5 Businesses. 5 Fixes. One Playbook | Ep 894

Like, as a physical product e-commerce owner, like, your core most important skill is the brand. Like, you can't outsource that. It's the most important thing. Like, so you need to learn the skill of branding, which is fundamentally making associations with things that people in your audience find positive. How's this morning? Good. Super tactical. Yes. Okay, good. I always, I always want to make sure we do that. You might be wondering why we kind of organize things this way. Well, first off, it's because we've just iterated it a bunch of times and it worked out. But basically we wanted to make sure one key thing happens, which is that you allocate resources towards the thing that gives you the highest return. And so fundamentally, the difference between entrepreneurs who move faster versus the ones who move slower isn't that they actually physically move faster or slower, it's that they choose the right things to do and more importantly, the things not to do. Because it's— we have such limited resources and the smaller your business is, the fewer resources you have. And so you might see Elon and say, hey, how can Elon have $9 billion companies or whatever it is now? Well, he has like 100 children, so who knows, right? The guy does a lot. But to the same degree, you might only have the resources to do like half of one thing. And we get in trouble when we try and do too much because you just can't do that many things well. And what Elon's kind of superstar superpower is, is more so than anything, Obviously he's a great strategist, he's great at promotion, but he's so good at attracting the top talent because people wanna work for, you know, one of the smartest human beings ever from a purely technical perspective. And so like that is how he gets his operating leverage. That being said, this is what I wouldn't wanna have happen, which is that you go home and then you say, okay, I'm gonna start at the top of this list and start working my way down because it means that you didn't hear anything from this entire 2 days. I'd rather you open up a new page and then have the 3 things that you think will drive the absolute highest return possible and then forget everything else. And if it really up to me, I'd rather you pick one of those three things and then cross out the other two. And so a really wonderful thinking process that I, I try and exercise a lot because where the role that I have sits within most businesses is that I will get brought in to look at everything and then think, okay, what's our goal? Let's say that we want to triple the business or we believe that we have a triple in us this year. We say, okay, What are the fewest amount of things that would have to happen in order for us to do that? There's of course a lot of things that could happen because as long as you're not supply constrained, then it's like, well, we could increase our sales conversions, we could increase our traffic, we could have another acquisition channel, we could add more, you know, whatevers, right? In order to increase throughput. But at the end of the day, if there's a way that we can more efficiently do that, meaning if there's just one thing that we could do, like if we only did that and that got us our triple, then why are we talking about everything else? Like, why are we talking about it? Why wouldn't we just allocate all of our resources to making sure that one thing actually happened? And I think that is fundamentally why we've been able to move disproportionately quickly with the businesses that we have. And so with that being said, I've had the distinct pleasure of answering a handful of business-related questions. And so what's— what I found interesting is that the places where business owners get stuck is typically not tactical. Sometimes it's tactical, but it's typically strategic, meaning that they get stuck in a decision. And what's really harrowing about that is that decisions can take as long or as little time as you take to make them, which means that some people stay stuck for years and never get past them. And so a lot of times it's like you grow, of course there's a constraint, but usually there's a decision behind that constraint. That's actually the thing that's blocking you. And so usually it's when you have to choose between two terrible decisions and they both suck. One just sucks now, the other sucks later. And so the first one that I see is avatar selection, meaning I have, you know, 3 different avatars that I sell to. I'm doing $3 million a year and I really do prefer this avatar, but the other 2 together are 50% of my business. If I stop selling to them, I will go out of business, right? That's a, that's a bad thing. But if I don't stop selling to them, I will want to kill my business. Also not a good thing. Right. And so what do you do? Right. So these are kind of the rock and hard place scenarios. The next is data. This is the only one that is not necessarily rock and hard place, but it is worth mentioning because it's happened so many times. I get a lot of math questions, which is like, hey, I've got these two product lines. I'm not sure which one to go all in on. And those are questions that get answered with math. But then I say, hey, so what's LTV on this and what's LTV on that? Or what's churn on this and what's churn on that? And then the person might say, I don't know. Well, it's like, well, if that's the one thing that's holding the business back, then you should stop what you're doing. And only find out the answer to that question. And sometimes it takes a month, sometimes it takes 2 months. Okay, fine. But distracting yourself with kind of the urgent but not important things that come up throughout the day still puts your long-term goals on hold. The next is focus, which is typically I have 2 businesses, which one, you know, and they're both great and I can't stop one of them because I would make less money if I had one business instead of 2 tomorrow. But I guarantee that you'll make less money in 5 years because you have 2 businesses instead of one. The next one is overexpansion. So I have one location that's working well. And so then I opened up my second location. My first location dropped a little bit. My second location didn't go as high as my first one. And so now I have twice the liability and about the same amount of profit and I have twice the work and life sucks. And so I think the answer is I should open a third location, right? Rock and a hard place. What do I do? Do I shut down my new location or like how do I fix this? Right. And typically you have this much profit And so the answer is something really hard, which is either you have to cut down one location, go back, refortify the base, or you have to give up almost all of your profit to bring someone in on a shot that they're gonna be able to help you out who's good enough. And because fundamentally, like no business ever over-expands, you just under-talent. And it's a great way of thinking about it 'cause you can't do anything about over-expansion. You can do something about under-talenting. The next one is compensation. So this goes in both directions. Hey, I've got an HVAC business. And, you know, the phone's ringing off the hook, but I can't take the business anymore. I can't find any dudes to do HVAC stuff, technicians. And then I say, cool, well, how much are you running? Good margins? And they're like, yeah. And I'm like, okay, well, what do you pay your guys? X. Okay, well, why don't you pay your guys more than X? I don't know. It's like, well, you have the cash flow. It's the constraint. What are we talking about? Right? So it could be a competition on the low side or it could be the other side, which is I had a physical therapist came the other day. Everything was good. Like, marketing, sales, everything was working. She was at full capacity, but she was not profitable. And I was like, okay, well, how is this happening? And she said, well, 50% of revenue I give to my therapist. And I was like, well, does that, do they like rent chairs from you kind of thing? Kind of like the salon model. She said, no, I do everything. I run all the marketing. I close the deals. I'm the one who fills the toilet paper up, up, you know, they use my materials and they just show up for work and just have all these full calendars. And I said, it must be nice. And so. Rock and a hard place. She can either lower her compensation and then potentially lose her team or not do that and never make money. What do you do? Right. The next one is underpriced. I would guess right now half of you at least are underpriced. And I think that's just because of psychology. Typically, like as soon as people start saying no, you back off on pricing. That's usually very far from where the ideal sweet spot on pricing is. And so a lot of entrepreneurs will stop and it's like, okay, you know, 2 out of 3 people, you know, 1 out of 3 people are saying no. I don't, I don't want to hear any more nos. But usually if you have 2 out of 3 people who are saying yes, you probably have a 2.5x in price sitting there to get to where you should be. And at that point you'd have maybe half the delivery with 2.5 times the revenue. You'd make a hell of a lot more profit. And so super common. And then the last one is what I call just a single product business. And there's nothing wrong with this per se. It's only an issue. When you're not profitable as a result. So I had an example where I had a guy who taught people to speak English in Latin America and he sold digital products from a YouTube channel that had like 3 million subs and he was selling like 700 to 800 people a month on these like $20 to call it $1,000 products. And the issue was, or what I asked him to do was I was like, what if we called those people and made them another offer? He said, there's no way. No one will ever spend more than $1,000 on language stuff. And what was really great for me in this exact moment is that there was a guy right next to us who was from Latin America, who didn't have English as his first language. And he looked at him, he was like, I mean, would you have paid $5,000 to learn English? And the guy just looked at him like very soberly and was like, I would have given everything I had. And I was like, I'm fucking right. And of course he didn't listen. So it doesn't matter. He has a social media agency now. So he can't make good decisions for people. So that being said, he thought it'd be less competitive. So anyways, these are kind of the 7 growth sins. As we go through, I'll try and do one of these because I'll point because usually they fall into these buckets. With that being said, let's ask some Qs. Yes, sir.

Hi, yeah, my name is, uh, Dylan. Um, I do power washing, solar panel cleaning, window cleaning. Um, power washing, solar panel cleaning, solo panel cleaning, solar panel, solar panel clean.

Okay, yeah, I was like, wait, you're selling solar and you're doing— I was like, hold on.

Yeah, window cleaning. And, uh, we do like $500,000 in revenue.

Amazing.

Um, I want to be at Supreme, right? Yeah, Supreme Powerwash. And, uh, what I think is stopping me is, uh, strategies to attract or reach out to business-to-business, uh, recurring clients. And if I should just focus on doing that primarily.

Okay. So right now you're residential?

Yeah.

Doing a lot of door knocking. Yeah. So what are margins now? Um, profit?

Oh, uh, yeah, we're making $500,000 a year profit. Yeah.

So what's revenue? Top line sales, the dollars you collect?

$500,000.

What do you take home?

Oh, $250,000.

Okay. So half.

Yeah.

Okay. So, and that's all residential right now?

Yeah. There's a little bit of like some like apartment complexes or.

Okay. So what stops you from doing more of that? People just call us on the phone by my, by luck and we get, you know, so it's referrals is the primary way of growing the business right now. Okay. So you don't have an acquisition channel. And so the thought process that you have is I'm going to start an acquisition channel and go after commercial cleaning rather than residential.

What's an acquisition channel?

So the way you get customers right now, my phone rings and I'm getting referrals from existing customers who are calling me up and saying, hey, can you clean my stuff? You say yes, but it's very much dependent on that phone ringing, right? Okay. So then you're thinking or you're telling me that what you want to do next is build out way of getting customers in the door and you want to target commercial. Yeah.

Cause we have like this one client that just came upon us and I noticed like it's, it's a lot more money and it's a lot more stable.

Yeah.

Cause it's recurring on a monthly basis.

So basically, hopefully you've seen this before, right? You've got OB and then I'll just put affiliates from over here. So you've got 4 ways that you can get, you can get clients right now. Besides referrals, which is what you're currently doing. So do you have experience with any of these things? Running ads, posting organic content, cold outreach, or do you have like people who already have a lot of these types of customers already?

I have like a third party help with the ads.

How much do you spend a month on, on the ads? $2,000. Okay. Do you know if you get anything from it?

Yeah. Um, I would say like we get more like off like door knocking and referrals.

Okay, so you door knock a lot? Yeah. Yeah. Okay, so you're spending $2,000 a month here, you're doing door knocking. So how many deals a month are you doing off door knocking?

Like 20.

Okay, 20 here. What's the average deal size?

Like $350,000 to $1,800,000.

Okay, so I'll just call it $500,000. Okay, so you got $10,000 a month there. That sound right? Okay. The rest is the phone rings or what other percentage is this? Uh, like the— does more come from the door knocking or this?

Uh, probably door knocking.

Probably. Yes.

Door knocking.

Okay. So you say like half comes from this compared to door knocking. Okay. What stops you from spending like 5 times more money here?

The fear of not getting my money's back on the third party doing its job right.

I think the first, like you need to get this in place. You need the data, meaning you need attribution tracking, which if somebody else is helping you run this, they should do it. And if they don't, then you should probably find someone who does know how to Give attribution for, for the ads that you're doing. I wouldn't say, hey, let's go after a new avatar and build a whole new way of getting customers when you currently have two that are working, or one that's working, one that we're not sure it's working. But if you're spending $2,000, you're getting more than one deal a week from ads. Well then it's probably working cuz you're spending $500 a week. If the average deal's $500 and you're getting more than that, then you're probably doing okay. And so you might actually be sitting right now on something that's getting 5 to 1 or 10 to 1, but you're only spending $2,000 a month. And so it's like, if we can just bump that to 10, then that would be big. Now you don't have to jump there immediately, like go from 2 to 4, 2 to 6, whatever you feel comfortable with. But step 1 is get the attribution in place. Step 2, then increase it, provide the attribution, meaning that we can track what we spend versus what we make is good. Then spend as much as you can there. Once you've tapped that, you'll have a little bit more cash flow. And then at that point, we can make the decision of, okay, do we want to open up another paid ads channel? Do we want to spin up more door-to-door guys? Local is the only exception I have for being willing to have more than one acquisition channel. I'm not against it as hardcore as I am for other businesses, because if you're in, you know, bumfuck Kentucky, like there's only 50,000 people, like you got to reach them as many ways as you can. But right now, attribution, spend more if you can, as long as the attribution is good. I don't think you should change the business model. I think you should just do more of what's already working and you just don't know if what you're doing is working. But I can tell you got 50% margins. It's not bad. Yes, sir. Cool. Thank you, Alex. Congrats on the business.

Hello, my name is Jessica. I have a subscription-based boat rental.

Yeah, yeah, boat membership.

Yes, yes, I do. Uh, currently doing $2 million top line. Um, I'd like to pass the $10 million mark. Uh, what's stopping me is a decision. I came here to this workshop because Um, I've been doing this 13 years. I put in my 10,000 hours, not making enough money. So I came to learn how to scale. Um, I have two options, uh, in front of me in the next six months. One, to purchase an existing club that would more than double, and another to start a third. Um, I have five locations. This would make, uh, ten.

Um, and you're doing like two-ish with $500,000 in profit, right?

Yes.

$600.

I mean, hey, every dollar counts. I'm with you. Okay.

Yes.

Um, and in a session that I had this morning or this afternoon in asking questions about how to scale, Ed told me I should not scale, I should sell.

So is that because you don't like it?

Yeah, that's what he said.

I'm just reading here. Yeah.

He said, do you love boats? And I said, No.

So, well, before we break your life, just a couple frames cuz I, I didn't say this earlier, but I'll say this now. I'm really not talking to anyone per se. I'm talking through them to everybody else cuz believe it or not, the problems that you have is the same problem that like 5 other people here have or 10 other people here have. So just wanna set that up front. I'll just share something that might be just a, maybe a different frame on this, which like, have you heard this story of the 3 stonecutters? So guy walks up, sees a stonecutter and he says, hey, how's your day going? And the guy's like, it's terrible. It's backbreaking work. It sucks. And he is like, okay, wow. All right, got it. And he goes to the second stonecutter and the guy says, Well, you know, pays the bills, you know, keeps the family fed, you know, that's fine. And then he goes to the third stonecutter and he says, you know, how's your day going? He says, oh, it's amazing. I'm building a cathedral that, you know, is going to last for generations for my kids. Right. And so the same work, just different perspectives on the work itself. And so the perspective that I'll share is just that having now owned a lot of different businesses, almost all businesses are the same as if you chunk up high enough. Because if you get 2 or 3 levels up, you're going to have a director of sales, director of marketing, you're going to have a director of IT, you're going to have personnel issues, you're going to have HR, you're going to have legal, and it's going to suck every other day. You know what I mean? And so it's kind of like, you know, I've had 10 executive assistants and I currently have none. And the common thread between all of me and them is them, obviously. And so I say this because like, if we're, if we're trying to hope for the business to be the thing that brings you joy, I would just really strongly push against that. And I'd rather you just see the business through a different perspective, which is like, this is an opportunity. They get to learn some skills. Like a good friend of mine who's in the fitness industry and then started a cookie company, which makes it seems completely antithetical, right? He's like, I'm creating demand and supply. But what was interesting about it is that I asked him, I was like, are you passionate about cookies? And he was like, no, not at all. And I was like, why are you doing this? And he's like, well, I think there's a good gap in the market. This is before Crumble. So he had the right idea. Like he thought that gourmet cookies were going to be a thing. He ended up having a bad partnership, whatever. But the point is, is that he was right about his idea. He did 100 different recipes to figure out the one chocolate chip cookie that was amazing. And he did, he did really well. But the thing is, is that he wasn't, he wasn't in love with cookies. He was in love with being excellent. And I think that that's, that's at least how I try to see business. It's like, how can I let this business be an expression of the values that I have rather than this business has to fill a hole in my heart? So back to you. Okay. So do we exit this thing? Do we get another location? Because I'll bet if you just didn't hate the people you work with, you'd probably be okay with it.

With getting another location?

Oh no, just in general. Like, I mean, cuz right now you have this, this desire cuz you have what, $2 million in debt, right?

Yes.

Yeah. So you have $2 million in debt. You're doing $600,000, not $500,000 in profit. Noted. And so basically after taxes, it's gonna take you like 6 years, 7 years to pay the whole thing off, assuming you don't spend any money, which would suck, right? That would blow. Okay. So I can feel that that is crushing weight. So either you wanna scale past it so these debt payments aren't killing you. Because it's eating probably the majority of your cash flow or selling and kind of either starting over or, you know, doing something else, et cetera. Right?

That's right.

Okay. Do you have an offer on the business?

No, I wasn't even looking to sell until an hour ago.

I was like, sell it. So you have 25% margin, so it's not bad. Or no, less than that. 'Cause you're a little higher than $2 million in revenue, right? $2.7 is that what it is?

$2 million.

It is $2 million. Okay. So it's $2 million top line, $600,000, excuse me, $600,000 bottom line. So I mean, you're running 30% margins. The only issue is you made a bad decision like 4 years ago. Or however many years ago you took the debt out.

Yes.

Because it's pretty capital intensive to have 50 boats.

Yeah. So how's cash flow for the business? Good.

I mean, COVID was great. We sold like crazy and fortunately put a lot away, so I don't have a cash constraint.

That's great. So, okay, outside of like, let's sell this thing, you still want to grow it, right?

I want to grow business. This just happens to be the vehicle.

I don't think this is a bad business. I mean, a boat membership, fundamentally, you have very high margins on each incremental membership, correct?

Yes.

Yeah.

So you're kind of at this point where like you've covered all your costs and so each additional membership makes you a lot more money, right? Disproportionately drops the bottom line is my point. Yes. Okay. So what stops you from selling 10 times the memberships?

That was the question that I tried to answer, right? Coming here and going through the framework. And, and when we were going through the circles yesterday, I came down to, I think it's my offer.

Okay. And is this, is this a franchise or is this yours that you just start on your own?

That's the other part of the equation is that it's, it's a licensing model. And I think the conversation in the room today was, is it really mine if I'm under a licensing structure?

Yeah. I mean, you can sell the business, you have an existing agreement, but what do you give away? Top line?

Nothing.

Oh, okay. What do you license?

Marks in the system. It's a reservation system.

Do you pay a flat fee?

So technically my members do because we're licensed and not a franchise. I can't pay directly, so the members do.

Okay. What percent do they give away?

It, it's a $500 a month membership. $30 a month goes to corporate.

Okay. So whatever that is, 6%. Okay. I mean, that's fine. Okay. So I mean, I wouldn't say it's strangling you. Okay. So it's 20% of your margin functionally. So do you currently do ads? Do you do outbound? Do you do organic? You doing affiliates? What are you doing to grow?

We spend about $6,000 a month in paid ads. We do a lot organic.

What's ROAS on this? Good, bad?

Um, well, according to the marketing agency that I use, they're very, very great.

They're like, it's exceptional. Yes, yes. You should spend all your money there.

I only spend $11 per lead, and that's a fabulous number in the industry, evidently.

Well, what percentage are you closing of leads?

Uh, the industry standard is 6%. When I was doing it myself, it was—

I'm gonna pause here just for everybody. Zero fucks about industry standards.

Okay. And I'll tell you why.

Average American, overweight, in debt, divorced 7 times over. Why would I care about the average industry person? They all suck. They don't make money. Fuck them. So anyway, sorry, go back to you.

We're at 4% lead to close.

Okay. 4% lead. So it costs 25 times lead cost. So at 2, whatever, $266 is cost of acquisition right now, not including sales commissions. Membership is $500 a month.

It's a $5,000 initiation fee and then $500 a month. We sell 5-year contracts.

I love this. Why are we getting out of this business? Call it $300, $400 with commissions, whatever, to get the sale, to get a $5,000 upfront and then $500 a month or yeah, that sounds chill.

So that's why I was thinking I'd do more of it.

Yeah. Do more. Sounds great. I love this for us. I love this for us.

I love this.

Yeah. Okay. So why don't we spend more on ads?

Sounds like I should.

I feel like that's not a terrible idea. The thing is, is you have a business where this happens a ton, by the way, like you get, and this is actually really interesting because that's, in my opinion, it's purely psychology, but you have a certain amount of cost that you have that's fixed cost in the business. And then you spend enough marketing to get above the fixed cost and then make some profit. And then you like exhale, you're like, oh, thank God I'm not losing money. But it's like, you're willing to work so hard to make everyone else money, your landlord, the licensor, the employees, like you're paying all their mortgages, but then like, You're just forgetting to like pay you. And so it's like, let's go ham on that side. Like when it gets easy is when you go hard. So I'm, so you do this, what else do you do? You said you're good at organic stuff.

Yeah, we are. And a third of our new members come from our existing referrals or existing members.

Okay, cool. Do you have a really structured referral system or just people talk to people?

Yes and yes.

Okay.

Yes, we have those.

Cool. Because we have a whole bunch of badass stuff for referral stuff, but That's one thing that can probably get juiced beyond the scope of right now. But that's a big one. And then ad stuff, honestly, if we could just take a look at it, it's like we could probably figure this out in 5 seconds of what needs to do. The thing is, is what's your close rate on people who come in?

So 4% lead to close and then we 33%. Okay.

You're fine. Yeah. Like your stuff's not fucked up. We just need to get the referral system in place. We need to spend more on ads. We can make sure attribution's right. If we needed to tweak, like if you were like, I'm closing 10%, then it's either a sales motion issue or it's an offer issue. Now, if the lead costs are too high, but you said they weren't, if the lead costs were too high, I would look at offer as well, but that might not be the issue right now. And so I think probably more and better creative that we do on the ad side. And I'm sure, are you doing Google AdWords? Is that your primary? Yeah. More and better creative, probably better targeting in terms of what, what keywords would be look, uh, bidding on. And there's probably a handful of like really easy CRO stuff. So conversion optimization that we can do on the actual funnel itself. Like we just don't know a lot. Like there's so many little things there that you can just like immediately increase how much the business is making from each lead. And that'll probably just give you a little bit more exhale, like, in order to spend more, because I think that's what we have to do.

Thank you.

Real quick, guys, I have a special, special gift for you for being loyal listeners of the podcast. Layla and I spent probably an entire quarter putting together our scaling roadmap. It's breaking scaling into 10 stages and across all 8 functions of the business. So you've got marketing, you've got sales, you've got product, you got customer success, you've got IT, you've got recruiting, you've got HR, you've got finance. And we show the problems that emerge at every level of scale and how to graduate to the next level. It's all free and you can get it personalized to you. So it's about 30-ish pages for each of the stages. Once you answer the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com/roadmap, R-O-A-D map, roadmap. Hi Alex, first Google Seek You. You bet.

I've only found you 3 months ago and life-changing.

Oh, thanks.

No, thank you, really.

All you.

And when you said one time, It's like entertainment if it's just, oh, that was cool. Or like it changes behavior, it's changed behavior.

Oh, cool.

So thank you for that.

I appreciate that.

And it's only two people in my life that have done that for me. So thank you for that. So my name is Angela.

Buy a book at the next launch.

No, no, no, thank you. No, I really mean it. I really do. You and Michael Singer. So my name is Angela. I own a cybersecurity consulting. We focus on cybersecurity compliance. For middle market and enterprise customers. I've been in this industry for a long time.

Don't you want a boat membership business? I love what I know. I'm—

I love— I love our industry because it's always like changing.

I love it.

Technical and all that. Okay, so IT compliance, mid-market, cybersecurity, mid-market, and climbing to enterprise, more and more enterprise customers. I did revenue of $5 million, almost $5 million in 2023. Brute force and then it's dropped. So I'm like at 3.6 right now. My net margin was 35%, now I'm at like 18%, so it's shrinking. And what I've accumulated over these years was, you know, obviously ignorance and a lot of things that I wasn't even thinking, but people debt. So now all that margin is going to the people side, right? But also my sales, right, have dropped and my leads because I've been focusing now on the things I never did 'cause I was just, you know, hunter. And now I'm focusing on learning how to become a real CEO and learning how to do people things as well.

Operate, yeah.

And all of that.

Okay.

So I'm solving right now for some things. I didn't realize my concern was even recruiting. I found a recruiter by the grace of God that's amazing and he's helping me solve these problems. And then the next thing I was solving for right now is the practice leader, which is like a technical person too that's good with clients. And watches all the people that we work with and works with them, grows with them.

What's holding you back?

So that I'm working on.

Okay.

I think I'm cracking the nut with that.

Okay.

I think I may have found somebody, but we'll find out in a week or so. So, but in the meantime, sales has been my thing. And then I would say my industry has evolved and COVID definitely was a game changer where cost per events have increased tremendously. Your conference stuff, you gotta pay to speak right now, which wasn't the case before. And, you know, I had family changes and—

Yeah. Do you go to conferences to get customers?

I used to. Okay. But I'm not doing that anymore.

Okay.

Very little.

Got it.

Because of the cost and, you know, the, the time.

Are you coming back with us?

Um, I don't know.

Okay. No worries. We have a whole conference playbook that just murders. So for if you're selling at conferences—

Oh, I need, I need that. I need a lot. I need all the help I can get.

No worries. No, it's fine. I just figured I'd ask so we could—

But I'm learning tremendously from you. So thank you so much. I'm listening very intently to everything you say. So, you know, LinkedIn, it's obviously my, my, my market.

I wanna pause. So can you handle more customers? Yes or no?

Yes.

You can handle more customers? So you're demand constrained?

Yes.

Right now? Yes.

Right now. And it's, it's like change over time.

Okay, great. So right now you can handle more customers. You've got this other person that works out the door. I can handle customers. Yeah. Whatever. Okay. So demand constraint is where we're at right now.

Yes.

So you used to do conferences, they got too expensive, which means the sales motion didn't work as well as it used to.

I used to do little, not a lot.

Okay. Maybe we should do more.

Just organic friends networking.

All, everything. So that's how, basically you just did all outbound as your primary way. All outbound. That's what you did. Okay. Got it. So, and no one else did the outbound? Just you?

Just me.

Okay. So.

Now I have a marketing person that's like, keep the lights on marketing person, I would say. What does that mean? Nice guy, but anyways. He's not that good. And we're doing some content and we're, you know, like that is really nice.

Well, it's like keep the lights on marketing. It's like either you're getting us business or you're not.

I've used agencies before. It was awful too.

Well, if you don't know how to market, you're not good no matter what you spend money on.

I know, but no, I listen. The thing I'm thinking here is—

Do you want my advice?

Yes, I want your advice.

Of course.

Yes.

You figure it out. Thank you, Alex. Thank you.

So outbound is what you're good at. You can either go one-on-one the way you were, or you can go hunt where there's fish in a barrel. What's the average customer worth to you?

$75,000, $80,000.

Yeah, I think—

No, for her.

Yeah. Heard. You were the prototypical conference playbook. Go to conferences, run the sales motion through the conference, collect as many leads as humanly possible, and then basically have an offer that's structured there so that you have urgency for people to sign up. Like that is the way to do it.

And LinkedIn?

Hmm?

LinkedIn?

I would say LinkedIn is kind of what I would say is my like, for you, because of how your type of business works in terms of the sales motion overall, you, what'll happen is it'll look like this. So you'll— so it's like you'll fish with a net. This is me fishing with a net on a boat membership. Right. Okay. So we're fishing here and this is events, right? And then what will happen is kind of like a telephone poll. You'll start, you know, you'll close, close, close, and then you'll have fewer, fewer leads. And what you'll do is in the meantime, your outbound will go up during that time period until you lean into the event and then you'll have the next event. And so it's kind of this crisscross motion while it's just you. Once you get enough cash flow, which you're probably close to at now, I would then have somebody who's doing basically the SDR work for you. So sales development representative, somebody who's doing the outbound, who can just basically set and qualify. Yeah, exactly. Because for you, I'm sure you can close in a couple of calls anyways. And so you just take longer because they're a big company. Sure. No, you're good. But getting the SDR is probably the largest time constraint for you right now and also not that expensive. And so I would step one, run conferences for sure so I could fill up the pipeline cuz that's like, that can happen fast and you have the cash flow to do it. And then second, in that same time, because you could do these concurrently, I would just, I would put the ads out for SDR so that I could bring somebody in to start feeding.

I have somebody that could fill that role right now. He's my, what is he not?

Why is he not doing that? Is he the marketing guy?

No, he's not the marketing guy.

Maybe we should let the marketing guy do it.

No, but you know why? Cuz he's a recruiter.

He's a great guy though. He's a recruiter.

He's a good dude.

He's a good dude.

He's my recruiter that's like a salesperson recruiter.

Okay.

And he, he is working with us because he wants not to be a recruiter anymore. He wants to be in sales in a technical field. So he's gonna learn something technical.

I mean, if you—

He's putting all the time and effort to really learn that.

If you did recruiting and you did outbound for recruiting, which is what most recruiters do, doing SDR work is like the closest comparable role anyways.

Yeah.

So I'm fine with that guy.

So conferences, LinkedIn, and then thought leadership, LinkedIn. Just to like, so they wouldn't—

Thought leadership, do you mean just like post good shit?

Posting shit.

Okay.

No, but no, like I'm thinking about this, like trying to solve a client's problem. Like, yeah, listen, you have this issue, here's how it works.

Mm-hmm. Well, all you do is to be a thought leader, you just take the stuff you're doing privately and then just talk about it publicly.

Yeah, exactly.

So yeah, just talk about your client work and no webinars. Hold on.

No.

Okay.

Just con—

no, I agree. Conferences. Go to conferences.

Physical.

Hire somebody to do more. Oh no, making a shitload of money makes work.

Oh, I love money.

Right. So like do the conferences, fish with a net, fill up your pipeline, get the SDR so that you get the stability that'll happen. So this is our events that'll— event leads. This is our SDR leads until eventually the SDR leads will stay here and then this will just continue to stack over time. Make sense?

How many conferences per year?

How many a week can you do?

Oh God. No, I mean, I couldn't. I have family, kids.

How many a month?

Maybe 2 a month.

Cool.

That's fine with me. Let's start there.

Thank you, Alex.

Thank you.

Thank you.

Hey, Alex.

Yes, ma'am.

Catherine.

Hi, Catherine.

I have a dance school, 2 locations.

Wonderful.

We do $2.7 mil.

Congrats.

Thank you. Been in 5 years in business, so aiming for $3 mil this year and at least 10 plus in the future, constraint will be space capacity.

Okay.

Facility space.

Heard.

So yeah.

Okay.

What would you like to know?

Well, is that, is that just what's stopping you? Is just getting another location?

I could do, if I can get to $3 million this year, I'll be at probably 80% capacity running my core programs.

Okay.

Right.

Which is the key. I could add daytime. There's things I could do on the side.

I don't think you complicate the model.

Right.

So next step in scaling at that point is, is it additional locations or acquiring studios?

Franchise.

Yeah.

Right.

I don't wanna franchise. I think it's either acquiring studios that are already, that people wanna retire from and buy them out and run their businesses and then sell the whole thing eventually, or ground up organic build from location.

Location.

So do you want what you want to hear or the truth?

Both.

No, truth.

I want the truth.

Do you wanna exit?

Yes.

You said? Yeah. 100%. So, and when you say, okay, what size exit?

At least $20 mil.

Yeah. So the fun fact for everyone here, the hardest amount of money to sell for is between $10 and $30 million because it's just not big enough for people who have real money and it's too big for people who don't have real money. And so, uh, like it's easier to get like a $100 million deal done than it is to get a $25 million deal. $25 million deal is like the, the one of the hardest deals to get done because it's somebody who usually has a way bigger checkbook and it's just like really scraping down the bottom and doesn't really care because it barely moves the needle for them. Just for context. Now, that being said, if you want to sell for more, the difficulty of selling your particular business is that it's so people-driven, it's so talent-driven. And there haven't really been, to my standard, any super successful high-service-based gym businesses. The closest one for a period was Orangetheory, and then they went to shit during COVID and never recovered. But like, they were the closest ones. And it's just because it's the talent. It's just, it's such a service-heavy business and it's so reliant on the quality of the trainers, coaches, instructors, whatever you use, the word you use, right? So selling it will be difficult. You would be able to sell it to somebody who doesn't know what they're doing for sure, but you're not going to get a huge amount of money for it. So some doctor who has no idea about business but think he does because he has money would buy it, but you're probably like, you might get, you know, it would be 10 with a bunch of hair on it and earn, you know, clauses and a bunch of crap. So if you wanted to just do this forever, then I would say like, just keep growing. That's amazing. That's fine. But most people make this work in a franchise model. Typically, I think, I mean, you can get gyms for free, studios for free like that. Like that's, that's not, it won't be hard for you to find, you know, ballet, dance, et cetera locations because so many people are in pain and don't want to run them. Like you could get them for free. I mean, that's how I expand. Like I got them for free. So the good news is the business is good. It's just what is your expansion path? So either M&A, de novo, meaning organic growth, you open it yourself, or you go from like a franchise path. The franchise and/or licensing is for sure more sellable than those ones. And I don't normally give this advice. The issue is just that I know, I understand the nature of the business obviously pretty well. They're very hard to sell for a lot of money. You can offload them really easily because somebody else has a dream and And thinks that they're gonna make it work. It's like restaurants, like you can sell 'em for nothing cuz somebody else has, is a cook and people tell 'em their cooking's good and they're like, you should open a restaurant. Like you love fitness, you should start it. Like that. It's very easy to get people to say yes. Not for a lot of money though. So my, my honest truth is I think if you look at your current business model and say, how could I cut down the complexity by 80% and then franchise it? So I'll give you, I'll tell you a story. So the most successful fitness franchise right now is Alloy. They do semi-private training. Rick Mayo is a really good friend of mine. He had a $4 million a year single facility and they had smoothie bar, merch, PT, semi-private, large group. They had the whole— they had everything right. And when he went to franchise, he looked at revenue per square foot across all the business units and saw that semi-private was by far the highest revenue per square foot. So he had his 6,000-whatever square foot facility. He fired all of his clients. Except for his semi-private. It was still profitable with a 6,000 square foot lease, opened up a pilot location with only the most profitable service that had 3 employees, 1 manager that does mornings and evenings and does sales, and then an assistant that does morning and assistant does evenings and works backup. And so the 3-person model does $500,000 or $600,000 a year, 50% margins, and you can just cookie cutter that thing. And so I think your instinct on the front end was stuff like, I could add all these things. I think it's 100% right not to do that. And then look at your most profitable times, look at your most profitable pricing and packages. And then I would look at stripping this down to like, how could I get this to the fewest possible people who could run this so that I could open up, basically somebody else could do this. And that's probably the, like, that is the most likely path to the goal that you have. I'm not saying it's easy, but it's the most likely path to where you wanna go.

Yeah.

And what about the licensing?

You mentioned that.

Same, same. Just different, different legal structure. Okay. Hmm. Yeah.

All right.

Just being real. Like, I mean, you could obviously open more locations. Seems like you're competent. I say this as a compliment, but if you want the, if you want the exit that you're looking for, like, I can't, I mean, I know a lot of people in the fitness world who have 5 locations, 10 locations. So few, like almost every one of them did never sold the whole thing. I don't know one who sold the whole thing. Every one of them piecemealed it one to a trainer, one to a customer, one to a competitor, one, like they had to break the whole thing up when they got tired.

Really?

Yeah.

Okay.

Interesting.

Thanks so much.

Cool. Yeah. Awesome. Thank you.

Hi, my name is Michelle. This is actually my second time coming to the workshop.

You grew from like 400 to 1.2, right?

I'm hoping to break a million this year. Last year I did 356.

This is a good return. Yeah. Yeah.

My main takeaway from last year was I just needed to do more to even have more in the system to figure out. I know, crazy. So I have spent the last, this, I'm going on my third year of my business. I'm trying to replicate Gem Launch in the pet care industry. I am named Dogco Launch. It's not that innovative, but so it's—

I think it's a wonderful name.

I mean, I like it.

Okay.

So I do coaching and consulting. I modeled off of, I've really tried to study very deeply how you approach Gem Launch from what I can tell.

Happy to answer any questions. Huh?

Yeah. Well, I even read Gem Secrets. It was great. So we did $3.56 last year. I'd like to break $3 million this upcoming year.

Um, you mean $26 million? No, no. Yeah.

Yes.

Sorry. This upcoming year in 2023.

Yeah.

But this year you want to do 1 to 2, pacing 1 to 2, and then next year you'd like to do 3. Okay. Got it. So what's stopping you? I'm guessing you're not supply constrained. Well, can you take more customers?

No.

Huh. Word. Okay. So how are you getting customers now?

Uh, organic.

Okay. That's why. All right. So just you making content on Instagram, on YouTube?

Predominant.

Most of my market's on Facebook. So I have an interest group for companies that want to grow in the pet care space. Um, and I also do a speaking circuit on the 4 conferences that are in our industry.

Mm-hmm. Great.

I'm throwing my own conference this year cuz I figured I'd—

So you're saying conferences generate leads? Crazy. Keep going. Yeah. And thought leadership. Yeah, yeah, yeah.

Um, so yeah, organic content has been predominantly how I'm getting people.

Okay. So you want to sell more stuff, but you can't sell more stuff because you can't deliver on more stuff. So who's stopping you from delivering more stuff?

So I'm really excited about the Money Wellness book because I did—

was my original structure. It got me off the ground very quickly. I did this scarcity-based cohort model, cuz I buy each 25 companies in a group, we go twice a year, and it's been a difficult model to continue growing. I'm also the only coach in the business, so it, I'm doing everything right now.

The model might be fine. You're just the only person doing delivery.

Yeah. Yeah. Um, okay.

So we need to find another person to do delivery or you need to change how you do delivery.

So I'd like to change how I do delivery initially.

Okay.

Um, I'd like to go to more of an evergreen model where people can join at any point in time. I don't know if evergreen's the right word for it.

Um, that's what you're saying. Yeah, sell every day.

Yeah, yeah, that's what I've been considering.

Um, I, I don't actually think that's the approach that I would take though. Okay, I wouldn't change your selling model because you're supply constrained, not demand constrained. So why would we change anything on the demand side? So it's the delivery that's the part that's holding it back. So what is the delivery right now? One-on-one? One-to-one? A small group? Like, what's the—

Yeah, so I do a weekly coaching session with each cohort.

Okay, of how many?

I have 6 active cohorts.

Okay. And so you do weekly and it's what, an hour?

Uh, 90 minutes.

Geez. Okay. Got it. So you do one 9-hour day and then the other 6 days of the week you chill?

No, I'm doing Zoom calls like 45 hours a week. I do a daily office hour.

Okay. So then what is the other deliverable besides the one 90-minute thing?

So it's just very high touch right now. Like I, this is—

Are you overpromising or are you just, and I say this not as a slight, insecure about worrying that they're not going to get value and then you just like keep hopping on calls.

That is part of it. I'm okay in part because it's been so new and I really want to establish like goodwill in the industry. It— I've been throwing everything into it, but I've kind of created this monster where it's hard to start to work myself out because the expectations on me are very, very high.

Who do you think sets the expectations? Me. Yeah. So I think we just need to change the expectations of delivery, which either is just stick with what you promise cuz you might not promise nearly what you're delivering. So if they said yes to it, just meet expectations. Like, and that might just mean that you just need to learn a script of how do I deal with people who ask for my time, which is like you route them to a resource or you route them to the calendar when the next time is available. Mm-hmm. Mm-hmm. Cuz the thing is, is you reward people for reaching out to you quickly by responding quickly and answering their question. And so then they do more of it because you've trained your audience to do that. So you just need to train them to do something else. What are you afraid of?

Oh, so many things. Um, but we don't need to go down that list. Um, I feel spiders.

Yeah.

One of my differentiators has been accessibility and—

Oh, it's totally differentiator.

Yeah.

In the beginning when you're an underdog, you do that because you say, hey, you know, you could go to these guys, but you're just a number. With me, you get my cell phone. Right. But at some point you get big enough that you're like, I can't give you my cell phone because I'm good enough and I've proven that. And so you have these cohorts, basically this is the equivalent of like, you can have like, there's price raises you can do. You can also do delivery decreases. Like you're going to keep paying the same amount and you're just going to get less, but the way you're going to pitch it is that you're going to get even more, but rather different. And so whenever I've done a delivery change, I don't position it as, hey, I'm going to do less of what you liked. I'm going to say, hey, I've listened to all your feedback and I'm actually going to change this in a way that benefits all of you guys in these 17 reasons. And it's— and what you have to do is you have to position this as a moral high ground, right? And so it's a, hey, I made a promise to you and I've realized recently that I'm actually breaking this promise. And so I no longer can stay out of integrity to what I promised you guys. And so in an effort to stick with my integrity, I have to change it to this. And so that way, if anyone tells you that you can do it, are you saying, are you telling me to question my integrity? And then they're like, oh, that's right. And they're fucked. And so that's the— that's actually how you have to roll something like that out. Mm-hmm.

Okay. Most of my clients know each other. Are there any concerns about going—

Well, you do it to everybody.

Okay. Okay. So this would be just broadly. Okay.

Yeah.

Okay.

Okay.

Like, this is how things were. This new thing has come to my attention. As a result of this new thing, new information, new decisions, new actions. This is what's happening. Here's why it's great for you. 17 more reasons that you didn't expect. And this way I can reinvest in these things that you really care about that I haven't been able to do, which is a promise I made to you that I have been falling short of.

Okay. What if they don't feel like I have been underdelivering?

It's not up to them.

But like the kind of talking, the positioning of I'm doing this so that I can fulfill with integrity. I don't know that they'd resonate with that. And I'm sorry if I'm splitting hairs.

It, I mean, you gotta sell you right now.

How do you mean?

You are trying to sell me on the way that you don't wanna do. You're like, I hate this life, but I damn it, I'm going to defend it. So, so like you just have to, you have to flip that fundamentally. Like you're going to burn out because you don't, in fact, you can't do what you're doing. You would like to help. You want to help more dog owners, right? Or dog co-owners, right? Yes. You cannot do that with your current model. So if you said that you have a mission of helping this many people, you currently are out of integrity with that mission. So either you change your mission and say, I'm actually going to play really small and I'm not going to help that many people. And that's fine. Or I'm going to provide something different that I think is going to be even just as valuable or even more valuable to you guys in this way. And you will lose some people and that's okay because you will make room for better people who pay more and didn't come in with the old expectations.

Yeah. Okay. Okay. Thank you.

First of all, thank you for all the value you share.

You bet.

There's like a few number of people that I respect and you're one of them.

So. Well, that makes one of us.

Yes. So my name is Lucas, right? I run a DTC skincare brand.

Okay.

E-commerce.

Oh yeah.

You do like $12 million top line and you have like a bunch of different brands that you have, but they're all white labeled, right?

Yeah. So we do actually $10 million.

Yeah. And you want to get to $100 million, right?

We want to get to $100 million.

Yeah.

The key constraint right now is Margins, right? So 15% margins.

Yeah. Do you know why your margins are low?

I think we—

Want me to tell you why your margins are low?

Yes.

You don't have a brand.

So we, we just to, to give you some numbers, like 100, we might have scaled too fast or like scaled too much to, because here's the thing, the more we scale, the higher the CPA, right?

The—

You're a performance marketer, right?

Yes.

You have to learn brand. Yes. You're not going to arbitrage your way out of it. You're falling into the trap that I did and I was stuck there for 3 and a half years. All right. So you can stay for 3 and a half years or you can take 3 and a half minutes. All right. So what happens is you're going to keep scaling spend, right? And revenue is going to keep going up, but your margin is going to compress, which you're already seeing. Right. And that makes sense because you go to less profitable audiences, you continue to scale. right? And so I think I see like my visual for this is like in each rung we have like the same number of sales that are going to happen, but I only have to buy this much traffic to get the same number of sales versus this much versus this much versus this much. And so for you to scale long-term, you need to get to the point where 70% of your advertising is brand driven, not direct to buy, but it's building founder story. It's building narrative, unique differentiation. Things like that, that are top of funnel awareness, like associations with things that your ideal avatar would find interesting so that you cannot just be a media arbitrage white label thing because you're just always gonna be beholden to like the newest hack, the newest bidding strategy, the platforms where you can get the cheapest clicks and you'll never build something that's actually like sellable in the long haul. I'm assuming that's what you wanna do.

Yeah. So we wanna build for an exit.

Right. You have to build a brand. No one wants to buy these arbitrage businesses.

A few investments that we made right now is, first of all, rebranding, like with a branding agency. Uh, second is you need to master it.

Like, as a physical product e-commerce owner, like, your core most important skill is the brand. Like, you can't outsource that. It's the most important thing. Got it. Like, so you need to learn the skill of branding. Branding, which is fundamentally making associations with things that people in your audience find positive.

Got it. Do you think we have a model problem as well? Because for example, you run ads, you sell stuff, you ship it, right? Yeah.

No, I don't think of a model.

I was thinking about changing to a subscription model because we're not doing that yet.

You can have a percentage. What is the, what's for all of them or for, are they consumables?

So we sell gadgets like skincare gadgets and then we also sell consumables. We usually do bundles.

Well, the gadgets are going to be really tough for subscription.

Yeah, of course. We want to like, we just manufacturing a new serum in the US and the idea would be like hair or like supplement skincare, like topical.

Yeah, yeah. Lotions and potions.

Yep.

Yes.

And the idea would be to slowly be shifting towards subscription because that's fine.

To me, that's, again, that's you still thinking with your performance marketer hat. You're just trying to like, how do I increase cart value? How to increase LTV? Like, yeah. And that's fine. There's nothing wrong with that. So think about conversion optimization overall as steroids, which is like, you can use them once and then that's it. You get a one-time pop and then that's your new baseline. And so like whatever you're doing, you can get a double, sometimes a triple from CRO improvements. But after that, You still need to solve the big gaping hole on the front end, which is like, how do I get more traffic? How do I get more repeat buyers? How do I command a premium? Because the only way that you can outspend competition in the long haul who are just as good as you are at performance marketing, because again, it's not even you versus them. It's your employees versus their employees. And if you have access to the same talent and you have the same undifferentiated products, you're running on the same margins. So you're just going to be a completely commoditized business functionally in terms of how much you make. Versus how much you spend. And so the only way to decommoditize this is that you have to build the associations that allow you to command a premium price, that get people to be more loyal to you so you can attract better talent as well, because they actually believe in what you're, what you're about, right? Like you have for sure spreadsheeted your life in terms of how you've thought about your business. Yes. Yeah, for sure. I get it. Yeah. But like you actually have to put a different hat on if you want to get to the next level. Got it. So you actually have to stop thinking as quant and start thinking in terms of psychology of customers. And not like, oh, this specific type of ad convert. It's not like that. You have to expand out your window in terms of attribution of how long it takes to make a sale. You start looking at how many people actually follow the account. There's a great article. I think it was a CMO of Chubbies wrote this. I want to say it was Chubbies, but he talked about the, the ROAS doom loop or the direct response doom loop. And you're in that now, which is that you just keep spending more to make less and then you're like, I'll just spend more and you make less and it just gets until eventually you're like, I'm just putting money in and getting it back out. And I'm just like, I have a number, but I don't make anything. Right. So it's a very vicious loop and cash flow sucks for the business.

Yeah.

Yeah. I get it. And so the only way out of that is you have to rethink, it's a strategic change to rethink how you're advertising. Got it.

And in terms of branding, what do you mean by branding? Because sometimes for me, branding looks like woo woo, you know, totally.

I thought the same thing. And then I built like multiple billion dollar companies off of it. So like, like I get it.

But, but like the, if you can put it in a framework, yeah. What would be like the key levers of branding for you?

You can charge more money. People buy more times. Don't need to go more. That's good enough. You get higher CTRs, higher conversion rates, all of that. Yeah.

But I mean, in terms of like building a brand, you post your stuff next to shit that people like, so they think it's cool.

Okay. And then eventually you take the cool thing away and then your thing's still cool. And so then they pay a cool premium to buy your thing versus the other guy's thing that's not cool. And they keep buying your thing because they feel cool when they buy it. Got it. So do you know Gymshark?

Yes.

Why would they pay Sam Sulek to become an ambassador? Why would they pay him money when he can't directly drive ROAS? Branding is higher return on spend than direct response does over a longer time horizon. The thing is, is your problem is you have a 30-day window for everything you're looking at, maybe 60. If you look at brand, you have to extend to 6 to 12 months. But when you do that, you actually start getting insane returns on capital, but you have to start thinking like a capital allocator rather than just a direct response performance marketer. I could talk to you more about it, but like, I want to go too deep in it, but that's fundamentally, that's the frame shift you need. And you having many businesses, I don't think helps you. There's probably one of them that's your flagship one. That's probably the best one that has the most potential.

No, I just have one business.

I thought you had multiple brands under there.

No, no, no, no, no. I mean, we just have one skincare brand.

But you said you had gadgets and widgets and then you have serums and potions. No, no, no.

Gadgets is like skincare gadgets.

Okay. So skincare devices. Yeah, exactly.

And then—

But it's one—

Just one brand.

Okay.

Nothing else.

Nice.

I feel a little better.

Okay.

A little better. But I stick by what I said. You have to have a frame shift. Otherwise, you're not going to get past where you're at. Okay. Thank you. Yes, sir.