Throwback: This Isn't Fun But it Will Make You So Much Money | Ep 706

What I'm going to talk about in this podcast is not fun, but it's going to make you a lot of money. And it's probably the number one reason that you are not doubling down on the biggest strategic advantage most small businesses have. And I'm going to explain why so many of you are leaving massive amounts of money on the table right now and not using your single largest competitive advantage. And these lessons have come hard earned from years in business. I founded and exited 9 businesses, my last one at $46.2 million. Our current portfolio is over $200 million a year, and I make these videos so that you can make money. I remember when I was in weight loss, I would have a lady who would walk in and she would say something like, hey, I don't wanna lose too much weight, right? Or I'd have a guy, and this is probably the more common one, they'd say, well, I don't wanna look like you. And I'm like, don't worry, you never will. But the point is, is they would look at me and say, I don't want to get bulky like you. You have too much muscle. I don't think that looks good. And I'm like, you know, you're not going to wake up tomorrow and just be jacked as shit and have trained for 20 years, right? It's not going to happen. There's going to be a million days in between. And at any point you can say, I'm just going to stop here. I'm going to try and maintain. But the thing is, is that people try and say that they don't want the extreme version of a solution, so they're not willing to do— take a step in that direction. And so the same thing happens from a deliverability perspective. They say, hey, You know what, if I do it this way, I'm not going to be able to hit $100 million a year. This isn't scalable. But the thing is, is that you're not even making money right now and you're talking about scale. You're talking about how you're not going to be able to fit in your clothes and you haven't even lost weight. You're talking about how you don't want to look too bulky, but no one even knows you work out right now because of how you look. And so the same thing in business is that like, sure, you think, and here's the, here's the real, real is that when you start, you don't have context and you don't have resources. So with your current set of resources, The unscalable thing looks unscalable because you have no help and you have no money and you have no leverage. But a good friend of mine, Andy Frisella, he has First Form. They do hundreds of millions of dollars a year in revenue. When he started the business, he started writing handwritten cards to every single person who bought their products. Now in the beginning, you'd be like, you're the owner, how could you write handwritten cards to every single person that buys the product? That's not scalable, Alex. But guess what? He still does it today, and they get a zillion orders a minute at this point. But what did he do? Well, in the beginning, he was writing the handwritten cards, and over time he just signed the handwritten cards, and then finally other people were writing the handwritten cards, and the gesture still held. And so the thing is, is there's a, there's a 2.0, 3.0 version that can still check 80% of the boxes that you learn from the unscalable solution. I got on the phone this last week with a recent founder who exited a fintech company for $2.5 billion. Some of you guys who saw my story, I've been trying to talk to people in that space, so if you do know somebody in neobanking and payment processing who had a big exit, please hit me up. I'm trying to learn some stuff for one of our portfolio companies. But anyways, he was saying, hey, it's all about the unscalable. And he and I had this great chuckle about this, that so many business owners are unwilling to do the heavy hard work, the one-on-one calls, the talking to customers in the beginning because they say it's not scalable. But there's always a version that presents itself 2, 3 steps down the road because you have the money and the skill to be able to say, hey, What are the key components of this thing that can make it scalable? And so I would encourage you, if you're starting the business and let's say you're selling, because I'm obviously in the school community, right? And so I see people who are trying to sell a $20 a month community and they're like, well, I don't want to hop on the phone for a $20 a month sale. Also, first off, guess what, genius? I was in the large fitness world, brick and mortar. What do you think gym memberships sell at? Do you think they have a person selling it at the front desk? Sure as shit they do. Guess who it isn't? The owner. And they can still scale that process. And so again, the idea that things aren't scalable is ridiculous. Now sure, you're not going to be able to take 20 calls a day in the beginning, you know, at scale, but you're currently making $0. So what the fuck are you doing all day? You can't be busy and broke. Pick one, right? You're either busy and you're making money because you're doing the right stuff, or you're broke but you got plenty of time. Like, you can't have both problems. And so if you're broke, get busy and do some of the unscalable stuff. And that means hopping on the calls with customers that are below your ticket price. But guess what that happens is that you're learning more from them than you are earning from them. And that's okay, because you're gonna learn the pain points they're suffering from. You're gonna learn the hooks in the messaging that matter most to them. You're gonna learn how to alter your product and your offer in a way that makes it convert at a higher percentage. You're gonna learn the things they don't care. By the way, you want 2 magic questions? Here's some pro tips for you. The first thing you ask a customer is you say, "Hey, if I were to eliminate all of the things that I have in my feature set except for one, what would it be?" And they'll tell you. And if you ask 100 people, you'll get by far a power ranking for what matters most in terms of value for the core deliverables you have. Now you can also ask the second, the inverted version of that question, which is, "Hey, if I were to eliminate one thing from my entire feature set and it changed nothing about your life, which one would it be?" And you'll also get the least valuable thing. And between both those elements, and if you do this on a regular basis, you continue to cut and trim and distill down the value they provide to the most amount of people by simply asking them. And so I think Paul Graham said this, and I believe this, and I keep repeating it because I think it's so important, is that you can solve every question and every problem in business by talking to your customer more. You have a marketing problem? Talk to your customer. You have a product problem? Talk to your customer. Like, they know what they want, and they will tell you how to address them and how to advertise to them. And so getting on the phone and doing the quote unscalable, writing the handwritten card, onboarding every customer even though it's $10 a month that they're paying Guess what happens when you onboard those customers? I'll bet you they're gonna stay longer, I'll bet you they'll refer more people, and you're gonna be able to make the product better and the marketing better. And so even if you do that, now let's say, okay, Alex, oh my God, I followed your advice and now I'm taking 20 calls a day. Well, guess what? Now you're making money and I don't give a shit. But if you're still like, hey, I wanna make more money, fine, I'll give you the next step. So when you go from one-on-one, you go to semi-private, you do one-on-six, right? You can still deliver a close to that experience, but you 6x your output. So instead of talking to 20 people a day, you talk to 120 people a day. Now, if you're like, wow, 20 people a day, that sounds like a lot. Guess how Alex learned sales? I did 4,000 one-on-one closes, not consults, closes over a multi-year period for my gyms. Why? Because I had appointments back to back to back to back to back, and I had 2 to 3 people that were scheduled for every 30 minutes. And so that accounted for show rates so that no matter what, I always had 1 to 3 people who were showing up every 30 minutes that I pitched the exact same thing to. And guess what happened? I got pretty good at sales. The amount of people who asked me, hey, what sales training did you go to? I didn't. I went through the unscalable sales training of actually just selling a lot of people. And so the idea is that you are going to learn more than you are going to earn in the beginning, and that is okay because as long as you see entrepreneurship as a continual journey of education, educating yourself on your customer, the problems that you're trying to solve for them, why would you not want to fast-track that and jam as much of that as you possibly could from the best possible teacher that is in the marketplace, which is the market itself? And so I get passionate about this because I see so many poor people trying to think that they're thinking like rich people when they're really thinking like poor people because they're trying to be broke and not busy. So get busy. Talk to the customers. Even if they pay you $10 a month, you'll learn more. And then guess what happens after you do 1-on-6? You do group onboarding. You do 1-on-20. You do 1-on-30. And guess what you can do from there? We have a company right now that still does that did group onboarding and scaled to $100 million plus a year, alright? And we still did it because we knew the onboarding was such an important part of the process for setting expectations, telling them what was gonna happen next, keep setting promises and keeping promises over and over and over again. And so, if you have one on 30, fine, guess what? You can still do 6 of those, do 180 people a day with just one person. And if you train somebody, and what happens is, like, let's really think through this. In the beginning, you do the one-on-ones, okay? Now, in the beginning, you're just answering questions. Over time you say, okay, most people have these same 6 questions, and so then I'm gonna create a little presentation around these 6 questions. And so then you start using the presentation in the one-on-ones, and you're like, you know what, I think I can do this a little bit faster. And so you get the one-on-six there, and you have the presentation, and you're still seeing the same output with the one-on-six as you were with the one-on-one. Fantastic. Now what do you do? You see, can I get to 30? And you do 30, and then you 5x again your 6x output. And again, now you're like, huh, I wonder if I can teach somebody else to go through the same deck as me. And you know what you do? And just like that, you scaled the fucking unscalable. Real quick, if you're tired of being broke and would rather be busy, join me at the school, game. So school.com/games. I take a call every, every week in there. I'll help you build your business step by step. We have once a month a mastermind that I drop in there of all the people who fly out from the top 10 communities that are making money online right now. And we break down all the tactics that they're doing right now so that you can use them too. And so just because in the beginning you can't see how it's going to scale doesn't mean it's impossible to scale. I had this girl come up to me, me at an event ages ago, and she was in the fitness world, obviously, because that's where I was. And she said, I do outbound for my, my business, and we do $30,000 a month, but I want to have a more scalable acquisition system. And I was like, why can't you scale outbound? And she's like, well, I mean, it requires people. And I was like, welcome to business, baby. Like, how do you think you're going to scale the deliverable if you had fitness coaching? I was like, People. Is fitness coaching unscalable? No, you hire and train people. Welcome to the service business, which is culture and training. That's service. That's how it works. And the fact that you don't know how to do it is what makes it unscalable. Not that physics disproves the ability to scale onboarding or scale handwritten cards. Like, unless you can prove physically that's impossible, that gravity exists differently in your fucking world, then it's not unscalable. You have a skill deficiency. It's unskillable. That's what it is. It's not unscalable. You are unskilled enough to scale it. And so the reason that you have to do the unscalable stuff is that there's a swamp in business where you don't have enough money to pay somebody else, but you still have to do your day job and the next job. And so you just have to work overtime. And that means you work today's job and tomorrow's job so that you can get ahead. And so the thing is, is that every single business— hear me out— every single business incurs debt. So the question is, what type of debt do you want to incur? So a venture-backed company, incurs financial debt so that they can have lots of talent up front. They can get really smart people and pay them where they should be paid at market rates. Now, if you don't have that money to pay all those good people, guess what kind of debt you incur? Management debt, because you don't have the right people because you can't afford to pay them. And when you have management debt, what does that mean? It means that you have to work the job of 2, 3, 4 people, and that's what makes it, quote, unscalable. But you have to go through that swamp in order to get to the other side. And one of the big problems is that people look 10 steps ahead and then project that back to the present. It's the same thing as saying, hey, I wanna get rich, so I'm gonna go start flying private. It's like, Warren Buffett wasn't flying private to get rich, he has done that as a result of being rich. It's not the path that got him there, it is the outcome of being there. And this is actually one of the big issues I see at large with a lot of the information that gets put out there is that what happens is people grind and they sacrifice a ton, and then they get rich, and then they have a different demand on their time, and then they extrapolate and they give advice of their current setting to people who are not in their current context, which is why I try to spend a lot of time with people who are making their first $10K, first $100K, first million dollar a month, so I can, I can remember what it's like to be at each of those levels so that I can make sure that what I'm saying is contextual to the current constraint of the business that you're in. And I'll give you a super tactical example of this in companies that we still to this day who do tens and hundreds of millions of dollars in revenue is that I know just like you do, if I get a green text, that clearly is from a, you know, a chat interface for a sales rep or an automation, I'm way less likely to respond. If I get an iMessage, I'm an Apple user, and so I know that this is a real person on the other side. And so what do you think I have our sales teams do? Do we use the interface or do we do the unscalable? Yes. Guess what? We send a personalized voice note. We send a personalized video. We send it via iMessage from a personal phone. Now, does it mean that they have to have a personal phone? No, I don't need to use their phone. I can buy them an iPhone. Again, there's leverage. There's leverage. In the beginning, you're like, what am I going to do, buy everyone an iPhone? Well, eventually, yes, but in the beginning you don't have money, and that's okay. But you think that something isn't scalable because you don't have the context from which to scale it. But if you had unlimited money and unlimited talent, you absolutely could scale it. And so just don't use that as the excuse to not do the thing that you know would work better, because you have to be more efficient per lead per opportunity when you're small. And so you have to pull out all the stops. Gary Halpert has this amazing story about this. He says, whenever I want to write a sales letter, I imagine that I can only write one letter for my life or I'm gonna die. And so he says, if I— he starts with that hypothetical max saying, if that's what I had to do, what would I do? He's like, well, first I would have a handwritten envelope that I'd handwrite the name on it. I'd have a stamp that I would lick and put on it. On the inside would be a handwritten letter from from me, and then the words themselves would be all these things, and I'd have some lumpy thing in there. And he starts at the hypothetical extreme, because if you only have enough money to send 100 letters, then fucking handwrite all of them, right? Now over time you're like, okay, this worked, how do I scale it? But guess what? Now you've got the sales from you writing 100 letters, and guess what? You have the skill of writing 100 of those letters, and all of a sudden you start to develop a system for how you write those letters, and you expand your capacity to 500 letters, and you 5x your income, and you're like, okay, Now, what are the elements that of my unscalable solution that had the highest effect or impact on the throughput? Well, 80% of the stuff, uh, didn't have as much of the impact. This 20% did. I can use cash from my earlier less scalable thing to create more leverage in the more scalable thing and get 80% of the effect and 10 times the output. So it still makes sense. And so you always are going to lose efficiency at scale. But the question is, in the beginning, start with the absolute most efficient process. And this is fundamentally the opportunity for all starting or smaller businesses. And when I say any small business. I'm saying $10 million and under. All right? So don't get your, get your ego all up like, oh, I'm a 7-figure entrepreneur. I don't give a shit. The point is, is that you're not, you're not Apple. You're not a $3 trillion company. You're not Microsoft, right? So you can do things that they can't. That is the advantage of the small business. And that is why there will always be small businesses because they can do things that big businesses can't because they don't scale. But the fact that they don't scale 100% is 100% your opportunity to beat them. If you're not doing this, it's like getting dealt pocket aces and then choosing to fold because you're saying, I can't have pocket aces on every single turn because my next turn I might not get it. And so I have to not use them. Now you have them in this chapter, so use them. Use what you've got. The first rule of entrepreneurship, use what you have. And if you have an advantage, if you're the small fish, then that's the advantage you play. Now become a mid fish. Then you have other advantages. You have resources, you have a little bit of reputation, and you use those resources to leverage up. So now I've talked about scaling the unscaled, but hopefully you're sold on that concept. There's two frameworks that I introduce you. One is the sales to delivery continuum and understanding the dynamic between both poles. And secondly, the done for you, done with you, do it yourself pyramid. So the first thing is, is understanding something that I called in the Offers book, the sales to fulfillment continuum. And basically the sales to fulfillment continuum states that the easier something is to sell, the harder it is to fulfill in general. Now the only main exception to this is technology, but when it comes to services, uh, it's usually, if it's really easy to sell, it means, hey, I'll do everything for you no matter what. Very easy to sell, very easy to make that promise, very hard to deliver on that promise. Now the other side of that is that if I said, hey, you have to do it all yourself, then that's something that's very hard to sell, uh, but very easy to deliver on. And so what I find interesting is that the vast majority of people who are starting businesses try to start on the thing that's the hardest to sell. And I think they have it wrong. I think they have it backwards. And in my career, I've had basically the, the exact opposite, uh, perspective or approach to starting a business or starting a new product line. And so if you're a business owner, I would think about this when you're thinking about selling a new product or starting a new level of service. And if you're someone who's new, then this is going to be starting from zero to selling the first thing. Now, the second framework around this— the first is the sales-to-fulfillment continuum. The second is the order in which you attack it. And so the way that I recommend doing this is following what I call, you know, like the Tesla model, which is you start at the top of the pyramid with the most expensive thing first. This is typically done for you. So this is very easy to sell, very hard to fulfill. And that's okay because in the beginning you don't have that many customers, you don't have that much lead flow. And so you want to maximize the revenue per customer. Now, in addition to that, it also sets you up to go downstream later because you will get the highest percentage of people, the best results with done for you. The difficulty is that it's more difficult to scale, comma, and that's okay because again, we're starting out. And when you do this, you develop the SOPs, you develop the products underneath of that larger product that allow you to productize the service that you're ultimately going to deliver later. And so imagine you take on— I'll use an agency as a simple example here. If I took on agency clients and I did everything turnkey, well, I'm going to start developing SOPs for lead magnets, developing SOPs for ads, start developing SOPs for landing pages and upsell pages and email follow-up. All of these things are things that I'm going to have to develop SOPs for. Now, once I have all of these systems in place, guess what happens next? You go from the top of the pyramid to the second layer of the pyramid, which goes from done for you to done with you. Now, done with you, you can typically charge a fraction of or less than what you charge for done for you, sometimes a third of the price, a fifth of the price. But by doing that, you've productized a great degree of the service. And then you switch from a service provider to a consulting relationship where you're helping someone do it themselves, but you're still there to assist. And so that's kind of in between the total— not even handholding, it's hand doing— to handholding, to no hands touching, right? Which is do it yourself at the end. And the thing is, is imagine the opposite version of this from a branding perspective. You've positioned yourself, you've price anchored the most expensive version of your service that has the highest results with the best customers. And so you already have this strong association at the top of the pyramid, which then allows you to go and say, hey, listen, I have, you know, 10 private clients. They all, you know, pay me $10,000 a month to do whatever it is. And I have a lot of you guys who are asking me, but you don't necessarily qualify for my private client service. And so I decided to take all the stuff that I have for my private client service and make it available to you and I'll help you walk through the process that I walk through with them. But instead of me doing it, you could do it for yourself, but I will be there every step of the way. And by offering that, you are able to sell 10 times the amount of people because the amount of handholding in terms of support that you have to offer is 1/10 of you literally doing it. Now from there, again, you say, hey, there's a lot of people who know my private clients, they can't necessarily afford that and they can't afford this thing, but they have— they're enterprising and they want to take things on their own. And so I take all the SOPs and stuff and I will give them to you so you can just follow along. And do it on your own. And that's 1/10 or, you know, 1/3 of the price of my Done With You. And so I prefer the top-down approach to the bottom-up approach because let's play it the other way. Hey, I've got this really cheap thing, right, that I've been selling to everybody and I have, you know, everyone in there and their mother takes it. Now I'm going to start helping you through it. Now, to be fair, I don't think there's anything necessarily wrong with that. It's just that if I had a preference between which one I would prefer to build, I'm going to have the least operational drag at the top because I have the fewest number of customers. And then I have more customers and then I have the most customers. And as I move my way down the pyramid, it gets harder and harder to sell. But my skill in sales improves, right? Because I'll know the customers, I'll have talked to them, I'll spend time with them. And so my messaging can improve and get better and better. All right. That's what I had. That's my money message of the day is that scale the unscalable. Start there. Stop being, stop being broke and not busy and get busy and you won't be broke for long. Hey guys, if you enjoyed this podcast, share it. That's all I ask. Don't be lame, share the game. Screenshot it, tag me on Instagram. I'm sharing as many of them as I can. Uh, send it to your employees, send it in Slack, uh, because this is the stuff that really makes businesses work.

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, HR, you've got finance. And we show the problems that emerge at every level of scale and how to graduate to the next level. It's all free and you can get it personalized to you. So it's about 30-ish pages for each of the stages. Once you answer the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com/roadmap.

Roadmap. Roadmap.

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've got customer success, you've got IT, you've got recruiting, you've got HR, you've got finance. And we show the problems that emerge at every level of scale and how to graduate to the next level. It's all free and you can get it personalized to you. So it's about 30-ish pages for each of the stages. Once you answer the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com/roadmap.

R-O-A-D map, roadmap.