Take The High Leverage Opportunities | Ep 833

Summary

Podcast Summary: The Game with Alex Hormozi – Episode 832: "Take The High Leverage Opportunities"

Introduction

In Episode 832 of The Game with Alex Hormozi, released on February 5, 2025, entrepreneur and business strategist Alex Hormozi delves into high-leverage opportunities across various business models. The episode features real-world business challenges presented by listeners, with Alex providing actionable insights and strategies to scale operations effectively. This summary captures the key discussions, insights, and conclusions from each segment, enriched with notable quotes and timestamps for clarity.

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1. Scaling an Infinite Banking Insurance Business

Challenge: An insurance business with 29 agents is at a crossroads—should the founder remain the face of the business to attract customers or focus on expanding the agent team and training them in lead generation?

Alex's Advice:

• Leverage Through Agents: Alex strongly advocates for expanding the agent base. He emphasizes that recruiting more agents and empowering them to generate their own leads offers higher leverage compared to solely relying on the founder to attract customers.

  “Dude, get agents. I don't even know what we're talking about for sure. Get agents.” (00:26)

• Enhance Training Systems: It's crucial to develop a robust training system that enables agents to self-generate leads reliably. This approach removes the founder as a bottleneck, allowing the business to scale exponentially.

  “You need to bring them on and you need to have the training system to reliably get them to self generate. Like that's it.” (03:00)

• Double-Dipping Strategy: By alternating calls to action (CTAs) in marketing efforts, the business can attract both potential insurance customers and new agents simultaneously without overhauling the existing content strategy.

  “I think if you basically alternate the CTAs, you'll be able to ... get a little bit of the best of both.” (02:59)

Conclusion: Expanding the agent team and equipping them with effective lead generation strategies presents a higher leverage path with lower risk, enabling scalable growth without overreliance on the founder.

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2. Expanding an Educational Business Focused on the Hispanic Market

Listener: Henry – Sells education services teaching fix-and-flip strategies, primarily to the Hispanic market in Spanish.

Challenge: Henry aims to scale from $1.3 million to $3 million in revenue. Currently, the business relies on two major events a year, each attracting 600 attendees, with a 20% conversion rate to a high-ticket $12,000 mentorship program. Post-mentorship, there's no further sales, limiting ongoing revenue.

Alex's Advice:

• Increase Event Frequency: Doubling the number of events can directly multiply revenue without fundamentally changing the existing successful model.

  “The easiest thing to do is just double the amount of events you're doing.” (06:03)

• Focus on Revenue Retention: Beyond just acquiring new customers, Henry should implement strategies to retain customers by offering additional value propositions, such as yearly memberships or ongoing support services.

  “Your goal that you guys should have is like we don't care at all about the education. All of your focus all the profit goes into just fixing one number, which is that you need to look at M12, so month 12 retention and just say like, okay, we're at 40. How do we get to 60 and then how do we get to 70?” (24:03)

• Upsell Opportunities: Introducing lower-priced offerings or subscriptions can create a continuous revenue stream, ensuring customers remain engaged and provide sustained income.

  “So if you have a 12,000 is actually going to offset CAC, which is like you could break even on the 12,000 if you know that someone gets into a 3,000 a year membership.” (06:46)

Conclusion: By increasing event frequency and implementing revenue retention strategies, Henry can effectively scale his educational business while ensuring sustained income from existing customers.

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3. 10x Growth Strategies for Custom Branch Railings Business

Listener: James – Sells custom branch railings to homeowners, seeking strategies to transition from 2x to 10x revenue by targeting high-value clients ("whales").

Challenge: Currently, most business comes from organic inbound leads via SEO and some Facebook ads. James wants to build a referral network with architects and designers to secure large contracts (e.g., $50,000 per client).

Alex's Advice:

• Targeted Outreach: Focus on B2B outreach to architectural and engineering firms. Develop an irresistible offer for these partners to incentivize referrals.

  “So it's like they bundle basically your lead magnet in for free with their thing they sell. So it enhances the value of their wallet package.” (13:01)

• Affiliate Models: Implement an affiliate program where partners earn commissions for referrals. Alex suggests more innovative approaches than standard commission structures to make the offer irresistible.

  “It's gotta be an irresistible offer. And so if we give away the lead magnet or something, think about it as like my CAC for a $50,000 customer is the cost of the lead magnet.” (12:00)

• Increase High-Value Sales: Shift focus towards landing whale clients by developing strong relationships and ensuring high-quality delivery to secure repeat and larger contracts.

  “I think that the missing link with what you were already doing was just that you didn't have basically the continuous affiliate marketing strategy to get them to keep sending you business.” (28:00)

Conclusion: By establishing a robust B2B referral network with architects and designers and creating compelling affiliate incentives, James can significantly scale his business by securing high-value contracts.

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4. Scaling a Creator Tools Platform Amidst AI Disruption

Listener: Manafate – Founder of Elfen, a platform providing tools to creators and facilitating brand collaborations. Aims to scale revenue from $4.3 million to $100 million.

Challenge: Elfen has multiple revenue streams, including a creator agency, music label, and a tech platform. However, only a small fraction of the 40,000 creators on the platform are actively generating income, creating a scalability issue.

Alex's Advice:

• Transition to SaaS Model: Shift from a commission-based model to a subscription-based SaaS model. This reduces reliance on active revenue from creators and provides a predictable income stream.

  “I think the idea of switching to SaaS is not a bad one.” (16:43)

• Maintain Brand Revenue Streams: Continue earning through brand partnerships by charging commissions for collaborations, ensuring multiple revenue streams remain intact.

  “If you have a freemium model, the waiting to just run perfect marketing couldn't work because you're making your backbone dependent on affiliates or on something else.” (19:24)

• Low Barrier for Creators: Offer both free and paid tiers to keep the barrier to entry low while incentivizing successful creators to upgrade for additional features and support.

  “You want to have the lowest barrier possible on the creator side.” (19:27)

Conclusion: Transitioning to a SaaS subscription model while maintaining brand partnership revenues will enable Elfen to scale efficiently and sustainably, leveraging both passive and active income streams.

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5. Optimizing a Music Attorney's Multi-Business Model

Listener: Alex Rodriguez – Music attorney managing a law firm, educational platform, and contract automation software. Seeks guidance on where to focus amidst growth and cash flow challenges.

Challenge: The law firm and educational platform are growing organically, but the contract automation software faces high churn and inconsistent revenue. Alex Rodriguez is torn between focusing on the software or maintaining the other businesses.

Alex's Advice:

• Focus on Core Revenue-Generating Unit: Prioritize the contract automation software by enhancing customer retention (M12 retention) and streamlining acquisition strategies to improve cash flow.

  “The million dollar question is if they stop the education, do they keep paying for the software? The software is one time pay?” (24:17)

• Separate Business Streams: To avoid split attention, consider separating the businesses to focus resources and efforts on optimizing the most scalable and profitable unit.

  “You're in a prosumer audience. ... if you solve that, then the thing will just keep growing.” (24:26)

• Improve Retention Metrics: Implement strategies to increase the monthly retention rate of the software users, such as better onboarding, continuous support, and feature enhancements.

  “Retaining that top tier. That paid me the high ticket.” (06:03)

Conclusion: By focusing on the contract automation software and improving its retention metrics, Alex Rodriguez can stabilize cash flow and drive scalable growth, while potentially phasing out or divesting less profitable business segments.

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6. Scaling a Mobile Healthcare Business from $1M to $25M

Listener: Mike Nathan – Operates a mobile healthcare service providing cellular therapy in home settings, currently generating $1 million with a 50% EBITDA. Aims to scale to $25 million and prepare for an exit.

Challenge: The business has strong B2B relationships with physicians but lacks effective B2C strategies. There's uncertainty about transitioning to consumer marketing and scaling beyond the Twin Cities.

Alex's Advice:

• Maximize Existing B2B Relationships: Focus on enhancing the affiliate program by implementing a dedicated affiliate manager to maintain and stimulate consistent referrals from physicians.

  “I think you're doing the hardest part, which is getting them to refer. You just didn't have the consistent referrals because if you had 200 active affiliates who are consistently referring you business...” (27:10)

• Systematize Referral Processes: Implement a systematic approach to follow up with referring physicians, providing feedback on referred patients and cultivating ongoing relationships to encourage more referrals.

  “System has the hell out of that. Because it's like, hey, you just sent me this person. Let me close that loop for you.” (30:25)

• Expand B2B Efforts Before B2C: Consolidate and optimize the B2B referral system before venturing into B2C marketing. Scaling B2B successfully can provide a stable foundation for future expansion.

  “If I crush my B2B play, then I just run my B2B playbook in the new market.” (33:21)

Conclusion: Mike Nathan should strengthen and systematize his B2B affiliate program before exploring B2C avenues. Enhancing existing physician relationships and ensuring consistent referrals will provide the scalability needed to reach the $25 million target.

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Key Takeaways:

• Leverage High-Leverage Opportunities: Focus on strategies that offer exponential growth with manageable risks, such as expanding agent networks or optimizing affiliate programs.
• Prioritize Revenue Retention: Beyond customer acquisition, implementing robust retention strategies ensures sustained revenue and scalability.
• Systematize Processes: Developing systematic approaches to referrals and customer follow-ups enhances efficiency and scalability.
• Adapt Business Models: Transitioning to scalable models like SaaS can unlock new revenue streams and support rapid growth.
• Focus on Core Strengths: Concentrate resources on the most profitable and scalable aspects of the business to drive growth and prepare for future opportunities.

Notable Quotes:

• “Dude, get agents. I don't even know what we're talking about for sure. Get agents.” (00:26)
• “You need to bring them on and you need to have the training system to reliably get them to self generate.” (03:00)
• “The easiest thing to do is just double the amount of events you're doing.” (06:03)
• “It's gotta be an irresistible offer.” (13:01)
• “I think the idea of switching to SaaS is not a bad one.” (16:43)
• “Then I'm like, I want them to be sending you 20-50 a month.” (30:25)

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Conclusion

Episode 832 of The Game with Alex Hormozi provides invaluable insights into identifying and capitalizing on high-leverage opportunities within diverse business models. Alex Hormozi’s pragmatic advice emphasizes the importance of scalable strategies, revenue retention, and systematization to drive substantial growth. Whether expanding an agent network, optimizing affiliate programs, or transitioning to scalable business models, the episode equips entrepreneurs with actionable strategies to elevate their businesses from millions to hundreds of millions in revenue.

Transcript

[Alex]

Infinite Banking insurance. You have 29 agents.

[Unknown]

Yes.

[Alex]

And you're needing to decide whether you need to be the face and get customers to feed your agents, or you should go all in on getting more agents and teaching them how to do lead gen.

[Unknown]

Yes.

[Alex]

Cool. Yeah. So do the second one.

[Unknown]

Do the second one.

[Alex]

Yeah. Yeah. It's significantly higher leverage. So basically, so think about this is what problem do you want to solve? So either you say, I want to become a. Like, you want to keep growing your brand top of funnel so that you just have more and more people who are interested in infant banking, and then you have all these agents that you pass it off to so that they can basically transact and own the relationship. So that's like option one. That is, I would say, the lower risk path, because you're already doing that today. And so how many is it on Instagram that you do your stuff?

[Unknown]

Yeah, all on Meta and YouTube.

[Alex]

Okay.

[Unknown]

And we're getting.

[Alex]

What's your followership from that?

[Unknown]

15,000 subscribers on YouTube and 12,000 followers on Instagram and 6,000 on Facebook.

[Alex]

Yeah. And what percentage of the leads come from that stuff versus whatever you do in person?

[Unknown]

15% come from online and.

[Alex]

Okay, where's the rest come from?

[Unknown]

The rest of it comes from referrals and networking and.

[Alex]

Dude, get agents. I don't even know what we're talking about for sure. Get agents.

[Unknown]

Go get agents.

[Alex]

Yeah. I thought it was like 60, 70% of the business was coming from your organic.

[Unknown]

No, most of it's coming from that. And then the challenge with the agents, originally it was all me teaching people to do that, how to go out there and get business. Go network, go join BNI Chamber of Commerce, whatever. That's what worked for me. And then we would get good people that were like, hey, I don't have any network. So I said, all right. And they asked where leads were, and I said, all right, so let me go create leads. And we started calling business owners because that's who I was selling to, but they were not showing up and they weren't really busy. Whatever we were offering wasn't whatever. Then I reread $100 million offers and $100 million leads, and I looked at the value equation. I said, the best value I can give is to real estate investors. So let me go get real estate investor leads. And then we're calling them all day long. And the people that I'm hiring don't know how to communicate with them properly, so they end up just setting up appointments, and then they hand Them back off to me.

[Alex]

Okay.

[Unknown]

And they're good. But I think it comes down to recruiting. People want leads. The first question, where do we get leads? If you say you have to go generate your leads, they might go look at somewhere where they give them leads. So we started giving people leads. So we make an offer to recruits. That's good.

[Alex]

Well, I think that one is you could probably just take the existing brand that you have and just be more deliberate about the call to actions that you make. Because like if you talk about high level insurance stuff, that's going to attract both people who want to learn more about insurance. But many of those people will be agents.

[Unknown]

Yes.

[Alex]

And so I think if you basically alternate the CTAs, you'll be able to basically, I don't want to say chase, you know, both, but in some ways you kind of can double dip here because as long as the content strategy fundamentally doesn't really change or just changing really the calls to action, then you can kind of get a little bit of the best of both. But I do think that the big thing that you need to crack is teaching them to generate their own leads. Like that is 100. Like that's the limiter of your business heard. So you need to bring them on and you need to have the training system to reliably get them to self generate. Like that's it. Like that's what you have to do. If you do that, the sky's the limit.

[Unknown]

And the 20 people that we have at a 29 that are just simply coming in and cold calling real estate investors all day right now that are setting up an insane amount, I think our offer is not great. So I'm going to drawing board with that. But all those people, now I gotta go teach them. I'm just teaching them how to cold call.

[Alex]

Well, they already are cold calling, right?

[Unknown]

Huh?

[Alex]

They already are cold calling.

[Unknown]

They are cold calling now. Well, they're coming in. I'm teaching them to cold call.

[Alex]

That's fine.

[Unknown]

Rather than coming and teaching them to go shake hands and kiss babies, you.

[Alex]

Want to teach them the highest efficiency strategy for getting customers. So whatever that is. So you can just like whatever your method is that you think the highest percentage of people will succeed with, that's what you teach.

[Unknown]

Cool.

[Alex]

So whether it's shake hands, kiss babies or it's cold calling, whatever.

[Unknown]

Or a combo of both.

[Alex]

Yeah. Or a combo of both.

[Unknown]

Did.

[Alex]

Either way's fine. But fundamentally, look at the biggest insurance companies in the entire world. They are that big for a reason. And Almost all of them. They are recruiting machines. That's where fundamentally they're not a supply constrained business. You can sell as much insurance as you want. You're not supply constrained, you're just demand constrained. And so you just gotta get guys and then put the system in place so that they learn how to sell and then that's the business.

[Unknown]

Heard, heard. Thank you. Appreciate you.

[Alex]

Yeah.

[Henry]

Hey, Alex, My name is Henry. I sell education. I teach people how to fix and flip. Mainly the Hispanic market, so it's only in Spanish. We did 1.3 mil last year, second year in business, and we want to do 3 million this year. So with the more better new. Right. Right now we only do two events a year, big events, 600 people. And we upsell to a high ticket, 12,000. Right. And we convert 20% of the room more or less, so that 80% that went to that room never sees me again. I never sell them anything again. And while that 20% they bought my high ticket, that mentorship is a year. And after that, I don't sell them anything ever again. Okay, so more better. Do I just do more of these events and like never ending looking for new customers for the rest of my life or should I focus?

[Alex]

No, you're good. You're in education.

[Henry]

Yeah.

[Alex]

And education graduates people. That's how education works. So if you look at the education system overall, the way to create continuity in education is just always have something else to learn or to teach. Like first year, now you're an undergrad, now you're a graduate student, now you have a master's, then there's a PhD and you get a second PhD. You just keep people just become endless students. And so do you want to sell the business eventually or do you just want to make money?

[Henry]

Make money? I mean, we're not.

[Alex]

No, it's fine. No, I prefer the truth. Yeah, I mean, the easiest thing to do is just double the amount of events you're doing. Either just do you either go one a quarter or you can do two at 1200.

[Henry]

And would you travel or just stay in where I'm at in Miami.

[Alex]

Is that where you run them now, in Miami? Yeah, I would do east coast, west.

[Henry]

Coast, maybe Texas or something.

[Alex]

Yeah.

[Henry]

Okay.

[Alex]

I mean, you have a really simple solution, like just run the same playbook more times. If you were like, I want to build a more valuable business, then I would say take the year to figure out revenue retention, which is how do I get these people who pay me $12,000 to pay me another $12,000 or pay me $30,000 next year, or even downsell them to something that's $5,000 a year, but they stay.

[Henry]

Right. And focus on retaining that top tier. That paid me the high ticket.

[Alex]

Yeah. But I think considering for the model that you have downselling, the upsell, I actually like a lot. So if they paid you 12, maybe they'll stay for three a year, three to five, just to have access to the network and some of your vendors and the stuff that you kind of, like, provide. And I think that's something that people would be far more likely to stick with. And so then you can basically think about your business as from a zooming all the way out perspective is that the $12,000 is actually going to offset CAC, which is like, you could break even on the $12,000 if you know that someone gets into a $3,000 a year membership. That's pretty much all margin that doesn't leave. So it's like that allows you to spend way more than your competition because they need to make money on the 12. You can break even on the 12, and then you just have this stack of $3,000 bills that just keep stacking up. That's like, low effort to maintain.

[Henry]

Got it.

[Alex]

Make sense?

[Henry]

Yeah, it's good.

[Alex]

But, yeah, the nice thing is that you were honest about just wanting to make more money. It makes this a lot easier. Yeah, yeah, yeah. Don't say I want to make an impact.

[James]

I'm James. I sell custom branch railings to homeowners. We did 420 or so last year. I've read 10x is greater than 2x. And so last night it was coming to me again, like, do I really just want to double or do I want to try to 10x? And so what I want to try to do is to develop a network of product specifiers, architects, designers, contractors that can act kind of like a referral network. I want to shift away from the minnows and to focus more on whales. We had one client last year, about $50,000 worth of handrails. And if I could get 10 of those in a year, then I would double revenue just with 10 clients. So kind of what are my best strategies to go about achieving that?

[Alex]

So where did you source the single whale this year?

[James]

He found me. It's all inbound. It's all through search.

[Alex]

Okay, so SEO or ppc?

[James]

SEO.

[Alex]

Okay.

[James]

I just started Facebook ads about three or four weeks ago. They were going pretty good. Qualified about half of the lead so far.

[Alex]

So I would. So if you want to go whale hunting then. I think your initial thought strategy of finding the architectural firms and engineering firms and whatnot is a good one. I would probably try the outreach method as my primary way because you can be hyper targeted in terms of who you're reaching out to. And the key to making it work though is like what's in it for them to refer you business?

[James]

Are you asking me that? That's an excellent question. Okay, so architects will typically in a plan, like if they make a set of plans, they'll specify what kind of tiles to use and what kind of windows to use, et cetera. So I've, we've gotten plans in the past where it's like, it's got the pictures from the website with the CAD drawings and everything on the plans and so it's like how to persuade them to do that kind of in absentia. And I should also note that we ship nationwide, so this is not like, you know, a hyper local.

[Alex]

Are you shipping or are you doing installs or. No, no, we haven't done any.

[James]

We just ship product.

[Alex]

Interesting. Got it. Then who are the decision makers? Well, right now it's been primarily residential is what it sounds like. Right.

[James]

It's primarily homeowners. We've done some commercial work, you know, but it's primarily homeowners who are, you know, looking for something different. And so it's very what I call intentional inbound search. It's like they're looking for something, they are deliberately searching it out. They find it. You know, we have a lead magnet kind of, which is like 250,000 SEO. It's SEO, you know. Yeah.

[Alex]

Well, this is a fundamental change in business strategy. So you're aware of that. So with that comes risk. Because like if obviously the lowest or the highest risk adjusted return move or lowest risk I guess is to probably add in like if I were like tomorrow, what would I do? I'd probably just add PPC in right now. Because you already have something that's working on SEO. I would probably see how can I get way more articles written so that my SEO traffic can go up? Can I tackle more, you know, more keywords that's like the for sure will work and make you more money play the going after whales for sure can make more money because why not add zeros to things? It'll just be a completely different sale and you'll have two levels of sales. So sale number one is going to be for the affiliates and then figuring out what's going to make it worth it for them and Then the second level is what's the actual sale to the whale customer. So who's the decision maker with the whales?

[James]

Like the final decision maker, it's going to be the homeowner, whoever's doing the project.

[Alex]

So you just want bigger homeowners.

[James]

The architects have the ability to specify it and to put it in front of the client. So, like, we also did another one, which was about 60,000 for a guy that was doing a development of Airbnbs in Virginia. He put up like six yurt kind of things. And, you know, so I had two very.

[Alex]

So both of them were architects that sent you these.

[James]

The one was an architect and the other was a construction company.

[Alex]

Okay. Yeah. So you're gonna have to go B2B. Outreach is the. Basically, when you look at Core 4, that's gonna be your. What you're going to do and then they're going to be your affiliates. And so the million dollar question is, what's in it for them? So my proposition would be, so there's three ways you can do affiliates, at least in the world of Alex. So you have. They sell your shit for you and they get a commission. That's option one. That's typically my least favorite option, but it is an option. Option two is that you give them some morsel of something that you sell that they can sell for 100% markup. They could keep all the money, but you get the introduction. This is my favorite way of doing it. The third way is that you basically allow them to just bundle in your free thing with their services. Now, with architecture firms, it's not like they're going to bundle in a railing for their service, but just for everybody else. Like, those are the three things. So it's like they bundle basically your lead magnet in for free with their thing they sell. So it enhances the value of their wallet package. You give them the things so they can upsell your lead magnet for an amount of money that they can keep 100% of. Or they just sell your stuff and they get a kickback. Is there a version for this where they can just upcharge? Like, you can do a small portion of this that they get 100% of.

[James]

100%? Like, I don't think so. Like, maybe some kind of contractors or architect discount.

[Alex]

We wanted them to be stupid to say no. Yeah, because the generic, like, you get 20% kickback. It's just like everyone does it. Like, who here does 20% kickbacks? For anybody who refers you business, you can raise your hand. I'm not going to be upset. Okay. And so the point is that and you probably no one here has referred anyone else business because no one cares. That's kind of the point. And so it has to be an irresistible offer. And so if we give away the lead magnet or something, think about it as like my CAC for a $50,000 customer is the cost of the lead magnet. And If I close 1 out of 3 introductions, then it's 3x. The cost of lead magnet is my cost to a hire customer, which is usually pretty darn good. But it sounds like an irresistible offer to the architecture firm because they're like, we can just sell this and keep 100%. You're like, yep, just make the introduction and I'll deliver that. And then when you talk to the customer, you're like, yeah, I'll deliver that. Here's one rail, but you need 10 more and then you make the sale. Does that make sense?

[James]

I'm not entirely sure. Like people would order the entire project.

[Alex]

Okay.

[James]

So it's not like you can just like I can't just ship you a sample and be like, hey look, here's.

[Alex]

A yeah, then you're gonna have to do the commission based structure, which is not my favorite, but that's probably the way you're gonna have to do it. So either you can do the discount. I mean I would say, guys, I have 20% that I can play with here. So you can take all 20 and give them no discount. You can take a 10% discount and then they get, you get 10% kickback. Like this is what I got. I'll make it work whatever way you want. But this is my bare bottom price. And I think that's what like that's the outbound strategy.

[James]

So should I then in turn raise prices for direct to consumer.

[Alex]

Yeah, I love that.

[James]

Okay, thank you.

[Alex]

Love that for you.

[Manafate]

Hey, Alex.

[Alex]

Hello.

[Manafate]

Thank you for the content you create. My name is Manafate. I'm the founder of Alphan.

[Alex]

Of what?

[Manafate]

I'm the founder of Elfen.

[Alex]

So Elfen. Yeah. Okay.

[Manafate]

So basically we sell tools to creators, help them make more money and we also simplify how brands collaborate with creators.

[Alex]

Okay. Tools like software.

[Manafate]

So software and serve agency tools. So we have a music label, a creator agency for big creators, and then a platform as well. So I'm coming to that just in a bit. I know the focus topic. We made around 4.3 million last year and basically my goal is try to get to 100 million. Now the issue here is what's the.

[Alex]

Split between the three in terms of revenue.

[Manafate]

1 million for the creator agency, 1.3 million for the music label, and then the rest is on the brand side.

[Alex]

And the brand side is you basically being an agent to do partnerships. Exactly.

[Manafate]

Connecting it both. But basically what I've been doing is that I realized the disruption of AI that's kind of coming in. I also saw the scalability of what we were doing because I've been in the YouTube space for a while, so a lot of these services aren't going to be scaling as much. So in the past two years, I've been taking that profit and putting it into a tech platform. Basically, it's like a creator store where you can sell your services, digital products, but also items that you love. So the skincare, they use, the hair cream, the shoes, and you'll earn a commission. And we use all of that data to make it easier for brands to know what creators to work with. Because right now in influencer marketing, it's like a spray method.

[Alex]

Right.

[Manafate]

I'm going to pay. I have no idea how much conversion they're going to actually get me. But our integration shows you for a thousand clicks, they get you these number of visitors and then they end up buying. My challenge here right now is that I'm trying to scale that business. But my business model is we make money when you make money. So on the brand side, we get a 15% commission or margin on all the spend. And on the creator side, we get around 8% from whatever they make with their fans by selling these digital products and courses or affiliate links.

[Alex]

Okay.

[Manafate]

My issue here is I got 40,000 creators, but only a thousand are making money.

[Alex]

Right.

[Manafate]

And I've been kind of struggling between going on a SaaS model to be able to scale, because when I do any social marketing, we get a creator that comes on board, but they don't make money right away. So it's not like you, you know, and the longer it takes you to recoup your ad, spend is not usually a good metric for scalability. So I'm kind of pivoting. Should I go into a SaaS model where. Right. Whatever I make from the creator, I'll just be like, hey, like, just pay me that price and I take zero percent from you and then I just charge the brands the commission to collaborate with those creators. This way I can scale the business in a much faster.

[Alex]

Say the last part again.

[Manafate]

So instead of me making percentages from creators.

[Alex]

Yeah.

[Manafate]

I provide them the same tools that a lot of them make make Money and I keep zero percent.

[Alex]

Okay.

[Manafate]

But then let's say they have to pay like 20 bucks a month.

[Alex]

Sure.

[Manafate]

But then I still make my money on the upside, on the brand side by connecting them with these creators.

[Alex]

Okay, so switch to a subscription.

[Manafate]

Switch to a subscription. Yeah.

[Alex]

Okay.

[Manafate]

Cause right Now I have 40,000 creators who signed up, but I'm really making money off 1,000.

[Alex]

Right. And it's free to sign up and you only get paid if they get paid. Yeah. So you're in a prosumer audience. So if you look at like Shopify for example, it's super. If you look at the amount of people who've tried to build marketplaces, almost all of them fail. And it's my opinion that the best marketplaces do run as SaaS. And then once they get to scale, they can kind of push more marketplaces like Shopify, for example, like it's 29 bucks a month or whatever it is because they know that the vast majority, like they make more money charging $29 a month than getting 4% on Xero for the vast majority of stores. But people continue to pay for the hope that someday they will make money. And so I think the idea of switching to SaaS is not a bad one. I am concerned about the four businesses that you have because in order to win at SaaS, you have to be all in on software. And so the alternative to that would be instead of letting creators come on for free, you would charge them to come on, which you could do. It has a one time setup fee and then maybe increase the likelihood that they win. Either path would work. But if the ultimate goal is that you want to build a network of creators, then you want to have the lowest barrier possible on the creator side.

[Manafate]

So I'm still thinking of a free tier and a paid tier with some minor benefits. But then if you really want to make money, you got to end up paying a subscription. Exactly.

[Alex]

Yeah. Yeah. You'll have to play with the feature set because that's always a bitch.

[Manafate]

Just the path of least resistance to getting to 100 mil.

[Alex]

Yeah. So I think adding the subscription for the base and then still maintaining the revenue that you get from the sponsors makes sense. I would maybe push back slightly on the hypothesis that they can't convert anything because it dramatically decreases the value of the network from the sponsor side.

[Manafate]

What do you mean by that?

[Alex]

Because some people will pay for impressions.

[Manafate]

Yeah.

[Alex]

And so those guys can for sure deliver those. And so maybe there's like two tiers that you can sell. You have Another product on the ad side are there on the media side, it's just something to consider.

[Manafate]

Perfect. Thank you. You just validated my thoughts.

[Alex]

Oh, good.

[Manafate]

I'm thinking the right way.

[Alex]

No, I think it makes sense. Yeah. Basically, you have to position as higher ticket and do premium white glove onboarding and then select only for the really good creators. And that would be like, you charge 5 or $10,000 and you really get them set up, or you basically flip the other way, go freemium. And then it's all based on basically, media arbitrage, where you're just running tons and tons of ads to get people onto the platform. And you just know what your average revenue per platform user is.

[Manafate]

Perfect. Thank you.

[Alex Rodriguez]

Hi, Alex. Hello, my name is Alex. You can call me Alex Rodriguez.

[Alex]

From Puerto Rico.

[Alex Rodriguez]

From Puerto Rico. So I'm a music attorney. Abogado correcto y elentra danimient. So what we do is our constraint is focus.

[Alex]

Okay. I have. At least you said it. Yeah.

[Alex Rodriguez]

So we have three businesses.

[Alex]

Yeah.

[Alex Rodriguez]

So basically it's three businesses. But today, thanks to Ed and Sami, we got much more clear on what we should do. But I would like to know, how would you think about this? Because the law firm side, it's growing 20% year over year without me actually doing anything. Just redirecting people that come to me through my law firm. And right now it's about 100k. And then we have the educational side, and that is making 200K. And it's been stocked like that in the last two years.

[Alex]

And we're building customers from organic.

[Alex Rodriguez]

Yeah, both are organic.

[Alex]

Okay.

[Alex Rodriguez]

So if you don't have money to pay us as a lawyer, you go to the educational platform. And we are developing a contract automation software for big companies like major labels or publishing companies. So right now, the product. Our software. Our goal with the software is to sell. We are seeing that other. That big music companies are buying tech so specific for them. So they're doing everything manually. We want to sell that, but we have a cash flow problem because we're selling to people without a lot of money. And the service size does make money. So our problem is where should we focus?

[Alex]

Yeah, but what's monthly churn right now on the software?

[Alex Rodriguez]

We got 100 people, and we only have 40 active right now.

[Alex]

And how long have you been doing it in the first year? So you've retained 40%. Are they actually active, though? So they're paying.

[Alex Rodriguez]

The people that are active are paying $3,000 per year. And there are only like 4. 44 that are paying 3,000 and then.

[Alex]

What are the other 36 paying?

[Alex Rodriguez]

Are paying 600 per year.

[Alex]

Okay, got it. Okay, so I think we chatted about this last night. So there is no right answer. But there is a path that you have to pick. And so either you're going to be enterprise company and you're going to build only for that. And I would say you probably will just transact on the education side in order to fund this. I in general don't like this plan, but you could do this because you'll be split attention. And this is fundamentally why people raise money in software. So they can just focus on one customer the whole time, build the product and then actually get it to work. Okay, that's that. Because you said that you're retaining 40% in basically a prosumer ish market, which is where you're at, I would be inclined to say that you probably are pretty close to a decent product. So you probably have nailed something there. Because keeping 40% of people one year later on whatever it is for musicians that you guys have for contracts and whatnot, you could absolutely go all in on that and get that to like 50 or 60%. And then you just need to have a different acquisition system. So you probably just need to go spend money acquiring customers and that already cash flows because of the education side. And are the people who are still paying you on the software all also education customers or.

[Alex Rodriguez]

No, they usually come from the education or from my legal services as well. So I have some clients that be 80% of the job.

[Alex]

Here's the million dollar question. The million dollar question is if they stop the education, do they keep paying for the software?

[Alex Rodriguez]

Yes, because it's a one time pay.

[Alex]

Well then that's what you mean. The software is one time pay?

[Alex Rodriguez]

No, the education. Oh, well then they just pay and they're gonna use the software as long as they.

[Alex]

So the only thing that we're solving for is revenue retention on the software. And so enterprise in and of itself is not more valuable than lower market. It's just it tends to be stickier, which is what makes it more valuable. But if you can get a larger marketplace, easier to acquire customer to stick as well as a large enterprise customer, you've got a gold mine if that's true. And so if you want to go spend money, acquire customers with the education or media as your liquidation and then get 100%, but the goal that you guys should have is like we don't care at all about the education. All of your focus all the profit goes into just fixing one number, which is that you need to look at M12, so month 12 retention and just say like, okay, we're at 40. How do we get to 60 and then how do we get to 70? And that's all you're solving for. Because if you solve that, then the thing will just keep growing. And that's the beauty. I mean, that's fundamentally the beauty of software, once you get it right, is that it just keeps growing.

[Alex Rodriguez]

Thank you.

[Mike Nathan]

Yeah, my name is Mike Nathan. I sell cellular therapy in home to the old affluent, injured, probably and athletic. We're new, but we've got a million dollars in revenue, half an EBITDA. We would like to get to 25 million.

[Alex]

In home or in home. Okay, got it.

[Mike Nathan]

Considered mobile healthcare.

[Alex]

Okay. Is it like guy drives out or is it you sending machines?

[Mike Nathan]

RN drives out, gives you an IV infusion in your home.

[Alex]

Okay, got it.

[Mike Nathan]

We'd like to get to 25 million. We're built to be bought. We want to exit. So we think we're on the cutting edge of this. What's stopping us is my team is awesome, great. From the NFL to a lot of great. We have great business. To Dr. B2B sales experience, zero B2C experience. And that playbook we're learning is wildly different. We have no idea what we're doing.

[Alex]

Yeah. So what stops you from just doing way more of the doctor stuff?

[Mike Nathan]

It doesn't quite pay as well. Meaning we have people that knock on doors to orthopedic surgeons who are looking for patients with alternatives to surgery. Pt, chiropractors. It's a lot of effort and there's some that are going to refer to you and some that just will not. So that's our constraint in a one market. In the Twin Cities, it's a one market play. We know there are more people looking for this solution. So we want to understand what the B2C is. If we go to then Dallas, Philly, Louisiana. As we try to scale it, we're convinced it needs to be a better ROI than maybe what we're doing right now.

[Alex]

What do you do? So you're making 50% margins. Right. So what's the cost to acquire a physician cost?

[Mike Nathan]

Acquiring a physician who refers you business.

[Alex]

Cost of acquiring affiliate.

[Mike Nathan]

It's oftentimes just it can be a physician. So we don't track it that way. But it's $500.

[Alex]

Okay, so it costs you 500. And then what does the average physician refer to you in a year in terms of business.

[Mike Nathan]

6,000.

[Alex]

$6,000. So I mean you're getting 12 to 1 there and you already know how that works. So like what stops you from doing 10 times more of that? You're saying they don't pay well, but that's the part I'm not sure because you're getting 50% mark through the woods.

[Mike Nathan]

And hit all the people that are going to refer us. The number's not amazing or at least I just know there's more there. I assume there's more. There's got to be more than the 200 people we've hit in the like.

[Alex]

You mean you've only really talked to 200 in terms of like reach outs and 200 who signed up as affiliates kind of thing.

[Mike Nathan]

I don't know the number off the top of my head, but it's in the hundreds. Less than a thousand of B2B PT, chiropractors, orthopedic surgeons.

[Alex]

We've done that in the Twin Cities.

[Mike Nathan]

And the super small people that have given us has been some give four, five and six, some give zero.

[Alex]

Yeah. Do you have an active affiliate manager who's like regularly reminding them? Yeah, so with. So the way that I think about affiliates is it's basically a second tier of customer. And so you need to have somebody who's regularly kind of like stoking the affiliate fire to keep them activated and continue to get them to continue to refer business. So I'll give you an example. So there was a roofing company, for example, it was a restoration company. They had one star, star salesman and all he did was he'd go around to other tradesmen and get them to refer them business. And so they would get 1000 bucks to refer to refer the restoration business. But the sales guy got 500 for every time they referred. And so that guy all day long was knocking on doors, walking in the front door with donuts, asking them how they're doing, bringing coffee to the guys and then reminding them that they existed. And that's all he did. And so I think you're doing the hardest part, which is getting them to refer. You just didn't have the consistent referrals because if you had 200 active affiliates who are consistently referring you business, and most of these physicians especially like gps, things like that, they see thousands of patients and many of them could probably benefit from the services you have. And so the activation is both getting them to refer consistently, but also percentage of customers that they see that they refer to you. So it's kind of both sides of it. And so I think that the missing link with what you were already doing was just that you didn't have basically the continuous affiliate marketing strategy to get them to keep sending you business. So that's probably like right now, today. I would fix that first, because you already have the acquisition system. You already have the network. And so for me, reactivating that affiliate base would be the first thing that I did. The second thing maybe because you might just reactivate the base and all of a sudden you're like, I got 200 guys who are referring me business. Holy shit, we're at 10 million. But the second thing I would consider probably. I would still probably focus most of my time on the B2B because you already have it. But for this business, I think that it lends itself. What's the price point?

[Mike Nathan]

$6,000 of treatment per treatment.

[Alex]

Okay, wait. So the average doctor will send you one $6,000 patient per year. When you said it cost you 500, they'll send you one patient. Interesting. So do you have a process for once the patient gets the thing? Calling the physician up.

[Mike Nathan]

Sorry, say that.

[Alex]

So like, I'm Dr. Smith. I send you Sandy. Sandy goes and gets the. Well, you come to Sandy and Sandy gets the treatment. Is there a cycle where you call back me Dr. Smith and say, hey, we just dealt with Sandy. Here's some of her stuff.

[Mike Nathan]

Not in a medical term, like, we're not putting notes back in because it is private for sure.

[Alex]

Yeah.

[Mike Nathan]

But we do we ask for more referrals. There's a circle back that way. There's not a patient loop back. Okay, that's not true. Sometimes that does happen. Excuse me. It does.

[Alex]

Yeah.

[Mike Nathan]

That's not systematized, though.

[Alex]

Yeah, I would. System has the hell out of that. Because it's like, hey, you just sent me this person. Let me close that loop for you. She's awesome. We did this thing. She loved it, by the way. And then we have the opening to the other. What customers or customers. Sorry, what patients did you see this week who you think would be a good fit? And rather than saying, do you have any? It's which ones would be, is the question. Small training stuff, but it matters. So I feel like there's so much on the B2B side that honestly, that's probably where I'd be ripping off.

[Mike Nathan]

So you would not go after a B2C approach, like advertising online, going, pushing in on a strategy on that.

[Alex]

It's not that I wouldn't. It's that when I think about. So this Is the difference in, like, theoretical and actual. Like, I would. Given. Given the fact that you, like, you're already running good margins on this thing, basically doing it, and take this the way I mean it, completely unoptimized, like right now. Right. Again, this is not a slight. Then I'm like, there's so much juice left in this thing. I don't want to now start something new. It's like, I barely got this one going. I want to crush this. And when I'm like, no, we follow up with every single person. I've got a full time affiliate manager who steps by our affiliates. I'm calling them affiliates, but drops by the docs once a week just to remind us, say nice things. Hey, by the way, that is happening all the time. And we've already covered literally every single physician in the Twin Cities. Then I'm like, okay, let's go B2C. But if we haven't completely squeezed the hell out of this thing and it's already working, and at the level it is right now with like zero, like, you're only getting one patient per doc, it's like, so, yeah, so you getting B2B customer is the same as getting one B2C customer. I understand why you'd be frustrated. Cause you'd be like, well, fuck it, I'll just fucking. I could sell one customer on my own without having to deal with the doc. But the whole point is that I want them to be sending 2050amonth. And they can because they have the volume. And I think that first one has to be a beautifully choreographed experience because that first patient's the test run for them for you, right? They'll refer you one and we'll see what happens. Right? And so one. It's like, Sandy's got to be blown away, right? She's got to come back and be like, oh, my God, that place was amazing. And then you also have to go back to the doc and be like, we blew Sandy away, by the way. And so I think you have to tackle it from both sides.

[Mike Nathan]

Okay.

[Alex]

That's what I would do. Getting into the AD side, you absolutely could do it. And we'll walk through some whole strategy there, but if we swap places, that's where I would be focused on.

[Mike Nathan]

If you were going to try to expand into other major metros in the next 18 months, would you have the B2C sorted out before you went to the next market, or would you?

[Alex]

Honestly, no. If I crush my B2B play, then I just run my B2B playbook in the B2B playbook in the new market. Once I find something that works, I just want to just do more. Yeah, Pillage.

[Mike Nathan]

Right on. Thank you.

[Alex]

Yeah, no, you bet. Thank you. 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 service. 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 forward/, roadmap, r O, a D map, roadmap.