WEBVTT 1 00:00:00.000 --> 00:00:03.760 Basically, I started with the question, what could I do forever, and then worked backwards from there? 2 00:00:03.760 --> 00:00:06.160 Because I knew if I could do something forever, then it would get very big. 3 00:00:07.440 --> 00:00:11.040 Welcome to the game where we talk about how to sell more stuff to more people in more ways and 4 00:00:11.040 --> 00:00:15.120 build businesses worth owning. I'm trying to build a billion dollar thing with acquisition.com. 5 00:00:15.120 --> 00:00:18.960 I always wished pesos, musk, and buffet had documented their journey, so I'm doing it for the rest 6 00:00:18.960 --> 00:00:25.920 of us. Please share and enjoy. One in every 250 businesses achieve a ten million dollar or more 7 00:00:25.920 --> 00:00:32.400 run rate. That's 0.4%. And I started four businesses that cracked ten million in a row. 8 00:00:33.040 --> 00:00:36.400 And if you're on your entrepreneurial journey, I want to share the frameworks and lessons I learned 9 00:00:36.400 --> 00:00:40.400 from the many mistakes that led to those four in a row, so that you can use the same frameworks 10 00:00:40.400 --> 00:00:43.520 so that hopefully the next business you have or the current business you're on can achieve 11 00:00:43.520 --> 00:00:46.880 that level and beyond. And for context, if you don't know who I am, my name is Alex Mosey. 12 00:00:46.880 --> 00:00:50.800 I own acquisition.com. It's a portfolio of companies that right now does over $200 million a year, 13 00:00:50.800 --> 00:00:54.560 and I make these so that you can hopefully get big enough past three million, ten million, 14 00:00:54.560 --> 00:00:57.200 et cetera, and then we can invest in your business and help it grow further. 15 00:00:57.920 --> 00:01:03.280 So the first big company I built was called Jim Launch. It was a licensing business for Jim owners 16 00:01:03.280 --> 00:01:06.960 as in I had a model, and I would license that model to them. They would use those things they'd 17 00:01:06.960 --> 00:01:12.080 make more money. On average, the average it would make an extra $100,000 a year profit on top of what 18 00:01:12.080 --> 00:01:16.720 they were currently making using the model that we had. And we were able to charge a percentage of 19 00:01:16.720 --> 00:01:22.240 that additional profit as our fee. And that's how we made money. That business at its peak was worth 20 00:01:22.240 --> 00:01:28.400 about $150 million. And then COVID hurt that business, and I ended up selling it for $46.2 million 21 00:01:28.400 --> 00:01:32.960 to American Pacific Group, which is a private equity firm out of San Francisco. I had had many 22 00:01:32.960 --> 00:01:37.920 businesses before Jim Launch. And the reason that Jim Launch in my opinion was able to scale from 23 00:01:37.920 --> 00:01:41.120 what I had pretty much capped that before, which is about a couple million dollars a year, 24 00:01:41.120 --> 00:01:47.600 all the way to $30 million a year in 20 months was because I had more leverage in the model. 25 00:01:47.600 --> 00:01:51.280 And if you're new, there's four types of leverage that you can employ in a business. And this is 26 00:01:51.280 --> 00:01:57.200 directly from the Volrovicon. So it's his thing, but it's great. The first level is labor. 27 00:01:57.200 --> 00:02:00.800 So you can get other people to do work for you, right? Like you were doing something. 28 00:02:00.800 --> 00:02:04.480 Someone else does it now. You don't have to do it. That's leverage. You get more, you get more 29 00:02:04.480 --> 00:02:10.720 done for your time. The second level of leverage is capital. So that's you asking for other people's 30 00:02:10.720 --> 00:02:14.720 money. Other people spend their time to make the money. And then you use that money to make money 31 00:02:14.720 --> 00:02:18.080 as well. And you get a percentage of that gain, but you didn't have to incur the cost of time 32 00:02:18.080 --> 00:02:22.560 to get the money. That's the second level. This is how Warren Buffett, Charlie Mungerl, 33 00:02:22.560 --> 00:02:27.680 Car icon, those guys made their fortunes. Labor was how the pyramids of Egypt were built, 34 00:02:27.680 --> 00:02:32.000 and how the royalty of generations was built before that on the backs of other workers. 35 00:02:32.960 --> 00:02:38.960 The third level is, and really third and fourth are same. They're just equal. Is code and media? 36 00:02:38.960 --> 00:02:43.680 Code being software. So if you write something once, a zillion people can use it. That's leverage. 37 00:02:43.680 --> 00:02:48.080 You put one input and you get infinite output. Media to the same degree. I'm recording this video 38 00:02:48.080 --> 00:02:52.880 right now. I record it once and a million people can see it. Those are things that are newer 39 00:02:52.880 --> 00:02:56.640 of this economy, which is why even more wealth is being aggregated in the companies that can use 40 00:02:56.640 --> 00:03:01.600 one, two, or all four. And I will say one more thing is that it's not, do you use it? But it's the 41 00:03:01.600 --> 00:03:06.400 extent to which you use it. So you can raise capital. It doesn't make you Warren Buffett. If you can 42 00:03:06.400 --> 00:03:11.120 raise $10 billion, you have more leverage than somebody who might have just a YouTube channel. 43 00:03:11.120 --> 00:03:15.520 If Mr. Beast only has his YouTube channel, he might have more leverage than somebody just has an 44 00:03:15.520 --> 00:03:21.280 app. So it's not just which ones do you have, but to what extent? And so Jim Launch was able to 45 00:03:21.280 --> 00:03:26.160 grow significantly faster because as I look back on my career at every level of leverage, 46 00:03:26.160 --> 00:03:31.440 I've added a zero to my monthly income. And so when I was an employee, I was making four figures 47 00:03:31.440 --> 00:03:36.960 a month. When I became self-employed, I started making five figures a month. When I started using 48 00:03:37.040 --> 00:03:42.240 other people to help me out, labor, my first real level of leverage is when I got to six figures a 49 00:03:42.240 --> 00:03:48.320 month. When I used labor and included media, which was licensing, I got to seven figures a month. 50 00:03:48.320 --> 00:03:52.880 And so all it is, I was able to get more out of the inputs that I was putting in the system 51 00:03:52.880 --> 00:03:56.560 because the work that I did was always constant. I was working six years a day every day. That's 52 00:03:56.560 --> 00:04:02.240 just what I did. That was constant. But how much I got out of that work expanded. And that is how 53 00:04:02.240 --> 00:04:08.240 my income changed. The first 10 customers I got from Jim Launch came because I got somebody to pay 54 00:04:08.240 --> 00:04:15.680 a VA in the Philippines to scrape CrossFit's database for gym owners and then send me the list of 55 00:04:15.680 --> 00:04:20.960 emails. I then uploaded them to Facebook made a look like audience off of those marketed to get a 56 00:04:20.960 --> 00:04:26.720 webinar, which no one watched. And then I had 80 leads from people who had opted in. I didn't 57 00:04:26.720 --> 00:04:30.320 even know cold outreach like existed at that point. Could have just called the leads. Then they 58 00:04:30.400 --> 00:04:35.680 got that. And so I had the 80 leads that came from that who went through the opt-in page and none of 59 00:04:35.680 --> 00:04:41.120 them bought or scheduled a call. And so I looked up every one of the emails manually and I like 60 00:04:41.120 --> 00:04:45.760 friend of them on Facebook. I messaged them and then I got a few of them on the phone. And I got 61 00:04:45.760 --> 00:04:51.840 them to pay me 500 bucks to go out to fly to their gym and actually do the turnaround. Once I started 62 00:04:51.840 --> 00:04:55.280 the licensing version of the model, which is the one that really gave me the scale because I started 63 00:04:55.360 --> 00:04:59.840 doing like a few hundred thousand dollars a month when I was doing the turn rounds in person. I then 64 00:04:59.840 --> 00:05:04.320 called back all the guys that I had done the turnaround and said, hey, you want to do this new thing. 65 00:05:04.320 --> 00:05:09.200 At that point, I switched the offer from me flying out and I had gotten a little bit better at 66 00:05:09.200 --> 00:05:12.720 marketing that point that people did start booking calls. But then then I was selling the 67 00:05:12.720 --> 00:05:17.920 licensing package rather than like the done for you service ride fly out. And when I started 68 00:05:17.920 --> 00:05:22.080 gym launch, when we transitioned from selling done for you service, which is operationally heavy, 69 00:05:22.080 --> 00:05:27.280 to the much operationally lighter media version where I was licensing content and promotions and 70 00:05:27.280 --> 00:05:32.320 ad copy and all that stuff, I was able to sell something that had virtually 100% margins. 71 00:05:32.320 --> 00:05:36.160 So the first month, I think it did like a hundred twenty thousand in sales. And the next month, 72 00:05:36.160 --> 00:05:42.160 I did like 300 ish and then four high fours and then seven 80 and all I was doing was just selling 73 00:05:42.160 --> 00:05:46.960 more units and then we hit a million the next month. And this is where the skill sets that I'd 74 00:05:46.960 --> 00:05:51.280 learned from the turnaround business because I had eight sales guys then. And we were doing 75 00:05:52.080 --> 00:05:57.840 10,000 a day or more in sales in three to five hundred dollar increments. And so I was used to 76 00:05:57.840 --> 00:06:04.400 managing a team of eight guys who were selling 10, 20, 30, 40 units a day, you know, because they 77 00:06:04.400 --> 00:06:09.360 don't sell 30 days a month. So they're selling 24 days. You get the idea. I was used to super high 78 00:06:09.360 --> 00:06:14.320 volume sales, very transactional. And so I had the skill set already scale a sales team really 79 00:06:14.320 --> 00:06:18.560 quickly. And that's why I was able to scale so so fast. Whereas other people get stuck there. 80 00:06:18.560 --> 00:06:22.000 They like, they've been the only salesperson. They've never trained a salesperson. They've never 81 00:06:22.000 --> 00:06:24.720 hired a salesperson. They've ever built a sales team. They don't have about commission structures. 82 00:06:24.720 --> 00:06:28.560 They don't have to build ramp up like I already had all that stuff. And so because the turnaround 83 00:06:28.560 --> 00:06:34.400 business, I had built all these internal trainings to teach the gyms like what to do after we left. 84 00:06:34.400 --> 00:06:39.120 I didn't have to do a ton to translate that into things that I would give to them. And all I 85 00:06:39.120 --> 00:06:43.840 really did was take two trainings that were internal, the sales and the marketing and make them 86 00:06:43.840 --> 00:06:47.520 things that I sold the rest of it, all the delivery, all the meal plans, all the fulfillment. 87 00:06:47.520 --> 00:06:52.000 I was already giving that. So I literally only had to take two internal trainings, make them 88 00:06:52.000 --> 00:06:56.400 external. And then I just turned the faucet on and I already had a sales team so I could just scale it. 89 00:06:56.960 --> 00:07:01.280 Jim launches a product continues to change every month. We we've run the same cadence. We run a 90 00:07:01.280 --> 00:07:06.320 beta test. We take 10 gyms that are from representative markets that are representative in skill sets. So 91 00:07:06.320 --> 00:07:09.360 we take some people that are the bottom third, some that are the middle third, and some that are 92 00:07:09.600 --> 00:07:13.520 high performers. This is actually a mistake I made early on. I used to only take high performers, 93 00:07:13.520 --> 00:07:17.360 but then they always won. And then I didn't have a representative idea if this was actually a good 94 00:07:17.360 --> 00:07:22.320 thing or that they were just winning. And so we started taking representative samples from representative 95 00:07:22.320 --> 00:07:27.440 markets and we would run one specific play. And so if you think about any business as a pipeline, 96 00:07:27.440 --> 00:07:31.360 we would look at whatever problems the gym owners that we were with were currently suffering from. 97 00:07:31.360 --> 00:07:34.400 So it could be their suffering from churn. They could be suffering from margin issues. They could 98 00:07:34.400 --> 00:07:37.360 be suffering from they're not getting enough leads. They could be where there's, you know, the 99 00:07:37.360 --> 00:07:41.040 close rates aren't as high as we want them to be. Whatever the problem was, we would then create a 100 00:07:41.040 --> 00:07:44.960 hypothesis around what we thought might work. And so usually the way we would do that is we would 101 00:07:44.960 --> 00:07:49.200 survey the community and say, who has the best conversion rates? If that's what we wanted to fix. 102 00:07:49.200 --> 00:07:54.560 And then we invite 20 of them onto a call. We would take all the notes to figure out what things 103 00:07:54.560 --> 00:07:58.000 they were all doing. And here's the important point. We didn't say, great, we're going to do all 104 00:07:58.000 --> 00:08:02.800 these things. We try to see the few things that they were all doing. Because people might have 20 105 00:08:02.800 --> 00:08:06.640 things that they're doing, but all of them were doing these two or these three. And so we cut 106 00:08:06.640 --> 00:08:10.480 everything else out would remove it just to the core units. And then we take the group of 107 00:08:10.480 --> 00:08:15.920 representative gym owners that are a smorgasport who weren't doing necessarily well at those things. 108 00:08:15.920 --> 00:08:19.760 And then we'd say we'd make the training and we'd deliver it the same way we would to everyone. 109 00:08:19.760 --> 00:08:22.880 Because if you give more service when you're doing the training, you screw the results. Because 110 00:08:22.880 --> 00:08:27.200 then it is it because the way you package the license of material is good or because of the service. 111 00:08:27.200 --> 00:08:31.040 And so we had to deliver it the same way we would deliver to everyone else to see what the result 112 00:08:31.040 --> 00:08:35.920 was. After we had the result, it was either positive or negative or it was neutral. So if it was 113 00:08:35.920 --> 00:08:39.920 negative, we would still share the results because then the entrepreneurial brains of everybody who's 114 00:08:39.920 --> 00:08:43.120 there is always just curious like how did the test go? So that was still valuable for the community 115 00:08:43.120 --> 00:08:47.440 because they didn't have to run that field test. If it was neutral, I would say, hey, this is neutral. 116 00:08:47.440 --> 00:08:51.440 I don't think it's worth incurring the cost of change based on what everybody else is already doing. 117 00:08:51.440 --> 00:08:55.920 And then if it was above, then we'd say, hey guys, this is a big deal. This is like worth the cost 118 00:08:55.920 --> 00:09:00.800 of change. You're going to have a demonstrated long-term benefit to the business. And for context, 119 00:09:00.800 --> 00:09:07.040 my best gym did about $600,000 a year. Our average gym, who was a gym lord, made 600,000 120 00:09:07.040 --> 00:09:13.200 a year. So where my gym success ended is where my tests began to improve the model. And I would say 121 00:09:13.200 --> 00:09:18.320 that was probably a decent operator. And so if I had had all the things that I now know or what I 122 00:09:18.320 --> 00:09:22.400 learned from everybody else in the community, my gyms would have all been some bigger gyms. I just didn't 123 00:09:22.400 --> 00:09:27.360 know. Testing was something that was a consistent value at month over month because a lot of times 124 00:09:27.360 --> 00:09:31.360 people who have any kind of digital business or licensing business, media business, 125 00:09:31.360 --> 00:09:36.080 you learning business, things like that, information to clients in value precipitously over time. 126 00:09:36.080 --> 00:09:40.560 So like the day before you get information, it's incredibly valuable. The day after you learn it, 127 00:09:40.560 --> 00:09:46.160 it's almost no value. And so in order to retain people, one thing we had to do was separate 128 00:09:46.160 --> 00:09:50.240 information from consumable services and say, okay, well, what we're charging on a recurring basis 129 00:09:50.240 --> 00:09:54.480 of the things that you consume, you consume ads because you need new ads every month. You consume 130 00:09:54.480 --> 00:09:57.920 accountability is actually a thing that people consume. They need it this month next month. 131 00:09:57.920 --> 00:10:00.720 Community is something that you consume this month next month. So what are the things that they 132 00:10:00.720 --> 00:10:04.320 consume on a monthly basis versus the things that once they've learned, they don't need it anymore. 133 00:10:04.320 --> 00:10:08.240 And new tests is another version of things that every month you want improvements. And so you 134 00:10:08.240 --> 00:10:12.160 can consume those improvements. So even though the information there declined after we did it, 135 00:10:12.160 --> 00:10:17.440 they knew another one was coming. I mean, in gym, we had many, many terrible things that happened 136 00:10:17.440 --> 00:10:21.920 during the month. I mean, one we had COVID, which was tough, you know, for gym owners in general, 137 00:10:21.920 --> 00:10:25.760 a third of all of our clients went out of business very hard when you're not allowed to be in 138 00:10:25.760 --> 00:10:29.600 business, even if you're a great gym owner, if your state won't allow you to do your business 139 00:10:29.600 --> 00:10:33.520 and you still have to pay rent. And that's it. Like, there's not a lot you can do there. 140 00:10:34.080 --> 00:10:39.040 Another thing that we did that was really bad was we overhired for our support for our 141 00:10:39.040 --> 00:10:42.960 supplement business when we launched it. I had hired an inexperienced director of customer 142 00:10:42.960 --> 00:10:46.240 service. She was a frontline rep that we just promoted all the way through. She was a great 143 00:10:46.240 --> 00:10:51.440 culture fit, you know, high work ethic, but no experience. And so she mapped the level of support 144 00:10:51.440 --> 00:10:57.600 we provided for a high level B2B business to the same number of people for a very high volume 145 00:10:57.600 --> 00:11:03.760 transactional business. And so she hired 35 reps for customer service on the supplement business. 146 00:11:03.760 --> 00:11:09.200 And we only needed five. So we had to lay off 30 people. And guess who's glass to work at her? 147 00:11:09.200 --> 00:11:13.920 Her's or mine? Mine. And then that became a thorn on our side for the next two, three years 148 00:11:13.920 --> 00:11:18.080 because our glass door got smashed. And this was all front level employees who were new, 149 00:11:18.080 --> 00:11:22.320 so they had no problem just smashing someone's mother. Like they had no loyalty. And I get it, 150 00:11:22.320 --> 00:11:27.040 you know, it was it was a mess upon our side. And then of course when you, you know, achieve a certain 151 00:11:27.040 --> 00:11:33.840 size, there are predatory employees who will come in whose sole way of making money is trying to 152 00:11:34.640 --> 00:11:39.760 make a lawsuit and get you to settle for less than the cost of proving that you were innocent. 153 00:11:40.400 --> 00:11:45.280 And so depending on the state you're in or if you hire remotely, if you're hired from 50 states, 154 00:11:45.280 --> 00:11:49.200 there are very employee friendly states where, but you know that the legal fees are going to be 10 to 155 00:11:49.200 --> 00:11:54.800 $20,000 and it costs less to just pay someone 10 to $20,000 and settle. So by the way, if you ever 156 00:11:54.800 --> 00:11:59.840 hear a company settled out of court, they might have been right. Then it just becomes a cost analysis 157 00:11:59.840 --> 00:12:04.080 which sucks because on principle, a lot of I had to like my CFUG who's more experienced than me at 158 00:12:04.080 --> 00:12:06.560 the time was like, Alex, do you want to be right? Do you want to be rich? And I was like, 159 00:12:07.440 --> 00:12:12.320 the biggest reason Jim won't your successful and it's funny because I see these Twitter threads 160 00:12:12.320 --> 00:12:15.520 where people break down why Jim won't your successful having never actually been in Jim won't 161 00:12:15.520 --> 00:12:21.280 or been a customer or being me in my opinion. And who knows, known will ever know why it was 162 00:12:21.280 --> 00:12:26.000 successful, but I believe looking back, I have a couple of things that made it successful. One is that 163 00:12:26.960 --> 00:12:33.120 it was timing. We identified arbitrage on Facebook ads before anyone else did and we created a 164 00:12:33.120 --> 00:12:39.440 turnkey system around how to monetize it. And so I mean, I was running ads on Facebook in 2013, 165 00:12:39.440 --> 00:12:43.440 like that's hard for people to come. Like that was a long time ago. And that was when you could put 166 00:12:43.440 --> 00:12:47.920 a girl with a bikini and say, click here now, like it was the Wild West. The second thing is that 167 00:12:47.920 --> 00:12:53.520 because of that arbitrage, the average Jim was taking home an additional $30,000 in cash in 168 00:12:53.520 --> 00:12:58.000 their first 30 days. That was the average. Like it's very difficult for anybody who has any kind of 169 00:12:58.000 --> 00:13:02.720 e-learning thing or licensing or even franchise to understand like how insane that is. 170 00:13:03.360 --> 00:13:08.720 Like if you take a business where the average business owner is making $36,000 in profit, 171 00:13:09.200 --> 00:13:14.400 and then you add $30,000 in the first month of working with them, you don't need to worry about 172 00:13:14.400 --> 00:13:19.600 marketing. And so technically, my return on marketing was a hundred to one for the first 18 months 173 00:13:19.600 --> 00:13:23.600 of the business. But it's because I probably could have just not marketed at all and I would have 174 00:13:23.600 --> 00:13:27.200 had the amount of people that came in. So like who knows if the ads were doing anything. But 175 00:13:27.280 --> 00:13:31.200 everybody from the outside was like, this guy's ads are everywhere. Like he's killing it. And the 176 00:13:31.200 --> 00:13:35.760 thing is I was killing it, but not necessarily for that reason. And later on, COVID taught me an 177 00:13:35.760 --> 00:13:41.840 important lesson, which was that timing matters. And as much as I will never give power in terms of 178 00:13:41.840 --> 00:13:46.560 like it's not going to change my behavior if we have, you know, like right now we're in a recession, 179 00:13:46.560 --> 00:13:53.280 but I will be more realistic about goals and expectations. So I attributed all the success 180 00:13:53.280 --> 00:13:59.440 early to myself. And and then later I looked back and COVID taught me the lesson that I was like, 181 00:13:59.440 --> 00:14:03.440 I'm pushing twice as hard now, but we're pushing against the industry that 30% of people are 182 00:14:03.440 --> 00:14:08.240 permanently going out of business. And maintaining is what I told my team is the new win. 183 00:14:08.240 --> 00:14:14.800 If we maintain, we win. And so that was an important lesson. But I think the big, the big picture 184 00:14:14.800 --> 00:14:20.480 is that the product has to be exceptional. If your customers are in love with your product, 185 00:14:20.480 --> 00:14:23.360 which takes more time, because people are like, Oh, you threw this thing together. It's like it 186 00:14:23.360 --> 00:14:28.960 took six years for me to put all those pieces together. And then finally be able to monetize that 187 00:14:28.960 --> 00:14:34.480 deliverable. And everyone just underestimates how much time it takes to go from good to great. And 188 00:14:34.480 --> 00:14:40.480 like that little inch between good and great is yours. But the return you get on it from the word 189 00:14:40.480 --> 00:14:45.680 of mouth that compounds is hard to fathom when you get it right. So telling the team to maintain 190 00:14:45.680 --> 00:14:51.200 wasn't as hard as you might think because everybody else who is in my industry was just dying. 191 00:14:51.200 --> 00:14:54.560 Like everyone else was dying. And so I was like, all we have to do is stay alive and then we'll 192 00:14:54.560 --> 00:14:58.800 get all their business like the next year. And that's what happened. So many people who were 193 00:14:58.800 --> 00:15:03.520 copycats, Mickey Mouse, gimmick, bullshit, people who just used old versions of our stuff to try 194 00:15:03.520 --> 00:15:07.600 and sell out of it. Like all the stuff you would imagine, all those guys went out of business, 195 00:15:07.600 --> 00:15:11.040 because they didn't have the depth. Like they hadn't put in the work. They didn't understand 196 00:15:11.040 --> 00:15:14.000 why the stuff was structured that way. They would make changes to it that we had already made 197 00:15:14.000 --> 00:15:19.200 and made it worse. Like we'd already tested that stuff. And so I had confidence that we would 198 00:15:19.200 --> 00:15:23.040 be able to weather the storm one because we had big cash reserves that other people didn't have. 199 00:15:23.040 --> 00:15:27.200 Secondly, because other people stopped marketing and we marketed harder and CPM dropped for our 200 00:15:27.200 --> 00:15:31.520 market because no one could afford getting to them. And because it's a service-based business, 201 00:15:31.520 --> 00:15:36.080 we had actually are we're already very tight. We ran a very lean ship at gym once like 202 00:15:36.080 --> 00:15:40.560 pride ourselves on that. And so we had to let some people go, but it wasn't a huge percentage 203 00:15:40.640 --> 00:15:45.200 of the workforce. It was just like, okay, well, if our clients go from 700 to 500, then we need 204 00:15:46.080 --> 00:15:51.360 15% fewer support reps or whatever. But what adds up having those, you prune the tree. And so a lot 205 00:15:51.360 --> 00:15:56.880 of times when you get rid of the lower performing people, the actual tree gets stronger and sets 206 00:15:56.880 --> 00:16:01.600 itself up to grow more the next season. So I will say that the biggest shift I've had as a 207 00:16:01.600 --> 00:16:06.320 longer term entrepreneur because now I hit my decade of entrepreneurship is that things are more 208 00:16:06.320 --> 00:16:11.920 seasonal than I used to think they were. One of the other big secrets of gym lunch was that we 209 00:16:11.920 --> 00:16:17.840 had a very different approach to acquiring customers. And so the traditional model of most businesses 210 00:16:17.840 --> 00:16:22.400 in general is loss leader, you know, you get someone in for some sort of free thing, you lose 211 00:16:22.400 --> 00:16:26.400 money in the acquisition, you make it up in LTV. That's kind of the model. I came with a different 212 00:16:26.400 --> 00:16:30.000 model and I've since done that every single business I have. So this is one of the important frameworks 213 00:16:30.000 --> 00:16:33.600 that I want to pass to you and it's something called client-financed acquisition. So client-financed 214 00:16:33.680 --> 00:16:37.600 acquisition basically means you get the customers, you get your clients to finance the acquisition of 215 00:16:37.600 --> 00:16:41.920 the next customer. So all you have to do is have enough money to get the first sale. And if you make 216 00:16:41.920 --> 00:16:46.480 more in the first sale than the cost to acquire that customer and the cost to fulfill that customer, 217 00:16:46.480 --> 00:16:50.480 plus the cost to fulfill the next customer and the cost to acquire the next customer, you eliminate 218 00:16:50.480 --> 00:16:55.280 capital as a constraint in the business. And so I would give you a simple math thing, but there's 219 00:16:55.280 --> 00:17:00.080 no point. That's fundamentally what it is. If you can put a dollar in and get two customers back, 220 00:17:00.080 --> 00:17:03.840 then that next customer buys you two more and two more and two more. And then that point, 221 00:17:03.840 --> 00:17:07.200 acquisition no longer becomes the bottleneck. And so with the brick and mortar businesses, 222 00:17:07.200 --> 00:17:13.280 I taught them that model. So a traditional gym would make $600 to $1,200 in LTV. With my model, 223 00:17:13.280 --> 00:17:17.440 they would make that upon the first transaction. And so they would get that cash flow up front and 224 00:17:17.440 --> 00:17:20.960 then they would collect the LTV on the back and that would continue to stack. And they'd be competing 225 00:17:20.960 --> 00:17:24.400 against people who are bidding for the same eyeballs that were only trying to sell a 21-day detox 226 00:17:24.400 --> 00:17:28.800 for 21 bucks. And so all my gyms were able to just crush everyone else because we get out 227 00:17:28.800 --> 00:17:33.200 spend them. And so I've taken that kind of aggressive acquisition perspective to every one of the 228 00:17:33.200 --> 00:17:38.400 businesses that I've had. So the way we think about that is like, is there a way that we can increase 229 00:17:38.400 --> 00:17:42.000 the first transaction, which is counterintuitive because most people don't increase the first transaction 230 00:17:42.000 --> 00:17:45.360 because they're afraid of not selling? But if you have the skill of sales, it's in my opinion that 231 00:17:45.360 --> 00:17:49.840 when someone's the most excited, the most in pain is at the first moment. So the day you walk in 232 00:17:49.840 --> 00:17:54.720 the gym is the day that you are the most in pain. And so trying to sell someone later when they've 233 00:17:54.720 --> 00:17:58.800 already had some results or the novelty has worn off to me, always sell backwards. And so I want to 234 00:17:58.800 --> 00:18:03.280 get someone in, make a very strong argument with why they should commit, and then also get the 235 00:18:03.280 --> 00:18:06.640 bigger commitment up front, which actually long term makes it more likely that they're going to be 236 00:18:06.640 --> 00:18:10.000 successful, especially if it's something where they have to do a lot of work, which in the fitness 237 00:18:10.000 --> 00:18:14.320 business, there is a lot of work that customers do. So Prestige Labs was my second big company, 238 00:18:14.320 --> 00:18:18.400 which actually is really a sister company to gym launch. So when I said 150 enterprise value, 239 00:18:18.400 --> 00:18:22.960 that was both of them together. But Prestige Labs contributed about half or a little bit more than 240 00:18:22.960 --> 00:18:27.280 half of the revenue, but less than half of the profit. So it was a less profitable business that 241 00:18:27.280 --> 00:18:30.960 had more revenue because it was e-commerce, direct consumer. The difference being there is that 242 00:18:30.960 --> 00:18:36.400 we basically just monetized our base of gym owners through another stream. And so the reason I wanted 243 00:18:36.400 --> 00:18:40.640 to start the business was I wanted to have more recurring revenue. And so rather than seeing an end 244 00:18:40.640 --> 00:18:45.360 consumer who buys a supplement as the person who is recurring, I saw the gym owner as the recurring 245 00:18:45.360 --> 00:18:50.240 revenue customer. So I knew that every month they're going to sell 10 to 20 new members. And if I 246 00:18:50.240 --> 00:18:55.600 could get them to sell 10 of them supplements at a $200 average price point, then I add another $2,000 247 00:18:55.600 --> 00:19:01.040 a month per gym per month. Even if the people change, they're going to be responsible for $2,000 a month. 248 00:19:01.040 --> 00:19:04.640 And one of my big things with compounding is that you either have to sell something that people 249 00:19:04.640 --> 00:19:08.960 never stop buying or you have to get people who never stop selling. Like those are the only two 250 00:19:08.960 --> 00:19:13.120 things. And so when you bring in an affiliate base and you get them to consistently sell for you, 251 00:19:13.120 --> 00:19:16.640 even if the end consumers change all the time, you can count on the fact that if you get 10 affiliates 252 00:19:16.640 --> 00:19:21.040 this month and 10 affiliates next month, then all 20 of them are now going to sell $2,000 a month, 253 00:19:21.040 --> 00:19:25.920 et cetera. And so we built the entire business off of an affiliate base that we acquired through 254 00:19:25.920 --> 00:19:30.800 gym launch. And so like the first month of being fully operational did 1.7 million. And the next 255 00:19:30.800 --> 00:19:34.160 month, the 1.5 million, you know what I mean? And so mind you, the first month was January, 256 00:19:34.160 --> 00:19:37.120 which I planned. And so that was going to be a little bit higher. But that was kind of the idea 257 00:19:37.120 --> 00:19:42.480 and it stabilized around there. And so that business, you know, cost of goods is low, but the affiliate 258 00:19:42.480 --> 00:19:47.040 payouts are significant and sourcing is an issue. There's just completely different problems 259 00:19:47.040 --> 00:19:52.800 that present itself in a physical products business. Real quick guys, if you can think about how you 260 00:19:52.800 --> 00:19:57.600 found this podcast, somebody probably tweeted it, told you about it, shared it on Instagram, 261 00:19:57.600 --> 00:20:02.400 or something like that. The only way this grows is through word of mouth. And so I don't run ads, 262 00:20:02.400 --> 00:20:06.880 I don't do sponsorships, I don't sell anything. My only ask is that you continue to pay it forward, 263 00:20:06.880 --> 00:20:10.800 do whoever showed you or however you found out about this podcast that you do the exact same thing. 264 00:20:10.880 --> 00:20:14.960 So if it was a review, if it was a post, if you do that, it would mean the world to me and you'll 265 00:20:14.960 --> 00:20:20.240 throw some good karma out there for another entrepreneur. So I would recruit a gym owner, 266 00:20:20.240 --> 00:20:24.720 and I would say, Hey, we're teaching all this marketing and sales stuff over here. I can show 267 00:20:24.720 --> 00:20:29.360 you how to get your marketing for free. So normally, I was teaching how they could sell services 268 00:20:29.360 --> 00:20:32.880 for higher tickets and having more upfront cash that they could liquidate acquisition costs. I was 269 00:20:32.880 --> 00:20:38.000 like, but if you just sell every person supplements, it will cover the cost to acquire a customer 270 00:20:38.000 --> 00:20:41.280 just from the physical products. And the beautiful thing with selling physical products is that 271 00:20:41.280 --> 00:20:45.440 there's no added fulfillment. So in a services business, you know, one of the problems is the more you 272 00:20:45.440 --> 00:20:49.840 sell, the more you have to deliver, right? And so it's kind of established or the moment you swipe 273 00:20:49.840 --> 00:20:53.120 the credit card, you're like, Oh, shit, now I have to deliver on this, right? And so with physical 274 00:20:53.120 --> 00:20:57.360 products, they didn't have to do anything. They literally just swipe the credit card and then we 275 00:20:57.360 --> 00:21:01.680 meant centrally, we would ship a direct consumer. And because I built it, so this is the unique 276 00:21:01.680 --> 00:21:06.720 value prop I had, is that it was built for gym owners, buy a gym owner. And so all the things that I 277 00:21:06.800 --> 00:21:10.640 hated about dealing with supplement businesses before that right there had to front them cash for 278 00:21:10.640 --> 00:21:15.840 inventory. They only had a couple of brands that I could pick from the margins were lower. I'd have to 279 00:21:15.840 --> 00:21:20.080 compete with the vitamin shop down the street after I sold someone like BSN, then they go to BSN and 280 00:21:20.080 --> 00:21:25.040 save five bucks or they go to Amazon who basically got every sale after that. I was like, this sucks. 281 00:21:25.040 --> 00:21:31.280 So I wanted to create a brand that only gym owner sold. So no one else could sell it. We priced it 282 00:21:31.280 --> 00:21:36.080 on our home site higher than they would price it. So if someone wanted a price match, they'd be like, 283 00:21:36.080 --> 00:21:40.080 oh shit, this is just and we priced it 30% higher on the main site. So there were significant 284 00:21:40.080 --> 00:21:44.640 savings. On top of that, we gave them a very good selling system because I had learned a lot 285 00:21:44.640 --> 00:21:48.560 about selling supplements because it was a big percentage of my profit within my brick and mortar 286 00:21:48.560 --> 00:21:53.920 facilities. And so once we basically connected the dots were the last piece that I added to make it 287 00:21:53.920 --> 00:21:57.600 even more friendly to gym owners is I made it a recurring subscription. So now they got to have two 288 00:21:57.600 --> 00:22:02.400 recurring subscriptions per customer. And so if someone's coming in and they're bought in on having 289 00:22:02.400 --> 00:22:06.800 some sort of transformation because the gyms that we worked with were more like weight loss 290 00:22:06.800 --> 00:22:10.880 training specific, they weren't like big facility leaseage gym. Now we do both. But at the time, 291 00:22:10.880 --> 00:22:14.320 it was just those ones. If people were bought in on a transformation, they're going to want to 292 00:22:14.320 --> 00:22:18.480 pay both for the services and for the products. And they will also take the recommendation from the 293 00:22:18.480 --> 00:22:22.240 person who sold them the services. So rather than send them down the streets, the vitamin job, 294 00:22:22.240 --> 00:22:28.080 which is what 90% of gyms do, like I'll tell you the moment that it became real for me. I didn't 295 00:22:28.080 --> 00:22:31.680 want to sell supplements for a very long time because I was like supplements. You just need to eat 296 00:22:31.920 --> 00:22:36.720 right and work out. And then this woman wouldn't leave my office. She's like, my friend says, 297 00:22:36.720 --> 00:22:40.000 I need supplements. You have to tell me, I was like, fine. So I wrote her list and they go get the 298 00:22:40.000 --> 00:22:44.080 stuff going. She came back the next day with the things and she was like, I just want to make sure I 299 00:22:44.080 --> 00:22:47.600 got the right stuff. And I saw the receipt and it's $700 in the receipt. And the thing that I had 300 00:22:47.600 --> 00:22:52.480 sold her was $400. And I was like, this motherfucker across the street just made $700. And I had to 301 00:22:52.480 --> 00:22:56.160 arm muscle this bitch for an hour to get her to say yes to sign up for my fitness program. And I was 302 00:22:56.160 --> 00:23:00.240 like, fuck that. And so I was like, I'm gonna sell supplements. And so that's when I started selling 303 00:23:00.240 --> 00:23:05.360 products of my own and that that was kind of how I got into the supplement. So I picked the first 304 00:23:05.360 --> 00:23:09.600 10 customers from our distribution base already. So there's obviously going to be gyms or customers that 305 00:23:09.600 --> 00:23:16.400 are better than other ones. And I wanted to work with again, a representative sample of, you know, 306 00:23:16.400 --> 00:23:20.720 some bad ones, some middle ones, some good ones and present them a training on how to sell supplements 307 00:23:20.720 --> 00:23:25.360 and then the way to do it. And so I rolled out 10 locations, I think. And then the next month, 308 00:23:25.360 --> 00:23:29.360 I rolled out like 20 or 30 next month, I rolled out another 20 or 30. And then we did the big 309 00:23:29.440 --> 00:23:32.800 launch to everyone kind of the 90 days leading up to the big launch. And we were able to get a lot 310 00:23:32.800 --> 00:23:36.400 of the kinks out just like small things in terms of how the shopping carts worked. How it was 311 00:23:36.400 --> 00:23:40.480 attributed like we added in a thing. So trainers could get commissions. Like there's lots of little 312 00:23:40.480 --> 00:23:44.320 things that we did that were gym specific that no other supplement company could do, which has given 313 00:23:44.320 --> 00:23:49.520 us a nice moat in that space. So it cost me four million bucks to start prestige labs. About a 314 00:23:49.520 --> 00:23:55.360 million of that went to the tech. So we created our an entire point of sale for supplements that was 315 00:23:55.360 --> 00:24:00.480 specifically made for gym. So every gym would get a retail kit so they'd have a full wall of products. 316 00:24:00.480 --> 00:24:05.440 They would have a kiosk, which is like kind of like a stand with a like an iPad type thing on it. 317 00:24:05.440 --> 00:24:11.200 That would already be preloaded to their gym specific page. So they would get, you know, the sale would 318 00:24:11.200 --> 00:24:16.400 be attributed to them. And then they could run that transaction and also track it down to the 319 00:24:16.400 --> 00:24:21.280 trainer level and then automate payouts across hundreds of people. And this is my new like Shopify 320 00:24:21.280 --> 00:24:25.440 didn't really exist that. So like we had to build this whole thing and to build like a Shopify 321 00:24:25.440 --> 00:24:29.040 from like the ground up and it costs us about a million bucks. And then it also had to like 322 00:24:29.040 --> 00:24:32.880 manage inventory like, you know, how to do all these things. And then the other three-ish million 323 00:24:32.880 --> 00:24:38.080 went into just product. The biggest difficulties with it. I mean tech was always a problem with the 324 00:24:38.080 --> 00:24:42.320 business because we started right as Shopify was there and it wasn't good enough yet. Like Shopify 325 00:24:42.320 --> 00:24:45.840 was around, but it just wasn't good enough. It didn't do a lot of our use cases, which made it 326 00:24:45.840 --> 00:24:50.080 unique for our specific business. So that was always tough. There's always bugs and things like that 327 00:24:50.080 --> 00:24:53.840 that we had to fix. Second, it's supply chain. So like if you run out of one ingredient on one 328 00:24:53.840 --> 00:24:59.760 product, like you can't sell the product, that's tough. There are also legal firms that will buy all 329 00:24:59.760 --> 00:25:05.360 your products and try and test find something that's off or underrepresented or whatever. That's just 330 00:25:05.360 --> 00:25:10.480 like a pain. You know, we've had multiple people claim like name infringement, things like that. 331 00:25:10.480 --> 00:25:14.400 Like they had half of their name is in our name. We don't even know this company exists. And so 332 00:25:14.400 --> 00:25:18.320 they just there's predatory law firms that as soon as you have a patent, they'll just try and find 333 00:25:18.320 --> 00:25:21.120 people to sue and they'll just like basically rev share on the amount of money they can get 334 00:25:21.920 --> 00:25:26.320 terrible way to live life, but people do it. That's always an issue. And then I would say the 335 00:25:26.320 --> 00:25:31.360 two biggest problems with the business overall is that the end consumer is just not sticky. And 336 00:25:31.360 --> 00:25:34.160 that's just because people don't stick with fitness stuff in general for a long time. And I think 337 00:25:34.160 --> 00:25:37.440 that's one of the things that like I just kind of hate, just in general, like I hate products for 338 00:25:37.440 --> 00:25:41.920 people. I hate having to resell people. Like I don't like that. Consuming with my stuff like I've 339 00:25:41.920 --> 00:25:46.400 every business I've started it consistently gets more and more compounding. There's more compounding 340 00:25:46.400 --> 00:25:51.920 that happens with every business. The other issue was my problem, which is that I always focused 341 00:25:51.920 --> 00:25:56.640 on how much money they were going to make. And I tried to do that for like five years. And I was 342 00:25:56.640 --> 00:26:01.200 able to brute force my way to keep in that company at, you know, in our 20-ish million, a year. 343 00:26:01.760 --> 00:26:06.320 But it was actually talking to Andy Priscilla from first form. He was talking to me about this. And 344 00:26:06.320 --> 00:26:11.760 he said he his big transition when he switched from talking about sales and the hand in hand 345 00:26:11.760 --> 00:26:14.720 combat and how to present things and all that stuff to just like he said he switched from head to 346 00:26:14.720 --> 00:26:19.840 heart. And he's you talked about like when you were first getting into fitness, you bought 347 00:26:19.840 --> 00:26:24.720 supplements. This marked a new identity for you. Like you should want to do that for the customers 348 00:26:24.720 --> 00:26:28.960 and the people who follow you. And I did not have that language. And so I've already told 349 00:26:28.960 --> 00:26:31.760 that those guys and they're trying to implement that now in their language because everything I had 350 00:26:31.760 --> 00:26:34.720 was what I cared about, which is like how do I make more profit in my business? How do I liquidate 351 00:26:34.720 --> 00:26:38.880 cost of acquisition? But many people who are in fitness unsurprisingly get into fitness because 352 00:26:38.880 --> 00:26:41.600 I actually want to help people not that I didn't want to help people. I just also wanted to make 353 00:26:41.600 --> 00:26:47.280 a profit. And that was a priority for me. But I should have talked more about that than anything else. 354 00:26:48.000 --> 00:26:52.880 So the biggest lesson I have for you guys' motivation is around prestige labs is that I probably 355 00:26:52.880 --> 00:26:57.840 shouldn't have done it. That's the real role. It is a business. It is a good business. But I think 356 00:26:57.840 --> 00:27:03.920 that if I had allocated more time to just making gym launch better, gym launch would have been bigger. 357 00:27:03.920 --> 00:27:08.480 And because gym launch stopped growing, the year I launched prestige labs. And I don't think 358 00:27:08.480 --> 00:27:13.840 it had to stop growing. I think I was split. And I also at that time didn't understand how to 359 00:27:13.840 --> 00:27:19.360 recruit talent the same way. And so I just became CEO of two companies rather than CEO of one. 360 00:27:19.360 --> 00:27:23.040 And so that was that was the big mistake. Now, maybe I could have done prestige labs like today. 361 00:27:23.840 --> 00:27:27.840 But at the time, I didn't have the skill set. And I didn't have the ability to recruit the way we do know. 362 00:27:28.560 --> 00:27:33.600 So the third business I started that hit eight figures was uh use allen dot com still around 363 00:27:33.600 --> 00:27:38.960 today doing great. Use allen was one of the first companies to use machine learning in chat 364 00:27:38.960 --> 00:27:42.960 interactions. And so I first started it to solve the problem for gym owners because one of the 365 00:27:42.960 --> 00:27:47.600 biggest constraints is that people don't work their leads. Amazing. I know. But the average gym was 366 00:27:47.600 --> 00:27:52.080 getting 9% of leads in the door when they had to work to manually. We were able to get just under 367 00:27:52.080 --> 00:27:58.320 20% of leads in the door without them doing anything. And the average front desk person costs 2000 plus 368 00:27:58.320 --> 00:28:03.120 a month. And we could do it for a fraction of that. And so one of the things I did, which I thought was 369 00:28:03.120 --> 00:28:09.440 pretty genius, was I ran a pricing survey to our customers. And I said, Hey, if you could get this 370 00:28:09.440 --> 00:28:14.240 outcome, what would you pay per month for a software that would do that? And the sweet spot was like 371 00:28:14.240 --> 00:28:18.320 $300 to $400 a month is what they'd be let's kind of like the sweet spot in in terms of demand and 372 00:28:18.320 --> 00:28:23.280 pricing power. So then I had I sent a second survey that had the exact same use case exact same 373 00:28:23.280 --> 00:28:27.440 outcomes. And I said, if you had to pay her person who walked in the door, what would you be willing to 374 00:28:28.320 --> 00:28:33.360 pay? If you reverse the math, it was four times the price. And so that was a huge breakthrough in 375 00:28:33.360 --> 00:28:37.760 pricing is that how I positioned it, rather than making a recurring subscription, but paper usage 376 00:28:37.760 --> 00:28:42.080 became core to the model. And so because they are small business owners, they don't like recurring fees. 377 00:28:42.080 --> 00:28:45.440 And this was something that we learned about our avatar. They preferred to have something based on 378 00:28:45.440 --> 00:28:50.160 usage, even if it was more expensive, because it's lower risk, at least perceived risk. And so 379 00:28:50.160 --> 00:28:55.600 that was a big pricing thing that we figured out. Sold the first-gen customers of Alan by going 380 00:28:55.600 --> 00:28:59.360 to our distribution base and saying, hey, do you want to try this thing? And so we sold customers 381 00:28:59.360 --> 00:29:03.440 and I rolled it out the exact same way I rolled out prestige labs. But what was interesting is that 382 00:29:03.440 --> 00:29:08.800 we very quickly realized that we couldn't expand outside of our distribution base. And so then 383 00:29:08.800 --> 00:29:14.000 I had really good results for that specific avatar, but like it's still of such a very narrow 384 00:29:14.000 --> 00:29:17.920 niche in terms of who we could use. And the price per was significantly lower than what I could 385 00:29:17.920 --> 00:29:23.440 charge for other things. So like revenue was low-ish relatively. Then the breakthrough was that I 386 00:29:23.520 --> 00:29:28.240 realized that we needed to get agencies on board rather than getting small businesses on board, 387 00:29:28.240 --> 00:29:31.120 because they'd be like, great, I can work my leads. How do I get leads? And then we're like, oh, 388 00:29:31.120 --> 00:29:34.960 shit, they don't know how to get leads. And so we went to the people that we knew we're getting 389 00:29:34.960 --> 00:29:38.480 them leads, which was agencies. So then we started selling agencies, which had another degree of 390 00:29:38.480 --> 00:29:42.720 leverage, because if you sell an agency, they could have 50 small business owners underneath of them. 391 00:29:42.720 --> 00:29:46.240 And so we had to reconfigure the software so that it was actually made for agency owners, 392 00:29:46.240 --> 00:29:50.480 and it was made agnostic to industry. So we could select the industry and we learned how to 393 00:29:50.480 --> 00:29:55.360 white label it. That was a huge advancement. As soon as we did that, that was kind of the unlock. 394 00:29:55.360 --> 00:29:59.920 And then I did two webinars with people who had big agency audiences, and now you go up another 395 00:29:59.920 --> 00:30:07.600 level. So I could make one pitch get 100 agencies. Each agency might have 10 small businesses, 396 00:30:07.600 --> 00:30:12.480 and in one pitch get a thousand customers. That was when this thing really took off. I did two 397 00:30:12.480 --> 00:30:17.760 pitches, and within six months we were doing 1.7 also, ironically, per month through the software 398 00:30:17.760 --> 00:30:23.120 company. I developed software for prestige labs. I used the exact same development shop to make the 399 00:30:23.680 --> 00:30:29.920 software for Alan. I regret that. I should have just brought it in house and had a CTO. You need 400 00:30:29.920 --> 00:30:34.640 someone who has skin in the game. Otherwise, so this is for all entrepreneurs. I don't think 401 00:30:34.640 --> 00:30:38.880 development shops, honestly. I think they're, they're as close to a complete scam as you can come to. 402 00:30:38.880 --> 00:30:41.840 Like I just, because if you really are going to build a software company, you need to build a 403 00:30:41.840 --> 00:30:46.160 software company. Like that's it. Like you need to build a software company. It's like having a 404 00:30:46.160 --> 00:30:51.040 marketing agency and having a white labeled marketing agency doing all your delivery. It doesn't 405 00:30:51.040 --> 00:30:56.240 make any sense. Like that is the business. You need to know how to do the business. And I made 406 00:30:56.240 --> 00:31:00.160 that mistake twice. The first one less so because it was just like a core helping component with 407 00:31:00.160 --> 00:31:04.720 prestige labs, but it was the core thing that we were delivering here. And so that was a mistake, 408 00:31:04.720 --> 00:31:10.400 but it cost me about two-ish million, I want to say. And then it still stayed at like a few 409 00:31:10.400 --> 00:31:17.280 hundred thousand dollars every month in development costs. And so I figured if I were able to aggregate 410 00:31:17.280 --> 00:31:22.800 all of the data from every single type of small business, all scheduling brick and mortar in person 411 00:31:22.800 --> 00:31:28.320 appointments, I'd be able to predictively show what days of the week, what times of day, what kind 412 00:31:28.320 --> 00:31:32.000 of follow-up sequences got the most amount of people to shop. And since we were compensated on 413 00:31:32.000 --> 00:31:35.520 percentage of people that showed up, we were highly incentivized to solve that problem. And I learned 414 00:31:35.920 --> 00:31:41.200 a ton about how to get the most throughput for leads from that business. And I've used that 415 00:31:41.200 --> 00:31:45.360 in every one of the portfolio companies that we have. And you can usually add 20, 30, 40 percent 416 00:31:45.360 --> 00:31:50.080 to the throughput on ads simply by adjusting how you your scheduling process. 417 00:31:50.880 --> 00:31:54.960 The agencies would come on, they would pay, I think it was like 20 grand to license the whole 418 00:31:54.960 --> 00:31:58.800 thing and like white label it because it would create a ton of value for them. And they were able 419 00:31:58.800 --> 00:32:03.360 to switch their business models from a recurring revenue model to a paper show model as well. 420 00:32:03.360 --> 00:32:06.640 And so they were able to charge significantly closer to the transaction. So the closer you can 421 00:32:06.640 --> 00:32:10.160 charge to the transaction, the higher percentage of the transaction you can charge. The sales 422 00:32:10.160 --> 00:32:13.600 process is simple. You say, how much do you make per customer? The most you could pay to get someone 423 00:32:13.600 --> 00:32:17.600 in the door and they would give you that price and then you could just charge a percentage of that 424 00:32:17.600 --> 00:32:20.880 rather than saying, you know, pay me $2,000 a month and I'll run your Facebook ads and whether 425 00:32:20.880 --> 00:32:26.400 the person makes 50 grand or $5 you still get $2,000. This way you've got aligned with the wins 426 00:32:26.400 --> 00:32:30.800 and what happens is the few customers that are really big spenders end up becoming kind of 427 00:32:30.800 --> 00:32:35.040 almost like partners which aligns even further. It aligns the economic model from the top down. 428 00:32:35.760 --> 00:32:41.200 Allen was a company that worked with agency owners. We first started working with small business owners 429 00:32:41.200 --> 00:32:45.760 as gyms realized that they didn't get leads for themselves even though we solved that problem 430 00:32:45.760 --> 00:32:49.840 and then we had to realize we had to go to marketing agencies that were lead gen-based because they 431 00:32:49.840 --> 00:32:53.440 would solve that problem. Then we white labeled it so that they could use it as their own company 432 00:32:53.440 --> 00:32:57.040 and then switch their model from a recurring revenue model to a paper show model. That allowed 433 00:32:57.200 --> 00:33:01.520 them to make more money and it was also an easier sale. So they could charge someone $5,000 434 00:33:01.520 --> 00:33:06.080 one time for a setup fee and then only on if somebody showed up after that which was a much easier 435 00:33:06.080 --> 00:33:11.040 sale for a small business owner to swallow rather than $1,000 a month until you die. And so a lot 436 00:33:11.040 --> 00:33:14.560 of people like that because then if they turn ads off, if they turn ads on, it was variable. 437 00:33:15.440 --> 00:33:18.960 Allen was the business that I probably learned the most lessons from. I ended up selling that 438 00:33:18.960 --> 00:33:23.200 business as well, 75% of it to a strategic buyer who's still running it and doing a good job with 439 00:33:23.200 --> 00:33:26.800 it and hopefully they'll have a big exit in a few years. And that was an all stock deal. So 440 00:33:27.520 --> 00:33:30.640 under NDA and I can't tell you but I can tell you we did 12 million in the trailing 12 months 441 00:33:30.640 --> 00:33:35.200 before the sale. So you can do your own math. That being said, lesson one is that you need to have 442 00:33:35.200 --> 00:33:39.680 an in-house CTO if you're going to get into software and ideally somebody who I think should have 443 00:33:39.680 --> 00:33:42.640 equity in the business because they should be invested. Like this should be like this is a long, 444 00:33:42.640 --> 00:33:45.680 you just have a partner who's going to be running this with you if you're not a tech guy. 445 00:33:46.400 --> 00:33:51.360 Number two is that you want to run pricing surveys early because we unlocked four times the 446 00:33:51.360 --> 00:33:56.320 pricing power by simply repackaging how we charged. So exploring different ways to charge based on 447 00:33:56.320 --> 00:34:00.640 usage, based on recurring fees based on different, you know, KPIs. This is especially true of software 448 00:34:00.640 --> 00:34:03.680 because there's so many different ways you can charge compared to maybe traditional service. 449 00:34:04.400 --> 00:34:09.280 The third thing is having a line incentives with your customers often just makes you more money. 450 00:34:09.280 --> 00:34:13.840 And so that business had a tremendous amount of scale because we had so much alignment with every 451 00:34:13.840 --> 00:34:17.440 single stakeholder. The small business owner want people to show up, the agency owner wanted 452 00:34:17.440 --> 00:34:21.840 people to show up and we got paid based on shop. So everybody was aligned top down to make things 453 00:34:21.840 --> 00:34:28.640 happen. The fourth thing that we learned this is more tactical is that throughput on appointments 454 00:34:28.640 --> 00:34:34.240 when you're scheduling for sales calls or in-person appointments. The amount of days per week that you 455 00:34:34.240 --> 00:34:42.480 are open, the hours that you are open, and the increments of time matter a lot, like 50 to 200% 456 00:34:43.120 --> 00:34:46.720 a lot. And one of the biggest issues we ran into is that people would be like, 457 00:34:46.720 --> 00:34:50.400 marketing doesn't work for me and they had one time stop for an hour per week that they were 458 00:34:50.400 --> 00:34:55.200 willing to take new customers on. That's just stupid. And so there's no other way to say it, 459 00:34:55.200 --> 00:34:58.960 people complain about being poor and be like, well, you do poor things. So stop doing that. 460 00:34:58.960 --> 00:35:01.760 But the people who made the most money, the most throughput of the ones who gave the most 461 00:35:01.760 --> 00:35:05.440 availability, gave the most flexibility their customers were open the most days and they 462 00:35:05.440 --> 00:35:10.080 unsurprisingly got more people to schedule and show up. And so that was a huge breakthrough and then 463 00:35:10.080 --> 00:35:13.600 trying to set expectations there with customers that they should do that in order to maximize 464 00:35:13.600 --> 00:35:17.040 their return. Not all of them did it. In fact, many of them didn't because there's a reason 465 00:35:17.040 --> 00:35:22.320 small business owners stay small. They make small business owner decisions. So acquisition.com, 466 00:35:22.320 --> 00:35:26.160 this is the fourth business that we're now, obviously, crossing your figures with. 467 00:35:26.160 --> 00:35:31.040 I wanted to have a compounding vehicle that I could do for the rest of my life. I wanted to be able 468 00:35:31.040 --> 00:35:36.080 to be involved in different industries so that I wouldn't get bored. Basically, I started with the 469 00:35:36.080 --> 00:35:39.600 question, what can I do forever and then worked backwards from there? Because I knew if I could do 470 00:35:39.600 --> 00:35:43.760 something forever, then it would get very big. And so that was really what I was solving for. 471 00:35:43.760 --> 00:35:46.800 And so then I just had requirements for that business model. So it's like there has to have a lot 472 00:35:46.800 --> 00:35:49.760 of leverage. I need to have a capital compounding vehicle. One of the things that I didn't have in 473 00:35:49.760 --> 00:35:53.200 the other businesses or at least I didn't realize that in the other businesses is that I didn't have 474 00:35:53.200 --> 00:35:58.880 a way to reinvest capital to further spur growth, which I do have in this business. I started 475 00:35:58.880 --> 00:36:03.360 acquisition.com by hiring the top down. So every other business I've had, I hired from the bottom 476 00:36:03.360 --> 00:36:08.160 up. This one I went from top down and I will always do that for me or not. You can really only do 477 00:36:08.160 --> 00:36:12.800 that if you're well capitalized, meaning you have money to spend on people before they can pay for 478 00:36:12.800 --> 00:36:17.920 themselves. That's why venture people raise money because you can get more talent before the business 479 00:36:17.920 --> 00:36:21.920 can really afford the talent. I can afford the talent which ultimately makes you grow faster because 480 00:36:21.920 --> 00:36:25.920 you have better people sooner. And you also don't have to go back because at the end of the day, 481 00:36:25.920 --> 00:36:30.960 every business occurs debt. So it's just what kind of debt. So are you incurring financial debt? 482 00:36:30.960 --> 00:36:36.080 Are you incurring management debt? Are you incurring cultural debt? Are you incurring technical debt? 483 00:36:36.080 --> 00:36:39.280 Like there's always different types of debt you're incurring and the question is which one do you 484 00:36:39.280 --> 00:36:44.640 want to pick and have to pay down later? And so for us, I being the bank was willing to pay down 485 00:36:44.640 --> 00:36:48.320 financial debt to not have to pay any of the other debt down in the future because ultimately on 486 00:36:48.320 --> 00:36:53.760 a longer time horizon, we'd move faster. So the first 10 investments that we found all came from 487 00:36:53.760 --> 00:36:59.120 content. So it's just people that we, I mean some people I knew from beforehand and I would say that 488 00:36:59.120 --> 00:37:03.200 the relationship had shifted more and more to like basically an advisory role anyways and I was 489 00:37:03.200 --> 00:37:06.640 like, Hey, I think we should probably just formalize this. And so that was probably the first few. 490 00:37:06.640 --> 00:37:10.400 And then from there, the rest of it has been people who read the book, who watch videos, 491 00:37:10.400 --> 00:37:13.840 who listen to podcasts, who come in, who already are aligned with our values. They have a business 492 00:37:13.840 --> 00:37:18.480 that has some level of compounding in it. There, you know, doing five million or more. We'll 493 00:37:18.480 --> 00:37:22.400 always look at anything as three or more. But most of the businesses over five, the average business 494 00:37:22.400 --> 00:37:27.600 right now is doing 17 million in the portfolio. So that's kind of the range there. So acquisition 495 00:37:27.600 --> 00:37:30.960 is not common as the first business that was really like built on a personal brand and inbound 496 00:37:30.960 --> 00:37:34.560 with content. So that's been like the biggest change compared to the other businesses. There's 497 00:37:34.560 --> 00:37:38.800 pros and cons to it. Like we can attract more talent than we otherwise could we get we get better 498 00:37:38.800 --> 00:37:43.440 people. I mean, they're partners. So you're dealing with a more sophisticated person in general. 499 00:37:43.440 --> 00:37:48.240 So that's a little bit different. It's a slower business overall. Like if you are used to doing 500 00:37:48.240 --> 00:37:52.080 a transactional business where you're doing, you know, multiple sales a day type thing going into 501 00:37:52.720 --> 00:37:57.280 a business model where you have one every month is very different. And there's a lot of conversations 502 00:37:57.280 --> 00:38:00.880 that happen that don't amount to anything. That's kind of that's a very different thing that you 503 00:38:00.880 --> 00:38:06.560 have to get used to. There's more conversations. It takes longer. There's legal involved in these, 504 00:38:06.560 --> 00:38:10.640 you know, deals. So there's just more of that, which is different than all of the other business 505 00:38:10.640 --> 00:38:16.400 models we have. The thing that excites me most about acquisition.com is the well, it's the things 506 00:38:16.400 --> 00:38:21.440 that I learn. Like I love learning every day. And then I get to learn something from one company 507 00:38:21.440 --> 00:38:26.080 and help another company use that learning. And so I learn more now than I ever have because I'm 508 00:38:26.080 --> 00:38:31.840 exposed to more businesses at a higher level. And so I believe that the purpose of life is to learn. 509 00:38:31.840 --> 00:38:37.200 That is my purpose of life. And so if that is my purpose, then enabling myself to learn in as many 510 00:38:37.200 --> 00:38:41.280 ways as humanly possible maximizes that. So like I write books because I want to learn about the 511 00:38:41.280 --> 00:38:45.920 subject matter I'm writing about. We co-own all these businesses because I want to learn how 512 00:38:47.120 --> 00:38:50.640 solar sales work. I want to learn how mortgage sales work. I think that's interesting. You know, 513 00:38:50.640 --> 00:38:54.080 like those are all just very interesting things. And so I end up getting a really diverse 514 00:38:54.080 --> 00:38:59.200 background of experience like knowing a lot about a lot of things allows you to cross pollinate 515 00:38:59.200 --> 00:39:02.720 ideas that worked well in one industry and then apply them to another one and then get 516 00:39:02.720 --> 00:39:07.920 outsized returns. And the last big lesson I have from acquisition.com was as we saw how quickly 517 00:39:07.920 --> 00:39:13.200 and how easily acquisition.com grew, the biggest part of that was because we hired from the top 518 00:39:13.200 --> 00:39:18.800 down. And so there was so much that we could automatically delegate to people who were better than us 519 00:39:18.800 --> 00:39:23.840 at their respective things, not as good as, but better than us who were teaching us about these 520 00:39:23.920 --> 00:39:26.960 things, teaching us about personal brand, teaching us about making content, teaching us about 521 00:39:26.960 --> 00:39:33.120 how to set up HR and recruiting teams. That was issued right through for why this did well. 522 00:39:33.120 --> 00:39:38.320 And the other thing is that we have made recruiting talent, probably the single core competency 523 00:39:38.320 --> 00:39:42.720 of the business in terms of how we get better returns. So most of the companies that were bringing on, 524 00:39:43.520 --> 00:39:47.120 like I said, they're most of them doing 5 million, 10 million, whatever, or higher than that. 525 00:39:47.600 --> 00:39:53.280 The biggest companies, you know, was pacing like more over 100. So big difference there. 526 00:39:53.280 --> 00:39:58.640 But the entrepreneur needs more talent. And we have the ability to recruit talent better than 527 00:39:58.640 --> 00:40:03.920 most people because one, we have so much inbound that comes in too. We as a private equity firm 528 00:40:03.920 --> 00:40:08.400 have more prestige than most of the companies that are in our portfolio because we are bigger and 529 00:40:08.400 --> 00:40:13.200 we are more sophisticated. And so we can recruit and people respond to a private equity firm who 530 00:40:13.200 --> 00:40:19.120 is more full of companies more than they respond to Joe's dry cleaning. Right. And so we can get 531 00:40:19.120 --> 00:40:23.520 better talent than they can get on their own. And then once we put the person in their role, 532 00:40:23.520 --> 00:40:27.680 we have somebody at hold co who will help train them on our way of doing business so they get it 533 00:40:27.680 --> 00:40:31.760 right the first time. So you get the right person in the right seat doing the right playbook on the 534 00:40:31.760 --> 00:40:36.560 first shot. And so what you do is you massively pay down that ignorance that it's what causes most 535 00:40:36.560 --> 00:40:40.240 companies to slow down. And so what happens is they just have a really nice trajectory and keep going 536 00:40:40.240 --> 00:40:43.760 because they're just not fucking up. So when you're higher from the top down, it's every 537 00:40:43.760 --> 00:40:47.520 department of the business. So you director of sales, director of marketing, director of people, 538 00:40:47.520 --> 00:40:52.160 director of IT, director of you know, portfolio operations, you know, for us, we have our CFO. 539 00:40:52.160 --> 00:40:55.440 Like these are all different roles that correspond to different components of the business director 540 00:40:55.440 --> 00:40:58.560 of business development. These are all like you just think about the pipeline of the business. Like 541 00:40:58.560 --> 00:41:01.440 you have to get somebody who gets the increase. You got to get somebody who closes deals. You have 542 00:41:01.440 --> 00:41:06.720 to get somebody who, you know, papers the stuff with law and finance. And then you have to have 543 00:41:06.720 --> 00:41:11.120 people who can translate those skills into the portfolio company. So a portfolio company, 544 00:41:11.120 --> 00:41:14.400 when their managers are getting stuck or their directors don't getting stuck, they talk to our 545 00:41:14.400 --> 00:41:18.320 director of sales who implants the playbook into their into their business. If they're getting 546 00:41:18.320 --> 00:41:22.640 stuck on marketing, our marketing goes in to help them out. If they're getting stuck on HR, 547 00:41:22.640 --> 00:41:26.720 our recruiting team recruits for their leadership. So we can help them with the job descriptions. 548 00:41:26.720 --> 00:41:30.640 We already have how to post it. We know what the follow up sequences are and we can do for a higher 549 00:41:30.640 --> 00:41:34.800 level. We'll actually take the, well, if it's the highest, if it's C level and up, we'll do the whole 550 00:41:34.800 --> 00:41:40.000 thing in debt. Because we want to have a big say in the talent that's going to grow this company, 551 00:41:40.000 --> 00:41:43.120 because we want to make sure they're aligned with our vision for how the company is going to grow, 552 00:41:43.120 --> 00:41:46.640 because a lot of times if you don't know what you're looking for, which is what the most entrepreneurs 553 00:41:46.640 --> 00:41:51.120 are at this level they've never done it before, they pick wrong. And sometimes it takes six to 12 554 00:41:51.120 --> 00:41:54.960 months to reverse that error. And it's six to 12 months of growth. They keep basically having to 555 00:41:54.960 --> 00:41:57.920 push off until they find the right person. And so if we get the right person, the right C, 556 00:41:57.920 --> 00:42:07.920 the company grows on its own.