I Built 4 Businesses In A Row To Show It's Not Luck

I started four businesses that cracked 10 million in a row. I want to share the frameworks and lessons I learned from the many mistakes that led to those four in a row so that hopefully the next business you have or the current business you're on and achieve that level and beyond. So the first big company I built was called Gym Launch. It was a licensing business for gym owners. As in, I had a model, and I would license that model to them. They would use those things, they'd make more money. The average gym would make an extra $100,000 a year in profit. Business at its peak was worth about $150 million. And then Covid hurt that business, and I ended up selling it for 46.2 million to American Pacific Group, which is a private equity firm out of San Francisco. The first 10 customers I got from Gym Launch, I got somebody to pay a VA in the Philippines to scrape CrossFit's database and then send me the list of emails. I then uploaded them to Facebook, made a look like audience off of those, marketed to get a webinar, which no one watched. And then I had 80 leads from people who had opted in, and none of them bought or scheduled a call. And so I looked up every one of the emails manually and I, like friend of them on Facebook, I messaged them and then I got a few of them on the phone to pay me 500 bucks to go out to fly to their gym and actually do the turnaround. Once I started the licensing version of the model, which is the one that really gave me the scale, I was able to sell something that had virtually 100% margins. The first month I think I did like 120,000 in sales. And the next month I did like 300 ish, and then high fours and then 780. And all I was doing was just selling more units, and then we hit a million. The next month, we would look at whatever problems the gym owners that we were with were currently suffering from. So it could be they're suffering from churn, or they could be suffering from margin issues. They could be suffering from they're not getting enough leads, close rates aren't as high as we want them to be. We would then create a hypothesis around what we thought might work. We would survey the community and say who has the best conversion rates, if that's what we wanted to fix. And then we'd invite 20 of them onto a call. We would take all the notes to figure out what things they were all doing. And here's the important point. We didn't say great, we're going to do all these things. We tried to see the few things that they were all doing. Then we'd say, hey guys, this is a big deal. This is like worth the cost of change. You're going to have a demonstrated long term benefit to the business. For context, my best gym did about $600,000 a year. Our average gym who's a gym lor made 600,000 a year. Big picture is that the product has to be exceptional. If your customers are in love with your product, which takes more time because people are like, oh, you threw this thing together. It's like it took six years for me to put all those pieces together and then finally be able to monetize that deliverable. And like that little inch between good and great is years. But the return you get on it from the word of mouth that compounds is hard to fathom. One of the other big secrets of gym launch was that we had a very different approach to acquiring customers. The traditional model of most businesses in general is loss leader. You know, you get someone in for some sort of free thing, you lose money on the acquisition, you make it up in ltv, I came with a different model and I've since done that in every single business I have. So this is one of the important frameworks that I want to pass to you. And it's something called client financed acquisition. So client financed acquisition basically means you get the customers to finance the acquisition of the next customer. So all you have to do is have enough money to get the first sale. And if you make more in the first sale than the cost to acquire that customer and the cost to fulfill that customer, plus the cost to fulfill the next customer and the cost to acquire the next customer, you eliminate capital as a constraint in the business. You can put a dollar in and get two customers back. That next customer buys you two more and two more and two more. All my gyms were able to just crush everyone else because we could outspend them. I've taken that aggressive acquisition perspective to every one of the businesses that I've had. We had many, many terrible things that happened during gym launch. I mean, one, we had Covid, which was tough, you know, for gym owners in general. A third of all of our clients went out of business. Another thing that we did that was really bad was we overhied for our support. I had hired an inexperienced director of customer service. She was a frontline rep that we just promoted all the way through. High work ethic but no experience. And so she hired 35 reps and we only needed five. So we had to lay off people. And then that became a thorn in our side for the next two, three years because our glass door got smashed. The biggest reason Jim launch was successful one is that it was timing. We identified arbitrage on Facebook ads before anyone else did. And we created a turnkey system around how to monetize it. I was running ads on Facebook in 2013. You could put a girl with a bikini and say, click here now, like it was the wild west. The second thing, because of that arbitrage, the average gym was taking home an additional $30,000 in cash in their first 30 days. That was the average. If you take a business where the aver business owner is making $36,000 a year in profit and then you add $30,000 in the first month of working with them, you don't need to worry about marketing. Technically, my return on marketing was 100 to 1 for the first 18 months of the business. But it's because I probably could have just not marketed at all and I would have had the amount of people that came in. So, like, who knows if the ads were doing anything. But everybody from the outside was like, this guy's ads are everywhere. Like, he's killing it. So many people who are copycats, Mickey Mouse gimmick bullshit, people who just used old versions of our stuff to try and sell out of, like all the stuff you would imagine all those guys went out of business because they didn' depth. Prestige Labs was my second big company, which actually was really a sister company to Gym Launch. You built the whole thing of an affiliate base that we acquired through Gym Launch. And so like the first month of being fully operational did 1.7 million. I didn't want to sell supplements for a very long time because I was like, supplements, you just need to eat, eat right and work out. This woman wouldn't leave my office. She's like, my friend says I need supplements. Fine. So I wrote her list. I was like, go get this stuff. Go away. She came back the next day with the things and she was like, I just want to make sure I got the right stuff. And I saw the receipt and it's $700 on the receipt. And the thing that I had sold her was 400 bucks. And I was like, fuck that. I'm going to sell supplement. So I would recruit a gym owner and I would say, hey, we're teaching you all this marketing and sales stuff over here. If you just sell every person supplements, it will cover the cost to acquire a customer just from the physical products. And the beautiful thing with selling physical products is that there's no added fulfillment. One of the problems is the more you sell, the more you have to deliver, right? And so it's kind of this double edged sword where the moment you swipe the credit card you're like, oh shit, now I have to deliver on this, right? They didn't have to do anything. They literally just swiped the credit card. And then we managed centrally, we would ship it direct to the consumer. I wanted to create a brand only gym owner sold. No one else could sell it. We priced it on our home site higher, we priced it 30% higher on the main site. So there was significant savings. On top of that, we gave them a very good selling system. Because I learned a lot about selling supplements. I made it a recurring subscription. So now they got to have two recurring subscriptions per customer. I picked the first 10 customers from our distribution base already. I rolled out 10 locations and then the next month I rolled out 20 or 30. Next month I rolled out another 20 or 30. And then we did the big launch to everyone. There's lots of little things that we did that were gym specific that no other supplement company could do, which has given us a nice moat in that space. Cost me 4 million bucks to start Prestige Labs. About a million of that went to the tech. So we created our an entire point of sale for supplements that was specifically made for gyms. So every gym would get a retail kit. So they'd have a full wall of products. They would have a kiosk which is stand with an iPad type thing on it. Shopify didn't really exist that we had to build this whole thing. And then the other 3ish million went into just product biggest difficulties with it in a supply chain. So like if you run out of one ingredient on one product, like you can't sell the product. There are also legal firms that that will buy all your products and try and test to find something that's off or underrepresented or whatever. There's predatory law firms that as soon as you have a patent, they'll just try and find people to sue and they'll just like basically rev share on the amount of money they can get. The end consumer is just not sticky. And that's just because people don't stick with fitness stuff in general for a long time. So the biggest lesson I have for you guys mosey nation around Prestige Labs is that I probably shouldn't have done it. That's the real, real it is a good business. But I think that if I had allocated more time to just making Gym Launch better, Gym Launch would have been bigger. And because Gym launch stopped growing the year I launched Prestige Labs, I just became CEO of two companies rather than CEO of one. The third business I started, useallen.com, still around today, doing great. I saw where chat was going and I saw where AI and machine learning were going a few years ago. And I figured if I were able to aggregate all of the data from every single type of small business, all scheduling brick and mortar, in person appointments, I'd be able to predictably show what days of the week, what times of day, what kind of follow up sequences got the most amount of people to show up. And since we were compensated on percentage of people that showed up, we were highly incentivized to solve that problem. And I learned a of ton ton about how to get the most throughput for leads. And I've used that in every one of the portfolio companies that we have. And you can usually add 20, 30, 40% to the throughput on ads. Simply your scheduling process. I first started it to solve the problem for gym owners because one of the biggest constraints is that people don't work their leads. Amazing, I know, but the average Gym was getting 9% of leads in the door when they had to work them manually. We were able to get just under 20% of leads in the door without them doing anything. And the average front desk person costs 2,000 plus a month. And we could do it for a fraction of that. Sold the first customers of Allen by going to our distribution base and saying, hey, do you want to try this thing? What was interesting is that we very quickly realized that we couldn't expand outside of our distribution base. The breakthrough was that I realized that we needed to get agencies on board rather than getting small businesses on board, because they'd be like, great, I can work my leads. How do I get leads? And they were like, ah, shit, they don't know how to get leads. So then we started selling agencies, which had another degree of leverage because if you sell an agency, they could have 50 small business owners underneath them. I did two webinars with people who had big agency audiences. So now you go up another level. I could make one pitch and in one pitch get a thousand customers. That was when this thing really took off. I did two pitches and within six months we were doing 1.7. Also ironically, per month through the software company, Allen was the business that I probably learned the Most lessons from I ended up selling that business as well, 75% of it to a strategic buyer who's still running it and doing a good job with it and hopefully they'll have a big exit in a few years. And that was an all stock deal. So under NDA can't tell you, but I can tell you we did 12 million in the trailing 12 months before the sale. That being said, lesson one is that you need to have an in house CTO if you're going to be, if you're going to get into software. I develop software for Prestige Labs. I use the exact same development shop to make the software for Alan. I regret that development shops, honestly, they're about as close to a complete scam as you can come to. Because if you really are going to build a software company, you need to build a software company like that's it. Like you need to build a software company. It's like having a marketing agency and having a white labeled marketing agency doing all your delivery. It doesn't make any sense. Number two is that you want to run pricing surveys early because we unlocked four times the pricing power by simply repackaging how we charge, exploring different ways to charge based on usage, based on recurring fees, different APIs. This is especially true with software because there's so many different ways you can charge compared to maybe traditional service. The third thing is having aligned incentives with your customers often just makes you more money. And so that business had a tremendous amount of scale because we had so much alignment with every single stakeholder. The small business owner wanted people to show up, the agency owner wanted people to shop and we got paid based on shop. So everybody was aligned top down. The fourth thing, throughput on appointments. When you're scheduling for sales calls or in person appointments, the amount of days per week that you are open, the hours that you are open and the increments of time matter a lot. Like 50 to 200% would be like marketing doesn't work for me. And they had one time slot for an hour per week that they were willing to take new customers on. That's just stupid. There's no other way to say it. The people who made the most money, who had the most throughput are the ones who gave the most availability, gave the most flexibility. Their customers were open the most days and they unsurprisingly got more people to schedule and show up. There's a reason small business owners stay small. They make small business owner decisions. So acquisition.com so this is the fourth business portfolio company is that right now does over $200 million a year. And I make these videos so that you can hopefully pass 3 million, 10 million, etc. And then we can invest in your business to help it grow further. I started with the question what can I do forever? And then work backwards from there. So it's like there has to have a lot of leverage. I need to have a capital compounding vehicle. So the first 10 investments that we found, some people I knew from, you know, beforehand and I would say that the relationship had shifted more and more to like basically an advisory role anyways. And the rest of it has been people who read the book, who watch videos, who listen to podcasts, who come in, who already are aligned with our values, will always look at anything as three or more. But most of the businesses are over five. The average business right now is doing 17 million. So acquisition.com is the first business that was really like built on a personal brand and inbound with content. So that's been like the biggest change compared to the other businesses. There's pros and cons to it. Like it's a slower business overall. If you are used to doing a transactional business where you're doing multiple sales a day, going into a business model where you have one every month is very different. And there's a lot of conversations that happen that don't amount to anything. The thing that excites me most about acquisition.com is I learn more now than I ever have because I'm exposed to more businesses at a higher level. I believe that the purpose of life is to learn. That is my purpose of life. Then enabling myself to learn in as many ways as humanly possible maximizes that co own all these businesses. Because I want to learn how solar sales work. I want to learn how mortgage sales work. Like knowing a lot about a lot of things allows you to cross pollinate ideas that work well in one industry and then apply them to another one and then get outsized returns. As we saw how quickly and how easily acquisition.com grew, the biggest part of that was because we hired from the top down. There was so much that we could automatically delegate to people who were better than us at their respective things. Director of Sales, Director of Marketing, Director of People, Director of it, Director of Portfolio Operations. Not as good as, but better than us who were teaching us. Every other business I've had, I hired from the bottom up. This one I went from top down and I will always do that from here on out. You can really only do that if you're well capitalized. That's why venture people raise money. Because you can get more talent before the business can really afford the talent. Because at the end of the day, every business incurs debt. It's just what kind of debt? So are you incurring financial debt? Are you incurring management debt, cultural debt, technical debt? And the question is, which one do you want to pick and have to pay down later? And so for us, being the bank was willing to pay down financial debt to not have to pay any of the other debt down in the future because ultimately on a longer time horizon, we move faster. And the other thing is that we have made recruiting talent the single core competency of the business. Most of the companies that we're bringing on, the entrepreneur needs more talent and we have the ability to recruit talent better than most people because one, we have so much inbound that comes in two, we as a private equity firm have more prestige than most of the companies that are in our portfolio. And so we can recruit and people respond to a private equity firm who has a portfolio of companies more than they respond to Joe's dry Cleaning. And then we have somebody at Holdco who will help train them on our way of doing business so they get it right. The first time a portfolio company, when their managers are getting stuck or their directors getting stuck, they talk to our director of sales. And if you're a business owner and you'd like to scale to 50, 100 and beyond, we'd love to partner with you on it. We have the track record that we have because we've done it multiple times and the biggest cost that you have in the business is what you do not know. And so if we can help you pay down ignorance debt and we can drag what you might already do in 10 years and three years, then for us that's a win for everyone. So if that's interesting, you can always go to acquisition.com, go there, apply through the site and look forward to hopefully working with one of you guys.