Episode #240: Stefan Batory, Booksy, “This Is Probably The Last Major Vertical That’s Not Digitalized…And This Is A Massive Space”
Guest: Stefan Batory is co-founder and CEO of Booksy, a robust mobile and web marketplace that allows customers to quickly and easily discover and book appointments with a variety of local services while offering innovative tools for service providers to generate leads and manage appointment schedules.
Date Recorded: 7/2/2020 | Run-Time: 54:04
Summary: In today’s episode, we’re talking about helping folks in the hair and beauty industry get organized and get their time back when it comes to scheduling customers.
We discuss the headaches and time-sink these professionals experience when it comes to scheduling; the majority of them are still using some type of manual or non-digitalized solution when it comes to scheduling. We cover launching and growing the business, the fragmented nature of the industry, and the massive opportunity for Booksy as they address the market, which represents hundreds of billions of dollars in services globally.
As we wind down, we even touch on some memorable moments of gratitude the Booksy team has received from customers that have achieved a better and healthier work/life balance.
Comments or suggestions? Email us Feedback@TheMebFaberShow.com or call us to leave a voicemail at 323 834 9159
Interested in sponsoring an episode? Email Justin at jb@cambriainvestments.com
Links from the Episode:
- 0:40 – Intro
- 1:49 – Welcome to our guest, Stefan Batory
- 3:25 – Stefan’s origin story
- 6:53 – The first few companies Stefan started
- 13:33 – How running led to another startup
- 19:45 – Early days of Booksy
- 24:17 – The go-to-market strategy
- 27:20 – How the industry has changed since launch
- 31:00 – What goes into Booksy’s global expansion decisions
- 34:16 – Customer acquisition
- 35:27 – The impact of the pandemic
- 39:42 – Future plans
- 42:52 – Biggest challenges to being CEO
- 45:30 – Best practices for promoting diversity and inclusivity as a founder
- 48:37 – Most memorable moment as founder of Booksy
- 51:30 – Personal plans for the year
- 53:00 – Learn more at booksy.com
Transcript of Episode 240:
Meb: Welcome to “The Meb Faber Show” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Female: Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
Meb: Hey, podcast, listeners, awesome show for you today. Our guest is the world’s premier potato chef on his journey from Poland to Iowa to Silicon Valley. He’s also founded multiple companies and currently, he’s the co-founder and CEO of Booksy, a robust mobile web marketplace that allows customers to quickly and easily discover and book appointments. If you booked a haircut, chances are you use Booksy. It also allows service providers to generate leads and manage appointment schedules efficiently. In today’s episode, we’re talking about how to help you look good, mainly small business owners in the hair and beauty industry get organised and get their time back when it comes to scheduling customers. We discuss the headaches and time sink these professionals experience when it comes to scheduling. A majority of them are still using some type of manual, paper-based or non-digitised solution when it comes to scheduling. That’s crazy. We cover launching and growing the business, the fragmented nature of the industry and the massive opportunity for Booksy as they address the market, which represents hundreds of billions of dollars in services globally. And as we wind down, we even touch on some of the memorable moments of gratitude the Booksy team has received from customers that had achieved a better and healthier work-life balance. Please enjoy this episode with Booksy’s Stefan Batory. Stefan, welcome to the show.
Stefan: Welcome, Meb. Thanks for having me here.
Meb: I’m excited to have you in this mid-summer quarantine. Where in the world do we find you today?
Stefan: I’m based in Palo Alto, California sheltering at home, and kind of stuck, waiting for borders to be opened till I can travel again.
Meb: Yeah, well I’m optimistic and pessimistic, sad and happy today because you’ve actually caught me on my birthday.
Stefan: I didn’t know that. Happy birthday. And I’m honoured that you are spending your birthday with me.
Meb: No better way, man. I love podcasts, but the sad part is that they decided to close all the beaches in Los Angeles for the weekend. And so, that’s definitely bumming me out a little bit because I love the ocean, but we’re heading on a little western road trip through Utah and Colorado here next week. So, hopefully, they’ll be open when we get back.
Stefan: Wow. What a coincidence. I’ll be doing exactly the same next week.
Meb: Where are you going to be? I’ll wave as we cross each other on the road.
Stefan: So, we are still figuring out the exact route, but definitely like parts of Utah, Arizona, maybe even all the way to Texas.
Meb: Awesome. I got a lot of family in Colorado. We’ll be hitting up Zion. I’ve never seen Monument Valley, up through kind of the Moab area, and then doing a pack trip on horses with my family. So, listeners, hopefully, I survive that, but we’ll be in the wilderness, off the grid for a few days. That’s for sure.
Stefan: It sounds like a lot of fun.
Meb: If you got any recommendations, listeners, shoot them over and I’ll share them with Stefan. Hopefully, this gets published before we’re both on the road. So, you’ve not always been in Palo Alto. There’s been stops in Iowa and Poland and all sorts of places. You have a pretty interesting background. Why don’t we kind of walk through your origin story pre-Booksy because I think it’s actually a kind of interesting runway into what you’re doing now?
Stefan: I never expected I would end up here in the heart of Silicon Valley. So, I was born and raised in Poland in the late ’70s. And back then that was a communist country. And when Poland got rid of communism in 1989 and the world opened up for us, I got a scholarship from American Institute for Foreign Studies. So, in 1994, I moved to the U.S. to Iowa and I graduated from a high school near Iowa. So, that was my first international experience. Then I came back to Poland. Actually I got offered a scholarship by one of the universities in Iowa. I forgot which one that was. And that was like a full tuition and accommodation scholarship. I just did not realise that they would require me to stay for five years after I graduated. So, when I went for a final interview, they asked me what were my plans after I graduate?
And I said, “Well, I’ll go back to Poland,” and that’s how the scholarship got cancelled. So, I went back to Poland, studied applied mathematics at the University of Technology in Warsaw. And I think that was my final year. I was getting my master’s degree in applied mathematics. When I decided to launch my first company, that was January 2000 so a little bit over 20 years ago. And that’s the beginning of my path as an entrepreneur. And I started my first software development house with seven other guys. So, there was eight of us together. Now, when you ask me, a little bit too crowded to run a company. And then I had several other successful companies, one of them IPOed at the Warsaw Stock Exchange, and a couple other smaller companies. And I started Booksy five years ago out of Poland, that scheduling app for hair and beauty industry. And we’ve always wanted it to be a global brand.
So, we launched it here in the U.S. first, even before we launched it in Poland. And that’s how I ended up here because U.S. is the biggest and the fastest-growing market for us. So, I decided to move in here so I can be closer to my clients. I can interact with them, understand their needs better, and also build a strong team here because building it over the pond was kind of difficult being on the phone all the time, which by the way, is the case right now in the past three months. So, it wouldn’t really matter if I were back in Poland or still here in the past three months, but I’m hoping the market will be open and we’ll be able to go back to the office as soon as they find a good cure or a vaccine for this virus. But that’s a long story made short.
Meb: I was smiling as you were telling that story because I have very similar memory from interviews. And I jokingly say this to listeners, but always remember to never be totally honest in interviews and come across as yourself because the answer may disqualify you from something. I definitely didn’t get a few jobs from being a little too open and honest. You know, I’ve never been to Poland. I was considering going this summer and up to Scandinavia, there’s a band I’ve never seen that was playing in that part of the world. Of course, all before all this got cancelled, but on the to-do list. All right. So, can we talk a little bit before we hop over to Booksy, I would love to hear about the companies that you started prior to Booksy. I mean, January 2000, I’m trying to think of a worst time to start a company, maybe 2000, late 2007 in the financial or real estate space. January 2000 must’ve been a tough time. What was that like?
Stefan: It was really tough. So, as I mentioned, we started it as a group of eight friends. And like as soon as the dotcom thing collapsed, three of my friends who are supposed to run the business side, they decided to leave the company and I was the CTO and there was four other developers and they looked up to me and they said, “Hey, Stefan, why don’t you lead us?” And that’s how I became a CEO. And I had to learn how to run a company, how to build a team and foremost, how to sell, because we didn’t really have any clients. And back then, everybody was like running away when they heard like we want to do something with the internet because they got scared. So, I literally starved for the first two years because when we started the company, we didn’t have any revenue. We had to pay the office rent. We had to buy computers. We had to pay salaries because we had a few employees and the only thing I could afford to buy and to eat it was potatoes. So, I was lucky enough I had a girlfriend. I am even more lucky because she became my wife and she invited me for dinner on Sunday. So, her parents fed me with like a proper Sunday dinner. I had meat and veggies and desserts, but like six days a week, I ate potatoes.
Meb: Well, the good news is you’re one of the world’s best potato chefs at this point. What was it…? This reminds me, it’s like “Forrest Gump” when he was talking about all the different types of shrimp he eats. What was your go-to? Is it baked potato? Is it hash browns? Was it sauteed?
Stefan: Like at some point, I even had that idea to write a cookbook, like potatoes, a hundred different ways. So, I made soups. I made potato pies. I fried them, baked them, boiled them, mixed those different ways of making them. So, literally, maybe there wasn’t literally a hundred ways, but easily 20, 30 ways I can cook potatoes now.
Meb: It’s interesting because you mentioned the world has come a little bit full circle since that time. You have a lot of stories about the big potato farmers in the United States and probably in Iowa that have had to dump tons of potatoes this year because of the supply chain disruptions with the coronavirus and everything that’s kind of gone wonky this year, but okay. It brings back a lot of memories by the way, because many times being an entrepreneur and thinking back to our story, my God, the agony and ecstasy of being an entrepreneur, it can be really tough. And certainly in many years, partners of our company, the pay stubs had a big fat zero on both sides of the decimal place. So, this would have been what year? Where are we in the timeline now?
Stefan: So, that was 2000 through 2001, beginning of 200 when we finally started getting major clients and new contracts. Our portfolio was credible enough that we could start getting some major contracts. And then we started growing really fast and eo Networks became 1 of the top 50 fastest-growing companies in Central and Eastern Europe by Deloitte. And we made it for seven consecutive years. So, that made us also the only company with such strong growth for seven consecutive years. They also recognised us as 1 of the top 500 fastest-growing companies in Europe, Middle East and Africa. So, that was from 2000 when I started the company through 2011 and ’12 when IPOed it and left the company a year after.
Meb: And then next up was what? You just take a long sabbatical or move on to..?
Stefan: So, in the meantime, I started another software development company, which was a spinoff of the first one, which focused on a slightly different vertical. So, we did a lot of projects for classified media companies and publications like Penny Savers and The Fires. So, we had clients all over the world, all continents except Australia, and here in the U.S. we worked with like 70 different publications, like “Tucson Shopper,” Penny Saver in Orange County, The Flyer in Florida, and we just built websites for them. So, that was my second business. And I ran it in parallel to the first one. And then in 2012, I started that taxi-hailing app, which was bootstrapped and the spin-up of that first software development house. So, we built the platform, we launched it. And as soon as we launched it, the taxi dispatching companies wanted to block us. And they forbid their drivers to join the platform and the project was practically dying, and my partner wanted to kill it.
And I decided to buy it from the company that I managed and split ways with my partner. So I bought that iTaxi as a standalone project and that other smaller software development house working for those classified media companies and started focusing mostly on growing the ride hailing business while making sure that I might live running that software development house and working for those Penny Saver and The Flyer clients. So, that’s what I did for a couple of years. And that was like 2012, 2013. And at that time I learned from those classified media publishers that they are all struggling in print because circulations were declining. They were not successful online and they all wanted to go mobile. And they started asking me, how do we go mobile? Like how do we transition our business? Because we are losing…our circulation is declining.
We are losing online against eBay and Craigslist and Kijiji and Gumtree and other guys like that. So, we want to do something mobile and have that first movers advantage. And back then, I had no idea how to help them with cars or real estate or verticals because technically, we could help them and launch their online websites and make them mobile trendy but I didn’t really think that was a good idea just to kind of copy-paste it and fit it into a smaller screen. I’m a firm believer that the print media types, they require different solutions and kind of like squeezing everything into a smaller screen is not the best idea and that it would not be appealing. And just as a side note, back then I started running because I wanted to lose some weight. And at the beginning, I never liked running, but after a few months I kind of got used to it, and I think I got addicted and started enjoying running.
And then, you know, when I ran my first 5K race, I liked it. And then I tried to run a 10K race and I liked it. And then I tried the half marathon and I liked it even more. And then I signed up for a marathon and a friend of mine said, “Hey, Stefan, like I see you have that resilience and persistence. And you like running. So, how about we sign up for Marathon des Sables?” which means Marathon of the Sands in French, and he told me it’s in Morocco in the Sahara desert. So, I didn’t fully understand what that meant. It sounded like fun. So, I signed up with him. And in the meantime, I was just training for my first marathon. And when I finished it, then I started Googling and doing some reading, I realised that I signed up not for a single marathon, but for six back to back marathons in Sahara desert in self-sufficiency formula, which meant I had to carry a backpack with all the food and supplies and everything I needed to survive a week in the desert.
So, I started ramping up my mileage to get ready for that crazy race. And when I started running more, I started having some aches and pains in my muscles and my joints and then, so I had to see a physiotherapist. And I usually work out like super late night at 10:00 or 11:00 p.m. And after I was done with my workout, there was no way to call that guy because I didn’t want to wake him up. And I didn’t want to send him a text message because I hate when people do it to me because when I pick up my phone at midnight, then I never put it away. After I read that message, I always check my mail, check my direct messages. And then I end up working or using the phone for another couple of hours. So, I didn’t want to do the same thing to him.
So, I thought I would call him the next day in the morning, but being a father of two and taking my kids to a preschool and then rushing to work and going into back to back meetings meant that I never called him the next day. And then in the evening, I was upset because I couldn’t work out. And then I thought, “Okay, I’ll call him tomorrow.” And then I never call him tomorrow again. And then the next day, and again and again, and, you know, the pain was gone after a week and I was able to resume my workouts, but I lost a week and I had a need because I needed to see the physiotherapist. He had a need because he wanted to make money. He had availability, but I never knew that he was available and I was not able to reach out to him.
So, I started thinking, “Okay, how do I solve that problem? Like is there an app or is there a website that could help both him and me to solve it?” Then I connected the dots because the fourth-largest vertical for all those or most of those classified newspapers, the fourth largest vertical was local services. And that included personnel services, professional services and home services. And then I thought what a brilliant idea, add a booking component or a booking button to that listing. So, this would be that added value when we parked their print and online inventory to mobile. And mobile gives you the freedom to use it anywhere you are at any time. Right now it’s obvious, but back in 2012, 2013, it was not that obvious. So, like I said, “Why don’t we take your listing to mobile and then why don’t we give both the consumers and those service professionals the ability to manage their calendar on the go?”
And that’s how we came up with that idea for Booksy, which back then was meant to be a white-label platform for those classified media publishers, because we wanted to sell them a license and brand it and sell it by themselves in their local markets. To make a long story short, we developed the solution and none of them wanted to buy it because they had constraints, cashflow constraints, like their print and online businesses were declining. They didn’t have money to buy it. So, I thought, “Well, since we developed the platform, we could launch it ourselves and see if that works.” And that’s how we started Booksy in 2014 and, well, the rest is just history because since then we are growing super fast and we are now the number one scheduling app for hair and beauty in eight countries, including the U.S. being the biggest and the fastest-growing market for us, and also Canada, the U.K., Ireland, Poland, where I come from, Spain, Brazil, and South Africa.
Meb: That’s quite the origin story. We’ve had a few ultra runners on the podcast before. Did you ever complete the race? What was the status? Did you get sidetracked by starting a company?
Stefan: No, I completed the race. And the first time, I went there to see if I could just complete it. And I was 113th or 114th out of 1300 runners. So, the next year I entered the race again to see if I could finish it in the top 100. And I completed it again and I believe I was 96th or 98th. And 2 years later, I signed up for the 3rd time to see if I could finish it in what they call the elite top 50 and I ended up being 43rd. So, I did it three times. That’s how much I enjoy suffering.
Meb: I’m surprised even that many finish. I figured like there’d be a lot more attrition, but I guess if you’re going to go all the way to do it, you’re probably going to be prepared.
Stefan: Yeah. I was surprised to see that too. I mean, there were 1300 participants and maybe 80 to 120 did not finish it. So, there was like roughly 10% dropout rate, but like usually 90% people finish it.
Meb: Wow. I would have guessed it would have been way over half. That’s crazy.
Stefan: Well, people pay $4,000 just for the entry fee. So, I guess when you spend that much on the race, then you’ll really want to train hard enough to finish it.
Meb: Let’s hop back to Booksy now. It’s an interesting story because obviously, you’ve been very successful now and it’s easy to kind of look back and draw a lot of lessons, but take me back to the early days because you didn’t have, like you mentioned, kind of what most people would call that product-market fit or the natural just rocket ship launch, but you guys had to pivot. Was there any initial sort of aha moments to where you were rolling out the version 2.0 of the product where you started to say, “Oh wait, this, there might be something here?”
Stefan: There was a major one. So, when we first launched it, we had a totally different business model. So, we wanted to make it a marketplace and we wanted to monetise on transactions. And our goal was to bring clients to salons. And there were two major problems with that. The first one was that people are very loyal in this space. And 60% to 80% of appointments usually come from returning clients and only 20% to 40% come from like brand new clients. That depends on vertical and whether that’s a new salon or an established salon. Sometimes that varies by geography and also by salons’ reputation. But the vast majority of their clients and appointments come from repeat clients. So, that was the first problem. And the second one was that it was super expensive to acquire traffic and to bring them these clients. So, we ended up having a lot of issues because we had to spend a lot of money on AdWords and Facebook ads and the results were poor.
It cost us a lot to bring a single client. So, you know, the economics were not as good as we had assumed. And the second problem with that high loyalty was that these salons were not using our app as their main calendar because majority of their clients still called them. So, they used whatever they did use before, pen and paper or other systems, and they treated us as a lead generator. They didn’t check it like on a daily basis. Sometimes they didn’t check it at all. So, if we ended up bringing them a client, it often resulted in a conflict or a double booking. So, that was terrible experience for these clients. They came to those salons and they heard like, “Oh, I didn’t know anybody booked with me through Booksy,” because they didn’t use our app and they didn’t use it because they had a different operating system.
In most cases, that was just pen and paper. So, that’s when we realised that we have to change our business model and go to market because bringing new clients always sounds like everyone wants to buy it. Like if you go to any business, whether it’s a restaurant or a hair salon, and if you say, “Hey, I have a system and will bring you new clients,” 9 out of 10 people will say, “Well, great. I’m happy to pay you for new clients.” But the problem is that this particular space there is that inventory challenge or issue. Because for restaurants, like if you bring them new clients, they usually can accommodate that. They have multiple tables and chairs. And especially if it’s food delivery, it doesn’t really matter if they get 5 pizza orders or 10 pizza orders, they usually can fulfil that. So, they didn’t have constraints hairstylists or barbers do.
And they have just one pair of hands and one chair. So, at any given moment in time, they can just cut hair of one person. They cannot have two or three clients being serviced at the same time. So, that was the main challenge. And for that, we needed to became the operating system, their default calendar. So this way, whenever we bring them new clients later on, we will have their real-time availability. So, that was that aha moment like two or three months down the road when we launched Booksy in South Florida that we realised that it’s not really viable to build a marketplace in the space, how you would typically build any other marketplaces, whether it’s food delivery or hotel bookings or ride-sharing, like you have to become an operating system in this space first. And then when you own the inventory, then you can build a marketplace on top of that. So, we pivoted using exactly the same product, using exactly the same tech stack, but changed our model and business model and go-to-market completely.
Meb: And so, once you had that sort of initial concept, what was the go-to-market? Did you just launch in one market or were you trying to go and find different places at one time? How did you guys kind of think about the rollout?
Stefan: So, we went online and started acquiring hair salons and barbershops across all of the U.S. because it didn’t really matter whether they use the platform since they were using it only for themselves and their clients. So, if a barbershop from Alaska started using Booksy and they told their clients like, “Hey, I’m going to make it easier for you to schedule appointments with me, just download Booksy and go to my profile. And you can see my availability and just pick the date and time that suits you best.” When people downloaded the app, they were not disappointed that they wouldn’t find any other barbershop. They were actually happy that they could book with their favourite barber that told them about the app. So, we started growing nationwide here in the U.S. and in Poland, which was more of a testbed for us, like the development team and the product team was, and still is based in Poland.
So, it was just easier for them to test the product, to iterate it with salons in Poland. And then we were launching it in the U.S. as new versions. So, these were the initial two markets that we launched in end of 2014, beginning of 2015. And we were nailing down product to market fit and then searching for scalable acquisition channels. And once we found them, we got our first seed round. And when we got the seed round, we felt we had that pressure to scale up and scale out and do it like really globally. And then we opened up eight other markets, including the U.K., Brazil, South Africa, but also Argentina, Singapore, the Philippines and India. And these were the initial markets where Booksy operated in, but about 12 to 18 months later, we learned that we were stretched and spread too thin. We didn’t really have processes and know-how that was matured enough to operate in so many markets.
We didn’t have best practices. We didn’t know how to train people in all these other markets, how to operate across so many different time zones and countries and continents, 24 hours, 7 days a week. So, we decided to focus and close four of these markets. So, we closed Singapore, the Philippines, India, and Argentina, and decided to focus on the U.S., the U.K., Brazil, and Poland as our core markets. So, that was like another aha moment when we learned building a global company, it’s not that easy. You need to have really strong operations. We need to have strong processes. You need to have a strong team that will help you and allow you to operate in so many different countries, cultures, time zones, and do it around the globe 24 hours, 7 days a week.
Meb: And you mentioned the kind of competition, at least in the early days was literally just people that used pen and paper. As you’ve rolled this out globally, this is sort of a two-part question, one is, have you seen a fair amount of competition start to enter the marketplace or incumbents? And then two, what do you think’s unique about the particular vertical you guys picked? It’s a pretty interesting niche idea to kind of focus on this particular area, much like OpenTable with restaurants and other sort of apps? But talk to me a little bit about the industry, I guess, is what I’m saying and how that’s developed over the past 5, 10 years.
Stefan: So, the industry has changed a lot. There were a lot of incumbents and back then, we didn’t even realise that because all of these incumbents were focusing on providing…they were like mini ERP or CRM systems for salons, but they didn’t really focus on online scheduling. A lot of them did not allow it. And later on, they started adding it as a feature, but because they didn’t allow online scheduling, like we didn’t have that visibility. We didn’t know they even existed. We didn’t know that salons were using them because salons did not accept online appointments. So, when we evaluated, we didn’t even know if they were using online scheduling or not. So, that’s what it looked like back in 2014, 2015. There was a lot of new companies that emerged in the past five years. A lot of them have already went out of business.
There is a couple of the new ones that are still operating, and there is a lot of incumbents that got to a certain threshold, and they are not able to grow anymore. So, the market is super fragmented. Probably that’s one of the most fragmented markets. Like if you think that food delivery is fragmented and there was a lot of competitors, this market is like 10X more competitive, 10X more fragmented. So, that’s probably the most fragmented market, at least from my perspective. And like, when I see ride-hailing or food delivery or hotel bookings or flight bookings, or like any other marketplace. And despite having so many competitors and being such a fragmented space, this is still 60% to 70% pen and paper. So, the market is still not digitalised. And there is still majority of appointments booked offline. People just simply call their salons or text them or DM them. So, this is probably the last major vertical that’s not digitalised. And this is a massive space. This is north of $150 billion U.S. dollars worth in services in the U.S. only, hundreds of billions of dollars globally. And the only country that’s been really digitalised and penetrated is Japan. Every other market in the world is still wide open for somebody to win it.
Meb: You know, it’s funny you say that because I was thinking my own personal experience. And again, it’s 2020. I go to a place in Los Angeles, really nice and not that cheap real estate that they rent out, and their garbage engine, whatever they use, it’s not you guys, by the way, it is so bad. I need to tell them. But the problem was, my girl decided to road trip when COVID hit. And so, I ended up just shaving my head. I can’t risk going with a new person. I’m just going to shave it in the meantime, but I needed to let them know. And I said, “You guys got to check out Booksy.” Talk to me a little bit about…you mentioned Japan. What goes into the calculus for you guys on different markets that you look at, what markets to launch in? What has been the major differentiators between, say, England and Poland and Texas and Asian countries?
Stefan: The biggest difference is between the U.S. and the rest of the world and then there is a major difference between Asia and the rest of the world. So, these are like three distinctive micro-regions. So, the difference between the U.S. and the rest of the world is that 60%, maybe even up to 70% people who work in this space in the U.S. are independent contractors. And most people don’t even realise it. But when you go to a barbershop or when you go to a hair salon, there is 60% to 70% chance that this person is not a commission-based employee, but they are independent contractor, which means they rent the chair or they rent a booth and they get to keep all the revenue and tips, but they bring their own tools. They have their own price list. They have their own working hours and they basically operate like a separate business within the barbershop.
Most people can see the difference because you’ll come in, you’ll get a haircut, you’ll go out and you don’t even realise that’s an independent contractor. And there is 4 million licensed beauty professionals in the U.S., and by the beauty professionals, I mean, barbers, cosmetologists, hairstylists, nail stylists. And there is another couple of million personal trainers, dietitians, masseuses, which we consider addressable market. So, in total, it’s like 6 million to 7 million individuals. And the vast majority of them are independent contractors. And it’s not like that over in Europe or in Latin America or in Asia where majority of people work in the field as employees, usually commission-based employees. So, they get a salary and they usually get commission on all the services and products sold. That’s the first major difference. And the difference between Asia and the rest of the world, especially, I don’t know much about Japan, but what we’ve seen in India or in the Philippines is that there is so much supply.
And there is like so many people or stylists, service professionals waiting for their clients that people don’t schedule appointments. They just walk in because there is always somebody that’s available. Those services are so cheap. They are so affordable. And there are so many people working in the field that people don’t bother scheduling appointments. They just go there and they get a haircut. So, that was one of the reasons we pulled out of that market. There wasn’t that much product-market fit, because if there was no appointments, why would you need the online scheduling in the first place? So, these are the biggest differences we see between markets. When it comes to competition, it’s like pretty much, it’s fierce everywhere. Like there is a lot of competitors in the U.K., a lot of competitors in Australia. Probably most of them are here in the U.S. because that’s the biggest market, and everyone wants to go after the U.S. but there is a lot of competition across the board.
Meb: How do you guys think about acquiring customers? There’s both the merchant side. There’s the end-user side. I imagine there’s a lot of digital marketing and targeting, but also seeing you guys talk about some various loops that are a bit of a growth hack. Can you talk to us a little bit about that?
Stefan: So, we acquire service providers and they acquire their clients. So, we page Booksy as a tool for them to manage their existing clients, and they are the ones that push the app to their clients. So, that’s how we approach to solve the chicken and egg problem. Like we don’t acquire consumers as we don’t want to disappoint them because like if they downloaded Booksy in Alaska and they saw there was only one barbershop, they will be disappointed if they were just random consumers. But if they download Booksy because their barbershop tell them to download the app to book appointments with them, then they are happy because they find exactly that barbershop they want to schedule appointments with. So, that’s how we solve the chicken and egg problem. And we are going after the supply side and supply acquires that demand for us.
Meb: So, you guys have been rocking and rolling. Everything’s kind of moving up into the right. Things look good. You’re expanding globally. You raised some funding. 2020 comes along and throws everyone a few different curveballs. How has this year been for you guys? And I’m trying to think ahead of time. Like I imagine it’s been tough for a lot of service providers, but you would think that the opportunity to have something like this would be a big positive as well. Anyway, we’d love to hear kind of how this…I was going to say this decade, how the six months has been for you guys?
Stefan: It’s been very volatile and scary at first. So, when we saw what was happening in Italy and in Spain, we anticipated that it would spread around the globe. And unfortunately, we were right. And we assumed that, you know, once there is lockdowns put in place and people are not able to work, that a lot of these small businesses would not be able to pay us and…because they won’t be able to make money. So, we assumed that we would lose majority of our revenue and it turned out to be true. Maybe not to such extent that we had assumed but we lost more than 50% of our revenues by giving them discounts or suspending their accounts. So, at first it was scary because we thought that we would go out of business and that we would not be able to continue operating. So, to protect the company and to protect the business and to make sure that we can survive, we had to make some very difficult decisions.
And we laid off half of our team anticipating that these lockdowns would last three, four months, and there might be second or even third waves later in the year. So, that was the first part. And then when lockdowns started being lifted, then our business started growing faster than ever. So, now from six to eight weeks perspective, depending on the market, because different markets started reopening at different times, I can say that the past few weeks have been the best weeks ever because we are growing 50% to 100% faster than before COVID. And with just half of the team, that fraction of our marketing expenses… As you said, like there is a lot of service providers that are now using Booksy to follow social distancing rules, to make sure they operate in a safe and healthy environment, taking care of themselves, their employees, and their clients, and providing all of them a sense of protecting them and making sure they don’t become a source of local community spread.
So, there is a lot of salons and barbershops that are now implementing different rules. And we see there is that fundamental shift in the industry. It’s pretty obvious to say that everything and everybody is going digital. And also in that space, I mean, obviously cutting hair or painting nails can’t go digital, but their interactions with clients are going digital because these clients can’t queue in a wait room anymore. So, there is that fundamental shift from walk-ins to appointments, but even with appointments, like sometimes people would come 5, 10 minutes earlier, and now they are not allowed to get in. They have to wait outside most likely in their car. So, we’ve implemented a number of features helping them to manage that traffic, helping them to notify their clients like, “Hey, you can come in now,” or per client, so they can check in with their barbers or with contact-less payments or even video consultation. We’ve implemented 10 different features to support businesses when reopening and helping them to follow local guidelines from the authorities. So, the past couple of months have been really great after the initial six, eight weeks of really scary and with a lot of uncertainty.
Meb: I was looking at some of the local shops near me and saw some do house calls, even as a cool feature.
Stefan: Oh yeah. We added that too. We added house calls to our app just a couple of weeks ago.
Meb: I was almost going to book one. I’m getting a little shaggy. All right. So, assuming…who knows what the future’s going to look like. As a founder CEO, what does Booksy look like kind of one, three, five years from now, what is the main initiatives for you guys? Is it simply blocking and tackling and expanding the offering throughout the world? Is it trying to add new features and expand into other verticals?
Stefan: Well, the longer we run the business, the more we are realising that this is winner takes most, maybe even winner takes all dynamics. The bigger we grow in local markets and the bigger we are against our competitors, like if we are five, six, eight times bigger than they are, the easier it is to grow. So, that made us thinking that instead of expanding to other markets, we should focus and secure our leading position in the existing markets. So, we’ll be doubling down, at least in the next two, three years, we’ll be doubling down and making sure that we win all those markets we currently operate in. So, I’m not thinking about expanding to new markets at the moment. So, that’s the first major thing that focus is the king. Having said that we will be adding adjacent verticals and we will be adding and we are adding those features that will enable us to open up new verticals.
And even within hair and beauty, there is different needs or slightly different needs for nail techs and hairstylists and barbers, and for somebody who does brows and lashes, or for somebody who does skincare or hair removal. So, definitely for the next 12, maybe even 18 months, we’ll be focusing on making sure that we cater for all those sub-verticals and we create unique experience and we provide them an app that’s suited to that specific sub-vertical because right now we have one app for everybody and that’s what all the competitors are doing. And soon, we’ll be releasing Booksy 3.0, and it will be still a Booksy app, but the way it will behave, it will adjust depending on what vertical you operate in as a service professional. So, it will look completely differently for a barber and completely differently for a nail tech or for a spa.
So, this will be a unique experience because with one stroke, we’ll hit two goals. The first one is that we’ll have an app that will have this unique look and feel to those verticals. And at the same time, it will be much simpler to use because right now, by adding all those features for all these verticals, the app is getting more and more complex. So, we want to remove that complexity and at the same time provide more customised user experience for those beauty sub-verticals. So before we expand to different verticals, to different service professionals beyond hair and beauty, we want to make sure that we win within this vertical first in the markets that we operate in right now.
Meb: As someone who’s been a multi-stage founder for a number of different companies at various stages and challenges, what are some big takeaways from being at the helm, being the CEO and in some cases you had to step into the role, in some cases, you started it from the get-go, any general takeaways? And also, from someone who’s done it in entirely different countries and continents too, any thoughts?
Stefan: I guess two things. The first one is that, especially with fast-growing companies, I have to reinvent myself every 12 to 18 months. So, I was like a completely different person when we first launched Booksy and I was hustling and doing everything by myself. And I’m a completely different person right now, focusing more on strategy and building the executive team. I’m still rolling my sleeves up, but doing totally different kind of work that I used to do five years ago. So, that’s the first challenge. And I’ve had to learn new skills and I still need to learn new skills because when you double or triple every year, then the company changes every year and you have to build different processes and change the structure. And by changing the structure, you need to bring on board completely different skill sets and experience and you need more and more senior people.
And when you bring more senior people on board, you also need to reinvent yourself and learn how to manage this completely new team. So, this has been the biggest challenge for me personally. And the second one, which is kind of derivative of that, is that when the company grows so fast and you have to reinvent yourself every 8, 12 to 18 months, and the company has a completely different structure because it has grown, then you need to help people to adjust to this new situation. You need to help them to find themselves in their new roles, with new bosses. And also you need to help them to grow because not everybody is able to grow themselves as fast as the company grows. So, a lot of people feel disappointed that for some reason, you are not…like if somebody was a manager and you put somebody over them, they feel disappointed. And in many cases, they don’t understand why you made the decision, why you did not see them fit to grow into this new role and had to bring somebody from the outside. So, you have to manage those different expectations and emotions, especially that these are the people that helped you to build the company and be who you are and where you are today. So, these are the two biggest challenges that I’ve been facing. And I believe I will be patient in the next few years.
Meb: You’ve also received a couple recognition, awards as a CEO for Booksy’s workplace and diversity. And from someone who’s in the field of finance like myself, it’s something I struggle a lot with on both race and gender. My world is dominated by various specific demographic. I’d love to hear any kind of best practices, thoughts you have on being a founder and CEO, and why you guys have found…or how you guys have found a workplace that has been so diverse and inclusive.
Stefan: Honestly, I’m not sure what’s the right answer because it’s kind of hard to assess what I’ve been doing right or wrong. And that’s just myself. What has helped me a little bit, is that being an immigrant and kind of facing some of the challenges that those unprivileged groups and minorities are facing, it was easier for me to understand their challenges and be more sensitive to that. When I moved in here two years ago, I had no idea what credit score was. I had no idea how difficult it is to rent a house if you can’t go through a background check or how difficult it would be to get a car loan or a car lease, or even to get a credit card. So, I had a lot of challenges in the first 12 months when I moved in here. And I think it helped me to realise what it means to be unprivileged.
With all the respect to differences, because I was still privileged, I was able to grasp some of the problems, not all of them, but some of them. So, I think that kind of opened up my eyes and made me more sensitive and more open to understanding and embracing at the same time, those differences and it kind of evolved naturally but…like in opening offices in Sao Paulo, Brazil, here in the U.S. across different states, in the U.K., in Asia, the only way to be successful in those places, you have to respect the differences and different cultures, and then create a single organisation where everybody feels like part of a one big family, where everybody feels they are contributing to a bigger overarching goal, no matter who they are and where they are at. And they feel important in their roles. I don’t really know what was the recipe or what were the steps, but I guess being very open to listening to people and embracing the differences and focusing on their strong suits instead of pinpointing their weaknesses, I think that’s what made up Booksy’s culture and made it such an inclusive place both for minorities and for women. And we got awarded for that. But maybe that was easier for me as an outsider without different assumptions or prejudice. So, I don’t know how I would have behaved if I were born and raised here. There is a definition of genius that I liked, a genius is a person who doesn’t know that it cannot be done. So, maybe that was the case. I didn’t know that it couldn’t be done.
Meb: I love it. As you look back on the sort of journey with regards to Booksy, what’s been the most memorable moment, good, bad, in between? Any story or anything really stand out in your mind as being particularly memorable?
Stefan: There were a few moments that were really memorable when different service providers reached out to me thanking me for starting Booksy and showing how much Booksy have helped them in their business and in their lives. So, just to name a couple of these, there was a guy who called me to say, “Thank you. You saved my marriage because my wife is a stylist. And before Booksy, I never went out on a date with her because she was always on standby with her phone because she didn’t want to miss clients wanting to book appointments with her. And now, thanks to Booksy, we can finally go out for dinner or go to movies. And she has that peace of mind.” There was a guy who emailed me saying, “Thank you. Thanks to Booksy, I can finally lead a healthy lifestyle. Before Booksy, I had a lunch break, but I never ate lunch. I always replied to text messages and returned phone calls. And then when I went back home, I spent like a couple of hours doing the same. I always had like one meal really late at night and it wasn’t good. And it wasn’t healthy for me.”
There was, you know, somebody thanking me that now they got more time to spend with their family and with their kids. So, people are getting their lives back and they are enjoying much better quality life, not only because their businesses are booming and growing and making more money, having more clients and less no shows, but also he goes, Booksy changes their personal lives. So, I think these were the most memorable moments. I told you that I had to reinvent myself. And at the very beginning, I was selling Booksy personally. And that’s probably one of the few things that I still do.
It’s not that it changes the momentum because last month only we acquired over 3000 new paying subscribers. I closed maybe one or two of them, but I’m doing it to stay in touch with our service providers, with our clients, to understand them better, to sense their sentiment, to keep my hand on the pulse. And there was even one guy who called our CS in the middle of the night and he was FaceTiming from hospital. His wife was giving birth to their child and he said, “I’m so happy. I’m so excited I’m having this child because of Booksy. And I just wanted to share my joy with you guys, because you are my family,” and he didn’t call his parents, his brother, anybody else, he called us because he felt we were that important in his life. So, these are the most memorable moments for me and my team when we hear from the happy and excited clients, not only about the product and its features, but more importantly about how we affect their lives.
Meb: I love it. That’s great. I imagine most of your races, if you had any plan for 2020 are cancelled. What has Stefan got planned for the rest of the year, personally? Are you still doing any races? Are you being distracted with any other hobbies and diversions during this time?
Stefan: I haven’t been racing for a couple of years now. Before I moved into the U.S., I was extensively travelling and going back and forth between Europe and the U.S. And that was very grueling because of sleep deprivation, jetlags, eating trash food at hotels and bars and restaurants. And I put some weight back on. And since I moved in here, I still do three, four, sometimes five workouts a week, but I’m not as competitive anymore. Booksy is taking up so much of my time that I don’t feel like I would be able to prepare for a race. And whenever I do something, I want to do it 100% and I’m not in a position to prepare for a race at the moment. So, even if there were races…I would just, as I said, like run three to five times a week, just to clear my head and to stay fit, but I probably won’t be able to run and be competitive for another couple of years. I’m planning to go back to Marathon des Sables maybe two or three years. And I want to finish in the top 30, maybe top 25. So, I definitely have some more goals, but I need to postpone them and focus on business now.
Meb: Right on. Stefan, this has been a lot of fun. Where do people go if they want to find out more what you guys are up to, follow along, sign up, what’s the best places?
Stefan: Well, the best place is to go to booksy.com, booksy.com. And as consumers, you’ll see some great barbers and stylists. And there is a link for service providers, it says For Business. So, you can click on that button and you will find out more how Booksy can help you run your business and give you booking peace of mind.
Meb: Thanks so much for joining us today.
Stefan: Thanks for having me here. My pleasure.
Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback@themebfabershow.com. We love to read the reviews. Please review us on iTunes and subscribe to the show anywhere good podcasts are found. My current favourite is Breaker. Thanks for listening, friends, and good investing.
