The One With Bryan Franklin And Jennifer Russell - I Love Marketing With Joe Polish And Dean Jackson - Episode #129

I'm dean jackson, he's joe polish, and this is the I love marketing podcast. Hey everybody, it's Dean Jackson and no Joe Polish today, but welcome to the I Love Marketing Podcast. And I am very excited about today's episode. I mentioned in our introduction there we have Brian Franklin and Jennifer Russell with us. So welcome you guys.

Great to be here. Thank you, Dean.

Very exciting. Now, where in the world are you guys today?

We're in Alameda, which is for those of you that know, it's an island in the San Francisco Bay. And it's a sunny day today. We're doing beautiful weather these days.

Awesome. Well, guys, thank you for coming on today because I've gotten to know you guys over the last couple of years here and I was really excited to get to spend some real quality time with you guys in Chicago at Evans Accelerate event this year. And I was really fascinated by, it's really kind of the first opportunity that I had to kind of go deep into what you guys do. And I'm very excited to kind of bring that to our listeners today because I think what you talk about, rapid scale is kind of a fascinating topic. I mentioned in your intro, Brian, that it's not often that you meet somebody who's been able to be involved on any level in a company that scales to a billion dollars. But to be somebody who's been with seven companies who scaled to a billion dollars, you guys have probably learned a thing or two in observation even just being in that environment.

Yeah, Jennifer and I have definitely learned a lot. We've been really fortunate to see the inside of what it looks like in the, you know, in the executive staff room when you have 12 employees at a startup and you're dreaming of being a billion dollar company and the kinds of things people say, you know, we have to do it this way because that, you know, if we don't, we'll stop, you know, we'll cap it at 100 million and we want to be a billion dollar company. And then we've gotten to see over the years which ones of those companies and which ones of those kinds of decisions actually make it and hit that inflection point and which ones kind of chug along or fizzle out. And over the last 15 or 20 years, we've gotten to see, see the patterns really and what the indications are that that's going to happen or that's not going to happen and what you can do from inside the company. Even if it's just you, even if it's just you and your cat, you could be sitting on an acorn, which is the seed that grows into a mighty oak tree, or you could be sitting on an apple seed and have a crab apple tree, which is one of the shortest trees there is. So even if it's just you, we've learned the patterns of what are the activities that lead to growth and what can you do to make that happen rapidly. Because it's really.

And you've got a really sort of systematic approach to it, which is something that I really, I mean, I was, I took pages and pages of notes at Eben's event, and then even in our conversations privately after that, you guys have been very helpful, even just with the issues that I deal with. And so I want to get this message out there as much as we can.

Yeah, I think one of the things that we, you know, that's important to us is, is helping entrepreneurs overcome the overwhelm that they feel. And what we've done here is put it together in a step by step, easy to follow plan that shows you what you have to go through. If you're starting a company all the way from early phase and then growing it all the way to scalability phase, when you're looking at creating real wealth and billions of dollars, there's a, an easy to follow set of steps and a path that we've seen over and over that applies to big companies and small companies that, you know, that we want to share so that you're not overwhelmed, you can find where you're at and look at what step do you need to do next instead of, you know, looking at everything you haven't done. So it's a, it's a real important key to being able to apply all of this.

Well, you guys have, you talk about three different phases that people go through, and that was really sort of eye opening to me. I mean, it seems so. It just made so much sense when I heard you talk about it in Chicago. So I was hoping that maybe we could spend the time today kind of talking about the three phases.

Yeah, so let's dive into that. Basically, I think what we want to do is kind of tell you the story of a company and that company could be your company. And this is the story that every company goes through. Just like, you know, there's only three or four stories in Hollywood and if you look, go to the movies, it's pretty much the same. There's the good guy and the bad guy. And, you know, there's sometimes there's the good guy gets the Girl. These days, the good guy usually is the girl. But so the companies have the same kind of story. And, and it starts out in startup phase where it's really just you and it's kind of like the wild, wild west. So Jennifer, why don't you dive in because I know you've had a lot of experience with startup companies. What's that like?

Yeah, yeah. So in phase one, you know, and again, as you're listening to this, find where you are in this story and as you find where you are, you'll have a sense of where you need to focus on next and make sure as you're listening that you don't skip around. It's really important to realize the phase you're in and not succumb to the temptation to start working on things that are way outside of the phase you're in now, when you haven't really gotten the stuff done that needs to be done in that phase, such that you're setting yourself up for any of that stuff to be meaningful for you. So, so let's dive in. Let's talk a little bit about the startup phase. The word startup has been co opted by the Silicon Valley to refer to a specific type of technology startup that back then it involved massive growth, a global product strategy, and heavy backing from capitalists and a founding team of super genius technologists. So that word was heavily used in the Silicon Valley. But that term startup, when used that way, really only represents about 10% of startups. The other 90% of startups are all the self funded businesses that are based on an interest or a skill or an opportunity, that are all trying to grow quickly and safely and are mostly bootstrapping. And so when we say startup, we mean all of those companies too. And really similar to being early in your development, imagine being an infant. The startup phase involves really vulnerable, a vulnerable phase and requires a lot of special care and attention. And so in this phase it's really about one main thing which is getting the value equation right. And you know, basically getting the value equation right is looking at, you know, what price your products and services are and making sure that the value of those products and services are greater than the cost, that it costs you to make them, and that your customers perceive the value much greater than you're charging. And so if you have that value equation right, where they are getting the better end of the deal and they're kind of giving you the thumbs up, saying, yes, this has value, then you've got a kind of an indication that you've Got the value equation right.

And it's really interesting, isn't it? It feels like what a lot of businesses do is they just get so excited about their technology or their widget or their method or whatever it is, and they just want to get that out there without really taking the view that the end user, their client, is actually going to get a result from using it.

Yeah, I can't tell you how many times I've seen entrepreneurs come to us and say, yeah, well, I just started my business and I'm working on a really fancy website and getting a nice firm to come do that. And I'm buying this really, really good automation system to manage my list and all sorts of activities along those lines which are way far ahead of the game. First, you really need to focus on, okay, what is your value equation? Do you have it right? Are customers actually willing to give you money for your products and services without a lot of resistance? You've really got to start there before you start investing in your marketing and in your systems and in all sorts of other things that are absolutely critical in later stages, but aren't critical here. And one of the best ways to begin getting your value equation right is to really focus on what is your offer and look at two of the P's, we call it. Every offer has four P's and we look at two of them in the early stages and those two are what is your product and what is your promise? Sorry, what is your product and what is your promise? And then what is the process that you're giving your product away at? What is the way that you fulfill on it? So you want to really form a well formed offer and then see how that goes, have sales conversations with people in order to get that value equation right.

I just love that because we were talking in Chicago and just saying how I, how much this resonates with our eight profit activators. You know, with the before unit really being about selecting your target market as profit activator 1, but then jumping forward and starting with the user in mind, starting with your client in mind and really thinking through what would be a dream come true for them. And can you get that result? Always, always focused on the result before you start, you know, focusing on the price and on the, you know, you really want to focus on your ability to deliver the result and then figure out what that's worth and what the price is.

Yeah, there, there are, there are a couple of dimensions in the startup phase when you're trying to get the value equation right that will Determine how rapidly you grow. The first is whether or not you're focused on the value equation as your primary outcome. And this is something that we've seen a lot of where people are just getting going and they get engaged with all the different ways they could provide value to different customers. And particularly companies that are in more of a service kind of industry or service business, they'll kind of invent a new company for every customer they meet because, you know, you need money and the person, this person wants their cat rescued out of a tree and the other person wants a haircut. So you have a kind of a haircutting, cat rescuing business for a while, you know what I mean? And if you're spending time chasing opportunities but not drawing a conclusion about something that you could repeat, where it's the same value equation, where you can kind of know that, oh yeah, this is generally the value I provide, this is how they, this is the value they get. And then this is what I can charge for it, and hey, it costs me less. Until you arrive at that conclusion, you're parked really in terms of growth. You may get more income or more revenue in the short term, but your company is not scaling or not growing in any kind of way that builds on itself. So the first way to grow rapidly is in the startup phase to focus only on that value equation, not anything else. And then the second is that you want that value equation to have as wide a berth as possible. If I could use a sailing term, you want it to be really a big distance between the value the customers get and what it costs you to deliver it. And then you have a lot of flexibility on price. You can experiment with charging a little more, charging a little less. But if you can deliver to a customer, say 10 times the value that it costs you to provide it, that's a wide range and you're going to have a lot of flexibility. That company is going to grow more quickly than if it's a narrower margin. Do you know what I mean?

I often see people and tell me if this fits with what you're saying. One of the things that I see people do is they come into something with a preconceived notion that they're going to package up a $79 info product or $199 processor set of CDs or something like that, an Info product, and they're coming into it with this preconceived notion of what it is that they're going to create. Rather than thinking about what you know is ultimately the result that they're going to create. And if they were to just focus on creating that result, they may be able to charge 10 times more for. For the result than just limiting themselves by, you know, constraining it before they go into it.

Yeah, absolutely. The. We recommend that you actually pick your price last, not first. So first you want to understand what's the biggest value that I could deliver. And that value is expressed by what customers are comfortable. What do they get from that? What dollar value do they place on what they get? And if the price is the same as that value, then the customer doesn't care whether they buy it or not. In other words, if you have something you're selling and I give you exactly the right price for it, then you don't care whether I buy it or not. Because if I don't buy it, you have the thing. And if you do buy it, you have the money, which is the same value. So you don't want to be in a situation where your customers don't care whether they're doing business with you. Right. So they have to get more. So you get the value nailed down first, then you get your cost structure nailed down so you know what it takes you to deliver it. And then last thing you do is come in and go, okay, now what's my price strategy? And, you know, you mentioned you could end up delivering a lot more value and charging a lot more for it. And that's one way to have more margin, more profit. One of our clients who was the founder of three companies, the least valuable of which was sold for $300 million and the most recent of which is Quantcast, the audience measurement for the, you know, for measuring Internet audiences. So Paul Sutter's name, and he said every time he does a company, he wants the customers to say, I'll take as much as you have as soon as they find out what you're selling and what the price is like selling a dollar for 80 cents. I'll take as much as you have. And that. That kind of automatic, I'll take as much as you have is a huge growth accelerator, because then you don't have to convince the customers to buy anything. All you have to do is let them know what it is you're selling and how to get it. And it's a very different process.

Yes. Yeah, that's. Do you have an example of something that would fit along that line?

Sure. So Jennifer and I are currently investing in a company, a startup company, and this company provides. Done for you. Content marketing so it will do your social media and your blog and your email and all those kinds of publish those things for you. And we were talking with the CEO and, and we're trying to come up with pricing, you know, what's it worth to an entrepreneur to have all of that done for you? Done for you? Well, and done for in your, in your voice. And you know, we came up with the figure something like 1,500 to $2,000 a month is what it's worth. And we, you know, we talked to people, we probably could get that price from certain people, but then we said, what if we could, what if we could offer it for 500 instead of 2000? Because then I can imagine entrepreneurs never canceling, not having to think about whether it's a thing that they should pay for or not. You know, it doesn't matter whether they're making money this month or not. They just want to keep doing it. And so we drove the price down to 500 or 600. 599, I think, is where we ended up. And then the question was, okay, how do we drive that cost down so that we can actually produce a high quality product at that price? So that's an example of just going towards velocity versus margin. And especially in any kind of reoccurring revenue business where you've got a subscription, because, boy, that average profit per customer really adds up. If they don't cancel in six years and seven years versus you get them for three months at 1500 to 2000. And then, and then they're like, well, jeez, this is expensive.

It strikes me that in the startup phase, it's important to be able to push the accelerator pedal and see the long term potential of the offer or the business that you're entering into.

Yeah, if you just respond to the customers and what they need and kind of, if you let your email box determine your calendar, then you're not going to grow very rapidly. You might not grow at all. Because each time you go from one phase to the next, you have to do a sort of unnatural act. You have to do something very counterintuitive because once you get the value equation right and the, and you're kind of exiting that startup phase and you're into the next phase, your whole mind has to change about everything you're doing and you have to be slightly less responsive to customers. And you would never be able to do that unless you weren't looking at the long term and understanding that you're running this thing through a series of gates or through a series of thresholds and you want to compress the time as much as possible.

Yeah, it's interesting. So it seems like in the beginning the getting the value equation right, you're going to, you're sort of over investing in the fulfillment of it in the, you know, using it as kind of a R and D lab in a way to figure out and get really behind the scenes and see what things, how it actually works, how people are experiencing it, what they perceive, what's working and what's not working to get it all tweaked, I guess. Right. And ready to go.

Yes, absolutely. So you know, once the value equation is nailed down and you know that you have not just one customer or two customers, but you can see that if you meet a customer with a kind of particular profile or particular situation, you know, you can slam dunk, you can deliver value, it's going to be awesome for them and it's going to cost you less than the price. Then you really need to move into the next phase, which is the sustainability phase. And Jennifer, I thought you might share some stuff about that too.

Yeah, I just wanted to interject about startup real quick though. I'd like to underscore there are two vectors, two main vectors to play with to optimize growth in the startup phase. And one vector, as Brian said that I just want to underscore is that you want to increase the customer's perception of the value that your offering is dramatically and that way you have a lot of flexibility. If they are feeling like it's a huge, huge value and it's a no brainer for them to invest, then that gives you a lot of flexibility around your costs. And so make sure that you're looking to optimize that vector along with setting the price so far that you have people that want to come on board very, very, very quickly. So if you lower the price to the no brainer price and you increase the their perception of value simultaneously and you optimize between those two, you're optimizing between having good profits which is setting the value high and speed of adoption which is creating a price that's a no brainer for them to adopt very, very, very, very quickly. And there's like an optimal level of optimizing for those two vectors that will allow for rapid growth. And so that's kind of a process that you look at when you're getting your value equation right in startup. So that's that phase. So really when you're in that phase, that's what you're doing, you're not doing anything else. But once you've got that right, and it's an easy yes and they're getting the better end of the deal, it's time to move forward and into our second phase. And the second phase is what we call the sustainability phase. And this phase is really about three things. It's about having your business become predictable, repeatable and replenishable. And what I mean by that is when you look at the major business activities that you're going to be spending most of your time in, look at, let's say starting with marketing, you've got your marketing as one of those major business activities, you've got sales as another major business activity, and then you've got fulfillment as another big activity. And then what makes up the rest is profit, right? And you know, there's kind of a dotted line that we draw between profit and overhead, because that is often quite arbitrary, right? You know, how much you tend to spend on the overhead of your business depends on whether you have your office in a big palace on, you know, some main street in a big metropolitan city, whether you've got your Learjet set taking you back and forth to your meetings, or whether you've got a home based business where you're running with a remote team. And so that would change the nature of your profit and your overhead. But really what you want to do is look at making your marketing repeatable, predictable and replenishable. You want to make your sales repeatable, predictable and replenishable. You want to make your fulfillment repeatable, predictable and replenishable. And sometimes the way I talk about that is it's like creating a crank for your business. What I mean by a crank is a good visual image. Because with a crank you have a known quantity of effort in which yields a known quantity of work or result out. Imagine in your business, if you will, that you had a marketing crank so that you knew if you turned this crank, you would yield a predictable amount of profits and revenue. Or a predictable amount of leads would come out the other side. A predictable amount of people would start hearing about you and opting into your offers. A predictable amount of people would start calling you up at your business to ask about how they can have your services or your products. So what you really want to do in this phase is create those cranks for each area so that you've got them predictable, repeatable and replenishable. Super important. And often what happens as you're listening and looking for where you are in. The story is you'll have one of these set up as a crank, but not the rest. Perhaps you have automated your lead flow. You've got a predictable, repeatable and replenishable amount of leads. But maybe what we see often is that entrepreneurs haven't created a predictable, repeatable, replenishable flow with either their sales or their fulfillment. And you can see that they can't really move on to really grow rapidly until they've got that, because one aspect of their business will break. And if they send too many leads to fulfillment and they haven't gotten a really nice, repeatable, predictable way of cranking out fulfillment, then all the efforts in perfecting that marketing crank are going to be wasted. And so you really want to create all three of these before you move forward, and that's the next step.

It's kind of funny because what I often see is people the marketing crank. The good news about it is that it is by nature sort of scientific and repeatable. If you're using direct response marketing, you can sort of deploy something and generate a lot of leads. And then what I often see is people get caught up or get surprised by the volume of leads that they're able to generate and they're not able to handle the conversion of those or the fulfillment of those. And you end up like Lucy at the chocolate factory with all the leads coming and they're coming in too fast and they can't. They can't, you know, deal with them all. So they have to shut down the line for a little bit to kind of catch up. And then they get back in the beginning because they're not busy anymore and they have to crank it up again.

Yeah, exactly.

I'll sometimes call it, and I think I've even heard you say this, Dean, is you got holes in your bucket, you're pouring a whole lot of leads in and they're just kind of through the holes in the bottom, they're just kind of flowing all the way out. And you're leaving a lot of money on the table and you're losing a lot of steam in your business and your ability to grow because you haven't figured out how to capture those and have all three of those cranks really forming one machine that's well oiled and running smoothly. And that's really what you want to do in this phase. For us, for instance, a good example of a marketing crank, since we brought it up, is for us, a teleseminar is a really good marketing crank. For us, you know, We've used these successfully in our businesses and they yield a predictable and repeatable and replenishable source of revenue for us. So if you've got a business where you use these, you'll relate. We partner with someone who has a list, they invite them to a teleseminar which we host. Then we provide valuable content to everyone on the call. At the end, we talk about our products and services and then they enter our sales funnel. Now, teleseminars are completely repeatable. We can do them over and over. We can do many of them, we can do them with different people. They're replenishable insofar as the minute we do one, it's not like all the leads on the planet have disappeared and you can't replenish those sources and continue to do more. And then they're predictable. We know based on how many people come about, how many people are going to eventually become customers. And that's a percentage that we've calculated from having done these and refined them and gotten better and better. And so just to kind of make it real for the listeners, that's an example of a marketing crank where you've got it predictable, repeatable and replenishable.

Go ahead, go ahead, Bart.

Oh, I was just gonna say that.

When you're doing that, the whole. And it can be anything, it can be a predictable pay per click campaign where you set up on Google AdWords where you know that your clicks are going to cost you 50 cents or a dollar and you know that when 100 people come that 20 of them are going to leave their name and their email address. That's sort of a repeatable thing. Or if you've got a postcard campaign where you can mail a thousand postcards and you're going to get, you know, to get 100 opt ins from sending people to that same page or any of those things that you know are going to work again. I think you guys call those things assets, right? Is that what you call the.

Yes.

Yeah.

We have an important distinction around assets, which we call those assets for a specific reason because we want people to have the relationship to those things that they actually are a valuable piece of their business that is worth investing in. And it's not just about taking an action here and there that emulates a role model, but it's really about building an asset that is valuable to the business and that you can actually use to generate your leads. And so yes, I would call a pay per click campaign that actually yields revenue for you an asset and one that doesn't as an incomplete or not a very well oiled crank that you still need to refine, the more erratic it is or the more non predictable and non replenishable it is, the less it becomes an asset and the more it becomes a drain. And it's really important to know the difference and to really build it such that it is an asset that you can tap.

In this phase. Sometimes I think of the assets, you know, those little wind up dolls where you twist them and they kind of hop on the table. I sometimes think of the business as all these little assets. You know, you've got your pay per click campaign or your teleseminars and your relationships with joint venture partnerships or you have, you know, my mom's marketing crank, when she was a successful executive coach years ago, when before there was such a thing as an executive coach, she would say she was a coach and people would say, well what sport? So her marketing crank was that every year for Thanksgiving she would write notes to all of her past clients telling them what she was thankful for about them and then by January some number of them would come back to her with more work. That was kind of how she did it. So you have all these little cranks and these little wind up dolls that are, are jumping on the table. And a good clue that you've got a crank is that if you crank it harder, if you invest more time or money into it, then you should get more out of it. So the pay per click, the campaign that you mentioned, if you increase your bid price or you invest more time and money in it, you'll get more leads out. The teleseminars, if you do more of them, you'll get more leads out. So then you can modulate how big your business is basically by how big hard you're working at that phase. And you know, you mentioned the people who aren't ready for the influx of leads. I also see people who are afraid of that. So they never start and kind of stop at startup mode and they don't really get the cranks going because they're worried. And just to help people out, you know, focus on getting your fulfillment crank ready but maybe not started first. So you know you can fulfill if people come in, you know you can please them, you know you can give them the service that you promise and then do your marketing crank. And if you have a lot of leads and you can't close them and you're leaving money on the table while you figure out your sales crank, that's Fine. So do your fulfillment. At least set it up. If not, press go then to get your marketing crank going, then get your sales crank going. And if you end up with a lot of leads and you're closing them and it's more than you can handle, that's the time to introduce partnerships where you're giving leads and business to other people. Everybody loves partners that want to give you money and give you business. So it's really easy to find partners who, you know, have extra fulfillment, extra capacity, but don't have the leads or the sales. And if you end up owning the leads and the sales and owning those cranks, you're going to have plenty of time and plenty of money to invest in fulfillment over time to round it out. So if you do it in the right sequence, you think about your fulfillment crank first, then you build the marketing one, then you build the sales one, and then lastly, you press go on that fulfillment one. If you do that in that right sequence, then every step is easy. And if you're struggling and it's hard, then you've probably done it in the wrong order. Yeah.

And, you know, I think it's important to note that there's nothing. These are kind of things that you can develop on a smaller scale. You know, there's nothing. I often see people, you know, spend a lot of money, like they want to send out 20,000 postcards right out of the gate when they could test, and they haven't even tested whether this works. When you could get the. You could get the answer for much less money, you know, to make sure that you're on the right. On the right track.

Yeah. No reason to scale your crank before you've tested it and know that it's actually a working one.

Right?

That's exactly right.

Yeah.

Yeah, that's right.

So I just want to, you know, Brian brought up the idea of partnerships, which are key, because you can't scale a business and grow it really rapidly without partnerships. You know, we're working all alone. And in order to really set yourself up to do that and to grow, you really need to understand some very important numbers in your business. You need to understand what we'll call the cost structure of your business. So let me walk through that just a bit. You know, earlier I said that you look at your business and you look at the four major activities of the business, and pretty much everything you're doing in your business will fit into one of these four activities. And when you're looking at the cost structure of your business, what we want you to do is for every dollar of revenue your business is making, you need to allocate that revenue into these major activities. So how much of every dollar by percentage is allocated to your marketing, how much of every dollar is allocated to your sales, how much to your fulfillment, and then how much to your profit and overhead? Right. And so you really want to get these right, because if you understand in your industry how that revenue should be allocated, it allows you to enter into partnerships with confidence. Because, you know, let's say you want to enter into a partnership with someone who's going to handle, let's say, your marketing. You know that marketing in your industry is approximately worth, let's say, 40% of that revenue. And if someone comes in with a deal and asks for 60% or 80%, you know whether you can afford it, whether it's going to be sustainable, because you know that you're spending the rest of those dollars on your sales, your fulfillment, and your overhead. And so it allows you, by knowing this cost structure, to know exactly how to enter into these partnerships. And it also gives you the discipline of knowing how to value your time, effort, and energy within your business and what you ought to be spending on each of those activities. You know, if you want to grow and you find out you're spending zero dollars and zero time on your marketing and you're wondering, why aren't you growing? Well, maybe it's time that you need to spend 40%, if that's your cost industry or that's your industry model, 40% of your time, your money and your resources on that. If you're not selling and you're not converting and you're realizing you're not spending that time and that money in investing in that area of your business, perhaps it's time for you to do that. And so the idea when you're setting this cost structure up is it's not just a guessing game. What you want to do is you want to look at what is standard in your industry, and it's dramatically different from industry to industry. But you look at your industry and you want to be kind of within a reasonable range of what is standard for your industry. So that when you're trying to work with vendors within that industry or partners or customers, that you're fitting within where your industry's at. Yeah, go ahead.

That brings up two questions for me then. So for everybody, what distinction do you make between marketing and sales?

Sure, sure. I think one of our definitions for marketing sales is marketing is about getting people who don't Know about you to know about you.

Right.

And so that's really marketing. So the minute someone goes from not knowing about you to knowing about you, you successfully market it to them. Now they know about you. So in sales, it's about getting somebody that knows about you to purchase your product.

Right.

This is slightly different.

This seems like how resonant this stuff is with the profit. Oh, good, good. You know, we look at like profit activator 2 is getting them to raise their hand, turning an invisible prospect into a visible prospect. Profit Activator three is about educating and motivating them. And Profit activator four is about making an offer. And those things would be kind of the distinction between marketing and. And sales. So it's, you know, everybody that's listening is familiar with our eight profit activators. And that really is the essence of your before unit, that distinction between marketing and sales. So thanks for clearing that up.

Yeah, that maps really well.

Then how does somebody know in their industry? You talk about the standards or the norm for their industry. Where can somebody get information like that? Or how would they know what is appropriate?

Well, the slam dunk way is to meet people who are your competitors and who are in the industry, who've been in the industry for a long time and become their friends. We're seeing this trend more and more, that the idea of competition is kind of fading away and it's being replaced by the idea that we're in this together. And if you're trying to provide value, like I know, Dina, one of your activities for this blog is you're trying to help entrepreneurs be more successful and have the information they need to have an easier time reaching their goals. One of your goals is it should be as easy as possible for an entrepreneur once they intend to do something for them to be successful in doing it. Well, Jennifer and I have the same goal. So I suppose you could squint and say we're kind of competitors because you're helping them and we're helping in them. But I think that's kind of silly. It's actually more what we're seeing, that we can connect and be friends on the level of what we're both committed to, which is the value that we want to give the entrepreneur in the first place. And if you're doing that and I'm doing that and Jennifer's doing that, we're all doing it together, then the more people that get help, the more all of us have done what we came here to do, and we can kind of feel gratified in that. So once you have that mindset, then, you know, you have a beer with your friend Dean and it's like, hey, man, what do you pay for sales? Like, you got a sales guy and it works for you. So what's your commission rate and how's that work? And do you have any management? Do you have any software that you have to pay for? And are there any other sales expenses that are kind of hidden in there that I don't know about? So I'm trying to figure out what that percentage is and how that works for me. So that's the best way. We'll give you a shortcut. For service professionals, you can count on fulfillment being about 50% of revenue. And then, I don't know, Jennifer, you want to talk about the marketing and sales pieces of those for the service funds?

Well, yeah, I would just say, like, if you're looking at, let's say like a consulting business, like a coaching business like ours, right? For our business, for instance, the coaching side of our business, not the program side, you know, our fulfillment is about 50%, you know, what we would pay for anyone managing all the sales activities, which is not just the commission, but anything relating to sales, that's between 10 to 15%. Marketing for our business is about 5 to 10%. Overhead should be about 10% or less. And then profit leaves you about 20%. And so that would be a typical service business.

Right?

But if we were to look at a completely different business, like let's look at a car company, right? It's like selling a Honda, right? The fulfillment in that case would be about 80, 90%. Right? Because the cost of the car itself is the lion's share of the revenue structure. And then the 20% leftover is actually split between sales and marketing and profit. And so those are two very, very different models to look at. And your industry, if you're more towards the service side, is going to have a higher percentage towards marketing and sales. And if you're more towards the product side, the idea is you'll probably have a higher percentage towards fulfillment. And we consider many people that probably listen to your show who are in the industry of creating products and programs online, we still kind of classify that as closer to a service. Even though you could technically buy a physical, tangible cd, really what you're doing is you're offering the service of education and help. So it's kind of in that area in between. And so rather than fulfillment being 50%, you know, I'd say an Internet marketing company, company's Got more of a where the marketing is around 40%, your sales is around 20%, your fulfillment is around 30%, and then the remainder is around profit and overhead. And so that's a generalized set of models that fit quite a few industries all the way from a full on consulting based service business to a product business, to a kind of hybrid in between, which is your programs and online. And so those are some good rules of thumb. But really what Brian said about reaching out, that will give you a sense, you know, reach out to the people in your industry, realize that there's nonlinear growth available. If you all band together and collaborate and contribute to one another, it really unlocks growth potential. And so we really recommend reaching out to those having mentors and advisors that can help you find out what it is for your industry and then reaching out to the people that are really directly in your industry as well.

Awesome.

Yeah, yeah. And I guess another real quick key, and then we'll move on to the next phase is, you know, even if you're wearing a lot of hats in your business, right? And you know, you look at us and say, well, wait a minute, Brian and Jennifer, you know, I'm, you know, the chief marketing officer and the chief salesperson and the one to fulfill and chief janitorial officer, chief janitorial officer and chief garbage officer and all of that. And if you're in sustainability phase and still feeling that way, really it's important to have the discipline to separate those activities in your mind and just start to notice the different activities that you're doing. You know, are you right now generating a new lead or are you turning them into a customer or are you working on your product or fulfillment? Which of those activities are you doing? How much of your time and energy and efforts are you spending and keep track and make sure that it all makes sense given your model. Because what we find is most entrepreneurs are scratching their heads going, why am I not growing? And when we actually have them take it apart and look at how they're spending their time and energy and resources, even if it's all them, it's, it becomes super clear. It's like, oh, you're not spending any time on selling, so you're not closing any leads. You're spending one hour a week and you really want to be converting. And if we know how many sales conversations you have with a predictable crank, you have to have 10 hours of sales to yield one customer out, let's say as an example, then you need to be doing that many hours of sales 10 hours of sales in order to get your one customer. And if one customer is all you need each week to create a sustainable business, then you know what your time is.

Right.

And that's the percentage of time out of your full day. And so it's a really important exercise, even if you're an entrepreneur with a very small team or even if it's just you as a solopreneur. So just want to underscore that because you cannot move into sustainability phase before you've created those cranks and then figured out this cost structure. And then, and only then do you move on to the next phase, which is really where it gets interesting, which is scalability.

Yeah, I think that's really kind of an interesting dilemma is that often if they're working the crank for the marketing and the sales, and then they get caught up in that, they're so busy delivering that they don't have time to go back. I think part of the thing is to really kind of observe it as a process. I was. Have you guys ever seen that show how it's made on discovery?

I've heard of it, yeah.

Where they. Well, they go through and they show manufacturing processes of how they make bowling balls or how they make light bulbs. And it's, you know, they narrate the process from the raw materials all the way through the assembly line. And at every step along the way, they're describing what happens next and what happens next. And one of the things that I would use as an example of that is trying to imagine creating the narrative for your business process to say, this is how it works. We run ads on Google pay per click. And whenever somebody finds the word Winter Haven, Florida real estate date, they see our ad and they come to our website and they leave their name and their email address. And then every week we send them a newsletter that's got all the updates of all of the new properties that come on the market. And we invite them to come on a daily tour of homes or to come to a home buyer workshop or to get a free home loan report. And, you know, X percent of the people that do that engage in a conversation with us, and then we're able to help them find a home or come and sit with them about selling their home. And so, you know, kind of imagining yourself narrating your process, and if you can't narrate, you know, seamlessly how the whole throughput system works, that gives you an indication of really what you need to. What you need to work on, but it also gives you an opportunity to imagine that part of the process happening without you imagining that somebody else is doing it. One of my favorite things in that how it's Made show is that they describe sometimes a process that involves human intervention. And they say a worker takes this and does this, and it's just so kind of like, it was kind of interesting that it's just in their minds, a worker is a human machine that does this specific thing. And it's kind of. You know, one of my kind of buzzwords is, you know, human automation is still automation. Right. To you, it doesn't matter whether it's a human or a machine, as long as it is being done. That's automation.

Yes, absolutely. Absolutely.

Yeah.

You know, I just want to say about this sustainability phase, is that the sad news for us when, you know, we've observed thousands of entrepreneurs, is that this happened. This phase tends to be where most of most people park. You know, this is the step in our experience where most entrepreneurs stop developing.

They never figure this out.

Right.

Or they. It's just this constant dance of, you know, going back and forth between being too busy or being not busy enough and, you know, dancing through all the parts. Yeah, yeah, I see that all the time. Just amazing how that. You're absolutely right, that that's where they get stuck.

Yeah. You know, these first two phases are really focused on generating income.

Right.

And what you end up with if you stop at sustainability phase is that you end up with a lifestyle business, and it makes you just enough money to give you a lifestyle that you're comfortable with. But, you know, last I checked, there's no wealth. You know, you're really dodging the wealth bullet, as we'll sometimes say, if you stop here. Because it's not until you move into this third phase, the scalability phase, that wealth actually occurs. Here's when you really are all about automating, delegating, and outsourcing. So the scalability phase, you're automating, delegating, outsourcing. And what you're really doing in some ways is working yourself outside out of a job. You're being a job creator at this point and taking every area of your business, your marketing, your sales, your fulfillment, your profit and overhead even. And looking at how do I automate that, how do I delegate that, how do I outsource that, such that everybody that comes in gets to add to and form their own multiplier and their own call crank, and then expand it from there. And what we see as the big pitfall in this phase so often, which has people not really move into it, is that they believe that they're the only one that can do the job. Can't tell you how many times the arrogance of. No, no, no, you don't understand, Brian and Jennifer. I can't outsource or delegate the fulfillment or nobody but me can write my copy. You know, I'm the only one that knows how to write the marketing for my business, and I'm just the best.

Nobody can paint a house like me. Right, Exactly.

Yeah.

I'm the only one who can paint a house like me. Sorry, go ahead.

And that may be true.

Yeah.

And, well, what we find when people have that belief, it's usually because they don't fully understand what the magic fairy dust that they're using that's creating the success in their business. And because they don't quite understand it fully, it seems to happen because of their unconscious competence that they don't actually know how to outsource it, delegate it, automate it, and have other people do it. And therefore, they're perpetually stuck because they're the kind of limiter for their own business. So the thing that had you become the most valuable entrepreneur, the thing that had you wearing all those hats and willing to work all night and be the janitor on one day and be the salesperson on the other, that very thing that got you here, that got you to a sustainable business with a crank, is the very thing that's in your way to actually generate wealth and grab that brass ring at the end of the game. So what you really want to do is work yourself out of a job and create a position such that you understand it well enough that a monkey could run your business. And when I say that, I always get a sideways glance, like, what do you mean a monkey could run your business? And really, if you're creating a business that only geniuses could run, imagine if it's you and only the few geniuses on the planet that are capable of running your business. And that's how you see it, then how big can you really get? How can you really scale? Well, you can't. And when I say monkey, what I actually mean is maybe not quite so literally a monkey, but what I mean is, like, so that an average person coming into that position would do well.

You're saying average people are monkeys? Is that what you're saying?

Well, not exactly.

Warren Buffett has said that in his organization. Operationally, his role could be filled by a cardboard cutout of him.

Right?

Right.

Well, then he's Then he. And he gets it. You know, look at the size and scale of everything that Warren Buffett touches. And you know, and even like a.

Richard Branson, who's got 300, though, that. We had our episode with Richard Branson.

Oh, great.

And he had said, you know, because Jannik Silver asked him, what's the, you know, secret to scaling to, you know, to a billion dollars? How do you do that? You're running 300 or 400 companies and all of that. And Richard just. He said, well, first of all, you. You can't do anything. You have to kind of be able to get out of the way, you know, ride, set the vision and find and trust competent people to do their best work, you know, and get out, stay out of their way.

Absolutely. You know, that's really the, I think, the biggest mindset shift to help people get into scalable mode full force. You know, like Jennifer said, if you recognize that you don't know the value that you provide every time, you think you're the only one that can do it. Because what people think now is that other people that they're hiring aren't as good. You know, I can't hire any salespeople because I can't find any good salespeople. And anytime you have that thought, I can't hire someone because I can't find anyone who can do it. What you need to do is go, wait a minute. That's actually a trick. And the truth is that I'm doing something and I don't know what it is. And if I examine what it is and find out, then I'll easily be able to find the people to hire to do that. And if you don't do that, you end up just scaling the one piece of your business which doesn't generate any revenue, which is. Yet entrepreneurs scale their overhead. They tend to scale that piece first. So they'll get an assistant and then a. The bookkeeper and then a lawyer. And pretty soon you have four or five people helping on the overhead piece. But you. But you're still holding all the weight yourself. And sales, marketing, fulfillment.

Yeah, Yeah.

I just want to underline figuring out what it is that you're. What is the magic? And figuring out how to sort of. How to sort of bottle it, package it, and pass it on to somebody who can fulfill that role for you.

Yeah. You know, companies that scale are led by people who continually are investigating where and how value is being produced in their organization.

Yeah.

And then innovating ways of communicating, educating, and rewarding those Capabilities. Right.

So your new job, even if you can, it seems like, even if you can get somebody who could do it 80% as good as you, but the way that things are set up, you, you only get to spend 20 or 30% of your time doing it the way you do it. You know that, that if somebody was able to do it 80% as well as you, but they were able to do that 100% of the time, that, that's a big scalability and you could get five people doing 80% as good as you. That's, that's, that's scalability there.

Yeah. And this is where the monkey, this is where the monkey comes back in. Because if the difference between 80% and 100% is significant in your business, if your business is riding on that difference, then you have to go back to the drawing board and your value equation is probably screwed up. It probably relying too much on you and your specific genius in order to pull out that value. If you can redesign the business so it's easier to provide more value and a larger population can easily provide the high value that you've got because you've developed a system or you've developed a process, or you've developed an approach, or you've identified a need that nobody else had identified. If you can make it easy so then the difference between 80%, 100% really is nothing, then you definitely get out of it. But as long as you're taking up all the roles, then you'll never have a team and you'll only have one man year per year to work on your business versus 5, 10, 100, 500, 5,000 man years per year.

Yeah, I love that.

Yeah, it's coming.

Yeah. Here you're shifting from generating income, which is primarily your activity in the first two phases, to here you're literally building assets and you're building positions inside the company that are profitable job descriptions.

Right.

So that everybody that you bring on board adds to the bottom line, adds to the ability to market, sell, and fulfill on your products, such that if every employee or every contractor, everyone that you partnered with Created at least 2x what you're paying them in bottom line revenue, wouldn't you take as many as you could? Just like the Paul Sutter phrase, you know, I'll take as many as you've got. If everybody that you added to your system was hired in such a way that they were a profitable job description, and then it was just a matter of taking a month or two to see if they were ramping up and creating that 2x, then you're going to want to just continually hire and continually create jobs and continually create impact on a much, much, much bigger scale. And that's really what this phase is about, is getting good at doing that.

If you imagine scaling or automating, delegating and outsourcing your marketing and then your sales and then your fulfillment, the next thing that gets automated is your profit. And if your profit is your income, then automated profit is wealth. And that's when you first have. It's actually the first time that an entrepreneur can, can start to engage in the idea of creating wealth is once they're well on their way to scalability. And as Jennifer said earlier, in that sustainability phase, you're trapped in a business that you can't quit, you can't leave it, you can't quit it. People depend on you to keep doing it, but it's never going to make you wealthy.

Well, so in work, I can't believe how fast the time's flying here, but in our last few minutes kind of thing, what would be your kind of summary advice for the three. For the three phases? Just as kind of a quick review and maybe some action items for people?

Sure.

So if you're in the startup phase, you got to focus all your attention on getting the value equation right and having the widest distance as possible between the value that you're actually providing that the customer actually receives. Not that you're telling them they will, but the value they actually get and the cost that it costs you to deliver that.

Yeah. And then in sustainability phase, it's about creating a crank for your business such that your marketing, sales and fulfillment are predictable, repeatable, and replenishable. So you really want to focus on creating that crank so that a known amount of energy in yields a known amount of revenue and opportunity out. And then secondarily during that phase, you want to understand the cost structure of business. Understand those 4, 5 numbers, know those percentages well so that you can begin to enter partnerships that help you grow.

Once you're in the scalable phase, then you, your job changes. Your first job changes from creating value for customers to creating valuable jobs. And so you have to be creative about thinking about what Jennifer and I call profitable job descriptions. You got to create job descriptions where if someone fills the job description, they generate 2, 3, 4 times the value for the company that they cost in terms of their salary and benefits. So you create those job descriptions and you fill them. And in doing so, you're automating, you're Delegating or you're outsourcing, first marketing and then sales and then fulfillment. And then you have a fully scalable business where your last job that you hold is holding the vision and leadership. And that's when you actually get wealth and then you get that brass ring. You know, the reason entrepreneurs go into business for themselves in the first place, when you, when you poll them, there's two main reasons which are, number one, freedom and number two, wealth. And the way to get freedom in your time and, you know, generate wealth financially is you have to get through these gates that we just said as quickly as possible. And developing the next phase of your business is higher urgency and more important than any customer concern, any short term fire that you're putting out than any email in your inbox. So prioritize that first and then make room or make time after you're doing that, after you've done that, for handling the day to day.

So you've got to be prepared that it's okay that some people might slip through the cracks or that you might not be delivering the level of service that you were able to deliver when that was your sole focus and be okay with that, knowing that in the greater good, this is going to be the long term.

Yeah, gotcha. So in closing, I'll give you an image. I think sometimes being an entrepreneur is like being a ping pong player and you're playing against the, the world champion Olympic ping pong player and the balls are coming at you at a really fast rate. All you can do to kind of bat each one back and what you got to do is intentionally let one go by and use that time to lean over and pick up a brick and put the brick on the ping pong table. And if you keep doing that, pretty soon you have a brick wall that's automatically bouncing all the ping pong balls back and you don't have to swing the paddle at all. But if you keep swinging at every ball, you're never gonna, you keep swinging at every ball, you're never gonna pick up a brick, and you're just gonna swing at every ball from here on out. So you do have to be willing to let things go occasionally, you know, this one or that one, in order to put something in place that can build your future and that ultimately is in service to the larger market and to what the value that you want to provide.

Guys, this has just been so valuable. I think this is going to be one of the episodes that people listen to again and again and again and get something different out of it every time and listen to it maybe every quarter and get a different thing when they're at a different level in their business. So thank you so much for taking the time to share with us. It's fascinating to me. I just think you guys are doing such a great thing and you've got a lot of really simple to understand ways to look at rapidly scaling your business. So I appreciate you.

Yeah, it was an absolute pleasure. Thank you for having us, Dean.

Yeah, thank you, Dean. This is a lot of fun and I'm just really pleased that we can help people out and help them scale their businesses.

Perfect. Now how can people get more information if they want to kind of seek you out and go deeper with this?

Yeah, there's so we have a lot of ways that we work with entrepreneurs to help them grow and scale their businesses and around this topic. On our website, mindmoneymeaning.com we have a link if you say mindmoneymedia.com createwealth and on that link you'll find us going way, way deeper into this topic. You'll have a report for each of the different phases. We'll talk more about how to do cost structuring of your business. You'll see a video of us talking through it. We'd love to share that with anyone that heard this call. It's totally free and you can find it@mindmoneymeeting.com Create Wealth. We'd love to share those with you and your audience.

Perfect.

Great.

And I'll put up a link to that on our on ilovemarketing.com too.

I think what I'm going to do.

Is put up a picture of the image that was with the circle and the lines because that's kind of a central visual to what we've been talking about. That was really what kind of hit home for me when I saw you talk about this in Chicago. So I'm going to put up that visual for people too. So if you're just listening on itunes right now, if you go to ilovemarketing.com you'll see a visual that really kind of helps cement this in your mind so you know what we're kind of talking about. And then I'll put up the link to where you can download their information too. So guys, thank you again. It's been phenomenal. I look forward to revisiting this. I think it'd be good to maybe have another episode very soon and go a little deeper with this. So I appreciate it.

That'd be great. Thank you.

Thank you.

Thanks, guys.