Podcast Summary
Leveraging resources for business growth: Effectively using labor, capital, code, and media leverage can help businesses scale and reach new heights.
Building a successful business involves leveraging various resources to grow beyond what you can do on your own. Alex Schmose, the founder of acquisition.com, shares his experience of scaling his first company, Gym Launch, from a few million dollars to over $30 million in just 20 months. He attributes this growth to the increased use of different types of leverage: labor, capital, code, and media. Labor leverage involves delegating tasks to others, allowing you to focus on higher-level activities. Capital leverage involves obtaining funding from external sources to fuel growth. Code and media leverage come from creating something once that can be used or accessed by many, such as software or content. Schmose emphasizes that having access to these forms of leverage doesn't guarantee success but rather increases your potential for growth. By understanding and effectively employing these levers, businesses can scale and reach new heights.
Expanding labor and media led to 7 figure income: By outsourcing tasks, creating lookalike audiences, and shifting from services to licensing, the speaker grew income from 6 to 7 figures a month.
Leveraging labor and media expansion were key factors in increasing income from 6 figures to 7 figures a month. The speaker's constant work input remained the same, but the outputs grew as he was able to reach more customers through outsourcing tasks and creating lookalike audiences on social media. The turning point came when he shifted from offering done-for-you services to licensing content and promotions, which had virtually 100% margins and allowed him to scale quickly due to his previous experience managing a high-volume sales team. The speaker's ability to translate internal trainings into external offerings and already having a sales team in place enabled rapid growth for Gym Launch.
Identifying Success Factors of Top-Performing Gym Owners: Focusing on core units of successful gym owners leads to consistent results and ongoing value for customers.
Effective testing and implementation of proven strategies can significantly improve business performance. The speaker described their process of identifying common success factors among top-performing gym owners, and then sharing these findings with a community of gym owners. By focusing on the core units that all successful gym owners shared, they were able to deliver consistent results and separate valuable information from consumable services. This approach helped retain customers and provide ongoing value through monthly improvements and tests. Despite facing challenges like COVID-19 and business closures, the importance of testing and learning from successful strategies remained consistent in driving long-term business growth.
Hiring inexperienced leadership can lead to overhiring and mismanagement of resources: Inexperienced leadership can result in unnecessary hires and financial losses, while effective resource management and adaptability to market conditions are essential for long-term business success.
Overhiring and mismanaging resources can have significant consequences for a business. In the case of GemLaunch, hiring an inexperienced director of customer service led to the hiring of 30 excess support staff for a high-volume transactional business, resulting in layoffs and damage to the company's reputation. This experience served as a costly lesson for the founder, who later learned that timing, exceptional products, and maintaining operations during challenging economic conditions are also crucial factors in business success. While GemLaunch's early success could be attributed to the founder's identification of arbitrage opportunities and effective marketing, the long-term success of the business required a focus on efficient resource management and adaptability to changing market conditions.
From good to great takes time and dedication: Investing in long-term growth and thinking creatively about customer acquisition can lead to significant returns
Becoming great in business takes time and dedication. The speaker shared his experience of investing six years into perfecting his deliverable before being able to monetize it. He emphasized that the small difference between good and great can equate to years of work, but the potential return from word-of-mouth and market consolidation can be significant. Additionally, the speaker discussed his unconventional approach to customer acquisition, which he calls "client financed acquisition." In this model, customers finance the acquisition of new customers, eliminating capital as a constraint. By focusing on increasing the first transaction, businesses can outspend competitors and gain a competitive edge. The speaker's success in implementing this strategy across various businesses highlights the importance of investing in the long-term and thinking creatively about growth.
Creating a successful business model in fitness industry through recurring revenue and affiliate network: Focus on recurring revenue from customers and building a strong affiliate network to grow your business in the fitness industry.
Building a successful business involves getting customers committed early on and securing recurring revenue streams. This was the approach taken by the speaker in his fitness business, where he focused on selling supplements to gym owners and their customers, creating a mutually beneficial arrangement. The key to this strategy was building an affiliate base and leveraging their network to consistently sell products. The business, Prestige Labs, contributed less profit but more revenue due to its e-commerce model, and the speaker aimed for recurring revenue from gym owners as customers. The business stabilized around $1.5 million in monthly revenue, with low cost of goods and significant affiliate payouts. The speaker emphasized the importance of word-of-mouth marketing and asked listeners to pay it forward to help grow the business. By focusing on recurring revenue and building a strong affiliate network, the speaker was able to create a successful business model in the fitness industry.
Creating a gym-focused supplement brand: The speaker identified a gap in the supplement industry by catering to gym owners, offering gym-specific features, and creating a recurring subscription model to increase sales.
The speaker identified a problem with selling supplements through traditional channels and decided to create a solution by starting his own supplement brand specifically for gym owners. He priced the products higher on his website, offered a good selling system, and made it a recurring subscription to encourage customers to buy both services and products from the gym. By doing so, he created a moat in the supplement industry by offering gym-specific features that no other company could provide. It cost him $4 million to start Prestige Labs, with a significant portion going towards creating a custom point-of-sale system for gyms. This system included a full wall of products, a kiosk with an iPad, and the ability to track sales and automate payouts to trainers. This innovative approach allowed gym owners to compete effectively with larger supplement retailers and vitamin shops.
Building a Business in the Fitness Industry: Overcoming Challenges: Building a business in the fitness industry requires overcoming numerous challenges, including outdated tech infrastructure, complex inventory management, supply chain issues, legal hurdles, and prioritizing profits over customer connection. Successful entrepreneurs focus on improving their existing business or recruiting the right team to help them grow.
Starting and growing a business comes with numerous challenges, particularly in industries where existing solutions don't fully meet your specific needs. The speaker, for instance, faced significant hurdles in building Prestige Labs, a business focused on fitness supplements. The tech infrastructure wasn't advanced enough, inventory management was complex, and supply chain issues could halt sales. Legal challenges also arose due to name infringement claims and predatory law firms. Moreover, the speaker admitted that he prioritized profits over customer connection, which hindered the business's growth. He learned the importance of connecting with customers on an emotional level, as many people in the fitness industry start their businesses out of a genuine desire to help others. Despite these challenges, the speaker was able to launch another successful business, Useallen.com, which utilized machine learning in chat interactions to help gym owners work their leads more effectively. In retrospect, the speaker realized that he should have focused more on improving Gym Launch instead of launching Prestige Labs. He didn't have the necessary skills or ability to recruit talent effectively at the time. Overall, the key takeaway is that building a business involves overcoming numerous challenges and prioritizing the right things, whether it's investing in better technology, connecting with customers, or growing your team.
Discovering customer preferences for pricing models: Understanding customer needs and pricing preferences can lead to business growth. Alan's success came from offering a usage-based pricing model to small businesses, but expanding required targeting agencies.
Understanding your customer's needs and pricing preferences can lead to significant business growth. The speaker discovered that small business owners preferred a usage-based pricing model over a recurring fee, which led to the success of their software product, Alan. However, they also realized that expanding beyond their distribution base required targeting agencies instead of small businesses directly. Additionally, outsourcing software development to a development shop instead of bringing it in-house proved to be an expensive mistake. Ultimately, the key to building a successful software company is to know your customers, build the software yourself, and avoid outsourcing core business functions.
Exploring flexible pricing models and aligning incentives with customers: Switching to a pay-per-show pricing model increased revenue for marketing agencies, while conducting pricing surveys early unlocked four times the pricing power. Having an in-house CTO and tech expert, and optimizing scheduling processes, were also crucial for growth.
Aligning incentives with customers and having a flexible pricing model can significantly increase revenue and make for a more successful business, as learned through the experience of working with Allen, a company that provided a lead generation solution for marketing agencies. By switching from a recurring revenue model to a pay-per-show model, these agencies were able to charge closer to the transaction and make more money. Additionally, conducting pricing surveys early to explore different ways of charging can unlock four times the pricing power. Having an in-house CTO and a partner who is a tech expert is also crucial for getting into software. A tactical lesson learned was the importance of optimizing scheduling processes to increase throughput on appointments, which can lead to a 50-200% increase in revenue. Overall, aligning incentives, exploring flexible pricing, and optimizing scheduling processes can lead to substantial business growth.
Providing more scheduling options leads to business success: Offering flexibility and availability can attract more customers and lead to increased profits. Personal brand and inbound content can bring sophisticated partners but require more resources.
Providing greater availability and flexibility to customers can lead to increased business success. This was observed in the case of Acquisition.com, where the most profitable businesses offered the most scheduling options and were open the most days. The founder, seeking to build a compounding vehicle for his future, identified the need for a business model with high leverage, capital compounding, and the ability to reinvest capital for growth. Acquisition.com was unique in being built on a personal brand and inbound with content, allowing for the attraction of more sophisticated partners but requiring more time and resources for deals. The founder's excitement lies in the continuous learning and ability to apply those learnings to help other companies.
Emphasizing continuous learning and hiring top talent: Continuous learning and hiring top talent are essential for business growth. Focus on recruiting experts, reducing ignorance debt, and providing training to build a skilled workforce aligned with your vision.
Continuous learning and hiring the right talent from the top down are key to business growth. The speaker emphasizes the importance of learning as the purpose of life and strives to maximize this through various means, including writing books and co-owning businesses in diverse industries. Hiring from the top down enables delegation to experts and reduces ignorance debt, leading to a smoother business trajectory. By focusing on recruiting top talent and providing training, companies can benefit from a more skilled workforce and better alignment with their vision for growth.
Hiring the wrong person can set back a company's growth: Finding the right person from the start saves time, resources, and energy, and a strong team propels growth
Hiring the wrong person can significantly set back a company's growth trajectory. This mistake can take six to twelve months to correct, during which time the company may need to continue pushing off important hires. However, if the company manages to find and hire the right person from the start, the company can grow on its own without the need for costly and time-consuming corrections. Essentially, the hiring process is crucial, and getting it right the first time can save valuable time, resources, and energy. Additionally, a strong team can help propel a company forward, making the investment in finding the right fit worthwhile.
