WEBVTT

1
00:00:00.000 --> 00:00:01.000
What's going on, everyone?

2
00:00:01.000 --> 00:00:02.000
Happy Thursday.

3
00:00:02.000 --> 00:00:04.960
Hope you guys have an amazing week so far.

4
00:00:04.960 --> 00:00:07.880
I wanted to start this one with something that was a little bit more of an incendiary

5
00:00:07.880 --> 00:00:08.880
title.

6
00:00:08.880 --> 00:00:10.960
LBOs are the future.

7
00:00:10.960 --> 00:00:15.840
And I am saying that because most people who have been a part of our community, been

8
00:00:15.840 --> 00:00:20.440
a part of our world know that I don't talk much about LBOs.

9
00:00:20.440 --> 00:00:26.080
I'd rather, I guess, I do talk about them, but I'm always kind of bashing against them.

10
00:00:26.080 --> 00:00:30.680
And part of that is just for marketing, just to be a little bit more polar.

11
00:00:30.680 --> 00:00:37.920
But the other side is kind of realizing that where you are in the context of your business

12
00:00:37.920 --> 00:00:42.080
and what the lifetime value of your customer looks like at any given point, what's up

13
00:00:42.080 --> 00:00:46.280
Kate, is going to dictate how you acquire.

14
00:00:46.280 --> 00:00:53.680
So when Jim lunch started, we, like Jim lunched him lunch, we actually had people pay half

15
00:00:53.680 --> 00:00:56.280
and half or paid in full up front.

16
00:00:56.280 --> 00:01:00.280
And I had to work with a financing company at the time, which I really didn't like.

17
00:01:00.280 --> 00:01:02.880
It was kind of like one of those higher risk financing companies.

18
00:01:02.880 --> 00:01:07.760
So people ended up having to pay like 25% more by using this financing company.

19
00:01:07.760 --> 00:01:11.040
But it was the only way that we'd be able to get paid up front.

20
00:01:11.040 --> 00:01:17.200
And the thing is, is that over time, what should happen is that the lifetime value of the

21
00:01:17.200 --> 00:01:19.240
customer should start stacking.

22
00:01:19.240 --> 00:01:22.280
It should start kicking in over time.

23
00:01:22.280 --> 00:01:27.200
And so over time, we had Jim's who started with Jim lunch and then they started staying

24
00:01:27.200 --> 00:01:29.200
on the back end and they'd stay with us.

25
00:01:29.200 --> 00:01:34.240
And so the revenue that came in from those people from recurring continued to grow.

26
00:01:34.240 --> 00:01:39.360
At a certain point, we didn't need to ask for half and half or paid in full up front.

27
00:01:39.360 --> 00:01:43.520
We were going to do longer, more extended payment plans, which means that we're basically

28
00:01:43.520 --> 00:01:45.960
lowering the barrier to entry, right?

29
00:01:45.960 --> 00:01:50.800
And the lower the barrier to entry, the more people who can enter it, right?

30
00:01:50.800 --> 00:01:58.000
And so I use the title of LBOs of the future because like right now where Jim launches,

31
00:01:58.000 --> 00:02:05.080
we have like $1,000 to start and then people get two weeks, I think, of grace period,

32
00:02:05.080 --> 00:02:09.400
to make sure that they're making money so that they can afford the second real payment

33
00:02:09.400 --> 00:02:11.240
that they have, right?

34
00:02:11.240 --> 00:02:16.480
And so it's actually like we super have spread it out over time so that basically anyone

35
00:02:16.480 --> 00:02:17.960
can do it.

36
00:02:17.960 --> 00:02:21.520
And so we have client finance acquisition, which is what we preach with most of the

37
00:02:21.520 --> 00:02:25.680
Jim's that come in with us because most of them don't have the recurring stacked up

38
00:02:25.680 --> 00:02:30.320
in order to allow them to basically lower that barrier to entry.

39
00:02:30.320 --> 00:02:36.280
And so the big problem that happens is that when small Jim's market like big Jim's,

40
00:02:36.280 --> 00:02:39.480
that's where they get into trouble because when you lower the barrier to entry, you're

41
00:02:39.480 --> 00:02:43.920
lowering your cash up front, your immediate cash per customer.

42
00:02:43.920 --> 00:02:47.120
And then what that does is it puts more stress on the business, right?

43
00:02:47.120 --> 00:02:52.200
If you have the cash reserves or you have stacked up the retention and the recurring that's

44
00:02:52.200 --> 00:02:57.560
come in from these customers, then you can have LBOs that actually work.

45
00:02:57.560 --> 00:03:02.280
And so I do kind of poo poo and I did poo poo for a very long time, the whole LBO model

46
00:03:02.280 --> 00:03:06.280
and it's mostly for from a marketing standpoint because it doesn't really match the reality

47
00:03:06.280 --> 00:03:12.440
of 99% of the Jim's that are struggling or even just not wrong or they want to be, right?

48
00:03:12.440 --> 00:03:15.200
And it's because if you're losing money in the acquisition, then it's really hard to

49
00:03:15.200 --> 00:03:21.080
market unless you have a lot of cash and most people aren't in that space, right?

50
00:03:21.080 --> 00:03:22.080
But...

51
00:03:22.080 --> 00:03:26.040
Hey guys, love that you're listening to the podcast.

52
00:03:26.040 --> 00:03:30.120
If you ever want to have the video version of this, which usually has more effects, more

53
00:03:30.120 --> 00:03:35.120
visuals, more graphs, you know, drawn out stuff, sometimes it can help hit the brain centers

54
00:03:35.120 --> 00:03:36.120
in different ways.

55
00:03:36.120 --> 00:03:37.120
You can check out my YouTube channel.

56
00:03:37.120 --> 00:03:38.120
It's absolutely free.

57
00:03:38.120 --> 00:03:44.040
Go check that out if that's what you are into and if not, keep enjoying the show.

58
00:03:44.040 --> 00:03:48.120
If your recurring starts kicking up, if your lifetime value of a customer starts really

59
00:03:48.120 --> 00:03:54.640
stacking, then you can continually lower and lower and lower the bar to the point where

60
00:03:54.640 --> 00:03:58.600
you're cash flow negative for two weeks, four weeks, six weeks.

61
00:03:58.600 --> 00:04:04.200
So like Jim launched, for example, when we acquire a Jim, we're cash flow negative for

62
00:04:04.200 --> 00:04:06.120
the first six weeks.

63
00:04:06.120 --> 00:04:14.120
So six weeks from the time somebody opts in to that point, you know, what are the six

64
00:04:14.120 --> 00:04:15.120
weeks?

65
00:04:15.120 --> 00:04:20.040
We're negative in the acquisition and then we start making our first dollar of profit.

66
00:04:20.040 --> 00:04:24.000
And what that's allowed us to do is basically take over the entire market because we don't

67
00:04:24.000 --> 00:04:26.360
need to ask for all this money upfront.

68
00:04:26.360 --> 00:04:30.440
We don't need to do all these things because we know that our average customer is going

69
00:04:30.440 --> 00:04:32.880
to stay for a very, very, very long time.

70
00:04:32.880 --> 00:04:37.560
And so right now, like if we had no money that came in from Jim launch, the recurring

71
00:04:37.560 --> 00:04:41.920
that we just have from the base of customers that we have already served would still provide

72
00:04:41.920 --> 00:04:47.920
us a 60, 70% plus margin for operating business, which is crazy, right?

73
00:04:47.920 --> 00:04:48.920
But it didn't happen overnight.

74
00:04:48.920 --> 00:04:53.680
It took time to get there and we took steps from going half and half and paying fools

75
00:04:53.680 --> 00:04:57.840
to, you know, three pays to, okay, everything's more upfront.

76
00:04:57.840 --> 00:05:01.800
Let's see, like, let's do, you know, three or four thousand down and then thousand, whatever.

77
00:05:01.800 --> 00:05:07.280
So like we've continually lowered what we ask for on the front end from a cash standpoint

78
00:05:07.280 --> 00:05:10.960
to continually lower the bars so we can get more volume in.

79
00:05:10.960 --> 00:05:15.920
But you have to do that with an eye on how much cash does coming in from your current.

80
00:05:15.920 --> 00:05:23.920
If you never solve your retention problem, you'll never be able to scale at a massive,

81
00:05:23.920 --> 00:05:25.680
at a massive level, right?

82
00:05:25.680 --> 00:05:27.760
You'll never be able to do that.

83
00:05:27.760 --> 00:05:31.240
And so that's why some of the plays that we have in Legacy, for those of you who are

84
00:05:31.240 --> 00:05:38.080
on here, lower the varied entry of life, the green play so that we can get more people

85
00:05:38.080 --> 00:05:39.320
on recurring faster.

86
00:05:39.320 --> 00:05:45.080
We get less cash up front, but we should, if your retention is strong, be stacking five

87
00:05:45.080 --> 00:05:48.120
to ten thousand a month in your recurring revenue.

88
00:05:48.120 --> 00:05:52.040
And when that happens, that's when the game really, really, really gets funky.

89
00:05:52.040 --> 00:05:54.760
And that's really the goal that everyone should be shooting towards.

90
00:05:54.760 --> 00:06:00.920
But ironically, how you do the very back, back, back end affects how you do the very,

91
00:06:00.920 --> 00:06:03.000
very, very front, front, front.

92
00:06:03.000 --> 00:06:08.480
And so it really does kind of pump full circle in terms of how you look at acquisition

93
00:06:08.480 --> 00:06:11.520
and how nothing happens in a vacuum, right?

94
00:06:11.520 --> 00:06:16.000
And so I say LBOs are the future because in a lot of ways, they are one of the most effective

95
00:06:16.000 --> 00:06:21.720
ways of growing your business, but 99% of people don't have a business as strong enough

96
00:06:21.720 --> 00:06:25.840
that they can actually use LBO without going under.

97
00:06:25.840 --> 00:06:27.760
And that's the fundamental problem.

98
00:06:27.760 --> 00:06:33.880
And so we have to do client-finance acquisition on the front end, get more per customer so

99
00:06:33.880 --> 00:06:38.600
that we can outspend everyone in the beginning and be cashful positive in the acquisition

100
00:06:38.600 --> 00:06:44.960
so that we have the cash flow to then take and then reinvest in building up the services,

101
00:06:44.960 --> 00:06:48.760
customer service systems, et cetera, so that we can get the left-time value high enough

102
00:06:48.760 --> 00:06:51.560
that we can actually lower the front end.

103
00:06:51.560 --> 00:06:53.040
So I hope that makes sense.

104
00:06:53.040 --> 00:06:56.240
I hope that was Nito for you.

105
00:06:56.240 --> 00:06:58.080
And that should give you an idea of what the goal is.

106
00:06:58.080 --> 00:07:03.400
The goal over time should be absolute volume and maximizing lifetime value.

107
00:07:03.400 --> 00:07:06.080
So if you maximize the lifetime value, then you want to lower the barriers as much as

108
00:07:06.080 --> 00:07:10.520
you can so you can get as many people into that lifetime values you possibly can.

109
00:07:10.520 --> 00:07:13.960
But you have to keep an eye on the cash realities of the business.

110
00:07:13.960 --> 00:07:17.840
And so that's where the seesaw, the balance point between how much cash you ask for

111
00:07:17.840 --> 00:07:21.680
at the front and then how many people you get seesaws.

112
00:07:21.680 --> 00:07:23.480
And that's really the whole game.

113
00:07:23.480 --> 00:07:25.720
So anyways, I thought that would be Nito for you.

114
00:07:25.720 --> 00:07:27.520
Thanks Chris, appreciate that.

115
00:07:27.520 --> 00:07:28.520
Lots of love to everybody.

116
00:07:28.520 --> 00:07:30.040
Hope you guys have an amazing Thursday.

117
00:07:30.040 --> 00:07:35.520
And if you wouldn't mind, drop a like and a comment and I'll be sure to like and comment

118
00:07:35.520 --> 00:07:37.120
on your comment back.

119
00:07:37.120 --> 00:07:41.000
All right, amazing day guys and I'll catch you guys soon.

120
00:07:41.000 --> 00:07:42.000
Bye.