At 13 he started a business that grew to a million customers, now his agency has over 400 employees

1:31Took a look at your LinkedIn just like the day before to double check and see if there's anything I was like Ah that's super exciting great nugget to bring up at the beginning here but yeah I do think it's a nice parlay because the goal of the podcast is to answer the question of how do you create a high performing agency and I think a lot of times we just look at what did Alex do in the last six months and while I think that's insightful a lot of my belief of what makes us successful entrepreneurs started 10 20 maybe 30 years ago so I'd love if you'll go back in time with me here I'd love to start in the beginning you immigrated to New York City from Kyiv back in 1992 how old were you when you moved here that's that sounds like forever ago yes I was 8 years old so I wasn't involved in that decision but obviously was a looking back on a great decision on my on my family's part although it was very difficult for them yeah I was fortunate a couple is very fortunate to have come to the US which I think now we employ people from all over the world I could confidently say it's probably the best place to start a business grow a business anything entrepreneurial by far there's nowhere close anywhere in the world so fortunate in that regard and I was fortunate enough to grow up during the start of the tech boom and was fortunate to be very involved in it so my when my family came

2:58To us my dad my dad was involved in computer science so not necessarily internet stuff but that gave me the exposure just by having a computer so jeez I forget how old I was but maybe a couple years after we came to the US my parents literally spent all their money to buy a computer because that was my dad's line of work and we had a computer in the house 1990 let's say and I was just given the ability to explore all of the both text stuff and internet stuff from early time from the like pre- AOL like for those for those who remember dialing into CompuServe on the like 14.4k modem right from those years so yeah it's been a while I guess to answer your question the first company I started T35 hosting was one of the first free we hosting companies so that predates the start of Google and a couple other big companies that you guys might have heard of for those that were around back then this was around the time of what was it GeoCities started I think a same month as I did Hypermart all these tripod all these companies that don't exist anymore but the idea back then from both T35 hosting and the

4:24Other companies trying to do the same thing was to allow people to have a web page on the internet quickly and free so again for contacts for those that might have not been involved in the internet before then and this was I started T35 hosting 1997 so in the mid90s if you wanted to start a website to have a page on the internet just a simple page about yourself let's say or your resume right it was very difficult you'd have to go to your internet service provider your Verizon at the time it was Bell Atlantic and pay them thousands and thousands of dollars and wait months and months and that was that was pretty much the only way to go so the idea with the whole free web hosting model and this movement of free and cheap web hosting providers was to allow anyone to have a page on the internet that could be accessible from anywhere in the world and at that time that was very novel and very I want to say revolutionary even I W up growing that T35 hosting to over a million customers over the I think it took five six years to get to that I still actually it still exists as opposed to all the other brands that I mentioned that no longer exist in a slightly different fashion than it did back then but yeah that was that was the

5:47First business I started in 97 I don't I'm afraid to even do the math but seems like a lot of years ago yeah I was 13 yes I started I and what's funny I even had businesses before then but that was the first real one that incorporated and everything and the reason it was T35 Hosting which seems like a weird thing to name it is I had a lot of other businesses and domains and at the time one of the domains I had was T35.com and it was top 35 websites so this was again like preg Google right before searching the internet when the way to use the internet was Yahoo which was a directory of websites the idea was to display the top 35 websites and when I started the hosting business to be able to have every for everyone to be able have a free website it had to be a subdomain right it was way too cost prohibitive to give people domains so it would be something t3.com and the idea with T35.com is it was super short right as opposed to like if you use GeoCities so GeoCities for those who used it when with a whole like homes and neighborhoods approach so your website was GeoCities slash like a random City a neighborhood your name that was it was a very wrong long year row and the my Approach is opposite to go as short as possible so I used the T35.com domain just because it was super short so but yeah I the official my official first official incorporated business that actually had

7:10Employees and generary revenue was when I was 13 that's wild because that was something that really struck me when I was initially reading your story when I was 13 I was focused on how do I land my first kickflip and I'm like skateboarding outside and it really made me refle ref because I didn't even know that entrepreneurship was like a path that could be for me until like my mid 20s and I think had I not had access to the internet which your first company was predating Google and all this stuff I was like how did you get involved in entrepreneurship or what was the was it your dad being involved in computer science was he a big influence or what else was the to help yeah it was what it was I think being in the in the right place at the right time and being inquisitive so my dad doing programming stuff I think he wasn't to be honest I don't think he was even using the internet for years after I started T35 hosting so it's a little bit of a different world the only thing in common was the access to technology and having the computer and I remember and by the way that itself was super risky I leaving like a 10 11-year-old with your most price possession while you go to work I took that thing apart like five times I remember I burnt out the

8:34CPU I remember overclocking it was it was before the i486 so the there was a big transition from the i386 computers to the i486 because with the 486 RAM and everything else was removable so there was a lot more a lot more you could do but that in itself I think that was the biggest risk they took on I'm sure I broke that computer more times than I repaired but yeah I think having access to that and just seeing the web the web stuff built up around me and just seeing it was like mostly just playing around with it at first but the potential I saw there was huge and it was even like so the original website now one of the I was trying everything just because it was so cool just to test it was to me it was the coolest thing that you could put a website or a business whole business idea on the internet in the evening and then wake up in the morning and see how many people went to your website right like things happen without you naturally doing it with the T35 top 35 websites I played around with putting advertising on it and it was like at that time there was a lot of internet casinos which by the way are coming back now but at the time because it was so unregulated there was a lot of Internet Casino stuff so I put an internet Casino banner and I remember I went to sleep I woke up I logged into like the account that where they show you like your commissions and everything I made like a thousand bucks which I don't know I was I was not

10:04Even 13 yet I was 12 years old it's like holy I just made $1,000 doll so it was it was it was that stuff that just was very was very interesting to me and just testing and playing around with different concepts different ideas even T35 hosting which was probably the more successful of the things I played around with and did was certainly not my first thing I tried or even the 30th thing I tried so really okay cuz it's it looks like of course the only thing that you really see online is like what were oh you only see the successes you don't see the 29 failures that came before it so tell us about because okay t37 you started in 1997 you were 13 or sorry T35 in 1997 and then you started your first agency with your younger brother in 2009 what was the impetus to start that business and what happened in between yeah good question so I've ran T35 hosting for a while eventually I think first of all being young it was very difficult there was a lot of advertisers there when they found out how young I was just wouldn't pay me because the contracts were not legally binding and at the time it was a lot less common that it is today right today you have a lot of YouTubers influencers whatever it is that are making a lot money on the internet that are under 18 right when

11:32I was doing it was extremely rare and came off as odd to a lot of companies I worked with so that in itself was a challenge and I think looking back on it of course I was also this was like from 13 and through college so I wasn't I wasn't I looking easier to look back on it than at the time then but I was very cautious in growing the business I never took on any Equity or Investments there was a there was a big push at one point to have me sell the business by a couple investment Banks would obviously make money on it there were some propositions to take the company public and I didn't do any of them because I just well as a teenager you don't have the full scope of understanding of what all of that even means but I took a very conservative approach to it so ultimately I kept growing the business at 10 to 30% a year some years more but the whole industry grew around me right you had you companies that popped up like GoDaddy who and they still do this by the way so they invest so much into marketing that their Break Even is typically I think the last study I looked at was 10.5 years so literally they will spend thousands of dollars on that customer that will pay them $10 a month knowing a they'll make money on them on year 11 and B they upsell them

13:01On a lot of other things so the whole industry grew around me and T35 hostings still exist we don't do free hosting because there was a lot of there's a lot of abuse and other things that led to the end of free I don't think anyone does free hosting even go even Google briefly started doing free hosting and even they then they stopped but T35 Hosting still exists I worked in several different professions in between along with running T35 Hosting just trying to find where I could make the biggest impact so I worked in corporate finance for a little bit I worked as an actuary for a little bit I worked in investment banking for a little bit I wound up after and those were all like six-month increments like I was an actuary for six months I did invest in banking for six months it was very quick increments I wound up at MediaVest which is part of Publicis very just coincidentally doing digital marketing for Samsung first and then Walmart and I did that for three years I was there almost three years and that job I really enjoyed and I started SmartSites with my younger brother from my standpoint the idea was to bring the Cutting Edge marketing that was being done at the Publicis level for the fortune 500s to the small mediumsized businesses and it's things today that obvious but 10 15 years ago

14:32It wasn't as much so the marketing we were doing like targeting audiences like very precise remarketing like that stuff even today I could say most like SMB like think roofer plumber I don't know realtor those restaurant right even today they're not doing but 1015 years ago no one they didn't even know that stuff existed so the idea with SmartSites was to bring that leading digital services to the SMB space that at that time was very exclusive to the Enterprise level folks it seems like throughout your life there's been this pattern of being able to identify opportunities early do you feel like you have a way of thinking or a heuristic that allows you to identify this is something worth investing my time into or do you feel like it's almost more so been rapid prototype being where you're just willing to try and fail and try and fail until you figure out something that works for you oh man good question I think for me personally it was a lot of a lot of trial and error stuff almost like I was doing with websites and businesses early on but with my career would I recommend it for other people I'm not sure I think I think obviously everyone's different everyone's risk tolerance profile is

15:59Different and different places in your life like if you have like a wife and kids and everything are you going to quit your high-paying job and try another job that might fire you probably not right at MediaVest Publicis when I quited to start SmartSites I was making very good sixf figure income I had very high level job high level Authority I was hiring my own team members I was really was very safe place to be to quit that and start something from zero obviously is very risky and so we so were my past hop hopping between jobs but I think it is important if it fits your risk profile if you're for those listening who are towards the start of their career coming out college and things like that I think for sure if you get a job and you're sitting there month six and you're like am I really is this really the best of use of my time am I providing the best value to a company to myself am I advancing myself it's for sure should be questions you ask yourself because you don't want to 10 years down the road be like this was not the profession I wanted to be in so for sure for sure I would I would encourage that behavior but as long as long as your risk profile allows for it right and what were the early days of

17:24SmartSites like I know you guys have doubled every 18 months since starting what were some of like the big challenges that you guys encountered that you had to work through yeah good question man it was very different and if later on I don't know if I want to encourage all the listeners but might as well since this going to be public but later on if you search so originally the company was Melen LLC like my name Melen LLC and LLC see if it's still on there's we were going to there was going to be a pilot about us and you could if you search let's see if I could get to come up it still comes up if you search melan LC pilot you'll see you'll see visually what it was like when we started but yeah it was it was a we were very Scrappy business we started it was mostly my brother's friends from Cornell and from my brother's perspective that the way all this went down is I think he was starting his third year of Cornell and he didn't seem like he wanted to go into the corporate world might be putting words in his mouth but he came to me and at the time he was already running a link building SEO service and he was like when I graduate we should just combine what you're doing and this SEO service and start a digital marketing company and to me at that time and this was 2009 I guess something like that to me at that time I was like I think all the this is

18:54Already like a we're like 10 years late to the game right there was already so many companies doing it and everything I'm like if we do it we gota we can't do this when you graduate in two years he was starting his third year I'm like we got to do it right now and he's like what if I graduate this year I'm like I don't know we gotta take two years of Cornell in one year he's like yeah why not he end up graduating that year and we started the company that year so from that was that was where he came from his perspective he C he brought over a lot of his Cornell friends with him to start the company with us so we had I eight nine people at the time and it was very Scrappy operation where we really were still trying to figure out what our main value ad is and I use that phrase a lot in other podcasts and speeches but I think it's important for all companies no matter whether your agency or not to really think about what your main proposition or value add is to clients and that was that was what we struggle with for a little bit so we started doing social media for a little bit and that wasn't really our strong suit so we do it now but at the time we went very Broad and then we tighten up based on where we were providing the most value to our customers and we end up tightening up on we made websites and we would do SEO on pay-per-click / PPC management so search marketing that was our core services but it took us a little while we were we

23:16Because the last thing roofer plumber realtor or even medium-sized businesses want is to be dealing with like 20 different agency like this guy does my social media this guy does my website login updated so the social media guy can't connect to it this guy does our pay-per-click / PPC management but the landing page broke which is done by this other agency so the idea was always to be a full digital partner and we built Services out around that as more and more people not even wanted but needed the social media component we hired the right people and we created the right processes to be able to add that as a service as well the beta piloted it on current clients at discounted rates or free rates for a while and slowly rolled it out until it was the quality of service that we could provide to clients that's interesting is that a strategy that you would recommend for someone who's getting started as well to provide the services for free and ah man we had so many there's so many learnings I had the long the way so when we just started we would make we would make cheap websites let me rephrase that we try to be we try to be a lowcost option to be able to attract more customers and grow quicker the idea is always growth and I we could talk about that next but there's a whole reason for growth

24:46That I think is very important to everyone listening but the idea the idea was always for growth so we originally priced things very cheaply I think we were making websites for a thousand bucks granted this was 15 years almost 12 years ago it was still not the right price point so what ends up happening in that situation and this is for those that have not done this yet I'll walk you through exactly what happens you build a website for a th000 bucks the probably will cost you think it's going to co we were we were thinking that it would cost us like 900 and we sell it for a thousand right it winds up costing twice or three times more than you think it does it takes probably twice or three times longer than you think it does so we wind up losing money on the website the website becomes a much longer process than the project manager and everyone involved anticipate so now the employees is frustrated the client's frustrated we told them 30 days but client just requested a 300th revision and all a sudden it's not 30 days but they're still upset and even though they requested 300 revisions they're like you promised me 30 days so at the end of the day we wind up losing money we wind up going overtime over budget the project man manager is stressed out the client's pissed off they don't care they only paid a th000 bucks they get a crap product they're still going to be pissed even if they paid 500 bucks and everyone's upset and then the client who we just lost money on top of it goes

26:11Online and leaves a bad leaves us a bad review right and then the employees are so frustrated they quit right everyone loses and that's it like it's very go out business six months later right luckily we were always very agile and quick to learn as we went along and we were able to make changes but for sure that was a terrible model right I'd rather turn down 90% of clients if what we're offering doesn't meet what they're looking for then go down that road where we lose money clients pissed off even if we don't lose money let's say we break even or make a little bit of money clients pissed off employees frustrated everyone loses at that point for us our reputation was always the most important thing and if you search SmartSites reviews we probably have the most and highest five star reviews of any other agency out there period like period like people bigger than us smaller than us it doesn't matter and that's very hard to maintain you'll maintain that by taking on clients are not good fit so good question should you offer things cheaper free I think it's it becomes a slippy slope very quickly and I wouldn't perhaps you have a new service you're rolling out and you want some clients to volunteer as beta testers guinea pigs maybe that's an opportunity but for sure I would not let me grow my business I'll give everyone a cheap website or cheap marketing or whatever never works out for anyone and your reputation is the hardest thing to

27:39Repair it's the hardest it's the it's the easiest way to think your business all you have to do and it's very by the way for growing companies that's always the biggest Struggle No matter what industry you're in whether you're an agency or a supermarket or a restaurant as you grow if you don't staff up quit if you underst staff if you over staff you'll go out of business because you lose money right if you're underst staff wind up with bad reviews that's impossible to repair right even if you look at the numbers like Google reviews let's say right you have you have you have 55 star reviews all of a sudden your current batch of clients are all pissed off because you're under staff and behind and things and you get eight one star review your average drops so far and you lose so much business that it's crazy to make up for E onear review viws to get your average to say above 4.5 if you do the math it's crazy how many five star reviews you'll need to make up for that right so reputation's really important that I think that always has to be a focus for everything you do I would not encourage people to be the cheapest I would also these days not encourage people to unless you have the financial resources to withstand it I would not encourage people to do the wide net that we did and try to offer all different kinds of services and see what stick right you could do that but you have to understand that you'll lose money for a long time until you find tuning I think the better approach these days is to hopefully you're going in already knowing that but figure out what you're

29:10Really good at and what your value at is like I don't know even let's say making websites and we may we work in every industry so we don't can't even say we follow this advice but if you're starting now let's say you want to make websites right maybe you're really good at making dentist websites and you've already made eight of them right focus on that first right focus on where your value and why is that become your value ad well you already made eight of them you already know a lot of the structure needs you need know the pages it needs so that saves you time you could make it quicker right you could make it quicker you already know the services the project managers already know how to manage that dentist the sales people know the like how to sell it right so I these days I would I think especially with so many agencies being out there and so many other companies being out there in every industry I think it really helps to pecialize and really think about what your value ad is what you're good at where do you want to be better than other agencies right I think these days that's the way to go on the note of growth what have been the most effective strategies for you guys are you eating your own dog food has it mainly been through the reputation Word of Mouth Works worked best yeah good question so we don't do any outbound sales so that means we don't do cold calling or calling of any kind or any outbound marketing

32:05Diversifying into other ways I know a lot of agencies do conferences but Ry and that is also a little shaky I know that a lot of agencies do outbound marketing calling which is an area we have not explored before so there's definitely different Avenues but yeah for us it's always been a market ourselves approach reputation for sure carries us right if we had if our on Google we our average reviews were like two three stars instead of five stars I'm sure we would convert at like 1% inste 10% and if we converted even a little bit less than we do now we would not get ROI from the search marketing so there's for sure a lot of components that go into it but for us the growth has always been from increasing our marketing span and it's always a risk right you increase your marketing spend without transactional return right the return is lifetime value of the customer return and that's an important mindset not only for agencies but I feel like a lot of businesses sometimes lack that we have a lot of clients who always think of it as a transactional ROI like I want to be profitable on that one click from Google ads today I think the mindset has to be lifetime value and a lot of things have to go into that like the person who signs up with us for a website if we do a good job on the website guess what they're going to come to us for SEO pay-per-click / PPC management and curring monthly services not just a website

34:55We double in size every 18 months and Inc. 5000 now for eighth time / eighth year and it's threeyear growth so we technically every single year that we could qualify for ink 5,000 we did right and to I think our three-year growth on this time we qualified was 188% and that's rough roughly you need to be it's getting harder and harder by the way growth speeds up but the list the list of companies gets more competitive but I always get asked do you really need that do you really need to be because there's a lot of challenges right if I were to say let's leave us at 400 employees I'd have a lot less headaches growing a company and growing it correctly growing the right departments with the right amount people not over hiring not under hiring putting the right people in place right processes in place because the processes that work at 100 employees aren't going to work at 400 employees your corporate structure at 100's not going to be the same as 400 there's a lot a lot of headaches the reason for that and I've had these discussions with a couple people and I want to say not everyone agrees with me so take all this with a grain of salt but for us growth has always been very important not really to like make more money like make money is always one of our lowest priorities our priority is that we provide value to our clients are happy and employees are happy that's our priorities right so growing isn't necessarily make more money if anything I think as we've been growing as a percent we definitely make less money

39:13One of the most important things we offer is opportunities for our employees and help with employee retention and that's been a huge one it's I think every company should offer opportunities for their employ way to move up if they want to by the way and not everyone wants to and not everyone should right there's a lot of people that are fine working at a certain level and staying at that level they don't want more responsibility they're fine where they are but for those that want to try something different they want to they want to manage a team manage a department if you're not growing you're just not offering those opportunities they literally have to wait out for someone else to quit get fired or pass away right so that's been one of their big ones for growth and I've had a lot of conversations with companies who disagree and say there's too many challenges with continuing to grow and eventually there's a ceiling I don't think there's a ceiling I think there's different there's different struggles at each level but I don't think necessarily is a ceiling and I think for employee retention and to really grow and develop your employees right you have to be in the mindset that you it's not just like you hire this person and you work them as much as you can until they're maxed out right the mindset has to be you hire this person and you develop them to their best potential that best potential might be to stay at that level they don't want

42:06He's the co-founder of Google all sudden he's back right why do you think he's back you think he got bored like sipping pina coladas on the beach he's back because For the First Time Ever there's a Google has an existential threat right I think since Google started there's never been any opportunity that they could be replaced like it just not like replaced by what replaced by Facebook right it doesn't make any sense right but before where you would go let's say let's say you want a apple pie recipe so if you go on Google right now you search apple pie recipe you'll get probably 10,000 spammy recipe websites you'll click on to them if you've ever been on these recipe websites they're going to have like 50 banners on them you're G to wind up clicking on something by accident wind up on a different website and get a virus in your computer and your computer formats itself and you're done right that's your journey to get your apple pie recipe now all a sudden you ask a generative AI or either on your phone or through Alexa or whatever it is give me that app pie recipe and repeat it to me slowly step by step and it does without giving you any viruses or giving you that bad UI/UX experience it's really it's really gamechanging where there's certainly so much the disruption that could H and ChatGPT has a search engine now by the way so much disruption that could happen at the same time you have so many macro things going on

43:29Google just lost their antitrust lawsuit of course they're gonna of course they're going to appeal it and I don't think they're G to get broken up but there's so many things that could change for example if they are no longer I think the government is going to get involved in their exclusive deals I think that's what's going to happen I don't think they're G get broken up but I don't think they're going to allowed to be make exclusive deals like they have the big one of course is with apple so Google paid I forget I don't the numbers in front of me I want to say 20 billion Apple pays I forget who pays who forget who pays ping this but anyway the Apple the Apple relationship they have where Google's the default search in apple right if all sudden it's not and let's say Microsoft is that's really G to be gamechanging because Microsoft has almost no mobile market share now so a lot of disruption happening if all of a sudden all these recipe we websites become obsolete do these businesses even need a website right like I'm in the business of making websites granted ChatGPT doesn't create their own stuff and they actually take content from these recipe websites so it's not as simple as that but I think at a macro level there's a lot of change coming and I wrote my book a year and a half ago in year and a half ago something like that it was before ChatGPT I mentioned somewhere in the end that

44:53There's generative AI stuff coming and it's going to be very disruptive I'm like don't worry Google's going to know content that's generi generate they're GNA they're going to at least point it out or block it and that hasn't really happened so it's a lot of changes coming so long-winded answer to your question I think for us it's business as usual even with all of the stuff going on generative AI I thought would really help us improve our content creation because for SEO we do a ton of content creation it surprisingly hasn't it's helped us make better content where we use ChatGPT for research and outlines and things like that but certainly has not allowed us to produce more content quicker as I was hoping so it's all small Improvement type tools that are coming out but for sure everything moves to generative AI No One Needs websites it's going to be a whole different world but for now it's business as usual I think just I don't think we're going to have such huge disruptions happening but I think for the first time ever there's potential for it right potential for change in how we use the internet and again this hasn't happened since Yahoo's directory got changed into Yahoo search engine and then Google search engine really like a complete change of how we look for things online

46:16Is possible might not happen right Google could just incorporate some of this and they Remain the main search engine but it's definitely possible for the internet world to be different in five years from now I don't think it'll be in three years but maybe in five years for people who are same shoes as I am I think it's a continuation of business as usual I think you always have to be very agile and it's something I see big companies lose the they lose the not necessarily ability but they lose their agility that they're no longer as agile in their decisions processes and not as quick to Pivot I think businesses who are become very set in their ways and not agile are the ones who are going to go out of business for everyone else in the in the agency world I think if you stay you stay agile and keep up with what's happening I think there'll always be a place for digital Partners in the world well I know we're coming up on time here I really appreciate you hanging out with us and sharing your expertise for those who want to continue the conversation with you or want to learn more about what you do where should they go to check you out yeah good question so SmartSites smarts sites.com s SM TSI tes.com you could also Google SmartSites and see all our

47:43Amazing reviews for me personally if you go to my name which is Alex Melen.com a X mn.com on the bottom I have all my Social Media stuff I'm probably most active on LinkedIn these days so feel free to find me and connect with me on LinkedIn well thanks again for joining Alex talk to you later thank you thank you for having me