Why 20% Referral Fees Still Don't Motivate Partners — Transcript

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1. 0:00I'm so happy to be here and I've
2. 0:02consumed a lot of your your content.
3. 0:04Um
4. 0:06My daughter's name is Layla.
5. 0:07>> Oh, that's cool.
6. 0:08>> Super happy. Um anyway
7. 0:10>> her after Layla? That's awesome.
8. 0:14>> Alex, I've
9. 0:15I've consumed a lot of your content,
10. 0:17read all your books.
11. 0:19And my question is
12. 0:21throughout your content, you talk about
13. 0:24niching in or niching down rather.
14. 0:26>> Mhm.
15. 0:26>> And um we provide payroll services.
16. 0:29>> Mhm.
17. 0:29>> We compete with the likes of ADP and
18. 0:31Paychex.
19. 0:31>> Mhm.
20. 0:32>> And in that space, it's really hard to
21. 0:35niche down when you're just getting
22. 0:37started, but we haven't just started.
23. 0:39We've been in business for 12 years now.
24. 0:40>> Right.
25. 0:41>> Um
26. 0:41>> What's the count?
27. 0:43>> I'm sorry?
28. 0:44>> Head count? How many people?
29. 0:45>> Employees or employees? We have four
30. 0:47employees.
31. 0:49Four. Yes.
32. 0:49>> Okay.
33. 0:51>> Uh but we have over 300 clients.
34. 0:53>> Right.
35. 0:54>> Most of them are small, but we have
36. 0:55three three three whales.
37. 0:57Now, um we've been thinking about
38. 1:00niching down, but we are afraid of
39. 1:02alienating
40. 1:03>> From?
41. 1:04>> a lot of our sources.
42. 1:06>> Mhm.
43. 1:07>> Um and most of our sources actually are
44. 1:09accountants and CPAs. We don't advertise
45. 1:11and we haven't really done any
46. 1:12marketing, but we are now starting to do
47. 1:14that because I feel like I have more
48. 1:15time to dedicate to the business. I
49. 1:18usually I'm usually done by 2:00.
50. 1:20>> Okay.
51. 1:20>> So I can dedicate time to my family, but
52. 1:22now my kids are a little bit No, a
53. 1:23little older. We have more time I have
54. 1:25more time.
55. 1:25>> Yeah.
56. 1:26>> Now, thinking of niching down to the
57. 1:28cannabis industry.
58. 1:29>> Mhm.
59. 1:30>> Got these, you know, better margins and
60. 1:31all that.
61. 1:32>> Mhm.
62. 1:32>> Um what what what risks am I facing and
63. 1:36what should I avoid when I'm
64. 1:38niching down, sorry. Niching down
65. 1:41and yet alienating or just leaving out
66. 1:43all the other sources of business for
67. 1:44me.
68. 1:45>> So
69. 1:46>> in addition to that
70. 1:47um we are contracted by the by the
71. 1:50government by the federal government and
72. 1:52that kind of boils down to us or
73. 1:54government agencies, state, federal, and
74. 1:57all that.
75. 1:58So, we don't want to put cannabis on our
76. 2:00main website because
77. 2:02obviously, cannabis is illegal on the
78. 2:04federal side.
79. 2:06Um so,
80. 2:07>> What problem are you solving?
81. 2:11>> Um
82. 2:11>> Because you don't want to niche for the
83. 2:13sake of niching. Like there's there
84. 2:14there there should be like
85. 2:16it's
86. 2:19Basically, you have a way of getting
87. 2:20customers all over the place. If you
88. 2:21were to niche to cannabis, it wouldn't
89. 2:22work cuz you can't put it on the site
90. 2:24unless you truly niche to cannabis, in
91. 2:25which case you get rid of you know, you
92. 2:27sacrifice the government contracts um
93. 2:30you know, as a result of doing that. And
94. 2:31so, if you make more revenue per
95. 2:33customer on cannabis, then a a big point
96. 2:37of that is that you can make more
97. 2:38specific messaging and you can have
98. 2:39higher LTV to CAC ratios. And so, that
99. 2:41should in theory allow you to expand um
100. 2:44basically, you can sell more customers
101. 2:45in a smaller pool.
102. 2:47>> [snorts]
103. 2:47>> It's like fundamentally, you want to
104. 2:48make the most money. Um and so, right
105. 2:50now you've been you know, you have 300
106. 2:52300 customers that have come in. How
107. 2:53many How many units do you sell a month
108. 2:55right now?
109. 2:57>> How many units per month?
110. 2:58>> people do you How many logos? How many
111. 2:59companies do you sell a month right now?
112. 3:04>> At least 200 out of those. Oh, you mean
113. 3:07like new clients?
114. 3:08>> Yeah.
115. 3:08>> Oh, new clients? Probably three or four.
116. 3:11>> Three or four
117. 3:12>> per month.
118. 3:12>> Yeah. Um
119. 3:14I honestly feel like you you should just
120. 3:16like advertise more.
121. 3:18I don't think you like I think you just
122. 3:20need to advertise more right now. Unless
123. 3:21there's some sort of operational
124. 3:22constraint that like if the delivery is
125. 3:25very different between different types
126. 3:26of businesses, then it would make sense
127. 3:28to do the niching because then you can
128. 3:29productize a little bit more. Like you
129. 3:30can make it more templated. You can get
130. 3:31more streamlined in the back end. But it
131. 3:34sounds like if you is the is are you
132. 3:35trying to grow? Is that the goal? I
133. 3:37think you just need to advertise more.
134. 3:39So, it's I mean, fundamentally. Now, if
135. 3:41you can't differentiate, basically no
136. 3:42one's responding to the advertisement,
137. 3:44then that's where the niching down
138. 3:45become like that's now that would then
139. 3:47be the problem that we'd solve. It's
140. 3:48like, okay, of the customer base that So
141. 3:50have, which ones are the most
142. 3:50profitable? Fine, then we're going to
143. 3:52make our messaging to tailor the you
144. 3:54know the offer the lead magnet that's
145. 3:55going to be similar to
146. 3:58whatever would resonate with that with
147. 3:59that avatar. And the whole point of it
148. 4:01is just so that you have advertising
149. 4:02that's going to convert uh
150. 4:05and be scalable.
151. 4:06Like that's the that's the problem that
152. 4:07niching solves because it increases your
153. 4:09lifetime gross profit per customer. And
154. 4:12with well-targeted advertising, it also
155. 4:14decreases CAC.
156. 4:16Does that make sense?
157. 4:16>> Yeah.
158. 4:17>> And so fundamentally it's it's a it's a
159. 4:18it's a it's an efficiency problem that
160. 4:20we're solving by niching down. At the at
161. 4:22the absolute extreme almost all
162. 4:24companies do go broader. But if you
163. 4:26already have 300 customers, then I feel
164. 4:28like you should just advertise more
165. 4:29unless there's some problem that's
166. 4:31occurring with your existing advertising
167. 4:32process.
168. 4:35>> Yeah.
169. 4:36Well, we don't advertise, so it's
170. 4:37something that we don't
171. 4:38>> Right. And so
172. 4:39>> We don't
173. 4:39>> You have no understood. And so it's like
174. 4:41you have these CPAs that do the work
175. 4:42that refer you business, right? So then
176. 4:45if that's the node, then it's like okay,
177. 4:47then I need to start doing outbound to
178. 4:49CPA firms using the list of CPA firms
179. 4:52that I have as references to say hey, we
180. 4:54do a really good job for these people
181. 4:55and basically build the affiliate
182. 4:57network. So if your call yesterday I
183. 4:59talked about you can only have two ways
184. 5:01of having a compounding business. This
185. 5:03one is that people never stop buying,
186. 5:04which you already have, which is pretty
187. 5:05cool. The other is that you have people
188. 5:07never stop selling for you, which you
189. 5:08also already have. So you have a really
190. 5:10wonderful business. You probably run
191. 5:11really good margins.
192. 5:12>> Yeah.
193. 5:13>> Right.
194. 5:13>> [laughter]
195. 5:14>> Four people 300 like 300 customers, I
196. 5:16would imagine they probably spend 500
197. 5:18bucks a month something like that on
198. 5:19average or higher.
199. 5:20Is that about right?
200. 5:21>> Yeah.
201. 5:21>> Okay. Yeah. And so yeah, you've got a
202. 5:23great business. I think it's just okay,
203. 5:26we need to get the outbound and the nice
204. 5:28thing is that for accounting firms it's
205. 5:29probably very easy to get in contact
206. 5:30with them.
207. 5:30>> Sure.
208. 5:31>> Right. And so like that's the
209. 5:32advertising. I wouldn't necessarily even
210. 5:34try to go direct to businesses. I would
211. 5:35go straight to CPAs and then CPAs become
212. 5:37the and then there's probably CPAs that
213. 5:38will sub sub-specialize will know what
214. 5:40types of CPAs refer better. And the the
215. 5:43process that I would think through is
216. 5:45this goes for everybody
217. 5:46is is what's the irresistible offer to
218. 5:49the affiliate? Cuz that's what they are,
219. 5:51right? And so, almost everybody here
220. 5:53when I talk to you, it's like, "Yeah, I
221. 5:55have a referral thing. I give 20% to
222. 5:57anybody, you know, who refers me
223. 5:58business." And no one refers you
224. 6:00business, and you're surprised because
225. 6:01if you were to go to every other person
226. 6:03here and say, "Hey, I'll give you 20% if
227. 6:05you refer me business." you'd probably
228. 6:06be like, "Eh, I'm good."
229. 6:08And so, it has to be an irresistible
230. 6:09offer in order to get to be really to
231. 6:11for it to really work. And so, I've seen
232. 6:13basically two ways of doing this. One is
233. 6:16that
234. 6:17they can include your service or a
235. 6:19parsed out version of your service in
236. 6:21their services at no added cost.
237. 6:23>> Absolutely. That's what you guys do now?
238. 6:24>> Yeah.
239. 6:24>> Yeah, dude. You just need to advertise
240. 6:25it. Like, you need like that's what you
241. 6:26need to advertise. Advertise that to the
242. 6:28CPAs and then build that network, and
243. 6:31then they become the consistent referral
244. 6:33gen basically every single month, and
245. 6:34you can rely on that network of CPAs to
246. 6:37send you five this month, 10 next month,
247. 6:3915 the month after that. Um and so, it's
248. 6:42like you probably have 20 CPA firms that
249. 6:44refer you business.
250. 6:46>> About 30.
251. 6:46>> 30, great. Yeah. Feel like my guesses
252. 6:48are pretty on point here. Um
253. 6:50>> [laughter]
254. 6:51>> So, so if you have 30, it's like, "Okay,
255. 6:53what does it look like to get to 300?"
256. 6:56And then think about that. So, it's
257. 6:57like, "Okay, these 30 get us four
258. 6:58referrals." I'll bet you could probably
259. 6:59increase activation on those cuz they're
260. 7:01certainly selling more than four people
261. 7:02a month between the 30.
262. 7:03>> Yeah.
263. 7:04>> Right? So, it's like I would probably
264. 7:05re- like step one would be, "How do I
265. 7:07re-engage with them? How do I integrate
266. 7:08into their existing customer journey?"
267. 7:10Because if if they have to just rem-
268. 7:13remember me, then it's like one out of
269. 7:1410 of those CPAs is remembering you once
270. 7:16a month. Like, that's not enough. Right?
271. 7:19So, it's like I need them to I need them
272. 7:20to be incorporating it into every single
273. 7:22thing so that every customer they sell
274. 7:24has something from me. So, I immediately
275. 7:26get the opportunity to upsell all
276. 7:28customers from all 30 of the CPAs.
277. 7:30Does that make sense?
278. 7:31>> Yeah. Does that include collateral to
279. 7:34the CPAs too?
280. 7:34>> Yeah, as I I mean, the irresistible like
281. 7:37what would be the most amazing thing I
282. 7:38could possibly do? Or it's like, "You
283. 7:40can sell my service at a margin." That's
284. 7:42tough for me unless you already have
285. 7:43another back-end service you can sell on
286. 7:44top of that. Right? But like there's a
287. 7:46friend of mine who has a a very big
288. 7:48um
289. 7:49uh CPA firm actually. And what he does
290. 7:52is he he goes to people who start small
291. 7:54who help small business owners get
292. 7:55started, so some of you guys in this
293. 7:56room. And he does a deal where he says,
294. 7:58"I'll set up the LLC and like the first
295. 8:00bank account for every customer." which
296. 8:02is normally like a $300 or $400 and he
297. 8:05does it for free because he knows that
298. 8:06he upsells them bookkeeping on the
299. 8:08back-end for 2,000 a year. And so he
300. 8:10just gets hundreds of appointments every
301. 8:12single day from these people that they
302. 8:14bundle his, "Hey, by the way, also when
303. 8:16you buy my thing, we'll help you set up
304. 8:17your LLC and get your first bank account
305. 8:19started, blah blah blah." and they he
306. 8:21just is included in the bundle of what
307. 8:23they sell. And then they set up a call
308. 8:25with him to do that portion of the
309. 8:27delivery.
310. 8:28Does that make sense?
311. 8:28>> Yeah.
312. 8:29>> That's the piece like right now if you
313. 8:30did nothing else, if you just do that,
314. 8:31you're like you would be able to
315. 8:32significantly increase the business.
316. 8:34>> Okay.
317. 8:35>> Cool.
318. 8:35>> Nice. Thank you.
319. 8:36>> Yeah, no worries. If you're not getting
320. 8:38as many leads as you want and your
321. 8:39business is demand [music] constrained,
322. 8:40meaning you could service more customers
323. 8:42than you currently have, then this is
324. 8:44for you. So marketing is changing
325. 8:45[music] and I think ACQ tends to be on
326. 8:47the bleeding edge of this stuff. We
327. 8:48certainly spend the money
328. 8:50to do it, but we also build custom
329. 8:51[music] software and we pay amazing
330. 8:53vendors and very expensive people to
331. 8:54figure out the system that we have right
332. 8:56now and I want to share it with you kind
333. 8:57of open kimono style. If you're not
334. 8:58getting as many leads as you want,
335. 9:00boy do I have the [music] thing for you.
336. 9:01Click below, book call and
337. 9:03hopefully I'll see you in Vegas.