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Ion 13 portfolio companies and in one of them, Ion locked $6 million of enterprise value in 60 days by solving three problems and I did it with data.

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So this is actually a sequel video and you may remember our three wise men, they came and they were sad because they had problems that they wanted to fix.

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And they're already making twice as much money just from the fixes that we did from the sales.

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So we went from 56 units per month sold to 93 units again in 60 days.

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And so the problem that we encountered after we doubled the sales, now they had twice as many people going to get fulfilled on whatever the thing is that they sold.

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What was once shaky had completely been obliterated because it was already tough when they had the current amount but with double, they were completely lost.

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So one of the never ending issues in business is that there's something called the problem solution cycle.

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It works like this. You've got problems, you've got solutions. That's ugly as shit.

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So the problem is when you solve a problem with a solution, you then create another problem.

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So if I 10x your sales, what's the next problem going to be? And so we had to fix that problem now.

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We wanted to track these three stats because they didn't even have LTV tracked.

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The first was time to first value. The second was customer satisfaction and then we had our ascension rates or the absolute amount of money that they were making on the back end,

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which is after someone buys the first thing to buy the second thing, right?

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So let's start with where they were at. And by the way, this E is not something fancy. It just should be there, but y'all are cool, so we'll go with it.

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Time to first value is a really interesting statistic. It's probably one of the ones that I care the most about in any kind of service.

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So in the world of content like watching TV, there's different shows that you might watch. So each show, they calculate natural retention point.

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So breaking bad, for example, is one of the best shows of all time. They found that if someone made it to the third episode, they had like an 87% likelihood of finishing the entire five seasons if they got to that point.

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And so different shows have a different retention point that hooks the viewer for the long haul.

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And so that's what we're ultimately driving towards. You can call it a retention point, you can call it activation, you can call it whatever you want.

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But there's a key moment that transforms the customer relationship into a long-term commitment with you. And what your goal is to pull that as far forward the present as you possibly can.

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You don't have to deliver the ultimate result immediately. I mean, the faster you can do that, the better. But what you want to do is break into many small chunks and show leading indicators of success. So in other words, progress.

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And the more times that you can break down an outcome into tinier chunks, the more reinforced the customer will be for staying with you. So for example, if I was in a high-touch agency, I did marketing services for someone.

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And let's say we touch base once every two weeks, right? Now I do a lot of things between those two weeks for the customer. But if every two weeks I correspond with them, then they're going to get reinforced every two weeks for me doing stuff.

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Now consider a different way of doing it. I onboard them. And then every day I send them what I did to work on their behalf. At the end of that two weeks, they would have had 14 different positive interactions with me versus one.

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You can take what you're currently doing, not change much about it, and simply communicate it differently so that they can perceive a faster time to first value. That's the idea here.

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For example, in the gym launch world, in the beginning was if we can get someone to do a high ticket sale in the first seven days, it would triple the LTV for us. So then instead of trying to think about churn or any of these metrics, we said, let's just try and make sure every single person gets that sale as fast as possible. And so that's what we'd measure.

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The way that we eventually would go to was how quickly they would launch an internal campaign for us and how much they generated from that. So our goal then became how quickly can we get them to send the emails that we want them to send. That's two different examples of different time to first values. And without further ado, let us show you the before data.

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So for the time to first value was 47 days, got to improve that. Imagine you buy something and it takes you more than six weeks, almost seven weeks to hit that first real value. The second way was the customer satisfaction score. And survey says, what was their customer satisfaction?

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Non-existent because they didn't even track the data. I'm giving you the real stuff here, ascension. All right. So what percentage of customers do they send or how much money were they making from ascensions on the back end survey says zero dollars because they didn't have a back end. When I say back end, I mean again, the second thing or the thing after the first thing they were selling. These are not pretty statistics. That's okay.

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So this means that again for us as investors, huge opportunity for improvement. And that's where I get great returns.

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So product problem number one, high churn. What's churn, Alex? Great question. Is the percentage of customers that leave from this month to next month?

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So if I start the month with 100 customers, those same 100 customers a month later, how many of them choose to renew? So if 95% of them choose to renew, then I have 5% churn.

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This particular business was a 16 week implementation. So 16 weeks is how long people were committing to on the front end. The problem was people weren't even making it through the first thing all the way.

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The reason this is so important is that is one of the largest profit drivers in a business. So let me give you an example.

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If we had two ways to make X dollars, alright, an X dollars from keeping a customer means they stay for three more months.

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An X dollar from getting a new customer means we have to pay to get a new customer. So we pay Mr. YouTube, we pay Mr. Facebook $1,000 to get X dollars.

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Or we could pay $60 in staff or labor to get the same X dollars. So let's say I had to pay for an hour of extra work per month for my team to reach out or hop on a phone call or two 30 minute phone calls with the customer per month.

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So we got 30 minutes times two, 30 minutes times two. Now you might be like, man, that's a whole lot of work. Well, let's say I'm paying 20 bucks an hour. And so this is $20. This is $20. This is $20.

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Maybe like, wow, again, so much work. But look at my return, the $60 to get the X versus the $1,000 to get the X is like 17 times more profitable. And if I'm an investor, which everyone who runs a business is just on a micro level, that's a way better return.

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And so I should be allocating as much effort into that bucket until I can't do any more in this bucket and then go to my less efficient ways of allocating capital.

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The biggest and easiest problem that we identified was that their customer success team was arbitrarily checking in. All right, meaning they would just be like, Hey, what's going on? Let me go take some of your time with no agenda, rather than being one proactive and two, knowing what problem the person should already be experiencing at this point in their 16 week implementation.

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After all, for this particular product, they were taking everyone through a choreographed experience, except it wasn't a choreographed experience, which is not the way to do business. So if you know that everyone in week one or two is going to be suffering from one of these two problems, then you'd start the call saying, Hey, most people this point or at point A or point B, where are you right now? And they're automatically boom, you're right into it. And they're like, this is value additive. This is actually helping me. Whereas you're like, what's going on, John? And then just like, everything sucks. And you're like, Oh, why does everything suck?

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It's like, you don't seem informed. You don't seem on top of it. You don't seem proactive. And just by doing this, it sets an entirely different tone for the customer relationship, because they're like, these guys know what they're doing. And I feel better about paying them.

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And this is why knowing that key milestone that you're driving towards that activation point, that time to first value is so key, because what you do is now all of your communication and all of your efforts are going to be targeted and optimized to get this one single outcome. Right.

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So if I know that I need to get somebody to get their first sale in seven days, that's high ticket in order to triple their lifetime value, think about the resources that I can put there.

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So if someone goes from $17,000 and LTV to $50,000 and LTV, which is much more like the stats were for gym lunch, I have $20,000, $33,000 of resources that I have at my disposal of almost all profit to deploy to get that one thing to happen.

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So how many resources do you think I should put towards that? A ton. And so when we get on the call, we're like, hey, man, let's send that email out together right now.

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They're like, oh, I don't know how to do it. Don't worry. I've got my tech guy with me here. We're going to connect the things that you were probably struggling with. Where are you struggling with that? Oh my God. This is great. Wow. They're on top of this. Cool. By the end of this call, we're going to send that email. And then the likelihood, if they sent the email that they make the sale extremely hot. And that's how you can drive towards the dot com. If we haven't even defined that, we're like, hey, where are you at?

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In the steps. And they're like this. And you're like, okay, cool. Well, I haven't, I haven't made it able to get to it yet. Okay, don't worry about it. You know, take your time. I don't want to overwhelm you like waste of time, waste of your time, waste your staff's time. And you're ultimately not going to extend the LTV and get them a good experience.

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Problem number two, survey says, no back end. All right. Remember back end is the second thing you sell. What these guys were doing. And it's a, it's a very common mistake is to say, Hey, after the 16 weeks, you can stay in the community, parts of Spain, all the stuff that we have.

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Absolutely free. And that's usually just an attempt to sell more people in the front end. But it actually creates lots of problems because what you do is you create an endless liability for a one time income. Right. So if I say, Hey, I'll personal training for free after six months. If you pay the first six months, it's like, well, sure.

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I got the first six months, but now the rest of my life, if I'm going to be a man of my word, I have to train this person. That's a terrible, unending liability. Even though in the beginning, it feels like it's a good idea. The other issue is that it actually drives less client success. So let me explain. If I know that I'm going to have to start paying more at a certain time in the future, I'm going to be more likely to take action faster. Right. If I know that I can do it whenever it means I do it never. So the idea is we want to have that sting at the end that they know about so that we can drive for that time to value. So you remember this little problem solution.

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Like I was talking about we got our problems. We got our solution. Well, the good news is is that you can actually use this to make more money because if you properly solve the first problem that they're presenting with with your solution, then you should also introduce the next problem. And here's the key point. You should know what that problem is better than your customer does. Why? Because you've done this a zillion times. And so they might think, Hey, once I lose weight on my problems are going to be gone. But that's not true. There's a lot of other things that they're going to have to do as a result of that. They're going to have loose skin. They're going to have to change their wardrobe.

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Now they want a six pack rather than losing weight. You're just going to introduce new problems. And so after you get someone down to their high school way, the next solution you might have for them would be our six pack program. Right. And so you lead them down to their ultimate goal. But if you said, Hey, when someone walks in the door, let me get you six pack. They're like, Dude, I'm just trying to get my high school way. And so you have to meet them where they're currently at. And so this is how great businesses continue to stay and profit from customers for years is by knowing, well, one, effectively solving the first problem you promised that you were going to solve. But then because you're so

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good at solving the first problem, actually creating the second most businesses don't solve the first problem and then don't give

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themselves the opportunity to solve the next one. And as a result, don't make nearly as much money as they could. Problem number three, no metric tracking. It seems like a common theme, doesn't it? And given the the sheet that I showed you earlier, two out of the three weren't

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basically not tracked or nonexistent, right? And honestly, it's more common than you think. You know what I can absolutely promise you is that if you don't

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measure a metric, you're not going to improve it. And so one of the beautiful things about once you start tracking the metrics is that then you

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can tie incentives to achieving this metrics. So both on an individual level and at a team level, because incentives is what's going to drive

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behavior. And so if you want your clients to have this milestone, which we can now track with metrics, then we can incentivize and put real

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resources behind making sure that they actually achieve them. And people are willing to take the extra step, go to the

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extra mile to make sure this happens because they get compensated for it. But if we don't have this up front, we can't do any of those things. So we went over three

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problems on their back end, right? They weren't delivering on promises. And we knew that because they had high turn, they didn't even really have a

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back end, and they had no metrics around success, right? You can predict how good someone is at whatever skill is based on the quality and the quantity of the

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data they track. And these guys track none of it. So we can kind of guess how good the back end was. And mind you, that's okay, right? Like we still chose to invest in this

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company because we saw opportunity, we saw the spirit of the founder, we saw the desire to get better. And that's all I really need is

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on some of his work ethic, they have the desire to continue to improve. Cool. We can help this stuff. Like that's why we do what we do. But if you're at like a

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hundred thousand dollars a year, five hundred thousand dollars a million dollars a year, like it's normal to not have all these pieces. That's why it takes time to build

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something great. I don't want this video to be taken as like, I need to stop what I'm doing and start doing this. This might not be the

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constraint of your business. But when you are there, you'll know what to do. All right. So let's look at our handy dandy data sheet. And now you know what's

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going on. You have some context. You know what the problems are. And you know what our current stats are with our weird before putting the comments below. What you think you would do to fix these

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problems in this business. I know you guys want to see the after numbers. And I'm going to show them to you in a moment. But before I do, I'm going to show you step by step, which

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solutions we did in what order so that we actually achieve this solution. Number one, improve customer onboarding. What we did was they didn't have an

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onboarding process for getting customers to start. They got sold and they got tossed into this big bucket of other customers. It's

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obviously not good. And so what we did was we created a choreographed onboarding process. And that was from the moment the sale closes, the

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moment they got off the phone all the way until they begin implementation. So here's a fun stat for you. People will make a lasting

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impression about your business within the first 24 hours after the transaction. Wild. So many people, maybe you watching this don't

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really have any good communication or process in the first 24 hours. You might be like, Oh, yeah, Sandra's going to touch base with you in four days.

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Dude, way too long from now. So if we sell someone, we want multiple points of communication, multiple points of open and closed loops. What I mean by that is saying, I'm going to make this promise.

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And then I keep this promise. I'm going to make this promise. I'm going to keep this promise. I'm going to get like four or five six promises. Open and

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fulfilled within the first 24 hours because they're like, man, these guys are on it. Even if something that you would do all at once, just take that one thing that has six checkpoints and make it six

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individual promises and fulfill all of them. There'll be so much more impressed with you. So we did a lot of things to fix the back end. And I had my team actually write down the things that we did in this

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business so that I could have all the up to date details for you. So we did four things just to improve this customer onboarding experience. So number one is that we created a sales and CS team

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synchronicity meeting. We just aligned both teams through the internal handoff process. We actually created a handoff process so that it's like, hey, before we go, I'm going to connect with Sandra.

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Sandra is going to be a point of contact. And as a way of life, I'm going to give you this thing that you can give to your team. Bam, bam. Book a meeting from a meeting. There

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should never be a client who's in no man's land. They should never be lost in the process. They should always know when the next

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communication and the next correspondence in terms of meeting is going to be the next thing we did was we started tracking all client goal.

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So on the sales call, we would ask client with their goal is we could understand why they really wanted to buy this thing. Then what we did was we passed it on the customer service team. And

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when they would hop on to the customer, they'd be like, Hey, Johnny told me that you're trying to retire your wife. Hey, Johnny told me you wanted to clean your house or whatever it was because you have a wedding coming up. And so you have this clear reason why that we reiterate to the customer. And they're like, wow, I didn't even have to tell this person. These guys are on it. Notice this recurring theme is that they're like, wow, these guys are tight. They go above and beyond. The third thing we did was reset.

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Expectations for the customer. So the sales team is going to set expectations obviously because they're selling. But now that they're on the other side of the paywall, you get to reset the

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expectation. And this should be restating and reemphasizing exactly what the sales person said. If you're a disconnector to disjointed between sales and CS, it creates a lot of dissonance.

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And people like, wait, this isn't what I signed up for. And that's what you don't want. So right now you get a lot of cold feet or backouts or people asking for refunds really early. It's usually because there's a disc connect between first transaction or first conversation and second conversation.

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Then after resetting the expectations, we would resell them on the purchase. And this is important because especially if it's a big purchase or it's an involved purchase, meaning a gym membership isn't a big purchase.

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But it's a big commitment for the customer. And so we want to resell them on their why and why it's going to be worth it. Tell them some stories of people just like them who are in the same position, who saw the outcome they ultimately want.

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And the fourth thing we did to improve the onboarding process is that we set the outline of steps to achieve the target. This is really important. As we're saying, listen, you want this thing.

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Let me tell you what the steps are going to look like. And once you outline them, we continue to engage the client throughout. And so that whole process became standardized. And that was the fourth process step that we used to improve the onboarding process. So you're like, wait a second, we have one problem. We have one fix. But this fix had four pieces to it. And the answer is yes, is that you're not going to fix churn with one thing. It's going to be many small things. It's going to be many golden babies, no silver bullets. Product fix number two.

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Over here. So we implemented a CRM and customer KPI tracking. So if you don't measure it, you can improve it. Or rather, you won't know even if you did. We have a lot of pros at HoldCo for acquisition.com. And so when we take a company on, we're like, listen, let's put all the systems in place and just install that stuff so we can prove all these metrics.

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It's one of the easiest ways that we just provide tons of value and grow the enterprise value of the business overall. So that's exactly what we did. My team gave me some notes to make sure I can give you more details on it.

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So we started tracking time to value. And we started tracking churn within the CRM automatically. And so this allowed us to in real time see how many customers are hitting their activation points and how many customers are leaving. There are two types of indicators in business. You got leading and lagging. All right, lagging indicators are like churn is that you don't fix churn.

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churn is a result. So you have to do things before the bad result happens to fix it. And so we know for someone doesn't show up to the gym for a month, that becomes a leading indicator that they're going to cancel.

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If someone doesn't log in an Netflix for a long period of time, the likelihood that the cancel goes up compared to somebody who logs in and watches every day.

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One of the biggest unlocks in a business, especially in a recurring revenue business is figuring out what are the leading indicators that get someone to leave or stay.

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And driving towards those leading indicators to make sure that they don't leave. And with the CRM, we were to automate customer satisfaction surveys to all customers in real time.

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So we could see how we were doing and segmented by customer service representative. And so we could see, okay, the teams at X, but Sandy ain't dragging her weight and she is sandbagging true to her name.

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So we have to give Sandy the boot or get Sandy up to snuff so that she doesn't drag the whole team down. But we wouldn't be able to do that unless we first were able to show Sandy.

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Hey, Sandy, here's a step that says that you are worse than everyone else, which means that you have to do something better or do something different than you earlier.

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Why don't you follow the process that everybody else is following and you'll probably be able to win too.

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Which segues almost perfectly into commissioning the team for customer success. Now a lot of people think that the only people who should get commissions are sales people.

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And I think that's silly because believe it or not, a lot more of your profit is driven from customer success.

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So we did was with the new CRM that we'd implemented. Notice how these things kind of happen in sequence, right? Like we had to hit the CRM once we had the CRM, then we had the metrics.

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Now once we had the metrics, we could say, hey, these are your metrics that you need to improve. And this is the target or range that we want your metric to be in.

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And then we can commission them weighted against how far into that range they were. So if you're at 100%, you're going to get 2x.

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If you're at 50%, you're going to get X. If you're at 0%, you're going to get 0x. That's the idea.

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With this implementation program, it was 16 weeks. And if people are getting to 12 weeks, then it would be weighted as 12 versus 16.

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So it's going to be weighted at 75%. I'm giving this as a simple example, but you can use this concept to commission anyone for any particular metric that you want to drive.

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So the whole idea is that once we had the few metrics that we knew drove success, we would get more people to become successful, which got more people to stay and pay longer.

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And then would naturally lead to the next problem, which is that we now had all these customers who were finishing and had WIP or willingness to pay and be sold more stuff.

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And so that's exactly what we did.

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Survey says, no back end, built back end. And so what we did was we actually did implement a wall at the end of the 16 weeks.

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So rather than saying it's 16 weeks and then after that, you just get this community, we said, you have to pay to stay.

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But we had driven all the other metrics to make sure that people were succeeding prior to the end of that.

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So we had people who were ready to move on and saying, hey, what's the next thing?

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And so what we did was we rolled this out really slowly because we didn't want to shock the system.

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And so right as soon as we rolled it out, we got 10% of customers to ascend into the paying option, which is great.

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And then as we tracked it over the next 60 days, we got up to 27% of people ascending into the paid option.

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This is pure created revenue on the back end for no real additional cost besides the cost of this commission that we had to add the customer service team and a one-time implementation of a CRM.

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So think about this on returns on capital.

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You'd have this back end that would continue to stack and stack over time.

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And that then translates to how much more you can market and sell in the front end because if your cost to require stays the same, but you double your LTV, you can sometimes market 10 times more, not just twice as much.

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So in this particular instance, because I told you the beginning that we added $6 million in enterprise value, there's two elements that really drove EV.

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One was when you add a recurring element to a business, it decreases the risk that revenue will disappear.

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So if there's recurring revenue, it will become more valuable.

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And so this back end was a recurring back end.

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The second way that it increased enterprise value is that not just changing the nature of the revenue, but also changing the amount of profit that we were making.

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Because that added revenue that we added to the back end per month ultimately became profit to the business on the bottom line.

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And so we have profit, which then gets multiplied by harm, ultimately because it's recurring.

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And so those two things together unlock even more enterprise value, which is why some of this incredibly boring stuff like customer success can make you a ton of money.

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So let's talk data.

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Boom! All right, so I told you before, we had our time to value. This should be time to value by the way.

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But it's okay. So we have time to value, we have our customer satisfaction, and we have ascension before we had 47 days, non-existent, and $0.

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So we did these things, and our time to value went from 47 days to survey says, ugly ass tear, 34 days.

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Our customer satisfaction went from non-existent because we weren't even tracking it to survey says, and we were able to do this because we had implemented our CRM.

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98%. So we actually had pretty happy customers overall, which is pretty cool. Now, if I were to piecemeal this out 98, I'm like, little sauce.

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What I'm guessing is, this is probably right after our really good choreographed onboarding, is that we did the customer satisfaction surveys.

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When you want to start parsing this out, you can start tracking them at week 0, week 2, week 4, week 8, week 12.

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Now, if you do that many surveys, people will start resenting the fact that you're asking surveys.

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It's really kind of a push pool of how able you are to collect the data and how you collect the data.

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So for example, if I were to get on a call, which I do have regularly scheduled and say, hey, by the way, on a scale from 110, how likely would you prefer a friend, they might give us a score.

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Now, that score might be different than if it was sent to them voluntarily.

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The other part to add even more mud to the water, the only people who choose to respond to customer satisfaction survey are typically either very happy or very sad, but you usually lose the middle.

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This is just all to say, it is a metric that you can track. It doesn't mean it's the end all be all.

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So I could try and like brag and say, look, 98% we've totally crushed it.

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I would suspect that this is because we put it right after a choreographed process, which is good.

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All this tells me is that people enjoyed the onboarding, which is better than not having one to begin with.

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And the last one was ascension, alright? And if you're like, wait, where did the $6 million to enterprise value come from?

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Grow a world, please?

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And from $0 to $140,000 in backhand, that we were able to create.

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So this is over 60 days, so it's two months, and this will continue to increase.

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But if we just split this in half and set $70,000 a month in profit that we were able to add to the business over the year that's just under a million bucks.

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And if you multiply that by six, which would probably be a standard enterprise value multiple for our company of this size, then we added about $6 million in enterprise value to the business.

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But we could not have done this one if we hadn't fixed all of these other things first.

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We improved the customer onboarding.

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We then implemented the CRM and created KPI tracking so that we could then commission the customer's success team on the activation points in the leading indicators that would also only drive success for the clients.

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And we had the customer satisfaction surveys that we could also implement to make sure that people and their reps in any ways, even from a behavioral standpoint, just them knowing that whenever they talk to somebody,

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they're going to get surveyed afterwards and you can segment it by rep.

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It just keeps people more honest. So they're more on their game to prepare for the calls.

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They say, Hey, I listened to your last call. I have these steps.

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I outlined how we're going to support you and how we're going to reverse engineer success.

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All of these things were only possible from these first three steps.

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And then when we make the next ask because we fulfilled our first promises, a certain percentage of those customers were willing to say yes.

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In the beginning was 10% and now it's 27% and it'll leave it more in the future as we continue to get more and get better processes in place to win.