How To Raise Your LTV | Ep 804

Summary

Podcast Summary: The Game with Alex Hormozi – "How To Raise Your LTV | Ep 823"

Release Date: January 10, 2025

In Episode 823 of "The Game with Alex Hormozi," host Alex Hormozi delves into strategies for increasing Lifetime Value (LTV) of customers. Throughout the episode, Alex interacts with various entrepreneurs facing unique challenges related to customer acquisition, retention, and revenue optimization. This summary captures the essence of these discussions, highlighting key insights, actionable advice, and notable quotes from Alex, complete with timestamps for reference.

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1. Introduction

Alex Hormozi sets the stage by emphasizing the critical role of LTV in scaling a business. He underscores the importance of balancing Customer Acquisition Cost (CAC) with LTV to ensure sustainable growth and profitability.

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2. Caller Discussions

a. Lorianne’s Personal Finance Coaching Business

[00:00 – 05:50]

Business Overview: Lorianne runs a personal finance course and coaching business targeting women, boasting a revenue of $30 million. Her primary challenge lies in optimizing her CAC to LTV ratio, where her CAC is excessively high ($1,500), and her LTV remains low ($2,400). Additionally, her Average Order Value (AOV) on the front end is insufficient.

Key Challenges:

• High CAC and low LTV
• Low front-end AOV
• Reliance on paid Meta ads directing to free webinars
• Inefficient outsourced sales team resulting in a mere 7% upsell rate

Alex’s Advice: Alex recommends bringing the sales team in-house to exert better control and influence over the sales process. He outlines a structured sales funnel involving multiple touchpoints:

1. Webinar Purchase: Initial engagement through a free webinar.
2. Onboarding Call: A group session to confirm commitment.
3. Goal Setting Call: Identifying client goals to qualify leads.
4. Closer Call: Finalizing higher-ticket offers.

Notable Quotes:

• "Your LTV is too low. You will probably have to bring the sales team in house if you want to really fix it." [02:21]
• "You need to hire one person, a really good sales director, and then you hire six recruiting firms..." [04:11]
• "If you have a cash flow issue right now... you can just spend less and improve the returns." [05:08]

Actionable Steps:

• Integrate sales ascension into the onboarding process.
• Implement Buy Now, Pay Later (BNPL) options on the front end.
• Split test webinar introductions to optimize engagement.
• Increase upsell rates from 7% to at least 25%, aiming for 50%.

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b. Jacqueline’s Dental Practice Appointment No-Shows

[05:50 – 10:01]

Business Overview: Jacqueline operates a dental practice in Dallas with $3 million in revenue and a 5% profit margin. She faces a significant issue with appointment cancellations and no-shows, resulting in a loss of approximately $1 million annually.

Key Challenges:

• Over 30% cancellation/no-show rate
• Ineffective appointment confirmation processes

Alex’s Advice: Alex suggests refining the appointment scheduling and confirmation process to enhance commitment and reduce no-shows:

1. Integrity Tie-Downs: Immediately ask clients if anything might prevent them from attending after booking.
2. Manual Reminders: Supplement automated reminders with personalized manual texts:
   • 24 hours before the appointment
   • Morning of the appointment
   • 60-90 minutes prior to the appointment
3. Incentivization: Offer personalized incentives (e.g., free items in a goody bag) to increase accountability and reduce the likelihood of cancellations.

Notable Quotes:

• "You just need to make sure that that time is the right time for them." [06:06]
• "Have the manual text at 24 hours... the morning of, and the third text is going to be 60 to 90 minutes prior." [08:02]
• "You have to increase the ascension rate and that's it." [05:08]

Actionable Steps:

• Implement integrity tie-down questions during booking.
• Introduce manual reminder texts at strategic intervals.
• Personalize appointment incentives to foster commitment.

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c. Tyler’s Roofing Business Scaling Strategy

[10:04 – 13:10]

Business Overview: Tyler runs a roofing business specializing in insurance-related roof repairs, generating $1.8 million in revenue within 10 months. He aims to scale to $8 million in the short term and $70 million long-term. Tyler is uncertain whether to expand through franchising or multiple company-owned locations.

Key Challenges:

• Determining the optimal scaling model (franchising vs. ownership)
• Adapting to changing insurance landscapes and increasing deductibles

Alex’s Advice: Alex advises Tyler to first solidify his business model before considering scaling methods. He shares insights based on his experience, favoring company-owned expansions over franchising due to better control and profitability:

• Franchising Pitfalls: High complexity, lower profit margins, and increased administrative burdens.
• Ownership Advantages: Greater control over operations, higher returns, and streamlined management.

Alex emphasizes the importance of understanding the return on invested capital before choosing a scaling strategy and shares his own experience of transitioning from franchised to company-owned locations to eliminate administrative headaches and enhance profitability.

Notable Quotes:

• "Franchises are the most expensive form of capital..." [11:22]
• "I have a habit of flipping franchises back into let's own them all." [12:00]
• "If you nail the model and then the path will become really clear." [12:05]

Actionable Steps:

• Focus on perfecting the existing business model.
• Consider company-owned expansion to maintain control and maximize profits.
• Evaluate the cost and oversight requirements of franchising before proceeding.

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d. Adam’s Music Lessons and Recording Studio Optimization

[13:10 – 22:44]

Business Overview: Adam operates a music lessons and recording studio in Atlanta, generating half a million dollars in revenue with aspirations to reach $2 million. He sells music lessons to neurodivergent children aged 8 to 18. Adam identifies several operational inefficiencies:

• Underpricing services
• Overcompensating staff
• Underutilizing physical and time-based capacities

Key Challenges:

• Optimizing pricing and service delivery to enhance profitability
• Transitioning from one-on-one to semi-private lesson models
• Managing operational stress and capacity constraints

Alex’s Advice: Alex introduces a framework centered around LTV to CAC and return on invested capital. He suggests:

1. Pricing Strategy: Raise prices to reflect the specialized service and improve gross margins (aiming for 80-90%).
2. Service Delivery Model: Shift from one-on-one to semi-private lessons (e.g., 1-on-4) to maximize teacher utilization and increase revenue per session.
3. Sales and Marketing Alignment: Tailor offerings to the unique needs of neurodivergent clients, potentially allowing for premium pricing.
4. Operational Efficiency: Focus on raising prices and optimizing client delivery ratios before expanding capacity.

Notable Quotes:

• "For brick and mortar service businesses, I want it to be over 80%, ideally over 90% gross margins." [16:27]
• "The nicer thing about the music business is that it's actually identical to the gym business." [14:13]
• "The easiest solution is you just raise prices. Because if you have supply constrained, prices go up." [19:29]
• "Those are the three steps... raise the prices, change client delivery ratio, and bring in others to delegate." [19:53]

Actionable Steps:

• Increase pricing to achieve higher gross margins.
• Transition to semi-private lesson models to enhance capacity and profitability.
• Focus on creating specialized, premium offerings tailored to neurodivergent clients.
• Implement strategic sales processes to support higher-value transactions.

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3. Alex’s Closing Remarks

[22:44 – 23:53]

In his closing segment, Alex Hormozi offers a special gift to loyal listeners: a comprehensive Scaling Roadmap developed in collaboration with Layla. This roadmap breaks down scaling into 10 stages across eight business functions, providing personalized guidance to navigate common growth challenges. Listeners are encouraged to access this free resource at acquisition.com roadmap.

Notable Quotes:

• "Look at ltv. That will make you money. But the biggest issue is that you're upselling 7%. Like you need to be at least 25 and you should shoot for 50." [03:32]
• "The more stressed you are, the lower your IQ is... solve for capacity." [22:44]

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Conclusion

Episode 823 of "The Game with Alex Hormozi" offers a wealth of practical strategies for entrepreneurs aiming to enhance their businesses' Lifetime Value. Through real-world examples and expert advice, Alex guides listeners on optimizing their sales processes, refining their business models, and scaling efficiently. The episode underscores the importance of strategic pricing, effective team management, and personalized customer engagement in driving sustainable growth.

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For more insights and resources, visit acquisition.com and explore the Scaling Roadmap to tailor growth strategies to your unique business needs.

Transcript

[Lorianne]

Hi. Thank you so much for all your content you make. My name is Lorianne and I sell personal finance courses and coaching to women. We do 30 million for women. Pardon?

[Alex]

For women.

[Lorianne]

For women.

[Alex]

Ah.

[Lorianne]

With a plus sign in it.

[Alex]

You're like, screw the guys. They don't need to save money.

[Lorianne]

You know, they can learn from someone.

[Alex]

Else I'm messing with.

[Lorianne]

So we do 30 million in revenue.

[Alex]

Badass.

[Lorianne]

Thank you. I would like to be at, I don't know, revenue. Which comes to my question.

[Alex]

Right.

[Lorianne]

And what is stopping me is our CACT LTV ratio. Both CAC is too high. Got the team working on volume right now. LTV is too low.

[Alex]

Okay.

[Lorianne]

And AOV is too low on our front end.

[Alex]

Okay.

[Lorianne]

I think it's actually a cash flow maybe constraint potentially. But I'm a little, I'm a little confused on where like exactly to go to work.

[Alex]

Okay. How do you acquire customers right now?

[Lorianne]

Primarily meta.

[Alex]

So it's all paid ads.

[Lorianne]

Yeah.

[Alex]

Okay, so all paid ads. And you're running to What, a webinar?

[Lorianne]

2K webinar.

[Alex]

Okay. Are you. Are you have a low ticket offer before the webinar? Are you charging like something as like a self liquidating offer on the front?

[Lorianne]

Free webinar? No, never done a self liquidating.

[Alex]

Okay. So free webinar on the front end, you have a $2,000 offer. Okay. Then what?

[Lorianne]

$2,000 or 12 month payment plan for $200 a month. Which is why our AOV is like $9.

[Alex]

Got it.

[Lorianne]

And then acquisition costs like 1,500 on the client and then we have a back end that's 10k, has a 7%. That's your problem. Low outsourced sales team right now. So LTV is like 2,400.

[Alex]

Yeah, that's a problem.

[Lorianne]

Yes. That's why I'm here.

[Alex]

Yeah. No, your century is too low. You will probably have to bring the sales team in house if you want to really fix it. It's very hard to influence the team. You'll want the ascension to be integrated into the onboarding. And so you sell the $2,000 thing, you have your onboarding call. The onboarding call. The finish of the onboarding call is they set their goal setting call with what would become a setter and then that setter sets for a closer. So they actually get three calls. So they have webinar buy, they have an actual onboarding call because you want them like you want to make sure.

[Lorianne]

You deliver one on one or that's.

[Alex]

A group one to minute. You can do well, you can start with, you can start with group and then you will make more money if you go to one on one. It is more ops but like we actually did this and I have a video that breaks down everything that you need to know. Yeah. Okay. Yeah. And so one on one is better. But if you're going to start, start with the group and they're way of getting off the call like saying like okay, you're dismissed. Is that you show me that you have confirmed your booking with your next call. So that way you have 100% through through line to the next. Now they're customers, they're going to show up. The goal setting call basically sifts for who like what's your goal? Cool. What's basically just do another sales call again and then you push people into the ones who can afford it. That makes sense. Into a close call which with basically an invitation to join something that has more help or work associated.

[Lorianne]

Yes. Okay, great.

[Alex]

You'll probably need to get third party financing in place. Yeah.

[Lorianne]

On front end for the sales calls.

[Alex]

Yeah. And front end, like you should definitely have some BNPL options. So buy now, pay later. You should probably have a few.

[Lorianne]

Okay. We have them on the back end. We don't have them on the front end.

[Alex]

Also with the webinar I would recommend split testing the first five minutes. So retest two or three different intros and look at ltv. That will make you money. But the biggest issue is that you're upselling 7%. Like you need to be at. You want to be at least 25 and you should shoot for 50.

[Lorianne]

Okay. Okay. So just one more question as I'm. That's like a longer term solution, right. That's going to take.

[Alex]

You mean bringing the sales team in.

[Lorianne]

House to bring the sales team in house and really optimize the that process.

[Alex]

Why does it have to be long term?

[Lorianne]

Just a time it'll take to find a sales leader and recruit and like shift leads from the.

[Alex]

You need to hire one person, really good sales director and then you hire six recruiting firms that do sales and say I need 10 guys from each of you and you can get a 60 person team in for like two weeks.

[Lorianne]

Okay. Okay.

[Alex]

We just added 40 guys in two weeks to one of our companies. We just paid a bunch of recruiters. Like if we're doing that kind of volume, we're just going to go to somebody who has a big network of people that's their full time business recruiting sales guys. So it's like great. These are requirements Go get them.

[Lorianne]

Yeah.

[Alex]

And I'm willing to pay for the speed. So if it's. And you can also negotiate if you're doing multiple, like the same of multiple. So it's like, hey, normally, you know, it's 10 grand per, per head, but I'm going to buy 20 from you, so I'll do it for five.

[Lorianne]

Okay.

[Alex]

So you pay 100 grand, all of a sudden you have an apartment.

[Lorianne]

Okay, cool. So action on that immediately. And then while we're doing the recruiting and getting that person up to speed, just keep spending basically as we can afford to spend on the front end to keep like lead flow coming into the back end.

[Alex]

Realistically, if you spend less, you will typically roas will increase. Typically. YouTube's not that way though. Kind of random. The more you spend, the more profitable it gets. It's wild. Yeah, it's the shit. Anyways, if you have a cash flow issue right now or like, you know, it's like it's self inflicted, like you can just spend less and improve the, improve the returns, but your CAC is appropriate. $1,500 to acquire a customer in that space.

[Lorianne]

It's not gonna get that much lower.

[Alex]

Yeah, it's like you're not gonna like, you're not gonna get below a thousand. And so this is a backend issue. Like you just have to increase the ascension rate and that's it.

[Lorianne]

Okay. Thank you.

[Alex]

You bet. Awesome.

[Jacqueline]

Hi, I'm Jacqueline. I know, we talked about.

[Alex]

Dentist. Yes. 3 million 5% profit margins. You have five different ones. Three are part time.

[Jacqueline]

Perfect. Wow, great memory.

[Alex]

Yeah. You're in Dallas. This 30 year old business inherited from your father.

[Jacqueline]

Yes.

[Alex]

Yep.

[Jacqueline]

And my Social Security number, I can pull it up. So I know we talked. Yes. Last night, which you obviously remember and a couple other people from your team. We talked about this issue that my number one constraint probably isn't our cancellation rate, but it is something that I'm like really perplexed about and want to at least go back with a little bit of something to share with my team about.

[Alex]

Sure.

[Jacqueline]

So our show rate or our cancellation rate is a little over 30% and this past year we've lost like a million dollars because people made appointments, confirmed them, and they didn't show up. So if you have any insight on what we could do to start improving that, I would be really grateful.

[Alex]

Yes. I don't think it's the constraint of your business. So number one is you're going to want to make sure that that time is the right time for them. And we ask questions like, is there anything that will possibly get in the way of you showing up for your meeting? And so we call this an integrity tie down. And so after you get a time slot, you want to ask that right afterwards because then it shakes them out of their mind for whatever reason. It works. So I could come up with some narrative for it, but it works. Number two is, I think I mentioned this yesterday, but I think it might be worth considering pulling up appointments, like to basically, can we bring them up sooner so that we have increased shop rates. The next one is, let's see here. You want to make sure that you have automated reminders, which you probably do, but then you want to have manual reminders on top of that. So if you have. I would have an office iPhone. And you want to send manual text at three times. So you want to send the manual text at 24 hours. So basically think night before. Second text is going to be morning of, and then the third text is going to be 60 to 90 minutes prior, basically when they have to like, get your shit together, get in the car. Now, ideally we like to have some sort of selection that they pick that we have, like some cost we have incurred. So this works exceptionally well for brick and mortar, which is why I'm sharing it with you in the gym space, obviously we would say, hey, Sharon, I've got this shirt. Tell me what size you're at and I'll pull it aside for you. And so when you come here, I'll give it to you. Or it's like, do you want red or do you want blue? Like, just do some sort of a B, ask for them. And so it could be as simple as, like, you're gonna pull. I mean. Cause it's a dentist office, right? And so you're like, okay, what can I give them? Well, I always get free shit when I go to the dentist's office. And so just like have them pick the free stuff that you put in their goody bag. And then I would send them a picture with their name on it so that they're like, oh, man, they incurred this cost just for me. I have to show up now. Right? Because you're having the issue. Because someone books and like six months later is their cleaning or whatever. Right, that's the problem here.

[Jacqueline]

Yeah, well, we call and confirm their appointment a week in advance and then we call and remind them again three days in advance. And then we call them and text them again a day before and they'll say, yeah, I'm going to be there and then 2 o'clock comes and they don't show up.

[Alex]

I think you're reminding too far out.

[Jacqueline]

Okay.

[Alex]

Like, if, if, if I schedule an appointment on Saturday, Monday morning is a different universe for me. Yeah, no, I'm just being like super real. And so I think, I think a lot of people are that way. And so all of the manual reminders are like, if you want to, like, I use the automated ones for the far out. Like, hey, you're seven days away. Hey, you're three days away.

[Jacqueline]

Okay.

[Alex]

But I would have the ones that you're putting the real effort in 24 morning and right before.

[Jacqueline]

Okay.

[Alex]

And then have the incentive, have the personalization and I will bet you dollars to donuts that that on its own would work.

[Jacqueline]

Okay, awesome. Thank you so much. I really appreciate it.

[Alex]

No, you bet. Yes, sir.

[Tyler]

My name is Tyler. I sell roofs to residential homeowners or commercial building owners.

[Alex]

Sweet.

[Tyler]

We're about 10 months old. Did 1.8 million in revenue this year.

[Alex]

Door knocking?

[Tyler]

Yeah, somewhat. A lot of the guys, like I've been in the industry for a while, so I had a lot of return customers. Did about 1.1 from return and then my four sales guys brought the rest of the business. Short term goal would be 8 million go to that and then long term would be around 70 and exit. The problem is we don't know what model to choose or how to do it. So, like, was it franchising?

[Alex]

Are you going to insurance and storm chase or are you going to do private, like cash pay, like new?

[Tyler]

We haven't done any storm chasing, so.

[Alex]

It'S all new roofs and repair.

[Tyler]

So it's the market that we live in is we get storms every year. So yeah, it's insurance. 95% is insurance.

[Alex]

Okay, it's insurance. Got it. Okay.

[Tyler]

Yeah. So I guess my question is, like, how would you scale or what model would you choose and then how would you go about building that?

[Alex]

Well, you already have 95% insurance, so I would probably keep doing that. So what stops you from doing that?

[Tyler]

Well, we're going to stay with insurance. Well, insurance is changing a little bit. Deductibles are growing up. Homeowners don't want to get their roofs done as often. But would you scale to multiple locations, like different cities, or would you do like a franchise model?

[Alex]

Do you feel like you've nailed the model? No, I would. So right now what I wouldn't want to do is try and make a decision with incomplete information when it could be knowable. And so I think once you nail the model, then the path will become really clear. And so if you nail the model and then the returns on capital are really interesting and you can be more patient, then owning them all privately becomes more interesting. If it costs a ton of capital to open up, and let's say it requires a lot of oversight, then sometimes a franchise model can be good. But fundamentally, I kind of see franchises as being impatient, just being honest, because basically it's the most expensive form of capital is you say, hey, we're going to partner and you're going to put all the money in and I'm going to become a. Maybe you get 8% of top line. So maybe figuratively it's like 25% partner or 30% partner location, which is okay. Nothing wrong with that. But I have seen such a graveyard of 20 location franchises that make no money. And the amount of work that it takes to maintain 20 is about the same amount of work as it takes to maintain 20 re ownable. It just happens faster, but you make way less money. So I have a habit of flipping franchises back into let's own them all. Like the teeth whitening chain that we bought. When we bought it, we had 14 corporate stores, we had 18 open franchisees, and so then over the last 12 months, we bought out all 18 franchisees, and so now we own all 32. But then like all of the administrative headache has just basically disappeared because we just run them the way we want to run them and we make more money. I think you need to nail it. And then the scaling of path will become clearer. I know it's not the sexiest answer, but that's probably the truth.

[Tyler]

No. Thank you.

[Alex]

Awesome. Yes, ma'am.

[Adam]

Hi, my name's Adam. I have a music lessons and recording studio in Atlanta, Georgia. And your content, you and Layla, what you've done has profoundly changed my life because you've put me out of my comfort zone in how I think. And so I sell music lessons to neurodivergent kids between 8 and 18. We have a half million dollars of revenue.

[Alex]

Awesome.

[Adam]

I think we could be at $2 million of revenue. And what's stopping me is I've realized that the model is completely broken. I'm underpriced, overcompensating the staff. We're underutilizing capacity in terms of square footage, time and physical space and time. And so my question is, how would you apply first principles thinking to what I should do now next and later to run the business that I've got as we make the transition to one that becomes an asset.

[Alex]

Yeah. So basically the core. So there's two. A chunked down version and chunked up version of the core economic engine that makes a business successful. So LTV to CAC is the smallest version of that engine. You put some money in, you get more money out. That's the gross profit you run the entire business off of. At a higher level, it's return on invested capital. Right. So it's like, okay, that's what the core machine is. But then there's also equipment, there's leases, there's build outs, there's all that stuff that goes into it that's not typically included in ltb cac. And then how much does it cost us to build this machine again and again? So that's kind of how I think about it. Like micro level. It's ldbt cac. Return on invested capital is what it is at the macro level. When you're opening more and more locations and saying it cost me 500,000 to open a location location makes me $500,000 within the first six months. Okay, cool. I've got a 2 to 1 return on capital within a year, which is awesome. So let's tactical for you. So the nice thing about the music business is that it's actually identical to the gym business. So I know a lot about it. And so the models that I've seen works unbelievably well have been semi private models, number one or the 30 minute multiple times a week. Much higher ticket people. You know, people stay three, four, five years with music lessons with their person. I prefer semi private because I think you get more loyalty to the brand and it's less about the music teacher who can then leave and then take all of those students who go private. And so I like semi private in general also. I'm sure you could sell around the idea that they get a little bit more socialized and it's probably good for them and all that jazz. And in terms of pricing, I want my gross margins to be at least 80%, ideally 90. Now you can do that when you're one on six. Harder one on one. And so let's say you have six kids in a class or four, I mean, you can level into it, but let's say it's one on four, keep it math simple. And you charge $200. Sorry, $50 per session, times four kids is 200. You make $200 per session. Right? Well, for you to pay for an hour of a music teacher's time, what.

[Adam]

Does that cost right now, that would be 40 to $50.

[Alex]

Okay, so that's 80% right there. So 240. So 80% gross margins right there. Now, if you charge 60 bucks a session, you'd be at 240. So then you'd be at like 84, whatever in terms of gross margins. So you're above that. But that's my rule of thumb for brick and mortar service businesses is I want it to be over 80, ideally over 90. But I will not do a business if it has lower than 80% gross margins. Some people do. I just don't like to. Because you don't have enough cash to do anything. Right. And so then the question is, okay, how do we create the sales process and the positioning so that now you already are working with a special class of customers? And so I would imagine that you would be able to probably even more easily than a traditional music academy, sell at a premium price. Because if I'm a parent who had a neurodivergent kid, I would be willing to pay for a specialist. And so specialist prices are a premium. So I think that would work. And in terms of the model, you can. I mean, it's just headcount divided by teachers, basically. But you have to get the core gross profit right in the business, and then everything else kind of flows from there.

[Adam]

I'm kind of in the same position that this guy over here was, and I don't have an operator, and so I'm kind of in that swamp too. And.

[Alex]

So we have to get more margin. You have to get more cash flow. Cash flow allows everybody to breathe better.

[Adam]

So, okay, I guess that makes sense. We raise prices and get that a different sort of client funding.

[Alex]

Sell one on four and say. And just sell around the fact that it's a better experience for them because you don't want them to be married to a teacher you want them to be married to. Like, this is how I would sell it. I would say, Listen, Mrs. Whatever. Like, if your child becomes really attached to a single teacher, then if that teacher leaves, then all of a sudden this skill that they spend all this time on, they'll associate with the teacher, and then all of a sudden, they stop playing violin after five years. You don't want that? I don't want that. What we want is to create a positive relationship with the skill so they just continue for life. Right, Right. And so we facilitate that by having other people in the sessions and so that the teachers sometimes do change so that no one really goes too attached to Anybody, but they really grow attached to the craft. So if you are capacity constrained, so some of you guys are in that position, like you can barely handle the customers that you have right now. You have three solutions. The easiest solution is you just raise prices. Because if you have supply constrained, then that means that you have more demand than you have supply. Prices go up. Right. And most people just don't do that and just suffer. So just raise the prices, make more money. That's solution number one. The second solution is change client delivery ratio, which we just covered. So instead of going one to one, you go one to four. So you get more out of what you already have. This gives you leverage and it gives you cash flow, improves your gross margins. The third way is to bring other people in who can do what you do, which is then delegating, you know, the responsibility. Right. To somebody else. So that's the ultimate leverage. So you don't have to do any of it. That make sense? So those are kind of like the three steps that I think about when I have somebody who's supply constrained and they don't have any time, they can't grow the business and they can't sell more customers, but they need to sell more customers to grow the business. And it's the rock and hard place. And the nice thing is we start with price because it's the fastest and easiest one to do. You don't have to do anything, you don't have to change anything. You just say a different word and then you make more money.

[Adam]

So our primary thing when we opened was it was 100% private lessons.

[Alex]

Yeah.

[Adam]

And so that's where that's basically the only difference in the. The hypothetical gym and gym launch, which I read the whole thing on the plane over here. You know how I didn't know that book didn't exist until.

[Alex]

It's a good book.

[Adam]

It's awesome.

[Alex]

Yeah.

[Adam]

Like, so what would that, what would the.

[Alex]

You can still have one on one. You can still have one on one. Just. I would predominantly sell semi private. And if someone's like, well, I want the special snowflake treatment, then you're like, awesome. I'll give this special snowflake price.

[Adam]

Right. How would you design the initial offer for that type of model? The six week beginner challenge.

[Alex]

But it would be something, whatever the fast outcome that you can deliver to a kid who's neurodivergent, who picks up a violin or whatever the instruments that you teach are, it's like they'll be able to play a song in this period of time now, it might not be good, but you'll recognize it kind of. Right. But I would want some sort of discrete outcome. And that would be like an outcome. You could also do some sort of subjective thing, which is that they rate X or they. You could have a survey at the beginning, survey at the end. That would be kind of more of an internal thing. Got it. But yeah, typically you'll sell some sort of package upfront. I'm going to guess that the price point for what you're looking at is going to be between 600 and 2,000 is what the upfront package would be. And then you'd upsell or at least let people go into continuity on the back end. And it'd probably be somewhere in the neighborhood of like six weeks to six months. You would know that range better in terms of how long to software. Okay.

[Jacqueline]

Yeah.

[Adam]

And the best thing, we're drowning in context. We're a recording studio. So these kids are making songs all the time and they should be feeding the marketing. But it's just so much. Then there's that whole problem.

[Alex]

But yeah, you just need time, man. I think what's interesting is that the more stressed you are, the lower this is not me. This is not a slight. Just to be clear, I'm saying in general, the more stressed anyone is, the lower your IQ is. And so I'm saying this to say that again, this isn't a you thing. I'm saying that the problems that you struggle with when you are stressed, when you have a good night's sleep and a little bit of time, you solve in like five minutes. And so if you want to increase your capacity, it's like, let's solve for capacity. And then a lot of these things that are keeping you up at night, you're like, oh, we'll just run a six week thing or run a 12 week thing. We'll sell it for this. I can see how the margins work out. And like we already have more demand than we can handle. So it's okay if people say no at our higher prices because we'll make it up in profit anyways. Other people who do say yes. That makes sense. That wasn't a slight, to be clear. I'm saying for anybody, that's fine.

[Adam]

Yeah, no, it's true.

[Alex]

So cool. I appreciate that. Yeah. You're back.

[Lorianne]

Hi. Thank you so much for all your content you make. My name is Loriann and I sell personal finance courses and coaching to women. We do 30 million for women. Pardon?

[Alex]

For women.

[Lorianne]

For Women.

[Alex]

Ah.

[Lorianne]

With a plus sign.

[Alex]

You're like, screw the guys. They don't need to save money.

[Lorianne]

You know, they can learn from someone else.

[Alex]

I'm messing with you.

[Lorianne]

So we do 30 million in revenue.

[Alex]

Badass.

[Lorianne]

Thank you. I would like to be at, I don't know, revenue. Which comes to my question and what is stopping me is our CAC to LTV ratio? Both. CAC is too high. Got the team working on volume right now. LTV is too low.

[Alex]

Okay.

[Lorianne]

And AOV is too low on our front end.

[Alex]

Okay.

[Lorianne]

I think it's actually a cash flow maybe constraint potentially. But I'm a little confused on where exactly to go to work.

[Alex]

Okay. How do you acquire customers right now?

[Lorianne]

Primarily meta.

[Alex]

So it's all paid ads. Yeah. Okay, so all paid ads and you're running to What?

[Lorianne]

A webinar? 2K webinar.

[Alex]

Okay. Are you have a low ticket offer before the webinar? Are you charging like something as like a self liquidating offer on the front end?

[Lorianne]

Free webinar? No, never done a self liquidating.

[Alex]

Okay. So free webinar on the front end, you have a $2000 offer. Okay. Then what?

[Lorianne]

$2000 or 12 month payment plan for $200 a month. Which is why our AOV is like got it. And then acquisition costs like 1500 on the client and then we have a back end that's 10k, has a 7%.

[Alex]

That's your problem, right?

[Lorianne]

Yeah. Low outsourced sales team right now. And so LTV is like 2,400.

[Alex]

Yeah, that's a problem.

[Lorianne]

Yes. That's why I'm here.

[Alex]

Yeah. No, your sentry is too low. You will probably have to bring the sales team in house if you want to really fix it. It's very hard to influence the team. You'll want the ascension to be integrated into the onboarding. And so you sell the $2,000 thing. You have your onboarding call, the onboarding call. The finish of the onboarding call is they set their goal setting call with what would become a setter and then that setter sets for a closer. So they actually get three calls. So they have webinar buy, they have an actual onboarding call because you want them like you want to make sure.

[Lorianne]

You deliver one on one or that's.

[Alex]

A group one to many. You can do. Well, you can start with, you can start with group and then you will make more money if you go to one on one. It is more ops. But like we actually did this and I have a video that breaks down everything that you need to know. Okay. Yeah. And so one on one is better. But if you're going to start, start with the group and they're way of getting off the call like saying like okay, you're dismissed. Is that you show me that you have confirmed your booking with your next call. So that way you have 100% through. Through line to the next. Now they're customers, they're going to show up. The goal setting call basically sifts for who, like what's your goal? Cool. What's that? Basically just do another sales call again and then you push people into the ones who can afford it. That makes sense. Into a closed call with basically an invitation to join something that has more help or work associated.

[Lorianne]

Yes. Okay, great.

[Alex]

You probably need to get third party financing in place. Yeah.

[Lorianne]

On Friday for the sales calls.

[Alex]

Yeah. And front end, like you should definitely have some BNPL options. So buy now, pay later. You should probably have a few.

[Lorianne]

Okay. We have them on the back end. We don't have them on the front end.

[Alex]

Yeah. Also with the webinar, I would recommend split testing the first five minutes. So retest two or three different intros and look at ltv. That will make you money. But the biggest issue is that you're upselling 7%. Like you need to be at. You want to be at least 25 and you should shoot for 50.

[Lorianne]

Okay. Okay. So just one more question. As I'm. That's like a longer term solution, right? That's going to take.

[Alex]

You mean bringing the sales team in house?

[Lorianne]

To bring the sales team in house and really optimize that process.

[Alex]

Why does it have to be long term?

[Lorianne]

Just a time it'll take to find a sales leader and recruit and like shift leads from the.

[Alex]

You need to hire one person, really good sales director and then you hire six recruiting firms that do sales and say I need 10 guys from each of you and you can add a 60 person team in for like two weeks.

[Lorianne]

Okay. Okay.

[Alex]

We just added 40 guys in two weeks to one of our companies. We just paid a bunch of recruiters. Like if we're doing that kind of volume, we're just going to go to somebody who has a big network of people that's their full time business recruiting sales guys. So it's like great, these are requirements, go get them. And I'm willing to pay for the speed. So if it's. And you can also negotiate if you're doing multiple, like the same of multiple. So it's like, hey, normally you know, it's 10 grand per head. But I'm going to buy 20 from you, so I'll do it for five. Okay, so you pay 100 grand, all of a sudden you have an apartment.

[Lorianne]

Okay, cool. So action on that immediately. And then while we're doing the recruiting and getting that person up to speed, just keep spending basically as much as we can afford to spend on the front end to keep like lead flow coming into the back end.

[Alex]

Realistically, if you spend less, you will typically roas will increase. Typically. YouTube's not that way though. Kind of random. The more you spend, the more profitable it gets. It's wild if you have a cash flow issue right now or like, you know, it's like it's self inflicted. Like you can just spend less and improve the, improve the returns. But your CAC is appropriate. Fifteen hundred dollars to acquire a customer in that space.

[Lorianne]

You're not gonna get that much lower.

[Alex]

So you're saying, yeah, it's like you're not gonna, like you're not gonna get below a thousand. And so this is a backend issue. Like you just have to increase the ascension rate and that's it.

[Lorianne]

Okay, thank you.

[Alex]

You bet. Awesome. Real quick, guys. I have a special, special gift for you. For being loyal listeners of the podcast. Layla and I spent probably an entire quarter putting together our scaling roadmap. It's breaking scaling into 10 stages and across all eight functions of the business. So you've got marketing, you've got sales, you've got product, you got customer success, you've got it. You've got recruiting, hr, you've got finance. And we show the problems that emerge at every level of scale and how to graduate to the next level. It's all free and you can get it personalized to you. So it's about 30ish pages for each of the stages. Once you enter the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com roadmap R O A D map roadmap.