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- [00:00]
Alex
There are probably 100 things that you have on those notes, and each of them, you're like, this could give me 5% more, this give me 10% more. This, give me whatever. If I know them and have a 20% guaranteed cost, that whether it works or not, I'm going to have this happen. It changes what things I'm willing to take a bet on. So how's this morning? Good. Yes. Tactical. Okay, good. That is the objective. And hopefully it puts a little bit more context on what I was talking about yesterday, which is, all right, there's probably a hundred questions you could have potentially asked, but ideally, or hopefully, you ask the questions that you think could get you the highest return. And that's fundamentally why we laid out that way. To frame this Q and A, I want to go over a couple small things and then we'll kind of dive into it. So one of the big ones is everyone here probably has a lot of notes from this morning and yesterday. And when you get back in your car or you go on the plane, you're going to open up your laptop, you open up your notes, and you'll probably open up some sort of fresh document and be like, okay, what am I actually going to do? Right. Because you have all these ideas. And kind of the objective for me, when I think about how to prioritize within a business, AKA strategy, it's making sure that we get those one to three things that we're going to change. Correct. And I want to introduce a little bit of a concept that's taken me too long to understand, and it's really, really hard, which is this. There's a lot of things that you can do to grow the business. You have a lot of ideas that you're coming off from. And so let's imagine that this line represents your current revenue level whenever you make a change in the business. My estimation is that we see about a 20% decrease in revenue as a result of a change, especially if it's a manual change. We're changing a sales process, we're changing a customer service process, something that involves humans. We're change something that they're doing. We'll typically see a 20% decrease guaranteed simply because of the cost of change. But once I kind of like realized this, it changed what things I decided to choose to change to begin with. Meaning there are probably a hundred things that you have on those notes, and each of them you're like, this could give me 5% more, this give me 10% more, this give me whatever. If I know them and have a 20% guaranteed cost that whether it works or not, I'm going to have this happen. It changes what things I'm willing to take a bet on. And so for me, my kind of minimum litmus test for this is I need to see at least a 20% bump, or believe I can see a 20% bump from any implementation that I'm going to run, or I'm not going to take the guaranteed 20% loss. And so part of this comes into something called ice, which is kind of an investor terminology, but basically you have impact confidence. How likely? Like how big of a difference is it going to make? How likely is that to happen? And then you've got ease, which is basically the value equation without speed. And so if we're looking at any of the implementation that you're thinking about putting in the business, I'd be like, okay, how big of an impact do I think this could have? How likely do I think this is to occur? And then how fast and how easy do I think I can make it happen? And so typically we'll organize it in that way and you'll probably figure out pretty quickly, if I were to implement two things at once, what do you think would happen? Right? And so you'd have two negative 20% decreases. And so the end result of like basically taking this ideology to its natural extreme means that you basically can't change that many things in the business and expect as a growth. And so that end result for me has been, and I'm going to be crude on purpose, is that some shit stays fucked. And so, like, there's a lot of things that I would love to do to improve this experience for everyone Here I've got a list like many pages long. But every time I do implement a change, it negatively impacts the next. The next group because it was a change, now the next one after that it starts to recover and come back up because the team learns, whatever that process was, they get better at it. And then maybe the one after that it goes even higher. And that's great. And so what happens is like, I. I've gotten addicted to not changing things because people tend to. Because the flip side is if you change nothing. So let's say you have no change that occurs. You'll have something usually that's in like the, like a 2 to 3% increase that happens pretty much no matter what, because people just get better at their jobs. Sales guys just get a little bit more comfortable. Customer service guys get into a rhythm like it just works and it Just works a little bit better. Cuz most people like to make their jobs easier and so they tended to do it a little bit better. That's what specialization, specialization of labor is all about. And so I would encourage you that when you have this list that you're going to have for, you know, your 1, 2 and 3 that you're going to go home with, think about ice when you're putting that together and make sure that you're going to make your biggest swing worth it. If you have a change that can get 2, 2x the business, then yeah, take the 20% dip, no question. Right. But there are some changes that just aren't good enough to be even worth the guaranteed cost. Does that make sense? This took me a really long time to understand and is almost like, I would say like a stepbrother to the focus on the macro scale of business model. Focus. Let's not start a second business, which probably a third of you have, but even within the business, it's staying focused on keeping the main thing. The main thing and the hard part is, is it's hard because the thing that's often limiting you in the business are hard problems. New things are easy problems. Cause you can always just whip something up and promote it and make money. But the hard problem is like, okay, I can't scale past this current level because I need to recruit like three really niche employees. Well, you're going to have to do it either way. And so you might as well just confront the hard that's in front of you. And so being able to spell that out to myself and be like, this is the hard. The heart is the not knowing how to do this thing. And I have to figure it out and not knowing where to find these people. But I'm going to have to figure it out. And so it's like taking all that energy where you're like, I don't know how to do this, so I'm just going to do the thing I know how to do, which is I say this and I see like all the smiles like and like nods in the audience right now. But you have to keep fighting that muscle because in a lot of ways it's almost like an addiction for entrepreneurship. It's like, we like to do new things and also like addiction, you just have to fight it every day. This is just because a lot of you guys are going to be implementing some of the things that you walk away from here. I, I just want to make sure, number one, that the few things that you choose to do that they're absolutely worth it. And that many of the things on that list I'd rather you just forget about. Because after you do the first three things, all the, all the pieces on the board are going to change. You're going to have new resources, new problems. And number, you know, 5, 4, 5, 6, 7, 8 might not be like once you do one through three, number four might not be number one. You'll have another thing that'll be number one that you didn't even think about. Which is why I'm not super obsessed with very long term planning. So I, I thought this might be a good timer before we get into this as a good way of thinking through this. And this is like, I wish I could transfer this to you because this is probably from a skill perspective. One of the things that has made me the most money is basically just saying I'm not going to do new things. And if I'm going to do it, it better be worth it because I'm going to pay a price. Immediately with my team being confused, feeling whiplash, saying, what is this thing? I didn't feel like it was communicated well. It doesn't matter how well you communicate. It's not communicated well enough. Cause they don't just immediately know it. Okay, cool, let's do Q and A's. All right, so you had 107,000, you went to get to a million issue hiring.
- [06:48]
Jacob
150.
- [06:49]
Alex
150. Excuse me, you want to get to a million? Yep. And your biggest issue is hiring? Yep. What do you sell?
- [06:57]
Jacob
I sell content, so.
- [06:58]
Alex
Content? Yeah.
- [06:59]
Jacob
So we do videos, like marketing materials for real estate agents looking to market their personal brands and properties.
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Alex
Okay, so personal branding for them.
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Jacob
Correct.
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Alex
Okay, got it. So what stops you from doing a lot more of that?
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Jacob
So I'm a young entrepreneur and I basically based my own brand off of being a young entrepreneur. My.
- [07:19]
Alex
And now you're just gonna be a middle, young white guy.
- [07:25]
Jacob
So my business partner.
- [07:26]
Alex
I know what you're dealing with because like when I came up, I started making a lot of money at like 26, 27. And they're like, Alex is so young. And now I'm just like 36 and no one really gives a fuck. Yeah, sorry, keep going.
- [07:38]
Jacob
The only problem is like clients find out my real age and I use my, I technically use my age as a leverage to what I sell. So social media, I grew up with social media, so you know, I, I know social media better than 60 year old agents do. Okay, so my constraint.
- [07:56]
Alex
What's Up. What's the issue? Just the pitch is wrong.
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Jacob
No, people don't trust necessarily older people. In my business, we based our brand off of being young.
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Alex
Okay, so you're still young.
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Jacob
Yes, but when I hire someone, like a new shooter or a director of operations who's 25 and above, they don't necessarily. Yeah, they don't necessarily.
- [08:20]
Alex
I want to say, too, as boomers. Yeah, yeah, boomers. So, but what are you saying, though? Like, it's.
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Jacob
It's more of a trust issue with clientele.
- [08:31]
Alex
It's like, totally in your head, man.
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Jacob
Really?
- [08:33]
Alex
Yeah, 100%. You care. No one else cares. You even think they're old?
- [08:38]
Jacob
Hey, I don't think.
- [08:39]
Alex
I don't think they're old like you a little bit, because you're bringing it up, right? So, like. Like, no one cares. Did you guys care that Jacob Hopkins is 22? At the same time, we got people who are in their late 30s and 40s. People just care about how good you are. So, like, people will care about your age for the two seconds before you open your mouth. And then as soon as you open your mouth, all of it's like. That's like the. The. The. The. The absolute thinnest surface level of judgment that someone will make. In general. Younger people know less than older people in general. Yeah, but there are also Mark Zuckerberg, who's a billionaire at 21, so there's obviously people who know more at a younger age. So you just have to demonstrate expertise.
- [09:21]
Jacob
Okay, can I follow up with another question? So, on a scaling aspect, we have a lot of realtors, you know, asking us in different areas, like Texas, California to come produce the work out there, because our content is kind of one of one. It's different, and it's providing a lot of value. I'm looking at. I'm looking at it as more of like a 1099, you know, contracting videographers and teaching them, you know, in that state or region to shoot that kind of property. But I'm also looking at it as kind of like a franchise. What would you do in that situation?
- [09:52]
Alex
For a franchise to be something that you'd really want? It's typically, you're have some sort of, like, franchising is just a model for raising money, and you dilute selling the most expensive version of it, which is that you're going to give all of the upside away except for a small royalty, and you're going to do a huge amount of the work. And so in your business, you don't require really Any capital to expand. Right. So we wouldn't franchise. So that doesn't make sense. If you wanted to have revenue retention for these people who are in, you know, different markets, I could see two different ways that you could do it. Well, really three. So one is they fly to you and then you just book. You do like one day of recording and you get 90 days or six months worth of content for them. And I think that would be a very strong value prop. And you could probably charge 25 grand for that. That's number one. The other ways that you could fly out, you could fly somebody out to do that. That's the second version. Also still charging a lot of money. The third way is you can, I guess, find people, basically run ads locally to find videographers to go capture the footage and then do what? Edit centrally. We would.
- [10:53]
Jacob
We have a team in house to edit. It's more so like the shots, like learning the correct shots and for us to edit.
- [10:58]
Alex
So you edit centrally. They. They capture locally. Right. So I think I would just consider hiring those people on behalf of the client and then just charging an upcharge on the rate that you're like, if you, you know, pay them $4,000 a month, you charge five and. But they're paying you five, you pay the person four. And then that way you'll have built in revenue retention because it's much harder to fire an employee than it is to fire a vendor. Real quick, guys, I have a special, special gift for you for being loyal listeners of the podcast. Layla and I spent probably an entire quarter putting together our scaling roadmap. It's breaking scaling into 10 stages and across all eight functions of the business. So you've got marketing, you've got sales, you've got product, you got customer success, you've got it. You've got recruiting, hr, you've got finance. And we show the problems that emerge at every level of scale and how to graduate to the next level. It's all free and you can get it personalized to you. So it's about 30ish material pages for each of the stages. Once you enter the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com roadmap R O A D map, roadmap but you would just basically fractionally own a lot of these relationships.
- [12:27]
Jacob
So look at it more as like a vendor.
- [12:29]
Alex
Yeah. And as soon as someone says they're going to cancel, say, oh, that's great. I had such a waiting list in your area. I'm just going to have that guy shoot your competitor. This is so helpful. That works out great.
- [12:37]
Justice
My name is Justice. I'm a short form content creator in the product review space. So right now I'm doing about 120 million views a month. Just short form. But 75% of my revenue comes from brand sponsorships.
- [12:49]
Alex
Okay. But I'm review products. Yeah. Okay.
- [12:52]
Justice
So you are ugc, pretty much usual Faceless as well. So it's like not really a personal brand type of thing.
- [12:58]
Alex
Cool.
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Justice
I'm realizing the current business model isn't as like scalable and sustainable long term. Just for me, what would be a good roadmap for someone like me who's a client scalable? It's just, I think like a little part of it's like unfulfilling and a lot of it is like, all right.
- [13:15]
Alex
I'm pause you right there because I think this is really valuable. Yeah. Fairly. I hear that sentence all the time. I have this business. It's working. I don't think it's scalable. I should do a different business. If we reframe this as I'm doing her business, it's working and now it's hard. And so I'd like to do something easy. Can you tell me something easy? That's, that's what I hear. And so I'm bringing this up because it kind of hits to kind of what I was talking about earlier. Like, you have to confront the problem, but like the other side of that problem. So the way that I, the way that I talk about this to our founders within the portfolio is like, let's say that. I'll just give a simple example. Let's say that we have to. I'll, I'll go back to our question. Let's say that we have, you know, a key hire that when this key hire comes in, we could add, you know, 5 million. Ooh, nice green. There we go. $5 million in profit to the business. All right. This would be a really 5 million top line, $2 million in profit of the business. But this is somebody we're gonna have to pay, you know, 500k a year to unlock this. Okay. So this is gonna be a pretty specialized role that we're looking for. Now a founder might say, hey, can we Just like figure out a way to not have this role? No, I think it's a worthwhile question to pursue, but sometimes you just need the role. Right. And so this $2 million, let's say at a 7x enterprise valuation, is going to be an increase in $14 million in enterprise value, which, if you own the business, goes straight to your net worth, tax free. And so if I say back to the founder, hey, do you think you could find this one person for $14 million? All of a sudden it feels better. You're like, you know what? 14 million, I could find it. Right. And so I try to think about, like, what is this going to unlock in the business? What does this create to enterprise value? And then I try and put a ticket to kind of the hard that I'm trying to go through. Like, we had a different portfolio company where we had to put in this. I talked about them yesterday. We had to put in this tech, tech component to it and I was like, well, currently the company's probably valued at like 80. If we can get this fully integrated, we could be valued in the 200s. It's like, man, but building a whole developer team. We'd have to recruit, you know, a head engineer. We'd have to bring all these other people in. I was like, yeah, I mean, we'll also get paid $150 million to do it. So, you know, worth it. So it's like, it's hard and worth it. So anyways, please continue. So it's not scalable. Okay.
- [15:20]
Justice
Yeah, I appreciate that. Sometimes I'm struggling to figure out, like, what to optimize for because just like, chasing views as a content creator isn't always like the best thing to do. Especially because I don't have a product to sell. And Since I review 50 products a month, if I make one product, there's only so many times I could post.
- [15:36]
Alex
A video about it.
- [15:36]
Justice
Right.
- [15:37]
Alex
So there's so many products. Yeah.
- [15:39]
Justice
I mean, are you saying, like, why do I review so many products?
- [15:41]
Alex
No, I understand why you review so many products, but there's so many more products to review, basically. Why is this not scalable? Why can't you review 500 products a month?
- [15:49]
Justice
I can. I think that's a possibility. It would be like figuring out if the business model is going to be served towards brands because that is the driver of the business. It's 75% of the revenue or if I'm approaching it from the wrong way and I'm just like, I should just double down on like long form YouTube. Because I haven't even posted a long form YouTube video.
- [16:05]
Alex
But you get paid on short form that they probably repurpose those ads. They.
- [16:10]
Justice
Yeah, they run ads behind it. So they usually are paying for like the usage behind that. So it is a, you know, a possibility. And then another thing is just me getting in my head about creating a bunch of me's who is just doing the same thing because it's basically like a formula because I'm not a type.
- [16:24]
Alex
You do a lot of faceless though.
- [16:26]
Justice
Yeah, that makes sense. Yeah.
- [16:27]
Alex
I mean, yeah, it's just like I, I do 50 and I do majority faceless. Why can't we do 500? I mean, do you run good margins?
- [16:35]
Justice
Yeah, we have 80% margins, right?
- [16:36]
Alex
Yeah. Let's do more of that.
- [16:38]
Justice
Two more.
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Alex
Yeah. Sweet. Cool.
- [16:40]
Justice
Thank you.
- [16:41]
Jacob
This is a good talk.
- [16:43]
Alex
Simple threads, four locations. Oh, small threads. Sorry, small threads, four locations. Three are new, one is the old one you had for 16 years.
- [16:51]
Jean Paul
Yeah.
- [16:52]
Alex
Yes. And one of the big issues is we don't have enough data and we have a better CRM so we can track.
- [16:57]
Jean Paul
And you were right last night. I went home and dug into the data I do have just by raising my revenue to 5 million instead of 3 million and getting rid of the data challenge, it makes my company worth 6 million.
- [17:11]
Alex
Amazing. So that would be. So that's more money.
- [17:15]
Jean Paul
Yeah, that's money.
- [17:16]
Alex
Me too.
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Jean Paul
So my question is, last year I dabbled in organic content, usually like crypto.
- [17:23]
Alex
I was like, here we go. All right.
- [17:26]
Jean Paul
And had some success. I had videos that got like two and a half million views. But you know, brought me people that weren't necessarily in my market, which I'm okay with because the ultimate goal is to have stores everywhere. So it could be okay. But my current thought is time wise because I, I, you know, I like working, but I work a lot. I work like 90 hours a week. Is if I were to kind of go down this a little more time and energy into organic content creation to then use it to do paid local ads, what should I be making content about? That's where I got st. So I was doing like two kinds of content, like kind of like thrift content, which isn't really what I do.
- [18:08]
Alex
Instead of thinking about what type of content, think about what will be valuable for the person that I'm trying to attract.
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Jean Paul
Okay.
- [18:15]
Alex
So think about all the problems that moms have, specifically the moms that you were talking to. So maybe single child or single sex child, whatever moms. And the nice thing is that they have lots of problems. And so you just make your content around that, and then you just try and tie in the product. Okay.
- [18:30]
Jean Paul
And then run targeted local.
- [18:33]
Alex
You post as many of those as you can. The ones that take off, you take those, make them into ads. Yeah. And if you don't want to even put a CTA in the organic, you can just make the organic content. When you have the winner, you take that one and then stitch on 5 seconds of a CTA at the end and then run that as the ad. Oh, yeah. Super easy. It's a really good strategy for anybody. Like, if you, if you're, like, trying to get it, like, if you right now are predominantly paid and you want to start doing a little bit more content, I do think it's a good idea in general just because you'll get more conversions on a lead. Nurture perspective. Because people get on the phone, they're like, what is this person? Or who's this person? Then they'll look at your account. They're like, oh, okay. They're alive. And so. But basically it's just free. I just see it as free testing. So you just get. You post as many times you want. You can just see relative to the other, other, other pieces that you have these ones outperformed. Great. Now I'll make these into ads. So just provide value. Here's other. Like, here's three ways that you can, you know, save on repairs for, you know, kids, torn clothes, or here's how you get stains out of these things. Or if you're. If you're the type person who, like, sees this and say, I'm never going to do that. Awesome. Come to simple threats. Like I keep saying. Simple, sorry, small threads. We got you covered.
- [19:36]
Jean Paul
Okay.
- [19:37]
Alex
That help? All right.
- [19:37]
Jean Paul
That helps.
- [19:38]
Alex
Thank you. Easy.
- [19:39]
Mike
All right, Alex. My name is Jean Paul, and I sell healthcare listing services for doctors. I guess I. I work with PI attorneys, personal injury attorneys. And so I work. What I'm trying to figure out, like, I'm trying to figure out my bottlenecks in the business. I think one of the biggest ones.
- [19:57]
Alex
Is that a lot of I work with personal injury attorneys.
- [20:00]
Mike
So my clients, my paying clients are physicians, like healthc care providers.
- [20:04]
Alex
Okay. Okay.
- [20:05]
Mike
And then the reason why they hire us is because we're trying to get leads from personal injury lawyers.
- [20:11]
Alex
Uhhuh.
- [20:12]
Mike
For like, car accidents, slip and fall.
- [20:13]
Alex
So if someone slips and falls, then they need to get repaired. We're here as a repairman.
- [20:17]
Mike
Yeah, kind of being a repairman.
- [20:19]
Woo
Yeah, Biological repairman.
- [20:20]
Alex
Got it.
- [20:20]
Mike
So my, my, the hardest thing is trying to figure out how the PI lawyers are sending referrals to the doctors. And a lot of the physicians that I work with only want to know how many referrals they're getting versus, you know, like trying to brand them and doing like, you know, the full spill of marketing. Yeah, they just want to know, hey, how many leads am I getting? Or how many, you know, referrals are am I going to get? Yeah, a lot of these referrals are worth a lot of money. It's not like, yeah, all right, so that's where I'm at. I don't know, like, we're expanding into Arizona and Texas and I'm planning on hiring somebody there in each state.
- [20:57]
Alex
Is this a, is this a problem to solve or is this just like overhead?
- [21:00]
Mike
This is a problem solve.
- [21:02]
Alex
Okay, so what I'm trying to figure, is it limiting your ability to grow? Yes. Why?
- [21:08]
Mike
Because a lot of the physicians expect a certain amount of leads per month. And so it's, it's obviously it's hard because accidents don't just happen in the same city.
- [21:18]
Alex
Right. Over and over. What if driverless cars come and then it's like, no, accidents happen and now what are we going to do? Right. Okay, okay, okay. So let me just, let me pause you real quick. So I think. So part of this is probably how it's being framed, the positions. Right. So one is you could just reframe it based on revenue, like basically revenue volume. So be like, cool. We're going to usually send you around $20,000 worth of revenue volume. Sometimes it's going to be from two or three cases, sometimes it's going to be from, you know, five or six. It'll depend. Obviously we can't make sure that everyone's going to be paralyzed. I'm sorry. Hahahaha. Right. But I think if you just reframe instead of lead count to revenue volume, which is ultimately what you care about anyways, like leads translate to revenue. And if you're saying that there is some variability there, I think that the lead number will no longer matter nearly as much based on how you're just framing it. And in terms of the whole branding and all the other stuff, I think that's a different business. And so I. Either you would start that as an additional service that you charge separately for based on its own value proposition or. Or my preferred method, don't do that and just continue to do the main thing that's working. Got it. Cool.
- [22:19]
Max
My name is Mike. My Wife and I are here. We started a company with your content. Super gratitude, super grateful, man. We, we exited for over 20 million.
- [22:29]
Alex
Amazing.
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Max
Appreciate.
- [22:30]
Alex
All right, you're right.
- [22:30]
Max
But you're doubting your, your books are worth the weight in gold, bro.
- [22:34]
Alex
Thanks, man.
- [22:34]
Max
Anyhow, we're, we're at a crossroads because we're, we're building a new company based on our passion project. We started a company that taught do it yourselfers how to remodel their kitchen and bathroom using epoxy over old countertops to make them look like natural stone. So with that idea, we found that, you know, we, we really hit home with the DIYers. But a lot of our people that saw you, we built over 1.5 million YouTube subscribers and a lot of them didn't want to do it themselves, but we couldn't serve those customers. And so there's a shortage of contractors in the US So we're really going to reach out to, to young people that maybe don't want to go to college or, or old people.
- [23:12]
Alex
Right?
- [23:12]
Max
Or, or middle age 30 year olds. So we're, we're really, we're, we're going to, we're building a trade school right now. We're going to teach these, these people how to do the trade. How to. I've already proven the, the lead gen so that I can give them all the leads they could handle because that's really the harder part of the business for them to learn. My question is we can either charge up front for this school, cost about 20 grand for us to train somebody, or we could, we could, we have a big following. We could attract the people to apply, train them on our dime, maybe lock them in with a, you know, if you leave before two years or whatever. But would, and then we own the businesses in all these different areas or should we? Should we. They would own it. We supply leads and cut the liability. That's really the crossroads we're at.
- [24:02]
Alex
Yeah, there's a lot of different models from the position that you're in right now, which is probably why you feel the heartburn. The first thought that I had was just like, and instead of, or like maybe I want them to pay $20,000 to make sure that they're legit and I'm going to get a percentage of all the business that I send them.
- [24:19]
Max
My, my concern with that is if you look at a franchisee, which we're not going franchise, but if you look at that avatar, they're probably not the hustler who's as hungry as the kid with nothing who want that, that's just, that's my passion. I want to help the kid. That has nothing to do with. Okay, well, I can't finance it. You know, we could finance it and help him earn it back, but.
- [24:39]
Alex
Well, to help the kid who has nothing, you can just make all the content free. Right. Which you do now. Yeah. So that kid already has been helped from you. If he wants more help from you, he can pay and he can save up his shekels. So instead of 20, if you want to make it 5 or you want to make it 10, and you can offer, you know, nice financing terms, you could do that. I will just tell you that there's. I get where your heart's coming from. It's, it's, it's very tough to go free and deliver a lot to people expecting that they're going to do something. They typically will need to have some skin in the game. If you're going to put skin in the game, you're going to want them to put skin in the game, still.
- [25:13]
Max
Own it, charge for the school.
- [25:15]
Alex
Yeah, I think you can play with the price. Okay, great. Mrs. My client. Yes. Yeah, it's. Otherwise you're just gonna have a bunch of freebie seekers who are going to come and then you're also like, the enforceability of the backend contract and them repaying you is probably going to be a little bit of a nightmare. I would pro, like, if it were me, I would control the sales and then hand them the deals so that I could collect the payment and then distribute payment to them rather than expecting them to pay me for the leads.
- [25:43]
Max
Yeah, got it.
- [25:43]
Alex
So I was like, I'd rather just basically build a centralized phone team that could close the deals or whatever and then send the deal to the person. Got it. And if they're coming from your content, they already have trust. So you probably like, it makes sense that they would buy from you. You'd be like, cool. One of our licensed contractors would go out there. Licensed contractors go through two year training. You know, they're vetted by us. And also just like, think of it like Harvard. You pay to go, you don't get guaranteed a graduation. So it's like I would just let them know. It's like, we will not graduate you if you're not good. Right. So yeah. Or we kick you out just like a school. Like real schools have standards and you pay and you might not graduate like normal school. So just do the same thing.
- [26:29]
Max
Just your kid won't be screwed up when they leave my school. Was that your kid Just won't be screwed up when they leave my school.
- [26:34]
Alex
Yeah. Yeah.
- [26:35]
Max
Thank you.
- [26:36]
Alex
Oh yeah. You're back.
- [26:37]
H
My name is Max. I sell tech and operations consulting to law firms. We started about six months ago and.
- [26:44]
Alex
We have enterprise clients and we have our other ones that are 36 to 80k and they have a 300 to 600k packages and we need to figure out which one has the highest LTV to CAC ratio and which one you can convert most easily. So what is the issue?
- [26:56]
H
That's correct, essentially. Well, first of all, I have no idea what I'm doing. I started about six months ago.
- [27:02]
Alex
First step.
- [27:04]
Mike
Thank you.
- [27:05]
H
Second thing, I think we just have a fulfillment issue. And so my question is at what point do we consider productizing the service? From what I understand, it's kind of what you've done with Gym launch.
- [27:18]
Alex
Yeah.
- [27:18]
H
At what point would it be worth doing, doing that, if at all?
- [27:22]
Alex
You said you wanted to sell this eventually, right? Yeah, yeah, I wouldn't do that.
- [27:26]
H
Okay.
- [27:26]
Alex
Yeah. So you have the same issue that justice has, which is like I have this hard thing in front of me. Can you tell me there's an easy way? The easy way will create a business that's significantly harder to sell. And so then you'll be at that point and be like, how can I sell this business? I'll be like, you can go back in time and not do this. Right. So like basically you're in a high, you're in a high skill service business. It's a professional services business. Most professional services businesses are supply constrained. It is easy to sell high end professional services if you are good at what you do. It is hard to find other people who are good. This is the trade. But if you build a firm like that, you build a very valuable company.
- [28:07]
H
And, and another just on a side note, again, I don't know what I'm doing. I got, I got a 500k in, in investment coming in soon. Why it's been my, my boss just.
- [28:18]
Alex
Why are you taking investment?
- [28:20]
H
I don't. So we haven't finalized this yet, but I'm considering whether to do it or not. That.
- [28:25]
Alex
Oh, you don't see any point? And why do you need money? You don't run a capital expensive business. Like what are you going to use the money for?
- [28:32]
H
I guess to hire great people.
- [28:35]
Alex
The, the business model should be able to hire great people. Like you're not a tech. Like there. It's, it's, it's very Rare that you need to bring on outside capital. Far rarer than most people expect. If you want to build a platform, you want to build school. Yeah. You got to do that because you need to get zillions and zillions of users and you have to build this exceptional product before you monetize. So yeah, someone's going to front the money on the bet that it's going to be worth a lot more later. Your business makes money today on work. It does today. And if anything, you can sell the work before you even have the person. And so like you, you, you have a negative cash flow cycle. You have no, you don't have to like front inventory for months ahead of time. You don't have to do any of that. So you have a service business. So we just need to make the business make money. You're already profitable, I'm assuming, right. So you don't need the 500 grand. You have deals that are worth 500 grand, right? Yep. From what you told. Yeah. So why would you like why would I give a chunk of the way the company to have somebody who's permanently going to be involved in my business for the cost of one deal? It's like just sell another deal. Gotcha. Work a little extra on your own time and then not. Don't take that guy's money and just have the money.
- [29:34]
H
Okay.
- [29:34]
Alex
You know what I mean?
- [29:35]
H
And, and you, you absolutely think then it shouldn't be, you know, because I feel like I'm creating extra problem that I otherwise wouldn't have to have being the, the whole high skill talent thing. If I just went down the productized route. You think it's really.
- [29:46]
Alex
When you say product size, you're talking about the 36-80k price point. Yes, that's fine. I'm okay with that. But again, it's going to go back to what I originally said, which is we just have to look at the LTV to CAC between both of the different avatars. If the LTV to CAC is literally the example. I was just saying if you have a hundred thousand dollar thing that cost me 30, then I make 70 or something that costs $10,000 that costs a hundred. I'd rather just sell six more of the 10k things provided I have the ability to sell that. So it's like I want to find something that has really good revenue attention, really good gross margins. If I have that, then I can just sell the shit out of it. And then I'd rather just sell five times more of that than trying to come up with the, you know, high touch. One that's going to like is a more immediate ticket today, but it's going to quickly, I'm going to quickly get constrained. So I'm basically pushing out my constraint based on what problem I'd rather solve today. So the question back to you is, do you think you can. So what are the gross margins on. Let's say the average on the 36 to 80k is 50,000. That sound fine? Yep. Okay, so let's say 50k is the average price. What's the gross margin on that?
- [30:42]
H
Not too sure.
- [30:44]
Alex
We.
- [30:44]
H
Okay, yeah, we're quite early on, so yes, half of that.
- [30:47]
Alex
Okay. And then with the 200k thing that you do, what's the gross margin on that?
- [30:54]
H
50%.
- [30:56]
Alex
That's gross margin. So you're running thin net margins because that means you're starting at 50 and then you got to pay everything else.
- [31:02]
H
Yeah, I mean at the moment we, we are getting this fulfilled by a really expensive, highly certified guy that's been.
- [31:08]
Alex
Outside of the business. Yes. You're basically white label selling his stuff.
- [31:11]
H
We do what we can on the inside, but we accepted quite a few projects, so.
- [31:15]
Alex
Okay, then the follow up question is, can you more easily sell four times as many of the low touch as the high touch? Yes. Then do that one. If your gross margin is the same and you can sell more than four times as many on that one, then do that one. Basically we're just looking at number of units sold times gross margin, the one that makes the most money. Got you.
- [31:35]
H
So I think it always just comes back to the point of the ltv.
- [31:38]
Alex
Yeah.
- [31:38]
H
To get creation. Okay. Thank you so much.
- [31:39]
Alex
Yeah, you bet.
- [31:40]
Woo
Sup Alex?
- [31:41]
Alex
What's up?
- [31:41]
Woo
My name is Woo. First of all, thank you. You helped me turn my senior design project. It's Woohoo without the who.
- [31:48]
Alex
So. Yeah, no, that works. Right?
- [31:50]
Woo
Thank you. You helped me turn my senior design project at college into my business last year. It's my second year in business. Last year we did 150.
- [31:58]
Alex
Amazing.
- [31:58]
Woo
And I want to get to 500.
- [31:59]
Alex
Were you at one of the schools I talked at? No. Okay, cool. No, I just figured, I guess, yeah.
- [32:04]
Woo
I would love to be a 500k and the one thing that's stopping me is right now it's just me selling. So 90% of our sales come from in person presentation.
- [32:12]
Alex
What do you sell?
- [32:13]
Woo
We do digital business cards for primarily in real estate.
- [32:16]
Alex
Digital business cards for real estate? Yeah. I know somebody else who's in real estate. How Old, are you? Me?
- [32:21]
Woo
I'm 27.
- [32:22]
Alex
27. Yeah.
- [32:23]
Woo
I'm old.
- [32:27]
Alex
Never mind, never mind. Yeah, but it's digital business cards, though. It's an NFT. There you go.
- [32:35]
Woo
Web3, I'm the only salesperson. I have a few vendors, so more better than you. Online metal that. My options are, one, duplicate myself, hire salespeople to do what I do, sponsor events, pitch and sell. Or number two, basically transcribe my sales process online. And I wanted to hear what you think is the better move.
- [32:58]
Alex
What's the value prop of a digital business card?
- [33:00]
Woo
So essentially, we connect to. It's like a. I don't know if I'm. Am I allowed to say, like, brand names? Linktree.
- [33:05]
Alex
Sure. Okay.
- [33:06]
Woo
It's like linktree on steroids. Linktree, your phone and your CRM all connected. It builds your CRM on, like, an automake.
- [33:13]
Alex
Okay. So people opt in when they scan the QR code.
- [33:16]
Woo
Yeah. And then that info will go to their CRM, essentially. And it's got other features like business card scanner. You scan your business card, that info goes to your CRM.
- [33:26]
Alex
You want to grow this.
- [33:28]
Woo
So just to be sure, I'm not trying to solve. I just want to make money and to sell more expensive things later. Right now, I'm just using this to make money.
- [33:35]
Alex
To make money. Yes. Yeah, yeah. No, heard, dude, I think if you sold something else, you'd make way more money. I agree. Okay. But some hard pitch, like what you have is a hard pitch because I'd be like, your digital business card is. Here's my Instagram. That's my digital business card. If you want to find out more about me, watch some content, you know, what else are you into selling, man? Like, I just. I. I just. I don't know if this is fundamentally you can sell. Like, you obviously have the skill of sales, and so I'd rather you just, like, use that on a better opportunity vehicle.
- [34:15]
Woo
Got it. Okay.
- [34:16]
Alex
It's like this world is just crumbling. You want to hire me? Well, if you can.
- [34:23]
Woo
First.
- [34:24]
Alex
Yeah. Sales. Ari. Is Ari over there? Oh, there's Stephanie. Stephanie's right there. Stephanie's works in our recruiting. You can talk to.
- [34:32]
Woo
Oh, yeah, Stephanie. We'll talk about on the real note, though.
- [34:34]
Alex
Oh, that was the real. That's not a real offer. All right. Neither was mine. Two can play that game.
- [34:42]
Woo
On a real note, though, like, I don't know what I'm doing. What do I do in the meantime to make money?
- [34:46]
Alex
Essentially, yeah. So you're selling sue, who had this Idea for this digital business. Well, there's your senior whatever thing, right? Yeah, senior project. Yeah. One of the big issues I take with and when I do my entrepreneur talks at like colleges and stuff, the big thing that I, that I hate about those classes is that they try and make seniors invent something. It's like, it's very like invention heavy. Like everyone thinks it's shark Tank. Like I have to invent something that doesn't exist. When you can pretty much just like go look at any business that exists and just do that and probably make way more money. Like you start a lawn care business tomorrow, like knocking door to door and probably get to two or three million dollars a year just with your existing skill set. Like you're able to, you know, shake hands and kiss babies and clothes and so like, like you could sell solar and make, you know, 800 grand a year on your own income. So I was like, I'm just saying, like there's, there's like, I think I would be looking at. So when I was, when I was doing the presentation yesterday, I talked about how like now I look for products that people don't cancel. I would look for products that people don't cancel. Probably the people that are similar to who you already sell to. I would look for that product and then I would use all my sales skills on that rather than trying to explain to them why they need a digital business card. Got it. Basically, for your current pitch to work, you have to create a problem and then solve a problem all within one presentation. Right. And also explain some stuff that they don't understand how it works. Right. So it's kind of like three things. I'd rather just like talk to somebody who immediately already knows the problem that they have and I'd be like, I can solve that. And I know from the history of that industry that they don't cancel and that they're just going to buy from me because they like me better.
- [36:17]
Woo
Awesome. Well, can I have a follow up question to that?
- [36:19]
Alex
Sure.
- [36:19]
Woo
Okay, so would you recommend.
- [36:21]
Alex
We went fast on the other ones.
- [36:23]
Woo
Would you recommend that I get like a sales position at another company or just like sell more expensive so.
- [36:30]
Alex
No. I mean fundamentally, every entrepreneur is a salesman at heart. Like we're the promoters and so like you can obviously sell for somebody else or you can sell for yourself. A good way to learn a new industry is to sell within that industry. Kind of learn the ropes and then try to basically just figure out lead gen for it. Once you have that, then you have lead gen. And sales. And so the only thing that you'd really need would be delivery. If you're good at sales and good at training sales, which is a different skill, then it comes down to, like, can I. Like, this is where, like, insurance sales are incredibly profitable. Like, there's really no delivery. You just sell the product. Right. And then there's these massive behemoths that deliver the risk, essentially. There's so many businesses that are basically demand constrained, where people stick. You just want to find one of those that you like that caters to the existing avatar you currently sell to, because you already know that avatar. Well, and from. If we're talking speed to money, and then sell that. Got it.
- [37:15]
Woo
Thank you, Alex. I'll switch vehicles.
- [37:17]
Alex
Okay. All right.