Q&A. Growth Is Just Constraint Removal | Ep 933

28:08And that's what keeps you stuck. Right. And so it's a process issue on the demand gen side for talent. And so usually we look at that and say, okay, what part of this can we screen ahead of time? So it's, let's send them the script before they even show up. So people apply, we send them the script. And then send us a 60 second video of you saying the script. And then from the 60 second videos, we're going to invite people to a group call, not one-on-one because we don't have time for that. And we're going to go quick drill, say the script, give a piece of feedback, see how they do it again. If they could take the feedback well and they were prepared, great.

28:40It means they're coachable. They have work ethic. Awesome. Now we can take you to a job offer call. Somebody has attitude on the coaching, they're out. If someone doesn't show up prepared, they're out. Very easy screening. and so you take 10, you pick two, pick three, they go to the next one, you make job offers and that's the flow. But like the entire sales process of selling them on selling for you sets the frame for how the company operates. Like how disciplined you are and how militant you are in terms of how you set the frame for this. This is how we fucking do things here. Either get in or get out.

29:13I do not care, but we win. And if you can set that frame, you will attract winners. And winning is not for everybody. And so that means that on the team, there's probably some losers and it's not for everybody. So that's the decision you make and that's from top down. So there's the tactics and then there's the root issue. I would try this first. If this doesn't work, you have to probably gut things. Thank you. I know he's the only person struggling with sales here. I saw like more notes. Like, okay, group interview. Yeah. Go ahead. Wow. I'm super nervous. Oh, don't be. So I actually, there is someone that I ran into at a house party that was pivotal for you.

29:56Pivotal for me? Yeah. You mentioned in a podcast that they inspired you to create content. Okay. And I was too shy to say hello. So can you imagine how I feel right now? You're crushing it. Thank you. Okay. So my name is Sasha. I sold designer bags and sunglasses. Cool. And we do about six million a month. No, sorry, a year. Sorry, six million a year. Still cool. And I would like to do 38 million. Precise. Yeah, 38 million. Okay. And what's stopping me is recruiting. Why 38? Just because I figured 100 ,000 a day, something like that, round up, down, something like that. Okay. Got it. Just a roundabout.

30:45and obviously more. Yeah, okay. I was thinking 38 would be fair. Yeah, that works. And it is just recruiting. Oh, recruiting is the bottom of that because you're saying? Yeah. Okay, got it. My house cleaner was my first employee and because I consumed yours and Lalo's content so much that I was like, I'm going to be these two people in one. That's me. I'm going to be these two people. And as a result, I have... a great team a really great team and it's just a matter of being militant in the the recruiting process okay the we do sell on whatnot quite a bit who do you have what's stopping you so you make money six million dollars you're selling handbags and and sunglasses for you to sell more handbags and sunglasses you need more people to do that yes because we we only go live for about five hours a day because we get tired which is me and me and i have three sales people but it's just we get tired we could if we were live more often we could create more you're going live on like your instagram page or your what on whatnot okay got it and do you have a big following there 110 and so you're just selling to that same base and if you just sold for longer, you would make more?

32:03A lot more. I could do$100 ,000 in the show. Okay. So you just need two more salespeople who go on camera? But, yeah. And then the recruiting as well. Recruiting for what? Packing. Because we do a lot of... You do your own 3PL or not third party, but you do your logistics? Why? Why do we do it ourselves? I didn't know you could have other people do it. Boy, oh boy. Yeah. step inside yes so functionally like because of the nature of the business that you're in we have to think we have to consolidate resources i'm not normally somebody who's let's cut parts of the business out but unless your shipping is some key differentiator that you have like amazon shipping became a competitive advantage right but unless that's like some differentiator then shipping for the most part is pretty commoditized and there are people who all day long, they think about saving 15 cents on cardboard boxes and tape and packing peanuts and all that shit.

33:07And I think that you having to like think about that and run a functionally a warehouse at the same time as running a marketing and sales and talent business slash media, that's not where the value is. The value is in the distribution and the sales. and so i would say can we outsource this so that can we outsource this the logistics part so that you can just go all it because all we had to do is you get two more sales people and you get to 100 000 a day we should do that we have to physically show the product like well i'm not saying you don't have some product on hand you just don't need a warehouse no we do need it because it's go okay we run probably about so you're like we sold this item to this person is how you do it yes okay got it like a warehouse it's yeah okay that's fine all right so you just need to hire more people so what's stopping you from hiring more people the talent the talent to hire more people i'm learning now that's why i'm here oh you're good You're good.

34:13So I'm saying like, you have two sets of roles. You've got warehouse folks and you've got people who can get on camera. So what are you currently doing to get each of those people? We had ads on Indeed. Okay. But I didn't realize how militant it had to be until I came here. It makes a lot of sense. I know that there's that many interviews that are required. And that's more for the warehouse side, correct? Both. Because sales is... I think that you'd be able to find salespeople like I would probably look at Amazon affiliates how much would you pay them percentage that's the thing now okay so it takes skill to do what we do yeah it takes skill agreed for example my girl is better than me great she's better than me and it's not only is it motor skills it's presentation and entertainment like i i get it i understand i did a live for three days i got it yeah so finding and training that that's definitely a process and takes time yeah the question is whether you want to buy or build do you want to buy the town or build the town building the town is cheaper takes longer harder buying the town is faster more expensive which one do you which one feels right for you so when it comes to the so we have we're not always so we're profitable per show yes okay profitable per show but sometimes what ends up happening is let's just say it's a wednesday are you on cash based accounting or accrual probably cash yeah so you might if basically if you run a physical products business which you do here you're like okay we made money now let's take all of that profit gross profit that we had and go buy more shit so we can sell more shit right so this is where like you probably have what's your like what's your financial the financial side of the business the financial ops look like my accountant handles it you're who my accountant oh your accountant does it okay you will need to have soon a relatively strong finance person who can give you better forecast so that you can, it's not just like how much cash you have in the bank account.

36:32Let's go buy more shit. It's we can only afford to buy this much given this growth rate that we want to have. Otherwise you will get into these probably cash crunches that you're feeling right now. It's not that the business isn't profitable because I'm guessing the headcount's not super buy. So our shows will make anywhere from five to 7 ,000 profit depending on like the volume that we did that day. So we know the profit like per show. However, that's where the skill comes into play if a show is not going well we need to have that person trained to be able to do the thing and so that's why not knowing how much to pay them is i think doing a percentage would make sense percentage of profit yeah like a salesperson okay and so you can buy or build that so you buy it as i would just go to mini micro influencers who are already like on amazon hawking stuff and be like they already do live streams and they already do sell shit and i bet i could teach them to do this for me that is a buy version because you already know it's already proven you're just saying hey do it under my umbrella the build version is that you have to kiss a lot more toads and try and look for who has already built in a bunch of soft skills and then you can hire for the small skill efficiency that you know how to train okay so amazon affiliates you can do either but yeah obviously this would be a lower risk thing and then you just have to have some agreement that they're going to only sell for you for extra period of time good contract yeah like a contract thank you yes but i would but big picture because i want to make sure that you're good the indeed warehouse stuff that's just commoditized you have a warehouse maybe you have to have it for your business but i don't see that as that's not a core differentiator you might have you're not different because you have a warehouse behind you that's not special so the roles that you have there it's like they need to be like have a pulse have a good leader there let them just deal with it your star factor is going to be your ability to train people to sell and so that's like where is you what is what is the true pinpoint of where the most eye gets created for you as the founder the entrepreneur is that you need to be able to take somebody and teach them to sell i yeah and you have to break it down in in terms of the most concrete language you possibly can And so think of everything purely in terms of behavior and do not use any amorphous words.

38:51So I need you to have higher energy. That means nothing. I need you to raise your voice. I need you to talk faster. I need you to have your shoulders back. You have to describe things that people can see. And then other people will describe them as having high energy, having charisma, having confidence. And so if you want to teach someone to present, you have to tell them what to do with their body and their voice. And it will be far faster for you. and what you'll find is the training lap, the reason it takes so long for people to train where they can't train salespeople or presentation people is because they literally do not use words that other people understand.

39:25This is the problem. This is why most companies cannot teach people to do shit because they say, have more charisma and then the person listens and is like, I'll translate that into what I think charisma means, which who fucking knows what they think it means, right? And then we're just playing this telephone game where no one agreed on what are the behaviors I want you to do. that will compress the amount of time that will take you to get someone one up to speed and two long term if you can develop the sales training then you can have a stable of stallions that are on 24 7 for you working in your barn i don't know why it's animals now but let's go with it so that that's actually that brings up a good point so i i i have so my girl like i said she's my house cleaner shows up at my door one day she's like hey i want to be you yeah and she's i'm a copy and paste of you and she became me yeah now there's a little bit a little bit of a how can i because obviously i had to learn the care part like from layla so i learned the care part and now i have it but then i've seen her i've seen situations not go the way they should because she's too she's a copy and paste of me from yesterday so i'm starting to see those what's the problem we'll just put her in front of the camera have her sell and get her out of the building if she can sell yeah so let her sell don't have her manage people have her sell got it understood thank you this is good talk yeah thank you Thanks.

40:58Yes, sir. Alex, my name is Sebastian. Four years learning. Thanks for everything. Yeah. Thanks for coming out from Australia. Melbourne. Yep. Melbourne. Nice. Sick. Blue Sense Digital. We sell paid ads and growth advisory to eight and nine figure econ brands. Sweet. We do three and a half. Okay. We'd like to be a 10, then 20. Okay. Feel super clear on our top priority against our supply constraint. Oh, talent? Yeah. Talent acquisition and first getting LTGP on talent. Something that's unclear is we've just established this past 12 months our leadership team. So we have two team leaders, a head of growth and a head of strategy.

41:43They're all just on salary at the moment, but putting together or building an incentive, a great incentive plan for them as a group to carry us as we 2 and 3x headcount. I would just go profit share pool, 10 to 20%, and then they get slices of that slice. So it caps. So basically it's like, if you say, simple math,$100 a year of profit,$20 is always going to be allocated, or 20 % is always going to be allocated to all leaders. And so they get slices of that pool, but then you always have 80. And then they think like you do, which is if we're going to bring this leader and we got to give up some of this pie, but they should be able to grow the pie, which is the exact same math that all of us do when we bring someone in yeah and so it gets them thinking more like owners that's the simplest way i could break it down are you planning on trying to sell the business anytime soon potentially yeah okay if you want you can include a profits interest in the sale which you can have be proportional to their interest yeah and then if they leave comes back to you yep how would you apportion that percentage split against those different roles it's going to be, so first off, you're going to want to leave probably two thirds for future talent if you want to go big.

42:58And so do not be like, okay, I'm going to blow my whole like slice of pie on these people because the best talent is in the future. It's not right now, but I'll give you the pitch or the walkthrough that I have with, with somebody who's in this position is that, and this will probably apply to half of you who here as somebody that they were considering tying into your business. Okay, so I'll give you quick big picture advice. If you never want to sell the business, don't give shares away. The only thing that is guaranteed 10 years from now is that you will still be in the business. That's it. Everything else is not guaranteed, so I would not encourage you to give real shares away.

43:38Thing one. Thing two, there are four things that equity provides. One is cash flow. The second is sale bonus, sale dollars. The third is risk. And the fourth is control. And so when I have a conversation like this, I'd be like, okay, cool. So do you want any risk? And they're like, no, I don't want any risk. And you're like, okay, cool. So we don't want that. I'm not going to give you control. So that's off the table. So all we have left are cash flow and the chance that we sell. And that's what we're going to do. And I'm sure in Melbourne, I know the legal situation, but there's a version of, we'll give you a profit share, which comes off bottom line.

44:20and in the event of a sale, you'll get a sale bonus. Now, the issue with that is it's going to be taxed as income, at least it is in the US if they have a sale bonus, rather than capital gains. But there is no real other alternative because either they have to take on risk and not get control and pay taxes on you gifting to them or they have to buy it and give you money. Most people don't want to do either of those things and you have to agree on a valuation. It's a whole fucking mess. And so it's easier to say, I'll give you some money today and if we sell, you get money tomorrow and if you leave, you get neither.

44:50And then that sale, you might have just said that, the sale number, is that predetermined? There's a zillion ways to slice this, but the simple way is if you have a 10 % profit share, like for the whole company, and somebody, let's say, gets 10 % of that, so they have 1 % of the profit, you could say, when we sell, you will get a proportional amount relative to the total for that 1%, so they get 1 % of the sale. Sure. Yeah. And when you write that, make sure that it's the percentage of cash not calculated on the total value of the sale. Yeah. Sorry, last thing. I got fucked on that one before, so there you go.

45:26Stoked. The head of growth is pretty much the sole sales guy. Uh-huh. Or our first sales guy, non-founder led. He'd be at this table, commission on Clipper sales plus this percentage of profit share, or it's one of the other. Is he a founder? No. It just sounds like he's your sales guy. Correct. yeah i don't new role for us yeah he gets commission yeah he already participates the leadership table uh-huh the other guys at the leadership does he do marketing he started to yeah he's developing into his backfilling that head of growth role giving equity a sales guy is like one of those day one mistakes that i'd prefer you avoid yeah so i if that guy's like really ambitious and really hungry and smart and you think that he's going to be there long term i would say i want you at the leadership table i don't think you're ready there yet this is what i would need to say and just make it quantifiable yeah you need to get you need a master demand gen which creates five deals a week five deals a month whatever that number is that you'd act like if he actually did this you'd be like you earned it so whatever that is that's right thank you yeah you bet was this helpful for somebody else okay this is how you have the condo though it's much easier than like why won't you give me it's like you don't even want equity do you want to pay me no do you want to pay taxes no okay great do you want risk no oh, okay, great.

46:43I'm not going to give you that. So you want these two and I can do that for you. Yeah. Hello, Alex. I'm going to piggyback on Dr. Stemsel and just thank you for - That's El Senor. He went to the - Sorry, go ahead. Letting us learn from you and your team. Thank you, Ben. My name's Trenton. We sell roofing in the Metro Detroit market. Sweet. We're going to do about$3 million this year. We'd like to be at$10 million. Okay. Quick context. We were primarily a storm contractor. Yeah. Storms have vanished in our market, which was - What the hell, right? Yeah. It's a global warming vacate. Climate change, whatever.

47:21Keep going. Actually, the best thing that ever happened because it allowed me to step into retail. Okay. So over this last year, I've really had to rebuild my business because right before that, we had hit 5 million two years in a row. Okay. And now we're seeing this drop off. So my biggest constraint or what's stopping me is that for the last eight years, all of our lead gen has been from doors. Okay. So it's been 100 % door-to-door lead gen. And now when we're trying to knock for retail, it seems to be like heavier of a weight on the team. When you say retail, what do you mean? Like just people on market that need a roof.

48:00So like residential? Residential. Okay, got it. Residential, yeah. And when you were doing door knocking before, you were knocking on? Residential doors. Okay. So it was the weather. But we were getting funding from the insurance company. Got it. Word. Okay. Yeah. Okay. So keep going. So now with me being a door to door guy, like purchasing leads and all that was like sacrilegious to me. Okay. So there's some limiting beliefs there that I started to explore last October. We bought leads. I just want to be lead curious. That's all I'm asking. Yeah. I'm very lead curious now. but I basically got slaughtered learning this.

48:36This don't be acquisitionary binary. Be non-binary with your leads, like as many as you want. No, that's what I'm trying to do here. And when we did purchase leads, and I was able to - You get the unedited version, by the way. Hey, go ahead. And when we started to stack the guys' calendars, there was a big culture shift where we actually saw like more buy-in from the guys, but then like the door knocking just went away. Yeah, because it was easier. It was way easier. Yeah. But like our CAC and all that was absolutely horrid. So I'll spend$7 ,500 just to acquire one customer over the summer. Okay.

49:13And it wasn't sustainable. What did you make from a customer? On average,$6 ,500. So that does not work. No, it doesn't work. Yeah. And it was just like a lot of the marketing agencies that we worked with were like younger people. They were like using AI tools, go high level. That's right. So we decided that we were going to build it in-house. Okay. So with that being said, now it comes into a leadership issue because I need somebody that knows how to market better than I do so that I can focus on training. Can I pause you real quick? Yes, please. Okay, cool. So you're at three. You want to get to 10.

49:49You rebuilt it from storm chasing to just straight up door knocking whenever. Fine. I think it was a good idea. You had a door knocking team. You took the same sales guys, brought them on leads that you got them. they got lazy, fat, and don't want to do door knocking anymore. Great rule number one, outbound and inbound are separate teams. Yes. Inbound is what you graduate to. And so if you're an absolute savage, like you just take children's souls and just rip them out every day because you're a terrible person, but you're just unbelievable at sales. Then and only then do you get the opportunity for me to feed you leads because these are the most expensive leads that we have to work very hard for to make sure.

50:31And like, we cannot waste them on anybody who cannot close everything. And so, thank you. Oh, that was an amen. So first off is the team should be separate, but you're in this mix now. You're in a little bit of a mess. And so my two cents would be like, take that, because I'm sure their commissions have gone down since they now are selling nothing, basically. Yes. Yeah. So I would say, guys, my fuck up. I went to this thing. He told me I did this big boo, which is inbound and outbound were together, which is not how it should be. Everybody get back on the streets. So you guys do that. And then for the absolute savages of you, because you can usually have far fewer people on inbound, that becomes the Christmas tree of the career path.

51:08Because on inbound, I can feed you and you can do five sales a day. You can't do that door knocking, but you can do it if I'm feeding you leads that are already qualified, already set, already gone through a VSL, whatever in the sales motion. And then those guys can absolutely clean up, but you get, you earn the opportunity to get that level of commissions. Now, the commission's structure should also be different on inbound because you have to pay for those leads. So it's a different role. They graduate to it. It's more volume, lower per, but it's more reliable, which guys with families, things like that, if you have a bad day, you close two, and a good day, you close seven.

51:41It's different than you have a bad day, you can close zero, zero, zero. It's much more stressful. And so guys will be happy to even give up. They'll even make the same money, but just have to be more reliable. And you don't have to be in the sun. so then we should hire for inbound sales yeah or take one of the guys you have who's really good at it and put everybody else back on the street so you just funnel everything to that guy who because then you can iterate faster because you're new on this and so you want to you never want to have too many news because kind of like the brick analogy i gave at the beginning the more news there are the more likely something's going to fuck up and so it's i know this is an absolute savage salesperson if they're closable he'll close them or she'll close them and so then the only variable we have is just what offer slash lead source am I getting and what process are going from lead to talking to them.

52:29Those are the only variables you have to play with. And you can control, it's much easier to iterate on that and then get it to go faster. Okay. Okay. And then, okay. So then I want to hire a marketing director or leader to manage that. Now, Tim was blowing our minds in the workshop. He does do that. Our Asian Clark Kent. Yeah, it was, yeah. Racist today? I was almost going to say he was a ninja, but I didn't want to. He was a ninja. Anyways. He's Chinese, I'll have you know. Samurai. Yeah. You're good. Keep going. But he was talking about when another guy was talking about a constraint, and he was talking about the trade-off of, okay, so you could spend$6 ,000 a month.

53:14You don't want to spend basically$100 ,000 to replace the person. what I'm trying to figure out is I think I've answered my own question I won't keep going here I've been working on the wrong problem I think is what the situation is and I'm trying to make sure outbound team goes out inbound team becomes the one guy you need to hire a marketer person who actually knows what they're doing probably pay more than you expect but then that person will be worth it your entire business is sales and marketing so you should have the core elements of the business in-house okay great if you need help with the sales process we can help excellent thank you Alex, this will be your last question.

53:49Ah. It's got to be like the best question ever. Hello. So my name is Evan. I sell duct cleaning supply to duct cleaners. Fair. This year we will do$1.2 million in revenue, and I think I'd like to be around$3.5 million. Okay. And I think what is stopping me is just being clueless. Okay, cool. So let's give you clues. so let's do one more how do you get customers now strictly organic can you take more customers than you have yes okay so you don't do anything that's why all right no i mean like it's word of mouth there's no like demand gen that's happening all right so i've got good news and bad news the good news is that your business probably you probably are good at what you do because you've been relying solely on word of mouth so that's the good news the bad news is that you're going to have a steep learning curve for what you have to do next.

54:45And so you basically have to pick, do you want to do outbound as your way of getting customers, which could either be door knocking, it could be emailing, it could be cold calling, but you got to be Instagram DMing, it could be anything, but outbound. You could do paid ads to get customers. You can have affiliates, so you do those things to get affiliates, or you can post content. Those are your options. Which of these do you feel like you are best equipped to do? Probably paid ads, but one of the things I was thinking like is creating a higher value per customer, a get option instead of trying to get more customers.

55:21Okay. I don't know which route to go. So you'd want to double how much customers are worth. I guess utilize my existing customer base with more consumables. So there's more repeat orders so like they're ordering more so duck cleaners go clean ducks yeah correct and you sell them we sell them the cleaning supplies which is really high profits and then we started selling some consumables but they're low profits they might buy 500 a year but it's only like six dollars a unit or something uh-huh so there's not too much money in that yet okay i guess the But are they buying regularly from you? How many customers per month are new customers versus repeat customers?

56:05We average 80 new customers a month. Okay. So you do not have a lot of repeat business? No. How? Unfortunately, but fortunately, the equipment I sell is really good, so it doesn't break down frequently. But on the consumable side, are all those repeat customers? Consumables, yeah, those would all be repeat customers. is there's just, even though the margins are, there's just, you don't make so much selling a$6 product. So I don't know if there's a way, I don't know, maybe through selling them education to maybe that be. No, fundamentally, you have a normal business. There's a zillion businesses that work this way.

56:46Auto dealerships work this way. Large equipment works this way. Like ink and printers work this way. You sell, you basically have three wheels of revenue in this business. You've got, you sell the machines. you sell the stuff that the machines use and you sell the service around the machines. That's the three-pronged approach. And so your ability to extend the customer LTV is going to be around the second two, not where most people will even like the more sophisticated business will sell these at cost or at a loss because all their margin is on the consumables and on the service. Now you can sell bigger customers so that those$6 things times 10 ,000 of those starts to add up, or we can sell more on the front end.

57:27But either way, the core focus of your business, like if I had a two-step approach for you, core focus number one is we have to know that we're retaining 90, 95 % of those people on an annual basis on all the consumables. So every year, I should know that 95 % of those people are, they have to buy it from somewhere and they should all buy it from me. And so what ends up happening is your business starts, that becomes like the annuity of the business. So you acquire these new customers to sell machines for whatever, And then this base of service and consumables just continues to rise over time.

57:56And that's super profitable. That's the game. Now, you said that you wanted to grow the business by making them more valuable. I think you will have a hard time making the individual more valuable. I think it would be easier for you to sell a higher tier customer. So somebody who cleans more ducks so that they can buy in higher volume or buy for entire fleets, whatever. That would be the path, but it'll be a different sales motion than you currently do. And so you are at a crossroads where if you want to have significant growth, you'll either have to have a new acquisition system basically either way.

58:30Because you're either going to have a new acquisition system for a new type of customer or a new acquisition system for your existing customer. If I had my druthers, I'd probably rather you start with new acquisition system existing customer because you already know that flow. Once you have that, then I'd be willing to go out market. it gotcha so would a good first step be to reach out to our existing customer bases with explaining to them we have consumables like we don't do any outbound to existing customers yes that would be an excellent idea gotcha we have things available for purchase you should purchase them from us that makes sense and so realistically you should probably get them on a cadence or subscription with the sale of the initial product so i don't know what the offers that you use would probably be on the scope right now but that's where a lot of the alpha is right there is what kind of maintenance programs are we selling up front?

59:16What kind of incentives are we giving them for subscriptions up front? Like the entire business. And here again, I have more good news for you is that you've been making the money that you are with none of the actual pieces that make your business make money, make money, which is great news. And so we just have to put these other two wheels in place and then develop the motions around those. And like the profitability of the business will go up a lot, like a lot, dude. Like you've got the front, you've got the hard part of a profitable business without the profitable part of the profitable business.

59:47So we just have to bridge that mode. That's it. Yeah, that makes sense. Yeah, I think that's my only question. Okay, great. So sales motion change, offer change, and then there's gonna be a reengagement on the back. And those are the three things for like today. All right, cool. Thank you. Rock and roll. Appreciate you. Okay, fun. Exciting. We had a brothel, lots of exciting things.