Q&A. Growth Is Just Constraint Removal | Ep 991

Summary

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Podcast Summary

The Game with Alex Hormozi

Episode: Q&A. Growth Is Just Constraint Removal | Ep 991
Date: January 14, 2026
Host: Alex Hormozi

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Episode Overview

This episode of The Game is a rapid-fire, live Q&A where Alex Hormozi fields business growth questions from entrepreneurs across various industries. The central theme is "growth as constraint removal": identifying the bottlenecks preventing scale and implementing actionable strategies to break through. Alex dives deep into each founder’s unique scenario, from SaaS for fitness coaches to home building, real estate wholesaling, e-commerce, agency, construction, and distribution. The energy is fast-paced and tactical, with Alex blending direct advice, real-world anecdotes, and humor.

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Key Discussion Points & Insights

1. SaaS for Fitness Coaches: Messaging, Offer, & Scaling Meta Ads

[00:27 – 06:49]
Participants: Mike Klson (sells GoHighLevel to fitness coaches)

• Core Constraint: Messaging the value of the CRM to attract more leads and scaling acquisition channels (especially Meta/Instagram ads).
• Retention improved, but not enough spend to test ads.
  • “Rule of thumb for everybody... I can’t really test a campaign unless I’m willing to spend 2x my target CAC as just a test to see if it works.” – Alex, [01:59]
• Offer Positioning: Highlight automation to turn IG followers into clients without DMing all day.
  • “You having trouble turning your IG followers into customers? All of this can be automated. We’ll show you in 7 minutes.” – Alex, [03:13]
• Case Study Angle: Present multiple avatars to counter the “will this work for me?” objection.
• Strategic Partnerships: Focus on agencies/guru mentors.
  • "You don't want to generate demand, you want to channel it." – Alex, [06:38]
• Upsell Agencies: Can charge more for onboarding + recurring, but now serving two customer types (agencies + coaches), requiring customer success on both.

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2. Home Building Company: Growth Blocked by Land Development

[07:50 – 13:28]
Participants: Katie (sells new construction homes)

• Core Constraint: Land acquisition and development timelines (2–10 years).
  • “So the quantified version of what a constraint is, it’s the allocation of resources that yields you the highest return.” – Alex, [12:57]
• Potential Solutions:
  1. Pillage talent: Poach best developers’ key people.
  2. Acquisition: Buy an established developer (vertical integration).
     • "At your size, it's buyer build. Depends on entrenchment and relationships." – Alex, [09:49]
  3. Earn-out Structures: Structure long-term, low-cash deals for retiring developers.
• Philosophy: As a business scales, it becomes a “business of businesses.” Constraint removal can lead to order-of-magnitude improvements.
  • “Constraints aren’t 10-20% improvements—they can open up path to a billion.” – Alex, [12:56]

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3. Biotech Funding: Raising at Higher Valuation

[13:29 – 20:46]
Participants: Eric (Bioxcellerator, stem cells)

• Core Constraint: Raising large capital without being squeezed on valuation or losing control.
• Advice:
  • Focus less on facts, more on investor “belief” story.
    • “This is just a sale...question is what would you need to see in order to believe?” – Alex, [16:24]
  • De-risking: Investors need to know what step has changed since last round (e.g., tech validated or regulatory risk decreased).
    • “If we’re raising at 500M, what risk did the 50M round take that is now removed?” – Alex, [18:12]
• Pitch Strategy: Frame new raise as risk-mitigated, with regulatory progress and working business model.
  • “Do not be a scientist for the pitch.” – Alex, [20:47]
• Ownership: Maintain control via voting rights or structured deals.

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4. Real Estate Wholesaling: Sales Team Performance

[20:58 – 26:49]
Participants: Francis (wholesaler, $450K/mo)

• Core Constraint: Variability and inconsistency in sales team; performance drops after big months.
• Main Issue:
  • “You have an ops issue—sales ops. This is a culture game.” – Alex, [23:01]
  • Poor script adherence, lack of training discipline, weak management.
• Solution:
  1. Enforce script—mandatory use, daily training (“If they’re not saying the script, they’re off the team.” – [24:25])
  2. Culture: No cowboy sales; process above the player.
  3. Leadership: Sales manager must reinforce behaviors.
  4. Hiring/training process: Group interviews, script testing, coaching feedback loops.
     • “As the company operator, you have to be militant in sales process.” – Alex, [26:31]
  5. For scaling, the strength lies in how, not who you hire.
     • “The better you get at training, the less raw skill you need to hire.” – [26:57]

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5. E-Commerce (Designer Goods): Scale Blocked by Recruiting & Training

[29:46 – 40:52]
Participants: Sasha (designer bags, $6M/yr)

• Core Constraint: Recruiting/talent—limited show hours due to salespeople fatigue.
  • “If we were live more often, we could create more.” – Sasha, [31:50]
• Logistics: Doing own warehousing/packing is a drag.
  • Outsource non-core (packing/logistics) unless a differentiator.
    • “Your value is in distribution and sales, not running a warehouse.” – Alex, [33:39]
• Sales Roles:
  • Hire/train more on-camera salespeople (focus on those with entertainment/presenting skills).
  • Consider “buy or build”—recruit micro-influencers/affiliates or develop new talent.
    • “Buy is faster, more expensive; build is slower, cheaper.” – Alex, [35:22]
  • Compensation: Percentage of profit per show.
• Training Philosophy:
  • Training in concrete behaviors (not fuzzy words).
    • “Don’t say ‘more energy’—be specific: ‘raise your voice, move faster.’” – Alex, [38:39]
  • Focus CEO/founder energy on building replicable sales training.

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6. Digital Agency: Incentive Structures for Leadership

[41:09 – 46:19]
Participants: Sebastian (Blue Sense Digital, $3.5M/yr)

• Core Constraint: Talent acquisition & retention (especially as headcount grows).
• Advice:
  • Leadership incentives: “Profit share pool, 10-20%. They get slices of that slice; that's it.” – Alex, [41:56]
  • Don’t give equity unless selling; restrict real shares.
    • "Best future talent is yet to come—save some of the pie." – [42:51]
    • “Four things equity provides: cash flow, sale bonus, risk, control. You want to give cash and bonus only.” – [43:29]
  • For salespeople, stick to commissions unless they move into cross-functional roles.
    • “Giving equity to sales guys: one of the mistakes I’d prefer you avoid.” – Alex, [46:01]

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7. Roofing Business: Transition from Storm-Driven to Retail

[46:48 – 53:45]
Participants: Trenton (roofing, $3M to $10M target)

• Core Constraint: Lead generation and team adaptation after storm market vanished.
• Advice:
  • Outbound (door-to-door) and inbound (lead-fed) sales roles must be separate.
    • “Inbound is what you graduate to—those are your all-stars.” – [50:09]
  • Use best closers for inbound; rest back to outbound to maintain hunger and team discipline.
  • Commission lower for inbound; compensation = volume/reliability.
  • Internalize marketing/sales core functions (hire experienced marketer).
    • “Your business is sales and marketing; build internal expertise.” – [53:29]

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8. Distribution: Growing by Increasing Customer Value

[53:55 – 59:53]
Participants: Evan (duct cleaning supplies, $1.2M to $3.5M goal)

• Core Constraint: Scaling beyond word-of-mouth; growing LTV.
• Advice:
  • Diversify acquisition: consider outbound, ads, affiliate channels, content.
    • "How do you get customers now? Strictly organic... so you don't do anything. That's why." – Alex, [54:22]
  • Three revenue wheels: sell machines, consumables, service.
  • Focus on increasing repeat revenue (subscriptions, consumable sales) with existing base first, then move upstream to higher-tier customers.
    • “You have the hard part of a profitable business without the actual profitable part in place. Build those other two wheels.” – [59:02]
  • Action: Reach out to existing buyers with consumables, upsell/cross-sell service, implement subscription models.

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Notable Quotes & Memorable Moments

• “Growth is constraint removal—businesses get stuck where their bottlenecks are, and the path to scale is always attacking the biggest one.” – Episode premise, continually referenced
• “You don’t want to generate demand. You want to channel it.” – Alex, [06:38]
• "Every business at a large enough scale becomes a business of businesses." – Alex, [12:19]
• “Do not be a scientist for the pitch.” – Alex, [20:47]
• “The process goes above the player—no one is above the script.” – Alex, [24:25]
• “Winning isn’t for everybody—the sales team culture starts at the top.” – Alex, [28:10]
• "As the founder, your highest value is in the training and replication of your revenue-generating roles." – Paraphrase from [38:37-39:56]
• "Profit share—set 10-20%, save room for future talent. Equity isn’t for now; it’s for an exit." – Alex, [41:56, 44:50]
• “You can't iterate on sales/marketing if you have too many new variables—start with your closers, then scale.” – Alex, [52:14]
• "You’ve been relying solely on word of mouth: the good news is you’re good, the bad news is you’ll have a steep learning curve for real acquisition." – Alex, [54:13]

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Key Timestamps

• 00:27 – Mike asks SaaS growth question (GoHighLevel for fitness)
• 03:13 – Offer positioning for fitness coaches
• 07:50 – Housing company stuck by land constraint
• 13:29 – Biotech: Raising at higher valuation
• 20:58 – Real estate wholesaling and sales team issues
• 29:46 – E-commerce talent and scaling bottleneck
• 41:09 – Digital agency: Incentive structure for leadership
• 46:48 – Roofing: From storm-driven to retail sales model
• 53:55 – Distributor: How to increase customer value and scale

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Tone & Style

Alex Hormozi’s delivery is brisk, practical, and unsparing, often punctuated with sharp humor and empathy for operator pain points. His advice is actionable and specific, translated into direct next steps. The atmosphere is energetic with a consistent focus on "finding and removing the bottleneck" in every business scenario.

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Closing Reflection

Across all business types, the common thread is identifying and relieving the true constraint—whether it’s talent, offer, acquisition, operations, culture, or capital. Hormozi’s approach is always to clarify what is really stopping the next level of growth, then attack it with relentless practicality.

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Transcript

[Trenton]

Please help me welcome host of the.

[Alex Hermosa]

Game, author of the $100 million series.

[Trenton]

Guinness World record holder, Alex Hermosa.

[Alex Hermosa]

Okay, fantastic. Talk fast. Ready to rock and roll. All right, you. Yes, sir.

[Sasha]

All right.

[Mike Klson]

My name is Mike klson. I sell GoHighLevel to online fitness coaches. I would do 2 million in revenue and would love to be at a million a month.

[Alex Hermosa]

Okay.

[Mike Klson]

This is what is stopping me.

[Alex Hermosa]

So what is stopping you right now? Why can't you do more what you're currently doing?

[Mike Klson]

Yeah, we basically developed and built up a better product because we had terrible retention.

[Alex Hermosa]

You had terrible retention?

[Mike Klson]

Terrible retention.

[Alex Hermosa]

And now you have good retention.

[Mike Klson]

Yes. So we.

[Alex Hermosa]

7% monthly.

[Mike Klson]

Monthly.

[Alex Hermosa]

Okay.

[Mike Klson]

Over 9000 LTV.

[Alex Hermosa]

Okay. What's CAC?

[Mike Klson]

6 to 5 or 4.6 to 1.

[Alex Hermosa]

Okay, so it's like 1500 bucks. Okay. Yeah, Cool. Got it. So how do you get customers?

[Mike Klson]

Right now we have 40 come through strategic partnerships of other mentors. Business sending their clients about the funnels.

[Alex Hermosa]

Okay.

[Mike Klson]

And then organic. And I would say the last piece is actually the meta ads or Instagram ads.

[Alex Hermosa]

Are those working and profitable?

[Mike Klson]

Yes.

[Alex Hermosa]

Okay, so two of those are reliable word of mouth. We'll just put a pin in for now. So fundamentally, why can't we either do more meta slash Facebook ads or more strategic partnerships in terms of the outreach required to get more of those people on board?

[Mike Klson]

Yeah, we totally think that meta is where to go. We used to do it. We turned it off.

[Alex Hermosa]

Cool.

[Mike Klson]

Okay, my real question I think on that is how do I make the CRM sexy on the front end to get somebody to actually inquire, are the.

[Alex Hermosa]

Ads working right now?

[Mike Klson]

I wouldn't say we're spending enough to say yes.

[Alex Hermosa]

What are you spending?

[Mike Klson]

2,000Amonth.

[Alex Hermosa]

Oh, okay. So, yeah, that's.

[Mike Klson]

We just have them on.

[Alex Hermosa]

Yeah, yeah, got it. Rule of thumb for everybody. Just side note, I can't really test a campaign unless I'm willing to spend 2x my target CAC as just a test of whether this works or not. So it's if my target CAC is 2k, it's like if I don't spend at least 4k, it's like you can't know anything because the cadence of feedback is so slow. On 2000, it's every two months. You'd be able to get like a sale inefficiently. And so you would. Because I have to be willing to spend more than my Target CAC so that I can then get it efficient. Assuming that I'm going to literally knock it out the gate on the first shot is unlikely. Okay, so from an offer perspective, what problem does go high level stuff solve for the online fitness coaches?

[Mike Klson]

We really break it down into four different funnels. We have basic manychat killer. We have a link in bio, which is your lead magnet.

[Alex Hermosa]

We have. So there's a pain there, which is you have followers want to turn your followers into customers without DMing anyone. It's going to be the automate. It's going to be the pain of being in the DMs all day. I would imagine they're all online fitness coaches. Yeah. And I'm guessing most of them are on meta or IG or whatever as their primary way of getting customers.

[Mike Klson]

Instagram primarily.

[Alex Hermosa]

Yeah. And then Maybe some like 20% on LinkedIn doing busy executives, whatever.

[Mike Klson]

Yeah, I would say none of them actually are on LinkedIn.

[Alex Hermosa]

Okay. So it's just IG.

[Francis Aguilo]

Yeah.

[Alex Hermosa]

Yeah. So at least you have a very targeted avatar. So it's, hey, you having trouble turning your Instagram followers into customers? All of this can be automated. We'll show you in 7 minutes how to do it. And that's the lead magnet. And then it where it's a case study of somebody who had ideally 7,000 followers and then was able to get to this many sales per month. Intimidating. That's what I would. That's what I would. That's what I would lead with would be like, here's five different coaches who all had less than 5,000 followers who are all able to get five clients a week. Right. That sounds sexy. Just using our automation. That would be my angle. But fundamentally it would just be like, boom, five case studies. Let me break down each of these. And each of the five would represent different psychographic avatars. So it'd be like jacked white bodybuilding dude. And then it'd be like skinny vegan dude who's older and black. And then there's Asian girl vegan powerlifter, and then mom's over 50 lady. Like all of them have their own niches. And I'll just show that it because everyone's concerned after you say, hey, I'm an online CRM is will this work for me? And so you just would be like, yes, it will work for you. And so that would be basically a representative that I would use there. That's what I would do as my first shot. But then, yeah, VSL sales call close. Try and accelerate as much of that cash up front as you can. This is like a bingo bango money mango type play.

[Mike Klson]

No for sure. Yeah.

[Alex Hermosa]

What part worries you?

[Mike Klson]

I don't think any part worries me as much as just we're not a mentorship group.

[Alex Hermosa]

Yeah.

[Mike Klson]

And so trying to sell the CRM with the automation process more so than another, if you would. But just trying to find the right messaging. We know this is where we're supposed to go.

[Alex Hermosa]

Yeah.

[Mike Klson]

The idea was like before I just.

[Alex Hermosa]

Tried and figured out. Yeah. I'll tell you what I did when I had an identical business with Alan. It wasn't just online, but it was brick and mortar primarily. But same idea. Me marketing directly to SMBs sucked. And so I just marketed to agencies. And so to your point, like, you're not a guru, you don't want to get in the guru business. I didn't want to be in the SMB guru business. I just found people who had agencies that were Cairo, agency, whatever agency. And I said, hey, use my platform. I'll do this shit that you don't want to do. And then they constantly would have clients coming in and out. But the people. But they stuck with me for less.

[Mike Klson]

She was saying we should run a. From an ad strategy campaign to gurus, business mentor.

[Alex Hermosa]

Yeah. If you're a fitness business coach, hit me up. We'd love to do this stuff all for you. And we have stickier revenue than you do. And so, like the pains for those people. Aren't you tired of giving people the keys to the kingdom and having them leave three months later? Wouldn't it be nice to have some recurring revenue that would actually stick year every year? Imagine if you could have customers from three years ago or every customer you've ever sold in your whole life still paying you. How different would your business look? Probably materially. Each of those are probably hooks that I would test and I don't know which one would work, but one of them would. And then that as soon as I know, then crank. But I would probably go there. Especially if you're like. Because what will happen is if you actually go straight to the quote fitness coaches, they'll be like, great, I have this thing, how do I get leads? And then you're like, fuck, yeah.

[Mike Klson]

It's a whole nother process.

[Alex Hermosa]

So you'll end up having to get into that. When in reality, the people you have to meet, customers who have the problem to solve. You don't want to generate demand, you want to channel it.

[Mike Klson]

Yeah. As the coaches that normally are already doing 10k.

[Alex Hermosa]

Right. I don't know what the LTV to CAC difference between the two would be. I Can tell you that. I know like on our side with Alan it was absurd when we went one level up. Yeah. So just going because an agency, it's like I could acquire an agency for $5,000 and then the agencies would pay to onboard with us and they'd pay 25,000 number one and then number two. Then each one that would onboard. Let's say they had 50 customers. They pay a thousand per customer. So we had another 50 grand and then we had the recurring which on the back end was like 30% of top line. So it was a super profitable model for us. But it worked for them because they didn't have to do any of this backend shift which we did. So if I had to like how do you get there faster? Would probably be just go up one level of. But when you do that though realize you will now serve two customers. You'll basically have to have a customer success manager for the gurus and then you also have to have success on this side to make sure the customers are happy. So it'd be two sided.

[Home Builder]

My name is Katie. I sell new construction homes to first time home buyers.

[Francis Aguilo]

Awesome.

[Home Builder]

We do 200 million in revenue.

[Alex Hermosa]

Amazing.

[Home Builder]

We, we would like to be at 300 and land acquisition. The constraint of our industry is what's stopping us.

[Alex Hermosa]

So you getting land has been the issue?

[Home Builder]

Yes.

[Alex Hermosa]

Okay. So where do you currently, where do you source land deals now? It's like the permitting or just. Okay. So it's mostly just getting farmers to give up their land.

[Home Builder]

Yeah. Anyone who owns land but they just.

[Alex Hermosa]

Have a lot of it. Yeah. Word. So what's the current strategy that you use to get farmers to give up their land?

[Home Builder]

Find out who they are.

[Alex Hermosa]

Okay.

[Home Builder]

Do a lot of digging to find out who has land available and calling them.

[Alex Hermosa]

Are you buying lists?

[Home Builder]

No, there's not. It's readily available in the mls. Like we have access to the information.

[Alex Hermosa]

Okay. Yeah. So the issue is there's just no more names to call.

[Home Builder]

It's not about the lead of land. It's getting it from the point of acquiring it ready to build on.

[Alex Hermosa]

So is the permitting.

[Home Builder]

It's the development of the raw land to finished lot. Could be anywhere from 2 to 10 years depending on the project. And we don't want to put our cash just rotting out in the 10 year timeline, no return. So we like to purchase it from the a developer that does it for us. We can find the weeds and find the land but we don't have the people to develop it to get it to us.

[Alex Hermosa]

Your Size. Have you considered either one, pillaging the best developer's talent? Bucket A, bucket B, just your size.

[Home Builder]

You can just do the acquisition, become the developer yourself.

[Alex Hermosa]

You mean like, yeah, we'll just buy one. Yeah, buy one. So you can just basically vertically integrate what you're trying to build.

[Home Builder]

Yeah, we should probably do that.

[Alex Hermosa]

You have the capital to do it. I'm sure you have really good lending relationships anyways. And those businesses, I don't know what kind of margins those run. But like, I'm sure like I would look at who are like my first steps would be like if I was like transplanted in, I'd be like, okay, who did we buy land that was developed from over the last 10 years? And I would get all of those names and then I would be smiling and dying, slash, trying to fly out or fly them out to say, some of those guys are going to be older, some of those guys aren't going to give a shit anymore and they've got a good team or whatever. And I'd be like, great, like how can we make something work here? And I'd be looking at doing a deal that way because it depends obviously at your size, it's buyer build. And it really depends on how entrenched the inroads are and how from like the zoning and all that bullshit, how relationship dependent it is at the levels that you're looking at. I'll give you a completely different example. But if you think about like OpenAI and some of the new AI stuff that's going on, one of the strategies that's becoming more prevalent is rather than try and buy these AI companies that, let's say they've got 30 geniuses that work there and trying to buy that company for a billion dollars, they just look at the top 20 of the 30 people who don't have, who have, maybe they got diluted because of the way the VCs ran the deal or whatever. And then they just say, hey, I'll give you. And you've seen these like $100 million signing bonuses probably like flying around on Instagram. And it sounds absurd, but it actually is more efficient to give one person or the four key people in the business $100 million than buy the business for 4 billion. So it's just a pure allocation of capital play. And so from a buy versus build, if you can strip the talent out and they can keep the relationships and then you can rebuild it, that'll be the most efficient way to do it. But the, and again, the test is that would Be my hypothesis, like how ingrained are those inroads? If they're super entrenched and very difficult to transport those relationships, then I would be looking at, I'll just buy the whole company. Older guys oftentimes will actually take super long earn out periods because it just becomes an annuity for them. So sometimes they're willing to take 15 year seller financing just to know that they're going to get paid and collateralize it against the business. And you already have assets and so do they. And so that can actually be a really, it's a win win structure for many of them.

[Sasha]

Yeah.

[Alex Hermosa]

Just as a consideration. But that's probably. I would, you're at the size now rather than me say here's how I'd build a land development business. That's probably how I think about it.

[Home Builder]

I think we have just been avoiding it because it's a distraction from home building. It's like a completely different business.

[Alex Hermosa]

I think that every business at a large enough scale becomes a business of businesses. Okay, so like Amazon is not just like a business. Like there's AWS and there's the white label business and then there's the logistics and distribution. There's so many elements, there's the video and the media side. There's so many different elements of Amazon that you might be at the stage where it might make sense. So it does come back to the goals. If you know that you're. Do you feel confident that you'll stay at 200 million or are you going to grow at 20% if nothing happens? Or what's the current growth rate? Are you stuck there?

[Home Builder]

We've been stuck.

[Alex Hermosa]

Okay, yeah. Then you probably do need to. If that is the constraint of the business. It's like we build on every piece of land that we can get. That's the constraint.

[Home Builder]

Right.

[Alex Hermosa]

So then that, so then I think about. So the quantified version of what a constraint is, it's the highest return. It is the allocation of resources that yields you the highest return. And so if you focus on so fundamentally. So why would we not want to do that? It's like this is the place where we get the highest return in the business. And the nice thing with that is that constraints oftentimes are not like 10, 20, 30% improvements. They can be like order of magnitude improvements. All of a sudden you can go to a billion because you opened up five times the land.

[Home Builder]

Nailed it.

[Sasha]

Thank you.

[Alex Hermosa]

Yeah.

[Eric Stauffers]

My name is Eric Stauffers and I'm not a paid spokesperson, but I'm Going to speak for all the entrepreneurs. You put together an amazing group here, not just of entrepreneurs that you cur, but the acquisition team. We've learned so much. So thank you for that.

[Alex Hermosa]

Thank you.

[Eric Stauffers]

My company is bioxcellerator. We're one of the top stem cell companies in the world right now. That's what we're known for. We're actually a biotech platform. So we have a lot more behind the scenes. So what we do right now, what we sell for revenue is our services, our health care services in stem cell and exosome. We're 24 million. We want to be at 250.

[Alex Hermosa]

Okay.

[Eric Stauffers]

Actually 500. But I was sandbagging for this. But there's a lot of things stopping us. One of them, I'm afraid, that has been uncovered is our level of expertise, possibly including me. I think we're doing better than anybody in the world. I'm biased, obviously, but we're pioneering an industry, so there's no real great blueprint. That's my excuse. But I've raised capital for both for this business and my previous real estate career. But it's been in small chunks of 5 million, 10 million, 15 million, like.

[Alex Hermosa]

Rounds or like friends and family?

[Trenton]

Both.

[Eric Stauffers]

So for this company, I seeded it angel seed and then a series A. We're on a series B right now. That's about my level of expertise. But when we really need to get out to scale, we're going to have to get a lot more money. And I'm noticing and starting developing these relationships that it's a much different conversation when you start asking for 100 million versus 10.

[Alex Hermosa]

Yeah.

[Eric Stauffers]

So I guess my question gets down to what are. What would be a good suggestion, knowing that I don't want to leave the company and get kicked out yet.

[Alex Hermosa]

How much equity do you have left? Or do you have 65%? Okay. So you still have a good chunk and then 35% is all investors or their team okay?

[Eric Stauffers]

I have some team members also.

[Alex Hermosa]

Okay. Key players.

[Eric Stauffers]

Yeah, Chief medical officer, stuff like that.

[Alex Hermosa]

So is the issue that you've had the conversations and people are saying no to the higher valuation in order for you to get the capital you need?

[Eric Stauffers]

Yeah, a little bit of that. Because really we have a lot of technology that hasn't. It's been proven in our clinic and it's ready to basically scale if I could get the money for the manufacturing to build the extra laboratories. And so I don't want the valuation to be squeezed so much that it squeezes me right out of A power position. Yeah, that's the issue.

[Alex Hermosa]

Do the existing investors who have come in so far, do they have. Because like you can absolutely maintain control and still be a minority shareholder. Zuck has 100 to 1 voting rights. And so if there's a business that requires more capital, but they still trust you, but understand that it requires more capital to get to where you want to go, then you could still maintain control. You want. As long as they buy you.

[Eric Stauffers]

Yeah. The people we have right now are like that. We have some professional athletes and celebrities, a lot of people that were like really good patients of ours.

[Alex Hermosa]

And then they wrote us.

[Eric Stauffers]

Yeah. And then they wrote us checks. But they're not really big funding partners.

[Alex Hermosa]

Yeah. So fundament, this is just a sale. That's all it is. And so I would, I would encourage you to probably think less about this is sound really less about the facts and more about the story. Now facts do make great for great stories, but the question that we have to answer is like, what would you need to see in order to believe? And so if I'm talking to. So when we're thinking we're about to. Let's say we want to raise a round in 2026. Right. I'm having these conversations now with 10 times the amount of potential, kind of like investment partners to understand what their, what each of them needs to believe or needs to see in order to feel confident to make the bet. And once I have that kind of big list, then I can narrow that down to okay, this guy's unrealistic, this guy's unrealistic. This we can do and it's going to cost us this much. And so sometimes it's a tiny race to just get this one need to believe to be believed. And then you can ladder into this other thing. And so I think about it as I want to go find my customers, find out what they want, and then build the thing they want. Now to be clear, that's not like trying to derail the vision. Like you don't want to build another person's company. But it's typically they're all going to just try to pay down risk. That's all they're paying down. Right. Or want you to pay down for them. So from a control perspective, that's super manageable. If you did it today, it's like maybe you lose half the equity that you have, but now you have a company that you raise. How much cash do you need to finish this round?

[Eric Stauffers]

5 million. But we want to go out and raise 100 in 26, 27.

[Alex Hermosa]

And what. And you want to raise that at what, a billion at.

[Eric Stauffers]

No, half a mil, Half a bill.

[Alex Hermosa]

Okay. 500 million is what you want to raise it at. So you want to sell 20% and get 100 million in cash.

[Trenton]

Yeah.

[Alex Hermosa]

Okay. There they have to see basically what risk are the people who bought in at 20 or what's your current valuation? The last round, 50 million. Okay. So that's a 10x difference in valuation. What risk did the 50 million round take on that they are now rewarded for with the $500 million round? That's a question. I don't know.

[Eric Stauffers]

In my mind, we've de risked this more than any other platform on the planet, but there's still a lot of regulatory risk. Okay, so there's a lot of unknowns that the 50 million round didn't know. Like in. In the sense that now Florida and Utah and some other states are starting to change their thought process on stem cell. So it's starting to look more de risked in that from that point of view.

[Alex Hermosa]

So directionally the only. Has there been any technological change or sales velocity change or Avatar Channel? Has there been any new finding that fundamentally changes the game? Because again, I'm trying to help build the story here because that's all we're selling here is that we raised at 50. Now we're raising at 500. And the reason is.

[Eric Stauffers]

Oh yeah, we'll have a lot of reasons. Yeah. Because with that. Yeah, sorry, I guess I wasn't understanding. Yeah. We're going to build a laboratory that we've already proven our technology that we've been delivering for years and we're just going to be able to scale it. So I think.

[Alex Hermosa]

And that was there at 50.

[Eric Stauffers]

Yeah.

[Alex Hermosa]

And that was not there at 50.

[Eric Stauffers]

That was not there in 50.

[Alex Hermosa]

Okay, great. And so to me it's like these are the. This is what has changed and now fundamentally changes the nature of the business. That is it. So it's like this is a $10 billion business. There are three more assumptions that have to be proven true. We proved this one right, which is why we are now because it's. They're all discounts on a $20 billion business of the likelihood that you actually achieve that. Like, at least that's the thinking process most VCs or at least good VCs come in with is like they're only making money on multi, multi billion dollar companies. And so it's. How many assumptions do I have to believe will be true and the fewer assumptions that need to Be true the higher the valuation, because the higher likelihood. And so if we're like, this was actually the riskiest of the four that have to happen. And that's why we have the biggest step up in our valuation, because now it's just a capital constraint, not a assumption constraint. We've already deconstrained this, and from the regulatory risk perspective, all the directions are pointing green, not red. That's how I'd position it. Okay. It is for sure a pitch, though.

[Eric Stauffers]

Yeah.

[Sebastian]

Yeah.

[Eric Stauffers]

I get kind of in the weeds of the nuts and bolts and people just. Their eyes glaze over.

[Alex Hermosa]

They don't know the science. Yeah. They just want to know that they're going to make a lot of money. And so it's going to be a sale on you and a sale on the story.

[Eric Stauffers]

Okay. Yeah. Thank you.

[Alex Hermosa]

I just, like, do not be a scientist for the pitch.

[Eric Stauffers]

Yeah, no, I'm not.

[Alex Hermosa]

So, yeah, I was like. We could help you with that if you need it. Yeah, thanks.

[Francis Aguilo]

Hey, Alex, what's up? My name is Francis Aguilo. I am a real estate wholesaler.

[Alex Hermosa]

Okay.

[Francis Aguilo]

We're currently averaging about $450,000 a month in revenue. I would like to be at a mean.

[Alex Hermosa]

That's your spread. That's what you're making. Or that's like house volume.

[Francis Aguilo]

That's gross.

[Alex Hermosa]

Okay, so what's your. What's your spread on that? What's your take on that?

[Francis Aguilo]

So we're at 40%. So right around 250. 240.

[Alex Hermosa]

Interesting. Weird. That's high. What kind of. What are you wholesaling?

[Francis Aguilo]

All right, so here's the.

[Alex Hermosa]

He's like, have you heard of brothels? So imagine a brothel, but now it's all midgets. Okay, keep going. You're good. Okay.

[Francis Aguilo]

But here's the challenge we run into. So we're currently at 450 average. Yeah. We've had 700k months this year already. The challenge is every time we get to those numbers and I try to, hey, you know what? It's time to ramp up. For some reason, we tend to tank to 200. 250.

[Alex Hermosa]

Okay.

[Francis Aguilo]

I'm sick. I have cause to believe it's the sales team and just.

[Alex Hermosa]

Okay.

[Francis Aguilo]

They have those power months where everyone takes home 20, 30 grand. And then the month after it's.

[Alex Hermosa]

Are they pure commission or is it split?

[Francis Aguilo]

So there is a base salary.

[Alex Hermosa]

Okay. What's the split between commission and base?

[Francis Aguilo]

So they're at 42 base.

[Alex Hermosa]

Okay.

[Francis Aguilo]

Per annum, and then 10 of the assignment fees.

[Alex Hermosa]

Okay. Of the fees all right, this is. So you have an ops issue, which is sales ops. And so it's good. This is going to be much more weedy in terms of, like, tactics, to answer this question. But there's probably like 20 things that you need to be doing, and you're probably doing like 13 of them. And the other seven are going to be the thing that make the difference and creating the consistency of the team. That's at the surface level. At the deep root of this is who's the leader of the sales team.

[Francis Aguilo]

I do have a sales manager.

[Alex Hermosa]

Okay. So he or she is the problem. Because, like, sales at the end of the day is a culture game. Everything's a culture game. But like sales, you can feel it so quickly when things are good or not good because the performance, the feedback loops are so fast. But for whatever reason, you do not have a culture of consistency within your team. I would wager that script adherence is low because you have such variability in close rates. Unless there's a change in lead quality, which would be something else. But are the leads the same like this month as last month?

[Francis Aguilo]

Yes, the leads are the same.

[Alex Hermosa]

Yeah. So it's a sales discipline issue, which then comes down to the training cadence, the scripting, how people are being managed on a daily basis and weekly basis in terms of their career goals, how like, you're doing morning. Like, it's. This is all sales ops. I could, like, just start talking about sales, but this is a pure sales ops issue. And so at the. There's a two step. Like, I would approach this in two steps. Step one is we should do all the stuff that we are not currently doing or we should be doing. Everyone should be reading the same script. If they're not reading the script, why are you on this team? We need to have training that's every day to make sure that they are saying things the right way. We need to make sure that everyone memorizes the script. Some of you guys might have seen the YouTube video I put out like two days ago about this. But, like, they have to breed the script. If they were not saying the script word for word, you cannot be on this team. You cannot take these calls. I'm getting these leads and not for you to go cowboy and make up. And that then if we cannot solve that problem because for whatever reason, you keep trying it and they don't adhere and they go off script because they just want to close the deals. It means you have a cultural issue, which is a leader problem, because it means the leader is reinforcing behaviors that get people to go off script and there's no consequences for doing it. And so if you want to have a consistent world class sales team, the process has to always go above the player. No one is above the process. And I do think that 95, maybe 98% of sales teams have no idea how sales training, how sales culture, any of this stuff works. They just hire a bunch of people, see who closes deals, fire the rest. And so then you just have a bunch of mercenaries who work for you. But there is no culture, there is no team, and it's every man for himself. And that is what creates this volatility in sales. And some guy says something and he closes a deal and the other guy's, I'm going to try that now. And there's no consistency across the board. And that also gets you in trouble long term because they start promising things and making deals that you can't cash.

[Francis Aguilo]

That makes a lot of sense. I, up until now we have scripts.

[Alex Hermosa]

But they're more of suggestions, guidelines. Yeah, no, it's. I've done a lot of sales. This is a straight out of the book checklist problem. We have to do all of these things. If we do this entire checklist, we will get this outcome. If we can't do this checklist, the leader is the problem because they don't know how to reinforce culture, which then means that they're not able to get the right people on and the wrong people out. Which sometimes means we might have to fire half the team to get the right people in so that we can build the culture we need to get to where we want to go. Because you are in, I show the shapes of businesses you are in a sales and marketing business, there's functionally no delivery. Like you're just basically you guys doing outbound or like smiling and dialing or do you buy leads from setting teams?

[Francis Aguilo]

Inbound is Google Ads.

[Alex Hermosa]

Google Ads? Yeah. Okay, so you have inbound leads that are coming in and then you close. Like that's the business. Like you buy media, you sell shit. And so this has to be a core. Like you have to be world class at this if you want to be world class at wholesale. Gotcha. But that's the contrary.

[Francis Aguilo]

In the event that I have to let go of half the team, they're just not good enough.

[Alex Hermosa]

Yeah.

[Francis Aguilo]

Where do you suggest I look for?

[Alex Hermosa]

It's not about where, it's about how. So it's not like I'm going to find the better you get at training sales and creating consistent sales processes, the less skill someone can have and create a consistent outcome within your team which becomes the arbitrage of your business. Just like I said the cleaning thing before, if the whole constraint of that business is going to be finding basically taking a human being and then turning them to a great cleaner that actually shows up on time, you have to take the raw input of somebody who has no skill and just has work ethic, just has energy and in 14 days you can get them closing deals on wholesaling. That box is the value that your company, that is your ip, that is the trade secret, that's how your company is valuable. And so when I say who versus how, like where do I find these people? You could run indeed ads and find like for this caliber of salesperson they're everywhere. The issue is then what is the process and what are the expectations we're setting for those people as they walk in. And so typically when you're doing high volume sales like you are how many guys you have on the team currently 17. Okay. So when you have that, that mid sized someone comes in, usually you get constrained because the amount of churn you have people quitting, leaving is about equal to what you have to hire. And that's what keeps you stuck. Right. And so it's a process issue on the demand gen side for talent. And so usually we look at that and say okay, what part of this can we screen ahead of time? So it's let's send them the script before they even show up. So people apply, we send them the script and then send us a 60 second video of you saying the script. And then from the 60 second videos we're going to invite people to a group call, not one on one because we don't have time for that. And we're going to go quick drill, say the script, give a piece of feedback, see how they do it again, if they could take the feedback well and they were prepared, great. It means they're coachable, they have work ethic. Awesome. Now we can take you to a job offer call. Somebody you know has attitude on the coaching, they're out. If someone doesn't show up prepared, they're out. Very easy screening. And so you take 10, you pick two, pick three, they go to the next one. You make job offers and that's the flow. But like the entire sales process of selling them on selling for you sets the frame for how the company operates. Like how disciplined you are and how militant you are in terms of how you set the frame for this is how we Fucking do things here. Either get in or get out. I do not care. But we win. And if you can set that frame, you will attract winners. And winning is not for everybody. And so that means that on the team, there's probably some losers, and it's not for everybody. So that's the decision you make, and that's from top down. So there's the tactics, and then there's the root issue. I would try this first. If this doesn't work, you have to probably gut things.

[Sasha]

Thank you.

[Alex Hermosa]

I know he's the only person struggling with sales here. I saw, like, more notes, like. Okay, group interview. Yeah, go ahead.

[Sasha]

Wow, I'm super nervous.

[Alex Hermosa]

Oh, don't be.

[Sasha]

So I actually. There was someone that I ran into at a house party that was pivotal for you.

[Alex Hermosa]

Pivotal for me?

[Sasha]

Yeah. You mentioned in a podcast.

[Alex Hermosa]

Okay.

[Sasha]

That they. That they inspired you to create content.

[Alex Hermosa]

Okay.

[Sasha]

And I was too shy to say hello, so can you imagine how I feel right now?

[Alex Hermosa]

You're crushing it.

[Sasha]

Thank you. Okay, so my name is Sasha. I sold designer bags and sunglasses.

[Evan]

Cool.

[Sasha]

And we do about 6 million a month. No. So sorry. A year. Sorry. 6 million a year still.

[Alex Hermosa]

Cool.

[Sasha]

And I would like to do 38 million.

[Alex Hermosa]

Precise.

[Sasha]

Yeah. 38 million.

[Alex Hermosa]

Okay.

[Sasha]

And what's stopping me is.

[Alex Hermosa]

Why 38?

[Sasha]

Just because I figured a hundred thousand a day, something like that. Round up, down. Something like that. Okay.

[Alex Hermosa]

Got it.

[Sasha]

Around about. And obviously more.

[Alex Hermosa]

Yeah, yeah.

[Sasha]

Okay. But, yeah, I was thinking 38 would be fair.

[Alex Hermosa]

Yeah, that works.

[Sasha]

And it is just recruiting.

[Alex Hermosa]

Oh, recruiting is the bottleneck, as you're saying.

[Sasha]

Yeah.

[Alex Hermosa]

Okay, got it.

[Sasha]

My house cleaner was my first employee, and she just. And because I consumed yours and Lado's content so much that I was like, I'm gonna be these two people in one. That's me. Be these two people. And as a result, I have a great team. Really great team. And it's just a matter of being militant in the. The recruiting process.

[Alex Hermosa]

Okay.

[Sasha]

The. We do sell on whatnot quite a bit.

[Alex Hermosa]

Who do you have? What's stopping you? So you make money $6 million a year selling handbags and sunglasses. For you to sell more handbags of sunglasses, you need more people to do that.

[Sasha]

Yes. Because we. We only go live for about five hours a day because we get tired. It just means me and I have three sales people, but it's just, we get tired. We could. If we were alive more often, we could create more.

[Alex Hermosa]

You're going live on, like, your Instagram page or your what?

[Sasha]

On whatnot.

[Alex Hermosa]

Okay, got it. And do you have a big following there?

[Sasha]

110,000.

[Alex Hermosa]

And so you're just selling to that same base. And if you just sold for longer, you would make more.

[Sasha]

A lot more. I could do 100 grand in the show.

[Alex Hermosa]

Okay, so you just need, like, two more salespeople who are going on camera.

[Sasha]

But yeah. And then the recruiting as well.

[Alex Hermosa]

Recruiting for what?

[Sasha]

Packing? Because we do a lot of.

[Alex Hermosa]

You do your own 3 PL or not third party, but do you do your logistics?

[Mike Klson]

Why?

[Sasha]

Why do we do it ourselves? I didn't know you can have other people do it.

[Alex Hermosa]

Boy, oh, boy. Yeah. Step inside. Yes. So functionally, like, because of the nature of the business that you're in, we have to think we have to consolidate resources. I'm not normally somebody who's let's cut parts of the business out, but unless your shipping is some key differentiator that you have, like Amazon shipping became a competitive advantage. Right. But unless that's like some differentiator, then shipping, for the most part, is pretty commoditized. And there are people who, all day long, they think about saving 15 cents on cardboard boxes and tape and packing peanuts and all that shit. And I think that you having to, like, think about that and run a. Functionally a warehouse at the same time as running a marketing and sales and talent business, media, that's not where the value is. The values in the distribution and the sales. And so I would say, can we outsource this so that. Can we outsource this, the logistics part, so that you can just go all in? Because if all we had to do is you get two more salespeople and you get to a hundred thousand a day, we should do that.

[Sasha]

We have to physically show the product.

[Alex Hermosa]

Like, well, I'm not saying you don't have some product on hand. You just don't need a warehouse.

[Sasha]

No, we do need it because it's go.

[Alex Hermosa]

Okay.

[Sasha]

Speed. We run probably about.

[Alex Hermosa]

So you're like, we sold this item to this person is how you do it.

[Sasha]

Yes.

[Alex Hermosa]

Okay. Got it.

[Sasha]

Like a warehouse. It's. Yeah.

[Alex Hermosa]

Okay, that's fine. All right. So you just need to hire more people. So what's stopping you from hiring more people?

[Sasha]

The talent.

[Alex Hermosa]

The talent to hire more people.

[Sasha]

I'm learning now. That's why I'm here.

[Alex Hermosa]

No, you're good. You're good. So I'm saying, like, you have two sets of roles. You've got warehouse folks and you've got people who can get on camera. So what are you currently doing to get each of those People we had ads on.

[Sasha]

Indeed.

[Alex Hermosa]

Okay.

[Sasha]

But I didn't realize how militant I had to be until I came here.

[Sebastian]

It's.

[Sasha]

It makes a lot of sense that there's that many interviews that are required.

[Alex Hermosa]

And that's more for the warehouse side. Correct.

[Sasha]

Both. Because sales is.

[Alex Hermosa]

I think that you'd be able to find salespeople like I would probably look at Amazon affiliates.

[Sasha]

How much would you pay them?

[Alex Hermosa]

Percentage.

[Sasha]

That's the thing. Okay. So it takes skill to do what we do. Yeah, it takes skill.

[Alex Hermosa]

Agreed.

[Sasha]

For example, my girl is better than me.

[Alex Hermosa]

Great.

[Sasha]

Better than me. And it's not only is it motor skills, it's presentation and entertainment.

[Alex Hermosa]

I get it. I understand. I did a live for three days. I got it.

[Francis Aguilo]

Yeah.

[Sasha]

So finding and training, that. That's definitely a process and takes time.

[Alex Hermosa]

Yeah. The question is whether you want to buy or build. Do you want to buy the town or build the talent? Building the talent is cheaper, takes longer, harder. Buying the talent is faster, more expensive. Which one do you. Which one feels right for you?

[Sasha]

So when it comes to the. So we have. We're not always. So we are profitable per show. Yes.

[Alex Hermosa]

Okay.

[Sasha]

Profitable per show. But sometimes what ends up happening is. Let's just say it's a Wednesday. Right.

[Alex Hermosa]

Are you on cash based accounting or accrual? Probably cash.

[Sasha]

Yeah.

[Alex Hermosa]

So you might. If basically if you run a physical products business, which you do here, you're like, okay, we made money. Now let's take all of that profit, gross profit that we had and go buy more shit so we can sell more shit. Right. So this is where like you probably have. What's your, like, what's your financial. The financial side of the business?

[Sebastian]

The financial ops look like my accountant handles it.

[Alex Hermosa]

You're who? My accountant or your accountant does it. Okay. Yeah. You will need to have soon a relatively strong finance person who can give you better forecasting so that you can. It's not just like how much cash we have in bank account, let's go buy more shit. It's. We can only afford to buy this much given this growth rate that we want to have. Otherwise you will get into these probably cash crunches that you're feeling right now. It's not that the business isn't profitable because I'm guessing the headcount's not super buy.

[Sasha]

So our shows will make anywhere from 5 to 7,000 in profit depending on like the volume that we did that day. So we know the profit like per show. However, that's where the skill comes into play. If a show's not going well. We need to have that person trained to be able to do the thing. And so that's why not knowing how much to pay them is.

[Alex Hermosa]

I think doing a percentage would make sense.

[Sasha]

Percentage of profit.

[Alex Hermosa]

Yeah. Like a salesperson.

[Sasha]

Okay.

[Alex Hermosa]

And so you can buy or build that to buy it as I would just go to many micro influencers who are already like on Amazon hawking stuff and be like, they already do live streams and they already do sell shit. And I bet I could teach them to do this for me. That is a buy version because you already know it's already proven. You're just saying, hey, do it under my umbrella. The build version is that you have to kiss a lot more toads and try and look for who has already built in a bunch of soft skills and then you can hire for the small skill deficiency that you know how to train.

[Sasha]

Okay. So Amazon affiliates, you can do either.

[Alex Hermosa]

But yeah, obviously this is me a lower risk thing. And then you just have to have some agreement that they're gonna only sell for you for X period of time.

[Sasha]

Good contract.

[Alex Hermosa]

Yeah, like a contract.

[Sasha]

Thank you.

[Alex Hermosa]

Yes. But I would. But big picture because I want to make sure that you're good. The indeed warehouse stuff that's just commoditized. You have a warehouse, maybe you have to have it for your business. But I don't see that as. That's not a core differentiator you might have. You're not different because you have a warehouse behind you that's not special. So the roles that you have there, it's like they need to be like, have a pulse, have a good leader there. Let them just deal with it. Your star factor is going to be your ability to train people to sell. And so that's like where is your. What is. What is the true pinpoint of where the most value gets created for you as the founder, the entrepreneur is that you need to be able to take somebody and teach them to sell.

[Sasha]

Yeah. My.

[Alex Hermosa]

And you have to break it down in. In terms of the most concrete language you possibly can. And so think of everything purely in terms of behavior and do not use any amorphous words. So I need you to have higher energy. That means nothing. I need you to raise your voice. I need you to talk faster. I need you to have your shoulders back. You have to describe things that people can see and then other people will describe them as having high energy, having charisma, having confidence. And so if you want to teach someone to present, you have to tell them what to do. With their body and their voice, and it will be far faster for you. And what you'll find is the training. The reason it takes so long for people to train or they can, where they can't train salespeople or presentation people is because they literally do not use words that other people understand. This is the problem. This is why most companies cannot teach people to do shit. Because they say, have more charisma and then the person listens and is. I'll translate that into what I think charisma means, which who fucking knows what they think it means. Right? And then we're just playing this telephone game where no one agreed on. What are the behaviors I want you to do that will compress the amount of time that it'll take you to get someone up to speed. And two, long term, if you can develop the sales training, then you can have a stable of stallions that are on 24, 7 for you working in your barn.

[Sasha]

So that.

[Alex Hermosa]

I don't know why it's animal snap, but let's go with it.

[Sasha]

So that, that's actually, that brings up a good point. So I, I, I have. So my girl, like I said, she's my house cleaner, shows up at my door one day. She's like, hey, I want to be you.

[Alex Hermosa]

Yeah.

[Sasha]

And she's like, I'm a copy and paste of you. And she became me.

[Alex Hermosa]

Yeah.

[Sasha]

Now there's a little bit, a little bit of a How can I. Because obviously I had to learn the care part, like from Layla. So I learned the care part and now I have it. But then I've seen her. I've seen situations not go the way they should because she's too. She's a copy and paste of me from yesterday. So I'm starting to see those.

[Alex Hermosa]

What's the problem? We'll just put her in front of the camera, have her sell and get her out of the building. If, if she can sell.

[Sasha]

Yeah.

[Alex Hermosa]

So let her sell. Don't have her manage people. Have herself.

[Sasha]

Got it. Understood.

[Mike Klson]

Thank you.

[Alex Hermosa]

This is good talk. Yeah.

[Sasha]

Okay.

[Alex Hermosa]

Thank you. Yes, sir.

[Sebastian]

Alex, My name is Sebastian. Four years learning. Thanks for everything.

[Alex Hermosa]

Yeah, thanks for coming out from Australia.

[Mike Klson]

Melbourne.

[Alex Hermosa]

Yep, Melbourne. Nice.

[Sebastian]

Sick Blue Sense Digital. We sell paid ads and growth advisory to eight, nine figure Ecom brands.

[Alex Hermosa]

Sweet.

[Sebastian]

We do three and a half.

[Alex Hermosa]

Okay.

[Sebastian]

We'd like to be a 10, then 20.

[Alex Hermosa]

Okay.

[Sebastian]

Feel super clear on our top priority against our supply constraint.

[Alex Hermosa]

Oh, talent.

[Sebastian]

Yeah.

[Alex Hermosa]

Okay.

[Sebastian]

Talent acquisition and first getting LTGP on talent. Something that's unclear is we've just established this past 12 months, our leadership team. So we have two team leaders ahead of growth and ahead of strategy. They're all just on salary at the moment, but putting together or building an incentive, a great incentive plan for them as a group to carry us as we 2 and 3x headcount.

[Alex Hermosa]

I would just go profit share pool, 10 to 20% and then they get slices of that slice so it caps. So basically it's like if you say simple math, 100 a year of profit, $20 is always going to be allocated or 20% is always going to be allocated to all leaders. And so they get slices of that pool, but then you always have 80 and then they think like you do, which is if we're going to bring this leader and we got to give up some of this pie, but they should be able to grow the pie, which is the exact same math that all of us do when we bring someone in. And so it gets them thinking more like owners. That's the simplest way I could break it down. Are you planning on trying to sell the business anytime soon?

[Sebastian]

Potentially, yeah.

[Alex Hermosa]

Okay. If you want, you can include a profits interest in the sale which you can have be proportional to their interest.

[Sebastian]

Yeah.

[Alex Hermosa]

And then if they leave, comes back to you.

[Sebastian]

Yep. How would you apportion that percentage split against those different roles?

[Alex Hermosa]

It's going to be. So first off, you're going to want to leave probably 2/3 for future talent if you want to go big. And so do not be like, okay, I'm going to blow my whole like slice of pie on these people because the best talent is in the future. It's not right now, but I'll give you the pitch or the walkthrough that I have with with somebody who's in this position is that. And this will probably apply to half of you who here has somebody that they were considering tying into your business. Okay. So I'll give you quick big picture advice. If you never want to sell the business, don't give shares away. The only thing that is guaranteed 10 years from now is, is that you will still be in the business. That's it. Everything else is not guaranteed. So I would not encourage you to give real shares away. Thing one thing to there are four things that equity provides. One is cash flow, the second is sale bonus sale dollars. The third is risk. And the fourth is control. And so when I have a conversation like this, I'd be like, okay, cool, so do you want any risk? And they're like, no, I don't want any risk. And you're like, okay, cool, so we don't want that. I'm not going to give you control. So that's off the table. So all we have left are cash flow and the chance that we sell. And that's what we're going to do. And I'm sure in Melbourne, I know the legal situation, but there's a version of we'll give you a profit share which comes off bottom line and in the event of a sale, you'll get a sale bonus. Now the issue with that is it's going to be taxed as income. At least it is in the US if they have a sale bonus rather than capital gains. But there is no real other alternative because either they have to take on risk and not get control and pay taxes on you gifting to them, or they have to buy it and give you money. Most people don't want to do either of those things. And you have to agree on evaluation. It's a whole fucking mess. And so it's easier to say I'll give you some money today and if we sell, you get money tomorrow and if you leave, you get neither.

[Sebastian]

And then that sale, you might have just said that the sale number predetermined.

[Alex Hermosa]

There's a zillion ways to slice this, but the simple way is if you have a 10% profit share like for the whole company and somebody let's say gets 10% of that so they have 1% of the profit. You could say when we sell, you will get a proportional amount relative the total for that 1%. So they get 1% of the sale.

[Sebastian]

Sure, yeah.

[Alex Hermosa]

And when you write that, make sure that it's the percentage of cash not calculated on the total value of the sale.

[Sebastian]

Yeah, sorry, last thing.

[Alex Hermosa]

I got fucked on that one before. So there you go.

[Sebastian]

Stoked. The head of growth is pretty much the sole sales guy or our first sales guy, non founder led. He'd be at this table commission on clipper sales plus this percentage of profit share. Or it's one of the other.

[Alex Hermosa]

Is he a founder?

[Sebastian]

No.

[Alex Hermosa]

It just sounds like he's your sales guy.

[Mike Klson]

Correct.

[Alex Hermosa]

Yeah. I don't.

[Sebastian]

New role for us.

[Alex Hermosa]

Yeah, he gets commission.

[Sebastian]

Yeah. He already has a leadership table, huh? The other guys at the leadership.

[Alex Hermosa]

Does he do marketing?

[Sebastian]

He started to. Yeah. He's developing into backfilling that head of growth role.

[Alex Hermosa]

Giving equity to sales guys. Like one of those day one mistakes that I'd prefer you avoid. Yeah. So I. If that guy's like really ambitious and really hungry and smart and you think that he's going to be there long term, I would say. I want you at the leadership table. I don't think you're ready there. Yeah. This is what I would need to say and just make it quantifiable.

[Sebastian]

Yeah.

[Alex Hermosa]

You need to get. You needed master demand gen, which creates five deals a week, five deals a month, whatever that number is that you'd act like if he actually did this, you'd be like, you earned it. So whatever that is.

[Sebastian]

Sweet, thank you.

[Alex Hermosa]

Lock and roll. Yeah, you bet. Was this helpful for somebody else? Okay. This is how you have the condo, though. It's much easier than, like, why won't you give me. It's like you don't even want equity. Do you want to pay me? No. Do you want to pay taxes? No. Okay, great. Do you want risk? No. Okay, great. I'm not going to give you that. So you want these two, and I can do that for you. Yeah.

[Trenton]

Hello, Alex. I'm going to piggyback on Dr. Stem cell and just. Thank you for.

[Alex Hermosa]

That's Elsinore. He went to the. Sorry. Go ahead.

[Trenton]

Letting us learn from you and your team. My name's Trenton. We sell roofing in the Metro Detroit market.

[Alex Hermosa]

Sweet.

[Trenton]

We're going to do about 3 million this year. We'd like to be at 10 million. Okay, quick context. We were primarily a storm contractor.

[Alex Hermosa]

Yeah.

[Trenton]

Storms have vanished in our market, which was hell, right?

[Sasha]

Yeah.

[Alex Hermosa]

Global warming back here, climate change, whatever.

[Trenton]

Actually the best thing that ever happened because it allowed me to step into retail.

[Alex Hermosa]

Okay.

[Trenton]

So over this last year, I've really had to, like, rebuild my business because right before that, we had hit to 5 million two years in a row.

[Alex Hermosa]

Okay.

[Trenton]

And now we're seeing this drop off. So my biggest constraint, or what's stopping me, is that for the last eight years, all of our lead gen has.

[Alex Hermosa]

Been from weather, from doors. Okay.

[Trenton]

So it's been 100% door to door lead gen. And now when we're trying to knock for retail, it seems to be like, heavier of a weight on the team.

[Alex Hermosa]

When you say retail, what do you mean?

[Trenton]

Like, just people on market that need a roof.

[Alex Hermosa]

It's like residential.

[Trenton]

Residential.

[Alex Hermosa]

Okay. Residential.

[Trenton]

Yeah.

[Alex Hermosa]

And when you were doing door knocking before, you were knocking on residential doors. Okay. So it was the one we were.

[Trenton]

Getting funding from the insurance company.

[Alex Hermosa]

Got it. Word. Okay. Yeah, yeah. Okay, so keep going.

[Trenton]

So now with me being a door too guy, like, purchasing leads and all that was, like, sacrilegious to me.

[Francis Aguilo]

Okay.

[Trenton]

So there's some limiting beliefs there that I started to explore. Last October, we bought leads.

[Alex Hermosa]

I just want you to be lead curious. That's all I'm asking for.

[Trenton]

Yeah, I am. I'm very lead curious now and. But I basically got slaughtered learning this acquisitionary binary.

[Alex Hermosa]

Be non binary with your leads. Like as many as you want.

[Trenton]

Yeah, no, that's what I'm trying to do here. And when we did purchase leads, and.

[Alex Hermosa]

I was the unedited version, by the way. Hey, go ahead.

[Trenton]

And when we started to stack the guys calendars, there was a big culture shift where we actually saw like more buy in from the guys. But then like the door knocking, just.

[Alex Hermosa]

Because it was easier.

[Trenton]

It was way easier. But like our CAC and all that was absolutely horrid. So I was spending $7,500 just to acquire one customer over the summer and it wasn't sustainable. So you make from a customer on average $6,500.

[Alex Hermosa]

So that does not work.

[Trenton]

No, it doesn't work.

[Alex Hermosa]

Yeah.

[Trenton]

And it was just like a lot of the marketing agencies that we worked with were like younger people. They were like using AI tools. Go high level, like, so we decided that we were going to build it in house.

[Alex Hermosa]

Okay.

[Trenton]

So with that being said, now it comes into a leadership issue because I need somebody that like, knows how to market better than I do so that I can focus on training and.

[Alex Hermosa]

Can I pause you real quick?

[Trenton]

Yes, please.

[Alex Hermosa]

Okay, cool. So you're at 3. You want to get to 10. You rebuilt it from storm chasing to just straight up door knocking whenever. Fine. I think it was a good idea. You had a door knocking team. You took the same sales guys, brought them on leads that you got them. They got lazy, fat, and don't want to do door knocking anymore. Great. Rule number one, outbound and inbound are separate teams.

[Trenton]

Yes.

[Alex Hermosa]

Inbound is what you graduate to. And so if you're an absolute savage, like you just take children's souls and just rip them out every day because you're a terrible person, but you're just unbelievable at sales. Then and only then do you get the opportunity for me to feed you leads. Because these are the most expensive leads that we have to work very hard for to make sure. And like, we cannot waste them on anybody who cannot close everything. And so thank you. I hope that was an amen. So first off is the team should be separate, but you're in this mix now. You're in a little bit of a mess. And so my 2 cents would be like, take that, because I'm sure their commissions have gone down since they now are selling nothing. Basically.

[Eric Stauffers]

Yes.

[Alex Hermosa]

Yeah. So I would say guys, my up. I went to this thing. He told me I did this big boo which is inbound and outbound were together. Which is not how it should be. Everybody get back on the streets. You guys do that. And then for the absolute savages of you because you can usually have far fewer people on inbound. That becomes the Christmas tree of the career path. Because on inbound I can feed you and you can do five sales a day. You can't do that door knocking. But I. You can do it. If I'm feeding you leads that are already qualified, already set, already gone through a vsl, whatever in the sales motion. And then those guys can absolutely clean up. But you get. You earn the opportunity to get that level of commissions. Now the commission structure should also be different on inbound because you have to pay for those leads. So it's a different role. They graduate to it. It's more volume, lower per. But it's more reliable. Which guys with families, things like that. If you have a bad day you close two and a good day you close seven. It's different than you have a bad day you can close 000. It's much more. It's much more stressful. And so guys will be happy to even give up. They'll even make the same money but just have to be more reliable. They'll be. And you don't have to be in the sun.

[Trenton]

So then we should hire for inbound sales.

[Alex Hermosa]

Yeah. Or take one of the guys you have who's really good at it and put everybody else back on the street so that you just funnel everything to that guy who. Because then you can iterate faster because you're new on this and so you want to. You never want to have too many news because kind of like the brick analogy I gave at the beginning. The more news there are the more likely something's going to fuck up. And so it's. I know this is a absolute savage salesperson. If they're closable he'll close them or she'll close them. And so then the only variable we have is just what offer slash lead source am I getting and what process are going from lead to talking to them. Those are the only variables you have to play with and you can control. It's much easier to iterate on that and then get it to go faster. Okay.

[Trenton]

Okay. And then. Okay. So then I want to hire a marketing director or leader to manage that. Now. Kim was blowing our minds in the workshop like he does he does do.

[Alex Hermosa]

That, our Asian Clark Kent.

[Trenton]

Yeah, it was. It was, yeah.

[Alex Hermosa]

Racist today.

[Trenton]

I was almost going to say he was a ninja, but I didn't want to. He wasn't anyways.

[Alex Hermosa]

But he's Chinese, I'll have you know. Samurai. Yeah, you're good. Keep going.

[Trenton]

But he was talking about when another guy was talking about a constraint and he was talking about the trade off of, okay, so you could spend $6,000 a month. You don't want to spend basically 100 grand to replace the person. What I'm trying to figure out is. I think I've answered my own question. I won't keep going here.

[Eric Stauffers]

It's.

[Trenton]

I've been working on the wrong problem, I think is what the situation is. And I'm trying to make sure this for you.

[Alex Hermosa]

Outbound team goes out. Inbound team becomes the one guy you need to hire a marketer person who actually knows what they're doing. Probably pay more than you expect, but then that person will be worth it. Your entire business is sales and marketing. So you should have the core elements of the business in house. Okay, great.

[Trenton]

Excellent.

[Alex Hermosa]

If you need help with the sales process, we can help you.

[Trenton]

Excellent.

[Alex Hermosa]

You bet.

[Trenton]

Thank you.

[Home Builder]

Alex, this will be your last question.

[Alex Hermosa]

Ah, it's gotta be like the best question ever. Hello.

[Evan]

So my name is Evan. I sell duct cleaning supply to duct cleaners. This year we will do 1.2 million in revenue. And I think I'd like to be around three and a half.

[Mike Klson]

Okay.

[Evan]

And I think what is stopping me is just being clueless.

[Alex Hermosa]

Okay, cool. So let's give you clues. So let's do one more. How do you get customers now?

[Evan]

Strictly organic.

[Alex Hermosa]

Can you take more customers than you have? Yes. Okay, so you don't do anything. That's why. All right. No, I mean, like, it's word of mouth. There's no like demand gen. That's happening. All right, so I've got good news and bad news. The good news is that your business probably, you probably are good at what you do because you've been relying solely on word of mouth. So that's the good news. The bad news is that you're going to have a steep learning curve for what you have to do next. And so you basically have to pick do you want to do outbound as your way of getting customers, which could either be door knocking, it could be emailing, could be cold calling, but you got to be Instagram DMing. It could be anything. But outbound, you could do paid ads to get customers. You can have affiliates. So you do those things to get affiliates or you could post content. Those are your options. Which of these do you feel like you are best equipped to do?

[Evan]

Probably paid ads. But one of the things I was thinking like is creating a higher value per customer a good option instead of trying to get more customers?

[Alex Hermosa]

Okay.

[Evan]

I don't know which route to go.

[Alex Hermosa]

So you'd want to double how much customers were worth.

[Evan]

I guess utilize my existing customer base with more consumable. So there's more repeat orders. So like they're ordering more.

[Alex Hermosa]

So duct cleaners go clean ducts. Yeah, correct. And you sell them.

[Evan]

We sell them the cleaning supplies, which is really high profits. And then we started selling some consumables but they're low profits. They might buy 500 a year, but it's only like $6 a unit or something. So there's not too much money in that yet. Okay, I guess the.

[Alex Hermosa]

But are they buying regularly from you? Just like how many customers per month are new customers vs repeat customers?

[Evan]

We average 80 new customers a month.

[Alex Hermosa]

Okay, so you do not have a lot of repeat business.

[Evan]

No how unfortunately. But fortunately the equipment I sell is really good. So it doesn't break down frequently.

[Alex Hermosa]

But on the consumable side, what percent are all those repeat customers?

[Evan]

Consumables? Yeah, those would all be repeat customers. There's just, even though the margins are. There's just. You can only make so much selling a $6 product. So I don't know if there's a way, I don't know, maybe through selling them education to maybe that be.

[Alex Hermosa]

No, fundamentally you have a normal business. There's a zillion businesses that work this way. Auto dealerships work this way. Large equipment works this way. Like ink and printers work this way. You sell, you have three. You basically have three wheels of revenue in this business. You've got. You sell the machines, you sell the stuff that the machines use and you sell the service around the machines. That's the three pronged approach. And so your ability to extend the customer LTV is going to be around the second two. Not where most people will even like the more sophisticated business will sell these at cost at a loss because all their margin is on the consumables and on the service. Now you can sell bigger customers so that those $6 things times 10,000 of those starts to add up. Or we can sell more on the front end. But either way the core focus of your business, like if I had a two step approach for you. Core focus number one is we have to know that we're retaining 90, 95% of those people on an annual basis on all the consumables. So every year I should know that 95% of those people are. They have to buy it from somewhere and they should all buy it from me. And so what ends up happening is your business starts, that becomes like the annuity of the business. So you acquire these new customers to sell machines for, whatever, and then this base of service and consumables just continues to rise over time. And that's super profitable. That's the game. Now you said that you wanted to grow the business by making them more valuable. I think you will have a hard time making the individual more valuable. I think it would be easier for you to sell a higher tier customer so somebody who cleans more ducks so that they can buy in higher volume or buy for entire fleets, whatever. That would be the path. But it'll be a different sales motion than you currently do. And so you have, you're at a crossroads where if you want to have significant growth, you'll either have to have a new acquisition, you'll have to have a new acquisition system basically either way, because you're either going to have a new acquisition system for a new type of customer or a new acquisition system for your existing customer. If I had my druthers, I'd probably rather you start with new acquisition system, existing customer, because you already know that flow. Once you have that, then I'd be willing to go up market.

[Evan]

Gotcha. So would a good first step be to reach out to our existing customer bases with explaining to them we have consumables, like we don't do any outbound to existing customers?

[Alex Hermosa]

Yes, that would be an excellent idea.

[Sebastian]

Gotcha.

[Alex Hermosa]

We have things available for purchase. You should purchase them from us.

[Evan]

That makes sense.

[Alex Hermosa]

And so realistically, you should probably get them on a cadence or subscription with the sale of the initial product. So I don't know what the offers that use, it's probably beyond the scope of right now. But that's where a lot of the alpha is right there is what kind of maintenance programs are we selling up front? What kind of incentives are we giving them for subscriptions up front, like the entire business. And here again I have more good news for you is that you've been making the money that you are with none of the actual pieces that make your business make money, make money, which is great news. And so we just have to put these other two wheels in place and then develop the motions around those and the profitability of the business will go up, up a lot. Like, a lot, dude. Like, you've got the front, you've got the hard part of a profitable business without the profitable part of the profitable business. So we just have to bridge that mode. That's it.

[Evan]

Yeah, that makes sense. Yeah. I think that's my only question.

[Alex Hermosa]

Okay, great. So sales, motion change, offer change, and then there's gonna be a re engagement on the back. And those are the three things for, like, today.

[Evan]

All right, cool. Thank you.

[Alex Hermosa]

Rock and roll. Appreciate you. Okay. Fun, exciting. We had a brothel. Lots of exciting things.