Why Constant Changes Kill Growth | Ep 862

There are probably 100 things that you have on those notes, and each of them you're like, this could give me 5% more, this give me 10% more, this give me whatever. If I know that I'm going to have a 20% guaranteed cost, that whether it works or not, I'm going to have this happen, it changes what things I'm willing to take a bet on. So how was this morning? Good? Yes. Tactical. Okay, good. That is the objective. And hopefully it puts a little more context on what I was talking about yesterday. Which is, all right, there's probably 100 questions you could have potentially asked, but ideally, or hopefully, you ask the questions that you think could get you the highest return. And that's fundamentally why we lay it out that way. To frame this Q&A, I want to go over a couple small things and then we'll kind of dive into it. So one of the big ones is everyone here probably has a lot of notes from this morning and yesterday. And when you get back in your car or you go to, on the plane, you're going to open up your laptop, you're going to open up your notes, and you'll probably open up some sort of fresh document. And be like, okay, what am I actually going to do? Right? Because you have all these ideas and kind of the objective for me, when I think about how to prioritize within a business, aka strategy, it's making sure that we get those 1 to 3 things that we're going to change correct. And I want to introduce a little bit of a concept that's taken me too long to understand. And it's really, really hard, which is this. There's a lot of things that you can do to grow the business. You have a lot of ideas that you're coming off from. And so let's, let's imagine that this line represents your current revenue level. Whenever you make a change in the business, my estimation is that we see about a 20% decrease in revenue as a result of a change, especially if it's a manual change where we're changing a sales process, we're changing a customer service process, something that involves humans. We're changing something that they're doing. We'll typically see a 20% decrease guaranteed simply because of the cost of change. But once I kind of like realized this, it changed what things I decided to choose to change to begin with. Meaning there are probably 100 things that you have on those notes and each of them you're like, this could give me 5% more, this give me 10% more, this give me whatever. If I know that I'm going to have a 20% guaranteed cost that whether it works or not, I'm going to have this happen, it changes what things I'm willing to take a bet on. And so for me, my kind of minimum litmus test for this is I need to see at least a 20% bump or believe I can see a 20% bump from any implementation that I'm going to run, or I'm not going to take the guaranteed 20% loss. And so part of this comes into something called ICE, which is kind of an investor terminology, but basically you have impact, confidence, how likely, like how big of a difference is it going to make? How likely is that to happen? And then you've got ease, which is basically the value equation without speed. And so if we're looking at any of the implementation that you're thinking about putting in the business, I'd be like, okay, how, you know, how big of an impact do I think this could have? How likely do I think this is to occur? And then how fast and how easy do I think I can make it happen? And so typically we'll organize it in that way. And you'll probably figure out pretty quickly, if I were to implement two things at once, what do you think would happen? Right? And so you'd have two negative 20%. Decreases. And so the end result of like basically taking this ideology to its natural extreme means that you basically can't change that many things in the business and expect it to grow. And so that end result for me has been, and I'm going to be crude on purpose, is that some shit stays fucked. And so like there's a lot of things that I would love to do to improve this experience for everyone here. I've got a list like many pages long, but every time I do implement a change, it negatively impacts the next group. Because it was a change. Now the next one after that, it starts to recover and come back up because the team learns whatever that process was, they get better at it. And then maybe the one after that, it goes even higher and that's great. And so what happens is like, I've gotten addicted to not changing things because people tend to, 'cause the flip side is if you change nothing, so let's say you have no change that occurs, you'll have something usually that's in like a 2 to 3% increase that happens pretty much no matter what. Because people just get better at their jobs. Sales guys just get a little bit more comfortable. Customer service guys get into a rhythm. Like it just works and it just works a little bit better because most people like to make their jobs easier. And so they tended to do it a little bit better. That's what specialization, specialization of labor is all about. And so I would encourage you that when you have this list that you're going to have for, you know, your 1, 2, and 3 that you're going to go home with, think about ICE when you're putting that together and make sure that you're going to make your biggest swing worth it. If you have a change that can get 2x the business, then yeah, take the 20% dip. No question. Right. But there are some changes that just aren't good enough to be even worth the guaranteed cost. Does that make sense? This took me a really long time to understand and is almost like, I would say like a stepbrother to the focus on the macro scale of business model focus. Let's not start a second business, which probably a third of you have, but even within the business, it's staying focused on keeping the main thing, the main thing. And the hard part is, is it's hard because the thing that's often limiting you in the business are hard problems. New things are easy problems because you can always just whip something up and promote it and make money. But the hard problem is like, okay, I can't scale past this current level because I need to recruit like 3 really niche employees. Well, you're going to have to do it either way. And so you might as well just confront the hard that's in front of you. And so being able to spell that out to myself and be like, this is the hard. The hard is the not knowing how to do this thing and I have to figure it out and not knowing where to find these people, but I'm going to have to figure it out. And so it's like taking all that energy where you're like, I don't know how to do this. So I'm just going to do the thing I know how to do, which is I say this and I see like all the smiles and like nods in the audience right now, but you have to keep fighting that muscle because in a lot of ways it's almost like an addiction for entrepreneurship. It's like we like to do new things and also like addiction, you just have to fight it every day. This is just because a lot of you guys are going to be implementing some of the things that you walk away from here. I just want to make sure, number one, that the few things that you choose to do, that they're absolutely worth it. And that many of the things on that list, I'd rather you just forget about because after you do the first 3 things, all the, all the pieces on the board are going to change. You're going to have new resources, new problems. And number, you know, 5, 4, 5, 6, 7, 8 might not be like, once you do 1 through 3, number 4 might not be number 1. You'll have another thing that'll be number 1 that you didn't even think about, which is why I'm not super obsessed with very long-term planning. So I thought this might be a good primer before we get into this as a good way of thinking through this. And this is like, I wish I could transfer this to you because this is probably from a skill perspective, one of the things that has made me the most money is basically just saying, I'm not going to do new things. And if I'm going to do it, it better be worth it because I'm going to pay a price immediately with my team being confused, feeling whiplash, saying, what is this thing? I didn't feel like it was communicated well. It doesn't matter how well you communicate, it's not communicated well enough because they don't just immediately know it. Okay, cool. Let's do Q&As. All right. So you had $107,000. You want to get to $1 million. Your issue is hiring.

$150,000.

$150,000. Excuse me. You want to get to $1 million.

Yeah.

And your biggest issue is hiring. Yeah. What do you sell?

I sell content.

So content.

Yeah. So we do videos like marketing materials for real estate agents looking to market their personal brands and properties.

Okay. So personal branding for them.

Correct.

Okay. Got it. So what stops you from doing a lot more of that?

So I'm a young entrepreneur and I basically based my own brand off of being a young entrepreneur. My—

And now you're just going to be a middle young white guy. So my business partner, I know what you're dealing with because like when I came up, I started making a lot of money at like 26, 27. And they're like, Alex is so young. And now I'm just like 36 and no one really gives a fuck. Yeah, sorry, keep going.

The only problem is like clients find out my real age and I use my, I technically use my age as a leverage to what I sell. So social media, I grew up with social media. So, you know, I know social media better than 60-year-old agents do.

Okay.

So my constraint, what's up?

What's the issue? Just the pitch is wrong?

No, people don't trust necessarily older people in my business. We based our brand off of being young.

Okay.

So, you know, young.

Yes.

But when I hire someone like a new shooter or a director of operations who's 25 and above, they don't necessarily look. Yeah, they don't necessarily.

I want to say too, it's boomers. Yeah. Yeah.

Boomers.

So what are you saying though?

Like, It's, it's more of a trust issue with clientele. They don't like—

totally in your head, man. Really? Yeah, 100%. You care. No one else cares. You even think they're old.

Hey, I don't think that. I don't think they're old.

I feel like you a little bit because you're bringing it up, right? So like, like no one cares. Did you guys care that Jacob Hopkins is 22? At the same time, we have people who are in their late 30s and 40s. People just care about how good you are. So like, people will care about your age for the 2 seconds before you open your mouth. And then as soon as you open your mouth, all of, it's like, that's like the, the, the, the absolute thinnest surface level of judgment that someone will make. In general, younger people know less than older people. In general. Yeah. But there are also Mark Zuckerberg, who was a billionaire at 21. So there's obviously people who know more at a younger age. So you just have to demonstrate expertise.

Okay. Can I follow up with another question? So on a scaling aspect, we have a lot of realtors, you know, asking us in different areas like Texas, California to come produce the work out there.

Yeah.

Because our content is kind of one of one. It's different and it's providing a lot of value. I'm looking at it as more of like a 1099, you know, contracting videographers and teaching them, you know, in that state or region to shoot that kind of property.

Okay.

But I'm also looking at it as kind of like a franchise. What would you do in that situation?

For a franchise to be something that you'd really want, it's typically you're going to have some sort of like franchising is just a model for raising money and you dilute selling the most expensive version of it, which is that you're going to give all of the upside away except for a small royalty and you're going to do a huge amount of the work. And so in your business, you don't require really any capital to expand. Mm-hmm. Right. So we wouldn't franchise. So that doesn't make sense. If you wanted to have revenue retention for these people who are in, you know, different markets, I could see two different ways that you could do it. Well, really three. So one is they fly to you and then you just book, you do like one day of recording and you get 90 days or 6 months worth of content for them. And I think that would be a very strong value prop and you could probably charge $25,000 for that. That's number one. The other way is that you could fly out, you could fly somebody out to do that. That's the second version. Also still charging a lot of money. The third way is you can, I guess, find people, basically run ads locally to find videographers to go capture the footage and then do what, edit centrally?

We would, we have a team in-house to edit. It's more so like the shots, like learning the correct shots and go for us to edit.

So you edit centrally, they, they capture locally. Mm-hmm. Right. So I think I would just consider hiring those people on behalf of the client and then just charging an upcharge on the rate that you're like, if you, you know, pay them $4,000 a month, you charge $5,000 and, but they're paying you $5,000, you pay the person $4,000. And then that way you'll have built-in revenue retention because it's much harder to fire an employee than it is to fire a vendor. 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. R-O-A-D map. Roadmap. But you would just basically fractionally own a lot of these. Relationships.

So look at it more as like a vendor.

Yeah. And as soon as someone says they're going to cancel, say, oh, that's great. I had such a waiting list in your area. I'm just going to have that guy shoot your competitor. This is so helpful. That works out great.

My name is Justice. I'm a short-form content creator in the product review space. So right now I'm doing about 120 million views a month, just short-form, but 75% of my revenue comes from brand sponsorships.

Okay. But I'm like— You review products?

Yeah.

Okay. So you are UGC.

Pretty much you would see them more faceless as well. So it's like not really a personal brand type of thing.

Cool.

I'm realizing the current business model isn't as like scalable and sustainable long-term just for me. What would be a good roadmap for someone like me who's a content creator?

Why is it not scalable?

It's just, I think like a little part of it's like unfulfilling and a lot of it is like, all right, I'm gonna pause you right there.

'Cause I think this is really valuable.

Yeah.

Fairly. I hear that sentence. All the time. I have this business, it's working. I don't think it's scalable. I should do a different business. If we reframe this as I'm doing her business, it's working and now it's hard. And so I'd like to do something easy. Can you tell me something easy? That's, that's what I hear. And so I'm bringing this up because it kind of hits to kind of what I was talking about earlier. Like you have to confront the problem, but like the other side of that problem. So the way that I, the way that I talk about this to our founders within the portfolio, is like, let's say that I'll just give a simple example. Let's say that we have to, I'll, I'll loop back to your question. Let's say that we have, you know, a key hire that when this key hire comes in, we could add, you know, $5 million. Ooh, nice green. There we go. $5 million in profit to the business. All right. So this would be a really, or I say $5 million top line, $2 million in profit to the business. But this is somebody we're going to have to pay, you know, $500K a year to unlock this. Okay. So this is going to be a pretty specialized role that we're looking for now. A founder might say, hey, can we just like figure out a way to not have this role? No, I think it's a worthwhile question to pursue, but sometimes you just need the role, right? And so this $2 million, let's say at a 7x enterprise valuation, is going to be an increase in $14 million in enterprise value, which if you own the business goes straight to your net worth tax-free. And so if I say back to the founder, hey, do you think you could find this one person for $14 million? All of a sudden it feels better. You're like, you know what, $14 million, I could find it, right? And so I try to think about like, what is this going to unlock in the business? What does this create to enterprise value? And then I try and put a ticket to kind of the hard that I'm trying to go through. Like we had a different portfolio company where we had to put in this, I talked about them yesterday, we had to put in this tech component to it. And I was like, well, currently the company's probably valued at like 80. If we can get this fully integrated, we could be valued in the 200s. It's like, man, but building a whole developer team, we'd have to recruit a head engineer. We'd have to bring all these other people in. I was like, Yeah, I mean, we'll also get paid $150 million to do it. So, you know, worth it. So it's like, it's hard and worth it. So anyways, please continue. So it's not scalable.

Yeah, I appreciate that. Sometimes I'm struggling to figure out like what to optimize for because just like chasing views as a content creator isn't always like the best thing to do, especially because I don't have a product to sell. And since I review 50 products a month, if I make one product, there's only so many times I could post a video about it, right?

So there's so many products.

Yeah. I mean, are you saying like, why do I review so many products?

No, I understand why you review so many products, but there's so many more products to review. Sure. Basically, why is this not scalable? Why can't you review 500 products a month?

I, I can. I think that's a, a possibility. It would be like figuring out if the business model is gonna be served towards brands because that is the driver of the business. It's 75% of the revenue.

Yeah.

Or if I'm approaching it from the wrong way and I'm just like, I should just double down on like long-form YouTube. 'Cause I haven't even posted a long-form YouTube video.

But you get paid on the short form, that they probably repurpose those ads.

They, yeah, they run ads behind it. So they usually are paying for like the usage rights behind that. So it is a possibility. And then another thing is just me getting in my head about creating a bunch of me's who is just doing the same thing. Cause it's basically like a formula because I'm not a type of—

You do a lot of faceless though.

Yeah. That makes sense.

Yeah. I mean, yeah, it's just like I do 50 and I do majority faceless. Why can't we do 500? I mean, do you run good margins?

Yeah, we have 80% margins, right?

Yeah.

Let's do more of that.

Do more.

Yeah.

Sweet.

Okay. Cool.

Thank you.

This is a good talk. Simple Threads, 4 locations. Oh, Small Threads. Sorry. Small Threads, 4 locations. 3 are new. One is the old one you had for 16 years.

Yeah.

Yes. And the, one of the big issues is we don't have enough data and we have to have a better CRM so we can track.

And you're, you were right last night. I went home and dug into the data I do have. I wanna just by, raising my revenue to $5 million instead of $3 million and getting rid of the data challenge, it makes my company worth $6 million.

Amazing. So that would be— so that's worth more money.

Yeah, that's money.

Me too.

So my question is, last year I dabbled in organic content.

I thought you were like crypto. I was like, here we go. All right.

And, uh, had some success. I had videos that got like 2.5 million views. That is a But, you know, brought me people that weren't necessarily in my market, which I'm okay with because the ultimate goal is to have stores everywhere. So it could be okay. But my current thought is time-wise, cause I, I, you know, I like working, but I work a lot. I work like 90 hours a week. Is if I were to kind of go down this a little more time and energy into organic content creation to then use it to do paid local ads. What should I be making content about? That's where I got stuck. So I was doing like two kinds of content, like kind of like thrift content, which isn't really what I do.

So instead of thinking about what type of content, think about what will be valuable for the person that I'm trying to attract.

Okay.

So think about all the problems that moms have, specifically the moms that you were talking to. So maybe single child or single sex child, whatever moms. And the nice thing is that they have lots of problems. And so you just make your content around that and then you just try and tie in the product. Okay.

And then run targeted local.

You post as many of those as you can. The ones that take off, you take those, make them into ads. Yeah. And if you don't want to even put a CTA in the organic, you can just make the organic content. When you have the winner, you take that one and then stitch on 5 seconds of a CTA at the end and then run that as the ad.

Okay.

Yeah, super easy. It's a really good strategy for anybody. Like if you, if you're like trying to get it, like if you right now are predominantly paid, And you want to start doing a little bit more content. I do think it's a good idea in general, just because you'll get more conversions on a lead nurture perspective. Because people get on the phone, they're like, what is this person or who is this person? Then they'll look at your account and they'll be like, oh, okay, they're alive. And so, but basically it's just free. I just see it as free testing. So you just get, you post as many times as you want. You can just see relative to the other, other, other pieces that you have. These ones outperformed. Great. Now I'll make these into ads. So just provide value. Here's other, like here's 3 ways that you can, you know, save on repairs for, you know, kids' torn clothes, or here's how you get stains out of these things. Or if you're, if you're the type of person who like sees this and is like, I'm never gonna do that. Awesome. Come to Simple Threads. Like I keep saying simple, sorry, Small Threads. We've got you covered.

Okay.

That help?

All right. That helps.

Thank you. Easy. All right.

Hey, Alex, my name is Jean-Paul. Jean-Paul. And I sell healthcare listing services for doctors. I guess I, I work with PI attorneys, personal injury attorneys, and so I'm, What I'm trying to figure out, like I'm trying to figure out my bottlenecks in the business. I think one of the biggest ones is that a lot of—

you work with personal injury attorneys.

So my clients, my paying clients are physicians, like healthcare providers.

Okay. Okay.

And then the reason why they hire us is because we're trying to get leads from personal injury lawyers for like car accidents, slip and falls.

So if someone slips and falls, then they need to get repaired. So you're the repairman?

Yeah, kind of.

Being an auto repairman.

Yeah, but a lossable repairman. Got it. So my, the hardest thing is trying to figure out how the PI lawyers are sending referrals to the doctors. And a lot of the physicians that I work with only want to know how many referrals they're getting versus, you know, like trying to brand them and doing like, you know, the full spiel of marketing.

Yeah.

They just wanna know, hey, how many leads am I getting? Or how many, you know, referrals am I gonna get?

Yeah.

A lot of these referrals are worth a lot of money. It's not like, yeah. All right.

So.

That's where I'm at. I don't know, like we're expanding into Arizona and Texas and I'm planning on hiring somebody there in each state.

Is this a, is this a problem to solve or is this just like overhead?

This is a problem to solve.

Okay.

So I'm, what I'm trying to figure— is it limiting your ability to grow?

Yes.

Why?

Because a lot of the physicians expect a certain amount of leads per month.

Okay.

And so it's, it's obviously it's hard because accidents don't just happen in the same city, right?

Over and over. What if driverless cars come and then it's like no accidents happen? Now what are we going to do?

Right.

Yeah. Okay. Okay. Okay. So let me just, let me pause you real quick. So I think, so part of this is probably how it's being framed, the positions, right? So one is you could just reframe it based on revenue, like basically revenue volume. So it'd be like, cool, we're going to usually send you around $20,000 worth of revenue volume. Sometimes it's going to be from 2 or 3 cases. Sometimes it's going to be from, you know, 5 or 6, it'll depend. Obviously we can't make sure that everyone's going to be paralyzed. I'm sorry. Hahaha. Of course. Right. But I think if you just reframe instead of lead count to revenue volume, which is ultimately what you care about anyways, like leads translate to revenue. And if you're saying that there is some variability there, I think that the lead number will no longer matter nearly as much based on how you're just framing it. And in terms of the whole branding and all the other stuff, I think that's a different business. And so I either you would start that as an additional service that you charge separately for based on its own value proposition. Or my preferred method, don't do that and just continue to do the main thing that's working.

Got it.

Cool.

My name is Mike. My wife and I are here. We started a company with your content. Super grati— super grateful, man. We, we exited for over $20 million.

Amazing. Appreciate it.

All right.

You're right. What you've got in here.

Your, your books are worth their weight in gold, bro.

Thanks, man.

Anyhow, we're, we're at a crossroads because we're, we're building a new company based on our passion project. We started a company that taught do-it-yourselfers how to remodel their kitchen and bathroom using epoxy over old countertops to make them look like natural stone. So with that idea, we found that, you know, we, we really hit home with the DIYers. But a lot of our people that saw our YouTube, we built over 1.5 million YouTube subscribers and a lot of them didn't want to do it themselves, but we couldn't serve those customers. And so there's a shortage of contractors in the US. So we're really going to reach out to, to young people that, maybe don't want to go to college or old people or old people, right? Or, or middle-aged, right?

30-year-olds.

So we're, we're really, we're, we're going to, we're building a trade school right now. We're going to teach these, these people how to do the trade, how to, I've already proven the lead gen so that I can give them all the leads they could handle because that's really the harder part of the business for them to learn. My question is we can either charge upfront for this school. Cost about $20 grand for us to train somebody, or we could, we could, we have a big following, we could attract the people to apply, train them on our dime, maybe lock them in with a, you know, if you leave before 2 years or whatever. But would, and then we own the businesses in all these different areas, or should we, should we, they would own it, we supply leads and cut the liability. That's really the crossroads we're at.

Yeah, there's a lot of different models from the position that you're in right now, which is probably why you feel the heartburn. The first thought that I had was just like, and instead of or, like maybe I want them to pay $20,000 to make sure that they're legit and I'm going to get a percentage of all the business that I send them.

My concern with that is if you look at a franchisee, which we're not going franchise, but if you look at that avatar, they're probably not the hustler who's as hungry as the kid with nothing who want that. That's just, that's my passion. I want to help the kid that has nothing.

Okay.

Well, I can't finance it. You know, we could finance it and help him earn it back, but.

Well, to help the kid who has nothing, you can just make all the content free, right? Which you do now.

Yeah.

So that kid already has been helped from you. If he wants more help from you, he can pay and he can save up his shekels. So instead of $20, if you want to make it $5 or you want to make it $10 and you can offer, you know, nice financing terms, you could do that. I will just tell you that there's, I get where your heart's coming from. It's it's, it's very tough to go free and deliver a lot to people expecting that they're going to do something. They typically will need to have some skin in the game. If you're going to put skin in the game, you're going to want them to put skin in the game.

Still own it, charge for the school.

Yeah. I think you can play with the price. Okay, great. Mrs. Myklyte. Yes. Yeah. It's otherwise you're just going to have a bunch of freebie seekers who are going to come and then you're also like, the enforceability of the backend contract and them repaying you is probably going to be a little bit of a nightmare. I would probably, like, if it were me, I would control the sales and then hand them the deals so that I could collect the payment and then distribute payment to them rather than expecting them to pay me. For the leads? Yeah.

Got it.

So I was like, I'd rather just basically build a centralized phone team that could close the, close the deals or whatever. And then, you know, send the deal to the person. Got it.

Thank you.

And if they're coming from your content, then they already have trust. So you probably, like, it makes sense that they would buy from you. Yeah. You'd be like, cool, one of our licensed contractors would go out there. Licensed contractors go through 2-year training, you know, they're vetted by us. And also just like, think of it like Harvard. You pay to go, you don't get guaranteed a graduation. So it's like, I would just let 'em know. It's like, we will not graduate you if you're not good. Right. So, yeah. Or we kick you out just like a school. Like real schools have standards and you pay and you might not graduate like normal school. So just do the same thing.

Just your kid won't be screwed up when they leave my school.

Was that?

Your kid just won't be screwed up when they leave my school.

Yeah, sure. Yeah. Thank you, Adam. Oh yeah, you bet.

My name is Max. I sell tech and operations consulting to law firms.

We started about 6 months ago and price clients and we have our other ones that are $36K to $80K and they have a $300K to $600K packages and we need to figure out which one has the highest LTV to CAC ratio and which one you can convert most easily. So what is the issue?

That's correct. Essentially, well, first of all, I have no idea what I'm doing.

Okay.

I started about 6 months ago.

First step. Thank you.

Second thing, I think we just have a fulfillment issue. And so my question is, at what point do we consider productizing the service? From what I understand, it's kind of what you've done with Gym Launch.

Yeah.

At what point would it be worth doing, doing that, if at all?

You said you wanted to sell this eventually, right?

Yeah.

Yeah. I wouldn't do that. Okay. Yeah. So you have the same issue that Justice has, which is like, I have this hard thing in front of me. Can you tell me there's an easy way? Like the easy way will create a business that's significantly harder to sell. And so then you'll be at that point and be like, how can I sell this business? I'll be like, you can go back in time and not do this. Right. So like basically you're in a high, you're in a high skill service business. It's a professional services business. Most professional services businesses are supply constrained. It is easy to sell high-end professional services if you are good at what you do. It is hard to find other people who are good. This is the trade. But if you build a firm like that, you build a very valuable company.

And, and another, just on a side note, again, I don't know what I'm doing. I got, I got a $500K in, in investment coming in soon.

Why?

It's been my boss just—

No, but why are you taking investment?

I don't, so we haven't finalized this yet, but I'm considering whether to do it or not. Yeah.

But that— Oh.

You don't see any point in—

Why do you need money? You don't run a capital expensive business. Like, what are you going to use the money for?

I guess to hire great people.

But the business model should be able to hire great people. Like, you're not a tech, like, it's very rare that you need to bring on outside capital, far rarer than most people expect. If you want to build a platform, you want to build school, yeah, you got to do that because you need to get zillions and zillions of users and you have to build this exceptional product before you monetize. So yeah, someone's going to front the money on the bet that it's going to be worth a lot more later. Your business makes money today on work it does today. And if anything, you can sell the work before you even have the person. And so like you, you, you have a negative cash flow cycle. You have no, you don't have to like front inventory for months ahead of time. You don't have to do any of that. So you have a service business. So we just need to make the business make money. You're already profitable, I'm assuming. Right. So you don't need the $500 grand. You have deals that are worth $500 grand, right? Yep. From what you told me. Yeah. So why would you, like, why would I give a chunk of the way the company to have somebody who's permanently gonna be involved in my business? For the cost of one deal. It's like, just sell another deal.

Gotcha.

Work a little extra on your own time and then not, don't take that guy's money and just have the money.

Okay.

You know what I mean?

And you absolutely think then it shouldn't be, you know, cause I feel like I'm creating extra problem that I otherwise wouldn't have to have being the whole high skill talent thing. If I just went down the productized route, you think it's really—

when you say productized, you're talking about the $36K to $80K price point?

Yes.

That's fine. I'm okay with that. But again, it's going to go back to what I originally said, which is we just have to look at the LTV to CAC between both of the different avatars. If the LTV to CAC is literally the example I was just saying, if you have a $100,000 thing that costs me $30,000 and I make $70,000 or something that costs $10,000 that costs $100,000, I'd rather just sell 6 more of the $10K things provided I have the ability to sell that. So it's like, I want to find something that has really good revenue retention, really good gross margins. If I have that, then I can just sell the shit out of it. And then I'd rather just sell 5 times more of that. Than trying to come up with the, you know, high-touch one that's going to, like, is a more immediate ticket today, but it's going to quickly, I'm going to quickly get constrained. So I'm basically pushing out my constraint based on what problem I'd rather solve today. So the question back to you is, do you think you can, so what are the gross margins on, let's say the average on the $36,000 to $80,000 is $50,000. That sound fine? Yeah. Okay. So let's say $50,000 is the average price. What's the gross margin on that?

Not too sure. We, yeah, we're quite early on. So half of that.

Okay. And then with the $200K thing that you do, what's the gross margin on that? 50%. That's gross margin. So you're running thin net margins because that means you're starting at 50 and then you gotta pay everything else.

Yeah. I mean, at the moment we, we are getting this fulfilled by a really expensive, highly certified guy that's been in the outside of the business.

You're basically white label selling his stuff.

We do what we can on the inside, but we, we accepted quite a few projects. So, okay.

Then the follow-up question is, can you more easily sell 4 times as many of the low touch as the high touch?

Yes.

Then do that one. If your gross margin's the same and you can sell more than 4 times as many on that one, then do that one. Basically, we're just looking at number of units sold times gross margin. The one that makes the most money.

Got you. So I think it always just comes back to the point of the, the LTV.

Yeah.

To cat ratio.

Okay.

Thanks so much.

Yeah, you bet.

What's up, Alex?

What's up?

My name is Wu. First of all, thank you. You helped me turn my senior design project—

Name of the day.

It's Wu Hu without the who.

So yeah. No, that works right.

Thank you. You helped me turn my senior design project at college into my business last year. It's my second year in business. Last year we did $150K.

Amazing.

And I want to get to $500K.

Were you at one of the schools I talked at? No. Okay, cool. No, I just figured I'd ask.

Yeah, I would love to be at $500K. And the one thing that's stopping me is right now it's just me selling. So 90% of our sales come from in-person presentation.

What do you sell?

We do digital business cards for primarily in real estate.

Digital business cards for real estate. Yeah, I know somebody else who's in real estate. How old are you?

Me?

I'm 27. 27?

Yeah, I'm old. Easy.

Oh, never mind. Never mind. Yeah, but it's digital business cards though. It's an NFT. There you go. Web3.

I'm the only salesperson. I have a few vendors. So more better new in my mind, mental that my options are one, duplicate myself, hire salespeople to do what I do, sponsor events, pitch and sell. Or number two, basically transcribe my sales process online. And I wanted to hear what you think is the better move.

What's the value prop of the digital business card?

So essentially we connect to, it's like a, I don't know if I'm, am I allowed to say like brand names? Linktree?

Sure. Okay.

It's like Linktree on steroids. Linktree, your phone, and your CRM all connected. It builds your CRM on like an automate.

Okay.

Yeah.

So people opt in when they scan the QR code.

Yeah. And then that info will go to their CRM essentially. And it, like, it's got other features, like business card scanner. You scan your business card, that info goes to your CRM.

You want to grow this?

So, just to be sure, I'm not trying to solve. I just want to make money, and to sell more expensive things later. Right now, I'm just using this to make money.

To make money. Yes. Yeah, yeah, no herd. Dude, I think, I think if you sold something else, you'd make way more money. I agree. Okay. But it's some hard pitch. Like what you have is a hard pitch. Because I'd be like, your digital business card is, here's my Instagram. That's my digital business card. If you want to find out more about me, watch some content. You know, you should just say, what else are you into selling, man? Like, I just, I, I just, I don't know if this is funny. You can sell, like you obviously have the skill of sales. And so I'd rather you just like use that on a better opportunity vehicle.

Got it.

Okay. It's like this world is just crumbling. You want to hire me? Yeah. Well, if you can sell us. Yeah, sell us. Ari's, is Ari over there? Oh, there's Stephanie. Stephanie's right there. Stephanie works in our recruiting. You can talk to her. Hey, Stephanie, we'll talk.

But on a real note though.

Oh, that was the real? That's not a real offer. All right. Neither was mine. Two can play that game.

On a real note though, like, I don't know what I'm doing. What do I do in the meantime to make money?

Yeah. So you're selling this to who had this idea for this digital business? Well, there's your senior whatever thing, right? Yeah. Senior project.

Yeah.

One of the big issues I take with, and when I do my entrepreneur talks at like colleges and stuff, the big thing that I, that I hate about those classes is that they try and make seniors invent something. It's like, it's very like invention heavy. Like everyone thinks it's Shark Tank. Like I have to invent something that doesn't exist. When you can pretty much just like go look at any business that exists and just do that and probably make way more money. Like you can start a lawn care business tomorrow, like knocking door to door and probably get to $2 or $3 million a year just with your existing skillset. Like you're able to, you know, shake hands and kiss babies and close. And so like, like you could sell solar and make, you know, $800 grand a year on your own income. So I was like, I'm just saying like, there's, there's like, I think I would be looking at So when I was, when I was doing the presentation yesterday, I talked about how like now I look for products that people don't cancel. I would look for products that people don't cancel. Probably the, the people that are similar to who you already sell to. I would look for that product and then I would use all my sales skills on that rather than trying to explain to them why they need a digital business card. Got it. Basically for your current pitch to work, you have to, you have to create a problem and then solve a problem all within one presentation. right? And also explain some stuff that they don't understand how it works. Right? So it's kind of like 3 things. I'd rather just like talk to somebody who immediately already knows the problem that they have. And I'd be like, I can solve that. And I know from the history of that industry that they don't cancel and that they're just going to buy from me because they like me better.

Awesome.

Well, can I have a follow-up question to that?

Sure. Okay.

So would you recommend—

we went fast on the other ones. So yeah.

Would you recommend that I get a, like a sales position at another company or just like sell more expensive software? Definitely not here.

So no, I mean, fundamentally every entrepreneur is a salesman. At heart, like we're the promoters. And so like you can obviously sell for somebody else or you can sell for yourself. A good way to learn a new industry is to sell within that industry, kind of learn the ropes and then try to basically just figure out lead gen for it. Once you have that, then you'll have lead gen and sales. And so the only thing that you'd really need would be delivery. If you're good at sales and good at training sales, which is a different skill, then it comes down to like, can I, like, this is where like insurance sales are incredibly profitable. Like there's really no delivery. You just sell the product.

Right.

And then there's these massive behemoths that deliver the risk, essentially. There's so many businesses that are basically demand constrained where people stick. You just want to find one of those that you like that caters to the existing avatar you currently sell to because you already know that avatar well. And from, if we're talking speed to money and then sell that.

Got it. Thank you, Alex.

I'll switch vehicles. Okay. All right.