricing in apps, but I don't see it much in ecom. Maybe like a month, maybe 2 months to really know, at least to know like what the monthly renewal rates are going to be. I am so [ __ ] damp because this

[17:34] data is looking so promising right now. Sup legends. Good morning. We are now setting everyone will see a subscription now. 25% will see $40 a year. 25% will see 100 a year. 25% will see $5 a week and 25% will see $10 a month. I decided that I'm just going to build out a customer support dashboard for us. Maybe it will have like an alert system where if on a specific day there's all of a sudden an influx of customer support

[18:02] notifications on like a specific thing. It is currently 2:32 p.m. So, let's see what time it finishes. It's now 7:08 and I've just been working. I had some like calls in between and some distractions. But essentially what's going to happen is the emails come in, they go in the queue and then the AI will use the guidelines. The guidelines will kind of be a lot of documents you could give to give it like context on how to handle these support queries and then it will respond put it in the responded and if it's something that requires a human it will go to the escalated folder. All

[18:31] right, what's going on? All the information is very clear. Confirm OTP. Sky text your code. Sky text me I booked. Yo, what do you think about the color black? The color black? Mhm. Yeah, we're keeping that in by the way. Yeah, I think it's Leave it in the comments who you think. Someone in this

[18:50] room has never before. It's 9:40, guys. I'm still grinding. Everything is erroring out right now. So, it's just like analyzing one by one, then putting the error state on it. Yeah, I am fixing this. Alex is back and it's 11:30. We switched places on the couch. We are cooking. I'm almost done. Like, I'm wiring it up so I could actually cancel and refund [music] orders for the user. Okay, it's 1:15

[19:19] a.m. I just got off a call with Nick. He's going to make it more production ready [music] cuz I just did a lot of things locally. But yeah, I'm so tired. It's 1:00 a.m. I [music] have to go to bed. up guys. I don't know if like I trust like the intelligence tracking if that makes sense. It's kind of what we already discussed. Like I don't know if it cookies people the right way. We could also like when it comes to positioning of flow plus like we could potentially still run it in the way we are but make it very clear in the funnel on the on Shopify on our product

[19:54] pages like you get everything you need to like use the core features of the alarm and then there's this other section just unchecking it would accomplish that. unchecking the subscription by default. Well, in this like like it's just like this new thing you got to consider and think about and that's my take on it.

[20:10] That tells me like bricks going for 60. If they can run at 60 bucks and they have a new customer offer, right? I think they could run at 50. Well, I just think that there's something more to be done here. Something more to be tested. All of us call like 10 20 people and ask

[20:27] them like why did you make a purchase? Like look here. This person is not available. Hi, my name is Zach Adagari. Hi, this is Hey. Hello. How are you? Is this Sierra? Yeah. Who's this? Hey, it's Zach Adagari. I'm one of the co-founders of Flow Alarm. I saw that you just went on our website and you were thinking about purchasing. I'm actually calling cuz we launched the store recently and what what were your thoughts looking at it and why did you ultimately decide not to purchase? One of my biggest things right now that I'm

[21:01] dealing with is just getting out of bed. Yeah, I do scroll a little bit, but um just right now I'm kind of still looking at all of my options. Did you by any chance you didn't see the that there's an option for a subscription? Is that like if you were to purchase is that something you think you would move forward with or you

[21:17] wouldn't? Potentially. Yeah, I was I was just kind of scrolling around looking at different things. Was it clear that you could use it without having the subscription? M. No, but I also didn't look that closely into it. Thank you so much, Sarah. You've been super helpful. Yeah, of course. Good luck, guys. All right. Thank you. Bye-bye. It's uh 10:30 p.m. I was just with Alex hanging out, and only some of our odds are from the affiliate creators, and [music] most of our affiliate creators are on the 10% plan, not 15%. Am I seeing a profitable day? Hopefully, the [music] CAC keeps

[21:48] going down tomorrow. And I started looking through our graphs. We use triple whale and I realize all of this data is [ __ ] inaccurate. We're losing money off of just the dock without the subscription. Also, let's just check in on how the AB test is doing. But what I'm more interested in is the attach rate. How many people that subscribe are actually subscribing to the plan. So, it looks like these are the two that are the fewest to be um that people are subscribing to. And then the 10 a month and 40 a year. I I don't know like I don't know how profitable we are. and we

[22:18] can make an offer saying, "Hey, if Flo doesn't successfully get you out of bed, you get your money back."

[22:31] I guess I I honestly I didn't know it was this bad. So, I'm like really stressed right now. I've been looking through the Facebook ads manager and for whatever reason, our CAS just spiked today. I mean, I have to think it was because we added the subscription to every product. And maybe it's going to come down or something, but right now things are just looking way worse than I thought. I mean, I thought we were golden with these subscriptions. [music]

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