The Business Game No One Tells You About. Hormozi Hotline. | Ep 908

Let's talk about whatever. And by whatever, I mean ideally Keyman-related topics. You don't understand the value of enterprise value. Of course you build net worth without taxes, but it's fictional numbers that can't liquidate. I like cash flow, hard cash. Thanks, Tuvblccctgj. Let me tell you why enterprise value fucking matters. Enterprise value is important for a variety of reasons. Enterprise value dictates how valuable something is. So Stripe, for example, is not publicly traded, but people are willing to invest money in it, and so the founders can get liquidity. And so what you want is to be able to spend something, but the thing is, is that that comes from the position of not— of already not having enough. So let me explain. Once a business actually has enterprise value, it usually has already generated or had the ability to generate more than sufficient cash flow for the owner. Which means that all the excess cash flow that the business generates is going to be transferred to the owner in a tax-inefficient manner. And so then what happens is that you want to have growth in your net worth that isn't affected by taxes, right? And so if you say, I want cold hard cash, cool, bro, you want to pay your rent, I get it. After you're done paying your rent and after you pay your house off and after you pay for your parents' house and after you pay for their cars and your kids' schools and all that, there's still cash flow coming in. And then you're like, well, I wanna upgrade all my cars. Okay, great. And then I want a vacation. Cool, costs $100 grand if you wanna be a fucking baller. Okay, then what? Then you want the most efficient tax vehicle for building wealth, which is your enterprise value. Guess what else you can do with a high-value enterprise? You can take loans against it. You can get lines of credit. It becomes an asset. You can raise capital on that, right? And so said differently, there's levels to this game. If you want to move up levels, you need to play a different game and you have to graduate. If you can't, if you don't know where your rent's coming next month, fuck enterprise value. Being super real here. Fuck enterprise value. If you have those things satisfied, and the vast majority of my content I try to make for business owners who are trying to get bigger, who are trying to scale, enterprise value becomes increasingly important. Basically, the bigger you get, the more you satisfy your needs, the people around you's needs. At some point, then it becomes about the game. And to be clear, I'm not saying this game is the only game worth playing, and there's not other games in life that are worth winning, but in the game of business, net worth becomes the objective measure. And so that's how that works. Cool. Okay, let's do next question. So Alex, as a software dev trying to grow a startup app, what do you recommend? I mean, that's like saying, how do you advertise? Honestly, read this book, pick one of the core 4, which is either gonna do outreach to people you know, outreach to people you don't know, you're gonna do paid ads, you're gonna, make content. The other 4 things you can do is get an agency to do that thing for you, find affiliates to do that thing for you, get customers to do off a viral loop, or you have employees that do the first 4 on your behalf. Those are your options. Which one would I pick if I were you? In the beginning, you actually care more about revenue retention, and then eventually, once you have revenue retention, then we have to figure out whether it's gonna be viral growth or it's all based on like, I can keep everyone who comes in. Past month 12, but the issue is that no one knows about my stuff and then it just becomes a CAC to LTV ratio problem. It's just math after that. Okay. The problem, the hard part is obviously keeping people. Okay. Can you clearly define how to find out what is valuable to your marketplace? Yes. You ask them to buy it and if they pay you for it, then they have found value in it. And if you're like, what? How do I know how to define value? I actually wrote a book on that too. I actually made an equation for it. So the value equation has 4 components. One is the dream outcome, which is what is the thing that people ultimately want? And then the other 3 variables are things that detract or pull away from that dream outcome. And so if I can give you this dream outcome, let's say that you want to get a 6-pack, you want to be in shape, and I say it's going to take 2 years, so it's going to be slow. It's going to take time from you every single day. It's going to be, it's going to take a long time and it will take you a lot of time. So that's two elements of time. It's going to cause you to have to do things that you don't want to do, and it's going to cause you to do, stop doing things that you do want to do. So you stop good stuff and you start bad stuff. And then on top of that, there's a chance that you might not hit it even if you do all these other things right and you take all this sacrifice. Is that a valuable thing? It's kind of, but I basically described the fitness sale to you. You gotta work out, you gotta stop eating tacos, you can't drink on the weekends, right? It's gonna take multiple years and it's also gonna take you time every single day. You're gonna be sore, you're gonna be tired, all this stuff, right? And then on top of that, you might try this whole period of time and you might have terrible genetics. And so all that to say, it will— that's why you have to spend an hour arm wrestling somebody to sign up for personal training. On the flip side, if I sold GLP-1, which is the diet drug, right? And they have a new drug that's coming out that they're gonna pair with GLP-1, which is like a muscle preserving drug. So you can literally keep or maintain or gain a little bit of muscle on this drug while also starving yourself. Then you have a better physique and it takes no willpower and you just take this drug. So it's fast, it's virtually guaranteed cuz it requires no willpower. I'm gonna get you the physique you want. Which one's more valuable? Which one do you think would be harder to sell? Probably the personal training one. And so fundamentally, this is how you differentiate value. Hopefully that answers your question. All right, hotline, let's rock and roll. All right, who we got? Hello? You're on speaker. What's up, man?

Hi, this is William in Michigan. How you doing, Alex?

William in Michigan?

Yeah.

All right, what's up, man? Tell me about the business.

Yeah, so I'm in the, uh, wiping booties for seniors business, the assisted living memory care business. And the main problem we have, sales are good, but it takes a long time to get the LTV, so they stay within a year at least in our business. But I'd like to find out a way to bring the cash forward. So it's kind of like, you know, we're getting cash, but it takes 2, 3 months for us to really get good profits. And then of course after that, it's doing really well. But how do we bring that cash up forward and present that ahead of time?

Are you billing insurance or you're billing private?

Private, no insurance.

Okay, got it. So do you bill monthly or how do you bill?

Yeah, so we bill the first of the month, and a lot of times we look to collect first and last month's rent. And last month's rent's fully refundable on a 30-day notice, but it's similar to an apartment building.

Yeah, got it. So I would have, honestly, there's really only 2 options that are immediately available to you, or I guess 3. So number 1 is you could have some sort of setup enrollment, onboarding, some sort of fee like that that you could put into the upfront payment. That's thing one. Thing two is you could require first 3 months upfront. That's option two. Option three is you can add on additional service that many of them need, and then you could contract that out. So let's say that, what are the other things that someone has to buy in order to begin your service? I'm guessing there's some sort of moving costs or moving services, right?

Yeah. There's like ancillary, like transportation. Right. Beauty, hair and nails, stuff like that.

Yeah. So basically what we do is just create a bundle that many of those people immediately need to buy in addition to— have you read the Money Miles book?

Yeah.

Okay.

I'm reading through it and I bought the course too.

Oh, awesome. So big picture, the one of the first stories I tell in there is a guy who owns a storage facility. And so he gave a free month of storage away. So very similar business to yours. Not saying that you get free month, but same idea. It's like, well, what else do you need to have when you have a storage unit, you need a lock. Oh, you need boxes. Oh, you need insurance. Oh, you need maybe a bigger unit, right? And so all of these things pull cash forward. And so, well, not the bigger unit, but the other ones do. And so same degree, it's like, okay, can we sell insurance on top? Can we sell the move-in services? Can we sell the boxes associated with that? You know where I'm going with this?

Yeah.

So I think people will have some, some sort of elasticity. Like people are very, very sensitive to the monthly fee. Right? They are less, but people are less sensitive to one-time fees cuz it's only once.

Correct.

So we just need to create that one-time fee for people and it'll be even more profitable obviously if it's not just a fee, but it's also tied to stuff they already have to get solved. And if they do it through you, then it just feels easier.

Yeah.

Does that help?

Yeah.

Something else I was thinking about too, it's like even furniture. We have it fully furnished, but maybe we could give them like, uh, buy extra furniture if they want a nice queen size or upgrade on their bed. We could offer that to them too. That's something that, you know, just popped up. I never thought about that.

Yeah, exactly. So we just look at all the other problems that a customer has that they're going to pay somebody to solve when, cuz you're at a transition point in someone's life. Yeah. So money's coming outta their pocket and it's already in the wallet, it's already open. And if you can, especially cuz this is such a, like a stressful time for many families, If you can just say like, if you can just say, we'll handle everything, just pay us this extra fee, we'll make it easy. Uh, many people will just give you that money and then I think you would pull forward all your, your, uh, cash flow to our customers.

Awesome. Okay. Well, sounds good, Alex.

Appreciate you, William.

Yep.

All right. Have a good one, man. Do we have somebody on here? Oh, we got some votes coming in. What's up, man?

Howdy, how are you?

Howdy. What's your name?

My name is JT.

JT. All right, JT.

Yes, sir, brother.

Tell me about your business.

I run like a real estate company.

Okay.

Called Closer, and it handles the marketing and sales for like new wholesalers and people getting into the business so they can scale faster and learn the process while they earn it.

—okay, so you generate appointments and leads for them?

We generate the leads for them and we send our sales team on the deal. So basically we are running like the entire front end and the back end. So they're basically running the marketing, but they get to learn while they do the process with us.

So why— so this genuine question, like, why do you do that versus just like doing wholesaling?

I do it because it fixes the cash, our cash conversion cycle. Like we're able to, we're able to fix the, like the liquidity issue in wholesale because the days on market is so long. We're taking it down to where we can like become way more profitable if we do it this way.

Yeah. Okay. Um, you could raise money and just do it, side note, but all right. Okay, so what do you want to have happen that's not happening?

So when we're on like sales calls with people, basically they agree on the price, but a lot of the times like they can't afford the first payment or they can't get approved for financing. And I'm like, is that a sales problem or is it like a lead problem? And should we just collect whatever cash they have? Or no.

Well, how are they going to afford to pay for the marketing too if they can't pay for— or is that what you're saying? They can't afford to pay for the marketing?

Yeah, so they can't afford to pay for the marketing. What's the revenue stick?

What's the stick in this business? Like, how long— like, do people stay for years doing this with you? Or like, what percentage of customers are here 12 months later?

No, it's mostly not that they're here 12 months later. It's like the onboarding. So the LTV is roughly like $35,000 within like 90 days. But over time, like the only thing they really stay for is like the CRM that they use it.

Okay. So you white label GoHighLevel or something? Yeah. Okay. Okay. So the issue is that like, what's your LTV to CAC right now?

So right now our CAC is roughly Like 5,000, but we're, we're at 35, like 35,000-ish LTV.

Okay, so you're 7 to 1. Okay. So, I mean, that inherently is okay. So what stops you from doing more of what you're doing?

Nothing's necessarily stopping me.

Our close rate is just super low. Okay. I would probably just throw in lead qualifications on the front end. It'll just like decrease the frustration of your team. You'll probably increase your— obviously increase your close rates if you take out the disqualifieds, but it'll— you'll close more in general because the sales team won't be beat down from hearing no all day. Okay. I'll tell you this, man. You will make significantly more money by adding qualifications to a funnel. Like, I almost— I have almost never— I'm trying to think of a time where me adding qualification friction made me less money. Your metrics will change. So like your So not CAC and LTV, but your LTV might change, but said differently, like your cost per call or cost per click or cost, you know, whatever metric you use there will probably go up, but your CAC may go down and your LTV will certainly go up. Okay. I would just add more qualifications in the process and then do more.

So I guess that is, I guess that's a fear of mine. Receipt for the appointment to go up, cost per appointment to go up, but basically it should make it more profitable because we're not talking to unqualified people, correct?

Yes, 'cause listen, if you let some of these minnows in, right, it's not a good fit for them. It's putting, it's their last dollar, like you should not, like you shouldn't do it ethically anyways. But like outside of ethics, 'cause that never convinces anyone if they're making money, it's not good for the business. It's bad for the sales team, it's bad for reputation, And fundamentally, like, when you accept everyone, you ward off people who can actually afford stuff. Yeah.

Yeah. And like, I guess for the, so we, like, like you said, with, you're big on lead magnets. So we do provide like a really in-depth training guide, like really in-depth. But the issue there is the majority of people who come in are not qualified at all. So should I add more qualifications to that too?

So you can add qualif— what is the lead magnet again?

The lead magnet is a training, like it's like all of our SOPs, like all of our SOPs, all of our, basically for our entire company.

You can, I mean, you can have the SOPs there, whatever, just put, add an extra box that says like, whatever the qualifications are that you know are required for somebody to be a good customer. So like, for example, at the book launch, people could opt in to show up to the launch. The launch functionally acted as a lead magnet in this scenario. I still asked for people whether they owned a business and if they had a business, what revenue level they were at, because I have no need for leads in a CRM who are not business owners above a certain size to get a call from my team. There's no point. It's a waste of their time. It's a waste of ours. They should just use all my free stuff. And so just add a qualifier on the, on the front end. Okay. And then only call those leads and then have the thank you page sort leads, the best leads to the with the sales team, and then the worst leads, just send them to an automated thing that maybe self-liquidates some of the ad spend.

Okay, so on the qualification question, would you put like something vague? Like we have right now, we have a qualification question like, are you willing to invest in your business?

No, but that's not a qualification question, dude. That's like, do you have a pulse and a credit card question? I'm saying you have to, you need to figure out who your avatar is. Have you read the Lost Chapters book? The Lost Chapters book? No, I haven't read that one. First chapter of the Lost Chapters book is finding your avatar, your first avatar. All right. The process that it walks through that in the book in that first chapter is you need to look at the customers who spent the most with you and stayed the longest. What are their characteristics? So we look at their demographics, like who are they, right? We looked at their quantifiables, like do they have a certain income level? Do they have a certain amount of kids? They have a certain family. And then I look at geographics. Do they live in a certain area? Right? And so when I have those 3 things put together, then I know that it's like, okay, it's actually conservative Christian males, you know, 35 plus who are married is actually my best avatar. And it's like, great. So that's what we're going to make in our ads. And your big fear right now is if I make more qualifications, my cost is going to go up. But it's not, dude, because you're going to need to advertise to the right type of customer and you'll get those people to opt in and then you will go get them to buy more expensive stuff. It's everyone's fear. Everyone's fear is going from general to specific, but when you go specific, you get the right people.

Okay. So actionable steps are just like the qualification questions and making it specific to the avatar.

So in order, it will be determine the avatar by looking at all the customers that you have. You wanna look at who they are, what quantifiables they have, geographics, and if you can, bonus points for sales process. Did they consume anything else? In the sales process, they have a different experience than the people who didn't, who aren't worth as much. Once we have that data, we then weave that into the advertising in terms of callouts of who the avatar is. We weave that into the landing pages, weave that into the dropdowns for the questions and the friction that we add in the funnel. We add that into the VSLs. If you have a VSL, I'm sure you do, that, that tells them about the process and it begins with the pains and the hook of that specific avatar. You do all that stuff. You will for sure convert more. Okay, cool. Thank you, brother. You bet, man. Have a good one, dude. All right, so it looks like, ooh, what does it look like? Let's, let me see if any, any question. Okay. What you think are the best revenue retention opportunities for an architecture firm? What would it take to get there starting from scratch? All right, Emiliano, I'm gonna give you, I'm gonna give you some, some game. So some businesses like yours, you need to chunk up a level to figure out revenue retention. So what does that mean? So I'll give you an example. So Allen, say the universe knew, Allen, the software that we ran, at the beginning I was trying to sell lead nurture services to brick and mortar businesses, SMBs. The problem with lead nurture services when you have an SMB is that they have inconsistent lead flow. And so as soon as they're like, oh, this is great, but how do I get leads, right? And there's like, oh no, this is a whole nother problem, this is a different business. And so then we had the smart idea of like, well, what businesses already have leads? The answer to that question was businesses already working with agencies. And so then I said, oh, maybe agencies are really our customer. And so that's what we figured out was that agencies would bring customers in and they would churn those people out. But they— let's say a chiropractor agency has 10 chiropractors that pay $2,000 a month. So I'm sorry, mini itty bitty agency, right? They've got 10 chiropractors paying $2,000 a month. And let's say every month they lose 2 chiropractors and they gain 2 chiropractors. I can rely on that agency to use my software month over month over month with each of his chiropractor people, even though the logos of the people inside of his little ecosystem will change. But my revenue retention on the— at the agency level was super good. So why did I tell that story? Because it's an analogy for you, Emiliano, which is that your architecture firm, you're thinking about it at the house level or at the building level, right? If you chunk up a level, which is like, okay, who are the referral partners or who are the people that you do business with on a regular basis? Is it is it contractors? Is it— who are the people referring you business? And so once we find those people who, who you're doing business with on a regular basis, we want to demonstrate that we're retaining them rather than the pro— at the project level. So chunk up and then those become your nodes of revenue. And so you then have your acquisition or your sales motion is going to be geared around how do I advertise and acquire more of these referral partners? And I know each referral partner is worth X and it costs me Y in order to acquire them and I can retain them significantly more than I can for the individual products or logos that they're bringing on. That help, Emiliano? That's how you do it. Okay. Next caller. Hello. What's up, man? What's your name?

My name is Liam. I'm 24. My business is going to do about $6 million in revenue this year. Okay. And we do apparel for TV shows.

Unlimited time exclusive drops. Apparel. Okay, so you do, so you partner with the team, you partner with Shark Tank, right? I'm saying hypothetically. So you partner with a TV show and then you make Shark Tank merch and then you drop, they drop that merch on their show and you deliver.

We market it ourselves. We drop it through our channel. So it's a collaboration, but it's all through our own channels.

But you obviously get to use their brand. In the advertising, and then you do some sort of like split on the profits, I'm guessing. Yes? Yep. Okay, great. So you're doing $6 million. What's internal revenue? Or rather, what's gross profit, and then what's internal revenue? So that's kind of 3 numbers there.

Gross profit this year, we're gonna be running at about 10 to 15%, and we're doing about 30% last year. Gross?

So $6 million is what you made. That's how many shirts were bought.

Right?

Yep. Okay. $6 million of shirts are bought. What do you sell a shirt for? What does it cost you fully loaded?

$50 for a shirt and it costs about $12.

Damn. Okay. Okay. So you got $38 on $50, right? Is what, is what you're making, right? Yep. Okay. Fantastic. Now, so what's that? That's 75-ish gross margin, somewhere in there. Okay, so that's fine. Now of that $38, what's the split between you and the TV show?

Each license is negotiated independently. It can range from 5% to 25% depending on the size of the IP.

Oh, so they get 5%, so they would get $2.50 per shirt all the way to getting $12 a shirt. Yeah. Okay. That's not bad. That's not bad. Okay. This is workable. So I'm just going to say like midpoint. Let's just say midpoint is $10. All right. We'll be aggressive with it. So $10. So you actually at $28 per shirt on, on a $50 shirt, call it $25 with other shit. So 50% is what we're working off of. Okay. So what was net profit? About $600K. Got it. 10%. All right, so what's the problem?

We've completely capped out on our— we do almost exclusively paid traffic on Meta and TikTok. We drive people to a waitlist for the drop, we hype the drop up, and then we do a launch. And the pricing model, we base it off of what we can acquire a lead for. And the problem is our cash flow becomes super inconsistent because Each type performs wildly differently in terms of how much revenue you can generate. And some waitlists will convert at like a 25% waitlist-to-purchase ratio, some will convert at 5%, and so we need a more cost-effective way to acquire leads. 'Cause essentially we're just dead in the water at 10%.

Yeah, so I think the big thing that's actually missing for you is predictive data. You being able to say like, you're like, well, they perform wildly differently. Well, the more you do it and the more data you track, the less wild it should be. That makes sense. So if you were to take somebody, I'll give you an example, a simple example. If somebody else were to go launch a book, right? And they have, call it 4 million, you know, YouTube followers, whatever. And I launch a book and I have 4 million YouTube followers. Why is it that my book is going to sell way more than theirs? Right? You should be able to answer that question quantitatively. And so that'll take a lot of the guesswork and the volatility around which brands you partner with and the power of the negotiation. Because I'm sure there's some deals where they thought their brand was significantly more valuable than it really was. And there's probably other brands, and this is probably even sometimes more often the case, a brand that they don't think is that valuable at all, and in fact is actually super valuable in terms of the people who are willing to buy. So thing one is predictive data. Thing 2, have you considered going to influencers and doing this exact same model? We have.

The big thing is emotional relevancy to the show or to whatever the IP is. So a lot of influencers, they're not particularly well for something like that, where it's like, a really good example is the Nelk Boys with Full Send, right? Find a commonality with the audience, they have a hierarchy, of brand over— they treat themselves like ambassadors. We've looked at it, we've interviewed you, but the numbers just never made sense to us.

Well, I mean, like, I feel like they should, because you're taking premium TV shows which have a lot of times smaller audiences than like some big creators do. Yeah, you're honestly right. MrBeast can drop a t-shirt and do your entire year's revenue in like a day.

You can dive deeper into the creator economy, leverage your already existing audience. We don't have to spend so heavily on ads.

Yeah, and they'll collab it with you. And there's a zillion of them, and a lot of them don't make money. And they're not gonna be hardcore negotiators. Sorry, go ahead.

All of the IP that we're collecting are in a specific niche. And as we retain a whole lot of the IP, we can renew these releases over and over again. Okay, and that makes us an acquisition target when we have all these relevant IP.

You mean just the t-shirts that you're allowed to use and the ads that you can run for them?

Exactly, because all the TV shows, they're anime TV shows. Oh, word.

I got it. So you're super niche. So the issue is what? Is issues that like it's not growing as fast as you want? And I mean, what kind of exit do you want?

I would like to get positioned for like, uh, 4 to 5x EBITDA within 2 years in like the, uh, yeah, well, who wants to—

okay, I'm going to say it back to you. So basically, like, you want to make like $3 or $4 million on a sale? Yes. Okay, who would be an acquirer for a business like this? Who's the buyer?

Big media distribution companies. There's a whole bunch of, uh, any moving into westernizing this Japanese IP. There's some pretty big players, multiple billions of dollars in space now.

Yeah, but if they're—

And buy from the company list and all the exclusive IP, exclusive rights.

Yeah, I have two pieces of relatively kind of maybe bad news. Bad news number one is that multi-billion dollar companies don't write $4 million checks. It's just, it's de minimis, right? It doesn't move the needle. The second issue is that the nature of what you do is not that complicated. I can just have the show and make my own t-shirt. I'm not saying this because I want to blow your balloon up. That's not the— that's not my point. I'm just kidding because I want to— I want to help. So you're all in anime. I mean, I mean, what about anime creators? There's tons of those even in that niche.

Yes, this is what we're looking at doing next is building out a really solid ambassador program. Yeah.

Um, and scaling through it, you could build— I think the ambassador program So if we're talking about high leverage, right, I think the ambassador program is really smart for a couple of reasons. Thing one is that each of the ambassadors themselves, once you, you can, they could go promote each of these other products and then make money. Like you build your own functionally a TikTok shop of t-shirts via ambassadors who are pushing them because they think the t-shirt's sick. That's not that hard of a push. And a lot of people would sell that, right? You'll then see which ambassadors have the most pull. So you get early data. And then what I was talking about earlier with predictive data, you will then be able to say, oh, these— here's— we have 1,000, you know, ambassadors of people who are micro and nano creators and maybe mega creators around anime. And we're going to make t-shirts for the top 100 of them and do drops so that every week we do 2 drops a week for these creators. And they're going to go promote other t-shirts for the premium brands that you were talking about, the IP. Throughout the year, but you, uh, but they themselves will do 2 drops for themselves, which will pull way fucking harder anyways.

Okay, so to just to make sure I understand this, it would be partnering with larger creators doing drops relevant to their audience, building relationship, and then that would also double dip where they would promote for our exclusive IP releases as well? That's actually a really good idea. All right, thanks.

Yeah, hey, here it is.

Yeah, I'm gonna own all the credits.

All right, there you go, brother. Have a good one, man. I'm gonna go chat. Okay, so I am starting a SaaS on property due diligence slash inspection services for buyers interested and serious about buying one or more properties. Should I hire inspectors or operate a platform model? I honestly, dude, I think you'll find out. Like I think you like you'll take a bet. And I started Allen and was like, oh, we're going to build lead nurture for small businesses. This will be a home run. And then I found out that agency owners were actually our best, our best customer. So you'll probably, depending on how different the— I'll say platforms are significantly harder to build. So I think B2B SaaS is a way safer bet. I mean, as a co-founder of Skool, I can tell you it is not easy to do. And the hardest part is the part that Skool is already through. But it's the 5 years of going from, you know, every single person saying, can I white label this? Can I white label this? And you having no real value prop besides like someday this will be really valuable when it's a marketplace. But once you turn that corner, cause you make the product so good, then the marketplace component, if you're saying true platform model, but I would do— the reason platforms get the multiples they do is because it's so, so expensive and so hard to do. I would prefer a B2B SaaS model if I was, if I was a betting man and it was my life and equals 1, you can't live 10 lives or 20 lives. I would probably, but if you're like, I have to be a trillionaire, then if that's the thing, then you got to go platform. Okay. Okay. I actually want to answer this other one. Rowdy Adventures. I have a patent that will be pending in 8 weeks. What would you recommend to do in preparation for that? I've already been working on finding the cheapest manufacturer to get the price parts down. All right, so I've got good news and I got bad news. So patents, believe it or not, don't mean shit unless, guess what, you have a legal budget to defend them. So I have a 5-person team full-time in-house that all they do is takedowns. Every week we take down 50, 100, 200+ accounts. All those scam things where people try and sell my stuff or the impersonator account, like all that stuff that happens, like we have a full legal team that gets them delisted, gets their ad account shut down, gets them removed from social media, gets their Shopify pages down, gets their processors removed. That's a whole process. But that only works if you defend it. And so basically in the eyes of the law, if you do not defend your patents or your IP, they, they're not that defensible. Also, like the idea, like business is much more ruthless and cutthroat than you think it is because like people will just steal your shit and then say, What are you gonna do, right? And then it's gonna be a multi— it's a long legal process to prove how close is it, is this fair competition? There's a lot of other stuff. So having a patent in and of itself does not in any way guarantee success. You're still going to have to market it. The patent has to be around something that truly is core that no one else can reproduce around the product. And so basically you still gotta start a business. You still gotta make the business make money. and then when you have some of that money and you start to get successful, that is when the dupes will start flowing in, the duplicates, and then at that point you need to start allocating a certain amount of capital to continue to defend the IP. I, like, as far as we're concerned, until the business is successful, the patent means nothing. Okay, so who else we got? Hey, Alex. Hello, sir.

Hi, uh, my name is Sam. My business partner and I run a membership site for real estate agents. Where they basically get daily social media templates, lead magnets, training videos, all this stuff to help them save time and get better at Instagram. Okay.

So it's a membership, right? Yeah, we do. What do you give them on a monthly basis?

A lot of it is just daily social media templates, so 30 days of content that they can edit, customize to their own personal branding, post on social media. And then there's a library of like little lead magnet things and that they can customize again and use on their Instagram and training videos to help them set all up their Instagram, all that stuff.

But mostly it's gonna be the content templates.

Yeah, it's a content membership, yeah.

Okay, got it. Okay, so how many people you got? What do you charge?

Yeah, so we charge $49 a month. All right. We have just under 300 members. Okay. And, uh, yeah, I mean, we do just under sort of $20K a month and we take home 75, 80% of that.

Cool. Got it. So what is the, what's the issue?

Yeah.

So my question is, what's churn? What's churn?

What's churn? Yeah. Uh, yeah.

The hovers around 12%, you know, monthly. Yeah. Monthly. Okay. Got it. Do you have any metrics that like after a certain point people continue to stick?

We've only been in business for just over a year, so it's hard to get that like 12-month kind of stick number, but monthly it's 12%.

Yeah, yeah, well I'll tell you why this is important. If let's say it's 12%, well 12% is tough 'cause that's like you lose all the customers by the end of the year almost. Okay, what's sales velocity right now? Meaning monthly sales, units sold? Between, you know, 50 a month. 40, 50 a month. 50 a month? Yeah. Okay. Got it. Okay. So you're still, you're still growing, but slow.

We're getting to the point where churn is starting to catch up with us. Yeah. Um, and that kind of leads into my question being, you know, how do you kind of decide whether to push or pivot when there are sort of these structural challenges, or at least perceived structural challenges in your market? And you're maybe looking at a different market, a different niche that might be better for your business or for your offer, essentially. As in not marketing, as in not doing it for real estate agents, maybe doing it for a different market.

Why do you think this other market is going to be different than real estate agents?

Yeah, so I mean, generally real estate agents from our perspective, there is a lot of structural volatility in terms of their income. And obviously with SMBs, that's, you know, a given. It's probably worth real estate agents, and they don't make a lot of money. There's not a lot of willingness to pay. Yeah. And basically what we've seen in our market, there is like a market leader with, you know, over 5,000 members, been doing it for 6+ years now, and a couple others with 1,000+. Like, we are a late entrant into this market. This is something we started to do just because we thought we might as well pick proven business model. And we've seen other content memberships in other industries, like, you know, accountants, one with like aesthetic nurse practitioners, start at the same time as us, have the same Instagram following. We've gone through their funnels and they've like 5x'd. Yeah. From, in terms of what we've been able to do growth-wise. And we're wondering, trying to figure out why that is essentially.

Do you have full transparency into their numbers?

I have full transparency into a few of their, just, you know, the amount of members they've had and the amount of Instagram followers they've had.

I've kind of gone through their funnel a little bit.

I know that they don't necessarily run a ton of ads. Like, it's not like they're doing a ton of ad spend, for example.

Do you know what their churn is and how many members they have?

I can give you one example of one that has— we have like 50K on Instagram, they have 40K on Instagram. We're kind of friendly with them, and I know they have like 1,800 members.

Okay. And that's—

that's been a year. And their sales velocity, from what I can tell, is like 100+ a month, maybe 150-200 a month.

Okay, and they started the same time as you?

Basically, yeah.

Similar following, all that. I mean, the only—

And they have no big competitors.

Yeah. Well, I mean, I think going to an underserved marketplace is not a terrible idea. The reason I'm like more okay with this is that you guys are still really early, you know what I mean? Like, it's kind of, it's pretty much a brand new business. I do think that like, is this business that you have fixable? Yes. If the market leader, I'll put quotes around that, has 5,000 people, well, there's like a million realtors. So there's lots of opportunity that's still there. Like no one really owns the market. So those are kind of the plus sides. I'm going to also bet that like to your point, it might not be that realtor— like realtors, of course, if you take them in aggregate, are— have volatility. But if you look at the top 5% of realtors, like they, they make their full time, right? If you have a lot of part-timers who are in there, then you have huge amounts of churn because they're not even— they're barely even business owners, right? So you could probably fix this.

In terms of our value prop though.

Yeah. Okay. Go ahead. Yeah.

Just in terms of our value prop, it's mean if you're a top 1% agent, you probably have some sort of social media manager or media team. We're a low-cost alternative to that essentially. So it, it's kind of just a feature, not a bug, I guess, in our business. So yeah.

Okay. Zooming all the way out, what do you want to happen? Do you wanna sell this thing? Do you wanna make more money?

Short term, make more money for sure.

That's what we're focused on. Right. More cash flow. The thing is, is that you're selling 50 a month, which is actually like really not a lot. From a sales velocity perspective, even the size of that market. And that is the problem, right? Like you could sell, like if you have a million person marketplace, it's like we could be selling 1,000 of these a month, right? And then the churn, even though it's 12%, it's like, well, we just know that we're gonna get 8 months on average times $50. So we're gonna make $400 per customer as long as CAC is, you know, $100 or less. Cool, we have high margins, we're good to go. and you just take the money and then you do whatever you're gonna, you're gonna do. That's like short term. You could do that. And I think targeting people who've done a sale within the last 30 days or something like that, maybe they're not the 1%, but they're like, quote, on the way, they're quote, reinvesting their business. And if they just had a sale in the last 30 days, they have some cash. There's some elements here that you can do. I also like, are you doing a big, uh, do you do a big promotion for getting annuals? Uh, we try, yeah, we try our best.

We do 2 months off. We're starting to add other bonuses in terms of annual as well to try to push more people towards annuals, but yeah.

Right now LTV is 8 months for you, so you might as well give 4 and pull the cash flow forward since it's equivalent, and churn on those customers will be lower. Right. Cool, alright, so that's thing one. Now, to the larger question of like, should you go after a bluer ocean market? And in so doing, like, does that mean you're gonna start another Instagram page and like build that whole thing up and do that game?

Essentially, that's— the thing that we're relatively best at, the thing we've invested a lot of time into. It's something that I think we can do, but it's obviously gonna take time and time away from our everything else we do.

Okay, I'll tell you what I want. I don't think it's a bad idea. I'll say that. I don't think it's a bad idea. Like, normally I just say like, no, stick with your existing thing. I do think you should stick with this thing a little longer, and I'll tell you why. I think that it would behoove you to learn which types of realtors churn versus the ones that don't. And there's probably 2 or 3 characteristics that separate the people who do versus the ones that don't. Number 1. Number 2, I do think you need to make a better incentive to get people to prepay for annual. Number 3, is there a version of this business that like on top of this you sell some sort of maybe $500 a month thing as an upsell or $1,000 a month thing that does have some sort of managed element to it that you have lots of AI and automation built into it so that you can do it with high gross margin.

Right, yeah, definitely something we've thought about, just adding upsells, adding different offers.

Yeah, I like, I can appreciate the simplicity of the business, believe me. I just feel like you have a lot more to learn from this before doing the next thing, rather than just saying like, oh, it's the avatar. It's just 'cause like, that's the obvious thing that everyone says, and the market leader, and I'll put quotes here, has 5,000 people. It's not that many.

No, and I've tried not to just say it's the avatar to the best of my abilities, you know what I mean?

Okay.

It seems like, yeah, it's the easy way out.

So that's what I would do. Alright, so I would try to learn more about the customers, number 1. Number 2, I'd have the annual prepaid thing. Number 3, I would start running ads and see what your cost of acquisition is with ads. And having that strong prepayment thing, I would also have a self-liquidating offer on the thank you page that could be even higher than just the annual, right? 'Cause that could just improve the funnel metrics overall. Maybe like a—

Okay, like a high ticket, a higher ticket item?

Yeah, and I'll say higher ticket with quotes here. I'm talking like $197 to— Right. $397, somewhere in there, which might be like, we have all these accounts, we'll tell you, we're gonna give you the 100 best performing pieces of real estate content over the last year. I would buy that. All right, that's what I would do. I think you need to learn this game better, and then you'll have more perspective, and you might just break through and then just become the market leader.

Yeah, okay, thank you, really appreciate everything you do.

Appreciate you too. Okay, Mr. Mosey, that's Mr. Mosey to you. As a video editor who's facing client acquisition problems, I get scared thinking of AI. And if I even have a scope in the future. Bruh, why would you be scared of AI when AI makes your job 100 times easier to scale? Like, for the short to medium term, there is tremendous leverage. Like, the— everyone knows, quote, knows that AI is going to come for everyone's job. Okay, internet is going to disrupt every industry. Okay, and it has. But guess what? There's also businesses that still don't operate on the internet, so use fax machines. So like, it's still going to follow an adoption curve of early adopters all the way to laggards. And some people never adopted at all. And those businesses can still make money. Real talk. Some people use fax machines, still make money. Some people only do in-person business and only use, you know, paper and clipboards, still make money. And so I wouldn't fear it. You always want to harness it because as long as humans can compete against humans with tools, that's how it's always been for the dawn of mankind. As soon as it's AI versus human, AI will win. And so, but as far as I'm concerned right now, use the AI to get as much leverage as you can. Maybe you could 100x your scale using technology rather than fearing it. Last caller. Hello, senor or senorita? Oh, can you hear me? That's a senor. Hello. Talk to me about the business.

So I do robotic cutting candy machines, essentially. That's our main product. Robotics and what? Two different people. Hold on.

Robotic cotton candy machines. Robotic cutting and canning machines?

No, robotic cotton candy.

Cotton candy. Robo cotton candy. Got it, all right. Yes, you can put it like that, exactly. Okay.

So we have two makers that we sell to. We have entrepreneurs who buy our machine as an investment and put them in locations. And then we have actual businesses who we do one of two things with. We place it there for free, give them a percent of sales, or they can buy it for their business. Now we're at a point right now where we have a bunch of entrepreneurs, too many to count, who want to buy a machine, but they don't have enough locations to put them at. So what we're trying to figure out is we're trying to figure out the best way to get locations. I love this business. This is cool. And we're trying to basically build an outbound funnel.

Dude, this is a cool business. I like this business. Okay, so give me, give me some, give me some cotton candy money. Give me some cotton candy money. What, what is that? Obviously it depends on the location, foot traffic, blah blah blah, but what does the average cotton candy, Robo cotton candy machine make? I've been waiting all day for a call like this. You're looking at— go ahead.

Yeah, at a trampoline park, it's not amazing. It's about $1,000 a month, but at a higher tier venue, so think like museums, uh, amusement parks, water parks, We have machines that are doing $10,000 to $15,000 a month.

Okay, but average is $1,000?

I would say average is about $3,000 or $4,000.

Oh, okay. Average or median?

Average. Okay. Median, median is probably about that range though. There's a lot of outliers.

Okay, okay, cool. $3,000 to $4,000 a month. All right, I can rock with that. $4,000 a month, making $1,000 a week selling Robo Cotton Candy. Okay. Yeah. So, Can you supply all these machines to these people who wanna buy 'em? Yes. Okay, so you have the supply. All right, so then what again is the constraint here?

So the constraint is getting enough businesses who want for us to put the machine. We have entrepreneurs who wanna buy it, but they don't wanna buy it unless they have a location. So we need to find locations. They need to find the location.

They need to find the location.

So that's what we've been doing, but that's the main constraint. If we could find them locations, A, we could charge for it. And then B, maybe you just take it ourselves if it's a good location.

Well, that's what I'm saying is like, if they, like the value of the entrepreneur is that they front capital and work. Yeah. If you just find the location, then you should just own the location, right? Like why bother having them there? It's like, why split it?

Usually they're, we're looking for locations in their areas because it's a, it's a servicing thing, right? Like I don't want to have to hire a new guy in Connecticut for one location, right? Unless you're gonna give that to somebody else. Yeah, it takes a lot, a lot to service it.

Okay, fine.

What we do actually is we take a percent of revenue that their machine makes under their service. So that's the second line of business.

Okay, got it, got it. Either way we're making money. I love this business, dude. Okay, cool. So you just need to go generate leads for businesses that wanna make money for no dollars down, and you're having trouble with that? Yeah, big right now. How are you advertising?

So good. We tried cold ads like LinkedIn, didn't work. Meta didn't work. The only thing we've really— Bro, hold on, hold on. Calling the businesses or emailing them. Okay.

All right. Okay. So emailing is working. I'm not even gonna touch the first statement that you said 'cause I just wanna light my hair on fire. Okay, I'm gonna go off for a second, then I'm gonna, we're gonna circle back to this email thing. For everyone, if you run Meta ads, and it didn't work, it doesn't mean that Meta ads don't work for your thing. It means that your Meta ads and your conversion process didn't work, not that Meta ads don't work. Okay, rant over, back to you. Emailing people and then asking them if they want free money has gotten response rates. All right, so what are the metrics of our outbound funnel for our Robo Cotton Candy business?

What specifically are you interested in? Walk me through the funnel. We'll get about 2 to 3 to respond. And out of that, honestly, most will close because it's a really easy thing to sell.

Okay, you send 100 emails and you get 2 to 3 responses and you'll close basically anyone responds. So let's just say, let's get really conservative here and say that you close 1 out of 100 emails. Yeah, sure. Okay, great. So 1 out of 100 emails. Okay. And what's the cost of a machine? About $15,000.

But again, they're not initial. I'm— We don't finish the funding.

$15,000. Okay, what do you make on a $15,000 machine upfront? 50%. All right, so then what stops you from sending 10,000 emails a day?

One of the things I'm working on, I'm working on doing that and building up cold calling calls.

And building a cold calling business side, is that what you said?

Yeah, exactly, those are the two that work the best.

Yeah, I mean, like, this is a great business. How can I help? You're like, I send 100 emails, which takes 2 seconds, and I make $7,500.

Yeah, that is, you know, something that's a lot easier. So my main focus has been for the past couple weeks has been the cold calling aspect. How do you help bring people on? How do you train them to do this? I watched the video yesterday you made, it was like an hour-long presentation about like BDRs to like the ratio of those people to salespeople. Can you kind of like just walk me through like the setup you would have for something like this? Because right now our salespeople control the entire funnel. They find the leads, they contact them. I mean, it's messy. There's not enough things in the pipeline because people are busy closing deals essentially.

Everything's good, man. You just have a process that works and you haven't scaled it up yet. I mean, the returns on this are stupid. Yeah.

They may, it's insane.

It's ridiculous. So like you're winning. It's like you gotta hire some headcount. Okay. It's like every SDR can probably bring like, I mean, my God, dude. I mean, this is absurd. I don't even know. I don't even know where to start, man. It's like, it's, I mean, we just have to like, you have to warm up domains. You have to have multiple domains. We have to send, we have to get to 1,000 emails a day. We're gonna, inbound 20-ish qualified leads. Those 25 qualified leads are gonna talk to one setter and you can have one close. Like you don't need, like you don't even need to have an army to, to make this thing make crazy money. Let's say you had a team of 4 setters, 1 closer from this model, like 4 setters. Jesus, 4 setters. You could get to 10,000 emails a day. So you get 100 leads a day.

So I'm glad you said that. So I think our problem is it's the opposite. We have 4 closers and We actually don't even have a single setter.

Well then they gotta work their leads.

Yeah, they hunt their own food, so to speak, is what we say.

No, but I'm saying like you, you need to basically, let me say it this way, they have to hunt their leads. You can hand them some leads that you generate from email outbound. Awesome. And do it as a round robin, first come first serve, first person who grabs it as soon as you put it in.

So would you hire someone specifically for outbound through email and call, same person? Like how would you go about growing that, like the pipeline itself, the very beginning?

Well, the thing is, is that right now, given the size, like if the close rate on these deals is already so high, you could have the closers just work these leads. So basically everything that's email inbound, just hand them straight to a closer and boom, they close the deal, right? That's all it is. Now they still have to work their phones and go get deals for themselves. And that's fine. Like our closers still do 2 hours outbound every day because it keeps the sword sharp. And it keeps them appreciating the leads that we send. Interesting.

Interesting.

Okay. Now SDRs though, dude, I mean you could get a list of just business owners, work that. And there's also, I mean right now there's the AI dialers are, are getting exceptionally good, especially for this type of thing. But you could even do this old school. And so like fundamentally either you can install SDR team or you can have an AI SDR team. You have so much opportunity. You have 4 sales guys, I would, like, my immediate next action, 'cause I'm only gonna give you one, is that I would go from 100 emails to, I would say, I would go to 5,000 emails a day instead of 100. That's what I would focus on. All my focus is how do we go from 100 to 5,000 emails a day?

Would you do it or would you have them?

No, I would do it. You can automate most of this stuff, you don't need them to do it. It can come from their account, but they're not doing it. That's it, you literally need, High-level email automation with some AI personalization on the front end. Warm up the domain, set up multiple names, one for each guy. Probably have backups as well to send the emails to them. Each guy gets 10-ish plus leads a day from these emails, closes 6, and you're at— dude, you're at a lot. Okay, copy that.

I appreciate it. All right, that was from Mosey Hotline.

So appreciate you all. Peace and blessings be upon you. Rock and roll, provide value, and, uh, don't break the law. Bye!