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Churn: The Silent Killer of Your Business
00:41:15
Are you ignoring churn in your business? You might be losing more than you realize. In this episode of the Build Your Business podcast, Matt and Chris Reynolds reveal how churn is the silent killer of growth—especially in service-based and fitness...
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- [00:01]
A
Hey, coaches, are you still chasing clients? Every month we're flipping the script at the business of Coaching workshop. We'll help you learn how to keep clients longer, set premium pricing, boost your dollars per hour, and let referrals, not marketing machines, make you more money. Register for free at Turnkey Coach Voc. That's Turnkey Coach Voc. We'll help you build a coaching business that lasts foreign.
- [00:35]
B
You're listening to the Build your Business podcast, powered by Turnkey Coach, where we help business owners find freedom over fear. I'm Matt Reynolds and I'm his brother, Chris Reynolds.
- [00:45]
A
Join us as we help build your business and move from fear to freedom together. You're listening to the Build your Business podcast. I am your co host, Matt Reynolds. I'm here with my little brother, Chris. Hey, man, what's up?
- [01:07]
B
What is up?
- [01:09]
A
So we're going to dive in as we normally do. We're going to talk about Churn today. I'm coming in as pissed off. And here we go. You're going to get pissed off. But it's a potentially good podcast to be pissed off about because Churn is something that I see in my industry, small, specifically in the fitness industry, that is not taken into account. It's just. It gets sort of forgotten about. And so for, obviously for Barbalogic online coaching, for Block, which is our B2C company, we're constantly looking at Churn. I'll get into that in a minute. For Turnkey Coach, where we're the B2B side. All of these coaches who are coming onto the platform are like, how do I get more clients? How do I get more clients? How do I get more clients? We're like, okay, that is a thing. Except you're asking the wrong. That's not the right first question. Yeah, because the first question has to be. Often we'll just ask, well, what is your churn? And I get one of two answers. What is Churn? Or I don't know. Yeah, right. And so we're going to go into Churn today because I think it's one of the most important things to talk about for any business. B2C, B2B Enterprise, any of those things. And so let's talk through it. So first off, what is Churn? Cause I'm sure there are people who listen to this. It's like, I've heard that term. Maybe you haven't. Hopefully you have. I'm not entirely sure what that is. What is Churn?
- [02:37]
B
So, like, you gotta think about Churn as the backdoor of your business. That's the way I always describe it to people. It's like everybody wants to focus on the new thing. You wanna focus on new sales, you wanna focus on new customers. And that's the front door. It's where people come in.
- [02:52]
A
But how do we get more people in the funnel? Drive them to the funnel, convert them. Yep.
- [02:56]
B
So exciting.
- [02:57]
A
All important things we'll do podcasts on.
- [02:59]
B
You know how easy it is though to, to drive new business in. It's not, it's hard to drive new business in.
- [03:07]
A
Right.
- [03:08]
B
But it's much easier to keep the business you have. And so the idea behind Churn is Churn is how many customers per month usually that you're losing.
- [03:16]
A
You think about the churn percentage of clients as a percentage of clients of your total.
- [03:21]
B
Yeah. What you're looking for there obviously like you don't have, you won't have a business very long if your Churn is higher than your incoming sales rate and.
- [03:32]
A
You'Re going to be net negative.
- [03:33]
B
Yeah. And beyond that, like maybe even more importantly, those are usually really good numbers to help you understand one or two things that are really important. One of them is the level of service you're providing or the product you're providing to your customers. And the second one is potentially economic conditions. Like kind of depends on what it is that you're, that you're doing and what kind of product you you sell or what service you sell. But you will notice very clear lines in your business behind. You can draw a straight line from what happens to Churn and one of those two things. Right. Like every time.
- [04:10]
A
First off, for calculation. So Churn is just the percentage of clients that you lose on a monthly or yearly basis. However you want to calculate that and it's all kind of the same and you want to look at your industry standard and this is where AI is great because you can just ask Chat, GPT or any, anybody. This is the industry I'm in. What is the average churn? So I did that before the show for the average in fitness is about 10% per month. That's a terrible business.
- [04:38]
B
Yeah.
- [04:39]
A
It's tough if you're losing 10% on that's the average industry standard. That's crazy. And the only fitness businesses that tend to have lower churn industry wide is the big chain gyms that have long term contracts. So you still sign a two year contract or like a Planet Fitness where you're paying 10 bucks a month. There's a very low Churn because the actual, the process of canceling that, you're like, ah, I'll use it at some point. It's only $10 a month. It's so cheap that the churn is relatively low. And so but even for them, it's somewhere in the 7.5 to 8% range, which I would still argue is still like way, way, way too high. As you get more boutique, it goes up even more. 10, 12, 15%. One of our biggest competitors, which I certainly won't name in the B2C industry, I know because they had a top level manager who lives in our area and talked to him and he said they celebrated and gave out bonuses for. If you were kind of a upper level manager, you would have other coaches underneath you. They were working with clients. If you had an under 10% churn that month or that quarter, you would get a bonus.
- [05:50]
B
That's crazy.
- [05:50]
A
I'm like, what? That is insanity. So to put things into perspective at barbalogic online coaching, our average churn last year per month was 2.5%. That is on some level. And for those of you guys that are not in the know on this, that's like enterprise level type. That's HubSpot, salesforce, that's these major, major enterprise. So rarely will you ever see anybody under 3 to 1.5%. Like that's, that's basically unheard of. 10% is like super dangerous zone. And so then the last part of the math that I'll give you is if you're losing 10% of your clients per month, regardless of how many are coming in, you have to replace a hundred percent of your clients every 10 months. So the average lifespan of the client at 10% churn is 10 months. So the other thing you can do is you can start to look at your churn percentage. If you're at 3% churn, you can take that 3% churn, you can divide it into 100%. You can say, my average life span of the client is 36 months. Now we even go deeper than that and we'll say, well, what months are the biggest churn months? And for us it's like month five, month four. Right. So somebody does it, but they don't really ever buy in and they churn out kind of early. And then we notice if we keep them through month six, they don't stay for 36 months, they stay for 36 years. Yeah, they stay, you know, for five to seven years is kind of average. And so, so you do want to look at industry standards. You want to make sure that you are below that. We certainly will get into the weeds on why those things are important. But the overarching theme of this is that everyone wants to know, how do I get more clients? Dude, social media is so just, it's just totally saturated with people trying to get more clients. You are competing for attention. All of these things are important. Yes, you have to do that. Yes, you have to get more clients. But it is 5 to 7x more expensive to gain a new client, and that's across all industries than is to keep an existing client. So the first thing you should be concentrating on as a business, whether you are literally a not a service business, and definitely if you're a service business, is in keeping and nurturing the clients you already have so that they stay. So that you already sort of spoke to this through the midst of economic turmoil, macroeconomic stuff, recessions. If you have clients who are stark raving fans and they're never going to leave, then that's money in the bank every single month that you can count on. And when the economics turn negative, it starts to become very difficult to get new clients into that top of the funnel, or at least push them down the funnel and get them to actually convert and then stay. And so once they've converted, your first job in business is to keep them, to nurture them, to make sure that they're. And then to expand them. I mean, this is another huge piece of this is that a client that stays longer and businesses that are healthy also figure out how to continue to give more service over time and end up being able to charge more for those services so that the client actual their lifetime value, that total value of the customer, whether that's top line or gross margin or net or whatever, that continues to go up. Those are easy wins. I don't know that I'd say easy, but that's, that should be the primary focus of your business as you get those clients.
- [09:24]
B
It's more of the game than anything else. And I actually think it, it speaks to something about human nature that I think is important. Like that you just kind of want to recognize in yourself and, and you'll see this, like, you see this everywhere. But like, people also get super excited about making money. Like, let's just say outside of a business. Let's just say you figure out how you know you're gonna sell a couple things or whatever and make some money, but so much less excited about not spending it, like in certain areas. Right. Like, but actually that's way easier. Cause like you're Gonna pay taxes on the income. But on the, on the outgoing bit, you already paid taxes. Like so this is a human thing that humans have. And if you can figure out, if you can see it in yourself, you can combat it because you understand like, oh, wait a second, it really is a penny saved is a penny earned. Except it's like, it's like better than that because of at least the tax implications.
- [10:19]
A
Right.
- [10:19]
B
So keep in mind as you're thinking about this with your business, that everybody wants to grow the business. It feels like hunting sales. I always equate sales to hunting. It's like you get these people that are going out and they're like, I'm gonna go get the business. And it just feels so active and I'm going to stuff. When in reality, like the unit economics of your business are more driven by the customers you keep and the amount of value you drive for those customers in terms of a land and expand opportunity for, you know, how much more can you grow the revenue that you get out of that individual customer who already trusts you, who already believes that you are great in the area that you're in and probably wants you to provide more services for them. If you could just figure out what it is, try to focus your attention there first. And then obviously you still have to do the sales part. Like that stuff doesn't go away.
- [11:06]
A
But it's important. The opposite of Churn is your retention rate, right? So if you have 3% churn in a month and your retention rate for that month is 97%, which sounds pretty good.
- [11:17]
B
That's right.
- [11:17]
A
But 3%, which is good, is still. You're still talking about losing. Let me make sure I got this right. That's 36. Right? It's 36% of your clients per year, which means your retention rate is 64%. So you're only keeping 64% of your clients. This is why we have such a focus on Churn. And as a personal story here, we always track Churn. And I was trying to remember. I wish I had. I don't want to tell a lie here because I don't remember why. I started tracking churn very early. I don't remember where I first read about it early in business. And I did not keep track of churn at Strong Gym.
- [11:55]
B
I'm pretty sure it was e Myth. I'm like 99% sure.
- [11:59]
A
Maybe it was emyth. And so I tracked it and I can remember in that first year or two of the online coaching business trying to be 5%, 7%. Somewhere in there, it was typically between 5 and 10, but it was closer to 5. And I remember that we just didn't pay a lot of attention to it because we were adding clients so quickly. And then as the low hanging fruit started stop being added, we're like, ah, we gotta churn. Like, how do we not lose as many clients? So if you have, again, for easy math, if you have a hundred clients and you're churning 10% per month, then you've got to replace them with 10 clients per month just to net zero. Yeah. If instead you take your churn from 10% to 5 or from 10% to 3 and you have a hundred clients now you only lose three clients, but you still add the 10, you netted seven. And so it is actually then, and you continue to do that month after month after month. It's the compounding interest piece. Right. You continue to compound that interest. So that Churn is the backdoor leaky system that will destroy businesses faster than anything else. Now there are other things you talked about, like spending money again, I think it equates really well to that, that for us when we started to then very much consider churn, okay. We've got to really have a good customer experience, customer service system in place. We've got to put a team in place to make sure that we are going to fight Churn with everything we can immediately. Churn got cut in half.
- [13:29]
B
Yeah.
- [13:30]
A
Just by focusing on it, just by tracking it, just by talking about it among the team. It was amazing. So it was instant. Now here's the thing. Growth new clients is a much longer tail, typically, unless you just hit pay dirt and something explodes. Right, right. And it's the same thing with revenue added versus cost or expenses. So for us, you know, being on the board, we tightened the belt a little bit this year for sure. I could cut the expenses really overnight within the month. I could say, okay, I can compare February to March and see that we reduce expenses this much this month. If the focus is on the growth of revenue, that is very hard to do drastically in a single month.
- [14:16]
B
That's right.
- [14:17]
A
But it's not hard to do in both cost and in reduction of Churn if it just focus on the things that matter most, which are those things.
- [14:26]
B
Yeah. And I, I would just say, like, look, there's low hanging fruit everywhere. Okay. One of the things that you notice acquirers do. So people that go around and buy businesses, let's say this could be private equity or, or this be individuals who are going around and sort of accumulating different kinds of companies, One of the first things they do is they look for what is that low hanging fruit that the owner of this business just didn't see, like whatever that is. And it's on both sides of the revenue and expense line and it's on both sides of the sales and churn side.
- [14:59]
A
Right, sure.
- [15:00]
B
The reason that you make such a huge amount of improvement in a short period of time is because right off the bat it's really easy to see the things that you could change really quickly. When it comes to churn, that's usually some just basic block and tackle stuff like I always just say, like, you know the, the example here is you're doing some things like if you just check in with the customer on a regular basis, like increase touch points, period. Just do that.
- [15:27]
A
Yep.
- [15:27]
B
Right. Have somebody whose job it is to reach out by email say how's it going? Like that kind of thing right there cuts churn by itself.
- [15:35]
A
That's right.
- [15:35]
B
The low hanging fruit on the sales side is normally just a matter of paying attention to it and tracking how many inbound leads you're getting or whatever the action is that drive your inbound leads.
- [15:47]
A
Sure.
- [15:47]
B
So if that's content created or if that's, you know, reach outs that you're doing to warm leads that came in from some of that content or whatever, like that's the thing like that that spins them up. On the other side of it is your spending. If you literally just pay attention to it and it. These aren't major drivers of the business. Not things like, oh, I'm going to cut marketing like as far as I possibly can. So we save on the expenses of saying, well that's going to drive, you know, that's going to change the inbound side of the business and have a negative consequence. But there are a lot of other things like you can make sure that your travel expenses are lower because you're not spending money frivolously on that kind of thing. You can make sure that you just go and cut subscriptions that you signed up for that you've never used or you thought you would use but couldn't.
- [16:35]
A
Right.
- [16:35]
B
Just paying attention to things normally eliminates a good portion of the waste that, that you build up in an organization over time. And personally it's the same thing like you need to do the same thing with your personal finances. But broadly speaking, those things can be attacked really, really quickly and have a outsized effect on your company. And then from there it's fine tuning right Then it's like, okay, what expenses drive things? What expenses can I move if I need to? What are my levers? But you know, right off the bat, you know, you can look at some pretty, some pretty profitable businesses that are out there that people will literally acquire and do nothing other than like put some marketing money into it, like, that's it. And everything else works. Clean up the expenses a little bit, you're good to go. Right, right. So for those of you that are listening and are thinking like, oh, you know, that sounds like a lot of work. It's really, it's not. Just start paying attention to it, measure it, make sure that your leadership team is talking about it. That's it.
- [17:25]
A
Yeah, I think it's actually that's maybe the most important point of the whole thing is that for us, eliminating churn or reducing churn dramatically actually didn't take much work at all.
- [17:36]
B
Yeah.
- [17:37]
A
And adding to the company. So again, for us, I mean, you know, we've got a full scale content marketing sales team. So you've got to produce the content, you got to make the content, you got to come up with the ideas of the content, you got to record the content, you got post production. Once the content is made, you have to market the content as you market the content, which takes a lot of time. Usually I have other people doing that. As the marketing content comes in, people come in through the funnel. Maybe they download an ebook or something, you capture their email address, they become a lead. For us, we actually qualify those leads. We'll actually do another, I know, a future episode on qualifying customers ahead of time and making sure that you're cutting out, not trying to bring in the ones that you don't want. For us, we start to qualify those leads and they go from basically like a low score lead to a marketing qualified lead. And when they hit a certain score, they become a sales qualified lead. At that point, a member of the sales team reaches out and they try to sell them or start a dialogue, conversation, focus on value, think of hormozy, that kind of stuff. That is a lot of work across a lot of people. Making the content, producing the content, post production, marketing the content, social media, qualifying them as leads, turning them over. The sales team. Sales team works to try to convert. They converted. Okay. Holy. We just had 12 people working on this thing for lots of hours. Or one customer service person reaches out once a month and just says, hey, how's it going?
- [19:00]
B
That's exactly right.
- [19:01]
A
How are you enjoying your service? Or when someone decides or they are considering leaving. Or they even email and say, hey, I think I want to cancel my membership at the end of this month. Our customer service person immediately says, hey, no problem at all. We make that. By the way, I also wanted to say, because I think it's really important. We have no contracts. We're in the fitness industry. We have no contracts at all. So there's not a two year contract. We make it very easy to quit. You can sort of pigeonhole somebody so that it's not easy. If you've ever tried to get rid of the Wall Street Journal, it's impossible. Just stop getting the Wall Street Journal sent to your house. You're like, I don't want. And it's cheap, but it's cheap because they've got a million of them and nobody can get rid of it. For us, it's very easy to get rid of. If somebody tries to cancel, they can absolutely cancel. But we have our customer service team, we have great people on the customer service team. Just reach out and go, hey, we would love to do a super quick phone call and just talk about your experience. And with no sort of pressure, like, they're going to try to get me to stay. And there really isn't pressure to try to get them to stay. They just want to hear their, like, what are your concerns? And if it's price, if it's, you know, if it's cost, then, okay, we're not providing enough value. Or if it's service, like, well, it's just not. The service isn't as good as I thought it would be. Okay, that's, you know what, why don't we switch you to a different coach and let's, and let's just test that out for a month. If you don't like it, we'll refund the money from the past month. Like whatever those things are. Yeah, that is very low effort for a dramatic improvement in compounding growth of the company. While, of course, all those other things are going on on the front end, where you still are making content and marketing and sales and all this stuff. But everybody wants to focus on that because it's exciting and it's flashy and I want to be like Hormozi or somebody else again, which, which I respect tremendously. But watch Hormozi's videos and look at how many times he talks about Churn.
- [20:48]
B
Yeah.
- [20:48]
A
Like, it's massive. Like, he understands. Ultimately what we're trying to do is retain clients. Retaining clients drives up the lifetime value of the customer. So if the lifetime Value of the customer. Again, it's all over the place based on your industry. But if the lifetime value of your customer is on average $500 and you take it from $500 to $1,000 or from $500 to $5,000, you've either you can double it, you can 10x it, you can 100x it, if you can just retain them and expand them longer. So that takes much less work on the back end. And the problem is the backend isn't sexy on both humans and in industry and. And is leaky both in humans and in industry, certainly is for me. And people don't want to deal with it because they've got this leaky bucket that's leaking clients out. And it's really easy to patch the hole.
- [21:40]
B
Yeah, it's so much less harder to.
- [21:42]
A
Fight to pump the water from the well into the bucket. Right. Like, that is why your focus has to be on Churn first. Now, really quick, and then I will let you go off in your diatribe, because I'm pissed off. I'm gonna go on my diatribe. All of these coaches in the online fitness industry, in the fitness industry in general, across the board, are providing the same service. They're just sending out programs. They write a program, they spend some time working on the program. Maybe the program looks fancy, whatever the thing is. But there is no elevated level of service that separates them from anybody else. That elevated level of service, which again, is in the fitness industry especially, and in some industries is much more difficult. But in the fitness industry, it is very easy to separate yourself from everyone else just by caring and for us, just by doing like, as you know, we have an integrated screen recorder. We break down videos of all of our clients. Every single workout of every single day. Everybody does it, but no one else in the industry does it. So we're looking at things like, not just Churn, but we then also look at things like NPS Score, like the Net Promoter Score. How happy are your clients with you? All those sorts of things. And as those numbers are extremely high, Net Promoter Score insurance is extremely low. You've essentially. It's the same thing as, like, when you cut all the fat from the expense line. That isn't going to affect incoming potential clients. Yeah. And then you're like, okay, this is shored up. So now we can just continue what we're doing. And now we can focus on the front end. That's where it all comes down to. But everybody wants to do the sexy thing first. And nobody Wants to provide a service that's better than anybody else. Yeah, that's. That is the problem. And by the way, that is a massive, massive problem. Since COVID specifically, everybody knows this. Think about what your dining experience was like with, like, your waiters and waitresses in 2019 versus what they were in 2021 and through today. They're terrible, and nobody cares. And so when one person figures out how to care, like, why does chick fil a do so well? Why does in n out do so well? Why does raising canes do so well? Because the service is freaking good and the food's good. Yep. Right. But I don't know the food, like, they've figured out how to separate themselves from everybody else in these little places that are not massive and not massive expenses. We don't eat much fast food, but when it comes time to go, like, that's where we don't have in and out here. But it's like, it's our chick fil A or raising canes. That's where we're gonna go. Because the food's best. It's gonna be consistent every single time, which is again, back to e myth, like that consistency every single time. It is terrible to give somebody great service one time and. Or two times or even three times in a row, and then the service is really crappy, and then it's good again, and then it's like, they'll leave.
- [24:28]
B
That's right.
- [24:29]
A
They want consistency. Right. So, okay, that's my. I'll get off my high horse for a minute.
- [24:33]
B
Yeah. So this just drives back again to the topic that I brought up before, which is that this is really a human psychology problem. And it's a human psychology problem because sales are promises. And fixing the leaky bucket is coming to terms with the reality of the thing that you sold. That's what it is. And you don't want to do it. A lot of people don't want to do it, but that's where the work is. And actually getting great as a company is about that iterative cycle of figuring out what it is that you're selling, what it is that they ended up receiving in terms of value from the thing that you sold. And course correcting essentially constantly. You never stop.
- [25:13]
A
Yep.
- [25:13]
B
So, like, of course, they say, you know, look, this. I was all in. You know, on the sales side, this was great. But then when I actually went through the process, you know, here are the things that really you kind of over.
- [25:25]
A
Promised and under delivered.
- [25:26]
B
Sure.
- [25:26]
A
Or.
- [25:27]
B
Or whatever it is. Like, maybe it has nothing to do with you. Maybe instead it's just they thought they would do it. In the case of working out, maybe they thought they'd do it, but in reality, like, oh, life crept in and this, you know, I didn't have good systems in place to, to do this thing. There are a million reasons. But what you'll find about those reasons is that they're the harder ones to solve. And I'm saying that not so much. Again, there's a lot of low hanging fruit there. Reach out and you'll just notice that the numbers change. But if you really want to separate yourself from other businesses in that space who are also reaching out on a regular basis to their customers to try to reduce overall churn, the way you do that is you actually dig in to what the real problem is, what the real source of the churn is, when you can't save it, when you can't get rid of the churn just from the fact that you're showing that you care what is the thing. You solve that problem and your business will grow on both sides. You will reduce churn and you will grow sales. Because the thing that you will speak to on the sales side is the real thing that nobody's talking about that you can drive a lot of value in.
- [26:34]
A
Yeah, they, it's the problem they don't want to admit to.
- [26:37]
B
Yeah, that's right.
- [26:37]
A
And it's in, it's often it's not even, you know, it's, it's not even their fault. It's your fault. Or maybe it's the other way around. Maybe it is their fault. But the bridge between improving churn and improving new clients coming in, that's really what product market fit is. So I'm sure again we'll do an episode on product market fit. It's a common term, right? Just means does the product or service I offer fit the market? Do they love it if they can't live without it? You've got product market fit. Now here's the thing. If your churn is high, you don't have product market fit guaranteed. You do not have product market fit, or at least not for that market. Right now it's possible that you need to shift the market you've told your story about. You didn't have product market fit in banking, but you did in insurance. And so you transition. But for the market you're in, if your churn is high, you do not have product market fit. Everybody's constantly trying to focus on how do I find product market fit. So that we get more clients in the door. But if they come in the door and they just go right back out the door and they leak out through the leaky bucket, you don't have product market fit.
- [27:40]
B
It just means you sold a promise.
- [27:42]
A
That's right. When you know you have product market fit is when churn is insanely low, especially for your industry. And organically, it's growing tremendously. And that doesn't mean that you shouldn't put in marketing efforts. You should, because you can continue to compound that as well. When those two things are occurring, what you're seeing is that's when the net number matters. When you're looking at the net client retention rate, like net client growth month over month is like, well, we're losing almost nobody and we're gaining a whole lot. Yeah. And so that's where you get the hockey stick. Right. And that's what you're trying to go for. People talk about it all the time, about these businesses that are these, like, unicorns. They hockey stick up. Think about, like, Nvidia. Right? So Nvidia, you know, they make all the big GPUs for AI. Jensen Wong, that's been a company for 25 years, 30 years, a long time. Right. And they were real slow growth. Real slow growth, real slow growth. And Jensen was just this, like, perfectionist about things. And then they were like, we found the thing, we figured out how to serve well, we found product market fit. And, oh, by the way, the world has gone crazy for AI. And we're the ones that produce the thing that everybody needs to make AI. And so they hit it. And so nobody ever wants to talk about the 27 years of the bottom of the hockey stick before it actually turned and went vertical. Yeah. But the reality is, is that if you don't figure out how to plug the holes in the churn, it never turns vertical.
- [29:09]
B
That's right.
- [29:10]
A
As a matter of fact, it does the opposite. It's going to turn and start going down into the right instead of up and to the right.
- [29:14]
B
Yeah. And I feel like the other thing that is important to understand for founders is that a hockey stick is not. It is not common that the. The striking area of the hockey stick, which is. Which is sort of the low end. Right.
- [29:31]
A
That.
- [29:31]
B
That is perfectly straight and flat. It's not. And for most companies, you get this gradual rise over time. It's just not all that exciting. You look at it and you're like, you know, this is just the grind. Right. Like, maybe I'm going To grow at, you know, 10% a year, 15 a year, 20 a year or something like that. And maybe that's all it is. And if I love it, I'm just going to grind it out and just keep going. What you find though is that as you, if you've got that, that type of business at the longer that you engage with the problems in the way that we're talking about, solve the hard ones, like get in there, get the low hanging fruit done, that's, that's just table stakes. Then get in and start really grinding on the hard ones. Like what is the hard problem that I have to solve here on the leaky side? What is the hard problem I have to solve on the inbound side? You get those things resolved and you do that enough cyclically it is, I think it is difficult to avoid some kind of hockey stick. Now whether that's a flatter hockey stick or whether it's like a severe hockey stick, it's like, you know that that's really what drives it. There's nothing also nothing wrong with just growing a business at you know, 25, 30% a year or something like that and just go do it.
- [30:46]
A
That'd be great.
- [30:46]
B
That's great.
- [30:46]
A
I'll take that forever.
- [30:48]
B
Right?
- [30:48]
A
It's fine for sure.
- [30:49]
B
So like, you know, don't be concerned about that piece. But I also don't want you to get discouraged because I think there are, there are certainly businesses we've talked about this before, like Dyson where it's like can't get a damn thing done for.
- [31:01]
A
Tried, tried many, many, many, many years, 40 or whatever. It was different permutations of the vacuum.
- [31:06]
B
And then all of a sudden it hits. But that's a less common thing. More common I actually think is someone with a, a reasonably astute business mind gets into business and actually starts generating some money and it's good and they're glad to be doing it. It's great. What you will find is that your greatest opportunities, you are buying the time to generate the greatest opportunities by generating that little bit of profit throughout those years. Right? Because what that's going to do for you is it gives you exposure to customers which you can talk to, you know, as much as you want. You should do it a lot trying to figure out like why are they churning, why are they buying what the thing that's really the most valuable. And the more time you spend in that zone, you are find you, you become the expert of that thing, whatever that thing is. That's right to a degree. Frequently that is completely unreasonable. And no one else has ever gone that far. And when you get into that zone, that's where the real money can be made. Because no one has taken it that far. Nobody knows it as well as you know it. And you can kill it in that space.
- [32:08]
A
Yeah. This again, where you hear some of the guys that I respect tremendously say it's, it's not even about tremendously outperforming, it's about outlasting.
- [32:16]
B
Yeah.
- [32:17]
A
When you're able to continue to improve over time. A little over time. A little over time. A little over time. And you see you've, everybody's heard the stats like how many businesses fail in their first two years. Right. And then how many businesses make it 10? It's the businesses that make it for decades. When you play this, it's a decades long game. It's not a get rich quick scheme that almost never works. And so it's when you look back and you go, hey, we've done this. We had this conversation. I might get choked up on the all hands meeting yesterday. Sorry. We had a comment by the staff that said, so we're 10 years old, almost 10 years old. And they said they made some comments about, remember who we were 10 years ago, look at how far we've come. This is insanity. And when you look at it, and so it's just like anything else. If you lift, if you put on muscle, it takes a long time. If you lose weight, if you've put on a bunch of bad weight and you lose weight, you look at yourself every day in the mirror and you don't really see the changes. And then when you look back and you see the memory on the Facebook timeline or whatever, and you're like, oh my God, it used to be a huge fast and now like, I look totally different. Or this thing happened. And we, we took a moment yesterday which was completely not planned, unscripted. And because it wasn't me that said it, it was another member of the team that said, like, I went back and looked at some of our original, like things that we put out or our feedback to our clients, whatever it was nine years ago, ten years ago, and they're like, I cannot believe who we are today. Well, we've never really hockey sticked. We've just slowly grown over time. As a matter of fact, I would say that we pretty much raised our entire series A a couple years ago. Not on hyper growth, but on incredible retention. Our retention was excellent, Our churn was excellent, our NPS score was excellent. So that the investors that looked at our business said, okay, these guys got a solid model. Their clients stay forever. All we have to do is figure out how to get the world to know about this thing. And when they do, they will, there will be hypergrowth. Now, I'm still, we're still growing a little bit at a time, and it's been really good for us. But I would love the hockey stick to occur. But the reality is, is that all of that came off of retention, not off of hypergrowth. And so for us, that was everything. So it's like you said, there's nothing wrong with that. Slow. You're constantly trying to solve those problems. You're constantly trying to figure out, we call them micro problems or these problems that the clients have. There are the potential client has that you're trying to solve. That's actually true. Not what they tell you at first. This is about asking the right questions, really understanding what it is. Like, oh, it's just too expensive. Well, too expensive is not the problem. You're not providing enough value.
- [35:06]
B
That's right.
- [35:06]
A
There's the difference between the value that the client's getting and the price that they're paying is way too close or even inverted. And we have, okay, so that's a problem that must be solved. You have to get to the heart of that problem that solves the churn when the churn is solved. And then you continue to see client lifetime value go up and retention continue to go up and NPS scores go up where they're super happy and they stay forever and they're telling others, now you've solved those problems. And like you said, if you outlast everybody 10 years, 15 years, 20 years, it's very difficult to avoid the hockey stick. At some point, at some point, you are just going to become the de facto expert in the field because you've done it longer and better than anybody else. Consistently, consistently, consistently, without any just, you know, like over the top circus tricks, but just in good hard grinding like I'm solving these problems every day as a team. Watch what happens if you do that. Not for one or two or three years, but for 10 or 15 or 20 or 30 years, your business will look nothing like it did 10 years before, five years, like it's, it'll change dramatically.
- [36:12]
B
That's absolutely right. And one of the reasons that it does this is because the longer you stay in the game, the more relationships you form and it's, it ends up being those relationships that open doors that you couldn't have Opened on your own things that you, you know, weren't aware of.
- [36:28]
A
Network effect.
- [36:29]
B
Yeah, it's incredible network effect. And I do think, I think this is important. There are businesses, you can find some that are out there that didn't really ever hockey stick either, that they just grew at a really regular linear clip.
- [36:42]
A
Yeah.
- [36:43]
B
Just like a straight line basically. And it was, and it's a beautiful enormous business because they essentially are compounding still inside of that, that frame. Right. So yep, there's, there's a lot of ways to grow a business.
- [36:56]
A
But yeah, you look at, look at it like a Coca Cola, which is so unsexy. And like some of the guys who are big time investors who I respect the most, they're like, Coca Cola is a great buy. But. And by the way, this is not, I'm not telling you, invest in Coca Cola and I have zero dollars in Coca Cola. I've never invested in them, but they have just grown for like 150 years. They pay out massive dividends. Right. I think Walmart, at least after Walmart, had a pretty good hockey stick early on when they expanded stores dramatically. But since then it's just sort of been like just smooth, slow growth for the last 40 years.
- [37:29]
B
Right. And the bigger that a company gets, the other thing to remember, you know, the bigger they get, the less likelihood there is for an actual hockey stick to occur after it a second.
- [37:37]
A
You can't, your market share is massive. You're a trillion dollar company. Like you can't, you can't hockey stick A trim Nvidia can't continue to hockey stick.
- [37:44]
B
That's right.
- [37:45]
A
You get to a point, like Apple can't hockey stick. Right? Like Apple. These trillion dollar companies can't do that. But when you're a hundred thousand dollars company, you make $100,000, you can definitely hockey. You can definitely go from 100,000 to a million and a million to 10. Right.
- [37:58]
B
Like those things and one of the things that you see, which I think is at least interesting for all of you that are in sort of the small space from a founder standpoint, you had a small company going. What they end up doing to hockey stick again is they spin off something small. That's what they do.
- [38:12]
A
Right?
- [38:12]
B
Right, yeah, sure. So like we've talked about this before, but like people a lot of times talk about how being small is a real hindrance and causing them all kinds of problems. And I always say it is your absolute greatest friend that you can be small because that is the only way that you can find these Markets grow and get that kind of a hockey stick effect. Large companies can't do this and they also tend to have too much bureaucracy to actually be able to do much. They can't move very fast. So keep in mind, like as we talk about this stuff that you know, you are in a very, very good position to do this. If you're listening to this, this podcast, you are a small business owner, you are a founder of a tech company or a, or a coaching company or whatever it is that you do. All of these things that we've talked about today are probably applicable immediately. The low hanging fruit is the first one. Go get that done. That's right. Right. The second piece of it is then, all right, let's start iterating on the hard problems, see if we can solve them. And this overarching long arc is just stay in it longer than everybody else. Be there long after they're gone. Right. You do that. That's recipe for success.
- [39:15]
A
Yep, that's well said. We'll tie it up with that. That first thing that you have to do, I think for almost everybody is just serve your current clients better than everyone else. And it's really not that hard. I'd say it's easier in 2025 than it has ever been because of what has happened to service. You can. The cream rises to the top in service. Our number one tenet for our company is service. We serve our clients well. Like we overserve, we under promise and over deliver, not the other way around. That's the first thing to focus on. That will be the great separator for you in the short term. That can be done literally right now, today. And then you get to start working on those harder problems. Outlast. Watch what happens. So there you go. Another episode of the build your business podcast with Matt Chris Reynolds. Thank you so much for listening. If you got value from this, as always, would love a five star review on Apple podcasts or Spotify or wherever you listen to the podcast, share it with a friend or family member. Especially if you got somebody that is running business or just getting into business and they're trying to understand how to make this thing work. I have so many guys, man, that talk to me. You probably do too. I mean I've got, you know, blue collar guys like welders and stuff. And like I'm thinking about leaving my welding job and starting a welding business. I'm like, I don't know if. Let's talk through that if that's. I would tell them the exact same thing. Just like it's not the best welder, it's the best service guy. Right? Like it's the. It's the. You show up on time, you dress professional, you shake their hand, you, you like, you under promise and over deliver every single time. That immediately will solve some of your churn issues. And if you're thinking about this, you're in the coaching industry, you're in the debt. Like, massive changes are occurring with AI. If you're a developer and you haven't figured out how to leverage AI and become a hundred x 1000x developer, you're dead. If you're a coach, a fitness coach, and you're sending out programs, you're dead. Yeah, because that's what everybody else does. And so the way to fix it is to out serve everybody else. And out serving everybody else is not that hard and doesn't take that much effort. That's what's amazing. And yet no one wants to do it. So there you go. All right, thank you so much for listening. We'll see you guys next Friday. Sam.