Sell One Level Up to Scale Faster | Ep 942

0:02I can't really test a campaign unless I'm willing to spend 2x my target CAC as just a test of whether this works or not. So it's like, if my target CAC is 2k, it's like if I don't spend at least 4k, it's like you can't know anything. Because the cadence of feedback is so slow on 2000. It's like every two months, you'd be able to get like a sale inefficiently. I have to be willing to spend more than my target CAC so that I can then get it efficient, right? all right my name is mike krausen i still go high level to online fitness coaches i would do two million in revenue and would love to be at a million a month okay this is what is stopping me so what is stopping you right now why can't you do more what you're currently doing yeah we basically developed and built a better product because we had terrible retention you had terrible retention terrible retention and now you have good retention yes so what's churn now uh seven percent monthly monthly okay have a 9 000 ltv okay what's cac uh i think it's a five or four point six to one okay so it's like 1500 bucks okay yeah cool got it um so how do you get customers right now uh we have 40 come through shiju partnerships of other mentors business sending their clients to build out the funnels okay um and then organic and i would say the last piece is actually the meta ads or instagram ads are those working and profitable yes okay so two of those are reliable word of mouth we'll just put a pin in for now so fundamentally why can't we either do more meta slash facebook ads or more strategic partnerships in terms of the outreach required to get more of those people on board yeah we totally think that meta is where to go we used to do it we turned it off cool okay my real question i think on that is how do i make the CRM sexy on the front end to get somebody to actually inquire.

1:50Are the ads working right now? I wouldn't say we're spending enough to say yes. What are you spending? $2 ,000 a month. Oh, okay. So yeah, that's... We just have them on. Rule of thumb for everybody. Just side note. I can't really test a campaign unless I'm willing to spend 2x my target CAC as just a test of whether this works or not. So it's like, if my target CAC is 2k, it's like if I don't spend at least 4k, it's like you can't know anything because the cadence of feedback is so slow on 2000. It's like every two months, you'd be able to get like a sale inefficiently. And so you would, because I have to be willing to spend more than my target CAC so that I can then get it efficient, right?

2:27Assuming that I'm going to literally knock it out the gate on the first shot is unlikely. Okay, so from an offer perspective, what problem does Go High Level Stuff solve for the online fitness coaches? we really break it down into four different funnels we have basic mini chat killer we have a link in bio which is your lead magnet we have um so there's a pain there right which is like you have followers like want to turn your followers into customers without dming anyone like it's going to be the automate it's going to be the pain of being in the dms all day i would imagine um they're all online fantasy coaches yeah and i'm guessing most of them are on meta or IG or whatever is their primary way of getting customers.

3:10Instagram primarily. Yeah. And then maybe some like 20 % on LinkedIn doing, you know, busy executives, whatever. Yeah. I would say none of them actually are on LinkedIn. Okay. So it's just IG. Yeah. Yeah. So, I mean, at least you have a very targeted avatar. So it's like, hey, you're having trouble turning your Instagram followers into customers. All of this can be automated. We'll show you in seven minutes how to do it. And that's the lead magnet. and then it was a case study of somebody who had ideally 7 ,000 followers and then was able to get to this many sales per month. That's what I would, that's what I would lead with.

3:42We'd be like, here's five different coaches who all had less than 5 ,000 followers who are all able to get five clients a week. Right. That sounds sexy, right? Um, just using our automation. That would be my angle, but fundamentally it would just be like, boom, five case studies. Let me break down each of these. Um, and each of the five would represent different, uh, psychographs or avatars. so it'd be like you know uh jacked uh white bodybuilding dude and then it'd be like skinny vegan dude who's uh older and black and then there's asian girl vegan powerlifter and then you know mom's over 50 lady like all of them have their own niches and i would just show that it because everyone's concerned after you say hey i'm an online you know crm is will this work for me and so you just would be like yes it will work for you and so that would be basically the representative that i would use there that's what i would do is my first shot but then yeah VSL sales call close trying to accelerate as much of that cash up front as you can this is this is like a bingo bango money mango type type play no for sure yeah it was um what parts what part worries you um i don't think any part worries me as much as just we're not a mentorship group yeah and so trying to sell the crm or the the automation process more so than like another yeah if you would um but just trying to find the right messaging we know that this is where we're supposed to go yeah the idea was like before i just tried to figure it out like yeah well i'll tell you what i did when i had an identical business um with alan it wasn't just online but it was brick and mortar primarily but same same idea me marketing directly to smbs sucked um and so i just marketed to agencies and so to your point like you're not a guru you don't want to get in the guru business i didn't want to be in the smb guru business i just found people who had agencies that were Cairo agency, you know, whatever agency.

5:30And I said, hey, use my platform. I'll do this shit that you don't want to do. And then they constantly would have clients coming in and out, but the people, but they stuck with me for less. So it's saying we should run a, from an ad strategy campaign to like, if you're a business mentor, blah, blah, blah. Yeah. If you're a fitness business coach, hit me up. We'd love to do this stuff all for you. And we have stickier revenue than you do. And so like the pains for those people are, aren't you tired of giving people the keys to the kingdom and having them leave three months later? Right? Wouldn't it be nice to have some recurring revenue that would actually stick year over year over year?

6:06Imagine if you could have customers from three years ago, or every customer you've ever sold in your whole life still paying you, how different would your business look? Probably materially, each of those are probably hooks that I would test, right? And I don't know which one would work, but one of them would. And then that as soon as I know, then crank. but I would probably go there, especially if you're like, because what will happen is if you actually go straight to the quote fitness coaches, they'll be like, great, I have this thing. How do I get leads? And then you're like, fuck. Yeah, it's a whole other process.

6:34Right. Right. So you'll end up having to get into that when in reality, the people you have to, you have to meet customers who have the problem to solve. You don't want to generate demand. You want to channel it. Yeah. As the coaches that normally are already doing 10K. I know clients. Great. I don't know what the LTVDK difference between the two would be. I can tell you that I know like on our side with Alan, it was absurd when we went one level up. So just going because an agency, it's like I could acquire an agency for like$5 ,000. And then the agencies would pay to onboard with us and they pay$25 ,000, number one.

7:08And then number two, then each one that would onboard, let's say they had 50 customers, they pay$1 ,000 per customer. So we had another 50 grand. And then we had the recurring, which on the back end was like 30 % of top line. So it was a super profitable model for us, but it worked for them because they didn't have to do any of this backend shit, which we did. So if I had to, like how do you get there faster would probably be just go up one level of. But when you do that, though, realize you will now serve two customers. You'll basically have to have like a customer success manager for the gurus.

7:40And then you'll also have to have, you know, success on this side to make sure the customers are happy. So be two sided. Okay. Thank you. Yeah. My name is Katie. I sell new construction homes to first-time homebuyers. We do$200 million in revenue. We would like to be at$300 million. And land acquisition, the constraint of our industry, is what's stopping us. So you getting land has been the issue? Yes. Okay. So where do you currently, where do you source land deals now? It's like the permanent or just like, okay, so it's mostly just getting farmers to give up their land? Yeah. Well, anyone who owns land.

8:20Sure. But they just have a lot of it. Word. So what's the current strategy that you use to get farmers to give up their land? Find out who they are. Okay. You know, do a lot of digging to find out, you know, who has land available and calling them. Rebuying lists? No, there's not. I mean, it's readily available in the MLS. Like we have access to the information. Okay. Yeah. The issue is there's just no more names to call? It's not about the lead of land. It's getting it from the point of acquiring it ready to build on. Is the permitting? It's the development of the raw land to finished lot. Could be anywhere from two to ten years depending on the project.

9:04Super true. And we don't want to put our cash just rotting out in the, you know, ten-year timeline. with no return. So we like to purchase it from a developer that does it for us. So we can find the leads and find the land, but we don't have the people to develop it to get it to us. Well, at your size, have you considered either, one, pillaging the best developer's talent, bucket A, bucket B, just, I mean, your size, you can just do the acquisition. Become the developer yourself, you mean? Like, yeah, we'll just buy one. Yeah, buy one so you can just basically vertically integrate what you're trying to build.

9:45Yeah, we should probably do that. Well, you have the capital to do it. I'm sure you have really good lending relationships anyways. And those businesses, I don't know what kind of margins those run. But I'm sure I would look at who are... My first steps would be if I was transplated in, I'd be like, okay, who did we buy land that was developed from over the last 10 years? And I would get all of those names. and then i would be smiling dying slash trying to fly out or fly them out to say like some of those guys are gonna be older some of those guys aren't gonna give a shit anymore and they've got a good team or whatever and i'd be like great like how can we make something work here um and i'd be looking at doing a deal that way because it depends obviously i mean at your size it's buyer build right and so it really depends on how entrenched the inroads are and how uh from like the zoning and all that bullshit, how relationship dependent it is at the levels that you're looking at.

10:39I'll give you a completely different example. But if you think about like open AI and some of the new AI stuff that's going on there, one of the strategies that's becoming more prevalent is rather than trying to buy these AI companies that let's say they've got 30 geniuses that work there and trying to buy that company for a billion dollars, they just look at the top 20 of the 30 people who don't have, who have, maybe they got diluted because of the way the VCs ran the deal or whatever. And then they just say, hey, I'll give you, and you've seen these like$100 million signing bonuses probably like flying around on Instagram.

11:10And it sounds absurd, but it actually is more efficient to give one person or the four key people in the business$100 million than buy the business for$4 billion. So it's just a pure allocation of capital play. And so from a buy versus build, if you can strip the talent out and they can keep the relationships and then you can rebuild it, that'll be the most efficient way to do it. But the, and that again, the test is, is that that would be my hypothesis is like, how ingrained are those inroads? If they're super entrenched and very difficult to like transport those relationships, then I would be looking at like, I'll just buy the whole, the whole co older guys oftentimes will actually take super long earn out periods because it just becomes an annuity for them.

11:50So sometimes they're willing to take like 15 years seller financing, just to know that they're going to get paid and you collateralize it against the business and you already have assets and so do they and so that can actually be really it's kind of a win-win structure for many of them yeah um just as a consideration but like that's probably like i would like you're at the size now rather than me say like here's how i'd build a land development business that's probably how i think about it i think we have just been avoiding it because it's a distraction from home building you know it's like a completely different business i think that every business at a large enough scale becomes of business of businesses.

12:22Okay. So like Amazon is not just like a business. It's like there's AWS and there's the white label business. And then there's the logistics and distribution. Like there's so many elements. There's the video and the media side. There's so many different elements of Amazon, right? That you might be at the stage where it might make sense. So it does come back to the goals. Like if you know that you were, do you feel confident that you're going to stay at 200 million or are you going to grow at 20 % if nothing happens? Or like what's the current growth rate? Are you stuck there? We've been stuck.

12:48Okay. Yeah. Well, then you probably do need to, like, if that is the constraint of the business is like we build on every piece of land that we can get. Well, it's like, well, that's the constraint. Right. So then I think about, so the quantified version of what a constraint is, it's the highest return. It is the allocation of resources that you'll do the highest return. And so if you focus on, like, so fundamentally, so why would we not want to do that? It's like, well, this is the place where we would get the highest return in the business. And the nice thing with that is that constraints oftentimes are not like 10, 20, 30 % improvements.

13:21They can be like order of magnitude improvements. All of a sudden you can go to a billion because you opened up five times the land. Nailed it. Thank you. Yeah. All right, cool. Thank you, Alex. My name is Eric Stauffers and I'm not a paid spokesperson, but I'm going to speak for all the entrepreneurs. You put together an amazing group here, not just of entrepreneurs that you curated, but the acquisition team. We've learned so much. So thank you for that. Thank you.

13:48So my company is BioAccelerator. We're one of the top stem cell companies in the world. Right now, that's what we're known for. We're actually a biotech platform, so we have a lot more behind the scenes. So what we do right now, what we sell for revenue is our services, our healthcare services and stem cell and exosome. We're$24 million. We want to be at$250 million. Okay. Actually,$500 million, but I was sandbagging for this. but there's a lot of things stopping us. One of them I'm afraid that has been uncovered is our level of expertise, possibly including me. I think we're doing better than anybody in the world.

14:26I'm biased obviously, but we're kind of pioneering an industry. So there's no real great blueprint. That's my excuse. But I've raised capital both for this business and my previous real estate career, but it's been in small chunks of like 5 million, 10 million, 15 million. Like formal rounds or like friends and family? Both. Like, so for this, this company, I seeded it, I angel seed and then a series a, we're on a series B right now. That's about my level of expertise. But when we really need to get out to scale, we're going to have to get a lot more money. And I'm noticing and starting developing these relationships that it's a much different conversation when you start asking for a hundred million versus five for 10.

15:06Yeah. So I guess my question gets down to what would be a good suggestion knowing that I don't want to leave the company and get kicked out yet? Well, how much equity do you have left? Or like do you have? 65%. Okay. So you still have a good chunk. Okay. And then 35 % is all investors or other team? Okay. I have some, yeah, team members also. Okay. Key players. Yeah. Chief medical officer, stuff like that. So is the issue that you've had the conversations and people are saying no to the higher valuation in order for you to get the capital you need? Yeah, a little bit of that, because really we have a lot of technology that hasn't, it's been proven in our clinic and it's ready to basically scale if I could get the money for the manufacturing to build the extra laboratories.

15:50And so I don't want the valuation to be squeezed so much that it squeezes me right out of a power position. Yeah. So yeah, that's kind of the issue. Do the existing investors who have come in so far, do they have, because like you can absolutely maintain control and still be a minority shareholder. Like Zuck has 101 voting rights. And so if there's a business that requires more capital, but they still trust you, but understand that it requires more capital to get to where you want to go, then you could still maintain the control you want as long as they buy you. Yeah, the people we have right now are like that.

16:27um you know we have some professional athletes and celebrities a lot of people that were like really good patients of ours and then they wrote you checks yeah and then they wrote us checks but they're not really big funding partners yeah so fun i mean this is just a sale that's all it is and so i would i would encourage you to probably think less about less about the facts and more about the story now facts do make great for great stories um but the question that we have to answer is like, what would you need to see in order to believe? And so if I'm talking to like, so when we're thinking like, if we're about to, let's say we want to raise a round in 2026, right?

17:06I'm having those conversations now with 10 times the amount of potential kind of like investment partners to understand what their, what each of them needs to believe or needs to see in order to feel confident to make the bet. And once I have that kind of big list, then I can narrow that down to like, okay, this guy's unrealistic. This guy's unrealistic. This we can do, and it's going to cost us this much. And so sometimes it's a tiny race to just get this one need to believe to be believed. And then you can ladder into this other thing. And so I think about it as like, I want to go find my customers, find out what they want, and then build the thing they want.

17:43Now, to be clear, that's not like trying to derail the vision, like you don't want to build another person's company, but it's typically, they're all going to just try to pay down risk. That's all they're paying down, right? Or want you to pay down for them. So from a control perspective, that's super manageable. If you did it today, it's like maybe you lose half the equity that you have, but now you have a company that you raise. How much cash do you need? To finish this round, 5 million, but we want to go out and raise$100 in 26, 27. Okay. And you want to raise that at what? A billion? No, half a bill.

18:14Okay. 500 million is what you want to raise it at. So you want to sell 20 % and get$100 million in cash. Yeah. Okay. They have to see, basically, what risk are the people who bought in at 20, or what's your current valuation, the last round? Oh, it's$50 million. Okay. So that's a 10X difference, right, in valuation. What risk did the$50 million round take on that they are now rewarded for with the$500 million round? That's a question. No, no. I mean, in my mind, we've de-risked this more than any other platform on the planet, but there's still a lot of regulatory risk. Okay. So there's a lot of unknowns that the 50 million round didn't know, like in, in the sense that now Florida and Utah and some other, uh, states are starting to change their thought process on stem cell.

19:00So it's starting to look more de-risked in that, from that point, point of view, I guess. So directionally the only, has there been any technological change or sales velocity change or avatar change? Like, has there been any new finding that fundamentally changes the game. Because again, I'm trying to help build the story here. Because that's all we're selling here is that we raised at 50. Now we're raising at 500. And the reason is, Oh, yeah, we'll have a lot of reasons. Yeah, because with that. Yeah, sorry. I guess I wasn't understanding. Yeah, we're going to build a laboratory that we've already proven our technology that we've been delivering for years.

19:34And we're just going to be able to scale it. So I think that was there 50. Yeah. And that was not there at 50. That was not there in 50. Okay, great. And so But to me, it's like, this is what has changed and now fundamentally changes the nature of the business. That is it. So it's like, this is a$10 billion business. There are three more assumptions that have to be proven true. We proved this one right, which is why we are now, because they're all discounts on a$20 billion business, of the likelihood that you actually achieve that. Like, at least that's the thinking process most VCs, or at least good VCs, come in with.

20:06is like they're only making money on billion, you know, multi, multi-billion dollar companies. And so it's how many assumptions do I have to believe will be true? And the fewer assumptions that need to be true, the higher the valuation because the higher likelihood. And so if we're like, this was actually the riskiest of the four that have to happen. And that's why we have the biggest step up in our valuation, because now it's just a capital constraint, not a assumption constraint. Like we've already, we've already deconstrained this. And from the regulatory perspective all the directions are pointing green not red that's how i position it okay it is for sure a pitch though yeah i get uh kind of in the weeds of the nuts and bolts and then people just their eyes glaze over they don't know the science yeah they just want to know that they're gonna make a lot of money and so it's going to be a sale on you and a sale on the story okay yeah i'm just like do not be a scientist for the pitch yeah yeah no i'm not so yeah i was like we can help you with that if you need it.

21:02Yeah.