In this podcast, Speaker A outlines the growth stages of a business, focusing on the revenue milestones from zero to over $100 million. He emphasizes the importance of mastering one product on one channel to reach the first million, then scaling to multi-product offerings for growth up to $10 million. Beyond that, he discusses professionalizing the business, with structured operations and legal frameworks, to support expansion from $10 to $30 million. Finally, Speaker A highlights the need to foster intrapreneurship within the company to drive innovation and maintain the entrepreneurial spirit for reaching $100 million. He also touches on his own experiences and mistakes, recommending a focus on core competencies and avoiding distractions for those in the early stages of business growth.
What's going on? Everyone? Super excited to break down what we're going to talk about today, which is the kind of four big, you know, chapters in the growth of a business. So zero to a million dollars a year, one to $10 million a year, ten to $30 million a year, and then $30 to $100 million plus.
This quote introduces the main topic of the podcast, which is the breakdown of the four key growth stages of a business in terms of revenue.
Like, unless you have a business, it's hard to understand all the bottlenecks because none of it's real for you. So this will probably be more for the people who have businesses. But if you don't have a business, then please enjoy. That being said, zero to a million, really simple. It's just one product on one channel.
Speaker A explains that understanding the challenges of business growth is easier when you are actively running a business. The first stage of growth is simplified to focusing on one product and one sales channel.
Getting to ten is multi products, right? Now, an important note here is that you're not starting multiple businesses, right? It's going to be cross sells and upsells.
Speaker A clarifies that scaling to $10M in revenue involves expanding the product range offered to existing customers through cross-sells and upsells, rather than creating separate businesses.
Now from ten to 30. And mind you, it's multiple products. And depending. Sometimes it's multiple channels, all right? You can kind of do it either way.
This quote indicates that the journey from $10M to $30M in revenue can involve diversification of both products and marketing channels, depending on what suits the business best.
"uperior back end, you can now go broader, right? That's kind of how it works from a business day to day standpoint."
This quote highlights the significance of having a robust operational back end in a business before attempting to scale up and broaden the market reach.
"And this is honestly really painful, and it's hard to do. And I'm thankful that I had mentors early on that were like, this is what you need to do now."
The quote reflects the speaker's acknowledgment of the difficulties in professionalizing a business and their gratitude for mentorship during this challenging phase.
"Because I probably wouldn't have said this is the next thing. But what ends up happening, which you're at like 10 million million a month type range, is then the thing that made you special, your special sauce here, which may have been a lot of you as the founder, is it starts to get diluted out, right?"
The speaker is expressing the reality that the unique qualities of a business, often tied to the founder, can become less prominent as the business grows and requires more structured management.
"And then you have customer complain and customer support issues. And then it's just like you're basically still a really big small business at that 10 million."
This quote points out the operational difficulties that arise when a business grows in size but lacks the necessary infrastructure to handle the increased complexity effectively.
"You don't have the systems, the infrastructure to build more on top of because it's still like Google sheets, trello boards. It's just craziness to try and manage this."
The speaker is highlighting the inadequacy of informal or ad-hoc systems, like Google Sheets and Trello boards, for managing a business once it reaches a certain scale.
"And so this is where you have to hire some more corporate people. And this is what every entrepreneur fears more than anything, right? Is that we fear bringing in these corporate suits who just are going to suck the life out of you."
The speaker discusses the common entrepreneurial fear of hiring corporate individuals who may not share the same passion and could potentially stifle the business's original spirit.
"You have to have structure. You have to have hierarchy. You have to have HR, you have to have these things in place so that employees feel more comfortable, but also so that you're protected from a liability standpoint, right?"
The necessity of implementing structured hierarchy, human resources, and other formal business systems is stressed as essential for both employee well-being and legal protection.
"Because honestly, once you get into this range, you become a target. This is where lawsuits start coming in. This is where lawyers and contracts start mattering and all of this stuff, right?"
The speaker warns that reaching this level of revenue increases the business's visibility and vulnerability to legal challenges, emphasizing the importance of sound legal and contractual practices.
"And so professionalizing the business, especially from HR, legal and accounting standpoint, comes here. And then the it systems. All right?"
The quote underscores the transition to a more professional business model, focusing on human resources, legal, accounting, and IT systems as critical areas for development.
"So this is really like really strengthening the ops of the business, the operational infrastructure, because what this does is that it makes all of these things that we learned how to upsell before. It really makes them methodical, right?"
The speaker is highlighting the importance of solidifying the operational infrastructure to ensure consistency and efficiency in the business, which in turn improves customer satisfaction.
"But the thing is that these are all like pendulums, right? If you go too far in that direction, then you lose the creative energy and the drive of the business because you kind of have these suits that are trying to control everything."
This quote illustrates the speaker's view that too much corporate control can dampen the entrepreneurial spirit and creative energy that are essential for continued business growth.
"And so this is the gap that I have struggled to make is going from 30 million plus to $100 million a year."
The speaker is candidly sharing their personal challenge in scaling the business beyond $30 million in annual revenue, a hurdle many businesses face.
"But, yeah, I mean, we did 28, 37, 32 I think the last three years. So we've just really been stuck at this level."
The speaker provides specific revenue figures to illustrate the plateau their business has reached, indicating the difficulty in breaking through to the next level of growth.
"Because the thing that made us, frankly, was me and the entrepreneurial drive. And I'm not saying I'm the sole responsibility, obviously our team's amazing and they're the reason this works. But it's saying what's the soul, right?"
The speaker acknowledges their role in the success of the business while also recognizing the team's contributions, and poses the question of what constitutes the soul of the business.
"And so what ends up having to happen is that at this level, you actually have to have more souls. You have to have more people with the juju, right?"
The quote suggests that to scale beyond a certain point, a business needs to cultivate multiple leaders who possess the entrepreneurial spirit and drive.
"More people who can drive growth, who can take initiative and seize opportunities, right?"
The speaker emphasizes the need for individuals within the company who can independently drive growth and identify opportunities for expansion.
"And so this is kind of the entrepreneur versus the entrepreneur dilemma. And I'll break this down for you. So an entrepreneur is somebody who has entrepreneurial tendencies within a corporate structure, right?"
The speaker introduces the concept of the "entrepreneur," an individual who exhibits entrepreneurial qualities within an existing corporate framework, contrasting with the traditional entrepreneur who prefers to own their own venture.
"An entrepreneur wants to own their own thing. And I have made horrible mistakes so many times hiring entrepreneurs and treating them like entrepreneurs when in reality I should have just never hired them."
The speaker reflects on past hiring mistakes, highlighting the importance of distinguishing between entrepreneurs and entrepreneurs to ensure alignment with the company's needs and culture.
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The speaker takes a moment to promote their book to the podcast audience, highlighting its high rating and availability on Kindle as a testament to its quality and usefulness.
"Either have the entrepreneur who comes into your business, lost their juju, right. And now just sits in your business and continue complaints about how they're not getting paid as much as they could make on their own, but they can't make it on their own, which is why they're with your business."
This quote highlights the risk of hiring entrepreneurs who may become disengaged and dissatisfied with their compensation, leading to a negative impact on the business.
"Or the person is right and can make more on their own. And so they come into your business, basically regain their confidence, start doing well, and then take as much of that business with you as they possibly can. And so either way, the outcome is poor."
This quote discusses the second risk of hiring entrepreneurs: they may use the business to regain their confidence and then leave, taking clients or business with them.
"What you want to do is find entrepreneurs, all right? These are people who really prefer, they love the entrepreneurial drive of driving growth, driving change, taking initiatives, building out new things, innovating, right. But they don't have the same appetite for risk."
The speaker suggests hiring "entrepreneurs," individuals who possess entrepreneurial traits but are risk-averse and value the stability of employment.
"So you've got your core here, which is the operational infrastructure that we put in place from ten to 30 million. So this is your HR, legal, it, finance, right? That's your core."
This quote outlines the essential operational components of the business that support its functioning and ensure compliance with legal and financial obligations.
"And then what ends up happening is that off of that spoke, you have profit centers, right. And inside of a profit center, you're going to have product and you're going to have acquisition. All right, so acquisitions, marketing, sales, and then product, right. And so inside of these, these are all identical, right. Product acquisition."
The speaker describes the structure of profit centers within the business, each responsible for product development and acquisition, creating a scalable model for business growth.
"And so each of these become profit centers for the business. And so these things can all roll into you while this all rolls into someone else. Right. From an operational standpoint, but this is really how the business would function."
This quote explains how profit centers operate within the larger business framework, contributing to the overall success and functioning of the company.
"And so this is where you might have product line number one, product line number two, product line number three. And each of these are going to satisfy needs for the customer. Ideally, when you're enumerating these product lines is you want to use the existing resources that you have and capital and infrastructure to create products that are similar but different."
The speaker emphasizes the strategy of diversifying product lines to meet various customer needs while efficiently using existing resources and capital.
"So we added in, what do you call it? Boiler room. So this is something like a lot of our gyms were asking for more help with sales. And so we were like, well, how about we just train you guys? Like we train our team. Like our team drills every morning and we do boiler room. That's how all of our guys start our day. So why don't all of you just, if you want this additional service, because not everyone wants it, you can pay a little extra for it and then you can bring all your sales team and we can drill your sales team."
This quote illustrates how the business responded to customer needs by creating a new service that leverages their internal practices for external clients, enhancing their offering and providing additional value.
"So it's really sticky, right? And it's high margin, so it literally works for everyone, right?"
This quote emphasizes the importance of offering products or services that are both attractive to businesses (sticky) and profitable (high margin).
"We didn't have to do a ton of stuff there, right."
Speaker A suggests that expanding their service line was efficient because it did not require significant additional investment or effort.
"I should have thought, like, okay, well, they also want someone to run their ads for them, so that's going to be our done for you agency side."
Speaker A reflects on the need to consider what additional services customers might want that align with the business's capabilities.
"You want to envelope the customer with all the things that they want."
This quote highlights the strategy of fully catering to customer needs to improve retention and satisfaction.
"Is that when they create these product lines, they start trying to manage both, and then they start trying to manage all three, and then they start another business, and then it gets even crazier."
Speaker A warns against the pitfalls of expanding too quickly without adequate management and operational structures in place.
"Until you have a true leader...I would not recommend doing it, which is why business growth is slow, because it's all about the people."
The quote underlines the importance of having competent leadership before expanding into new product divisions.
"Every entrepreneur's biggest problem is they can't find good people."
Speaker A identifies the challenge of recruiting talented individuals as a major stumbling block for entrepreneurs.
"If I were a perfect leader and a perfect manager, I could get everyone to surge forward and be the best."
The speaker acknowledges the ideal scenario of perfect leadership, highlighting the importance of management skills in maximizing team potential.
"At this point, this would be like your zero to a million would be, here you go, zero to 10 million, maybe with product line one or product line two added in."
Speaker A outlines the progression of business development from the initial million to further growth by adding new product lines.
"Which then allows you to scale your acquisition."
The quote suggests that expanding product offerings can lead to increased customer acquisition and business scaling.
"So acquisition goes up on each of these things because the total LTV is higher."
Speaker A explains that the expansion of services or products can raise the overall Lifetime Value of customers, which in turn boosts acquisition efforts.
"If you're zero to a million, you don't need to worry anything. You got to sell one product on one channel."
This quote advises businesses in the early stages to concentrate on perfecting sales of a single product through one channel before diversifying.
"From ten to 30 line, it's like, all right, now, we need it. We need legal, we need HR, we need compliance."
As businesses grow, Speaker A points out the necessity of developing professional structures to support the larger scale of operations.
"To not lose the entrepreneurial spirit is when you hire entrepreneurs and then you put them in charge of product lines."
Maintaining an entrepreneurial culture within a growing business is proposed by delegating leadership to entrepreneurial individuals over new product lines.
"Focus on one product, on one channel. It's all you need to do."
The final advice is to stay focused on a singular product and channel to avoid distractions and ensure stable growth in the initial phase.