The Fastest Way to Grow Is Simpler Than You Think | Ep 887

Summary

Podcast Summary: The Fastest Way to Grow Is Simpler Than You Think | Ep 887

The Game with Alex Hormozi, hosted by entrepreneur and business guru Alex Hormozi, delves into actionable strategies for scaling businesses, enhancing customer retention, and maximizing profits. In Episode 887, titled “The Fastest Way to Grow Is Simpler Than You Think,” Alex engages with multiple entrepreneurs, addressing their unique challenges and providing tailored advice to accelerate their growth. This detailed summary captures the essence of the discussions, key insights, and strategic recommendations shared during the episode.

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1. Joe Reed’s Genesis Family Healthcare

Background:
Joe Reed, the owner of Genesis Family Healthcare, has transitioned to a direct primary care model resembling a gym membership structure. With a revenue of $2 million last year and a 15% profit margin, Joe seeks strategies to double his business growth.

Challenges:

• Low sales velocity: Acquiring only 7-8 new patients per month.
• Ineffective marketing campaigns: Previous efforts with Google Ads, Facebook, and Instagram yielded high leads but poor conversions.
• Follow-up issues: Difficulty in converting leads due to inadequate follow-up and sales processes.

Alex’s Advice:

• Refine the Front-End Offer: Develop an enticing low-cost offer (e.g., $19-$99) such as functional movement screenings or pain assessments to attract and qualify leads effectively.
• Streamline the Sales Process: Implement a dedicated sales role focused solely on lead follow-up and closing, rather than relying on existing staff who may lack sales expertise.
• Focus on Core Activities: Prioritize interviewing and training a setter (sales representative) to handle lead conversions, as these activities are pivotal to doubling the business.

Notable Quotes:

• “Everything that you spend your time on that is not interviewing to get this setter and get them trained up are things that are not going to double the business.” [00:02]
• “Most people in our town kind of know our brand. Or they know who I am.” [02:11]

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2. Frank’s Luxury Watch Dealership

Background:
Frank operates a B2B luxury watch dealership with a revenue of $88 million and a modest 3% margin. His goal is to double the revenue by expanding inventory sales without compromising proprietary lead sources.

Challenges:

• Proprietary Lead Flow: Reluctance to share or outsource lead generation to protect competitive pricing advantages.
• Limited Time: As the key person driving lead acquisition, Frank is constrained by time to scale operations.
• Short-Term Partnerships: Current partnerships yield short-term gains but lack sustainability.

Alex’s Advice:

• Hire Virtual Assistants (VAs): Utilize offshore VAs to manage outbound lead generation without understanding the intricacies of the watch market, thereby maintaining control over proprietary information.
• Document Sales Processes: Create detailed rubrics and decision trees to enable VAs to identify and qualify deals effectively.
• Evaluate Partnership Models: Focus on long-term partnerships or consider acquisitions to scale lead generation without diluting the brand or pricing strategy.

Notable Quotes:

• “Everything that you spend your time on that is not interviewing to get this setter and get them trained up are things that are not going to double the business.” [Repeated emphasis]
• “You have all three of those, which is why you have a money flow.” [07:12]

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3. Alex Hider’s Fire and Safety Company

Background:
Alex Hider runs a fire and safety company in Canada, targeting restaurant owners with services like fire suppression and hood cleaning. With three key clients and $20,000 monthly revenue from safety compliance, he aims to double revenue and eventually scale to $10 million.

Challenges:

• Sales Process Deficiencies: Lack of a structured sales process resulted in significant revenue drops when introducing new services.
• Team Capacity: Limited staff to handle increased business without compromising existing customer service.
• Customer Acquisition Hesitancy: Difficulty in leveraging LinkedIn and other platforms to announce business changes due to personal reservations.

Alex’s Advice:

• Prioritize Sales Processes: Establish a robust sales process focusing on high-value clients, such as property managers, before expanding to restaurants.
• Optimize Team Structure: Streamline the compliance department by implementing processes and reducing key person dependency.
• Focus on Core Offerings: Concentrate on acquiring new business segments methodically before diversifying further.

Notable Quotes:

• “If you have to make a bet, I would probably bet on the better button for the existing sales function.” [14:20]
• “It's not that you have to do something radical, but you have to implement consistent sales practices.” [Expanded from context]

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4. Michaela’s Photographic Art Sales Agency

Background:
Michaela runs a sales agency that markets photographic art and albums to consumers on behalf of photographers. Last year’s revenue was just under $2 million, with a target of $5 million by year-end.

Challenges:

• Limited Marketing Efforts: Advertising and marketing are underutilized, hindering growth.
• Course vs. Free Content Strategy: Uncertainty over whether to offer her educational courses as a downsell or make them freely accessible to attract more leads.
• Low Revenue from Education: Education-based offerings contribute less than $10,000 annually, making it a non-primary revenue stream.

Alex’s Advice:

• Offer Free Content: Remove paywalls on educational content to serve as a top-of-funnel strategy, leveraging free content to attract and nurture leads.
• Enhance Content Marketing: Utilize platforms like YouTube to distribute free, valuable content that draws in potential customers.
• Implement Effective Follow-Up: Develop a systematic follow-up process with leads, using scheduling tools to convert prospects into paying clients.

Notable Quotes:

• “If you're at like 1.5 and it's, I think we get this to 3, it's like there's a double. Great.” [35:30]
• “Try to put out 450 pieces a week. So like, you're, you're so again, this is not a slight...” [36:45]

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5. Raja Mukherjee’s Cybersecurity Company

Background:
Raja Mukherjee leads a cybersecurity company specializing in analytics to detect hackers within large organizations, primarily targeting Fortune 1000 and Global 2000 companies. With $304 million in revenue last year, Raja aims to reach $500 million within 18 months.

Challenges:

• Sales and Marketing Efficiency: Despite high gross margins (88%), the company struggles with sales velocity and substantial infrastructure costs.
• Lumpy Revenue Streams: Dependence on large deals causes significant quarterly revenue fluctuations.
• Enterprise vs. Minnow Sales Model: Existing enterprise sales are facing challenges, and integrating a land-and-expand strategy has proven difficult without specialized sales talent.

Alex’s Advice:

• Refine Sales Team Structure: Assess the performance of the current 204 salespeople, potentially implementing a performance-based evaluation to retain top contributors and eliminate underperformers.
• Explore Inorganic Growth: Consider acquisitions of companies with established minnow sales functions to diversify and stabilize revenue streams.
• Focus on Sales Efficiency: Implement rigorous sales training, role-playing, and rapid feedback mechanisms to enhance the effectiveness of the sales team.
• Trust Founder's Insight: Recognize and act upon the founder's unique perspective regarding the business's existential threats, even if it contradicts existing management or PE ownership strategies.

Notable Quotes:

• “If the deal works for you, the deal works for you.” [08:35]
• “You need to have someone who's entrepreneurial and renegade to rattle some cages.” [31:03]
• “What we're going to do here is this is going to be number one and then the second thing that you're going to tack on is the cross sell.” [18:32]

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6. Antonio’s Drawing Learning Platform

Background:
Antonio has developed a platform akin to Duolingo for learning how to draw, offering guided personalized learning to aspiring artists. Currently generating $60K in Monthly Recurring Revenue (MRR), his short-term goal is to quadruple revenue within 18 months, with a long-term exit strategy aimed at larger educational platforms.

Challenges:

• Traffic Generation: Reliance solely on organic word-of-mouth and social media channels limits growth potential.
• Content Production Capacity: Limited ability to scale content creation due to personal bandwidth constraints.
• Conversion Optimization: Need to enhance the funnel’s efficiency to maximize lead conversion rates.

Alex’s Advice:

• Scale Content Output: Increase the volume of content production significantly to amplify reach and engagement.
• Diversify Acquisition Channels: Implement paid advertising strategies and influencer partnerships to boost traffic beyond organic channels.
• Double Conversion Rates: Optimize the sales funnel by refining call-to-actions, improving scheduling processes, and enhancing follow-up mechanisms.
• Set Ambitious Targets: Aim higher than quadrupling by targeting exponential growth (e.g., 40x) to ensure robust scalability.

Notable Quotes:

• “We have to do so much more. So you said you get some from organic. What was the other source?” [34:32]
• “If you 10x the amount of volume of content... there's your 4x.” [36:16]

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7. Conclusion and Key Takeaways

In Episode 887, Alex Hormozi emphasizes the importance of focusing on core growth activities, refining sales processes, and strategically leveraging resources to overcome business challenges. Key takeaways include:

• Prioritize Sales Efficiency: Hiring dedicated sales professionals and optimizing the sales funnel are crucial for scaling.
• Leverage Low-Cost Offers: Implementing low-ticket offers can effectively attract and qualify leads, enhancing conversion rates.
• Optimize Content Marketing: Consistent and scalable content production paired with strategic distribution can significantly boost traffic and engagement.
• Adopt a Holistic Growth Strategy: Combining organic growth with paid advertising and strategic partnerships or acquisitions ensures balanced and sustainable scaling.
• Trust Founder's Insights: Founders possess unique insights into their businesses and should leverage their intuition to address existential threats and drive growth.

Notable Quotes from Alex Hormozi:

• “Everything that you spend your time on that is not interviewing to get this setter and get them trained up are things that are not going to double the business.” [Repeated Emphasis]
• “If they make enough money doing the deals with you, they eventually just stop doing it.” [07:15]
• “What we need to do is basically have an offer that we can run on the front end.” [03:25]
• “If you have to make a bet, I would probably bet on the better button for the existing sales function.” [28:34]

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Additional Resources

For entrepreneurs seeking to delve deeper into scaling their businesses, Alex Hormozi offers a Scaling Roadmap—a comprehensive, personalized guide covering marketing, sales, product development, customer success, and more. Access this free resource at acquisition.com/roadmap.

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This summary encapsulates the core discussions and strategic insights from Episode 887 of The Game with Alex Hormozi, providing actionable advice for entrepreneurs aiming to scale their businesses effectively.

Transcript

[Alex]

Everything that you spend your time on that is not interviewing to get this setter and get them trained up are things that are not going to double the business. Let's do A's and Q's. Hello.

[Joe Reed]

Hey. My name is Joe Reed. I own Genesis Family Healthcare. I have been in primary care for the last 20 years. At 16 in my own business. In the last two years, I've changed to a direct primary care model, which is basically a. A membership model, much like a gym membership model. So my revenue was $2 million last year. 15% profits. I do kind of live through my business too, so that kind of helps out. So the. The thing that I would really like to know is what is the marketing strategy or the marketing model that you would advise me to grow my business?

[Alex]

You want to double? Cause I overheard you earlier. What, what sales velocity right now. How many customers are you selling per week? Per month?

[Joe Reed]

I have around 2,000. Per year.

[Alex]

Per year. Okay, so. So 40 a week, roughly. Okay, so 40 new patients a week are coming in. What's the way that you're getting customers?

[Joe Reed]

Right, sorry. No, it's, it's, it's not the new patients that are coming in. I have 2,000 patients, 300 patients.

[Alex]

What's sales velocity? So what's new sales velocity is probably.

[Joe Reed]

Around seven to eight a month.

[Alex]

Seven, eight a month. Okay, got it. So you have really good patient stick. Obviously, if you're at a thousand and you can. That's great. Okay, so the seven to eight a month that are coming in. Is that just word of mouth?

[Joe Reed]

We did. We did a pretty good marketing turn in the fall. Spent a lot of money on some things. I think we put the cart before the horse a little bit.

[Alex]

Okay.

[Joe Reed]

As far as just going on online and really marketing Google Ads, what did you.

[Alex]

So it was pvc?

[Joe Reed]

Yes. I mean, and, and then Facebook and, And Instagram.

[Alex]

Did you hire an agency?

[Joe Reed]

We did.

[Alex]

Okay, how did that work?

[Joe Reed]

Got a lot of people at the top of the funnel and we did not close.

[Alex]

Okay.

[Joe Reed]

So we know what our issue was at that time. So it's always issue, I think follow up as much as anything. Because most people in our town kind of knows they know our brand.

[Alex]

Yeah.

[Joe Reed]

So. Or they know who I am.

[Alex]

Sure.

[Joe Reed]

So. So yeah, I think it's close as much as anything.

[Alex]

Yeah. So what stops you from doing that again and now working the leads this time? People. Okay.

[Joe Reed]

Getting the right people. Okay. You know, a lot of answer. A lot of questions have been answered since being here.

[Alex]

No, you're good. I Mean, that's, I mean, that's, that's the hope.

[Joe Reed]

Exactly.

[Alex]

Yeah.

[Joe Reed]

So it really is, I think the people and the script and the, and, and the execution.

[Alex]

Okay.

[Joe Reed]

Of those things. So.

[Alex]

So in all likelihood, you running ads in a local market to get more patients feels pretty sound to me. The offer that you were running, what was what. What offer were you running to get people in the door as far as.

[Joe Reed]

Just direct primary care?

[Alex]

You ran your ads.

[Joe Reed]

Yeah, it's a monthly membership.

[Alex]

No, no, no. But like, the ad wouldn't be like, want to buy a direct monthly membership, right? No. Right. So it was the offer that people saw that caused them to, to take action.

[Joe Reed]

The genesis difference was, was a big part because we're, we're more of a difference in. We're more of a functional type medicine. You know, I hate to use functional, holistic and all those things. It kind of sounds.

[Alex]

Yeah, yeah.

[Joe Reed]

So I'm more of a relo path. So I'm realistic.

[Alex]

I'm a real path for myself.

[Joe Reed]

Yeah, yeah. So. And we did shut the gym down during COVID sir. And I told certain things about this. I was a rebel during COVID I gotcha. A lot of things that, that has really been a flagship with me.

[Alex]

Okay.

[Joe Reed]

Because I was, I was where we. As a practice, we've got six providers at my practice and we all kind of stuck a thing to the establishment.

[Alex]

So what we need to do is basically have an offer that we can run on the front end. It would typically be some sort of, I'd say 19 to $99 offer. And I want to be clear, I'm not trying to undervalue your services. It's going to be a front end thing. So you value. You get them to opt in, thank you page. They can buy it. Some of them will, some of them won't. Doesn't really matter. So the ones that do buy and self schedule, those will be easy because you won't have to work them. They'll probably just show up because they paid for all the rest of the leads. You call them up, you collect the card over the phone and then you obviously bill them. The 19 or 99 thing for whatever the call it a functional movement screening or like some sort of pain assessment or something. That's basically, you want to figure out what the most common pain that your ideal avatar is suffering from and then make the offer related to that. And it would probably be some sort of screen slash, assessment slash, you know, X ray or whatever.

[Joe Reed]

Right.

[Alex]

That then reveals the problem and then you do A prescriptive close on the solution. And so this is a. A very tried and true method. And it sounds like the, the biggest issue that physicians offices typically deal with is that secretaries don't know how to work leads. Right, right. And so you really need a sales role. And so it feels uncomfortable, sales medicine, but it's also reality. And so that's pretty much it. Which is. That's the offer. And then you would hook it up to a scheduler and then you would call the leads. That's it. I mean, that's, that's really it. And so it means you just need one person to call the leads and you can do this thing. Okay. So then everything that prevents you. So I'm. I'm going to say it super directly. Everything that you spend your time on that is not interviewing to get this setter and get them trained up are things that are not going to double the business.

[Joe Reed]

Thank you.

[Alex]

Yeah, 100%. Thank you. That help? It did. Okay, good.

[Frank]

My name is Frank. I sell luxury watches to other watch dealers.

[Alex]

Oh, B2B. B2B. Yes. Got it.

[Frank]

Our revenue last year was 88 million and our margin is 3%. So I would like to. It's. It's a. It's jewelry.

[Alex]

I get it.

[Frank]

It's the type of the business. So I would like to double our revenue. And obviously you just need to sell double the inventories, double of the watches. And right now we are capped because I'm am actually, I'm actually the person who get good leads because in order to make money, you need to buy cheap and sell either high or. Okay.

[Antonio]

Yeah.

[Frank]

So I'm not able to give up my proprietary deal flow because somebody can just take it and do it themselves. Because in this industry, pricing is. Price is most of the competitive advantage. Branding is not that much. So.

[Alex]

Well, the watches are the ones that are carrying the price, but your specific price.

[Frank]

So I'm able to get good price, sell reasonably. But right now my time is pretty kept and we are trying to double it. I'm trying to figure out what's the best way to do it.

[Alex]

So I think is there a way that we can chop it into pieces?

[Raja Mukherjee]

Yeah.

[Alex]

Meaning you have your proprietary lead flow. Right, Right. You cannot share where the leads are coming from and then share the leads with someone and have someone else work the leads.

[Frank]

That's what I. That's what being trying to do.

[Alex]

Okay.

[Frank]

My time will be kept of these proprietary leads because I want, I want to double my proprietary leads.

[Alex]

But you want to double your lead Flow, Right, Right, right. And I'm guessing this has to do some sort of outbound method that you use, correct? Yeah. Okay. So I would probably look at like VAs in, like offshore that don't know anything about the space. So I think it's. So if you look at the keys of the kingdom, it's like what you don't want to have is somebody who understands how to get the deals, gets the cash to buy it, and then find sellers. Right. You have all three of those, which is why you have a money flow. Right. And so if we got, let's say somebody who is a VA who could work some of the outbound stuff and do more of that work for you, they don't know any of the buyers, and they probably don't have the cash to buy something like that. And so I think you could pretty easily get someone to duplicate the effort that you're doing on the outbound lead generation side doing that and just keep it controlled there.

[Frank]

Yeah.

[Alex]

Does that make sense?

[Frank]

Yeah. Another business model we've been doing, we've been trying for the last year is we partner with other people who get leads, but they don't have money and we just partner on deals.

[Alex]

Okay.

[Frank]

These are doing pretty well. But the caveat is that they will over declare their cost or if they will under declare their price. Sure, they will undercut you, they will give you a fair cut, but they won't give you everything. Is this just a feature or it's a book?

[Alex]

It's a feature.

[Frank]

It's a feature.

[Alex]

So I'll say something that Leila taught me this one early on in our relationship. She said, never count the other guy's money. If the deal works for you, the deal works for you.

[Frank]

Okay.

[Alex]

If the deal doesn't work for you, it doesn't work for you. If the other guy makes more money, he'll do more deals with you.

[Frank]

Got it. So right now I have two options, right? One is partnership, one is va. There's. If I have to prioritize one, what would I do with?

[Alex]

Which one do you like better? Which one scales faster given your skill set?

[Frank]

Partnership.

[Alex]

Then do partners. I don't think there's any issue with that.

[Frank]

Got it.

[Alex]

Build a big. I mean, if you think about from the value of a business perspective, I, I personally do like the partnership thing. If you have a reliable way of getting, of getting them kind of in. I would say the only, you know, problem with that particular angle is that if they make enough money doing the deals with you, they eventually just Stop doing.

[Raja Mukherjee]

Yeah.

[Frank]

It's a, it's a short term relationship.

[Alex]

Right.

[Frank]

So keep them poor.

[Alex]

Yeah. Sell them a watch. So. Or tell them to move to the us get taxed anyways. Boy bang. I think long term the VA thing is nice because of the issue that we were just talking about. Because if you only get eight deals done with somebody before they make enough money to buy their own, you know, I was trying to think of ap. There you go. That's. I can show you my luxury watch collection then. I just don't think the VA thing's gonna be that hard for you to do.

[Frank]

Can you elaborate more? Can you, can you.

[Alex]

So you, you document, demonstrate duplicate. So what do you do? What's your process? You find somebody like a VA is gonna have a very hard time making the amount of money to do one deal. Right. You're gonna pay them five to ten dollars an hour. Okay. It's not gonna be a lot. Right. And so it's take a lot of hours for them to buy an $80,000 or $240,000 watch. Right.

[Frank]

So they are basically just talking to other wholesalers and bring me deals.

[Alex]

Yeah. They're just gonna do what you do.

[Frank]

Okay. But then I'm still the person who evaluating the deals. Right. At the end of the day, my.

[Alex]

Time was, realistically, you just have a rubric like you know all the brands of all the watches. I know that you probably in your head have an idea of what's hot right now and what prices you're willing to buy at. So you just have a decision tree that's in your head that you run every time. You just need to document it so that you can say, hey, if you find anything that's like this or they have any of these products, let me know.

[Frank]

Okay. The tricky part is that the price fluctuates day by day. And somebody has to be in the business to understand what's the reasonable price to buy.

[Alex]

Yeah.

[Frank]

So feature, feature.

[Alex]

You're, I mean, you're, you're in the commodities business. Price is the game. So you having real time metrics on pricing is what allows you to scale and go from being a one man shop to somebody who can get more to build. Building a business. Fundamentally, you build a business around buying and selling. So prices, the winner is the exchange. And, and so that's probably just going to. Every morning you update the pricing sheet and then they can go out and hunt.

[Frank]

I see.

[Alex]

Does that make sense, Al?

[Frank]

Yeah, that makes sense. Yeah. Thank you.

[Alex]

Yeah, 100%. Thank you. Thank You. Yeah. There we go. There we go. Yeah.

[Alex Hider]

Hey, Alex Hider here from Canada. I bought the Boring fire and safety company, but I've changed my mindset to say boring, but I love it. I, I, I sell fire and safety and commercial cleaning to mainly like, restaurant owners. When you bought it 200 plus.

[Alex]

Yeah. But in miniatures you have three and they're whales. Yeah, I got you.

[Alex Hider]

Thank you. I told my wife about that. She's like, why do you need Alex? Just watch his videos.

[Alex]

Yeah. Yes.

[Alex Hider]

Anyway, that's a different algorithm. Yeah. She's German, so she's very methodical. I would like to get at least double the revenue. But because of your workshop, I want to get to 10 million one day, but I don't. I think let's double it first. What's stopping me is that when we introduced the fire suppression for the restaurant Avatar, and we discussed this yesterday, a big key piece we were missing was, for example, you have this tag here. It's a national fire protection code, basically.

[Alex]

Good to know.

[Alex Hider]

Then the one that's 96 needs to clean the hood cleaning in restaurants. So we try and introduce that, but we had zero sales process for over two decades. The husband and wife team that sold it to me didn't believe in that. The phone rings, we pick up in two rings. That's literally the process. We went down to 20%.

[Alex]

Sorry, it's a complex. Yeah, that's kidding.

[Alex Hider]

Yeah, yeah, exactly. We went down 20% the first time because we tried to launch that division last summer. I'm in that boat right now and I have gone down another 20% again because I tried to launch it again three months ago. So that's what's stopping me. The second thing is zero sales, as we talked about. The third thing is I had did some fancy roles in finance that I was telling you about and some government, you know, I'm on some boards and so on, so forth. I haven't posted on LinkedIn. I've got 15,000 followers on LinkedIn. People have been asking me, hey, man, what are you up to? And I'm a little bit shy to tell them that I'm in fire safety. I've tested it out with a few folks here. I say to them, hey, I went from finance to fire safety. The first question is like, why the hell did you do that? You know, it's like a shocker. So crazy. So, yeah, so I just wanted to know what, a few thumbs up. Yeah, exactly.

[Alex]

Yeah.

[Alex Hider]

Thanks.

[Alex]

So, so, so you have a pretty classic issue. And so this will affect More than one per. More than just you. So I'll fill in some of what he was explaining. So he's got restaurants as an avatar, right. Which. And he also has property managers. Right. And they've got like a hundred units at a time. Right. So think of this as these are your whales and you've got your minnows over here. And the issue is that he only has three of these. And these came super, you know, sporadically. There's no process around it. The restaurants also come sporadically, but there's more of them.

[Alex Hider]

Right.

[Alex]

And the main hook that he has now is that he also didn't tell you that he bought a cleaning business.

[Alex Hider]

That's right. We had a roll up place to.

[Alex]

Right. So he bought a cleaning business and then he uses the cleaning as a way to get into the restaurant, right?

[Alex Hider]

That's right.

[Alex]

Okay, so do you remember what I told you last night? Yes. Okay, so what did I say?

[Alex Hider]

You said focus on the, the. A property management Persona to build on the fire and safety stuff. And then after one year of me doing the sales, she said, I need to be in the business because I found fire myself. When I talked to you, you said.

[Alex]

No, I'm going to be out of the business in three months. I was like, well, that's not going to. That's right.

[Alex Hider]

That's right. Yeah.

[Alex]

So I bought this business and I want to be out of the business.

[Alex Hider]

And so I quit my other stuff. Exactly. I have to quit teaching, I quit everything else. And property management firms nail the fire and safety first and then after a year, then slowly nudge them into cleaning.

[Alex]

So the key here is that. So I'll put a nuance into what I said so that you can. Because I said other. It's a lot to take in when we were talking. So there's. I did say that. But the other part that what we're solving for is it's not that that's the solution. It's that I want to solve for the greatest discrepancy between LTV to CAC on customers that are easier to acquire. Right. Yeah. And so what I want to figure out is, is it easier and more profitable to get restaurants? Because even if these guys are minnows, there's tons of businesses that can make a killing with minnows. There's nothing wrong with minnows. We just have to look at LTV to CAC and so, like, maybe it cost you, you know, $100 to get a restaurant and a restaurant's worth, you know, $2,000 over the next five years. 20 to 1. Good business. Right now, these guys might be worth. You know, that's supposed to be a dollar sign backwards. There we go. Let's say these guys are worth, you know, $20,000 a year. I know they're not, but whatever. Let's just say they're worth $20,000 a year, and it costs you $4,000 to acquire them. Now, in your mind, you're like, man, this is so much more money. But the LTV to CAC ratio is actually much smaller. Right. And so what I want to just figure out is what the LTV to CAC is between these two things. And I do think that you owning it is an intelligent decision. If you have an inkling as to which one of these is more profitable in terms of what it costs versus how much you make, then I would start there, but I would focus only on one of them, because you just have to get your hands dirty and learn the actual sales process. Now, I'll bet because you have this cleaning thing, if that gets the door open for these restaurants as a pretty easy, like, foot in the door, quite literally.

[Alex Hider]

It does.

[Alex]

Okay. Well, then it's great. Well, then this one's like, property management. Be harder to get. Right. And so if you're like, cash flow can train, which I'm guessing you are, given the stress I can feel right. I would probably go cleaning. Because you can get your foot in the door and get your reps much faster. Yeah. And I think you'll learn the sales motion that might also apply to the property managers later. So it's not like you're excluding that. But for right now, and this is what I hope to have happen, is that you figure out the sales motion for. For restaurants with this offer, and you might just be like, we're making a lot of money. Let's just keep doing this. And then you can just transfer that. Because I'll also bet, kind of like the selling, you know, flipping watches. Selling property managers can be harder. Yeah. Than selling restaurants. And so if you do eventually want to get out of the business, it'll be easier to get out of the business if you make that the customer real quick.

[Layla]

Guys, I have a special, special gift for you for being loyal listeners of the podcast. Layla and I spent probably an entire quarter putting together our scaling roadmap. It's breaking, scaling into 10 stages and across all eight functions of the business. So you've got marketing, you've got sales, you've got product, you got customer success, you've Got it. You've got recruiting, hr, you've got got finance. We show the problems that emerge at every level of scale and how to.

[Alex]

Graduate to the next level.

[Layla]

It's all free and you can get it personalized to you. So it's about 30ish pages for each of the stages. Once you enter the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com roadmap R.

[Alex]

O, a D map roadmap.

[Alex Hider]

Got it. One last question to follow up on that is we also sell like a third department that does safety compliance. That's like only two or three people that do that. So for example, that fire sign that you have, the exit sign. So that needs to be there otherwise the fire department can shut you down. I haven't even touched that department because the feedback I get from the team is don't sell more stuff because you can't keep up with the current customers. So don't bring more. Any, any insights on that.

[Alex]

One is it profitable? The other that it is.

[Alex Hider]

That one is a subscription model, so yeah, I mean, super profitable. Yeah, it is.

[Alex]

Yeah.

[Alex Hider]

It's 20k a month in revenue, for example.

[Alex]

Okay, cool.

[Alex Hider]

And 20 clients that pay well and you know.

[Alex]

Okay, okay.

[Alex Hider]

All companies and things like that.

[Alex]

So. All right, we have this, you said department, it's $20,000 a month. So departments, one person.

[Alex Hider]

Yeah, well, it was one person. It was a previous owner, but she, we hired three more people. So it's.

[Alex]

Yeah, but it was the owner and now you have three people there.

[Alex Hider]

Correct. Because that was like the key, key person risk. So all the information was in her head. Remember, there's no processes here.

[Alex]

Right.

[Alex Hider]

The phone just rings, huh?

[Alex]

Yeah, bro. So I, I. Okay. We have to take these one thing at a time. So first things first, we're going to ignore this. Cool. We're ignoring that. Second thing is you're going to get the sales cycle for doing this offer on the front end because that seems to be working for you. So I wanted to get you better at closing these deals and doing consistency.

[Alex Hider]

And that's a 20 year history as well.

[Alex]

Great. So that's good. In terms of the cross sell, which is basically what that is. I would say table it for now. Not, I mean, I do think the reasoning of we're too busy but we're also not making as much as we want is tough. But the steps of what we're going to do here is this is going to be number one and then the second thing that you're going to tack on is the cross sell. Actually it'll be 1.5 is fix compliance department so that they can actually handle the customers. And then so it's restaurants is number one. Fix the compliance department and then you'll start cross selling the compliance services. But this will probably take six to nine months to get to here. Just to be clear. It'll probably take six months to learn this, maybe three months to turn the department and figure out like you hired three people to replace one. I'll bet you two of them aren't doing anything. Especially if they're like we're too busy. It's one person who's doing this. There's three of you. Now you're saying you're too busy. Something doesn't add up here. And so you pro like right now your business need has four fires. You just have to take one fire at a time. And this is the most important fire which is getting new business. So let's solve that one first.

[Alex Hider]

Okay, thanks so much Al.

[Alex]

You appreciate that. Yeah, a hundred percent.

[Michaela]

So my name is Michaela. We have a sales agency that sells photographic art and albums to consumers on behalf of photographers. Right. This past year we did just under 2 million and I need to be at 5 the end of this year.

[Alex]

You must be.

[Michaela]

I must.

[Alex]

Or else.

[Michaela]

Or else. And what's stopping me is definitely just advertising and marketing. We haven't done anything up until this point. Our business evolved from selling courses. So selling courses and then people didn't want to implement or do the sales appointments themselves so I built an agency to do it for them. Yesterday you mentioned the plumber situation. Right. So my question is right now we. So I have my course that basically teaches photographers how to run a print driven business business and do what we do. But it was also like a really great final strategy for this business. So I'm not sure whether to use that as a downsell for if they don't qualify for our partnership program to put them in the course first or to pull it from behind the paywall and turn it into just free content to be top of funnel.

[Alex]

What percentage of the revenue is coming from the education?

[Michaela]

Like less than 10,000 a year. It's not something that.

[Alex]

Well then yeah, they could free for sure. No, no question. Yeah. And I would make it free in a couple ways. So one is I'd put it out as content, put it on a YouTube channel, let it be stream free. You can still have people opt in for it if you're running ads and just give them all the links to the YouTube videos. And so that would both get you leads from the platforms and also from you running ads to them. And it basically functions as like a great and like just put an easy call to action upfront and then also follow up with the leads. Like you have a sales team. So follow up with the leads who opt in and just put a thank you page scheduler that's hey, by the way, if you want us to implement this stuff because you don't want to do it, we're happy to show you how we execute this stuff. And just put a sorting question on the the opt in form so you can see what revenue level they're at. And so if they're, let's say minnows or not big enough to do what you want to do, then don't have it. Thank you page over to the scheduler and then only have the pixel on the thank you page that has qualified leads and then that way you'll the algorithm will target more qualified leads on a continuous basis. Does that make sense?

[Michaela]

Yes. Thank you.

[Alex Hider]

Great, this was good.

[Raja Mukherjee]

Hi Alex. My name is Raja Mukherjee and I run a cybersecurity company. We sell cybersecurity analytics. Specifically we catch hackers in large organizations, primarily sell to the Fortune 1000 Global 2000 specific focus on financial services, nation states and retail. Last year we did $304 million of top line.

[Alex]

Awesome.

[Raja Mukherjee]

And our gross margins are about, gee, about 88%. Net operating margins are lower primarily because we have significant costs in terms of sales and marketing and what have you. There's a lot of infrastructure on the back end there. Even though the delivery costs are low, the sales and marketing efficiency is not there. We'd like to get to about $500 million of revenue and about about a year and a half from where we are. And that's recurring. What's stopping us is that we're sort of addicted to those large deals. Take a look at our average deal size. We're Talking about about 536k for average deal size today. And what that really causes is it causes a significant amount of lumpiness in the business. Moreover, there's a lot of platformization in terms of what we have in terms of the technology. And what I mean by that is we tried to do A land and expand sales model. We sold smaller amounts, if you will. We tried to transact those and try to upsell, but ultimately we haven't relevant hunters on our enterprise sales team who just go and sell the entire fleet of products in one shot. Nine months. It's nine months or bust. Really what's happened over here though, is that this is a fundamental risk to the business. It's very, very lumpy. And sometimes a quarter will be. We'll. We'll either make the quarter or lose the quarter based on a particular. On one deal. And this is particularly frustrating right now because we are PE owned. We've sold the company. We've sold the company twice. We sold it from VC to PE and then from another PE to another pe. And now we're looking at the third exit here in the next year and a half, which is why we had the $500 million ARR target. Any suggestions as to how to take an established model where we have various covenants and add a minnow or basically a land expand motion without disrupting the existing enterprise sales motion?

[Alex]

Did you found the business?

[Raja Mukherjee]

Yes.

[Alex]

Congratulations.

[Raja Mukherjee]

Thank you.

[Alex]

How long has it been?

[Raja Mukherjee]

18 years? Feels like 18.

[Alex]

Yeah. That might be my quote of the day. Okay, so I think that. So I mean, margins have to be razor thin if a $500,000 deal is going to make or break the quarter. So what Part of my misunderstanding there.

[Raja Mukherjee]

It's not so it's not so much. So basically we reinvest a significant amount in growth. So for example, we have 204 salespeople in the company today. And what we generally have been trying to do is rather than optimize on the operating margin, we've been reinvesting into the business. So we have sales capacity for the next year.

[Alex]

Do you trade on ebitda?

[Raja Mukherjee]

We have now we've recently moved from Covenant, basically our leverage. Covenant moved from ARR to EBITDA as it's actually, it's moving next end of this year. So we're preparing for that right now.

[Alex]

Yeah, because you'd have to dramatically increase EBITDA if you're.

[Raja Mukherjee]

That's right. So we've actually moved from negative ebitda to. To $37.6 million of EBITDA this year.

[Alex]

All right, so I'll. I'll tell you what, I might start by what I wouldn't do, which is I probably wouldn't allocate existing resources or people and try and take people from one to the other because it's, it's such a different sales Motion kind of going after minnows. And so I think you'll probably need somebody who's kind of entrepreneurial. It might be a really. Because given the size that you have, it might make sense to acquire somebody who already had. That's pro if I'm in your shoes. Because you need to have such a significant amount of scale in order to make a, you know, make a dent in this. It's. I'd be looking at somebody who has inferior product to yours but has a really good marketing and sales function for minnows. And just say, listen, your back end's trash. We'll plug it into ours. But we just want like this. There was a deal that I was looking at for gym launch, obviously smaller, but where there was a marketing agency that was selling like 50 gyms a month and they would keep them for three months and they turn out. And I was like, man, I could just buy this company and just say, keep everything the same. Just sell our thing. We ended up doing the deal for a different reason. But I think that would probably be like the fastest way of getting into the minnow market. Start building that from scratch. Given the fact that no one in the business sells to minnows now, given the timeline, I don't think I would. I don't think I would try an organic growth strategy for minnows to get from, you know, 340 or right around reset to 500 in 18 months. I don't think. I don't think. I just. I think it'd be really, really tough.

[Raja Mukherjee]

I think that that's. That's our sense as well. We were looking at doing an inorganic, rather an inorganic acquisition there. The catch is also one of them, maintaining the culture of that acquisition. That's going to be such a distraction.

[Alex]

I mean, I think either way, it's going to be a distraction. I wonder if. I know you said that. The lumpiness is an existential threat to the business. What is sales velocity?

[Raja Mukherjee]

So as I mentioned, the sales. I'm not happy with that sales cycle either. It's about nine months, but how many.

[Alex]

Deals a year do you do?

[Raja Mukherjee]

So in general. So right now we have about 40 customers with ARRs of over a million. Our total customer count is approximately a thousand today.

[Alex]

Got it.

[Raja Mukherjee]

And so we'll add a net new this year of about 150 customers.

[Alex]

You have a thousand customers? 340 million roughly. So annual revenue is like 3,40ish per customer. And then top 40 are disproportionately higher.

[Raja Mukherjee]

That so. So we have a Long tail. So we raised prices in recently. Now we're looking for larger deals. The, the average deal size has increased as, as we've grown the company.

[Alex]

Yeah. Yeah. So if we were looking at the more better new. I know as, as, as rudimentary it is, I still think that way. If I had to make a bet, I would probably bet on the better button for the existing sales function with. Do you have 204 or 40? 204. I just.

[Raja Mukherjee]

204 people.

[Alex]

Yeah. 204 salespeople. I would probably be thinking like, okay, I'm dissatisfied with this. I'm probably not going to introduce a new variable into the business when I know that if I, if we just, I guess thinking like 12 months in the future, if we just nailed one thing, what would have the highest likelihood impact on us getting to 500? We'll probably take in the existing infrastructure, existing deal model and just say like how can we tune this thing up? Would probably be. And that's just going to be a lot of rolling sleeves up. But I think realistically that that's probably. And there's probably a lot of bloat right now. And I'll bet you that from a cultural perspective, I know you want to maintain the culture, but I'll bet you the culture of that team's probably not as good as you want it to be. It's probably a lot. I mean especially in like tech sales. It's like literally the butt end of jokes for lack of work ethic. Right?

[Raja Mukherjee]

That's right.

[Alex]

So probably putting in almost like a Welchian Jack Welch perspective of every quarter bottom 10% gets cut. Right. I think would probably dramatically signal to them that like we need to produce. And usually laying off the top bottom 10% in a business of that size, it'll. You will make more money. And so actually, I know, I know we, we had to derive that be of a bigger business. That's probably what my next move would be. And then I would be looking at. So if we're. It's kind of funny because it's really what we're doing one more. So this was like a perfect case study here, which is we need to get more customers. Right. Are we doing more? Are we doing better or are we doing new? So new would have been we're going to go after minnows or we're going to do an acquisition that's new. So we talked through that. It was like, I don't know, especially on the timeline, is he going to create 150 million in sales? Probably not. It'd be really tough. Unless you just did. You acquired one that was already doing this.

[Raja Mukherjee]

That's right.

[Alex]

So then it's okay. Do we hire more sales guys or better? Well, we have a lot of bloat on the team right now. I'll bet you we could do it better. Cool. Okay, so who's in charge of that team right now and why are they not winning?

[Raja Mukherjee]

Does that. Yeah, yeah. So, yeah, we have. We have a CRO on that team. Like, again, he's the incentive on. Again, is completely revenue based.

[Alex]

Yeah.

[Raja Mukherjee]

So really my concern more than anything else is. And I keep on hearing this, and this is a topic that we have fairly frequently of. It ain't broke. So don't. So don't try to fix it.

[Alex]

Yeah.

[Raja Mukherjee]

At the same time, is it broke, though? I look at it, I'm not happy with the way. I mean, when we started this company, the goal was it was less about revenue and more about ubiquity. We said, okay, we have the solution that can get everywhere. And as we sort of learned, got wedded to the teat of the big deal. It's been hard to break that habit.

[Alex]

Yeah, heard. So I'll say this, and you may not need to hear this from me, but I think that founders have a special privilege, which is that you know how the company was founded, you. You know how it was made, you know how to break it, you know how to bend the rules. And so if you started this, the first few sentences you said was, this is an existential threat to the business. And so if the private equity firm is not recognizing it as an existential threat, it's because they don't have the same information that you do, because they couldn't. They haven't been around the business for 18 years, but you do. And so whatever pulse you have, I would probably trust your gut and say, no, this is a threat. So, like, when you say, it ain't broke, don't fix it. I say it is broken, and we do need to fix it, because we will not hit the $500 million goal if we continue with status quo. And if we. If we don't hit that goal, then all of a sudden, you know, one of the private equity guys that I. He says all businesses increase in value over time, unless they don't, in which case they are worth nothing. And so you were you. From that perspective, that's kind of where you're at right now. And so I think it would make sense for either you to parachute in and you might need somebody who's a little bit more entrepreneurial, a little bit more renegade to go in and kind of rattle some cages and say we need to, we need to do better. And I think that's probably going to be what will be required and it'll. And I focus, obviously, we think I talk a lot about behavior, but what are the behaviors that we're going to change and how can we. I mean, we solve sales problems in every organization by more role playing. That like role playing so your eyes bleed. That's how we do it. And that's fundamentally how we fix sales functions because we can just give rapid feedback. And so it's. I think you need people who. It's not like getting all the sales team to attend a rah rah event and having some sales speakers speak for eight hours. It's not going to do anything. Right. I think it's. You need to have probably almost like a SWAT team of people going in and then retraining and quickly, red, red, yellow, greening the team as is and be like, this guy sucks. He's out. This guy has potential but still needs to learn. This guy's great. Let him do his thing. And I mean, that might take 12 months, but at least at the end of that 12 months, like your sales and velocity will increase. The deal cycle will probably shorten the deal. Average deal value will go up. And those are the things that I think would have the highest likelihood of getting to the 500. It's from my vantage.

[Raja Mukherjee]

I appreciate it very much.

[Alex]

Thank you. No, 100%. Thank you.

[Antonio]

Alex.

[Alex]

Hello.

[Antonio]

Cool workshop. More of these. What's that? You should do more of these.

[Alex]

Oh, yeah.

[Antonio]

My name is Antonio. Well, we built the Duolingo for learning how to draw.

[Alex]

Sweet.

[Antonio]

We basically sell guided personalized learning to aspiring artists.

[Alex]

Cool.

[Antonio]

We currently do 60k in MRR. The long term goal is I would like to exit to a company like Duolingo, like Joy Tunes. Right now. The more short term thing is getting to a quadruple, get bigger. Oh, get to a quadruple revenue. Oh. Or like valuation essentially in 18 months. Yeah. What's stopping us right now is traffic primarily. We have two acquisitions channels, which is organic word of mouth and then social media. We have around 600,000 followers across three channels. Your team eloquently told me, do more. I just wanted to know at what point would you say, okay, now we need to do better instead of only more.

[Alex]

You need to do way more for sure.

[Antonio]

And then, and then at what point is just for the Forex. That would just be. Do more.

[Alex]

Yeah, I mean, for sure.

[Antonio]

That's it.

[Alex]

Yeah. You're, you're so again, this is not a slight, but like $60,000 a month, like you're, you're tiny. Yeah, yeah. So we have to, we do have to do so much more. So you said you get some from organic. What was the other source?

[Antonio]

Social. Social media. So YouTube, Instagram, TikTok.

[Alex]

So all traffic is from organic? No.

[Antonio]

Basically, yeah.

[Alex]

Okay. Do you run ads? No. Yeah. So I think it's unlikely that you're going to quadruple this year off organic unless you just get really good at it really fast, which you could. And so I would say it would probably like, if you really, if you have to hit four or more, it would be either an ad funnel or if you look at what Duolingo did, they did a lot of influencer campaign. Yeah. Of all these guys who teach languages or speak different languages and say, hey, you know, go sign up for Duolingo. Yeah. And that might be a really good strategy given there's so many artists on YouTube and Instagram and they typically are horrendous at monetizing. Yes, Right.

[Antonio]

But it's a double edged sword because they're usually incentivized to sell their own courses.

[Alex]

Yeah. There's also a bunch that just don't. And so, but big picture, I just don't think you're going like, I don't think you're going to quadruple your following or like your organic views. I mean, maybe you could. Right, but what's the funnel that you have right now in terms of how you get customers?

[Antonio]

It's affiliated links on the, on the social media channels that we can pack.

[Alex]

What's the price? Sorry, what's the price?

[Antonio]

We have three prices. We have nine, 29 and 99. And obviously the 29 is the most popular. 70% of people are on the annual subscription.

[Alex]

Okay, that's good.

[Antonio]

Yeah.

[Alex]

So good on annual. And then what's LTV for the customers?

[Antonio]

Around $200.

[Alex]

Got it.

[Antonio]

And virtually no CAC.

[Alex]

It's like $12. Well, it's. You mean $12 is if you take your organic cost, basically your cogs. Proof of the media. Okay. How many pieces of content are you.

[Antonio]

Putting out across all channels? We'd say about 10 to 12 per. Per week.

[Alex]

Okay, cool. So yeah, let's go more. For sure. Let's do more. Yeah, I, I, I, I revert back to my original statement. To put this in context, we put out 450 a week. So like you definitely have room.

[Antonio]

Yeah, yeah, yeah.

[Alex]

So yeah, I mean you want to, you want to, you want to build this thing. So I mean, you know, 10, 10 a week is like one and a half a day. Yeah. So yeah, so just do that till.

[Antonio]

You hit the constraint of people operations basically. And then, and then at some point you look at, if you had to pinpoint anything that could be better in, in terms of, to raise engagement, all of that.

[Alex]

Well, I'd have to look at all the content and I have to look at the funnel. Cause I'm sure there's things we can find on the funnel to increase in conversion. So if you're at like 1.5 and it's, I think we get this to 3, it's like there's a double. Great. So now we only have to double our impressions. Well, if we double our number of posts, we have a double there on the front end, we have a double on conversion. So there's our 4x. But if we, you know, I like to say like how do we leave no doubt with this goal? So it's okay. Well if we, if we 10x the amount of volume of content we're putting out and we double our conversion and we increase our follow up on the back end and we look at our pricing strategy and see if there's maybe some holes that we can find there. Right. Then it's, well, there's a 40x and so if we just suck by 1/10 of that, we'll still hit the 4. Right. Does that make sense? Yeah, that's 10. That's how I tend to look at those types of rules. I wanna, I don't wanna hit a quadruple. I'll shoot for 40 and if we miss it, we'll hit 20. Right?

[Antonio]

Yeah, makes sense.

[Alex]

Rather than solve for four.

[Antonio]

Okay. I mean the last question, maybe like you have, well, maybe you still have like the, the key man issue of like you're the face of. Sure, right, this, I have that. But at what point would you say, okay, I'm, I'm the key man, what's the first sort of talent I would bring on the team? If we scale in terms of content and everything and we hit like a, a wall of okay, I can't produce anymore and I'm only in front of the camera 24.

[Alex]

7. I don't even want to answer the question because it's so far from where you're at right now. Right. Doesn't matter. Right. It just doesn't matter. Right. Because you'll have. My answer will also be irrelevant, because by the time you do have that problem, you have different resources, different teammates, more cash, and you'll have a different solution that will then make sense than what me trying to predict what that's going to look like 12 months from now is going to be. But really, the. The. The. The scaling that it will look like in the short term is how do we get more out of you? And it's going to be basically you getting as much assist as you can so that you can reduce more. And so you're like, well, what, am I going to be on camera 24 hours a day? I'm not on camera 24 hours a day. We put out 450. So, like, we're, you know, we're doing. I don't know what the math is there, but more. Right. I guess we're doing, what, 40. 40 times more content than you are. And I'm. I'm not on camera 24 hours tonight. Cool.

[Antonio]

Thanks.

[Alex]

Cool.

[Antonio]

Awesome.

[Alex]

All right. Yeah, Easy.

[Antonio]

W.