#125: Scaling Fails: How Financial Blind Spots Cost Him Big

Summary

Podcast Summary: Next Level Pros – Episode #125: Scaling Fails: How Financial Blind Spots Cost Him Big

Introduction

In Episode #125 of Next Level Pros, host Chris Lee sits down with Ulysses, a seasoned PR expert who has worked with notable figures such as Cody Sanchez, Brandon Dawson, and Gary Breca. The episode delves deep into Ulysses's journey of scaling his PR firm, the financial pitfalls he encountered, and the strategies he employed to overcome them. Through an open and vulnerable conversation, listeners gain invaluable insights into the challenges of business growth and the importance of financial acumen.

Business Overview

Ulysses has been running his PR firm for seven years, carving a niche by securing high-profile clients and delivering specialized services tailored to their needs.

• Clientele and Services: Recently, Ulysses's firm has been working with Cody Sanchez on projects like Resi Brands, a window cleaning franchise, among others. Their services primarily include booking clients on stages, podcasts, publications, and TV appearances, offering both exposure and connections depending on the client's status.

  "We help people get booked on stages, get them booked for podcast articles and publications and then TV." (00:11)

Challenges Faced

Despite achieving significant revenue growth, Ulysses faced substantial financial challenges that stemmed from scaling too rapidly without a solid understanding of financial management.

• Initial Motivations: Initially, Ulysses pursued PR for the wrong reasons—primarily for fame and quick financial gains. This mindset led to unsustainable business practices, such as high referral bonuses and commissions to sales reps, which eroded profits.

  "I wanted to make a lot of money. I wanted to be famous. And that was like the easiest way to make money at the time for me." (02:05)

• Revenue vs. Profit: While the firm's revenue peaked at $1.1 million last year, poor margin management resulted in financial strain. High referral bonuses and inadequate understanding of fixed costs caused the business to grow "broke," leading to substantial debt.

  "From a break even analysis last year he scaled too fast, too quick, left me with some terrible feelings of fear and everything else." (00:11)

Financial Analysis

Chris Lee guides Ulysses through a detailed financial breakdown to uncover the root causes of his financial difficulties.

• Revenue and Expenses: Ulysses's first-year revenue was $200,000, which plateaued over the years. Last year's revenue reached $1.1 million but was accompanied by high expenses, including a 30% referral bonus and significant commissions to sales reps, leaving minimal margins.

  "I didn't understand salary cap. I didn't understand margins. So I was growing broke last year, made a ton of money." (05:53)

• Cost of Goods Sold (COGS): For each $15,000 client, the COGS amounted to $4,000, yielding a gross margin of $11,000 (70%).

  "So when you break this down, if you're getting $15,000, your gross margin per deal is 11,000 bucks." (12:00)

• Cost of Acquisition: Ulysses spent approximately $1,400 monthly to acquire four new clients, translating to a $350 cost per acquisition.

  "So you spend $2,800 more dollars a month on two more assistants and two more software packages to hit capacity." (14:03)

• Fixed Costs: Monthly fixed costs included $7,000 for payroll, $2,500 for subscriptions, $650 for insurance and bookkeeping, totaling around $9,500.

  "So let's call it 2500. Yep." (17:14)

Strategies for Scaling

To rectify his financial blind spots, Chris helps Ulysses develop a scalable model grounded in understanding his business's financials.

• Break-Even Analysis: By analyzing fixed costs and gross margins, Ulysses realizes he needs just one client to break even. Each additional client significantly contributes to profit.

  "So you're at 10,650. So what it takes to break even in your business? One client." (19:47)

• Optimizing Team Capacity: With four client managers capable of handling up to 40 clients, Ulysses identifies that scaling requires maximizing the utilization of his team without overextending resources.

  "Every time you bring on $800 in monthly expense, you're getting $33,600 in profit as long as you're utilizing them." (28:34)

• Incremental Growth: Chris advises Ulysses to invest an additional $2,800 monthly in hiring two more virtual assistants and purchasing two more software packages. This investment is projected to yield an extra eight clients, translating to an additional $85,000 in net profit monthly.

  "So you're getting eight more clients a month which would be how much money? ... $85,000 net." (27:46)

• Hiring Sales Reps Strategically: Instead of retracting, Ulysses is encouraged to retain and empower his sales reps to handle increased leads, ensuring sustained growth without compromising the quality of service.

  "One day you're going to come, you're going to walk in and you're going to be like, dude, we had all these leads and you didn't close all these deals." (42:53)

Lessons Learned

Throughout the conversation, Ulysses acknowledges the critical importance of financial literacy and proactive business management.

• Importance of Financial Management: Ulysses admits that a lack of understanding of financial principles like gross margins and fixed costs severely impacted his ability to sustain growth.

  "I took too long to make the decisions that I know I needed to do." (07:55)

• Value of Mentorship and Coaching: Both Chris and Daryl emphasize the necessity of having mentors and coaches to navigate the complexities of scaling a business effectively.

  "What we did was spend a lot of money to have people in our corner." (49:56)

• Embracing the Business Growth Cycle: Ulysses resonates with the concept that every stage of business growth comes with its own set of challenges, likening it to the life cycle of a human.

  "These are all cycles. And this last cycle I'm probably most grateful for because it's the finance thing." (52:30)

Conclusions and Final Thoughts

The episode concludes with actionable advice for entrepreneurs facing similar scaling challenges. Ulysses's journey underscores the balance between growth and financial stability, highlighting the necessity of understanding and managing key financial metrics.

• Actionable Steps: Entrepreneurs are encouraged to conduct thorough financial analyses, understand their break-even points, and make informed decisions about scaling based on their business's capacity and financial health.

  "Like, don't be afraid to ask us, like, hey, this is what I'm thinking about doing." (48:36)

• Mindset Shift: Transitioning from a reactive to a proactive business strategy is crucial. Embracing the 'science' of business rather than succumbing to emotions can lead to sustainable growth.

  "It's really understanding the game, the science of what business is. And then just apply." (48:14)

Notable Quotes

• "I took too long to make the decisions that I know I needed to do." — Ulysses (07:55)
• "Revenue growth is like only one indication of how well the business is doing." — Chris Lee (10:14)
• "Every business has problems at every stage of growth." — Daryl (51:10)
• "You have to scale to hit capacity." — Chris Lee (25:38)

Closing Remarks

Chris Lee commends Ulysses for his transparency and resilience, reinforcing the episode's theme that understanding and managing financial levers is paramount for successful scaling. Ulysses concludes by committing to implement the discussed strategies, aiming to leverage his team's capacity and enhance his business's profitability without sacrificing his desired lifestyle.

"I'm definitely going to try out the marketing portion yeah. You know, see how that ends up going." — Ulysses (46:34)

For listeners seeking PR services or wishing to follow Ulysses's journey, he can be reached via Instagram and other social media platforms under the handle @Ulysses.

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Episode Release Date: September 24, 2024

Transcript

[Ulysses]

I took too long to make the decisions that I know I needed to do. Yep. It's because I kept thinking, like, doesn't matter, like, we're growing. Right. The revenue's, you know, increasing. But it doesn't work like that. Like, you can grow, grow.

[Daryl]

It's.

[Chris]

Are you struggling to scale to the next level? In this episode, we are with Mr. Ulysses. This guy has been just an absolute PR savant. Been with, worked with so many of the big names and he breaks down and gets super vulnerable where we talk about his financial situation, what's working, what's not working, how we break it out. From a break even analysis last year he scaled too fast, too quick, left to just like some terrible feelings of fear and everything else. And so he's retracted. And how we have worked through in this episode to get him to the point where he's going to take the next level of risk, pull some levers, make it happen on this episode. Ulysses, dude. So what's going on right now? Give us like up to date. You. You've been running this PR firm for how many years now?

[Ulysses]

Like seven.

[Chris]

Seven?

[Ulysses]

Yeah.

[Chris]

Yeah, dude. I mean, you've gotten in with some pretty big names, right?

[Ulysses]

Yeah.

[Chris]

Give me some examples.

[Ulysses]

Recently we're working with Cody Sanchez. So she just.

[Chris]

Cody's cool.

[Ulysses]

Yeah. She invested into like Resi Brands, so we did the PR for that. And then she has another business that's coming out like this week.

[Chris]

Didn't she do like Pinky something? It was like a. It's like a window washing company or something.

[Ulysses]

That's the one. Resi Brands is like. Yeah, they have a franchise of like this window, like window cleaning. And it's like. It's a bunch of home service, like, type businesses.

[Chris]

Yeah, Yeah. I mean, we know a few things about home services.

[Ulysses]

A lot of things.

[Chris]

Yeah. That's good. That's good. So you're working with Cody. What else you got going on?

[Ulysses]

We did work with Brandon Dawson, Gary Breca, things like that. So I think that's like the big stuff for the people that we work with. But yeah, for a long time it's just been pr, just kind of honing that in and been doing it for a long time. At first, we're doing it for the wrong reasons. Got a slap on the wrist, you know, which I was grateful for because.

[Chris]

What were the wrong reasons?

[Ulysses]

The wrong reasons? I wanted to make a lot of money. I wanted to be famous. And that was like the easiest way to make money at the time for me because I did websites before that. But the thing with websites, like, I mean, somebody doesn't like the font that. The color, the size of something, it's like you gotta, you know, edit that for, like, a little bit of money. And for pr, it's like, I mean, if you want to get introduced to somebody else, it's like the easiest money I could do, just email introduction, and, like, I'm done, you know, like, the services is there.

[Daryl]

So let me just ask you clarify. What is pr? Like, what value are you giving to these customers?

[Ulysses]

So it depends. Like, for the higher people, it's more so connections, because they can get it themselves, but it's just speed for them. And then for people that are not like a Cody Sanchez, it's more so exposure, because for them, it's like getting on podcast like this or speaking on stage. Like, any one of those things could lead to a sale or could lead to business that they didn't have access to before. So different things for different people. But primarily what we do is we help people get booked on stages, get them booked for podcast articles and publications and then tv. Like, that's pretty much it.

[Chris]

Love it, love it, love it. So let's. Let's break down. Like, what. So you've been doing this business six, seven years?

[Ulysses]

Yeah.

[Chris]

Right. Initially. So you did for the wrong reasons. Like, what are the right reasons?

[Ulysses]

The right reasons is, like, to grow a business. And for me, it's to have this be the vehicle for my life. Before that, it was my life. So, like, now that I'm a dad, I don't care too much about, like, you know, speaking on stage or the limelight anymore. I used to, like, only care about getting women, you know, smoking, drinking, like, and all that cool stuff initially, but now I don't. I don't see it like that. And now my, like, my clients represent something different than who I was, like, representing before.

[Daryl]

I can always remember you sharing this. This was, what, six years ago, last time we met.

[Ulysses]

Yeah.

[Daryl]

And you were talking about how when you were. You're wanting to, like, find women, you. You threw out ads.

[Ulysses]

Yeah.

[Daryl]

That would just target crazy that.

[Ulysses]

You remember that, Dude, I remember that.

[Chris]

It's like Instagram ads. Like, look at this guy. He just made this much money or.

[Daryl]

Whatever else, but you're able to target the crowd you wanted to date.

[Ulysses]

That's so embarrassing. Yeah, yeah, yeah.

[Daryl]

I mean, to me, it's like, that's pretty brilliant. You used your skills to like, I.

[Chris]

Want to do it, but, hey, get fascinating.

[Daryl]

I was as pretty at best.

[Ulysses]

I got A lot of dms. When I. When I did that, You're.

[Chris]

You're how old now?

[Ulysses]

I'm 27.

[Chris]

27 years old. You know, it's. It's funny. When I was 27 years old, right before my 27th birthday, I was filing bankruptcy, right? $2.2 million. So it was, like, filed in January, turned 27. So, like, you're in my life. Like, if I'm comparing myself against Ulysses, it's like, man, you just still start now, right? So. So, like, you've got a. You got a head start on us.

[Ulysses]

Oh, dude, I want to have Europe, you guys. Yeah, you guys have crushed it since then, since the last time we spoke. I mean, you guys were already crushing it when I first met you guys, But, I mean, from what you guys did in six years is. Is. Is not something that, like, most people accomplish when even if they get a head start, you know?

[Chris]

Right.

[Ulysses]

So.

[Chris]

Well, you know, it's as we talk about, right? Like, the whole premise of our show is that success is a trajectory, right? Like, as long as you're on the trajectory, you know, hopefully you can change the trajectory and go a little bit faster or whatnot. But as long as you're there, figuring out where the next level is. So for you right now, like, what are the struggles? What. So you've been in business six years. Can you give us, like, a bre. Like, what is the revenue been in this business over the last six years?

[Ulysses]

Yeah. So I know my first year. My first year was, like, 200,000.

[Chris]

Cool.

[Ulysses]

And then from then on, it's, like, plateaued. And then. Or it stayed around. Like, it grew, but. And then last year, we did 1.1, so we did pretty well. But, you know, I didn't understand salary cap. I didn't understand margins. So I was growing broke last year, made a ton of money. But the good thing is, like, my tax bill is not going to be that high, Right. So. But everything else was not that great. Like, give me.

[Chris]

Give me a little more detail. So, yeah, you did 1.1 million. What kind of expenses did you have associated with them?

[Ulysses]

So the issue was, like, a quarter of our business came from referrals, and I was giving out, like, high referral bonuses. Yeah.

[Chris]

Like affiliate commissions.

[Ulysses]

Yeah. Like, it was 30%. And then I was giving high commissions to our sales reps. It's like, you know, he was helping us a lot, so I was like, all right, I'm going to give you 20% right off the gate. It's like 50% out the back, you know, just straight from there. It doesn't. There's no cost of goods associated with that. There's no, you know, nothing.

[Chris]

Because it's all info, right? It's relationships, information.

[Ulysses]

Well, we still have to. We. We do have to pay for a lot of cost of goods. So I do a lot of paid placements as well. Oh, you do? Yeah. So. So the margins were like, minimum, you know, and then when you have a lot of clientele, you still got to pay for payroll and, you know, they don't, like, just off board, you know, so it's like you got to continue hiring. And anyways, structurally and operationally, I wasn't doing a great job. We were crushing it on the PR side, you know, thankfully, that's why we continue to get a lot of business. But I had a course correct a lot this year. So this year we're doing pretty similar numbers. Like, I know the last three months we probably won't hit a million. We'll probably hit like 600, 700 maybe. I mean, but the margins are a lot higher. Like, I've been. I've been paying off a lot of debt from like last year. So, like, I'm averaging like 10 to 12,000amonth that are paying off in debt. So, like. But that means.

[Chris]

That's a tough, tough lesson to learn.

[Ulysses]

Yeah. Yeah. And the thing is, it took me too long to learn. It sucked because when things were not going good, when we're making, you know, 80 grand or whatever, like last year, each month, when things are not going good, you can't just like, fire the people that you. You currently have. You still got to have them. So it's like, if you have a bad month or whatever, it doesn't necessarily matter. Like, it just comes straight out of the bank. Yep. And I took too long to make the decisions that I know I needed to do. Yep. It's because I kept thinking, like, it doesn't matter. Like, we're growing. Right. The revenue is, you know, increasing, but it doesn't work like that. Like, you can grow, grow.

[Daryl]

It's. Yeah, there's. There's actually quite a few people we come across who are like, they made a ton of money when they're small, and then they're four or five times the size.

[Ulysses]

Yeah.

[Daryl]

And they're broke.

[Ulysses]

Yeah.

[Chris]

Less money.

[Daryl]

Yeah, a lot less money. So I think with us is interesting because, you know, we had significant growth really quickly. And so a lot of those issues you come across, they hit us pretty fast and we had to adjust quickly. So we learned without like the consequences. But it's something we teach a lot of people is just how like you have to look at your business like five years in the future. If it's, you know, beyond what you expect, how would you set it up today?

[Ulysses]

Right.

[Daryl]

So that it can accomplish what you need today and what you need in the future.

[Ulysses]

Yeah.

[Daryl]

And that's a hard, it's a hard thing to go through, but it's the most powerful exercise for a business that goes through growth.

[Chris]

Yeah, I mean, frankly, I mean, revenue growth is like only one indication of how well the business is doing. And yeah, usually it doesn't say anything. Yeah. Like you can have a hundred million in revenue and 110 million in expenses and you lost 10 million bucks. Right. Like, so it really doesn't matter. Right. Like revenue, revenue at the end of the day doesn't matter. It's how much you put in the bank. But I think where a lot of people get it wrong, which you kind of brought up is like they don't build to scale. Right. Like they don't, they don't look at it from a standpoint of percentage of revenue that's associated. Right. So like what you brought in, brought up was like, hey, I still have these employees and I got to pay them whether it's a good or bad month. And from a business standpoint is okay, I got to understand my fixed costs. Right. Fixed costs are there regardless.

[Ulysses]

Yeah.

[Chris]

And you got to be very meticulous when you bring on a fixed cost. Like, you got to understand the risk associated with every fixed cost that you bring on. Because when you hire an employee, it's like signing a lease basically.

[Ulysses]

Right, Right.

[Chris]

I am, I am paying and it's a minimum lease. Right. Like there's a good chance that you're going to have to give them a raise and you're going to, they're going to be other costs associated with this person. Right. You're going to have to pay for occasional meals and benefits and everything else. Right. And so like that fixed cost. Right. The thing that we always talk about is, is a break even analysis. Have you ran a break even analysis on your business?

[Ulysses]

I think we did so earlier in the year because we needed to. Yep. So. Yes. But I don't know off top of my head.

[Chris]

Okay, so first of all, what, what is an average customer worth to you?

[Ulysses]

Like 15, 25.

[Chris]

15 to 25,000.

[Ulysses]

Yes.

[Chris]

Okay. That's a big range.

[Ulysses]

Yeah, it is. It's because. Yeah. Well, it'll probably be on the 15,000 side.

[Chris]

Okay. So that. First of all, that. That's an important thing to understand. Right. Like, you don't want to.

[Ulysses]

You.

[Chris]

You need to know this is my average customer.

[Ulysses]

Yeah.

[Chris]

Like, if my average customer is 15, sure, you can make it 25,000, but you can also probably make a 5 or $10,000 customer. Do you have those type of packages?

[Ulysses]

Not on the 5,000 or 10,000 side. So it's like 15 is our lowest.

[Chris]

15 is your minimum.

[Ulysses]

Yeah.

[Chris]

Okay.

[Ulysses]

Yeah.

[Chris]

So if I'm looking at your business, I'd probably be analyzing it from just straight 15, and anything above that is butter.

[Ulysses]

Okay. Like, just so, like, fixed costs at 15? Is that what you're saying?

[Chris]

Well, no. So let's. So let me. Let me back into this. So, 15 grand. What cost of goods do you. If you bring on a $15,000 customer.

[Ulysses]

Yep.

[Chris]

Not talking about your employees. Anything else. What is your cost of goods to fulfill on $15,000?

[Ulysses]

It's like four grand.

[Chris]

4,000 bucks?

[Ulysses]

Yeah. Now it is. Thank God.

[Chris]

Okay. Okay, so four grand, that's. What. What are. What's the breakdown on that? $4,000.

[Ulysses]

So it. So it'll be like TV spots. So we pay for TV spots.

[Chris]

TV spots.

[Ulysses]

It'll. Paid placements, paid article placements, and then any, like, barters that we end up doing that, we have to pay fulfillment costs. Okay.

[Chris]

So do you. Do you understand gross margin?

[Ulysses]

No.

[Chris]

Okay, this is great. This is exactly why we want to break this down. Okay. So gross margin is the amount of money you make before you pay your fixed costs.

[Ulysses]

Okay.

[Chris]

Okay.

[Ulysses]

Yeah.

[Chris]

So when. When you break this down, if you're getting $15,000, your gross margin per deal is 11,000 bucks.

[Ulysses]

Okay.

[Chris]

Or essentially about 70% is what that. 11 out of 15 would be. About 70%, right?

[Ulysses]

Yeah.

[Chris]

Okay, so if you're operating on a 70% gross margin, then you need to look at that number and how that pays towards fixed costs.

[Daryl]

So. But you also. I'm not sure if you're accounting for, like, affiliate marketing.

[Chris]

Oh, yeah, yeah. That's. We'll break that down as well. So. So that's your standard gross margin. Now, are your cost of acquisition, like your affiliate marketing or sales, is it directly tied to getting that customer?

[Ulysses]

Yeah, I have some. Yeah.

[Chris]

Okay. And it. But is it the same regardless? Is it always a percentage?

[Ulysses]

No.

[Chris]

Okay. What's your average cost of acquisition?

[Ulysses]

That I don't know. I can tell you how much I pay per month. Okay. But I don't know how much it is per.

[Chris]

So let's let's talk about that. How. How much is that?

[Ulysses]

So I pay. So based off of software's. Software is probably around, like, maybe 600 bucks.

[Chris]

Okay.

[Ulysses]

And then the VA that I have to run, it is 2, 4, 6, 8 is like another $800. Okay. So that's about it. That I pay.

[Chris]

So you pay $1,400 to acquire new customers every month?

[Ulysses]

Yes, to acquire customers. Yes.

[Chris]

And do you acquire about the same amount of customers?

[Ulysses]

Yep.

[Chris]

Okay, so how many. How many customers with $1400 are you able to acquire?

[Ulysses]

Like four to five.

[Chris]

Okay, let's call it four.

[Ulysses]

Okay.

[Chris]

Okay. So if you're. You said we're 1800 or so.

[Ulysses]

1400.

[Chris]

1400, sir, I'm jumping around numbers. 1400 divided by four. Okay. Which would be $350.

[Ulysses]

Okay.

[Chris]

So that would be what you'd call your cost of acquisition.

[Ulysses]

Okay, got it.

[Chris]

So it's directly attributed to, like, this is how much I spend. And it's pretty steady that way.

[Ulysses]

It is. Because that's. Yeah.

[Chris]

So if you went and you spent 2,800 and maybe you duplicated exactly what you're doing, would you be able to bring in eight customers?

[Ulysses]

I don't know. Because it's not paid advertising. It's like, cold, like LinkedIn outreach.

[Chris]

Okay.

[Ulysses]

So unless I. Yeah, double. Maybe the accounts or something.

[Chris]

But, I mean, but it. But what they're doing is very measurable. Right. They're doing a certain amount of cold outreaches, which gives a certain amount of leads, which gives a certain amount of. Yeah, so it. It probably scales.

[Ulysses]

Probably.

[Chris]

Yeah, I mean, that. That would be safe to say.

[Ulysses]

Yeah.

[Chris]

Okay.

[Ulysses]

Yeah.

[Chris]

Okay. So the. To Daryl's point. So on a. Do you. Do you understand a P and L at all?

[Ulysses]

Yes. Could. We have to do them, but not really, like, in depth.

[Chris]

And that's. That's what we're trying to help with.

[Ulysses]

Yeah.

[Chris]

That's good, because I. I would say most business owners are exactly where you're at. Yeah. They. They account based on how much money's in the bank account.

[Ulysses]

Right.

[Chris]

Like, and then. And then they'll look at balance sheets or whatever else afterwards and be like, yeah, I guess I kind of understand this. Okay, so on a typical P and L, you have your revenue at top you, minus your cost of goods sold, and that gives you a gross margin. Okay, so $15,000. We're breaking this down by one account.

[Ulysses]

Okay.

[Chris]

15,000 minus 4,000 gives me 11,000 margin.

[Ulysses]

Yeah.

[Chris]

Right. Now, if you can directly tie your sales and marketing to, like, hey, If I, if I continue to scale this up, it's going to always be 350 bucks. Then you're going to also add that in and say, this is what I call my CEO gross margin.

[Ulysses]

Okay.

[Chris]

And so what I would look at is your gross margin is 11 grand, minus 350. You're going to be at 10,650 bucks gross margin.

[Ulysses]

Yeah.

[Chris]

Okay. That. Now from there we're going to go and we're going to apply it towards break even. What are your fixed cost? What are you. What are your. Like, what do you spend money on? No matter what, whether you get clients or not.

[Ulysses]

So payroll.

[Chris]

Payroll, yeah. What does that look like?

[Ulysses]

Payroll is like 1,600 a week, so I don't know what that is.

[Chris]

Okay, so 1,600 a week, that would be 64. It would be about $7,000 a month.

[Ulysses]

Yeah, Yep, yep. That's just payroll and then subscriptions, it's like another 2,000. 3,000.

[Chris]

Okay, let's call. That's big range.

[Ulysses]

I think it's like closer to like 2500.

[Chris]

Okay, so. So th. This is good because I think for anybody that's watching this show, like, or listening to this, this podcast, like, you need to understand these things meticulously.

[Ulysses]

Yeah, right.

[Chris]

Because when you say, oh, it's 2 to 3,000, the difference between 2 and 3,000 is 50%. Yeah, yeah, right. Like that is. That is a big range. We're not saying 99 or 100,000. We're saying 2 to 3th. That. That's a big jump. Okay, so like understanding that. Let's. Let's call it 2500.

[Ulysses]

Yeah.

[Chris]

Okay, so I got 7000 fixed payroll, 2500 in subscriptions, that's 9500. What else you got?

[Ulysses]

Do you have any leases, business wise?

[Chris]

Got leases, got payments that I rent.

[Ulysses]

But that's not. That's not part of. Yeah, that's. So I'm pretty sure I have something.

[Chris]

Insurance business.

[Ulysses]

I do pay insurance. Yep. I pay admin.

[Chris]

Anything else? That's.

[Ulysses]

Yeah, 300.

[Chris]

Bookkeeping.

[Ulysses]

Bookkeeping, yep. 350.

[Chris]

Yeah.

[Ulysses]

Okay. Damn, I should have been prepared for this.

[Chris]

No, this is good. This is good. This is good.

[Ulysses]

Yeah. So bookkeeping, I pay for 350 and then insurance, I pay for 300. Yep. 300.

[Chris]

Okay. Okay, so look, this is what we're going to do. We're going to break out our calculators. Okay. So I have. So $7,000 a month. Okay. On payroll.

[Ulysses]

Yeah.

[Chris]

Plus $2,500 in subscriptions. Software. Different things like that. Plus 650 for insurance and bookkeeping.

[Ulysses]

Yep.

[Chris]

What else we got?

[Ulysses]

Taxes?

[Chris]

No. So taxes. Don't worry about taxes. Taxes are what you pay. Unless B and O taxes. Do you pay B and O taxes?

[Ulysses]

I'm not sure what that is.

[Chris]

Okay, B O taxes is like here in the state of Washington is like a percentage of your revenue.

[Ulysses]

It's like usually like 1% sales tax is.

[Chris]

No, no. Do you have any, do you have any payroll taxes or anything associated?

[Ulysses]

No.

[Chris]

Okay. All right, so let's, let's just say that's everything.

[Ulysses]

Okay.

[Chris]

Okay. So we're at, for those that are looking on the Cameras, we're at 10,150. What was our, do you remember what our gross margin was?

[Ulysses]

11,000.

[Chris]

Okay, so it was. Yeah, it was 11,000 minus what did we say? 350 of acquisition.

[Ulysses]

750.

[Chris]

So 10,650. So what does that mean? What does it take to break even in your business?

[Ulysses]

One client.

[Chris]

One client. Okay.

[Ulysses]

Yeah.

[Chris]

So and what that means is every additional client is worth how much to you?

[Ulysses]

10,000. 6.

[Chris]

50. 10,650 exactly. So and this is a very simplified version for there's a lot more complex businesses out there, right. Like, like that require more than one client to break even. Like first of all, congratulations to be able to set it up where it's that simple. Right. It's probably works great for a lifestyle business and everything else.

[Ulysses]

Yeah, right.

[Chris]

You know, when, like for example, when we're running our solar business, there was a point in time where, okay, it took 65 clients to or installs to be able to break even. And then our break even, as we added fixed costs, it became 100 and then we break it. And so but what's so important as a business owner is that you always are tracking that break even analysis. Because now I know that is the point that I have to get to every single month regardless. Like that is my, you know, die. But then I can make better decisions based on acquiring these new customers.

[Ulysses]

Right.

[Chris]

And what I mean by better decisions. So what is your, what is your average? You're, you're acquiring how many customers a month right now?

[Ulysses]

Like four. I mean, I want to say, I want to give a range, but let's just go, let's go with four. Yeah.

[Chris]

Okay, so based on our break even analysis, how much profit should you be making on four customers?

[Ulysses]

I should be making 10,650 times three.

[Chris]

Exactly. Okay, so now, now we're on the same page, right? So now, now we're at $32,000 in profit. Okay, now here's the question. Does your current staff, your fixed costs. Right. Your capital expenditures down there, whether you have an office space or support staff or whatnot, can they handle more than four clients a month?

[Ulysses]

Yep.

[Chris]

How much. What is your maximum capacity? That. That current staff? Can. Can.

[Ulysses]

So I know one client manager can handle 10 accounts.

[Chris]

Okay.

[Ulysses]

So I. I won't. I don't need. And right now, because we have an overload from last year, we have about four client managers. Oh, so. Yeah, well, yeah, we had a lot because we made a lot of money last year. But I mean. Yeah, so it took a time. Took some time, but.

[Chris]

Okay.

[Ulysses]

Yeah.

[Chris]

So, okay, if I'm hearing you right, every. Every client manager can handle up to 10 accounts a month. Yep, that's right.

[Ulysses]

Yep.

[Chris]

And you have four client managers.

[Ulysses]

Yep.

[Chris]

Okay, so what's your maximum capacity?

[Ulysses]

I don't know.

[Chris]

Okay, four times 40. 10. Yep, exactly. Okay, so now. Now let's. Let's look at this. I have 40. I have 40 capacity. And what's your current. What. How much of the capacity are you using?

[Ulysses]

We're using, I think, all of it right now.

[Chris]

How are you using all of it?

[Ulysses]

Because we still have clients from last year.

[Chris]

Okay.

[Ulysses]

Yeah.

[Daryl]

Okay, so you have 40 clients.

[Ulysses]

Yeah. Yeah. So you're a little bit more.

[Chris]

So you don't have cause. Cause this is where I'm trying to get to. Okay, so right now you're bringing on four clients.

[Ulysses]

Right.

[Chris]

Okay.

[Ulysses]

Yep.

[Chris]

How long does a client stay on with you when you acquire a customer?

[Ulysses]

It depends what package, but it could be, you know, a month.

[Chris]

How much is a $15,000 package?

[Ulysses]

They'll stay with us for, like, 60 to 90 days.

[Chris]

Okay, so they're with you for 90 days?

[Ulysses]

Yeah. Okay. Yeah.

[Chris]

So over three months, that would be 12 clients. Okay.

[Ulysses]

Yeah.

[Chris]

So. And one of those. One of those people, could they manage all 12 of those new clients, or would you need one and a half of those people?

[Ulysses]

They could manage those 12, but probably not with, like, the best quality.

[Chris]

Right. So what I. What I'm trying to get back here. So clearly you're doing some, like, some previous work or whatever else but we have to look at is. Okay, what are my fixed costs capable of doing? Yeah, if. If they're able to do 40 customers at once and a client stays on for three months, you want to take the 40 and you want to divide it by three.

[Ulysses]

Right.

[Chris]

Because it's. So that's kind of your maximum capacity that you can bring on every single month.

[Ulysses]

Okay, that makes sense.

[Chris]

Does that make sense?

[Ulysses]

Yeah. Yeah.

[Chris]

Because if they're staying on 90 days. Right, right. And so I bring that down so I can acquire 13 new customers a month. And if, and if you're, if your people aren't able to do that right now, one, maybe their capacity isn't 10 or two, they're not performing properly.

[Ulysses]

Yeah, right. Yeah.

[Chris]

Or maybe you have like this customer issue or whatever, but you gotta get that cleaned up.

[Ulysses]

Yeah. Well, is. Because part of, like, so our, the, the way that we, like, work is we normally work Mondays through Thursdays.

[Chris]

Yep.

[Ulysses]

And we only work five hours a day.

[Chris]

Okay.

[Ulysses]

So it's like 7am to noon and like, that's it. If they had a full, you know, eight hours, we definitely could. But I'm assuming that could be part of the reason why is like limited time because they also don't do anything Fridays.

[Chris]

Okay.

[Daryl]

Are you paying them full time?

[Ulysses]

No, these are a lot of these. So I pay people from Poland and I also pay people overseas. And a lot of our stuff is like. I mean, by now 60 years is like, you know, we have our sops down already, so.

[Chris]

Right.

[Ulysses]

Yeah.

[Chris]

So if so right now you would say you're netting about $32,000 a month.

[Ulysses]

And it does sound accurate because I'm on debt that I'm paying off from last year.

[Chris]

Right.

[Ulysses]

It's like ten grand. Right. And then I know I need like seven to ten just to live and then. Yeah, so it does sound about right. Yeah. Okay.

[Chris]

Okay, so we're, we're in the, we're in the right numbers. Okay. So what you have to look at is like, if my current team has capacity to do 13 and I'm only doing four.

[Ulysses]

Yeah.

[Chris]

You have to scale to hit capacity. Right. And how do you. Based on what you're telling me, you could go, because each of these virtual assistants, you. They're about 200amonth.

[Ulysses]

No, I wish.

[Chris]

No, I'm saying the people that are doing the LinkedIn.

[Ulysses]

Oh, yes. They're. They're 800amonth, so I pay them 200 a week.

[Chris]

Okay.

[Ulysses]

Yeah. And I only have one guy doing that because a lot of it is automated.

[Chris]

Right. So he's doing. He's 800amonth. And then what was the other 600 associated with that?

[Ulysses]

It was like the software associated with that.

[Chris]

Okay. Is that software. Would you need to buy another $600 software to be able to add one more person?

[Ulysses]

Yeah.

[Chris]

Okay, so it's going to cost you fourteen hundred dollars to Be able to get four more clients.

[Ulysses]

Yeah. Okay, makes sense.

[Chris]

Based off of what I'm hearing, you should be spending 2,800 more dollars a month on two more assistants and two.

[Ulysses]

More software packages to hit capacity.

[Chris]

To hit capacity. And so what. What that's going to do for you is this. Okay. So. Because it's not going to increase your fixed costs at all.

[Ulysses]

Right, Right.

[Chris]

And it's also not going to reduce your margin at all.

[Ulysses]

That's true.

[Chris]

Because you're. Because that cost is associated with acquiring a customer.

[Ulysses]

Yep.

[Chris]

Right. So it's going to. It's going to yield. Now, fixed costs. You always got to look at, like, fixed cost doesn't give me a return, but it takes care of the return I'm already getting.

[Ulysses]

Yeah.

[Chris]

Does that make sense?

[Ulysses]

Yeah.

[Chris]

Right. For variable costs, stuff that's associated with acquiring a customer, cost of goods sold. Right. Like that. You really only pay if you get something in return. If you're not getting something in return, you got to cut it quick. Right. And so what I'm hearing is if you hire two more. Two more virtual assistants plus the software, you'd spend $2,800, but you wouldn't even look at that as a line item on your expense because it's going to be associated with your cost of goods sold. Does that make sense?

[Ulysses]

Yep.

[Chris]

Okay. You following me?

[Ulysses]

Yep. Yep.

[Chris]

And you're going to get how many more clients?

[Ulysses]

I will get eight. Eight more clients. Yeah.

[Chris]

Eight more clients a month.

[Ulysses]

Yeah.

[Chris]

Which would be how much money?

[Ulysses]

I don't know. I'm not that.

[Chris]

Come on, go. Let's go back to how. What's our Gross margin?

[Ulysses]

It's 11,000.

[Chris]

No, no.

[Ulysses]

10,650.

[Chris]

10,650 times.

[Ulysses]

Times 8 times 8. Yeah. Yeah.

[Chris]

So, dude, think. Think about this. Like, with the amount, like what your staff is already in place.

[Ulysses]

Yeah.

[Chris]

10. Going eight times 10,650. Right. We're talking about an extra $85,000 net.

[Ulysses]

Yeah. Just if I focus on the marketing acquisition portion. Right.

[Chris]

That's it.

[Ulysses]

Yeah.

[Chris]

Right. Because you already have the staff that can fulfill this.

[Ulysses]

Right.

[Chris]

You already have the process that this can get done.

[Ulysses]

Yeah.

[Chris]

You already have, like, everything in place. This requires no more effort besides taking a little risk.

[Ulysses]

Yeah. And.

[Chris]

And so how much re. How much risk are you taking to get this much?

[Ulysses]

Like 2800.

[Chris]

2800 bucks?

[Ulysses]

Yeah.

[Chris]

Would you spend $2800 to get $85,000?

[Ulysses]

Yeah. Yeah.

[Chris]

A month?

[Ulysses]

Yep.

[Chris]

So. So, like, this is like, that's. Oh, it went Dark on me, you know, 20, 2800 bucks. Now, here's the cool thing. You don't even have to do that. Like, go and add one more.

[Ulysses]

Yeah. And test it.

[Chris]

And test it.

[Daryl]

Yeah, right.

[Chris]

Like, because, like, too often, like, business owners, they're so scared of risk, and they don't even know what lever they're supposed to pull. Yeah, right, because you're. You're basing things off of, like. Well, last year, I took. I went too much action, and it caused me to pay this much in debt.

[Ulysses]

Yeah, right.

[Chris]

Is that. Those are the feelings.

[Ulysses]

100%. I'm like. I'm, like, doing the complete opposite of what I did last year.

[Chris]

So tell me. Tell me the feelings that are going on in your brain that have caused you not to take more risk right now. What are the thoughts that go through?

[Ulysses]

Well, last year was very hectic. I didn't have a lot of time to myself, and I didn't have a lot of time for, like, family. So the. I'm afraid if I do that again and I don't do it correctly is the same thing's going to happen. And then I also have to, like, spend a year this year fixing what I did last year instead of, like, you know, on the trajectory going upwards. So it's like, I just want, like, what I really. What I would like to do now is right now we're doing really great, like, this entire year because I have margin finally. And it's like, all right, just work with this, you know, Because I feel like, finally, it's like the. The business model is kind of built better. Yep. To sustain more of, like, my lifestyle. So it's like, I like that I only work five hours a day and then four days out of the week. So I like that now, you know, so here's.

[Chris]

Here's the cool thing, Ulysses, is like, this would require no more work.

[Ulysses]

Yeah.

[Chris]

Like. Because if I'm understanding your business correctly, you're. Once you land a client who's selling these clients.

[Ulysses]

So right now we have one sales rep.

[Chris]

Okay.

[Ulysses]

Next week, we won't. It'll be me.

[Chris]

Okay.

[Ulysses]

Yeah, you.

[Chris]

So you're getting rid of. You're getting rid of your sales for more margin?

[Ulysses]

Yeah.

[Chris]

You want more margin?

[Ulysses]

Yeah.

[Chris]

Why?

[Ulysses]

Because I already don't work a lot. Okay. You know, so. So to get that extra 15, 20, I think, would be worth it.

[Chris]

Okay.

[Ulysses]

So you're.

[Daryl]

You're contradicting yourself, though, right? Because you're saying I. I like this lifestyle where I don't work a lot.

[Ulysses]

Yep.

[Daryl]

Now you're saying I don't work enough. I need to work more. So there's almost like a.

[Ulysses]

Well, I feel like they don't work enough. They don't. But like, we don't have that many calls to close four clients. You know, it doesn't take that like that many. So opening up a few more hours in the day, I don't think would.

[Chris]

So what if, what if you were spending 2,800 more dollars and you were getting enough leads to close 200% more.

[Ulysses]

Right.

[Chris]

Go from going from 4 to 12.

[Ulysses]

Yep.

[Chris]

Right.

[Daryl]

You had to work another eight hours a week.

[Ulysses]

Deal.

[Chris]

But the sales rep, like, not you.

[Ulysses]

Yeah.

[Chris]

You kept your sales rep on.

[Ulysses]

Yeah.

[Chris]

And he went and did that. Right. Would you, would that keep him busy?

[Ulysses]

Yeah. Okay.

[Chris]

So. So I just want to identify like the just like strategy where flaw. Right, right. Because so I guess really understand, like, what do you want in your business? You want time freedom.

[Ulysses]

Yeah. Yeah. I like peace overall. Yep. That's probably the main thing.

[Chris]

Yep. So usually that piece comes from time freedom and working on your business rather than in it.

[Ulysses]

Yeah.

[Chris]

Right. I'm sure you probably like the sales side too, right? It's fun to get on with clients and close deals or whatever else.

[Ulysses]

Yeah.

[Chris]

But you probably wouldn't want to do that 10 hours a day.

[Ulysses]

No.

[Chris]

Okay.

[Ulysses]

Yeah. If it became 10 hours a day, 100% like I would bring back a sales rep immediately. Okay. Yeah.

[Chris]

Okay. So can I give you some suggestions?

[Ulysses]

100%.

[Chris]

All right. So what if instead of getting on the phone and being the sales rep again. Right. You work on your business, you pull these levers that are going to help you get the additional clients that's going to keep that sales rep busy, which is going to in turn make you freer. Yeah, freer. Right. But all you're, you're still going to spend time working on the business. It's just not going to be on the phones with clients.

[Ulysses]

Yeah.

[Chris]

It's going to be okay. Going and hiring a new sales rep or like figuring out a new acquisition strategy or, you know, making sure that you hire the right VA that's going to go and fulfill on this SOP to be able to go and do the cold reach outs on LinkedIn and. Right. Like you're just looking at it strategically. Right. So my question is, who's coaching you on this right now?

[Ulysses]

You.

[Chris]

Well, right now this is. But like in, in, in real life, are you.

[Ulysses]

No one.

[Chris]

Okay.

[Ulysses]

No one.

[Chris]

Okay.

[Ulysses]

Yeah. I did have, when I was struggling with the finances Thing I did hire somebody to, like, just, you know, consulting. Be like, look, what the. Like, what am I doing wrong? You know? And I was like, there's just. Yeah. I couldn't figure out how to profit from, like, the business that I had. I mean, but once I got solved, thankfully, it's like, yeah, I'm in a good spot now. There's really not too many core things that I'm focusing on. I also don't work too much in the business. Like, I'm on those five hours, but I'm not directly communicating with clients. I'm really just managing the team. That is.

[Chris]

But now you're getting rid of the sales rep, so you're getting ready to dive back in.

[Ulysses]

Yeah, yeah. And speak to prospects.

[Chris]

Okay.

[Ulysses]

Yeah.

[Chris]

Which I think, if I'm in your shoes, is a. Like, you don't want to do that.

[Ulysses]

Yeah.

[Chris]

Like, not. Not that you're not willing to get back in. Right. Like, you should always be willing to get back in the game. Yeah. Like, no. No business owner should ever be high and, you know, haughty enough where he's not willing to make the sacrifices when necessary.

[Ulysses]

Right, right, right.

[Chris]

But fundamentally, dude, you can keep the sales guy on. Just give him more opportunities.

[Ulysses]

Yeah.

[Chris]

To be able to go and close and not only him, more opportunities. Like, figure out how you can take this thing. Dude, you've got a model that works. Like, if I'm fundamentally looking at your model and knowing that I have a. Just on a per account gross margin of 10,650.

[Ulysses]

Okay.

[Chris]

But it does sound like you're paying a commission on these deals, too.

[Ulysses]

No. I mean, yeah, with the sales rep that I have. Yes. But, like, I don't have what I had last year where I, like, 30, 50.

[Chris]

What is your commission with your current sales rep?

[Ulysses]

So it depends. If they bring a client in, it's 20. If they don't bring a client in, it, it ranges from, like, 10 to 15%.

[Chris]

Okay.

[Ulysses]

Okay.

[Chris]

So let's call it 15%.

[Ulysses]

Yeah.

[Chris]

15% of $15,000 is how much?

[Ulysses]

Like 1500, 250. Got it. Yeah. I'm not that good at math.

[Chris]

That's fine. That's fine.

[Ulysses]

That's why I'm in the position. It's like, I wasn't good at math.

[Chris]

This is good. This is good. So if it's 2,250, like, because you really should be asking yourself, how can I scale what I currently have? Not get rid of sales reps and take more margin.

[Ulysses]

Yeah.

[Chris]

Right.

[Ulysses]

Yeah.

[Chris]

Because, like, taking more margin like, 100% of $1 is not a lot of money.

[Ulysses]

Yeah.

[Chris]

Easter. Right.

[Daryl]

How do you scale. How do you scale profits?

[Chris]

How do. How do I scale? Yes. And so. So now let's go back to our original math. 10,650 is our gross margin, but now we're going to subtract what we're paying a sales rep.

[Ulysses]

Okay.

[Chris]

Because fundamentally, you need a sales rep. Yeah. You shouldn't be the sales guy.

[Ulysses]

I got it.

[Chris]

All right, let's. Let's not. Let's not do that. That's a. That's a mistake. Okay, so we're going to go 2,250. Okay. Now we're at 8,400 bucks.

[Ulysses]

Yep.

[Chris]

So what was our fixed cost again?

[Ulysses]

Fixed costs.

[Chris]

What do we. What do. What's the nut. We have to cover every single month?

[Ulysses]

It.

[Chris]

It was like. It was like 10,250 bucks.

[Daryl]

My question is.

[Ulysses]

Oh, yeah, it's a break even. The break even. Yes.

[Chris]

Thank you.

[Daryl]

Do you have the sales commission in this?

[Ulysses]

No, that's what we just.

[Chris]

Yeah, I just took out.

[Ulysses]

Now it is 250. Now it does.

[Chris]

Yeah, now it does. And so now this. This is actually representative of your real gross margin. You're. I know where your mind was. You're like, oh, I'm getting rid of him so I don't have to calculate that anymore.

[Ulysses]

Right, Right. Okay.

[Chris]

But let's not go there. Let's go. Let's go here. Okay, so I'm 8400. $400, which means I need one and a quarter clients to break even.

[Ulysses]

Yep.

[Chris]

Okay. So if I need one and a quarter clients to break even, and I go. And I sell 12 clients. Okay. 12 clients minus one and a quarter clients is how much?

[Ulysses]

10. 10 and half.

[Chris]

So 10 and three quarters. Okay. And I'm going to times that by my gross margin.

[Ulysses]

Yeah. Okay.

[Chris]

Because that's my. Because what? Because one and a quarter is to break even. Ten and three quarters is to make money. So now my real. If I continue. So 10.75. If I continue to pay a sales rep and I max out everybody to their capacity, you're going to go from working in the business, making $33,000 to working on the business and making $90,000 every month.

[Daryl]

So now basically what. This is what's going on here. Right. Chris is creating a formula to apply.

[Ulysses]

Yeah.

[Daryl]

As you apply the formula, you're going to be like, wait, that didn't. That didn't equate.

[Chris]

Right.

[Daryl]

And you'll start to tweak and you'll start to learn assumptions that you were making that aren't true.

[Ulysses]

Right.

[Daryl]

You also identify other opportunities that you didn't realize. And so this is where. When you can understand these numbers. When we understood our numbers, like, and we knew how we could. It was. It was, how high can we go?

[Ulysses]

Yeah.

[Daryl]

Right. And then that's where we could scale at 300 and not be, like. Not sink the ship.

[Ulysses]

Yeah.

[Daryl]

What people often do is they have some success, and they're like, let's just scale this. Without knowing their numbers.

[Ulysses]

Yeah.

[Daryl]

Well, now those numbers all change because they're not even aware of where they're at.

[Chris]

And they don't track them, and they don't track them.

[Daryl]

And so things start to get misaligned, and you don't realize it till, hey, the money's gone. And then you get in the scarcity mindset of, oh, crap, I need a backup. Like, I don't want to lose my lifestyle. I liked having what I had.

[Chris]

I got to pay all this debt back that I buried myself in a hole doing $1.1 million.

[Daryl]

So then you go back to retreat.

[Chris]

Right.

[Daryl]

And then you just stay hunkered down.

[Ulysses]

Yeah.

[Daryl]

And we see this is a very, very common.

[Ulysses]

Yeah, I mean, that's where I'm at. It's like. And that's why I was thinking first is like, well, just make more margin, because if everything stays the same and I just make more margin, you know, then it's. It's better than what I have now, you know? But that makes a lot of sense because I'm. I'm really only spending 2800 to, like, test. And it doesn't even have to be 2800. Could be 1400 to.

[Chris]

To add one more. One more person. And so let's. Let's say that you. You decide to do that.

[Ulysses]

Right.

[Chris]

You spend the 800 bucks plus the 600 in software.

[Ulysses]

Yeah.

[Chris]

And it does contribute four more clients. Right. How much is four more clients worth to you now?

[Ulysses]

Sixteen. Like 32,000 something.

[Chris]

Yes, exactly. 8,400 times four.

[Ulysses]

Yeah.

[Chris]

Right.

[Ulysses]

Yeah.

[Chris]

So it's 33,600.

[Ulysses]

Right.

[Chris]

So now you're like, holy crap, this works. Let's get one more on there. Let's get to max capacity.

[Ulysses]

Yeah.

[Chris]

Now. Now here's where it gets fun. Okay, so now you get to max capacity. Right. You have all your fixed costs being fully utilized. Right. Your. Your. Your client. Client managers. Is that what you're calling them?

[Ulysses]

Yeah.

[Chris]

Your client managers are fully utilized and everything else. And you're like, hey, let's grow this thing. What's it going now? Once you're fully maxed out, what's it going to take to grow your business?

[Ulysses]

I hire a new client manager.

[Chris]

Yes. So I hire a new client manager which is capable of bringing on how many customers?

[Ulysses]

I think he said 12, 13.

[Chris]

So no, 10. But 10 is divided by. Because a client stays on with how. How long?

[Ulysses]

90 days.

[Chris]

So you got to divide it by three.

[Ulysses]

Okay.

[Chris]

Okay. So one client manager.

[Ulysses]

Yeah.

[Chris]

Can handle how many new clients a month?

[Ulysses]

I don't know.

[Chris]

10? Ide by 3.3.3.

[Ulysses]

3.3, yeah. Okay.

[Chris]

Now here's now what we've realizes. There's a ratio for every client, man. A client manager can essentially do what, an acquisition, your $800 acquisition. Right. Because they're bringing on four a month, and this person can do about 3.3. Okay. So that's pretty dang close. Hopefully you can increase the efficiency of a client manager where they can take on four new clients a month.

[Ulysses]

Yeah.

[Chris]

Right. And so essentially manage 12 over a period of 90 days.

[Ulysses]

Okay.

[Chris]

Make you follow me.

[Ulysses]

Yep.

[Chris]

Okay. So if you can get that on a one to one ratio, then this becomes a very easy game, literally, is hire client manager, go and get an acquisition person, Spend the money, get the new clients, do it again. Now, along the way, you're going to max out this sales rep. He's going to be busy. Right now you've gone the opposite way. You've got it to where he's so not busy that you're considering letting him go and stepping in and doing the jobs yourself.

[Ulysses]

Yeah. Okay.

[Chris]

So one day you're going to come, you're going to walk in. You're going to walk in and you're going to be like, dude, we had all these leads and you didn't close all these deals. You're not being able to keep up. Oh, I need to go and hire another sales rep. Okay. So I got my client manager, I got my acquisition manager, and then once I max the sales rep out, I bring on another sales rep, which means I need to do another client manager, another acquisition manager, until I get him to capacity along the way. The only time where. Where am I adding fixed cost?

[Ulysses]

When it gets to the client manager.

[Chris]

Portion, that is the only time I'm adding fixed costs. Okay. Because my sales rep is purely commission, Right?

[Ulysses]

Yep.

[Chris]

And my acquisition manager should be able to be directly tied, essentially the same as a sales rep. Yeah, Right. As a variable cost rather than a fixed cost. Right, Right. So I am Just stair. Stepping up my break even analysis today. My breakeven analysis says I need 1.125 customers. Right. And so if I add another client manager. How much do you pay a client manager?

[Ulysses]

I pay them around the same. $200 a week.

[Chris]

$200 a week?

[Ulysses]

Yeah.

[Chris]

So 800 bucks. Okay. $800 would take your break even analysis from like, 1.25 to, like 1.35.

[Ulysses]

Yeah. All right, so literally, like, almost no difference. But.

[Chris]

But how much is a client manager worth to you?

[Ulysses]

I don't know. A lot of money.

[Chris]

So let's. Let's back it. What. How much. What can a client manager do? How many clients?

[Ulysses]

You said three a week.

[Chris]

3.3.3Amonth.

[Ulysses]

3.3Amonth. Yeah.

[Chris]

Right. But we said we should probably get them up to four.

[Ulysses]

Yeah.

[Chris]

Capacity.

[Ulysses]

Yeah.

[Chris]

How much is four clients worth to you?

[Ulysses]

15, 60. Like 60 grand.

[Chris]

No, that's 60 in revenue. Remember, we don't.

[Ulysses]

Yeah, yeah.

[Chris]

So everything in revenue.

[Ulysses]

Yeah. So that's like the 33,000, I think it was.

[Chris]

Yeah, dude, $33,600. So literally every time you bring on $800 in monthly expense, you're getting $33,600 in profit as long as you're utilizing them. Right, right. That's the key. The key is how much capacity you have. Are you getting max capacity? And then. And once you charge up your marketing and sales enough to get to max capacity, then you grow that again. And so, dude, literally you have a business here that could be made. Like, you got to think bigger, bro. Yeah, like. Like, dude, I'm sure you know your quarter million dollars a year that you're making in Tri Cities is cool, right? Like, that's. That's awesome. You pay the bills. But, dude, it's 2024. Biden economics are kicking us in the. In the freaking teeth.

[Ulysses]

Yeah, right.

[Chris]

Like, quarter million isn't what a quarter million used to be.

[Ulysses]

That's true.

[Chris]

So, like, we got to think about this. Like, how big can we. We go and do. So currently, you have how many client managers for.

[Ulysses]

Yes.

[Chris]

Okay. You have four client managers for every four, five, six, whatever. Dude, we're talking about. Literally every client manager you add on is going to net you 360,000 more a year.

[Ulysses]

Yeah. Yeah, it's true.

[Chris]

Dude, that's pretty wild.

[Ulysses]

That is pretty good.

[Chris]

That is pretty wild. And like, bro, like, the last thing you should be doing is retracting.

[Ulysses]

Yep. Well, I'm definitely going to. I'm definitely going to try out the marketing portion yeah. You know, see how that ends up going. Because it doesn't make sense. You just do exactly what you're doing already. Add another account and then just run it. Yeah, yeah, yeah.

[Chris]

You know, it's. It's funny. I think a lot of times business owners don't realize how much of a science business is right? Like, we get caught up in the feels, the emotions, the fear, the retraction, the excitement of. Of it all, the what's in the bank account or whatnot. Instead of just thinking, okay, logically, let's just dial this back and let's see what we have. And, like, if you can understand that game. And, dude, what I would recommend to you is like, get somebody in your corner because you have a unique talent to be able to go. Like, you've built a awesome personal brand. Right. Like, people know you as the PR guy. Right. So you've. You've got that down now. Go capitalize on it.

[Ulysses]

Yeah.

[Chris]

Like, go make real money. Not just appear to make real money. Not the rented Lambos or the rented mansions or the fake girls that you've picked up on Instagram or whatever else. But, like, you've got something that you can build off of that is ink. Like, literally all it takes is just. Oh, plug and play.

[Ulysses]

Yeah.

[Daryl]

Input.

[Ulysses]

Knowing which lever to put to pull.

[Daryl]

Yep.

[Ulysses]

What were we gonna say?

[Daryl]

I was gonna say, yeah, it's a met. Just measuring your inputs and outputs. But I think what you gotta realize is, like, what you've gone through is like, what most people go through.

[Ulysses]

Yeah, Right.

[Daryl]

It's really common thing to break that ceiling. It's really understanding the game, the science of what business is. And then just apply.

[Ulysses]

Yeah.

[Daryl]

Apply, tweak, measure.

[Chris]

Yeah, dude, it's in. And what I. What I. To Daryl's point, like, don't beat yourself up. Like, don't be like, oh, man, like, what. What have I done? I have this great thing and I haven't utilized. Like, don't beat yourself up about that. Like, get somebody in your corner. Like, hire a mentor, hire a coach. Hire somebody that can actually push you and hold you accountable because it's costing you severely in a financial. In a lot of ways by just not understanding these levers to pull.

[Ulysses]

Yeah.

[Chris]

Because, dude, I would. I would say, you know, we talked about earlier, like, hey, the last time we met was six years ago. Right. And, like, you saw what we've done in six years.

[Ulysses]

Yeah.

[Chris]

And the large reason for that is because we spent a lot of money to have people in our corner. And so Daryl And I have. So, personally, I've spent over a million bucks. Coaches, consultants, masterminds, and not just to look good, but actually to have guys in my corner that actually help me understand these things. So I know the levers to pull.

[Ulysses]

Yeah, right.

[Chris]

Like, I mean, I still go back to, like, holding the mastermind up at my. My lake house. I got Russell Brunson there. I got Alex or Mosi there. And Alex is like, dude, you need to run a process, but before you run a process, you need to hire a cfo. Right? Like, that's what Alex. Alex told us. We went back and made some big adjustments to our business based off of that conversation, and it helped us understand where we needed to do to be able to run a process, which is the. The process of selling your business. Yeah, right. Like, and it's because I was in the room spending the money to be with the right people. Right? Like, that is just, like, one small instance that I can even think back.

[Daryl]

I'll give you another one. For me, an aha moment was I went to a business conference, and the reason I went was because I felt like I didn't know how to run a business. Like, every time I turn around, there's another set of problems. And, like, maybe I'm just not meant to do this. I'm struggling. The biggest thing I learned from that conference was that every business has problems at every stage of. And they just change. Right? So your strengths, weaknesses are always changing as the business grows. They never go away. You always have problems, right?

[Chris]

Always. And so what's really the next level formula? Right? Like, the fact that no matter where you're at, there's always the next level. There's always a new set of problems.

[Daryl]

And once I did that, I was like, oh, cool. Stop beating myself up. Realize what my set of problems are. Solve those so I can get ready for the next set of problems.

[Ulysses]

Yeah, right.

[Daryl]

And. And so then all of a sudden, I was like, okay, I understand. It's a game. Where before that, it was, like, all, like, inwardly, like, I'm not good enough. I can't figure this out. I'm not gonna. I'm not gonna succeed.

[Ulysses]

Like, it all felt like fires.

[Daryl]

Oh, yeah.

[Ulysses]

Instead of just part of it, it.

[Daryl]

All felt like fires. Like, what am I doing this for? When reality is like, no, this is what businesses go through to, like, scale up.

[Chris]

In fact, I remember when you came home from that conference, right? Like, there was this PDF sheet that you had, and it was like, this cycle of business, and it showed, like, infant Right. Like toddler.

[Daryl]

It mimicked the life cycle of a human.

[Ulysses]

Yeah.

[Chris]

And it said, like, at each stage of your business, these are the problems that you will face.

[Daryl]

So predictable.

[Ulysses]

Wow.

[Daryl]

It's, it's, it was wild. It was like the fact that it was that predictable and the fact that it was so obvious where we were at and it's always what we just went through and what we will go through at the time was like, it blew my mind. I'm like, all right, settle down, let's go. Yeah, yeah, let's get some, let's get to work.

[Chris]

What do you, what are you hearing for yourself, man?

[Ulysses]

I think I resonate with that a lot, you know, because I think at first my, the first issue I had was I just didn't know how to, like, I had to do everything myself. So then I had to learn how to hire a team. That was like the first issue that I had. Then I had too many clients. I didn't know how to service them correctly then. That was the second issue I had. Then I had a team member when I had that, like the team, but they were all commission based. So it's like, honestly, these are all.

[Daryl]

The things that listed. It was like one man show. Then it was like managed by crisis. Yeah, I mean, you're, you're just going through the stages, but keep going.

[Ulysses]

And so I had that team, but I mean, nobody was on payroll, so it was like chaotic the entire time. You know, I didn't handle that well. So it's just like. Yeah, they're just cycles. And this last cycle I'm probably most grateful for because it's like, it's a, the finance thing, you know, And I feel like, all right, I'm just, I'm, I'm grateful right now that I'm able to like pay off the debt and I have like left over and I'm not worried, you know, So I feel like I got that part down. Yep. So I like, I'm in a place now where I'm comfortable enough to like, take those risks. I can spend the 2400amonth, you know, test and, you know, things like that. So, yeah, that's where I'm at, you know, I love that cycle.

[Chris]

Yeah, man. Like I said, I think there's, there's just so much power having the right people that are, that are in, in your corner working with you, like, not being afraid to ask. I like, like, I would recommend like, dude, if you got questions, don't, don't be afraid to like, come and, come and ask us, like, hey, this is what I'm thinking about doing, or whatever else. So, you know, the. The. The local tri. Sitans. We got to. We got to. We got to stick together, you know?

[Ulysses]

Yeah. Yep.

[Chris]

Good stuff. Sweetly. Ulysses, man, I appreciate you being willing to be vulnerable, opening up, and, like, just discussing, like, these things, because I think there are so many people that are listening to this that are going through the exact same things, that are trying to scale, that are trying to make the right moves, that are either, you know, starting out for the first time or they went too fast, and now they're retracting and they're scared and whatever else. Right. Like, there's a lot that can be related to. And so I appreciate you opening up and being vulnerable.

[Ulysses]

I do. Thank you. I appreciate. Appreciate the help.

[Chris]

Awesome. Awesome. So if any of our listeners are wanting PR services or they want to follow Uesis and what you got going on, What's. What's the best channels to do?

[Ulysses]

So, yeah, they can follow me on Instagram or, like, any social media at Ulysses, and they can talk to me there.

[Chris]

Awesome. Awesome. Appreciate it so much. Until next time.