What’s Actually Holding Back Your Growth? | Ep 881
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there will literally always be money on the table. Like you can't sell everything as much as you want to. You just can't. And the thing is, is like, if this company can go from six to 15 and the next year goes from 15 to 30 and the next year goes from 30 to 60, if you hit the same numbers and have two different product lines versus one, which would you rather have? And I'll also tell you that if you just do it with one, you'll increase the likelihood, not decrease the likelihood that that occurs.

Hey Alex, my name is Henry. I sell education. I teach people how to fix and flip, mainly the Hispanic market. So it's only in Spanish. We did 1.3 mil last year, second year in business, and we want to do 3 million this year. So with the more better new, right now we only do two events a year, big events, 600 people, and we upsell to a high ticket, over 12,000, right? And we convert 20% of the room, more or less. So

The 80% that went to that room never sees me again. I never sell them anything again. Okay. And well, that 20%, they bought my high ticket. That mentorship is a year. Sure. And after that, I don't sell them anything ever again. Okay. So more or better, do I just do more of these events and like never ending looking for new customers for the rest of my life or should I focus? You're good. You're in education. Yeah. And education graduates people. Yeah.

Yeah. That's how education works. So if you look at the education system overall, the way to create continuity in education is just always have something else to learn or to teach. I like first year. Now you're an undergrad. Now you're a graduate student. Now you have a master's. Then there's a PhD and you get a second PhD. You just keep people just become endless students. And so do you want to sell the business eventually or do you just want to make money? Make money. I mean, we're not. No, it's fine. No, I prefer the truth. Yeah. I mean, the easiest thing to do is just double the amount of venture doing.

You either go one a quarter or you can do two at $1,200. And would you travel or just stay in where I'm at in Miami? Is that where you run them now? In Miami? Yeah, I would do East Coast, West Coast. Yeah, maybe Texas or something. Yeah. Okay. I mean, you have a really simple solution. Just run the same playbook more times. If you were like, I want to build a more valuable business, then I would say take the year to figure out revenue retention, which is how do I get these people who pay me $12,000 to pay me another $12,000 or pay me $30,000 next year?

Or even downsell them to something that's $5,000 a year, but they stay. Right. And focus on retaining that top tier that paid me a high ticket. Yeah. But I think considering for the model that you have downselling the upsell, I actually like a lot. So if they paid you 12, maybe they'll stay for three or three to five, just to have access to the network and some of your vendors and the stuff that you kind of like provide. And I think that's something that people would be far more likely to stick with. And so then you can basically think about your business as from a zooming all the way out perspective is that

The $12,000 is actually like an offset CAC, which is like you could break even on the $12,000 if you know that someone gets into a $3,000 a year membership that's pretty much all margin. That doesn't waive. So it's like that allows you to spend way more than your competition because they need to make money on the 12. You can break even on the 12. And then you just have this stack of $3,000 bills that just keep stacking up. That's like low, low effort to maintain.

Got it. Make sense? Yeah, it's good. But yeah, the nice thing is that you're honest about just wanting to make more money. It makes this a lot easier. Yeah. Yeah. My name is Mike Nathan. I sell cellular therapy in home to the old, affluent, injured, probably, and athletic...

We're new, but we've got a million dollars of revenue, half at EBITDA. We would like to get to $25 million. In home or? In home. Okay, got it. Consider it mobile healthcare. Okay, is it like guy drives out or is it you sending machines? RN drives out, gives you an IV infusion in your home. Okay, got it. We'd like to get to $25 million. We're built to be bought. We want to exit, so we think we're on the cutting edge of this. What's stopping us is my team is awesome. All right. Great. And from the NFL, it's a lot of great players.

We have great business-to-doctor B2B sales experience, zero B2C experience. And that playbook we're learning is wildly different. We have no idea what we're doing. Yeah. So what stops you from just doing way more of the doctor stuff? It doesn't quite pay as well. Meaning we have people that knock on doors to orthopedic surgeons who are looking for patients with alternatives to surgery, PT chiropractors.

It's a lot of effort. And there's some that are going to refer to you and some that just will not. So that's our constraint in a one market. We're in the Twin Cities. It's a one market play. We know there are more people looking for the solution. So we want to understand what the B2C is. If we go to then Dallas, Philly, LA, as we try to scale it, we're convinced it needs to be a better ROI than maybe what we're doing right now. What do you do? So you're big in 50% margins, right?

So what's the cost to acquire a physician? Cost to acquire a physician? Mm-hmm. Who refers your business? Cost of acquiring an affiliate? It's oftentimes just, it can be a physician, so we don't track it that way, but it's $500. Okay. So it costs you $500. And then what does the average physician refer to you in a year?

In terms of business. $6,000. Okay. So you're getting 12 to 1 there, and you already know how that works. So what stops you from doing 10 times more of that? You're saying they don't pay well, but that's the part I'm not sure I don't understand. Because you're getting 50% more. Run through the woods and hit all the people that are going to refer us. The number's not amazing, or at least I just know there's more there. I assume there's more. There's got to be more than the 200 people we've hit in the money. You've only really talked to 200. Yeah.

In terms of like reach outs and, and, or yeah, 200 who signed up as affiliates kind of thing. I don't know the number off the top of my head, but it's in, it's in the hundreds, less than a thousand of B2B, uh, PT, chiropractors, orthopedic surgeons. We've done that. In the twins. And the super small people that have given us has been some give four or five to six, some give zero. Yeah. Do you have an active affiliate manager who's like regularly reminding them?

Yeah. So with, so the way that I think about affiliates is it's basically a second tier of customer. And so you need to have somebody who's regularly kind of like stoking the affiliate fire to keep them activated and continue to get them to continue to refer business. So I'll give you an example. So there was a roofing company for example, it was a restoration company. They had one star, star salesman. And all he did was he'd go around to other tradesmen and get them to refer them business. And so they would get a thousand bucks to refer the restoration business to

business, but the sales guy got 500 for every time they referred. And so that guy all day long was knocking on doors, walking to the front door with donuts, ask them how they're doing, bringing coffee to the guys and then reminding them that they existed. And that's all he did. And so I think you were getting, you're getting, you're, you're doing the hardest part, which is getting them to, uh, refer. You just didn't have the, the consistent referrals because if you had 200 active, uh,

affiliates who are consistently referring you business. And most of these physicians, you know, especially like GP, things like that, like, I mean, they see thousands of patients and many of them could probably benefit from the services you have. And so the activation is both getting them to refer consistently, but also percentage of customers that they see that they refer to you. So it's kind of both sides of it. And so I think that the missing link with what you were already doing was just that the, you didn't have basically the continuous affiliate marketing strategy to get them to keep sending you business.

So that's probably like right now today, I would fix that first because you already have the acquisition system. You already have the network. And so for me, like reactivating that affiliate base would be the first thing that I did.

The second thing, maybe, because you might just reactivate the base and all of a sudden you're like, I got 200 guys referring me to business. Holy shit, we're at 10 million. The second thing I would consider probably, I would still probably focus most of my time on the B2B because you already have it. But for this business, I think that it lends itself for, what's the price point? $6,000 a treatment. Per treatment. Okay. Wait, so the average doctor will send you one $6,000 patient per year. When you said it costs you 500, they'll send you one patient. Interesting. So do you have a process for once the patient gets the thing calling the physician up?

Sorry, say that one more time. So, like, I'm Dr. Smith. I send you Sandy. Sandy goes and gets the... Well, you come to Sandy and Sandy gets the treatment. Is there a cycle where you call back, need Dr. Smith and say, hey, we just dealt with Sandy. Here's some of her stuff. Not in a medical term. Like, we're not putting notes back in because it is private. For sure. Yeah, yeah. But we do... We ask for more referrals. There's a circle back that way. There's not a...

A patient loopback. Okay. That's not true. Sometimes that does happen. Excuse me. It does. Yeah. That's not systematized. Yeah. I would systematize the hell out of that. Cause it's like, Hey, you just sent me this person. Like, let me close that loop for you. She's awesome. We did this thing. She loved it by the way. And then we have the, you know, the opening to the, to the others. Like what customers or customers, sorry. What patients did you see this week? Who you think it would be a good fit?

Right. And rather than saying, do you have any, it's which ones would be is the question. Small training stuff, but it matters. So I feel like there's so much on the B2B side that honestly, that's probably where I'd be. So you would not go after a B2C approach, like advertising online, going, pushing in on a strategy on that. It's not that I wouldn't. It's that when I think about, so this is the difference in like theoretical and actual, like.

I would given, given the fact that you like, you're already running good margins on this thing, basically doing it and take this the way I mean it completely unoptimized, right? Right now. Right. And I, again, I'm not, this is not a slight, then I'm like, there's so much juice left in this thing. I don't want to now start something new. It's like, I barely got this one going. I want to like crush this. And when I, when I'm like, no, we've like, we follow up with every single person. I've got a full-time affiliate manager who steps by our affiliates, uh,

I'm calling them affiliates, but drops by the docs once a week just to remind us, say nice things. Hey, by the way, like that is happening all the time. And we've already covered like literally every single physician in the Twin Cities. And I'm like, okay, let's go B2C. But if we haven't completely squeezed the hell out of this thing and it's already working at the level it is right now with like zero, like you're only getting one patient per doc.

It's like, so yeah, so you getting B2B customers the same as getting one B2C customer. I understand why you'd be frustrated because you'd be like, well, fuck it. I'll just fuck. I could sell one customer on my own without having to deal with the doc. But the whole point is that like, I want them to be sending 20, 50 a month.

And they can because they have the volume. And I think that first one has to be like a beautifully choreographed experience because that first patient's the test run for them, for you. Right. They'll refer you one and we'll see what happens. Right. And so one, it's like Sandy's got to be blown away. Right. She's got to come back and be like, oh, my God, that place was amazing. And then you also have to go back to the doc and be like, we blew Sandy away, by the way. And so I think you have to tackle it from both sides.

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 eight functions of the business. So you've got marketing, you've got sales, you've got product, you've got customer success, you've got IT, you've got recruiting, you've got HR, you've got finance. And we show the problems that emerge at every level of scale

and how to graduate to the next level. It's all free and you can get it personalized to you. So it's about 30-ish pages for each of the stages. Once you answer the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com forward slash roadmap, R-O-A-D, roadmap. That's what I would do.

Getting into the ad side, you absolutely could do it and we could walk through some, you know, whole strategy there. But I, if we swap places, that's where I would be focused. If you were going to try to expand into other major metros in the next 18 months, would you have the B2C sorted out before you went to the next market or would you? Honestly, no. If I crush my B2B play, then I just run my B2B playbook in the new market.

Once I find something that works, I just want to just... Do more. Yeah, pillage. Right on. Thank you. Yeah, no, you bet. Hi, my name is Julie Diepdeller, and we sell travel coaching to people who want to travel more frequently or more luxuriously for free or almost free. You already know all our business stuff. So my question is...

Kind of piggybacking on what you were talking about earlier with your six pages of ideas, we're in a room full of people that are always trying to optimize as well as always has new ideas. We had an idea for a B2B offer for adding a 50K concierge offer for businesses that are already spending half a million or more on travel annually. So when is it appropriate to add a new offer while you're already still working and optimizing your other ones?

sorry i just wouldn't you would i wouldn't do it okay you're gonna go from 6 to 15 this year do that okay like i'm not i'm not trying to be like uh short to like like these are these are the mistakes that we make there will literally always be money on the table like you you can't sell everything as much as you want to like you just you just can't and the thing is is like

If, so said differently, if this company can go from six to 15 and the next year goes from 15 to 30 and the next year goes from 30 to 60, if you hit the same numbers and have two different product lines versus one, which would you rather have? One, right? And I'll also tell you that if you just do it with one, you'll increase the likelihood, not decrease the likelihood that that occurs. Mm-hmm.

And so like that's all the that's the focus and discipline stuff that you hear all the Steve Jobs and all that. Like it's just it's he called it the the quantity of unbelievable ideas that, you know, you could crush that you say no to. That's what focuses. So how do you discern when to pursue something off of that six page list? When we have bandwidth, which if you're continually like if you're basically doubling every year, your bandwidth is getting eating up by doubling. So just double it.

Basically, it's like, why, why would we do it? Okay. Thank you. Yeah. But if it's like, I want to grow, why would I like, why? Like, then let's just grow with the thing that already is working and is really profitable. And we know everything about it rather than this, you know, crazy girl in the red dress that like walking by and like has a crazy boyfriend has crabs. You're like, what's going on? You know? So like, why bother? It's like, we have this girl. She loves us. She knows me. I know her. Let's go.

Hey Alex, my name's Luke. We run a firm similar to Acquired actually in Sydney where we buy majority stakes for all the businesses. We currently operate three of them. We want to be operating or at least contributing to operations for about 30. We've had a lot of success exiting in the past so we've kind of got it dialed in but we can't do more than a couple at a time. Our constraint is

at the sort of venture studio level is talent, really. We don't really know what our org chart should be and who should be doing it. So I don't know if there's anyone better place to help with that than you. So you have a holding company right now. Yeah. And what are the three businesses that you bought?

One's a SaaS company at the moment, one's early education, and the other one is a gourmet food e-commerce business. The one before that was music industry stuff. We're really diverse. Well, we just had a lot of exits, so these three are quite small. The e-commerce one's doing three and a half million at the moment. And the other ones are smaller? Yeah, they just started. So did this one. This one's only a year old. And so the founder... So are you...

funding them and finding a founder or are you buying businesses that are existing and exiting founders? In the current case of these current three, we've just bought them and now we're the only operators of them. In the past, it's been slightly different. So 100 case by case. What do you want to do with your life? No, because what I'm about to say is going to be a dramatic change from what you're doing. I want to have fuck it money. Okay. Yeah. So there's basically you have, how much do you know about private equity?

I've read a couple books. Okay. So the problem, I can tell you what the problem with the existing model is, is that you don't have enough operating leverage. And so it's actually, in my opinion, a foundational issue with the business model. Like, I don't think it's going to work. Now, to be clear, I think you can make some money. I don't think it's going to accomplish the goal that you want.

And so if you're trying to treat this like private equity, where you hope to have exits later and then gain liquidity versus if you were like, I'm just a holding company and I just want to continue to buy cash flowing businesses, I'd have a different, a slightly different answer. But the businesses that you're buying are too small. And so if you're exiting founders, then the problem that you're having is like, oh my God, I have to build this entire business, which is why most private equity institutions start at 5 million in EBITDA as their basically minimum that their check size that they're willing to write because of the problem that you are dealing with right now.

And so I would encourage you to not try and reinvent the wheel. And I say this coming from like with arrows in my back and lots of scars. In the first 24 months of acquisition.com, I did 24 deals. I had much, many, many smaller deals because I thought, okay, I'll just do, I'll use the brand that I have. I'll attract entrepreneurs that are kind of emerging and I'll take a minority stake and kind of help them grow, whatever. The issue with that is that a lot of businesses that are small are small for a reason.

because they don't have good entrepreneurs who are leading them. And now you're like, okay, well, either you remove the mediocre entrepreneur and now you have just a bunch of basically nothing that you're now like, oh, now I just bought myself a job. Right. And maybe you got it for no money down because they were willing to leave and you didn't have a lot of capital that you had to put to work. Fine. But I would, in my opinion, you have basically two paths that you can pursue here from where you're currently at. I don't think buying more companies is the answer.

unless you raise a lot of money so that you can buy actual companies and not like someone's big bucket of risk, right? Which is what we, if we, if you took the companies that you bought through the scorecard, I'll bet you that they probably fail a lot of those checkpoints. Two of the three help, yeah. Yeah. And so, and for that reason, they wouldn't be deal, like they wouldn't be deal ready businesses, right? They're just basically a person with a job that has a couple of people helping them out. And then that person steps away.

and now what right and now you're just responsible so basically two paths so path one is that you raise money or get enough money to buy legit businesses option two is that you decide one of these businesses is the business that you want to do as your main thing and you use your m a skills to basically bolt on stuff to using that as a platform rather than having all these disparate businesses

So it's like the commerce one is the best one. It's like, okay, can we acquire some sub brands or some sub product lines underneath that, fold them into the brand and then flip that. That makes sense. And that allows you to not have as much capital and you can organically grow it and then you can keep your focus. But there's a reason that most private equity firms only take on, call it five to eight investments. And that's after they raised half a billion dollars to make those deals if they're in disparate industries.

If they're a private equity firm that has a thesis based around basically a roll-up strategy where they're like, we're only buying plumbing and that's our whole thesis, fine. And that's more akin to what you were doing in terms of alpha, a little bit more boring, more ops heavy. But you don't have to have as much capital. And the more entrepreneurial you are, the more organic growth you can be able to drive in the original platform business. Does that help? Thank you. Yeah. My name's Chris. So

eyeglasses to people that can't see and specifically nice targeted. Yeah.

Ideally, right? So specifically trying to target a piece of that, which is not just your primary pair, which is like, I can't see, I need to see, but more specific things like driving, office, that kind of stuff, a little bit more of those tasks, specific things. So this is going to sound funny here, but basically we do $0 in revenue. We'd love to be at a hundred million. You do $0 in revenue? Yeah. So I'm going to tell you why. So basically I have a business that I'm exiting 10 locations. Awesome.

You know, like 20, you don't care about that one. You want to talk about it? So, so what I'm here for is to understand like, well, if I'm going to start this, let me start at the best. Well, what's the best vehicle, those kinds of things. So that's why like, yeah. So you're going to bring a mortar.

Yeah, we have 10 brick and mortar. No, are you going to, for the glasses business? So that's kind of the question is, really it's like, do I go brick and mortar? So I could either use doctors as affiliates, et cetera. But the problem there is that they, their sales teams that otherwise don't tend to sell these glasses well. So I'm on the iDoctor. And so part of this is coming from

knowing these common like five things that people just... My mother and grandfather are ophthalmologists. Oh, really? Oh, yeah. Well, you know this well then, I guess. So those common things are not being addressed well because it's just not communicated well, all the things. So then I have to like figure out how to get them to sell the product that I'm making, which is like a whole challenge itself. Or do I just...

sort of go more of the path of like direct to consumer and that kind of thing. And whether it be brick and mortar or combo of online, et cetera. I think it depends on your strengths. Yeah. So Layla has a really good frame for these types of decisions, which is what problem would you rather have? Because

you're going to have a problem in either of them, right? The problem that you described with the first one is basically the affiliate problem, which is how do I attract them? How do I keep them motivated? How do I train them? How do I keep quality high? How do I make sure that they're representing the brand the right way? That is the problem with affiliates. But the nice thing is that if you solve that problem, you get paid like 50 or a hundred million dollars. And so like, I feel like there's an appropriate price tag

ascribe to solving it. And that's what gets me through honestly harder times when you guys, because sometimes you're like, man, I just can't figure out how to get these conferences to work. It's like, yeah. And then as soon as you do, you make $10 million. So yeah, solve it. Like, that's how it works. When it comes to the direct-to-consumer side, if you feel like you're more skilled with, call it, you know, basically,

The business, like what business you're really in. So if you get into the direct-to-consumer business, you're competing against like snow teeth whitening. And like, if you look at the business model there, it's all media. It's all, you know, advertising driven type business. This is with glasses.

likely very transactional. So it's a super direct response heavy business. You'd probably be recruiting affiliates for brand associations and be able to whitelist for them to be wearing your, you know, your, your glasses and whatnot. And that's the business that you're in. So it's going to be the problems that you're solving, or I have to be creating shit loads and shit loads of, uh, of ads all the time. I have to be up to date on the best media buying stuff and have a really good at CROs or conversion optimization.

And I should probably over time develop a strong influencer affiliate strategy so that I can actually build a brand rather than just a ROAS arbitrage business. That's that path.

The other path is the brick and mortar affiliate path where you still are centralized. You're just using doctors as your distribution base. If I had to pick which one I would rather have, I would rather do that one. That's me personally. And you're also a physician, which I think gives you a little bit of leg up or at least foot in the door, figuratively and literally. I think that that one actually, if you want to sell a business in the future, would probably be more likely to be sellable.

just because the direct response nature of that other business is so volatile that any kind of like wrinkle of volatility in a year prior to a sale, sale's done, sale's off the table. And so, whereas once you develop a strong affiliate base of basically referral network from physicians, though it is complex and challenging, literally you just solve that one problem and you have the business. Yeah.

small follow-up to that would be then is so in the vein that that's the ultimate goal I know that well in order to get there solving that problem means that I probably need to do this xyz here for that uh practice so that eventually I'll be able to do what I want that's I guess okay to sort of take that approach that longer tail approach of it nothing's fast yeah so

Well, sure. No, I was just being like super real. Just more from, obviously, experience of seeing it and going like, oh, that's a stupid path versus... No, I think either of those paths would work. I think given your experience from just the limited amount that I, you know, we've interacted right now, if you'd said, I'm a hardcore direct response marketer, I make tons of media, I really understand that well, I'm really good at building sites and know people who can, you know, CRO really well, then I'd be like, okay, maybe that's the play. But you didn't jump at any of that. And so this one feels like the right path. All right, makes sense. Does that help? Yeah.

Alex, my name is Josiah. We sell chiropractic services to members of Lifetime Fitness. We're going to do 16 million this. You do, sorry. So chiropractic services to members of Lifetime Fitness. Okay, got it. Are you within Lifetime? Yes. Got it. Okay, great.

This year we're going to do- I was like, that's a niche. Your ads are like, are you a Lifetime Fitness member? You're the only people we take. I understand. Okay, got it. I got it. No, so we're going to do 16 million this year. Might get to 32 million. The thing that's stopping us right now is the sell for our chiropractors in the front end to the initial eight week plan. They don't convert really well. Okay.

Some do, we use the closer framework. - Sure. - And some doctors have three times the lifetime value of other doctors. The pushback we get is they say, "I'm a doctor, I'm not a salesperson, too salesy." So they have a hard time following the script. How can I break their mindsets? - I think you'll probably, one is I think Chick-fil-A, the head of people there has a really great framework on this, which is basically like a lot of teams will lose in the playoffs and think they lost in the playoffs when they lost in the draft.

And so you might just have the wrong docs. And so if I think about like, you know, you have your customer avatar characteristics, you should be more selective about your chiropractor avatar characteristics. These are the beliefs you have to have about the world in order to function well within this business model.

for the same reason that I didn't work with Yogi's and spin studios, even though it's literally this exact same business model as large bootcamps, it's the same business, but they were so like woo woo that my like race prices and sell shit was like, whoa. And so I didn't work with them because they were just too big of a pain. And so for, to the same degree, um, I would say there are two ways to solve this. One is just pick the docs right up front. The reason that I would prefer that one is that you, you probably,

you already have a business model that clearly works. And so I would be like hesitant to try and like change something. The second, um, well, sub point under that is probably just significantly more frequent training. And that's in the form of role-playing. Like I have yet to find anything that is more effective than modeling and role-playing, uh, when it comes to transferring skill. The nice thing is that sales can be transferred relatively quickly, especially cause they're, you know, they're, they're smart. They're, they can figure it out. What they get lost in is all the medical stuff and they try and like tech

techno jargle, you know, people, and then they have no idea. It's like, Hey, you're in pain. I'll get you to be not pain by this thing. Right. Um, uh, but I think, uh, reading testimonials of patients who were undersold or not sold, uh, and telling them that they are hurting them by not providing solutions to help them. And so I think the, to be clear, I would also position this as like, we're not selling here. We're making offers available to people who need them.

That's all. So that's what I would try and do to like immediately try and fix the existing thing. If you feel like this is some structural thing, I'm not sold on the fact that it is. But I have seen models where they have patient care coordinator and they just leave the doc in the back and they've just found it easier to just find salespeople and just be like, cool, you're the manager of this location, which really just like Lifetime Fitness, the manager is just sales manager, right? Like we both know that. And so basically the patient care coordinator is just the salesperson. Got it. Cool. Thank you so much. No, you bet.

Does that help though? Super helpful. Okay. I was already talking with Jacob really about sales in terms of simplifying this and then starting like a three times a week role play. So that's been hit a few times. And then just talking with Frank too, it's like, I think we do have opportunities from the hiring standpoint. We just got to dial in, you know,

the expectations we put even in the job posting interview process. So, cause there are definitely some chiropractors who love selling. Yeah. And so one other thing that I think you can do tactically to make the kind of operationalize this besides the role playing and constant feedback is because of the benefit of being one in person into a physician, having a clipboard that has the script on it with check marks makes it really hard to mess up. It's like, so what brought you in today? Tell me where it hurts on a scale from one to 10. How bad does it hurt? A lot.

Tell me all the things that you can't do as a result of this pain. Tell me all the things that you wish you could do that if this pain were resolved, you would now be able to do. All right. So what have you tried so far? Oh, that's interesting. We're not like that. You didn't like that. Oh, you like that? We're a lot like that. Great. Wonderful.

And so basically for everything that you've told me, if you really hated this stuff and you really like this stuff, I think you're going to love what I have to tell you. Can I talk to you about it? Great. I have permission for the close. And then I just say like, great, there's three options. Let me go into the pitch. I liked you. I mean, you dropped that video the other day on the planer. Exactly. I loved your idea about just breaking it to like a script on like a laptop or iPad, just like go through it together. That seems genius. So.

Thank you so much. No, you bet. My name is Christian and I sell solar to homeowners and we do $20 million in revenue a year. I'd like to be at 160 million in revenue. The biggest thing that's stopping me is we can recruit unlimited appointment setters. The reps that we bring on are independent contractors. So there's not a high cost there. The biggest bottleneck is that although we could bring on unlimited appointment setters, we need the leaders to be able to help scale. You all right? All

arm hair. We need the leaders to help, you know, obviously lead those guys through the job, help hold them accountable. And we have a lack of leaders issue where we don't recruit externally, like from other companies to take leaders from. It's not my preference. I like to develop them internally, but it also comes at the cost of it's very slow to develop leaders. How long is it taking you to get from zero to 20?

It's been five years now. Okay. Yeah. Heard. Well, what problem would you rather have? Slower growth or faster growth? Yeah. So faster growth and dilution of culture are probably more fires for finding wrong people that aren't good leaders and then mishire underneath of them and having to lay those kind of branches off and then bring new people in or continue to grow on the path that you're currently on, which seems to be working pretty well. Yeah. Yeah.

I mean, just thinking out loud, I'd prefer to grow slower, but like, obviously it would be really cool to have my cake and eat it too. Yeah. Yeah. Yeah. I guess is, is there an intermediary road where, uh, can I just get the best of the fast growth and the great culture? How can I guess the, probably the question is how can we help grow and develop leaders quicker within our organization? So I'll bet you right now that you're probably pretty good at training sales. Yeah. Okay. You have to get good at training leadership. Okay.

So right now you're a sales training. Fundamentally, like you're in the business and I've had lots of very sales driven organizations. Like your business is a sales driven organization. You're in the recruiting, onboarding and training of salespeople business. And you just happen to sell roofs, right? Solar. And if you needed tomorrow to sell roofs, you'd fucking sell roofs. We have roofing companies. Right. Exactly. Of course. Couldn't leave money on the table. I'm kidding.

But basically what it is is that you have really operationalized how to get someone to do a specific set of behaviors that increase the likelihood that someone gives you money, period. So now you need to have a different set of behaviors that you have to standardize around leadership that increase the likelihood that people follow directives. Okay.

One challenge I have is like, I've tried to shift the culture. We've like put together a leadership development program, but I noticed that what will happen is some of the sales people will start focusing on the leadership development stuff and then their sales volume goes down. Yeah. Because they're like, I'm picking for the, for the leaders. What was that? So I'll tell you this. In my experience, the best leaders, especially in sales organizations are not the best closers. Yeah. And the best closers in every business that I own make more than the sales managers. Yeah.

And so if you have a killer, let them kill, let them hunt. It's the guys who were like three out of tens worked really hard to get to a six or seven out of 10. Those guys I found have been exceptional sales managers and leaders. Interesting. And so I would be trying to identify that because the thing is, is like some of the best basketball coaches were not the best players, but they were guys who loved basketball, loved their teammates, loved learning how to get better. So they could point out what someone else needs to do, even if they're not as good as it at it.

And so you probably have a little bit of a pick them issue, which is that you might be picking the wrong horses. Cause now you're hurting yourself twice. You're losing a sales guy and don't have a good leader. Yeah. Right. Yes. Uh, and so I would say leave the best sales guys alone and then look for the middle of the pack guys that everyone loves. Like, you know, those guys, like they're not the best closers, but like everyone loves them. They're like spiritual leaders of the team that they're on. Those guys are the ones that make banger sales managers. And this is a pattern recognition thing. I'm sure

Like you'll get it. Okay. And then really, because the thing is, is those guys eat up the leadership stuff. Beautiful. And then basically the way that you train sales, I'm sure it's really militant. You train leadership the same way. So leadership development path isn't like once a month we do a fucking training. Yeah. No, I'm being real. Because some of you guys have that. You're like, oh, we're pouring to our people. Once a month we spend an hour with them. Yep.

Great. And then when that takes, you know, 25 years for them to become a leader because they've forgotten between each one hour where they just have a random Zoom call, then maybe you'll teach them how to lead. Right. And so you have to train it the way that you train sales. Okay. Which is intense, many hours, lots of shadowing, full days, like one day a week you're with the other sales manager for a month or two. Because the thing is, is they know what to do. They lose it in the how.

And a lot of that gets there. Obviously you want to get as good as you can operationalizing the smaller skills, but there's a hundred things that someone does. You might operationalize the 15 most important ones, but the other 85 still make a big difference. And so when I was like a sales leader, like running a team, I was a really good player coach and I'd leave from the front, just closing a shit ton of deals. But like, but you own a $20 million business.

Yeah. Why can't everyone be me? So player coaches. If I had 20 of me, Oh my God, I would bring so much, but you're not. So player coach is good or bad idea. I prefer, it depends because you're a bigger organization. So this is a supply. And for context, the reason I like lean towards player coach sometimes is because there's shared risk, like mutual risk because we're going out and knocking on doors every day. And if your sales leader isn't doing that to some extent, I mean, you can have them do half days if you really want to, but like,

It really depends on the ratio of sales lead or leader to guys. I found after like six-ish, it's a full-time job if you really want them to manage the team. Cool. Okay. Thank you. Now, smaller sales teams, you have three guys. One guy's a player coach. You don't have the bandwidth to have somebody who's managing full-time.

Beautiful. Thank you, Alex. Hi, my name is Adam. I have a music lessons and recording studio in Atlanta, Georgia. And your content, you and Layla, what you've done has profoundly changed my life because you've put me out of my comfort zone in how I think. And so...

I sell music lessons to neurodivergent kids between eight and 18. We have a half a million dollars of revenue. Awesome. I think we could be at $2 million of revenue. Yeah. And what's stopping me is I've realized that the model is completely broken. I'm underpriced, overcompensating the staff. We're under utilizing capacity in terms of- Square footage. Time and physical space and time. And so-

My question is, how would you apply first principles thinking to what I should do now, next, and later to run the business that I've got as we make the transition to one that becomes an asset? Yeah. Yeah.

So basically the core, so there's two, a chunked down version and chunked up version of the core economic engine that makes a business successful. So LTV to CAC is the smallest version of that engine. You put some money in, you get more money out. That's the gross profit you run the entire business off of. At a higher level, it's return on invested capital, right? So it's like, okay,

that's what the core machine is. But then there's also equipment, there's leases, there's build outs, there's all that stuff that goes into it that's not typically included in LTV to CAC. And then how much does it cost us to build this machine again and again. So that's kind of how I think about it, like micro level, it's LTV CAC, return on invested capital is what it is at the macro level, when you're like opening more and more locations and saying, it costs me 500,000 to open a location, location makes me $500,000 for the first six months. Okay, cool. I've got a two to one, you know, return on on capital within a year, which is awesome, right? So let's

Let's tackle for you. So the nice thing about the music business is that it's actually identical to the gym business. So I know a lot about it. And so the models that I have seen works unbelievably well have been semi-private models, number one, or the 30 minute, multiple times a week, much higher ticket. People stay three, four, five years with music lessons with their person. I prefer semi-private.

because I think you get more loyalty to the brand and it's less about the music teacher who can then leave and then take all of those students and go private. And so I like semi-private in general. Also, I'm sure you could sell around the idea that they get a little bit more socialized and it's probably good for them and all that jazz. And in terms of pricing, I want my gross margins to be at least 80%, ideally 90. And so now you can do that when you're one on six, harder one-on-one. And so if let's say you have,

six kids, right, in a class or four, I mean, you can, you know, level into it, but let's say it's one on four, keep it math simple. And you charge $200, sorry, $50 per session times four kids is 200, you make $200 per session, right? Well, for you to pay for an hour of music teacher's time, what does that cost? Right now, that would be 40 to $50. Okay, so that's 80% right there.

So 240, so 80% gross margins right there. Now, if you charge 60 bucks a session, you'd be at 240. So then you'd be at like 84, whatever in terms of gross margins. So you're above that, but that's my line. That's my rule of thumb for a brick and mortar service businesses is I want it to be over 80, ideally over 90, but I will not do a business if it has lower than 80% gross margins. Some people do. I just don't like to, cause you don't have enough cash to do anything.

Right. And so then the question is, okay, how do we, how do we create the sales process and the positioning so that now you already are working with a special class of customers. And so I would imagine that you would be able to probably even more easily than a traditional music academy sell at a premium price. Because if I'm a parent who had a neurodivergent kid, I would be willing to pay for a specialist. And so specialist prices are a premium. So I think that

would work and in terms of the model you can i mean it's just headcount divided by uh teachers basically but you have to get the core gross profit right in the business and then everything else kind of flows from there i'm kind of in the same position that this guy over here was and i don't have an operator and so i'm kind of in that swamp too and trying to we have to get more margin you have to get more cash flow cash flow allows everybody to breathe better so okay i guess that makes sense we'd

raise prices and get that different sort of client funding. Sell one on four and say, and just sell around the fact that it's a better experience for them because you don't want them to be married to a teacher. You want them to be married to like, this is how I would sell it. I would say, listen, Mrs. Whatever, like if your child becomes really attached to

to a single teacher, then if that teacher leaves, then all of a sudden this skill that they spent all this time on, they'll associate with the teacher. And then all of a sudden they stopped playing violin after five years. You don't want that. I don't want that. What we want is to create a positive relationship with the skill. So they just continue for life. Right? Right. And so we facilitate that by having other people in the sessions and so that the teachers sometimes do change so that no one really goes too attached to anybody, but they really grow attached to the craft. That's how I would sell it.

Whether that's true or not, no idea. But that's, I don't know. Yeah. But like, that's how it's, does that make sense? It does. Yeah. So that would be my positioning. And I think if you, if you just switch the ratio to one on four and so, okay, everybody. So if you are capacity constrained, so some of you guys are in that position, like you, you're, you can't, you can barely handle the customers that you have right now. You have three solutions. The easiest solution is you just raise prices because if you have supply constrained, you

then that means that you have more demand than you have supply prices go up right and most people just don't do that and just suffer so just raise the prices make more money that's solution number one the second solution is change client delivery ratio which is covered so instead of going on to one you go into four so you get more out of what you already have this gives you leverage and it gives you cash flow improves your growth margins the third way is to bring other people in who can do what you do uh which is then delegating you know the responsibility right to somebody else so that's the ultimate leverage so you don't have to do any of it

That make sense? So those are kind of like the three steps that I think about when I have somebody who's supply constrained and they don't have any time. They can't grow the business and they can't sell more customers, but they need to sell more customers to grow the business and it's the rock and hard place. And the nice thing is we start with price because it's the fastest and easiest one to do. You don't have to do anything. You don't have to change anything. You just say a different word and then

you've made more money. So our primary thing when we opened was it was 100% private lessons. Yeah. And so that's basically the only difference in the hypothetical gym and gym launch, which I'd

read the whole thing on the plane over here. How I didn't know that book didn't exist until... It's a good book. It's awesome. So what would the... You can still have one-on-one. You can still have one-on-one. I would predominantly sell somewhere private. And if someone's like, well, I want the special snowflake treatment, then you're like, awesome, I'll give you the special snowflake price. Right. How would you design the initial offer for that type of model? The six-week beginner challenge offer?

So I would have, so you know this, you would know the outcome better than I do, but it would be something, whatever, whatever the fast outcome that you can deliver to a kid who's neurodivergent, who picks up a violin or whatever the instruments that you teach are, right? It's like, they'll be able to play this, like a song in this period of time, right? Now it might not be good, but like they'll be able to, you'll, you'll recognize it kind of, right? Yeah.

But like I would want some sort of discrete outcome and that would be like an outcome. You could also do some sort of a subjective thing, which is that like they rate X or they, like you could have a survey at the beginning, survey at the end. That would be kind of more of an internal thing. But yeah, typically you'll sell some sort of package upfront

I'm going to guess that the price point for what you're looking at is between $600,000 and $2,000 is what the upfront package would be. And then you'd upsell or at least let people go into continuity on the back end. And it'd probably be somewhere in the neighborhood of like six weeks to six months. You would know that range better in terms of how long to sell for. Okay. Yeah. And the best thing, we're drowning in context. We're a recording studios. Kids are making songs all the time and they should be feeding the marketing, but it's just so much. Then there's that whole problem. Yeah. You just need time, man.

Like I think what's interesting is that like the more stressed you are the lower this is not me This is not a slight just to be clear I'm saying in general the more stressed anyone is the lower your IQ is and so I'm saying this to say that Again, this isn't a you I'm saying that the problems that you struggle with When you are stressed when you have a good night's sleep in a little bit of time you solve in like five minutes

And so if you want to increase your capacity, it's like, let's solve for capacity. And then a lot of these things that are keeping you up at night, you're like, oh, we'll just run a six week thing or run a 12 week thing. We'll sell it for this. I can see how the margins work out. And like, we already have more demand than we can handle. So it's okay if people say no at our higher prices, because we'll make it up and profit anyways on the people who do say yes. Does that make sense? That wasn't a slight to be clear. I'm saying for anybody. That's fine. Yeah, no, it's true. So cool. I appreciate that. Yeah, you bet.