Why This $2M Business Needs More Members — Transcript

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1. 0:00I have a subscription based uh
2. 0:03>> Yeah.
3. 0:04>> Yeah, boat membership.
4. 0:04>> Yes, yes, I do.
5. 0:06Uh currently doing 2 million top line.
6. 0:10Um I'd like to pass the 10 million mark.
7. 0:14Uh what's stopping me is uh decision. I
8. 0:17came here to this workshop because um
9. 0:21I've been doing this 13 years. I put in
10. 0:23my 10,000 hours, not making enough
11. 0:25money. So, I came to learn how to scale.
12. 0:28>> Mhm.
13. 0:29>> Um I have two options
14. 0:32uh in front of me in the next 6 months.
15. 0:34One to purchase an existing club that
16. 0:36would more than double.
17. 0:38>> Mhm.
18. 0:38>> And another to start a third um I have
19. 0:42five locations. This would make uh 10.
20. 0:45Um
21. 0:45>> And you're doing like two-ish with
22. 0:46500,000 in profit, right?
23. 0:49>> Yes, 600.
24. 0:52I mean
25. 0:53>> [laughter]
26. 0:53>> Hey, every dollar counts. I'm I'm with
27. 0:55you. Okay.
28. 0:55>> Yes. Um and in a session that I had this
29. 0:59morning or this afternoon
30. 1:00um
31. 1:01in asking questions about how to scale,
32. 1:03Ed told me I should not scale, I should
33. 1:06sell.
34. 1:07So,
35. 1:08>> Is it cuz you don't like it?
36. 1:11>> Yeah, that's what he said.
37. 1:13>> [laughter]
38. 1:15>> I'm just reading here.
39. 1:17>> Yeah.
40. 1:18>> Fair enough. Okay.
41. 1:18>> "Do you love boats?" And I said, "No."
42. 1:23So,
43. 1:24>> Well,
44. 1:26before we before we break your life,
45. 1:28um
46. 1:30just a couple frames cuz I I didn't say
47. 1:32this earlier, but I'll say this now. Um
48. 1:34I'm really not talking to anyone per se,
49. 1:36I'm talking through them to everybody
50. 1:37else cuz believe it or not, the problems
51. 1:39that you have is the same problem that
52. 1:40like five other people here have or 10
53. 1:41other people here have. So, just want to
54. 1:43set that up front. Um I'll just share
55. 1:45something that might be just a maybe a
56. 1:47different frame on this, which like have
57. 1:49you heard the story of the three stone
58. 1:50cutters?
59. 1:52So, guy walks up, sees a stonecutter,
60. 1:54and he says, "Hey, how's your day
61. 1:55going?" The guy's like, "It's terrible.
62. 1:57It's backbreaking work. It sucks." And
63. 1:59he's like, "Okay, well, I got it." And
64. 2:00he goes to the second stonecutter um and
65. 2:02the guy says,
66. 2:04um "Well, you know, pays the bills, you
67. 2:06know, keeps the family fed, you know,
68. 2:07that's fine." And then he goes to the
69. 2:09third stonecutter and he says, you know,
70. 2:11"How's your day going?" He says, "Oh,
71. 2:12it's amazing. I'm building a cathedral
72. 2:13that, you know, is going to last for
73. 2:15generations for my kids, right?" And so
74. 2:17the same work, just different
75. 2:19perspectives on the work itself. And so
76. 2:22the perspective that I'll share is just
77. 2:23that. Um having now owned a lot of
78. 2:25different businesses um
79. 2:28almost all businesses are the same as if
80. 2:31you chunk up high enough. Because if you
81. 2:33get two or three levels up, you're going
82. 2:35to have a director of sales, director of
83. 2:36marketing, you're going to have director
84. 2:37of IT, you're going to have personnel
85. 2:39issues, you're going to have HR, you're
86. 2:40going to have legal. And it's going to
87. 2:41suck every other day.
88. 2:44You know what I mean? And so it's kind
89. 2:46of like, you know, I've had I've had 10
90. 2:48executive assistants and I currently
91. 2:50have none.
92. 2:52Um
93. 2:53and the common thread between all of me
94. 2:55and them is them, obviously. And so
95. 3:00and so I say this because like if we're
96. 3:02ho if we're trying to hope for for the
97. 3:04business to be the thing that brings you
98. 3:06joy I would just really strongly push
99. 3:09against that. Um and I'd rather you just
100. 3:11see the business through a different
101. 3:12perspective, which is like this is an
102. 3:13opportunity to get to learn some skills.
103. 3:15Like a good friend of mine had um
104. 3:17he was in the fitness industry and then
105. 3:18started a cookie company, which makes it
106. 3:20seems completely antithetical, right?
107. 3:21He's like, "I'm creating demand and
108. 3:22supply."
109. 3:23>> [laughter]
110. 3:24>> Um
111. 3:25but what was interesting about it is
112. 3:26that I asked him, I was like, "Are you
113. 3:27passionate about cookies?" And he was
114. 3:28like, "No, not at all." And I was like,
115. 3:30"Why are you doing this?" And he was
116. 3:30like, "Well,
117. 3:31I think there's a good gap in the
118. 3:32market." This is before Crumbl. So he
119. 3:33had the right idea. Like he thought that
120. 3:35the gourmet cookies were going to be a
121. 3:36thing. He ended up having a bad
122. 3:37partnership, whatever. But the point is
123. 3:38is that he was right about his idea. He
124. 3:40did a hundred different recipes to
125. 3:41figure out the one chocolate chip cookie
126. 3:42that was amazing. And he did and he did
127. 3:44really well. But the thing is is that he
128. 3:46wasn't in he wasn't in love with
129. 3:47cookies. He was in love with being
130. 3:48excellent.
131. 3:50And I think that that's that's at least
132. 3:51how I try to see business. It's like how
133. 3:52can I let this business be an expression
134. 3:54of the values that I have rather than
135. 3:57this business has to fill a hole in my
136. 3:59heart.
137. 4:00So, back to you. Okay. So, do we exit
138. 4:04this thing? Do we get another location?
139. 4:06Cuz I'll bet if you just didn't hate the
140. 4:07people you work with, you'd probably be
141. 4:09okay with that.
142. 4:12>> With getting another location?
143. 4:14>> Oh, no, just in general. Like I mean,
144. 4:15cuz right now you have this this desire
145. 4:17cuz you have what? 2 million in debt,
146. 4:19right?
147. 4:20>> Yes.
148. 4:21>> Yeah, so you have 2 million bucks in
149. 4:22debt.
150. 4:23You're doing 600, not 500,000 in profit.
151. 4:25Notice.
152. 4:26Um and so basically after taxes, it's
153. 4:29going to take you like 6 years, 7 years
154. 4:32to pay the whole thing off assuming you
155. 4:33don't spend any money, which would suck.
156. 4:34Right?
157. 4:35>> Yes.
158. 4:36>> That would blow. Okay.
159. 4:37Um
160. 4:39So, I can feel that that is crushing
161. 4:40weight. So, either you want to scale
162. 4:42past it so these debt payments aren't
163. 4:44killing you because it's eating probably
164. 4:46the majority of your cash flow. Um or
165. 4:49selling it and kind of either starting
166. 4:51over or, you know, doing something else,
167. 4:52etc., right?
168. 4:54>> That's right.
169. 4:54>> Okay, do you have an offer on the
170. 4:55business?
171. 4:56>> No, I wasn't even looking to sell until
172. 4:59an hour
173. 5:00>> That was like sell.
174. 5:05Um [snorts]
175. 5:07So, you have 25% margins, so it's not
176. 5:08bad. I know less than that cuz you're a
177. 5:10little higher than 2 million in revenue,
178. 5:11right? 2.7, is that what it is?
179. 5:14>> Um
180. 5:14>> revenue?
181. 5:15Between 2 and 5?
182. 5:16>> 2 million.
183. 5:17>> It's 2 million, okay. So, it's 2 million
184. 5:18top line five 600, excuse me. 600,000
185. 5:20bottom. So, you run 30% margins. The
186. 5:22only issue is you made a bad decision
187. 5:23like 4 years ago or however many years
188. 5:25ago you took the debt out.
189. 5:27>> Yes, cuz it's pretty capital intensive
190. 5:29to have 50 boats.
191. 5:30>> Yeah.
192. 5:33So, how's cash flow for the business?
193. 5:36>> Um good. I mean
194. 5:38COVID was great. We
195. 5:40sold like crazy and unfortunately put a
196. 5:42lot away, so I don't have cash
197. 5:44constraint.
198. 5:45>> That's great. Okay. So, okay, outside of
199. 5:48like let's sell this thing. You still
200. 5:50want to grow it, right?
201. 5:52>> I want to grow business. This just
202. 5:54happens to be the vehicle.
203. 5:55>> think this is a bad business. I mean a
204. 5:56boat membership where you have a, you
205. 5:58know, like I mean I fundamentally you
206. 6:01have very high margins on each
207. 6:02incremental membership, correct?
208. 6:04>> Yes. Yes.
209. 6:05>> So, you're kind of at this point where
210. 6:06like you've covered all your costs and
211. 6:08so each additional membership makes you
212. 6:11a lot more money, right?
213. 6:13Disproportionately drops the bottom line
214. 6:14is my point.
215. 6:15>> Yes.
216. 6:15>> Okay. So, what stops you from selling 10
217. 6:18times the memberships?
218. 6:25>> That was the question that I tried to
219. 6:27answer
220. 6:28coming here and going through the
221. 6:29framework and I and when we were going
222. 6:31through the circles yesterday,
223. 6:33I came down to I think it's my offer.
224. 6:35>> Okay.
225. 6:37Okay. And is this is this a franchise or
226. 6:39is this yours that you just started on
227. 6:40your own?
228. 6:40>> That's the other part of the equation is
229. 6:43that it's it's a licensing model. And I
230. 6:45think the conversation in the room today
231. 6:47was
232. 6:48is it really mine if I'm under a
233. 6:50licensing structure?
234. 6:51>> I think you could sell the business. You
235. 6:53have an existing agreement, but what do
236. 6:54you give away top line?
237. 6:56>> Nothing.
238. 6:57>> Oh, okay. So, then what what's the
239. 7:00what do you license?
240. 7:02>> The the
241. 7:03marks and the system. It's a reservation
242. 7:06software system.
243. 7:06>> fee?
244. 7:07>> So, technically my members do because
245. 7:10we're licensed and not a franchise. I
246. 7:11can't pay directly, so the members do.
247. 7:13>> Okay, what percent do they give away?
248. 7:15>> It It's It's $500 a month membership. 30
249. 7:18bucks a month goes to corporate.
250. 7:20>> Okay, so whatever that is, 6%?
251. 7:23Okay. I mean that's fine.
252. 7:24>> Mhm.
253. 7:25>> Okay, so I mean I wouldn't say it's
254. 7:26strangling you.
255. 7:27Um okay, so it's 20% your margin
256. 7:29functionally. All right. So, uh why So,
257. 7:32do you currently do ads? Do you do
258. 7:34outbound? Do you organic? Do you do any
259. 7:35affiliates? What are you doing to grow?
260. 7:37>> We spend about 6,000 a month in paid
261. 7:40ads. We do a lot organic.
262. 7:42>> What's your ROI on this?
263. 7:43>> Oh.
264. 7:47Good bad?
265. 7:48>> Um
266. 7:49well, according to the marketing agency
267. 7:50that I use, they're very very great.
268. 7:54>> And then they're like, "It's
269. 7:55acceptable."
270. 7:55>> Yes. Yes.
271. 7:56>> You've just spent all your money here.
272. 7:57>> Yes. I only spend $11 per lead and
273. 7:59that's a fabulous number in the
274. 8:01industry, evidently.
275. 8:02>> Well, what percentage are you closing of
276. 8:04leads?
277. 8:05>> Uh the industry standard is 6%. When I
278. 8:07was doing it myself, it was 10%.
279. 8:09>> here. Just for everybody, zero
280. 8:10about industry standards.
281. 8:11>> Okay. We're at 4%.
282. 8:13>> Average American, overweight, in debt,
283. 8:15divorced seven times over. Why would I
284. 8:16care about the average industry person?
285. 8:18They all suck and don't make money.
286. 8:19them. So, anyway, sorry. Go back to you.
287. 8:21>> [laughter]
288. 8:23>> We're at 4% lead to close.
289. 8:25>> Okay, 4% lead. So, it cost So, 25 times
290. 8:27lead cost. So, it two, whatever, 266
291. 8:31is cost of acquisition right now, not
292. 8:33including sales commissions.
293. 8:37That's what the number is. So, like um
294. 8:39>> Thank you.
295. 8:39>> Yeah, yeah, you're good.
296. 8:40So, um if that's if that's what it costs
297. 8:43you to get a customer, what's the
298. 8:44membership? It's 500 a month?
299. 8:46>> It's a $5,000 initiation fee and then
300. 8:48$500 a month. We sell 5-year contracts.
301. 8:51>> I love this.
302. 8:52>> Uh
303. 8:53>> Why are we getting out of this business?
304. 8:55Costs it costs it costs $300, $400 with
305. 8:59commissions, whatever,
306. 9:00to get the sale, to get a $5,000 up
307. 9:02front and then and then $500 a month or
308. 9:05>> Mhm.
309. 9:06>> Yeah, that sounds chill.
310. 9:08>> So, that's why I was thinking I'd do
311. 9:10more of it.
312. 9:10>> Yeah, do more sounds great.
313. 9:13I love this for us. I love this for us.
314. 9:16>> [laughter]
315. 9:16>> I love this.
316. 9:17>> Yeah.
317. 9:18Um
318. 9:19Okay. So, why don't we spend more on
319. 9:22ads?
320. 9:23>> Sounds like I should.
321. 9:24>> I feel like that's not a terrible idea.
322. 9:26>> Not a terrible idea.
323. 9:27>> Yeah. The thing is is you have a
324. 9:28business where
325. 9:29this happens a ton, by the way. Like,
326. 9:31you get And this is this is actually
327. 9:32really interesting cuz that's in my
328. 9:33opinion is purely psychology, but you
329. 9:36you have a certain amount of cost that
330. 9:37you have that's fixed cost in the
331. 9:38business and then you spend enough
332. 9:40marketing to get above the fixed cost
333. 9:42and then make some profit and then you
334. 9:43like exhale you're like thank god I'm
335. 9:44not losing money. But it's like you're
336. 9:46willing to work so hard to make everyone
337. 9:48else money. Your landlord, the licenser,
338. 9:51the your the employees, like you're
339. 9:52paying all their mortgages but then like
340. 9:55you're just forgetting to like pay you.
341. 9:57>> Mhm.
342. 9:57>> And so it's like let's go ham on that
343. 9:59side.
344. 10:00Like when it gets easy is when you go
345. 10:01hard.
346. 10:03So I'm So you do this, what else you do?
347. 10:07You said you're good at organic stuff.
348. 10:09>> Yeah, we are and well a third of our new
349. 10:11members come from our existing referrals
350. 10:14or existing members.
351. 10:15>> Okay, cool.
352. 10:16Do you have a really structured referral
353. 10:17system or just people talk to people?
354. 10:20>> Yes and yes.
355. 10:21>> Okay, cool. Cuz we have a whole bunch of
356. 10:22badass stuff for referral stuff but
357. 10:25um that's one thing that can probably
358. 10:27get juiced beyond the scope of right
359. 10:28now.
360. 10:29Um
361. 10:30but that's a big one and then ad stuff
362. 10:33honestly if we could take a look at it
363. 10:34it's like we could probably figure it
364. 10:35out in 5 seconds of what needs to The
365. 10:37thing is is what's your close rate on
366. 10:38people who come in?
367. 10:41>> Um
368. 10:43So
369. 10:444% lead to close and then we 33%.
370. 10:48>> Okay, you're fine.
371. 10:53Yeah, like your stuff's not up.
372. 10:55>> [laughter]
373. 10:55>> Okay.
374. 10:56>> We just need to get the referral system
375. 10:57in place. We need to spend more on ads.
376. 10:58We need to make sure attribution's
377. 10:59right. If we needed to tweak the like if
378. 11:01you were like I'm closing 10% then it's
379. 11:02either a sales motion issue or it's an
380. 11:03offer issue. Now if the lead costs are
381. 11:05too high but you said they weren't, if
382. 11:07the lead costs were too high I would
383. 11:08look at offer as well but that might not
384. 11:09be the issue right now. And so I think
385. 11:12probably more and better creative that
386. 11:14we do on the ad side and I'm sure Are
387. 11:15you doing Google AdWords? Is that your
388. 11:16primary? Yeah.
389. 11:17>> Yes.
390. 11:17>> Um more and better creative, probably
391. 11:19better targeting in terms of what what
392. 11:20keywords we'll be look uh bidding on. Um
393. 11:24and there's probably a handful of like
394. 11:26really easy CRO stuff so conversion
395. 11:28optimization that we can do on the
396. 11:29actual funnel itself. Like you just
397. 11:31don't know a lot of like there's so many
398. 11:32little things there that you can just
399. 11:34like immediately increase how much the
400. 11:36business is making from each lead and
401. 11:37that'll probably just give you a little
402. 11:38bit more exhale like
403. 11:41uh in order to spend more cuz I think
404. 11:42that's what we have to do.
405. 11:43Thank you. If you like this video and
406. 11:45you're a business owner who wants to
407. 11:46break through your current revenue
408. 11:47ceiling, I distilled every lesson from
409. 11:48scaling 10 businesses past 10 million
410. 11:50and three businesses past 100 million
411. 11:52into a completely free scaling roadmap
412. 11:54that I've used to go from zero to one,
413. 11:56zero to 10, and zero to 100 plus. And so
414. 11:58you can click here and you can check it
415. 11:59out. Again, absolutely free and since
416. 12:01you're a business owner, I appreciate
417. 12:02you and enjoy.