In a detailed breakdown of goal-setting and business forecasting, the host, Alex, shares insights from a recent gathering of top sellers in Austin and discusses the practical steps for reverse-engineering business goals with precision. Using the case study of Monica Batar, a gym owner who rebounded from personal challenges to rebuild her gym membership, Alex demonstrates how to set realistic targets and plan for growth by factoring in current conversion rates, attrition, and advertising costs. He emphasizes the importance of using real, present-day business metrics rather than aspirational ones to make accurate predictions, highlighting the necessity of adapting systems to manage growth effectively. He also shares a personal anecdote on overcoming limiting beliefs about his math skills, offering a quick mental math technique to calculate percentages using tens, fives, and ones.
"But one of the conversations that came up during the full day was how to basically reverse engineer goals to a freakish amount of precision."
This quote highlights the discussion on the meticulous process of reverse engineering goals, which was a topic of conversation during a meeting with top sellers.
"And so I make decently far out predictions, six months, nine months away of how many people we're going to have, how much rev we're going to have, what we're going to need to sustain the growth that we want to hit."
Alex explains his approach to forecasting business metrics and growth requirements for the future, emphasizing the precision of his predictions.
"So she was at 100 efts. So she 100 recurring members at her gym and she had added 50 efts the month before."
This quote provides context on Monica Batar's current business status, indicating her gym has 100 recurring members and the recent growth she experienced.
"She had a huge emotional issue that happened, some big family issues that went on and so she basically closed her gym down and started over and was still able to maintain her legacy payments because of how much she had cash."
Alex describes the adversity Monica faced and overcame, highlighting her resilience and financial management that allowed her to maintain legacy payments despite closing and reopening her gym.
"And with 45 minutes sessions, she could do 3 hours in the afternoon, 3 hours in the morning, and have eight sessions a day. So that would be 176 people per day that she can service."
Alex breaks down the gym's daily capacity, showing how many people can be accommodated in the available session times.
"Which means she total would be, like 350 ish, right? So I said, I think 300 is a very easy goal for you to hit because your actual max is significantly higher than that."
This quote explains the rationale behind setting 300 EFTs as a realistic goal for Monica, given that her gym's capacity exceeds this number.
"So I was like, let's set a goal for this that seems reasonable. Do you think gaining, you just did 50 efts in a month? I was like, let's just say that we try and gain 20 net the next ten months from where you're at now."
Alex proposes a monthly net gain goal for Monica, building on her previous success to set a target that seems achievable within the given timeframe.
"We also know that her attrition is 6%, which means that she loses 6% of her customers month over month."
This quote acknowledges the reality of customer loss in membership-based businesses and quantifies the attrition rate for Monica's gym, which is critical for accurate goal setting.
"So if she's got 6% attrition, then I'm going to take, like, one of the last months that she has here... So that's going to be one of the last months near the end. And I'm going to take 6% of that number, okay? Six... That's what, 6%, if you're ever curious on how to do this in your head anyhow, so 16.2 is what her attrition is going to be on that last month... Now, if we also have to add that 20 efts of growth, it means that what she actually needs to be signing up is 36 people per month."
The explanation of the quote is that Alex is demonstrating how to calculate attrition and adjust for growth by using the example of a business with a 6% attrition rate and a goal to add 20 efts, resulting in the need to sign up 36 people per month.
"So if she has 36 efts that she needs to sign up monthly... So if she's doing 66%, then that's going to be roughly like 55 people... Now, mind you, the way that these stats become accurate is by using the stats that you have right now."
The quote explains the process of reverse engineering the number of sign-ups needed based on the current conversion rate of 66%, which leads to the determination that approximately 55 front-end sign-ups are required to achieve the goal of 36 efts.
"So if she's losing 10% of people, then it means she's going to be signing up 61 people... She loses 10% between sign up and start."
The relevance of the quote is that Alex is accounting for a 10% loss of people between sign-up and start, which necessitates signing up 61 people to maintain the target of 55 actual sign-ups.
"So let's divide this by four instead of 4.3... That's going to be 15 people per week that she needs to sign up."
The quote demonstrates the process of converting monthly sign-up goals into weekly targets, simplifying the time frame to four weeks for easier management and to provide some leeway in achieving those targets.
"Which means 22 people are going to actually sit down with her... Now, of the 22 people that sit down with her, she has a 50% show rate, which means she's going to need 44 people scheduled in order to hit that 22 shows... It's actually 59, but I'm just going to say 60 for math sake."
The explanation of the quote is that Alex is detailing how many leads need to be scheduled and how many of those scheduled leads need to show up to achieve the weekly sign-up goal, taking into account show and scheduling rates.
"Now, that means that she's spending $720, $720 per week in ads."
This quote indicates the financial commitment required in advertising to generate the 60 leads needed per week, based on the cost of $12 per lead.
"So she's spending $10 per day to get this from winners, right? Per ad set. That means that she has twelve winning ad sets that are working, which means she created 36 total ad sets to get her number."
The quote explains the ad spend strategy, where the individual allocates $10 per day for each winning ad set, leading to the creation of 36 ad sets to find the 12 that are effective.
"So in order for her to hit her goal, what she is going need to do, right, is that if she's doing 15 sign ups per week and she signed it, and she's selling people five days a week, it means she needs three sign ups a day, which means she needs to sit down with. So divided by five, about five people a day."
The quote outlines the lead conversion process necessary to meet the weekly sign-up goal, requiring meetings with an average of five people per day to secure three sign-ups.
"And so if we have to break this down tactically for her, she's going to every single week, make 36 ads, which takes time. This shit takes time."
This quote emphasizes the time commitment required to create the volume of ads needed to generate sufficient leads.
"She's going to get 44 of them scheduled, up to 60. Half of those people will show, which is 22 of those, half that show, she'll close 15 per week."
This quote details the funnel from lead generation to closing sales, highlighting the expected attrition at each step and the number of leads needed to meet the weekly target.
"And so you have to use the numbers that are real for your business right now. Like, what's actually happening, not what you wish has happened."
The quote advises on the importance of using accurate, current data for forecasting and setting realistic goals.
"She needs to have five people show up, which means she needs ten appointments per day."
This quote breaks down the daily operational needs into actionable targets, clarifying the number of appointments required to meet the individual's objectives.
And so when we make back of napkin math predictions based on how many support reps we're going to need at x amount of revenue and how many applications we need to drive growth to hit this goal, this is how we break it down.
This quote explains the process of making rough calculations for business needs, such as the number of support reps needed for expected revenue or applications required for growth.
Not what they should be closing, but what they're actually closing. And in order to hit this volume goal, I need this many salespeople at current level, right?
The quote emphasizes the importance of using actual sales figures to determine the number of salespeople needed to meet sales goals, rather than relying on theoretical or expected figures.
The systems that you create break. And that is part of growth. Welcome to business.
This quote highlights that system failures are a common and expected part of business growth, indicating that businesses should be prepared to continuously address and fix these issues.
For the longest time, when talking about limiting beliefs, I, for most of my life, thought I was really bad at math, okay?
The speaker shares a personal anecdote about overcoming a limiting belief regarding their math skills, which is relevant to understanding how such beliefs can affect one's self-perception and performance.
And so if you want to do this for yourself and have a party trick or I think it's really useful because you can get really good guesstimates in your head and not constantly have to pull the calculator out, which kind of slows your momentum down.
This quote provides a practical tip for performing quick mental math calculations, suggesting that it can be a valuable skill for both business and social settings.