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We want to be able to ideally cash low the acquisition,

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which means that in the first 30 days of the customer,

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we want to be able to make back the cash

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that it costs us to acquire them.

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The wealthiest people in the world see business as a game.

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This podcast, the game, is my attempt

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at documenting the lessons I've learned

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on my way to building acquisition.com

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into a billion dollar portfolio.

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My hope is that you use the lessons to grow your business

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and maybe someday soon partner with us

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to get $200 million in beyond.

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I hope you share and enjoy.

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There are six ways to get customers.

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The first four ways, the core four ways

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you let anyone know about anything.

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So you let people you know one-on-one

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about the stuff you sell.

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You let people know publicly about the stuff you sell.

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You let people you don't know privately about the stuff

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you sell and you let people know publicly

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about the stuff that you sell.

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From those four ways, you can leverage the other two ways,

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which is referrals and affiliates.

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You have to do those four things to get customers.

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We have to do those four things to get affiliates

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and then those affiliates in turn do those four things.

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Now, when you let a stranger one-on-one

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know about the stuff that you sell,

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that's called cold outbound, all right?

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And so what I want to talk about this video

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is cold outbound and a really interesting story

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that just happened, all right?

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And so I've been of the belief that those four methods

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work for any business anyway, no matter what.

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Now, cold outbound is a little bit more cost-level way

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of acquiring customers.

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So most times, it tends to be B2B businesses

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that sell higher ticket that can afford

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to pay people to do outbound, et cetera, to get customers, right?

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And I had this belief broken for me

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because as a consumer or direct to consumer business,

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physical products, maybe smaller ticket, higher volume

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business, most times anyone would use cold outbound

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would be to get affiliates and then those affiliates

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get customers.

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So you can afford to get affiliates

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because affiliates worth more than a single customer is.

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Does that make sense?

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Hopefully it does.

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Now, I was thinking about, I was like,

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but marketing always works.

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So I just have to think about an example

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where it would be real.

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And so Layland and I were walking on the beach

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and we saw these two girls who I was like,

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along the boardwalk, and these two girls

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were pushing a cooler full of energy drinks.

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You know, the two-cure girls remember Red Bull

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did this back in the day.

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And I thought about it for a second and I was like,

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okay, they're handing out cans of energy.

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And there has to be some financial ROI on this.

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So let's do the math.

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So I go up to the girls because they're like,

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hey, do you want a thing?

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And I was like, actually not really, but let's talk.

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And so I asked them, how many cans do you guys give out a day?

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Just like a thousand.

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I was like, okay, you give out a thousand cans.

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How many hours does that take you?

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Just like six hours.

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And the amount that they make per hour

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is about 20 bucks an hour.

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And so figure six hours is 120 each.

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It's 240 with taxes, maybe 260, 270, whatever, right?

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Okay, so there's $270 in labor.

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Now, how much does a can of energy drink

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or can of whatever soda cost?

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Well, believe it or not, cans of soda on their own

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cost very little.

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It's actually mostly water.

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And then there's just the cost of cans.

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So you're talking probably like 25 cents to make a soda.

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All right, probably less than that.

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Like, oh, I'll cost less than that for them at that.

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But let's just use 25 cents for the example.

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All right.

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The biggest cost for a consumer product,

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especially the lower ticket one is the shipping.

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So the cost for them to get the soda to the gas station

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is the vast majority of the cost.

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The cost of the product is very little, right?

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So when they give a thousand,

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they can ship a pallet all at once to one location

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or pallets all at once to one location.

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They stack them in a warehouse.

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And then teams of two girl teams that look cute,

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that can get attention, get these coolers full,

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put a thousand cans in and have to give them out.

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So let's do the math.

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So if they give out a thousand cans in a day,

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which is what they said, a thousand times 25 cents

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is $250 in product.

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And let's just round and say it costs $250 in labor.

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So it's $500 a day is what they're cost per day

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of this one single two person team is, all right?

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Now, let's try and figure out the return on this for them.

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So if they can, and we can also figure out

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that cost per can handed out.

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So if we're giving out a thousand cans

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and it costs 500 bucks, then it costs 50 cents

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to deliver a can to a potential customer, all right?

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That's what our cost is.

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Now, let's think about the lifetime value

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of somebody who actually gets the drink and enjoys it, right?

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So this is where having a very good product is so important.

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Because if you can give a can away for free

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of the thing that you sell,

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and know that x% of people will buy again,

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then you have an incredibly viral product.

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Hey guys, love that you're listening to the podcast.

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If you ever want to have the video version of this,

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which usually has more effects, more visuals, more graphs,

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you know, drawn out stuff,

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sometimes it can help hit the brain centers in different ways.

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You can check out my YouTube channel.

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It's absolutely free to check that out.

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If that's what you are into.

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And if not, keep enjoying the show.

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There's a good friend of mine that owns a bar business.

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Actually, it acquaintance, more than friend.

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But anyways, he owns a bar business

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that gets 63% of people who get their first order to buy again,

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which is crazy high for a consumable, all right?

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Now, I'm going to use a much smaller version of this

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because it's free and there was no purchasing.

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And let's just say four out of 100.

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So four percent, all right?

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One out of 25 people who get a can for free

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are willing to then consistently buy cans.

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Now, a case of this stuff is about 30 bucks for 12 cans, okay?

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So if you wanted to buy a month's worth,

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it would be 30 times two and a half.

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So 75 bucks.

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So 75 dollars a month if you drank one in a drink

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in the morning every morning,

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which is what a consistent user would take, right?

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Now, if you remember, our cost per can is 25 cents.

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Now, the shipping of a really expensive,

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really expensive because it's heavy,

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12 cans might be somewhere like five bucks ish,

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direct to the consumer, okay?

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So if we get $90 for those 30 cans, right?

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And it costs us $15 in shipping,

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plus 30 times 25 cents, which is eight bucks ish.

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So eight bucks plus the 15, we got 23 bucks on 90, all right?

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So we've got the rest of that, which is the margin, all right?

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So we've got $67 per month,

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and let's say the average person stays for five months,

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which is $335, all right?

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So let's say that's the LCB of a customer lifetime.

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Now, we handed out a thousand cans,

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and we said only 4% become lifetime customers.

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So that means that we have 40 people

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who would then become $35 of LCB.

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40 times $335 is $12,000, roughly, right?

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They spent 500 for that.

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Does that make sense?

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Let's say it was one in even less than that, right?

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Like let's say the LCB is a hundred bucks,

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and they only get one out of a thousand to,

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sorry, 1%, so 10 out of a thousand people

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to become that type of customer.

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Well, then they get 10 customers to give us $100 in LCB,

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which means they get $1,000 on 500, right?

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So the question is, at what point does it make sense

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to do this, right?

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And I use this more of an illustration

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to show you that there are as a zillion ways

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to let people know about the stuff you sell, all right?

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There is never a lack of attention or traffic

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that's out there, you just have to be able to afford it.

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Marketing always works.

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It's just a matter of how efficient is it.

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If every person in the world literally just saw

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the name of your company and nothing else,

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you would make money.

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Period.

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A certain percentage of those people would come and buy.

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Period.

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The problem is it's hard to reach every single person

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in the world.

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So marketing is not whether it works or not,

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but how well did it work?

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And so it's good to have benchmarks for these things.

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And this is one example that's in the leads book

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that's coming out soon.

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And if you've watching this and maybe it's already out

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and blah, blah, you can check it out.

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Anyways, so since it's a matter of efficiency,

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we need to have benchmarks.

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And so for me, I like to have a minimum of a three to one

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LTV2CAC ratio.

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So that means the lifetime value of the customer

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in gross profit, not revenue,

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if it costs me $90 to $100 a thing,

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I can only use 10 to market it, right?

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Just think about that.

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So it's just on the profit margin that you have.

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That's what you have to use your calculation for.

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So you need a three to one LTV2CAC ratio.

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CAC is cost of acquiring a customer.

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So if it costs me $100 to get a customer,

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and I have to make at least $300 in LTV4 to be worth it,

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because I have to cover the cost of acquisition

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and then with the remaining $200,

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run my entire business and still have

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someone left over for profit.

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And so they've done a lot of research on this.

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And so three to one is the minimum LTV2CAC ratio

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that is required for profitable growth, right?

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And so it's good to have that benchmark.

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Now, me personally, I tend to shoot really high.

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I like to have 10 or more,

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because I like to have lots of profit.

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I want to make lots of money while I grow, right?

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And I genuinely believe it's a belief thing

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where like if you believe it's possible, it is.

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And so people, I think they have their standard,

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like people fall to their standards,

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because three to one has been accepted.

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A lot of people just go to three to one.

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I think you can have 10 to one and then keep going, right?

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And you just fall to that level of your standard.

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In the book, I talk about how my lifetime

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return to advertising is 36 to one.

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Right now, it's continued to improve.

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And now the numbers wouldn't make sense

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because of the deals that we make.

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But fundamentally, if you believe it's possible,

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it is, you just have to think about it more cleverly, all right?

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And so I want to use this example to show you that

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cold outbound specifically works for any type of business.

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You can use it for a direct-to-consumer business.

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It can be knocking on doors.

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It can be handing out cans.

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It can be cold calling, cold email, cold message.

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It can be direct-mailing people, it doesn't matter.

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Whatever it is, it's cold outbound.

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You're letting people know one-on-one about the stuff

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that you sell.

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And if you do the math, you can make it work.

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And just to clarify on this math real quick,

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it would cost $75 if we were able to buy two and a half

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cases, which we can't.

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So we have to buy three cases to get our months worth

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of 12 cans, because 12 plus 12 is 24, plus another half case

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gets us to 30 for the month, right?

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And so 90 is what I did this math on.

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And it's more important to think about just what the math is

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just to get to the LTV, because that's

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the only number we really care about.

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This is just back of Neppin.

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And the reason I give the second example after that

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with the 100 bucks is that it doesn't matter.

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It's just, do you understand the thinking process, which

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is, this is how much it costs for me

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to get a new customer, and this is how much I make per customer

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over the lifetime of them being with me, right?

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That's the big thing that we need to look at.

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And as an added caveat, we want to be able to ideally cash

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low the acquisition, which means that in the first 30 days

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the customer, we want to be able to make back the cash

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that it costs us to acquire them.

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So if it costs me $100 to get a new customer on my business,

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I want you to create an access of $100 of never cash low back

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to me to cover the expense.

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Because if you can do that, then you can take a credit card,

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you can borrow the money for 30 days,

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you can get a customer, and pay back the card.

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So the customer was free, and now you

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have no money that's owed and a customer

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that you can sell for the rest of your life.

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That's how you can profitably grow, even if your capital

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constrained.

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And so if you literally just figure out

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that part of the equation, acquisitions no longer

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the bottleneck in your business, and it will be something

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else further down the pipe.

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And that's what we try to do with every business

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that we have in the portfolios.

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How do we make it so that cash is not the restrictor of growth

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solved for number one?

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Number two, now that we've eliminated cash as the growth,

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we can grow as much and as fast as we want,

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which then means something else to become our barrier,

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and then we attack that.

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So let's say I was going to say,

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I'm going to spend $1,000 a month on Facebook ads.

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I spend $1,000.

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I don't have $1,000 back.

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From those $1,000 I sell 10 people for $100.

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That wouldn't work, because I have a cost to fulfill.

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So I would have less money.

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Even if the LTV was $10,000, but if I made $1,000 back

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and my cost of fulfill, if it was $500,

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I only make $500 back as my net free cash,

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which means I'm down $500 at the end of the month.

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So I need to fix my pricing, fix my offer such that

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on that first 30 days of transactions with a customer,

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I have at least the cost to acquire them in net free cash to me.

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So the metric I use there is called 30-day cash,

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which is how much net free cash does a customer spend off

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in the first 30 days so that I can pay off a credit card

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to acquire the customer.

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And at that point, you don't need to even use your business

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as money to acquire customers.

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You just have a revolving credit line with the credit card

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company, and the more you spend, the more you pay back,

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the more you'll bump your limit.

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All right, keeping awesome as a nation, lots of love,

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and I'll see you guys back.