Navigating Entrepreneurial Seas: Caleb Roth's Insights on Metrics-Driven Business Success

Unlock the strategic mastery of business metrics with entrepreneur Caleb Roth in our latest chat, where measuring success isn't just a practice but a pivotal force in crafting your empire. From the leap of faith out of corporate life into the dynamic world of startups, Caleb's journey exhibits the transformative power of side hustles, flipping books, and the groundbreaking Scout IQ. He also unveils Empty Shelves, his unique partnership with libraries, emphasizing how traditional domains can evolve into innovative business models. With every tale and tool discussed, we underscore the fundamental importance of tracking key performance indicators to navigate the entrepreneurial seas with precision and insight.

This episode is a treasure trove for those yearning to set sail toward their business horizons, armed with actionable metrics that dictate the course to success. We dissect the art of goal setting through the prisms of unit economics, profitability, and the diverse scales of operations—whether you run a quaint shop or a bustling warehouse. By tethering ourselves to the right metrics and blending in invaluable customer feedback, we map the path from simple beginnings to monumental growth. Join us as we chart the terrain of data-driven triumph with Caleb Roth, and gather the wisdom to steer your business ventures towards uncharted successes.

To connect with Olivet’s Entrepreneurship Program, contact Program Director, Chris Perez at caperez2@olivet.edu.

To learn more about other entrepreneurship opportunities and the McGraw School of Business’s very own Createur Conference and Pitch Competition, go to Createur.Olivet.edu.

Transcript

Speaker 1: 0:00

This week, Caleb Roth will be joining us to discuss how to effectively utilize and track metrics within your business.

Speaker 2: 0:07

Where faith and business meet. This is Creator. What does it mean to be a Christian entrepreneur? How can I turn my ideas into an actual business? How do I navigate my path to entrepreneurship?

Speaker 1: 0:20

Welcome to Creator, the podcast brought to you by Olivet Nazarene University's McGraw School of Business to unlock the secrets to Christian entrepreneurship and fuel your path to success.

Speaker 2: 0:31

I'm your host, Carly Bird, graduate assistant of Olivet's Entrepreneurship Program.

Speaker 1: 0:37

I'm your co-host, Spencer James, an Olivet undergraduate marketing management and business administration major.

Speaker 2: 0:43

Join us, fellow students, as we embark on a journey to discover the call of the entrepreneur.

Speaker 1: 0:49

Hey everyone. This week, Carly and I have the pleasure of being joined by someone that is always looking for a need to solve in the business field Caleb Roth.

Speaker 2: 0:57

Caleb is a professional entrepreneur and an amateur golfer, although he wishes it were the other way around, which, I have to say, I completely relate to that. Now, he is fascinated by people who pursue one thing obsessively, especially if there are metrics involved, which we're going to get into today. He founded a software tool called Scout IQ that helps booksellers find profitable inventory to resell on Amazon. He sold that tool in 2022 and is currently on sabbatical searching for the next big thing. Caleb, thank you so much for being here with us today. We're so excited to have you.

Speaker 3: 1:31

I'm delighted to be here. Thanks for having me.

Speaker 2: 1:33

Yeah, of course. So, caleb, you've had multiple successful companies, such as Scout IQ, as I mentioned in your bio, as well as one of your latest endeavors, empty Shelves. Do you think you could share just a little bit more about these two companies to give our listeners a bit more context on them? And then this is the question that, based on our topic today, that I'm really curious about too is what were some of the key performance indicators or KPIs as a lot of business people call them that you tracked in your businesses?

Speaker 3: 2:00

Yeah, happy to dive into all of that. Well, first off, you mentioned many successful ones and I'd have to also say there's many unsuccessful ones. I think there's all these stats out there that 80% or 90% of small businesses fail. I've had four or five successful ones and probably 15 to 20 unsuccessful attempts. So I think people that are entrepreneurs are always trying to get something going, are always trying to get something going, but I wasn't always an entrepreneur.

Speaker 3: 2:26

I had some aspects of that as a kid certainly, with lemonade stands and garage sales and car washes and all that. But I actually got a corporate job out of high school. I worked in orthopedics and did marketing for them and then really wanted my freedom and so I was trying to figure out a way to start something, and I had flipped books in high school a little bit. I'd flip books in college because everybody understands that textbooks are really expensive and that's all I knew. So in 2015, I said, hey, I want to start a side hustle, see if I can grow this up and eventually maybe quit my job at Johnson Johnson. So that's what I set out to do.

Speaker 3: 3:01

It's not super glamorous, it's literally just going to thrift stores, garage sales, working with libraries and finding books that they have for a buck or two or five and flipping them on Amazon for, you know, 10, 20, 30, 50. So that was the business. And then Empty Shelves was a piece of that. That was essentially a consignment business, where we, instead of going to thrift stores and libraries, we would have the library scan their own books. We would simply turn green or red if they should accept it or reject it, and then we would sell them and handle all of the fulfillment on Amazon and then do some sort of a revenue split with those libraries. So that that's how we eventually built the business into a professional business, if you want to call it that.

Speaker 2: 3:42

I love that. I like seeing the connection between some of these side hustles that you went through and being able to grow from what you've already started and being in a field that you understand. You kind of just keep going in that track now that you have that business knowledge in that particular field.

Speaker 3: 3:57

What's interesting too is when I started to get into books I didn't think that was going to be the thing. I just thought that was going to be a bridge to corporate, to some sort of entrepreneurial venture. And I started out with a spreadsheet. My wife and I sat down and we said if we find a hundred good books a week and we sell 4%, 5% a week, whatever that would be we actually didn't know what's possible in the industry because we hadn't done it and we just mapped it out, said you know 100 books, let's say we sell 5%, that's five books. Well, that's hardly anything to sneeze at.

Speaker 3: 4:28

The next week we list another 100. Now we have 195 and we sell 5%. So almost you know 10 books. That's still nothing. But you extrapolate that out six months, nine months, 12 months down the road and all of a sudden you have a substantial business. Assuming that you can find those hundred bucks and assuming that your metrics are accurate, which it turns out, 5% a week is pretty average. So I built the business going all right. I think there could be something substantial if you put consistent effort into it and it turns out that it worked almost according to plan.

Speaker 1: 5:01

Yeah, I think that's such a cool model. It's one of those things during COVID I kind of saw really start to grow a lot at least just kind of in some of my research right and the side hustling of it and I think that's just such a unique model. What's one of the ways that you feel like you can accurately measure some of the metrics within your business right? Like it seems like at least within Quest IQ, there's a lot of data and metrics that you kind of all need to keep in check to be able to help provide accurate results for people who are using the scanner.

Speaker 3: 5:30

Yeah, I think it's important to separate out vanity metrics from actual metrics. So metrics are really just a fancy way of saying we're tracking something and it's really important to know where you are in life and what your goal is. Where do you want to go? And then metrics are some sort of way to figure out if you're on the right path to get from where you are to where you want to end up. And so a lot of people show screenshots of their Amazon seller account. Spencer, if you're watching TikTok videos and saw people bragging about, they're selling $10,000 of books a month. That sounds sexy and great and it is, but that's just top line sales. Amazon's got their fees, you've got cost of goods, you've got all your other expenses and supplies and shipping, and so it is important to sell $10,000 or hit a certain metric, but ultimately the money that comes into the bank is what matters.

Speaker 3: 6:17

So when we built Scout IQ, we tried to simplify as much as possible and we taught people really only three metrics matter and we try and get the metrics to be what you can control. So we boiled that down to how many books are you finding every single week? What percent are you selling? So what's your sell through rate. Again, that's that 5% number. If you have 100 books, you should be selling five to seven ish typically. And then what's your average selling price?

Speaker 3: 6:42

Because those three variables eventually play into how big is this business going to get and how much profit are you going to take home, and ultimately those are what matter. So you can't necessarily control sales, but you can control the steps along the way to give yourself the best chance of hitting your goals. And so that's what we broke it down to, and I think it's important to track on the right timescale, so the right rhythm. If we track those monthly, then you only got 12 check ins or reflection points every single year. We advise checking weekly so you knew if you were on track, you knew if you were sliding or if you needed to adjust your quality of your books or your repricing rules, and a weekly check in is sort of a pretty good indicator to help you make sure you stay on track.

Speaker 1: 7:26

Yeah, I think that's a really cool way to put it. It's almost like you're giving yourself quality assurance, almost right, and you're kind of checking in with yourself, because a lot of times it can be easy to kind of get carried away by a lot of those big numbers, right? Or you look at some of these big Amazon sites and they have the big flashy numbers. So that is a really, really good way to go about it businesses go out of business, they go bankrupt.

Speaker 3: 7:51

Yeah, there's this joke that you know on a unit economic level, which simply means if you buy the book for five bucks and after all the fees and everything you clear for so, you actually lose a dollar. There's the joke that well, that's okay, You'll just make it up in volume. And that's not the case. You need to make sure you're being smart about what you're doing and working toward a goal. So many businesses make millions of dollars and raise millions of dollars of capital and still ultimately end up bankrupt because they can't figure out how to adjust and track the proper metrics.

Speaker 2: 8:16

Exactly, caleb. You are getting into exactly what I was actually going to ask you next, honestly, because you know, I think it's easy for us to get into our routines and those standard operations with our businesses, often to a point where we forget why we're actually doing what we're doing Like what is it for and tracking those metrics tends to fall into that category for some people, and we want to make sure that we're actually using that data and tracking these for a goal. You know, and you mentioned your three KPIs and those end goals that you have in mind, but, Caleb, how do you set those specific, measurable goals based on your metrics you track to ensure that you're actually making progress and staying on track?

Speaker 3: 8:57

It's a great question. A big part of it is making sure you connect and network with other people in your industry to understand what your benchmarks are. So what is possible? So if you, if your business case is predicated upon flipping 30 percent of your inventory, that may work in other industries, but that's pretty hard to do in books on a monthly level, or even a weekly level, for that matter. And so if you, if you have the wrong numbers to even start off or faulty assumptions, then it doesn't really matter what you're working toward, because that's that's not feasible. So it's important to talk to other people to understand what is possible and then figure out what you want.

Speaker 3: 9:33

We had a lot of mom and pop sellers that were simply looking to make an extra $2,000 a month, and we also had, on the other end of the spectrum, people with warehouses that were selling three to $5 million of books every single year, and so their goals are certainly very different. Their profit margins are different. Their overhead is certainly much higher. Their goals are certainly very different. Their profit margins are different, their overhead is certainly much higher, and so if your goal is to make $2,000 a month, then what we do is help back you into. If I need to make 20 or 2000 bucks profit, after everything I probably need to sell five to $6,000 of books. I need to probably have this many, you know, thousand books in inventory.

Speaker 3: 10:07

And if, if we get to this magical theoretical point called equilibrium, that's where we might be finding 75 books a week and selling 75 books a week and our inventory levels stay roughly the same. And if you can achieve that point which is possible then you can sort of hit your goals. And there's always people further ahead, there's levels to the business game, so there's people further ahead, there's people behind, and you can look at the ones ahead and be jealous and go, man, I wish I could be there. Or you can look at the ones behind and go, hey, look, I'm crushing those guys. Or you can say, look, my goals are this, I'm hitting my goals and I'm happy. And so that's really where goals come into play and you can always reevaluate. But that's essentially why we set out and have those goals.

Speaker 1: 10:50

That's really interesting to me. I want to go back to that piece that you just said. You have mom and pop sellers and then you also have people that are selling on warehouses. I mean, that is such a wide demographic. How are you able to innovate in a demographic that large? Is there some point of reference that you go off of?

Speaker 3: 11:07

We eventually made different tools because the bigger players had a little more sophisticated needs and they wanted to understand some of the nuances better the mom and pop sellers we tried to put as much data I'm a data junkie, spreadsheet guy. We tried to put as much data into our app as possible, but ultimately, what most of our customers wanted was simply the green and red. Green is accept. And we invented a proprietary data point that shared how many times a book sold in the last six months. So we tried to give people a realistic picture of what they could expect on their books.

Speaker 3: 11:38

And when we first launched, people kept coming back and go I love your app, love your app. And I said awesome, why and I was hoping they'd be like your data is impeccable, it's perfect, I love it. And all they said was I'm buying the green books and I'm making money and I was like cool, but do you know why they turned green? They go, I don't care, I don't need to, I just know that they're green and it's working and thank you and I'm going to keep using your app. And so we just understood that there was a lot of sophistication behind the scenes, but most of our customers ultimately just wanted it to work.

Speaker 1: 12:08

Yeah, it's like breaking it down and keeping it simple, right? It's just, sometimes people just kind of want to know the straight answer.

Speaker 3: 12:14

Well, and speaking of simple, that's often what people get sidetracked on metrics, because accounting and numbers just even from a personal finance standpoint, it's very difficult and anxious. You know it causes a lot of anxiety to dive into numbers and understand where you're at, and so people get scared and wait till tax season and then delay. And so one of the really important things with metrics is to keep it simple. If you can't understand what you're after, you don't need to get overly complex with all these ratios and everything else. Just keep it simple. Can I find 100 bucks a week? Am I selling 5% of them and is my average selling price, you know, higher than 17?

Speaker 2: 12:52

bucks or whatever your threshold is. That's a great point, caleb, you know, and that kind of goes back to just making sure that you're actually reaching those actionable insights in your business. How would you say that you analyze those metrics? You know, like you said, just kind of breaking it down to what's simple and not focusing on all the ratios and all these different pieces that you might not even understand fully, you know. So how do you break away from all those complex pieces? You know, let's say that if we have a lot of listeners out there who are starting their own businesses and, like you said, it's very overwhelming to be surrounded by all this data, and you know all these different types of formulas and ratios that you could potentially use, how do you kind of split that step away from some of those pieces and just look at what is the most important for your business? What advice would you give to our listeners who are just getting started?

Speaker 3: 13:40

I think it comes back to controlling what you can control and finding the simplest data point that gets you on the right path, and it has to be something you can control. So if you're in sales you can't control let's say, you're selling vacuums door to door, for a simple example you can't control how many people are going to say yes, but you can control how many doors you knock on, and so if you understand your ratios after a month or two of doing this and you know that you're going to close again 5%, we'll just stick with that number. Then, if you knock on on 100 doors, you're going to get five sales, and so it's not your job to control which five people buy, but you can control putting in the work, and so that might be a very simple way to work on that. And then, as you get better and better, you can try and bump your rate up to seven or 8% by, you know, getting better at psychology and asking better questions and understanding the customer's needs.

Speaker 1: 14:27

I think that's really good to be mindful of, because we've talked to a lot of students and a lot of listeners and it's been something where they'll start out and particularly also in kind of the tech space, and there are so many variables that go into that that for a lot of them just starting out it's like where do I even start at? And so I think that's really really valuable insight, a piece we would teach is simply get started.

Speaker 3: 14:49

It's much easier to move a boat and course correct once it's in motion. It's a lot harder to get that boat, you know, set up and turn the engine on and get it going. So we often encourage people just get out there and start scouting books. You know, we had a free trial so there was really no risk involved. Just get out there and get started. And once you're moving, then you'll start having a trail of data that you can leverage and look at and get curious about and look for clues about improving. But until you're starting, everything is just theoretical. You're just guessing what's going to happen and then you end up in putting yourself in paralysis by analysis instead of just going.

Speaker 1: 15:25

Do you have any data privacy pieces that kind of come with this right Like you're scanning a lot of books and a lot of I mean gathering a lot of and collecting a lot of data on things Is there any data privacy concerns that come with hosting your own app and working in that tech space?

Speaker 3: 15:42

Yeah, there certainly are. In the UK or the European Union. They rolled out GDPR, which was primarily related to emails, so we had to make sure that credit card information was encrypted and secure. We used Stripe. I think you may have heard of that. Email is really important. We never tracked location data on our customers. Just from you know, we were sellers too, so if they thought that we were collecting their location, we would potentially go and steal their best sources. Okay, well, I'll go through that. Yeah, but most of the stuff out there now, as long as you're careful about passwords and credit card information, is pretty good. The book data that's really all Amazon's data, and the nice part is the more customers we had going out and looking for books, the better the data got for everybody, because we tracked every scan that came in.

Speaker 2: 16:29

Caleb, you know I want to go back really quick to when you were discussing your customers in particular and how. Of course, as most of us know by now, in the business field, of course, knowing your target audience and taking the time to listen to your customers is crucial to success. And, with that being said, I was just wondering could you share some examples, maybe, of how you've been able to incorporate customer feedback and satisfaction metrics into your overall tracking system, because I know you were mentioning that a little bit earlier, but I was just wondering if we could go back to that, because that's very interesting.

Speaker 3: 17:02

Yeah, I think there can be a big disconnect between what you think the audience needs and what they actually want, and so a big thing we did. We had a Facebook group and we were very engaged and active with the community and connected with them in email. We did some in-person meetups and I shared that story a little bit ago about when we launched. We thought everybody would want sophisticated, complex, really intelligent data, and all they wanted was a simple buy or don't buy decision. So we listened to the customers and customers had great ideas like hey, I want to hire someone to scout for me and I don't want them to see all the data, I actually just want the screen to be green and red and I want to pay a cheaper amount because they're on my team, and so we listen to our customers a lot.

Speaker 3: 17:44

Ultimately, sometimes we had the vision to go push a new feature, but more often than not, the features that we rolled out came from our audience, because we listened to them. I have a saying I like to say is demand is undefeated. If there is a desire and a demand for something and you put it out there, you're going to be successful and you're going to be serving those clients and if you want to try and create that demand, sometimes you can be successful, but more often than not it's much easier to just listen for what people want and then give it to them.

Speaker 2: 18:13

So true. I love that saying you got there. That is a great way to put it, Caleb. I also want to ask what are maybe some challenges that you've encountered when you're going through this process and tracking your data? Are there any challenges that you've had to face and overcome, maybe that you could share with the listeners?

Speaker 3: 18:31

I think for me, my propensity to get into the weeds can chase shiny or get curious, so sometimes I will go down too many rabbit trails and chase metrics that really don't matter. And one thing I've learned to do one is just surround yourself with other people that are smart and entrepreneurs and they understand it. And if you ask them questions or they can kind of come alongside and be like hey, caleb, you're, you're being stupid over here, why are you spending so much time in this little tiny area of your business? Um, a really good habit I got into was once a quarter I would sit down, I'd get a big white board. I love spreadsheets, but I there's something about writing it down and stepping back and seeing it. That helps you see the big picture.

Speaker 3: 19:14

And I would list every one of my businesses.

Speaker 3: 19:16

So it could be the libraries I'm working with, could be the three or four software companies I ran, it could be the Airbnbs and I would list out what's the revenue for the last quarter, what's the profit, how much time roughly am I putting per week into this business?

Speaker 3: 19:29

How much fun am I having?

Speaker 3: 19:31

What's the perspective for growth, or do I think it's going to be pretty flat or going down and I would sit back and just stop and think and look at that and go all right, based on what I'm looking at, take off my CEO hat and say if I was looking at someone else's business with these numbers, what would I recommend that they do more of, less of, or the same of, and a lot of times that helps indicate, because the 80-20 rule, the Pareto principle, factors into nearly every business, and so you're going to be getting 80% of the results or profits out of 20% of the inputs or your efforts, and so if you can identify where that leverage is, you can simply do more of those things.

Speaker 3: 20:09

You can cut out some of the things that maybe don't give you as much joy or energy, and your business probably won't notice much of the difference, but you will. And so for me, diving into the weeds, that was a great exercise. I tried to do it once a quarter. I didn't always succeed at that, but that would help me step back and make better decisions.

Speaker 2: 20:27

Yeah, that's a great mindset to have. This has been such a great talk. I have thoroughly enjoyed the content that you've provided throughout this episode, and I know that Spencer has, and our listeners as well, but it does look like we are kind of running out of time here, of course. I just can't believe how fast it goes. You know when you're having a good time, right, time flies. So before we wrap things up though I know that you know you know this already, caleb, since you've listened to our show here at Creator there you go.

Speaker 3: 21:02

He knows he's a fan All right, well, we have a good one for you today.

Speaker 2: 21:03

So are you ready for your quirky question? Let's go All right. So, caleb, we know that you love to play golf, is that right?

Speaker 3: 21:09

That is accurate.

Speaker 2: 21:10

Okay, Okay. So your question is if you could choose a famous golfer to be your business mentor, who would it be and why?

Speaker 3: 21:20

Oh my goodness, living or dead, or doesn't matter.

Speaker 2: 21:22

Either one.

Speaker 3: 21:25

And I'd have to say Arnold Palmer Okay, not only did he make the great drink by combining yeah, he was, he was just a gentleman and very kind to everybody. He came across and built a really good hospitality business. He, he really genuinely cared about people and he passed away just a few years ago, but the Arnold Palmer invitational is still a golf tournament that happens down in Florida bears his name. There's a whole hospitality group that bears his name and I think if, if you give people a great experience, then that's really ultimately what matters. So he, he understood serving people and, uh, if he was still alive, I'd love to have him mentor me.

Speaker 2: 22:04

Wow, okay, I feel like it. It almost seems like you knew this question was coming. That was such a good answer. I have to agree, I know. Yes, he did not know.

Speaker 1: 22:12

That was so good.

Speaker 2: 22:14

But yes, as someone who is also a fan of golf, I have to admit that's a really great answer.

Speaker 1: 22:19

Well, hey, Caleb, thank you again so much for being on the show today and being real with us, so we just really really appreciate that.

Speaker 2: 22:25

Yes, this was such a great conversation and listeners. If you want to connect with Caleb, you can visit his LinkedIn at Caleb J Roth, so go check him out.

Speaker 1: 22:34

And to connect with Olivet's Entrepreneurship Program Director, chris Perez, or to discover other entrepreneurial opportunities that the program has to offer, such as the McGraw School of Business's very own Creator Conference and Pitch Competition. You can go to creatorolivetedu.

Speaker 2: 22:49

Thank you for listening everyone and don't forget to tune in next time where faith and business meet.

Speaker 1: 22:54

This is the creator podcast. We'll see you later. Thanks,