there will literally always be money on the table. Like you can't sell everything. as much as you want to you just you just can't and the thing is it's like if this company can go from 6 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, our second year in business, and we want to do 3 million this year.
so with the more better new right right now uh we only do two events a year big events 600 people and we upsell to a high ticket uh 12 000 right and we convert 20 of the room more or less
So that 80% that went to that room never sees me again. I never sell them anything again. And well, that 20%, they bought my high ticket. That mentorship is a year. And after that, i don't sell them anything ever again okay so uh 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 well you're right focus oh you're good you're in education and education graduates.
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 young people and just become endless students. And so do you want to sell the business eventually or do you just want to make money?
No, it's fine. No, I prefer the truth. Yeah, I mean, the easiest thing to do is just double the amount of energy doing. You either go one a quarter or you can do two at 1,200. Would you travel or just stay where I'm at in Miami? Is that where you run them now? In Miami. I would do East Coast, West Coast. Yeah, maybe Texas or something. Yeah. 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'd 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 payment, that high ticket. Yeah, but I think considering for the model that you have, downselling the upsell, I actually like all...
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 offset CAC, which is like you could break even on the $12,000 if you know that someone gets into a $3,000 membership that's pretty much all margin. That doesn't wait.
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 the stack of three thousand dollar bills that just keep stacking up that's like low low effort to maintain makes sense yeah
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 uh my name is mike nathan um i sell cellular therapy in home to the old affluent injured probably an athletic Um, we're new, but we've got a million dollars of revenue, half of it, but, uh, we would like to get the 25 million. In home or? In home. Okay, got it. Consider mobile health.
Okay, is it like guy drives out or is it you're sending machines? RN drives out gives you an IV infusion in your... 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 edges what's stopping us is my team is awesome all right great and from the nfl it's a lot of good We have great business to doctor B2B sales experience.
zero D to C 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. So you're making 50% margins, right? So what's the cost to acquire a physician? Cost acquiring a physician who refers your business. cost of acquiring affiliate it's oftentimes just it can't be a physician so we don't track it that way but it's um five hundred dollars okay so it costs you five hundred and then what does the average physician refer to you in a year
Uh, $6,000. So you're getting 12 to 1 there, and you already know how that works. so like 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 that mark run through the woods and hit all the people that are going to refer us the number is not amazing or at least i just know there's more there i assume there's more there's got to be more than uh you know the 200 people we've hit
Like you've only really talked to 200 in terms of like reach outs and 200 signed up as affiliates kind of thing. I don't know the number off the top of my head, but it's in the hundreds less than a thousand of. B2B, PT, chiropractors, orthopedic surgeons. We've done that. And the super small people that have given us.
has been some give four, five, 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 business, but the sales guy got 500 for every time they refer.
And so that guy all day long was knocking on doors, walking to the front door with donuts, asking 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're doing the hardest part, which is getting them to refer. You just didn't have the consistent referrals. Because if you had 200 active... affiliates who are consistently referring your 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. 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 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 of treatment. Per treatment. Okay, 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 so like i'm dr smith i send you sandy sandy goes and gets that well you come to sandy and sandy gets the treatment is there a cycle where you call back me dr smith and say hey we just dealt with sandy here's some of her stuff uh not in a medical term like we're not putting notes back in because it is private for sure yeah but we do we ask for more referrals and just circle back that way there's not a
a patient loop back. Okay. That's not true. Sometimes that does happen. Excuse me, it does. Yeah. That's not systematized, though. Yeah, I would systematize the hell out of it. 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 are, what patients did you see this week? Who do 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 are not go after a B2C approach, like advertising online, going, pushing it on a strategy on that. it's not that I wouldn't it's that when I think about so there's a difference in like theoretical and actual like I would.
Given the fact that you're already running good margins on this thing, basically doing it, and take this the way I mean it, completely unoptimized like right now right 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 that 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 steps by our flight
I'm calling it 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. then i'm like okay let's go b to c 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're getting b2b customers the same as getting one b2c customer i understand why you'd be frustrated because you'd be like well i'll just i can 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 on 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 dock 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 scale
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. 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 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. That's what I would do. getting into the ad side you absolutely could do it and i could walk through some you know whole strategy there but
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? 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... Yeah, pallet.
thank you hi my name is julie deep teller 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 um 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. travel annually so when is it appropriate to add a new offer while you're already like still working and optimizing your Sorry? I just wouldn't. You wouldn't. 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 6 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
and so like that's all that that's the focus and discipline stuff they hear all the steve jobs and all that like it's just it's uh he called it the uh the quantity of unbelievable ideas that you know you could crush that you say no to that's what So how do you discern when to pursue something?
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 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, 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 any one 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 oh yeah they just started yeah so i decided this one this one's on a year old and so the founder sir sir you are you funding them and finding a founder or are you buying businesses that are existing and exit
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 Matt says is going to be a dramatic change from what you're doing. I want to have fuck it money. Okay. So there's basically you have how much do you know about private equity?
i've read a couple books okay so the 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. 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're 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. And now you're like, okay, well, either you've removed 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'd offer 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 if you took the companies that you bought through the scorecard, I'll bet you that they probably fail a lot of this. Two of the three, yeah. Yeah. And for that reason, 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? And now you're just responsible. So basically two paths. The path one is that you raise money or get enough money to buy legit business. 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 that makes sense so it's like the e-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 raise half a billion dollars to make those deals if they're in disparate industry. 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're doing in terms of alpha a little bit more boring more ops heavy but you have uh you don't have to have as much capital and the more entrepreneurial you are the more organic growth you're gonna be able to drive in the original platform
is that thank you yeah thank you uh my name is chris uh so uh eyeglasses to people that can't see and specifically nice uh targeting yeah 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 task-specific things. So this is going to sound funny here, but basically we do zero dollars in revenue.
i'd love to be at a hundred million zero dollars yeah so i'm gonna okay so basically i have a business that i'm exiting 10 locations you know like you don't care about that one you want to find out 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
uh yeah we have 10 brick and mortar no are you for the glasses 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 etc
But the problem there is that their sales teams and otherwise don't tend to sell these glasses well. So I'm on the eye doctor. And so part of this is coming from... knowing these common like five things that people just like mother and grandfather are ophthalmologists oh really oh yeah well you know this well then i guess so um and 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 the path of like direct to consumer and, and that kind of thing. And whether it be brick and mortar, a 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?
you're going to have a problem 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 affiliate But the nice thing is that if you solve that problem, you get paid like 50 or 100 million dollars.
And so like, I feel like there's an appropriate price tag ascribed 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 dollars so yeah solve it like that's how it works when it comes to uh the direct consumer side if you feel like you're more skilled with hot you know map 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 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 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. shitloads and shitloads 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. That's that.
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, sales done, sales 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.
small follow-up to that would be then is so in the vein that that's the ultimate goal i 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 it is a lot that's i guess okay to sort of take that approach that long or tail approach of it nothing's fast yeah well sure you know i'm just being like super rare just more from obvious experience of seeing it and going like
stupid path versus... No, I think neither of those paths would work. I think given your experience from just the limited amount that we've interacted with right now, if you'd said, I'm a hardcore drug response marketer, I make tons of media, I really understand that well, I'm really good at building sites and know people who can CRO really well. then i'd be like okay maybe that's the play but if it's but you didn't jump at any of that and so this one feels like the right path
Alex, my name is Josiah. We sell chiropractic services to members of Lifetime Fitness. We're going to do 16 minutes. You do? Sorry. We sell chiropractic services to members of Lifetime Fitness. Okay, got it. Are you within Lifetime? Yes. Got it. Okay. this year we're gonna do like that's a niche uh like your ads are like
Are you a Lifetime Fitness member? You're the only people we take. No, I understand. Okay, got it. So we're going to do $16 million this year. We're going to get to $32 million. The thing that's stopping us right now is the sell for our chiropractors on the front end to the initial eight-week plan. They don't convert really well. Some do. We use the closer framework. And some doctors have three times the lifetime value of other doctors.
the pushback we get is they say i'm a doctor and a salesperson too salesy so they have a hard time pulling the script yeah how can i break I think you'll probably, one is I think Chick-fil-A is 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.
for the same reason that i didn't work with yogis and spin studios even though it's literally this exact same business model as large boot camps 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 to the same degree.
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 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 underneath that is probably just significantly more frequent training and that's in the form of role playing
I have yet to find anything that is more effective than modeling and role-playing when it comes to transferring a scale. The nice thing is that sales can be transferred relatively quickly, especially because they're, you know, they're... They can figure it out. What they get lost in is all the medical stuff, and they try and, like, 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.
buy this thing. But I think reading testimonials of patients who were undersold or not sold and telling them that they are hurting them by not providing solutions to help them. And so I think to be clear, I would also position this as like, we're not selling here. We're making offers available to people who need.
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 solid 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's 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 sales.
cool thanks so much no you bet does that help though super helpful okay i was already uh talking with uh jacob early about sales in terms of simplifying this and then starting like a three times a week yeah 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 the expectations we put even in the non-posting.
Because there are definitely some chiropractors who love selling. Yeah. And so one other thing that I think you can do tactically to kind of operationalize this besides the role playing and constant feedback is because of the benefit of being one in person and two a physician, having a clipboard that has the script on it with checkmark. makes it really hard to mess up it's like so I brought you in today tell me where it hurts
On a scale from 1 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 ah 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 from everything that you've told me, if you really hated this stuff and you really liked 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, blah, blah, blah. And then we go into the pitch. I like you. I mean, you dropped that video the other day on the planner.
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 Thank you very much. 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 um the reps that we bring on are independent contractors so there's not a high cost there um the biggest bottleneck is that Although we could bring on unlimited appointment centers, we need the leaders to be able to help scale URI. We need the leaders to help, you know, obviously lead those guys through the job, help hold them accountable.
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 has it taken to get from zero to 20? It's been five years now. Okay. Yeah. Heard. Well, what problem would you rather have? Or naturally.
Yeah. So faster growth and dilution of culture are probably more fires for finding wrong people that aren't good leaders and then miss hire 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. i mean just thinking out loud i'd prefer to grow slower but like i'll just say it would be really cool to have my cake and eat it too yeah um 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?
I guess 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 trainer. 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. Right. And if you needed tomorrow to sell Rose, you'd fucking sell Rose. We have Irving companies. Right, 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 increases 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 increases the likelihood that people follow or direct it.
Okay. One challenge I have is I've tried to shift the culture. We've 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 looking for the for the leader 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 uh make more than the sales managers
And so if you have a killer, let him kill, let him hunt. It's the guys who were like, Three out of tens worked really hard to get to a six or seven out of ten. Those guys I found have been exceptional sales managers and leaders.
And so I would be trying to identify that because the thing is, it's 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. and so you probably have a little bit of a pick-em issue
which is that you might be picking the wrong horses because now you're hurting yourself twice. You're losing a sales guy and don't have a good leader. Yeah. Right. Yes. And so I would say leave the best sales guys alone. Yeah. 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 um and then really because the thing is is those guys eat up the leadership stuff um and 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 yeah
great and then when that takes you know 25 years for them to become a leader because they've forgotten between each one hour uh or 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 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 they know what to do they lose it in the house
And a lot of that gets there. Obviously, you want to get as good as you can operationalizing the smaller scales. 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. Yeah. But like. But you own a $20 million business.
yeah let's go on why can't everyone be me so player questions if i have plenty of me oh my god i would make so much but you know so player coach is good or bad idea i prefer it depends because you're a bigger organization there's a supply system 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. 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.
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 8 and 18. We have a half million dollars of revenue. Awesome. I think we could be at $2 million of revenue. And what's stopping me is I've realized that the model is completely broken. I'm underpriced. overcompensating the staff. We're underutilizing capacity in terms of time and physical space and time. 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. 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 LTV2CAC 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 ltv2cac 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 ltv2cac
return invested capital is what it is at the macro level. When you're like opening more and more locations and saying it cost me $500,000 to open a location, the location makes me $500,000 from the first six months. Okay, cool. I've got a two on, you know, return on capital within a year, which is awesome, right? So 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've 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 summer 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 can 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, 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 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. Because you don't have enough cash to do anything.
Right. And so then the question is, OK, 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 just had count divided by teachers. 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. So we have to get more margin. He has to get more cash flow. Cash flow allows everybody to breathe better. So, okay, I guess that makes sense.
raise prices and get that different sort of client funding. Sell one on four 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 i would say listen mrs whatever like if your child becomes really attached
to a single teacher then if that teacher leaves then all of a sudden this skill that they spend all this time on they'll associate with the teacher and then all of a sudden they stop 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 it 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 crap That's how I would sell. whether that's true or not no idea but that 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 race because if you have supply constrained 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 the solution number one the second solution is change client delivery ratio which is covered so instead of going 101 you go into four so you get more out of what you already have this gives you leverage and it gives you cash flow
computes 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 makes 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. 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 have to change anything. Just say a different word. And then... you make more money so our our primary thing when we opened was it was a hundred percent private lessons yeah um and so that's where that's basically the only difference in the the hypothetical gym and gym launch which i read the whole thing on the plane over here you know how i didn't know that book did It's awesome.
But like, so what would the, what would the, um, you can still have one-on-one. You can still have one-on-one. Just, I would predominantly sell somewhere private. Right. If someone's like, well, I want the special snowflake treatment. Then you're like, awesome. I'll give you a special snowflake prize. Right. How would you design the initial offer for that type of model, the six-week beginner challenge?
So I would have, so you would 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. 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 you'll recognize it kind of right
But I would want some sort of discrete outcome, and that would be an outcome. You could also do some sort of subjective thing, which is that they rate X, or you could have a survey at the beginning, survey at the end. That would be kind of more of an internal. Yeah, typically you'll sell some sort of package up front.
I'm going to guess that the price point for what you're looking at is between $600,000 and $2,000,000 is what the upfront package would be. And then you would 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 it's all for.
yeah and the best thing we're drowning in context we're 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 but yeah you're just in time 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 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 and 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, we'll just run a six week thing or on a 12 week thing we'll sell 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 Does that make sense? That wasn't a slide, to be clear. I'm just saying for anybody.
It's true. Cool. I appreciate that, man.