Business Growth: Leveraging Capital and Return on Investment

Understanding capital allocation and leverage is crucial for business growth beyond $100 million, as explained by Davey Foggy, an experienced e-commerce entrepreneur.

### Leveraging Capital Allocation for Business Growth: Insights from a $650M E-commerce Entrepreneur
* 💼 Davey Foggy, an e-commerce entrepreneur with over **$650 million in sales**, emphasizes the importance of **capital allocation and leverage** for business growth.
* 📈 Foggy explains that as a business grows, founders must transition from **doing everything themselves** to **strategically allocating resources for maximum impact**.
* 🧠 The concept of leverage in this context refers to a business's power to influence outcomes, influenced by factors such as **brand awareness, unit economics, repeat purchase rate, and marketing funnel effectiveness**.
* 💰 Foggy highlights the need for founders to understand the **return on investment (ROI)** of each marketing channel and to **scale up successful efforts** through strategic hiring and investment.
* 📊 He cautions against common mistakes, such as assuming organic social media is always effective, and **emphasizes the importance of measuring the effectiveness of all marketing efforts**.
* 🚀 Foggy explains that as a business's **brand leverage increases**, it can justify investing in **higher-quality team members and content creators**, leading to **exponential growth**.
* 🛠 The relationship between investing in each marketing channel and the business's growth stage is dynamic, with strategies evolving as the brand's **leverage and resources increase**.
* 🎓 Foggy concludes by inviting e-commerce entrepreneurs to check out Daily Mentor for further **insights and advice on leveraging capital allocation for business growth**.

if you want to grow your business to over $100 million, there's two concepts you need to understand: Capital allocation and leverage. I'm Davey Foggy. I started Daily Mentor, one of the fastest-growing e-commerce mentorships. I also have done over $650 million in e-commerce sales across multiple Brands, and this concept is constantly alluding a lot of our mentoring students. Let's break it down from the beginning. The vast majority of businesses start as the fing. They've got one or two Founders, and they're sitting in the garage, ready to do whatever it takes. Cuz you have no budget at this stage and no savings, you can't just go out and hire anyone, meaning you have to do everything yourself. Could be code calling, Facebook ads, organic social. Could be everything. Eventually, as the business grows, you have to do everything to the half of your ability because you're so time-constrained. Logically, The Next Step, you decide you need to hire. You have a few options here. You can hire a cheap contractor, hire an expensive agency, or

full-time role or keep doing everything kind of half-ass as it's technically not broken. It's just not great. This is a huge inflection point and depending on whether you understand the concept of leverage and a return on invested capital or return on invested time is whether you will grow or fail. Obviously, leverage is often used to refer to as debt, which is not what I'm talking about today. In this situation, I'm referring to business's power influence a person or situation to achieve a particular outcome. There are a ton of things that impact the leverage a business has for its marketing efforts, so let's use like an obviously extreme example to illustrate this point. Ronaldo, one of the biggest influencers in the world, apparently charges 3.2 million million per Instagram post. If I was to create a fitness tracker similar to whoop or whatever and it cost me $90 to get it to the customer all in close it and I sold it for $200, meaning I make $110 profit. I would need to sell over 29,000 watches.

just for that post to break even, but anyone that's done influencer marketing, they know that the chances of this happening on a fresh new brand that's just started is absolutely zero. However, a brand like whoop or Nike, they can actually afford this because of the leverage their business has. So what creates leverage? It's affected by a few things. First is its brand awareness, its affinity with its customer. The second is its unit economics. Third, its repeat purchase rate. And fourth is its entire marketing funnel. Even if Ronaldo doesn't convert enough to break even on that post directly on Instagram, brands like Nike or whoop, they have so many other supporting factors that allow the campaign to eventually convert profitably. People will go follow the brand's Instagram, people will go check out the brand's store, and they'll also see a bunch of new products there. People even notice other elite athletes wearing the brand and product. So what does this all have to do with you as a small or medium-sized business? The first point is you need to understand the underlying

return on investment that each marketing effort is giving you so that you can decide is whether it's worth it or not. A common mistake here I see is organic social media. The founder is initially doing one reel a day. They're just carving out a little bit of time, and they're getting a decent amount of reviews. Then they stop on a certain month because they need to focus on creating ads, or they need to hire something for something completely unrelated. If the founder took time to actually understand the value creation, the return on investment that that channel was actually providing, rather than just allowing it to stop completely, you might hire a Creator to take it off your hands. Alternatively, you might just completely stop this Channel and never go back to it until your Brand's Leverage is high enough 'cause you know it's not worth it. People just assume organic social media is worth it, even if you've got a brand doing over $500,000 Revenue a year. Often it's not unless it's going by viral. You need to find a

way to measure the effectiveness of everything you do then 10x it through employees. Let's take another example: website conversion rate optimization. Initially, when you're doing a few sales here and there, small website changes like changing the color of a button, they're just not going to move the needle. At that stage, you're better off doing massive changes like big new landing pages or offers. But suddenly, when you have well over 100,000 website visits a month, suddenly you have the leverage to invest in like a c agency or even a funnel manager. Your existing Pages have enough traffic that hiring a role is suddenly worth it, and they can start making some of these small changes as well. This relationship between investing more into each channel is just constantly fluctuating throughout your business growth. If your product and brand is just becoming better and better, just compounding chances are you should be investing more and more into the quality of your teams and content. It allows you to spend a lot of money on thought leaders and SE level staff that

would not have been profitable in the early stage because there's more team members underneath that can benefit from this wisdom. This is often why you can't just keep hiring $10 an hour freelancers if you want to push past these limits. If today was interesting to you and you've got to e-commerce brand, check out Del Mentor. Don't forget to like and subscribe.

The 2 Key Concepts You Need for Rapid Business Expansion

Davie Fogarty

The Key Concepts for Growing a Business to Over $100 Million

Davey Foggy, a successful e-commerce entrepreneur, emphasizes the importance of capital allocation and leverage for business growth.

In the early stages, founders often have to do everything themselves due to budget constraints, but as the business grows, understanding how to leverage time and resources becomes crucial.

Leveraging the power of influence, such as through effective marketing and partnerships, is essential for achieving significant growth in sales and revenue.

Building Brand Leverage and Marketing ROI

Brand leverage is crucial for influencer marketing success, allowing for profitable campaigns even if direct sales impact is low.

Small and medium-sized businesses need to carefully evaluate the return on investment for each marketing effort, rather than relying on organic social media without assessing its true value.

Overlooking the importance of brand leverage and ROI analysis can lead to ineffective use of marketing channels and resources.

Maximizing Effectiveness and Employee Investment

Measuring effectiveness and then increasing it through employees is crucial for business growth.

In the case of website conversion rate optimization, the approach to making changes evolves from small to large scale as the website traffic increases.

The relationship between investing more in each channel fluctuates throughout business growth, but as the product and brand improve, there is a compounding opportunity to invest more in the quality of teams and content, including hiring thought leaders and high-level staff.

The Importance of Investing in a Knowledgeable Team

Investing in a knowledgeable team is crucial for long-term profitability and growth.

Relying solely on low-cost freelancers can limit business expansion and success.

Del Mentor is recommended for e-commerce brands seeking valuable insights and knowledge.