What’s Actually Holding Back Your Growth? | Ep 881

0:02There will literally always be money on the table. Like you can't sell everything as much as you want to. You just can't. And the thing is, is like, if this company can go from 6 to 15, and the next year goes from 15 to 30, and the next year goes from 30 to 60, if you hit the same numbers and have two different product lines versus one, which would you rather have? And I'll also tell you that if you just do it with one, you'll increase the likelihood, not decrease the likelihood that that occurs. Hey, Alex. My name is Henry. I sell education. I teach people how to fix and flip, mainly the Hispanic market.

0:33So it's only in Spanish. We did 1.3 mil last year, second year in business, and we want to do 3 million this year. So with the more, better, new, right? Right now, we only do two events a year, big events, 600 people, and we upsell to a high ticket, over 12 ,000, right? And we convert 20 % of the room, more or less. So that 80 % that went to that room never sees me again. I never sell them anything again. Okay. And, well, that 20%, they bought my high ticket. That mentorship is a year. Sure. And after that, I don't sell them anything ever again. Okay. So, more or better, do I just do more of these events and, like, never-ending looking for new customers for the rest of my life?

1:20Well, you're in focus. You're good. You're in education. Yeah. And education graduates people. Yeah. That's how education works. So if you look at the education system overall, the way to create continuity in education is just always have something else to learn or to teach. I like first year, now you're an undergrad. Now you're a graduate student. Now you have a master's. Then there's a PhD and you get a second PhD. You just keep, you know, people just become endless students. And so do you want to sell the business eventually or do you just want to make money? Make money. I mean, we're not. No, it's fine.

1:47No, I prefer the truth. Yeah, I mean, the easiest thing to do is just double the amount of venture doing. You can either go one a quarter or you can do two at 1 ,200. And would you travel or just stay in where I'm at in Miami? Is that where you run them now? In Miami? Yeah, I do East Coast, West Coast. Yeah. Yeah, maybe Texas or something. Yeah. Okay. I mean, you have a really simple solution. Like just run the same playbook more times. If you were like, I want to build a more valuable business, then I would say take the year to figure out revenue retention, which is how do I get these people who pay me$12 ,000 to pay me another$12 ,000 or pay me$30 ,000 next year?

2:23Or even downsell them to something that's$5 ,000 a year, but they stay. Right. and focus on retaining that top tier that paid me the high ticket yeah but i think considering for the model that you have downselling the upsell um i actually like a lot so if they paid you 12 maybe they'll stay for three or three to five just to have access to the network and some of your vendors and the stuff that you kind of like provide and i think that's something that people would be far more likely to stick with and so then you can basically think about your business as from a zooming all the way out perspective is that the twelve thousand dollars is actually like offset CAC, which is like you could break even on the$12 ,000 if you know that someone gets into a$3 ,000 a year membership that's pretty much all margin that doesn't leave.

3:05So it's like that allows you to spend way more than your competition because they need to make money on the 12. You can break even on the 12. And then you just have this stack of$3 ,000 bills that just keep stacking up. That's like low, low effort to maintain. Got it. Make sense? Yeah, it's good. But yeah, the nice thing is that you're honest about just wanting to make more money. It makes this a lot easier yeah yeah uh my name is mike nathan um i sell cellular therapy in home to the old affluent injured probably an athletic um we're new but we've got a million dollars of revenue half at ebda we would like to get the 25 million in home or in home okay got it consider mobile health care okay is it like guy drives out or is it you sending machines rn drives out gives you an ivy infusion in your home okay like to get to 25 million we're built to be bought we want to exit so we think we're on the cutting edges what's stopping us is my team is awesome all right great and from the nfl it's a lot of good we have great business to doctor b2b sales experience zero b2c experience and that playbook we're learning is wildly different we have no idea what we're doing.

4:14Yeah. So what stops you from just doing way more of the doctor stuff? It doesn't quite pay as well. Meaning we have people that knock on doors to orthopedic surgeons who are looking for patients with 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. We know there are more people looking for the 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.

4:54What do you do? So you're making 50 % margins, right? So what's the cost to acquire a physician? Cost acquiring a physician? Who refers to 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. $6 ,000. Okay. So you're getting 12 to 1 there, and you already know how that works. So 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. I don't understand.

5:26Because you're getting 50-50 more. I went through the woods and hit all the people that are going to refer us. The number's not amazing, or at least I just know there's more there. I assume there's more. There's got to be more than the 200 people we've hit. Nah. Like you've only really talked to 200 in terms of like reach outs and, or yeah, 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 the hundreds, less than a thousand of B2B PT chiropractors, orthopedic surgeons. We've done that. In the twins. And the super small people that have given us has been some give four, five, six, some give zero.

6:03Yeah. 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. And 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 business.

6:36but the sales guy got 500 for every time they referred. And so that guy all day long was knocking on doors, walking to 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, you know, especially like GP, things like that, like, I mean, they see thousands of patients and many of them could probably benefit from the services you have.

7:14And 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.

7:41The 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. 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 for, 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 costs you$500, they'll send you one patient? Interesting. So do you have a process for once the patient gets the thing calling the physician up?

8:10Sorry, say that one. 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, need Dr. Smith and say, hey, we just dealt with Sandy. Here's some of her stuff. Not in a medical term. Like we're not putting notes back in because it is private. For sure. Yeah. But we do, we ask for more referrals. There's a circle back that way. There's not 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 systematize the hell out of that.

8:42Because it's like, hey, you just sent me this person. Like, let me close that loop for you. She's awesome. We did this thing. She loved it. By the way. And then we have the, you know, the opening to the, to the others. Like what customers, or customers, sorry. What patients did you see this week? who you think would be a good fit right and rather than saying do you have any it's which ones would be yeah is the question small training stuff but it matters so i feel like there's so much on the b2b side that honestly that's probably where i'd be so you would not go after a b2c approach like advertising online going 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 like theoretical and actual like i would given given the fact that you like 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, right?

9:28And again, I'm not, 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. and we've already covered like literally every single physician in the twin cities, then I'm like, okay, let's go B2C.

9:57But 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, like you're only getting one patient per doc. It's like, so yeah. So you getting B2B customer 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 and 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?

10:29They'll refer you one and we'll see what happens. Right. And so one, it's like, Sandy's got to be blown away, right? 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 doc and be like, we blew Sandy away by the way. And so I think you have to tackle it from both size. 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.

11:09And 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. Once you enter 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. Okay. That's what I would do.

11:43Getting into the ad side, you absolutely could do it and I could walk through some, you know, whole strategy there. But I, I, if, if we swap places, that's where I would be focused. If you were going to try to expand into other major metros in the next 18 months, would you, would you have the B2C sorted out before you went to the next market? Or would 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. Hi, my name is Julie Teepteller, and we sell travel coaching to people who want to travel more frequently or more luxurious free or almost free.

12:22You already know all our business stuff. um so my question is kind of piggybacking on what you were talking about earlier with your six pages of ideas we're in a room full of people that are always trying to optimize as well as always has new ideas um we had an idea for a b2b offer for adding a 50k concierge offer for businesses that are already spending half a million or more on travel annually um so when is it appropriate to add a new offer while you're already like still working and optimizing your yeah i just wouldn't sorry i just wouldn't you would i wouldn't do it okay you're gonna go from six to 15 this year do that okay like i'm not i'm not trying to be like uh short to like like these are these are the mistakes that we make there will literally always be money on the table like you you can't sell everything as much as you want to like you just you just can't and the thing is is like if so said differently if this company can go from 6 to 15 and the next year goes from 15 to 30 and the next year goes from 30 to 60 if you hit the same numbers and have two different product lines versus one which would you rather have one right and i'll also tell you that if you just do with one you'll increase the likelihood not decrease the likelihood that that occurs and so like that's all the that's the focus and discipline stuff that you hear all the steve jobs and all that like it's just it's uh he called it the uh the quantity of unbelievable ideas that you know you could crush that you say no to that's what focus is so how do you discern when to pursue something off of that six-page list when we have bandwidth which if you're continually like if you're basically doubling every year your bandwidth is getting eating up by doubling so just double basically it's like why why would we do it okay thank you yeah but if it's like i want to grow why would i like why like then let's just grow with the thing that already is working and is really profitable and we know everything about it rather than this you know crazy girl in the red dress that like walking by like has a crazy boyfriend has crabs you're like what's going on you know so like why bother it's like we have this girl she loves us she knows me i know her let's go hey alex my name's luke um we run a firm similar to acquired actually in sydney where we buy majority stakes for all the businesses we currently operate three of them we want to be operating or at least contributing to operations for about 30.

14:53we've had a lot of success exiting in the past so we've kind of got it dialed in but we can't do more than a couple at a time our constraint is at the sort of venture studio level uh is the or is talent really we don't really know what our org chart should be and who should be doing it so i don't know if there's any one better place to help with that than you so you have a holding company yeah right now yeah and what are the three businesses that you bought uh one's a sass company at the moment one's early education and the other one is a gourmet food e-commerce business the one before that was a you know music industry stuff we're really diverse well we just had a lot of exits so these three are quite small the e-commerce one's doing three and a half million at the moment and the other ones are smaller yeah oh yeah they just started yeah so did this one this one's only a year old and so the founder so so are you are you funding them and finding a founder or are you buying businesses that are existing and exiting founders in the current case of these current three we've just bought them and now we're we're the only operators of them uh in the past it's been slightly different so 100 case by case i i what do you want to do with your life no because what i'm about to say is going to be a dramatic change from what you're doing.

16:04I want to have fuck it money. Okay. Yeah. So, so there's basically you have, how much do you know about private equity? I've read a couple books. Okay. So the problem, I can tell you what the problem with the existing model is, is that you don't have enough operating leverage. And so it's actually, in my opinion, a foundational issue with the business model. Like I don't think it's going to work. Now, to be clear, I think you can make some money. I don't think it's going to accomplish the goal that you want. And so if you're trying to treat this like private equity, where you hope to have exits later and then gain liquidity, versus if you were like, I'm just a holding company and I just want to continue to buy cash flowing businesses, I'd have a different, a slightly different answer.

16:43But the businesses that you're buying are too small. And so if you're exiting founders, then the problem that you're having is like, oh my God, I have to build this entire business, which is why most private equity institutions start at 5 million in EBITDA as their basically minimum that their check size that they're willing to write because of the problem that you are dealing with right now. And so I would encourage you to not try and reinvent the wheel. And I say this coming from like with arrows in my back and lots of scars. In the first 24 months of acquisition.com, I did 24 deals. I had much, many, many smaller deals because I thought, okay, I'll just do, I'll use the brand that I have.

17:17I'll attract, you know, entrepreneurs that are kind of emerging and I'll take a minority stake and kind of help them grow, whatever. The issue with that is that a lot of businesses that are small are small for a reason because they don't have good entrepreneurs who are leading them. And now you're like, okay, well, either you remove the mediocre entrepreneur and now you have just a bunch of basically nothing that you're now like, oh, now I just bought myself a job. Right. And maybe you'd have it for no money down because they were willing to leave and you didn't have a lot of capital that you had to put to work.

17:47Fine. But I would, in my opinion, you have basically two paths that you can pursue here from where you're currently at. I don't think buying more companies is the answer unless you raise a lot of money so that you can buy actual companies and not like someone's big bucket of risk right which is what we if we if you took the companies that you bought through the the scorecard i'll bet you that they probably fail a lot of those checkpoints two of the three half yeah yeah and so and for that reason they wouldn't be deal like they wouldn't be deal-ready businesses right they're just basically a person with a job that has a couple people helping them out and then that person steps away and now what right And now you're just responsible.

18:25So basically two paths. So path one is that you raise money or get enough money to buy legit businesses. Option two is that you decide one of these businesses is the business that you wanna do as your main thing. And you use your M &A skills to basically bolt on stuff to using that as a platform rather than having all these disparate businesses. Does that make sense? So it's like if the e-commerce one is the best one, it's like, okay, can we acquire some sub brands or some sub product lines underneath that, fold them into the brand and then flip that? that makes sense. And that allows you to not have as much capital and you can organically grow it and then you can keep your focus.

18:58But there's a reason that most private equity firms only take on, call it five to eight investments. And that's after they raised half a billion dollars to make those deals. If they're in disparate industries, if they're a private equity firm that has a thesis based around basically a roll-up strategy where they're like, we're only buying plumbing and that's our whole thesis, fine. And that's more akin to what you're doing in terms of alpha, a little bit more boring, more ops heavy, but you have, uh, you don't have to have as much capital and the more entrepreneurial you are, the more organic growth you're gonna be able to drive in the, in the original platform business.

19:28Does that help? Thank you. Yeah. Okay. Thank you. Uh, my name's Chris. Uh, so, uh, eyeglasses to people that can't see and specifically nice, uh, targeted. Yeah. Ideally. Right. So specifically trying to, uh, target a piece of that, which is not just your primary pair, which is like, I can't see, I need to see, but more specific things like driving office that kind of stuff a little bit more of those tasks specific things so this is going to sound funny here but basically we do zero dollars in revenue we'd love to be at a hundred million zero dollars yeah so i'm gonna okay so basically i have a business that i'm exiting 10 locations awesome you know like 20 you don't care about that one you want to find out about it so so what i'm here for is to understand like well if i'm going to start this let me start at the best well what's the best vehicle those kinds of things yeah That's why, like, yeah.

20:15So you're going to break and mortar? Yeah, we have 10 brick and mortar. No, are you going to, for the glasses business? So that's kind of the question is, really it's like, do I go brick and mortar? So I could either, you know, use doctors as affiliates, et cetera. But the problem there is that they, their sales teams that otherwise don't tend to sell these glasses well. So I'm on the eye doctor. And so part of this is coming from knowing these common, like, five things that people just - My mother and grandfather are ophthalmologists. Oh, really? Oh, yeah. well you know this well then i guess so um and so those common things are not being addressed well because it's just not communicated well all the things so then i have to like figure out how to get them to sell the product that i'm making which is like a whole challenge in itself or do i just sort of go more to the path of like direct to consumer and and that kind of thing and whether it be brick and mortar combo of online yeah i think it depends on your strengths yeah so leila has a really good frame for these types of decisions which is what problem would you rather have because you're going to have a problem in either of them, right?

21:15The problem that you described with the first one is basically the affiliate problem, which is how do I attract them? How do I keep them motivated? How do I train them? How do I keep quality high? How do I make sure that they're representing the brand the right way? That is the problem with affiliates. But the nice thing is that if you solve that problem, you get paid like 50 or a hundred million dollars. And so I feel like there's an appropriate price tag ascribed to solving it. And that's what gets me through honestly harder times when you guys, because sometimes you're like, man, I just can't figure out how to get these conferences to work.

21:40It's like, yeah. And then as soon as you do, you make$10 million. So yeah, solve it. Like, that's how it works. When it comes to the direct to consumer side, if you feel like you're more skilled with, call it, you know, map, basically, the business, like what business you're really in. So if you get into the direct to consumer business, you're competing against like snow teeth whitening. And like, if you look at the business model there, it's all media. It's all, it's all, you know, advertising driven type business. This is with glasses, likely very transactional. So it's a super direct response, heavy business.

22:12You'd probably be recruiting affiliates for brand associations and be able to whitelist for them to be wearing your, you know, your, your glasses and whatnot. And that's the business that you're in. So it's going to be the problems that you're solving, or I have to be creating shitloads and shitloads of, uh, of ads all the time. I have to be up to date on the best media buying stuff and have a really good at CROs or conversion optimization. And I should probably over time develop a strong influencer affiliate strategy so that I can actually build a brand rather than just a ROAS arbitrage business.

22:40That's that path. The other path is the brick and mortar affiliate path where you still are centralized. You're just using doctors as your distribution base. If I had to pick which one I would rather have, I would rather do that one. That's me personally. And you're also a physician, which I think gives you a little bit of leg up or at least foot in the door, figuratively and literally. I think that that one actually, if you want to sell a business in the future, would probably be more likely to be sellable just because the direct response nature of that other business is so volatile that any kind of like wrinkle of volatility in a year prior to a sale, sales done, sales off the table.

23:13And so whereas once you develop a strong affiliate base of basically referral network from physicians, though it is complex and challenging, literally you just solve that one problem and you have the business. Yeah. Small follow up to that would be then is so in the vein that that's the ultimate goal i i know that well in order to get there solving that problem means that i probably need to do this xyz here for that uh practice so that eventually i'll be able to do what i want that's i guess okay to sort of take that approach that longer tail approach of it nothing's fast yeah well sure no i'm just being like super real just more from obviously experience of seeing it and going like, oh, that's a stupid path versus...

23:58No, I think either of those paths would work. I think given your experience from just the limited amount that we've interacted right now, if you'd said, I'm a hardcore drug response marketer, I make tons of media, I really understand that well, I'm really good at building sites and know people who can CRO really well, then I'd be like, okay, maybe that's the play. But you didn't jump at any of that. And so this one feels like the right path. All right. Makes sense. Does that help? Hey, Alex. My name is Josiah. We sell chiropractic services to members of Lifetime Fitness. We're going to do$16 million this year.

24:26You do? Sorry. So chiropractic services to members of Lifetime Fitness. Okay, got it. Are you within Lifetime? Yes. Got it. Okay. Right. This year we're going to do... I was like, that's a niche. Like your ads are like, are you a Lifetime Fitness member? You're the only people we take. I understand. Okay, got it. Got it. Got it. No, so we're going to do$16 million this year. I'm going to get to$32 million. The thing that's stopping us right now is the sell for our chiropractors on the front end to the initial eight-week plan. Okay. They don't convert really well. Okay. Some do. We use the closer framework.

24:56Sure. And some doctors have three times the lifetime value of other doctors. The pushback we get is they say, I'm a doctor, not a salesperson, too salesy. So they have a hard time pulling the script. Yeah. How can I break their mindsets? I think you'll probably, one is I think Chick-fil-A, the head of people there has a really great framework on this, which is basically like a lot of teams will lose in the playoffs and think they lost in the playoffs when they lost in the draft. and so you might just have the wrong docs and so if i think about like you know you have your customer avatar characteristics you should be more selective about your chiropractor avatar characteristics these are the beliefs you have to have about the world in order to to function well within this business model for the same reason that i didn't work with yogis and spin studios even though it's literally this exact same business model as large boot camps it's the same business but they were so like woo woo that my like raised prices and sell shit was like whoa and so i didn't work with them because they were just too big of a pain and so for to the same degree um i would say there are two ways to solve this one is just pick the docs right up front the reason that i would prefer that one is that you you already have a business wallet that clearly works since i would be like hesitant to try and like change something the second um well sub point underneath that is probably just significantly more frequent training and that's in the form of role playing Like I have yet to find anything that is more effective than modeling and role playing when it comes to transferring skill.

26:25The nice thing is that sales can be transferred relatively quickly, especially because they're, you know, they're smart. They can figure it out. What they get lost in is all the medical stuff. And they try and like techno jargle, you know, people and then they have no idea. It's like, hey, you're in pain. I'll get you to be not pain by this thing. But I think reading testimonials of patients who were undersold or not sold and telling them that they are hurting them by not providing solutions. to help them. And so I think the, to be clear, I would also position this as like, we're not selling here.

26:56We're making offers available to people who need them. That's all. So that's what I would try and do to like immediately try and fix the existing thing. If you feel like this is some structural thing, I'm not sold on the fact that it is. Um, but I have seen models where they have patient care coordinator and they just leave the doc in the back and they've just found it easier to just find salespeople and just be like, cool, you're the manager of this location, which really just like Lifetime Fitness, the manager is just sales manager, right? Like we both know that. And so basically the patient care coordinator is just the salesperson.