Why Aren't You Spending More on Ads? — Transcript

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1. 0:00buying how to scale my travel agency.
2. 0:01Currently, I do lead generation via
3. 0:03Meta. Okay. The few sales agents last
4. 0:05month, we did 30k profit. Amazing. And a
5. 0:07hard 60k in sales. All right. Five jeez.
6. 0:10Okay, 5,500 ad spend. Really good. How
7. 0:12does this scale to a million plus
8. 0:14uh sales per month? Okay, great. So,
9. 0:18I mean, fundamentally, I'm actually not
10. 0:19really
11. 0:20I mean, if I don't know what percentage
12. 0:22of the revenue you're generating is from
13. 0:25ads, but if you spent 5,500 bucks or
14. 0:29pounds, and you made 160,000 dollars in
15. 0:31sales,
16. 0:33like that's that's pretty good. You know
17. 0:34what I mean? Like that's that's really
18. 0:36strong. And that
19. 0:37if you made 30k in profit from that,
20. 0:39then your gross margins are obviously
21. 0:41higher than that. And so, if I'm going
22. 0:42to spend 5,500 dollars in ad spend, and
23. 0:45I'm going to make at least six to one
24. 0:47because your gross profit's higher than
25. 0:48your net profit, then I would say like,
26. 0:50what stops you from spending more on
27. 0:52ads? And to me, that is the process of
28. 0:55how do I scale to a million a month.
29. 0:56Now, there's a world where you're unable
30. 0:59to scale the ad spend past a certain
31. 1:00point because the lifetime gross profit
32. 1:02per customer is not high enough. And in
33. 1:03that situation, you've a number of kind
34. 1:05of levers that you can pull. Number one
35. 1:07is you could change the offer itself,
36. 1:08which would
37. 1:09you know, improve those metrics. Number
38. 1:10two is that you could expand to other
39. 1:12cheaper CPM channels. Or number three,
40. 1:14which is my preference, is that you
41. 1:16expand the money model, right? Expand
42. 1:18the mouse trap, so that you can make
43. 1:19more per customer. Because if you think
44. 1:21about long term, if we if we if we
45. 1:22equate businesses in terms of their
46. 1:24ability to get customers, what is what
47. 1:26is typically far more differentiated is
48. 1:28the LTV per customer. And so, the
49. 1:29classic example that I give is uh
50. 1:31Starbucks, right? If you have a coffee
51. 1:32shop and you're competing at Starbucks,
52. 1:34you getting a coffee customer is
53. 1:35probably not going to cost that much
54. 1:36more than it costs for a Starbucks to
55. 1:37get a a coffee customer. But what will
56. 1:39be dramatically different is that they
57. 1:40have a $14,000 LTV and you do not. And
58. 1:42so, they're able to spend more than you
59. 1:43can because they make more. And so, the
60. 1:45long-term arms race of business is
61. 1:47always the lifetime gross profit per
62. 1:48customer, and that is how you can go
63. 1:50into new markets and dominate because
64. 1:52you have a way that makes way more. Now,
65. 1:54I would say that that is the
66. 1:56that is the best long-term competitive
67. 1:58advantage is having something that a lot
68. 2:00of people need that you make a lot of
69. 2:02money from. Now, the short-term
70. 2:04competitive advantages, which is where I
71. 2:05think real disruptors actually happen in
72. 2:06the business world, is where you
73. 2:08actually find a way to have different or
74. 2:10cheaper distribution. So, for example,
75. 2:13Jim Shark has come in and, you know,
76. 2:15taken a shot at Nike and some of these
77. 2:17larger brands because they had unique
78. 2:19unique and new and cheaper distribution.
79. 2:22And this is almost always the the the
80. 2:23case because old players don't learn the
81. 2:26new tricks fast enough and then the
82. 2:27emergent players, if they're smart, can
83. 2:29capitalize and disrupt.
84. 2:32Um
85. 2:33Look at First Form for supplements. They
86. 2:34were one of the first people. Look at
87. 2:35Quest also for supplements. I'm
88. 2:37obviously I'm from the fitness space, so
89. 2:38I saw those ones firsthand.
90. 2:40Um and Jim Shark as well, right? And so
91. 2:41each of these are are examples of people
92. 2:43who were who were bootstrapped, started
93. 2:45early on a new trend where they had
94. 2:47cheaper CPM. So, in the event where you
95. 2:50feel like it is very difficult for you
96. 2:51to expand your lifetime gross profit um
97. 2:54in comparison to a larger entrenched
98. 2:56competitor, then you'll have to beat
99. 2:57them on CAC. So, you have to get lower
100. 2:59way sorry, a cheaper way of getting
101. 3:01customers.
102. 3:04So, fundamentally, spend more money than
103. 3:06you currently are. Um and if you can't
104. 3:07spend more money, those are the
105. 3:08different things that I just walked
106. 3:09through in terms of solutions.
107. 3:11And I think actually the the the chat
108. 3:13had good look more ads. What's stopping
109. 3:15you from doubling your revenue, right?
110. 3:16Here we go. Sales agents do manual sales
111. 3:18manual sales takes time to convert. It's
112. 3:20travel agency. More spend more than
113. 3:21Okay, so you need more sales people.
114. 3:23Okay, so if that's actually the
115. 3:24limitation, then what we need to do is
116. 3:27go get another sales person. So, let's
117. 3:28see if he answered that one. But, this
118. 3:30is actually a great exercise though
119. 3:31actually seeing this because like that
120. 3:33is the game. That is the process. Well,
121. 3:35I would, but I can't because. And
122. 3:37whatever the because is then should be
123. 3:39the thing that takes your full attention
124. 3:40in terms of your resources to go solve.
125. 3:42And so whenever you're spending time,
126. 3:43this is very real. The reason that some
127. 3:45people like every bootstrapped
128. 3:46billionaire that you've ever met, if
129. 3:48they started with zero and you have
130. 3:49zero, you have no more advantages than
131. 3:51they have. And it has to be very real.
132. 3:53And so fundamentally the only thing they
133. 3:54were able to do is allocate the very
134. 3:55limited resources they had compared to
135. 3:57you in a superior way, meaning they got
136. 3:59better returns for their time, their
137. 4:00effort, and their money than you are.
138. 4:02And so most of the time you are spending
139. 4:04your days working on things that are not
140. 4:06the constraint of the business. Elon in
141. 4:08a in a recent interview talked about
142. 4:09what do you what are you thinking about
143. 4:11when you're trying to
144. 4:13you know, how are you growing these
145. 4:14businesses so fast? He says, "I
146. 4:15exclusively focus on the limiter, the
147. 4:17rate limiter." And so every business has
148. 4:19rate limiters. There's something that is
149. 4:20stopping you from scaling. And so all of
150. 4:22your effort as an entrepreneur should be
151. 4:23directed towards solving the most
152. 4:24complex problem, which is typically the
153. 4:27rate limiter, the bottleneck, the
154. 4:28constraint. All different ways of saying
155. 4:29the same thing, which is there's
156. 4:30something that's that's stopping you
157. 4:31from making more. And any resource that
158. 4:33is not deployed towards that is
159. 4:36increasing the potential of the system,
160. 4:38not the throughput of the system.
161. 4:40And so we need to increase the
162. 4:41throughput, and the only way to do that
163. 4:42is to address the constraint. If you're
164. 4:44not getting as many leads as you want
165. 4:45and your business is demand constrained,
166. 4:46[music]
167. 4:47meaning you could service more customers
168. 4:49than you currently have, then this is
169. 4:51for you. So marketing is changing, and I
170. 4:53think [music] ACQ tends to be on the
171. 4:54bleeding edge of the stuff. We certainly
172. 4:56spend the money
173. 4:57to do it, but we also build custom
174. 4:58software, and we pay amazing vendors and
175. 5:00very expensive people to figure out the
176. 5:02system that we have right now, and I
177. 5:03want to share it with you kind of open
178. 5:04kimono style. If you're not getting as
179. 5:05many leads as you want,
180. 5:07boy, do I have the thing for you. Click
181. 5:08below, book call, and
182. 5:10hopefully I'll see you in Vegas.