Fix These Bottlenecks to Scale Past $1M | Ep 891

0:00And I think that was... tell you a secret yeah very small business owners will never build a stable business because they are not stable it has nothing to do with you okay hello how are you sir my name is kyler i sell landscape lighting and exterior lighting basically to homeowners north of half a million dollars for the value of your home well done uh really good i'm at 310 revenue 310k 142 ebota and what's stopping me is i literally make all that money from that lighting division temporary lighting so holiday lighting so now i know i need to add on landscape lighting permanent lighting to be sustainable all year round okay i haven't started advertising for landscape lighting except for the warm outreach that i've done to my temporary lighting customers so now i need to start working on a proven acquisition channel for new customers and that's what's stopping me okay and it's usually like christmas lighting type stuff yeah okay when you when you spin that up every year do you just hire a bunch of temps and then you guys put them all up and then you fire everybody kind of thing unfortunately yeah but we also have a washing side i talked to ed about that we might kill that so i didn't really want to get into the week but i keep a couple on that do washing with me washing exterior cleaning concrete house washing gutter cleaning that's actually pretty decent business side note but okay you're like i'm selling water you know like not a bad not a bad gig okay but you prefer the lighting business because it has higher margins and okay yeah so two potential ways to think about this so one way is you look at the halloween store which you probably heard of and they you know they run for 90 days or two months whatever it is leading into Halloween.

1:48And they every year just do more and more of it. And that's the model. And he just sticks to that and he just takes off the rest of the year. And so then the question becomes, how do I continue to gain access to a scalable workforce that I can basically turn on overnight and train up in a weekend to deliver all these services? So that is not an unattractive business, to be clear. I mean, a lot of people would love to own a business that they only have to work 90 days a year. And they just, I wouldn't say chill, but like kind of, right? And so the other nine months of the year for that business would be you building out the inroads and laying in all of the, basically building out the rapid work infrastructure so that when people come in, it's just like, boom, this is the training or like, boom, we sent our messages out.

2:33You guys have 14 days to respond. And you know that every year you get verbal commitments around the year from a hundred people. And you know that that translates into 20 people who are actually proficient in work. And so then you just work your, you're basically work backwards from the model. Does that make sense? Yeah. So that's the Halloween store path, which I don't think is necessarily a bad path. Like when I have something you're like, okay, I'm making three 10 on 500. I'm like, cool. Let's do like 5 million and make 3 million. Like that sounds chill. Yeah. Right. Rather than like, how do I start another business to like give my people something to do in the meantime?

3:02So if I'm you, I would probably try and say like, and Layla has a great frame on this, which is when we're looking at two business decisions, there's always problems on either side. And so we ask the question, which problem would we rather solve? Or which problem do we feel like we're more equipped or more likely to solve, given our current resources, skill sets, et cetera? And so if we're looking at this path, path one would be like, do I believe it's within my skill set to build the network nine months a year and build the training out so that when I send the mass blast out, like we're about to go into high season, ready to rock and roll, I can get this percentage of people and I can get them trained up in a weekend and then we're off and running.

3:41Do I want to solve that problem or do I want to build out basically the ascension path from temporary lighting to permanent lighting and kind of build that whole other business? Okay. The way I asked the question seemed one-sided, but like that's a real question. Yeah, no, it's a real question because I could spend nine months doing that, but I'm not going to lie. I think I may just get like a little bored, you know, yeah the rest of the nine months yeah get a dog you know well one of the things you can do and like okay so okay so i define patience as figuring out what to do in the meantime right so we have to figure out something for you to do in the meantime and so the question is what can i do in the meantime that could make my core business money during that high season yeah well i could probably pre-sell that season all year so i did do pre-sales basically last month we do our pre-sale just you know get cash flow and just real quick side tangent basically i went to a permanent lighting training end of last month they actually said you can lease that permanent lighting essentially you know year-round lighting it for all y 'all that don't really know yeah yeah year-round lighting but basically you know have that just recurring every single year so they're leasing it basically and then if they want they could buy it out so i was thinking about upselling those customers we have one year three or five year contracts and then upselling the people that are on those contracts for just year-round lighting and say hey do you want this thing all year and it's not going to cost you the six to ten k if you don't want to pay that up front of course we'd like that but then offer that same exact price every single year i don't think it's a bad model which one would you rather do i think both will work honestly i'm leaning towards just figuring out the landscape lighting because i don't think it's that hard okay great margins to add on to the business.

5:29In my long-term play of making this scalable potentially to other markets, I would like a full year-round business instead of just seasonal. So I'll say this. It's not that it's not a year-round business in the first year. This isn't me trying to convince you of this. This is kind of for everybody else too. It's not that it's not a year-round business. It's just that you do delivery for 90 days. You're right. The fact that you're not working the other nine months is the problem. You're right. Because could we take 500K and make it 5 million if you worked the other 75 % of the year. Yeah. Rather than kind of like creating this other business to keep yourself busy.

6:04Okay. Like that's how I think about it. Like you're like, man, if I work a little bit, I make$300 ,000 at a quarter. I'm like, we'll work a lot of it. Maybe make$1.2 million in the next year. That's with zero changes in like current capacity. Yeah. And honestly, you answered my question. Sammy's in the room. Really sorry. I tried to ask her a question. She's like, I need literally 98 other data points, but you just do it as hell. because that's literally the problem I run into is like I had to pull all my advertising all that stuff last season because I hired on all these people half the people don't know what they're doing all the way there's no time to train so that makes a lot of sense what'll happen what would happen next is like if you went the other path of if you decide to do the the temporary leasing thing the demand that you'll be able to generate for temporary lighting will still exceed your capacity with your existing workforce on the recurring work.

6:55So you're going to have the problem either way. Yeah. So which problem would you rather have? Okay. That's a you problem. Business-wise, either model works. I would recommend not doing both. Yeah. Okay. Cool. Thank you. Yeah, you bet. Thank you. A little round of applause.

7:16These have been an easy one. These have been fun ones. All right. Oh, my goodness. Let's see. So my name's Christine Mattis, and I sell legal services in the form of estate planning and helping clients with real estate matters basically to families. And there are families. All high net worth families. Yes, high net worth families. Okay. We did 2 million. So we've been growing 20 % every year for the last five years. My goal is 10 million. What's stopping me is really it was an eye opener yesterday doing that scorecard. My EBITDA is terrible, like zero. and but yet i know we want to get more you just do nothing for zero it's so much easier and our i know i want to get more leads but also sales so i'm trying to figure out well what's the first thing you would attack with when you have this kind of situation well i don't understand why we weren't making money right so i would probably be tackling that first okay i think we're talking about y 'all's restaurant yesterday like we need you need to fix the core model unless there's some what I'm pretty confident because I understand the business fairly well.

8:18Like there isn't some massive fixed cost. Like your cost is people, it's payroll. It's not like you have some machine that you have to pay or some massive rent that must get paid before you can make, you know, incremental revenue. And so I would probably be looking inwards first at basically how I'm compensating people and how I'm pricing. So it's likely that, so are you at capacity right now with your current team? They think we are, but I'm feeling there's more room to grow. Yeah. So you have a pricing issue. So you're either underpriced or overpaying or a combination of both. Okay. And so I would fix that first because then you'll fix cash flow and then that freed up cash flow will allow you to go or get more aggressive on the front end.

8:59Got it. But like for me to say, hey, let's go get more customers is probably not the solution right now. Makes sense. Like we have to free up cash so you can breathe. Yeah, absolutely. Appreciate it. Thank you. Yeah, you bet. Oh, thanks. How's everyone, Alex? My name is Alex. Also, Alex, I own a company. Are you having the best day ever because you have that name? I mean, that's how I wake up every day. I'm like, I'm called Alex. Like, I'm having the best day. I sell trivia nights to bars and restaurants across the country. So they'll bring us in on their slow night of the week. And we will come every week and basically fill up their bar for them.

9:29Cool. Currently at 1.1 million in revenue. Like bar launch. Sure, if you will. No, man, that's what I did. That's what I did for a living for two years. So currently 1.1 million would like to be at 10. And what's stopping me right now is capacity, but I think really I'm just a couple hires away from getting that. So my question is really more about our upsell. We do have an upsell that we present to bars right now, but it kind of sucks. And that our core offers to the trivia nights themselves, our LTV to CAC is about 12 to 1. So I like where we are there. But our upsell, I mean, people churn out after like three months.

10:03You mean they do a couple of trivia nights and then they dip or the bars? The bars themselves, we use it for about three months, the upsell. and then what is the upsell the upsell is basically a different type of trivia night it's called music mashup more of that it's like a music style trivia okay so my question is this is like fun right now i'm trying to just improve the music mashup game to make it something better okay do i keep doing that or do i just bail okay so this is this is like super applicable to a lot of people here okay so let's say this is a customer journey this will be trivia all right so where do you sell ideally on this on this life cycle where do you sell where do i sell the best time to sell this is our value line at the bottom at the pain point right yes okay so you're delivering trivianites right yes we have now provided value and we're selling here, but they're already full.

11:07So I give the analogy of, if I go to, I go to y 'all's restaurant, right? And I say, hi, I want a steak. I'm starving, right? And sorry, I go to the restaurant. I say, I'm starving. You say, would you like a steak? And I say, sure. I eat the steak. And you guys come back over and you're like, how was it? I'm like, oh my God, it was amazing. And you're like, awesome. Do you want another steak? I'd be like, no, no, I'm, I'm good. Like, I'm good. And they're like, oh, you don't like the steak? I'm like, no, I like the steak. I'm, but I'm good. It's like, well, then why don't you have another steak?

11:31You're like, ah, right. it gets really awkward, right? But that's actually kind of the situation a lot of business owners are in. And so, but after I have my steak, I might have the desire to have something sweet. And so now I'm full on my value vector for steak eating, but I'm empty on my value vector for dessert eating. And so then I'd be like, ah, you should try our apple cobbler. It's delicious, whatever. And so what we want to figure out is sometimes the point of greatest value also on another vector becomes the point of greatest deprivation. And that's why sometimes they overlap. Often they don't.

12:04And so I think it's one of the big mistakes that people make is when they time their upsells. And so for, I'll give you a B2B example and then I'll circle back to the bar. So if I help someone get more leads, right, I have now provided value. But now that I've provided this value, they're like, shit, now I have to work all the leads. And so then that creates the opportunity to sell the lead nurture services or the other things that they need to go with this problem that I just created by solving their first problem. And so upsell timing is one of the big mess ups, I think, in a lot of businesses.

12:34Okay, back to the bars. So trivia nights is the core. So what stops you from just having basically just continue to do trivia nights with them? What do you mean? So you do a trivia night. You bring a bunch of people on Thursday. Next Thursday, I still want a bunch of people. Why don't I do a trivia night? That is the business model. Everything is weekly. So a bar will hire us and we will come in every week on that day at that time and bring back that crowd. so we develop regulars for them. Okay, and that's sticky though, right? Yes. Okay, then what's the problem with just doing more of that? That was my question, is whether I should just focus on doing more of that.

13:06Yeah. Okay. You're like, I've got this really sticky thing that we're really good at and people like it. It's like, do that. Okay, so follow-up question to that would be, at what point, so let's say I just, the next however many years, I just keep milking the trivia nights over and over again. At what point do I even consider bringing on an upsell? Because right now we have no upsell. I don't think you necessarily need one. Are you running good margins? Yeah, they're fine. They're 25-ish percent. Yeah, 12? 25. Oh, 25. Okay, I was like, 25's fine. Okay, yeah, I think you're in a more situation.

13:37So how do you get bars right now? Primarily cold outbound, a lot of cold email, cold call. Some inbound, about 20 % of new clients come via referral. Cool. So, and I can understand that because they're not trying to refer the bar down the street because it's like, I get it. So we had some of the issues with Jim Watch. They only refer somebody who's like out of state. That's perfect. I get it. How many outbound actions are you taking per day to generate your sales velocity? One sales guy full-time and he'll make about 100 sales cold calls per day. Yeah. So, I mean, that guy should probably rip like 300, just as a baseline.

14:10But I think hiring like three more guys and having all those guys do 300 a day would probably get you a bunch of sales. Because the biggest thing that I would want to solve if I'm you is how do I make sure that bars that do trivia night just keep doing trivia night with me yeah if that's not a problem and they are just all continually doing that then you have solved the hardest problem in business which is that you have revenue retention so we just don't need to be fancy we just need to do a shitload more of it cool thank you rock and roll yes ma 'am hi my name is zara mutoekio i sell zara zara nice to meet you nice to meet you i sell kitchens and bathrooms to residential homeowners Our revenue is about$320 ,000.

14:55I would like to be at$1 million. The problem we're having is we have a sister company that is commercial real estate development that is taking the money from the construction. It's my father's interest to keep that. The real estate, I want to focus on the commercial or the construction. Who founded this business? My father, both. So you founded both of them. So it's a family business. Family. Your father here? No. Okay. All right. So, I want to focus on the construction. We are partners with Home Depot for three of their stores. I was told, try to like do more with Home Depot, get more stores.

15:37But we do have all those leaks in the real estate. Like properties aren't selling, properties aren't being rented to the max, all these bills and they take the construction money. so i was so you have one business that makes you money and another business that loses money yeah okay and we're kind of stuck in the you're stuck it's like a fight with my dad oh yeah yeah so i tell him relax take a chill pill let's do the construction but he's like real estate is what makes you rich and i'm like no that's like you save and you invest with real estate but that's not the business and that's where we have different opinions so that's where we're trying to plug in the holes and i want to just give you this which is that your father's logic is sound the practicality of it tends to be different in reality and so the vast majority this is super i would say it's more common than it's uncommon is that people who get into construction they make some money and they're like oh i'll just start also doing construction and real estate and then i'll start flipping things and then all of a sudden they've got like for businesses that are kind of real estate adjacent.

16:42And they're like, well, it's actually an ecosystem. And you're like, oh God, anyways. Real quick, guys, I have a special, special gift for you for being loyal listeners of the podcast. Layla and I spent probably an entire quarter putting together our Scaling Roadmap. It's breaking scaling into 10 stages and across all eight functions of the business. So you've got marketing, you've got sales, you've got product, you've got customer success, you've got IT, you've got recruiting, you've got HR, you've got finance. We show the problems that emerge at every level of scale and how to graduate to the next level.

17:14It'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 answer the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com forward slash roadmap. R-O-A-D map. Roadmap.

17:42So I think, let's say you're on stage here. What do you tell you? What was that? What do you tell you if you were on stage? What do I tell you? I want to focus on construction. I like to focus on one thing. I don't like doing multiple. And it just gets to the fight. Yeah. You know what to do. Yeah. so i think you have so so let's get real for a second so you have a question of what you want to do in your life so you can continue to work in your father's business so you have basically three paths one is stomach it i don't think your dad's going to change his mind how old is it i'm waiting like five years for him to retire he's 56 yeah because he tells me he's like i'm gonna give you like five years and then he tries pushing it like 10 years i think it'll be five years away for the next day.

18:32And I tell him I'm like I'm gonna take over it's me and my sister and hopefully my husband comes back because he kicked them out. It's a whole family affair. It's crazy. Okay. It's getting so juicy. Yeah it's crazy. This is one where there's high drama very simple solutions. Other ones you have like no drama and very complex solutions. These are what I tell him like I'm gonna take over you should focus on what I want and it's kind of just like repeating that into him. Wait for your dad to retire in five years.

19:10Know that it's not going to be five years. Or I'm leaving. That's what you start with. And under these terms, I'll stay. I feel like I've done the third and that's why I'm here. But do you believe that, but you just said he's moving them, he's pushing them back we find but i tell him i'm the boss yeah it's very and he listens but it's a fight like it's fight but did you sign something sign what an agreement no i put it in paper and i know this sounds wild because it's like it's family the thing is is that i don't think he's going to take you seriously you're his baby girl yeah right and this is big gruff construction they're going to take advantage of you you don't know i've been doing this longer than you right and you're like and in the short time that i've done it i've made more so my units of you know my income for unit times actually way higher than your sis you don't even say that he'll hate you so but honestly you have you have life choices right now the business decision is actually really easy you know the construction business is what you should be doing stick to the one that you have really good margins and you have all these growth opportunities that are sitting in front of you and you have you're throwing good money after bad right that's like a pretty standard thing that happens in the entrepreneurial journey but you just have that choice to make now if you're like well i already did three it's like then you didn't do it right and so fundamentally he doesn't believe you now there is a world where he will just never relinquish power and then you've got to figure out what you want to do with your life yeah i'm gonna hope for three and then we'll see what happens but you have to he's got to take it seriously though so here's how i would do it this is how i do it i want to buy the business from you because you saying, wait until you retire.

20:56It's like, what am I going to do with my time? And like, I, you know, I got to do something. Right. So it's like, I'm going to buy the business from you effective today. And I will pay you over the next five years. Then you have a clear date or three years, whatever. And then you work essentially for free. And then you take the profit that you would, you know, you agree on a price and you start paying it. Like you have to have an agreement and you have to send money has to change hands. Either way, it's going to have to change hands otherwise you're gonna have a tax event regardless when he gives you a business so you might as well do it now you talk to the estate attorney right like there's a way to do this in a tax efficient manner but if he is going to transition the business to you which i'm sure he does want to do then we need to put a clock on it when you start making payments towards it that's how three actually works if it's just like hey i'm the boss now it's like you're just going to keep doing this loop for the next 20 years okay and you seem like a very kind person and so i need you to put your take your teeth out a little bit that's what my sister is yeah she's the mean one and i'm like is she here no she's not so the deal i made with him when i wanted to come here was to invest in the construction and he said okay you go you pay for it if it works i'll give you your money back so that's when i hope he's like okay i mean if i say you can do this problem yeah i don't want to do the real estate yeah but this is it there's no there's really no more to to go over on this one do the paperwork this is the deal agree on a price and then agree on the terms and then start the car okay and if he says no then you'll actually be able to say this is like i'll give you a totally different example girl dates guy guy promises to marry girl girl asks for engagement ring he says i'll give you a promise ring

22:37wait when are we getting married don't worry i gotta close up some things at work first two years pass when are we getting married he's never gonna marry you and so you just have to like you have to there's a decision that has to get made and so and if you want to use this quote you can which is decision comes from the latin root of decadere which means to cut off which means that we have to cut off one of these paths otherwise you haven't made a decision i define commitment as the elimination of alternatives right now you have three alternatives you have to eliminate two okay cool thank you

23:17Hey, Alex. Hello, sir. My name is Adam Howard. We sell health insurance, life insurance, retirement planning to middle-income Americans. We are currently about 4 million in top line. Want to be about 10 million here. I think we can do it in two years. Our constraint is we've got two locations, brick and mortar. We have a DMA about 90 miles from our brick and mortar. We're max capacity at this point. And so we're looking to bring another location out outside of this DMA. And so how do we efficiently, as we're thinking through the strategy, find good talent that we can eventually groom into leadership to lead that office and then do so cash flowing as quickly as we can?

23:58Because one of the challenges is taking somebody from unlicensed to licensed to learning the business to we have a six month sales cycle as it is once we start marketing, how do we do that as efficiently as possible? What stops you from taking one person from your current locations and giving them the opportunity to own a small chunk of that one? Yeah, we've thought about doing that. And then the thought process is there where we kind of disrupt the flow of that existing office. How many guys are in each office? They're small. So our West office is two people and then we've got five in our home office.

24:32Okay. Yep. You think you can take one of the five? No, I don't. I don't think so. Okay. Well, which problem would you rather have? So either you can take your five location and bring it down to four and then backfill within that location that's already cash flowing positive, has the culture there and bring somebody else in. Or do you think it'll be harder to get somebody who's brand new, not surrounded by anyone to get up to speed? it's a great question i don't know without testing it and i know that you know both have risks and you know oh you know we might you're only intentionally yeah exactly so i'm always thinking about how do we mitigate the risk and how do we yeah so i'm i'm leading to where i'm where i i think that it is lower risk to take one of the five and bring them over to the other location and have them see that with all the values in the culture that you know they already know how to run the business and so now you only have one new variable which is the location do you know the guy's good, you know he's going to do your values, and then you can spin that location up.

25:31And then the location that you have that is your mothership, it can take a little bit of a dip, right? If it needs to, because it can weather that. You've got cash flow, you've got existing contracts, you've got premiums that are coming in. If you do new guy, new location, everything's new and you're not sure, is it the market that's bad? Is it this guy who's bad? Maybe he's good, but he's not a culture fit, but now I got to turn the whole location over because he ends up hiring two other people underneath them that also aren't cartridge fits. So to me, it's a pretty straight, I think the risk on going from five to four, taking one of the best guys, giving the opportunity for his career to advance, which also paints a picture for everyone else in the organization that, hey, you do a great job.

26:11You might be able to have your own office that you can leave. I think that's a really good story. And you're in the talent business. It's hard to find good guys. Right. For sure. I own an insurance company, so I get it. question for you to follow up on that then so to efficiently scale that quicker and continue to duplicate that then you know we thought about that as as a model for it so then but it's kind of slower we got to build this up find a guy from here and then move them here right guy or gal from here or how do we eventually across state lines now find somebody that's two states over you know you got somebody's like i don't want to move two states over maybe they do because the the upside is so good you know so opportunity creating a good enough opportunity yeah and this is career pathing.

26:52I think it's actually really good for the business because people do eventually, they build a big enough book a bit. I'm thinking about hanging my own shingle. It's like, cool, let me just take care of that for you. Hang your own shingle, but under our bigger flag. And you get all of our systems, all of our infrastructure, all of our support, our lead generation, everything that's in that area, we'll just immediately send to you. You'll hit the ground running. So from initial onboarding, having a good process is thought out from A to Z. Hey, if you get to this point, this is an opportunity. Yeah.

27:16And I think that paints a really compelling picture yeah that's what i would do i also would just this is for everybody a lot of the problems that you have are based on timeline which is just like an arbitrary line in the sand that it's like i must get to this point by this you know by this day which is basically irrelevant just made up and so i think at the end of the day if you thought well what would it take to make this you know insurance company one of the biggest in the in the us in 20 years you probably grow very strategically off of this culture that has worked really, really well and trying to seed each location with the best seeds from the ones before.

27:52So you just keep those values kind of all the way through. So I think that's the much lower risk path. Appreciate it. Thank you. 100%.

28:04Hi again. Yes. My name is... New seller, Ukraine. Number one seller in all Ukraine, spends lots of money on ads. You've gone to Poland and you haven't been able to get the market to convert. We talked last night, you take the words, look at the cultural differences on ChatGPT, translate your existing marketing copy back into the Polish cultural norms so that the right language is used so that it converts there. What's the question? Wow. You have AI here already. Neuralink, something like this. I prepare a little bit different question. Thank you. Thank you. I promise that you don't remember me.

28:39We sell crypto education to a wide audience and mostly who want to meet their basic needs. So there are no specific audience. We make over 1 million in revenue. We operate in Ukraine and are launching in other countries. I want to reach 10 million. I more or less understand how by expanding to new markets and we run cold traffic from meta, Google, influencers, telegram, and et cetera through funnels. And one auto-webinar funnel had generated over$20 million and still working. And we tested VSL. We put same content like in our auto-webinar, but shorter and without comments, activities. We tested advertorials.

29:23We tested lead magnets funnels. And nothing works as well as auto-webinar funnel. That's where the magic happens. where we are creating new off-the-webinar funnels and testing new topics, even new faces within these funnels. And I want to reach the audience that doesn't attend webinars. And my big question is how to find best practices and what else could hypothetically work. And I'm reading your book about offers right now. and it inspired me to build funnels for specific high paying segments instead of just wide audience. And I'd like to ask you your opinion about this and is it the right way that I think right now?