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Hey guys, welcome back to the game.

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I was just recently a guest on my first million, the podcast with Sam Parr and Sean Perri.

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And in this episode, we talk about my journey going from broke to over 100 million.

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If you have heard that journey, then feel free to skip a loser.

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So Laila and I had, so we started dating in April of 16.

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I immediately was like, I've got this idea for this thing called gym launch.

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I want to go fly out to gyms and do turnarounds because I can like fill my gyms up faster

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than I can build them.

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By the way, context is at the time you owned a couple of gyms.

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Yeah, I had five gyms when I met her and the bank balance looked like what at the time?

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I was making like 20 grand a month.

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I know that.

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So I don't remember what my savings were.

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But I was making like 20 grand a month in cash flow and you're like, wait, five gyms.

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It's like, yeah, some of them work good.

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Some of them were tied to corporate locations are a little smaller.

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Anyways, but I was like 25, 26.

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So like, I always hoodwitch, you know, as far as I'm concerned, I go by whatever I wanted.

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I can live where I wanted, you know, I could go out to eat whatever.

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And so I started the turn around business and I mean, $100,000 in cash in 21 days.

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And I was like, holy shit.

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That's like, this is awesome.

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And so I came back and she picked me up from the airport and I had this big stack of contracts.

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And I was like, hey, we can go on that date because I hadn't taken on a date in three

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weeks and we'd seen each other every day.

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So it'd been like 21 days of hanging out and not one date.

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And so you said, you promised you'd take me on a date after you did this launch.

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And I was like, okay, okay, I was like, how do we process these?

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So you process the contracts and 45 minutes she saw as 100 grand, she was like, holy shit.

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The first question she asked is, is this legal?

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And I was like, yeah, it's legal.

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And she was like, all right, I'm in.

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And so she decided to join me.

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So we went out to the next launch together, a few more launches.

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And then one of the launch guys that I did that I did really well, the one that I came

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back with 100 grand for, was like, hey, let's partner.

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Like instead of, you know, you're just doing these gyms and then walking away, let's

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just open new gyms.

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I'm a really good operator.

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I'll just open them behind you and run it.

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And then if you open up one or two gyms a month, you think you own 24 gyms instead

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of just like doing the service.

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And me being me, I was like, of course, money on the table, why would I not do that?

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And the fact that he had been indicted for fraud, like it was a misunderstanding, whatever.

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And he was like, hey, you know, you should sign all the leases for these new locations

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because I had a little run in like no big deal.

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You should do it.

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And so I personally guarantee the lease and I put all the capital up because, you know,

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I'm 25 and don't know what I'm doing.

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And so of course, we know how this story goes.

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I launched that.

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I launched it 376, you know, new members, which feel like a CrossFit slash micro gym

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is massive to open up with.

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Then I wake up on morning and all the cash and bank accounts go on and I was like, what

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the fuck?

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And I, we know, hit him up and I was like, dude, what's going on?

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He's like, oh, that was my half.

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And I was like, what do you mean your half?

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I was like, you just call the money up.

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He's like, why?

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I know you've been skimming.

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And I was like, what?

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I was like, I'm here.

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What?

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I'm here every time.

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What?

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So I came to him with all the bank accounts, like every transaction highlighted and I was

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like, hey, let's go through this.

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Like, I just want to make sure we're good and he threw it off the table because I don't

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need to see that shit.

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And I was like, oh, you, okay, got I now understand what happened, like, okay.

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So I just got all my money stolen and right at when that had happened, I had decided to

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go all in on that business.

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So I sold my gyms and I put all that cash in that account.

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So the cash that I used to open the gym and the subs of King Cash that came, all of that

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was pooled into one place, but that was what I had sold all my gyms for.

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And so when he emptied that, I had basically the five years I had built my gyms, I had nothing.

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And so that sucked.

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And so Leila was like, you know, dust it off, forget the whole like build and whatever,

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like, let's just go back to the turnaround model, like you made money doing that.

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Like, let's do that.

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And I was like, I will do that.

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And so the next launch that's supposed to happen is in California.

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There's a guy who hits me up randomly on Instagram and says, hey, do you have work for

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me?

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I've got to kill him the way and I've got a one year old I need the money.

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And it just so happened, he lived 10 minutes away from the one gym that we were going

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to launch in the world.

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And so I was like, dude, do this launch for me.

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So he does a hundred, he does a hundred grand in sales in 28 days.

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And all of a sudden though, as I'm like, normally, I know my deposits always hit on Tuesdays

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over the weekends.

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And so Tuesday hits and I'm like, there's no deposit.

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I'm like, we're processing the contracts that was going on.

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I call up mine body, which is the, you know, Heartland was the processor they integrated

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with at the time.

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And they put, they give me the run around and they're like, oh, it's a standard annual

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review.

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And I was like, okay.

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And no, no Wednesday, no Thursday, no Friday, no Saturday, then it's the weekend again.

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And then Tuesday comes back and no, no deposit.

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And I was like, dude, what the fuck?

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So they said, no, you're still in the annual reviews.

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I did it one more week and now it's Christmas Eve.

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And I had about 23 grand left after all the money was, there's basically my checking was

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what was left from all that other stuff.

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And so they got on the phone.

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I said, I'm not getting off.

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It's Christmas Eve.

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I need to pay my guys like, what the hell?

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And they said, we're going to hold on to this for six months because it's a regular activity

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because I was processing these turnaround gyms through my brick and mortar location.

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I did not process it works.

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I was like, you know, flying into Calgary, Canada, doing a turnaround, running it through

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Huntington Beach, California for an in-person transaction.

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Like I didn't know how it worked.

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And so they were like, this is weird.

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We're going to hold on to the funds.

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And so I owed $22,000 in commissions for sales that I hadn't gotten paid for for this guy

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who had, you know, the kids and the babies or whatever.

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And so I didn't want to like give myself the idea that I could not pay him.

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And so I sent him the money and so I had $1,000 left.

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It's Christmas where at Layla's family's house, I'm stressed the fuck out because I just lost

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all my money in the last two, like I got the money stolen.

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And then my, my Hail Mary to Save the Day was the 100 grand new launch.

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I didn't get paid for that.

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I ended up just having an empty, the small 20 grand that I had and had $1,000 left.

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She told six of her friends to quit their jobs to start that month on the 26th of December

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because that's going into New Year.

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So I could do, I was like, let's do six gyms because that's Loshgoogle from one to six

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immediately since we're going to go all in.

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And so after I found out that I didn't have any money and I had $1,000 left and the ads

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were supposed to launch on the 26th.

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And I was going to be spending 3,300 a day in advertising hotels, rental car, per diems

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for the six sales guys that were her friends.

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And I had $1,000 in total.

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And so I, you know, we're sitting at, like, the, like, her parents are downstairs.

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We're in like, the spare bedroom where like the grandkids are.

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So there's like this little mini furniture everywhere.

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They like I'm sitting in a tiny chair.

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And I was like, hey, this could go horribly wrong.

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And if you, I said, I wouldn't stay with me if I were you.

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I am a sinking ship right now.

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And so in that moment, she grabbed my chin and she was like, I would sleep with you

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under for Bridget became to that.

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And so I was like, all right.

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And honestly, I just kind of felt relief at the time.

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I kind of, I can appreciate it more later.

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But you know, she quit her job to join me doing these turnarounds.

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And all she got to see besides the one that she did in the beginning was me just getting

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kicked in the nuts for like eight straight months.

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And so the next day, I said, okay, well, I still had $100,000 limit on my credit card

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from all my five gyms.

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Like, Amix had an updated the fact that I was broke.

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And so I put $3,300 a day on that credit card, mind you, with no way to process money.

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And so I'm spending $3,300 a day of money I don't have with no way to process new money.

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And so I got like porn, casino, and like gambling, processing that had like 10% reserves,

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and like 6%, 7% processing fees, they were taking like 17% off the top.

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But I needed the cash.

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And so I got one turned on with a 50K limit, and I needed, I mean, I had a 100K in cost.

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I needed, it was, we were going to do 200, I needed 200 grand.

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And there's like, well, if you do well, you know, you get 50.

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And I got it only turned on three days before the end of January.

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So this whole time, I'm running $3,300 a day, and we're collecting these contracts with

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credit cards, and I'm not processing anything.

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And people were calling me like, hey, I haven't seen the money come out.

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Hey, like, what's going on?

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Run the card and we're like, yeah, yeah, we're getting to it.

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And so three days before the end of January, the first 50K processor hits.

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And so I've run that in a day, you know, because I had so much backlog.

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But he's like, the good news is it's per month.

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So on the first of February, you can run another 50.

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So I ran 50, 50, and that covered my 100 that went out the 3,300 a day.

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And then I got two more processors turned on at 50, 50.

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And then, and then I was able to get out of it.

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There's also another crash that happens after that where I lost it all again three months

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later.

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But that was because all of the launches that we were doing, I had a new hole in my model,

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which is that I was selling and other people were delivering.

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And then they would tell the customers to refund and then sign up with them for half the

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price after we'd leave.

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So we'd sell like five, you know, we'd sell a $500 challenge or whatever.

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And then we'd put 100 people in the location and they would just tell them all like, hey,

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refund with them, sign up with me for 200 bucks.

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And we'd already fronted the cost for the hotel, the ad spend, the commission, the sales

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guy, like all that jazz.

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And so that's when I lost everything again.

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And that was probably the hardest of all of them because this was the only model I knew.

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And so the more I sold, the more refund risk I exposed my stuff to.

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And so it was just like, I had to sell more to cover the first month's refunds.

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And then the next month was bigger.

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And then I had to sell more and more to cover that month's refund.

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And so then I had to make a switch in 30 days to get one of the 150 graded profit and

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30 days.

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And I was like, I don't know what I'm going to do.

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The first two were out of your control, you know, business partner screws you, the payment

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process.

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And you off this one, your model was broken.

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Yeah.

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We were like, oh, shit.

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Because Sam, I don't know if you know how this business worked.

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It was basically like, you would go, my understanding is you'd go turn around the gym,

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which means just you'd sell a bunch of memberships.

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And the deal was like, I keep the upfront cash and then you keep the members.

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And so they were just like, well, he took all the upfront.

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He made a hundred grand in like whatever a month or something.

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A few of them were like, well, you know what?

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Why don't I just cut them out and just do the deal directly with my customers who I'm

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going to serve going forward.

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And so that one was your fault and in your control, they see your model.

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But then you fix the model, right?

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And it worked.

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Well, sort of.

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So what ended up happening is I told Layla, I was like, hey, because she still had her

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fitness clients, because she was a personal trainer and she had a book of business.

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She converted like half them into like online training or online training was the thing.

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And so she was making like four grand a month and one day we're sitting in the kitchen

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table.

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Hey, how would you make on that?

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And she was like defensive.

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She was like, hey, this piece for our food.

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And I was like, no, no, no, I'm not like, I'm not saying it's a bad thing.

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And she's like, I don't know, like four grand a month.

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Why?

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And I was like, how many hours a week to take you?

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And she's like, I don't know, four hours.

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And I was like, that's not a bad business.

228
00:10:56.200 --> 00:10:58.760
And I was like, well, I already know how to sell fitness.

229
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Why don't let's let's cut the gym owner out.

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Like, let's just sell straight to consumer.

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So it's been 48 hours took a ton of out of all and wrote the best sales letter in my

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life.

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God adds live in 48 hours to a sales letter.

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And we started doing five hundred bucks a day, five hundred to a thousand days first.

235
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But this is like a women's weight loss product.

236
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Yeah, it was called queen transformation.

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And so it told Layla, because Layla signed me out.

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Yeah, let's go.

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She lost a hundred pounds and then did a fitness competitor.

240
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So she had a great before and after a great transformation story.

241
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I like it.

242
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I was like, as though I, yeah, Layla, as though I were her.

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So I'm like, my thighs were shaking together and I couldn't go out on the side.

244
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Like it was, it was just me, right?

245
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My thighs are shaking.

246
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Yeah.

247
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So this is working.

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A thousand bucks a day.

249
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I get that now.

250
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I need to sign up for this queen transformation.

251
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So we do the thousand bucks a day and I saw, I got eight sales guys now and I was like,

252
00:11:44.760 --> 00:11:48.760
wait, if I got eight guys, I can do eight grand a day with, with covering costs, I could

253
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make one 50 on this.

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Like, this could work.

255
00:11:51.320 --> 00:11:54.760
And so I call up the gyms that are supposed to launch the next month and I said, hey,

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we're not flying out and they're like, what the hell, what am I, and then what guy's

257
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like, dude, I need this.

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You turn around one of my buddy's gyms and like, because for the other model not work,

259
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only like one out of five gyms had to fuck me.

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So it wasn't like they all did it, like some of them were fine, but like my profit was

261
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like 20%.

262
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You know what I mean?

263
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And so I called the first guy up and he's like, I need this.

264
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And so I said, he said he was poor.

265
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So I just said the highest number I could think of at the time, which was $6,000.

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I was like, fine, I'm not flying out there to save your ass if you can't close, but I'll

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show you how I did it for six grand.

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And he was like, six grand, he was like, don't.

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And I remember just like looking at the phone and being like, whole, I mean, I was selling

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$500, $300, $400, $400 at a time, like six grand, I was like, what the fuck just happened?

271
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And so I still had seven more calls that day.

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So I called the next guy, same conversation, he's like, how much?

273
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I was like, eight grand, he was like, done.

274
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And so next call, same thing, how much 10 grand.

275
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And by the end of the day, I did $60,000 and cash collected.

276
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And I was like, holy shit.

277
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Now you're now your thighs are really shaping.

278
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Yeah.

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And so I call it.

280
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So lay the comes in after a full day of sales.

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And I was like, I think we're still in the gym business and she was like, what?

282
00:12:57.080 --> 00:13:00.120
You just sold me on like, this is the new direction.

283
00:13:00.160 --> 00:13:02.360
We're going to be online queen transformation.

284
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And I was like, no, I think, I think we were just doing it wrong.

285
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I say, I think we just need to show them how we fill gyms rather than flying out and

286
00:13:09.960 --> 00:13:13.320
filling it for them, let them take the risk on the ad spend and the like, they don't have

287
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to do a hotel.

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They don't have to hire a salesman like, they can just do it themselves.

289
00:13:16.680 --> 00:13:18.680
If you, you know, if I teach them how to do it.

290
00:13:18.680 --> 00:13:22.680
And so we did that and then I called the 30 plus gyms we turned around and I was like,

291
00:13:22.680 --> 00:13:23.680
hey, remember that thing I did?

292
00:13:23.680 --> 00:13:25.120
I'm going to show you how I did it.

293
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And a lot of them saw me pull 500 grand out.

294
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One out of five was like, I'm going to super fuck this guy.

295
00:13:29.880 --> 00:13:33.440
But four out of five are probably like, this guy made more out of my gym than I did.

296
00:13:33.440 --> 00:13:36.640
Like, and so when I called him back, almost all of them said yes.

297
00:13:36.640 --> 00:13:40.360
And so I did like 240 grand in sales in that next 30 days.

298
00:13:40.360 --> 00:13:43.880
That was almost all profit and I was able to pay off all the refunds that we're going

299
00:13:43.880 --> 00:13:45.640
to be due from all the other gyms.

300
00:13:45.640 --> 00:13:48.640
So I paid the 150 down and I was like, in the clear.

301
00:13:48.640 --> 00:13:51.120
And then that was what became, that's what became gym.

302
00:13:51.120 --> 00:13:52.520
What did that's insane?

303
00:13:52.520 --> 00:13:56.240
Have you ever felt richer than that first relief of being like out of the mess?

304
00:13:56.480 --> 00:14:01.840
Now I say to my book, the offers book, the last chapter is the first 100,000.

305
00:14:01.840 --> 00:14:05.440
When we had our first 100,000, which was like four or six weeks after that,

306
00:14:05.440 --> 00:14:08.480
I showed it to Layla on the phone and I was like, we did it.

307
00:14:08.480 --> 00:14:09.880
And she was like, what do you mean?

308
00:14:09.880 --> 00:14:11.160
And I was like, look, and I pulled it up.

309
00:14:11.160 --> 00:14:13.920
And it wasn't like in the business account because I'd had that in like business.

310
00:14:13.920 --> 00:14:17.680
But it was like, but that's like operating expensive and earmarked for other stuff.

311
00:14:17.680 --> 00:14:20.320
But like this was like in the personal account.

312
00:14:20.320 --> 00:14:25.080
And I was like, we can screw up for like three years and we're going to be fine.

313
00:14:25.080 --> 00:14:28.840
Like we could do, we could just, we could take off for three years and be fine.

314
00:14:28.840 --> 00:14:33.160
And to this day is, it is 100% the richest I have ever felt.

315
00:14:33.160 --> 00:14:35.760
And I think it's because of relative change in wealth.

316
00:14:35.760 --> 00:14:37.120
So I have thought about it.

317
00:14:37.120 --> 00:14:39.760
Is it like, if you go from a thousand dollars to a hundred thousand dollars,

318
00:14:39.760 --> 00:14:43.480
it's a hundred X increase in wealth in a month.

319
00:14:43.480 --> 00:14:47.880
By the way, the end of that story is like within the first 12 months,

320
00:14:47.880 --> 00:14:50.600
there's some like ridiculous venture, you guys hit, right?

321
00:14:50.600 --> 00:14:53.880
So from that brink of failure to, what was it at the end of the year?

322
00:14:53.880 --> 00:14:55.400
Yeah, so, so we did that.

323
00:14:55.400 --> 00:15:04.000
So December 26th of, of 2016, processor shuts me down and I make the big bed.

324
00:15:04.000 --> 00:15:07.120
And Layla says, I'll go through under a bridge and it's 3,300 a day.

325
00:15:07.120 --> 00:15:11.760
It takes four or five months for me to realize the new model where I fly out to gyms

326
00:15:11.760 --> 00:15:13.960
has this big refund problem.

327
00:15:13.960 --> 00:15:17.160
And so now we're into May of 17.

328
00:15:17.160 --> 00:15:23.280
I flip, I flipped during that kind of like April May-ish, the model.

329
00:15:23.280 --> 00:15:31.640
And we start doing the licensing model and it goes like 400, 700, a million,

330
00:15:31.640 --> 00:15:34.800
one, two, one, five, like into the end of the year.

331
00:15:34.800 --> 00:15:37.480
So we ended up with like 6.8 million top line.

332
00:15:37.480 --> 00:15:40.880
And I think we did 3 million in profit.

333
00:15:40.880 --> 00:15:48.080
And then the full next calendar year, we did 26 million and 16 million in EBITDA.

334
00:15:48.080 --> 00:15:49.320
That's insane.

335
00:15:49.320 --> 00:15:50.320
Yeah.

336
00:15:50.320 --> 00:15:51.320
It was wild.

337
00:15:51.320 --> 00:15:53.400
It was just this wild for me, for anyone who's listening.

338
00:15:53.400 --> 00:16:00.040
Like, I actually think it took me like three years to acclimate to the wealth that we

339
00:16:00.040 --> 00:16:01.040
were making.

340
00:16:01.040 --> 00:16:05.640
It was like, it was probably like 2019-ish, like end of 2019, 2020 is when I started to

341
00:16:05.640 --> 00:16:10.160
like realize how much money that we were making because I didn't adjust my, I didn't adjust

342
00:16:10.160 --> 00:16:11.160
my living.

343
00:16:11.160 --> 00:16:12.160
Like, we did buy a house.

344
00:16:12.160 --> 00:16:15.160
It's like three years later one day you just woke up and you were like, holy shit,

345
00:16:15.160 --> 00:16:16.160
I feel good.

346
00:16:16.160 --> 00:16:17.160
Wait a minute.

347
00:16:17.160 --> 00:16:18.160
What is this?

348
00:16:18.320 --> 00:16:21.920
We took out 42 million in distributions prior to selling it.

349
00:16:21.920 --> 00:16:26.120
And so that's why the sale was not like, I mean, we got a ton of notoriety from the sale,

350
00:16:26.120 --> 00:16:29.960
but in terms of material change in the living, like it wasn't a massive step up.

351
00:16:29.960 --> 00:16:33.960
Sam, if you actually read his offer's book, the purple one, I read the purple one.

352
00:16:33.960 --> 00:16:34.960
Yeah.

353
00:16:34.960 --> 00:16:35.960
No, I read.

354
00:16:35.960 --> 00:16:36.960
Yeah, I read it.

355
00:16:36.960 --> 00:16:37.960
No, it was leads.

356
00:16:37.960 --> 00:16:38.960
I thought.

357
00:16:38.960 --> 00:16:39.960
Bro, leads the leading one.

358
00:16:39.960 --> 00:16:40.960
The purple one.

359
00:16:40.960 --> 00:16:41.960
And then say, bro, I read.

360
00:16:41.960 --> 00:16:42.960
Sorry.

361
00:16:42.960 --> 00:16:43.960
Leads.

362
00:16:43.960 --> 00:16:47.800
Well, they're all like the same cover, just different, but they're like the same thing.

363
00:16:47.800 --> 00:16:50.280
No, I read the, oh, well, they're like the same color.

364
00:16:50.280 --> 00:16:52.600
I mean, it makes it look like they're working with me.

365
00:16:52.600 --> 00:16:54.120
I read the leads one.

366
00:16:54.120 --> 00:16:55.120
All right.

367
00:16:55.120 --> 00:17:00.280
So the compliment is, Alex, you have a very useful thing on offers that I read a bit of

368
00:17:00.280 --> 00:17:01.280
the books.

369
00:17:01.280 --> 00:17:02.800
I read like the first 20% of the book and I was like, sweet, got it.

370
00:17:02.800 --> 00:17:03.800
Ready to act.

371
00:17:03.800 --> 00:17:04.960
Don't need the rest of this book right now.

372
00:17:04.960 --> 00:17:06.920
New exactly what I needed to do.

373
00:17:06.920 --> 00:17:09.920
And it really wasn't actually something super specific in the book.

374
00:17:09.920 --> 00:17:11.600
It was just implanting the idea.

375
00:17:11.600 --> 00:17:15.200
You sparked an idea in my head of, how do you make somebody offer so good that they

376
00:17:15.200 --> 00:17:17.960
would be stupid to turn you down?

377
00:17:17.960 --> 00:17:18.960
And that stuck with me.

378
00:17:18.960 --> 00:17:20.800
It was like that one line stuck with me.

379
00:17:20.800 --> 00:17:23.840
And then immediately I went into this one business that we had started.

380
00:17:23.840 --> 00:17:27.400
And we had this business that I was like, what this business needs is a killer offer.

381
00:17:27.400 --> 00:17:30.880
And we were going to do nothing until we craft a killer offer.

382
00:17:30.880 --> 00:17:34.240
And we've crafted a killer offer in that first year of this, this business we haven't

383
00:17:34.240 --> 00:17:35.320
announced on the podcast.

384
00:17:35.320 --> 00:17:40.000
It'll probably do four million in revenue, 50% margins.

385
00:17:40.000 --> 00:17:41.920
It's a really great business.

386
00:17:42.000 --> 00:17:46.760
It needed a killer offer and I would not have had that idea had I not heard you kind

387
00:17:46.760 --> 00:17:49.240
of plant that seed of like why that matters.

388
00:17:49.240 --> 00:17:52.800
Can you give us the like couple minute version for anybody else that's listening?

389
00:17:52.800 --> 00:17:56.120
Because if it was that useful for me, I know it's going to be useful for a few hundred

390
00:17:56.120 --> 00:17:57.840
thousand other people that are going to listen to this.

391
00:17:57.840 --> 00:18:03.880
Also, I'll say because of what you said, I wrote a summary and workbook of offers so

392
00:18:03.880 --> 00:18:05.880
that they can finish it in one sitting.

393
00:18:05.880 --> 00:18:07.080
Does it come with crayons?

394
00:18:07.080 --> 00:18:07.840
My kind of guy.

395
00:18:07.840 --> 00:18:08.840
Yeah.

396
00:18:08.840 --> 00:18:09.840
Yeah.

397
00:18:09.920 --> 00:18:13.440
So fundamentally, you know, you think about like, are there supply, are there supply

398
00:18:13.440 --> 00:18:15.440
constraint businesses or demand constraint businesses?

399
00:18:15.440 --> 00:18:18.600
And I like going into band constraint businesses because that's what I'm good at.

400
00:18:18.600 --> 00:18:22.080
So the core, if there is one framework in the book that it relates to, it's the value

401
00:18:22.080 --> 00:18:25.600
equation, which is that you have to understand how to create value so that you can charge

402
00:18:25.600 --> 00:18:27.560
as much as possible, right?

403
00:18:27.560 --> 00:18:29.960
And obviously also convert as many people as humanly possible.

404
00:18:29.960 --> 00:18:32.360
And so there's four elements that one is the dream outcome.

405
00:18:32.360 --> 00:18:34.400
The second is the perceived likelihood of achievement.

406
00:18:34.400 --> 00:18:36.640
And then below that, so it's a fraction.

407
00:18:36.640 --> 00:18:40.360
So dream outcome times perceived likelihood of achievement below that you have time to

408
00:18:40.360 --> 00:18:42.720
lay and then effort and sacrifice.

409
00:18:42.720 --> 00:18:46.400
And so the dream outcome is what I would say separates whether someone's even interested

410
00:18:46.400 --> 00:18:48.000
in your category of offer or not.

411
00:18:48.000 --> 00:18:51.360
So it's, you know, men in general probably want to make more money, women in general in

412
00:18:51.360 --> 00:18:55.840
general usually want to look better because both of those are more associated with status.

413
00:18:55.840 --> 00:18:59.800
So okay, why is it that B2B offers tend to be more expensive than B2C offers because

414
00:18:59.800 --> 00:19:01.320
it's more closely tied to ROI.

415
00:19:01.320 --> 00:19:02.320
Great.

416
00:19:02.320 --> 00:19:03.320
So that's the category one.

417
00:19:03.320 --> 00:19:05.480
And let's say weight loss given the example we're talking about.

418
00:19:05.480 --> 00:19:12.560
If you're B2C, how is it that you can have a $5 PDF and a $50,000 liposuction thing?

419
00:19:12.560 --> 00:19:15.000
But they both fundamentally solve the same problem, which is that they don't like the

420
00:19:15.000 --> 00:19:16.000
way their stomach looks, right?

421
00:19:16.000 --> 00:19:18.000
Well, it's the other three variables.

422
00:19:18.000 --> 00:19:20.120
And so the next is perceived likelihood of achievement.

423
00:19:20.120 --> 00:19:24.560
So taking the liposuction example, if you're a surgeon or you're a girl or you're thinking

424
00:19:24.560 --> 00:19:30.880
about getting liposuction, there's one surgeon that's just fresh out of medical school, hasn't

425
00:19:30.880 --> 00:19:32.120
done a surgery yet.

426
00:19:32.120 --> 00:19:36.560
And there's another physician who's got 10,000, you know, five stars or surgeries under

427
00:19:36.560 --> 00:19:37.560
his belt.

428
00:19:37.560 --> 00:19:38.560
Who do you go to?

429
00:19:38.560 --> 00:19:39.560
The guy with 10,000.

430
00:19:39.560 --> 00:19:40.560
Why?

431
00:19:40.560 --> 00:19:44.840
And the crazy thing is that it's the same procedure, but the perceived likelihood of achievement

432
00:19:44.840 --> 00:19:47.240
that you're going to get what you want is significantly higher.

433
00:19:47.240 --> 00:19:51.840
And so you pay for that premium because the equal opposite of this is risk, right?

434
00:19:51.840 --> 00:19:52.840
And so how do we decrease risk?

435
00:19:52.840 --> 00:19:56.000
So you have this dream outcome and you want it to be absolutely certain that you're going

436
00:19:56.000 --> 00:19:57.000
to achieve it.

437
00:19:57.000 --> 00:20:00.680
And so it's the category and then there's things you do in the offer like that's where

438
00:20:00.680 --> 00:20:04.800
guarantees come into play is how can I further decrease their risk associated with that.

439
00:20:04.800 --> 00:20:07.560
And then we have the bottoms out of the equation, which is time delay.

440
00:20:07.560 --> 00:20:10.760
So how far between when they buy and when they get?

441
00:20:10.760 --> 00:20:15.760
And so to use the example of personal training versus the liposuction, personal training

442
00:20:15.760 --> 00:20:21.240
got arm wrestle somebody for an hour to get them to buy a 2,000 dollar package of personal

443
00:20:21.240 --> 00:20:22.240
training.

444
00:20:22.240 --> 00:20:26.320
And the reason for that is because they might get their six pack, you know, 12 to 18

445
00:20:26.320 --> 00:20:31.160
months later, whereas if you do liposuction, you know, you're going to go to sleep and

446
00:20:31.160 --> 00:20:32.880
then you're going to wake up and you're going to be significantly thinner.

447
00:20:32.880 --> 00:20:35.160
So the time delays so much shorter.

448
00:20:35.160 --> 00:20:38.480
And so because of that, it increases the value of raw.

449
00:20:38.480 --> 00:20:43.360
And then finally, you have effort and sacrifice, which effort are things that you have to begin

450
00:20:43.360 --> 00:20:45.840
doing that you don't want to do as a result of purchase.

451
00:20:45.840 --> 00:20:49.920
So in the personal training example, you got to wake up early, you got to be sore, that's

452
00:20:49.920 --> 00:20:50.920
the effort side.

453
00:20:50.920 --> 00:20:53.760
You have to stop you, you know, well, sacrifice is the things you have to stop doing that

454
00:20:53.760 --> 00:20:54.760
you want to keep doing.

455
00:20:54.760 --> 00:20:58.080
So it's like you got to stop toco Tuesday, you got to stop sleeping in because you got

456
00:20:58.080 --> 00:20:59.160
to do it in the morning.

457
00:20:59.160 --> 00:21:02.600
So it's both sides of the same coin, effort and sacrifice.

458
00:21:02.600 --> 00:21:07.520
And when you itemize all the things that a customer has to do as a result of a purchase,

459
00:21:07.520 --> 00:21:10.720
what are all the things that they, what are the things that increase their risk, what are

460
00:21:10.720 --> 00:21:13.920
the things that make it take longer, what are the things that make them start doing things

461
00:21:13.920 --> 00:21:17.160
they hate, and what are the things that we have them stop doing that they love.

462
00:21:17.160 --> 00:21:22.800
And then you create solutions for each of those categories, then you create an incredibly

463
00:21:22.800 --> 00:21:23.800
valuable offer.

464
00:21:23.800 --> 00:21:26.720
And so from the weight loss perspective, many people think, oh, I'm going to help them

465
00:21:26.720 --> 00:21:30.000
lose weight, but it's like, well, they're going to have to go grocery shopping differently.

466
00:21:30.000 --> 00:21:32.240
They're going to have to learn how to prep food.

467
00:21:32.240 --> 00:21:36.400
And so it's really getting granular about all the little steps that has to occur in order

468
00:21:36.400 --> 00:21:37.920
for someone to get a result.

469
00:21:37.920 --> 00:21:42.560
And so looking at what happens immediately before and immediately post purchase, all the

470
00:21:42.560 --> 00:21:46.480
little steps, and then trying to deconstruct each of those steps for them, and then including

471
00:21:46.480 --> 00:21:51.440
those things in the offer, ultimately creates a much more valuable a offer and be a higher

472
00:21:51.440 --> 00:21:52.440
converting offer.

473
00:21:52.440 --> 00:21:58.680
This is where you get these massive stepwise increases in terms of company value, because

474
00:21:58.680 --> 00:22:03.920
all of a sudden we can double the price or triple the price for offer and close at a higher

475
00:22:03.920 --> 00:22:05.000
percentage.

476
00:22:05.000 --> 00:22:08.960
And so that's when these crazy kind of like lot of pollution effects occur in the business

477
00:22:08.960 --> 00:22:14.320
where they go from 2 million to 10 in a year, changing nothing, but what the core offer

478
00:22:14.320 --> 00:22:15.800
of what they said was.

479
00:22:15.800 --> 00:22:19.440
And then we do these little enhancers that I'll add on, which is like you've got scarcity,

480
00:22:19.440 --> 00:22:20.880
which is limiting number of units.

481
00:22:20.880 --> 00:22:23.800
You've got urgency, which is limiting number of time.

482
00:22:23.800 --> 00:22:27.320
You have guarantees, which is things that we do to reverse risk.

483
00:22:27.320 --> 00:22:31.880
If there's four types of guarantees, you can do unconditional, conditional, zero guarantee,

484
00:22:31.880 --> 00:22:32.880
and then performance.

485
00:22:32.880 --> 00:22:36.280
So performance, what I call an implied guarantee, like if you don't make money out of

486
00:22:36.280 --> 00:22:37.280
make money.

487
00:22:37.280 --> 00:22:40.360
Anti-garanties, you lean into the fact that you don't have a guarantee for the person needs

488
00:22:40.360 --> 00:22:41.360
a guarantee.

489
00:22:41.360 --> 00:22:42.360
This isn't for you.

490
00:22:42.360 --> 00:22:45.560
Conditionals, like I'll guarantee it if you do X, Y, and Z, and then unconditional, it's

491
00:22:45.560 --> 00:22:46.560
unconditional.

492
00:22:46.560 --> 00:22:48.200
I'll give you your money back if you ask for it.

493
00:22:48.200 --> 00:22:52.880
Then you have bonuses, which are things that drive action in the short term, buying

494
00:22:52.880 --> 00:22:53.880
decisions.

495
00:22:53.880 --> 00:22:57.400
And so a lot of those things that you can make near as a blogger or a grand slam offer

496
00:22:57.400 --> 00:23:01.120
from the book is by looking at each of those problems and creating kind of a bonus stack

497
00:23:01.120 --> 00:23:02.120
that solves each of them.

498
00:23:02.120 --> 00:23:06.720
And so from a selling perspective hand-to-hand, the salesman doesn't need to say all seven

499
00:23:06.720 --> 00:23:08.400
of the things that you have.

500
00:23:08.400 --> 00:23:12.080
And so the idea is that you make the ask on the initial offer, if they say no, you figure

501
00:23:12.080 --> 00:23:14.960
out what the constraint is, and then you plug that bonus in.

502
00:23:14.960 --> 00:23:18.800
And then maybe you need to put three bonuses in in order to get them over the edge.

503
00:23:18.800 --> 00:23:21.920
This also allows the sales team to stop doing discounts in order to close people.

504
00:23:21.920 --> 00:23:24.480
We just add value rather than taking away price.

505
00:23:24.480 --> 00:23:27.920
And then post purchase in order to make sure that ops is all the same.

506
00:23:27.920 --> 00:23:30.920
You then give them a surprise and delay with the remaining four.

507
00:23:30.920 --> 00:23:34.360
And you say, by the way, since you did buy, I want to give you these other things.

508
00:23:34.360 --> 00:23:37.400
And so if you get the fast buyer that doesn't need the bonuses, you just give them the

509
00:23:37.400 --> 00:23:38.400
bonuses and they love you.

510
00:23:38.400 --> 00:23:42.560
And as you got to somebody who needs all seven, then you give them the seven bonuses on

511
00:23:42.560 --> 00:23:43.560
the salescalls.

512
00:23:44.560 --> 00:23:47.080
You can just get increased close rates without giving away discounts.

513
00:23:48.120 --> 00:23:50.760
Got damn highly, highly useful.

514
00:23:51.160 --> 00:23:52.520
I feel pumped up, brother.

515
00:23:52.720 --> 00:23:55.440
I need to go read, I need to go read the blue end, the purple one.

516
00:23:56.280 --> 00:23:57.880
Like this is the stuff that I enjoy.

517
00:23:58.600 --> 00:24:02.640
And that's the stuff that we do to like really grow the business in the portfolio is, we're

518
00:24:02.640 --> 00:24:03.720
work in it.

519
00:24:03.720 --> 00:24:07.720
We're re-scripting the sales, like we're, we're changing the process overall.

520
00:24:07.720 --> 00:24:11.000
Like we bought a chain of 32 teeth whitening studios.

521
00:24:11.320 --> 00:24:15.360
Is there anyone at acquisition.com who's better than you at this or are you still the best?

522
00:24:15.920 --> 00:24:20.800
When it comes to like offer reimagining, like mixed with sales process, that's probably

523
00:24:20.800 --> 00:24:21.960
my strongest.

524
00:24:22.680 --> 00:24:24.120
It's probably the thing I invest at.

525
00:24:24.520 --> 00:24:27.320
And it just drives so much profit in a business since pricing is the strongest

526
00:24:27.320 --> 00:24:28.120
level of profit.

527
00:24:28.360 --> 00:24:29.960
There's a great example of the offer, by the way.

528
00:24:30.480 --> 00:24:33.880
I've been knee deep in like a, I do these two week learning sprints, where I just pick

529
00:24:33.880 --> 00:24:37.480
whatever the topic I'm most interested in, I just go fucking ham on it, like every minute

530
00:24:37.560 --> 00:24:40.560
that I'm not on this podcast or not, I'm like a required meeting.

531
00:24:41.000 --> 00:24:42.720
I'm just like going down on one topic.

532
00:24:42.720 --> 00:24:44.760
In this case, I've been doing like the old school marketers.

533
00:24:45.320 --> 00:24:46.960
And there's a great story.

534
00:24:46.960 --> 00:24:50.960
I think it's Ogovy who, when he launched his agency, he's like, how do I get people to

535
00:24:50.960 --> 00:24:53.120
do this? And he basically made a killer offer.

536
00:24:53.120 --> 00:24:58.720
He was like, take your top performing ad that you've spent years iterating on and you

537
00:24:58.720 --> 00:25:00.640
got this to be your top for performing ad.

538
00:25:01.280 --> 00:25:05.720
I guarantee that I will beat it in an A, B test head to head within a month.

539
00:25:06.120 --> 00:25:08.680
And I will fund my portion of the A, B test.

540
00:25:09.080 --> 00:25:14.400
So I'll make the ad, I guarantee you that I'll beat it and I'll fund the ad cost of the,

541
00:25:14.400 --> 00:25:18.720
I'm so confident, I will fund the ad cost if I don't beat it or even, I think even not

542
00:25:18.720 --> 00:25:21.200
if I don't beat it, I will fund the ad cost in order to win your business.

543
00:25:21.720 --> 00:25:25.480
And what he said was this was like the response rate on this ad was through the roof,

544
00:25:25.840 --> 00:25:30.160
because he's like, but the best part was of the 100% of people that responded.

545
00:25:30.520 --> 00:25:34.720
He's like, we didn't even end up having to do it because the top 20%, the most expensive

546
00:25:34.800 --> 00:25:35.880
clients were like, okay, cool.

547
00:25:35.880 --> 00:25:38.360
Forget the A, B test and the mechanics and the contract for that.

548
00:25:38.360 --> 00:25:42.320
Like the fact that you're willing to do that, we looked into your track record.

549
00:25:42.320 --> 00:25:43.520
We are big believers in this.

550
00:25:43.520 --> 00:25:45.840
We'd like to just move forward and go ahead and entertain you.

551
00:25:46.200 --> 00:25:49.520
I, we know that our agency would never be that, that confidence to pull that up.

552
00:25:49.520 --> 00:25:50.720
So we're willing to work with you.

553
00:25:51.120 --> 00:25:55.240
And he's like, it was incredible because I was a, I used this killer offer to fill up the funnel.

554
00:25:55.240 --> 00:25:59.000
And then I just picked the top 20% of clients in that funnel and that kick started

555
00:25:59.000 --> 00:26:01.480
Ogle V, which became, you know, one of the big ad agencies.

556
00:26:02.320 --> 00:26:03.280
That's in the game.

557
00:26:03.280 --> 00:26:06.160
And like we bought that, the, the teeth wedding chain.

558
00:26:06.160 --> 00:26:10.360
And so I sat down with our director of sales and we re-scripted the sales process and

559
00:26:10.360 --> 00:26:13.000
basically re-imagined how the offers were going to happen.

560
00:26:13.080 --> 00:26:15.920
And we five X del TV per sale.

561
00:26:16.480 --> 00:26:19.720
And so I was like, okay, here's the plan.

562
00:26:19.720 --> 00:26:20.560
Just roll it out.

563
00:26:22.360 --> 00:26:25.320
Fundamentally, it's like a lot of times people think there's a lot more that it takes

564
00:26:25.320 --> 00:26:26.080
to grow their company.

565
00:26:26.080 --> 00:26:29.200
But sometimes just a handful of levers just make a huge difference.

566
00:26:29.560 --> 00:26:34.760
Does every business and product offering have a killer offer inside of them?

567
00:26:35.120 --> 00:26:36.120
I do think so.

568
00:26:36.120 --> 00:26:40.480
I think that sometimes you have to, like the big part with the offers, you have to operationalize it.

569
00:26:40.920 --> 00:26:45.080
And so if you're Ogle V, it's like, okay, well, how can I write all these split-tests?

570
00:26:45.080 --> 00:26:48.640
Like it's like, if I'm going to have all these bonuses that I have to add in in order to make

571
00:26:48.640 --> 00:26:51.000
the thing more valuable, I have to operationalize that part.

572
00:26:51.040 --> 00:26:53.240
And so yes, I do think so.

573
00:26:53.240 --> 00:26:56.360
It's just like, usually you might sometimes have to put like terms around that.

574
00:26:56.360 --> 00:26:58.120
Like if I was an accounting firm, something boring.

575
00:26:58.480 --> 00:27:03.480
It's like, I can guarantee that I will get you more than you pay me by just auditing

576
00:27:03.480 --> 00:27:06.120
your back taxes and saving that money today, right?

577
00:27:07.160 --> 00:27:09.280
But you have to provide all the back taxes.

578
00:27:09.280 --> 00:27:13.160
And like you have to, and then I have to have a separate team that I now have to create

579
00:27:13.160 --> 00:27:18.000
just for our front end conversion to shrink time to value using that little nugget.

580
00:27:18.120 --> 00:27:22.360
And the big thing with most of the businesses I try and shrink time to value, like really aggressively,

581
00:27:22.600 --> 00:27:25.160
like even that publishing business, it takes a very long time for that business

582
00:27:25.160 --> 00:27:26.320
for our customer to get a result.

583
00:27:27.160 --> 00:27:28.120
And so we looked at it.

584
00:27:28.120 --> 00:27:32.360
We're like, can we peel some element of what we do and drop it in the beginning?

585
00:27:32.600 --> 00:27:35.800
And it turns out we could do something in like seven days that gave people a very

586
00:27:36.080 --> 00:27:38.640
positive outcome really quickly.

587
00:27:38.640 --> 00:27:41.320
And then they like get bought in emotionally that you know what you're doing.

588
00:27:41.800 --> 00:27:45.240
And to further on the point, I think that probably a major difference between like the

589
00:27:45.240 --> 00:27:48.960
tiny slash Wilkinson model and how we do it is that we are operators.

590
00:27:49.840 --> 00:27:55.920
And so the investment strategy has slowly, you know, continues to, you know, move over time.

591
00:27:55.960 --> 00:28:03.320
But it's been fewer, bigger deals that we have larger percentages of that we do more for.

592
00:28:03.600 --> 00:28:06.280
And it's just like basically the more we work on the business, the more money we make.

593
00:28:06.280 --> 00:28:08.280
And so if we're going to work on it, then it might as well be big.

594
00:28:08.960 --> 00:28:11.240
Did you did that school deal, right?

595
00:28:11.800 --> 00:28:14.080
We had, we had Sam on the pod.

596
00:28:14.640 --> 00:28:15.880
It was an interesting guy.

597
00:28:16.000 --> 00:28:18.600
Samovins, we're talking about school.com.

598
00:28:18.600 --> 00:28:19.360
Is it school.com?

599
00:28:19.360 --> 00:28:24.120
He, um, one of the oddest people you'll ever have a conversation with,

600
00:28:24.320 --> 00:28:26.280
but odd in the best possible way.

601
00:28:26.920 --> 00:28:31.360
So one time I was with him, it was my wife, me and Samovins.

602
00:28:31.880 --> 00:28:34.240
We're sitting at, um, we're at a party or something.

603
00:28:34.880 --> 00:28:39.080
And him and my wife get along great because my wife and I both love like quirky people.

604
00:28:39.080 --> 00:28:40.360
He's extreme quirky.

605
00:28:40.800 --> 00:28:46.840
It gets to a low on the conversation where there's probably a five second silence where we're thinking about what we're going to say next.

606
00:28:47.320 --> 00:28:51.480
And he looks at my wife and he goes, uh, I delivered my baby.

607
00:28:55.120 --> 00:28:58.480
And we both look at each other and like, what?

608
00:28:58.680 --> 00:29:03.960
He goes, I delivered my baby and, uh, I'm like, with what?

609
00:29:03.960 --> 00:29:11.760
He goes, uh, my hands and then he goes on to tell the story about how his wife gave birth at home because it couldn't make it to the hospital.

610
00:29:12.240 --> 00:29:16.080
But like, he didn't laugh when he was telling any of that stuff.

611
00:29:16.080 --> 00:29:17.760
And I thought it was so funny.

612
00:29:17.760 --> 00:29:20.000
And he's one of the quirkiest people I've ever met.

613
00:29:20.440 --> 00:29:25.560
But he's the type of people who I love where he's so logical that it's painful a little bit.

614
00:29:25.760 --> 00:29:30.080
But also he's the type of guy who I think has read a book on how like normal people interact.

615
00:29:30.080 --> 00:29:35.240
So and you could tell he's like, I do care about you, but I kind of have to learn a little bit how to adapt to fit your.

616
00:29:35.280 --> 00:29:36.680
But and you could tell that.

617
00:29:37.200 --> 00:29:37.960
And it's endearing.

618
00:29:38.040 --> 00:29:39.640
It makes me look more listening to you.

619
00:29:39.640 --> 00:29:41.200
He's like, I am active listening.

620
00:29:41.440 --> 00:29:43.240
Yeah, it's like, okay, thank you.

621
00:29:44.520 --> 00:29:46.880
Like, which I love because he wants to show you.

622
00:29:46.880 --> 00:29:47.680
He cares about you.

623
00:29:47.920 --> 00:29:48.960
And I like that.

624
00:29:48.960 --> 00:29:51.120
And it's like a really, he's got a really interesting personality.

625
00:29:51.480 --> 00:29:53.720
Yeah, no, the school deal is going exceptionally well.

626
00:29:53.880 --> 00:29:57.840
We've, you know, five or six X the business in the last eight months.

627
00:29:58.120 --> 00:29:59.040
Well, we'll break it down.

628
00:29:59.040 --> 00:30:00.040
Why do that deal?

629
00:30:00.160 --> 00:30:01.920
It seems like you made a much bigger bet.

630
00:30:01.920 --> 00:30:05.240
And I'm saying that because you started wearing the hat around, whereas your other deals, you don't promote.

631
00:30:05.400 --> 00:30:09.280
So I'm like, okay, he definitely like ponied up for this one and made a big bet on this.

632
00:30:09.520 --> 00:30:12.920
So why do a sass deal or, you know, why do the school deal?

633
00:30:13.720 --> 00:30:17.880
How, how do you figure out the bet size and, and was it like a butt, butt clenching number?

634
00:30:18.040 --> 00:30:19.880
And then, you know, what, what's the plan?

635
00:30:20.160 --> 00:30:21.240
Well, I'll say this.

636
00:30:21.320 --> 00:30:23.800
So breaking it out into the, into the deal components.

637
00:30:24.320 --> 00:30:29.160
Any brand endorsement for me is by far the butt clenching component of it, not the cash.

638
00:30:30.160 --> 00:30:36.760
Because you only have three, four brand bullets that you can use where you're going to throw it without becoming a shell, right?

639
00:30:37.320 --> 00:30:46.640
And so if I looked at my audience, I think about the people who best monetize an audience, do percentage conversion times LTV.

640
00:30:47.080 --> 00:30:47.560
That's it.

641
00:30:47.920 --> 00:30:52.320
So what percentage of your audience you convert and what's the lifetime risk profit for customer?

642
00:30:52.800 --> 00:30:53.800
And that's, that's it.

643
00:30:53.800 --> 00:30:56.120
That's the math the person who makes the most money wins.

644
00:30:56.480 --> 00:31:02.600
The big thing that's so with my audience is that obviously we have a very skewed, you know, monetization structure because we have

645
00:31:03.080 --> 00:31:09.240
portfolio companies where we just make a tremendous amount on like a handful and then everything else like kind of doesn't matter.

646
00:31:10.600 --> 00:31:13.160
And do you even promote, you don't even promote those others?

647
00:31:14.000 --> 00:31:14.280
Right.

648
00:31:14.280 --> 00:31:15.880
No, I don't know the other, no, not at all.

649
00:31:15.920 --> 00:31:17.320
That's just, but they come inbound though.

650
00:31:17.320 --> 00:31:24.480
So that's, it still comes from content often, but a huge percentage of my audience or people who want to start a business.

651
00:31:24.480 --> 00:31:28.960
And that's probably some of the people who listened to your stuff, their people who were employees, their high up, their executives, things like that.

652
00:31:29.240 --> 00:31:31.720
Or and they are, they want to start a business with their own, whatever.

653
00:31:32.080 --> 00:31:38.160
And so I was like, okay, so there's this entire huge part of my audience that wants to start a business.

654
00:31:38.840 --> 00:31:42.200
And I want to have something for them.

655
00:31:42.280 --> 00:31:46.520
And so I also don't want it to cannibalize acquisition.com in terms of how we generate deals or things like that.

656
00:31:46.520 --> 00:31:55.120
And so it had to be something that would help people start a business, which in my opinion was going to be the closest match, like audience match.

657
00:31:55.120 --> 00:31:56.480
So high percentage conversion.

658
00:31:57.200 --> 00:31:58.760
It had to be a scalable thing.

659
00:31:58.760 --> 00:32:02.320
So I didn't think a service would work given the amount of volume that we have.

660
00:32:03.200 --> 00:32:07.560
And so it's like, okay, it has to be something that's a demand constraint, not some hot constraint.

661
00:32:07.960 --> 00:32:14.800
So it's like, okay, and ideally, if there's something that we can create some sort of network effect, then some sort of company, you know, machine within it.

662
00:32:15.240 --> 00:32:18.600
And it has to be at the right point in the life cycle of the business, right?

663
00:32:19.480 --> 00:32:26.200
If you're, you know, day, day, you know, day a thousand at Facebook is probably too late.

664
00:32:26.280 --> 00:32:29.600
You didn't mean to get in on Facebook at any appreciable percentage, right?

665
00:32:30.440 --> 00:32:36.600
And also where I would have less leverage and less value to add to a company in that size.

666
00:32:36.600 --> 00:32:42.600
And so school was a big company in terms of its value and the rounds that they had done already.

667
00:32:43.080 --> 00:32:46.040
But I also have a really big brand.

668
00:32:46.920 --> 00:32:54.760
And so it took, you know, Sam and I call it nine months to work out kind of every component of the deal.

669
00:32:54.840 --> 00:32:57.160
There's, in my opinion, it was the best deal I've ever done.

670
00:32:57.480 --> 00:33:00.200
Not in terms of like winning over anything like that.

671
00:33:00.680 --> 00:33:07.160
It was just, it's a really elegant deal, the way that it works, which I'm not at liberty to explain all the pieces of it.

672
00:33:07.240 --> 00:33:12.440
But basically, like, we both gave a lot and we both are happy with how it's going.

673
00:33:13.800 --> 00:33:17.800
And so we both made commitments to the other person of what we can and can't do.

674
00:33:17.800 --> 00:33:25.240
Like, if someone's going to come on and, you know, be in an ad from school, like, I have to be okay with it because I have a strong association with that.

675
00:33:27.000 --> 00:33:31.320
And things like that, but it's just like, there's, how can I mitigate this risk? How can I mitigate that?

676
00:33:31.400 --> 00:33:35.720
And so to circle back to the original question, why did I do the school deal?

677
00:33:35.720 --> 00:33:42.120
I felt like I had 70% of the audience that I have because there's always way more people want to start a business than have a business, especially if you make business content.

678
00:33:42.120 --> 00:33:49.160
And so I wanted to have something for that audience that I that met all those other requirements and I knew Sam.

679
00:33:50.360 --> 00:33:53.080
And Sam told me about school two weeks into him starting school.

680
00:33:53.640 --> 00:33:59.160
And so I was kind of like, well, it's, I mean, I'm not going to try and bet on a platform at day one.

681
00:33:59.160 --> 00:34:01.320
That's why that's where Sam has just massive balls.

682
00:34:01.320 --> 00:34:08.200
I think on our podcast, I think he said he spent $10 million of his own money to fund the business.

683
00:34:08.200 --> 00:34:11.240
And I think he also said that was the bulk of all his money.

684
00:34:11.240 --> 00:34:13.720
Yeah, there was. I mean, I think he's been public about it.

685
00:34:13.720 --> 00:34:17.800
And then he still raised another five to still keep continuing reinvesting the business.

686
00:34:17.800 --> 00:34:21.720
And when I saw the metrics of school, it has everything that you want.

687
00:34:21.720 --> 00:34:27.000
It had viral organic growth. It was compounding, you know, 20% every single month, month over a month over a month.

688
00:34:27.000 --> 00:34:29.400
And I was like, this thing's a fucking monster.

689
00:34:29.960 --> 00:34:32.600
And it was right at that point where he's like, we need to grow up.

690
00:34:32.600 --> 00:34:34.760
And I was like, okay, I need a product.

691
00:34:35.320 --> 00:34:37.000
And so it was a perfect match.

692
00:34:37.640 --> 00:34:39.640
And it's worked really well.

693
00:34:39.640 --> 00:34:43.800
That's great. Last time you were on, you were talking about how like you started doing minority deals.

694
00:34:43.800 --> 00:34:46.520
And then you sort of realized like, damn, we're creating on the deals that win.

695
00:34:46.520 --> 00:34:47.800
We create so much value.

696
00:34:48.760 --> 00:34:51.800
Don't, you know, you basically wish you owned more on anything that works.

697
00:34:51.800 --> 00:34:53.720
And you're like, maybe we'll switch to doing majority.

698
00:34:53.720 --> 00:34:54.680
Like where'd you land on that?

699
00:34:54.680 --> 00:34:56.440
Like what's the evolved thinking on that?

700
00:34:56.440 --> 00:35:00.280
And I don't know if that relates to how you did the school deal, but just in general also.

701
00:35:00.280 --> 00:35:01.880
Yeah, it's almost all majority.

702
00:35:02.440 --> 00:35:03.480
It's almost all majority.

703
00:35:03.480 --> 00:35:08.200
Like if we're going to do a minority, it's got to be a massive company, you know, like for us to do that.

704
00:35:08.200 --> 00:35:13.320
I basically have, and one of the unfortunate things with content is like my deal line has

705
00:35:13.320 --> 00:35:14.200
continued to move up.

706
00:35:14.200 --> 00:35:17.000
And so like, you were like, I finally hit a million dollars in profit.

707
00:35:17.000 --> 00:35:20.360
And I was like, I, you know, like we're kind of looking at like five or 10 million to profit now.

708
00:35:20.360 --> 00:35:22.120
Like for a minimum to look at.

709
00:35:22.120 --> 00:35:24.920
Because right now, like the portfolio is 250 million a year.

710
00:35:24.920 --> 00:35:30.920
We do 70 million a year, but we have consolidated like the smallest percentage ownership we have is 20%

711
00:35:30.920 --> 00:35:32.040
the largest is a hundred.

712
00:35:33.480 --> 00:35:36.920
I think our aggregate is somewhere that is like 42 or something percent.

713
00:35:37.560 --> 00:35:39.480
If you blend all the the percentages together.

714
00:35:39.480 --> 00:35:41.000
So we have meaningful chunks of the companies.

715
00:35:41.800 --> 00:35:43.560
Are you like our friends?

716
00:35:43.560 --> 00:35:47.320
We have a couple of friends that are doing this and they were talking about metrics.

717
00:35:47.320 --> 00:35:51.480
And they were saying, you know, with a hold co like this, there's a couple different things you

718
00:35:51.480 --> 00:35:53.160
can go for. One is just free cash flow.

719
00:35:53.160 --> 00:35:56.040
So how much cash are these businesses spinning out?

720
00:35:56.040 --> 00:35:57.320
And they buy cash flow businesses.

721
00:35:57.320 --> 00:35:58.200
That's their play.

722
00:35:58.920 --> 00:36:00.920
They don't care as much about the equity appreciation.

723
00:36:00.920 --> 00:36:04.280
Obviously they care, but first and foremost, they're looking for cash flow generation.

724
00:36:05.320 --> 00:36:06.600
So they picked free cash flow.

725
00:36:06.600 --> 00:36:10.360
And then I know other people in private equity that are, you know, they're looking for basically

726
00:36:10.360 --> 00:36:15.160
ultimately like a return on capital invested or, you know, a multiple on capital invested.

727
00:36:15.160 --> 00:36:18.520
So what's the main metric for you with acquisitions?

728
00:36:18.520 --> 00:36:21.560
How do you measure if you're doing a good job deploying capital or not?

729
00:36:22.760 --> 00:36:26.040
I have thought about it as deal by deal.

730
00:36:26.760 --> 00:36:30.200
Like school is obviously a appreciation play.

731
00:36:30.200 --> 00:36:35.080
You know, like that will realize all of the gains from that years into the future, right?

732
00:36:35.640 --> 00:36:39.560
Whereas there's some companies that will buy that are pure cash flow deals.

733
00:36:39.640 --> 00:36:42.280
And so it really just depends on, I mean, deal by deal.

734
00:36:42.280 --> 00:36:45.800
So we don't have like a mandate, which is one of the reasons, you know, I haven't had LPs because

735
00:36:45.800 --> 00:36:49.640
I just look because the nature of having inbound deal flows like we get weird deals.

736
00:36:49.640 --> 00:36:53.320
And so if some of them are very interesting, like I have to buy out a partner.

737
00:36:54.040 --> 00:36:57.320
And it's like this weird terrible situation, but no one else wants to get into it.

738
00:36:57.320 --> 00:36:58.440
But like we're operators.

739
00:36:58.440 --> 00:36:59.640
And so we're happy to get into it.

740
00:36:59.640 --> 00:37:01.080
So we can get really good valuations.

741
00:37:01.080 --> 00:37:03.880
And maybe we get both in terms of cash flow.

742
00:37:03.880 --> 00:37:09.160
But like I'd say like for us in cash flow, we're probably on pace to do 40

743
00:37:09.240 --> 00:37:12.280
in cash flow, just like our slice for the year.

744
00:37:13.080 --> 00:37:13.960
That's incredible.

745
00:37:13.960 --> 00:37:17.480
And how much capital did it take to get to that, right?

746
00:37:17.480 --> 00:37:18.760
Because that's the that's the skill.

747
00:37:18.760 --> 00:37:19.320
That's the finesse.

748
00:37:19.320 --> 00:37:21.320
If it takes a billion dollars to generate.

749
00:37:21.320 --> 00:37:22.840
Yeah, cash flow, you're that's one thing.

750
00:37:22.840 --> 00:37:26.040
If it took 50 million to generate 40, that's incredible, right?

751
00:37:26.040 --> 00:37:26.760
Not a lot.

752
00:37:26.760 --> 00:37:30.440
And it's been mostly because what Layla and I have realized in this process

753
00:37:30.440 --> 00:37:33.560
is that we're better at building better at building than buying.

754
00:37:33.560 --> 00:37:33.960
Yeah.

755
00:37:34.920 --> 00:37:37.400
So like I so I so we did

756
00:37:38.600 --> 00:37:41.640
20 I did like a deal a month for like two years.

757
00:37:42.200 --> 00:37:47.000
And of those I've gotten rid of like I basically just like user equity.

758
00:37:47.000 --> 00:37:50.280
I don't even care to like 80% of them.

759
00:37:50.280 --> 00:37:53.960
And then we just we just basically did an 80 20 because it wasn't worth the time.

760
00:37:53.960 --> 00:37:57.640
I was like you can keep the cash and I will give you the equity back.

761
00:37:57.640 --> 00:37:58.600
I don't like this.

762
00:37:58.600 --> 00:38:00.200
It's just not worth the time anymore.

763
00:38:00.280 --> 00:38:05.160
But like the largest two companies in the portfolio together will do 150 million.

764
00:38:06.360 --> 00:38:09.240
And we own very large chunks of those companies

765
00:38:09.240 --> 00:38:12.840
with probably consolidated some like 60 like a lot of EBITDA.

766
00:38:12.840 --> 00:38:15.560
When you say build you don't mean incubate like from scratch.

767
00:38:15.560 --> 00:38:18.600
You're saying once we get in there we just do a shit ton of work and we kind of run the business.

768
00:38:18.600 --> 00:38:22.440
Yeah, so like the company that's doing 110 right now, which is the largest in the portfolio.

769
00:38:22.440 --> 00:38:23.240
Can you say which one?

770
00:38:23.880 --> 00:38:26.600
No, I just I just don't do I don't do any news besides school.

771
00:38:26.920 --> 00:38:32.200
It's a it's a B2C business business consumer business.

772
00:38:32.840 --> 00:38:35.880
But it started it did two million in 12 months when we got it.

773
00:38:36.680 --> 00:38:38.600
And so we own 29% of the business.

774
00:38:39.320 --> 00:38:44.120
And this year it'll do on its own between 35 and 40 million EBITDA.

775
00:38:44.920 --> 00:38:45.640
Wow.

776
00:38:45.640 --> 00:38:47.240
What was the unlock for that one?

777
00:38:47.800 --> 00:38:49.720
Well, what would you guys do that cranked it up so much?

778
00:38:49.720 --> 00:38:52.520
Because that's that's I'll tell you I'll tell you all the stuff we did.

779
00:38:52.520 --> 00:38:56.040
So and by the way, you still only have 30% of it.

780
00:38:56.040 --> 00:38:58.120
Yeah, that's that's 29% hasn't changed.

781
00:38:58.120 --> 00:39:03.640
So in the in the beginning, it was just basically a handful of founders that were together

782
00:39:03.640 --> 00:39:07.160
and they'd figured out a way to generate positive or a while the front end

783
00:39:08.360 --> 00:39:10.360
in terms of getting customers, but they had no back it.

784
00:39:10.360 --> 00:39:14.360
Can you say category like e-commerce licensing, like just like a general architect?

785
00:39:14.360 --> 00:39:15.080
Publishing.

786
00:39:15.080 --> 00:39:15.560
Yeah.

787
00:39:15.560 --> 00:39:16.520
Publishing business.

788
00:39:16.520 --> 00:39:21.000
And so they were they were getting like three to one up front LCV to CAC.

789
00:39:21.560 --> 00:39:25.000
And so I was like, hey man, wouldn't it be cool if we sold our customers something else?

790
00:39:25.560 --> 00:39:28.040
And it's actually really funny story if you guys want to hear it.

791
00:39:28.040 --> 00:39:32.040
So we're negotiating this deal and we're like right near the end.

792
00:39:32.760 --> 00:39:35.880
And we all agreed we need to have some sort of second up sell,

793
00:39:35.880 --> 00:39:38.440
some sort of backend that's going to build some sort of continuity, whatever.

794
00:39:38.440 --> 00:39:40.520
And so they were like, we've already got it.

795
00:39:40.520 --> 00:39:42.040
We've already built it all out.

796
00:39:42.040 --> 00:39:43.640
We're super passionate about it.

797
00:39:43.640 --> 00:39:46.760
We want to show people how to build a business like this.

798
00:39:46.760 --> 00:39:51.160
And I was like, that's not it was B2C business.

799
00:39:51.160 --> 00:39:53.560
It's like a published like it helps you publish books,

800
00:39:53.560 --> 00:39:54.520
like things like that, right?

801
00:39:54.520 --> 00:39:58.840
And I was like, this has nothing to do with what we do.

802
00:39:58.840 --> 00:40:00.600
And they're like, no, we're passionate about it.

803
00:40:00.600 --> 00:40:03.640
We know our customers are going to be passionate about it too if we're passionate about it.

804
00:40:03.640 --> 00:40:06.200
And so I was like, this is kind of a deal breaker for me.

805
00:40:06.200 --> 00:40:07.160
Like, I don't want to do that.

806
00:40:08.600 --> 00:40:10.280
And they're like, well, it's done.

807
00:40:10.280 --> 00:40:11.480
So I said, okay.

808
00:40:11.480 --> 00:40:13.560
And we're pretty much at the point where we're going to walk away.

809
00:40:13.560 --> 00:40:15.160
I said, crazy idea.

810
00:40:15.160 --> 00:40:21.000
Why don't you just survey the audience and put your offer next to my offer and just see which one they want.

811
00:40:21.000 --> 00:40:27.640
And I was like, and if they want your offer more, I was like, I'll kill myself and we won't do this deal.

812
00:40:27.640 --> 00:40:30.040
And I was like, and if they do want it, we do the deal.

813
00:40:30.040 --> 00:40:31.000
And they were like, fine.

814
00:40:31.000 --> 00:40:35.000
If you're and so we ran it and 85% of people wanted my offer.

815
00:40:35.800 --> 00:40:38.840
And my offer was more of that thing you just bought.

816
00:40:40.920 --> 00:40:43.320
And so it was a great, it was a great moment.

817
00:40:43.320 --> 00:40:44.680
Everybody came together as we did the deal.

818
00:40:45.400 --> 00:40:49.640
And then we built out that back end, which 1.9 X Dell TV, which now,

819
00:40:49.640 --> 00:40:52.200
now we've actually increased this 2.2 X Dell TV.

820
00:40:52.200 --> 00:40:55.800
And so we kept the same 3 to 1, but we were able to 5X advertising

821
00:40:56.440 --> 00:40:59.800
in terms of how much we could advertise and spend so we could be profitable.

822
00:40:59.800 --> 00:41:01.960
Which is basically, I mean, this is just like,

823
00:41:03.720 --> 00:41:07.720
like any digital marketer who's been in the game for 10 years or, you know,

824
00:41:07.720 --> 00:41:09.880
like this is like, this is the game.

825
00:41:09.880 --> 00:41:11.080
This is pretty standard shit.

826
00:41:11.080 --> 00:41:12.920
But every business owner has blind spots, right?

827
00:41:12.920 --> 00:41:13.800
Yeah, of course.

828
00:41:13.800 --> 00:41:15.080
There's so many business I look at.

829
00:41:15.080 --> 00:41:17.080
It's like, oh, yeah, we have 5X ROAS.

830
00:41:17.080 --> 00:41:18.760
It's like, cool, why aren't you spending more?

831
00:41:18.760 --> 00:41:19.480
Yeah.

832
00:41:19.480 --> 00:41:20.280
They don't have an answer.

833
00:41:20.280 --> 00:41:22.520
It's not like they have some complicated reason that they don't.

834
00:41:22.520 --> 00:41:24.760
They're saying, I don't know, I haven't really thought about it.

835
00:41:24.760 --> 00:41:25.320
Yeah, it's like,

836
00:41:25.320 --> 00:41:26.520
or they get romantic about it.

837
00:41:26.520 --> 00:41:29.720
And they're like, well, we don't want to, we don't want to like market it too much.

838
00:41:29.720 --> 00:41:30.440
We'll be annoying.

839
00:41:30.440 --> 00:41:32.280
I read this thing that said we need to have this margin.

840
00:41:32.280 --> 00:41:34.680
It's like, no, no, dude, you do this for two years.

841
00:41:34.680 --> 00:41:35.960
You get 10X bigger, right?

842
00:41:35.960 --> 00:41:39.240
Like, you know, there's a story they tell themselves or a blind spot

843
00:41:39.240 --> 00:41:42.120
or, hey, how'd you get all these customers like six months ago?

844
00:41:42.120 --> 00:41:43.880
It's like, oh, I used to go to these events.

845
00:41:43.880 --> 00:41:45.640
Like, do you go to those events anymore?

846
00:41:45.640 --> 00:41:46.600
No, I got tired of it.

847
00:41:47.160 --> 00:41:48.680
Yeah, then customers are gone, right?

848
00:41:48.680 --> 00:41:50.440
Do you want this to grow or what's going on here?

849
00:41:50.440 --> 00:41:51.160
Right.

850
00:41:51.160 --> 00:41:57.720
So it went from two million to did 16 million to 50, then 70,

851
00:41:57.720 --> 00:41:59.240
then this year we'll do one 10.

852
00:41:59.240 --> 00:42:03.480
And so we hired 40 sales guys so that we could do,

853
00:42:04.120 --> 00:42:05.480
we could add that back ended.

854
00:42:05.480 --> 00:42:09.720
We added a CMO, we added a CPO and a pull product

855
00:42:09.720 --> 00:42:12.120
seemed to help the chief product officer out.

856
00:42:12.120 --> 00:42:13.640
We added in a controller.

857
00:42:13.640 --> 00:42:14.920
And so one of the things that was not common,

858
00:42:14.920 --> 00:42:16.280
what we do is that we recruit.

859
00:42:16.840 --> 00:42:18.760
And so because we have a lot of inbound,

860
00:42:18.760 --> 00:42:20.760
we have a lot of talent that is in my audience.

861
00:42:20.760 --> 00:42:25.320
And so I might not endorse the company publicly,

862
00:42:25.320 --> 00:42:26.680
but from a private perspective,

863
00:42:26.680 --> 00:42:31.640
we'll recruit at HoldCo, get usually higher quality talent

864
00:42:31.640 --> 00:42:34.680
than a portfolio can get, place the high quality talent,

865
00:42:34.680 --> 00:42:36.200
and then they just grow way faster.

866
00:42:36.200 --> 00:42:38.680
Well, why wouldn't you recruit that, promote that company?

867
00:42:39.560 --> 00:42:40.760
Why wouldn't I?

868
00:42:40.760 --> 00:42:42.680
It's because I don't want to keep, well, one,

869
00:42:42.680 --> 00:42:44.280
I don't like promoting lots of things.

870
00:42:44.280 --> 00:42:46.840
So that's a big thing for me because I don't want to promote lots of stuff.

871
00:42:47.560 --> 00:42:50.200
It's one that I am considering to be fair,

872
00:42:50.200 --> 00:42:54.200
but it couldn't handle the amount of volume that I can send now.

873
00:42:54.840 --> 00:42:56.760
And now it's probably close.

874
00:42:56.760 --> 00:42:59.240
Because we actually built a SaaS component of that business,

875
00:42:59.240 --> 00:43:03.560
and now the software is doing more about 50% of the revenue in that business.

876
00:43:03.560 --> 00:43:05.000
And so that's going to be a monster deal.

877
00:43:05.480 --> 00:43:08.520
But the point there is that like we took the team from like,

878
00:43:09.080 --> 00:43:11.160
a handful of dudes with like some VAs,

879
00:43:12.120 --> 00:43:12.440
right?

880
00:43:12.440 --> 00:43:15.240
And to now the company's got 100 employees

881
00:43:15.240 --> 00:43:18.760
and like a whole leadership suite, a whole executive suite,

882
00:43:18.760 --> 00:43:20.040
it's a company, you know what I mean?

883
00:43:20.040 --> 00:43:22.920
And that just took a lot of work in four and a half years.

884
00:43:22.920 --> 00:43:26.360
And so our first kind of batch of deals that we did,

885
00:43:26.360 --> 00:43:29.320
we have our handful of winners that have come from that.

886
00:43:29.320 --> 00:43:30.760
What did you pay for that, by the way?

887
00:43:30.760 --> 00:43:33.240
The 30% how much cash did you put up at front?

888
00:43:33.240 --> 00:43:34.120
Like almost nothing.

889
00:43:34.840 --> 00:43:37.480
Let's say like a negligible amount relative to what we do.

890
00:43:37.560 --> 00:43:40.200
So you made tens of millions of dollars in value,

891
00:43:40.200 --> 00:43:41.960
potentially more in four years.

892
00:43:41.960 --> 00:43:43.240
And you made it for everyone.

893
00:43:43.240 --> 00:43:45.720
It sounds like, dude, I want to normalize this,

894
00:43:45.720 --> 00:43:46.840
because I think this is really cool.

895
00:43:46.840 --> 00:43:49.880
So I just did this, I just ran our stats this last weekend.

896
00:43:51.160 --> 00:43:53.080
Our average founder return on equity.

897
00:43:53.080 --> 00:43:57.160
So post deal, how much more is their slice worth?

898
00:43:57.160 --> 00:43:59.960
Like every PE buyer says, listen,

899
00:43:59.960 --> 00:44:01.640
and you could make more on the second bite, right?

900
00:44:01.640 --> 00:44:03.720
So everyone's like the same pitch, right?

901
00:44:03.720 --> 00:44:06.040
So our average founder return on equity,

902
00:44:06.040 --> 00:44:08.760
net of the chunk that we now own is 13x.

903
00:44:08.760 --> 00:44:09.480
Yeah, that's silly.

904
00:44:10.520 --> 00:44:11.160
That's silly.

905
00:44:13.160 --> 00:44:13.880
That's crazy.

906
00:44:13.880 --> 00:44:14.600
Right.

907
00:44:14.600 --> 00:44:16.280
So it's like, that's why I was like, you should pay me.

908
00:44:18.120 --> 00:44:21.080
Well, dude, so I did a deal that was similar.

909
00:44:21.080 --> 00:44:23.400
I can talk about it now, because the numbers have come out a little bit,

910
00:44:23.400 --> 00:44:25.880
which was this deal that at the time was called shepherd,

911
00:44:25.880 --> 00:44:27.080
and now it's called somewhere.

912
00:44:27.080 --> 00:44:29.960
So it's somewhere.com is basically a way you can hire

913
00:44:29.960 --> 00:44:31.160
like top talent overseas.

914
00:44:31.160 --> 00:44:35.320
So in the US, that same role for a developer might be 150 grand,

915
00:44:35.320 --> 00:44:36.120
180 grand.

916
00:44:36.120 --> 00:44:37.320
A lot of businesses owners don't want to do that.

917
00:44:37.320 --> 00:44:38.200
They're trying to be more profitable.

918
00:44:38.200 --> 00:44:38.680
You were in it.

919
00:44:38.680 --> 00:44:39.720
Yeah.

920
00:44:39.720 --> 00:44:44.520
So Nick was in the business, and then I wanted to join,

921
00:44:44.520 --> 00:44:45.560
I like that blueprint.

922
00:44:45.560 --> 00:44:46.680
So I was like, okay, that's a business.

923
00:44:46.680 --> 00:44:47.480
I'm either going to start.

924
00:44:47.480 --> 00:44:48.760
I'm going to buy into it, but do something.

925
00:44:48.760 --> 00:44:50.360
And I tested all the services out, and I was like, okay,

926
00:44:50.360 --> 00:44:50.920
I like this one.

927
00:44:51.560 --> 00:44:56.920
So I approached Marshall and cut a deal that I thought was so good for me,

928
00:44:56.920 --> 00:44:59.560
which is my objective when I do a deal is it has to be good for me.

929
00:44:59.560 --> 00:45:00.920
I'm not going to do a deal that's bad for me,

930
00:45:00.920 --> 00:45:02.440
but I want it to be good for both sides.

931
00:45:02.440 --> 00:45:04.120
But if I'm being honest in my heart of hearts,

932
00:45:04.120 --> 00:45:05.800
I was like, I think this is a good deal for him,

933
00:45:05.800 --> 00:45:07.000
and a great deal for me.

934
00:45:07.000 --> 00:45:07.400
Yeah.

935
00:45:07.400 --> 00:45:09.000
Turns out I had it like totally flipped.

936
00:45:09.000 --> 00:45:12.200
So what ended up happening was we put in a small amount of money,

937
00:45:12.200 --> 00:45:13.880
and then actually, you know,

938
00:45:13.880 --> 00:45:16.840
but the business was already making millions of dollars a year of profit.

939
00:45:16.840 --> 00:45:19.400
And so I was like, I can't value you this low,

940
00:45:19.400 --> 00:45:21.560
but I'm bringing value that's not cash.

941
00:45:21.560 --> 00:45:22.440
So how are we going to do this?

942
00:45:22.440 --> 00:45:23.480
And they're like, look, how about we do this?

943
00:45:23.480 --> 00:45:25.160
This is Nick's idea, actually, Nick was like,

944
00:45:25.160 --> 00:45:27.640
the business will loan you the money to buy your shares.

945
00:45:27.640 --> 00:45:29.640
And I was like, sick?

946
00:45:29.640 --> 00:45:32.200
Okay, you're going to give me the money to buy my, buy you?

947
00:45:32.200 --> 00:45:33.320
All right.

948
00:45:33.400 --> 00:45:35.720
Sign me up, you know, say no more.

949
00:45:35.720 --> 00:45:38.040
And so that's what that's when I was like, okay,

950
00:45:38.040 --> 00:45:39.480
this is an incredible deal for me.

951
00:45:39.480 --> 00:45:41.400
And it's, you know, a really good deal for them,

952
00:45:41.400 --> 00:45:42.600
because I know I was going to grow the business.

953
00:45:42.600 --> 00:45:44.360
I didn't know exactly by how much,

954
00:45:44.360 --> 00:45:45.720
and by how long it would take and all that.

955
00:45:46.680 --> 00:45:48.520
And what ended up happening was at the time,

956
00:45:48.520 --> 00:45:50.840
I think Marshall had an opportunity to sell the business,

957
00:45:50.840 --> 00:45:53.880
something in the range of let's call it like 15 million bucks.

958
00:45:53.880 --> 00:45:54.680
So that's what he's looking at.

959
00:45:54.680 --> 00:45:55.320
He didn't want to sell.

960
00:45:55.320 --> 00:45:55.960
He believed in the business,

961
00:45:55.960 --> 00:45:56.840
so he decided not to sell.

962
00:45:56.840 --> 00:45:58.760
But he had gone out, looked at offers,

963
00:45:58.760 --> 00:46:01.720
and that was like kind of where a realistic deal might have got done.

964
00:46:01.800 --> 00:46:03.320
A year later now, the numbers came out.

965
00:46:03.320 --> 00:46:05.880
So it basically, you know, the buyout happened

966
00:46:05.880 --> 00:46:07.240
at a $52 million valuation.

967
00:46:07.240 --> 00:46:08.680
So in less than a year,

968
00:46:08.680 --> 00:46:10.920
so basically like, I don't know, nine months of time,

969
00:46:10.920 --> 00:46:13.240
the business went from being worth 15 million to 52 million.

970
00:46:13.240 --> 00:46:15.640
And so I thought I was getting this incredible deal

971
00:46:15.640 --> 00:46:16.280
on my equity.

972
00:46:16.280 --> 00:46:18.680
Actually, Marshall got like, by far,

973
00:46:18.680 --> 00:46:20.680
like the most value out of the deal in less than a year.

974
00:46:20.680 --> 00:46:22.040
And the only thing that changed was

975
00:46:22.040 --> 00:46:23.320
being going in and, you know,

976
00:46:23.320 --> 00:46:25.080
being able to help the business in different ways.

977
00:46:25.080 --> 00:46:27.880
And so that way,

978
00:46:27.880 --> 00:46:30.120
and I realized, oh shit, that's the metric that matters.

979
00:46:30.200 --> 00:46:31.480
Because like, of course,

980
00:46:31.480 --> 00:46:33.000
I'm always going to protect my bottom line

981
00:46:33.000 --> 00:46:34.040
to try to make this work.

982
00:46:34.040 --> 00:46:36.520
But the only way that this model works long term

983
00:46:36.520 --> 00:46:41.000
is if the founders get a stupid return on equity after my split.

984
00:46:41.000 --> 00:46:42.600
And YC does the same thing. YC,

985
00:46:42.600 --> 00:46:44.440
which they used to get a lot of shit

986
00:46:44.440 --> 00:46:45.800
because they would give you 20,

987
00:46:45.800 --> 00:46:47.720
their original deal was like $18,000,

988
00:46:47.720 --> 00:46:49.320
like $6K per founder in a company.

989
00:46:50.280 --> 00:46:51.640
And they would take six or seven percent.

990
00:46:52.360 --> 00:46:53.400
And people used to be like,

991
00:46:53.400 --> 00:46:54.920
well, YC is getting in an effective,

992
00:46:54.920 --> 00:46:56.200
like a million dollar valuation

993
00:46:56.200 --> 00:46:58.840
into these like future drop box Airbnb,

994
00:46:58.840 --> 00:46:59.800
like those were YC companies.

995
00:47:00.440 --> 00:47:01.560
And Paul Graham came out, he's like,

996
00:47:01.560 --> 00:47:02.600
there's a very simple equation.

997
00:47:03.560 --> 00:47:06.520
You do one divided by the equity you gave me.

998
00:47:06.520 --> 00:47:08.120
So basically, it's like, if you gave me seven percent,

999
00:47:08.120 --> 00:47:10.600
but I make the company worth 10 percent,

1000
00:47:10.600 --> 00:47:12.040
like because you gave me,

1001
00:47:12.040 --> 00:47:13.240
because I'm now involved in the company,

1002
00:47:13.240 --> 00:47:14.600
the company's worth 10 percent more,

1003
00:47:14.600 --> 00:47:15.400
it was a good trade.

1004
00:47:15.400 --> 00:47:16.280
You would do that all the time.

1005
00:47:16.280 --> 00:47:18.840
And obviously, they add a lot more than 10 percent.

1006
00:47:18.840 --> 00:47:20.840
So it became kind of a no-brainer.

1007
00:47:20.840 --> 00:47:22.440
It was a different lens to look at

1008
00:47:22.440 --> 00:47:24.040
than just valuation,

1009
00:47:24.040 --> 00:47:27.240
which I think is where most founders get stuck on either

1010
00:47:27.320 --> 00:47:28.840
due to shark tank or just whatever.

1011
00:47:28.840 --> 00:47:30.040
That's the general parlance.

1012
00:47:30.040 --> 00:47:30.760
It's just,

1013
00:47:30.760 --> 00:47:31.400
is this the right value?

1014
00:47:31.400 --> 00:47:32.840
Am I getting a fair valuation or not?

1015
00:47:32.840 --> 00:47:35.160
Versus, if I gave you 10 percent of equity,

1016
00:47:35.160 --> 00:47:37.800
but I knew you tripled the value of my business,

1017
00:47:37.800 --> 00:47:39.640
of course, I would take every 100 percent of the time.

1018
00:47:39.640 --> 00:47:40.040
Right.

1019
00:47:40.840 --> 00:47:42.440
And then the risk that's associated is

1020
00:47:42.440 --> 00:47:43.480
what if you don't do anything?

1021
00:47:43.480 --> 00:47:45.400
And so then you coven it around that.

1022
00:47:45.400 --> 00:47:46.440
I think I'm a big,

1023
00:47:46.440 --> 00:47:47.880
I'm a big personally,

1024
00:47:47.880 --> 00:47:49.080
I love performance stuff,

1025
00:47:50.760 --> 00:47:52.360
because I know I'll hit it.

1026
00:47:52.360 --> 00:47:53.480
And so people tend to be like,

1027
00:47:53.480 --> 00:47:54.360
well, if we hit that,

1028
00:47:54.360 --> 00:47:55.160
I'm like, cool.

1029
00:47:55.160 --> 00:47:56.440
Like if you're good with that,

1030
00:47:56.680 --> 00:47:57.560
I'm good with that.

1031
00:47:57.560 --> 00:47:58.280
Sam, you were smirking.

1032
00:47:58.280 --> 00:47:59.480
Am I high on my own supplier?

1033
00:47:59.480 --> 00:48:00.520
What were you laughing at?

1034
00:48:01.160 --> 00:48:02.360
You're not high on your own supplier.

1035
00:48:02.360 --> 00:48:03.240
No, I like it.

1036
00:48:03.240 --> 00:48:03.880
I think that,

1037
00:48:04.760 --> 00:48:06.840
so we're glamorizing this,

1038
00:48:06.840 --> 00:48:08.280
the buying of businesses

1039
00:48:08.280 --> 00:48:09.720
because Alex,

1040
00:48:09.720 --> 00:48:10.600
you're doing it wonderfully.

1041
00:48:10.600 --> 00:48:11.000
And Sean,

1042
00:48:11.000 --> 00:48:12.840
you told the story of doing it wonderfully.

1043
00:48:12.840 --> 00:48:14.280
Whenever I hear these stories,

1044
00:48:14.280 --> 00:48:15.480
I'm like, this sounds awesome.

1045
00:48:16.280 --> 00:48:18.040
And then I get into the nitty-gritty

1046
00:48:18.040 --> 00:48:19.000
and I'm like,

1047
00:48:19.000 --> 00:48:20.440
I hate this.

1048
00:48:20.440 --> 00:48:22.520
I love starting stuff from scratch.

1049
00:48:22.520 --> 00:48:24.280
Like I get so much more joy,

1050
00:48:24.280 --> 00:48:26.040
like crafting the brand

1051
00:48:26.040 --> 00:48:27.480
and putting my personality into it

1052
00:48:27.480 --> 00:48:30.360
and like calling customers on the phone early on.

1053
00:48:30.360 --> 00:48:31.560
And like hearing,

1054
00:48:31.560 --> 00:48:32.680
like it's like you're committing,

1055
00:48:32.680 --> 00:48:35.560
I'm practicing my bits to hear what works well.

1056
00:48:36.440 --> 00:48:38.440
I love that so much more

1057
00:48:39.320 --> 00:48:40.680
than having to buy things.

1058
00:48:41.560 --> 00:48:43.240
Because I just think it's,

1059
00:48:44.440 --> 00:48:45.960
makes my soul feel better.

1060
00:48:45.960 --> 00:48:47.720
And now we can debate all day

1061
00:48:47.720 --> 00:48:49.240
if the numbers make sense for you

1062
00:48:49.240 --> 00:48:50.840
and both those examples that you guys gave.

1063
00:48:50.840 --> 00:48:53.320
The numbers like make so much more sense.

1064
00:48:53.800 --> 00:48:56.280
And it's hard to create that much value

1065
00:48:56.280 --> 00:48:58.360
in four years starting something from scratch.

1066
00:48:58.360 --> 00:48:59.560
And so what I want to know,

1067
00:49:01.400 --> 00:49:02.520
do you feel that way?

1068
00:49:02.520 --> 00:49:04.120
I mean, you're, you started something from,

1069
00:49:04.920 --> 00:49:07.160
like do you ever get a little bit of that vibe

1070
00:49:07.160 --> 00:49:08.360
when you're starting something from scratch?

1071
00:49:08.360 --> 00:49:08.760
So like,

1072
00:49:08.760 --> 00:49:09.960
The artist's regret.

1073
00:49:09.960 --> 00:49:11.160
The artist's regret.

1074
00:49:11.160 --> 00:49:12.280
Yeah, you're like,

1075
00:49:12.280 --> 00:49:13.560
dude, I'm producing all these artists.

1076
00:49:13.560 --> 00:49:15.560
I'm not actually writing songs.

1077
00:49:15.560 --> 00:49:16.760
You know what I'm saying?

1078
00:49:16.760 --> 00:49:19.080
Well, like, I miss that art,

1079
00:49:19.080 --> 00:49:21.720
that it's actually more like the analogy would be like a label.

1080
00:49:21.720 --> 00:49:22.680
You're a label.

1081
00:49:22.760 --> 00:49:23.560
Sure, whatever.

1082
00:49:23.560 --> 00:49:25.560
And you get to go be in the studio.

1083
00:49:25.560 --> 00:49:26.200
I get that.

1084
00:49:26.760 --> 00:49:27.480
I would say first of all,

1085
00:49:27.480 --> 00:49:28.840
I do consider myself a businessman.

1086
00:49:28.840 --> 00:49:30.120
So if I were to like give myself a side,

1087
00:49:30.120 --> 00:49:32.040
I feel like that's probably most appropriate.

1088
00:49:32.040 --> 00:49:32.760
Depping said,

1089
00:49:33.720 --> 00:49:37.240
I do get a lot of the stuff that I like a lot,

1090
00:49:37.240 --> 00:49:38.920
which is the big picture decisions,

1091
00:49:38.920 --> 00:49:40.920
which is like, what big bets are we going to make?

1092
00:49:40.920 --> 00:49:42.680
Like, I love that stuff.

1093
00:49:42.680 --> 00:49:44.280
Like, okay, we have,

1094
00:49:44.280 --> 00:49:46.280
we are like, what's our one big bet for the year?

1095
00:49:46.280 --> 00:49:48.040
And then spending a tremendous amount of time doing research

1096
00:49:48.040 --> 00:49:49.720
and being like, okay, this is where we're going to go.

1097
00:49:49.720 --> 00:49:50.440
And this is how we're going to go.

1098
00:49:50.440 --> 00:49:53.160
What's an example of a bet you made a year and a half or two?

1099
00:49:53.160 --> 00:49:55.720
Well, the software component for the publishing business.

1100
00:49:55.720 --> 00:49:57.240
So it was not that.

1101
00:49:57.240 --> 00:49:58.920
It was basically a consumer service business,

1102
00:49:58.920 --> 00:50:01.320
fundamentally like education and service, whatever.

1103
00:50:01.800 --> 00:50:05.080
And it was, I think the revenue is 50, 50 split between the two.

1104
00:50:05.080 --> 00:50:08.600
And so as like, we have to put some sort of software thing in here

1105
00:50:08.600 --> 00:50:09.880
that we can facilitate.

1106
00:50:09.880 --> 00:50:11.240
So either we get a tech enabled service,

1107
00:50:11.240 --> 00:50:12.840
multiple or we just get a pure SaaS multiple.

1108
00:50:14.040 --> 00:50:16.200
And so it was a year and a half ago.

1109
00:50:16.840 --> 00:50:18.920
And we started putting a few million dollars

1110
00:50:19.000 --> 00:50:23.560
into developing the software that now has just had a tremendous uptake rate,

1111
00:50:23.560 --> 00:50:26.040
has improved conversion rates, improved client success,

1112
00:50:26.040 --> 00:50:27.320
scores, all of these things.

1113
00:50:28.840 --> 00:50:29.640
And that was a bet.

1114
00:50:29.640 --> 00:50:31.640
You know, I mean, to be fair for a company of that size,

1115
00:50:31.640 --> 00:50:32.840
even when we made the bet,

1116
00:50:32.840 --> 00:50:35.640
I think we were doing somewhere like 20 million a day.

1117
00:50:35.640 --> 00:50:37.400
But I want to made the bet, something like that.

1118
00:50:38.360 --> 00:50:42.920
So, you know, betting 10% or 15% of net free cash is not like a massive bet.

1119
00:50:42.920 --> 00:50:47.240
But from a resources perspective of the attention of the leadership team,

1120
00:50:47.240 --> 00:50:48.440
that was where the big bet was.

1121
00:50:48.440 --> 00:50:50.600
And so kind of like the point with the brand versus the cash,

1122
00:50:51.240 --> 00:50:54.040
like if I'm going to do a deal and I promote it,

1123
00:50:54.040 --> 00:50:56.520
the biggest, the biggest slice that I'm giving is,

1124
00:50:56.520 --> 00:51:01.240
is the audience and the attention, not the cash.

1125
00:51:02.040 --> 00:51:03.880
What's a company you would want to go buy right now?

1126
00:51:03.880 --> 00:51:05.000
Let's say you had the money today.

1127
00:51:05.000 --> 00:51:06.120
What type of company would you go buy?

1128
00:51:06.760 --> 00:51:09.240
I probably want to buy a big professional services business.

1129
00:51:09.240 --> 00:51:10.120
What's that mean?

1130
00:51:10.120 --> 00:51:11.000
Business plumbing.

1131
00:51:11.000 --> 00:51:12.440
So payroll,

1132
00:51:13.400 --> 00:51:15.640
financial services, business like accounting,

1133
00:51:15.720 --> 00:51:18.200
tax, like the things that every business has to have.

1134
00:51:19.160 --> 00:51:20.360
I like those businesses.

1135
00:51:20.360 --> 00:51:22.440
I mean, I love service businesses.

1136
00:51:22.440 --> 00:51:24.680
Even the 40% of our portfolio software,

1137
00:51:24.680 --> 00:51:27.480
I still like service, tech and able to serve it.

1138
00:51:27.480 --> 00:51:29.800
Like, and I still see software as software as a service.

1139
00:51:29.800 --> 00:51:32.760
Like I just, I feel like I get those types of businesses.

1140
00:51:32.760 --> 00:51:36.360
Because there are so many things where my skill set of like tweaking, pricing,

1141
00:51:36.360 --> 00:51:38.360
and figuring out sales process and demand,

1142
00:51:38.360 --> 00:51:40.280
and like that's where I'm pretty good.

1143
00:51:40.280 --> 00:51:42.920
And so there's the businesses that I can make a huge impact on.

1144
00:51:43.800 --> 00:51:44.680
I got one more question for you,

1145
00:51:44.680 --> 00:51:46.440
which is what are you trying to figure out?

1146
00:51:46.440 --> 00:51:50.680
Because one trap you could fall into is like you're the advice guy.

1147
00:51:50.680 --> 00:51:52.440
It's like here's the guy who turned on the camera

1148
00:51:52.440 --> 00:51:54.280
and gives everybody advice all the fucking time,

1149
00:51:54.280 --> 00:51:57.640
which is like inherently somewhat of a no at all position,

1150
00:51:57.640 --> 00:51:59.880
which is dangerous on the audience side of like,

1151
00:51:59.880 --> 00:52:01.480
eventually people start to resist that.

1152
00:52:01.480 --> 00:52:03.400
But also more importantly for yourself,

1153
00:52:03.400 --> 00:52:06.120
you're like, you got where you got because you were the student.

1154
00:52:06.760 --> 00:52:08.520
And now you're getting good benefits of being the teacher,

1155
00:52:08.520 --> 00:52:09.720
but you still want to be the student.

1156
00:52:09.720 --> 00:52:11.880
And so I'm curious, where are you still the student right now?

1157
00:52:11.880 --> 00:52:12.840
Like what are you trying to figure out?

1158
00:52:12.840 --> 00:52:15.160
What are your unanswered questions that you're,

1159
00:52:15.160 --> 00:52:17.320
you're noodling on that maybe even we could help you out

1160
00:52:17.320 --> 00:52:19.160
or kind of you talk through this?

1161
00:52:19.160 --> 00:52:23.400
I would say the big things that I'm still like green on

1162
00:52:23.400 --> 00:52:27.160
are the fund world raising capital like LPs.

1163
00:52:27.160 --> 00:52:28.600
Like I don't have any experience with LPs.

1164
00:52:28.600 --> 00:52:30.040
I've always done my own money.

1165
00:52:30.040 --> 00:52:31.080
I don't use debt.

1166
00:52:31.720 --> 00:52:33.960
I will probably use more debt in the future.

1167
00:52:33.960 --> 00:52:34.680
I just haven't.

1168
00:52:35.720 --> 00:52:39.560
So those are all things that I am kind of more spending time on.

1169
00:52:39.640 --> 00:52:43.640
Depping said like to be very candid with you,

1170
00:52:44.520 --> 00:52:46.280
I feel like in salmon, I talk other Sam,

1171
00:52:46.840 --> 00:52:49.240
Sam partner of mine and I talk about this,

1172
00:52:49.240 --> 00:52:51.240
which is like there's periods of figure it out

1173
00:52:51.240 --> 00:52:52.360
and then there's periods of due.

1174
00:52:53.240 --> 00:52:55.240
Like I'm in a period of due right now.

1175
00:52:55.960 --> 00:52:57.880
And then when I get to a constraint,

1176
00:52:57.880 --> 00:53:00.680
because right now the plan of like grow more media,

1177
00:53:00.680 --> 00:53:02.600
grow the companies has been working.

1178
00:53:02.600 --> 00:53:05.000
And so I want to do more better, not new.

1179
00:53:05.800 --> 00:53:07.240
And so I'm going to continue to do more better

1180
00:53:07.240 --> 00:53:08.680
until more better stops working.

1181
00:53:08.760 --> 00:53:10.120
And then I will look at something new.

1182
00:53:10.120 --> 00:53:12.120
So like in terms of where I see my deficiencies

1183
00:53:12.120 --> 00:53:13.720
from the private equity perspective,

1184
00:53:14.600 --> 00:53:17.160
LPs and debt are things that I would say

1185
00:53:17.160 --> 00:53:19.320
that are our weaknesses of mine in terms of understanding,

1186
00:53:19.320 --> 00:53:20.760
just because I've used my own capital.

1187
00:53:20.760 --> 00:53:23.080
But in terms of limited for the business right now,

1188
00:53:24.840 --> 00:53:26.360
I think the biggest threat is always focus.

1189
00:53:27.080 --> 00:53:28.760
And so that's why I try and say no to everything.

1190
00:53:30.120 --> 00:53:32.200
Except coming on this podcast because we're your boys.

1191
00:53:33.000 --> 00:53:33.880
They're the man.

1192
00:53:33.880 --> 00:53:34.680
You guys are the man.