How I'd Pull Consulting Revenue Forward — Transcript

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1. 0:00I sell financial planning to people 55
2. 0:02and older. Last year we did 12 million
3. 0:05in revenue.
4. 0:06We would like to be at 100 million in
5. 0:08revenue in 4 years.
6. 0:09And what's stopping us is money,
7. 0:11specifically cash flow.
8. 0:13>> Okay. So, what are you doing to acquire
9. 0:15customers right now?
10. 0:16>> What's that?
11. 0:17>> How How are you acquiring customers
12. 0:18right now?
13. 0:18>> Uh YouTube and podcast.
14. 0:20YouTube and podcast.
15. 0:22>> Okay, so you have organic, so you're And
16. 0:23it's your podcast or you doing podcast
17. 0:25circuits?
18. 0:26>> Uh it's my podcast, my partner Ari's
19. 0:28podcast.
20. 0:28>> Okay. That works out. Um So, you guys
21. 0:31have organic following, you've got
22. 0:32listeners, you've got watchers, cool.
23. 0:34Um
24. 0:35why is cash flow limiting the business?
25. 0:39What's the model? You sell like 1% of
26. 0:41AUM or like what's the
27. 0:42>> 1% Yeah, carrying down from there, but
28. 0:44starting at 1%.
29. 0:45>> Okay.
30. 0:45>> Uh we grew from 30 team members to 64
31. 0:47last year. So, we're just reinvesting
32. 0:49all the profits back into
33. 0:51growing quickly to bring on more
34. 0:52clients.
35. 0:56>> How many clients you have?
36. 0:57>> About a thousand.
37. 1:00>> How many clients per uh per manager,
38. 1:02account manager?
39. 1:03>> Uh
40. 1:04no one's capped out yet because our V
41. 1:06advisors are new, but it'll probably cap
42. 1:07out around 125 to 125 or so.
43. 1:11>> What's the average assets under
44. 1:13management per
45. 1:14>> Two and a half million.
46. 1:15>> Okay. Um so, you said 125
47. 1:20So, what's that? 250 million is managed
48. 1:22per So, that's 250,000
49. 1:24>> 300 million or so would be the cap,
50. 1:25which is about 2 and a half million of
51. 1:27revenue
52. 1:28from that advisor.
53. 1:30>> That can't be right, that's 10%.
54. 1:32>> 300
55. 1:33>> right, my bad. I I carried an extra
56. 1:35zero. You're good. Um he's like, "I'm a
57. 1:37wealth advisor. I would know." You're
58. 1:38good.
59. 1:40So, okay, 2 and a half million per Okay,
60. 1:42so that I mean that that that math
61. 1:44maths. And it's just that they're all
62. 1:46under underutilized right now?
63. 1:48>> Um not underutilized, it's just we hire
64. 1:50a lot up front and it takes 6 to 8
65. 1:52months for that advisor to
66. 1:54payback on that advisor to essentially
67. 1:55break even. And so, we front-loaded so
68. 1:57much of that that
69. 1:59the answer's probably just maybe slow
70. 2:00down a little bit, but it's how do we
71. 2:01balance the opportunity that's in front
72. 2:02of us with we're turning away
73. 2:04more leads than we like to just because
74. 2:06of organic.
75. 2:07>> From organic.
76. 2:08>> Yeah.
77. 2:09>> So the the unit economic
78. 2:11economics all make a ton of sense. It's
79. 2:12just how much growth is too much growth
80. 2:15before we
81. 2:16>> Well, the nice thing is that this is
82. 2:17totally excel sheetable, which you
83. 2:18probably have already done.
84. 2:21And so you're probably right at
85. 2:22throttling at like the absolute fastest
86. 2:25you can grow in terms of hiring and
87. 2:26on-ramping and all that stuff. Um the
88. 2:29only way to grow faster would be one of
89. 2:30two ways. So way one would be that you
90. 2:33basically develop a sales motion that
91. 2:34gets people to pay up front to become a
92. 2:36customer, and that's where you could
93. 2:37have some sort of like $10,000 plan or
94. 2:40you know, whatever um that you could
95. 2:42then credit towards their first year of
96. 2:45services that they get from you, but
97. 2:46that would accelerate the cash flow
98. 2:47cycle for you. And so that would pull
99. 2:49cash forward. So that'd be like way
100. 2:50number one. Uh the other way is that you
101. 2:52would raise money off of equity so that
102. 2:54you could go faster. And this is such a
103. 2:55a classic venture play of like we have a
104. 2:57big opportunity, we're growing really
105. 2:59fast, we need these people so that we
106. 3:00can capture it, and our returns on
107. 3:02capital are still really good. That's
108. 3:03fine. It's just that
109. 3:06you'll have to it'll be one of those
110. 3:07two, or you'll grow at the rate that
111. 3:08you're currently at, and then you'll be
112. 3:10able to continue to grow faster as you
113. 3:11make more money, and you'll
114. 3:13the rate of growth will be limited by
115. 3:15the
116. 3:17there's a metric that I would find in
117. 3:18there, but it's basically like that
118. 3:20growth rate will be pinned to number of
119. 3:22new customers onboarded and activated
120. 3:23right, you know, assets that come in.
121. 3:25>> Is there a framework to think through
122. 3:26what's the
123. 3:29How do you not grow so fast that you
124. 3:30risk the whole business by go
125. 3:33it's recurring revenue, so I think that
126. 3:34risk is very small, but
127. 3:36is there a net income number that if
128. 3:39you're falling below that it's you're
129. 3:40you're kind of being stupid? Yeah.
130. 3:42>> By percentage or absolute?
131. 3:44>> Percentage. Like if you fall below
132. 3:4710% net income.
133. 3:48>> So you ask a really good question.
134. 3:50Um it's actually just like you would say
135. 3:52to your customers, it's about your
136. 3:53tolerance for risk, which is entirely
137. 3:55individual. If you ask Elon, he would
138. 3:57say go negative a billion and then
139. 3:59you're good to go, right? I don't I'm
140. 4:00being very serious. And on the other
141. 4:01hand, there's some people you've got
142. 4:02Dave Ramsey who's like never lose money.
143. 4:04And like both of them are successful
144. 4:05entrepreneurs, obviously to different
145. 4:06degrees.
146. 4:07Um, and so it's a risk reward uh
147. 4:09question. I would say that if you are
148. 4:10bootstrapped, which it sounds like you
149. 4:12are, then you can't go below zero cuz
150. 4:14you won't have money, right? But it's
151. 4:15basically throttling that line and like
152. 4:17that padding is just how confident you
153. 4:19are in your projections.
154. 4:20>> Mhm.
155. 4:21>> And how much you want to take out now to
156. 4:23buy the yacht, right? From the
157. 4:26I mean really, like it it it it really
158. 4:27is that. And so
159. 4:30that number is kind of Well, so if you
160. 4:31stopped growing today
161. 4:33and
162. 4:34you fully
163. 4:37utilized all of the
164. 4:39uh account managers that you have, what
165. 4:41would top line and what would EBITDA be?
166. 4:43>> We could get to top line of about uh
167. 4:4745 to 50 million.
168. 4:48>> Okay.
169. 4:49>> And EBITDA
170. 4:50>> that would be
171. 4:51a little over half of that.
172. 4:52>> Okay. And that's right now. And so
173. 4:55that's kind of like what you'll be
174. 4:56pacing in like 12 to 18 months,
175. 4:59something like that.
176. 5:00>> yeah.
177. 5:00>> Okay. Um
178. 5:02Okay.
179. 5:03Uh I don't think there's anything wrong
180. 5:04with your business. I think it's just
181. 5:04like an expectation setting thing, which
182. 5:06is that
183. 5:08every point that you give up in margin,
184. 5:10you'll recapture in growth and you also
185. 5:12increase in risk.
186. 5:13>> Mhm.
187. 5:14>> Me personally, um
188. 5:16I
189. 5:17as much as I am an entrepreneur um I'm
190. 5:20actually relatively risk-averse. Um
191. 5:23I don't I don't I like this framework
192. 5:27from Keith Cunningham, which is what's
193. 5:29the upside, what's the downside, and can
194. 5:31I live with the downside? If you can't
195. 5:33live with the downside, I don't do it.
196. 5:34>> Mhm.
197. 5:35>> Even if it's small.
198. 5:37And so
199. 5:38uh if you think that there's a chance
200. 5:40that you going like let's say you, you
201. 5:42know, increase your rate of growth by
202. 5:4330%. If you think that that doubles the
203. 5:46likelihood that you lose the whole
204. 5:47business, and then your reputation gets
205. 5:49smashed,
206. 5:50is that worth it?
207. 5:51>> Mhm. No.
208. 5:52>> Cuz right, and I see it as an Like if
209. 5:54you have a big like you say like there's
210. 5:56this opportunity in front of me,
211. 5:57and so I'll give you something that
212. 5:58Leila says to me a lot. Um she's like,
213. 6:01"That door isn't closed. It'll stay open
214. 6:02and only get bigger."
215. 6:04>> Mhm.
216. 6:05>> And so like the bigger you get, the more
217. 6:07proof you have,
218. 6:08the more that opportunity's going to
219. 6:09still be there. But the converse of that
220. 6:12is that if you have shitty service,
221. 6:13reputation goes down,
222. 6:15that door can close. And so I think the
223. 6:18biggest risk that you take on by growing
224. 6:20too fast is reputational, even more than
225. 6:22fiscal.
226. 6:23Is that like your quality of service
227. 6:24drops, and then that lead flow dries up,
228. 6:26and then all of a sudden you're stuck
229. 6:27with all these guys that are half
230. 6:28utilized. And then you're not making any
231. 6:29money.
232. 6:31>> [laughter]
233. 6:31>> Yeah.
234. 6:31>> And and you you miss both. And so I
235. 6:33think that's that's probably the greater
236. 6:34opportunity that I'd be mindful of. Um
237. 6:37but basically is like this is yours to
238. 6:39not [ __ ] up.
239. 6:40And so I would just say like then don't
240. 6:42[ __ ] it up.
241. 6:43>> Right.
242. 6:44>> Does that make sense?
243. 6:45>> Does. Thank you.
244. 6:45>> Yep. If you like this video and you're a
245. 6:47business owner who wants to break
246. 6:48through your current revenue ceiling, I
247. 6:49distilled every lesson from scaling 10
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253. 7:00can click here and you can check it out.
254. 7:02Again, absolutely free, and since you're
255. 7:03a business owner, I appreciate you, and
256. 7:05enjoy.