Why Copying a Competitor Can Copy His Broken Model — Transcript

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1. 0:00We sell motocross training.
2. 0:01>> Okay.
3. 0:02>> So, we we hold fiveday camps is what I'm
4. 0:04kind of realizing.
5. 0:05>> Yes.
6. 0:06>> Cool.
7. 0:06>> Yeah. So, this has been cool because I
8. 0:08start to the gears are turning as far as
9. 0:09how to run a good event.
10. 0:11>> So, thank you.
11. 0:11>> Yeah.
12. 0:13>> Um, what we did to be able to get our
13. 0:16projection to 26 to the 4 million is we
14. 0:20scaled down our single day tour dates.
15. 0:23We were we we did more in 24. We went
16. 0:26all the way to we scaled from 70 single
17. 0:29day tour dates in 23 to 140 of them in
18. 0:342024 and it was just a ton of
19. 0:36operational drag. I mean it was like we
20. 0:38were like a rock.
21. 0:40>> It was nuts.
22. 0:42>> But what we realized and looking back on
23. 0:43it is the bottom 20 of those were net
24. 0:45negative. The the next 20 were net less
25. 0:48than $1,000. So inconsequential. And
26. 0:51then I started looking at in 2024, we
27. 0:53did three of the five-day camps kind of
28. 0:55as a test run. Each of those net well
29. 0:57over 100 grand each. And I'm like, well,
30. 0:59hang on a second. This is the answer. So
31. 1:02this year, I told the team, at first I
32. 1:04called them. I said, hey, I just had an
33. 1:06epiphany. Here it is. We're going to do
34. 1:0810 camps. And I said, actually, no,
35. 1:10we're actually going to do 25. And
36. 1:12they're like, 25? What do you mean 25?
37. 1:15>> My question is,
38. 1:17>> do I continue to
39. 1:19>> my you just able to charge more for the
40. 1:21three-day than the one day.
41. 1:23>> Uh the five
42. 1:24>> Why did they make some or sorry?
43. 1:25>> So the one day is $300 which is probably
44. 1:27not enough. The 5day is $1,200 which is
45. 1:31definitely not enough.
46. 1:33>> Uh so that's what part of the question
47. 1:35too.
48. 1:35>> Cool.
49. 1:36>> Um
50. 1:37I want to continue to scale the
51. 1:39fivedayers and scale down the single
52. 1:40days, but my fear is we basically own
53. 1:42the space. Nobody else does what I do.
54. 1:44It's pretty large market. Um, there is
55. 1:47one copycat company and he's trying to
56. 1:49hit all these single day tour dates in
57. 1:50the regions that we're doing them. So,
58. 1:51I'm afraid if I scale them down too
59. 1:53much,
60. 1:54>> we won't.
61. 1:55>> He's going to copy the model that makes
62. 1:56no money.
63. 1:57>> Say that again.
64. 1:57>> He's going to copy the model that makes
65. 1:58no money, right?
66. 2:00>> Say it one more time.
67. 2:01>> He's going to copy the model that makes
68. 2:02no money.
69. 2:04>> That's a great point. Yeah.
70. 2:08>> Love this for us, right? [laughter]
71. 2:11>> I hope he does.
72. 2:12>> Okay. I could honestly I could go home
73. 2:15right now and I'd be happy after that.
74. 2:19>> Yeah, you're right. You're right. And I
75. 2:21feel more confident that I don't think
76. 2:22he could do what we could do anyways,
77. 2:23but he certainly can't do what we can do
78. 2:25in a 5-day event. I mean, we we've run
79. 2:27those five days like nobody else. So,
80. 2:28>> okay.
81. 2:29>> Um,
82. 2:29>> so you kept pushing on price, so let's
83. 2:31just handle that real quick. Um,
84. 2:33>> why can't you charge more?
85. 2:36>> I definitely can. The reason I haven't
86. 2:38is because I started riding dirt bikes
87. 2:40when I was two. I turned pro when I was
88. 2:4216,
89. 2:43>> etc. help people. I want to
90. 2:44>> My family had no money, so I didn't want
91. 2:46to outpric the people that were me. Does
92. 2:48that make sense?
93. 2:48>> Yeah. Yeah. Do you make like content? Is
94. 2:50that the primary way that you get
95. 2:51customers?
96. 2:51>> Yeah.
97. 2:52>> Okay. So, you do that for free?
98. 2:54>> Yep.
99. 2:54>> And those people get that for free.
100. 2:56>> Everything's free. Yeah.
101. 2:57>> Right. And so
102. 2:59I have we have 22 million subscribers.
103. 3:02There's 100 people here. A lot of people
104. 3:04get you for free. I think that
105. 3:08Let me say it differently. If you like
106. 3:10you will never help in person even a
107. 3:14tiny fraction of a percent of the people
108. 3:15that you've helped for free. It's just
109. 3:17not the world isn't structured that way.
110. 3:19You will be able to monetize 1% of the
111. 3:22people maybe right if you're lucky that
112. 3:25you've actually helped in the model that
113. 3:26the way media exists today. It might
114. 3:28change but for now that's how it works.
115. 3:30And so I think you have some sort of
116. 3:32guilt that you can't help somebody, but
117. 3:35you won't be able to expand your
118. 3:37footprint or the media without the cash
119. 3:40flow to grow. And so if you turn this
120. 3:42into a billion-dollar company, which why
121. 3:44couldn't you, right? I mean, the
122. 3:45market's big, right? If you were to turn
123. 3:47this into a gigantic company, do you
124. 3:49think you'd make a bigger impact than
125. 3:50you do now?
126. 3:53>> Yes.
127. 3:53>> Right. And in order to do that, it takes
128. 3:55money.
129. 3:56>> Yeah.
130. 3:57And so
131. 4:01you can you can serve the person who
132. 4:04can't afford it for free and then you
133. 4:06serve the people who can afford it for
134. 4:08the the correct price.
135. 4:10>> And we do have a crazy amount of free
136. 4:12content. So based on not knowing
137. 4:13anything about the industry, what would
138. 4:15you change the price from from 1,200
139. 4:16bucks a week?
140. 4:17>> I can't tell you what the actual number
141. 4:18is, but I can say what's your closure
142. 4:21right now?
143. 4:22>> I don't know.
144. 4:23>> Do you sell on the phone or via
145. 4:24checkout? I want to begin selling on the
146. 4:26phone. We have a a website landing page.
147. 4:29We just began doing ClickFunnels because
148. 4:31what made me sign up for this? I'm like,
149. 4:33we have to do that.
150. 4:34>> Yeah. Are you working with us after
151. 4:35this?
152. 4:37>> No, I think I should, but I'm afraid
153. 4:39that I don't have enough
154. 4:40>> I'm afraid I don't have enough data yet
155. 4:42because like when I was filling this
156. 4:43thing out,
157. 4:44>> but you don't have the data of like and
158. 4:45I don't I promise I don't care. Like I
159. 4:47mean I don't need the money. I I mean
160. 4:49that um the like the the reason I bring
161. 4:53it up is just because like you're going
162. 4:55to build a sales motion. There's a lot
163. 4:57of mistakes that you can make there and
164. 4:58getting it right the first time is worth
165. 5:00it.
166. 5:02>> So now would be
167. 5:03>> and all of a sudden the pricing power
168. 5:04might not be like 300 to like 400 might
169. 5:06be 300 to 3,000 and you'll be like I
170. 5:08can't even do that. You for sure [ __ ]
171. 5:10can't.
172. 5:11>> Would you give up on the single layers
173. 5:12completely and just only focus?
174. 5:14>> We have to look at the unit economics.
175. 5:16>> Say it again. We have to look at Is my
176. 5:17thing not loud?
177. 5:19>> The unit economics.
178. 5:20>> No, I'm just so stuffed up right here. I
179. 5:21>> Oh, god. Okay.
180. 5:22>> Just reading your [laughter] lips. Yeah,
181. 5:23>> you're good. Yeah, we just have to look
182. 5:25at the unit economics. So, we just have
183. 5:26to, you know, open the open the hood,
184. 5:27pop it, and just like look at both both
185. 5:29different event days. Well, sometimes
186. 5:32sometimes the single like I we had a we
187. 5:34had a business that had u um it was a
188. 5:36brick-and-mortar service business, had
189. 5:38two models, a micro model and like a
190. 5:40bigger facility model. The bigger
191. 5:42facilities uh obviously had more revenue
192. 5:44and more absolute profit, but the return
193. 5:46on capital and return on effort for the
194. 5:48small ones was like 5x. And so even
195. 5:50though like the founder was like, "Ah,
196. 5:52the I love having these, you know, these
197. 5:54big whatevers," it was like, "We can
198. 5:55expand so much faster and we can get to
199. 5:57our 10-year goal in three years if we do
200. 6:00the one day or the one the mini
201. 6:01version." So, we just have to look at
202. 6:03it. Um, and all we're really optimizing
203. 6:05for is returnal capital, human capital,
204. 6:07and financial capital. That's all like
205. 6:10if you think about if you if you boil a
206. 6:11business down to its most basic unit,
207. 6:12it's an economic arbitrage between what
208. 6:14it cost you to make more money. It's all
209. 6:15it is. And then the difficulty of of
210. 6:17continuing to do that. And so that means
211. 6:19that we spend a certain amount of money
212. 6:21to get someone in, which for you is
213. 6:22going to be the cost of your immediate
214. 6:23team and your time. That's the cost,
215. 6:24right? On the on the back end, it's what
216. 6:28do we make from those people who come in
217. 6:29the door and what stops us from doing
218. 6:31more of that thing, right?
219. 6:33[clears throat]
220. 6:33And so if there's a model that right now
221. 6:35we can can spin that wheel faster and it
222. 6:37costs us less here. That's the better
223. 6:38model. I just don't know which one it
224. 6:40is. And in terms of pricing, we just
225. 6:42continue to go up until willingness to
226. 6:44pay stops and then we just stay there.
227. 6:47The nice thing here's the
228. 6:48>> I have a hunch that the conversion's
229. 6:49very high.
230. 6:50>> Yeah.
231. 6:51>> Yeah. Obviously
232. 6:52>> you'll be able to afford it. [laughter]
233. 6:55But my but the the the the main point
234. 6:57though um you said something I had my it
235. 7:00was a good one. It was a good one. Um
236. 7:06yeah. Oh umh I'll remember it when I
237. 7:09talk to somebody else. Um [laughter] but
238. 7:12yes,
239. 7:12>> what was the thing that you said that
240. 7:14hit me like a in the face?
241. 7:16>> Uh your competitor.
242. 7:17>> He's going to copy something.
243. 7:18>> He's going to copy a broken model. So
244. 7:20you should hope he does that.
245. 7:20>> Okay. That was my sell to the team. Not
246. 7:22that I need to sell the team on it.
247. 7:24>> Yeah. And I'll land the plan on that for
248. 7:25you, too, which is that you will never
249. 7:27go out of business focusing on the
250. 7:29customer.
251. 7:30And I I'll tell you a quick story. So
252. 7:32the biggest business mistake that I I've
253. 7:34made, the two most costly business
254. 7:36mistakes I've made. Um, one of them has
255. 7:39nothing to do with this. This is the
256. 7:41other one, [laughter]
257. 7:42which has everything to do with this.
258. 7:44Um, I had a competitor that ended up
259. 7:47taking a bunch of my top testimonials
260. 7:49that were that we kind of converted to
261. 7:51semi- employees because they were big
262. 7:52evangelists back in the gym launch days.
263. 7:55And as soon as they took them and they
264. 7:57were they were big ads for me, all of a
265. 7:59sudden they were running ads for this
266. 8:00other guy. So it's kind of like when the
267. 8:01Verizon guy went to the AT&T, remember
268. 8:03that that that switch over that actor?
269. 8:05It was kind of like that. And this guy
270. 8:08was offering one-on-one coaching um to
271. 8:11help people out. I never did that. And
272. 8:13so and they were cheaper. So they were
273. 8:15cheaper. They were doing one-on-one. And
274. 8:17they had some of my top, you know,
275. 8:18customers uh becoming advocates. And
276. 8:21they said that the 10 of them had come.
277. 8:22They partnered. he partnered with these
278. 8:2410 people or something like that. And
279. 8:26when that happened, I got r my feathers
280. 8:28got all ruffled. And I was like, it's
281. 8:31war time. We gota, you know, we got to
282. 8:32go to the mattresses. We got to really,
283. 8:34you know, change change the business up.
284. 8:35And so I did this big kind of like
285. 8:37relaunch internally to my existing
286. 8:39customer base. And um I said, we're and
287. 8:43I did this big value stack and I said,
288. 8:45you're going to get all this extra
289. 8:46stuff, not for the same price you're
290. 8:49paying me, but for less. And so I took
291. 8:52my existing recurring base and I reduced
292. 8:56my revenue by $500,000 topline per
293. 8:58month. And so that translated because we
294. 9:01didn't take it off topline and and the
295. 9:02cost went up. So I increased my costs
296. 9:04and I took my topline down by 6 million.
297. 9:08And I ended up losing in profit
298. 9:10somewhere in the neighborhood of $6 to7
299. 9:12million a year for that business at the
300. 9:14time.
301. 9:16I then ended up selling that business
302. 9:18obviously and the business never
303. 9:20recovered that profit. It stayed there.
304. 9:23And when I did make that move, the first
305. 9:26comment in the chat after I dropped that
306. 9:29it was less was a complaint that I had
307. 9:31not done it earlier.
308. 9:34So it was not, "Thank you so much for
309. 9:36lowering the price and giving us more
310. 9:37shit." It was, "I can't believe I was
311. 9:39paying more." And I was like, "I want to
312. 9:43[ __ ] kill myself." [laughter]
313. 9:45And and here was the best part of all.
314. 9:48My churn
315. 9:50changed zero.
316. 9:52So I just cut my top line by 20%. Churn
317. 9:54remained the same because the
318. 9:56willingness to pay change that I made. I
319. 9:58basically reduced it from call it 3,000
320. 10:00a month to $2,500 a month. It actually
321. 10:02made no real difference in whether
322. 10:04someone would cancel or not. It was past
323. 10:06a threshold that this is a lot of money.
324. 10:09And so it changed nothing. I just made
325. 10:10less money.
326. 10:12And then when I sold the company, that
327. 10:14six got multiplied by a lot. And so that
328. 10:17probably cost me in the neighborhood of
329. 10:18probably $50 mill million.
330. 10:21And so the big lesson that I learned
331. 10:23there was that I shouldn't and that that
332. 10:25competitor ended up killing that
333. 10:27business because it wasn't [ __ ]
334. 10:29profitable.
335. 10:31And so I I was the market leader and
336. 10:33someone came in to undercut me and then
337. 10:35I said, "Oh, I'll copy the moron."
338. 10:40>> It's easy to let happen. Yes.
339. 10:42>> Yeah.
340. 10:42>> And so don't lose $50 million.
341. 10:45Let him let him figure that out for
342. 10:47himself. You just focus on the customer
343. 10:49and you'll win.
344. 10:50>> Yeah.
345. 10:51>> Good answer. Thank you.
346. 10:52>> Appreciate you. If you like this video
347. 10:53and you're a business owner who wants to
348. 10:54break through your current revenue
349. 10:55ceiling, I distilled every lesson from
350. 10:57scaling 10 businesses past 10 million
351. 10:59and three businesses past 100 million
352. 11:01into a completely free scaling road map
353. 11:03that I've used to go from 0 to 1, 0 to
354. 11:0510, and 0 to 100 plus. And so you can
355. 11:07click here and you can check it out.
356. 11:08Again, absolutely free. And since you're
357. 11:10a business owner, appreciate you and uh
358. 11:12enjoy.