Was Any of My $14,000 in Ads Actually Working? — Transcript

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1. 0:00Alexandra. I sell Pilates education. So,
2. 0:03I co-authored a comprehensive 550-hour
3. 0:05comprehensive school of Pilates along
4. 0:07with a physical therapist and professor
5. 0:09at Oakland University in Michigan. We
6. 0:11also I also used to have four Pilates
7. 0:13studios, so individual sessions and
8. 0:16um
9. 0:17Pilates classes as well.
10. 0:19Um I now have two and I'm trying to
11. 0:21offload the second right now to come
12. 0:23back to the roots of what was working.
13. 0:26Um and so I think my biggest constraint
14. 0:27like last week I fired my sales I fired
15. 0:29my marketing my entire marketing team
16. 0:32um because I learned that despite the
17. 0:35$14,000 a month that we were spending on
18. 0:37ads,
19. 0:38well, everything was still coming in
20. 0:40from word of mouth and my
21. 0:41>> it off and nothing changed.
22. 0:43>> Yeah.
23. 0:44And uh ads used to work though. Like
24. 0:47>> [laughter]
25. 0:49>> But ads used to work. I used to break
26. 0:51even on like that $14,000 a month used
27. 0:54to get me about $14,000 worth of intro
28. 0:56offers and then our conversions at like
29. 0:5886%. Um
30. 1:01Uh so, I do 1.5 in revenue now. I'd like
31. 1:05to be a billion-dollar company. I think
32. 1:06500 studios globally with a school and a
33. 1:09studio will easily accomplish that. More
34. 1:11important than that, I'm mission-driven.
35. 1:13I want to change the way humans feel and
36. 1:15move in their bodies.
37. 1:17I've been broken so many different times
38. 1:19and um people have a right to feel at
39. 1:21home in their bodies. And also I'm
40. 1:23education-driven. I I left home at 17. I
41. 1:25didn't get to go to college and it was
42. 1:27robbed from me despite all the
43. 1:28scholarship anyway. So, I want to
44. 1:30provide opportunities for people so that
45. 1:33like cuz I would love to have been a
46. 1:34physical therapist, but I'm not.
47. 1:36>> So, you have a school
48. 1:38>> Mhm.
49. 1:38>> and you have a facility where customers
50. 1:41come in. So, you have two of these dual
51. 1:43setups.
52. 1:44>> Mhm.
53. 1:45>> Okay. The B2B side where you teach how
54. 1:48to do Pilates.
55. 1:49>> Mhm.
56. 1:50Teach teachers how to teach. Yeah.
57. 1:52>> it. So, you teach teachers and then you
58. 1:54graduate the best teachers.
59. 1:55>> 12 entrepreneurs in the area instead of
60. 1:57supporting my flywheel.
61. 2:00>> You take the best ones, they come to
62. 2:01your thing, and then when they get good
63. 2:03they leave with your customers.
64. 2:04Something like that. Okay.
65. 2:06Um
66. 2:07Okay.
67. 2:08So,
68. 2:11you want to scale
69. 2:14>> epic
70. 2:14>> this business.
71. 2:15>> Yes.
72. 2:15>> Hm?
73. 2:16>> Epically, yes.
74. 2:17>> Yeah.
75. 2:18So,
76. 2:20having been in I still consider this the
77. 2:22gym space.
78. 2:23Um
79. 2:24Same, same.
80. 2:24>> Yeah.
81. 2:25>> From a customer perspective.
82. 2:26Um I feel like I have some credibility
83. 2:28talking about this. Um
84. 2:29>> That's why I'm here.
85. 2:31>> What's really difficult about that space
86. 2:34particularly is that
87. 2:36you sell
88. 2:39low
89. 2:40skilled labor
90. 2:42that you then train into high skilled
91. 2:44labor
92. 2:45that they can immediately earn more
93. 2:47somewhere else.
94. 2:48>> Mhm.
95. 2:49>> It's very hard.
96. 2:50>> Mhm.
97. 2:51>> And so, you have to build some sort of
98. 2:55widgetize system, if that,
99. 2:58to make it somehow more difficult for
100. 3:01them to try and do it on their own. So,
101. 3:03for example, an Orangetheory trainer has
102. 3:06a harder time leaving because they can
103. 3:09do some hopscotch in the parking lot,
104. 3:11but they don't have the vibe, they don't
105. 3:13have the lights, they don't have the
106. 3:14equipment. And so, it makes a little bit
107. 3:15of a moat for people but basically in
108. 3:17terms of making your own competition.
109. 3:19>> Mhm.
110. 3:21>> But, if we look at like how many really
111. 3:25successful micro gym boutique models
112. 3:28have you seen scale?
113. 3:31>> Um I mean the the one that comes to my
114. 3:34mind is Solidcore.
115. 3:35>> Okay.
116. 3:36>> Yeah.
117. 3:36>> And so, what's interesting about that?
118. 3:38Do you know what the unit economics are
119. 3:39for Solidcore?
120. 3:40>> No.
121. 3:41>> I'm going to bet they're bad.
122. 3:43>> Mhm.
123. 3:44>> I could be wrong, but I'm probably not.
124. 3:46And
125. 3:48the unfortunate truth about how most
126. 3:51brick-and-mortar fitness works is that
127. 3:53the person who makes the most money is
128. 3:54the franchisor.
129. 3:55>> Mhm.
130. 3:56>> And I have yet to see someone really
131. 3:59hack it with the exception of Alloy,
132. 4:02which is um a semi-private model.
133. 4:05Um I have yet to see someone have
134. 4:07impressive unit economics
135. 4:10because of the issue that I just stated.
136. 4:11The reason that you can have a Quiznos
137. 4:13and a Subway is because the food is all
138. 4:15there. The person's not The sandwich
139. 4:16artist isn't like, "I'm going to start a
140. 4:18different like you're like, "Oh, I'm
141. 4:19going to follow Rosie." You know, like
142. 4:20you have no affinity for the sandwich
143. 4:22artist, unfortunately, right?
144. 4:24Um and so those models are incredibly
145. 4:27replicable. And the chicken is the
146. 4:28chicken, the bread is the bread, so it's
147. 4:29it's so it's so easy not easy, but it's
148. 4:32easier to get consistent. Whereas even
149. 4:34with the same coach, they can be have a
150. 4:36good day and a bad day, let alone
151. 4:38differences between coaches. And so the
152. 4:40consistency of the model's incredibly
153. 4:41difficult. And typically you have an
154. 4:44owner-operator who has lots of
155. 4:45razzle-dazzle, and everyone loves them.
156. 4:47I'm guessing that's what's happened with
157. 4:48you. But as soon as you get people
158. 4:50around you, if you create enough
159. 4:51razzle-dazzle, you can't pay them
160. 4:52enough.
161. 4:53And if you don't create enough
162. 4:54razzle-dazzle,
163. 4:56your product suffers.
164. 4:57It's an incredibly hard business.
165. 4:59And so I'm not saying this to dissuade
166. 5:01you, I'm saying that the reality is that
167. 5:03the unit economics has to be
168. 5:06there has to be a more defensible moat
169. 5:07within the business,
170. 5:09like the actual four walls of the
171. 5:10business that that prevent a trainer
172. 5:14from
173. 5:16starting their own thing. And it's not
174. 5:17like I want to be defensive, I'm just
175. 5:18like the reality of it, right? Um in
176. 5:21order for it to scale, because you have
177. 5:22to have basically career growth and
178. 5:24retention for It's a service business.
179. 5:26>> Mhm.
180. 5:26>> Um and so that is the difficulty of this
181. 5:28particular model in terms of how do I
182. 5:29get to 500 locations? You can, if you
183. 5:32look at the Solidcore's and the the
184. 5:34Power Yoga's and whatever else that that
185. 5:35has scaled over the years, typically
186. 5:37you've got a really good marketing and
187. 5:38sales entrepreneur that gets one
188. 5:40location that they just crush ads
189. 5:41through, and then they sell off the unit
190. 5:43economics of that one, and sell 200 uh
191. 5:46locations. They scale to open 50 as fast
192. 5:49as they can. They're usually in year
193. 5:51one, year two max. They're a little bit
194. 5:53new, trendy, hip, fatty. And then they
195. 5:55immediately set up private equity who
196. 5:57then holds the bag. And then the
197. 5:58franchisees who own all these locations
198. 6:00never even open them up. The unit
199. 6:02economics drop. And then their item 19
200. 6:04sucks, which is basically where you
201. 6:05disclose how much money each location
202. 6:07makes. And then all of a sudden their
203. 6:08franchise sales die and the and the
204. 6:10cycle repeats.
205. 6:11That is 90% of franchises,
206. 6:14unfortunately.
207. 6:15So, this is me obtaining the biggest
208. 6:17doom and gloom
209. 6:19uh version for you. But um
210. 6:22>> So, with the school being a $13,000
211. 6:25ticket
212. 6:26>> Yeah.
213. 6:26>> at uh I think
214. 6:27>> I'd rather you do that.
215. 6:29>> Well, yeah, that's what I want to do.
216. 6:30And that's what I do.
217. 6:30>> Okay. Well, then can we get rid of the
218. 6:32the individual locations for the
219. 6:34customers and is Okay, let me let me ask
220. 6:36this differently. Do you just use the
221. 6:38locations as a way for them to practice?
222. 6:40>> They I need a location for them to be
223. 6:42able to practice.
224. 6:43>> Yes.
225. 6:44>> Okay. That's So, it's more of a you have
226. 6:46a you have a Pilates teaching school.
227. 6:48It's less about the other side.
228. 6:50>> Yes.
229. 6:50>> I'm fine with that business. The other
230. 6:52business is very hard.
231. 6:53>> But that's Oh, yeah. I agree.
232. 6:55>> Yeah, yeah. Very hard. Yeah, yeah.
233. 6:57>> Um So, So, my next question then would
234. 7:00be So, my competitors in the industry,
235. 7:02the people who are $200 million
236. 7:03companies, Balanced Body, Polestar,
237. 7:05Balanced Body, um they are doing it
238. 7:08scaling their education systems through
239. 7:10host locations, right? And And so, what
240. 7:14my brain did instead because like for
241. 7:16instance Balanced Body has a host
242. 7:17location in my community. So, I can't
243. 7:18open a school
244. 7:19>> Yeah, and then like a region gets sold.
245. 7:20So, like when I tried to
246. 7:22a scale or hire in my own community, I
247. 7:24went back to where I got educated. And
248. 7:26they're like, "No, your region's already
249. 7:27sold. We can't help you." And so, that
250. 7:29was the driving force to create my own
251. 7:30school. I was like, "Fine, [ __ ] you.
252. 7:31I'll do it myself. And I'll create my
253. 7:33own people that are qualified." So, um
254. 7:36So, I did that. And but now I have these
255. 7:3912 local entrepreneurs in in my area.
256. 7:41So, I'm like, "Fuck, I should have
257. 7:42thought of a licensing model. I should
258. 7:44have sold them my playbook. I should
259. 7:45have sold them like, yes, here's how you
260. 7:47teach Pilates, but now here's how you
261. 7:49have a marketing model. Here's how you
262. 7:51do this. Here's how you do this." And
263. 7:52then keep going.
264. 7:53>> like you want to start a franchise.
265. 7:54>> I don't think a franchise cuz I've read
266. 7:56all the books and that seems really hard
267. 7:58and sucky and
268. 7:59>> Well, I mean, bro, you want to get to a
269. 8:01billion and you're like it's hard.
270. 8:02>> No.
271. 8:03Well, I I
272. 8:06Yeah, hard is the wrong word. Um
273. 8:09Yeah, what about licensing? Like I guess
274. 8:11I'm trying I mean, I joined the thing.
275. 8:12>> Yeah, yeah. No, you're It's not like I'm
276. 8:14not going to help you for free.
277. 8:15>> [laughter]
278. 8:17>> I don't want to do this alone. I am
279. 8:19alone. So.
280. 8:20>> how much cash do you have?
281. 8:21>> None. I am so out of cash.
282. 8:23>> [laughter]
283. 8:24>> Okay.
284. 8:25>> Yeah.
285. 8:25>> Noted.
286. 8:26>> Yeah, that whole exercise yesterday was
287. 8:27like nearly impossible because my EBITDA
288. 8:29is like way in the [ __ ]
289. 8:31>> you. Okay.
290. 8:32Um
291. 8:33all right.
292. 8:34Okay.
293. 8:34>> [laughter]
294. 8:35>> So, no, you're good. You're good. So,
295. 8:40the difficulty is that you don't have a
296. 8:42true model yet because right now you
297. 8:45have a your business is teaching and you
298. 8:48use a store just so that you have a test
299. 8:50kitchen, but it's not because the
300. 8:52business is the store.
301. 8:55So, said differently, if you
302. 8:57if you have the true store model nailed,
303. 9:00then the education of the Pilates owner
304. 9:03is just part of the franchise package,
305. 9:04which is you train the staff, you train
306. 9:06the owner on your systems and whatever.
307. 9:08And so, like you're looking to build
308. 9:09like everything you're saying is looking
309. 9:11to build a franchise.
310. 9:13I'm saying what's difficult about it.
311. 9:15And I want to be very clear.
312. 9:16You can absolutely make a ton of money
313. 9:18doing it. I just ethically have some
314. 9:20issues with it because I have seen 99%
315. 9:22of franchises, the franchisor leaves
316. 9:24with the money and the franchise user
317. 9:25left with the bag, right?
318. 9:26>> all the money, but it's not actually my
319. 9:28>> Got it.
320. 9:29>> purpose.
321. 9:31>> Got [sighs and gasps] it.
322. 9:31>> But I do want it all still.
323. 9:33>> Yeah. Yeah. So, we
324. 9:37>> Sorry.
325. 9:38>> You're good. You're good. I'm trying I'm
326. 9:39trying to unpack this thing. So,
327. 9:44Layla has this great framework which
328. 9:45I'll I'll share with you, which is like,
329. 9:46are we are we talking about solving a
330. 9:48missed opportunity or are we solving a
331. 9:49problem? And most growth comes from
332. 9:51solving problems, not lamenting missed
333. 9:53opportunities, cuz there will always be
334. 9:55infinite missed opportunities. But,
335. 9:56there's a more finite set of problems
336. 9:58that you can solve, and there's one
337. 9:59problem that's going to be the most
338. 10:00valuable to solve, which by the way is
339. 10:01how you grow. It's not fun, but that's
340. 10:03how you actually grow. And so, right
341. 10:05now,
342. 10:06I want to go all the way back to basics.
343. 10:08You have an education business where you
344. 10:10teach the Pilates. What stops you from
345. 10:12doing more of that?
346. 10:17>> Uh I am doing more of it. Like, this my
347. 10:19goal this year is to sell out three So,
348. 10:21I'm the first company or first school to
349. 10:23do uh a daytime cohort and
350. 10:25>> What's stopping you from doing it?
351. 10:26>> What's stopping you from doing more? I
352. 10:27am doing more. I'm already doing more.
353. 10:28I'm I'm probably going to be at the
354. 10:31capacity that those two locations can't
355. 10:33do this fall.
356. 10:33>> why you can't do more. Correct?
357. 10:38Okay.
358. 10:39So,
359. 10:40are those locations profitable?
360. 10:43>> Uh my Berkeley location's very popular
361. 10:45pop- profitable. My Rochester one is not
362. 10:48at all, and that's the one I'm trying to
363. 10:50exit and sell to one of my students.
364. 10:54She don't know yet.
365. 10:55>> You're meant to be a franchisor.
366. 10:57>> [laughter]
367. 10:59>> Uh
368. 11:00I'm just kidding.
369. 11:01Uh
370. 11:01>> I did that with my third location. I
371. 11:03sold that to one of my students.
372. 11:04>> Okay.
373. 11:05All right. Um Jesus. Uh
374. 11:08>> [laughter]
375. 11:09>> All right.
376. 11:09>> Should I go home now?
377. 11:10>> So, no no no, you you have this
378. 11:12education business,
379. 11:14and I I I want to I'm trying to I'm
380. 11:15trying to solve this. So, uh you have
381. 11:17this education business, and you're
382. 11:23it's just it's because you have two
383. 11:25models that are getting mixed up.
384. 11:26You have this brick-and-mortar model and
385. 11:27the teaching model. There's nothing that
386. 11:29stops you from just opening more
387. 11:32teaching stores, whatever you want to
388. 11:34call it, classroom, whatever it is,
389. 11:35facilities. Um
390. 11:37>> And I have six educators that I've
391. 11:38trained and now teach the school.
392. 11:40>> I mean, if I were you, do you have a way
393. 11:42of reliably producing Pilates people who
394. 11:44will pay you money to get certified in
395. 11:46your style Pilates?
396. 11:47>> Yes.
397. 11:47>> Great. So, I think it would make a
398. 11:49shitload of sense for you to just
399. 11:52partner with people, use the off hours,
400. 11:54sell a shitload of customer students,
401. 11:56students who want to become teachers,
402. 11:57into those businesses. You don't have to
403. 11:59take the build-out risk, you don't have
404. 12:00to take the rent risk, and that is super
405. 12:03profitable.
406. 12:07>> But then I'm just like my competitors,
407. 12:08so then I got to
408. 12:09>> They make a lot of money for a reason.
409. 12:11>> beat Goliath.
410. 12:12>> Hm?
411. 12:12>> I got to beat Goliath. Like if I'm going
412. 12:15to do that
413. 12:15>> you want to be a billion-dollar company.
414. 12:17>> Yeah.
415. 12:17>> You got to beat Goliath. That's the
416. 12:19game.
417. 12:19>> Okay.
418. 12:20>> I'm being real as [ __ ] with you.
419. 12:22Like you want to be a billion-dollar
420. 12:24company.
421. 12:24>> I would do it differently than Goliaths
422. 12:26and therefore better.
423. 12:30Goliath has balanced body.
424. 12:31>> So,
425. 12:33most of the time Goliath is actually not
426. 12:35that hard to beat. The biggest part
427. 12:36about Goliath is hard to beat is the
428. 12:37idea of Goliath.
429. 12:39>> Yeah, I look up to them.
430. 12:41>> Yeah, you I think you show them too much
431. 12:42respect.
432. 12:44And what I mean by that is
433. 12:46that also means that they have a ton of
434. 12:48blow, they have a ton of overhead,
435. 12:49they're not adapted to AI, they're going
436. 12:51to be super slow on all this new stuff
437. 12:52that's coming out, and there's always
438. 12:54room for a new player because the new
439. 12:56player always is more up to date and is
440. 12:58always leaner and always faster. And
441. 13:00that is the cycle of business.
442. 13:02And so, like there's no like Rome didn't
443. 13:05lose to another Rome, they lost the
444. 13:06barbarians.
445. 13:08Right? And so, like you are the
446. 13:09barbarians right now, and I think that
447. 13:10that's probably the strategy that you
448. 13:12should take cuz if right now you believe
449. 13:13that you're Are you beating them in your
450. 13:14current market?
451. 13:15>> Yes.
452. 13:16>> Then why can't you beat them in another
453. 13:17market?
454. 13:19>> Uh capital.
455. 13:21>> Well, you're not beating them then
456. 13:23because you need to make money in your
457. 13:24business.
458. 13:24>> Mhm.
459. 13:25>> So, real talk, I think we need to zoom
460. 13:28all you know, I'm glad we're happy to
461. 13:30help, but like we have to fix the like
462. 13:33you're you're here.
463. 13:35We're trying to solve like it's like a
464. 13:37weight loss customer is like I'm going
465. 13:38to have to change all my clothes once I
466. 13:40lose 100 lb. It's like let's lose 100 lb
467. 13:42first, then we'll worry about the
468. 13:43clothes, right? So, you're like I got to
469. 13:46get to a billion. I'm like I hear you,
470. 13:47but like let's make money here first so
471. 13:50that we can do that.
472. 13:51>> Yes. You asked where I wanted to go.
473. 13:54>> No, you're fine. You're fine.
474. 13:55>> Yeah.
475. 13:55>> But we got to get these four walls to
476. 13:58print cash.
477. 13:59>> Yes.
478. 14:00>> Once these four walls print cash, you
479. 14:01will have oxygen to breathe and you have
480. 14:03optionality. At that point, we'll be
481. 14:05able to make the call of maybe maybe the
482. 14:07store itself is a franchisable model.
483. 14:10The the the teaching part, which is
484. 14:12different. It's B2B. It's cool.
485. 14:14That could be a franchisable model. You
486. 14:16could just do the kind of flying out in
487. 14:18the host version of that. That's also
488. 14:20super profitable. But until we nail
489. 14:21these four walls, nothing else matters.
490. 14:25>> Mhm.
491. 14:25>> So, this is what we have to focus on.
492. 14:26>> Mhm.
493. 14:27>> And we'll help you focus on it, but
494. 14:28that's that's that's what we have to
495. 14:30solve and thank God we got to there. But
496. 14:31that's that's where it is, okay? That's
497. 14:33what we have to do.
498. 14:34>> Yeah.
499. 14:34>> Forget everything else.
500. 14:36>> Yes.
501. 14:36>> Nothing else matters until this thing
502. 14:38prints.
503. 14:39And then you'll have lots of options.
504. 14:41But you have no options cuz you have no
505. 14:42money.
506. 14:43>> Right.
507. 14:43>> So, we need to go make money.
508. 14:44>> Yes.
509. 14:47Okay.
510. 14:47>> Yeah, sure.
511. 14:48>> [applause]
512. 14:56[clears throat]
513. 14:58>> Hey Alex.
514. 14:58>> We made it.
515. 14:59We [laughter] did it. You're great.
516. 15:01You're great. You're good.
517. 15:03Okay.
518. 15:03Okay. If you are a business owner and
519. 15:05you are not growing as fast as you like,
520. 15:07I'd like to give you a free gift. So, my
521. 15:09team and I put together the $100 million
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524. 15:15portfolio companies we've had and what
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