5 Businesses. 5 Fixes. One Playbook | Ep 937

Summary

Podcast Summary: The Game with Alex Hormozi
Episode: 5 Businesses. 5 Fixes. One Playbook | Ep 937
Release Date: August 15, 2025

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Introduction

In Episode 937 of The Game with Alex Hormozi, host Alex Hormozi delves deep into the common obstacles that businesses face when scaling and offers actionable strategies to overcome them. The episode, titled "5 Businesses. 5 Fixes. One Playbook," features a series of live interactions with various business owners seeking guidance on their unique challenges. Throughout the episode, Alex emphasizes the importance of strategic resource allocation, decision-making, and addressing foundational business constraints to achieve sustainable growth.

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Understanding Business Constraints

Resource Allocation and Strategic Focus

Alex begins by highlighting the critical difference between entrepreneurs who scale swiftly versus those who stagnate. He asserts that the key lies not in how fast one moves physically but in making the right strategic decisions about where to allocate limited resources.

"The difference between entrepreneurs who move faster versus the ones who move slower isn't that they actually physically move faster or slower so that they choose the right things to do and more importantly, the things not to do." ([00:33])

Decision-Making as a Bottleneck

Alex underscores that many business owners get stuck not because of tactical issues but due to strategic indecision. He illustrates this with scenarios where entrepreneurs face "rock and hard place" situations, forcing them to choose between two unfavorable options.

"A lot of times it's like you grow. Of course there's a constraint, but usually there's a decision behind that constraint that's actually the thing that's blocking you." ([02:37])

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Seven Growth Sins

Alex identifies seven common "growth sins" that impede business expansion. These are strategic pitfalls that entrepreneurs must recognize and address to scale effectively.

1. Avatar Selection

   • Issue: Struggling to choose the right target market, leading to potential business failure if they abandon profitable segments.
   • Insight: "If you stop selling to profitable avatars, you risk going out of business." ([04:02])

2. Data Deficiency

   • Issue: Lack of crucial business metrics like Lifetime Value (LTV) and churn rates, hindering informed decision-making.
   • Advice: Prioritize acquiring essential data to unlock long-term growth potential. ([04:02])

3. Lack of Focus

   • Issue: Managing multiple businesses simultaneously, leading to divided attention and reduced profitability.
   • Solution: Focus on scaling one business effectively before diversifying. ([05:20])

4. Overexpansion

   • Issue: Opening new locations without ensuring existing ones are stable, resulting in increased liabilities without proportional profit.
   • Strategy: Strengthen existing operations before expanding further. ([05:20])

5. Compensation Challenges

   • Issue: Balancing fair compensation to attract talent while maintaining profitability.
   • Example: A physical therapist struggling with compensation agreements affecting business sustainability. ([06:13])

6. Underpricing

   • Issue: Setting prices too low due to psychological barriers, limiting profit margins.
   • Recommendation: Adjust pricing to reflect value, potentially increasing profits significantly. ([06:56])

7. Single Product Dependence

   • Issue: Relying solely on one product or service, which can be risky if market preferences shift.
   • Case Study: A language teacher resistant to upselling higher-priced products despite clear demand. ([08:26])

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Live Q&A Sessions with Business Owners

Throughout the episode, Alex engages with several business owners, diagnosing their challenges and providing tailored advice.

Dylan – Supreme Power Wash

• Problem: Difficulty in attracting Business-to-Business (B2B) recurring clients despite stable residential revenue.
• Alex’s Fix:
  • Enhance Attribution Tracking: Implement systems to measure ad effectiveness.
  • Increase Ad Spend Gradually: Scale advertising budget based on performance data.
  • Optimize Existing Channels: Improve door-to-door strategies and referral systems.

"Step one is get the attribution in place. Step two then increase it." ([12:03])

Jessica – Subscription-Based Boat Rental

• Problem: Balancing growth with existing debt and deciding between acquiring new clubs or expanding organically.
• Alex’s Fix:
  • Debt Management: Consider scaling past debt constraints or selling the business if scaling isn't feasible.
  • Focus on High-Margin Memberships: Capitalize on profitable membership models to drive revenue.
  • Strategic Expansion: Opt for acquiring existing studios with lower operational complexity over organic growth.

"Most people make this work in a franchise model." ([34:56])

Angela – Cybersecurity Consulting

• Problem: Shrinking profit margins and decreased sales due to shifting focus from sales to operational leadership.
• Alex’s Fix:
  • Recruitment and Talent Management: Address under-talent issues by hiring key roles like recruiters and practice leaders.
  • Leverage LinkedIn for Lead Generation: Utilize thought leadership and targeted content to attract enterprise clients.
  • Optimize Sales Processes: Implement structured outbound strategies and enhance referral systems.

"Standards has to start thinking as a capital allocator rather than just a dark response performance marketer." ([47:05])

Lucas – DTC Skincare Brand

• Problem: Low profit margins due to over-reliance on performance marketing and lack of brand development.
• Alex’s Fix:
  • Brand Building: Shift focus from direct response to building a strong brand that commands premium pricing.
  • Diversify Acquisition Channels: Balance paid advertising with organic brand-driven strategies.
  • Long-Term Value Creation: Invest in brand narratives to foster customer loyalty and reduce dependency on fluctuating ad spends.

"Branding is higher return on spend than direct response does over a longer time horizon." ([50:00])

Alistair – Solutions for Dentists

• Problem: Limited visibility and a desire to scale beyond word-of-mouth referrals with a high-profit margin.
• Alex’s Fix:
  • Audience Building: Develop a structured marketing strategy to increase brand awareness.
  • Leverage Content Marketing: Create targeted content that resonates with dental professionals to generate leads.
  • Implement Referral Systems: Establish systematic referral mechanisms to amplify client acquisition without excessive time investment.

"Shift to being a capital allocator with your marketing efforts." ([56:18])

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Key Insights and Conclusions

1. Prioritize Strategic Decision-Making:
Successful scaling hinges on making informed, strategic choices about where to invest resources and what to prioritize. Avoid spreading yourself too thin across multiple ventures without a clear focus.

2. Address Core Constraints:
Identify and tackle the primary constraints holding your business back, whether they are related to market selection, data utilization, talent acquisition, or pricing strategies.

3. Importance of Branding:
Building a strong brand is essential for commanding premium prices and fostering customer loyalty. Shift focus from purely performance-driven marketing to creating meaningful brand narratives.

4. Optimize and Scale Proven Channels:
Instead of constantly chasing new acquisition channels, optimize and scale the channels that have already proven effective for your business.

5. Structured Growth Over Organic Expansion:
Adopt structured growth strategies such as franchising or licensing models to manage complexity and ensure sustainable expansion.

6. Delegate and Automate:
To scale efficiently, delegate operational tasks and invest in systems that allow you to focus on strategic growth rather than being bogged down by daily operations.

7. Long-Term Vision and Adaptability:
Maintain a long-term perspective, continually adapting your strategies based on performance data and evolving market conditions.

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Notable Quotes

• "The difference between entrepreneurs who move faster versus the ones who move slower isn't that they actually physically move faster or slower so that they choose the right things to do and more importantly, the things not to do." – Alex Hormozi ([00:33])

• "If you have two out of three people who are saying yes, you probably have a two and a half X in price sitting there to get to where you should be." – Alex Hormozi ([06:56])

• "You're falling into the trap that I did and I was stuck there for three and a half years." – Alex Hormozi ([46:30])

• "Branding is higher return on spend than direct response does over a longer time horizon." – Alex Hormozi ([50:00])

• "The only way to decommoditize this is that you have to build the associations that allow you to command a premium price." – Alex Hormozi ([49:45])

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Conclusion

Episode 937 of The Game with Alex Hormozi offers a comprehensive exploration of the strategic challenges businesses encounter when scaling. Through insightful discussions and personalized advice, Alex equips entrepreneurs with the tools and mindsets necessary to overcome growth impediments. By emphasizing strategic focus, effective resource allocation, and the power of branding, Alex provides a robust playbook for businesses aiming to transition from $100M to $1B in net worth.

For entrepreneurs seeking actionable strategies and deep insights into scaling their businesses, this episode proves to be an invaluable resource.

Transcript

[Alex]

You post your stuff next to shit that people like so they think it's cool, okay? And then eventually you take the cool thing away, and then your thing's still cool. And so then they pay a cool premium to buy your thing versus the other guy's thing that's not cool. And they keep buying your thing because they feel cool when they buy it. How's this morning?

[Co-Host]

Good.

[Alex]

Super tactical? Yes. Okay, good. I always want to make sure we do that. You might be wondering why we kind of organize things this way. Well, first off, it was because we've just iterated it a bunch of times and it worked out. But basically, we wanted to make sure one key thing happens, which is that you allocate resources towards the thing that gives you the highest return. And so fundamentally, the difference between entrepreneurs who move faster versus the ones who move slower isn't that they actually physically move faster or slower so that they choose the right things to do and more importantly, the things not to do. Because it's. We have such limited resources, and the smaller your business is, the fewer resources you have. And so you might see Elon and say, hey, how can Elon have $9 billion companies or whatever it is now? Well, he has, like, a hundred children, so who knows, right? The guy does a lot, but to the same degree, you might only have the resources to do, like, half of one thing. And we get in trouble when we try and do too much because you just can't do that many things well. And what Elon's kind of superpower is, is more so than anything. Obviously, he's a great strategist. He's great at promotion, but he's so good at attracting the top talent because people want to work for, you know, one of the smartest human beings ever, from a purely technical perspective. And so, like, that is how he gets. Gets his operating leverage. That being said, this is what I wouldn't want to have happen, which is that you go home and then you say, okay, I'm going to start at the top of this list and start working my way down, because it means that you didn't hear anything from this entire two days. I'd rather you open up a new page and then have the three things that you think will drive the absolute highest return possible, and then forget everything else. And if it really up to me, I'd rather you pick one of those three things and then cross out the other two. And so a really wonderful, figgy process that I try and exercise a lot because the role that I have sits within most businesses is that I will get brought in to look at everything and then think, okay, what's our goal? Let's say that we want to triple the business, or we believe that we have a triple in us this year. We say, okay, what are the fewest amount of things that would have to happen in order for us to do that? There's of course, a lot of things that could happen because as long as you're not supply constrained, then it's like, well, we could increase our sales convergence, we could increase our traffic, we could have another acquisition channel, we could add more, you know, whatevers.

[Co-Host]

Right.

[Alex]

In order to increase throughput. But at the end of the day, if there's a way that we can more efficiently do that, meaning if there's just one thing that we could do, like if we only did that and that got us our triple, then why are we talking about everything else? Like why are we talking about it? Why wouldn't we just allocate all of our resources to making sure that one thing actually happened? And I think that is fundamentally why we've been able to move disproportionately quickly with the businesses that we have. And so with that being said, I've had the distinct pleasure of answering a handful of business related questions. And so what's. What I found interesting is that the places where business owners get stuck is typically not tactical. Sometimes it's tactile, but it's typically strategic, meaning that they get stuck in a decision. And what's really harrowing about that is that decisions can take as long or as little time as you take to make them. Which means that some people stay stuck for years and never get past them. And so a lot of times it's like you grow. Of course there's a constraint, but usually there's a decision behind that constraint that's actually the thing that's blocking you. And so usually it's when you have to choose between two terrible decisions and they both suck. One just sucks now, the other sucks later. And so the first one that I see is avatar selection, Meaning I have, you know, three different avatars that I sell to. I'm doing $3 million a year and I really do prefer this avatar. But the other two together are 50% of my business. If I stop selling to them, I will go out of business.

[Co-Host]

Right?

[Alex]

That's a, that's a bad thing. But if I don't stop selling to them, I will want to kill my business. Also not a good thing. Right. And so what do you do Right. So these are kind of the rock and hard place scenarios. The next is data. This is the only one that is not necessarily rock and hard place, but it is worth mentioning because it's happened so many times. I get a lot of math questions which is like, hey, I've got these two product lines, I'm not sure which one to go all in on. And those are questions that get answered with math. But then I say, hey, so what's LTV on this and what's LTV on that? Or what's churn on this and what's turn on that? And then the person might say, I don't know. Well, it's like, well, if that's the one thing that's holding the business back, then you should stop what you're doing and only find out the answer to that question. And sometimes it takes a month, sometimes it takes two months. Okay, fine. But distracting yourself with kind of the urgent but not important things that come out throughout the day still puts your long term goals on hold. The next is focus, which is typically, I have two businesses, which one, you know, and they're both great and I can't stop one of them because I would make less money if I had one business instead of two tomorrow. But I guarantee that you'll make less money in five years because you have two businesses instead of one. The next one is over expansion. So I have one location that's working well. And so then I opened up my second location. My first location dropped a little bit. My second location didn't go as high as my first one. And so now I have twice the liability and about the same amount of profit. And I have twice the work and life sucks. And so I think the answer is I should open a third location.

[Co-Host]

Right?

[Alex]

Rock and hard place. What do I do? Do I shut down my new location or like, how do I fix this?

[Co-Host]

Right?

[Alex]

And typically you have this much profit and so the answer is something really hard, which is either you have to cut down one location, go back, refortify the base, or you have to give up almost all of your profit to bring someone in on a shot that they're going to be able to help you out who's good enough, because fundamentally, like no business ever over expands you, just under talent. It's a great way of thinking about it because you can't do anything about over expansion. You can do something about under talent. The next one is compensation. So this goes in both directions. I've got an H VAC business and you know, the phone's ringing off the hook. But I can't take the business anymore. I can't find any. Any dudes to do H vac stuff, technicians. And then I say, cool, well, how much are you running? Good margins. And they're like, yeah. I'm like, okay, well, what do you pay your guys? X. Okay, why don't you pay your guys more than X? I don't know. It's like, well, you have the cash flow. It's the constraint. What are we talking about?

[Co-Host]

Right.

[Alex]

So it could be a competition on the low side, or it could be the other side, which is. I had a physical therapist came the other day. Everything was good, like marketing, sales, everything was working. She was at full capacity, but she was not profitable. And I was like, okay, well, how is this happening? And she said, well, 50% of revenue I give to my therapist. And I was like, well, does that. Do they like rent chairs from you kind of thing? Kind of like the salon model? She said, no, I do everything. I run all the marketing. I close the deals. I'm the one who fills the toilet paper up. You know, they use my materials and they just show up for work and just have all these full calendars. And I said, it must be nice. And so rock and hard place. She can either lower her compensation and then potentially lose her team or not do that and never make money. What do you do?

[Co-Host]

Right.

[Alex]

The next one is underpriced.

[Co-Host]

I would.

[Alex]

I would guess right now half of you, at least, are underpriced. And I think that's just because of psychology. Typically, like, as soon as people start saying no, you back off on pricing. That's usually very far from where the ideal sweet spot on pricing is. And so a lot of entrepreneurs will stop. And it's like, okay, you know, two out of three people, you know, one out of three people is saying no. I don't want to hear any more no's. But usually if you have two out of three people who are saying yes, you probably have a two and a half X in price sitting there to get to where you should be. And at that point, you'd have maybe half the delivery with two and a half times the revenue, you'd make a hell of a lot more profit. And so super common. And then the last one is what I call just a single product business. And there's nothing wrong with this per se. It's only an issue when you are not profitable as a result. So I had an example where I had a guy who taught people to speak English in Latin. America. And he sold digital products from a YouTube channel that was. Had like 3 million subs. And he was selling like 7, 800 people a month on these like 20 to call it a thousand dollars product. And the issue was, or what I asked him to do was I said, what if we called those people and made them another offer? He said, there's no way. No one ever spend more than a thousand dollars on language stuff. And what was really great for me in this exact moment is that there was a guy right next to us who was from Latin America who didn't have English as his first language. And he looked at him, he's like, I mean, would you have paid $5,000 to, to. To learn English? And the guys just looked at him like, very soberly and was like, I would have given everything I had. And I was like, I'm fucking right.

[Co-Host]

Like.

[Alex]

And of course he didn't listen. So it doesn't matter. He's. He has a social media agency now, so you can't make good decisions for people. So that being CPA would be less competitive. So anyways, these are kind of the seven growth sins as we go through. I'll try and do one of these because I'll point. Cause usually they fall into these buckets. With that being said, let's. Let's a some cues. Yes, sir.

[Dylan]

Hi, yeah, my name is Dylan. I do power washing, solar panel cleaning, window cleaning, power washing, solar panel cleaning.

[Alex]

Solo panel cleaning, solar panel, solar panel cleaning.

[Co-Host]

Okay.

[Alex]

Yeah, I was like, wait, you selling solar doing? I was like, hold on.

[Dylan]

Yeah, Window clinic. And we do like $500,000 in revenue.

[Alex]

Amazing. I want to be at supreme, right?

[Dylan]

Yeah, Supreme Power Wash. And what I think is stopping me is strategies to attract or reach out to business. To business reoccurring clients. I should just focus on doing that primarily.

[Alex]

Okay, so right now you're residential.

[Co-Host]

Yeah.

[Alex]

Okay.

[Dylan]

Door knocking.

[Co-Host]

Yeah.

[Alex]

So what are margins now? Profit.

[Dylan]

Oh, yeah, we're making $500,000 a year profit.

[Co-Host]

Yeah.

[Alex]

So what's revenue? Top line sales, the dollars you collect.

[Dylan]

500,000.

[Alex]

What do you take home?

[Dylan]

Oh, 250.

[Alex]

Okay, so half.

[Co-Host]

Yeah.

[Alex]

Okay, so. And that's all residential right now?

[Dylan]

Yeah, there's a little bit of like some like apartment complexes or.

[Alex]

Okay, so what stops you from doing more of that?

[Dylan]

That it's just people just call us on the phone by my by luck and we get, you know, so it's.

[Alex]

Referrals is the primary way of growing the business right now. Okay, so you don't have an Acquisition channel. And so the thought process that you have is, I'm going to start an acquisition channel and go after commercial cleaning rather than residential.

[Co-Host]

What.

[Alex]

What's an acquisition channel? The way you get customers. Right now my phone rings and I'm getting referrals from existing customers who are calling me up and saying, hey, can you clean my stuff? You say, yes, but it's very much dependent on that phone ringing.

[Co-Host]

Right, right. Okay.

[Alex]

So then you're thinking or you're telling me that what you want to do next is build out a way of getting customers in the door and you want to target commercial.

[Dylan]

Yeah, because we have like this one client that just came upon us and I noticed, like, it's, it's a lot more money and it's a lot more stable.

[Co-Host]

Yeah.

[Dylan]

Because it's reoccurring on a monthly basis.

[Alex]

So you've got four ways that you can get. You can get clients right now besides referrals, which is what you're currently doing. So do you have experience with any of these things? Running ads, posting organic content, cold outreach, or do you have, like, people who already have a lot of these types of customers already?

[Dylan]

I have like a third party help with the ads.

[Co-Host]

Okay.

[Alex]

Just for everyone. You've got one of these?

[Co-Host]

Yeah. Right.

[Alex]

So how much do you spend a month on the ads? 2,000.

[Co-Host]

Okay.

[Alex]

Do you know if you get anything from it?

[Dylan]

Yeah, I would say, like, we get more like off, like door knocking and referrals.

[Alex]

Okay, so you doorknock a lot? Yeah. Okay, so. So you're spending 2,000amonth?

[Co-Host]

A year.

[Alex]

You're doing door knocking. How many deals a month are you doing off door knocking?

[Dylan]

Like 20.

[Alex]

Okay, 25. What's the average deal size?

[Dylan]

Like 350 to 1,800.

[Alex]

Okay, so I'll just call 500.

[Co-Host]

Okay.

[Alex]

So you got 10,000amonth there. That sound right?

[Co-Host]

Okay.

[Alex]

The rest is the phone rings or what other percentage is this more come from the door knocking or this?

[Co-Host]

Probably.

[Dylan]

Door knocking.

[Alex]

Probably, yes.

[Dylan]

Door knocking.

[Alex]

Okay, so you say like half comes from this compared to door knocking.

[Co-Host]

Okay.

[Alex]

What stops you from spending like five times more money here?

[Dylan]

The fear of not getting my money's back on the third party doing this job.

[Co-Host]

Right.

[Alex]

You need to get this in place. You need the data, meaning you need attribution tracking, which if somebody else is helping you run this, they should do it. And if they don't, then probably find someone who does know how to give attribution for the ads that you're doing. I wouldn't Say, hey, let's go after a new avatar and build a whole new way of getting customers. When you currently have two that are working or one that's working, one that we're not sure it's working. But if you're spending $2,000, you're getting more than one deal a week from ads, well then it's probably working because you're spending 500 bucks a week. If the average deal is 500 and you're getting more than that, then you're probably doing okay. And so you might actually be sitting right now in something that's getting 5 to 1 or 10 to 1, but you're only spending $2,000 a month. And so it's like, if we can just bump that to 10, then that would be big. Now you don't have to jump there immediately, like go from 2 to 4, 2 to 6, whatever you feel comfortable with. But step one is get the attribution in place. Step two then increase it. Provide the attribution, meaning that we can track what we spend versus what we make is good. Then spend as much as you can there. Once you've tapped that, you'll have a little bit more cash flow. And at that point we can make the decision of, okay, do we want to open up another paid ads channel? Do we want to spin up more door to door guys? Local is the only exception I have for being willing to have more than one acquisition channel. I'm not against it as hardcore as I am for other businesses because if you're in, you know, bumfuck, Kentucky, like there's only 50,000 people, like you got to reach them as many ways as you can. But right now, attribution, spend more if you can, as long as the attribution's good. I don't think you should change the business model. I think you should just do more of what's already working and you just don't know if what you're doing is working. But I can tell you got 50% margins. It's not bad.

[Co-Host]

Yeah.

[Alex]

Yes, sir.

[Co-Host]

Cool.

[Alex]

Thank you, Alex. No, you bet. Congrats on the business.

[Jessica]

Hello, my name is Jessica. I have a subscription based boat rental. Yeah, yeah, but membership, yes, yes, I do. Currently doing 2 million upline. But to pass the 10 year mark, what's stopping me is a decision. I came out here to this workshop because I've been doing this 13 years, put in my 10,000 hours, not making enough money. So I came to learn how to scale. I have two options in front of me in the next Six months to purchase an existing club that would more than double. And another to start a third. I have five locations. This would make ten.

[Alex]

And you're doing like 2ish. With 500,000 in profit, right?

[Angela]

Yes.

[Alex]

Okay. Hey, every dollar counts. I'm with you.

[Co-Host]

Okay.

[Michelle]

Yes.

[Jessica]

And in a session that I had this morning or this afternoon, and asking questions about how to scale, Ed told me I should not scale. I should sell.

[Alex]

So you don't like it?

[Jessica]

Yeah, that's what he said.

[Alex]

I'm just reading here.

[Jessica]

Yeah. You said, do you love boats? And I said, no.

[Alex]

So before we break your life, just a couple frames, because I didn't say this earlier, but I'll say this now, I'm really not talking to anyone, per se. I'm talking through them to everybody else, because, believe it or not, the problems that you have, the same problem that like five other people here have or 10 other people here have. So just wanted to set that up front. I'll just share something that might be just a. Maybe a different frame on this, which, like, have you heard the story of the free stone cutters? So, guy walks up, sees a stone cutter, and he says, hey, how's your day going? The guy's like, it's terrible. It's breaking work. It sucks. And he's like, okay, wow, I got it. And he goes to the second stone cutter, and the guy says, well, you know, pays the bills, you know, keeps the family fed. You know, that's fine. And then he goes to the third stonecutter, and he says, you know, how's your day going? He says, oh, it's amazing. I'm building a cathedral that, you know, is going to last for generations for my kids, Right? And so the same work, just different perspectives on the work itself. And so the perspective that I'll share is just that having now owned a lot of different businesses, almost all businesses are the same. As if you chunk up high enough, because if you get two or three levels up, you're going to have a director of sales, director of marketing, you have director of it. You're going to have personnel issues, you're going to have hr, you're going to have legal, and it's going to suck every other day. You know what I mean? So it's kind of like, you know, I've had 10 executive assistants, and I currently have none. And the common thread between all of me and them is them, obviously. And so. And so I say this because, like, if we're trying to hope for the business to be the thing that brings you joy. I would just really strongly push against that. And I'd rather you just see the business through a different perspective, which is like, this is an opportunity. They get to learn some skills. Like a good friend of mine who's in the fitness industry and then started a cookie company, which makes. Seems completely antithetical, Right? He's like, I'm creating demand and supply. But what was interesting about it is that I asked him, I was like, are you passionate about cookies? And he was like, no, not at all. And I was like, why are you doing this? And he was like, well, I think there's a good gap in the market. This is a four crumble. So he had the right idea. Like, he thought that gourmet cookies were going to be a thing. He ended up having a bad partnership, whatever. But the point is that he was right about his idea. He did a hundred different recipes to figure out the one chocolate chip cookie. That was amazing. And he did. He did really well. But the thing is, is that he wasn't in love with cookies. He was in love with being excellent. And I think that that's. That's at least how I try to see business. It's like, how can I let this business be an expression of the values that I have rather than. This business has to fill a hole in my heart. So back to you. Okay, so do we exit this thing? Do we go to another location? Because I'll bet if you just didn't hate the people you work with, you'd.

[Jessica]

Probably be okay with it with getting another location.

[Alex]

Oh, no, just in general. Like, I mean, because right now you have this. This desire because you have, what, 2 million in debt, right?

[Jessica]

Yes.

[Alex]

Yeah. So you have 2 million bucks in debt. You're doing 600, not $500,000 in profit. Notice. And so basically, after taxes, it's going to take you like, six years, seven years to pay the whole thing off, assuming you don't spend any money, which would suck, right? Yes, that would blow. Okay, so I can feel that that is crushing weight. So either you want to scale past it. So these debt payments aren't killing you because it's eating probably the majority of your cash flow or selling and kind of either starting over or, you know, doing something else, et cetera.

[Co-Host]

Right?

[Jessica]

That's right.

[Co-Host]

Okay.

[Alex]

Do you have an offer on the business?

[Jessica]

No, I wasn't even looking to sell until an hour ago.

[Alex]

I was like, sorry. So you have 25% margin, so it's not bad or. No, less than that. Cause you're a little higher than 2 million in revenue, right. 2, 7. Is that where it is?

[Jessica]

2 million?

[Alex]

It is 2 million. Okay, so it's 2 million. Top line, 600. Excuse me, 600,000. Bottom line. So, I mean, you run 30% margins. The only issue is you made a bad decision, like, four years ago or however many years ago you took the debt out.

[Jessica]

Yes. Because it's pretty capital intensive to have 50 boats.

[Co-Host]

Yeah.

[Alex]

So how's cash flow for the business?

[Co-Host]

Good.

[Jessica]

I mean, Covid was great. We sold like crazy and unfortunately put a lot away, so I don't have a cash constraint.

[Alex]

That's great. Okay, so, okay, outside of, like, let's sell this thing, you still want to grow it, right?

[Jessica]

I want to grow business. This just happens to be the vehicle.

[Alex]

I don't think this is a bad business. I mean, a board membership where you have a. You know, like, I mean, I. Fundamentally, you have very high margins on each incremental membership, correct?

[Jessica]

Yes.

[Alex]

Yeah. So you're kind of at this point where, like, you've covered all your costs, and so each additional membership makes you a lot more money.

[Co-Host]

Right.

[Alex]

Disproportionately drops the bottom line, is my point.

[Angela]

Yes.

[Alex]

Okay, so what stops you from selling 10 times the memberships?

[Jessica]

That was the question that I tried to answer coming here and going through the framework and it. And when we were going through the circles yesterday, I came down to, I think it's my offer.

[Co-Host]

Okay. Okay.

[Alex]

And is this. Is this a franchise or is this yours that you just start on your own?

[Jessica]

That's the other part of the equation, is that it's. It's a licensing model.

[Co-Host]

Okay.

[Jessica]

And I think the conversation in the room today was, is it really mine if I'm under a licensing structure?

[Alex]

Yeah. I mean, you could sell the business. You have an existing agreement. But what do you give away, top line?

[Jessica]

Nothing.

[Alex]

Oh, okay, so then what. What's the.

[Jessica]

What do you license the marks in the system? It's a reservation.

[Alex]

Do you pay a flat fee?

[Jessica]

So technically, my members do because we're licensed and not a franchise. I can't pay directly, so the members do.

[Alex]

Okay, what percent do they give away?

[Jessica]

It's $500 a month membership. 30 bucks a month goes to corporate.

[Co-Host]

Okay.

[Alex]

So whatever that is. Six percent.

[Co-Host]

Okay.

[Alex]

I mean, that's fine.

[Co-Host]

Okay.

[Alex]

So, I mean, I wouldn't say it's strangling you.

[Co-Host]

Okay.

[Alex]

So it's 20% of your margin, functionally. All right, so do you currently do ads? Do you do outbound? Do organic? You doing affiliates? What are you doing to grow?

[Jessica]

We spend about 6,000amonth in paid ads. We do a lot organic.

[Alex]

What's roas on this? Good, bad?

[Jessica]

Well, according to the marketing agency that.

[Michelle]

I use, they're very, very great.

[Co-Host]

They're like.

[Alex]

It's acceptable. Yes. You just spend all your money? Yes.

[Jessica]

I only spend $11 per lead and that's a fabulous number in the industry, evidently.

[Alex]

Well, what percentage are you closing of leads?

[Jessica]

Industry standard is 6% when I was doing it myself.

[Alex]

I'm going to pause here just for everybody. Zero fucks about industry standard.

[Jessica]

Okay.

[Alex]

And I'll tell you why. Average American, overweight, in debt, divorced seven times over. Why would I care about the average industry person? They all suck.

[Co-Host]

They don't make money.

[Alex]

So anyway, sorry, go back to you.

[Jessica]

We're at 4% lead to close.

[Alex]

Okay, 4%. So 25 times lead costs. So to whatever 266 is cost of acquisition right now, not including sales commissions. Is that what it costs you to a customer? What's the membership is 500amonth.

[Jessica]

It's a $5,000 initiation fee. And then 500amonth we sell five year contracts.

[Alex]

I love this. Why are we getting out of this business? Call it $300, $400 with commissions, whatever. To get the sale. To get a $5,000 upfront and then. And then $500 a month or. Yeah, that sounds chill.

[Jessica]

So that's why I was thinking I'd do more of it.

[Alex]

Yeah, do more. Sounds great. I love this for us. I love this for us.

[Michelle]

I love this.

[Co-Host]

Yeah. Okay.

[Alex]

So why don't we spend more on it?

[Jessica]

Sounds like I should.

[Alex]

I feel like that's not a terrible idea.

[Jessica]

Not a terrible idea.

[Alex]

Yeah. The thing is, is you have a business where this happens a ton, by the way. You have a certain amount of cost that you have this fixed cost in the business and then you spend enough marketing to get above the fixed cost and then make some profit. And then you like exhale, you're like, oh, thank God I'm not losing money. But it's like you're willing to work so hard to make everyone else money. Your landlord, licenser, the employees, like paying all their mortgages. But then like you're just forgetting to like pay you. And so it's like, let's go ham on that side. Like when it gets easy is when you go hard. So you do this. What else do you do? You said you're good at organic stuff.

[Jessica]

Yeah, we are. And a third of our new members come from our existing referrals or existing members.

[Co-Host]

Okay, cool.

[Alex]

Do you have a really structured referral system or just people talk to people?

[Jessica]

Yes and yes.

[Co-Host]

Okay, yes.

[Alex]

Because we have a whole bunch of badass stuff for referral stuff. But that's one thing that can probably get juiced beyond the scope of right now. But that's a big one. And then add stuff. Honestly, if we just take a look at it, it's like we could probably figure this out in five seconds of what needs to. The thing is, is what's your close rate on people who come in?

[Jessica]

33%.

[Co-Host]

Okay.

[Alex]

You're fine.

[Co-Host]

Yeah.

[Alex]

Like, your stuff's not do more. We just need to get the referral system in place. We need to spend more on ads. We can make sure attribution's right. If we needed to tweak, like, if you were like, I'm closing 10%, then it's either a sales motion issue or it's an offer issue. Now, if the lead costs are too high. But you said they weren't. If the lead costs were too high, I would look at offer as well. But that might not be the issue right now. And so I think probably more and better creative that we do on the outside.

[Co-Host]

And I'm sure.

[Alex]

Are you doing Google AdWords? Is that your primary? Yeah, more and better creative. Probably better targeting in terms of what keywords we're bidding on. And there's probably a handful of like really easy CRO stuff, so conversion or optimization that we can do on the actual funnel itself. Like, you just don't know. Like, there's so many little things there that you can just like immediately increase how much the business is making from each lead. And that'll probably just give you a little bit more exhale, like in order to spend more. Because I think that's what we have to do.

[Jessica]

Thank you.

[Angela]

Hi, Alex. First and foremost. Thank you. I've only found you three months ago. And life changing.

[Alex]

Oh, thanks.

[Angela]

No, thank you.

[Co-Host]

Really. All you.

[Angela]

And when you said one time, it's like entertainment. If it's just, oh, that was cool. Or like it changes behavior. Is change behavior cool. So thank you.

[Alex]

I appreciate that.

[Angela]

And it's only two people in my life that have done that for me, so thank you. So my name is Angela.

[Alex]

Buy a book at the next month.

[Angela]

I know. No, thank you. No, I really mean it. I really do. You and Michael Singer. So my name is Angela. I own a cybersecurity consulting. We focus on cybersecurity compliance for middle market and enterprise customers. I've been in this industry for a long time.

[Alex]

Don't you want a boat membership business?

[Angela]

I love what I love. I love our industry because it's always like changing.

[Alex]

I love it technical and all that.

[Co-Host]

Okay.

[Alex]

So it compliance mid market, cybersecurity mid.

[Angela]

Market and climbing to enterprise. More and more enterprise customers. I did revenue of almost 5 million in 2023. Amazing brute force. And then it's dropped. So I'm like at 3.6 right now.

[Co-Host]

Okay.

[Angela]

My net margin was 35%. Now I'm at like 18%.

[Co-Host]

Okay.

[Angela]

So it's shrinking. And what I've accumulated over this year was, you know, obviously ignorance and a lot of things that I wasn't even thinking, but people did. So now all that, that margin is going to the people side. Right. But also my sales. Right. Have dropped in my leads because I've been focusing now on the things I never did because I was just, you know, hunter. And now I'm focusing on learning how to become a real CEO and learning how to do people things well and all of that.

[Co-Host]

Okay.

[Angela]

So I'm solving right now for some things I didn't realize my constraint was even recruiting. I found a recruiter by the grace of God. That's amazing.

[Co-Host]

Great.

[Angela]

And he's helping me solve these problems.

[Alex]

Okay.

[Angela]

And then the next thing I was solving for right now is the practice leader, which is like a technical person too, that's good with clients and watches all the people that we work with and works with them grows. So that I'm working on. I think I'm cracking a note with that.

[Co-Host]

Okay.

[Angela]

I think I may have found somebody, but we'll find out in a week or so.

[Co-Host]

So.

[Angela]

But in the meantime, sales has been my thing, and then I would say my industry has evolved. And Covid definitely was a game changer where cost per events have increased tremendously. Your conference stuff, you gotta play to pay to speak right now, which wasn't the case before. And you know, I had family changes and.

[Co-Host]

Yeah.

[Alex]

Do you go to conferences to get customers?

[Angela]

I used to.

[Co-Host]

Okay.

[Angela]

I'm not doing that anymore. Very little because of the cost and, you know, the time.

[Alex]

Are you coming back with us?

[Co-Host]

Okay.

[Alex]

No worries. We have a whole conference playbook that just murders. So for.

[Angela]

I need that. I need a lot. I need all the help I can get.

[Alex]

No worries. No, it's fine. I figured I'd ask so we could.

[Angela]

But I'm learning tremendously from you, so thank you so much. I'm listening very intently to everything you say. So you know LinkedIn it's obviously my. My, My market.

[Alex]

I want to pause. So can you handle more customers? Yes or no? Yes, you can handle more customers. So your demand constraint.

[Angela]

Yes.

[Alex]

Right now?

[Angela]

Yes, right now. And it's so it's like change over time.

[Alex]

Okay, great. So right now you can handle more customers. You've got this other person. They don't.

[Co-Host]

Whatever.

[Alex]

Okay, so demand constraint is where we're at right now.

[Angela]

Yes.

[Alex]

So you used to do conferences. They got too expensive, which means the sales motion didn't work.

[Angela]

And I used to do little, not a lot.

[Alex]

Okay, maybe we should.

[Angela]

It's organic friends networking.

[Alex]

So that's basically. You just did all outbound as your primary. That's what you did. Okay, got it. So. And no one else did the outbound. Just you?

[Angela]

Just me.

[Co-Host]

Okay.

[Angela]

Now I have a marketing person that's like, keep the lights on marketing person. I would say nice guy, but anyways.

[Alex]

He'S not that good.

[Angela]

And we're doing some content and we're, you know, like that.

[Alex]

Well, it's like, keep the lights on marketing. It's like either you're getting us business. Cigarette?

[Angela]

I've used agencies before. It was awful, too.

[Alex]

But if you don't know how to market, you're not good no matter what you spend money on.

[Angela]

I know, but. No, I. Listen, the thing I'm thinking here is.

[Alex]

Do you want my advice?

[Angela]

Yes, I want your advice. Of course, yes. You figure it out. Thank you, Alex.

[Alex]

Thank you. So outbound is what you're good at. You can either go one on one the way you were, or you can go hunt where there's fish in a barrel. What's the average customer worth to you?

[Angela]

75, 80,000?

[Alex]

Yeah, I think. No, for perfect.

[Co-Host]

Yeah.

[Alex]

Heard you were the prototypical conference playbook. Go to conferences, run the sales motion through the conference, collect as many leads as humanly possible, and then basically have an offer that's structured there so that you have urgency for people to sign up. Like that is the way to do it. I would say LinkedIn is kind of what I would say is my like for you because. Because of how your type of business works in terms of the sales motion. Overall, you. What will happen is it'll look like this. So y'. All. So it's like you'll fish with a net. Is me fishing with a net on a boat membership.

[Co-Host]

Right. Okay.

[Alex]

So we're fishing here, and this is events.

[Co-Host]

Right.

[Alex]

And then what happens? Kind of like a telephone pole. You'll start, you know, you'll close, close, close. And Then you'll have fewer, fewer leads. And what you'll do is in the meantime, you're outbound to go up during that time period until you lean into the event and then you'll have the next event. And so it's kind of this crisscross motion. While it's just you. Once you get enough cash flow, which you're probably close to at now, I would then have somebody who's doing basically the SDR work for you. So self development representative. Somebody who's doing the outbound who can just basically qualify. Yeah, exactly. Because for you, I'm sure you can close in a couple of calls anyways.

[Angela]

And so take longer because they're a big company.

[Alex]

Sure. No, you're good. Getting the SDR is probably the largest time constraint for you right now. And also not that expensive. And so I would step one, run conferences for sure, so I could fill up the pipeline because that's like, that can happen fast and you have the cash flow to do it. And then second in that same time, because you could do these concurrently, I would just, I would put the ads out for SDR so that I could bring somebody in to start feeding.

[Angela]

You have somebody that could fill that role right now. He's my.

[Alex]

Was he not. Why is he not doing that? Is this a marketing guy?

[Angela]

No, he's not the market.

[Alex]

Maybe we should let the marketing guy.

[Angela]

No, but you know why?

[Alex]

Because he's a, he's a great guy. He's a recruiter.

[Angela]

He's my recruiter. That's like a salesperson recruiter.

[Co-Host]

Okay.

[Angela]

He, he's working with us because he wants not to be a recruiter anymore. He wants to be in sales in a technical field or something. Technical.

[Alex]

I mean, if you.

[Angela]

He's putting all the time and effort to really learn.

[Alex]

If you did recruiting and you did outbound for recruiting, which is what most recruiters do, doing SDR work is like the closest comparable role anyways.

[Co-Host]

Yeah.

[Alex]

So I'm fine with that.

[Angela]

So conferences, LinkedIn then thought leadership. LinkedIn just to like.

[Alex]

So they thought leadership. You mean just like post good shit?

[Angela]

Posting shit? No, but no, like I'm thinking about this like trying to solve a client's problem. Like, listen, you have this issue. Here's how it works.

[Alex]

Well, all you do is to be a thought leader. You just take the stuff you're doing privately and then just talk about it publicly.

[Angela]

Yeah, exactly.

[Alex]

So yeah, just talk about your client work.

[Angela]

And no webinars.

[Co-Host]

Hold on.

[Michelle]

No.

[Angela]

Okay, just.

[Alex]

No, I agree. Conferences go to conferences Hire somebody to do more.

[Co-Host]

Oh, no.

[Alex]

Making a shitload of money. Weeks work.

[Angela]

Oh, I love money.

[Co-Host]

Right.

[Alex]

So like, do the conferences. Fish with a net, Fill up your pipeline. Get the SDR so that you get the stability. That'll happen. So this is our events that are event leads. This is our SDR leads until eventually the SDR leads will stay here, and then this will just continue to stack over time. Make sense? How many conferences, how many a week can you do?

[Angela]

Oh, God, no. I mean, I. I couldn't. I have family. Kids.

[Alex]

How many a month?

[Angela]

Maybe two a month.

[Co-Host]

Cool.

[Alex]

That's fine with me. Let's start there.

[Angela]

Thank you, Alex.

[Co-Host]

Thank you.

[Michelle]

Hey, Alex.

[Alex]

Yes, ma'.

[Co-Host]

Am.

[Alex]

Catherine.

[Jessica]

I have a dance school. Two locations.

[Angela]

Wonderful.

[Jessica]

We do 2.7 mil.

[Alex]

Congrats.

[Angela]

Thank you.

[Jessica]

Been in five years in business, so.

[Alex]

Aiming for 3 mil this year and.

[Jessica]

At least 10 plus in the future constraint will be space. Facility space.

[Co-Host]

Heard.

[Jessica]

So, yeah.

[Co-Host]

Okay.

[Jessica]

What would you like to know?

[Alex]

Well, is that. Is that just. What's stopping you is just getting the.

[Jessica]

Location I could do. If I can get to 3 million this year, I'll be at probably 80% capacity running my core programs.

[Co-Host]

Okay. Right.

[Jessica]

Which is the key. I could add daytime. There's things I could do on the.

[Alex]

Side of Snap model. Right.

[Jessica]

So next step in scaling at that point is, is it additional locations or acquiring dance studios? I don't want to franchise.

[Alex]

I think it's either acquiring studios that.

[Angela]

Are already that people want to retire.

[Michelle]

From and buy them out and run their.

[Jessica]

Their businesses and then sell the whole thing eventually, or ground up organic, build from location.

[Alex]

So do you want what you want to hear or the truth?

[Co-Host]

Both.

[Alex]

No, one.

[Michelle]

The truth.

[Alex]

Do you want to exit, you said? Yeah. So, okay, what size exit?

[Jessica]

At least 20 mil.

[Co-Host]

Yeah.

[Alex]

So the fun fact for everyone here, the hardest amount of money to sell for is between 10 and 30 million because it's just not big enough for people who have real money and it's too big for people who don't have real money. Like, it's easier to get like a $100 million deal done than it is to get a $25 million deal. $25 million deal is like the. One of the hardest deals to get done because it's somebody who usually has a way bigger checkbook and is just like really scraping down the bottom and really care because it barely moves the needle for that. Just for context. Now, that being said, if you want to sell for more, the difficulty of selling your particular business is so that it's so people driven. It's so talent driven. And there haven't really been to my standard any super successful high service based gym businesses. The closest one for a period was Orange Theory and then they went to shit during COVID and never recovered. But like they were the closest ones. Yeah, and it's just because it's the talent. It's just, it's such a service heavy business and it's so reliant on the quality of trainers, coaches, instructors, whatever you word you use.

[Co-Host]

Right.

[Alex]

Selling it will be difficult. You would be able to sell it to somebody who doesn't know what they're doing for sure. But you're not going to get a huge amount of money for it. So some doctor who has no idea about business, I think he does because he has money, would buy it. Like you might get, you know, it would be 10 with a bunch of hair on it and earn, you know, clauses and a bunch of crap. So if you wanted to just do this forever, then I would say like just keep growing. That's amazing, that's fine. But most people make this work in a franchise model. Typically, I think, I mean you can get gyms for free, studios for free, like that. Like that's, that's not. It will be hard for you to find, you know, ballet, dance, et cetera locations because so many people are in.

[Co-Host]

Pain and don't want to run them.

[Alex]

Like you could get them for free. I mean that's how I expand. Like I bought them for free. So the good news is the business is good. It's just what is your expansion path. So either M and A de novo meaning organic growth, you open it yourself or you go from like a franchise path. The franchise and or licensing is for sure more sellable than those ones. And I don't normally give this advice. The issue is just that I understand the nature of the business obviously. Well, they're very hard to sell for a lot of money. You can offload them really easily because somebody else has a dream and thinks that they're going to make it work. It's like restaurants like you can sell them for nothing because somebody else has is a cook and people tell them their coding is good and they're like, you should open a restaurant. Like you love fitness, you should start it like that. It's very easy to get. So yes, not for a lot of money though. So my honest truth is I think if you look at your current business model and say how can I cut down the complexity by 80% and then franchise it so I'LL give you. I'll tell you a story. So the most successful fitness franchise right now is Alloy. They do semi private training. Rick Mayo is a really good friend of mine. He had a $4 million a year single facility and they had smoothie bar, merch, pt, semi private, large group. They had everything.

[Co-Host]

Right.

[Alex]

And when he went to franchise, he looked at revenue per square foot across all the business units and saw that semi private was by far the highest revenue per square foot. So he had his 6,000 whatever square foot facility. He fired all of his clients except for his semi private. It was still profitable with a 6,000 square foot lease. Opened up a pilot location with only the most profitable service that had three employees, one manager that does mornings and evenings and does sales, and then an assistant that does morning and assistant does, does evenings and works back up. And so the three person model does 5 or $600,000 a year, 50% margins. And you can just cookie cutter that thing. And so I think your instinct on the front end was of like, I could add all these things. I think it's 100% right not to do that. Not doing it. And then look at your most profitable times, look your most profitable pricing packages. And then I would look at stripping this down to like, how. How could I get this to the fewest possible people who could run this so that I could open up basically somebody else could do this.

[Michelle]

Right.

[Alex]

And that's probably the, like, that is the most likely path to the goal that you have. I'm not saying it's easy, but it's the most likely path to where you want to go.

[Co-Host]

Yeah.

[Alex]

And what about the licensing? Same, same. Just different. Different legal structure.

[Co-Host]

Okay. Hmm. Yeah.

[Alex]

All right. Just being real, like, I mean, you could obviously open more locations. Seems like you're confident. Um, I say it as a compliment, but if you want the exit that you're looking for, like, I can't. I mean, I know a lot of people in the fitness world who have five locations, ten locations. So few. Like almost every one of them did. Never sold the whole thing. I don't know one who sold the whole thing. Every one of them piecemealed it. One to a trainer, one to a customer, one to a competitor. Like they had to break the whole thing up when they got tired. Thanks.

[Co-Host]

Cool. Yes.

[Alex]

Thank you.

[Michelle]

Hi, my name is Michelle. This is actually my second time coming to the workshop.

[Alex]

You grew from like 400 to 1.2.

[Co-Host]

Right.

[Michelle]

I'm hoping to break a million this year. Last year I did 356.

[Alex]

It's a good return.

[Michelle]

Yeah. Yeah. My main takeaway from last year was I just needed to do more, to even have more in the system to figure out. I know, crazy. So I have spent the last this. I'm going on my third year of my business trying to replicate gem launch in the pet care industry. I am named.co launch. It's not that innovative, but so it's a wonderful name. I mean, I like it. Okay, so I do coaching and consulting. I modeled off of. I've really tried to study very deeply how you approach gym launch from what I can tell.

[Alex]

Happy to answer any questions.

[Co-Host]

Huh.

[Michelle]

Yeah. Well, I even read Gym Secrets. It was great.

[Co-Host]

Good.

[Michelle]

So we did 356 last year. I'd like to break 3 million this upcoming year.

[Alex]

You mean 26.

[Michelle]

26 million.

[Alex]

No, no. Yeah, but yes.

[Michelle]

Sorry. This upcoming year. In 2020.

[Co-Host]

Yeah.

[Alex]

Yes. But this year you want to do one, two, you're pacing one, two, and then next you'd like to do three. Okay, got it. So what's stopping you? I'm guessing you're not supply constrained. Well, I. Can you take more customers?

[Michelle]

No.

[Co-Host]

Huh. Word.

[Alex]

Okay, so how are you getting customers now?

[Michelle]

Organic.

[Co-Host]

Okay, that's fine.

[Alex]

All right, so just you making content on Instagram, on YouTube.

[Michelle]

Predominant. Most of my market's on Facebook, so I have an interest group for companies that want to grow in the pet care space. And I also do a speaking circuit on the four conferences that are in our industry. Throwing my own conference this year because I figured I'd.

[Alex]

So you're saying the conferences generate leads? Crazy.

[Co-Host]

Keep going. Yeah.

[Alex]

And thought leadership. Yeah, yeah, yeah.

[Michelle]

Um, so yeah, organic content has been predominantly how I'm getting people.

[Alex]

Okay, so you want to sell more stuff, but you can't sell more stuff because you can't deliver on more stuff. So who's stopping you from delivering more stuff?

[Michelle]

So I'm really excited about the Money models book because I didn't set up my original structure. It got me off the ground very quickly. I did this scarcity based cohort model where it's like 20, 25 companies in a group, we launch twice a year, and it's been a difficult model to continue growing. I'm also the only coach in the business, so it. I'm doing everything the model might be.

[Alex]

You're just the only person doing delivery.

[Michelle]

Yeah, yeah.

[Alex]

So we need to find another person to do delivery or you need to change how you do delivery.

[Michelle]

So I'd like to change how I do delivery. Initially, I'd like to go to more of an Evergreen model where people can join at any point in time. I don't know if evergreen's the right word for it.

[Alex]

I mean, I know what you're saying.

[Co-Host]

Yeah.

[Alex]

Sell every day.

[Michelle]

Yeah, that's what I have been considering.

[Alex]

I don't actually think that's the approach that I would take though.

[Michelle]

Okay.

[Alex]

I wouldn't change your selling model because your supply constraints, not demand constraints. So why would we change anything on the demand side? So it's the delivery that's the part that's holding it back. So what is the delivery right now? One on one, one to one to small group. Like what's the.

[Michelle]

Yeah, so I do a weekly coaching session with each cohort.

[Co-Host]

Okay.

[Alex]

Of how many?

[Michelle]

I have six active cohorts.

[Co-Host]

Okay.

[Alex]

And so you do weekly and it's what, an hour?

[Michelle]

90 minutes.

[Co-Host]

Geez.

[Alex]

Okay, got it. So you do one nine hour day and then the other six days a week you chill.

[Michelle]

No, I'm doing Zoom calls like 45 hours a week. I do a daily office hour.

[Alex]

Okay. So then what is the other deliverable besides the 190 minute thing?

[Michelle]

So it's just very high touch right now. Like I.

[Alex]

Are you over promising or are you just. And I say this not as a slight insecure about worrying that they're not going to get value and then you just like keep hopping on calls.

[Michelle]

That is part of it. I. In part because it's been so new and I really want to establish like goodwill in the industry. I've been throwing everything into it, but I've kind of created this monster where it's hard to start to work myself out because the expectations on me are very, very high.

[Alex]

Who do you think sets the expectations?

[Michelle]

Me.

[Co-Host]

Yeah.

[Alex]

So I think we just need to change the expectations of delivery, which either is just stick with what you promise. Cause you might not promise nearly what you're delivering. So if they said yes to it, just meet expectations.

[Co-Host]

Like.

[Alex]

And that might just mean that you just need to learn a script of how do I deal with people who ask for my time? Which is like you route them to a resource or you route them to the calendar when the next time is available. Because the thing is you reward people for reaching out to you quickly by responding quickly and answering their question. And so then they do more of it because you've trained your audience to do that. So you just need to train them to do something else.

[Co-Host]

What are you afraid of?

[Michelle]

Oh, so many things. But we don't need to go down that list. I feel that one of my differentiators has been accessibility.

[Alex]

And so it's totally differentiator.

[Michelle]

Yeah.

[Alex]

In the beginning, when you're an underdog, you do that because you say, hey, you know, you could go to these guys, but you're just a number. With me, you get my cell phone, right? But at some point, you get big enough that you're like, I can't give you my cell phone because I'm good enough. And I've proven that. And so you have these cohorts. Basically, this is the equivalent of, like, you can't. Like, there's price raises you can do. You can also do delivery decreases. Like, you're going to keep paying the same amount and you're just going to get less, but the way you're going to pitch it is that you're going to get even more, but rather different. And so whenever I've done a delivery change, I don't position it as, hey, I'm going to do less of what you liked. I'm going to say, hey, I've listened all your feedback, and I'm actually going to change this in a way that benefits all of you guys in these 17 reasons. And what you have to do is you have to position this as a.

[Co-Host]

Moral high ground, Right?

[Alex]

And so to, hey, I made a promise to you, and I've realized recently that I'm actually breaking this promise. And so I no longer can stay out of integrity to what I promised you guys. And so in an effort to stick with my integrity, I have to change it to this. And so that way, if anyone tells you that you can do it, are you saying. Are you telling me to question my integrity? And then they're like, oh, that's right. And they're fucked. And so that's actually how you have to rule. Something like that.

[Michelle]

Okay. Most of my clients know each other. Are there any concerns about.

[Alex]

Well, you do it to everybody.

[Michelle]

Okay. Okay. So this would be just broadly. Okay, okay.

[Alex]

Like, this is how things were. This new thing has come to my attention as a result of this new thing. New information, new decisions, new actions. This is what's happening. Here's why it's great for you. 17 more recents that you didn't expect. And this way I can reinvest in these things that you really care about that I haven't been able to do, which is a promise I made to you that I have been falling short.

[Michelle]

Okay, what if they don't feel like I've been underdelivering?

[Alex]

It's not up to them.

[Michelle]

But like kind of talking the positioning of I'm doing this so that I can fulfill with integrity. I don't know that they'd resonate with that. And I'm sorry if I'm splitting hairs.

[Alex]

I mean, you got to sell you right now.

[Angela]

How do you.

[Alex]

You're trying to sell me on the way that you don't want to do. You're like, I hate this life, but I. Damn it, I'm gonna defend it.

[Michelle]

Yeah.

[Alex]

So like, you just have to. You have to flip that.

[Michelle]

Okay.

[Alex]

Fundamentally, like you are going to burn out because you don't like, you can't do what you're doing. You would like to help. You wanna help more dog owners, right. Or dog co owners, right?

[Co-Host]

Yes.

[Alex]

You cannot do that with your current model.

[Michelle]

Yeah.

[Alex]

So if you said that you have a mission of helping this many people, you currently are out of integrity with that mission. So either you change your mission and say, I'm actually going to play really small and I'm not going to help that many people and that's fine, or I'm going to provide something different that I think is going to be even, just as valuable or even more valuable to you guys in this way.

[Michelle]

Okay.

[Alex]

And you will lose some people and that's okay.

[Michelle]

Yeah.

[Alex]

Because you will make room for better people who pay more and didn't come in with the old expectations.

[Michelle]

Yeah. Okay. Okay. Thank you.

[Lucas]

Hello, Alex.

[Alex]

Yes, sir.

[Lucas]

First of all, thank you for all the value you share.

[Co-Host]

Hey.

[Lucas]

Bet there's like a few number of people that I respect and you're one of them, so.

[Alex]

Well, that makes one of us.

[Lucas]

So my name is Lucas.

[Alex]

Right.

[Lucas]

I run a DTC skincare brand, Commerce.

[Alex]

Oh yeah, you do like 12 million top line. And you have like a bunch of different brands.

[Co-Host]

You have.

[Alex]

But they're all white labeled, right?

[Lucas]

Yeah. So we do actually 10 million.

[Co-Host]

Yeah.

[Alex]

And you want to get to a hundred, right?

[Lucas]

We want to get to a hundred.

[Co-Host]

Yeah.

[Lucas]

The key constraint right now is margins.

[Co-Host]

Right.

[Lucas]

15% margins.

[Co-Host]

Yeah.

[Alex]

You know why your margins are low?

[Lucas]

I think we want me to tell.

[Alex]

You why your margins are low.

[Lucas]

Yes.

[Co-Host]

You don't have a brand.

[Lucas]

So we. We just to give you significant like 100. And we might have scale too fast or like scale too much to. Because here's the thing, the more we scale, the higher the cpa.

[Co-Host]

Right.

[Alex]

You're a performance marketer, right? Yes. You have to learn brand. Yes. You're not going to arbitrage your way out of it. You're falling into the trap that I did and I was stuck there for three and a half years. What happens is you're going to keep scaling spend.

[Co-Host]

Right.

[Alex]

And revenue is going to keep going up, but your margin is gonna compress.

[Co-Host]

Yes.

[Alex]

Which you're already seeing.

[Co-Host]

Right.

[Alex]

And that makes sense because you go to less profitable audiences, you continue to scale.

[Co-Host]

Right.

[Alex]

And so I think I like my visual for this is like in each rung we have like the same number of sales that are going to happen, but I only have to buy this much traffic to get the same number of sales versus this much versus this much versus this much. And so for you to scale long term, you need to get to the point where 70% of your advertising is brand driven. Not direct to buy, but it's building founder story, it's building narrative, unique differentiation, things like that that are top of funnel awareness, like associations with things that your ideal avatar would find interesting. So that you cannot just be a media arbitrage white label thing because you're just always going to be beholden to like the newest hack, the newest bidding strategy, the platforms where you can get the cheapest clicks and you'll never build something that's actually like sellable in the long haul. I'm assuming that's what you want to do.

[Co-Host]

Yeah.

[Lucas]

So we want to build for an exit.

[Co-Host]

Right.

[Alex]

You have to build a brand. No one wants to buy these arbitrage businesses.

[Lucas]

A few investments that we made right now is first of all rebranding, like with a branding agency. Second is you need to master it.

[Alex]

Sorry like as a physical product e commerce owner. Like your core most important skill is the brand. Like you can't outsource that. It's the most important thing. Got it. Like so you need to learn the skill of branding which is fundamentally making associations with things that people in your audience find positive. Got it.

[Lucas]

Do you think we have a model problem as well? Because for example, you run ads, you.

[Alex]

Sell stuff, you ship it.

[Co-Host]

Right? Yeah.

[Alex]

No, I don't think it's because I.

[Lucas]

Was thinking about changing to a subscription model because we're not doing that yet.

[Alex]

If you have a percentage, what is the what's for all of them or for. Are they consumables?

[Lucas]

So we sell gadgets, like skincare gadgets and then we also sell consumables. We usually do bundles.

[Alex]

Well, the gadgets are going to be really tough for subscription.

[Lucas]

Yeah, yeah, of course we want to like we just manufacturing a use here in the US and the idea would.

[Alex]

Be like hair or like supplement skincare, like okay. Hair. Topical.

[Lucas]

Topical, yeah, yeah.

[Alex]

Lotions and potions.

[Co-Host]

Yep.

[Lucas]

Yes. And the idea would be to slowly.

[Alex]

Be shifting towards subscription because that's fine. To me that's again, that's you still thinking with your performance marketer hat. You're just trying to like, how do I increase cart value? How to increase ltv?

[Co-Host]

Yeah.

[Alex]

And that's fine. There's nothing wrong with that. So think about conversion optimization overall as steroids, which is like you can use them once and then that's it. You get a one time pop and then that's your new baseline. And so like whatever you're doing, you can get a double, sometimes a triple from CRO improvements. But after that you still need to solve the big gaping hole in the front end, which is like, how do I get more traffic, how do I get more repeat buyers? How do I, how do I command a premium? Because the only way that you can outspend competition in the long haul who are just as good as you are performance marketing. Because again, it's not even you versus them, it's your employees versus their employees. And if you have access to the same talent and you have the same undifferentiated products, you're running on the same margins. So you're just going to be a completely commoditized business functionally in terms of how much you make versus how much you spend. And so the only way to decommoditize this is that you have to build the associations that allow you to command a premium price that get people to be more loyal to you so you can attract better talent as well because they actually believe in what you're, what you're, what you're about. Like you have for sure spreadsheeted your life in terms of how you thought about your business. Yes. Yeah, for sure. I get it.

[Co-Host]

Yeah.

[Alex]

But like you actually have to put a different hat on if you want to get to the next level. So you actually have to stop thinking as quant and start thinking in terms of psychology of customers and not like, oh, this specific type of ad. It's not like that. You have to expand out your window in terms of attribution of how long it takes to make a sale. You start looking at how many people actually follow the account. There's a great article. I think it was a CMO of Chubby's wrote this. I want to say it was Chubby's, but he talked about the roas doom loop or the direct response doom loop. And you're in that now. Yes. Which is that you Just keep spending more to make less. And then you're like, I'll just spend more and you make less and it just gets. Until eventually you're like, I'm just putting money in and getting it back out. And I'm just like, I have a number but I don't make anything right. So it's a very vicious loop and cash flow sucks for the business.

[Dylan]

Yeah, yeah, I get it.

[Alex]

And so the only way out of that is you have to rethink, it's a strategic change. You have to rethink how you're advertising.

[Co-Host]

Got it.

[Lucas]

And in terms of branding, what do you mean by branding? Because sometimes for me, branding looks like woo, woo.

[Alex]

You know, Totally. I thought the same thing and then I built like multiple billion dollar companies off of it. So like, like, I get it.

[Lucas]

But like if you can put it in a framework.

[Co-Host]

Yeah.

[Lucas]

What would be like the key levers of branding for you?

[Alex]

You can charge more money, people buy more times, then you go more. That's good enough. You get higher CTRs, higher conversion rates, all that.

[Lucas]

Yeah, but I mean, in terms of like building a brand, you post your.

[Alex]

Stuff next to shit that people like, so they think it's cool. Okay. And then eventually you take the cool thing away and then your thing's still cool. And so then they pay a cool premium to buy your thing versus the other guy's thing, that's not cool. And they keep buying your thing because they feel cool when they buy it. Got it. So, you know gymshark.

[Lucas]

Yes.

[Alex]

Why would they pay Sam Sulek to become an ambassador? Why would they pay him money when he can't directly drive roas? Branding is higher return on spend than direct response does over a longer time horizon. See, the thing is, your problem is you have a 30 day window for everything. You're looking at maybe 60. If you look at brands, you have to extend to six to 12 months. But when you do that, you actually start getting insane returns on capital. But you have to start thinking like a capital allocator rather than just a dark response performance marketer. Fundamentally, that's the frameshift you need. And you having many businesses I don't think helps you. There's probably one of them that's your flagship one, that's probably the best one that has the most potential.

[Lucas]

I just have one business.

[Alex]

I thought you had multiple brands under there.

[Co-Host]

No, no, no, no, no.

[Lucas]

I mean we just have one.

[Alex]

You said you had gadgets and widgets and then you have. No, no, no serums and skincare. Gadgets.

[Co-Host]

Okay.

[Alex]

Like rollers. Yeah, exactly.

[Lucas]

And then.

[Alex]

But it's one. One.

[Lucas]

Just one brand.

[Alex]

Okay.

[Lucas]

Nothing nice.

[Alex]

I feel a little better. Okay. A little better. But I stick by what I said. You have to have a frame shift, otherwise you're not going to get past where you're at. Okay.

[Co-Host]

Thank you.

[Alistair]

Alex. My name is Alistair McDonald. I sell solutions to dentists.

[Co-Host]

Yes.

[Alistair]

In their practices. I do about 1.5 a year. Have done consistently. It takes me about six hours a week. My profit margin is about 88% and I would like to be at 5. What's stopping me is I don't exist. And my joke, my. My clients joke that I'm black ops.

[Co-Host]

Okay. I have.

[Alistair]

No way.

[Alex]

You guys should talk dog co. Six hours a week.

[Co-Host]

Right. Well.

[Alistair]

So my model. My. My model is great. My model's great. It can support. I just say five because I just made it up and I was sitting there.

[Alex]

Yeah, but there's no reason as any. There's no reason.

[Alistair]

Yes, the model supports it, but I. So I have. I have no audience. I have no email capture website marketing as I've never done anything all word of mouth.

[Co-Host]

Yeah. Okay.

[Alistair]

And the clients that stick with me tend to stay with me for years.

[Alex]

You seem happy. What's the problem?

[Alistair]

Oh, my life is amazing.

[Alex]

Then what's the problem?

[Alistair]

Everything goes great. Doesn't matter what I do.

[Alex]

Well, then what's the problem?

[Alistair]

Well, I could use a little more 10.

[Alex]

A little more what?

[Alistair]

A little more money.

[Alex]

A little more money.

[Co-Host]

Yeah. Gotta thank you Know your problem, right?

[Alex]

This is like. Yeah, I was just calling about that. That thing. So what are you looking for? Oh, no, everything's great. It's like. So you just call around all day at gyms and just to find. To tell people that you're great? Well, no, I. I am getting a little floppy. All right, so we have a problem. All right. So cool. So.

[Co-Host]

Yeah. Okay.

[Alex]

Sorry. Well, the.

[Alistair]

The legitimate answer is that I'm. I'm ready to grow this to make sure. Yeah.

[Co-Host]

Cool.

[Alistair]

And. And I have it in me. And. And.

[Co-Host]

Okay.

[Alex]

So you work six hours a week now on this?

[Alistair]

Yeah.

[Alex]

Do you have something else?

[Co-Host]

Well, I.

[Alistair]

No other business really, but I run an international counter wildlife trafficking operation in Western Central area.

[Alex]

That sounds cool, but it's just.

[Alistair]

It's a nonprofit that I.

[Alex]

Do you like that?

[Alistair]

Yeah, I do, but I don't want to give it any more than the eight hours a week that it gives.

[Alex]

So you spend 14 hours a week doing. Not chilling. It's exhausting.

[Alistair]

No, that's right.

[Alex]

The 14 hours a week is exhausting.

[Alistair]

Yes. No, I'm joking.

[Co-Host]

Okay.

[Alex]

Yeah, but like, that's where you're currently at though, right? Yes, 14 hours a week. Okay, you got it. So how many are. How many hours a week are you willing to give to grow? It's like two more. He's like, it's 25 increase, you know, like, what do you say?

[Alistair]

That's a big one. Yeah, it's less the time capacity. And the reason that I haven't is not that I'm not. I don't have energy or time. It's outside factors that are now past.

[Alex]

So those afterlife factors are now gone?

[Alistair]

Yes.

[Alex]

How many hours can you now work?

[Alistair]

Oh, I can work. Work 40 hours a week. I can work 30 hours a week.

[Co-Host]

Whatever it.

[Alex]

So the problem is you don't know what to work on.

[Alistair]

Exactly. I had no idea the, the people that I have were drafted off of some. Two other people's audiences, both of whom are fairly prominent in dentistry. And the one used to showcase me, but all of his clients started coming.

[Alex]

To me, so he stopped showcasing.

[Alistair]

Didn't go well.

[Co-Host]

Yeah, yeah.

[Alistair]

So I mean, he's still a mate, but it's a non professional.

[Alex]

It's like frenemies. Exactly.

[Co-Host]

Yeah, yeah, yeah.

[Alex]

How you doing? I hope it's not that good, you know.

[Co-Host]

Yeah.

[Alex]

So I would say we can do like speaking wheel. Like, what do you want to do? You want to run ads? You want to do outbound? You want to do affiliates? You already did affiliates. That's how you grew this point. Or do you want to. Do you want to. Do you want to be not a ghost?

[Alistair]

Yeah, I want to be not a ghost. I think I need to build. I want to build my own audience.

[Co-Host]

Okay.

[Alistair]

And I have no idea what I'm doing with the branding thing.

[Co-Host]

Okay.

[Alex]

So really, really fun little, little tidbit here. So when you build influence, influence, there's four things that you're trying to build. So these are the four things that give a person more persuasive power. There's other things in persuasion in general that can be environmental way more. But just from a person perspective, these are the four things that give you influence or increase the likelihood someone complies with a request. So status is that you control resources that other people want. Now these things can also happen concurrently, meaning I can do two or three of these at the same time, but they are still separate things because you can do one another the other. So for example, if I have a lot of money Then that gives me status, even if I didn't earn it. If I'm a trust fund kid, you get status for having money. Now, is it all of the influence? No, but you have some. The next is power, which is that you tell people to do something and a good thing happens and they follow your instructions. So there's a reason, like Martha Stewart, in my opinion, was the most influential, like the first big female influencers, because she literally gave people recipes and then they followed them and then people were like, oh my God, this is amazing. And then they went back and did it again. And so when she said, go buy my book or go shop in my store, everyone was like, everything you've told me at this point has made my life better.

[Co-Host]

I'll go do it.

[Alex]

And so there's a reason that the content that I make is so prescriptive, is because I want people to follow the instructions and get a good thing to happen, then in some way associate that directly or indirectly with me. So that's where power comes from. Credibility is that you have proof that we were saying, good. So, for example, if I have an exit, so money is one thing. If I have an exit, that might give me credibility, that the stuff that I'm saying works. And then finally you've like this, which is both physical, do you look like me? Et cetera, but also it's value based. You believe the same things I believe. And so when you're making your content, I would say number one is don't try and like, give your views on marriage, right? Just talk to dentists and just make it for them. Because what's happened is it shifted from social media, interest media, some of you guys probably heard this. And so the content is the targeting. So if you're like, I wish dentists would see it, then talk about dentist shit. And Instagram, the algorithms will, they will already push it to who? Like, they've already got AI knowing who it's for and what it's about. So you do the targeting of who you want to reach. And you have to completely ignore the number of views, the number of likes, because you just have to see those as just going to different pockets of the Internet. And so the content is the targeting. And so what you want to accomplish there is you want to help them, give them instructions that'll help them. You want to demonstrate the fact that.

[Co-Host]

You have credibility, right?

[Alex]

You want to share what you're about, which will repel some people who are not like you, but will attract the people who are. I'd Recommend you just be you rather than try to like woodoo. What is the optimal dentist like? Like just be you. And then status is like again, backdrops and things like that can matter. Like there's a reason that like I have a building and some of the stuff I have because people are like, oh, a building, that's a real thing. Therefore there's status associated with that.

[Co-Host]

Right.

[Alex]

And I think it's a little bit classier than like a Lamborghini. So fundamentally, like you just need to do a lot of that over and over again and like give it a year. It's like honestly like if you just post consistently for a year, you'll get inbound. Like it's, it's kind of stupid right now. And anybody who has made content, it's like I haven't, I haven't been able to like get it to make me money. It's because you're making content about the wrong stuff. You're trying to get views, you're trying to go viral rather than just making stuff that help dentists or fishermen or people who are trying to clean their house. Like you have to talk to the avatar and you have to give them stuff that's actually useful. Like just focus on utility if you were useful. And I'm telling you like the stuff that gets views is not the stuff that gets sales. Yeah, like the number one. You guys might not even know this, but there's a video that I've made like three years ago, it was just on the theory of constraints. It's just me in like the kitchen talking about the theory of constraints. Some of you guys might have watched it. It's the number one sales generating video that I have because it's just like very specific when I talk about are you supply constrained or demand constraint? That's a, like what business are you really in? Some of you guys have watched that video. Like that video generates sales right now. If I talk about 17 harsh truths about living doesn't generate. I do it every once in a while just because like it blasts out and I bring more people into the audience.

[Co-Host]

But.

[Alex]

Cause I'm a longer play. I know there's 18 year olds who eventually will have money and then eventually spend it with me. But that's the idea.

[Alistair]

Is that the prescriptive stuff or. Because that sounds more theoretical.

[Alex]

Yeah, don't do which one.

[Alistair]

The, the constraints video that you mentioned.

[Alex]

For the business owner that I'm talking to, it very much speaks to their existing pains.

[Alistair]

That's a key piece for me. I'm not interested in early stage.

[Alex]

Yeah. Then only cost is stuff that's going to help.

[Co-Host]

Yeah.

[Alistair]

More sophisticated docs.

[Alex]

So if you're like, hey guys, if you have more than two practices, blah blah, blah, then just frame that up front.

[Alistair]

Yeah.

[Alex]

If you're a multi location owner, if you were doing over a million dollars a year in your practice and can't get to 10, like all of that's going to be just all your hooks are going to, are going to do the targeting for you. So what you say in the first three seconds is what's going to matter in the contents to drive who you want.

[Co-Host]

Okay.

[Alex]

You're still going to get lesser qualified dentists and that's fine. And you can just catch and release.

[Co-Host]

Yeah. Thank you. AR.

[Alex]

The rumors are true. I'm launching my $100 million money models book. It's finally coming out. Six years in the making. My God, this took forever. But I've got something for you. I want to invite you to the entrepreneur event of the season, which is the launch of the book. Just to give you some context, last time I launched the book, I spent over a million bucks on the launch itself. This time I'm spending way, way more. And I've got a secret project that I've been working on for four years that I've been saving that every single person who shows UP Live Saturday, August 16th is going to get absolutely free. Now, if you're like, well, what is it? Well, I can't tell you what it is yet, that's why it's a secret. But it's better than an NFT and it's less than a bitcoin and every single person who shows up live gets one absolutely free. And so if that sounds at all interesting and you want to be at the book launch and you want the free thing and the event itself is going to be bananas. Click the link register and I'll see you there.