How To Raise Your LTV | Ep 823

0:00Hi, thank you so much for all your content you make. My name is Laurieann and I sell personal finance courses and coaching to women. We do 30 million. For women. Pardon? For women? For women. Ah. With a plus side of the camp. You're like, screw the guys. They don't need to save money. You know, they can learn from someone else. I'm messing with you. So we do 30 million in revenue. Badass. Thank you. I would like to be at I don't know revenue, which comes to my question. All right. And what is stopping me is our CAC to LTV ratio. So both CAC is too high, got the team working on volume right now.

0:37LTV is too low. Okay. And AOV is too low on our front end. Okay. So I think it's actually a cash flow. Maybe. Straight potentially, but I'm a little confused on where exactly to go to work. Okay. How do you acquire customers right now? Primarily meta. So it's all paid ads? Yeah. Okay. So all paid ads and you're running to what? A webinar, 2K webinar. Okay. Are you have a low ticket offer before the webinar? Before? Are you charging like something as like a self-liquidating offer on the front end? Free webinar. No. Never done a self-liquidating offer before. Okay. So free webinar on the front end.

1:13You have a$2 ,000 offer. Okay. Yeah. Then what? $2 ,000 or 12-month payment plan for$200 a month. Okay. Which is why our AOV is like$900. Got it. And then acquisition costs like$1 ,500 on the client. And then we have a back end. Okay. That's 10K, has a 7 % upgrade rate. Yeah, it's low outsourced sales team right now. And so LTV is like 2 ,400. Yeah, that's a problem. Yes. That's why I'm here. Yeah, no, your essential rate is too low. You will probably have to bring the sales team in-house if you want to really fix it. It's very hard to influence the team. you'll want the Ascension to be integrated into the onboarding.

2:00And so you sell the$2 ,000 thing. You have your onboarding call. The onboarding call, the finish of the onboarding call is they set their goal setting call with what would become a setter. And then that setter sets for a closer. So they actually get three calls. So they have webinar, buy. They have an actual onboarding call because you want them to like, you want to make sure you deliver. One-on-one or that's a group of them? One-on-one. You can do, well, you can start with, you can start with group and then you will make more money if you go to one-on-one. It is more ops, but like we actually did this and I have a video that breaks down everything that you need to know.

2:37Yeah, I've seen it. Okay, yeah, yeah. And so one-on-one is better, but if you're going to start, start with the group. And their way of getting off the call, like saying like, okay, you're dismissed, is that you show me that you have confirmed your booking with your next call. So that way you have 100 % through line to the next. Now they're customers, so they're going to show up. The goal setting call basically sifts for who, like what's your goal? Cool. Basically just do another sales call again. And then you push people into the ones who can afford it that makes sense into a closed call with basically an invitation to join something that has more help or work associated.

3:15Yes. Okay, great. You'll probably need to get third party financing in place. Oh. Yeah. Yeah, on front end. Oh, for the sales calls. Yeah, and front end. Like, you should definitely have some BNPL options, so buy now, pay later. You should probably have a few. Okay. We have them on the back end. We don't have them on the front end. Yeah. Also, with the webinar, I would recommend split testing the first five minutes. So, retest two or three different intros and look at LTV. That will make you money. But the biggest issue is that you're upselling 7%. Like you need to be at, you want to be at at least 25 and you should shoot for 50.

3:53Okay. Okay. And so just one more question as I'm, that's like a longer term solution, right? That's going to take time to bring the sales team in house and really optimize that process. Why does it have to be long-term? Just a time it'll take to find a sales leader and recruit and like shift leads from the. You need to hire one person, really good sales director. and then you hire six recruiting firms that do sales and say, I need 10 guys from each of you. And you can get a 60 person team in four, like two weeks. Okay. We just added 40 guys in two weeks to one of our companies. We just paid a bunch of recruiters.

4:28Like if we're doing that kind of volume, we're just going to go to somebody who has a big network of people. That's their full-time business recruiting sales guys. So it's like, great. These are requirements. Go get them. And I'm willing to pay for the speed. So if it's, and you can also negotiate if you're doing multiple, like the same of multiple. So it's like, hey, normally it's$10 ,000 per head, but I'm going to buy$20 ,000 from you. So I'll do it for$5 ,000. Okay. So you pay$100 ,000, all of a sudden you have an apartment. Okay, cool. So action on that immediately, and then while we're doing the recruiting and getting that person up to speed, just keep spending basically as much as we can afford to spend on the front end to keep lead flow coming into the back end?

5:08Realistically, if you spend less, you will typically, ROAS will increase. Yeah. Typically. um youtube's not that way though kind of random um the more you spend the more profitable it gets it's wild yeah it's the anyways if you have a cash flow issue right now or like you know it's like it's self-inflicted like you can just spend less um and improve the improve the returns but your cac is appropriate fifteen hundred dollars to acquire a customer in that space that much lower yeah it's like you're not gonna like you're not gonna get below a thousand uh and so this is a back end issue. Like you just have to increase the ascension rate and that's it.

5:48Okay. Thank you. You bet. Awesome. Hi, um, I'm Jacqueline. I know we talked dentist. Yes. 3 million, 5 % profit margins. You have five different ones, three are part time. Perfect. Great memory. Yeah. You're in Dallas. It's 30 year old business or inherited from your father. Yes. Yep. And my social security number. Yeah. I can pull it up. Um, so I know we talked, Yes, last night, which you obviously remember, and a couple other people from your team, we talked about this issue, that my number one constraint probably isn't our cancellation rate, but it is something that I'm, like, really perplexed about and want to at least go back with a little bit of something to share with my team about.

6:32So our show rate or our cancellation rate is a little over 30%. And this past year, we've lost like a million dollars because people made appointments, confirmed them, and they didn't show up. So if you have any insight on what we could do to start improving that, I would be really grateful. Yes. I don't think it's the constraint of your business. So number one is you're going to want to make sure that that time is the right time for them. and we ask questions like, is there anything that will possibly get in the way of you showing up for your meeting? And so we call this an integrity tie down.

7:11And so after you get a time slot, you want to ask that right afterwards because it like shakes them out of their mind. For whatever reason, it works. So I could come up with some narrative for it, but it works. Number two is, I think I mentioned this yesterday, but I think it might be worth considering pulling up appointments. Like to basically, can we bring them up sooner so that we have increased shop rates. The next one is, let's see here. You want to make sure that you have automated reminders, which you probably do, but then you want to have manual reminders on top of that. So I would have an office iPhone, and you want to send manual text at three times.

7:54So you want to send the manual text at 24 hours, so basically think night before. Second text is going to be morning of, and the third text is going to be 60 to 90 minutes prior basically when they have to like get your shit together get in the car now uh ideally we like to have some sort of um selection that they pick that we've like some cost we have incurred so this works exceptionally well for brick and mortar which is why i'm sharing it with you in the gym space obviously like we would say hey uh sharon i've got uh this shirt uh tell me what size you're at and i'll put it pull it aside for you And so when you come here, I'll give it to you.

8:33Or it's like, do you want red or do you want blue? Like just do some sort of A, B ask for them. And so it could be as simple as like, you're going to pull, I mean, because it's a dentist office, right? And so you're like, okay, what can I give them? Well, I always get free shit when I go to the dentist's office. And so just like have them pick the free stuff that you put in their goodie bag. And then I would send them a picture with their name on it so that they're like, oh, man, they incurred this cost just for me. I have to show up now, right? Because you're having the issue because someone books and like six months later is their cleaning or whatever, right?

9:09That's the problem here. Yeah, well, we call and confirm their appointment a week in advance. And then we call and remind them again three days in advance. And then we call them and text them again a day before. And they'll say, yeah, I'm going to be there. And then two o 'clock comes and they don't show up. You're reminding too far out. Okay. Like if I schedule an appointment on Saturday, Monday morning is a different universe for me. Yeah. No, I'm just being like super real. And so I think a lot of people are that way. And so all of the manual reminders are like if you want to like I use the automated ones for the far out.

9:44Like, hey, you're seven days away. Hey, you're three days away. But I would have the ones that you're putting the real effort in 24 morning and right before. Okay. And then have the incentive, have the personalization. and I will bet you dollars to donuts that that on its own would work. Okay, awesome. Thank you so much. I really appreciate it. No, you bet. Yes, sir. My name is Tyler. I sell roofs to residential homeowners or commercial building owners. We're about 10 months old, did 1.8 million in revenue this year. Yeah, somewhat. A lot of the guys, like I've been in the industry for a while, so I had a lot of return customers.

10:19Cool. Did about 1.1 from return. Great. And then my four sales guys brought the rest of the business. Short-term goal would be$8 million, and then long-term would be around$70 million and exit. The problem is we don't know what model to choose or how to do it. So, like, was it franchising? Are you going to go insurance and storm chase, or are you going to do cash pay, like new roofs? We haven't done any storm chasing. So it's all new roofs and repair? So the market that we live in is we get storms every year. So, 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?

10:59Or 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 wouldn't want to do is try and make a decision with incomplete information when it could be knowable.

11:33And so I think once you nail the model, then the path will become really clear. And so if you nail the model and then the returns on capital are really interesting and you can be more patient, then owning them all privately becomes more interesting. If it costs a ton of capital to open up and let's say it requires a lot of oversight, then sometimes a franchise model can be good. But fundamentally, I kind of see franchises as like being impatient. Just being honest. Because basically it's the most expensive form of capital. As you say, hey, we're going to partner and you're going to put all the money in and I'm going to become a, you know, maybe you get 8 % of top line.

12:14So maybe figuratively it's like 25 % partner or 30 % partner location, which is okay. Like nothing wrong with that. But I have seen such a graveyard of, you know, 20 location franchises that make no money. And 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 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 them the way we want to run them and we make more money but 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 awesome yes ma 'am hi uh my name is adam i have a music lessons and recording studio in Atlanta, Georgia.

13:18And your content, you and Layla, what you've done is profoundly changed my life because you've put me out of my comfort zone in how I think. And so I sell music lessons to neurodivergent kids between eight and 18. We have a half million dollars of revenue. I think we could be at$2 million of revenue. And what's stopping me is I've realized that the model is completely broken. I'm underpriced, overcompensating the staff. We're underutilizing capacity in terms of time and physical space and time. And so my question is, how would you apply first principles thinking to what I should do now, next and later to run the business that I've got as we make the transition to one that it becomes an asset.

14:13Yeah. So basically the core, so there's two, a chunked down version and chunked up version of the core economic engine that makes a business successful. So LTV to CAC is the most, the smallest version of that engine. You put some money in, you get more money out. That's the gross profit you run the entire business off of. At a higher level, it's return on invested capital, right? So it's like, okay, that's what the core machine is. But then there's also equipment, there's leases, there's build outs, there's all that stuff that goes into it. That's not typically included in LTVD CAC. And then how much does it cost us to build this machine again and again?

14:46So that's kind of how I think about it. Like micro level, it's LTVD CAC, return on invested capital is what it is at the macro level. When you're like opening more and more locations and saying, it costs me 500 ,000 to open a location, location makes me$500 ,000 within the first six months. Okay, cool. I've got a two to one, you know, return on, on capital within a year, which is awesome, right? So let's tackle for you. So the nice thing about the music business is that it's actually identical to the gym business, so I know a lot about it. And so the models that I've seen works unbelievably well have been semi-private models, number one, or the 30-minute, multiple times a week, much higher ticket, people stay three, four, five years with music lessons with their person.

15:32I prefer semi-private because I think you get more loyalty to the brand and it's less about the music teacher who can then leave and then take all of those students who go private. And so I like semi-private in general. Also, I'm sure you could sell around the idea that they get a little bit more socialized and it's probably good for them and all that jazz. And in terms of pricing, I want my gross margins to be at least 80%, ideally 90. Now, you can do that when you're one on six. Harder one on one. And so, let's say you have six kids, right, in a class, or four. I mean, you can, you know, level into it.

16:11But let's say it's one on four. Keep it math simple. And you charge$200, sorry,$50 per session times four kids is 200. You make$200 per session, right? Well, for you to pay for an hour of a music teacher's time, what does that cost? Right now, that would be$40 to$50. Okay, so that's 80 % right there. So$240, so 80 % gross margins right there. Now, if you charge$60 a session, you'd be at$240, so then you'd be at like$84, whatever, in terms of gross margins. So you're above that. But that's my rule of thumb for brick-and-mortar service businesses is I want it to be over$80. Ideally over$90, but I will not do a business if it has lower than 80 % gross margins.

16:56Some people do. I just don't like to. Because you don't have enough cash to do anything. Right. And so then the question is, okay, how do we create the sales process and the positioning so that... Now, you already are working with a special class of customers. And so I would imagine that you would be able to probably even more easily than a traditional music academy sell at a premium price. Because if I'm a parent who had a neurodivergent kid, I would be willing to pay for a specialist. And so specialist prices are a premium. So I think that would work. And in terms of the model, you can, I mean, it's just headcount divided by teachers, basically.

17:42But you have to get the core gross profit right in the business, and then everything else kind of flows from there. I'm kind of in the same position that this guy over here was, and I don't have an operator, and so I'm kind of in that swamp, too. and trying to... So we have to get more margin. You have to get more cash flow. Cash flow allows everybody to breathe better. So, okay, I guess that makes sense. We'd raise prices and get that different sort of client funding. Sell one-on-four and just sell around the fact that it's a better experience for them. Because you don't want them to be married to a teacher.

18:21You want them to be married to... Like, this is how I would sell it. I would say, listen, Mrs. Whatever. Like, if your child becomes really attached to a single teacher, then if that teacher leaves, then all of a sudden this skill that they spend all this time on, they'll associate with the teacher. And then all of a sudden they stop playing violin after five years. You don't want that. I don't want that. What we want is to create a positive relationship with the skill so they just continue it for life. Right? Right. And so we facilitate that by having other people in the sessions and so that the teachers sometimes do change so that no one really goes too attached to anybody, but they really grow attached to the craft.

18:57So if you are capacity constrained, so some of you guys are in that position, like you can barely handle the customers that you have right now, you have three solutions. The easiest solution is you just raise prices. Because if you have supply constrained, then that means that you have more demand than you have supply, prices go up. right and most people just don't do that and just suffer so just raise the prices make more money that's solution number one the second solution is change client delivery ratio which we just covered so instead of going one to one you go one to four so you get more out of what you already have this gives you leverage and it gives you cash flow improves your gross margins the third way is to bring other people in who can do what you do uh which is then delegating you know the responsibility right to somebody else so that's the ultimate leverage so you don't have to do any of it that make sense so those are kind of like the three steps that i think about when i have somebody who's supply constrained and they don't have any time.

19:48They can't grow the business and they can't sell more customers, but they need to sell more customers to grow the business. And so the rock and hard place. And the nice thing is we start with price because it's the fastest and easiest one to do. You don't have to do anything. You have to change anything. You just say a different word and then you'd make more money. So our, our primary thing when we opened was, it was a hundred percent private lessons. Yeah. And so that's where that's basically the only difference in the hypothetical gym and gym launch, which I'd read the whole thing on the plane over here, how I didn't know that book didn't exist until we - It's a good book.

20:18It's awesome. Yeah. So what would the - You can still have one-on-one. You can still have one-on-one. I would predominantly sell semi-private. And if someone's like, well, I want the special snowflake treatment, then you're like, awesome. I'll give you the special snowflake price. Right. How would you design the initial offer for that type of model? The six-week beginner challenge? But it would be something, whatever the fast outcome that you can deliver to a kid who's neurodivergent, who picks up a violin, or whatever the instruments that you teach are. It's like, they'll be able to play a song in this period of time.

20:57Now, it might not be good, but you'll recognize it, kind of. But like I would want some sort of discrete outcome. And that would be like an outcome. You could also do some sort of subjective thing, which is that like they rate X or they, like you could have a survey at the beginning, serve at the end. That would be kind of more of an internal thing. Got it. But yeah, typically you'll sell some sort of package upfront. I'm going to guess that the price point for what you're looking at is between 600 and 2000 is what the upfront package would be. And then you'd upsell or at least let people go into continuity.

21:32on the back end. And it'd probably be somewhere in the neighborhood of like six weeks to six months. You would know that range better in terms of how long to sell for. Okay. Yeah, and the best thing, we're drowning in context. We're a recording studio. These kids are making songs all the time. And they should be feeding the marketing, but it's just so much, then there's that whole problem. Yeah. You just need time, man. Like, I think what's interesting is that like the more stressed you are, the lower, this is not me, this is not a slight, just to be clear. I'm saying in general, the more stressed anyone is, the lower your IQ is.

22:02And so I'm saying this to say that, again, this isn't a use. I'm saying that the problems that you struggle with when you are stressed, when you have a good night's sleep and a little bit of time, you solve in like five minutes. And so if you want to increase your capacity, it's like, let's solve for capacity. And then a lot of these things that are keeping you up at night, you're like, oh, we'll just run a six week thing or run a 12 week thing. We'll solve for this. I can see how the margins work out. And like, we already have more demand than we can handle. so it's okay if people say no at our higher prices because we'll make it up in profit anyways on the people who do say yes.

22:36Does that make sense? That wasn't a slight, to be clear. I was saying for anybody. It's fine. Yeah, no, it's true. Cool. I appreciate that. Yeah, you bet. Hi, thank you so much for all your content you make. My name is Laurieann, and I sell personal finance courses and coaching to women. We do 30 million. For women. Pardon? For women. For women. Ah. With a plus sign. You're like, screw the guys. They don't need to save money. You know, they can learn from someone else. I'm messing with you. So we do$30 million in revenue. Badass. Thank you. I would like to be at I don't know revenue, which comes to my question.

23:09Okay. And what is stopping me is our CAC to LTV ratio. Okay. So both CAC is too high. Got the team working on volume right now. LTV is too low. Okay. And AOV is too low on our front end. Okay. So I think it's actually a cash flow constraint potentially, but I'm a little confused on where exactly to go to work. Okay. How do you acquire customers right now? Primarily meta. So it's all paid ads? Yeah. Okay. So all paid ads and you're running to what? A webinar, 2K webinar. Okay. Are you having a low ticket offer before the webinar? Before? Are you charging something as a self-liquidating offer on the front end?

23:53Free webinar. No. Never done a self-liquidating offer before. Okay. So free webinar on the front end. You have a$2 ,000 offer. Okay, then what? $2 ,000 or 12-month payment plan for$200 a month, which is why our AOV is like$900. Got it. And then acquisition costs like$1 ,500 on the client. And then we have a back end. Okay. That's$10 ,000, has a 7 % upgrade rate. That's your problem. Yeah, it's low outsourced sales team right now. That's true. And so LTV is like$2 ,400. Yeah, that's the problem.

24:30Yes. That's why I'm here. Your ascension rate is too low. You will probably have to bring the sales team in-house if you want to really fix it. It's very hard to influence the team. You'll want the ascension to be integrated into the onboarding. And so you sell the$2 ,000 thing. You have your onboarding call. The onboarding call, the finish of the onboarding call is they set their goal setting call with what would become a setter. And then that setter sets for a closer. So they actually get three calls. So they have webinar, buy. They have an actual onboarding call because you want them, like, you want to make sure you deliver.

25:05One-on-one or that's a group call? One-on-one. You can do, well, you can start with, you can start with group and then you will make more money if you go to one-on-one. It is more ops, but like we actually did this and I have a video that breaks down everything that you need to know. Yeah, I've seen it. Okay. Yeah. And so one-on-one is better, but if you're going to start, start with the group. And their way of getting off the call, like saying like, okay, you're dismissed, is that you show me that you have confirmed your booking with your next call. So that way you have 100 % through line to the next.

25:37Now they're customers, so they're going to show up. The goal setting call basically sifts for who, like what's your goal? Cool. Basically just do another sales call again. And then you push people into the ones who can afford it that makes sense into a closed call with basically an invitation to join something that has more help or work associated. Yes. Okay, great. You'll probably need to get third party financing in place. Oh. Yeah. Yeah, on front end. Oh, for the sales calls. Yeah, and front end. Like, you should definitely have some BNPL options. So buy now, pay later. You should probably have a few.