$50k Consulting in a Nutshell [This is 🔥 for anyone who understands strategy] Ep 240



In this podcast, the host discusses strategies for business growth by simplifying and optimizing existing operations rather than increasing complexity. He shares personal experiences, including a pivotal mistake when he started a new venture rather than focusing on his primary business, Gym Launch, which could have grown from $28 million to $100 million. The host emphasizes the importance of pricing strategies and the two fundamental aspects of growth: acquiring more customers and increasing customer value. He illustrates this with examples, such as improving lifetime value (LTV) and cost of acquisition (CAC) metrics, and suggests focusing on one or two high-leverage actions rather than a multitude of tasks. Additionally, he advises against expanding services or target markets prematurely and instead recommends mastering additional acquisition channels to scale effectively.

Summary Notes

Introduction to Business Growth Strategies

  • Speaker A discusses the importance of simplifying and optimizing business strategies for growth.
  • The focus is on increasing a business's bottom line without adding complexity or additional human resources.
  • Speaker A mentions their own experience with rapid business growth and the lessons learned from expanding too quickly.

"What could you do to add $5 million to your bottom line without doing anything right? What could you do to add $10 million to the business without adding anything? Any humans, any people?"

The quote introduces the concept of improving a business's profitability through strategic changes rather than through expansion or increasing the workforce.

Speaker A's Consulting Approach

  • Speaker A sells $50,000 consulting days to high-level business owners.
  • The consulting focuses on reducing complexity and implementing simple interventions.
  • Speaker A stresses the importance of pricing as a straightforward but impactful strategy to increase a business's bottom line.

"Number one, whenever I'm trying to do some sort of high level consulting day, the goal is not to increase complexity of their business, but decrease complexity of the business."

This quote explains Speaker A's primary objective during consulting sessions: to streamline business operations rather than complicate them.

Fundamental Aspects of Business Growth

  • Speaker A breaks down business growth into two elements: getting more customers and increasing customer value.
  • The concept of "three levers" is introduced: more customers, more spend per customer, and longer customer retention.
  • Speaker A provides a simplified example of business growth projections using sign-up rates and customer lifetime value.

"But if you want to go simpler than that, the way to grow a business is you can either get more customers or make the customers worth more."

Speaker A simplifies the concept of business growth to two fundamental strategies: acquiring more customers or increasing the value of each customer.

Growth Projections and Plateaus

  • Growth projections are used to determine when a business will plateau based on current customer acquisition and lifetime value.
  • Speaker A uses the term "asymptote" to describe the point where growth slows and stabilizes.
  • The importance of recognizing growth curves and their implications for business strategy is highlighted.

"So they're on a growth curve, but it will slowly slow down as it approaches 20. It's called an asymptote."

This quote explains the concept of an asymptote in the context of business growth, indicating a point where growth becomes less significant and stabilizes.

Focus on Back End or Front End

  • Speaker A discusses deciding whether to focus on back-end improvements (customer retention and value) or front-end improvements (customer acquisition).
  • The podcast "Good Enough for Growth" is mentioned as a resource focusing on back-end strategies.
  • Speaker A emphasizes the multiple ways to increase lifetime value, including pricing, continuity, service upgrades, retail products, and affiliate deals.

"So I made a podcast earlier called good enough for growth, and that's where you're really focusing on the back end."

The quote references a previous podcast episode that deals with strategies for enhancing the back end of a business, which is key to increasing customer lifetime value.

Increasing Lifetime Value (LTV)

  • Speaker A discusses strategies for increasing LTV, such as pricing, adding services, and decreasing churn.
  • The importance of benchmarks for different types of businesses is highlighted, such as brick-and-mortar services.
  • A comparison is made between the LTV of a chiropractor's services and the cost of customer acquisition.

"Pricing appropriately is a first and obvious 1. Second is adding in back end continuity or adding different levels of service for customers that want to upgrade, adding in retail products, affiliate deals, basically deals where you can refer portions of business to someone else, and get kickbacks from them."

This quote lists various methods for increasing a customer's lifetime value, which is a crucial aspect of enhancing a business's profitability.

Key Theme: Cost of Acquisition to Lifetime Value Ratio

  • The speaker emphasizes the importance of a high lifetime value (LTV) to customer acquisition cost (CAC) ratio.
  • A ten to one return from cost of acquisition to lifetime value is considered a good benchmark.
  • The speaker mentions that Gym Launch has an LTV to CAC ratio of 33 to one.
  • It is suggested that it's acceptable to lose money in the short term (first one to two months) if the long-term LTV is known and substantial.

"At least a ten to one return from cost of acquisition to lifetime value."

This quote establishes the speaker's metric for a successful cost of acquisition to lifetime value ratio, suggesting that for every dollar spent on acquiring a customer, they expect to see at least ten dollars in return over the customer's lifetime.

"The LTV to CAC ratio for gym launch, for example, is 33 to one."

This quote provides a specific example of a successful LTV to CAC ratio, illustrating that Gym Launch's strategy yields $33 for every $1 spent on marketing.

"So for every dollar we spend in marketing, we get $33 back over the lifetime of the customer."

This quote further clarifies the LTV to CAC ratio by quantifying the return on investment in marketing over the customer's lifetime.

Key Theme: Marketing and Customer Acquisition

  • The speaker discusses strategies to increase customer acquisition, including spending more on marketing.
  • There is a mention of common limiting beliefs regarding the saturation of specific marketing channels.
  • The speaker emphasizes the potential for growth in a channel often being greater than expected.
  • The conversation touches on the importance of focusing on the front end (customer acquisition) if the LTV is satisfactory.

"Again, one of these things is simply spending more on marketing for many times will accomplish that."

This quote suggests that increasing the marketing budget is a straightforward strategy to acquire more customers.

"A lot of people have very limiting beliefs about how many people you can acquire on a specific channel."

This quote highlights a common misconception among business owners that they may have reached the maximum potential of a marketing channel when, in reality, there is often room for further growth.

Key Theme: Business Growth and Scaling

  • The speaker shares insights into the scaling of their business, Gym Launch.
  • They discuss the mistake of adding complexity to the business instead of focusing on core customers.
  • The speaker reflects on the decision between expanding internationally and starting a completely different business.
  • They also mention the importance of staying focused on the core avatar and market.

"And so the way of scaling adequately, and this is why this was one of the biggest mistakes that I made early on in gym launch, is that I just didn't know how I could scale past the amount of sales that we were coming in."

This quote reveals the speaker's reflection on a past mistake of not understanding how to scale the business effectively, leading to unnecessary complexity.

"Versus starting a cell phone company. And to me, starting a cell phone company honestly just sounded easier."

This quote shows the speaker's thought process when considering different options for scaling the business, indicating a preference for simplicity.

Key Theme: Reflecting on Past Decisions and Future Strategies

  • The speaker contemplates what they would have done differently if given the chance to go back in time.
  • They would have explored other acquisition channels and prioritized getting channel partners.
  • The speaker would have considered international expansion as a method of scaling.
  • They emphasize the importance of maintaining focus on the core business and market.

"Number one is I would have looked at other acquisition channels, so I would have prioritized getting channel partners, which is people who can refer your business on a regular basis."

This quote outlines a strategic approach the speaker would have taken, focusing on diversifying acquisition channels and leveraging partnerships for referrals.

"Second would be going international. So that's another way of scaling here."

This quote indicates that international expansion is seen as a viable scaling strategy that the speaker would have considered.

Key Theme: Speaker C's Book Promotion

  • Speaker C promotes their book, "100 million dollar offers," available on Amazon.
  • The book is described as a significant contribution to the community with the aim of fostering future business partnerships.

"It's called 100 million dollar offers."

This quote introduces the title of Speaker C's book, suggesting it contains valuable business strategies.

"You can get it for Kindle. The reason I bring it up is that I put over 1000 hours into writing that book and it's my biggest give to our community."

This quote emphasizes the effort put into the book and its intended value to the business community.

Scaling Business Through Partnerships

  • Partnerships with channel partners in the U.S. who serve the same customer base can be a method of scaling.
  • Equipment dealers, flooring companies, financing companies, and CRMs that serve gyms are potential partners.
  • Mutual benefits include clients' increased longevity, profitability, and reduced likelihood of going out of business.
  • Clients who are more successful are likely to reinvest in more products and services.

"I could find channel partners in the United States who own lists of gym owners. So that would be equipment dealers, flooring people, shoot financing companies, crms that serve gyms."

This quote highlights a strategy for scaling a business by leveraging partnerships with entities that already have established relationships with the target customer base, in this case, gym owners.

Simplifying Business for Scaling

  • The simplicity of a business model is crucial for scaling.
  • Larger businesses tend to have simpler operations, as complexity can hinder scalability.
  • The focus shifts to scaling customer acquisition once the 'mousetrap' or business model is good enough.
  • Fixing a problematic back end is necessary before scaling can occur.

"The bigger the business is typically the simpler it has to be because simple is the only thing that scales."

This quote emphasizes the importance of simplicity in business models for large-scale operations, suggesting that complexity can be a barrier to growth.

Acquisition Channels and Scaling

  • Different channels can be used for scaling the front end of customer acquisition.
  • Options include email outreach, cold calling, and cold messaging.
  • Outbound acquisition is often cheaper than inbound and can scale more slowly, which might be beneficial for managing backend scalability.
  • Inbound lead generation can grow rapidly, potentially outpacing the ability to fulfill service demands.

"All of these are different channels that I could have used to scale the front end of acquisition."

This quote lists various methods for acquiring new customers, indicating that a multifaceted approach can be used to scale a business.

Understanding Cost of Acquisition and Lifetime Value

  • Knowing the cost of customer acquisition and the lifetime value (LTV) is crucial for scaling.
  • A small business owner's acquisition cost and the average LTV need to be understood to effectively scale.
  • The goal is to match or improve upon these metrics when exploring new acquisition channels.

"But once this is good enough, right. Once we know that, let's say a small business owner that walks through this mousetrap, whether it could be an agency, it could be a consulting business, it could be information, doesn't really matter, right. But if the back end, let's say, is $20,000, on average, we'll just use that $20,000. And we know that the cost of acquisition for a small business owner is going to be around $1,000 or around $1,500."

This quote explains the importance of having a solid understanding of the average LTV and acquisition costs to make informed decisions about scaling and exploring new acquisition channels.

Business Growth Strategy and Goal Setting

  • Setting clear growth goals is a part of strategic planning.
  • Incremental changes in sales numbers and LTV can lead to significant growth.
  • An example is given of a company aiming to grow from $200,000 to $1 million per month in revenue.
  • Strategies include increasing ad spend, adding salespeople, and tweaking prices and availability.

"And so the question is, how do we triple the business to get to the million dollars a month, which is what they decided was their goal."

This quote underscores the process of setting ambitious yet achievable business growth targets and the importance of having a clear goal in mind for scaling efforts.

Tactical Adjustments for Scaling

  • Small adjustments, rather than major overhauls, are often sufficient for significant growth.
  • Tweaking current methods and restarting effective ones previously abandoned can lead to increased sales.
  • The example describes a plan to increase inbound lead generation by 50% and restart an effective outbound method.

"And so let's factor the example in. So if we go from twelve k to, we take the acquisition on the front end from 30 to 60, and they actually had an organic method they had stopped doing that was generating them. I think it was ten or 15 new customers a month. They stopped doing that to do the inbound legion."

This quote illustrates a specific example of how a business can double its customer acquisition and reintroduce successful strategies to achieve substantial growth.

Consulting Approaches and Leverage

  • Consulting strategies often involve simplifying to a few high-impact actions.
  • Leverage is defined by the ratio of input to output, aiming for minimal input and maximal output.

And so that was literally what I just walked you through is pretty much what these massive consulting things look like. And the objective for me is to not give someone 100 things to do but one or two things, they're going to have the most leverage. And the definition of leverage is something that has a smaller input than it does output.

These quotes explain the speaker's approach to consulting, which focuses on identifying a few key actions that can provide significant benefits, thus creating leverage in a business context.

Business Metrics Analysis

  • Evaluating business metrics such as customer lifetime value, churn rate, pricing, and upsell percentages is crucial.
  • The ratio of lifetime value to cost of acquisition is a key indicator of business health.
  • A higher difference between lifetime value and acquisition cost generally indicates greater profitability and potential for growth.

And so when you're looking at your business, or I find this useful, when I look at my business is, I'm saying, okay, is the back end metrics in terms of what we're making per customer, what our churn is, what our pricing is, what percentage of people are taking the upsells, all of those things. Are they right? Are they good enough? Yes.

The speaker emphasizes the importance of regularly reviewing and ensuring that the fundamental business metrics are aligned and performing well.

Profit and Business Growth

  • Profit generation is essential for business growth, not merely expansion.
  • Prioritizing profit margins allows for scalable growth, whereas focusing solely on growth can lead to scaling inefficiencies.
  • The speaker advises against reducing margins to increase affordability at the expense of profitability.

A lot of people want to get bigger in order to get better, but usually it's getting better that allows you to get bigger, as in, you need to have lots of profit in order to scale, rather than say, I'm going to put all my profit back and not have a big margin in my business because I want it to grow and it's backwards, you have to have lots of margin in order for the business to grow.

This quote highlights the speaker's belief that improving the business's profit margins is a prerequisite for sustainable growth, rather than aggressively expanding without sufficient profitability.

Key Business Numbers

  • Focusing on lifetime value, cost of acquisition, and short-term cash flow (30-day LTV) is vital.
  • These metrics help in assessing the financial health and potential for scaling a business.
  • The speaker suggests that once these numbers are satisfactory, the focus should shift to increasing front-end inflows.

The numbers that you need to look at, and the three numbers that I'm looking at are, if you're curious if you want to do this mental example with your own team is, what's my lifetime value? What's my cost of acquisition? And if you're worried about cash, then what's my 30 day LTV?

The speaker outlines the three most important financial metrics for evaluating a business's performance and potential for growth.

Strategic Focus for Entrepreneurs

  • Entrepreneurs should avoid diluting their efforts by adding too many services or targeting too many customer profiles.
  • Instead, they should focus on mastering new acquisition channels to drive business growth.
  • Diversifying acquisition channels effectively can significantly increase business inflow.

So hopefully that makes sense. That is the process that I go through. Those are the two sides of the coin or the equation for growth.

The speaker concludes by summarizing their growth strategy, which balances optimizing the back-end operations with focusing on the acquisition channels to drive growth.

Business Adaptation and Risk

  • Overhauling a business's operational machine is labor-intensive and carries risks.
  • The speaker suggests focusing on learning new acquisition methods as a productive use of entrepreneurial energy.

And so in those instances, once this is good enough, you can always make the tweaks and whatnot. But fundamentally changing or overhauling the machine takes a lot of work and takes a lot of time. Also, it has certain amount of risk.

This quote discusses the challenges and risks associated with making significant changes to a business's core operations and suggests a more incremental approach to improvement.

Closing Remarks

  • The speaker encourages engagement with the content through likes, questions, and reviews.
  • They express a desire to provide value and share insights with their audience.

Stay amazing. If you found this valuable, leave a review and I'll catch you guys on the flip side. Happy Saturday. Bye.

The speaker ends the conversation by inviting feedback and emphasizing their commitment to providing valuable content to their listeners.

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