"I'm Profitable. Why Can't I Afford to Hire?" — Transcript

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1. 0:00man.
2. 0:00All right. Danny Dance Studio, that is
3. 0:03kind of funny.
4. 0:04Um Danny Dance Studio, I hope it's
5. 0:05called Danny Dance Danny Dances.
6. 0:10>> Good afternoon, this is Danny.
7. 0:11>> Danny, is what is the name of your dance
8. 0:13studio?
9. 0:14>> Uh Movers and Shakers.
10. 0:15>> Uh it's not Danny Danny Dances?
11. 0:18>> No.
12. 0:19>> I thought it'd be funny. Okay, this is
13. 0:20Alex. All right, talk to me. What's the
14. 0:23business What's revenue? What's revenue?
15. 0:25Where do you want to be? What's the
16. 0:26problem?
17. 0:27>> All right, 650k.
18. 0:29>> Great.
19. 0:30>> Uh I believe the constraint is myself
20. 0:32with sales. We need a good salesperson
21. 0:35and I don't know how to pay a great
22. 0:37salesperson enough to stick with us. We
23. 0:40only have
24. 0:41a couple leads come in a day and that
25. 0:43has been a constraint I think for a long
26. 0:45time.
27. 0:47>> Okay. So, yeah, Peter is trying to call
28. 0:50back now. Too late.
29. 0:52Sorry, there's a there's a call busy
30. 0:53signal, but you're the priority, Danny.
31. 0:55All right. So, 650,000,
32. 0:58you said you're the constraint being
33. 1:00sales. Now, tell me more about that.
34. 1:02Does that mean that you can't grow the
35. 1:04business because you're in sales all day
36. 1:06or because no one else can sell like
37. 1:07you?
38. 1:09>> Uh I think they can't sell like me. I
39. 1:10just don't know how to afford them. So,
40. 1:12the cost of a program is about $500. LTV
41. 1:15is maybe maybe 800.
42. 1:18>> Yeah, that's the problem, dude.
43. 1:19That's the problem.
44. 1:20Uh like you got to fix the business
45. 1:22right now.
46. 1:24Like we don't want to scale this.
47. 1:26The business doesn't Like what are your
48. 1:27margins right now?
49. 1:29>> Uh about 50%.
50. 1:33>> Interesting.
51. 1:34It's just like I still feel like you
52. 1:35could make even more.
53. 1:37Cuz if if you're charging 500 up front
54. 1:38and 800 is LTV, it's like you're not
55. 1:40really converting anyone. It's like
56. 1:41you're one-time popping people. How are
57. 1:42you getting customers? Ads?
58. 1:44>> Uh we don't run any ads. It's all
59. 1:46inbound.
60. 1:46>> So, inbound, but people just buy one set
61. 1:49of dance sessions and then that's it?
62. 1:51>> Uh about 50%
63. 1:53renewing.
64. 1:54>> And then after that, what happens?
65. 1:58>> Some will renew longer, some will even
66. 2:00come back, some are gone forever. I'd
67. 2:02love to bring it up to 70% and
68. 2:04definitely not sure how to do that yet.
69. 2:05>> Why don't you get them into a
70. 2:06membership?
71. 2:09>> Uh we recently experimented with selling
72. 2:11more programs up front with very limited
73. 2:13success so far, but I'm open to it.
74. 2:15>> No, no, like no, like sell your front
75. 2:17end thing cuz you're obviously closing
76. 2:18on that, but I'm saying why don't you
77. 2:19just take the 500 and then just roll it
78. 2:21into a membership?
79. 2:23>> Yeah, they go through levels. So, they
80. 2:24start beginner and then intermediate and
81. 2:25then
82. 2:26>> That's fine.
83. 2:27Just roll it in.
84. 2:28Yeah, roll it into the next level.
85. 2:32>> So, like when they purchase the first
86. 2:33level uh
87. 2:34>> Well, they come before they finish the
88. 2:36first level, offer them the next level
89. 2:38and then credit their first level
90. 2:39towards their second level and price the
91. 2:40second level such that when you roll in
92. 2:42the first level to the second level, you
93. 2:43still make a good profit.
94. 2:46>> We do. I mean, we uh sell it about
95. 2:48halfway through the first level and
96. 2:50we're about 50% recurring.
97. 2:52>> And then what percentage of people from
98. 2:54the second thing buy the third thing?
99. 2:56>> About 50%.
100. 2:57>> Yeah, so you got to keep it's the And
101. 2:59these are what six-week things?
102. 3:01>> Uh 10 weeks.
103. 3:02>> 10 weeks?
104. 3:04>> Yeah.
105. 3:07>> Are you the dancer?
106. 3:09>> Uh I used to teach everything. Now, we
107. 3:11have a couple other instructors. I came
108. 3:12to your scaling workshop last summer, by
109. 3:13the way. It's the best program I've done
110. 3:15in my entire life, by the way.
111. 3:15>> Oh, glad. I appreciate that. You donated
112. 3:17some books?
113. 3:19>> I already purchased the 200 bucks, yeah.
114. 3:21>> Rock and roll. Appreciate you. Okay. So,
115. 3:29the margins are good. Actually, did you
116. 3:30Did you ask me a question at the
117. 3:31workshop? Cuz I feel like I remember a a
118. 3:33dancer.
119. 3:34>> Yeah.
120. 3:35>> Yeah, you have really good margins. I
121. 3:36remember this. Okay. So, you had really
122. 3:38good margins.
123. 3:39Um
124. 3:40Okay.
125. 3:41So,
126. 3:42>> Just subtracting direct expenses, I
127. 3:43mean, it's about 80% margins, but when
128. 3:45you take away the overhead, we're at
129. 3:46about 50.
130. 3:47>> Yeah, I mean, well, yeah,
131. 3:48I mean, without overhead, I have 100%
132. 3:50margins. Um
133. 3:51>> [laughter]
134. 3:53>> Okay. So,
135. 3:55why can't you
136. 3:58I just like I want this to be more
137. 3:59recurring. That's the thing.
138. 4:01Like this is the thing that bothers me
139. 4:02about the business. I'm glad you're
140. 4:03making money. I'm glad it's 50% margins.
141. 4:04All this like all this stuff is great.
142. 4:06It's just like it ha- like
143. 4:08it just
144. 4:10I mean I obviously I understand the
145. 4:11space really well, right?
146. 4:13The reason So, I had Did you see Rick on
147. 4:15here earlier?
148. 4:16>> I did not.
149. 4:17>> Okay. So, Rick owns a franchise that
150. 4:19does um that does that does small group
151. 4:21training for gyms. It's one of the best
152. 4:22franchises right now in the fitness
153. 4:24space. And the key that makes his model
154. 4:26work is that they have a 38-month stick
155. 4:27rate.
156. 4:29>> Mhm.
157. 4:30>> And the way that happens is because they
158. 4:31do semi-private. So, one on four, one on
159. 4:33six.
160. 4:34And then people get to know each other.
161. 4:35They have a regular calendar that
162. 4:37they're used to. They take this as their
163. 4:38main workout.
164. 4:39Um and so the key is that we have to
165. 4:41figure out the what like how do we get
166. 4:42Basically, the thing to solve for this
167. 4:44business, if you really want to solve
168. 4:45like really actually want to do this
169. 4:46business for real, all of your effort
170. 4:48has to go to how do we get people to
171. 4:50stay for more than a year?
172. 4:51>> Okay.
173. 4:52>> If you solve that, you crack the whole
174. 4:54business open. LTV's going to expand.
175. 4:56The problem that you have is like yeah,
176. 4:57you can't pay sales people because like
177. 4:59there's there's just like there's not
178. 5:00there's not really a ton left. That
179. 5:02being said, you're running at 50%
180. 5:03margin. So, like if you had $325,000 a
181. 5:06year in profit, which is what you're
182. 5:07making right now, could you pay a
183. 5:08$100,000 a year sales person to sell for
184. 5:11you? Yeah, for sure. So, I don't know
185. 5:12why Like I mean, yeah, for sure. It's a
186. 5:14six-figure sales job. You'd sell 250
187. 5:16left. And then with all the extra time,
188. 5:18you could go make more money.
189. 5:20>> What What kind of commission would I be
190. 5:22able to offer them on a
191. 5:23>> Back into it. Back into it. Back into
192. 5:25it. So, how many deals uh per per year
193. 5:28or whatever Just do per month. How many
194. 5:30deals per month do you What does a sales
195. 5:31guy be expected to close?
196. 5:34>> Uh
197. 5:34I mean, we only have a couple leads
198. 5:35coming in a day, so
199. 5:3720, 30?
200. 5:38>> Okay. So, a deal a day, call it, that is
201. 5:40what they can close. Okay. So, if you
202. 5:43He's got to make two grand a week,
203. 5:45right? So, let He's working five days a
204. 5:46week, I'm guessing.
205. 5:48>> Yeah.
206. 5:48>> Okay, so he's got to make $400 a day, 5
207. 5:51days a week.
208. 5:53Okay, so
209. 5:55something doesn't make sense with your
210. 5:57math, though.
211. 6:03Yeah, because if you're closing 30 deals
212. 6:04a month and you said LTV was 800, then
213. 6:07that would mean that you'd be doing
214. 6:09uh $24,000 a month,
215. 6:12which would put you at 300,000 a year,
216. 6:13not 650.
217. 6:14>> I know what it is. A lot of people
218. 6:16purchase without um reaching out first.
219. 6:20These are people who reach out. These
220. 6:22are
221. 6:22>> Yeah, yeah, yeah. I got it.
222. 6:24Got it. Got it. Got it. Got it. Um okay.
223. 6:30So, he's doing a deal a day with the
224. 6:31average ticket is 800. Or LTV is 800.
225. 6:34Yeah.
226. 6:35>> Maybe we need to just start advertising
227. 6:36and suffer and take the loss for a while
228. 6:38to get more lead volume, and then we can
229. 6:40actually pay them a
230. 6:41>> Well, I mean, if you advertise well,
231. 6:43you'll make more money. You won't You
232. 6:44don't have to be like, I have to suffer
233. 6:45and advertise. Like, if you do it right,
234. 6:46you'll just make You'll make a bunch of
235. 6:48money.
236. 6:49Um okay. So,
237. 6:53if I really wanted to fix this business,
238. 6:55you have option one is you can just run
239. 6:57ads, right? That's it. That's an easy
240. 6:58option. But, I would not want you to do
241. 7:00that if we really want to do this right.
242. 7:02You want to fix LTV.
243. 7:04Like, if you want this business to
244. 7:05really scale, if you want to get to like
245. 7:07millions of dollars a year, not just a
246. 7:08few hundred thousand. And I want to be
247. 7:09clear, what's your goal? Like, do you
248. 7:10just want to make this?
249. 7:13>> Um yeah, I mean, if it expands to you
250. 7:15know, 2 3 million a year, that'd be
251. 7:16great. All good.
252. 7:18>> Okay. Well, if you fix the model, it'll
253. 7:20just keep growing. That's the thing.
254. 7:22So, we just have to fix We have to
255. 7:23basically, I would look at how you're
256. 7:25doing your delivery and think, how can I
257. 7:27do it in such a way that people can get
258. 7:29a and like, maybe you have a a $500
259. 7:31front end, but maybe there's a maybe
260. 7:32there's a $1,500 front end. And that has
261. 7:34a better a better client ratio. So, and
262. 7:37then they're stickier, too. I don't
263. 7:38know.
264. 7:39>> [clears throat]
265. 7:40>> But, right now, the the the thing to
266. 7:42solve is how do you get people to stay
267. 7:44for 3 years?
268. 7:461 year to start, but ideally 3 years.
269. 7:48>> With personal training, how long would
270. 7:50be realistic for a person to stay?
271. 7:51>> 38 months, that's what I'm saying.
272. 7:53>> 38 months, okay.
273. 7:54>> Yeah, so you want get churn
274. 7:56Yeah, churn under 3%. That's what you
275. 7:59want.
276. 8:00>> Just 3% monthly.
277. 8:01>> Monthly. The thing is teaching a skill.
278. 8:02The thing is once they have the skill,
279. 8:05I believe it becomes a lot tougher to to
280. 8:07keep them around, you know?
281. 8:08>> Yeah, heard.
282. 8:10Well, they learn new songs and then I'm
283. 8:12sure they dance with one another, right?
284. 8:14And they have And like And I'm sure like
285. 8:15everything it's like if somebody said,
286. 8:18"Hey, Alex taught me how to sell,
287. 8:19right?"
288. 8:21It's how well. You know what I mean?
289. 8:24>> Mhm.
290. 8:24>> Like there's there's like there's depth
291. 8:26to skill. It's not like, "Okay, he can
292. 8:27do the cha-cha." But, it's like how well
293. 8:29can he do it? Is he cha-cha champ?
294. 8:31Or is he just decent at the cha-cha? I'm
295. 8:33just making this up. I have no idea.
296. 8:34But, like
297. 8:35But, like I imagine that maybe part of
298. 8:36it is just like your own belief of like,
299. 8:37"Well, they already learned it." It's
300. 8:38like, "But, how But, how how good are
301. 8:40they?"
302. 8:41>> Mhm.
303. 8:43Okay. My experience is that at the
304. 8:45higher levels it becomes much more
305. 8:46competitive and much even harder to keep
306. 8:48them around. I understand that that
307. 8:50would crack the code though. I mean,
308. 8:52that would make a huge difference.
309. 8:53>> Yeah. [sighs]
310. 8:54Well, maybe Okay, hear me out. Is there
311. 8:57a way that you go from teaching to like
312. 9:00to like a group some sort of larger
313. 9:02group setup that's like more
314. 9:05more scalable so that becomes like the
315. 9:06recurring bucket that's like fun and
316. 9:08maybe lower price, but people like never
317. 9:11want to cancel cuz it's almost like a
318. 9:12dance club?
319. 9:15>> Yeah. Yeah, people do run dance clubs.
320. 9:18Uh it feels like a whole other animal
321. 9:20and not necessarily desirable.
322. 9:22>> Yeah, well then dude, if you don't want
323. 9:23it If you don't want it, man, then then
324. 9:26then that's not the that's not the
325. 9:27thing. Like the thing is is if I say,
326. 9:29"Hey, if you start advertising, the
327. 9:31business can double or triple." But, the
328. 9:32thing is is like that lever only gets
329. 9:34pulled once, right?
330. 9:36>> Mhm.
331. 9:36>> And so, I'd rather fix the bucket before
332. 9:39we pour a bunch of water. Pouring the
333. 9:40water is almost a commoditized thing.
334. 9:42It's like, we run ads, people come in,
335. 9:44we sell them, but then it's like, okay,
336. 9:45then the whole game is just, you know, I
337. 9:47buy customers at 200, I make 800 with,
338. 9:50you know, 90% gross margins or whatever
339. 9:51it is. And it's like, so you're just
340. 9:53buying, you know, $400 bills or $500
341. 9:55bills for $200. Not a bad thing to do.
342. 9:56Don't get me wrong with it. But like, if
343. 9:58you want to build the asset, the
344. 9:59business, it's like, how can we how can
345. 10:01we keep those dollars continuing to come
346. 10:03and really expand LTV?
347. 10:04>> Cuz that's what's going to give you the
348. 10:05stability for the business, which is
349. 10:06what you ultimately want.
350. 10:10We got to nail it.
351. 10:11>> Yeah.
352. 10:11>> And then scale it.
353. 10:12>> it.
354. 10:13>> Yeah. No, but that's that's so I think
355. 10:15when you go through the um
356. 10:17the the lifetime value playbook and you
357. 10:19go through the retention playbook,
358. 10:20that'll give you a bunch of different
359. 10:21frameworks to think through in terms of
360. 10:23how to apply it. And obviously, you can
361. 10:24ask the ACQAI. It'll give you a bunch of
362. 10:26different frameworks to to to apply to
363. 10:28your specific dance business. And then
364. 10:31that might be the thing that will unlock
365. 10:33uh the LTV for the model such that you
366. 10:35can then fix it, churn goes down,
367. 10:37renewals go from 50% to say 80 or 90%
368. 10:41from cohort to cohort. Now you're now
369. 10:44you're singing and dancing.
370. 10:46Dancing
371. 10:48Right?
372. 10:48>> the LTV playbook. Start with the
373. 10:50retention playbook. The constraint is
374. 10:51not the sales. The constraint you you're
375. 10:53saying is the LTV.
376. 10:54>> Yes. Yes.
377. 10:56>> Okay.
378. 10:57Well, then I guess that's my homework.
379. 10:58>> Binga banga. Rock and roll. Appreciate
380. 11:00you.
381. 11:01>> Appreciate you, man. Thank you.
382. 11:02>> All right. You bet. See you.
383. 11:04All right.
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