Mastering Investment Cycles and Leveraging PR for Success: Insights from Mark and Joe's Podcast

In this podcast episode, Joe Jerome interviews Mark Ferraro about the market environment from 2019 to today and how to manage the current investing cycle. They discuss the challenges of raising money in a tightening market and the importance of market separation and PR in achieving success. Mark shares insights on the multiplier effect and a model for marketing and sales. They also touch on Mark's diverse background and the role of PR in his work. Overall, the conversation provides valuable insights for entrepreneurs and business operators.

Takeaways

• The market environment has tightened since 2019, making it more challenging to raise money for growing companies.
  
  
• Investors are more cautious and selective, leading to a need for market separation and effective PR strategies.
  
  
• A multiplier effect can be achieved by effectively passing the baton in marketing and sales, resulting in increased brand recognition and customer acquisition.
  
  
• A metric-based and mathematical approach to marketing and sales can provide a clear ROI and avoid wasting marketing budgets.
  
  
• PR and communication strategies are crucial for conveying the value and differentiation of a product or service.

Transcript

Joe (00:30.134)
Hi all, welcome to the 10X Team Podcast, where we cover all things related to increasing revenue, end-to-end branding, rev ops, marketing, and sales. It's Joe Jerome here with Mark Ferraro, and we wanna share Mark's insights on how he's gotten companies to increase ARR between 70% and 10X, generally by using the 10X Team system-based approach. Actually, the team architected one company's 9,800% growth. Mark recently wrote an article, on using revenue operations to fuel growth when investing markets are tight. We want to ask him some questions about that article. Without further ado, let's get started. Mark, welcome.

Mark Ferraro (01:11.817)
Hey Joe, thanks for having me. Good to be here. Yeah, yeah, right.

Joe (01:14.13)
Yeah, that's our podcast. We can do what we want here. So I have a question for you about the article you wrote. And why don't we start by asking you about the market environment that we saw from 2019 through today and your thoughts on it.

Mark Ferraro (01:21.495)
Yeah.

Mark Ferraro (01:30.105)
Sure. So I think in 2019, you know, going up to the COVID period, we saw a market that was probably going to tighten in some way.

And, you know, obviously, as many of us know, the way that the markets were affected by COVID was that interest rates were reduced radically, a lot of money was pumped into the system, and, you know, fundraising was, you know, a lot easier. As a result, when inflation ticked up in 2022, 2023, and into today,

The Fed had to increase interest rates in the fastest clip that it's done since the early 80s. As a result, the money's not around for some of these higher risk leveraged returns that

growing companies need. And so you may have a company that takes all the boxes and they're trying to do an A round or their B round. And they are kind of in a basic situation where they've got an ARR, let's say it's a couple million dollars.

You're valuing them at six times the ARR, which is your vanilla scenario. And they want to raise $2.4 million and give up 20% of the company. Right now, they need to go to the market and hear crickets.

Joe (03:06.379)
So.

So what you're saying, this is the first time since the 80s that this has happened. And a lot of the current like market, like venture capital trend, investment banking, that'll happen after the 80s. Is this like the first time like the modern crowd in like tech at least, and some of these deep tech are facing like this type of environment? Is this like a new thing? Because you know, the whole startup world kind of happened with the dot com world. And you said this is the first time since the 80s this has happened. That brings...

together kind of an interesting dynamic.

Mark Ferraro (03:41.013)
It does. It does. I think what's interesting is I think that raises a very good point, Joe, and it raises two points, I think. I think that one, we have been riding to invoke the eight early eighties, we've been riding a rate cutting cycle for the better part of 40 years. And so that has been.

very beneficial for companies that want to use leverage and funds that want to use leverage in order to invest in growth companies. So I think that's an aspect of what you're saying. I wouldn't say that this is the only time we've seen markets tighten, but I think it's the first time that we've seen markets tighten in this way since we got down to essentially zero in interest rates for in a really long time. I think that

The other thing that this evokes is 40 years is a very long time and it's a very long time for the investment community, particularly because people start young and end young on the investment side and there's not a lot of institutional memory. So to go back to the 80s, you're talking about people who...

My grandfather was still at a bank in the early 80s. So you don't have a lot of people who can really think that far back. And usually it's a 10 or 15 year clip before you start getting people who have cycled out of the system. So I think it is a somewhat new phenomenon. But I think that there are some other factors that may contribute to medium term kind of tempering of this.

environment. But I do think that it's a period that we have to get through and I think that we have to implement strategies to get through them until we get to the other side.

Joe (05:22.69)
Mm-hmm

Joe (05:26.062)
Yeah, and speaking of that, where do you think we are right now in the overall investing cycle and how do we manage the current environment?

Mark Ferraro (05:34.393)
Well, I think, you know, the, I mean, Alan Greenspan said in the 90s that we were very lucky to be experiencing a long-term cycle of increases in productivity. And a lot of that had to do with the tech.

Mark Ferraro (05:58.273)
the implementation of techniques and technology, the internet, great leaps forwards in that.

in those arenas. I think that in a higher interest rate environment, I think that someone like myself would hope that AI can fill that gap as we go into the next period so that we don't end up in a longer period of higher inflation. I think a lot of people who are thinking that we're going to see a longer period of higher term inflation are not thinking about the efficiencies that we're going to see.

gain as it relates to productivity from AI. That being said, I think where we are is we're in a period where the Fed is going to have to cut rates at some point this year. They're very high, but that's not going to get us anywhere near where we were without those productivity gains. I think, you know, in this stage of the cycle, businesses need to be intelligent and leaders

Joe (06:50.894)
Mmm.

Mark Ferraro (07:01.797)
need to engage in activities that exhibit their traits as polymaths to put, wear different hats as executives in order to kind of get them through this cycle in a way where they have the liquidity to get to where they're going.

Joe (07:09.494)
Mm.

Joe (07:20.094)
Yeah, and like this is a unique market, as you say, and things are high right now in terms of rates. How are the investing markets generally?

Mark Ferraro (07:31.593)
I think that you have different types of investing markets. I think that you're seeing a lot of people who are trying to raise capital in the A to B round area having a more difficult time than, you know, the soaring stock market prices that you're seeing with kind of the more blue chip, higher credit quality equities.

Joe (07:45.134)
Hmm.

Mark Ferraro (08:01.477)
They're obviously anticipating the cuts and they're trading forward and you know with the less liquid a B-round people where It's less certain on who's gonna make it to the other end The markets are tighter

Joe (08:05.678)
Thanks for watching!

Joe (08:20.478)
Yeah, and of the operators who are out there, what should their approach to money, their approach be to the money raising world?

Mark Ferraro (08:28.841)
Well, I think that, you know, to the extent that someone wants to attempt to raise money, they should be, they should try to be investor ready. They should have their, all their materials and their projections and their benchmarks and what they've been able to achieve prepared so when the diligence does occur, when they are looking to raise the money or when the markets are propitious, that they have those, those materials ready.

Joe (08:39.138)
Right.

Mark Ferraro (08:58.389)
But as a general proposition, many of these businesses have a burn rate. They don't have a fully integrated team as far as middle managers or kind of top to bottom management. And so as a result, they need to generate dollars from areas other than just essentially selling a portion of the company in order to buy a department, which is what...

a lot of what happens in the money race. I'll raise $2.4 million and I'll buy a sales team. And so maybe what I need to do is take what I have and be intelligent from an outsource perspective to put in place the things I need in order to get my rev ops to where they'll.

be able to sustain me at the same time as they're able to give me that year of year ARR growth that the funds are ultimately going to be looking for anyway. It's kind of a win-win for an operator because you're making more money, you know, you've got less dilution because you're doing it further down the road, and you're actually ticking off one of the boxes that investors are looking for in order to make sure that you're investable.

Joe (10:18.87)
So is this a kind of a new strategy or is this advice that is more new and more well received due to the markets tightening up right now? Or have the people you come across in the investment world, those looking for money and those giving money, have they been talking about these strategies as much as you'd like to see? Or what's the overall temperature on this type of strategy right now?

Mark Ferraro (10:41.365)
Well, I think that at the end of the day, this is your tried and true, your granddad's strategy, right? You know, make money, right? You know, like I said, my grandfather worked for a bank. You asked him what he did. He said, I count money. And I think at the end of the day, there's been a lot of financial engineering and ways for people to get big fast and quickly.

without necessarily having to be cashflow positive or pay for their growth before accessing the public markets. So, I think it's kind of a tried and true strategy, but I do think that many operators are people who have an idea.

Right? They, um, they want to monetize that idea. It's a good idea. Maybe they do a friends and family round. They bring in, uh, sales, uh, in an industry with that they may be familiar with, um, through some contacts. Uh, and then, uh, when they kind of hit the wall, the, one of the first things they'll cut is, you know, sales and marketing. And so, you know, it ends up being like a

Joe (11:44.114)
Mm-hmm.

Joe (11:51.937)
Mm-hmm.

Mark Ferraro (11:58.15)
Cuts and marketing is a lagging indicator. So you may be able to like boost your tap there for a little while when you don't have people selling your product, but then what ends up happening as you have turnover in clients, you don't have people doing client retention, that kind of thing, you lose a couple of clients and then all of a sudden you start to tumble and it's a cascade effect in the other direction which is what I'm.

Joe (12:01.568)
Right.

Joe (12:05.466)
P&L.

Mark Ferraro (12:25.697)
seeing people are specifically telling me at this time who have cut their marketing and sales budgets.

Joe (12:33.058)
So would you say this whole idea of like, you know, you said it's your grandfather's business, count the money. Is that the same worldwide? Are American markets different than say, Asian markets, European markets, in terms of counting the money?

Mark Ferraro (12:46.409)
Well, I think that it depends on, look, there's speculation, right? And then there's value, and then there's selling something at a profit. And so I think that there's always gonna be speculation in markets.

So it depends on what market you're looking at. So for example, artificial intelligence right now, it's the hot new thing. So you're gonna see a lot of entrepreneurs who are flush with cash, who are gonna spend that money and they may not have to be as rigorous.

with the way that they run their businesses, at least during this period, as they will ultimately have to be when people want them to be more accountable for their growth. I think as a general proposition, I do think that across the board, we're seeing this in the United States, in Europe. I think this is something that we need to kind of address as a community of entrepreneurs.

and business operators in a way that allows us to deliver the good products that we're offering without relying on Fed policy and all kinds of kind of banking levers being pulled in order for us to be able to have the tide high enough for the ship to float.

Joe (14:22.366)
Right. And for those that don't know you, right, and might be hearing you for the first time, probably aren't aware that you're a polymath yourself. You have, you know, I don't want to make you blush there, but you have diversified experience in multiple areas. Legal, you went to the Wharton School of Business at the University of Pennsylvania. So you have background in business, legal, and financial markets. But also what you're doing these days more than anything is PR and public relations.

and your writing as well. So tell me about why you've gotten into that and why that's so important and why it works so much with the other things you're doing. And tell me about the term market separation and how to achieve that. That's one of your favorite terms I know. So...

Mark Ferraro (15:07.938)
All right. That's great. Well, first of all, thank you for the compliment. You know, I do blush. But to respond to your question, I think that, you know, I think what's interesting is that many people, first of all, every entrepreneur thinks he has the next Facebook, right? So, you know, the question is, what do you do if you do, right? So,

Joe (15:14.036)
Yeah.

Joe (15:27.655)
Mm-hmm.

Joe (15:33.558)
Mm-hmm.

Mark Ferraro (15:36.189)
If you're selling people on a dream that you've got the next Facebook, then you're really just telling a story and trying to get people to invest based on it. I think that what you're talking about as it relates to the work that I'm doing is the rev ops in addition to the PR and communication strategy and that type of thing. And I think that it's obvious that...

you can have the best product in the world, but if nobody knows about it, nothing's going to happen. Right? And so, you know, a famous philosopher once said, you know, we communicate when we agree to exchange meaning. And you could be out there trying to explain to people the best product in the world, and if they're not receptive,

Joe (16:10.202)
Mm-hmm

Mark Ferraro (16:28.453)
If the medium that you're using to make them understand how important what you're doing, how groundbreaking what you're doing is, you're not gonna exchange meaning, you're not gonna get anything with that person. And so I think there's a few things. I think, once again, we talked about Facebook. Let's look at Myspace, right? Same product, essentially, right? And Facebook got market separation. And I think at the end of the day,

when you're trying to convey what kind of separates you from the rest of the world, there's kind of a few things that happen, right? You either have kind of like a juggernaut or something that's like really like picking up or you can...

tell that story, right? If you tell that story and you're in like a legitimate third party press publication that's talking about how great your product is, you know, a lot of these statistics kind of add on top of each other and create a multiplier effect, which are what causes people to have these like multiple increases in their revenues. So someone's...

Joe (17:25.89)
Mm-hmm.

Joe (17:44.202)
Yep.

Mark Ferraro (17:50.181)
50 to 75% more likely to buy from someone that they have seen in a independent third party media outlet than someone that they have not seen there, right?

Joe (18:02.378)
Well, I've been working with you and you've been doing the research on this. You have a lot of stats that are from public and well-documented sources on what these standard percentage growth rates are, and you've worked them into a model. Do you want to talk about the multiplier effect and the model you've put together?

Mark Ferraro (18:18.285)
Sure, yeah, I think that what happens is that very frequently, well, I think there are different cultures in sales and marketing, right? So you're a marketing, you're a Madison Avenue marketing person that sees themselves a certain way, and then you send your salesperson who sees themselves a certain way, and they're different cultures a little bit. I think one of the things that's important is that these cultures need to be able to work together.

And because it's a progression from familiarizing the potential buyer, knowing where your buyer is, familiarizing the buyer with the brand, touching that person in like an impact-based marketing channel, right? And then being able to like move them along. And so these are each kind of periods in which the baton is being passed in a relay race.

And so you can come when you come out of the gate strong, right? So now you've got a brand message and you're winning the race. Right. And then you come around quarter miles done. You're going to pass the baton off. Next person drops the baton. You lose. Right. And so.

Joe (19:15.394)
Mm-hmm.

Mark Ferraro (19:32.761)
Each time the baton gets passed off effectively and the person who is running the next leg of the race is ahead of the rest of the pack, it multiplies the effect of the distance that you got between your business and the person who's number two behind you, number three, number four. And so these all...

you know, to go back to take the analogy back to the statistics, if I pass the baton off effectively, and I'm 50 to 75% more likely to, you know, bring in a client from there, then the person who takes that baton from me has to use certain tools to, you know, communicate effectively with a larger group of people, you know, in a way that feels bespoke and to be able to manage that database and, and kind of you at each stage.

Joe (20:20.832)
Right.

Mark Ferraro (20:26.381)
50 to 75% PR, using the CRM effectively another 30%, website presence, 25% digital presence.

Joe (20:33.146)
Right. We've compiled these things into a standardized review process, basically. Like you said, CRM, website, PR, you name it, search engine marketing, digital presence, community stuff, all those components are all these little relay runners in the race with the baton in their hands. Some of them are shaken, some have it firmly going ahead, but not many people are looking at their business that way. And I think that's a really...

unique approach that can benefit a lot of people.

Mark Ferraro (21:03.961)
Yeah, I think a lot of people don't have a metric-based mathematical approach to their marketing and sales, maybe to some of their sales based on quotas and goals. But I think that what we've solved for by doing a lot of statistical research is...

The old saw, I think it was Henry Ford, he said, I'm wasting half of my marketing budget. The problem is I don't know which half. And at the end of the day, I think we've statistically and mathematically been able to say, look, if you do these things and you have a good product and you have good sales execution, you're not gonna waste any of your marketing budget. You're gonna be hitting all of the people who are gonna buy, ready to buy in the right ways, getting separation from your competitors.

Joe (21:38.062)
Hehehe

Mark Ferraro (21:59.809)
You have more name recognition. People will be more likely to buy from you. And you'll be able to quantify that in a way where it's an ROI and it's not a touchy feely based. I'm gonna like spend $3 million at the Super Bowl and pray. Right?

Joe (22:19.119)
Well, that might be a good place to end this first discussion we're having, hit the Super Bowl and pray. I've seen a few of those too, right? Just we're coming off the Super Bowl recently. Look, it's been a pleasure doing this first podcast with you. It's always good talking to you. You and I have always had these kinds of conversations off camera and they've always been this way. It's like a podcast and we finally did it. We finally got one podcast out there and it's been great. So thanks so much for your time.

Mark Ferraro (22:27.131)
AHHH

Mark Ferraro (22:36.489)
Love it. Love it.

Mark Ferraro (22:45.977)
Thank you. Wonderful.