Breaking Growth Bottlenecks in Real Businesses | Ep 894

If you can make the decision, fail, and then go back and do the other path in less time than it would take you to gather the data for the right path, then you make a failure in judgment by not deciding. And I think that's a very key point. Please welcome to the stage the author of the $100 Million series and host of the game, Mr. Alex Hormozi. How was this morning? Good. Okay. Awesome. Yeah, we split this up into kind of theoretical frameworks day 1, and then we do very tactical day 2. And the reason for that was, well, we thought about it, but, but the big reason was mostly like, if you're going to have the opportunity to talk to the team, team's not bad, right? Yeah, they're pretty good. I think in some ways one of the biggest belief breakers that high I get a lot of feedback on is, you know, in a traditional service-based business, it's usually the founder and then everyone else is just like multiple orders of magnitude worse than them. And then we're like, yeah, my team will take care of you. Everyone's like, great, like super exciting. And then you just cancel immediately. That's why most service businesses don't scale. And hopefully in meeting the team, you got to have a better understanding of like why acquisition.com does the revenue it does, has the size companies we have. It's because we have Very competent people and they're not cheap to be really candid with you. And so I bring this up because I remember when I had my first private equity deal or was in that process, there was this moment where I was sitting at this long table. There's a managing partner at the end of the other side, half a billion dollar fund. They had their team and then there was my team on this side. And so this really stark contrast visually, and you know, I was doing the math on what he was going to make on the fund, which is somewhere in the neighborhood of like $200 million. $300 million personally over 5 years at a super efficient tax rate, all liquid. And then I was looking at my team and it became incredibly apparent to me why he was going to make so much more money than I was. And so it was a very jarring example for me. And I thought, man, whatever I do next, I want to make sure that I have people like this around me. And so that's partially why you got to meet the team that you did. But also if you have the context in terms of how we accelerate value in a business from day one, then when you do have the opportunity to ask the questions you're going to ask, ideally, or hopefully you should ask the ones that will generate the most impact in the business. And so I'll give you an example of this. I had a gentleman a few months back who came in and he said, hey, can you go over the closer framework? And so he was one of the questions and I said, okay, well, what's your close rate right now? He said 40%. And I was like, okay, so you got excited about this, booked this in your calendar, waited for the day, took time off from the business, flew out here, stayed at the hotel, did the full day one, and then you have your opportunity to get a question asked, and the one thing that you choose to ask about is something that is in no way going to change your business. 40% is not your constraint, man. He's like, I just love sales. And I was like, yeah, obviously. He already knew the Closer Framework. And so I bring it up because oftentimes the things that we love are rarely the things the business needs. And so a lot of times the business is almost like the inverse of the need. Like your constraint will typically be not the thing that you are good at. And what's interesting is that we typically think it's the thing we're good at because the business excels in the beginning because of that thing that we are good at. And so if you're really good at product, really good at team, then you'll be like, I need to do more of this stuff. It's like, dude, your marketing blows. Right on the other side, you've got the really heavy promoters who are like, man, what's the next ad traffic hack or new content viral trend, whatever. But the route is the product sucks. And so the, the business is never gonna compound. They never get sufficient LTV and so they cannot spend anyone. They think it's gonna be another trick to lower lower CAC or lower lead cost. And the reality is just the product sucks, right? And usually we have to chase the hard thing. And so I'll explain what I mean by that. If there's no hard part about the business you're in, that sucks. And so what happens is that we will often waste our time trying to solve easier problems rather than the one problem that if you just solve that, the rest of your problems would go away. I mean, and fundamentally this is what the theory of constraints is really about is that, you know, there's a lot of tiny hacks that you can do to improve conversion rate, improve ads, et cetera. But there's usually a big problem that you need to put most of your resources towards solving. And if you do that, then you get to crush everybody. The way that I like to frame this though is I remember there was a business I was working with that had, um, had a, had a lot of revenue, uh, but they had no enterprise value. So it was just like a cash flow machine, but not, it was all one-time transactions, et cetera. And wanted to switch towards a SaaS model. And so a SaaS model for that business, if they were able to keep the same revenue levels with like good SaaS metrics in terms of retention, would've added somewhere in the neighborhood of like $200 or $400 million in enterprise value to the business. So a lot of money. And so I was talking to the founder and he is like, dude, this is just so hard. And I remember saying, well, that's why they pay you $400 million for solving it. Right? And so I bring this up because like sometimes some of the problems that you have, I have to frame them in like there's just a big pot of gold that's gigantic on the other side of this problem. Which tends to just motivate me a little bit more, or at least, you know, it works for me. So with that being said, I've had the distinct pleasure of being able to talk to a lot of businesses over the last couple of years since we started doing this January of last year. And what's really interesting, you start to, you know, patterns start to emerge and there are basically 7 kind of, call it deadly sins that I have noticed as common themes for entrepreneurs. And what's very difficult about them is that they are typically a choice between two apparently hard things, one that's hard today, one that's hard forever. And most times the entrepreneurs will stay stuck until they make this decision because decisions will slow you down more than anything else because you can stop doing it. You can basically wait to make them forever. And a lot of you guys have unmade decisions right now. I'll explain these 7 kind of growth sins or kind of decision impasses. And my hope is that You guys probably have some notes from today and yesterday. Yes. Okay. Pages and pages of notes. If you go home and try to do all of those things, then I will have failed you because that is not how you will get ahead. You're going to get on, you know, get in your car, get in your Uber, get in your hotel room, get on the plane, whatever. And you're going to have an open piece of paper next to you at some point, hopefully. And you say, okay, I've got 8 pages of notes. What am I actually going to do? Right. And hopefully on that next piece of paper, you only have 1 to 3 things. And those 1 to 3 things are the things that will get you the highest return for the effort and money and time that you allocate towards it. And so fundamentally, strategy is making sure you pick the right things. And the reason that we've been able to disproportionately grow our companies and what we've done is because we've been pretty good at picking those things. And so like, if you're like, what is strategy? I think it's a big amorphous word, but basically it just means really good decisions around where we put our shit so we get more back. With that said, let me walk through the issues that most people struggle with. Number 1 is Avatar. I've got two different types of customers. I got residential, I got commercial. I've got poor people, I got rich people. I've got whatever, right? You have your two, two or three different avatars you might serve and you're like, well, Avatar 1 is 40% of my business. I prefer Avatar 2, but if I get rid of Avatar 1, I won't be able to pay my bills. But if I keep serving Avatar 1, I'll never be able to get the operating leverage in order to actually expand this thing and I'll stay stuck forever. Most of the time you just have to make the call and it's going to suck and it means that your ego is going to go down for a little bit because your revenue is not going to be what it was. And so whatever scoreboard or whoever you report to that somehow has like hold over your ego about whether you're making progress or not, I would encourage you to delete it because you will just stay stuck for a very long time. So if you have a clear avatar that you think you are better at serving, then serve that avatar. The next is data. This was the most recent that I've added to this list, which really just comes down to, I have this very important decision and I would be able to make this decision if I just had the information to make the decision, but I don't have the information, which then means Okay, what resources are required to make, to gather that information? Why I don't have the resources because I'm so scatterbrained, which means that fundamentally you need to stop doing everything else and just focus on putting the resources in place or processes in place or technology in place or all three in order to capture the data so that you can make an informed decision. There's also the opposite way of doing this, which is you just make the fucking call without the data because you can't have perfect data at all times because sometimes the opportunity disappears by the time you do have all the information required to make the decision. If you can make the decision. Fail, and then go back and do the other path in less time than it would take you to gather the data for the right path, then you make a failure in judgment by not deciding. And I think that's a very key point. The next one is focus, which is just, hey, I've got a yoga studio. I also have a chocolate factory. I'm really trying to have a platform all in one, one-stop shop for, you know, whatever. I'm sure that you have a great reason for why you have that second business or that third business. It's just not good enough. Like if you were that good, you would just make the one business bigger. It's better to have one $2 million business than two $1 million businesses for a variety of reasons. But the most basic is your competitors who are beating you are only focused on one, and that's why they're beating you. The next is overexpansion. And this is an interesting one because there's no like line in the sand that says, oh, you have overexpanded. But the reality is that you're under-talented. You have insufficient talent on the team, and as a result, you got above, you got ahead of your skis. You have one location, it was working well, and then you say, cool, we'll open up our second location. I'll take my best guy from here, put him there so they can stand this one up. They'll backfill themselves, and all of a sudden revenue from this location drops. This location doesn't go up as high as the first one. Now you have the same revenue you did before, but now you have twice the overhead and you're like, oh, I think the solution here, since this is now baseline, is to open a third location. People do that a lot. Some of you are nodding your heads. And so what do you do in one of these situations, right? Well, I can't, if I shut down the location, I've got a lease, I put, I put build out in, but I can't afford to bring someone else on 'cause I just dropped my profit in order to do this and I used up my savings. What's the call? Right? And it's almost always going to be, I stay here forever or I do something very hard. And I would encourage you to lean into that very hard decision because it's the thing that's going to get you out of it faster. It'll just be more painful. So it's like you take your 10 years of waffling pain and you compress it into 6 to 12 months. And it's very easy to say yes to pain for 6 to 12 months before you've jumped into it. But then you're 6 months in and you're like this Fucking sucks. And then you're still 6 months to go, right? So I just got out of a season like that. So ironically, the launch is like not like painful for me. It's work, but it's not painful. I went through a very hard season in the beginning of this year just because we had to headbutt our way through. But otherwise it's like, what else are you going to do? Just sit in it. So overexpansion. The next one is compensation. So rock and hard place here. If you, you know, I'm, I'm paying my people too much. Sometimes it's too little. A too little situation is, hey, I've got a plumbing company and phone's ringing off the hook. But I can't even service all the business because there's so few technicians that are good. I say, what are your margins? Person says, my margins are, you know, decent. I say, great. What do you pay your technicians? They say market rate. And I'm like, what are we talking about here? Pay them better, get more guys, increase revenue. Like, what's the decision? On the other side, I've got a, you know, physical therapy clinic and I, we're at full, you know, full capacity. All the beds are full all day long. Everyone's happy except I don't make any money. Okay. Why? Well, I give my therapist 50% of revenue. All right. Are they like doing their own marketing costs, own sales, like, you know, fronting the cost of the bed and the materials? Oh no, I do all of that. I just give them 50% of the revenue. It's like, well, yeah, I mean, that would make sense why you make no money. That makes sense. And so, but what do I do? Do I change their comp and then lose my team? Or do I just not make money forever and run a nonprofit? It's funny because The majority of businesses in the U.S. do not make money. Over half either lose money or break even every year. So this is not a small problem. This is a big problem. Profit is unnatural. It's not a normally occurring thing. You have to force it and you have to keep the line because people will spend your money happily. And so having that kind of discipline is difficult. It's a discipline. Profit is a discipline. I'm proud to say, actually, I have not had an unprofitable year since I've been in business. Kind of neat. Thank you. So compensation. So what do you do? Next one is underpriced, which I would estimate just from my conversations with y'all here, probably about half of you are underpriced, about half. Same situation as the therapist, but let's imagine that they're compensating appropriately. You're still, everything's capacity, everyone's happy, blah, blah, blah. Well, now if I raise my prices, I'll lose all my customers. You won't. You won't. You'll lose some and then you replace them with better ones and you'll make more money. And then finally, you've got single product, which this happens more in like e-commerce and sometimes the digital, um, which is, you know, you see a creator or somebody who's got a big following who has one product that they sell, they're able to do so profitably, but they're not making that much money and their margins are compressing every year as they add staff or they try to do advertising. And it feels like this vicious cycle, so they're not sure what to do. The reality is that they're selling hundreds of units a month of whatever the thing is, but we're not just like calling those people up or reaching out to them in another way to just sell them something else. And so if instead of thinking of those as customers, you think about them as highly qualified leads, then all of a sudden kind of the business model changes in your head. You're like, oh, this is just offset CAC. So that I can then sell my main thing and it's just the business is missing the main thing. You really just have a lead generation machine that doesn't, that just makes a little bit of money rather than honestly the makings and the foundation of a monster, which is a great problem to have, but some people don't recognize that they have a monster by the tail. So with that being said, I will try and point to what problem I think it is as we go, as we go through these and let's rock and roll. Oh, also I try not to answer their question, try not to talk to you. I try to talk through you to everybody else in terms of how I'm thinking about it. So when I'm answering the question, I'll half answer your question and half kind of address everybody else.

Cool.

Let's rock and roll. 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. Um, and so if that's at all interesting, you can go to acquisition.com. .com/roadmap. Roadmap. Roadmap.

Hey Alex, big fan from the Gym Launch days. My name is Amir. I don't know if you heard, own a medical practice. We're kind of closing in on $3 million revenue.

Correct.

We'd like to grow. Wrote down my question: what's the most overlooked operational system that adds the most leverage in scaling a service-based medical business like HRT And if you could only hire one person to help implement that system, who would it be and what would their role look like?

It's a very targeted question. I think it'll depend on the business. Right now, are you local or are you— yeah, are you local or are you national?

Just local.

You're local. Okay. So people come in person? Yes. Okay. Got it. What's your primary lead source? Meta. Meta. So ads?

Yeah, ads and rev— uh, sorry, referrals.

Sure. What's the split?

Probably 30-60 referrals, 30-60 meta.

Okay, heard. What's CAC? What's LTV?

LTV would be probably $4K, I would say.

That's LTV?

Yeah.

What's CAC? What do you spend for, uh, on per month on ads? How many new customers do you get?

We spend about $25K per month now. Yeah.

Okay. And AdWords?

Excuse me?

AdWords or Meta?

Both.

Both. Okay. Yeah.

And we get probably out of that, we get Roughly around 150 new patients.

Okay. So like $225-ish per, per patient-ish. Okay. So you're making like 20-ish to 1. That's not bad. Okay. So 20-ish to 1, and I'm guessing margins are good.

Yeah.

Great. From a capacity standpoint, do you have more square footage that you can service more customers with?

Yes, we have more square footage.

How many, how many more customers can you take right now per month sales velocity-wise?

100, 200.

Okay, so you can double right now. Okay. So then what breaks when you double?

Nothing breaks.

Well then why don't you double? No, to answer your question. So like the thing that breaks first is going to be the operating constraint. And so then what stops you from doubling? Can you spend twice as much money?

Yeah.

So why don't we spend twice as much money? We should do that. That sounds good. So if you had twice as many people, would they all be able to be serviced? Yeah. I love this for us. I don't really know what the issue is. Are you doing this right now? Month over month?

No, we're kind of stagnant.

So then why, why?

Yeah, that's what, that's why I'm here.

Why don't we spend more money? Just because it's like you got too much of a barrier of $1,000 a day and you're like, I don't want to spend more than $1,000 a day.

I mean, I think my personal observation or thinking was that we should be more efficient with the money we're spending.

Like I was thinking like, okay, our conversion rate is 20 to 1, should be like 40 to 1.

Maybe.

I mean, you can always get more efficient. I wouldn't say it's the limit of the business. Like, if we're just zooming, zooming out, the only thing that's really gonna matter long term is that you keep people forever. That's the only thing that matters. What are your long-term goals?

Long-term goals?

Yeah.

Ideally, I mean, we would like to grow, expand, you know, nationwide if possible.

Would you expand to multiple locations locally first?

Yeah.

Okay.

We have 2 right now.

Okay. So if you could have 4 or 5 in your local market, you'd be fine with that?

Yeah.

Okay. Yeah. The, the way, I mean, the way to do this is that you, you basically want, want to reverse engineer forever stick. Now, HRT is a product that tends to keep people pretty long time 'cause it's hard to get off, right? They might switch, you switch providers, but once you're on, you kind of stay on. So as long as you're, what's your churn? Do you know?

Right now, probably 40.

40%, 40% annually? Yeah.

Okay.

40% annually. So you keep 60% of your customers every year.

Maybe less. Maybe we keep like 50%.

Okay. So 50% leave, 50% stay. All right. So that would be something that I would be looking at. So yeah, if I were to solve this in order, I hear where you're coming from, from like, because you're local, you need to make sure that you don't just burn through your reputation, which you might be at 50% of your customers leaving every year, especially on a product that's typically as sticky as that. I mean, that's, if you come from the gym world, did you go through Gym Launch?

Yeah.

Yeah. So you learned how to market and sell. You just didn't learn how to product. Yeah. So I think you, I think your instincts are right. I think we have to fix churn and we have to fix the sales motion. Part of it is going to be how the expectations are being set on both the marketing and the sales call and the offers that are, that are top of funnel and kind of the handshake between kind of step 1, 2, and 3. And what are the, what are the kind of the key activation points and the conversations that have to be had? So if, if you did have a lot of profit, I would probably grab someone from, from the software world and customer success to build out the customer success like pathway for you. So that you can fix the churn issue. So to your point, I hear where you're saying we're like, yeah, you could spend more, but you'd be churning out of people. So I think your instinct's right there. Fix the hole in the back. And then number one, if you just do that, the business will probably double. Like if you can cut your churn from, call it 50% per year to 20% per year or less, then the business will just double on its own in 2.5 years. You just did nothing. You just kept everything the same. But the thing is disproportionately that would drop the bottom line. So your profit would significantly more than double by doing that. I'll give you guys a fun example. So We Whiten is a teeth whitening chain that we own, and when we invest in the business, doubled LTV, or rather double lifetime revenue per customer, which sounds like a small thing, but by doing that, we 2.4x'd revenue and we 7.5x'd profit per location. That's why I bought the company. I was like, oh, I can crush this. And so I, I, I say that as a good incentive for you in terms of making it worth it. Like you might be able to double or triple or maybe quadruple the profit. Of the business by simply keeping going from churn being half people leaving to only 20 or maybe 10% leaving every year. If you do that, the thing will just grow like crazy and you'll just feel good about it. So you're probably— the who to solve that problem is there is a customer success person and then mapping the journey. And there's probably a little bit of tech stack that you need to automate a good deal of it so that you don't have as much operational drag.

Awesome. Thank you so much.

You bet. Thanks.

How's it going, Alex? Good to meet you. I'm Austin. I sell medical student coaching.

Lot of medical. Okay. All right.

Two medical students, of course.

Yeah.

Um, for 5 years straight, the exact same stats.

Yeah.

Zero upward trajectory, mostly due to time constraints. I just finished up with my vascular surgery training 2, 3 weeks ago, so now I'm able to contribute more time to the business.

Uh, you're a doctor?

Yes, sir.

But you don't practice medicine?

I haven't started yet.

And you're like, wow, I could just start surgarizing or I could keep doing this thing that I make the same amount as surgarizing.

Exactly. Cool. Um, which I'm supposed to start in a month, uh, which is a whole nother conversation.

What are you gonna do? Depends how it, that was how this conversation goes.

That was initially gonna be my first question and then I decided against it and here we are.

Yeah, yeah, you're good.

The one where we go with my— I figured I knew what you were gonna say for that one.

Yeah. What am I gonna say?

There's a much higher ceiling for the company, which I've been working on essentially an hour per day for the last 5 years and doing what I will make. For 100 hours a week for the upcoming first year.

Well, you have a focus issue.

Yes. Put a star by that one.

I'll explain what I mean though. I mean, like you basically have two businesses. One is you being a doctor. The other is you teaching how to get into med school, right? Or do well in med school. Okay. So, I mean, you, you probably know what I'm going to say. Yes. Imagine if you worked more than one hour a day. Imagine the possibilities.

Absolutely. So I tried to, I'm gonna try and—

1 hour is so nothing. It's insane. Like I, I'd like, an hour is like my rounding error for, I don't even know. It's like for the, I don't even, it's absurd.

It feels like a lot when you're already burning the candle at both ends, but I know there's definitely more potential. So my actual question is throughout this, uh, last 2 days I figured out how to fix the supply constraint, which was myself, my own time for the coaching, for the medical school.

You mean the 1 hour? Yeah. Okay. So the next issue inherently is gonna be, do you know how you're gonna 5x this business? You're gonna from 1 hour to 5 hours a day, start at 5, be done by noon. You're already a retired doctor.

Just act like, you know, something like that. So the next issue is gonna inherently gonna be a supply issue. So maybe you mean demand or, sorry, uh, demand issue. Yeah.

Sorry.

So content's not an issue. I've I personally have created over 20,000 pieces in the last 5 years.

Yeah.

Put it out on all platforms.

How many units do you sell a month?

Generally between 5 and 10.

And how much price point?

$9,000 is our most common price point, which we're going to— another thing I learned is we're going to axe our lower ticket stuff, which was cannibalizing our mid to high ticket. So $9K is what we've sold 80% of our revenue for the last 5 years.

How many leads a month do you get?

Good leads? Maybe I want to say 15 to 20.

Really? That seems absurdly low. Are you YouTube, Instagram? Where you, where you?

YouTube, Instagram, Twitter, uh, Facebook.

Seems crazy.

We have a ton of friction in the sales funnel, which another thing that was—

Yeah, I was like, my bet was gonna be your sales motion's fucked up.

Yeah. Uh, probably if they get on the sales call, if they make it to that point, if I take the call, it's an 80% close rate. My sales guy is around 30 to 35, so the friction was built.

You're probably sitting on like a $3 or $4 or $5 million business right now. Change nothing. I mean, assuming you work. Yeah.

Oh, that's not a problem for sure.

Yeah.

So to increase the amount of leads that we get, one of the biggest problems that we've ran into is getting overseas leads. We've put all of our targeting for our ads to be United States specific. Other countries, just due to the conversion rate.

Well, you're doing content. So what percentage come from ads versus content or like organically versus paid?

About 50% of our leads are from direct outreach from our VA. And then about 25 and 25 from ads versus organic.

You mean organic? They don't, they just go through the funnel and stumble their way through the gauntlet call.

Yeah.

Yeah. I can't dive into it right now, but I'm, I can, I can almost guarantee you that you have a sales motion issue. So if I were to fix this, I would probably, my goal would be, I would want to break your business by selling so many people that you would feel so panicked and have like crushing anxiety that you would then be forced to not be the doctor thing because you'd be like, holy shit, I just made like 3 times or 4 times my monthly revenue this month, which means I have a chance at making more than I do of a sur— as a surgeon. And you can always go back to being a surgeon.

Mm-hmm.

So like, that's, it's like, it doesn't, you don't un-surgeon, right? So true. Yeah. So you can always just go back if you really want to.

So tactically you think, should I hire more DM setters? Should I crank the ad spend to get to that point where the leads are overwhelming me and I have that crushing anxiety to—

I don't know if like the team got a chance to look at everything, but like we have to, I'd have to look at the pro— like it's going to be more tactical. It's going to be like, what's the lead magnet? How are we qualifying leads? What's the motion that they're going through? Like what's the agenda for the call? How are we nurturing them prior to the call? Like if we just fix those pieces, like there's probably a double or triple sitting there. And then my goal is that you're like, holy shit, what will I do? And then we'd have to look at the model because it's probably super— actually, you might be that inefficient. You're working 17 minutes a day. So let's still look at the delivery part. But yeah, I'd probably just want to like crank demand. Cause if you can, if we, if you, would you be comfortable working 6 hours a day?

I'd be comfortable working 20.

Okay, cool. Well, you can't do that.

So let's just, that's what I did the last 5 years.

Let's settle, let's settle at, uh, let's settle at 10, right? Let's just go crazy, you know, 10x, bro. And so we 10x your time. And so as a result, we need to like, if if that allows you to 5x the business by 10xing your time, 'cause you're both demand and supply. Sure. That would get you to $2 million a year without really adding a huge amount of operational overhead. And you'd still have 6 hours to kiss the dog and do whatever you still wanna do.

Sounds good.

Yeah. I think that like sales motion has to get analyzed. It's beyond what I can do right now.

Sure.

But if it's a laddering up a level strategy question of like, how should you allocate your time to get the highest return? I wanna be clear, there are surgeons for sure that do 10, 15, 20 million bucks a year. Like there are, I see them, they come through. They typically are plastics or they're hyper-specialized and have built a big organic following for being the best at. And those guys usually run somewhere in the neighborhood of like 70% margins. So like there's money to be made if you know, like if you're deep, if you're good at marketing and you're an exceptional surgeon, then you can make a lot of money. But if that's not where your heart is, cause I'm, is it where your heart is?

Probably not.

Yeah. Fair. Then if you already know that now, then like why bother? Walking down the path that you already don't, you don't even want to do and you haven't even started. Yeah, I'm pretty sure like, yeah, like it, it only gets worse. So yeah, I think you need to make that call and then you'll open up your time and then we can obviously help with the sales, the sales motion stuff.

Sounds good.

Thank you. Thank you, bud.

Hey Alex, how are you? Longtime listener for Some Caller.

Oh.

Um, my name is Ezra Cohen. I sell, uh, low ticket digital video products.

Yeah.

To churches, like motion backgrounds.

I was gonna make David like, doing better than I deserve. You know, sorry, keep it up.

It's all right. And then like video editing assets, like film transitions, color overlays to filmmakers and editors.

So you sell to churches. Mm-hmm. And you sell to editors.

Yeah, it's two separate brands.

Okay.

And I understand what you're gonna say. I know what you're gonna say. I've been advised by your team so far that I should actually keep both.

Okay.

And that they're both important and basically they're kind of under one umbrella even though they're different avatars. I am at 1.2 million combined.

Okay.

About 350 on the film editing side, but I do about an hour a week on that. And so, uh, even lower, an hour a week.

That's right.

Um, the other one I'm kind of going all in on.

So you're making $6,000 an hour? Yeah. On that side. Okay.

Yeah. And the other one I'm kind of going more all in on and that's in around 750. So between those two.

Okay. That one takes all the rest of the hours.

Yeah. I feel that's What is stopping me is I, again, it's low ticket ranging between like $29 or like, no, the church is like, whatever, that's recurring revenue. That's $348 a year or $708 a year. Very low still, but it's above our market. What I feel is stopping me is not understanding the right money model to scale and take this. I mean, I have 170,000 customers.

Okay.

Uh, so I think it's kind of what you're saying of like a lead. I have a, very large lead magnet pool that I could sell into bigger things on both sides.

Yeah.

But I want to understand how to do that best.

Okay. I'm going to ask like if you can just rapid-fire answer for me. So the AV people you sell digital assets to—

sorry, say that one more time.

Tell me who you sell what to again real quick.

Video assets to video editors.

What does that mean? Color presets, film transitions, film burns, template type stuff, grains, things that your team would use. That they use those in their own—

Yes, in their own edits.

Okay. And then on the church side, what do you sell exactly?

Basically motion backgrounds like that, but better.

Okay. Yeah. Okay. We'll see.

Yeah.

So, okay. So you sell these guys graphics, you license them to them for $348 or $708 or whatever it is per year. And how many customers do you have in each of these? And this one is, this is one time and the church is recurring. Yes. And that's why you're going all in on this side versus that side. Where's the 170,000 pool of leads?

I've been running the video editing asset side of things for the past 7 years. And so I just have a, it's just, there's so many loads.

So if you sell to churches and then just say other people can use it too, kind of thing.

Kind of.

Okay.

Sorry. It's as confusing to me sometimes as it is to you.

Yeah. So you like the core business is the, is the $750K thing and then you have offshoots of assets that get created for those customers and you say, you guys can just license them from me. But one time though, the video editing side is one time, church is recurring. Why don't you just make the video editing side? Well, I don't really care about that side anyway. So let's talk about the church. So what stops you from tripling the church?

So content has been a big constraint. I'm a video editor and so I've bottlenecked myself and now I'm finally letting that go and starting to delegate.

So you're demand constrained, not supply constrained on the church side. Yeah.

So I have plenty of ideas for content that's about to go off.

What are margins?

Margins on the church side are probably 60%.

Okay, good. Yeah.

Yeah. Besides that, I feel like there's a high ticket offer or a higher ticket offer of some kind to be able to be a little bit more focused with, or sort of high touchpoint with churches, help them build better, you know, processes to have a better visual experience overall. Um, but I'm afraid to jump into that and kind of break the simplicity of automated digital products that I'm used to.

Mm-hmm. Mm-hmm. So $750,000 a year. So you have like 20, like 2,000-ish churches that pay you? Yeah. Somewhere in there.

2,000.

Yeah. Okay. How many churches are there?

In the country?

Well, are, are, are you US focused?

Uh, yeah.

Okay.

We are international. There's 300,000 churches in the US.

This in Español can't be that hard, right?

No.

Yeah. Acquisición.

Yeah, exactly.

Okay. So, but there's a lot, I'm guessing. So you could get to like, 'cause I'm just trying, I'm trying to paint this model out. So it's like, okay, if you're $2,000, like what do you want to have happen? Do you wanna sell this thing? Like what do you, what do you, what do you wanna do? Not yet. Yeah, yeah, no, I mean, but like if you 5x the company, like I just like, it's kind of like depends on what you wanna do. 'Cause you have a good business and there's a lot of elegance to simplicity. And so if I think that I can sell, you know, a truckload of units, then I'll sell a truckload of units. Like school is one thing. It's $99, you know, just sell a lot of 'em, you know? Yeah. So there's, there's nothing wrong with having just one if it's not getting in the way of LTV. So why can't you market more?

It's kind of been a, uh, you take distributions every month?

Yeah. Okay. So this will be good for everybody. So if you are in a service business or what I would consider like not SaaS, but sort of digital type business that doesn't traditionally have the same level of stickiness, but has more cash flow and less CapEx, meaning you don't have to invest more cash in order to grow. One of the things that took me way too long to learn is that the profit that you have at the end of the year in those businesses is not all yours. And so what I mean by that is there's two primary places where it should be going. So number one is talent, and then the second one is brand. And so if you're in that business, like the branding components, like I have to reinvest in the reputation of the business so that I can continue to grow next year. And so that's kind of like the CapEx of service businesses. Is like, that's the investment that we have to make in order to scale, which is people and brand. And so if you were to spend $600,000, which is whatever, roughly your profit this, you know, the next 12 months, what would you spend on?

Uh, I want to go pretty heavy on team to build the brand. Like I'm basically building a—

make more content.

Yes. Like an internal agency that can continue to crank out those, but also, you know, well, AI should bottleneck a lot of that.

Sorry, say that again. AI should be able to do a ton of this. I'd be thinking more in like Claude and GPT instances and less in headcount. For what you're trying to do. Like you want to be like, in the world of AI, which is now, by the way, it's about fewer, better people because everyone, like a lot, execution, believe it or not, becoming commoditized. So it's going to be, there's higher leverage on skill, taste, and just kind of strategic thinking until eventually that doesn't matter and then we'll all be useless. But looking forward to that anyways.

So I think it's the taste that I'm hiring for.

Yeah.

Because yes, you can technically make that stuff. And we have competitors who are making basically AI-type feeling stuff that doesn't feel good. And that's why we're beginning to grow because people are coming to us for our taste.

Yeah. So we just need to increase demand, which means you need to make more better content. And so if you need to hire a couple of people to do that, that's fine. I mean, that's, it's, it's, you have a relatively straightforward growth path. The difficulty you're going to have is on the recruiting talent side because media talent without a brand is very difficult because anybody who's kind of good, can make more money than most people pay them. Okay. That's gonna be your bottleneck. Yeah.

So you wouldn't even really explore a high, a higher ticket deal?

Well, I just don't think I, I couldn't really think of what a high ticket background would be.

A lot of churches are volunteer-based, so it'd be helping them, helping their, the team leads install better processes for their—

Well, then you're becoming a church consultant.

Yeah.

Feels like a different business.

Yeah.

Yeah.

I would just say like, why don't we just like, Just double down, 20x this thing. Okay. There's so many times where it's like, hey, to make more money, I could come up with another thing. It's like, you could also just do more of this thing and then figure out, and like, to be fair, the quote hard of this one is just like, how do I get more? And if it's not immediately apparent, that's the hard problem to solve. Cool. Awesome.

Thank you.

Yeah, you bet.