Answering Your Top Business Questions for 1 Hour | Ep 851

Summary

Summary of "Answering Your Top Business Questions for 1 Hour | Ep 851"

In Episode 851 of The Game with Alex Hormozi, host Alex Hormozi delves deep into real-world business challenges faced by entrepreneurs. Over the course of an engaging hour, Alex addresses a variety of questions from business owners, providing tactical solutions grounded in his vast experience scaling companies from $100M to $1B in net worth. This summary captures the essence of the discussions, highlighting key insights, actionable strategies, and memorable quotes from the episode.

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1. Handling Customer Service Mishaps

Key Discussion: Alex begins by sharing a personal anecdote about managing a customer service error, emphasizing the importance of not just rectifying mistakes but exceeding customer expectations to turn negative experiences into positive ones.

Notable Quote:

"You can't just make it right. You have to make it more than right in order to actually make it right."
— Alex Hormozi [00:31]

Insights:

• Proactive Solutions: When faced with a service failure, go beyond offering refunds or basic apologies. Engage customers personally to rebuild trust.
• Ambassador Conversion: By super compensating dissatisfied customers, businesses can transform them into their staunchest advocates.
• Avoiding Tragic Moments: Reference to Disney's statistic highlights the importance of minimizing service errors to maintain customer satisfaction.

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2. Reducing Churn Through Improved Onboarding

Key Discussion: A business owner shares concerns about high churn rates due to low customer engagement. Alex dissects the onboarding process and offers strategies to enhance customer retention.

Notable Quote:

"The ideal is you do like six one-on-one sessions with someone. They feel more comfortable in the gym, they understand the vibe, the culture, and then they kind of graduate into the group sessions."
— Alex Hormozi [04:09]

Insights:

• Personalized Onboarding: Implement multiple one-on-one sessions to ensure customers feel valued and understand the service fully before transitioning to group settings.
• Scheduled Engagements: Use automated and manual reminders to keep customers committed to scheduled sessions.
• Value Ladder: Gradually introduce customers to higher-value offerings, making the ultimate group sessions a coveted achievement.

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3. Maximizing B2C Growth Before Expanding to B2B

Key Discussion: An executive struggling to transition from B2C to B2B sales seeks advice. Alex advocates for maximizing existing B2C channels before diversifying into B2B.

Notable Quote:

"The lowest risk adjusted return move in any business is to do more of what's already working and answer the question, why can't we do more?"
— Alex Hormozi [09:13]

Insights:

• Exhaust Current Channels: Focus on scaling current successful strategies (e.g., Facebook ads) before venturing into new markets like B2B.
• Identify Constraints: Determine what is limiting the scaling of current operations and address those issues directly.
• Channel Diversification vs. Customer Diversification: Prefer expanding through additional channels rather than targeting entirely new customer segments prematurely.

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4. Training and Developing Effective Leadership

Key Discussion: A business owner grapples with delegating responsibilities due to ineffective leadership. Alex provides a framework for training leaders by focusing on specific behaviors rather than vague traits.

Notable Quote:

"If your leaders aren't doing what you want them to do, document, demonstrate, duplicate. This is the step process."
— Alex Hormozi [13:27]

Insights:

• Behavioral Specificity: Break down desired traits into actionable behaviors. For example, instead of saying someone needs to be more patient, specify the actions that demonstrate patience.
• Training Framework: Utilize the "Document, Demonstrate, Duplicate" method to standardize leadership training.
• Recruit for Skills, Train for Traits: Hire individuals for their skill sets and train them to align with company culture and behaviors.

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5. Strategic Acquisition and Portfolio Management

Key Discussion: An entrepreneur managing a diverse portfolio of companies seeks guidance on whether to focus on growth through acquisitions or by enhancing existing businesses. Alex explores the challenges of managing non-synergistic acquisitions and recommends strategies for focus.

Notable Quote:

"The difference between concentrated and diversified acquisition strategies is about knowing whether you want to build synergy or manage a diverse portfolio without related benefits."*
— Alex Hormozi [22:38]

Insights:

• Synergistic Acquisitions: Focus on acquiring companies within the same niche to leverage shared best practices and centralized operations.
• Portfolio Focus: Identify and double down on the top-performing companies in the portfolio to maximize enterprise value.
• Niche Specialization: Emphasize the importance of niching down to streamline management and amplify growth, avoiding the pitfalls of scattered, non-related acquisitions.

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6. Overcoming Supply Constraints in Service-Based Businesses

Key Discussion: A health and wellness business owner faces a shortage of qualified practitioners, limiting business growth. Alex offers solutions to address the supply chain issue without compromising revenue.

Notable Quote:

"Most businesses are either supply constrained or demand constrained. If you're supply constrained, solve that. Don't just change your business model."
— Alex Hormozi [26:30]

Insights:

• Reframing the Problem: View the business as addressing a different need, such as focusing on recruiting physical therapists rather than solely providing physical therapy services.
• Incentivized Recruiting: Implement robust referral programs with substantial incentives to attract high-quality talent.
• Diversified Recruitment Strategies: Utilize a combination of warm outreach, cold outreach, paid ads, and organic content to build a steady pipeline of practitioners.

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Concluding Thoughts

Throughout the episode, Alex Hormozi emphasizes the importance of focusing on what already works, systematically addressing constraints, and implementing detailed, behavior-oriented strategies for business growth. By sharing real-life examples and actionable advice, Alex equips entrepreneurs with the tools to navigate complex business challenges effectively.

Final Notable Quote:

"The riskiest thing you can do is change the business model when your current model is already working. Instead, solve the existing problems to amplify success."
— Alex Hormozi [27:17]

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This episode serves as a valuable resource for business owners seeking practical solutions to enhance customer retention, scale operations, develop leadership, manage acquisitions, and overcome staffing challenges. Alex Hormozi's insights provide a roadmap for sustainable and scalable business growth.

Transcript

[Alex Tribozzi]

I'm Alex Tribozzi, and I'm an investor, and I own acquisition.com, it's a big portfolio company. Makes me more money than I'll ever need. Most of my life. I had a hundred business owners who flow out to our headquarters to scale their companies, and so they asked me questions for an hour. I try to do my very best to make the solutions as tactical as humanly possible so that you can watching from home immediately use them in your business.

[Unnamed Speaker 1]

First off, I have to say thank you for taking me out for dinner last time. That conversation that we had literally changed my life and changed my business. So. So, yeah, appreciate that.

[Alex Tribozzi]

Can I tell the story of what happened?

[Unnamed Speaker 1]

For sure.

[Alex Tribozzi]

We had an event that was scheduled, had to get moved. The memo got passed down, and everyone found out except for one sales guy, and he sold six people into an event that didn't exist on, like, a random Monday. We had six people showing up, came from Israel, and he was like, hey, I'm here for the workshop. And I was like, this looks awesome for us. I'm really happy that we're in this situation. We've always tried to come from the perspective of when you have something that gets messed up, you can't just refund somebody because they're still net negative. He still flew from Israel. If I said, hey, my bad. Here's the money back, he'd still been like, screw this guy. We had the team spend the day with the six, and then we took them out to dinner. I bring that up just because it was a great example of, like, something that took me too long to learn was that, like, you can't just make it right. You have to make it more than right in order to actually make it right. You know, that was obviously a super unfortunate situation. And, you know, every business, if you have humans, you make mistakes, right? And so that was a mistake that we had made. I remember hearing the stat from Disney, which is that it takes 37 magical moments to overcome one tragic moment. And so the moral of that statistic is not let's do 37 magic moments. It's avoid the tragic moments if at all possible. But if you do find yourself in a tragic situation, here's an interesting thing that Laila taught me, which is that, believe it or not, the people that you wrong and then super compensate to make it super right, become your biggest ambassadors. He flew back out, and he gave such a heartfelt story that it took somebody who was negative. And I think from at least what it sounded like he was super positive towards us. And I think that that's in some ways as terrible as it is. When you do have one of those tragic moments. Just see it as an opportunity to flip someone from a hater into an ambassador. Rather than being like, oh, we got to give these people refunds. It's like, no. Like we actually get to build our reputation and decide what kind of company.

[Unnamed Speaker 1]

We want to be where we're stuck at right now. So we're selling the back end offer. 195amonth for semi private or four months for 595. Our churn for both of those is 50%. So weighted it's 30% churn. And the reason why we've got such terrible churn is nobody shows up. Like 7% of our student body actually shows up to the calls and actually gets the value from the thing they purchased.

[Alex Tribozzi]

What's the onboarding look like?

[Unnamed Speaker 1]

So we have the closer get them to see the calendar of. We have eight sessions a week that they can join. So they show them the calendar. They say, okay, which one of these do you think you can come to? And then they get them to say, okay, this one. And then the closer says, okay, I'm gonna tell Jenny, who's the coach on that call. She's gonna be expecting you.

[Alex Tribozzi]

There's two kind of like different angles to attack. This one is the kind of like logistics side, which I'm gonna cover first. Cause it's easy and just process stuff. And the other is kind of like the bigger, more amorphous stuff, which is like, how do I make our thing easier? Easier and more enjoyable for people to kind of experience on the logistics side. I'm sure that you're on my email list. If we had dinner, you'd better be on my email list. By the way, anyone here read the Mosi Minute? Anyone? I think it's the best. I think some of the best stuff to put out anyway. It's really good. I think it's really good. I spend my Sundays on it. Anyways, so Bamfam is a way of life. So book a meeting from a meeting. And so the sales guy should obviously book to the onboarding call or the whatever. I do think that you probably need to add one onboarding call that's specific to the person, not just have them drop in. How much do you want this to work?

[Unnamed Speaker 1]

Really bad.

[Alex Tribozzi]

Okay, so this is what I would recommend doing. You'll probably want to do something in the neighborhood of four to six sessions that are one on one. I'm just being like now, if you need to adjust price in order to do it, fine. But it's four to six sessions of one on one before they kind of qualify to go into the kind of the group setting. And so it's like you will personally onboard them so that they have this way better buy in. They don't feel like they're just in no man's land and just getting tossed into the middle of a conversation. You kind of like on ramp them after you have the onboarding, which would be. And you can cut, I mean, at the very beginning, just do two, you know what I mean? Just to start and then you can kind of see how it goes from there. You basically want to keep bamfamming per session. So all the people are showing up the last five minutes. I would say, okay, everybody, let's pull up the calendars. When are you guys showing up again? Great. And I would book it with everybody so that I'm keeping people forward. And you have to back that up with probably the reminder sequence that they're going to get because it's actually a scheduled session. So they should get automated reminders and they should probably get a manual reach out from the person who's running the session of the people who are supposed to attend. At the very least, do the automated one. And that would probably get a huge amount of like that will probably do a lot. And so this is actually, believe it or not, this is an onboarding process for a gym. So if you have large group training, if you take people and just toss them into the group, it's much harder than having kind of a more dedicated onboarding experience. The ideal is you do like six one on one sessions with someone. They feel more comfortable in the gym, they understand people, they understand how the vibe, the culture is and then they kind of graduate into the group sessions. And so what happens also is that the group sessions are now on a pedestal. It's like you're not ready for that yet. Right. It's like you got to earn that and all of a sudden it becomes the prize that they earned and now they got onboard. Does that make sense? Can you see how that would work? For sure, yeah. So this would probably be the.

[Unnamed Speaker 1]

You set that up as like a big head, long tail sort of pricing system.

[Alex Tribozzi]

And the question that you'd ask if you want to give an AB close for this is you would say, would you rather train, start your thing in a group or one on one with me? That's if you're selling, if it's somebody else or One on one with John. And a lot of times they're gonna be like, well, I'd rather do it with John. And you're like, great, so this is the price for that. And then you just go for that sale. If it sounds like no worries, we can just start you here, not a big deal. And then if you want, if normally you sell six, you can say, you know what, I'm still gonna give you one if you do that because it's gonna be way better of an experience for you. So then it feels like a gift and doesn't feel like they're like, well, nah, well now I don't want the group thing. Right. So just give them one or two. If you sell the six, for example, does that make sense? So he presented obviously with a low consumption issue, which then probably translated into low renewal and probably high churn. And so the issue that typically precedes that is low consumption. Right. And so in order to first get consumption know figured out, I like to get attribution in place. And so I don't know what kind of tracking he had, but I think he said like 7% or something like that. And so he had some level of tracking which allowed him to even take action on the problem. But most times when I ask more questions, I'd say nine times out of 10, the entrepreneur has a problem but doesn't collect any data that precedes the problem. And so then the first step is to just go collect the data. And once you have the data, typically the solutions become obvious. And so a lot of time is wasted in this space of like trying to ideate and figure out this hypothetical solution without any data. And you're like, I don't know, is it this or this or this that we could do. It's like, well, you have no data, so you have no idea. And so you just keep circling. And so when you don't know what to do, get data first. And then it makes the path easy.

[Unnamed Speaker 2]

I sell career coaching services to corporate executives. So basically we help these people find their next role. So we did 7.2 million in revenue last year.

[Alex Tribozzi]

Congrats.

[Unnamed Speaker 2]

About 2 million in profit.

[Alex Tribozzi]

Amazing.

[Unnamed Speaker 2]

And we know how to grow B2C. We know that we can do that, but we're really wanting to get B2B going. Okay, so these enterprise level deals are a little bit more. They're a different ballgame.

[Alex Tribozzi]

Right?

[Unnamed Speaker 2]

Okay, so we're struggling to get our first B2B deal because they have to be big enough to have the budget.

[Alex Tribozzi]

Why do you want to do B2B. So this entrepreneur's obviously doing well. You know, he's doing multiple millions of dollars a year. And he's got something that says decent margins. And he said in order to scale he should do B2B. But he was in a consumer based market and consumer markets are huge. There's way more consumers than there are businesses. So he had a proven product with a proven acquisition channel and was profitable and was growing and he was spending three or five thousand dollars a day. I was like, this is nothing in terms of the amount of scale that's available for the product that he had. And so when he said he wanted to do this other new thing, I had an inkling that it was for no actual reason besides, he probably encountered some sort of difficulty that he assumed the new path wouldn't have. And so this is just a classic woman in the red dress one. Why can't you just do more what you're currently doing?

[Unnamed Speaker 2]

We can. We hit like 980 in October and that was a big million month. That was the milestone where it's like, okay, let's start doing different stuff.

[Alex Tribozzi]

I'll tell you what my initial reaction is, which you're already probably guessing, which is I will exhaust more before I look at anything new. And so someone would have to make a very strong argument for me why I can't do more of what I'm already doing. So if I were to buy your company tomorrow, I'd be like, yeah, don't worry about that. What are you currently doing to get customers?

[Unnamed Speaker 2]

It's Facebook ads.

[Alex Tribozzi]

Okay, so what are you spending a day?

[Unnamed Speaker 2]

Anywhere from 3,000 to 5,000 a day.

[Alex Tribozzi]

Right. I'd be like, okay, so how do we get to 100,000 a day and spend a day? Yeah, like what stops us from getting to 100,000 a day? Okay, and the answer to that question is the constraint. So what stops you from getting so let's say 10,000 a day. So it's a triple. So like what stops you from doing that?

[Unnamed Speaker 2]

We were there in October around 10,000 a day. And then we had like sales efficiency issues and stuff like that. Obviously Q4 is not like the best time to have that type of service. And so really just like making sure that our back end or our front end like sales call to close rate, all that good stuff is like able to profitable. And we have a lot of like services, like one on ones that we pair coaches really well. We have a writing team in house that we pay. So there's cost.

[Alex Tribozzi]

So what would, but that those costs are fixed because you'd have that cost of the B2B.

[Unnamed Speaker 2]

Right.

[Alex Tribozzi]

Okay, so what stops us? The problems that exist in the B2C scenario also exist in the B2B scenario. And so he's like, hey, I've got, I've encountered this problem I don't know how to solve. And so my way of solving it is to not solve it and start something else that will create even more problems in my business. And so when you say it like that, it sounds ridiculous, but this is a decision making process that, or rather a mistake making process that a lot of people follow. Fundamentally you want to ask why can't we do more? And the answer to that question is the constraint. And the only, in my opinion, proper constraint for deciding to go after a new avatar is that you run out of the existing avatar. So think about this. Have you ever done B2B like Enterprise? Okay, so the thing is that they are higher leverage, but you're also going to have like 10, 15 touch points. And so the number of deals per guy is going to go down a lot. There's also going to be multiple stakeholders that you have to get involved on their side and multiple stakeholders that you're going to introduce on your side. So just in general for B2B, like enterprise level sales, you increase conversion rate and stick of a customer by increasing the number of people that are involved in the transaction on both sides. So basically you want to have as many of these ties as you can to do enterprise sales. The lowest risk adjusted return move in any business is to do more of what's already working and answer the question, why can't we do more? And so if you have a sales efficiency issue, then solve the sales efficiency issue because it's holding you back from tripling. The things that you brought up are all fixed problems, as in they're problems on both paths. So to forego the path you're currently on for a new path that's completely unproven with the same problems that you know already exist is a much higher risk move than just saying, yeah, why don't we just get to 30 million?

[Unnamed Speaker 2]

Okay, so just focus on maxing out B2C. Worry about B2B until we're like fully confident B2C, we're doing everything.

[Alex Tribozzi]

Well, not even that. You're doing everything that you have exhausted the market of C's. Okay, okay. Right. Like it's. So if you want diversity, then I would rather you go diversity of channel rather than changing customers. The riskiest thing you can do. It's a new business, basically. You have to have a new offering, new acquisition, like, everything's new. And so I would rather, if you have the itch for new, just get a second channel. But I don't think you're even close to that. You're at 3 or 5,000 a day. I think you can totally spend 50, 100,000 a day for sure, just on meta. What will likely be the next thing that gets in your way is that your ROAS is going to drop. And so typically that's going to be. You're going to need to have option one, better lead magnet. Option two, better creative. Option three, superior CRO conversion rate optimization just on the pages. Option four, improved sales efficiency. Option five, all four. And then that allows you to scale and like, fundamentally the difference between companies that can spend 100,000 a day and 5,000 a day profitably is how good they are. It's literally just making all of these pieces better. And that takes time because you're only change one of those at a time. And this is why business takes time to grow.

[Unnamed Speaker 3]

I sell bleacher rentals to festivals and fairs. So we do around four and a half million in revenue and about a million in profit.

[Alex Tribozzi]

Ebitda, congrats.

[Unnamed Speaker 3]

What's stopping me is having my leadership team delegate fully some of the responsibilities. And I think it has to do with creating processes that are followed by all. If we need to hire key people and we don't have the processes, then we can't delegate properly.

[Alex Tribozzi]

So how do you train leaders? So this is a good question that I'm going to chunk up one level because I think it'll be valuable in general, which is that fundamentally, when we're hiring anyone, we look for the smallest skill deficiency possible. Fundamentally, you've got traits, as people call them, and then you've got skills. Now, based on Alex's worldview, this is not a thing. It's just that a trait is just a series of skills, right? And so when you hire a cfo, for example, you're going to try and hire for the smallest skill deficiency. And so if the CFO is a dick, for example, but they're exceptional at all these other things, then you're like, maybe I can teach them to be kind in these ways. Now that'd be a big. It's a lot of skills to just have some, like go from not kind to kind. Right. A lot of sub skills underneath of that. And so if it's two days to train sales and two months to Train kindness. Take this person who's kind and then train them on sales later on. Sometimes you have people who you're like, okay, this person's a little different than our vibe. They're not going to be, you know, oil and water. But they have this massive skill set that we can use and this tiny deficiency that is around this stuff that we can be transparent with them up front that they need to fix. I've seen this happen, like, again and again and again where a manager or a leader talks to somebody else and says, hey, and then uses amorphous terminology that's very hard to pin down to basically say, change your behavior. And they're like, but how? And they're like, change it. And you're like, okay, I don't know what that means. And so the reason I'm so obsessive about operationalizing terms like what is patience? What is courage? What is, you know, what is humility? Like, what are these. What do these terms actually mean in terms of behaviors? Like, patience is figuring out something to do in the meantime. Like, if you do figure out something to do in the meantime, you're by default being patient, right? And so it's telling someone what they actually have to do, not who they have to be. Stop. Being lazy is very hard for someone to solve. It's like, I keep telling her to not be lazy, and she keeps being lazy. But you have to break the term down into what behaviors you describe as lazy. Because when you talk to, you know, your partner or you talk to somebody else, you say, hey, Sarah's kind of lazy. Have you noticed that there are things that she did that you observed that you ascribe the label lazy to? And so you have to think more deeply, like, what did they do to deserve the title? And it might be like, they don't respond quickly to slack messages. These are things that if you said, hey, Susan, instead of insulting her and saying, hey, you're lazy, instead, we'd say, hey, you don't respond to slack messages quickly enough. You aren't responding after hours, and our hours keep going until 9pm and you're not responding until after 5. And so for this week, I want you to focus just on responding to slack messages. So let's turn on notifications, let's turn it on both of your phones and. And turn it on your computer so that you can see it. Is there anything else that's going to get in the way of you responding quickly? Now, when we ask that question, we might find out that Sarah is overwhelmed because she's doing somebody else's job who we laid off and we haven't backfilled. It's like, okay, well, now we have context. But until we get to there, we can't appropriately measure Sarah's inherent value or traits, rather behaviors to give her a label. So to your question, how do you train leaders? I think that attracting good leaders. So one of it's recruiting. So Chick Fil A's head of people said this. She said, a lot of people are trying to fix process when they really lost the championship in the draft. And so a lot of people are trying to figure out what playbook they should be using with a team that's never going to win. So the big framework that we use for training in general is document demonstrate, duplicate. And so first you figure out exactly what the checklist is. And I like checklists more than quote sops. That's a personal preference. And you want to be able to break it down into behaviors. And I think this is where a lot of training goes wrong. I think most companies aren't very good at training. They basically hire a bunch of people, see who's got the skill, and then fire the rest. But if you do get good at training, it's like, how do you train kindness? Well, you say, okay, well, people who are kind when they come on a phone, they smile and they nod their head when people are listening and they repeat back what someone says and they raise their voice when they walk into a room. And so if you boil it down to some of the behaviors, then the onus is on us as leaders to be more specific with what we tell our subordinates to do. And I think a lot of times, if you're struggling to train some of these key traits with leaders, it's because you're not being specific enough about what you want them to change. And so it's like you're just not getting it. It's like, well, no one can do anything with that. And so it's like, you have to. And this is where the work comes in from the top down. We're like, okay, when you do this. And so the easiest way to bucket this. That's a p. There we go. Is Sarah, I need you to stop doing this. I need you to start doing this, and I need you to keep doing this. And so just being more granular about what behavior you want them to stop or what behavior they're not doing that they need to begin or a combination. And so giving someone the feedback of, I need you to do this instead of this has been some of the most effective way that I've been able to change people's behavior. And it's around the specificity. And so if your leaders aren't doing what you want them to do, document, demonstrate, duplicate. This is the step process. Let me show you how I do it. Now you do it in front of me, and this is what we're gonna have you stop doing. You're gonna now do this instead and keep doing the other stuff. That's good.

[Unnamed Speaker 4]

I sell professional book publishing services to entrepreneurs and executives. We do a million dollars in revenue. I'd like to be at 3.2 million in revenue.

[Alex Tribozzi]

Very precise.

[Unnamed Speaker 4]

And I just turned 32.

[Alex Tribozzi]

Yeah, that is my favorite number. This is the best explanation for a revenue goal I've ever had. That's great.

[Unnamed Speaker 4]

What's stopping me is I'm at the stage where I need to make more money before thinking about other things. And the challenge I'm facing is a lot of things have worked for us up to this point, but I need to know what to. I need clarity around what to do more of.

[Alex Tribozzi]

So what's the input? So what's the thing that drives the business?

[Unnamed Speaker 4]

The biggest thing that drives the business right now is referrals.

[Alex Tribozzi]

Okay.

[Unnamed Speaker 4]

Second biggest thing is related to organic in the form of speaking, social media, and guest coaching. And then we have a split between cold email, outbound and Facebook ads.

[Alex Tribozzi]

You're doing all the acquisition channels?

[Unnamed Speaker 4]

All of them. And we didn't even mean to do all of them. We just kind of tried them on. They all seemed to work enough.

[Alex Tribozzi]

What's the greatest percentage of your customers? What channel they come from?

[Unnamed Speaker 4]

The greatest percentage of the customers after referrals would be organic.

[Alex Tribozzi]

Okay. And that's now you put that both in organic content, but also like speaking and things like that. Okay. How many speaking things are you doing on, like, a monthly basis?

[Unnamed Speaker 4]

About 1 per year last year.

[Alex Tribozzi]

Okay, so I have an idea. So I would ask the question. Like, I think I might have told this in a short, but a really close friend of mine, he took over Real, which is a publicly traded real estate brokerage. Their primary way of getting more agents is him speaking at real estate events. And so in Q4, he did 66 speeches, and in 24 months, he took from 200 million to 1.2 billion in revenue. And so he's doing 270 plus events per year in person. We were having dinner and he was like, no one gets it. He was like, no one understands how much more we do than them. And I'm only telling the story not to make hopefully it comes across the right way because I think you just like if, and I'm guessing if that event generated business for you.

[Unnamed Speaker 4]

Yeah, I mean every time I speak we make significant amount.

[Alex Tribozzi]

Well, yeah. So I'd be like, let's like how do we go from, you know, one a year to one a week and start there just like Target 50 next year. And so he rightly identified that he simply needed to do more. The next natural question I was going to be asking is like, what are all the ways to get customers? Which he obviously answered. And so then it was like, okay, the next follow up question I'm thinking is where do we have the most leverage? So either that's going to be which thing is taking you the least amount of time that makes you the most amount of money or which one's the thing that costs you the least amount of money that makes you the most amount of money. So it's either time leverage or it's money leverage or both. Now the, the fact that he said I always make a bunch of money after I speak, I was like, okay, that's a positive indicator. And as soon as he said I only do one speaking of a year, I was like, I don't need to know anymore. Like if you're getting, if that's a significant amount of revenue and it's one day once a year, like I see that and think, okay, well we could 50x the business if we just did 50 of those. And so then the constraint then becomes, okay, how do I get booked on these stages? But then that's, you follow the same core four. You do the outreach, you post content and then you reach out to people to, to find out. And sometimes you have to pay to be on the stages. Sometimes you get a booth and then they'll give you a speaking slot. There's always ways to get on if you need to.

[Unnamed Speaker 5]

We acquired companies in the UK and Dubai. Current revenue across the portfolio is about 35 million. The metric isn't so much want to get to a revenue metric. I want to try and create a minimum of around 50 million enterprise value.

[Alex Tribozzi]

You own all of them outright?

[Unnamed Speaker 5]

No. So it's varied. I think the problem is do we focus on building out the double down on the companies we already have growth EBITDA that way or do we keep acquiring and build the EBITDA through acquisition?

[Alex Tribozzi]

How many do you have?

[Unnamed Speaker 5]

14.

[Alex Tribozzi]

14. Are they similar?

[Unnamed Speaker 5]

No, that's the thing. So if we used to go through acquisition, we'd have to try and create synergy down the line.

[Alex Tribozzi]

Yeah. So you're in a very classic kind of P.E. no man's land. So you have more companies than most funds would ever have and you didn't pursue a synergistic strategy in order to accommodate volume. And so on one extreme you have Constellation, which you're probably familiar with in Canada. It's like they only buy vertically integrated SaaS and they go sub 3 million and they just do 100 deals a year and they just know their playbook. On the other side you have traditional PE that would have a variety of different businesses. They buy detail shop and then a supplement company and then a whatever. But they only have six to eight companies in a fund and they have a decent, you know, decent holdco team to add value to the company. And so if I were in your position, first thing I would do is probably ask myself, who do I want to be when I grow up? In terms of what you want the actual day to day of the business to be? Because you can hit 50 on either of those paths. Right? And so it's which of these do I feel more like? More me? Like do I feel like I do have a couple of these businesses that you're like, I really understand these ones. And if you don't feel that way, then I would probably look at these and go 80, 20 and say, okay, what's the 20% that's driving 80% of the enterprise value and trim? Honestly, I would just go completely passive on those ones or just return equity or do some sort of deal so I could get my attention back and then double down on the ones that you are good at. So this gentleman who had a PE firm suffered from a classic issue that I cover in the offers book which is that he had not committed to the niche. So this is page 38 of the book and I tell a story where I try not to niche slap people, which is that they need to pick one niche ideally. Now this gentleman had basically two paths that he could follow. He could follow a more concentrated path of just a few companies that could be disparate or different in nature. But because of a team of 5ish people, he could probably preside over those, call it six companies that are the better ones of the portfolio, double down on those, inject capital, recruit higher level talent, maybe improve the strategy and then grow the companies. The alternative path was that he just gets really vertical, meaning he tries to get as many companies that are of the same type so that he can see trying to Use fancy words, but synergies between the companies so that they all together kind of the sum of the parts is greater than the whole because you can centralize some costs which adds profit to all of them. You can have cross business learning. So if you have 10 H VAC companies started by 10 different founders, all of them are going to have a few things they do well. So you take the best practices from each of them individually and then you implement them across all of them. And so you get this cost savings off the bottom line by centralizing costs and then you distribute out best pract. And so that is a typical kind of private equity play, which is a roll up play where you can buy 10 things for a million dollars and sell all 10 together for 50 million. And so he was obviously shooting for a $50 million exit. And the crazy thing is, and this is true of entrepreneurship, is there's a lot of ways up the mountain. The bigger the goal is, the fewer the ways up the mountain there are. So you want to get to a trillion dollar company. Well, you're going to have to do some crazy new technology that probably doesn't exist in order for you to get there. If you want to have a $50 million exit, you can do that with just about any business by just getting it to a decent amount of size. And yes, that includes chains of brick and mortar, that includes online business. Like you can absolutely do it in any niche, no matter how small it is.

[Unnamed Speaker 6]

I sell health and wellness. So basically physical therapy, personal training, 35 to 45 year old athletes is the avatar. And we do about a little over 3 million. The biggest thing that's stopping me, you have a huge shortage in, in practitioners, to give Context, there's about 16,000 open positions.

[Alex Tribozzi]

You're supply constrained.

[Unnamed Speaker 6]

Yes. So I need more producers to produce. So I decided to kind of pivot and say, well, if I can't find the people, I'm gonna increase price.

[Alex Tribozzi]

Well, I'm glad you did that as the thing you decided to do. So that's fine. Like I started another business on E commerce. Yeah, yeah. So to start teaching people to. Yeah, yeah.

[Unnamed Speaker 6]

So that went well to the tune of we didn't lose revenue. But I'm at that point where now do I go all in on continuing to increase price and move more into almost like a concierge membership model or do I go all in and just try to crush and find the people and do what nobody else is possibly doing?

[Alex Tribozzi]

Do you have any issues on getting customers? No, we have more demand than so have you heard my story about a buddy of mine who's in the cleaning business? I'll tell you. So former gym owner, crushed it with gym launch and then decided he started making enough money that he started investing in real estate, as all entrepreneurs do. And then after he was crushing in real estate, he was like, you know, I should probably start a cleaning company because he started doing Airbnb's out of his real estate. He's like, this is costing me a ton of money, I should vertically integrate. And so he started the cleaning company to clean his Airbnb and he's like, well, now that I have the cleaning company, I might as well start selling other customers. Don't want to leave money on the table, right? And so you can see how this spindles, right? The moral of the story though is that I called him up and he was telling me, he's like, dude, it's crazy. He's like selling cleaning customers. He's like, CAC is like 25 bucks. It's insane. It's so easy to get customers. And I was like, oh, you should scale this to the moon. He's like, yeah, you know, it's kind of hard to get English speaking mates who don't take stuff from people and do a good job and show up on time and are willing to work for $15 an hour. And I was like, okay, so the nice thing that you have is you have a supply constrained business that he was used to fitness, which is typically demand constrained. So it's just, it's hard to get people to want to show up to the gym, right? Not hard to get people to say they want somebody else to clean their house. And so basically the reframe that I gave him is what I'll give you, which is you're not actually in the physical therapy business, you're in the recruiting physical therapists business. The whole paradigm that I would have around this is what does the career path look like for the physical therapist so that I can make this really enticing. On top of that, I have to still think through the same. You still have the same core four, right? You've got, you've got warm outreach, you've got cold outreach, you've got paid ads, and then you've got. I should know these. I wrote the book, okay, Organic content, right? So these are the four things that you can do, right? And then you've got headhunters, right? Which is basically recruiters. And you have word of mouth from your existing. Oops. Word of mouth from your existing staff. And so these are the ways that you can get physical therapists. And so we have to approach this the same way we approach getting customers. They are just now the customer. And so maybe running indeed ads is probably not the way that you're going to get them. But I'll bet you that outreach will work exceptionally well to get therapists. And I would probably bet that if you had a really good referral incentive over time, that would compound now small, not as much. You'll probably need to do this to start. As you get bigger though, there's going to be enough of a base where, where a few percentage every month of referrals is material. And so let me just put this in math for you so that you can. So this will motivate you to do it. How much do you make in gross profit off of a physical therapist per year? On average?

[Unnamed Speaker 6]

About 350.

[Alex Tribozzi]

Okay, so if I told you that I could add $350,000 in gross profit per year to your business, how much would you be willing to pay for that in the first year? Quite a lot. Right? And so giving someone $500 for a referral, not that motivating. If you said, I'll give you 20 grand for a referral, I'll bet you'll get them to move. Most businesses are either supply constrained or demand constrained. Now if you have a business that's both, then it's like you don't have customers, you don't have employees. Like, that's a tough place to be. Most of the time it's one or the other. And what's interesting is that entrepreneurs will often try and basically like not solve the real problem. And this was kind of exactly what she was presenting with. She was like, should I do this other thing or should I, like, should I change my model altogether? But the crazy thing is her model was doing great. She was making good margins, she's doing good revenue out of two locations. It's like, why are we gonna break the model? Like, the constraint of the business is that you just don't know how to recruit. So let's just solve that problem. Because her own other path of like just raising prices, which to be fair, I'm all in favor of at some point. It's like you can't raise the prices anymore. Like you're becoming like a luxury business. And it's just like you're changing all the dynamics of the business. But her business worked already. And so for me, the lowest risk thing to do is not change the business model, but just figure out the problem of the business and solve it. And for her, the biggest problem was I can't get people. But I don't think she had quantified how much she should be willing to invest in getting more talent. And I think this is wildly underrated. It's like, think about it from a return on profit. I only did on gross profit, right? It's $350,000 per employee. So I'm like, why would you not pay? I mean, like, just being real, why would you not pay $50,000 or $100,000, right. If you know that if I. People are happy to put, you know, $100,000 in the stock market and get 10% back and make 10,000, but in their businesses, they're hesitant to give a commission of $10,000 for a $300,000 thing, right? And so if you're like, well, what if that doesn't work out? Then push it out where there's a contingency that you're happy to do it. And if you want, keep raising the price until you get people to refer. Like, with enough incentive, you can move the world. And so speaking of this physical therapy brick and mortar business, I did a brick and mortar breakdown of five locations, a chiropractor that had done through M and A on how to accelerate the growth of the business. And it's super tactical. And it works whether you have a single location or you're even virtual. A lot of the tactical carry over to any business to help it grow, enjoy.