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Action Academy | Millionaire Mentorship For Your Life & Business
Bought the Business? Here’s How to Run It (and Avoid Failure) w/ Gideon Spencer
00:55:04
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- [00:00]
A
When you're looking at your competition, don't just identify the good things that they're doing and try to clone them. What you want to do is identify what they are the weakest in and then you go all in on that weakness. To capture the market that they're not.
- [00:13]
B
Capturing, you need to get your first dollar as quickly as possible. We did $100,000 in revenue for Action Academy. Before I had a bank account, a business, an llc, or even a product. Doesn't matter if it's a million dollar company or a billion dollar company, all business is the same.
- [00:27]
A
Pick one product, one offering that you sell to one target avatar and you hyper focus on just one in each of those categories.
- [00:35]
B
Instead of doing the rainy day fund, make a fucking sunny day fund. I put 10% away where you're like, this is what I want to do. I want to go on this trip, this trip, this trip. How much do I need to make for that to be 10% of my disposable income? All right, Action Academy. Welcome back to another episode of today's podcast, Corporate America's least favorite podcast. I'm here with the man, the myth, the Gideon Spencer once again on the show. So today's episode is going to be a really good one. This is going to be a specialty episode that talks about not only buying the business or buying the real estate, which we're going to still put under the label of business, because any real estate investment done correctly and to its ultimate extreme is business. Buying a hotel is buying a business. Buying multifamily is still buying a business. So what happens after you buy the asset? Because on this podcast, we talk a lot about acquisition, but there's two other sections that are required for passivity after acquisition into both of our credit. I mean, we just didn't know any better until we went through it. And for some reason, nobody talks about this part. Everyone talks about just buying the assets and they just print off pure passive income. But it's actually a three step process and acquisition is only the first part. It goes acquisition acclimation architecture, how do I buy the asset? How do I acclimate to now being a business owner and an asset owner? And then lastly, how do I build the architecture, the meeting cadence, the flows, the. The org chart of my company so that I can have it run like I want it to run in? The company doesn't run. So today Gideon's going to break down along with me some of the different pillars of business and we're going to go kind of section by section with some of our greatest lessons. So, Gideon, you want to introduce yourself maybe for somebody that's listening for the first time and they're unfamiliar with you, and then break down the pillars that we're going to hit.
- [02:15]
A
Yeah, of course. Gideon Spencer. You can find me at Gideon Spencer underscore on Instagram. My background is in tech. Moved into hotel acquisition, so invested across seven hotels, partnered in one. We got two more deals in the pipeline that I'm super stoked about. We gotta, we gotta touch base on those lunch afterwards. So, yeah, basically the last few years have been hyper focused on acquisitions and stabilization of those assets. So that's why this, this episode's so important because we're going to go over four fundamental pillars of business and it's good to think of these things in simplified terms because it's easy to complicate business and when you buy a new business, it's easy to get muddied with all the different processes and operations and requirements and metrics. So we're going to keep it simple in this episode and we're going to break down business into four fundamental pillars. We have marketing, sales, and operations. Before we dive in, it's important to also note that when you are evaluating your business and you're, you're stabilizing it and like Brian mentioned, deciding what you want your business to look like and how you want it to run, it's. You want to apply something called the meta framework, which is effectively a framework of identifying the problems in each of these four pillars and hyper focusing on only one problem to solve at a time. So you're only looking at the biggest bottleneck, the biggest issues, and you're zeroing in on that as opposed to spreading yourself thin. So as we walk through these different pillars, we're going to be discussing the different frameworks that you can use to not only improve that aspect of the business, but evaluate the health of that aspect of the business. And once you've identified the least healthy aspect of the business, hyper focus on that, tackle it and yeah, we'll just work our way through.
- [03:54]
B
I love that you say that because I paid a lot of money now to learn business and people tend to overcomplicate it because we're all adhd. So our brains are naturally designed to like, find the chaos and seek the chaos rather than the simplicity. And one of my mentors told me this like, framework for business that really, actually finally made sense to me. And it took something that was so complicated and it made it simple. And he said it doesn't matter if it's a million dollar company or a billion dollar company, all businesses are the same. It's like a conveyor belt. And he was like, if you view business like a conveyor belt, instead of this whole thing that's going on with 9 million different directions all at the same time, it's way more simplified because you have sales and marketing at the front of the conveyor belt, then you have operations and fulfillment in the middle, and then you have product like profit and finance at the back end. And if you have a kink, it's a linear process where if you have a kink in the sales and marketing, then you're going to be able to see that because it's not even going to flow to operations. And then if you have a kink in the operations, you're going to see that because it's not going to float a profit. And so it's like you can solve one at a time on the conveyor belt. And once I figured that out and I was like, okay, so for instance, it's like if you don't have sales and marketing, if you don't have lead flow and proper revenue coming in and profit revenue coming in top line, then the rest doesn't even matter because you need to fix that because you don't even have money to pay your people for operations. And then if you don't have any profit, you got to go fix your operations. And so as soon as I viewed it like a conveyor belt, like sequentially, then everything changed for me and it became way more simple. So I'm excited to dive in, man. Let's start with sales and marketing. That's probably my favorite.
- [05:28]
A
Let's do it. Sales and marketing. And then just to quickly touch on that simple scales. So oftentimes people, when they run into issues with their business, they're looking for things to add. But nine times out of 10, you're going to be more effective by removing things. So pick one product, one offering that you sell to one target avatar on one platform, and you hyper focus on just one in each of those categories till you scale up to a million plus per year. And then after that you can think about, okay, what do I want to branch out? But you should be able to get to a million a year with just one in each of those categories. So actually, yeah, that's, let's just kick that off with marketing because that's effectively what that marketing is, right? So that's one of my favorite frameworks to dive into when you're thinking about what does my, my company actually sell. Oftentimes when we buy businesses we're inheriting decades of experiments that people have run. Hopefully we're buying poorly run businesses. And so one of the best ways to clean that up is identify the most valuable product that is being sold and then hyper focus on that and cut off any other products that aren't being, that aren't being sold as effectively hyper focus on the single avatar. Hyper focus on a single platform. So it's okay to post across YouTube, Instagram, TikTok, everything else, but you really want to master one platform. Um, and yeah, one single avatar. Because one single avatar you can scale. If you're trying to sell to 10 different avatars and you're, you're, you're barely making traction because you're trying to sell to everybody, then you'll end up selling to nobody. So just pick one and then hyper focus on those and scale from there.
- [06:59]
B
So let's, let's break this down into two sections. I'd like to hear your opinion about this on this specifically about like a USP or like, like a unique selling position. And then also your, I forget the acronym right now but like your perfect employ, your perfect avatar, it's like your ideal icp, Ideal customer profile or ideal client profile. ICP is the acronym. So how do you think about it from a hotel perspective? Because I think that that would be really useful for somebody that's in multifamily storage, hospitality or real estate at all. How do you think about that and apply that in your hospitality business? And I could talk about from a service business perspective.
- [07:39]
A
Yeah, so I like to employ something called the gap strategy and I did this in tech also. I didn't go into my tech background but built a bunch products for everyone from startups to large scale enterprises. This is a universally applicable concept in business. We're talking about fundamentals here and that.
- [07:54]
B
Is we're not talking about practice.
- [07:56]
A
Yeah, yeah, not practice.
- [07:57]
B
We're talking about practice.
- [07:58]
A
We're talking about game practice. Not a game, not a game. So the gap strategy effectively says when you're looking at your competition, don't just identify the good things that they're doing and try to clone them. What you want to do is identify what they are the weakest in and, and then you go all in on that weakness to capture the market that they're not capturing. So a perfect example that we did for our hotel, our most recent purchase in Solvang is we looked at the market and we found that it was incredibly restricted on space which is great for us because it's a natural mode. They're not going to do any more building in that market. Secondly, because there's restricted on space, there were no other hotels or even restaurants that had large outdoor areas. So when we identified an asset that had not only the largest outdoor area but we have two of the largest outdoor areas. So we have more than 5x the outdoor space than any other property. That was the moat that we leaned all in on. So what we've designed the hotel around is being able to host events, host weddings. We have two large garden areas that both have different vibes. So we have kind of the cozy hangout with a beautiful fireplace and relax, drinking wine with friends. And then we have the front garden area where we can have pop up events that are outward facing. So if a boutique wants to come and do a pop up they're right on the, the street with heavy traffic. So we basically, we saw what does the market, what, what competitors do terribly in the market that we think will be valuable and then we go all in on that. So it's identifying the gaps rather than trying to clone the strengths.
- [09:32]
B
Yeah, so I, I love the gap strategy. That's basically like USP unique selling point. So what is the one thing that you can do whereby doing that separates you from the rest of the competition? So it's exactly what you're talking about. And so ironically, before service business, I want to talk about our hotel that we're doing via because it's kind of something similar to where in Florida there's like 9 million beachfront properties and it's really hard to compete because a, the, the cost of the land itself is just like astronomical. So unless you have some type of economies of scale, it's just not going to work. Especially in the Miami market, South Florida market. It's crazy. Insurance is crazy. And so we're like, okay, well what's an under tapped, underutilized section of this market? And we're like, well people obviously love the Bali, the Tulum vibe and that doesn't really exist in the United States. So why don't we just build that? And so from a design perspective and an experience perspective, we said okay cool, this is a moat because this isn't anything that anyone's doing in the South Florida market. And we're starting with 20 keys with the ability to develop I think another 20 keys. So it's going to be individual villas. So we're starting with that. And then also another moat is a legal and infrastructure moat, like a, like a zoning moat. So we have farm and so it's, it's right, it's zoned agricultural. And so we're able to go from a multi year process with the, like the mayor and the board of directors for Miami and the county. We were able to get a bunch of like farmland grants and be able to do a land lease on this farmland that's really, really difficult to get. So that's a moat in and of itself. So when people, how do people can apply this is think about your usp. What is unique to you and you can choose your USP in the very beginning is what you're talking about. Like you want to go for a gap in the market and then hit that and be like this is what we do differently than anybody else. Because if you're more of the same, then you're just going to compete on price, which is a race to the bottom.
- [11:23]
A
Yeah, not only that, but when we think of marketing, people often think of the creative space and like oh, having creative content, creative copy. But marketing is also incredibly data driven. So you can also pull data on the market. Perfect example with our hotel is when we were looking at the data we found that there was a really high number of couples with pets that were visiting the market and solving. And there were no other hotels that were pet forward. There were some that allowed pets but it was very low key. Most of them didn't allow any pets at all. And so we are now leaning into that pet forwardness, tying it into the outdoor space and then not only that, but couples with pets is a highly targetable demographic. Like we can be incredibly precise with who we push ads to. It's within an hour and a half of la, which has an outrageous number of like this, that's a like a billion dollar industry in LA alone for people that are servicing their pets. So reverse engineering that gap can also be incredibly valuable where you're, you're looking at it at a micro perspective to see, okay, what is are these specific competitors doing? But then also taking a step back at the macro perspective to say what are these large gaps that are missing so that we can exploit the exploit those. And then not only that, because you're data driven, you're to reverse engineer and project your returns before you make that investment. So you're not, you're not putting as much, you're not, the capital that you're putting is not in as great of a risk as a more speculative play.
- [12:52]
B
Yeah. And I mean and then that goes straight into icp, your ideal client profile. Because what you guys did is you started from the beginning with reverse engineering, like, what works. And for us, we had other properties. So my business partner, Ben, who's the majority GP on the deal, and he's the one that's running the development team, he has two other properties here in Texas, Onara, Fredericks, and then another one. I forget the name, escapes me of where it is. But he serves couples, like, for romantic getaways, almost like a getaway house style. So that. That's who we're serving down there. We're not serving the person that wants to go to Miami to party and go to live. We're serving the person that wants to be part of the Miami wellness scene. And they want to go off on their own and bring a book, and they want to have privacy and seclusion, and they want to have their own space. That's very difficult to get in the Miami market. Another way that we use ICP is in Action Academy. So for somebody that's listening to this and you're starting your own, or you're building a company, or you just bought something and you're like, dude, Brian Gideon, I have no idea what my ICP would be. Here's what you do. First, you start. You can start kind of broad and be like, I serve this demographic. It can be males between 20 and 40 years old. Okay, cool. This is who I'm going to serve as my demographic. So for Action Academy, we start people that want financial freedom, high performers in corporate America. Okay, cool. We started with that, and then we started to just kind of see, all right, who's joining? And it was like, okay, 75% male, 25% female, wasn't marketing female. But then we just ended up with 25% female by default. I was like, that's interesting. Okay, what professions are joining? And then you start seeing all the different professions. And like you said, you collect data because you cannot make a decision in business without data. A decision without data is just a guess, and we don't have time for guesses. Like, guesses are expensive. And so you look at the data and we're like, okay, they're all sales and they're all engineers. Everybody in Action Academy is a fricking sales rep or they're an engineer. And we're like, okay, well, now after a year, let's go back and look at the data about who is our most successful member, not just who is a member that's paying us money. Who are our most successful members. And we Identify that person and that, that icp. And then so now we have like a pure demographic. If we're like, okay, if you're an engineer and you've got over $50,000 in cash, you're making over $200,000 or 150 to $250,000 in your engineering job and you have a high degree of urgency to leave that job. It's like, that is our perfect Action Academy member. So what you do is you just get the data of all of your customers and then you say, who are my top 10% customers? For both results and for spend and for the hotel space, it'd be like, okay, who's continuing to come back? Who are my highest LTV customers? And then you just take that 10% and you put all of your marketing towards them. And then that's the 10% that you market towards specifically and ruthlessly in your ads. And then you kind of ignore the other 90%. Not just say that you ignore them with delivery and fulfillment, but from your marketing perspective, you just attract more and more of the best customer that you know that you can serve. And then you don't even have to improve your delivery. It's just, you know, your delivery's tailored for them.
- [15:55]
A
Yeah. And then also another framework that a lot of people already know, the 8020 principle, where 80% of your return comes from 20% of your effort. So oftentimes I was actually just talking to someone who I coach who has a media company and she was like, I can't afford to give up, you know, this, this demographic that's giving me 20% revenue because I basically have 20% margins. And when I lose that and looking at where she was allocating her effort, that 20% was sucking up 80% of her time. So I was like, if you cut off that 20%, that's taking up 80% of your time and you hyper focus on the 20% that's giving you that 80% return, you'll forex your business. You're not going to lose by 20%.
- [16:35]
B
And you can adjust your price.
- [16:36]
A
Yeah.
- [16:37]
B
So I mean, if you, if you literally double your price, you can take half of the customers, you can lose half your customers. If you double, double your price, lose half your customers, you're doing the same revenue and probably more profit because now you can actually deliver better and get better results for your customers. So I mean like kind of all roads lead to like increasing your prices as much as you can. You don't want to be the low cost provider. You want to be the high cost provider. Dude, it's funny. Here's a really good one for marketing. So in marketing, pricing is everything. And it's so interesting because I'm someone that's gone from, you know, in the information space. In Action Academy, we went from fifteen hundred dollars lifetime to two grand to five grand. And now we're in ten grand plus for Action Academy price, price point and around two to five grand. Like my biggest mental hurdle was going from two to five grand. I thought that the business was shut down going from 2 to 5 grand. Now at 10 grand, it's like, dude, we service people 10 times better at 10 grand than we did at 2 or 5 grand. Now does that mean that I wish we would have started at ten grand? Not necessarily, because it would have been insane to try to market and target the same price that we have today. But the point of that is being is it's just like you want to have your price to a point where people actually believe it. So what people tend to do is you tend to sell out of your own wallet rather than sell to the person that actually like needs it. So it's, it's, it's bad to sell a $10,000 thing to somebody that only has a thousand dollars, but it's even worse to sell a thousand dollar thing to somebody that has a $10,000 budget. You know, because you're like, okay, I just missed out on that opportunity for that person. And I just saw this ad. On the flip side of this, with marketing, sometimes you make an offer. When you're making your offer, it still has to be wonderful. Like Hormozi talks about this a lot, but it has to be believable. So I saw this offer and I was like, this is the stupidest, scammiest, dumbest offer that I've ever seen. Because I'm in the space and I'm like, there's no way in hell I'm going to click on this thing. And I know there's no way in hell that you deliver on it. And the ad was literally just this static box. I'm not going to say the company, but the ad was, we will help you source, fund, analyze, underwrite and transition a cash flow. A million dollar cash flowing business within 60 days guaranteed. All it takes is $15,000 for $0. Now we'll help you negotiate it too. So like, we'll negotiate it for you, we'll raise the capital for you, we'll find it for you, we'll do everything for you. Just give us 15 grand. I was like, bro, that could be the greatest offer in the history of the world. But no one's going to believe that because that's exactly what it is. It's shit. Because I'm in that space. I'm like, dude, that's impossible. So it's like you have to be careful with what offer you position because you want to have it to where it's premium. And it's so believable though, you don't want to like say, oh, I'm going to make you a millionaire overnight. Nobody's going to believe that anymore.
- [19:33]
A
Yeah, yeah, a hundred percent. Something else. One more thing on the marketing, then we can move on. Being thoughtful of time. Something that you guys did really well with the resort that you guys are developing is you're effectively doing the marketing before you even break ground, which is another major hack that we do a lot in the tech space. People do it a lot less in real estate, but it's becoming more popular. Popular. And you and Ben are doing a really good job of that, which is selling an offering to gauge interest and then going all in. So with the development that you guys are doing, you had a lot of data to support it, but you're still doing great marketing to raise the capital and everything before you even break ground. So back to what you were saying. Guesses are incredibly expensive. You can capture data on guesses oftentimes before you invest too much capital into those by marketing and promoting a product and then gauging interest. And if people don't bite onto it, then you can pivot or pull back or do whatever. And then if people do bite onto it, then you can go all in. So people do this a lot in garments, right? So they'll say like, oh, we're doing a, I don't remember what they call it, but like a big drop, like a product drop. And they'll test the market and then the products that do best, they'll make a drop there and sell, you know, 10,000 or whatever and then not even sell the other ones that didn't gauge in, that didn't gain any interest. So being thoughtful and capturing as much data as you can ahead of time before diving in and going off in can be wildly advantageous.
- [20:56]
B
And one more thing on that is if you're starting a business, which is actually probably out of everything, the thing I'm most qualified to speak on because I've started multiple seven figure companies now, I'll have an eight figure company from scratch next year in 2026. And so I Would say the number one thing that is most important if you are looking to start a business is you need to get your first dollar as quickly as possible. And so what I mean by that is it's funny to come up with this crazy business plan for what you think it's going to be. You, you can have a general idea, but then you need to sell a discounted version of that general idea out to the market as quickly as possible. It's called your MVP Minimum viable product that you know about in tech. And you need to get customers on, like, paying you money as quickly as possible as soon as you have the idea. So, like, for instance, we did $100,000 in revenue for Action Academy before. I had a bank account, a business, an llc, or even a product. Like, I literally just coach people for free. And then I emailed them, yo, I've got this idea. I'm gonna make a course, 1500 bucks. It's gonna eventually be like five grand, but you want it for 1500 before I'm done with it. Like, yeah. And they venmoed me and cash app me a hundred thousand dollars. That was crazy. Yeah, but I mean, it validates what people say. And then I was like, okay, cool. Well, now that I've got you guys, I'm like, what do you need? And they're like, oh, okay. Well, we actually like the community better than the actual course. The course is awesome, but the people that we're meeting, it's like, okay, cool. Now I need to change the business to this new thing. Like, Airbnb was something before Airbnb. Uber was something before Uber. You have to iterate based off the customer feedback. And then now I'm even doing that with the business buying section is I'm like, okay, you bought the business, now what? And I'm going to all those guys and girls. I'm like, what are you struggling with? What's the issue? What's the problem? So that I can work with the customer to build our next offering and our next additions to Action Academy to add to our usp. So, like, you have to talk to your freaking customer. And people don't do that. They just guess. So guesses and yeses are really expensive.
- [22:54]
A
Yeah. Yeah. One of my favorite expressions, what is it? No save you time, yeses make you money and maybes just waste all your time. Yeah. And also like, build the plane as you build the plane on the way down. So what you did a really good job. And what I did same in my community, is I was literally, I Had webinars to tell people about what I was doing before I came up with the name, before I came up with the branding. And, like, I literally just had a price point and offering in a webinar. And it was actually somebody who bought into the community who came up with the community's name. Because we were literally, like, on the way down, assembling this plane, pulling it together and not getting distracted with the things that were down the road, but only doing, okay, what, like you were saying, profit first. What is the first thing that I have to do to make that first dollar? Okay, I need to tell people what I'm doing. Okay, cool. I told people what I'm doing. What's the next thing? I need to tell them what the offering is. Okay, what's that offering? And then get to the close. They were literally just wiring directly to my bank account. I didn't have some fancy stuff set up. I didn't have a name. I didn't have any branding. So literally just doing what the immediate next step is. Because oftentimes we plan so far ahead, and really that's just fear. Fear of taking that next step. So we spent all of our time planning, and we're waiting for all the lights to turn green before we actually leave the house. But realistically, what is the single most important thing that you need do to get to that first dollar, thousand percent.
- [24:16]
B
And don't make it, like, you don't have to have your $10,000 thing day one. Like, I wouldn't do it if I could go back. I do it exactly how I did it. Maybe I wouldn't start at 2 grand, maybe something around, like, 5 grand. But, like, I would start off with a stupid, simple offer that's super low that people can come into, and they're like, okay, cool. Like, even if this absolutely sucks, this is still going to be worth my time. If you're getting around $10,000 price point, though, like, you better be ready, willing, and able to deliver on that. Like, day one. That's the one thing that I'd offer. So speaking of profit, let's go into ops.
- [24:46]
A
And yeah, this is actually a really good segue into sales. One of my favorite frameworks is the yes ladder. So it's getting small yeses before you get those larger yeses. So something that we did when we were raising capital, and I recommend this to everybody, is effectively the first point of contact with a potential investor. I'm literally just saying, hey, this is a thing that I do. Would you be interested in future deals More specifically, I'd say like, hey, hey, Joe, how's it going? I'm buying boutique hotels. This is, you know, how we approach things, et cetera. When I do have a deal, I don't have a deal right now. Because we want the yes to be as small as possible. I don't have a deal right now, but when I do have a deal, is this something that you'd be interested in? By the way, how are Stephanie and the kids doing? Like, I genuinely care about you coming out with the ask right away. Don't act friendly and then pop and ask, because then it just feels slimy. Right. But literally, like, get the smallest yes you can first, which is just yes, I would be interested in something if something came up and then build up from there. Okay, now we have a deal in the pipeline. Would you be interested in learning more about this specific deal? Okay, It's a little bit bigger of a yes. And then it eventually goes down to, hey, we're looking for a check to be written for $150,000. This is something you'd be interested in. Right? So starting with those small yeses, like you were saying before, and then building up, if you come out the gate with too big of a yes too early, then you can end up pushing them away.
- [26:09]
B
Yeah, it's. It's the. It's the tie down. It's a tie down or a trial close. So it's like whenever. I mean, dude, like, I know so much sales stuff in my head that I don't even talk about it because it's just like, I've spent my entire career in sales. But yeah, it's just trial closes and getting it going and going and going again. So we just did a webinar for Action Academy where we did the business buying webinar, and it was amazing. So shout out to everybody that showed up. But we had like 650 registrants. We had almost 300 show up. Like 70, 80% of them stayed the entire call. And then at the end, it's. It's building the yeses. Like, hey, did you get value from this call? Yes. Okay, so here's. Here's a recap of what we did. Did you guys understand this part? Yes. Okay. Did you understand this part? Yes. Did you understand this part? Yes. Okay, cool. We're doing this offer. Do you want to book a call? Yes. And so it's the same thing. It's just building up the yeses. So it's just tie downs, tie downs, tie downs. I will say, though, when it comes to sales is you want to sell somebody out of hell before you sell them the ticket to heaven. So that's one way that we think about it, is you want to sell somebody away from a pain or away from a problem before you give them, like, the. The freaking plane ride to Hawaii. So for us, it's like, we really, really focus on doing, like, the one, two punch. So first is we'll focus a lot on, okay, what's the problem today? What's the constraint? Like, where do you want to go? Where are you at right now? Where you want to go? What's the current hell that we're experiencing? Because if somebody has too much comfort, they're not going to take action. So you want to make sure that whatever problem that they have, like, they're very, very aware of the problem. And then, then you sell them the. The ticket to heaven, and then you sell them the plane ride to Hawaii, and you're like, okay, cool, now we can do this thing. So, great, great tip for any sales reps is sell. Sell the path out of hell before you sell the path to heaven. Like that. That. That will probably double your income. Yo, what's up, guys? One sec. You're listening to a podcast right now, and I freaking love that. But this is not making you more money. What makes you more money, more wealth, more equity, is being in the room with the people that you're hearing on today's episode. If you want to be around hundreds of other people like you leaving corporate America, doing big deals in business, commercial real estate, and land, check out actionacademy.com Go in the show, link the show description, and click click the link to book a call with our membership director team. We'll give you the resources, the connections, and the community to actually pull off the stuff that you're learning about on this podcast. And we'll hold you accountable to the actual implementation of the information that is actionacademy.com now let's get back to today's episode.
- [28:46]
A
Yeah. And then in addition to that, there's a direct correlation between the duration of time you need to spend nurturing and the size of the ticket sale. So if you have a $50 product, very little nurturing is involved. People can just toss 50 bucks in to experiment to see if it's worth it. If you're selling a $25,000 ticket item, you need significantly more nurturing with significantly longer timeline. So this is more important if you're starting a new business where you're experimenting with timelines and like the size of the ticket sale. But be sure that you're giving ample time or relative time for nurturing to actually get to that close thousand percent.
- [29:26]
B
And I mean in corporate, like back when I was working my, my corporate sales job, it's like it's all the whales that were my big thing. And I think that for most people, if they just focus on doing a larger ticket in whatever sales profession that they're in, they'll double their income because most of it's off of like a bonus structure. And then the big guys and the big girls and the big companies, especially if you're in B2B, like they just, they're ready to buy when they're ready to buy, but that window may come up a year, a year later. So you just gotta be on top of them constantly marketing, constantly marketing. And so for me, whenever I was in sales, I was focused in my time was 50% marketing to the whales and 50% door knocking the minnows. And so I'd be door knocking the up and down the street business. So that would actually keep the lights on and keep some commission in my pocket. But I knew that some of those wells would close and it was the easiest sales pitch and sales presentation because they have so much money. And these are procurement directors, they're ops directors. Like it's not their money that they're spending, it's the company's money. And if you could just go in there and they already know the problem that they have and they're sophisticated buyer that you can offer sophisticated solution and then it closes pretty quickly. But it was getting in the door that was the hard part. So I would just constantly, it's, I call it air game versus ground game. And the same thing applies in, in your sales shop today. If you're doing real estate and stuff, selling residential homes, sell luxury homes. If you're buy, if you're doing commercial, don't sell the frickin million dollar storage facility. Sell the $20 million storage facility. You know, it's just, you're building, you're, you're dealing with a more sophisticated buyer and it's just, it's more fun.
- [30:57]
A
That is such a good point. That is such a good point. It's easier to sell 10 $100,000 products to make a million dollars than it is to sell a million $1 products.
- [31:09]
B
Yeah, yeah, it's way easier.
- [31:11]
A
So much easier. So much easier. Like the $1 products feel more accessible and it feels like you can get it, it kicked off faster and you can get it kicked off faster, but to actually scale bigger ticket is always better.
- [31:23]
B
Yeah, I mean, we're doubling the price of action academy here pretty soon because we just realized, okay, cool. The for us to be an eight figure company and for us to hire the new round of coaches that we want to hire, like, these are six figure guys and girls. Like, they're not, they're not freaking. No offense to the Philippines, but they're not just random people from the Philippines. Like, they're specialized in what they do. And so we're like, okay, cool. What do we need to be at that for us to hire these coaches to like really serve the client and like really be in there with the customer to give them the like, support that nobody else can match. We're like about $10 million a year is what we need. We're like, okay, cool. Well then you have to work that back into your unit economics. And you work backwards. You say, okay, well then how many people need to be joined in per month that we realized at this current price, we're like, dude, that would take a hundred people per month. I was like, we don't want a hundred people per month. We want maybe 40, 50 max. So you have to adjust the price to however many people. And so we're like, okay, cool. If we want 40 to 50 customers, new members joining per month, what price point is that needed to warrant this outcome so that way we can deliver to the best of our ability. And so that's how we make pricing decisions. You don't just wing it. You go off of like the industry. You go off the market, you go off of data.
- [32:35]
A
Yeah, 100%. All right. Segueing over to finance. One of the most important things to keep in mind with finance that is often forgotten is cash flow beats profit. Cash flow beats profit.
- [32:49]
B
Describe the difference between cash flow and profit. Because a lot of people don't understand there's a difference.
- [32:52]
A
Yeah. So cash flow is the money that is passing through your business and the rate at which money is passing through your business. Profit is top line or gross revenue minus expenses. And the reason it's important to distinguish these things is because oftentimes literally the same person who I was coaching with the media company, she was getting sales. She had about 30% profit margins, but she was had net 90 terms. So her clients didn't have to pay her for 90 days, but she had to pay out payroll regularly over that, over that 90 days. So she was like, I don't get it. Like my business, I have 30% margins but I never have any money in the bank. And I said that's because you don't have any cash flow. Like you're spending your cash super quickly and you're collecting it super slowly. So this is a crazy thing to think about because effectively you can have a profitable business and still go bankrupt if you're not collecting the profits quickly enough. If the cash flow is not strong enough.
- [33:52]
B
Yeah, profit's a theory. So profit's not even real. It's a theory because if you look at the profit for my companies, they're artificially lowered like because we lower for taxes. Like everybody that's a business owner does that. And that's why when you sell a company we have what's called add backs which are like, okay, cool, like I'm gonna add back this education. Like we spent like I think a quarter million dollars on education for the company this year. So it's like that's for me and the team. So that's masterminds that I'm joining and putting that on the company as it should be. That's not even anything that's wrong that should be on the company. I'm paying for my employees education and training on the company. So I mean that could be a quarter million dollars, you know that you're taking that profit number down. So we're manufacturing that low and that's again the tax game. But so that's why profit's a theory. Cash flow is king. So my favorite quote is revenue is vanity, profit is sanity. And cash flow is king by Verne Harnish. And so I just went to a Keith Cunningham workshop at Business Mastery for Tony Robbins. I love Keith Cunningham. He runs this program called a four day MBA that I'm going to be taking. And so he was teaching you how to look through that. And cash flow is. Yeah, single handedly. The most important thing is how much cash is left over in the bank like every single month. And so for us that is what we optimize for. We don't optimize for profit, we optimize for net free cash flow. That's what we look for. And so at the end of the day, Hormozi in his new book Hundred Million Dollar Offers has a good frame of it. I think he, he says the formula is you want two times your CAC and collected profit within 30 days. So that way you have a perpetual money machine that will be able to. It's client finance acquisition. Yeah, I think he calls it something else. But it's CFA client funded acquisition so that way that your. Your. Your customers and your clients are paying you enough money for you to go market back and get new customers. Because if you don't have cash flow, you can't market. And so that's something that we focus on, and that's the machine that we built in our companies, and that's, like the number one thing that we focus on. So is there anything that you've done to increase or kind of move your cash flow one way or another?
- [36:03]
A
Yeah. So in general, the principle that you want to follow that we employ everywhere we can is you want to collect as soon as possible and pay as late as possible. So for our hotel, we collect everything up front. So we get paid up front, and then, of course, the guest stays, and we don't actually incur those expenses until after they've stayed. Same with dude, big thing.
- [36:24]
B
Really quickly. Sorry to interrupt, but over the last five or six years, I've noticed a change in hospitality to where they will bill your card for incidentals at the very beginning of the check in. That's new. I don't remember when that started, but that's a new thing that I don't remember that always being is you check into any hotel and they're saying, hey, I'm gonna bill your credit card. I need a card on file to bill, you know, 300 a night in incidentals, which will be returned to you at the end if everything's okay. And so that's how they manage their cash flow. So if that there's anything that's wrong or anything that's out of the minibar that. That they miss, then they already have that out of your bill, and they already have the cash up front collected, and they just refund the rest. Yeah, genius.
- [37:05]
A
Yeah, yeah. No, 100%. And then not only that, we don't have time to get into it in this podcast, but when you have cash on hand, even if it is like in accounts payable money that's due to other people, you can do creative things with that cash because you have that cash on hand. Of course, it increases the risk depending on how you're. You're using it.
- [37:24]
B
The number one book changed my life because the first year, I made a million dollars in my company and in business, I looked at it at the end of the year, and I was like, well, where'd that go? Like, I made a million dollars. I know I made a million dollars, but where'd the million dollars go? Because everyone's like, oh, you have to reinvest it back into your business. No, dude, you're an idiot. You're an operator. You're. You're a clown. You don't know what you're talking about. That's how most business owners operate. Sorry. And to call him a clown. But I was that guy. I was a clown. Calling and talking to me, yelling at me. Got the book Profit first changed my life. Profit first by Mike Michalowitz. Mike wrote the forward to my book for passive to passionate dude. Just the idea of changing how you view profit. Like, everything changed for me. Because before, how most business owners think about profit is to think about, like, profit equals revenue minus expenses. Right? Right. But then in profit first, it talks about. It's like, revenue minus profit equals expenses. And I was just like, oh, I'm gonna just do that instead. And then the next year, like, I had a million in my bank account. Not on my top line, not in my statement. I had a million in my bank account. Huge difference. That was a year later, because I was like, okay, revenue minus profit equals expenses. So I go to my team. I'm like, this is the profit margin that we're shooting for. Like, this is our margin. And everything else that's left over is what we're able to spend and what we do. I took another book, business book that nobody talks about. That is insane. That's a sleeper business book is the millionaire real estate agent by Gary Keller and Jay Papazon. It is a business book. It's not a real estate book. It's like, how Gary Keller thinks about things and how he buckets his expenses out. And so I've followed his playbook for the millionaire real estate agent. I just kind of adapted it to mine, but he has buckets of expenses. So a few of the rules is you spend 10% on marketing. You don't spend more. 10% of your budget goes to marketing. And I was like, got it, Gary. I'm gonna do 10% towards marketing. And he's like, 30. Your opex should not be more than 30% of the business. Like, so all your operating expenses should not be more than 30% of the business. And then he goes, your salary should not exceed 15 to 20% of the business. As soon as they get to 25%, you need to wait to hire until you increase your revenue to bring them back down to 20%, and then you can h some more. And so, literally, just using those small rules of thumb from between profit first and millionaire real estate agent, if you just read those two books, you can run a profitable company. I'M telling you, reading those two books, put a million dollars in my pocket post tax.
- [39:57]
A
Dude, I love that.
- [39:59]
B
That's odd. Dude, it's, it's so good. Like, literally I get money now. And this is, we're recording this early September. And so I have my money right now. We collect it. I'm like, okay, cool. It goes into our top line revenue account and we have like nine different bank accounts with salaries, profit, like taxes, opex software, you know, everything. Like, we have different buckets for profit. First you have all these different bank accounts for your different buckets. And so it auto distributes every Friday to all the different buckets. So we don't even have to do anything. I just get the revenue and then I could see in each bucket, I'm like, 40% is going to the profit bucket. And that 40%, as soon as it reaches every $10,000 it just auto sends to my other bank account, so it just disappears. And so I call it taking poker chips off the table. So you take a, you, you win in roulette and you take a couple of those hundred dollar chips, 500 chips, you put them in your pocket and it's like they don't exist. And you're playing with the other money, playing with the house money. Like that's how business goes. And we're able to use that 40% that we have in cash to go reinvest back in the infrastructure of the business. So that's how we're able to fund and bankroll all of the stuff that we're doing in the business and grow so fast. Fast with the team, with the infrastructures, because it's client finance and so. And oh, and then people are going to say, oh, well, your taxes are going to suck. Your taxes are so bad. I'm like my brother, like, dude, once you actually own a business, it's like playing the tax game just for the sake of playing the tax game is dumb as hell. Like, I understand. Yes. Okay, cool. Like, my tax bill is 37%. So I'm like, I get it. We want to reduce the tax bill as much as possible, people. But people are like, oh, I'm gonna go buy, you know, a Range Rover or something. I'm like, okay, cool. So you'll save 30. Like, and you can make the argument of, oh, I can do bonus depreciation on it, I can do all this different stuff. But dude, you're just playing a vicious cycle. Because eventually, like, I came to the realization with me and my legal team and CPA team who Make a lot of money is. I was like, okay, well, if I like. So for instance, we had a hundred thousand dollar mastermind that I was gonna get. And I was like, okay, I'm gonna write this off. The taxes. I'm like, well, you don't actually write all a hundred thousand dollars of that off. You get 37 cents of the dollar off because that's your taxable rate. So I'm like, okay, so me getting the hundred thousand dollar thing is I'm still spending like $70,000. I'm able to write off like 37,000. So I'm, I'm spending like 63. And so you're still spending that, right? And so I'm like, you're, you're, you're spending $2 to save a dollar. And so at a certain point, it's like, there's smart things that you can do that don't involve spending all of your money. But what business owners do is they just go spend all their profit and they're like, oh, okay, I did it right. So US Government, you're not gonna get me my brother in Christ. You have no cash. Zero. So we have a lot. We, we hold cash. I like cash. I'm never gonna not like cash. I don't know about you, but like, dude, like, what we target right now is I want three months of complete OPEX reserves for the company. I want 12 months of salary for the company. So anyone that's on salary in action Academy has 12 months of payroll saved up. So in case Armageddon happens and we make no money, they've got 12 months of payroll covered, and I've got 12 months of my life covered. I just. 120 grand. So 10 grand a month. So I'm like, those are all in cash, making 5 to 6%. I have them in like T bill. And then all the rest on top of that, we dump and redeploy back into. We make that money work for us.
- [43:30]
A
Yeah, you have to spend your money on things that actually make sense for the business, not just spending.
- [43:37]
B
And sometimes it makes sense for the business to, to hold the cash. Like some real estate guys maybe coming at me and being like, oh, that's too much cash. I'm like, okay, but you got. I don't want to live your life. Like, I'm sorry, but like, even my hotel partner, Ben, shout out Ben, we're talking about, then we're talking about this. We're talking about it publicly. I'm like, bro, I don't want to. Like, he don't got cash because he's constantly reinvesting into new projects, new developments. And, like, I've got so many real estate friends that have been broke for, like, a decade. And, yeah, they'll pop up 12 years later, and they'll be like, oh, I'm worth 50 million now. I'm like, sick. But, like, that's 12 years. Like, I want to enjoy my cash flow, my distributions throughout, in a responsible way. So what I do is instead of thinking about, how can I scrimp and save, I'm like, here's how much I would love to spend. So what people need to do is $2 million a year, like, spending for everything that I want. I did the math, and I was like, okay, I need about $54 million a year. You know, coming from my business where I take this amount of distributions, I pay this amount in tax, like, like, I need to take home basically $12 million. I need to take home a million dollars a month to live the life that I want and be able to save 80% of it. So I'm like, I need a business that does 50 million. And so if people just reverse engineered that math, I'm like, okay, cool. I could do that in probably four or five years. That's how I think about it.
- [44:59]
A
Yeah.
- [45:00]
B
Gives you a target at least.
- [45:01]
A
Yeah, no, a hundred percent. That's strong. All right, wrapping up on time, segueing over to operations. This, this, this.
- [45:09]
B
Ignore operations, operations that exist. All you got to do is just buy the asset.
- [45:12]
A
You hire someone for operations.
- [45:14]
B
Just hire an operator man.
- [45:16]
A
So this is more for the leaders in the business of how to think about operations, which is give your team the what and the why and let them figure out the how. So the military calls this Mission Command. Spotify popularized an expression being tightly aligned and loosely coupled, which is effectively everybody is hyper aligned on the overall company vision and goal. And then their. Their personal roles, responsibilities, and the outcomes that they're owning and why they're owning it. And then you give them the how. 100%. That's so difficult, especially for people like you and me, who built their businesses from the ground up, because you're so familiar with each role, because there was a time where you were wearing all those hats, and then as you bring other people in, you're thinking, like, you know, what the hell looks like? But something I'd encourage people to think about. And this is something. I actually just posted this on my story, which is the thing that doesn't light you up that you hate doing. There's somebody else who loves doing that thing, and they're probably better at it than you are because they love doing that thing. So rather than. Rather than giving out the roles and responsibilities that you feel are less important so that you hang on to the important thing, flip it in terms of what lights you up, and then cut everything else out so that you can bring people in who like doing the things that you hate doing. And then now everybody's working on something that lights them up, everybody's aligned, and then that's when business really blossoms.
- [46:39]
B
Yeah. Can I add to it?
- [46:40]
A
Yeah.
- [46:41]
B
So, yes, I agree with that, comma. And it's more difficult than you're making it out to be, because it's. There's two different stages of business. There's the generalist stage of business, and there's the specialist stage of business. So in the beginning stage, it's like, yeah, I was doing everything like that to where I was like, okay, cool. Like, I'm gonna let you guys figure out the how. But then what do you do when your employees come to you and they're super frustrated because they're not performing? Because they don't fucking know how to do it? They don't know. They don't know how to do it. And you're like, okay, well, I don't know how to do it. And so you got two virgins trying to have sex. Like, that's why we don't have an HR department. But seriously, it's like, I got that one from Layla Hormozi, so if anyone sues me, shout out Layla. But seriously, so the issue is you have. You have two different ways of. Of training talent, right? So it's either you buy experience or you train experience. So you either need to train the employees on how to do the thing so that they can do it, or you have to hire somebody that knows how to do the thing. So that's the issue that you're running into, because I agree with what you say from a theory perspective, but from an execution perspective, it's really hard. So that's why when you go up to, like, 10 million plus, like, the messy middle is, okay, we have a lot of talent that works really hard. They don't know how to do the thing. So what we do right now and, like, kind of what I've gotten from the Hormoses and from, like, the coaching and training that I've done with them and with other people is you have what are called, like, rising stars on the team. So you have a bunch of people that are super smart and high agency. So people that want to do it and they're capable of doing it from a horsepower perspective, mentally, they just don't have the actual experience and the skill sets to do it. And this is in the middle stage where it's really difficult for you to hire the person because like the game of business is to hire the person that's already done it and you bring them down. So like that's the eight figure skill set is you're like, okay, cool, I don't know. Marketing. I'm going to hire Alex from Rosie's old creative director for like $400,000 to come in and teach me and like run the company, run the marketing. And he tells me what to do. That's the only way that you get the experience. So what we do right now is rising stars. So you have the people that are competent and then you go hire outside agencies and outside contractors to come in that are normally really expensive. So we just spent I think $87,000 on Cole Gordon's like sales sales, like mastermind and sales system. And then I'm using Estefania, who's my rising star. I'm training her on all the sales and marketing so she could be a really good CRO. So I'm training her from their skill sets because I didn't have the skill sets of how to build and manage and lead a sales team team, but they do. So now we're both learning together. So now we now possess that skill set to train somebody else. So like, it gets to a point in business where in the beginning, what we were talking about first is product market fit is just like, okay, can I make a good product? Make a good offer, fill in the offer. But to get to like 10 million plus, it's like, okay, I need the right people that are telling me what to do that have experience and that they're. Because the other people just don't know how to do it. It. So it's like, hey, do you guys know how to manage a thousand member community? It's like, nope. Like, all right. Kind of need to go get someone that's managed a thousand member community and bring them down. Say, hey, you've already done something at $20 million a year. Like, come down and come with us. We'll make you an offer you can't refuse. And so it's all talent. So it's complicated. Dude. Dude, it is hard. I mean, but that's why 98% of companies are beneath $10 million.
- [50:16]
A
Yeah. Something else that can be employed also is coaching and the framework differently than training. So there's a really good book, I think it's called High Performance Coaching, where basically it's run by this company who started off, they did an interesting study where they had tennis players that were coached by elite golf instructors who didn't know anything about tennis. And they were studying the different coaching styles. And what they found was that the top golf instructors that didn't know anything about how to play tennis were coaching tennis players better than moderate to high performing tennis coaches.
- [50:50]
B
How was that?
- [50:51]
A
The reason is because of their coaching style. And the coaching style was effectively one where they would ask the tennis players questions that would cause them to find the answers intuitively. So the way that would look is rather than saying, oh, hold your racket like this and pivot your hips like that, they would say, how does it feel when you hit the ball? Or rather than saying, keep your eye on the ball, which is a famous expression in sports, they would say, what direction does the ball bounce when you notice it spins on its way over to you? So they're asking questions that cause the individual to come up with the answers on their own. So, for example, in business, and to reiterate, this is very difficult because especially when you know how to do something, you just want to tell someone how to do it and send them on their way. But proper coaching, what that looks like is if an employee comes to you and says, oh, I don't know how to create this form, for example, then rather than telling them how to create it, you ask them, well, how would, how would you create it if. If like, you had full autonomy, what makes sense to you? Or who do you know that might know how to create it? Right. So you're asking them questions that they should be asking themselves. And then now, rather than giving them the answer, you're giving them the frameworks and the questions that are actually empowering them to be able to go answer those questions for themselves in the future. So while it is a more costly investment up front, because it does require more patience, it requires more conversations, you're giving them the tools such that they don't have to come and ask you for questions later on, because now they know the questions to cycle through to go solve those questions on their own.
- [52:24]
B
Yeah. And in closing, it's kind of like Dan Martell's one three one, where it's like one problem, three solutions, one suggestion.
- [52:31]
A
Yeah.
- [52:31]
B
So it's like when you come to me, don't just give me a problem, because then that's just complaining. Like, okay, cool, you're. I pay you money. Like, what's your solution to it? So now what we do is one. Three ones. Okay, what's the problem? What are your three solutions? This is just in one pair, one text. Okay, hey, we have this problem. Here's the three things that we think are possible solutions to it, and here's what we want to do. What do you think? And then nine times out of 10 you're like, yep, that's it. Run it. And it trains them to think about the solutions on their own rather than come to you as the, as the person. So everyone that's an operator in their business, oh my God, my customers come to me for everything. It's because you train them to. Because you train them to. You don't possess the skill set of saying no. And so I like what you said, where it's like you have to train them and coach them on everything. So man at that we're at time. So if people want to find out more about you, they want to partner with you on the hotels, they want to. They want to follow you. Where can they get more of Gideon?
- [53:23]
A
Yeah, I'm mostly. I'm all over the place, but mostly Instagram. It's Gideon Spencer. Underscore, G I D E O N S P E N C E R underscore. And yeah, hit me up and you.
- [53:34]
B
Guys know where to find me. I'm freaking everywhere. So, dude, awesome. The saga continues. Guys, if this was valuable to you, please like subscribe and share this with somebody else. And also if you're interested in having conversations like this. 24. 7 Action Academy. This is what we talk about 24 7. And then also what. What's your community?
- [53:55]
A
Incredible Hospitality co. So we coach people on how to target, take down hotels, raise capital and then stabilize it.
- [54:02]
B
Beautiful. So if you want one of those two, reach out, you guys know where to find us. There's. You're not going to lose either way. So guys, thank you so much. Send this to somebody that you think could get value from it. See ya.
- [54:12]
A
Peace.
- [54:13]
B
Boom. Thank you guys so much for listening to another episode of the Action Academy podcast. My one ask real quick before you go. If you enjoy this episode, if it brought value to you, please share this episode with one to three friends that you think could get value from it. This is how we grow the show. And at minimum, if you could leave us a five star rating and review on Apple podcasts, Spotify or whatever platform you listen to, that would mean the world to us is how we get in front of other entrepreneurs. If you're done sitting on the sidelines, you're done listening to the podcast. You want to be the freaking guest on the podcast? Go into actionacademy.com, go in the show description, the show link, and book a call to speak with our Action Academy community. We have hundreds and hundreds of people just like you buying businesses and commercial real estate with full coaches, full mentors, full support, full capital, everything. ActionAcademy.com is where you'll find us.