Throwback: This Isn't Fun But it Will Make You So Much Money | Ep 932

0:00What I'm going to talk about in this podcast is not fun, but it's going to make you a lot of money And it's probably the number one reason that you are not doubling down on the biggest strategic advantage most small businesses have. And I'm going to explain why so many of you are leaving massive amounts of money on the table right now and not using your single largest competitive advantage. And these lessons have come hard earned from years in business. I've founded and exited nine businesses, my last one at 46.2 million bucks. Our current portfolio is over$200 million a year. and I make these videos so that you can make money.

0:34I remember when I was in weight loss, I would have a lady who would walk in and she would say something like, hey, I don't want to lose too much weight, right? Or I'd have a guy, and this is probably the more common one, they'd say, well, I don't want to get, I don't want to look like you. And I'm like, don't worry, you never will. But the point is, is they would look at me and say, I don't want to get bulky like you. You have too much muscle. I don't think that looks good. And I'm like, you know, you're not going to wake up tomorrow and just be jacked as shit and have trained for 20 years, right?

1:04It's not going to happen. There's going to be a million days in between. And at any point, you can say, I'm just going to stop here. I'm going to try and maintain. But the thing is, is that people try and say that they don't want the extreme version of a solution. So they're not willing to do take a step in that direction. And so the same thing happens from a deliverability perspective. They say, Hey, you know what, if I do it this way, I'm not going to be able to hit a hundred million dollars a year. This isn't scalable. But the thing is, is that you're not even making money right now and you're talking about scale you're talking about how you're not gonna be to fit in your clothes and you haven't even lost weight you're talking about how you're don't want to look too bulky but no one even knows you work out right now because of how you look and so the same thing in business is that like sure you think and here's the here's the real real is that when you start you don't have context and you don't have resources so with your current set of resources the unscalable thing looks unscalable because you have no help and you have no money and you have no leverage.

1:58But a good friend of mine, Andy Frisella, he has FirstForm. They do hundreds of millions of dollars a year in revenue. When he started the business, he started writing handwritten cards to every single person who bought their products. Now, in the beginning, you'd be like, you're the owner. How could you write handwritten cards to every single person that buys the product? That's not scalable, Alex. But guess what? He still does it today. And they get a zillion orders a minute at this point. But what did he do? Well, in the beginning, he was writing the handwritten cards. And then for a time, he just signed the handwritten cards.

2:28And then finally, other people were writing the handwritten cards. And the gesture still held. And so the thing is, there's a 2.0, 3.0 version that can still check 80 % of the boxes that you learn from the unscalable solution. I got on the phone this last week with a recent founder who exited a fintech company for$2.5 billion. Some of you guys just saw my story. I've been trying to talk to people in that space. So if you do know somebody in neobanking and paper processing who had a big exit, please hit me up. I'm trying to learn some stuff for one of our portfolio companies. But anyways, he was saying, hey, it's all about the unscalable.

3:02And he and I had this great chuckle about this, that so many business owners are unwilling to do the heavy hard work, the one-on-one calls, the talking to customers in the beginning because they say it's not scalable. But there's always a version that presents itself two, three steps down the road because you have the money and the skill to be able to say, hey, what are the key components of this thing that can make it scalable? And so I would encourage you if you're starting the business and let's say you're selling because I'm obviously in the school community, right? And so I see people who are trying to sell a$20 a month community and they're like, well, I don't want to hop on the phone for a$20 a month sale.

3:36Also, first off, guess what, genius? I was in the large fitness world, brick and mortar. What do you think gym memberships sell at? Do you think they have a person selling it at the front desk? Sure as shit they do. Guess who it isn't? The owner. And they can still scale that process. And so, again, the idea that things aren't scalable is ridiculous. Now, sure, you're not going to be able to take 20 calls a day at scale, but you're currently making$0. So what the fuck are you doing all day? You can't be busy and broke. Pick one, right? You're either busy and you're making money because you're doing the right stuff or you're broke, but you've got plenty of time.

4:13Like, you can't have both problems. And so if you're broke, get busy and do some of the unscalable stuff. And that means hopping on the calls with customers that are below your ticket price But guess what that happens is that you're learning more from them than you are earning from them And that's okay because you're gonna learn the pain points they're suffering from you're gonna learn the the hooks in the messaging that matter Most of them you're gonna learn how to alter your product and your offer in a way that makes it convert at a higher percentage You're gonna learn the things they don't care by the way you want to magic questions Here's some pro tips for you The first thing you ask a customer is you say hey if I were to eliminate all of the things that I have in my feature set except for one, what would it be?

4:51And they'll tell you. And if you ask 100 people, you'll get by far a power ranking for what matters most in terms of value for the core deliverables you have. Now, you can also ask the second, the inverted version of that question, which is, hey, if I were to eliminate one thing from my entire feature set and it changed nothing about your life, which one would it be? And you'll also get the least valuable thing. And between both those elements, and if you do this on a regular basis, you continue to cut and trim and distill down the value they provide to the most amount of people by simply asking them.

5:20And so I think Paul Graham said this, and I believe this, and I keep repeating it because I think it's so important, is that you can solve every question and every problem in business by talking to your customer more. You have a marketing problem? Talk to your customer. You have a product problem? Talk to your customer. Like they know what they want and they will tell you how to address them and how to advertise to them. And so getting on the phone and doing the quote unscalable, writing the handwritten card, onboarding every customer, even though it's$10 a month that they're paying. Guess what happens when you onboard those customers?

5:49I'll bet you they're gonna stay longer I'll bet you they refer more people and you're gonna be able to make the product better and the marketing better And so even if you do that now, let's say okay, Alex. Oh my god I followed your advice and now i'm taking 20 calls a day Well, guess what now you're making money and I don't give a shit But if you're still like hey, I want to make more money fine. I'll give you the next step So when you go from 101 you go to semi-private you do one on six, right? You can still deliver a close to that experience, but you 6x your output So instead of talking to 20 people a day, you talk to 120 people a day Now if you're like wow 20 people a day that sounds like a lot guess how Alex learned sales I did 4 ,000 one-on-one closes not consults closes over a multi-year period for my gyms Why because I had appointments back to back to back to back to back And I had two to three people that were scheduled for every 30 minutes And so that accounted for sure right so that no matter what I always had one to three people who were showing up every 30 minutes That I pitched the exact same thing to and guess what happened?

6:44I got pretty good at sales. The amount of people who ask me, hey, what sales training did you go to? I didn't. I went through the unscalable sales training of actually just selling a lot of people. And so the idea is that you are going to learn more than you are going to earn in the beginning. And that is okay because as long as you see entrepreneurship as a continual journey of educating yourself on your customer, the problems that you're trying to solve for them, why would you not want to fast track that and jam as much of that as you possibly could from the best possible teacher that is in the marketplace, which is the market itself?

7:15And so I get passionate about this because I see so many poor people trying to think that they're thinking like rich people when they're really thinking like poor people because they're trying to be broke and not busy. So get busy. Talk to the customers. Even if they pay you 10 bucks a month, you'll learn more. And then guess what happens after you do one on six? You do group onboarding. You do one on 20. You do one on 30. And guess what you can do from there? We have a company right now that still does that did group onboarding and scale to 100 million plus a year. All right. And we still did it because we knew the onboarding was such an important part of the process for setting expectations, telling what was going to happen next, keep setting promises and keeping promises over and over and over again.

7:53And so if you have one on 30, fine. Guess what? You can still do six of those to 180 people a day with just one person. And if you train somebody and what happens, like, let's really think through this. In the beginning, you do the one on ones. OK, now in the beginning, you're just answering questions over time. You say, OK, most people have these same six questions. And so then I'm going to create a little presentation around these six questions. And so then you start using the presentation in the one-on-ones. And you're like, you know what? I think I can do this a little bit faster. And so you get the one-on-six there and you have the presentation.

8:19And you're still seeing the same output with the one-on-six as you were with the one-on-one. Fantastic. Now what do you do? You see, can I get to 30? And you do 30. And then you 5x again, your 6x output. And again, now you're like, huh, I wonder if I can teach somebody else to go through the same deck as me. And you know what? You do. And just like that, you scaled the fucking unscalable. Real quick, if you're tired or being broke and would rather be busy, join me at the school games. So school.com forward slash games. I take a call every week in there. I'll help you build your business step by step.

8:47We have once a month a mastermind that I drop in there of all the people who fly out from the top 10 communities that are making money online right now. And we break down all the taxes that they're doing right now so that you can use them too. And so just because in the beginning, you can't see how it's going to scale doesn't mean it's impossible to scale. I had this girl come up to me at an event ages ago and she was in the fitness world obviously because that's where I was and she said I do outbound for my my business and we do$30 ,000 a month but I want to have a more scalable acquisition system and I was like why can't you scale outbound and she's like well I mean it requires people and I was like welcome to business baby like how do you think you're going to scale the deliverable if you had fitness coaching.

9:32I was like, people, is fitness coaching unscalable? No, you hire and train people. Welcome to the service business, which is culture and training. That's service. That's how it works. And the fact that you don't know how to do it is what makes it unscalable. Not that physics disproves the ability to scale onboarding or scale handwritten cards. Like unless you can prove physically that's impossible, that gravity exists differently in your fucking world then it's not unscalable you have a skill deficiency it's unskillable that's what it is it's not unscalable you are unskilled enough to scale it and so the reason that you have to do the unscalable stuff is that there's a swamp in business where you don't have enough money to pay somebody else but you still have to do your day job and the next job and so you just have to work overtime and that means you work today's job and tomorrow's job so that you can get ahead and so the thing is is that every single business, hear me out, every single business incurs debt.

10:27So the question is, what type of debt do you want to incur? So a venture-backed company incurs financial debt so that they can have lots of talent up front, they can get really smart people and pay them where they should be paid at market rates. Now, if you don't have that money to pay all those good people, guess what kind of debt you incur? Management debt, because you don't have the right people because you can't afford to pay them. And when you have management debt, what does that mean? It means that you have to work the job of two, three, four people. And that's what makes it quote unscalable.

10:54But you have to go through that swamp in order to get to the other side. And one of the big problems is that people look 10 steps ahead and then project that back to the present. It's the same thing as saying, hey, I want to get rich. So I'm going to go start flying private. It's like Warren Buffett wasn't flying private to get rich. He has done that as a result of being rich. It's not the path that got him there. It is the outcome of being there. And this is actually one of the big issues I see at large with a lot of the information that gets put out there is that what happens is people grind and they sacrifice a ton and then they get rich and then they have a different demand on their time and then they extrapolate and they give advice of their current setting to people who are not in their current context which is why I try to spend a lot of time with people who are making their first 10k first 100k first million dollar a month so I can I can remember what it's like to be at each of those levels so that can make sure that what I'm saying is contextual to the current constraint of the business that you're in.

11:47And I'll give you a super tactical example of this in companies that we still to this day who do tens and hundreds of millions of dollars in revenue is that I know just like you do, if I get a green text that clearly is from a chat interface for a sales rep or an automation, I'm way less likely to respond. If I get an iMessage, I'm an Apple user. And so I know that this is a real person on the other side. And so what do you think I have our sales teams do do we use the interface or do we do the unscalable yes guess what we send a personalized voice note we send a personalized video we send it via i message from a personal phone now does it mean that they have to have a personal phone no i don't need to use their phone i can buy them an iphone again there's leverage there's leverage in the beginning you're like what am i going to do buy everyone an iphone well eventually yes but in the beginning you don't have money and that's okay but you think that something isn't scalable because you don't have the context from which to scale it but if you had unlimited money and unlimited talent you absolutely could scale it and so just don't use that as the excuse to not do the thing that you know would work better because you have to be more efficient per lead per opportunity when you're small and so you have to pull out all the stops gary hopper does this amazing story about this he says whenever i want to write a sales letter i imagine that i can only write one letter for my life or I'm going to die.

13:04And so he says, if I, he starts with that hypothetical max saying, if that's what I had to do, what would I do? He's like, well, first I would have a handwritten envelope that I'd handwrite the name on it. I'd have a stamp that I would lick and put on it on the inside would be a handwritten letter from me. And then the words themselves would be all these things. And I'd have some lumpy thing in there. And he starts at the hypothetical extreme, because if you only have enough money to send a hundred letters, then fucking handwrite all of them. right now over time you're like okay this worked how do i scale it but guess what now you've got the sales from you writing 100 letters and guess what you have the skill of writing 100 of those letters and all of a sudden you start to develop a system for how you write those letters and you expand your capacity to 500 letters and you 5x your income and you're like okay now what are the elements that of my unscalable solution that had the highest effect or impact on the throughput well 80 of the stuff uh didn't have as much of the impact this 20 did i can use cash from my earlier or less scalable thing to create more leverage in the more scalable thing and get 80 of the effect and 10 times the output so it still makes sense and so you always are going to lose efficiency at scale but the question is in the beginning start with the absolute most efficient process and this is fundamentally the opportunity for all starting or smaller businesses when i say small business i'm saying 10 million and under all right so don't get your get your ego all up like almost seven figure i don't give a the point is is that you're not you're not apple you're not a three trillion company you're not microsoft right so you can do things that they can't that is the advantage of the small business and that is why there will always be small businesses because they can do things that big businesses can't because they don't scale but the fact that they don't scale 100 is 100 your opportunity to beat them if you're not doing this it's like getting dealt pocket aces and then choosing to fold because you're saying i can't have pocket aces on every single turn because my next turn I might not get it and so I have to not use them now.

14:57You have them in this chapter so use them. Use what you've got. The first rule of entrepreneurship. Use what you have and if you have an advantage, if you're the small fish, then that's the advantage you play. Now to become a mid fish, then you have other advantages. You have resources, you have a little bit of reputation and you use those resources to leverage up. So now I've talked about scaling the unscaled but hopefully you're sold on that concept. There's two frameworks that I'll introduce you. One is the sales to delivery continuum and understanding the dynamic between both poles. Secondly, the done for you, done with you, do it yourself pyramid.

15:30The first thing is understanding something that I called in the offers book, the sales to fulfillment continuum. Basically, the sales to fulfillment continuum states that the easier something is to sell, the harder it is to fulfill in general. Now, the only main exception of this is technology, but when it comes to services, it's usually if it's really easy to sell it means hey I'll do everything for you no matter what very easy to sell very easy to make that promise very hard to deliver on that promise now the other side of that is that if I said hey you have to do it all yourself then that's something that's very hard to sell but very easy to deliver on and so what I find interesting is that the vast majority of people who are starting businesses try to start on the thing that's the hardest to sell and I think they have it wrong.

16:14I think they have it backwards. And in my career, I've had basically the exact opposite perspective or approach to starting a business or starting a new product line. And so if you're a business owner, I would think about this when you're thinking about selling a new product or starting a new level of service. And if you're someone who's new, then this is going to be starting from zero to selling the first thing. Now, the second framework around this, the first is the sales to fulfillment continuum. The second is the order in which you attack it. And so the way that I recommend doing this is following what I call the Tesla model, which is you start at the top of the pyramid with the most expensive thing first.

16:50This is typically done for you. So this is very easy to sell, very hard to fill. And that's okay because in the beginning, you don't have that many customers. You don't have that much lead flow. And so you want to maximize the revenue per customer. Now, in addition to that, it also sets you up to go downstream later because you will get the highest percentage of people, the best results with done for you. The difficulty is that it's more difficult to scale, comma, and that's okay because, again, we're starting out. And when you do this, you develop the SOPs, you develop the products underneath of that larger product that allow you to productize the service that you're ultimately going to deliver later.

17:24And so imagine you take on, I'll use an agency as a simple example here. If I took on agency clients and I did everything turnkey, well, I'm going to start developing SOPs for lead magnets. I'm going to start developing SOPs for ads. I'm going to start developing SOPs for landing pages and upsell pages and email follow-up. All of these things are things that I'm going to have to develop SOPs for. Now, once I have all of these systems in place, guess what happens next? You go from the top of the pyramid to the second layer of the pyramid, which goes from done for you to done with you. Now, done with you, you can typically charge a fraction of or less than what you charge for done for you, sometimes a third of the price, a fifth of the price.

17:57But by doing that, you've productized a great degree of the service, and then you switch from a service provider to a consulting relationship, You're helping someone do it themselves, but you're still there to assist. And so that's kind of in between the total, not even hand-holding, it's hand-doing to hand-holding to no hands-touching, right? Which is do-it-yourself at the end. And the thing is, is imagine the opposite version of this. From a branding perspective, you've positioned yourself, you've price-anchored the most expensive version of your service that has the highest results with the best customers.

18:27And so you already have this strong association at the top of the pyramid, which then allows you to go and say, hey, listen, I have 10 private clients. They all pay me$10 ,000 a month to do whatever it is. And I have a lot of you guys who are asking me, but you don't necessarily qualify for my private client service. And so I decided to take all the stuff that I have for my private client service and make it available to you. And I'll help you walk through the process that I walk through with them. But instead of me doing it, you could do it for yourself. But I will be there every step of the way.

18:54and by offering that you are able to sell 10 times the amount of people because the amount of hand-holding in terms of support that you have to offer is one-tenth of you literally doing it now from there again you say hey there's a lot of people who know my private clients they can't afford that and they can't afford this thing but they have their enterprising and they want to take things on their own and so i take all the sops and stuff and i will give them to you so you can just follow along and do it on your own and that's one-tenth or you know one-third of the price of my done with you and so i prefer the top down approach to the bottom up approach because let's play it the other way hey i've got this really cheap thing right that i've been selling to everybody and i have you know everyone in there and their mother takes it now i'm going to start helping you through it now to be fair i don't think there's anything necessarily wrong with that it's just that if i had a preference between which one i would prefer to build i'm going to have the least operational uh drag at the top because i have the fewest number of customers and then i I have more customers and then I have the most customers.

19:51And as I move my way down the pyramid, it gets harder and harder to sell. But my skill in sales improves, right? Because I'll know the customers. I'll have talked to them. I'll spend time with them. And so my messaging can improve and get better and better. All right. That's what I had. That's my money message of the day is that scale the unscalable. Start there. Stop being broken, not busy. And get busy and you won't be broke for long. Hey, guys, if you enjoyed this podcast, share it. That's all I ask. Don't be lame, share the game, screenshot it, tag me on Instagram. I'm sharing as many of them as I can.

20:23Send it to your employees, send it in Slack because this is the stuff that really makes businesses work. 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. And we show the problems that emerge at every level of scale and how to graduate to the next level.

20:59It'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.

21:26Real 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 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. It's all free and you can get it personalized to you so it's about 30-ish pages for each of the stages.

22:01Once 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 probably 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.