In short
Podcast Summary: The Game with Alex Hormozi - Episode 878: Brutally Honest Business Advice
Episode Overview In this episode, Alex Hormozi tackles a series of rapid-fire questions from real entrepreneurs. His responses cover a wide range of business challenges, from scaling service businesses to refining offers, managing customer acquisition costs (CAC), and knowing when to pivot away from unprofitable models.
Key Themes
- Honest, Tactical Advice: Hormozi emphasizes direct, practical advice based on real-world experiences.
- Scaling Challenges: Entrepreneurs discuss their struggles with scaling operations, managing customer retention, and optimizing offers.
- Decision Making: Hormozi encourages entrepreneurs to make informed decisions based on data and market conditions.
Key Discussions
- Personal and Business Relationships
- Advice for New Partners: Hormozi suggests that entrepreneurs test their relationship with partners by spending extended time together in a real work environment before committing to a major partnership.
- Service Business Scalability
- Transitioning Business Models: One entrepreneur in the health services sector grapples with a declining insurance reimbursement model. Hormozi advises considering a shift to cash-based services or improving operational efficiency in existing models.
- Focus on Customer Retention: Hormozi stresses that understanding customer acquisition costs is crucial and suggests that businesses should focus on upselling existing customers and improving service delivery.
- Marketing and Offers
- Effective Marketing Strategies: In response to a question about increasing perceived value, Hormozi recommends that businesses test their pricing strategy by gradually increasing prices and observing customer response.
- Grand Opening Strategies: For businesses looking to make a significant impact in new markets, Hormozi emphasizes the importance of having a strong grand opening strategy, including promotional giveaways to drive early customer traffic.
- Customer Acquisition and Maximizing Value
- Balancing CAC and LTV: Hormozi discusses the importance of maintaining a healthy LTV to CAC ratio. He suggests businesses should analyze their customer base to identify clients who are most likely to lead to repeat business.
- Focus on Profitable Customer Segments: He encourages businesses to target larger clients or more stable industries to maximize profitability and reduce churn.
- Business Models and Growth Strategies
- Franchising vs. Ownership: Hormozi discusses the trade-offs between franchising and owning multiple locations. He warns that franchising can dilute profit and increase administrative burdens.
- Iterative Improvement: He emphasizes the need for businesses to refine their offerings continually and adapt based on customer feedback and market conditions.
Conclusion Throughout the episode, Alex Hormozi provides candid insights aimed at helping entrepreneurs navigate common business hurdles. His emphasis on practical solutions, relationship management, and a strong focus on customer retention and acquisition strategies serves as a guiding framework for business growth.
For those interested in scaling their business, Hormozi's advice underscores the importance of data-driven decision-making and the need for continual adaptation in a fast-changing market landscape.
Learn More
- For a comprehensive guide to scaling your business, Hormozi recommends visiting [Acquisition.com](https://www.acquisition.com/roadmap) to access free resources, including the $100M Scaling Roadmap.
Follow Alex Hormozi
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Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.0:00Let's do Q &A's. Raising Q's in whatever word. Yes. So you sell people to people. You do human trafficking. You have no revenue, and you want to get to a million dollars a month. So what's the issue? Yeah, I'm restarting that company. So there's a long story on that. But my question is a personal question. We should do the little thingy-jiggy. Right. So I'm a father, single father. I got two boys here. My name is DJ Christofferson. There we go. I sell people to people. I'm restarting my virtual staffing company. And we're currently at zero revenue. It's just a matter of getting started. Okay. And so we're really confident in that.
0:37My question is on a more of a personal one. So I'm a single father in a serious relationship and she's not a business person at all. Very sweet and supporting. But what would you say would be some things to prepare her for when it comes to - So your spouse or not spouse? Your partner? My partner. I mean, she doesn't live at the house yet. It's long distance, but it's coming together, but it's getting really serious. Okay. preparing her for being married to a type a i think you should give her a try before you buy yeah seriously how do you mean so fly out spend two weeks with me i'm not going to cater to you i'm going to live my life yeah if the way that i live my life the way this works this is how it's going to be if you like that let's rock and roll if you don't i don't want to change yeah that's true that's perfect no i love it that's that's great
1:32crushed it hey alex thanks yeah you bet um so my name is zach levine uh we sell pain management services to new yorkers okay um integrative pain so chiropractic pt um but like old people young people women men it we have a bunch of avatars right now which is potentially a problem um brick and mortar brick and mortar we're out of network endurance we actually did dying which we'll get to sure reason we do 4.2 in revenue okay um you're mostly insurance or you're mostly cash mostly insurance oh mostly insurance out of network got out yeah yeah no i'm investing in a rehab facility so i'm familiar okay cool yeah um yeah 4.2 want to get to 20 okay got it we have three offices and don't know exactly how to transition out of the dying business model obviously our industry is growing yeah so what what business model are you thinking about switching to cash hmm i have a bunch of friends who are in network and murdering it in network yeah do why don't you get in network we've just heard it's a grind you know it's commoditized it is come on i mean the race of the bottom yeah i mean i mean basically you have three different three different ways so why let me ask the question why do you feel like the one that you have right now is dying from out of network uh because reimbursements from payers are declining this year whereas as inflation costs are going up.
2:54And because the amount of people who have out-of-network benefits is dwindling as well, it's mostly just corporate. And that's even declining. Yeah, they're just getting smarter and they want to push everyone in-network. So we're getting squeezed. Administrative burdens through the roof. Prior off, all this crazy shit. So you basically see it as like, I could either go in-network and then make your entire business model around operational efficiency, which is, I mean, I've got somebody to murder it doing that. So I don't think there's anything wrong with that. Or alternatively, you just go premium, be the best, and be private, right?
3:28Be cash pay. So the question is, how do you transition it? Yeah. Yeah. I think we've decided as a team, collectively, we just don't want to be in network because of the lifestyle. No, I guess. And who you deal with. Yeah. Yeah. A pain. Literally for you. Or really, I guess for them. uh so i think so fundamentally i think you just have to think about this as basically starting a business over but with resources already so it's like you don't have to think about you don't really have to think about the service you probably have to think about the packaging itself like what's the what's the grand sim offer for this yeah and you'll you'll have a number of like you're just going to become a normal business which is just like you will run advertisements and you will make offers to people and they will come in and then they will take their credit card out and they won't buy stuff from you um and so it's probably more that it conceptually feels complex more than it actually is and so it's probably a ripping the band-aid off thing which is that i would just out like so one is what channel of acquisition are you going to use i'm guessing right now is it mostly word of mouth yeah it's referrals okay yeah business for a long time yeah so one is you can start sell upselling existing customers so like obviously they have what's covered in from insurance but then um you know upselling other packages that'll get your team a little bit used to be like, it's okay to pay us.
4:43That's from like a really tactical level. But from an acquisition perspective, you've got content, you've got outreach, and then you've got paid ads, right? And alternatively, you could have affiliates. So we have to pick. So of those four things, which ones do you feel like you are better suited? So from affiliates, it's like, go to shoot injury attorneys, or like, you want to find the person that they're going to see prior to hitting you. I tried a bunch of that. And the issue there is that they want to send in network, or if you're injury attorneys to workers' cop cases, which they'll pay very well.
5:12So you don't want to go from that perspective. So you don't want to do affiliates. Content probably, in my opinion, probably isn't the best way. So then you have outreach and you've got paid ads. I'm going to bet paid ads is going to be your better bet since it's local. It's pretty straightforward. Operationally, it's not complex. Running paid ads in a local area is pretty easy. You drop a pin. You do your best. Just say we need more. So obviously, we have a bunch of different types of avatars. So really now, like how would you say going about you're probably going to end up finding that you have one to three offers that actually convert and then the remainder of your business will be upselling and cross-selling when they walk in the door so instead of thinking about your business is having like you know we have 15 services we advertise all 15 you're going to have one to three that convert really profitably on the front end and then the remainder of your business is cross-selling and upselling so it's like you're gonna have the most efficient door into your business and then you'll end up just cross-selling and upselling people and retaining people from from there and so like in terms of next steps, it's you need to record an actual ad for an offer and then put it on meta and then drop a pin on the map and do a 10 mile radius.
6:15Um, hopefully all three are close together. Um, and you'll run the ad that'll then go to, uh, either a CRM or if you're low tech, you can just go to a Google sheets and then you can have your front desk, call them within 60 seconds. And then if they don't pick up, call them again and get them booked because your time is valuable, you'll probably want to consider running some sort of highly discounted assessment on the front end. So that'd be like a$200 x-ray or something like that, that they can get for 19 or 20. You don't care about that. You just want a credit card on file so that when they walk in the door, you have two things.
6:48One is that when they walk in the door, well, one, you want them to walk in the door because they paid. Two, you can charge a no-show fee if you want to. But typically, if you're getting even a low ticket amount, you'll be in the 70 to 80 percent show right so you won't waste uh so how do you pay up front actually put over the phone out their credit card yeah yeah okay and just for the for the discount offer now when they come in the door you'll do the assessment and then after the assessment you don't treat them you'll do the sale appointment then you sell at point of greatest need not point of greatest satisfaction so at that point is when you'll make the offer um and then you'll be like hey awesome you want to use the card we have on file because you already have it on file because you got it earlier it makes it much further so yeah got it does that help yeah okay but that's what you have to do Like you have to learn how to acquire customers that are cash based.
7:33And so that means that you have to run ads and you have to sell shit. What would you do? Like if you were saying from a strategy standpoint, like we have the current business that's doing 4.2 million in revenue. You're going to keep that business. So you're all of your discretionary resources are going to go towards this. If you want to build a bridge to tomorrow. Yeah. Should we do any of the more on the things that are still working within out of network? Like it's really just that, you know, we have limited resources. How should we spend on each? Let's build a new. profit we're at basically at zero oh shit yeah that's part of the problem we waited yeah we wait longer than yeah i understand well you can't control so unfortunately because you can't control how you're reimbursed no but we can remove the lowest reimbursement we're reimbursing patients which is like remove medicare then we can lower our cost structure we can go that route i think that would probably be the first thing that i would do and then because you want to free up cash flow.
8:27So yeah, you use this resources in terms of time and money to build a bridge. Okay. That make sense? Yeah. Thanks a lot, Alex. Yeah, you bet. My name's Cody. I sell roofs to people. We did 140 million last year, trying to do 250 million this year. Trying to figure out how to follow the principle of giving away more guarantees and bonuses when I have such high hard costs and such a high ticket item. Yeah. Well, What are gross margins right now? 40%. Gross. What's that? 10 to 15. Okay, got it. Do you want to sell it or do you just want to keep it forever? Well, I actually just sold my roofing business and now we're part of a PE firm that now I'm directing that entire.
9:07So are you the platform? Yes. Okay, so you're the platform. How many tuck-ins have they done? Eight. Got it. How long has it been since they started? About three, four years. I just got acquired 30 days or we just closed 30 days ago. and now they're trying to roll everything into my brand and I'm chaos. Yeah. Got it. Okay. So, sorry, go back to the original question. You sound like better context on this. Okay. So how do I give a, you know, follow the principle of, of give away more value, make the offer so good. It's, it's, you got to feel dumb saying no, when I have such high hard costs, I, you know, I can't really do a money back guarantee.
9:39I can't really give away more than a, you know, a roof. Well, the question is, what is it? Is that the constraint? Like, is that the thing that's limiting the growth of the business? In my theory, yes, because if I create a good enough offer, then I could roll that offer out to the other eight other brands. And that would be the biggest amount of leverage I could deliver, you know, in the shortest amount of time. And is everyone insurance based? That's why they acquired us because we're retail. And so you're the only guy selling just new roofs. Everyone else is doing storm chasing and damage repair and shit like that.
10:08Correct. And what they want us to do is bring the retail model to the other brands. And to add another layer is we sell everything 100 % virtually. So no in-home appointments. It's all, you know, digital. And so that's what they, that's the vision is taking that, you know, nationwide. Centralized sales virtually. Correct. So you want an irresistible roof offer. I'm going to blow the roof off. I feel like if I were in your position, the first thing that I would do would be centralize everything first without trying to change. Basically, I would take the model that I already know works. What was your revenue before you were acquired?
10:42Okay, you're doing 20. so i would like in terms of introducing levels of change so this is actually pretty good for everybody like i i would typically not try and change like five things at once and so you centralizing all sales is going to get cost efficiency improvements and you're going to be able to have higher sales utilization so you probably cut off the bottom third of the sales force that's low performing that alone might give you a 25 lift in general because the best sales guys will take more of the sales and you'll have centralized all the costs. Like we have centralized all the costs.
11:13Right. And so you'll have an increase in revenue and a decrease in cost that's paired. That would probably be my first step. That was part of the acquisition deal. That's the only way I did the acquisition is if they were going to give me full control and centralize the sales. So, but like, I wouldn't, I mean, I know the question is about roofing, but like, that's what I would do first. And that will probably take you six months or more realistically. Exactly. In terms of the offer to roofs, an offer that's worked really well in home services is instead of being a money back guarantee, I position it as a profit guarantee.
11:46So it's like, listen, you want your thing to be on time and on budget probably. And so I guarantee that I will deliver it on time and on budget or I'll give you my profit, which is 20%, whatever. And that way, it's like you're not underwater and you still have 40 % gross margin. So you're not really losing on the deal. But then people were like, okay, so he's got skin in the game. And so that's a way of closing significantly more deals because the two biggest obstacles that, well, you would know this, but in most home services, it's on time, on budget. And probably for roofs, it's like, and how much am I going to be displaced?
12:18How much is going to interrupt my life? And so I would put my guarantee around those items and then just have a marginal amount that's back. But it's really just because all they don't. So the big thing, which is where I read with guarantees is that people don't want their money back. They want the roof. And so they just want to know that you care enough to make sure the roof gets delivered. And so that's really the solve for the guarantee is it just pays down risk of them not getting what they want. And so as long as that gets accomplished, you don't have to do it with money back. You can just do it with some money back that gets them to say yes.
12:46Does that help? Perfect. Hi, Alex. Hello. You can call me Alex Rodriguez. From Puerto Rico. Yes, from Puerto Rico. So I'm on Musica Journey. Abogado. Abogado, correcto. En la música y el entretenimiento. Yeah. So what we do is we have more constraint is focus. Okay. I have, yeah. At least you said it. Yeah. So we have a law firm. Yeah. So basically it's three businesses. But today, thanks to Ed and Sammy, we got much, much more clear on what we should do. But I would like to know how would you think about this? because the law firm side, it's growing 20 % year over year without me actually doing anything, just redirecting people that come to me through my law firm.
13:35And right now it's about$100K. And then we have the educational side, and that is making$200K, and it's been stopped like that in the last two years. Sure. And you get customers from organic? Yeah, both are organic. Okay. So if you don't have money to pay us as a lawyer, you go to the educational platform and we are developing a contract automation software for big companies like major labels or publishing companies. So right now, the product, our software, our goal with the software is to sell. We are seeing that other, that big music companies are buying tech. So specific for them. So they're doing everything manually.
14:18We want to sell that, but we have a cashflow problem because we're selling to people without a lot of money and the service size does make money. So our problem is where should we focus? Yeah, but what's monthly churn right now? On the software. We got 100 people and we only have 40 active right now. And how long have you been doing it in the first year? So you've retained 40%. Are they actually active though? So they're paying. The people that are active are paying$3 ,000 per year And there are only like four. Four? Four that are paying$3 ,000. And then what are the other 36 paying? Are paying$600 per year.
14:59Okay, got it. Okay, so I think we chatted about this last night. So you have a, there is no right answer, but there is a path that you have to pick. And so either you're going to be an enterprise company and you're going to build only for that. And I would say like you probably will just transact on the education side in order to fund this. I, in general, don't like this plan, but you could do this because you'll be split attention. And this is fundamentally why people raise money in software so they can just focus on one customer the whole time, build the product, and then actually get it to work.
15:29Okay, that's that. Because you said that you're retaining 40 % in basically a prosumer-ish market, which is where you're at, I would be inclined to say that you probably are pretty close to a decent product. so you probably have nailed something there because keeping 40 percent of people one year later on you know whatever it is for musicians that you guys have for contracts and whatnot you could absolutely go all in on that and get that to like 50 or 60 percent and then you just need to have a different acquisition system so you probably just need to go spend money acquiring customers and that already cash flows because of the education side and are the people who are still paying you on the software also education customers or no they usually come from the education or from my legal services as well so i have some clients that be 80 of the job the million dollar question the million dollar question is if they stop the education do they keep paying for the software yes because it's a one-time well then that's what what you mean the software's one time no the education oh so then sometimes they just pay and they're gonna use the software as long as they so the only thing that we're solving for is revenue retention on the software.
16:36And so like enterprise in and of itself is not more valuable than lower market. It's just, it tends to be stickier, which is what makes it more valuable. But if you can get a larger marketplace, easier to acquire customer to stick as well as a large enterprise customer, you've got a gold mine if that's true. And so if you want to go spend money, acquire customers with the education or media as your liquidation and then get, you know, a hundred percent, like, but the goal that you guys should have is like we don't care at all about the education all of your focus all the profit goes into just fixing one number which is that you need to look at m12 so month 12 retention um and just say like okay we're at 40 how do we get to 60 and then how do we get to 70 and that's all you're solving for because if you solve that then the thing will just keep growing and that's the beauty i mean that's fundamentally the beauty of software once you get it right is that it just keeps growing thank you yeah hello my name is zion we do 1.1 to 1.2 million in revenue a year which one is it 1.1 cool um i would like to be at 10 million in revenue i make one to 100 million a year in there you're good um this is what's stopping me i believe focus skill deficiency and belief okay i have two avatars which is working professionals and local government and yeah i need to i believe i need to choose between the two avatars what do you sell again um so support and accommodation so basically children who come from challenging backgrounds who have been in care come to us we basically help them build their semi-independent living skills so we built we help them build their independent skills so when they reach a certain age they can then move on to their own accommodation and live independently so these are kids in the system right so like cooking skills balancing a budget yeah personal development work yeah yeah yeah cool um now the issue i have is how do you make money huh how do you make money so we make money from our support services and our accommodation so basically we rent properties from landlords who have uh real estate and then we sublet the rooms um and then we charge the government a support package for supporting the young people um and then obviously there's a risk premium because these are challenged kids um and then yeah we just make the spread basically okay so the government is your is your customer yeah okay got it okay so the issue is focus and avatar why is that a problem um okay so basically because we so we have so we have two avatars so obviously the asset the asset we have uh control of is obviously the property so um we can use that for different services so we can either rent out to professionals who need rooms on a short-term basis which we do or we can rent out rooms to kids in care who need support and accommodation my issue is which one do i pick i don't know if that makes okay say the two people that you're running it out to is the differential okay so so working working professionals is one okay the second is kids in care the kids yeah what's the revenue split now right now just working professionals so the whole kids thing doesn't exist right now not at the moment no but but but but wait but wait but i'll tell you why i'll tell you why i'll tell you why so we were doing it we were doing it like this guy's doing the lord's work he's like for now i'm just a landlord so so so we actually so i actually scaled it from one to six right and my business partner had an inappropriate relationship with one of the kids in care and it completely fucked me and we'll do it really technically he fucked her yeah well well we don't know if he fucked her but it was inappropriate it was it was inappropriate the highest q a i've had today for sure all right keep going um and it's like uh it really ruined the brand and we were doing really really well and it's like obviously due to safeguarding and risk we kind of started losing all our contracts and they took all their kids out i've got empty properties so i just went to the professionals just to keep obviously paying my bills got it okay that helps a lot more context wise still you sneak that by me no so you can fill up all your properties using the professionals yeah within seven days okay so is it just that your heart's not in it with the professionals and you're yeah okay cool well um first off kudos how difficult is it how quickly can you fill it up with kids okay so longer six yeah longer three to six months yeah i'm guessing you have a cash flow issue in the meantime yeah yeah so obviously the professionals is to generate the cash flow to yeah i think you got to bridge the gap to where you want to go okay so like basically sometimes you got to do what you don't want to do to get to what you do want to do you know like as much as i could be like you should only serve the one person like i think that you have the properties you already have leases on you have the commitments that you have to stick with fill up the properties with the working professionals so that you can create cash flow i would consider just rebranding the old one given your partner and then just kind of relaunching if you can bandwidth wise in parallel but just knowing that this is going to be basically an asset that you're going to sunset is there a huge amount of like operational resources after it gets filled up that you have to deploy to like manage it or no the kids and professional professional no easy okay yeah i will say this is a side note notice how easy it is to like make money in this other thing versus the hard thing in general if you weren't like i really want to help the kids i'd be like dude just do the really easy one no you're like it takes nothing i could fill it up in a day cash flows whatever like like do more of that um if the goal was money yeah if the goal like okay well the goal the goal is money okay i mean i can but but but i can i can i can fill for professionals we can fill houses within seven days and what i put out my build out i get it back within seven days and i just keep doing that and the constraint is obviously finding the leases right so my my plan was to build it out do as many as we can use the cash flow to then obviously open up the kids home and then maybe convert that's just because you want to do that you know because all right so you're conflicting priorities okay that's the issue so it's like it's a sequence thing right like you have a thing that you're good at making money on and then you have a thing that you want to give back on i would imagine the professionals one makes you more money than the kids one does it doesn't no man this thing kids is that free time kids so kids is that three times maybe four times so so i would make so let's say for example what i make from five properties i can make from one kid home okay so i stand by my original thing bridge this for the cash flow and then switch to the kids professionals fill up your existing ones so that you don't you're not going into debt and you're not going negative and then basically the rest of your priorities going forward you sunset that it's like that was the our legacy model now we do kids when you mean sunset please elaborate what you're talking about what do you mean don't keep don't keep growing that side of the business the professionals right fill up the ones you have because you have all these vacancies because you had to get the kids out fill that up really quickly get the cash flow back up and then if you can make more money with the kids thing and that's what you you want to do it and you make more money do that but you got to get to there yeah that's my two cents thank you can i throw in one more one more okay in terms of like your top five meta skills what would you like left field okay got it what so what are your top five meta skills you would learn that give the highest projected output in terms of increasing business value i know leadership is one of them yeah i mean i really think prioritization is the most important skill top thank you sir everyone here is limited yeah so it's what you do with the limit thank you you bet thank you man my name is don i sell Christmas light installation to home and business owners.
24:30Love it. Last year we did 450K. Sweet. And this year I'd like to be at 2 million. Awesome. What's stopping me is that I still have prices when I started the business two years ago for some businesses or for some clients. So I'd like to know how can I increase the perceived value so that I could increase my prices while still doing the same thing. Can you just say a higher number when you get to the asking for money part? So for example, if I've been charging a house$1 ,000 for install and takedown. No, I understand. I understand. I'm saying like, what stops you from just changing nothing and just saying a higher price?
25:11Like this year it'll be$2 ,000. Yeah. I guess nothing. But the perceived value... That feels like the easiest thing to do. Yeah. So I wanted to know like if there's a script or anything, how... Okay, so a couple of things. So one is that It feels like you need to be sold more than anything, which like great, but are you good at it? Good at sales? No, Christmas tree lights. Oh yeah. Okay. Good. The best. So great. So then you can, you can charge whatever you want in terms of it has the business all come from referrals. Uh, from Google leads and, um, referrals. Okay. Got it. So you want to get to 2 million, uh, you raising your prices.
25:50What percentage do you want to raise them? Probably 50%. Okay. Okay. Got it. So the thing is, is like, if you want to raise some 50%, I'll bet you got so much more room than that because you seem not as convicted. So I'll bet you there's like a ton of room. Okay. Um, so you're charging, okay, let's just, let's start with 50 and then bump it again another 50. If basically you have no change in close rates and I would like you to keep bumping it by 50 % until you see that you're making less money. Got it. That's not okay. It's not simple. okay that sounds great i love this uh was that as good for you as it was for me um i'm kidding that's what your partner said there you go the uh okay so i'll give you a little script for the people who are old that are going to come back because i know some of them are going to recur is that um i would give them a heads up ahead of time and say hey just so you know we're raising prices on all these new crazy people who are trying to give us money um but since you're a an old OG, if you want to reward you for being a previous customer, I'll honor your old price as long as you buy now for Christmas.
27:00Otherwise you'll get the new price. So it's like, I'm giving you the love now because I'm like, Hey, I'm letting you in, but then you can front forward, you can pull cash flow forward. That make sense? Perfect. And then everybody else just raised the price and you'll feel okay about it because you'll have a full bank account. Right. Okay. Thank you. Hey, Alex. My name is Alex. What's up? We sell residential window replacements to homeowners. Okay. We did$84 million in revenue last year. Residential? Windows. To homeowners. To homeowners. Okay. Got it. 84. Okay. Yep. Today, we have had a Google Sheets empire.
27:37A what empire? A Google Sheets empire. And we're starting to build out a HubSpot. We spent the last few months building out the frameworks of our HubSpot. Are you involved in it? very involved okay good that's just like yeah these mistakes so uh that's what i wanted to ask you about because i know you just moved all your portfolio companies to hubspot who said that uh you when on one of your podcasts jesus it's like every it's like i say it on one pocket it's like four years ago it's like everyone there's like the best hubspot endorsement ever anyways yeah the question i have so we're gonna roll this out across 16 offices hopefully a hard launch march 1st i don't want to pay the ignorance tax if i don't have to so what advice would you have stake basically you just need like your ceo of it for basically this whole quarter it's the easiest way to say it and so i would have really rapid feedback loops with each of the department heads if you have functional heads at the holding company and then you'd want to have basically separate lines of communication for all the location heads so i think about do you use slack or something like that uh just boxer yeah really yeah geez okay yeah so i i'd want to have basically different threads by by function so one is the actual function so people who are handling sales people handling marketing and i'd have the leaders there and then i still want like you basically want the different slices basically lines of communication to the different slices of the org so that you can get as much transparency top down um into how it's working for them and making their life easier and then that way you can triage um basically which because you have limited resources in terms of which of these bugs are you going to fix you know which process flow sucks right um and then you can basically stack order which of these things has the highest driver for revenue but you can't really do it appropriately unless you basically can drink and all that all that information and as are you ceo no i'm okay yeah but but you're in charge of it so you're ceo of this so um that that's that's basically it's just like you need to eat breathe breathe and sleep this stuff yeah that's helpful thank you yeah just like it's okay that it is unscalable got it but you have to do that in order to make it scalable yeah thank you yeah you bet so first of all thank you you and your team for the things that you are doing no you bet um yeah my name is paulis this is what i'm doing that you are said already uh and for the i guess three four years seems like i just kind of lost something like why or stuff like this because uh uh two and a half maybe already three years ago uh we plan to go from what what i have right now because it's a one-man company just a few team team members uh now it's uh 416 revenue the last year and uh the goal was 2.3 mil um maybe this is the why i i lost this on the way um so i just wanted to to know what's your why why you are doing what you are doing i like working i'm dead like i spent a year thinking about that question when i had enough money to do whatever i wanted and just like could just live on treasury bills for the rest of my life um when i looked back on the days that I enjoyed most.
30:52They had three things in common. I worked out, I ate with people that I liked and I worked hard and had something to show for it and had nothing left in the tank. And so once I realized that those were the days that I enjoyed the most, that I made it my goal to live as many of those days in a row as I could. And the way that I live my life bothers a lot of people and that's okay. And so I think, I mean, I, I, I got that advice when I was 22 years old from, I'll just, whatever, from a person in my past. Um, and I'd had a good weekend and I started work and, uh, she said, you're in a good mood. And I was like, yeah, it's just, you know, had a good weekend.
31:35She was like, I'm pretty sure the secret to happiness is living as many days in a row like that as you can. And that was like the closest to operationalizing kind of joy that I'd ever heard. And so I have just stuck with that. And I think that the things that bring you joy will change over time. But I think that structure of just trying to find what that perfect day is and living in as many days in a row as you can is kind of the way to do it. That's how I do it. You can do it. Yeah. As a side note, um, for those of you who feel like you have lost your passion for your prospect. And I'll, I'll, I'll give you a simple example.
32:08Like I used to sell weight loss to women between the age of 25 and 55. And at a certain point, I just really stopped caring. They were like, Oh my God, my life changed forever. And I was like, I know you had a calorie deficit and you moved like, yes, that's how that works. And I would have to kind of like fake myself into feeling excited about it. I, it really bothered me because I was like, I quit my job to do something that I loved and I don't really care about this. I ended up loving business more than I loved weight loss. And then I fell into that. Um, but I had a friend who was a personal trainer who quit being a personal trainer and started a cookie business, brick and mortar, big cookie store, like did it right.
32:47Um, and I remember being like, are you passionate about cookies? And he was like, not really. And I was like, but he crushed it. He did a really good job. everything was like really tight. And what I realized was that he was passionate about doing things well, rather than the cookie business. And once I realized that I was like, oh, I don't have to be passionate about weight loss, but I can be passionate about being good. And just saying like, when I do things, I will do them well. And I think that has been something that has helped me stay motivated in times when I feel less so. Real quick, guys, I have a special, special gift for you for being loyal listeners of the podcast.
33:28Layla 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've got customer success, you've got IT, you've got recruiting, you've got 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 30-ish 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.
34:01It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com forward slash roadmap. R-O-A-D map. Roadmap. Hey, Alex. Hello. My name is Heather. I own a consulting firm called Channel Maven. Okay. We help large IT companies sell better through and with their partners. Revenue was$3.6 million. I sold it in 2021. Congrats. Thanks. Ran marketing for the company that acquired us. They called it an aqua hire. Yeah. And convinced the board six months ago that I was done and they should give me the name back.
34:46So got the name, got the IP. I get to start over, not make the mistakes I made before. The market has shrunk. So that channel role is being pushed out. And when I started it, there were five consulting companies I competed with. Now there are probably 200. Do I focus more? Like channel marketing is probably what I'm best known for. Do I focus more on that in this industry? Or do I go just B2B and like help kitchen and bath companies sell through dealers or automobiles? When you say channel, explain, dial into the channel sales that you're talking about. Yeah. So a large IT company sells direct, but they also sell through hundreds of thousands of mom and pop channel partners or Accenture or now Marketplace.
35:36So like affiliates. Yeah. Got it. Okay. So you're an affiliate expert for big IT companies and you have a network of people that can do basically sell their services for them with a markup. Yeah. I mean, I basically made an announcement on LinkedIn that I was back and did 360K in four months. That's awesome. Yeah. Thanks. So the question is, well, I mean, it sounds like you did okay with your announcement. Why do you feel like you can't outcompete the other people? I just feel like my champions, the 14 ,000 people that follow me on LinkedIn are starting to phase out a bit. And it's just gotten super crowded.
36:12And this is the channel part. So the crowded part doesn't bother me. all yeah because that just means that there's lots of demand my lines are the tech comp so hp google yeah so the 14 000 people you have a lot of high up people in those companies who follow you yeah i mean you could do either path but i mean it's a good question it was i think it's it's i think it's more the statements that would initially jar me of like it's saturated i think it's going away things like that because you know my my big questions are always logic evidence utility so uh uh what does that mean like define that for me how do you know that and so what logic evidence utility so when i asked you know channel partners like please define that for me it's like okay that's affiliates how do you know that they are going down like how do you know that they're all calling me asking if i know of jobs and i'm tracking how long they're on the market and on average it's about 11 months who's on the market for a lot they call it a channel chief So it's like chief partner officer.
37:14Okay. And those people are looking for jobs? Yeah, because they're all getting let go. So then the VP of channel sales reports to the CSO, the VP of channel marketing reports to the CMO. Like that level is just getting. And when you say a lot of people reach out to you, like how many is that? In the last year, because I was still in the channel when the company acquired us, I'd say probably 40 people. Okay. the big conflicting data point i have is that you like made a post and made 360 ground yeah so just so so just shut up and focus yeah no i mean it's real though but i think like i'll tell you what i like if i'm in your shoes i get excited by this stuff maybe because i'm broken on the inside who knows but like i am you i work i have little kids 50 of the time i work non-stop when they're not with me yeah and like i see everyone bleeding and i'm like let's let's finish them off you know what i mean like they didn't deserve to be in business to begin with and i will make sure that everyone knows and so if you have this in and you're better and you're seen as a market leader if things are consolidating for example then it means that like as long as if the industry isn't going away but it's consolidating then it means a winner take all so it just means the stakes got higher yeah which if you're better that's a good thing awesome thank you no you bet Hey Alex, my name is Chris and I have a question about a business I'm starting soon.
38:38So I have no numbers right now. For my background, I'm a physiotherapist and chiropractor. I have an academy where I teach medical professionals in my own concept called Crack and Move. And I'm doing social media. And I invented a tool where you can crack yourself, your back. Self-crack, if you will. Self-crack, yeah. More like a black roll, fast chair roll, but really intense and good. and you can use it as a customer for your own for your better posture and pain relief but also the professional for especially some small women have with some techniques problems you can you're a big guy so when i want to crack you i have to yeah neither i'm small guy so sometimes it's really hard and i would like to know would you focus on one group for selling b2c for example just a customer for the problem solve of cracking themselves and with a posture program and everything or just the medicals.
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39:33And I have the medicals also in my academy with affiliate or both. So you are a chiropractor. Yeah. And you no longer have your practice. I can if I want. I have a waiting list. But you have a practice. Yeah, I have. And then you also have an academy where you train other chiropractors. Yes, in my concept. Yes. And you also want to start a physical products business. Yeah, because of scaling. You don't want to leave money on the table. What's revenue right now? With my academy, I started one year ago, and we have 500K. So you just started it a year ago? Yeah. Why are you starting another business?
40:11Because it solves some problems, and I found out because I have a... Why not fill newspapers? You know what I mean? Like, sell orange juice. People are thirsty. I could. Right. Because of maybe your social media, I have an audience, I have customers who have a waiting list. I have the problem that many people want a treatment, I can't give them. so I built some specialists in them. You already have two businesses. Yeah. And you have a third business. And it's a physical product business. Totally different business. Yeah, but I have some partners in it who know, so I just have to do the marketing and the development of the tool itself.
40:45And we already did it, so it's ready to launch. But the problem is maybe, you know, sometimes it's boring just to do one thing at once. But in business-wise, maybe it's better. what's your goal? Good question. Of course, I want to make money. But of course, I want to do very nice products who have a nice impact. Yeah, but what do you want to have happen from that? I think the focus. So that's the problem. You want focus? You want to do that by doing more things? Yeah, and the problem is that's so combined to my brand. I have the problem that I have so many customers i can't offer them anything so i have limited time with my own treatments so i need time to develop uh some uh we have the academy sorry you have the academy though yeah but it's uh it's very hard to um to teach them my concept because it takes half a year so they can implement it in their own office so i i try to reduce it as a hybrid model with online and everything but it takes time because of the brand protection quality because i sent them my customers and when my customers go to them i want that high treatment high treatment and the problem is that the onboarding takes so long that the customers want the treatment and i have no time my um the people i'm teaching need time to learn it and get expert it takes time to build a big business yeah yeah I believe you.
42:18Yeah, but the problem is the social media makes all the followers just going through. Let me help for a second. You're good, man. You're also like probably, everyone's laughing, but you're probably one out of four, one out of three of you here is in this exact same boat. So, hope so. Here's the thing. The opportunity will only get bigger, not smaller. so the rush that you have is a rush to do a smaller version of what you want because if you get bigger on social media you will have more customers who want to buy your thing yeah right yeah the problem is that the customers are now a little bit set because they i have no offer for oh no i have no i had nothing to sell anyone for years okay so point being thing is I don't I don't actually think I'm going to convince you I think you're going to do it no I'm serious so I don't even know if there's a point you want to sell your thing you want to sell your widget yeah so what am I going to do more like the advice of focusing on just the professional you want me to tell you how to focus how would you're doing several things at once right what you're also doing fiveacquisition.com yeah you know just have all the so just build a team one business yeah you want to be ceo of multiple there's a difference between ownership i also own stocks and zillions of companies different businesses at all what okay product so your book is also different no so no you have no this is important this is good it's just for money so for everybody there's a difference between owning something and being ceo and operator you can only really operate one thing that's it if i buy a stock and apple i'm an owner i don't do anything but i'm an owner does that make you get the difference here yeah you're like well i'm going to be more so like the where you would get me if you wanted to was school on the face of but when i did that deal i said i will change nothing about what i do so my regular day must remain the same in order for me to do this deal i'm going to continue to make content i'm going to continue to record stuff and then all i'm going to do is point in a different direction that's it so the pointing is a copy paste on a link everything else remains the same so i boil this down to what does this change about what i do and so the reason that this is very difficult is that you're going to start another business and it's going to change what you do okay so i'll start the things i'm not doing in my daily business when I'm starting a different business.
45:01For example, the product, I'm just doing my marketing, the development I'm doing also. I did it. And everything else, so like targeting the group and strategies, I don't have any clue. I should not. So I'm here just taking the question. All right. I don't know what your question is anymore. It's more like, what do you focus on in this part when you have a selling group? I would take your 500 medical people and be like, how do I go from 500 ,000 in my first year to 5 million? That's what I would do. You already have something that works. You already have a following of people who have this thing.
45:39If you want, you can sell through them as an affiliate base. And you have one business. Okay. That's a good answer. Great. Thank you a lot. Taking. My name is Gabriel. Sell solar. Also have a personal brand that helps Christian men be better. I have no plan to monetize this at this point. just simply help people find jesus and the goal is to gain a following at this time um question is on organic content that's our biggest constraint we are putting out 350 to 400 pieces of content a month for solar for also for solar this is about the personal brand okay um for solar with paid ads it's easy we just run the 10 hooks we run did you do this framework yeah so the question is how do you split test organic content for different platforms meta tiktok etc how do you split test organic content yeah like you would for the ads where you do the 10 hooks three bodies different ctas let the algorithm tell you what's up when you spend money behind it how do you implement that into organic uh you you don't uh you just make 10 pieces of content and if you think something was really good and it bombed you can re-edit it with the new hook but it would be weird if match imagine if you had a page and you saw 10 hooks for the same piece of content it would be kind of odd and so um obviously you not youtube instagram has the trial reels and whatnot which is an interesting new function but every person up to this point in human history of social media has not had that function and so it's usually just a a gross and disgusting amount of volume for an unending period of time i'm being super real i Yeah, that is the answer.
47:20And that disgusting amount of volume, the learning process is this. We make, call it 100 pieces of content, and then we look back at which ones did well, and we try and point out what was different about those compared to the ones that didn't do well. Then the next 100, we say, let's add two points to our checklist and do these extra two points for the next 100 videos. And fundamentally, that is how we've continued to make content. So like our long-form YouTube videos have massive checklists of just like, okay, we have to do this. Like whenever Alex is about to enter a story, this is what we have to do visually.
47:53Uh, you know, big, this, like, obviously the intro is super, super important for long form, but I just like we're saying better and more that accordion, I would see say is a consistent theme across all content creators that I've met, which is like in the beginning, you just do a ton. And then you're like, okay, this, if I just like this video got 100 ,000 and the other 10 videos got like 500 views. Yeah. You're like, okay, if I just spent a little bit more time, instead of making 10 made three, I'll bet you I could get like 10 ,000 views per and then you start doing that. And you get good at that.
48:29And you're like, I could probably go from three to 10 of these. And then you do 10 of those. And then as you do 10, you're like, you know what, man, these ones popped off. I'll bet you if I spent a little bit more time, right? So you just keep going back and forth between better and more. And it's a very normal cadence. I will give you one final thing because I know that you're not the only content creator here. There's a lot of mythology around content and volume, which is like Instagram can only take two posts a day or TikTok maxes out at four or at two o 'clock and six, like don't worry about it.
48:59Don't worry about it. One of the biggest Instagram accounts right now is a Bollywood account. They post a hundred times a day. They get 9 billion views a month, a hundred posts a day. you were just not doing enough and so now i used to like be sore like okay let's make sure they're you know 12 hours spaced out like i'll post one and 30 minutes later i'll have something else and i'll post it again i it doesn't matter thing is just one percent of your audience is seeing it anyways so they'll just push it to somebody else the content is incentivized to distribute your content so the platform is incentivized to distribute the content to people who find it valuable so just give them more stuff to distribute just go crazy on the input yes just real it's a lot of volume hey alex my name is isaac hamlin i'm the founder and ceo of better blend which is a chain of 13 smoothie shops that focuses on macro macronutrients like high protein low calorie low sugar um we sell to healthy we sell to people who are looking to eat healthier easier and relate to just anybody yeah um our revenues are right around seven eight million um i'd like all of our locations to be at one million and the thing that's stopping that was wait why why why a million for each yeah because we have this we have this top line revenue thing where when once we get past this certain amount the we don't need more employees on staff so the margin just explodes contribution margin is right so we need to get to a million and then everybody's just like printing so that's the goal to a million or past a million past a million but to a million to start okay the thing that's stopping us is because we're such a unique and different brand.
50:31When we go into new markets that are miles or hundreds of miles away from like our mothership in Cincinnati, people don't trust. People either don't think it's healthy and it tastes good or they don't think it tastes good and it's healthy. So we have a hard time with like the trust aspect to get them in the door, like a CAC problem. Yeah. Okay. So are you franchised? So I own five and then we franchise the rest. So half and half. Yeah. I know you don't like franchising. It's not that I don't like franchise. It's just that when you do the math on the amount of franchise support that is required.
51:04Now, I do think that I'm more okay with it in food businesses, typically less with low skilled labor businesses, like a gym, for example, because it's easier to actually standardize a product in food more than that's why if you think about how many successful franchises there are in food, there's tons of them? How many successful franchises are there in service-based gyms? None. There's none. F45's out of business. Orange Theory's out of business. CrossFit's whatever. Like, and the thing is, is that they actually don't have a model. They're a licensing business. And so that's why they've been able to stay around.
51:37So anyways, back to your point about, about franchising, uh, the business. Um, I'm not, I'm not going to tear into that right now. Okay. So let's just, you just, you have a CAC issue. Okay. Well, what's the, so once a store gets going, do you have to have any advertising in the market or just, it just kind of like slowly grows its way off a word of mouth? We recommend a 2 % spend. It's usually through meta that we're, you know, it's like an agency throughout the, throughout everybody, but everyone's running the same ads. So like there's this runway to get to where it is, but it's a painful runway.
52:04So we're just trying to shorten it. You need a great opening strategy. Yeah. So every, every brick and mortar expansion, this is for everybody. Um, you have to have a killer grand opening. Like I can't tell you, like, I don't know of a single successful chain brick and mortar that doesn't have like a super dialed. This is exactly how we get to profitable within 30 days, 60 days, 90 days. These are the promotions we run. This is the 90 days we do, you know, leading up prior, like by the day. It's just the level of detail that has to occur. Like think about how Chick-fil-A opens up, right? Like that first day they have a line, you know, down, down the block, right?
52:40It's just, it's like, it's like this, you know, I was gonna say Jesus coming to town, that would be tongue in cheek, but, but it's, it's a big deal. Right. Um, and so one is you need some amazing giveaway that you can bring people in the door on. Two is I like to limit it to like the first 500 customers get something that's basically ancillary. So like Wendy's does a great one of these, which is like the first hundred people or first 500 people get a little golden key chain, um, that they get free Frosties, right. For wife, I think. And so very incentivizing for people to like tell their friends and line up.
53:14But where the second order effects that come from that are that the only people really gonna stand in line, there are people who live close by. Like, why would you care about getting that thing for that one local area when you live far away, right? But on top of that, what are you going to do now that you have this one free dessert, for example, that you can take whenever? You're going to bring friends with you. And you're not always just going to get dessert, you're going to get a burger, you're going to get fries, you're going to get everything else. And so that becomes kind of like the ambassador base of the business.
53:38And so having one killer giveaway promotion on the front end and like lifetime deals on some sort of mini or some sort of, I'm sure you have some sort of little upsells or desserts or whatever that are healthy that you can give away that are high margin. Um, that would be thing one. And it's probably like, you need to start marketing 60 days at least prior to kind of like pepper the market, let everyone know that it's coming. I would just like build the list up of people who are getting excited for this giveaway. And then you basically run a launch play with Chris, Chris, shout, um, into the launch itself.
54:06In terms of the offers for decreasing CAC, it's going to be some version of either BOGOs, so buy one, get one, or kids' cups are half off. You just have to have one or two-line transaction upsell that you have to teach the staff so that when people come in with this coupon, they ask one question back. That's it. And then that question then leads them to the upsell that can help you recoup CAC. And the thing that's going to be most important about this entire thing is what percentage of customers come back are you asking or i'm just telling you that is the most important metric that that you that you need what percentage i mean if you have it what percentage come back after first visit it's really tough to calculate ltv with a brick and mortar which that's part of the thing that's super doable super doable for brick and mortar what's the frame is it a year i mean 30 days 30 days i mean i would imagine if somebody's gonna be getting a smoothie if they don't come back for a month and like they weren't thrilled yeah that's fair right okay 30 day okay also punch cards running start you probably know some of those things already um when i say running start it's like instead of having if you have 10 on the card you want to punch three two or three up front when you give it to them uh psychologically they're like three times more likely to finish it in fact okay thank you yeah alex hello sir uh my name is chris i sell data engineering boot camp to current tech professionals we do a million a month would love to be at 10 million a month.
55:28What's stopping me is it's hard for me to know if it's a marketing sales or sales process issue. As I try to reduce my CAC, my LTV to CAC is 3.2 ish. I think I know how to increase my LTV. We were talking a little bit last night and I think Tim was also very, very helpful in helping me realize things I can do. But I think it's... Are you meta ads or YouTube ads? 70 % meta, 20 YouTube, 10. Got it. Big talk. what um how much creator were you putting out um per week at this point five or six uh i think 10 blew my mind or someone blew my mind when they were like you gotta do five or six per 10 grand so i'm like okay gotta 10x that so like 500 000 a day is usually 50 pieces a day yeah for context yeah spend 100 a day 100 000 a day it's we spend it's closer to it's less than yeah we spend two to 50 a month yeah i think that you should at least right now be at 25 a week minimum.
56:21Got it. And would you hire actors? Would you just? No, I think, I mean, I would rather you just get it going. You can kind of like think about removing yourself. Are you like still the face of the business? I very much am still shooting. Yeah, I'm fine. Yeah, I don't, I don't think that's the issue right now. If you want to get to 10, it's like you got tons of time before that's going to happen. So like, cool. Yeah, it's a, it's a ton more volume than you're currently doing. And it's actually the same answer that we're talking about earlier from the concept perspective, just on the ads. The nice thing with ads though, is that because the nature of testing that can occur with ads is that if you record, call it 25, um, here, I'll just walk you through this.
56:54This will apply to everybody. So you make 50 hooks. So it's just like, Hey, quick question. Hey, are you been, have you ever wondered about, you know, data engineering? Hey, look at this crazy AI thing. You know who makes this data engineers? Like what's that? Like you just, you just go through 50 hooks, right? Then you have your three to five meets, which is like, this is actually the fastest growing industry in America right now. And believe it or not, you know, Goldman Sachs said that there's 23 % in Kager. And if you're like, what's Kager? It just means every year by 23%, that means it's going to double in four years.
57:26So think about how many people you know who are data engineers, right? None. Well, there's going to be even more. And this is the starting salary. This is just according to this, you know, reputable source. And here's the craziest part. You only need 16 weeks in order to get certified to get these types of jobs. And so if you've ever been kind of tech oriented, or you're good at math, like this is something that's worth considering. I just have a free class that'll walk you through step by step, blah, blah, blah. Right. So that's the meat. And then you have, um, call to actions. I don't do a ton of tests on this.
57:56So usually typically with call to actions, once you know what the call to action that works best is, I tend to just run that as, as what I say at the end of the ad, which is if it's like, are you running to a VSL or something? Video sales letter. Opt in VSL setters. Okay. Yeah. So it's like, you might try web class. You might try masterclass. you might try. You could even just try video sales letter. Like I've got a video training, I've got a training, like basically it sounds small, but when you're running tons of traffic, those little, little incremental bits matter. But once you nail with the CTAs on the backside, just use that.
58:27But fundamentally 50, even times three is going to get you 150 ads. And so one, one recording session, if you do that, it's like, you only have to think of three to five actual like media angles. And the rest is just hooks that you'll take from the best performing ads. And I would strongly encourage you if you're running, um, one, look at obviously people in the marketplace that, uh, are, you know, kind of around you or adjacent, but the cool thing with hooks is that they work, they work across everything. And so I've used one of the same hooks in four different businesses that are completely different B2B, B2C tech and service, and it still works.
58:59Right. And so like you can reuse hooks. And so this is by the way, why I don't pay for any subscriptions for ad free service is I I'm always just paying attention to the hooks, like what hooks are coming in my ads. And if I see an ad that's been running a lot, I'm like, it's probably a good hook. Yeah. So I just write it down. Yeah, I was looking at the sales transcripts and trying to get hooks that way, but that's really helpful. Yeah, I don't know, for sure. Just watch ads. Cool. Thank you. Appreciate it. Was that helpful? Yes. Okay. My name is Joris Smit. I sell car loans to entrepreneurs. We do 6 million revenue.
59:30Cool. We'd like to be at 30 million revenue in 2027. Okay. But what's stopping me is that the CPA is getting higher and higher. When we started out, it was like 400, 500 euros. Now it's almost 900 euros, sometimes even 1 ,000 euros. Okay. And I think we're overcompensating the sales reps. Okay. Like 30 % of revenue is for wages for sales reps. What's LTV to CAC? So what do you make on a loan? Like 2.5? so you make$2 ,500 and it's costing you it was costing you$600 now it's costing you$900 for the same deal is that correct yeah okay something like this okay I actually just wrote an email about this today which will go out in like six weeks so uh fundamentally if ad costs are going up and so you feel like there's some sort of ceiling like you want to spend more but you can't spend more because the ad the cost goes up there's basically one of three potential progress for solutions.
1:00:27So problem number one is that the LTV needs to get fixed. And this is just a fact of life. As you go to colder and colder audiences, you get out of your kind of honeymoon phase of the easiest targeting, which is the absolute highest interest, you know, most, you know what I'm saying, that very small amount of people who are perfect fits, and then it just continues to go wider and broader, right? And so the way to fix that is that we have to increase LTV so that you can spend more. The second reason that this would be limited is based on the quality of the creative. And so I think a month ago we had, you guys seen the Old Spice ad?
1:01:05The guy, that whole famous ad. So the guy who made the ad actually came here. Kind of cool. So we got to chat about that. But what's interesting about that ad is that that ad was so good that they could show it to everyone. And they went from like 20 % of the market to 70 with one ad campaign. And so to me, that is like the perfect example of what like complete S tier creative, like the maxed out creative of just amazing advertising is. And so a lot of businesses will get stuck at$1 ,000 a day, for example, and say like, I think we've capped our market. When in reality, it's you've capped your creative.
1:01:46And so in order to break through that, the quality of the creative needs to go up and the volume also needs to go up by consequence. And so in the companies that we spend like 100 ,000 a day in, in terms of our ad spend, we create 50, 100 pieces a week that are going out in terms of ads. And then we do that at first. And then we follow kind of Google's 70, 20, 10 kind of rule, which is 70 % of the creative that goes on from that point going forward is the highest performing hooks from historic. Uh, 20 % is kind of adjacent to that. Uh, so just kind of like remixes, remakes, slightly different versions of the originals.
1:02:28And then 10 % is the wild ideas that you've been saving. But since it's only 10%, you're going to only pick the ones you're like, I think this one's going to work because you have 20 crazy ideas because you're an entrepreneur and you think that'll be awesome but you just got to pick the one or two um and so that's problem two that could um be the reason that that you are capped so um either you are not the creative sucks your ltv is too low um and there was a third one which i forgot uh but there were three in the email and so uh the question that i would have for you is which one of those do you think is the issue i think the ltv is like is is too low ltv too kek so we have to make the ltv higher but also we we have to get more creative better hooks i think that's the the key to better scaling the back end becomes the arms race of every business that spends money to acquire customers which is many businesses.
1:03:30And so if you look between industries, the benchmarks for plumbing businesses in North Dakota, the cost to acquire a customer is going to be more or less the same between businesses. So as much as we like to think that we have some like very special sauce about like our sales team somehow magically sells different, even though we recruit from the exact same pool and compensate the exact same way, like we think it's somehow different. But in reality, like we run similar ads, we're in similar promotions, we have similar sales teams, similarly compensated, pulled from the same talent pool. And so, so CAC is typically very similar between businesses, but where you get the outsized returns are that some businesses can have 10 times the LTV and that's how they ultimately win.
1:04:06So I think you're right. So when I, when I buy a business, I typically fix it back to front and then I look at the creative and think, okay, how do we just do a ton more volume here? Typically, because we just don't even have enough data to figure out what the best ones are. So like, let's do way more, then look at the top 10%, then do more of that. And that process just never ends. Does that help? Right. Yeah. Hey, my name is Kevin. I sell plumbing services to commercial and residential. Sorry, plumbing services to who? To residential and commercial people. Okay. We do about$5 million in revenue.
1:04:42Half of that's construction. Half of it's service work. Okay. I would like to do about$10 million in service revenue. And what's stopping me is really the construction side is a huge focus and a drain. so I'm just kind of wondering if I should kill that side or refocus it so I can pay more attention to the service side. What do you think I'll say? What do I think you'll say? Yeah. I mean, not as a slight. I mean it genuinely. I don't know. That's what I was asking. Okay. Yeah. Okay. No, that's fair. I mean, fundamentally, is the construction thing just like a separate business? Yeah, they're essentially ran two separate ways.
1:05:17Yeah, just under one income statement. I bought the business a year and a half ago. You bought the construction business? I bought both together a year and a half ago. Interesting. Yeah. From an entrepreneur who was retiring? Yes. Got it. Okay. What's the EBITDA contribution of each? It's about 50-50, but the pay, the accounts receive a little collection on the construction and the capital, Oregon capital requirements is much longer. The capital sucks. Right, exactly. Yeah. Is there one of those two businesses that you like better? Yes, service. Yeah. I would be willing to let it go it's some cost it's like it's already in your head even if you even if you bought it and paid for it it's it's that decision's done and the only decision you have now is like well if I were to start this today would I do it this way probably not and so if you're looking at also from an acquisition perspective like if you want to get acquired in the future which is I'm guessing because you bought it here it's cleaner it's like what's because they're going to probably want to carve out because they're like well we only want this piece and this is different than that and especially if it's splitting your attention you'll be amazed at how much faster the other one will grow by getting rid of the headache it's just really painful in the short term because you have all these like i made this mistake i should have and i will refer back to the nine failed businesses i have been losing all of my money twice and so like i think the game's long and it's um i think your gut was right i think you kind of know okay thank you yeah you're up my name is john and i run a cold email agency and i said to other agencies we are making 1 million per year and we would like to go to 10 million and what's stopping me is high churn rate and i think it's because i mean the core issue is when we deliver the leads to the agencies they cannot close them or if they close them they're on full capacity yeah yeah uh my guess is that you're serving customers that are too small so this is probably gonna be really good for like a third of you in here or like rather it'll be really relevant for like a third of you so there are some business models that small business owners look at from large businesses and say I'll do that same thing for the bottom end of the market the problem is that that strategy typically only works with a fully fledged business and so if you look at a small business, these agencies that you're selling, they're volatile.
1:07:52Like they have good ones, they have bad ones, they have good ones, bad ones, and their volatility now reflects onto your volatility. And so let's say you make them some money here, then they make more money here. And then all of a sudden they make less, and then they make, then they cancel. Right. And so these things are called structural churn, which is that kind of things that are inherent to the industry. And so I'll tell you a story that might make this relevant. So I was talking to a friend of mine who owns a CRM in the gym space. And I was asking him, I was like, what's your churn? I would imagine it's like zero.
1:08:27He said, ah, it's about 3 % a month. And I was like, 3 % a month for CRM? He's like, yeah. He's like, about a third of the gyms got a business at rate. And so like, there's nothing they could do to improve the product anymore. Just a third of the businesses go out of business every year, and there's nothing you can do to the product. And so it's kind of similar here, which is like, if you look at, and this is a great exercise, if you look at the ultimate version of your business, because there is a much bigger version of your business, which is you look at Ogilvy, you look at NP Digital, you look at Vayner, right?
1:09:01They're big agencies that exist. Who do they serve? Fortune 100. And so the reason that those work that way is because those businesses can pay on time. They have salespeople that know what they're doing. They have a process in place. They have margins. Their check's clear. And when they sign contracts, they keep them, right? And that's because they're good businesses. And so it's very likely that you're not in the wrong business. You might just be serving the wrong customer. And so if you were to look at your spread of customers right now, I would bet that there are some that have been with you for a little bit, right?
1:09:33And And then all the new ones just turn out. It's just like, they're the ones, right? And so those ones that have been with you for a little bit probably look a little bit different than some of the ones who are coming in. We did an analyze. And like, you can't really always see this from the outside because they can just sell. So this is hard to say, like from the outside, if they can sell. So the ones that stay with us, they can sell and they can close the leads. Were they at a certain size already? Yes, but the same size like other people were churning. Sure. And so if there are intangibles that someone has to have, you can test for that, or you can just go up market.
1:10:12So think about this way. If somebody does a$5 million year agency, they have to sell. There's no way they'd get to 5 million without being able to know how to sell. Right? And so you can just put, like, you can try to test for it, or you can just make a requirement that would make it impossible that the person didn't know how to do that. Does that make sense? and so I try like if I can get something that's really small and testy that like allows me to go a little bit lower market that's okay otherwise I'll just put a bar and say it's got to be this but likely and so many of you I think are in the same boat though is that you serve you have a business model that is better served to a bigger customer and you charge too little and then they churn and then you keep trying to like think about what new thing do I need to add my offering like what new guarantee what new onboarding process like you're keep adding things and it doesn't matter because they are volatile and that volatility will not change.
1:11:03Does that make sense? Yeah. Thank you. Oh, by the way, the equal opposite of that is that if you were in that, in that position, if you do want to serve that market, then you have to make the entire business model around being the low cost leader. And so you can serve that market. If you have like a very tech enabled service or software where you could charge those people$300 a month, which is always going to be below their volatility level of cash flow but it has to cost you nothing and so the idea of like i will you know 1500 a month for lead generation or whatever it is like which is kind of like the standard like that model doesn't work because it just won't scale okay but you can always make one to three million bucks a year with it and just always be like looking on the hunt for the next lead yes yes sir hey Alex my name is Jordan um we own a gym we sell we sell memberships and uh sups we do gym launch okay we just acquired the the company about three months ago is it a big box or is it a micro gym it's micro okay women's only kickboxing okay yeah it's on the head yeah he we bought from him yeah okay okay yeah for your opinion yeah um so we have about 560 000 revenue cool so you're trying to get to 1.2 and then we're going to sell it okay and buy our next bigger business cool yeah what's stopping us well um i was really concentrated on acquisition sure um and really just getting as many customers as possible and so kind of inherited a lot of you know customers that won't necessarily gain their full value and so our turn is at 25 on average we really got to lower that and that's gonna really really help us because we have no problem getting new customers yeah really um although we do need to work on more referrals um but my question to you is how quickly and how would you go about lowering that 25 churn um going into 2025 can i have that book real quick
1:13:11thank you so did you go through the four horsemen five horsemen retention retention yes so those are the things that we have done consistently to cut churn are you doing all of them not consistently yeah well i would do them consistently and i'm not saying that as a like the interesting thing about the um the horseman retention is that they when when you realize how much work it is you're like holy shit this is a lot of work but that's also why people stay. And so the point of the five-fourths of retention is to approximate what having a small tribe feels like in a disorganized manner, doing it on purpose.
1:13:54And so some of you guys are familiar with Dunbar's number, which is basically like people can maintain whatever 125 to 150 basically acquaintances in their mind. And that's, I think, the reason that the vast majority of gyms tend to cap around 100 to 150 because that's about as many as the owner can manage in their mind without it becoming too big. And then beyond that, new people come in, they never really get assimilated and they turn back out. And so it's like, what are we doing with the original 150 people that we're not doing with these other ones? And so that's where the touch bases on a regular cadence are super helpful.
1:14:29So Mike Ferreira has his retention system where they, he updated the five forcemen. Sorry, I'm getting really taxable about gyms. So, but basically alternating between an internal referral play. They've got fast cash Fridays, which is how they get, you know, how they generate the referrals. They have a weekly theme that that's gives you the thing to talk to them about. Cause it's like, how do I approximate a relationship? It's like, I check in on people and I let them know the thing that's new. That's cool. And so the tweak from the system that I have here is that I used to check in about people's results.
1:15:01And we realized that people didn't care, uh, and just wanted to work out and have fun. And so us reminding them about the fact that they were still overweight, uh, didn't actually help real talk. Um, and so we were like, okay, so the, that's probably the big major shift between what is in here and what is kind of now the, the most up to date. Um, and the, every other month is when you run the internal play. so internal plays are like when you hit your list up and say hey we're doing um it's the last chapter of the offers book it's whatever our internal seasonal promotion is so it's you know valentine's day you know get fit to fudge with your you know with your loved one whatever you know um accountability buddy you know uh lean by halloween you know whatever uh and so um Um, the churn though is still going to be the quality of the sessions.
1:15:57I mean, the fundamentals are going to be there. The sessions have to be good. The music has to be good. The trainers have to be solid. Um, you want to reach out on a, on a once every other week basis. You want to check in around the promotion that you're running or the bring a friend to component that you're, uh, that you're doing. And, um, obviously the sales stuff and getting the prepays and stuff Ed's already given you. Um, so that's the big stuff. but the main thing that drives down churn is consumption. And so all of the objective has to be around how do we get them to use the membership?
1:16:29No one cancels a membership they use. And so people will cancel$10 in memberships if they don't use them. Like nothing is worth it if you don't use them. And so that's the TLDR. Any questions on that? Because I want to make sure that you feel okay. No, thank you. Alex, thank you for all you do. I appreciate you. Oh, you bet. My name is Renz. I sell structural engineering services. So I designed commercial, large-scale commercial real estate buildings for commercial real estate developers and architects. Do 5.2 million in revenue. Trailing 12 months closed revenue predicts next year is about 8 million.
1:17:02I'm going to do 20 million in 2027. Learned a lot from the team and most of which is my data isn't organized properly for me to understand my appropriate CAC and LTV. But in our business, high reoccurring, right? They They do a lot, but it's cyclical. The funding's interesting. I feel like a certain amount of my marketing is just necessary to nurture my existing clients and has all these other. So when I go into like CAC to LTV to figure out my slot machine on where to allocate cattle, that's where I get confusing. Just curious if you've had experience. Well, you would just lose all of that, all that nurture into CAC.
1:17:37And then what about LTV for new customers? You just call that, you look at that as your CAC versus your new LTV. So CAC's CAC. Yeah. So think about it like this. So every month you spend X amount of money in general. So forget about the fact that like some of this is nurture for customers who've been here before. You pay this amount of money every single month that goes into advertising and sales to a car customers. So all of that blended together. And if you have more lumpy revenue, which I'm guessing you do, you just expand the time horizon. So you look at trailing six or trailing 12 and say, okay, we spent just simple math.
1:18:11We spent a million dollars on marketing and sales this year, whatever, between commissions and uh, advertising. Okay. Over that year we acquired, call it 50 customers. Okay. So our CAC is$20 ,000. So the longer the time horizon is also, by the way, the more accurate it tends to be. So if you just zoom it out, cause like if I just says like, what's your CAC today? It's, you know, it's kind of like that, this volatility thing. It's like our CAC today is terrible. And then tomorrow it's amazing. Right. And so the, the, the, the further out you blend it, the more accurate will be. But in terms of less than gross profit or LTV, that one, there's a lot of different ways to calculate it.
1:18:51I tend to calculate it in the ways that are underestimated so that I, like, I want to overestimate CAC and I want to underestimate LTV. If I do that and I still have my good metrics, then I'm kind of like in safety zone on both. So like I'll do fully loaded CAC, which is like including commissions and the software and the media spend and the nurturer and all that fully loaded. And then LTV, I'll say, okay, if I want to have the lowest LTV, I would just look at same thing, all customers, what do they spend historically? So even if you look at all the way from, it's been five years, whatever, even in business, what was revenue?
1:19:23How many customers do I have? And you just do total revenue for five years divided by total number of customers acquired. And then you're like, wait, but some of these customers are only six months old. It's going to underestimate it, but then you still have a, that will be the most, it will be the ugliest version of that number but if that's baseline then you can only go up from there does that make sense does okay was that helpful absolutely okay that's your wish my name is tyler i sell uh roofs to residential homeowners or commercial uh building owners um we're about 10 months old did 1.8 million in revenue this year uh yeah somewhat uh a lot of the guys like i've been in the industry for a while so i had a lot of return customers cool did about 1.1 from return and then my four sales guys brought the rest of the business um short-term goal would be eight million greater than that and then long-term would be uh brown 70 and exit um the problem is we don't know what model to choose or how to do it so like was it franchising are you gonna be like sure the storm chase are you gonna do private like cash pay like new we haven't done any storm chasing so it's all new roofs and repair so so it's the market that we live in is is we get storms every year.
1:20:30So, um, yeah. It's insurance. 95 % is insurance. Okay. It's insurance. Got it. Okay. Yeah. So I guess my question is like, how would you scale or what model would you choose? And then how would you go about building that? Well, you already have 95 % insurance. So I would probably keep doing that. So what stops you from doing that? Well, we're going to stay with insurance. Well, insurance is changing a little bit. Deductibles are growing up. Homeowners don't want to get their roofs done as often, but would you scale to multiple locations like different cities or would you do like a franchise model do you feel like you've nailed the model no i would so right now what i what i wouldn't want to do is try and make a decision with incomplete information when when when it could be knowable and so i think once you nail the model then the path will become really clear and so if you know the model and then the returns on capital are really like interesting and you can be more patient, then owning them all privately becomes more interesting.
1:21:26If it costs a ton of capital to open up, and let's say it requires a lot of like oversight, then sometimes a franchise model can be good. But fundamentally, I kind of see franchises as like being impatient, just being honest. Because like all it basically, it's the most expensive form of capital is you say, hey, we're going to partner and you're going to say you're going to put all the money in and I'm only, I may become a, you know, maybe you get an 8 % of top line. So maybe figuratively it's like 25 % partner or 30 % part of the location, which is okay. Like nothing wrong with that. But I've seen such a graveyard of, you know, 20 location franchises that make no money.
1:22:06And the amount of work that it takes to maintain 20 is about the same amount of work as it takes to maintain 20 where you own them all. It just happens faster, but you make way less money. So I am, I have a habit of flipping franchises back into let's own them all. Like the teeth widening chain that we bought. When we bought it, we had 14 corporate stores. We had 18 open franchisees. And so then over the last 12 months, we bought out all 18 franchisees. And so now we own all 32. But then like all of the administrative headache has just basically disappeared because we just run the way we want to run them and we make more money.
1:22:41But yeah, I think you need to nail it. And then the scaling of half will become clearer. I know it's not the sexiest answer but that's probably the truth no thank you
From the publisher
In this Q&A episode, Alex (@AlexHormozi) goes rapid-fire with real entrepreneurs, giving blunt, tactical advice on everything from scaling service businesses to fixing offers, boosting CAC, and knowing when to walk away.
Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned and will learn on his path from $100M to $1B in net worth.
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