Transitioning From Dying Business Models | Ep 853

22:18Now my hard cost is just the 50 cents it cost me to deliver the marker. And so the question is, what percentage of customers do buy a blue marker by the other three? And so if I found out one out of two customers who buy a marker at 50 cents, end up buying these, then my cost to acquire a customer through affiliates is 50 cents times two. So the cost of delivering my lead magnet is the actual cost. And here's the crazy part. If they go make zillions of dollars selling your thing, great. It means that you're going to make even more money upselling your stuff. And so a lot of people get very greedy about what other people are making off of their stuff.

22:54Just focus on the money you're making, whether the deal makes sense for you. That's one of the pieces of advice that Layla actually taught me. She said, never count the other guy's money. And it's a really good piece of advice and I'll pass it on to you. But it sounds like an irresistible offer to the architecture firm because they're like, we can just sell this and keep 100%. You're like, yep, just make the introduction and I'll deliver that and then when you talk to the customer you're like yeah I'll deliver that here's one rail but you need ten more and then you make the sale does that make sense I'm not entirely sure like people would order the entire project okay it's not like you can just like I can't just ship you a sample and be like hey look here's a yeah then you're gonna have to do the commission-based structure which is not my favorite but that's probably the way you're gonna have to do it so either you can do the discount I mean I would say guys I have 20 % that I can play with here so you can take all 20 and give them no discount.

23:40You can take a 10 % discount and then they get, you know, you get 10 % kickback. Like this is what I got. I'll make it work whatever way you want, but this is my bare bottom price. Okay. And I think that's what, like that's the outbound strategy. So should I then in turn raise prices for direct to consumer? Yeah, I love that. Okay. Thank you. Yeah. Right. Love that for you. The reason I like that second offer because I think it's very compelling. Now obviously the third way you can do it is just get them to sell your offer and then have some sort of kickback. Obviously, many companies do this.

24:11It has to be very compelling because almost every business I know is like, yeah, I give 20%, at least in services, every business I know gives 20%, you know, kickbacks for anybody who refers business their way. It's like, yeah, but no one does anything with that. And so it has to be enough that would really change someone's behavior. And so think about it like this, is that the offer has to be good enough that it changes what they do with their business. If it doesn't change what they do, the offer wasn't compelling enough or you made it too hard right so it's either make the thing better or make it easier for them my name is Cody I sell roofs to people we did 140 million last year trying to do 250 million this year trying to figure out how to follow the principle of giving away more guarantees and bonuses when I have such high hard cost yeah and such a high ticket item yeah well what are gross margins right now 40 % gross what's that 10 to 15 okay got it do you want to sell it or do you just want to keep it forever?

25:06Well I actually just sold my roofing business and now we're part of a PE firm that that now I'm directing that that entire. So are you the platform? Yes. Okay so you're the platform and how many tuck-ins have they done? Eight. Got it. How long has it been since they started? About three four years. I just got acquired 30 days or we just closed 30 days ago and now they're trying to roll everything into my brand and I'm spearhead. Yeah got it. Okay, so sorry, go back to the original question because now I have better context on this. So how do I follow the principle of give away more value, make the offer so good, you've got to feel dumb saying no.

25:42When I have such high hard costs, I can't really do a money-back guarantee. I can't really give away more than a roof. Well, the question is, is that the constraint? Is that the thing that's limiting the growth of the business? In my theory, yes, because if I create a good enough offer, then I could roll that offer out to the eight other brands, and that would be the biggest amount of leverage that I could deliver in the shortest amount of time. And is everyone insurance-based? That's why they acquired us, because we're retail. So you're the only guy selling just new roofs. Everyone else is doing storm chasing and damage repair and shit like that?

26:13Correct. And what they want us to do is bring the retail model to the other brands and to add another layer is we sell everything 100 % virtually, so no in-home appointments. It's all digital. And so that's the vision, is taking that nationwide. Centralized sales virtually. Correct. So you want an irresistible roof offer. The greater the change, the greater the risk that the change doesn't yield the outcome that you want in the business. And so fundamentally, you're always making a bet that you're going to get a higher return off of incurring the cost of change than it costs you to do the change, right?

26:43And so in this instance, he is now 30 days in or 60 days post-acquisition of his roofing company getting bought with seven other roofing companies and for them to try and combine them. And he's the one who's supposed to lead the effort of combining all this stuff. And so the idea of like, let's change the offer. The offer is one of the highest leverage things you can change, but it also affects every department. It changes how you bill. It changes how you sell. It changes how you advertise. It changes everything, right? Which is why it can change a business overnight, but it can also destroy a business overnight.

27:11And so when I see a business that in aggregate between those eight has$140 million in revenue and$30-ish million in EBITDA, you're talking about a business that's got probably$300 to$400 million enterprise value. I would be very hesitant to immediately change something that's obviously working. And so there's lesser degrees of change that have higher likelihoods of working that could still materially impact the business in terms of increasing the likelihood that it exits, right? And fundamentally, I'm guessing that's what he wants to get his slice from. Centralizing the sales would allow them to decrease costs because they could not have guys on the road.

27:44It's just cheaper to do it. It's also easier to hire salespeople who are remote. All of these kind of downstream cost savings. The other benefit is that when you hire remotely, you have access to a bigger pool. so you can get better salespeople at lower prices who close more deals, and they could cut down all the real big costs for this business, is salespeople who are unproductive. So people who are losing leads on people who can't close. And so by reducing costs, increasing talent, and increasing sales utilization, all three of those things reduce costs and increase revenue, which could disproportionately drive EBITDA, which is what that company is being valued on.

28:18And so when I look at that, I'm like, this is a change that you have to do, in order to sell the company, and will result in revenue and EBITDA growth. And so let's do this massive change first before risking the biscuit. Because we might just found out that just from doing that we get a 25 % increase in EBITDA, and that might be enough. Just bringing everything together plus adding the 25%. You might be right as rain, and at that point, why risk it? I feel like if I were in your position, the first thing that I would do would be centralize everything first without trying to change, basically, I would take the model that I already know works.

28:53What was your revenue before you were acquired? Okay, you're doing 20. So I would, like, in terms of introducing levels of change, so this is actually pretty good for everybody, like, I would typically not try and change, like, five things at once. And so you centralizing all sales is going to get cost efficiency improvements, and you're going to be able to have higher sales utilization, so you probably cut off the bottom third of the sales force that's low performing. That alone might give you a 25 % lift in general, because the best sales guys will take more of the sales and you'll have centralized all the costs.

29:24Like, we'll have centralized all the costs, right? And so you'll have an increase in revenue and a decrease in cost that's paired. That would probably be my first step. That was part of the acquisition deal. That's the only way I did the acquisition is if they were going to give me full control and centralize all the sales. Yeah, so, but, like, I wouldn't, I mean, I know the question is about roofing, but, like, that's what I would do first and that will probably take you six months or more, realistically. In terms of the offer to roofs, an offer that's worked really well in home services is instead of being a money back guarantee, I position it as a profit guarantee.

29:59So it's like, listen, you want your thing to be on time and on budget, probably. And so I guarantee that I will deliver it on time and on budget, or I'll give you my profit, which is 20%, whatever. And that way it's like you're not underwater, and you still have 40 % gross margin, so you're not really losing on the deal. But then people are like, OK, so he's got skin in the game. And so that's a way of closing significantly more deals, because the two biggest obstacles that, well, you would know this, but in most home services, it's on time, on budget. And probably for roofs, it's like, and how much am I going to be displaced?

30:31How much is going to interrupt my life? And so I would put my guarantee around those items, and then just have a marginal amount that's back. But it's really just because all they don't. So the big thing, which is for everybody with guarantees, is that people don't want their money back. They want the roof. And so they just want to know that you care enough to make sure the roof gets delivered. And so that's really the solve for the guarantee is it just pays down risk of them not getting what they want. And so as long as that gets accomplished, you don't have to do it with money back. You can just do it with some money back that gets them to say yes.

30:59Does that help? Awesome. Thank you. Perfect. So he wanted a better offer despite all of those improvements. And I was like, okay, I think I can think of something for you. So if you look inside the offers book, page 125, I talk about guarantees. And so this is the guarantee formula. So whenever you're thinking about adding a guarantee, like this is what I think through. So if you don't X in Y time, we will Z. Like that is fundamentally what a guarantee is. And most people, I would see a lot of times people just say, I guarantee it. But that doesn't mean anything. You have to say what the terms of the guarantee are on a timeline.

31:30What do I get if you don't perform, right? And so with this business, and some people are just like, well, I can't give a money back guarantee because I would just lose too much money. Understandable. Now, if you have hard costs like he does, then what we can do is we can just give something else. We can give there a lesser portion of money. We can give something else for free. And so the guarantee is a consideration. It's what are we going to do to show you that we're just as invested as you in the outcome being positive, right? And so we basically shift some of the risk from the customer onto us.

31:59And this is all you're doing as a business when you do a guarantee is they take some risk of buying, and you're saying, no, I'm going to take some of that risk. And so, sure, you can take 100%, but in this situation, he'd be taking like 200 % of the risk. Basically, he'd be losing money, right? And so the idea is, again, you can add stuff. So, hey, if you don't get what you want, I can add things, which is like, hey, if you don't hit your goal, I'll add more time, which does work as a sales tool. Sometimes, though, in the real world, if someone's not getting a result, they're like, I don't want any more from you.

32:28I hate you, right? And so it does still work as a sale, but it's one of those like mid, right? Now, alternatively, you can go the reverse direction, which is takeaway negative, which is a discount, right? So, hey, I can't give you all your money back, but I can give you back my gross profit, or I can give it back 20%, or I can give you back 10%. All right, these are all things that you can choose to give back. And the thing is, is it just shows that you have skin in the game. And all we have to think about, and this is the point of a guarantee, so I want to make sure I'm very clear here. The point of a guarantee is not to have the craziest guarantee.

32:55The point of a guarantee is to maximize net conversions. All right, so we just need to increase sales more than we increase refunds. So proportionally, we net more sales. And if you can just do 10 % back, then that's enough to change behavior. And that's the point. Like if there's no difference between giving 25 % back and giving 100 % back in terms of the actual performance of the sale, then give 25. And so you can move what you're guaranteeing in order to find the sweet spot and figure out what's actually compelling to your customer. And most times the things that you want to guarantee around are their biggest fears.

33:29In home services stuff it's usually around time and around budget, right? Are they getting it done on time or are they getting it around budget? If it's other services, it might be different than that. And so you'll know your services better, but you want to list out what their biggest fears are and then crush those with the guarantee. Hey, Alex. Hello. Thank you for the content you create. My name is Mohamed Fatal. I'm the founder of El Fan. Okay. So basically we sell tools to creators to help them make more money, and we also simplify how brands collaborate with creators. Okay. You say tools like software?

33:56So software and agency tools. So we have a music label, a creator agency for big creators, and then a platform as well. So I'm coming to that just in a bit. I know the focus topic. We made around 4.3 million last year. And basically, my goal is try to get to 100 million. Now the issue here is - What's the split between the three in terms of revenue? 1 million for the creator agency, 1.3 million for the music label, and then the rest is on the brand side. My issue here is I got 40 ,000 creators, but only 1 ,000 are making money. right and I've been kind of struggling between going on a SAS model to be able to scale because when I do any social marketing we get a creator that comes on board but they don't make money right away so it's not like you know and the longer it takes you to recoup your ad spend is not usually a good metric for scalability so I'm kind of pivoting should I go into a SAS model where right whatever I make from the creator I'll just be like hey like just pay me that price and I think 0 % from you and then I just charge the brands the commission to collaborate with those creators.

35:01This way I can scale the business in a much faster method. Say the last part again. So instead of me making percentages from creators, I provide them the same tools that a lot of them make money, and I keep 0%. Okay. But then let's say they have to pay like$20 a month. Sure. But then I still make my money on the upside, on the brand side, by connecting them with these creators. Okay. So switch to a subscription. Switch to a subscription, yeah. Okay. Okay. Because right now I have 40 ,000 traders who signed up, but I'm really making money off 1 ,000. Right, and it's free to sign up, and you only get paid if they get paid.

35:34Yeah, so you're in a prosumer audience. So if you look at like Shopify, for example, it's super, if you look at the amount of people who've tried to build marketplaces, almost all of them fail. And it's my opinion that the best marketplaces do run as SaaS, and then once they get to scale, they can kind of push more marketplace. So like Shopify, for example, like it's 29 bucks a month or whatever it is because they know that the vast majority, like they make more money charging$29 a month than getting 4 % on zero for the vast majority of stores. But people continue to pay for the hope that someday they will make money.

36:13And so I think the idea of switching to SaaS is not a bad one. I am concerned about the four businesses that you have. because in order to win at SaaS, you have to be all in on software. And so the alternative to that would be instead of letting creators come on for free, you would charge them to come on, which you could do. It has a one-time setup fee and then maybe increase the likelihood that they win. Either path would work, but if the ultimate goal is that you want to build a network of creators, then you want to have the lowest barrier possible on the creator side. So I'm still thinking of a free tier and a paid tier with some minor benefits, but then if you really want to make money, you've got to end up paying a subscription.

37:00Yeah, you'll have to play with the feature set because that's always a bitch. Just the path of least resistance to getting to 100 mil. Yeah, so I think adding the subscription for the base and then still maintaining the revenue that you get from the sponsors makes sense. I would maybe push back slightly on the hypothesis that they can't convert anything because it dramatically decreases the value of the network from the sponsor side. What do you mean by it? Because some people will pay for impressions. Yeah. And so those guys can for sure deliver those. And so maybe there's like two tiers that you can sell.

37:37You have another product on the ad side or the media side. It's just something to consider. Perfect. Thank you. You just validated my thoughts. Oh, good. I'm glad. I'm thinking the right way. No, I think it makes sense. Yeah, either basically you have to position as higher ticket and do premium and white-glove onboarding and then select only for the really good creators, and that would be like you charge$5 ,000 or$10 ,000, and you really get them set up, or you basically flip the other way, go freemium, and then it's all based on like basically media arbitrage where you're just running tons and tons of ads to get people onto the platform, and you just know what your average revenue per platform user is.

38:11Perfect, thank you. So this guy obviously has multiple businesses, and he's sinning. He's doing the cardinal sin of chasing multiple rabbits, or more particularly, many women in the red dress. That being said, I still wanted to help. And so he wants to build a software company. If that's really what he wants to build, then he's got to go all in. Because SaaS is one of the most, if not the most, competitive space that's out there. I guess now there's AI, but SaaS is still competitive. Everybody you're competing against is typically very well-funded and also very smart. And so they are going to have significant advantage.

38:41And so if you think that you can split your attention and still beat them, it's a tall order, right? And so for him, my whole goal was that at least he had clarity on what he needs to do so that hopefully he can get that business up and running as fast as possible so that he can basically shut off the other things and go all in. Hi, Alex. Hello. My name is Alex. You can call me Alex Rodriguez. From Puerto Rico. Yes, from Puerto Rico. So I'm a music attorney. Abogado. Abogado, correcto. En la música y el entretenimiento. Yeah. So what we do is we have more constraint is focus. Yeah, you think? Okay.

39:12I have. At least you said it. So we have a law firm. So basically it's three businesses. But today, thanks to Ed and Sammy, we got much more clear on what we should do. But I would like to know how would you think about this? Because the law firm side, it's growing 20 % year over year without me actually doing anything. Just redirecting people that come to me through my law firm. And right now it's about$100 ,000. And then we have the educational side, and that is making$200 ,000. And it's been stuck like that in the last two years. Sure. And you get customers from organic? Yeah, both are organic.

39:58Okay. So if you don't have money to pay us as a lawyer, you go to the educational platform. And we are developing a contract automation software for big companies like major labels or publishing companies. so right now the product, our software our goal with the software is to sell we are seeing that other big music companies are buying tech so specific for them, so they're doing everything manually we want to sell that but we have a cash flow problem because we're selling to people without a lot of money and the service size does make money so our problem is where should we focus Yeah, but what's monthly churn right now?

40:43On the software. We got 100 people, and we only have 40 active right now. And how long have you been doing it in the first year? So you've retained 40%. Are they actually active, though? So they're paying. The people that are active are paying$3 ,000 per year, and there are only like four. Four? Four that are paying$3 ,000. And then what are the other 36 paying? Are paying$600 per year. Okay, got it. He has a very classic problem, which is that you're good at doing something and you have two very different avatars. And if you continue down either direction, you ostracize the other. So he's actually at the productized stage.

41:16So he's 10 to 20 employees between the three companies that he has. And so the issue that he has to have is he's got to niche down. Qualified leads are too expensive and they cap his ability to advertise. That's fundamentally his big issue, right? And so he's got too many different customers. So we have to niche down his advertising and basically message the new offer, which for him was going to be the education and the software. And so the million dollar question for him, which is what forced me to say I think that it made sense, was, and this is rare for me, was for him to go down market, which means to go for the smaller customer that's more numerous.

41:49Most of the time you want to go out market, and that's because those customers can afford to pay you, like sell to the rich, you know, rich people pay better, solve their problems, that type of stuff. I'm always in that direction. But because he said that 40 % of his customers, basically right off the onset, that we're still paying him a year later, to me that's fairly compelling that he's found some sort of product market fit. And so in hearing that, I thought, okay, well, best in class is like 60 plus percent in your retention for a consumer prosumer type product, which is where he was at, which is musicians who like wanna make it in business but aren't that big yet.

42:22So to me that'd be a prosumer, somebody who's a little bit above a consumer, kind of business-y oriented, side gig-ish, right? And so the good news is there's lots of them. The other good news is that there's new ones that get minted every day. And it's a growing market. So all those things are in his favor, which is, again, these are some of the reasons I like that. The other piece is that some of the old businesses he was going after, I think, though they are big, I think they're going to have trouble over the next years with the AI stuff. I think they'll have a hard time pivoting. And so I would be at least, I would second guess going all in there.

42:50Not to say you can't, I would just really consider it. Now, the other piece of why I like this is that if he can move his revenue retention up at the 12-month mark, then he has something that will just keep growing year over year over year, Because getting those customers is not hard. Keeping them is hard. But if he can keep them, then he can probably blow the doors off this thing, especially if the education can offset his CAC or cost to acquire a customer. Okay, so I think we chatted about this last night. So you have a, there is no right answer, but there is a path that you have to pick. And so either you're going to be an enterprise company and you're going to build only for that.

43:25And I would say like you probably will just transact on the education side in order to fund this. I, in general, don't like this plan. but you could do this because you'll be split attention. And this is fundamentally why people raise money in software so they can just focus on one customer the whole time, build the product, and then actually get it to work. Okay, that's that. Because you said that you're retaining 40 % in basically a prosumer-ish market, which is where you're at, I would be inclined to say that you probably are pretty close to a decent product. So you probably have nailed something there because keeping 40 % of people, one year later on, you know, whatever it is for musicians that you guys have for contracts and whatnot.

44:09You could absolutely go all in on that and get that to like 50 or 60 percent. And then you just need to have a different acquisition system. So you probably just need to go spend money acquiring customers. And that already cash flows because of the education side. And are the people who are still paying you on the software also education customers or no? They usually come from the education or from my legal services as well. So I have some clients that 80 % of the job I've automated. Here's the million-dollar question. The million-dollar question is, if they stop the education, do they keep paying for the software?

44:42Yes, because it's a one-time fee. Well, then that's what? You mean the software is a one-time fee? No, the education. Oh, well then, okay. So something they just pay, and they're going to use the software. So the only thing that we're solving for is revenue retention on the software. and so like enterprise in and of itself is not more valuable than lower market it's just it tends to be stickier which is what makes it more valuable but if you can get a larger marketplace easier to acquire customer to stick as well as a large enterprise customer you've got a gold mine if that's true and so if you want to go spend money acquire customers with the education or media as your liquidation and then get you know 100 like but the goal that you guys should have is like we don't care at all about the education.

45:22All of your focus, all the profit goes into just fixing one number, which is that you need to look at M12, so month 12 retention, and just say like, okay, we're at 40. How do we get to 60? And then how do we get to 70? And that's all you're solving for. Because if you solve that, then the thing will just keep growing. And that's the beauty. I mean, that's fundamentally the beauty of software once you get it right is that it just keeps growing. Thank you. Yeah. And so for me, that was, I thought, the higher likelihood path, and also because you already knew how to get those customers. Whereas getting Sony and some of these large brands could be significantly more difficult.

45:54And so for me, I saw that and was like, I think that's the direction that has a higher likelihood of succeeding given their goals. Infinite banking, insurance, you have 29 agents. Yes. And you're needing to decide whether you need to be the face and get customers to feed your agents or you should go all in on getting more agents and teaching them how to do lead gen. Yes. Cool. Yeah. So do the second one. Do the second one. Yeah. Yeah, it's significantly higher leverage. Cool. So basically, so think about this as, what problem do you want to solve? So either you say, I want to become a, like you want to keep growing your brand top of funnel so that you just have more and more people who are interested in infinite banking, and then you have all these agents that you pass it off to so that they can basically transact and own the relationship.

46:48So that's like option one. That is, I would say, the lower risk path because you're already doing that today. And so how many, is it on Instagram that you do your stuff? Yeah, all on Meta and YouTube. Okay. What's your followership from that? 15 ,000 subscribers on YouTube and 12 ,000 followers on Instagram and 6 ,000 on Facebook. Yeah, and what percentage of the leads come from that stuff versus whatever you do in person? 15 % come from online. Okay, where does the rest come from? The rest of it comes from referrals and networking. Dude, get agents. I don't even know what we're talking about.

47:27For sure, get agents. Go get agents. I thought it was like 60%, 70 % of the business was coming from your organic. No, most of it's coming from that. And then the challenge with the agents, originally it was all me teaching people how to do that, how to go out there and get business, go network go join B &I Chamber of Commerce whatever that's what worked for me and then we would get good people that were like hey I don't have any network so I said all right and they asked where what leads were and I said all right so let me go create leads and we started calling business owners because that's who I was selling to but they were not showing up and they weren't really busy whatever we were offering wasn't whatever then I reread 100 million dollar offers and 100 million dollar leads and I looked at the value equation I said the best value I can give is to real estate investors.

48:13So let me go get real estate investor leads. And then we're calling them all day long. And the people that I'm hiring don't know how to communicate with them properly. So they end up just setting up appointments and then they hand them back off to me. And they're good, but I think it comes down to recruiting. People want leads. The first question, where do we get your leads? If you say you have to go generate your leads, they might go look at somewhere where they give them leads. So we started giving people leads. So we make an offer to recruits. that's good. Well, I think that one is you could probably just take the existing brand that you have and just be more deliberate about the call to actions that you make.

48:50And because like if you talk about high level insurance stuff, that's going to attract both people who want to learn more about insurance. But many of those people will be agents. Yes. And so I think if you basically alternate the CTAs, you'll be able to basically, I don't want to say chase two, but you know, but in some ways you kind of can double dip here because as long as the content strategy fundamentally doesn't really change, you're just changing really the calls to action, then you can kind of get a little bit of the best of both. But I do think that the big thing that you need to crack is teaching them to generate their own leads.

49:19That's the limiter of your business. So you need to bring them on and you need to have the training system to reliably get them to self-generate. That's it. That's what you have to do. If you do that, the sky's the limit. And the 20 people that we have at a 29 that are just simply coming in and cold calling real estate investors all day right now that are setting up an insane amount. I think our offer is not great, so I'm going to the drawing board with that. But all those people, now I've got to go teach them. I'm just teaching them how to cold call. Well, they already are cold calling, right?

49:50Huh? They already are cold calling. They are cold calling now. Well, they're coming in. I'm teaching them a cold call. That's fine. Rather than coming in and teaching them to go shake hands and kiss babies. You want to teach them the highest efficiency strategy for getting customers. So whatever that is. So just like whatever your method is that you think the highest percentage of people will succeed with, that's what you teach. Cool. So whether it's shake hands, kiss babies, or it's cold calling, whatever. Or a combo of both. Yeah, or a combo of both. And that's what I did. Either way is fine.

50:14Cool. But, like, fundamentally, like, look at the biggest insurance companies in the entire world. They are that big for a reason. And almost all of them, they just, they are recruiting machines. Right. Like, that's where, fundamentally, because, like, they're not a supply-constrained business. Like, you can sell as much insurance as you want. Right. Like, you're not supply-constrained. Yes. Right? Like, you're just demand-constrained. Yes. And so you just got to get guys and then put the system in place so that they learn how to sell. And then that's the business. Heard. Heard. Thank you. Appreciate you.

50:40Yeah. This is why there's higher leverage of him getting lead getters than him getting leads. So this is the Leads Book 175. So right now, he's in scenario one, which is that he is getting leads, right? He's getting customers and he's sending those leads to his agents to close, right? Look at a much higher leverage move. Let's go to scenario three, where he spends the same amount of time advertising, but every time he's getting lead getters. And so every month he's getting more agents into the business, and each of those agents are now getting money. Now, it's the same level of effort for him.

51:12Look, his line is still the same. He's still working the same amount every day, same amount every day, but here he's got these new nodes that are generating business for him. And so if you add up all of this, these are all the extra customers that he's gotten just from this level of effort. And so this has far higher leverage than this does, which is why I recommended that he start making CTAs in his content to both continue to generate, because I don't want to kill the business, continue to generate his normal leads, but also make it clear for agents if they want to join him and gain access to some of the leads that he has, that he can come in, he can train them, and he can show them how to get the leads on their own, which he can benefit from.

51:49My name is Mike Nathan. I sell cellular therapy in home to the old, affluent, injured probably, and athletic. We're new, but we've got a million dollars in revenue, half at EBITDA. We would like to get the 25 million. In home or? In home. Okay, got it. So we consider mobile healthcare. Okay, is it like guy drives out or is it you sending machines? RN drives out, gives you an IV infusion in your home. Okay, got it. We'd like to get to$25 million. We're built to be bought. We want to exit, so we think we're on the cutting edge of this. What's stopping us is my team is awesome. Okay. Great, from the NFL to a lot of great people.

52:30We have great business to doctor B2B sales experience. zero B to C experience and that playbook we're learning is wildly different we have no idea what we're doing yeah so what stops you from just doing way more of the doctor stuff um it doesn't it doesn't quite pay as well meaning uh we have people that knock on doors to uh orthopedic surgeons who are looking for patients with uh alternatives to surgery PT chiropractors it's a lot of effort and there's some that are going to refer to you and some that just will not. So that's our constraint in a one market. We're in the Twin Cities. It's a one market play.

53:11We know there are more people looking for this solution. So we want to understand what the B2C is. If we go to then Dallas, Philly, LA, as we try to scale it, we're convinced it needs to be a better ROI than maybe what we're doing right now. So you're making 50 % margins, right? So what's the cost to acquire a physician? Cost to acquire a physician? Who refers your business? Cost of acquiring affiliate. It's oftentimes just, it can be a physician so we don't track it that way but it's$500. Okay so it costs you$500 and then what does the average physician refer to you in a year? In terms of business.

53:49$6 ,000. Okay so I mean you're getting 12 to 1 there and you already know how that works. So like what stops you from doing 10 times more of that? You're saying they don't pay well but that's the part I'm not sure because you're getting 50 % we've gone through the woods and hit all the people that are gonna refer us the number is not amazing or at least I just know there's more there I assume there's more there's got to be more than you know the 200 people we've hit like you mean you've only really talked to 200 in terms of like reach outs and 200 who signed up as affiliates kind of thing I don't know the number off the top of my head but it's in it's in the hundreds less than a thousand of b2b PT chiropractors, orthopedic surgeons, we've done that.

54:30In the Twin Cities. And the super small people that have given us has been, some give four, five, and six, some give zero. Yeah, do you have an active affiliate manager who's like regularly reminding them? Yeah, so the way that I think about affiliates is, it's basically a second tier of customer. And so you need to have somebody who's regularly kind of like stoking the affiliate fire to keep them activated and continue to get them to continue to refer business. So I'll give you an example. So there was a roofing company, for example. It was a restoration company. They had one star, star salesman.

55:03And all he did was he'd go around to other tradesmen and get them to refer them business. And so they would get$1 ,000 to refer the restoration business. But the sales guy got$500 for every time they referred. And so that guy, all day long, was knocking on doors, walking in the front door with donuts, asking them how they're doing, bringing coffee to the guys, and then reminding them that they existed. And that's all he did. And so I think you're doing the hardest part, which is getting them to refer. You just didn't have the consistent referrals. Because if you had 200 active affiliates who were consistently referring your business, and most of these physicians, especially like GPs, things like that, I mean, they see thousands of patients.

55:47And many of them could probably benefit from the services you have. and so the activation is both getting them to refer consistently but also percentage of customers that they see that they refer to you so it's kind of both sides of it and so I think that the missing link with what you were already doing was just that the you didn't have basically the continuous affiliate marketing strategy to get them to keep sending you business so that's probably like right now today I would fix that first because you already have the acquisition system you already have the network and so for me like reactivating that affiliate base would be the first thing that I did so this gentleman is using B2B outreach to get physicians and therapists to refer him business.

56:24Now, part of what he was missing is if you go to 240 in the leads book, which is the affiliates chapter, I talk about the launch and integrate model. And so basically, right now he actually was missing both of those. So launch is like you want to do some sort of big promotion with them so that you get to all their customers. Now, they were giving him like a trial customer and he was basically not getting any customers beyond that. And so if he's acquired 200 affiliates and each one of them is sending one customer, it's because he's basically not following up with the test that they're making. Like imagine if you have a business and you have customers and someone says hey can you inform your business, you might be like I'll send you one and I'll see what they say, right?

57:01But it's a trial. And so basically we have to think about getting these affiliates on board is like a trial but to convert the affiliate into an activated affiliate, right? And so a launch is step one which is that okay maybe you succeed with the trial and then you propose hey let's do some big campaign to send a lot of your customers over and then you can make money, we can make money, everybody's happy. But the long-term goal is full integration, right? Which is at what point in your process can we integrate our business so that what you sell is merged with what we sell so that we don't have to do any extra work or remind you, you just do it on your own.

57:33The second thing, maybe, because you might just reactivate the base and all of a sudden you're like, I got 200 guys referring me to business, holy shit, we're at 10 million. But the second thing I would consider probably, I would still probably focus most of my time on the B2B because you already have it. But for this business, I think that it lends itself, what's the price point? $6 ,000 of treatment. Per treatment, okay. Wait, so the average doctor will send you one$6 ,000 patient per year? When you said it cost you 500, they'll send you one patient? Mm-hmm. Interesting. So do you have a process for once the patient gets the thing calling the physician up?

58:08Sorry, say that one more time. So like, I'm Dr. Smith, I send you Sandy, Sandy goes and gets the, well, you come to Sandy, and Sandy gets the treatment. is there a cycle where you call back me dr smith and say hey we just dealt with sandy here's some of her stuff uh not in a medical term like we're not putting notes back in because it is private for sure yeah but but we do we ask for more referrals there's a circle back that way there's not a a patient loop back okay that's not true sometimes that does happen excuse me it does yeah that's not systematized yeah i would systemize the hell out of that because it's like hey you just send me this person?

58:42Let me close that loop for you. She's awesome. We did this thing. She loved it. By the way, and then we have the opening to the other. What customers did you see this week who you think would be a good fit? Rather than saying, do you have any? It's which ones would be is the question. Small training stuff, but it matters. I feel like there's so much on the B2B side that honestly that's probably where I'd be ripping apart. So you would not go after a B2C approach like advertising online, and pushing in on a strategy on that? It's not that I wouldn't. It's that when I think about, so this is the difference in theoretical and actual.

59:18I would, given the fact that you're already running good margins on this thing, basically doing it, and take this the way I mean it, completely unoptimized, like right now. Again, this is not a slight. Then I'm like, there's so much juice left in this thing. I don't want to now start something new. It's like I barely got this one going. I want to like crush this. And when I'm like, no, we follow up with every single person. I've got a full-time affiliate manager who steps by. Our affiliates, I'm calling them affiliates, but drops by the docs once a week just to remind us, say nice things. Hey, by the way, like that is happening all the time.

59:54And we've already covered like literally every single physician in the Twin Cities. And I'm like, okay, let's go B2C. But if we haven't completely squeezed the hell out of this thing and it's already working at the level it is right now with like zero, You're only getting one patient per doc. It's like, so you getting B2B customers is the same as getting one B2C customer. I understand why you'd be frustrated because you'd be like, well, fuck it. I'll just, I could sell one customer on my own without having to deal with the doc. But the whole point is that like, I want them to be sending 20, 50 a month.

1:00:22And they can because they have the volume. And I think that first one has to be like a beautifully choreographed experience because that first patient's the test run for them, for you, right? They'll refer you one and we'll see what happens. Right. And so, one, it's like Sandy's got to be blown away. She's got to come back and be like, oh, my God, that place was amazing. And then you also have to go back to the dock and be like, we blew Sandy away, by the way. And so I think you have to tackle it from both sides. That's what I would do. Getting into the ad side, you absolutely could do it. And I could walk through some whole strategy there.

1:00:56But if we swap places, that's where I would be focusing on. If you were going to try to expand into other major metros in the next 18 months, would you have the B2C sorted out before you went to the next market? Honestly, no. If I crush my B2B play, then I just run my B2B playbook in the new market. Once I find something that works, I just want to just... Do more. Yeah, pillage. Right on. Thank you. Yeah, no, you bet. Now, if there's no way to do that integration, which there always is, but if for some reason you have limited beliefs throughout the world, what you can do is basically you have to pay affiliate managers to consistently...

1:01:31They're kind of like account reps. And so they manage the relationship with affiliates to remind them that you exist and remind them to promote your stuff. And so if you have a handful of good affiliates that can be worth their weight in gold, because each of these business owners is advertising on your behalf. And so if he has 200 businesses, which is what he said, imagine harnessing the horsepower of 200 businesses of advertising and forcing it through one. Well, if you have that, he's easily going to hit his$25 million in sales. He just needs to activate and better use the resources that he has at his disposal right now.

1:02:01And on top of that, he's already really profitable. We still know the model works. We just have to do more of it. I'm a father, single father. I got two boys here. And my name is DJ Kerstofferson. There we go. I sell people to people. I'm restarting my virtual staffing company. Cool. And we're currently at zero revenue. It's just a matter of getting started. Okay. And so we're really confident in that. My question is on a more of a personal one. So I'm a single father in a serious relationship. And she's not a business person at all. Very sweet and supporting. but what would you say would be some things to prepare her for when it comes to...

1:02:36So your spouse or not spouse, your partner is stopping her. My partner, I mean, she doesn't live at the house yet. It's long distance, but it's coming together, but it's getting really serious. Okay. Preparing her for being married to a type A... I think you should give her a try before you buy. Yeah? Seriously. How do you mean? So fly out, spend two weeks with me. I'm not going to cater to you. I'm going to live my life. If the way that I live my life, the way this works, this is how it's going to be, if you like that, let's rock and roll. If you don't, I don't want to change. Yeah. That's true.

1:03:08That's perfect. No? I love it. That's great. Thank you.

1:03:17Crushed it. I see the most important relationship that you have as you with your goals because your goals are really just a reflection of yourself. And so I don't want to, especially if I were single, I wouldn't want to sacrifice my relationship with myself essentially for someone else. The recommendation that I gave was what I would give myself, which is be you. And if the way that you want to live to maximize the likelihood that you do what you want to do with your life is this way, then rather than try and compromise where both people don't get what they want, try and see if there's somebody who actually just like really loves the way you live.

1:03:49That felt like the easiest first step is like just have her come out and just don't accommodate. Like, live the way you'd want to live. And if she's thrilled about living that way, then you have a very high chance of this thing working out because you have little effort. You're not pretending to be someone you're not. You're not putting on a show. You're just being you. And if being you is enough that she's stoked, then you probably have a good life ahead of you. Now, if she comes out and that's not the case, then at least you didn't have to wait two years to find out after you both stopped acting that this is how you really are.

1:04:21And so I see the goal as how do I get as far forward in the relationship as possible of what would it look like if neither of us acted and then let's just behave that way and if it still works, that feels pretty good.