WEBVTT 1 00:00:00.000 --> 00:00:06.200 There is an element where, at some point, especially the more niche you are, especially the 2 00:00:06.200 --> 00:00:09.720 more higher end you are, the more you are going to be able to keep customers because your 3 00:00:09.720 --> 00:00:10.720 product is really good. 4 00:00:10.720 --> 00:00:13.120 But it's not going to necessarily grow the business. 5 00:00:13.120 --> 00:00:16.840 So if looking at the business from the constraints perspective, we'd be like, okay, let's pool 6 00:00:16.840 --> 00:00:21.360 some resources from continuing to invest in the product where we currently have no 7 00:00:21.360 --> 00:00:22.360 interning. 8 00:00:22.360 --> 00:00:24.200 But the thing is, is that we want more people in. 9 00:00:24.200 --> 00:00:26.560 And so let's go get more customers. 10 00:00:26.560 --> 00:00:30.360 With that dog lie, reallocate some resources so you can let more people know about the 11 00:00:30.360 --> 00:00:31.360 stuff. 12 00:00:31.360 --> 00:00:37.520 I'm going to show you how to grow your business so fast this year that it makes your 13 00:00:37.520 --> 00:00:39.200 accountant nervous. 14 00:00:39.200 --> 00:00:41.400 And maybe you're not growing as fast as you want right now, and it's probably because 15 00:00:41.400 --> 00:00:44.920 you're trying to fix a problem that might not actually exist. 16 00:00:44.920 --> 00:00:48.160 And so most businesses have one of two core problems and they don't know which one they 17 00:00:48.160 --> 00:00:49.160 have. 18 00:00:49.160 --> 00:00:52.000 And so I'm going to show you how to identify which one of the two you have and how to fix 19 00:00:52.000 --> 00:00:53.000 it. 20 00:00:53.000 --> 00:00:54.000 I'm Alex Ramozzi. 21 00:00:54.000 --> 00:01:15.240 So here's the big idea. 22 00:01:15.240 --> 00:01:19.280 You can either have two few customers or two little capacity, but never both at the same 23 00:01:19.280 --> 00:01:20.280 time. 24 00:01:20.280 --> 00:01:21.880 And so how do you know which problem you have? 25 00:01:21.880 --> 00:01:26.000 So demand problem means that you have space, but not enough customers, like a restaurant 26 00:01:26.000 --> 00:01:31.680 without empty tables or a calendar with open slots or product sitting on shelves. 27 00:01:31.680 --> 00:01:34.360 You build it, but people aren't coming, right? 28 00:01:34.360 --> 00:01:35.840 So supply problem would be different. 29 00:01:35.840 --> 00:01:38.560 It means that you have customers, but not enough capacity. 30 00:01:38.560 --> 00:01:39.560 So you have waiting lists. 31 00:01:39.560 --> 00:01:42.800 You have to turn people away or you can't make products fast enough or you can't take 32 00:01:42.800 --> 00:01:43.960 on new clients. 33 00:01:43.960 --> 00:01:45.880 They're coming in, but you can't serve them all. 34 00:01:45.880 --> 00:01:48.040 And so how do you know which problem you have? 35 00:01:48.040 --> 00:01:49.600 And so here's the simple test. 36 00:01:49.600 --> 00:01:52.680 If you doubled your ad budget tomorrow, or you doubled your outreach, or you doubled 37 00:01:52.680 --> 00:01:55.520 your content, would you be able to double your sales? 38 00:01:55.520 --> 00:01:57.840 Or would you just create a mess that you couldn't even handle? 39 00:01:57.840 --> 00:02:00.200 So if you create a mess, then you have a supply problem. 40 00:02:00.200 --> 00:02:02.680 If it would double your sales, then you have a demand problem. 41 00:02:02.680 --> 00:02:05.320 It's the difference between businesses that grow and those that don't isn't just the 42 00:02:05.320 --> 00:02:08.080 hard work, but it's working hard on the right problem. 43 00:02:08.080 --> 00:02:11.640 And so as Warren Buffett says, there's nothing worse than doing well with something that 44 00:02:11.640 --> 00:02:12.640 shouldn't be done at all. 45 00:02:12.640 --> 00:02:17.160 So I'm going to give you a number of businesses that are constrained and give you some examples 46 00:02:17.160 --> 00:02:21.680 and then you need to figure out which category you think it's in, supply or demand. 47 00:02:21.680 --> 00:02:22.840 So let me give you the first one. 48 00:02:22.840 --> 00:02:24.720 So think about a consultant who's completely booked. 49 00:02:24.720 --> 00:02:28.800 So full schedule, three months ahead, working 60 hours a week, always stressed out, yet 50 00:02:28.800 --> 00:02:32.400 despite all the work, his or her income has stopped growing. 51 00:02:32.400 --> 00:02:35.120 All right, so what does he do with this little free time? 52 00:02:35.120 --> 00:02:39.000 Well, he makes more content, he runs more ads, and he tries to get more leads. 53 00:02:39.000 --> 00:02:41.600 He's trying to fix the demand problem that he doesn't have. 54 00:02:41.600 --> 00:02:45.160 He has a supply problem that could also be a pricing problem. 55 00:02:45.160 --> 00:02:46.160 So which is it? 56 00:02:46.160 --> 00:02:47.140 We'll dive in. 57 00:02:47.140 --> 00:02:48.980 So you might think, wait, that's crazy. 58 00:02:48.980 --> 00:02:53.060 I need more clients to make more money that consultant might think, and this might be you, 59 00:02:53.060 --> 00:02:54.060 too. 60 00:02:54.060 --> 00:02:55.060 But what if he tries something different? 61 00:02:55.060 --> 00:02:56.060 So he has three options. 62 00:02:56.060 --> 00:02:58.940 So number one is you can just raise his prices by a lot. 63 00:02:58.940 --> 00:03:01.620 And so most people when they raise their prices, they're like, I might add, I literally 64 00:03:01.620 --> 00:03:03.340 had a phone call earlier today. 65 00:03:03.340 --> 00:03:06.580 Someone said they were going to add a quarter, like 25 cents to their shipping, and they 66 00:03:06.580 --> 00:03:07.580 were like holding their breath. 67 00:03:07.580 --> 00:03:11.060 I'm like, bro, like add $3 and see what happens, right? 68 00:03:11.060 --> 00:03:15.180 Like it's just, just, most people are so afraid of raising prices because they're afraid 69 00:03:15.180 --> 00:03:16.420 they're going to lose their customers. 70 00:03:16.420 --> 00:03:19.780 But if you're going to supply a constrained business, it is one of the primary paths to 71 00:03:19.780 --> 00:03:20.780 fixing it. 72 00:03:20.780 --> 00:03:22.700 So if you're going to do it, raise your prices by a lot. 73 00:03:22.700 --> 00:03:27.540 We're talking 50% 100%, so singles doubles in terms of how much more you raise your prices. 74 00:03:27.540 --> 00:03:32.140 The second thing you do, and I'm going to explain how this kind of plays out in a second. 75 00:03:32.140 --> 00:03:36.740 The second thing he could do is basically change the service to delivery ratio. 76 00:03:36.740 --> 00:03:40.140 So instead of having just one on one services that are being rendered, he could do one to 77 00:03:40.140 --> 00:03:41.620 many or one to small group, right? 78 00:03:41.620 --> 00:03:45.180 So he changes how many customers she can take on personally, right? 79 00:03:45.180 --> 00:03:48.940 And the third is that he just hires and trains other consultants, right? 80 00:03:48.940 --> 00:03:52.100 So he keeps the ratio the same, but he just adds more headcount to his business. 81 00:03:52.100 --> 00:03:55.620 And so there's basically the three things that he can do to solve the supply constraint. 82 00:03:55.620 --> 00:03:59.020 Now he might be afraid to raise prices that much, and he might be like, oh my god, I'm 83 00:03:59.020 --> 00:04:00.180 losing all my clients. 84 00:04:00.180 --> 00:04:01.420 But what's actually going to happen? 85 00:04:01.420 --> 00:04:02.380 So let's play it out. 86 00:04:02.380 --> 00:04:06.340 So let's say about 30% of his clients leave, right? 87 00:04:06.340 --> 00:04:10.940 But if he doubled his prices and 30% of his clients left, he'd make more money while 88 00:04:10.940 --> 00:04:12.540 working with fewer people. 89 00:04:12.540 --> 00:04:17.380 And so here's the double, the double, double benefit of this is that number one, he makes 90 00:04:17.380 --> 00:04:21.060 more and he services fewer. 91 00:04:21.060 --> 00:04:22.820 So he also frees up time. 92 00:04:22.820 --> 00:04:26.260 It literally hits, kills two birds with one stone, he literally makes more money and has 93 00:04:26.260 --> 00:04:29.740 more time, which is why if you want to supply constraint business, pricing was only the 94 00:04:29.740 --> 00:04:32.780 strongest levers that you should consider pulling and usually a lot more than you think 95 00:04:32.780 --> 00:04:33.780 you should. 96 00:04:33.780 --> 00:04:34.780 All right. 97 00:04:34.780 --> 00:04:38.100 And now here's the secondary, here's the, or rather, the tertiary benefit of doing that. 98 00:04:38.100 --> 00:04:40.380 Now that you have that extra time, guess what you can do. 99 00:04:40.380 --> 00:04:42.420 You actually have time to create even more capacity. 100 00:04:42.420 --> 00:04:45.260 And so if you need to have time to say, okay, you know what, I'm going to increase my service 101 00:04:45.260 --> 00:04:46.260 delivery ratio, right? 102 00:04:46.260 --> 00:04:50.220 I'm going to figure out what tech I need to do so that I can expand my, you know, how 103 00:04:50.220 --> 00:04:51.620 many people I can take on. 104 00:04:51.620 --> 00:04:54.620 Or I'm going to create a training system so that I can bring on new consultants and I can 105 00:04:54.620 --> 00:04:57.780 bring them on faster so that they can start taking on clients for me. 106 00:04:57.780 --> 00:05:02.300 In either those situations, the net result would be he'd make more money per hour and bringing 107 00:05:02.300 --> 00:05:04.660 this extra leverage in would multiply that. 108 00:05:04.660 --> 00:05:08.900 And so by doing this, he's fixing the real problem, which is supply, not demand. 109 00:05:08.900 --> 00:05:13.740 And so he could double his income, working 15 fewer hours a week and then double it again 110 00:05:13.740 --> 00:05:17.220 after he has brought in more consultants or expanded the ratio. 111 00:05:17.220 --> 00:05:21.100 And so the main lesson here is that sometimes the path of growth isn't more clients. 112 00:05:21.100 --> 00:05:22.500 It might be better clients. 113 00:05:22.500 --> 00:05:27.140 So if you have the opportunity, instead of trying to work harder, appropriately charge 114 00:05:27.140 --> 00:05:31.060 with the market is saying they want to pay you and you're the one getting in the way. 115 00:05:31.060 --> 00:05:32.060 So that was a simple one. 116 00:05:32.060 --> 00:05:33.060 Let's do it. 117 00:05:33.060 --> 00:05:34.060 Let's rip it up a little bit. 118 00:05:34.060 --> 00:05:36.060 So second example, think about a software company, right? 119 00:05:36.060 --> 00:05:39.660 So imagine software going to be that's that helps service businesses, schedule appointments. 120 00:05:39.660 --> 00:05:40.660 All right. 121 00:05:40.660 --> 00:05:43.460 So the CEO proudly shows off all the new features that they're building and they're like, 122 00:05:43.460 --> 00:05:45.180 our products are going to be the best. 123 00:05:45.180 --> 00:05:46.620 And they's like, no one's can match us. 124 00:05:46.620 --> 00:05:49.020 But looking at their numbers, show something very different, right? 125 00:05:49.020 --> 00:05:52.340 So people who try their product love it and customers say a long time, the product works 126 00:05:52.340 --> 00:05:53.900 great, but they're still not growing. 127 00:05:53.900 --> 00:05:55.180 So what's the real problem? 128 00:05:55.180 --> 00:05:59.420 They spend only 5% of their money on marketing while their competitors spending 20 to 30% 129 00:05:59.420 --> 00:06:02.340 instead of a great product, but almost nobody knows it exists. 130 00:06:02.340 --> 00:06:04.060 They're fighting against irrelevance. 131 00:06:04.060 --> 00:06:08.060 And so they have a ding, ding, ding, demand problem, but they're putting all their money 132 00:06:08.060 --> 00:06:09.060 into the product. 133 00:06:09.060 --> 00:06:11.860 And now this can be tricky because of course you need to continue to improve the product. 134 00:06:11.860 --> 00:06:15.260 And if you keep improving the product, you might get to a point where the word of mouth 135 00:06:15.260 --> 00:06:18.420 alone can bring you in more customers. 136 00:06:18.420 --> 00:06:21.820 Now the big, the big question mark on this one, and I want to make a clear point here. 137 00:06:21.820 --> 00:06:25.700 And this is something that it took me a long time to figure out is that I've been on both 138 00:06:25.700 --> 00:06:28.580 polar extremes here where I'm like, marketing is the only thing that matters. 139 00:06:28.580 --> 00:06:29.580 Everything else is relevant. 140 00:06:29.580 --> 00:06:31.980 And on the other extreme, it's like, product is the only thing that matters. 141 00:06:31.980 --> 00:06:34.420 And the product is good enough, then you shouldn't need marketing. 142 00:06:34.420 --> 00:06:39.980 The asterisk is you need to have a product that the customers of that product have high 143 00:06:39.980 --> 00:06:44.540 surface area exposure to other people that could use that product. 144 00:06:44.540 --> 00:06:45.860 So let me explain. 145 00:06:45.860 --> 00:06:51.300 So if Facebook for example is for people, and so if you talk to other people, you have 146 00:06:51.300 --> 00:06:53.540 something that you can refer them to. 147 00:06:53.540 --> 00:06:58.380 But if you're in a super hyper, like if you're like, I do IT consulting for Fortune 100 148 00:06:58.380 --> 00:07:02.220 companies, the likelihood that you're going to get like referrals from that, I mean, 149 00:07:02.220 --> 00:07:04.300 you can, but it's not like you're going to get viral growth. 150 00:07:04.300 --> 00:07:07.020 I mean, for sure, word of mouth is me a part of it, but you're probably going to have 151 00:07:07.020 --> 00:07:09.500 to go out and get business. 152 00:07:09.500 --> 00:07:14.020 And so there is an element where at some point, especially the more niche you are, especially 153 00:07:14.020 --> 00:07:18.660 the more higher end you are, the more you are going to likely be able to keep customers 154 00:07:18.660 --> 00:07:22.700 because your product's really good, but it's not going to necessarily grow the business. 155 00:07:22.700 --> 00:07:26.700 So if looking at the business from the constraints perspective, we'd be like, okay, let's pull 156 00:07:26.780 --> 00:07:32.580 some resources, cash flow talent, from continuing to invest in the product where we currently 157 00:07:32.580 --> 00:07:33.580 have no one churning. 158 00:07:33.580 --> 00:07:34.580 Right? 159 00:07:34.580 --> 00:07:35.580 So like no one's leaving. 160 00:07:35.580 --> 00:07:36.580 Everyone loves it. 161 00:07:36.580 --> 00:07:40.420 But the thing is is that we want more people in, and so let's go get more customers. 162 00:07:40.420 --> 00:07:42.260 Again, I'm not saying make your product bad. 163 00:07:42.260 --> 00:07:47.460 I'm saying let that dog lie and then reallocate some resources so you can let more people know 164 00:07:47.460 --> 00:07:51.700 about the stuff because if the product is that good, then you might be able to just double 165 00:07:51.700 --> 00:07:55.740 the customers in just a few months without even changing the product and people continue 166 00:07:55.740 --> 00:07:56.900 to stay and pay. 167 00:07:56.900 --> 00:07:59.740 And fundamentally, we have this big misconception that from harder we work on something the 168 00:07:59.740 --> 00:08:04.580 better it necessarily is, but oftentimes products get way worse through addition. 169 00:08:04.580 --> 00:08:07.900 And so oftentimes you can improve a product a lot by just deleting things. 170 00:08:07.900 --> 00:08:12.060 And from a service perspective, you have a service business just letting the team work, 171 00:08:12.060 --> 00:08:13.060 right? 172 00:08:13.060 --> 00:08:16.460 Because the constant change oftentimes actually erodes the product quality and the service 173 00:08:16.460 --> 00:08:20.820 quality more than the incremental improvement you think this new change is going to create. 174 00:08:20.820 --> 00:08:24.300 And so some of the best years of different businesses that I've owned have been when 175 00:08:24.300 --> 00:08:28.500 I'm like not super involved with it because I'm like, hey, I've already done the thing. 176 00:08:28.500 --> 00:08:31.820 Let them just keep getting better at sales and let the team get better at onboard and 177 00:08:31.820 --> 00:08:35.620 let the team get better at customer success and just don't mess with it. 178 00:08:35.620 --> 00:08:40.500 Just let the natural improvement of humans improve the performance of the business. 179 00:08:40.500 --> 00:08:44.420 So in this particular business, the founder would likely take their free time and put all 180 00:08:44.420 --> 00:08:48.380 of it into getting more customers and they'd have to just figure out, am I going to run 181 00:08:48.380 --> 00:08:49.380 ads? 182 00:08:49.380 --> 00:08:50.380 Am I going to do outbound? 183 00:08:50.380 --> 00:08:52.020 Am I going to do affiliates? 184 00:08:52.260 --> 00:08:54.100 Am I going to make content? 185 00:08:54.100 --> 00:08:57.500 Which of these strategies am I going to use in order to get more people in the door? 186 00:08:57.500 --> 00:08:58.860 So let's walk through example number three. 187 00:08:58.860 --> 00:09:01.660 Let's say you're brick and mortar restaurant, you stir food. 188 00:09:01.660 --> 00:09:07.380 So imagine, and we actually had a business house out here, two hour waits on Saturday, 189 00:09:07.380 --> 00:09:08.380 right? 190 00:09:08.380 --> 00:09:10.820 But they're empty on a Tuesday afternoon. 191 00:09:10.820 --> 00:09:14.460 Same business, different problems depending on how you look at it and more importantly, 192 00:09:14.460 --> 00:09:15.460 when you look at it. 193 00:09:15.460 --> 00:09:19.660 So let's imagine the steakhouse, let's just call it a steakhouse, loves marketing, right? 194 00:09:19.660 --> 00:09:23.140 And keep saying we need more ads, we need more specials, we need more customers, right? 195 00:09:23.140 --> 00:09:25.900 And so he's spending thousands on ads every single month. 196 00:09:25.900 --> 00:09:27.140 But this is the twist. 197 00:09:27.140 --> 00:09:31.700 On Saturday and Friday nights, people are waiting 90 plus minutes for a table and they 198 00:09:31.700 --> 00:09:33.500 got to turn people away the door. 199 00:09:33.500 --> 00:09:38.060 And so more marketing would just mean more angry people who got dressed up, pulled up 200 00:09:38.060 --> 00:09:41.180 to the restaurant they wanted to go to and can't get in. 201 00:09:41.180 --> 00:09:45.900 So here's three different ways that we could solve this potential supply issue that only 202 00:09:45.900 --> 00:09:47.860 happens on certain days. 203 00:09:47.860 --> 00:09:51.780 The number one is, we could just raise prices on Friday and Saturday. 204 00:09:51.780 --> 00:09:54.900 So you give a different menu for weekends than you do during weekdays. 205 00:09:54.900 --> 00:09:58.860 And that extra increase could have a dramatic effect on the business. 206 00:09:58.860 --> 00:10:01.980 Restaurants typically run lower margins than most businesses, so let's just say they run 207 00:10:01.980 --> 00:10:02.980 10% margins. 208 00:10:02.980 --> 00:10:07.180 A 20% price increase would triple the profit on those two days. 209 00:10:07.180 --> 00:10:08.660 But here's where it gets kind of nasty. 210 00:10:08.660 --> 00:10:12.140 If those two days Friday and Saturday were half the revenue of the business is being 211 00:10:12.140 --> 00:10:16.140 generated, then you want and a half x the profit of the business just from increasing the 212 00:10:16.140 --> 00:10:17.820 prices in those two days. 213 00:10:17.820 --> 00:10:20.340 But what are some of the downstream effects that happen from that? 214 00:10:20.340 --> 00:10:24.100 Well people know that on the weekends it's a little bit more what happens to that demand. 215 00:10:24.100 --> 00:10:25.300 He's good at marketing. 216 00:10:25.300 --> 00:10:28.540 Some of them might not come, but a certain percentage would be like, I love this restaurant, 217 00:10:28.540 --> 00:10:30.140 but I don't want to pay extra for it. 218 00:10:30.140 --> 00:10:31.900 So all of a sudden I'm going to spread during the week. 219 00:10:31.900 --> 00:10:35.420 And so what we do is we actually spread out the demand to meet the capacity. 220 00:10:35.420 --> 00:10:38.340 Now what are some other things that the restaurant owner could do? 221 00:10:38.340 --> 00:10:40.740 They could let people pay extra to skip the line. 222 00:10:40.740 --> 00:10:44.580 This wouldn't necessarily solve the constraint, but it would make the business more money. 223 00:10:44.580 --> 00:10:47.180 Or they could just stay open later because they might find out they're like, hey, you 224 00:10:47.180 --> 00:10:48.180 know what? 225 00:10:48.180 --> 00:10:49.180 We close at nine, but we still have lines. 226 00:10:49.180 --> 00:10:50.180 It's like, all right. 227 00:10:50.180 --> 00:10:51.180 Well, let's close at 11. 228 00:10:51.180 --> 00:10:52.180 Right. 229 00:10:52.180 --> 00:10:55.420 And so the result is if you just did, I mean, shoot, if you did all three of those things, 230 00:10:55.420 --> 00:10:59.420 if you had an increase of price on weekends, you're literally going to make more if no 231 00:10:59.420 --> 00:11:01.140 one else came the rest of the week. 232 00:11:01.140 --> 00:11:04.220 But some of that demand is going to reroute and you'll also catch sales over here that 233 00:11:04.220 --> 00:11:08.060 you were otherwise turning away, telling people they can pay to skip the line either through 234 00:11:08.060 --> 00:11:12.220 a membership or just literally just paying at the door in order to do so would even further 235 00:11:12.220 --> 00:11:14.060 because it's all margin, right? 236 00:11:14.060 --> 00:11:15.580 All margin to the bottom line. 237 00:11:15.580 --> 00:11:19.940 And the third piece is that if they're staying later, this would even further allow them 238 00:11:19.940 --> 00:11:24.940 to capitalize on the demand that this really good marketing owner generated. 239 00:11:24.940 --> 00:11:30.180 Real quick guys, I have a special, special gift for you for being loyal listeners of the 240 00:11:30.180 --> 00:11:31.580 podcast. 241 00:11:31.580 --> 00:11:37.020 Layla and I spent probably an entire quarter putting together our scaling roadmap. 242 00:11:37.020 --> 00:11:42.580 It's breaking, scaling into 10 stages and across all eight functions of the business. 243 00:11:42.580 --> 00:11:45.700 So you've got marketing, you've got sales, you've got product, you got customer success, 244 00:11:45.700 --> 00:11:49.700 you've got IT, you've got recruiting, you've got HR, you've got finance, and we show the 245 00:11:49.700 --> 00:11:53.180 problems that emerge at every level of scale and how to graduate to the next level. 246 00:11:53.180 --> 00:11:56.540 It's all free and you can get it personalized to you. 247 00:11:56.540 --> 00:11:59.300 So it's about 30-ish pages for each of the stages. 248 00:11:59.300 --> 00:12:03.180 Once you answer the questions, it will tell you exactly where you're at and what you need 249 00:12:03.180 --> 00:12:04.180 to do to grow. 250 00:12:04.180 --> 00:12:08.420 It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the 251 00:12:08.420 --> 00:12:11.300 part that's relevant to you, which will probably be about 90 minutes. 252 00:12:11.300 --> 00:12:15.540 And so if that's at all interesting, you can go to acquisition.com forward slash roadmap, 253 00:12:15.540 --> 00:12:20.020 R-O-A-D, map, roadmap. 254 00:12:20.020 --> 00:12:21.020 Right? 255 00:12:21.020 --> 00:12:25.380 And so we're talking like 100% increases in profit, sometimes more just from three small 256 00:12:25.380 --> 00:12:26.380 changes. 257 00:12:26.380 --> 00:12:30.140 And the real reason is that originally, he was like, we need to market more because we're 258 00:12:30.140 --> 00:12:31.740 not busy during the week. 259 00:12:31.740 --> 00:12:34.540 And all he was doing was just keeping jamming more into Fridays and Saturdays where he 260 00:12:34.540 --> 00:12:36.060 was capacity constrained. 261 00:12:36.060 --> 00:12:41.020 But by solving the right problem, he actually can't unlock the growth in the business. 262 00:12:41.020 --> 00:12:44.220 And if you're in one of these positions, let me give you a little tip. 263 00:12:44.220 --> 00:12:46.340 People hate getting prices raised on them. 264 00:12:46.340 --> 00:12:47.860 Of course they do. 265 00:12:47.860 --> 00:12:51.140 But what can you do that actually has the same net effect to the business? 266 00:12:51.140 --> 00:12:57.780 Well, instead of saying weekends are 20% more, you can say weekdays are 20% less. 267 00:12:57.780 --> 00:13:01.700 People are happy to get a discount and then pay normal on Fridays and Saturdays. 268 00:13:01.700 --> 00:13:02.700 So it's all how you frame it. 269 00:13:02.700 --> 00:13:04.740 And so if you're in one of those businesses and you're thinking about how you want to 270 00:13:04.740 --> 00:13:06.500 do it, think about it like that. 271 00:13:06.500 --> 00:13:07.500 All right, so let's do a different one. 272 00:13:07.500 --> 00:13:08.500 Let's do an example for it. 273 00:13:08.500 --> 00:13:09.860 So online business. 274 00:13:09.860 --> 00:13:15.060 So let's imagine this is an online fitness equipment store, all right, during COVID. 275 00:13:15.060 --> 00:13:18.460 All right, so home workout, boom, everybody, you know, all the stores are empty, right? 276 00:13:18.460 --> 00:13:21.100 And so overnight, their sales go up 4x, right? 277 00:13:21.100 --> 00:13:22.100 Sounds amazing. 278 00:13:22.100 --> 00:13:25.820 Well, for anybody who's in, in some of these businesses that had disproportionate demand 279 00:13:25.820 --> 00:13:27.660 during the time, pain is pain. 280 00:13:27.660 --> 00:13:28.900 I'll just say it that way. 281 00:13:28.900 --> 00:13:32.420 You would prefer to sell out and have that pain than have no one buying. 282 00:13:32.420 --> 00:13:36.140 So if I had to pick, I'd rather be supply constrained than demand constrained, but both 283 00:13:36.140 --> 00:13:37.140 suck. 284 00:13:37.140 --> 00:13:38.140 All right. 285 00:13:38.140 --> 00:13:40.060 Back to the example, they sell out of everything. 286 00:13:40.060 --> 00:13:41.580 Their suppliers can't keep up. 287 00:13:41.580 --> 00:13:45.380 But instead of focusing all their energy on getting more inventory and improving their 288 00:13:45.380 --> 00:13:46.740 supply, they keep running ads, right? 289 00:13:46.740 --> 00:13:47.740 They keep marketing. 290 00:13:47.740 --> 00:13:49.460 They think, oh, we just need to ride this wave. 291 00:13:49.460 --> 00:13:50.460 Maybe we'll pre-sell. 292 00:13:50.460 --> 00:13:51.460 We'll keep selling more and more. 293 00:13:51.460 --> 00:13:54.500 Well, the result is that shipping times go from two weeks to eight weeks, bad reviews 294 00:13:54.500 --> 00:13:58.060 start pouring in, customer service gets swanced, angry emails. 295 00:13:58.060 --> 00:14:01.100 And all they end up doing is making the problem worse with each new sale because they aren't 296 00:14:01.100 --> 00:14:03.500 fixing the real issue, obviously, which is supply. 297 00:14:03.500 --> 00:14:07.220 Now once they realize this, if they were to actually tackle the problem, there's basically 298 00:14:07.220 --> 00:14:10.300 only two core things that this business owner could do. 299 00:14:10.300 --> 00:14:12.900 Number one is sell something different. 300 00:14:12.900 --> 00:14:16.220 Number two is going to be increase the supply of the business. 301 00:14:16.220 --> 00:14:17.700 So I'm going to break that down. 302 00:14:17.700 --> 00:14:21.460 So the sexy thing to do would be say, okay, we have all these customers that just bought 303 00:14:21.460 --> 00:14:22.860 our product from us. 304 00:14:22.860 --> 00:14:25.820 Is there something that's intangible that we can sell them that we're not going to run 305 00:14:25.820 --> 00:14:28.460 out of to immediately generate more cash flow? 306 00:14:28.460 --> 00:14:32.900 And maybe that cash flow could help us pay our vendors more aggressively to put us at 307 00:14:32.900 --> 00:14:33.900 the front of the line. 308 00:14:33.900 --> 00:14:35.420 Now, somebody might hear this and be like, what? 309 00:14:35.420 --> 00:14:37.940 A vendor would skip a line? 310 00:14:37.940 --> 00:14:40.060 Lines are as old as time, right? 311 00:14:40.060 --> 00:14:41.740 They're the only fair system in the world. 312 00:14:41.740 --> 00:14:44.380 No, of course, you could pay to get the front of the line and say, hey, if I paid to 20% 313 00:14:44.380 --> 00:14:46.220 more, do you think you could put my stuff first? 314 00:14:46.220 --> 00:14:47.220 Of course, right? 315 00:14:47.220 --> 00:14:48.540 Money talks. 316 00:14:48.540 --> 00:14:49.860 And so how would you generate this? 317 00:14:49.860 --> 00:14:52.220 So I'd be like, okay, I've got this fitness equipment. 318 00:14:52.220 --> 00:14:55.340 Maybe I go reach back out and sell a warranty with it. 319 00:14:55.340 --> 00:15:00.780 Maybe I talked to a couple of fitness app developers and I say, hey, you guys have a product. 320 00:15:00.780 --> 00:15:02.620 I have all these customers that just bought this thing. 321 00:15:02.620 --> 00:15:04.380 Do you think I could white label your thing? 322 00:15:04.380 --> 00:15:08.660 Or just do some sort of affiliate deal or I can sell your product to my audience, right? 323 00:15:08.660 --> 00:15:12.660 In each of these situations, the affiliate deal I'm tapping into somebody else's supply, 324 00:15:12.660 --> 00:15:13.660 right? 325 00:15:13.660 --> 00:15:14.660 And say, cool, you've already got supply. 326 00:15:14.660 --> 00:15:16.340 Well, let me sell through my distribution. 327 00:15:16.340 --> 00:15:17.860 Alternatively, I have my distribution. 328 00:15:17.860 --> 00:15:20.860 I could sell an insurance product, something like that that doesn't really have, there's 329 00:15:20.860 --> 00:15:22.340 no supply associated with it. 330 00:15:22.340 --> 00:15:23.820 I can maybe sell some services on top. 331 00:15:23.820 --> 00:15:26.020 You're like, hey, are there other things that you're looking at? 332 00:15:26.020 --> 00:15:28.540 Are you thinking about getting flooring or are you thinking about how you want to design 333 00:15:28.540 --> 00:15:29.540 the gym? 334 00:15:29.540 --> 00:15:30.540 Do you want to decorate the gym? 335 00:15:30.540 --> 00:15:32.940 Like, these are all different things that we could sell to that existing base rather 336 00:15:32.940 --> 00:15:36.540 than continue to be more people in, who even if they had the money, we can't deliver 337 00:15:36.540 --> 00:15:38.020 on the core service. 338 00:15:38.020 --> 00:15:41.180 So in all of those situations, these are ways you could easily generate the cash to then 339 00:15:41.180 --> 00:15:46.340 have leverage with suppliers or reinvest in the supply chain so that you could get your 340 00:15:46.340 --> 00:15:48.380 stuff to you faster. 341 00:15:48.380 --> 00:15:53.220 And the nice thing is that this sounds obvious and yet, no one does it. 342 00:15:53.220 --> 00:15:55.700 And if you look at some of the biggest e-commerce companies in the world or just physical 343 00:15:55.700 --> 00:15:58.540 product businesses, they have very dialed supply chain. 344 00:15:58.540 --> 00:15:59.540 They have multiple vendors. 345 00:15:59.540 --> 00:16:03.700 They have multiple kind of points of failure or rather, not they have redundancies to eliminate 346 00:16:03.700 --> 00:16:05.740 single points of failure within the system. 347 00:16:05.740 --> 00:16:09.100 And I was talking to Freda Mayan, who's looking at buying a very large supplement company 348 00:16:09.100 --> 00:16:10.500 that you've heard of. 349 00:16:10.500 --> 00:16:13.580 And one of the big things that he was able to do is like one of his core competencies is 350 00:16:13.580 --> 00:16:16.140 that he has an amazing supply. 351 00:16:16.140 --> 00:16:19.460 And so he gets his raw materials and he buys better than just about anybody else. 352 00:16:19.460 --> 00:16:22.980 And so if you're like, oh, it's supply chain issues, it's like that's the core of the 353 00:16:22.980 --> 00:16:23.980 business. 354 00:16:23.980 --> 00:16:28.220 Well, like if you're at a physical product business, supply chain is, it's the constraint 355 00:16:28.220 --> 00:16:31.500 oftentimes as soon as you, if you have a great product, it will become the constraint 356 00:16:31.500 --> 00:16:33.500 or if you're good at marketing, it will become the constraint. 357 00:16:33.500 --> 00:16:36.420 And if you want to see it at product businesses that are physical, you got to get good at 358 00:16:36.420 --> 00:16:37.420 both of those things. 359 00:16:37.420 --> 00:16:39.820 So this is the business you're really in. 360 00:16:39.820 --> 00:16:41.020 And I want to be really clear. 361 00:16:41.020 --> 00:16:43.780 This is definitely not me advocating for you having one in the red dress. 362 00:16:43.780 --> 00:16:47.300 In this very hypothetical scenario of somebody using COVID and they can't do anything else 363 00:16:47.300 --> 00:16:51.180 they need to generate cash so that they can move things forward, I'm okay with what 364 00:16:51.180 --> 00:16:55.380 I would consider like one time or short term options that you can generate cash in the 365 00:16:55.380 --> 00:16:56.380 business. 366 00:16:56.380 --> 00:16:57.380 It's the reality of business. 367 00:16:57.380 --> 00:16:58.380 Sometimes you got to make those plays. 368 00:16:58.380 --> 00:17:01.100 Rather than saying, oh, we're going to start another business and that's why with each 369 00:17:01.100 --> 00:17:05.020 of those things, they're not like, oh, we're going to maybe the, maybe the decoration 370 00:17:05.020 --> 00:17:06.020 thing. 371 00:17:06.020 --> 00:17:07.020 That was a little bit much. 372 00:17:07.020 --> 00:17:09.460 But like the insurance product or white labeling someone else's thing, both those 373 00:17:09.460 --> 00:17:13.620 things don't really require to do much more than just introduce it to your existing base. 374 00:17:13.620 --> 00:17:16.460 Sell them, take the split, take the cash and then reinvest into the thing that actually 375 00:17:16.460 --> 00:17:17.940 is limiting the business. 376 00:17:17.940 --> 00:17:20.760 If you're hearing this, you're like, well, that's, that's nice for a consultant, that's 377 00:17:20.760 --> 00:17:25.880 nice for a restaurant, that's nice for an online store, but my business is special. 378 00:17:25.880 --> 00:17:28.120 I'm a home services business. 379 00:17:28.120 --> 00:17:30.480 This couldn't possibly apply to me. 380 00:17:30.480 --> 00:17:33.000 So let's say you're a Palmer, right? 381 00:17:33.000 --> 00:17:37.600 And you're running Google PBC and you're booking every slot out in your calendar and your 382 00:17:37.600 --> 00:17:39.000 vans are always on the road, right? 383 00:17:39.000 --> 00:17:42.800 Technicians are working overtime and even with the overtime, like because you got to pay 384 00:17:42.800 --> 00:17:46.200 time and a half or whatever your overtime rates are, profits are starting to compress. 385 00:17:46.200 --> 00:17:47.200 It's like, wait a second. 386 00:17:47.200 --> 00:17:50.680 It's like, we're fully booked and we're just not that profitable. 387 00:17:50.680 --> 00:17:53.640 So this particular owner might think, oh, I need to get more customers or I need to 388 00:17:53.640 --> 00:17:55.120 get more technicians. 389 00:17:55.120 --> 00:17:58.720 But if we look under the hood a little bit and this is comment, it actually isn't either 390 00:17:58.720 --> 00:18:01.200 of those things, you're like, wait, what is it? 391 00:18:01.200 --> 00:18:02.760 Well, let's walk through it. 392 00:18:02.760 --> 00:18:08.560 So we might find out that their plumbers finish the jobs quickly, but they rarely offer additional 393 00:18:08.560 --> 00:18:09.560 services or upgrades. 394 00:18:09.560 --> 00:18:12.760 They're not selling them into the membership on a long-term basis. 395 00:18:12.760 --> 00:18:15.640 They're not looking for a repair schedule that they're going to come back. 396 00:18:15.640 --> 00:18:19.280 They're not looking, we're asking for the other units in the house if they need to 397 00:18:19.280 --> 00:18:20.960 dig a look at those two. 398 00:18:20.960 --> 00:18:26.720 And so the thing is, is that they have a supply problem with their sales skills rather than 399 00:18:26.720 --> 00:18:28.480 how many jobs they can do. 400 00:18:28.480 --> 00:18:34.680 And so if the exact same number of customers could get sold twice the services, but they're 401 00:18:34.680 --> 00:18:39.240 already there, right, it only takes a little bit more time for them to do the delivery. 402 00:18:39.240 --> 00:18:44.400 They could basically better utilize their existing supply to increase revenue and profit 403 00:18:44.400 --> 00:18:45.840 within the business. 404 00:18:45.840 --> 00:18:49.400 And so what we're actually diving deeper into is that there's basically this Mondo decision 405 00:18:49.400 --> 00:18:52.600 tree that ends up, if you've seen any of my cash guys episodes or Mosy tank, whatever 406 00:18:52.600 --> 00:18:56.320 I decide to call them, the first thing I typically look for is this supplier demand. 407 00:18:56.320 --> 00:19:00.760 Once I'm in the, okay, maybe it's a demand issue or maybe it's a supply issue, we start 408 00:19:00.760 --> 00:19:01.760 diving deeper. 409 00:19:01.760 --> 00:19:04.920 It's like, okay, well, maybe they're mispriced or maybe they don't have enough talent. 410 00:19:04.920 --> 00:19:09.520 Or the existing talent there isn't selling enough per job or per, you know, basically 411 00:19:09.520 --> 00:19:11.800 average cart value isn't high enough. 412 00:19:11.800 --> 00:19:15.200 And because of that, this particular owner can't spend to get more customers. 413 00:19:15.200 --> 00:19:16.520 You can't spend to get more technicians. 414 00:19:16.520 --> 00:19:17.720 So what do you do in that situation? 415 00:19:17.720 --> 00:19:20.440 I can't spend to get more of either because profits are thin. 416 00:19:20.440 --> 00:19:23.360 Well, we have to either raise the prices, but if they're competitive, then it's like, well, 417 00:19:23.360 --> 00:19:24.760 then maybe we just sell more work. 418 00:19:24.760 --> 00:19:27.640 And so fundamentally, this is how you dive through and start diagnosing some of the issues 419 00:19:27.640 --> 00:19:28.920 within a business. 420 00:19:28.920 --> 00:19:32.160 But the actual constraint, like, what would this owner have to do? 421 00:19:32.160 --> 00:19:35.960 Well, they would start teaching their plumbers, simple sales skills and give them a two three 422 00:19:35.960 --> 00:19:39.600 line script that says, once you finish this, ask them if they want this, right? 423 00:19:39.600 --> 00:19:42.400 They'd roleplay back and forth every morning they meet, they see what percentage of people 424 00:19:42.400 --> 00:19:46.520 in the upsell to a second job and all of a sudden they're like, wait, we're up 750% 425 00:19:46.520 --> 00:19:47.720 now to another job. 426 00:19:47.720 --> 00:19:51.640 Well, guess what happens to revenue goes up by 50%, guess what else happens? 427 00:19:51.640 --> 00:19:56.400 If costs remain just about the same, a disproportionate amount of that revenue drops the bottom line. 428 00:19:56.400 --> 00:19:59.560 And most businesses that run paper than margins of what I would consider established 429 00:19:59.560 --> 00:20:02.480 industries are just missing a core part of the business. 430 00:20:02.480 --> 00:20:06.360 And so they're doing like step one and not step two and because of that, step two is 431 00:20:06.360 --> 00:20:07.720 what the profit is. 432 00:20:07.720 --> 00:20:09.440 So I'll give you a different example. 433 00:20:09.440 --> 00:20:13.920 So Ida business that came out that was doing some sort of enterprise software for like commercial 434 00:20:13.920 --> 00:20:14.920 building. 435 00:20:14.920 --> 00:20:17.160 So something cleaning and efficiency related, I can't remember. 436 00:20:17.160 --> 00:20:20.560 But I do absolutely recall why the business was stuck. 437 00:20:20.560 --> 00:20:24.720 Now, this founder had been stuck at the same revenue level for years, like eight years. 438 00:20:24.720 --> 00:20:26.560 He could not crack the serving level. 439 00:20:26.560 --> 00:20:30.160 And so what we did is we looked at basically all the metrics of the acquisition funnel. 440 00:20:30.160 --> 00:20:34.960 And so he had an outbound method because there's only, you know, he had lists of what commercial 441 00:20:34.960 --> 00:20:37.560 buildings were in the area that he could service. 442 00:20:37.560 --> 00:20:38.560 And you know, went through it. 443 00:20:38.560 --> 00:20:41.480 I was like, okay, how many of these are, you know, reach out to sitting today with the messaging 444 00:20:41.480 --> 00:20:42.560 and all that stuff's sounding good. 445 00:20:42.560 --> 00:20:43.960 And it was like, okay. 446 00:20:43.960 --> 00:20:48.240 So how many demos are you doing, you know, per week of your, you know, prodder service? 447 00:20:48.240 --> 00:20:50.640 And he was doing like 10 a week. 448 00:20:50.640 --> 00:20:51.960 And let me put this in context. 449 00:20:51.960 --> 00:20:54.160 He'd close two new deals that year. 450 00:20:54.160 --> 00:20:56.520 And I was like, wait, hold on. 451 00:20:56.520 --> 00:20:59.960 Ten demonstrations a week and you're closing to a year. 452 00:20:59.960 --> 00:21:05.000 And he was like, yeah, like, so you're closing two out of 500 demos is like, well, you say 453 00:21:05.000 --> 00:21:06.000 like that. 454 00:21:06.000 --> 00:21:07.000 It kind of sucks. 455 00:21:07.000 --> 00:21:08.000 I'm like, well, yeah, it kind of sucks. 456 00:21:08.000 --> 00:21:09.000 Right. 457 00:21:09.000 --> 00:21:13.600 But the thing is, is that in this particular instance, they weren't really even demand constraint. 458 00:21:13.600 --> 00:21:17.440 They were basically, I mean, they are functionally demand constraint, but the issue was not actually 459 00:21:17.440 --> 00:21:20.200 the amount of people who said they were interested in the product or the number reach out there 460 00:21:20.200 --> 00:21:23.600 or even the scripting of the conversation they're having. 461 00:21:23.600 --> 00:21:25.720 They just couldn't close. 462 00:21:25.720 --> 00:21:29.520 And so the leaders were like, when they came to talk to me, they were like, hey, I think 463 00:21:29.520 --> 00:21:30.800 we need to hire more salespeople. 464 00:21:30.800 --> 00:21:32.760 And the little of the plan was to double the sales team. 465 00:21:32.760 --> 00:21:33.760 Right. 466 00:21:33.760 --> 00:21:35.640 So they're going to double the sales team because they're like, hey, we listen to your stuff, 467 00:21:35.640 --> 00:21:36.960 do more like we're double sales teams. 468 00:21:36.960 --> 00:21:37.960 We can double our sales. 469 00:21:37.960 --> 00:21:40.200 I was like, my God, let's not do that. 470 00:21:40.200 --> 00:21:44.480 Let's just figure out how we can get 500, 500 demonstrations turned into 100 deals instead 471 00:21:44.480 --> 00:21:45.480 of two. 472 00:21:45.480 --> 00:21:47.000 It's a 50X right there. 473 00:21:47.000 --> 00:21:48.760 And this is an unbelievably valuable business. 474 00:21:48.760 --> 00:21:52.680 And the reason they've been able to stay at that, at that level is because they like 98% 475 00:21:52.680 --> 00:21:53.680 revenue retention. 476 00:21:53.680 --> 00:21:56.000 I mean, no one ever left the business because it was such a complex thing that they were 477 00:21:56.000 --> 00:21:58.040 establishing and setting up. 478 00:21:58.040 --> 00:22:02.720 And so the thing is, is that right now, if you look at your process, you might find 479 00:22:02.720 --> 00:22:05.040 that you're like, oh, actually, we have plenty of leads. 480 00:22:05.040 --> 00:22:08.640 And people are scheduling calls and they are showing up, but they're just not buying. 481 00:22:08.640 --> 00:22:10.400 Or they are scheduling and they're not showing. 482 00:22:10.400 --> 00:22:12.800 Or they're opting in, but they're not scheduling. 483 00:22:12.800 --> 00:22:18.800 And so you might have this massive leak in your existing demand process that creates the 484 00:22:18.800 --> 00:22:22.160 demands to betray and then people mistakenly think, oh, I think I'm going after the wrong 485 00:22:22.160 --> 00:22:23.160 market. 486 00:22:23.160 --> 00:22:27.160 Or, oh, I think my ad suck or, oh, I think the target is off. 487 00:22:27.160 --> 00:22:31.720 But if people are the right type of people that are opting in, we have a sales process 488 00:22:31.720 --> 00:22:33.040 problem. 489 00:22:33.040 --> 00:22:34.920 That's where the demand leak is happening. 490 00:22:34.920 --> 00:22:37.920 And so rather than say, oh, let's double our ad spend or let's double our sales team, 491 00:22:37.920 --> 00:22:40.040 like, we got to fix the problem. 492 00:22:40.040 --> 00:22:42.880 So after I dug into the business a little bit more, I'll tell you where the actual world 493 00:22:42.880 --> 00:22:47.720 market was, was that they were presenting to the wrong people. 494 00:22:47.720 --> 00:22:51.920 So the way this particular business worked is that they had people who owned the buildings, 495 00:22:51.920 --> 00:22:53.360 who wanted to save money. 496 00:22:53.360 --> 00:22:57.440 And then they had building managers, the guys who actually like ran the buildings. 497 00:22:57.440 --> 00:22:59.080 And those were not the same person. 498 00:22:59.080 --> 00:23:01.200 And so they have something called the principal agent problem, which is basically the 499 00:23:01.200 --> 00:23:04.600 person who has to do the work for a person who makes the decision or two different people. 500 00:23:04.600 --> 00:23:07.640 And so all the owners were like, yeah, go save me money. 501 00:23:07.640 --> 00:23:10.280 But then when it got to that, the manager of the building, they were like, I don't want 502 00:23:10.280 --> 00:23:14.360 to do any more work because all this meant for them, they're not going to get paid more. 503 00:23:14.360 --> 00:23:18.400 And they had the decision making power even though the owners were the ones who were writing 504 00:23:18.400 --> 00:23:19.400 the check. 505 00:23:19.400 --> 00:23:25.400 And so basically what we did was we re-scripted the process to essentially elevate the status 506 00:23:25.400 --> 00:23:28.960 of the manager and make it all about them. 507 00:23:28.960 --> 00:23:32.840 And so basically it's like, just like what business are you really in? 508 00:23:32.840 --> 00:23:35.800 It's what customer do you really serve? 509 00:23:35.800 --> 00:23:38.560 And so that was kind of the million, and in this instance is probably $10 million plus 510 00:23:38.560 --> 00:23:40.920 question that we got to answer with that business. 511 00:23:40.920 --> 00:23:46.680 And so by simply redefining that sales process for that specific avatar, that is what unlocked 512 00:23:46.680 --> 00:23:48.280 growth. 513 00:23:48.280 --> 00:23:50.320 So let's go completely other direction. 514 00:23:50.320 --> 00:23:54.720 Let's say that you're an online course creator, you're a YouTuber, you sell some sort 515 00:23:54.720 --> 00:23:56.720 of digital product, all right? 516 00:23:56.720 --> 00:24:00.120 And let's say that you've got students, you've got high completion rates, and you get 517 00:24:00.120 --> 00:24:02.000 great results and people who've great reviews. 518 00:24:02.000 --> 00:24:04.320 Okay, here's the problem. 519 00:24:04.320 --> 00:24:05.320 They're breaking even. 520 00:24:05.320 --> 00:24:08.400 How could this even happen when you have a product that costs you nothing? 521 00:24:08.400 --> 00:24:11.200 This particular guy thinks, oh, the problem's marketing. 522 00:24:11.200 --> 00:24:15.200 So he's spending more on fancy funnels, paid ads, but every time like a new customer comes 523 00:24:15.200 --> 00:24:18.360 in, they barely make any profit after the group add costs. 524 00:24:18.360 --> 00:24:19.720 So what's the real problem? 525 00:24:19.720 --> 00:24:21.680 Is that, well, there's a number of things. 526 00:24:21.680 --> 00:24:23.080 So let's break down each of them. 527 00:24:23.080 --> 00:24:25.680 So either he's priced too low, right? 528 00:24:25.680 --> 00:24:29.520 So oftentimes, you'll find that you can double price and maybe sales may go down to 15% 529 00:24:29.520 --> 00:24:30.520 if that happens. 530 00:24:30.520 --> 00:24:33.960 Then it's like, boom, we fix the business just without one pricing issue. 531 00:24:33.960 --> 00:24:37.200 Sometimes it could just be the ads suck, which is a real one, right? 532 00:24:37.200 --> 00:24:40.800 The ads suck or the ads are good, but they're outdated because they're not making sufficient 533 00:24:40.800 --> 00:24:41.800 ads. 534 00:24:41.800 --> 00:24:44.920 So it's either quality of ads problem or quantity of ads problem or both. 535 00:24:44.920 --> 00:24:48.840 You could also have a funnel issue, a conversion rate optimization problem, which is like the 536 00:24:48.840 --> 00:24:52.480 headlines and the way that the pages are actually laid out don't actually make sense to convert 537 00:24:52.480 --> 00:24:53.600 traffic. 538 00:24:53.600 --> 00:24:57.640 And so this actually, I had this with an HVAC company, not that long ago, they were running 539 00:24:57.640 --> 00:25:00.640 their traffic to basically their home page. 540 00:25:00.640 --> 00:25:06.440 And it worked kind of, but if we just ran it to a page that was dedicated to collecting 541 00:25:06.440 --> 00:25:10.520 information so that we could get people to get on the phone and then buy something, like 542 00:25:10.520 --> 00:25:17.200 this is where you see like 3X, 5X, 7X increases in a business from one clear drop off point. 543 00:25:17.200 --> 00:25:19.480 So let's just play this out with this course greater. 544 00:25:19.480 --> 00:25:24.440 So if he tried raising his prices from, let's say, $1,000 to $3,000 for his main course, 545 00:25:24.440 --> 00:25:25.760 people around him I think he's crazy. 546 00:25:25.760 --> 00:25:27.520 No one's going to pay that, you know, whatever, right? 547 00:25:27.520 --> 00:25:28.520 But what would actually happen? 548 00:25:28.520 --> 00:25:33.560 So sales might drop by 15 or 20%, which would mean his revenue nearly triples overnight. 549 00:25:33.560 --> 00:25:38.560 But then by creating a high-end version for $10,000, which another 10% of the market might 550 00:25:38.560 --> 00:25:42.080 happily purchase, you might get another $1,000 per sale. 551 00:25:42.080 --> 00:25:47.160 So you go from $1,000 to $4,000 total per sale, 10% times 10,000 is an extra thousand. 552 00:25:47.160 --> 00:25:48.720 Maybe $3,000 is the new change. 553 00:25:48.720 --> 00:25:53.160 And that almost made up for the sales drop that he had in terms of number of units. 554 00:25:53.160 --> 00:25:57.000 And so same content, same marketing, very different results, all because he found and fixed 555 00:25:57.000 --> 00:25:58.600 the actual problem of the business. 556 00:25:58.600 --> 00:26:03.920 Now let's say alternatively, in his special snowflake market, he can't raise the price. 557 00:26:03.920 --> 00:26:04.920 Fine. 558 00:26:04.920 --> 00:26:08.160 So in this instance, do we say, okay, well, what UGC or what user generated content are 559 00:26:08.160 --> 00:26:09.320 you currently putting out? 560 00:26:09.320 --> 00:26:12.880 He also makes his own content and we're like, okay, well, what are your best performers? 561 00:26:12.880 --> 00:26:15.320 These ones, okay, why are your ads not those? 562 00:26:15.600 --> 00:26:17.480 I did thought they had to be different. 563 00:26:17.480 --> 00:26:22.560 Take your best organic content out of five seconds CTA at the end, run it as a paid ad. 564 00:26:22.560 --> 00:26:26.520 Especially if you know that some organic content is generated sales, do more of that 565 00:26:26.520 --> 00:26:27.880 and put money behind it. 566 00:26:27.880 --> 00:26:32.080 At the very least, if you're looking at your process of how people are getting into your 567 00:26:32.080 --> 00:26:36.240 business, for the love of God, make sure that when you're sending traffic to a page, 568 00:26:36.240 --> 00:26:38.800 it's actually structured to convert the traffic. 569 00:26:38.800 --> 00:26:43.240 Like you sending people to a beautiful homepage, have the beautiful homepage, 570 00:26:43.240 --> 00:26:45.680 but that's not the first thing they're going to see. 571 00:26:45.680 --> 00:26:50.240 Get their information and then give them the thing they want and then they can go and 572 00:26:50.240 --> 00:26:52.720 you know, peck around the site, look around. 573 00:26:52.720 --> 00:26:57.040 The thing is that they'll have time to look at it later, but right now we need to convert 574 00:26:57.040 --> 00:27:00.360 because people have very large motivation for very short periods of time when they see 575 00:27:00.360 --> 00:27:01.360 marketing. 576 00:27:01.360 --> 00:27:03.560 And in that very short window is when we need to maximize. 577 00:27:03.560 --> 00:27:04.960 So this is supplier domain constraint. 578 00:27:04.960 --> 00:27:08.480 Well, we're talking about raising his prices, but isn't raising prices what we do when 579 00:27:08.480 --> 00:27:09.960 we have supply constraints, right? 580 00:27:09.960 --> 00:27:11.600 Because you raise the prices, then fewer people buy. 581 00:27:11.600 --> 00:27:13.840 You create space and you also create profit. 582 00:27:13.840 --> 00:27:16.720 Well then why would we raise the prices when we have a demand constraint? 583 00:27:16.720 --> 00:27:18.320 Because we can't afford to get more customers. 584 00:27:18.320 --> 00:27:21.880 And so we need to raise the prices so that we can spend more money in ads, so that we 585 00:27:21.880 --> 00:27:23.080 can get more customers. 586 00:27:23.080 --> 00:27:27.080 Because fundamentally, could he, if we're answering the question, could he 2X the number of 587 00:27:27.080 --> 00:27:28.080 customers handling? 588 00:27:28.080 --> 00:27:29.080 Well, yeah, it's a course. 589 00:27:29.080 --> 00:27:30.080 It's very easy to get a login. 590 00:27:30.080 --> 00:27:32.840 The delivery is not the constraint of this particular problem. 591 00:27:32.840 --> 00:27:37.720 And so even though we have a demand constraint, we might have a similar solution to a supply 592 00:27:37.760 --> 00:27:39.160 constraint business. 593 00:27:39.160 --> 00:27:41.960 So I'll give you guys a little insight. 594 00:27:41.960 --> 00:27:45.800 My website, acquieses.com, I think is hideous. 595 00:27:45.800 --> 00:27:48.440 And I get people DMing me every day, be like, I read it, I just, I pour it. 596 00:27:48.440 --> 00:27:49.800 And I'm like, thanks for that. 597 00:27:49.800 --> 00:27:53.040 And the thing is, is that could my site be improved? 598 00:27:53.040 --> 00:27:54.040 Yes. 599 00:27:54.040 --> 00:27:57.640 The resources required to redo the site, it's going to be such a pain in the ass because 600 00:27:57.640 --> 00:28:00.320 every single apartment is going to have their own two cents of what they think it should 601 00:28:00.320 --> 00:28:01.320 look like. 602 00:28:01.320 --> 00:28:04.400 They want to, you know, we have to, we have to base, we're going to have to make hundreds 603 00:28:04.400 --> 00:28:07.280 of decisions on something that I then say, okay. 604 00:28:07.280 --> 00:28:11.280 Because all of these decisions and all of these resources is there something else we 605 00:28:11.280 --> 00:28:13.120 could do that will grow the business more. 606 00:28:13.120 --> 00:28:16.240 And oftentimes the answer is yes. 607 00:28:16.240 --> 00:28:22.200 And so for me, I've had notoriously ugly home, home pages because at the end of the day, 608 00:28:22.200 --> 00:28:23.560 they typically convert fine. 609 00:28:23.560 --> 00:28:26.960 And even though I'm like, oh my god, this is so ugly, I just deal with it because at the 610 00:28:26.960 --> 00:28:29.200 end of the day, it's not the constraint. 611 00:28:29.200 --> 00:28:31.440 And so I would say more times than not. 612 00:28:31.440 --> 00:28:36.000 And like, you hear this and it seems obvious when you're looking at someone else's business. 613 00:28:36.000 --> 00:28:39.400 When you look at your own, what you end up doing is you spend all your time doing the 614 00:28:39.400 --> 00:28:42.080 stuff you love because you love it. 615 00:28:42.080 --> 00:28:43.920 But the business might not need it. 616 00:28:43.920 --> 00:28:46.880 And so you spend all your time solving problems that don't need to be solved. 617 00:28:46.880 --> 00:28:50.720 And investing resources, the very limited resources you have as small business owner, towards 618 00:28:50.720 --> 00:28:56.200 problems that simply increase capacity, towards problems that simply increase potential. 619 00:28:56.200 --> 00:28:57.200 But not through putt. 620 00:28:57.200 --> 00:29:01.080 Let's say you've got four lanes, one lane and then four lanes, right on a highway. 621 00:29:01.080 --> 00:29:02.080 Okay. 622 00:29:02.080 --> 00:29:05.080 Well, if I take this one from four lanes to five lanes, is the traffic going to go faster? 623 00:29:05.080 --> 00:29:06.080 No. 624 00:29:06.080 --> 00:29:09.560 But this is what happens when you improve your website for no, and you don't get any 625 00:29:09.560 --> 00:29:13.320 increase in throughput in terms of your, your, your, your front end optimization, like you 626 00:29:13.320 --> 00:29:15.320 don't have a higher conversion rate because of that. 627 00:29:15.320 --> 00:29:17.200 You can't handle more customers because of that. 628 00:29:17.200 --> 00:29:20.600 And so all you did was you just spent time and money to increase potential. 629 00:29:20.600 --> 00:29:23.120 So with this business, is it a supplier domain constraint? 630 00:29:23.120 --> 00:29:27.920 Well, this one is a demand constraint, but less so that they don't have strong enough marketing. 631 00:29:27.920 --> 00:29:29.680 They didn't have strong enough sales. 632 00:29:29.680 --> 00:29:34.280 So the process itself and more specifically, they were almost like avatar constrained. 633 00:29:34.280 --> 00:29:35.800 They were trying to sell to the wrong person. 634 00:29:35.800 --> 00:29:37.960 They were convincing the business owners all day long. 635 00:29:37.960 --> 00:29:40.280 But the problem was the business owners weren't the ones making the decision. 636 00:29:40.280 --> 00:29:41.480 They got the form and the factory. 637 00:29:41.480 --> 00:29:44.080 The guy on the floor was the one who was making the call. 638 00:29:44.080 --> 00:29:46.920 So he's the real customer, which means chunked all the way up. 639 00:29:46.920 --> 00:29:48.400 Yes, it's a demand constraint. 640 00:29:48.400 --> 00:29:49.480 So let's do the next example. 641 00:29:49.480 --> 00:29:52.600 Let's say that you can vibe code because of cursor that came out. 642 00:29:52.600 --> 00:29:55.040 You're like, I can make an app in two seconds, right? 643 00:29:55.040 --> 00:29:59.560 And so this made up mobile app company shows, you know, if you build it, they will come, 644 00:29:59.560 --> 00:30:00.560 right? 645 00:30:00.560 --> 00:30:01.800 It's the most dangerous myth in business, right? 646 00:30:01.800 --> 00:30:05.520 So imagine that company has built an incredible product, it's easy to use, all right? 647 00:30:05.520 --> 00:30:07.640 The tech team is world class, the apps fast. 648 00:30:07.640 --> 00:30:08.640 It's beautiful. 649 00:30:08.640 --> 00:30:09.640 It does all the good stuff, right? 650 00:30:09.640 --> 00:30:11.480 But user growth is painfully slow. 651 00:30:11.480 --> 00:30:14.240 So they would only have a few thousand users when they really need millions in order to make 652 00:30:14.240 --> 00:30:15.560 the business model work. 653 00:30:15.560 --> 00:30:19.720 Now you might be like, thousands and millions, oh my God, I just want my first 10 customers. 654 00:30:19.720 --> 00:30:21.320 Everything that I'm talking about right now applies. 655 00:30:21.320 --> 00:30:23.880 Just add or remove zeros, but the same concepts apply. 656 00:30:23.880 --> 00:30:24.880 All right. 657 00:30:24.880 --> 00:30:26.520 So let's say the founders are blaming the product. 658 00:30:26.520 --> 00:30:28.440 They're like, maybe we need more features, right? 659 00:30:28.440 --> 00:30:30.160 Maybe it's too hard to get started. 660 00:30:30.160 --> 00:30:33.560 And so they're fixing the wrong stuff and so the app is in the issue, awareness is the 661 00:30:33.560 --> 00:30:34.560 problem, right? 662 00:30:34.560 --> 00:30:37.840 They're spending almost nothing on marketing and relying instead on word of mouth. 663 00:30:37.840 --> 00:30:41.080 And so they have this serious demand problem, but they're putting all their effort into 664 00:30:41.080 --> 00:30:42.080 product. 665 00:30:42.080 --> 00:30:44.600 And so they've shifted that focus to the right part of it that could change. 666 00:30:44.600 --> 00:30:46.880 So let's let's walk through what they might consider. 667 00:30:46.880 --> 00:30:49.840 So number one is they can probably optimize their app store listing. 668 00:30:49.840 --> 00:30:54.120 So if you convert a higher percentage of traffic, then a couple of things happen. 669 00:30:54.120 --> 00:30:56.800 One is that you get ranked higher because your sales velocity goes up. 670 00:30:56.800 --> 00:30:59.480 But also Apple also push you more traffic, right? 671 00:30:59.480 --> 00:31:00.480 Because they get a percentage. 672 00:31:00.480 --> 00:31:04.360 So they want the highest converting products to be on the store in the highest and most 673 00:31:04.360 --> 00:31:07.480 prevalent positions so that they make the most money too. 674 00:31:07.480 --> 00:31:11.080 That's just organically on top of that, that could they could pay for user acquisition. 675 00:31:11.080 --> 00:31:14.320 They could take some of that extra talent that they're focusing on the back end and say, 676 00:31:14.320 --> 00:31:18.040 okay, well, how do we maximize downloads and activation, right? 677 00:31:18.040 --> 00:31:22.040 They could go from an affiliate play and say, okay, who, what apps already exist that 678 00:31:22.040 --> 00:31:23.040 service exact market? 679 00:31:23.040 --> 00:31:26.680 And is there a way we could run a banner ad on somebody else's product, which absolutely 680 00:31:26.680 --> 00:31:27.680 exists? 681 00:31:27.680 --> 00:31:32.480 You could run into, there's tons of app platform marketplaces where you can buy those types 682 00:31:32.480 --> 00:31:33.480 of ads, right? 683 00:31:33.480 --> 00:31:36.320 On top, they could just build some really strong referral program depending on the nature 684 00:31:36.320 --> 00:31:37.320 of the product. 685 00:31:37.320 --> 00:31:41.360 And so in each of these ways, these would be things that they could do to capture more 686 00:31:41.360 --> 00:31:44.720 demand on the front end rather than being like, okay, well, no one's leaving and everyone 687 00:31:44.720 --> 00:31:47.600 loves the product we get reviews, but it's still not growing fast enough. 688 00:31:47.600 --> 00:31:51.880 And so within a year, if you just shifted all that effort there, the user basically 689 00:31:51.880 --> 00:31:56.440 goes 20x, 20x larger, right, or 100 times larger, whatever, because the product was good 690 00:31:56.440 --> 00:31:57.440 enough. 691 00:31:57.440 --> 00:32:00.280 They just need to solve their real problem, which at the time is to bend. 692 00:32:00.280 --> 00:32:01.680 Now, let's wrap this together. 693 00:32:01.680 --> 00:32:04.400 Is it always a supply or demand-constrained issue? 694 00:32:04.400 --> 00:32:10.680 The answer is yes, but it's not always going to be the same one at the same time, meaning, 695 00:32:10.680 --> 00:32:14.040 as soon as you solve a demand constraint, guess what happens next? 696 00:32:14.040 --> 00:32:16.400 You have a supply constraint, right? 697 00:32:16.400 --> 00:32:19.680 And then you'll solve your supply constraint and be like, okay, finally, we got all of our 698 00:32:19.680 --> 00:32:20.880 inventory back in place. 699 00:32:20.880 --> 00:32:23.120 The warehouses are full. 700 00:32:23.120 --> 00:32:24.120 We're not running any ads. 701 00:32:24.120 --> 00:32:25.120 Oh my God. 702 00:32:25.120 --> 00:32:28.320 Now that the fitness equipment is back in place, it's like, oh my God, we got to spin this 703 00:32:28.320 --> 00:32:29.320 up. 704 00:32:29.320 --> 00:32:33.320 Now that we just hired four more accountants, now we can take on more clients. 705 00:32:33.320 --> 00:32:35.080 Oh, wait, we don't have any more clients. 706 00:32:35.080 --> 00:32:36.080 Now we go to get them. 707 00:32:36.080 --> 00:32:40.520 And so it's this accordion, this back and forth that happens, it's the natural flow of 708 00:32:40.520 --> 00:32:41.520 business. 709 00:32:41.520 --> 00:32:45.680 But when people get stuck, it's because they stayed working on the demand constraint after 710 00:32:45.680 --> 00:32:48.960 the demand constraint went away and it became a supply constraint. 711 00:32:48.960 --> 00:32:54.000 This ping pong and this back and forth and the lack of awareness of the founder realizing 712 00:32:54.000 --> 00:32:59.640 that the constraint has moved in the business is why businesses will get stuck for years. 713 00:32:59.640 --> 00:33:03.360 And so if you have been stuck for a long time, it's not that you're an idiot, it's not 714 00:33:03.360 --> 00:33:04.600 that you're doing something wrong. 715 00:33:04.600 --> 00:33:09.480 It's likely that you started solving a constraint, you solved it, and you solved it so well, you 716 00:33:09.480 --> 00:33:13.720 created another one, but you didn't switch where your attention was being allocated. 717 00:33:13.720 --> 00:33:15.800 And so if you're like, okay, well, where am I at today? 718 00:33:15.800 --> 00:33:18.160 Here's an easy battery list that you can kind of walk through. 719 00:33:18.160 --> 00:33:20.760 So first, answer these questions honestly. 720 00:33:20.760 --> 00:33:25.760 If more customers showed up tomorrow, could you serve them well at the standard that you 721 00:33:25.760 --> 00:33:26.760 want? 722 00:33:26.760 --> 00:33:27.760 Yes or no? 723 00:33:27.760 --> 00:33:30.240 Two, are you turning away business or putting people on waiting lists? 724 00:33:30.240 --> 00:33:31.240 Yes or no? 725 00:33:31.240 --> 00:33:34.480 Are your most profitable time slots or products always sold out? 726 00:33:34.480 --> 00:33:35.800 Yes or no? 727 00:33:35.800 --> 00:33:40.400 Do you run out of inventory or have long shipping delays if you're in physical products? 728 00:33:40.400 --> 00:33:41.560 Yes or no? 729 00:33:41.560 --> 00:33:44.680 If you answered yes to any of those, you likely have a supply problem. 730 00:33:44.680 --> 00:33:46.880 And so if that's you, this is what you focus on. 731 00:33:46.880 --> 00:33:48.920 The easiest one first is raising prices, right? 732 00:33:48.920 --> 00:33:51.120 It's the fastest fixed first supply problem. 733 00:33:51.120 --> 00:33:54.160 The second thing is that you get ad capacity, right? 734 00:33:54.160 --> 00:33:55.720 The next is that you can just clean up operations. 735 00:33:55.720 --> 00:33:58.400 This means you get leverage for the existing people. 736 00:33:58.400 --> 00:34:01.200 So it's like, how do I get my one person to be able to deliver for three people instead 737 00:34:01.200 --> 00:34:02.960 of one or one, right? 738 00:34:02.960 --> 00:34:05.480 This then creates tech systems behind that. 739 00:34:05.480 --> 00:34:10.160 Now there's three ways you can solve the constraint on a service business outside of pricing. 740 00:34:10.160 --> 00:34:11.440 Number one is technology. 741 00:34:11.440 --> 00:34:14.600 As in this tech allows one person to do five times of work. 742 00:34:14.600 --> 00:34:15.600 Great. 743 00:34:15.600 --> 00:34:16.800 The second is training. 744 00:34:16.800 --> 00:34:20.480 So I got this person who's a level B talent to become level eight talent and they can 745 00:34:20.480 --> 00:34:22.040 now do five times of work. 746 00:34:22.040 --> 00:34:25.640 The third is that you then just bring somebody else on at the same B talent, and you just 747 00:34:25.640 --> 00:34:27.920 have twice the B's, right? 748 00:34:27.920 --> 00:34:32.320 In each of these situations, beyond pricing, these are the doors that we would knock on 749 00:34:32.320 --> 00:34:35.560 to feel like, okay, which of these is right for our business right now? 750 00:34:35.560 --> 00:34:38.560 Now once you do that, let's see, you solve that supply constraint. 751 00:34:38.560 --> 00:34:39.560 So you know what? 752 00:34:39.560 --> 00:34:44.280 I got my onboarding and training system for getting new people up to speed. 753 00:34:44.280 --> 00:34:46.400 Now I can do twice as much per account rep. 754 00:34:46.400 --> 00:34:48.960 So whoops, now we have a demand issue. 755 00:34:48.960 --> 00:34:52.480 And so if you answered no to those questions that I have, the things that you'd be focusing 756 00:34:52.480 --> 00:34:55.200 on, obviously fixing the acquisition channel. 757 00:34:55.200 --> 00:34:59.480 So it'd be like either have to do some sort of outreach, some sort of affiliates, some 758 00:34:59.480 --> 00:35:03.840 sort of ads that you're going to have to run, or some sort of contest strategy or combination 759 00:35:03.840 --> 00:35:07.080 of those that then generates the first level demand. 760 00:35:07.080 --> 00:35:08.400 But you still have to convert that demand. 761 00:35:08.400 --> 00:35:10.960 If you're getting those people but you're not turning them into sales, you have a sales 762 00:35:10.960 --> 00:35:12.200 constraint, right? 763 00:35:12.200 --> 00:35:15.280 This is all demand side, but you have to look at your own business and be like, which one 764 00:35:15.280 --> 00:35:16.280 of these is it? 765 00:35:16.280 --> 00:35:18.160 Now, you are getting on their sales cause. 766 00:35:18.160 --> 00:35:22.280 It's either like you don't know how, like fundamentally, you're going to have a people 767 00:35:22.280 --> 00:35:25.280 problem, the people suck and they're not following the process you have. 768 00:35:25.280 --> 00:35:28.720 You have a process problem, which is the process itself sucks and is selling to the wrong person, 769 00:35:28.720 --> 00:35:30.560 the wrong thing at the wrong time. 770 00:35:30.560 --> 00:35:33.640 You have an offer issue, which is like, you're getting in front of the right people and you're 771 00:35:33.640 --> 00:35:36.880 getting in front of the right time, but the offer you give them is not compelling. 772 00:35:36.880 --> 00:35:39.840 Or price doubles on both of these constraints. 773 00:35:39.840 --> 00:35:42.400 You might be doing everything right, but you're just not charging enough and because you're 774 00:35:42.400 --> 00:35:45.520 not charging enough, you can't spend enough on marketing to get the people in so you can 775 00:35:45.520 --> 00:35:46.520 be profitable. 776 00:35:46.520 --> 00:35:49.680 And to double click into the advertising and sales side, there's the advertising of like, 777 00:35:49.680 --> 00:35:52.280 how you're generating the demand and then there's the technical component of like, how 778 00:35:52.280 --> 00:35:53.960 we capturing leads, right? 779 00:35:53.960 --> 00:35:58.000 Now, the way you capture leads and this sounds like a very small thing is huge because the 780 00:35:58.000 --> 00:36:01.160 way you lay out your landing page, the headlines you use, the images you use, the copy you 781 00:36:01.160 --> 00:36:05.400 use, the lead magnet, if you have a lead magnet that you give away, something free, the assessment, 782 00:36:05.400 --> 00:36:08.560 the call, whatever it is that you're giving away, the benefit for them taking the next 783 00:36:08.560 --> 00:36:12.000 action, that might just not be good enough to convert a higher percentage of the traffic. 784 00:36:12.000 --> 00:36:13.080 So here's the trap. 785 00:36:13.080 --> 00:36:18.040 If you fix the wrong problem, it actually not only waste money and time, it often makes 786 00:36:18.040 --> 00:36:19.200 it worse. 787 00:36:19.200 --> 00:36:23.760 And this is why so many business owners are like working their faces often in so much pain 788 00:36:23.760 --> 00:36:26.880 is that the constraint switched. 789 00:36:26.880 --> 00:36:31.160 You didn't switch what you were doing and by succeeding really well at the thing that's 790 00:36:31.160 --> 00:36:34.800 no longer the constraint, you're actually further straining the system. 791 00:36:34.800 --> 00:36:35.800 And this is really hard. 792 00:36:35.800 --> 00:36:36.800 This is me personally. 793 00:36:36.800 --> 00:36:40.080 I've almost always been able to advertise any business I've ever had. 794 00:36:40.080 --> 00:36:42.840 I've almost always had supply constraints in my whole life. 795 00:36:42.840 --> 00:36:47.040 And so the problem is like sometimes, and I've had to learn this and I've heard sometimes 796 00:36:47.040 --> 00:36:51.120 I just had to take a step back and be like, we're just going to let less marketing or 797 00:36:51.120 --> 00:36:54.720 mediocre marketing or mediocre conversion continue because even if I fix it, it will 798 00:36:54.720 --> 00:36:56.080 literally make my business worse. 799 00:36:56.080 --> 00:37:00.680 And even though it breaks my heart to have leads not get followed up with sometimes, it's 800 00:37:00.680 --> 00:37:03.040 just like, we can't even take them on if we could. 801 00:37:03.040 --> 00:37:05.880 And that's ultimately going to hurt my reputation more than not falling over the lead. 802 00:37:05.880 --> 00:37:09.560 So if you have a supply problem, more marketing creates chaos and unhappy customers. 803 00:37:09.560 --> 00:37:12.680 If you have a demand problem, better operations isn't going to help much when there's no 804 00:37:12.680 --> 00:37:13.680 one to serve. 805 00:37:13.680 --> 00:37:14.680 Right? 806 00:37:14.680 --> 00:37:17.880 And so the most successful businesses I've ever worked with I've invested in keep finding 807 00:37:17.880 --> 00:37:20.800 and breaking through their current problem, their current constraint and then moving 808 00:37:20.800 --> 00:37:23.640 onto the next one because this is not a one time fix. 809 00:37:23.640 --> 00:37:24.520 It's a way of thinking.