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