You’re Not Behind: My System for Unf*cking Any Business

I'm going to explain how to un your business there are six problems that most businesses present with I own a portfolio of companies at acquisition. comom that do over $250 million a year and I see business owners at our headquarters all the time whether we're looking to invest in the business or they're just looking for help and so these six problems plague many many businesses so in this video I'll show You how to solve them the right path to take and one example of a portfolio company that we actually walk this through so number one

is serve too many avatars so what does that mean so if you don't know what an avatar is by the way an avatar is just like a ideal customer profile ICP there's different you know there's different language in different Industries what they call it but basically who are you trying to serve who's your customer and who's your daddy Anyways and so serve too many avatars basically means that you're just saying yes to anyone with money and not necessarily saying yes to only those people who you can deliver the most value to Andor who can pay

the prices that you want to charge and so this is fairly common especially when you're starting out call it you know sub $3 million a year uh in Revenue because in the beginning you're just saying yes anyone who's got money right you're just Saying oh he's got a credit card therefore he is qualified right and it that that can that can obviously create issues in the short term for you now the reason for that is because when you sell to too many different people you have too many different expectations that have to be set on

the front end so it makes your marketing less effective because you have to be everything to everyone which means you're nothing to no one uh on a on a sales perspective It's more difficult to train sales teams because they have to be trained on many different prospects and potentially many different versions of the product uh with different expectations being set for for each one of them that can be really complex on the third level like if that weren't enough like really hard marketing really hard sales the third piece is that your team that does delivery

then has to get trained on all these different types of delivery for All these different types of avatars and again the reason that people still keep doing this is because they always need to make payroll they always need to make pay make rent and they're afraid if they turn customers away who are less qualified that they're not going to be able to do it so by doing avoiding the short-term pain of actually being like you know what these are the customers that we do well with these are the ones we don't and we need to

get more of These uh and we're willing to have a short-term loss in order to really establish the business uh people just stay in this like everything to everyone land which sucks and so when I say narrow the front end I mean that the messaging and the lead magnets or the things that you offer people in your advertisements whether that's through outbound through content through paid ads or even through Affiliates if you're giving you give something away in order To get people's information you call them up you sell them whatever you want to make sure

that that's narrower if I say hey the hair industry here's a free report on the hair industry that's going to get anyone in the industry if I say how to get your first five uh hair you know cut and color clients I'm going to probably I might get some salon owners but I'll probably be skewed heavily towards hair stylists if I said how to fill up your hair salon and get all 10 Of your chairs filled within 30 days then I'm going to have a much I'm going to skew harder towards salon owners and so

the messaging the call out that you have in the ad if you say attention salon owners then you'll get Salon if you say attention hair stylist you'll get hair stylist if you say I'm going to help you fill your salon you'll get more salons like hope this makes sense but you get narrower in your messaging but here's the thing that everyone's afraid Of this is the big fear here if I get narrower in my messaging I'm going to get fewer leads yes and no if you get narrow when you're messaging you will have a higher

response rate in general from that particular segment and so sometimes the LTV toac ratio actually expands it gets even better when you because then you don't have the smaller one that you're diluting it down with and all of your focus and the um copy gets so much crisper for that person and They think this is what you want them to think when they see your ad oh this is just for me oh rather than like I might find some value here that's the difference yeah and so um because I talk a lot about marketing stuff

I I tend to have a lot of marketing agencies um that follow my stuff as well and if I were to invest in a marketing agency I would want one to be in a vertical I'd want it to be in a niche I'd want to buy an agency that only Services painters I Want to serve one that only Services plumbers not one that just says like if you run ads we do that um it's just much it's just it's just harder it's just it's too many things to too many people so the fix here is

you look at the LTV toac you see the one that has the greatest discrepancy relative to how much how big the market is and then you cut one of the front ends to the one that you get the best uh return on ads spend and then either you bridge to the Second or cut the second off so the second Horseman of our our business apocalypse is underpriced and so this is where you charge too little to be able to scale your business and so most people when they pick how much they're going to charge they

just look at the maret Marketplace they take the average and say I'm going to do a little bit more value for a little bit less money and that's how they pick but the thing that they don't know is that everyone's Broke that's the fun fact is that the average business owner makes very little money and um takes on a tremendous amount of risk in order to make very little money and so um what I want to walk you through is kind of a a three-phase plan for for getting out of this particular scenario okay and

so fundamentally you have two types of customers you've got the existing customers and you've got the new customers So we're actually going to solve these in kind of a reverse order so your existing customers are the ones that you already have these the people who pay you every month or they continue to come back whatever the second is new customers these are the people who are the leads right now who will eventually become customers in the future now when we actually want to make a pricing change we actually do it like this we want to

do new customers first and then Existing customers second and I'll explain the process and so when you do the new customers here's how it works you just raise your price that's it you just raise your price that's all you have to do is that when you get to the point on the script where you would normally say hey it's $1,000 you just say hey it's $1,500 or it's $2,000 and one of the things that people don't understand is that you will get more Nose but you can also make more money and so let me walk

you through this so let's say that we doubled our price and let's say our close rate before this was we were closing uh 30% of people that we get on the phone with okay now if we doubled our price and our Clos rate drop to 20% that's a great deal we should do that every day while still getting more NOS than we were before and this gets difficult for people to wrap their heads Around especially entrepreneurs because we and sales people like you want to get yeses and it hurts to get rejection but you just

have to let this be a math problem and then solve for it now let's say that you get on the front end and you make this change and if the market accepts that change they bear the higher cost or the higher price that you want to switch to that then gives you day to to go to your existing customer base now I'm not recommending that you just say Hey guys I just raised prices good luck that will surely piss a lot of people off so instead what we do is uh we have a we have

a process that you basically want to walk through so number one is you're going to send them an email saying that something big is going to come so you just give them a little bit of like brace yourself so you just like a little brace right uh big news coming tomorrow um just letting you know whatever B then in the email itself what You want to do is number one straight to it just let them know that you're going to be raising the prices number two then tell them that this is not because you're a

greedy bastard but because you want to fulfill promises and you see that you're no longer fulfilling the promises that you originally promised them and in order to reinvest in the business that's going to get them a b c benefit as a result of this investment because they don't care about you or Anything they just care about what what is it w ifm uh what's in it for me so you just have to explain to them that you're going to be taking this money you're going to be reinvesting in them and what they're going to get

as a result now uh before this we do the little reminder sorry I forgot to include this uh of value which is hey you've been with us for X period of time and we've made you this much money we've saved you this much time we've cut your Grass this many times we've gotten this you know you left at these reviews you want to demonstrate or remind them of the value they've already provided them then you tell them the bad news then you put that bad news in context of the promises that they're going to get

then and this is the this is where you soften the blow and so you soften the blow by saying hey I already raised the price on these [ __ ] these new guys who haven't been here for a while I've Already raised the price on them but because you're and you have been a loyal customer I'm going to give you a discount for the next 3 to six months on that original price and so the new price is effective today that's when you say that it's straight here but like slow down I'm going to give

you a discount equal to your current payment for the next 6 months and then after that point you will then go up to the regular price and that's as a reward or A thank you for being so loyal and so you give them the price raise but you soften the price raise with the discount and then people are much more comfortable having a discount disappear than a price go up and so also we're extending out when the Pain's going to happen and so it's like you give them the news today but then you're like oh

no no don't worry doesn't affect you today it's going to affect you in the future future use problem right and so That again this softens the blow and then finally you want to have a little PS statement that at the end you say hey by the way and this humanizes you you say hey by the way um if you're going to go homeless because of this this price increase if you're not be able to afford groceries if this is going to materially affect your business if you're B2B just please reach out to me I would

love to like get on the phone with you and we'll figure out something that's it and so Then the thing is is most people when they read that you're going to have one or two like most people read that be like h i get it if you're B2B they're like he's a business owner I get it whatever if it does materially affect their business then they can get on the phone and maybe you can extend it another 6 months or you can ratchet it up more slowly or you can peel off a piece of the

service that you offer them um so basically it's like you have price In terms and so it's like you can shift the terms to make the original price still just as profitable for you without having to deliver as much uh value per se to the customer and so this is kind of like this is a quick and dirty process um for walking through this now if you have like a community or something like that where you make this uh post and i' I've walked a lot of businesses through this uh when you make the post

just turn off comments and say Hey we want to keep this IRL so in real life so if you have any questions please reach out to me this is not going to be a gossip Fest just hit me up I'd love to talk to you all right and so um this is how we solve the underpriced problem and if you're curious about how this process works I actually have a letter inside of my gym launch Secrets book that walks gym owners how to walk through a price increase because many of them are underpriced because they're

like like I Did this for passion and they realize that they make no profit um and so and you can't expand your passion if you make no profit and so I've walked hundreds of of gyms through this and and you know countless other businesses but like I have walked through price raises on uh recurring customers which is significantly tougher than what just simply raising a price on customers that are onetime purchase if you're a onetime purchase one like don't even worry about It just raise the price you'll be fine and if you need to adjust

it later then just peel something off if you if you go too high and all of a sudden your Clos rate drops too too low that actually doesn't make sense just back down one and just give those guys something extra that's it so the third land ofy is overcompensation so this is kind of like the sister of underpricing and the reason this is so tough is that it's the Equal opposite instead of saying you're not pricing high enough it's saying I'm paying too much my cost of goods is too high and so if you have

physical products you might have less wber room in terms of your cost unless you have some sort of massive breaks around volume as you you know scale and you get a iies of scale um but with a service business and this is where it typically happens is you have a new founder who does some sort of rev share profit share Deal with what I would consider high-skilled labor and in so doing they're like yeah yeah I just do I just do go 5050 with my therapists or something like that but the therapists aren't responsible for

the overhead they're not responsible for the cost of requiring customers they're not responsible for retaining customers they don't do anything besides show up and like crack backs or whatever right and when you're in one of those situations It's tough and so the reason there's a lot of reasons it's tough but you actually kind of want to go through the same price raise concept but you're just doing it on the employee level and except it's a decrease instead of an increase and you just basically I'll walk through the same steps so it says existing so this

works out fine so existing employees and so you brace them and say hey I've got something serious I want to talk to you about and say listen We've worked together for this long period of time so this is reminding them of the value they pride in your life I made you this promise that I want to do this um but I'll get straight to it this business isn't profitable and I can't give you the career growth that I ultimately promised you in the beginning because we're never going to be able to expand and we can't

help more people and the mission that I sign signed you on was that we want to make you know this Clark County healthy and we can't do that because I made a mistake and that's on me but and Lea puts this joke in there which is um and uh and unfortunately I can't get fired because I'm the boss so I own the business I still have to be here and so what I want to do is kind of walk you through some of the changes that are going to come down the line so you're going

to skip this promises one because you're not getting more money to reinvest right You're going to go here which is um we have to make this change to compensation and you can give them obviously this is going to be a little bit more individual so here's my big disclaimer across the video is that if you have somebody that you have been with for a long time and they have a family kids whatever and you need to make this change then I suggest giving them a period of time and saying hey I'm going to put this

change in place in 3 months or 6 months and that Way if you need to look for alternative employment you can do that but that gives you some time now I would also have a way where I want you business owner to answer this question what would it take for them to be able to make the same amount of money that they're currently making because often times what has to happen is a resetting of expectations which is there probably is a way that they could make what they're currently Making just not doing what they're currently

doing and so if you can outline a plan for them which is hey if you do these three things I can get you back to here because this is how it generates enough Revenue in the business so that I can keep this promise to you originally and so basically they have three options option one they can just say I don't want to work more and I'm happy to stay here and that's fine cool option one option two um I'm going to Take the three to six months but I'm going to interview with some other people

fine option three uh I'm actually going to work more I'm going to take you up on this kind of changing the terms offer and I would like to keep my current current POS you know current compensation and I will take on this extra workload and so uh you can walk them through each of those paths uh but I will also say that you have to be prepared for the fact that some people Will leave and so if you recall what I said earlier you want to test this on new customers first right well you also

want to test this on new employees first if you put out a job you know job wreck on a job board and you have the new compensation structure in place go recruit somebody go bring someone in go have them do the same job as that other person and if you can attract the same level of talent that meets the standards that you have then you know that you Were mispriced you were overcompensated and then you can and then here you can point to precedent right the key is on both of these scenarios it's like you

try it with something new you make sure it works and then you can go back and say see I'm not being unreasonable and so from there this also is your insurance for the employees in the business because you say hey if this guy does leave I already hired one or two people so that I can slot them in And so again best case scenario you keep the best talent and you can bring somebody else on and save money on the new people or uh you have to shuffle the whole team out which unfortunately it sucks

it also happens and the alternative is you never grow your business and I want I want to be clear if this is almost my always my least favorite of the of the levers that I have to pull I would so much rather solve it by fixing the business model And say like is there a way where we can uh you know increase the price can we get more upsells can we you know do something something like that but where this really gets tough is when you're giving percentages of Revenue because you can't business model fix

it because if you go make if you go fix the pricing and fix the up so the person is just getting basically a free raise for no value provided that's where it gets tough so it's less likely when you have Someone who's on maybe a salary or someone who's hourly uh that you have to go through this it's just in my experience it's usually when someone is giving someone some sort of Revenue share or profit share on not the whole business and I mean sometimes worst case it's the whole business um but even just like

the revenue that they're maybe just delivering on but they're not accountable for any of the other costs associated with it and so that's just Like kind of big red flag especially if you're starting out of business I wouldn't recommend doing that um unless this is like they're a partner in the business and it's an equity deal which is just different and also the other exclusion here and this is why you know generic advice is tough um if you have like a brick and mortar location for example having a manager who's getting 10% of profit or

something like that if it's on bottom line then that person's Incentivized it's fine it's again it's where when when you're taking it off top top line how much sales you get independent of costs that's where it gets tricky I think the reason that so many business struggle with compensation is one just like pricing they just kind of like look around and then just like charge the average um which is not a good way to set up compensation the second is that when you are a smaller business the percentage Revenue that Each additional hire is is

a huge percentage of the money of your net profit they say your biggest expenses walk on two feet so let's say that you're a business that makes $1 million per year which is great right now let's say you run 25% margins okay so that means that you're making $250,000 per year after all your expenses all right now let's say that you want to hire one employee for $100,000 a year all of a sudden you go From $ 250 to 150 in terms of net income and so this one hire takes up 40% of the profit

of your business and so the reason that overhead walks on two legs is that in the beginning your margin for error on hiring because it's one of the most expensive things you can do is very small think about it like this if you were to go sign up for a software for $100,000 a year you would Google consumer affairs you look at every single review you get like seven Different demos to make sure that it did exactly what you want but then you hire this person after one conversation you had at lunch because a friend

of yours made the introduction it's dumb and so you got to be extra careful especially when you're starting out and what hires you're bringing in and what the true output of increasing profit and bottom line is and so let me put this in one more context for you this person to pay for themselves is going to have to Generate $400,000 per year if your margin stay the same just to cover the $100,000 that they cost you and so if you can't see a clear line to how they're going to add $400,000 in Revenue to the

business so that after your 25% margins you have the 100,000 that's just break even and this is why so many people get stuck yeah and the brutal the brutal truth is uh typically during 1 to three million in Revenue uh we you know Leila and I refer to that as The swamp and it's a swamp because you need to be able to hire that $100,000 your employee but you can't afford to and so you basically have two options you either need to basically kill your profit and bet on the fact that this person's be able

to generate that Revenue so they can make up for themselves in growth which realistically means that they should replace almost all the time that you're currently spending on the business so that you can Then go rainmate go out there and go hunt and bring more business in or you have to just do that and work two jobs you have to work your current job and the next job and so you basically work overtime and so the first version of this uh you make no money and you bet on the person the second version you stretch

yourself thin to be able to create the profit extra so that you can slide that person in without risking the biscuit so number four is Overextension which is AKA The Woman in the red dress and so I use this is probably my most used analogy that I have in all the business content I have which is if you're new to the channel if you've seen The Matrix there's a training program where Neo the main character is getting trained on what the Matrix is and so he's walking through and he's walking with Morpheus who's the the

guide and he says um were you listening to me or were you looking At the woman in the red dress and he turns around and there's uh he says so look again and so as soon as you looks back at this beautiful woman in the red dress who walked past him while he's going through this training program and not paying attention he looks back and there's a gun point in his face and then morphe says freeze and so he freezes the program he didn't know that he was in a simulation he says if you're not

one of us you're one of them and those are Agents and so women in the redress look attractive they distract you from the main thing but if if if if it's not one of you if it's not the core business it's something that's been sent to destroy you and so I am so adamant about this particular one because me as an entrepreneur of the of the six that I'm going to go through it's the one that I have struggled the most with um I have I have made so many mistakes with overextension my eyes being

bigger than My stomach and I'm 13 14 years into entrepreneurship now and I I honestly feel like I'm still just learning this lesson and so I I share this with you as a as a cautionary tale because you can always especially if you're good at sales you're good at promoting you can sell yourself and you can sell your team on why this time it's different on why it's not a shiny object and why it's such an opportunity and so I want to I want to give you this little lesson that Leela gave me that I

just continue to think about over and over again if you look at the things in your business that you want to invest in the things that you stress your team out over are they missed opportunities are they things that you think you should be doing but you aren't or are they problems are they things that you that you've promised but you're not delivering as well as you should have and if you want to have uh a great framework around this which I will Give to you is you will grow bigger by getting better you will

not grow bigger by choosing to get bigger when you choose to get bigger you will get bloated and so you grow through Improvement I have this this Frame that I've just been working on that's probably I'm make a whole podcast about it but I'll give you the the the quick and dirty if you want to make something valuable fundamentally you have the promise or the claim that you have so You say hey I'm going to help you with XYZ if people say I want that that is all you need you now have a valuable claim

all right everything after this point is removing friction and so you have to think what are the things that make this suck delay makes this suck effort that they now have to do this is new things they have to do that they don't want to do as a result of the purchase sacrifice what are the things that they have to stop doing that they Wish they could keep doing as a result of the purchase risk which is what risk do I now have to incur so B2B for example if you have to start spending money

on ads that's a new risk that you have to incur if you start with an agency on top of the agency itself if you have a a travel uh membership where people go to houses it's like well they now have to travel for flights they have to spend money on airfare which is not core to that membership but it's Additional risk and the last one which is still technically under risk but I like to pull it out is inconsistency so if you're thinking about okay if I said I can get you this this thing this

outcome all the things that make it suck are the delay the effort the sacrifice the risk and the inconsistent sometimes it works sometimes it doesn't work my Wi-Fi is spotty my like what makes you hate your cell phone the most if 95% of the time your cell phone worked and 5% It didn't you would hate your cell phone you would literally hate it if one out of 20 times it wasn't working you check your phone 20 times an hour if once an hour your phone didn't work you would want to throw it against the wall

and so a phone is an amazing product imagine all the things we can do but just having that little 5% inconsistency and the business owner of the phone's like what are they talking about this thing does the internet it does this it does that But just one out of 20 times you want to kill somebody and so the Charlie Monger had this quote which I love which is the new business is sitting on your desk in front of you it's the work in front of you that's where the next customer comes from and so I

have I have shifted my focus as an entrepreneur from what are these opportunities that I think I'm missing out on two how do I just make the thing that I currently have better and it's so painful because It's not fun everything new is exciting it's the woman in the red dress she walks by she gets all your attention and the thing is is that it's because you don't know her backstory you don't know the crazy ex-boyfriend you don't know that she has chlamydia you don't know all of these other things but everything looks good when

it's at a nightclub and it's kind of dark and you're a little bit buzzed right but the next morning you're like oh my God there's some crazy Boyfriend knocking on the door she's actually not single and oh my God why is it burned when I pee and you've got all these other issues that come with it because you didn't know and so you have uninformed optimism when you're looking at missed opportunities you have rosecolor glasses because all you see now are the problems in your business and you're like this thing would solve all my problems

this girl is the dream girl I had it all wrong but it's not and I'm telling you I've been so deceived by this girl so many times which is why I'm making this is that you just have to keep looking and be like maybe the reason that business isn't growing is because I'm just not good enough is that it's taking too long for my people to get results it's too much work for them it's too much sa they have to stop doing the stuff they like it's too risky for them to incur this and I'm

not consistent and if you use this as like What are all the things that are that are fall into these buckets and what you do is you make your list one by one and you go to your team and you say all right these are all the things that are messed up about our product let's solve number one and we're going to keep on number one until we solve it and once we solve number one we're going to go to number two and so if you're curious about what the iPhone is the iPhone is what's

left after you remove Everything that sucks from a phone and so you think about Steve Jobs in creating valuable products it's very difficult to know what is value but it's very easy to know what's a problem and when you remove all problems what you're left with is value fifth problem that [ __ ] small business owners and this is a big one all right so if you're like more than one business isn't that the woman in the red dress the answer is yes so everything I just said applies to That one overextension is what I

need to actually cover so overextension is where you grow for the sake of growing sake and so that's when you have one location and then you think oh okay I finally have this one going I'm going to open a second location but as soon as you open your second location all of a sudden the profit from your first location drops and so then what happens is now you're doing twice the amount of work as you were doing before but you're making the Same amount of money and then you think okay well now this is the

model this is where this is the this is stasis so I'm open a third location and so then you open a third location and both of your first two locations go down just a little bit more and so now you're working at three locations doing three times the work but now you make zero dollar in profit and anytime you've unexpected expense it comes out of your pocket and so you're like how did I get Here you got here because of overextension and so overextension is actually as a two-prong problem number one is is entrepreneurs have

arbitrary timelines so and I so funny I talked to a lot and I asked them what their goals are and often times the you know they the guys who are at uh you know 10K month say they want to get to 30 guys at 30 say they want to get to 100 guys at 100 say they want to get to 200 guys at you know 200 say they want to get to a Million whatever right everybody just just does whatever the next Notch is and so what's interesting is that although that is a is a

it's a noble goal there's nothing wrong with making more money all for it is that you want to be good enough to earn the growth more than say I will demand the growth by just forcing more Revenue through the business by just adding [ __ ] on and this can either be through adding products that you shouldn't be selling or adding Service lines that you don't need to or in the brick and mortar example starting to add locations before you're ready now if you're like well how do I know I'm ready so the litmus test

that I have I'll give you the brick-and mortar one but you can translate it uh pretty much in any business is that the business has to go for six months without you and it has to maintain or grow in that period of time and so a lot of people think especially If you're a smaller business owner and you're getting to this point where you're like oh I'm starting to grow is because you remove yourself from delivery and maybe sales and you're like my business makes money without me you've just never been a manager or director

or an operator before but you probably work almost every hour of every day and somehow you're not selling and you're also not delivering then what are you doing all day you're absolutely Working you're just in a higher leverage job and so to think that oh this business runs without me well no because if you're not there it goes to [ __ ] it just the customers you're no longer customer facing doesn't mean that you don't work anymore like imagine imagine what a big Fortune 100 company that all of a sudden the entire seae leaves and

says oh well this business runs without me it would very quickly crater because no one is setting the objectives no One's setting priorities no one's driving accountability throughout the organizations no one's aligning resources to getting outcomes and so of course what you do is still important and of course what you're doing is still work and so the trade that I I give I walk people through this uh emotionally I say this so if you want your location to work right and you want to pass this liit test here's the first and easy one go on

vacation for two to four weeks and Just say I'm turning my phone off okay that's that's level one test level two test is that after someone passes level one you go to the manager of your location or whatever and you say hey I'm going to give you the opportunity to be a co-owner in this business okay over the next however many years uh you're going to get 2% a year for the next five years up to 10% cool and I'll give you the profit share now and you can get the equity later whatever I'm not

going to Get in the deal structure but you say here's the deal you get this profit this phone doesn't ring that's the trade and so let's role play it a pipe bursts what do you do if your first inclination is call me that's not the deal what do you think I'm going to do I'm going to call a plumber and that's what you should do and so I have a a mentor uh my godfather um who said this to me and I just love this so I called Him once out of the blue and um

he said what's wrong is everything okay that's how he answered the phone and I was like yeah everything's fine um he's like so it's not an emergency I was like no he's like then why are you calling me and so basically he's like if you said it's an emergency call 911 if it's not an emergency why are you calling me and so either way don't call me and so we were we were playing tongue and- cheek he's a great guy that's not the point but the Point is when you're having the discussion with somebody to

truly delegate you have to be able to give the control away otherwise you don't pass the test that's if you have a brick and mor location where you need to nail the model before you scale it if you have a call it service-based business then you want to get the economics of your core business working such that you do have a profit and so if you're not profitable and then you say oh I'll then add Something else on top in order to become profitable I don't think that's the right solution unless since day one you're

like oh I'm going to sell soda and burgers and sodas where I make my money that's a little bit different but if you need to sell something else in order to be profitable there's something wrong with your core business and you should just fix that rather than try to add more and more stuff to your already failing business and so if you're Curious like what's the solve to this overextension let me tell you what the solve is it's three letters w h o who typically you have a who problem if you want to do this

expansion you want to open the next location you want to do this new product line or service line you typically need to have a who who either owns that new thing while you can maintain the current thing or who can take over the current thing so that you can grow and take on the new thing but In either instance overextension occurs when you don't have a good enough who and then you decide to do it anyways and that's because of greed there's no like there's really no other there's really no other one or Envy because

you're competing with somebody else and you think that you just arbitrarily need to increase your increase how much revenue because it fills some hole inside of you which I'm all for Success filling that hole but uh At least do it well the amount of overextension I saw at gym launch is was is second to none we'd fix a gym and then literally like I had this happen lovely lady named um um was two months from closing her gym signs up for gym launch 30 days later she's got a full gym and in 90 days from

the time that she signed up which remember is two days from her shutting two two months away from her shutting her doors she then signs another lease for a second Location and I was like in what world did you think that was a good idea she's like well I'm already full it's like yeah but you you've just been full for the first time ever and you had to hire new trainers which aren't who you didn't train and you have all these backend processes you don't even know what your conversion on the back end is going

to be you don't even know your what your turn rates are you have no I'm it's I'm I'm going to give foreshadowing for the Next the next problem right um You have no insert next problem you have to get this stuff in place you have to stabilize the business and so a lot of people they they like they struggle struggle struggle they see one thing is success and they immediately think oh I'm I'm therefore I'm successful I'm 10 Xing and if you measure on a longer time Horizon you feed your ego in the short term

and you empty your bank account in the long term which brings us to drum Please uh big risk number six which is no this a big one wait for it no data daddy wait why is Daddy included I don't know you guys are weird but no data daddy is the problem this is the the thing that syncs the business and so let me I want to describe what it feels like when you don't have data if you were constantly confused if you don't know what you should do you typically don't have data you have no

tracking in place you don't know where your customers come From you don't know what your sales conversion rate is you don't know what percentage your customers stay after X period of time you don't know what your turn is you don't know what your gross margins are and so you're trying to make these decisions with no data and you feel like you're an idiot but you're not I can't make decisions without data no one can I mean you can you're just guessing and the thing is is that guessing is a pretty bad way of making Decisions

it basically states that rolling a dice is the most effective way to get an outcome and it certainly isn't if you have a goal and so I mean you will get an outcome it just probably won't be the one you want it's assuming Randomness is better than thought and so if your thoughts are so poor that Randomness is better then entrepreneurship is never going to work out for you anyways all right and so I bring this up just to say that if you Don't know what to do data first and the reason that entrepreneurs get

stuck here remember I talk about the rock in the hard play scenario is that they feel like they need to make more money they feel like they need to be making more profit they feel like they need to get more leads all of these things right and this feels non Revenue generating and so you think well I got to go get I got to go make this money uh and the short-term pain is oh I got to Go collect a bunch of stuff and like get get attribution in place I got to like have an

Excel sheet that like I got to get my team to like say how many people walked in today or how many clicks we got to the website or what our conversion rate is on our Pages well God that's going to take so much time but I need to do this rock in a hard place I can promise you you're never going to scale with that data it's never going to happen but you can absolutely maintain Your very very terrible existence for a very long period of time without any dat and you're always wondering what's going

on wondering when the next shoe's going to drop wondering where your next lead's going to come from and what's astonishing is when I had Al in the software company we had these T t-shirts that said data is dope um and data is dope because you'd be amazed at how intelligent people will perceive you to be based on the quality of your Decisions when you have high quality data because decisions tend to become very easy when you have data if you know that one Revenue stream generates 80% of your revenue and the other one's 20 and

it's 80% of your effort what do you do well obviously you do this one yeah but people don't do that why because they don't have the data to see that if you have one one channel where you're getting the most profitable and best customers from and You've got another one that you spend 80% of your time on and You' be like well obviously I'll put my attention where yeah but you don't know that and so this is the thing is is like you will look like a genius from the outside but you're just making Common

Sense decisions and so most of business growth is common sense the problem is that most people don't do the first and obvious thing of Common Sense which is collect Data track and so I I I used to tell this to the sales team and I actually used it from when I had weight loss customers I said if you don't track you don't care and it's just like one of the easy like you don't record your sales calls you don't care if you don't track what your Clos rates are you don't care if you don't track

what your profit is you don't care and so I'm going to I'm going to give you a term right now that I I want you to write down if you're uh If you're at home which is measurement as inter vention and so there's been countless studies done on this but I'll give the simple one which is in weight loss if you want to help someone lose weight you can truly tell them nothing besides just getting them to weigh themselves every day and when people weigh themselves every day they lose weight wild if you track your

profit every month guess what will happen your profit Will improve if you track your closeth rate and you weren't tracking it it will improve because you will be able to use common sense because you able to see oh when I did these on these sales calls my close rate went up because you track it and so if you want to improve any component of the business the first step is measure and so I can't it's I mean I'm embarrassed to say some of the size business businesses that I've seen $5 Million a year sometimes $10

million a year who barely have simple data and so if you're like well what data should I collect because there's so much data that's out there so let me answer that question you want to collect the pipeline and that goes from click to close all right this is the first pipeline that you need to track which is at every point of conversion I've got a you know what's my ctrr on my ads are my content how much track traffic am I Getting what's my opt-in rate what's my schedule rate what's my show rate what's my

offer rate what's my close rate what's my cash collected all of these those are all the metrics you track but that's one funnel you have another funnel that goes from close to resell which is okay now that I've closed somebody what's the likelihood that they buy again or Ascend into something else and so we're going to have what's our activation what's our Time to Value what's our what's churn what's what's grow gross profit per product line what are Ascension rates by cohort meaning what types of customers choose what types of products and so you want

to have like if you had to do one you do this one if you got two I would say do this one if you had to do three then I would start looking more front end in terms of channels like where are my leads coming from and so one of these is probably the problem In your business start tracking that one first and if if you have problems on all of these then track them all and that is the first objective because from there you can then actually improve it and tracking itself and to rewind

to the um to the to the irrational belief of well well I have to do this Revenue generating activity I can't take time to do this data getting the data May in and of itself already solved the problem for You because you actually started paying attention to it so as promised at the beginning those are the six Horsemen that plague businesses on a regular basis I want to then translate this into the real world by walking through a real example of a portfolio company uh over a year of the data of this specific business now

I'm only going to share the backend data because I did a different uh breakdown on a YouTube video of the frontend data Of this business that we turned around and so the first thing that we collected was profit so the profit of the business at the time before it's 5% that's a terrible five there we go 5% Revenue retention was around 2% might as well be zero and then you have ascensions which is what percentage of customers and these are interrelated obviously because if you ascend customers they're more likely to keep paying you by the

way Pro tip if You sell someone something else they are more likely to pay you uh and so they were getting zero to one per month and this was a company that was selling you know tens if not just under a 100 units a month so like this this business had um volume right so let's walk through what we did to unfuck this business so let's list out the problems and you'll recall that the problems will not manifest the way I described all right so this is be this will be how you can Merge the

reality with the theory uh behind the problems all right so the first thing is we got churn and to be clear this is team churn not customer turn this is employee turn so people were leaving second was no data that one's actually word for word the exact same thing as the front next is no Revenue retention so people weren't staying and paying a year later and then no ascensions people weren't buying again Again now originally you'd think maybe this product sucked um but we felt really confident that it didn't because the people who were buying

were happy with it and so we're like okay there's some sort of misconnect which is usually what I'm good at fixing so let's start with the employee turn so they had two issues that were big ones so number one is that they were actually the reverse of the other situation they were actually Underpaying and because they were underpaying they couldn't get good calent into the business and I'll say often times this is more common than the undercompensation issue that I referenced earlier it's just that this one's easy to fix the overcompensation problem is significantly harder

because you got to pull something back that was once there and so what happens is when you underpay people one is you're going to get underqualified people and if you Do get qualified people they'll often just take side work or second jobs in order to make a full income for themselves and then you really have half of an employee and so uh not ideal and so both of those situations that occurred within the specific business and the other problem with this underpayment is that they had a poor leader and so they had this was specifically

over the delivery department and so that poor leader uh Ended up Believe It or Not uh trying to push the entire department against the founder uh and pit them against them and almost blew up the entire business and so we would consider this an existential risk so those were the problems let's talk about the solutions so number one is we hired a new uh CS leader unsurprisingly somebody who's more experienced that didn't hate the founder you'd be amazed at what happens when you take out people who hate the founder and Hate the business and it

turns out that businesses grow better when the people don't hate them who work there um the second thing we did and this is in lock step with what we're just saying is we actually fired 90% of the Baseline team and that was because we had hired the wrong people um and they were those basically cop was too low it attracted the wrong people those people were bad and we didn't think we could upskill them and it basically wasn't worth the Resources we'd have to deploy in order to fix it and so it's like hey it

would be faster for us to just restart and reboot this department number three is that with a reboot we hired super aggressively uh to backfill aggro hiring having a good CS leader requires a number of things so this type of person tends to be more operational focused they're good with details they're good at remembering things um they love customers and their Focus is on value creation and so the opposite of that is if your head of Cs blames customer customers on a consistent basis complaining is not a strategy nor is blaming customers because neither of

those make you better and basically taking zero accountability for customer outcomes and typically they are the type of people who also blame team for a lack of outcomes as well and so basically you've just got a big victim like a true CS leader is a leader They are accountable they hold themselves accountable they hold the team accountable and ultimately they want to deliver value and that's all you want someone who's customer obsessed who like when you're about to say hey I think we should do this thing they're an advocate for the customer on now obviously

not to the degree that they're like hey we should go out of business give everything away for free no but you should have somebody Who's got a heart for that and more is aligned with the idea that hey if these guys like if we can get them to pay more we can give them more even more value because they believe in the product and they believe in the company now a good Telltale sign of a CS leader is that they're they're immediately willing to jump in roll their sleeves up and talk to customers not to

say that's their full-time job or that they're going to do that like they're going to be taking CS calls as their main thing but especially if you're going to try and turn around a department and sometimes this is you you got to hop in there you got to talk to your customers so you can understand what's going on right and so you know Steve Jobs like the best entrepreneurs in the world still always do this you're never too big to talk to your customers so the next thing is is after we hired the new CS

leader he did an assessment of the team and saw that The majority of them were lacking skills and he determined that it would not be worth the resources to try and train these people now he didn't then say great now let's fire them all and screw the business that wasn't actually what happened so think about it like this um let's say you've got a pot right with water and this water is really diluted so it's empty right so what he did was he said hey I'm going to add more green dye into here and when

I add That green dye I'm going to have like a light green Hue and so he brought in some good people at new and better compensation who had more experience doing doing this particular CS role that was a better fit for this business and now we had some good people and some bad people but the good people were so clearly the ones who were driving the outcome willing to work harder willing to roll up their sleev cared about the customers that one of two things Happened a lot of these uh empty empty water the diluted

water uh exited voluntarily they said you know what this isn't for me anymore I don't want to work this much blah blah blah blah blah and then what ended up happening is that long term the entirety of the team basically became became these new people that we got in and so because of that we're able to shift the entire concentration of the team without disrupting the business and and to be Clear that means for a short period we had to pay two teams we had to pay the old team that sucked and the new team

that was good who would then jump in and then the bad team which we already knew were bad were happy to slack a little bit more and so then it's basically what what a lot of employees don't realize is that they think that if someone else comes in and makes their job option leete it means that they're getting a free check but what it really is it's The warning sign that you're on the way out the door you just don't know it someone's covering for you before you get fired and so the next question that

might naturally come up is like well shoot how did they hire aggressively so in terms of ordering probably is three and then two so apologies there in terms of the sequence of my little notes here um but in terms of hiring aggressively number one is we increased comp so we paid people better and so what do you Know more people responded to the job post responded to the reach outs um we looked for csms with experience so these were people who had already done a job like this at a company of this size before for

this type of product crazy crazy and we were looking for three plus years for this particular um for this particular business and the third thing that we did was we increased Benny's not Benjamin's uh but benefits all right so we gave them uh pay time off and we Added you know full compensation benefits on top of uh the salary and the money you know the cial compensation and so basically we just made an irresistible offer a grand slam offer if you will but to higher employees and so if you are struggling right now to fill

up a new team or you have a constraint in the business you're like I need to hire new sales guys or I need to have more CS or I need to have more whatever right and you're not getting a lot of Lead gen you just got to look at your offer you got to look at the you got to look at like an ad it's like what's the headline what's the what's the comp what's the you know is it remote or in person is it full-time is it parttime what are the working hours uh what

are the benefits what are the expect ations and you have to make sure that it's reasonable if you asking for 10 years of experience and you're starting somebody's salary at at 50k it's Probably unlikely that like for almost any role it's really unlikely that you're going to get somebody and so you need to make sure that you're matching the requirements to the compensation a good question that will come up around CS or customer success or customer service is do you compensate them around ascensions or renewals um it really depends on the business and so if

there's a call it a sale that's involved uh where they have to get on the phone And like sell a customer into it there's typically going to be some sort of compensation there if it's something that happens more automatically in the background they might have a percentage of a book of business I generally don't like that um I've noticed that people tend to get a little bit complacent uh when they just have like recurring Revenue that they're not really responsible for and so um if there's if it's more sales heavy then typically There will be

a commission if it's less sales heavy I would advise against it so the first problem that we saw was Employee turn so let's check that puppy so now let's move on to no data no data daddy zero data for me to tell you all the data they didn't know I mean there's unlimited amounts of data that they could potentially collect but I'll just give you some of the The Hot List all right so this is just directly from my notes so they didn't know what their Engagement rates were they didn't have any customer satisfaction or

NPS scores they didn't even know the date that customers were starting um they didn't have throughput on the funnel uh in terms of what closers are doing well they didn't so they didn't have closed rates by closer um they didn't even have a grand new le like to the week um customer segments were not existent as in we didn't see like what types of customers are buying what types aren't Um we didn't know what our refund rates were uh we didn't know what payment plans looked like in terms of managing cash flow in the business

like we didn't know what churn was we didn't know what Ascension rates were we didn't know what the time to Value was we didn't know what activation points were like I could keep going they basically they didn't didn't know a lot about about their own business you'd be amazed at how easy some of the things that you can do are Once you see what the problems are because the thing is that the data will scream at you it will become patently obvious like if you're not making money the data will will obviously show you why

you're not making the first thing we did was we wanted to fix the front end stats around sales because remember I said click the close you got to get that and so I talked about that at more length in a different video but we figured out close rates in General close Rates by closer close rates by time period um and by cohort all right so we got that stuff off the bat done now the second set of problems with this is more backend related uh was related to customer you know CS right and so um

number one is we looked at time to Value like was there some sort of Milestone that we could help them achieve sooner in their customer Journey the second was tto which is time to onboarding okay so how quickly from the time someone Purchases until they're live or active this is one of the easiest ways that you can drive value like how are these different well sometimes the time to Value happens after the onboarding sometimes it happens during the onboarding sometimes you have multiple points of value but this one obviously has to happen as fast as

humanly possible so time to value is going to be typically an activation point and so an activation point is some sort of Activity that occurs that is a high correlation with them staying or paying later and so if you're like well how do I know that the easiest way to do that is look at the people who are currently staying in paying and look at what they did earlier and then try and reverse engineer that outcome for everyone and so for example if you find out that uh you know customers who join a gym uh

and attend three workouts a week for their first uh actually I think Orange Theory They actually figured out their activation point which was five workouts in the first month and so when they found out that one metric was that if someone worked out five times in the first month the likely that they'd stay for the next like eight was significantly higher and so then all of their onboarding process was then geared towards driving that activation point and by the way this is most of what onboarding is and this is why data so Important if you

knew for example that every customer who gets their first you know one sale so for gym launch like we knew that if somebody got a $22,000 sale at a gym within their first seven days they were worth three times more to us as as a business owner and so what do you think we did we did everything in our power to get the $2,000 sale in the first seven days that's what we did and so it becomes You' be like well what do you do it's like well once you have the Data it becomes pretty

obvious what you do right you try and do more of that thing that worked and so this is this is where like the the the extra brain cell the second brain cell has to turn on and this is where you say what are all my successful customers look like what did they do and then how do I get all my customers to do that on purpose instead of on accident if you're very sales-oriented or promotional founder like if I if you take one thing from This whole video it's that you want to create a really

beautiful onboarding process like if you had only one thing to take away it would be onboarding like you fix turn through onboarding and a lot of this is expectation setting relative to goals and so sales hands off a customer to a customer success and in the onboarding you want to restate their goals multiple times so that they know that you know what their goals are and then you tie their goals to the actions Or activities that you want them to take which typically should be aligned with the time to value and so think about it

like this in General most businesses that are well-designed should have their value creation which is what they get paid for aligned with the customer value creation and so you in a very beautiful way have an aligned incentive with the customer if they want to make money because you're B2B then you want to make them money too and you should clearly State in order for us to have you hit this goal you need to do these five things and when you do these five things it increases the likely that this money occurs and if this money

occurs it means that it's more likely that you pay me and that you stay happy so the next thing that we looked at the next thing that we had to start tracking was customer engagement and so customer engagement is in a software setting it would be usage which is you know how Frequently are people commenting inside of the group are they attending calls are they attending their check-ins with their reps are there Milestones or achievements um all of these things are things that indicate engagement and so the shorthand for customer engagement is use are they

using it because I mean think about the logical extreme if someone doesn't use anything they're going to turn and if someone uses it all the time it's less likely they're going To turn and so figuring out what the activation point is is looking at all of the things people use and figuring out what few things they use that have the highest correlation with staying and so if you have 10 things that customers could potentially do in the business there might be three of them that are the ones that are the core value creators which then

have the highest correlate with them actually staying long term and I'll give you a little a Little a little Advanced business tip for you A lot of times if you want to improve the quality of a product product or service it actually comes from deletion not addition and so as humans we often want to overd deliver in value and so we think oh we need to add more stuff but the number one reason that people cancel or turn across across Industries is overwhelm there's too much stuff to do and so the result of that is

what are all of the things that we can Remove and so I'll give you a very tactical way to do this I want you to write out a list of every single feature that you have in your services now when you actually do this you'll realize that you have a lot more things that you give people than you realize you probably have downloads you might have calls you might have events you might have uh you might have some sort of chat support you might have all you also have the core deliverable you have all these

things That you do put a big list out and then ask them this magical question if I got rid of everything except one thing which would you want to keep and so you have that list below and when when people are forced to say like if you could only keep one thing what Would it be you will have a very clear idea of the things that drive the most value now you might you might initially think oh everyone's going to pick this just send the survey and you will be surprised some people stay for very

different reasons but it will give you a power ranking of one two and three that are the most valuable and then if you want to go to the 301 Advanced business move look at the one that was the lowest value and then remove it and don't tell People you remove it just remove it and see who complains and if no one complains congratulations you just got to make the same money for doing less and if people do complain look at who's complaining and are they the types of businesses or customers that you want to serve

and so sometimes you will get some complainers but they may be the worst customers that you've been planning on getting rid of anyways and you're like great let's get rid of them too why not And so um I'll give you a little story about this so I ran this survey uh at gym launch years ago and we had a lot of things that we were doing for our customers and one of them is that we had real-time tech support and so we had a 35 person team that did tech support for the gym owners because

it's one of the one of the biggest obstacles people kind of encounters they're not good with like how do I install pixel how do I make a landing page all that kind of stuff the Lowest one of the lowest ranked things was this tech support team and I after seeing it I was like oh my God this is a massive department so I interviewed a couple customers and they were like yeah I don't really care either way like that's not the the main the main value driver and so I deleted the department which is a

very nice way of saying that I released people to free free agency 35 it was terrible was honestly it was a horrible experience um um but here's What happened to our churn and our sales nothing they added no value and so Carl icon tells a story about this where he bought a company and there was an entire building in a state and I can't remember what state it was and it was like 11 stories of just this company just like one one huge you know division of this business and he said he he spent months

analyzing trying to figure out what anyone did there and he would go there and they would turn him six ways to Sunday and say all the work that they do was important and he was like I'm a pretty smart guy and I have no idea what you're doing and so he went to one of the factories and he asked one of the foremans he's like you know about these guys and he was like dude just get rid of them they don't do anything and so after months and months and months he decided to get rid

of the entire 11 floors he did he fired everyone and he said the weirdest thing happened nothing He said I didn't even get an email this was an entire a whole building full of people who actually did nothing and so the thing is is that we as entrepreneurs often times think to have to solve problems we add bodies and then bodies tend to multiply because other people tend to try and solve solutions by just saying I'll hire more people and this is where it gets even dumber is that one people hire people stupider than them

in general as a rule of thumb because they Feel like they're in control and they're not threatened which means that your organization over time just gets dumber and dumber and so you have to have controls in place to prevent that and number two so what happens is everyone delegates their workload to dumber and dumber people so it's like the director gets something from a CEO and then and says okay I'm just going to delegate that to the manager and then the manager gets in and says I'm going to delegate It to the Frontline employee and

then the Frontline employee says hey I need support because I can't do all this work and then hires someone new and then delegates it to them and so what was supposed to be an incredibly important thing just gets done by the most incompetent person in the business and that happens all the time and so to prevent against that consistently asking your customers where the value is being provided is an excellent way to Determine whether or not values being provided so the next thing that we started to track was cessat or so cat is customer satisfaction

uh CAD for short or NPS which is net promoter score so these are the two scores that uh acquisition. comom uses most frequently in terms of uh to determine uh how well you know product is delivering to its customers and um NPS is the less forgiving of the two and so I would weit rate that higher and so for those you Who don't know how NPS score works it's a uh it's a it's a negative 100 to a positive 100 score so it's not a 0 to 100 so Zero's in the middle and I think

the average company has like a -2 uh in terms of score just to give you context and so uh you ask people How likely are you to refer a friend to this business and uh basically the answers go 10 through you know one and anything that is a six or below is considered a negative one crazy someone gives you a Six it's a negative 1 seven and8 are both zeros and then only 9 and 10 are plus one and so in order to get a 100 that means every single one of the customers that you

survey has to rate you over an eight you cannot not get anyone who's even a seven like a seven would be a zero and so would it would detract from your 100 a six would be you'd have one of those plus ones would be counted against and so uh it's one of the most sensitive scores but because of That I think it's one of the most accurate um because it's such a hypothetical ideal it's so hard it's basically like to give you context apple has a 61 all right so it's a very very sensitive score

um and so like Chick-fil-A is a 58 just to give you a context here in terms of like some exceptional business is and how hard it is and this is why I like this score because you can kind of pump yourself up with customer satisfaction scores but NPS because it has the negatives and how it weights is a very good way to understand um how good you're actually doing the next one is Ascension rates so this is what percentage of customers who buy the first thing go to the second thing and you can do it

by two two metrics here you do qualified ascensions which is what percentage of customers who were qualified to ascend then ascended and what percentage of total customers um in toal Ascend this is more Valuable to understand how well you're doing this is more valuable to understand how the economics of the business work and so if you know that let's say uh you know 80% of customers who are qualified Ascend but you're only ascending 10% of customers then it means we might be selling too many unqualified customers or we might not be doing well enough on

our initial core product to get them to the point of being qualified and so having both of these metrics Gives you a a paired idea of a quantity and quality metric so the next one that we prioritized uh was was churn and you if you've been on this channel you should know what churn is by now but I will I'll I'll give you the quick and dirty so churn percentage is what percentage customers from last month are still here this month and so if I had 100 customers last month and I've got 95 of those

100 that are still here my turn is 5% now if I sold 10 more clients that Doesn't matter it's how many of the original customers I had last month are still here one month one month later now 5% may seem good to you but here's what's crazy if you want to see what percentage of customers you keep every year if you have 5% monthly turn you're going to lose over half of your customers every year which means you have to sell half the year just to break even on your growth very hard to out sell

bad turn Turn varies a lot by industry by the nature of the product and obviously the quality of the product like there's lower turn in alarm systems than there is in online groups right and so uh you know there's lower turn in you know internet providers there's there's a lot of industries that just have that are more prone to stickiness and they tend to be honestly uh products that work without the customer doing anything and so think about what what products are Like that so like Insurance Works without you doing anything your solar roof Works

without you doing anything your Wi-Fi works without you doing anything your your your cell phone carrier works without you doing anything and so they call this in the software word magical products it's like they you only notice when they're not working and so those are wonderful products to be able to build whenever you see those types of opportunities but for this Particular business it required work on behalf of the customer so it's naturally going to have higher turn uh but this was one of the big things that we had to be able to start tracking

because guess when you start tracking it it starts getting better if you want to use turn as a benchmark you can just Google uh industry Benchmark turn 4X um and you'll usually get some sort of stats that'll be decent at least it'll give you directional data um and Also just talking to competitors talking to other people you know trade conferences things like that can give you very good data of like oh you know what I have 5% ger but everyone's at 15 so I'm actually doing okay um now I don't care too much I want

to like just put this out there I don't care too much about everyone else does because like I just want to win and so if I'm like winning by a lot i' just still rather win by more um so the next one is uh and The last one was client goals and so this uh was important because so the next thing we tracked was was customer goals so this is a qualitative data point and this should be something that is one captured on the sales call it's also reminded or reiterated on the onboarding call it

should be something that's updated on a regular basis because client goals change and so we want to make sure that all of the people who are touching the customer weirdos um Know what the current goal of the customer is and so if you're doing a good job you might help them accomplish this goal so you might have to set another goal and so if you remember the whole point of of getting someone motivated to take any kind of action is you have to create some sort of deprivation between where they are and where they want

to be right so they want to be up here celebrating yay right and they're over here and they sad faces is That we just have to like as soon as they get happy be like no no no you should be sad even though we cut your turn from 10% to 5% you should be at two and a half percent right you just keep moving the goal post just like you do for yourself just do it for them so uh no Daya Daddy no we are actually not fatherless we indeed have a father father we have

father data so next we have uh basically no renewals we have no Revenue retention so if I looked at 100 Customers this year and I looked at 100 customers next year the likel that they' be the same people is zero no one no one is renewing so that's obviously an issue because think about like this if you have a business that you don't renew any customers here I'll I'll walk you through a visual example so let's say you've got two businesses all right and you've got you know year one year two and year three and

let's say at the end of year three both of these businesses Have 300 active customers okay now business one uh loses 100% of its customers every year that means that year one it sells 100 customers year two it has to sell 200 customers and then year three in order to have three 300 it has to sell all 300 that year so in order to scale that business you just have to scale acquisition you have to get more leads you have to get more salesman and you just have to keep scaling the front end Now let's

look at business 2 so business too and let's say that they sell 100 as well but they have 100% customer uh annual renewal so next year they sell plus 100 but they have 200 customers total and then the third year they have plus 100 but they have 300 customers total so both of these businesses have 300 customers three years later but which business would you rather have well I'll tell you which one I would rather have I would rather have this one Because I know that if I just keep doing this I'm just going to

keep being able to grow this business to grow this business I know that at year four in order to grow I'm going to lose all 300 of these and I got to sell 400 customers next year just just to grow a little bit just to grow by 25% and so this is why when you're building a business everybody's in a rush but being in a rush is what ensures that it takes much longer for you and so You you're you're here you're losing all your customers but you learned how to sell congratulations but by doing

that you never solve the main problem and then that problem that churn issue that Revenue retention issue will become a monster that in the beginning it's a little little nibble but then it just bigger and bigger and bigger and you don't want to feed that monster so the reason that they had no Revenue attention beyond the fact they didn't Even track it was that they had no script for how their customer interaction should should be they had no prioritization of customers overall the uh there these conversations were having at random not on any sort of

cadence ascensions were ad hoc meaning basically only if a customer reached out to them and said hey can I buy the other thing they're like oh yeah sure but there was no journey to drive people towards that that Outcome so this is what we did to fix it and so for the purpose of this I'm going to break renewals and ascensions into two different things renewals are they buy the same thing again ascensions are they buy something even either more quality or more quantity all right and so for the renewal process uh we did number

one we started tracking time to value and so crazy is if you actually provide more value to people faster and you track it they are happier the second Thing is that we contextualized uh conversation so um we had notes on every customer we installed a note system basically so that every time a rep would talk to a customer they had the history of the customer's past conversations and so one of the easiest ways to piss off a customer is to have them repeat themselves and so as I was alluding to earlier you want to think

about all the stuff that sucks about an experience and remove all the friction and so repeating Yourself would be friction and so if you want to have an exceptional experience just remove everything that sucks the third thing we did is we reframed the renewal in the context of their goals so basically we're like hey you want this big goal renewing is the way that you get there and so a lot of people didn't know that it sounds silly but like we didn't say hey your goal is this this gets you to your goal you should

buy it just as simple as that is and all Of these things build in each other so when you have the time to Value you know what you're driving everyone towards when you have the notes then you can talk to them and personalize the experience that they're having on a regular Cadence and then when we have the context and we know where we're driving them towards then we can speak in terms of their goals to get them to be more likely to renew and then finally here's the brilliant One we said when and where have

they renewed most frequently in the past and it turned out for this business that they would have these Live Events every so often and at the Live Events they had a huge amount of renewals that would happen and we said what if instead of having these happen on accident we had them happen on purpose instead of them happening randomly we had them happen regularly and so when we did that we got way more people to regularly Ascend by Driving them to the highest converting event that we had for renewals and so think about it instead

of saying like hey we're going to have a customer appreciation event once a year maybe you do one once a quarter and you actually choreograph the event a little bit so that you have a sales outcome and so survey says for Revenue retention huz that's what we did all right so for this particular business for Ascension so I just covered how we got every people who Were buying called six to 12 months of service to buy another six or 12 months of service the second part was can we get them to ascend to a higher

uh level of service for this business and so their Ascension process was just as disorganized Andor non-existent as the renewal process so there was no script there was no prioritization of customers that we thought these ones would be a good fit these ones wouldn't be a good fit it was random and and at the at the Point that we started decide to fix this all ascensions what 100% of ascensions came from only one closer who just happened to be a superstar closer and was just in touch with their Pipeline and so they would close somebody

and then they would just shoot him a random text six months later and be like hey uh you want to buy this next thing and that was how they were getting their ascensions and so here was the brilliant idea that we had now I've talked about This uh before but some people forget and some people need to be reminded which is that whenever you make a sale so let's assume this is the point of sale this is when you make your first transaction at this point there are four or five opportunities that you can have

to basically make ascensions occur so one is immediate so that's like 24 hours you just immediately upsell them that does work the next is um at some sort of time to Value so some immediate quick Value Point the next is the halfway point so just arbitrarily if you have some sort of defin in thing for whatever reason halfway feels like a great time for people to do it and so you can to send them the halfway point the next is if you have some big milestone that they achieve so if you have some more aspirational

so think this is like uh you get a first first win and this is a big win so this is a first win this is a big W all right so these are kind of Like two different they're somewhat similar but uh different in same in spirit different in practicality and then finally here you have your last chance which is usually not when you want to do this and believe it or not most people try and get all of their ascensions here which is why they don't make them and so I kind of think about

um ascensions and renewals like this open loop okay and so if we have this Loop that's see if I can draw this not Ugly so if we have this open loop that opens as soon as you you make a purchase or you make a sale I have this weird belief that people basically close this Loop and it's closing as they get to the end of something and so we want to sell them when it's most open and so we basically want to keep the party going rather than they're finish and then they're like okay now

I'm making another purchasing decision you want them to be in the middle of it and be like no we're Just going to kick it out we're just keep it keep it going and this is why I think we've been just exceptionally good at um ascensions across all the companies I've had as and I learned this from weight loss when I had sixe challenges I upsold people at 24 hours and I upsold people at the halfway and I upsold people at the at the end so I had three upsell points in six weeks and so if

you think you're you're making like again you're not hard closing you're Just making offers and you incentivize the person to take the next step as long as is align with their goal they'll take it so the number one thing that we did was that we aligned to the journey so we actually created customer journey and said at these points these trigger closing calls so if you say that then it's like okay well how do you make sure that that actually happens so I told you earlier that we typically don't do like uh commissions unless it's

Sales-oriented now this is a sales-oriented business and so what we did with this business is we actually split it so the csms got money for sets so they would identify a customer who had reached one of these points because they were the ones who were in touch with the customers that makes sense right and so they say hey I think you should talk to Shawn Shawn can definitely get you set up right and so if they did a good pass off they got Money just for the intro then obviously the closers would get commissions on

the sales right and so the result of both of those things is that we went from 0 to one per month happening randomly to 5 to six per month so we five to 6X the backend ascensions by simply saying here's the journey these are the Milestones when these Milestones occur pass them to these guys that's it not complicated but guess how you never find out that this can happen you have no Data because you have no start dates you don't know where people are at you have know one who's tracked you have no goals that

are being reset and so this is why data gives you the opportunities data opens the doors for these other things to occur afterwards and so for the revenue of this business so is a higher ticket B2B business uh this added an extra $2 million in Revenue to the business which drops almost just disproportionately to bottom line so Added $2 million in IA just from doing these things and so I don't know about you but I think we Kaz got our ascensions so we conquered the the six things that get people screwed now this this business

didn't have all six but it had a few of them and let's see what actually happened in terms of the after effect on the business so the profit of this business went from 5% to 30% so he 6X woohoo the second thing we did is we went from having no dat to having data Which I don't even have as a line here but we had it the next thing is we went from revenue attention being at 2% to 30% also ironically 30 is our magic number for this business and then for this business uh for

ascensions we went from 0 to1 to 5 to six per month so we had a 6X here 6X here and by the way there's a reason that those are related let me walk you through some of the big takeaways so that you can apply this to your business so number one they had the Wrong who on the back end right so had a cancerous leader who was there only for status and didn't care about the customers at all and just did it did the job because they wanted a paycheck and wanted to make their life

as easy as possible and only complained and had a victim mindset so number one if you have those people in your business just get them out as fast as possible like the best day to get rid of cancer is today number Two the profit is disproportionately made on the back end and I think that the reason the businesses that I've had you know over the years and continue to have are typically disproportionately profitable compared to other businesses in the industry is that we focus so hard on the back I typically build businesses back to front

I try and solve how do we make this thing so unbelievably profitable so that I can then outspend everybody else on the acquisition and That's fundamentally how I approach most businesses at least once they get to scale and so this business you saw the difference that that occurred by fixing the back end with renewals and ascensions was a 6X increase in profit now mind you they had had some tough times which is why we got involved with this particular business because we thought that there was a big area of opportunity and we obviously proved that

out pretty quickly I don't think this Took more than 90 days it was not a not a big change um but the stats I think I reported year to year but these were uh these were relatively fast changes that you can make in a business the next thing is that if you have no data you will never improve anything I think I beat this dead horse but if you don't know what to do or you don't know how to grow your business it's because you don't know because you don't have data and so the First

and most obvious thing that you have to get in place is tracking the next one is that the founder typically has to jump in you have to be comfortable getting your hands dirty you have to be comfortable rolling your sleeves up and so that's both the new hire who comes in who's the leader and also the founder and so I think the founder got a little bit too far away from the business and I have this saying that I like which is you want to know Where the bodies are buried and so if you have

anybody who rolls into you inside of a business department and you say hey how are things going and the person's like ah things are good blah blah blah if you as the founder or even you if you're in an organization you're just a director or leader if you don't know where the problems are in every person's Department who's reporting to you or even any every individual who's reporting to you you're too far away Because there's always bodies there's always problems and if you don't know what they are you're being an effective leader and so that's

how I that's how I keep the the right amount of distance for the things that I'm directly involved in because we spent basically this whole you know quarter or two stabilizing the business driving up the profit margin making sure that we streamline this back end now we can actually start scaling it and so I'll Just say this as somebody who owns a portfolio of companies we spend as long as it takes to get this right sometimes it's 18 months sometimes it's sometimes it's six months s it's two years and it just takes what it takes

but once you like this is where a lot of Founders want to scale like it's getting over your skis right they overextend if this particular founder had spent you know 10 times the money on Advertising it would have been a calamitous event it would Have been horrible for the business because all it would have done was compounded a negative reputation because they didn't have any processes in place to get people great results and have a wonderful experience and so if if anything it's like you only Market to let people know about your stuff but if

your stuff sucks you only want to let as few people as possible no just to keep the lights on right and so like I had zero issue with you know our us ramping Down or just keeping stable on ad spend um to keep this business just afloat uh because you notice like the the the the profit margin was really small in the business but I was like that's fine I don't care about breaking even right now let's fix all this other stuff improve the bucket fix all the holes then and now we can pour as

much as we want on the front end and so now we know with this business we have fixed costs that as we add even more customers that Margin will actually continue to expand and so fundamentally this is how we unfuck businesses and uh I hope the six that we uh that we outlined earlier you can identify uh maybe one or two of them that you're struggling with and if you are in that boat you at least you know how to fix them and so I just talked about how we fixed the back end of this

business but we also fixed the front end of this business and I went through a full breakdown of this was a business That sold via webinar uh to a sales team and so we optimized every part of that process on the front end which drove huge results for the business and so if you check that video out click