Why Aren't You Spending More on Ads?

0:00buying, how do you scale my travel agency? Currently, I do lead generation via Meta, okay? The few sales agents last month, we did 30k profit, amazing. And I had 60k in sales, all right. Five, jeez, okay, 5,500 ad spend, really good. How does this scale to a million plus uh sales per month? Okay, great. So, I mean, fundamentally, I'm actually not really I mean, if I don't know what percentage of the revenue you're generating is from ads, but if you spent 5,500 bucks or pounds and you made 160,000 dollars in sales, like that's that's pretty good. You know what I mean? Like that's that's really strong. And that if you made 30k in profit from that, then your gross margins are obviously higher than that. And so, if I'm going to spend $5,500 in ad spend and I'm going to make at least six to one because your gross profit's higher than your net profit, then I would say like, what stops you from spending more on ads? And to me, that is the process of how do I scale to a million a month?

0:56Now, there's a world where you're unable to scale the ad spend past a certain point because the lifetime gross profit per customer is not high enough. And in that situation, you have a number of kind of levers that you can pull. Number one is you could change the offer itself, which would you know, improve those metrics. Number two is that you could expand to other cheaper CPM channels. Or number three, which is my preference, is that you expand the money model, right? Expand the mouse trap, so that you can make more per customer. Because if you think about long term, if we if we if we equate businesses in terms of their ability to get customers, what is what is typically far more differentiated is the LTV per customer. And so, the classic example that I give is uh Starbucks, right? If you have a coffee shop and you're competing at Starbucks, you getting a coffee customer is probably not going to cost that much more than it cost for a Starbucks to get a coffee customer. But what will be dramatically different is that they have a $14,000 LTV and you do not. And so, they're able to spend more than you can because they make more. And so, the long-term arms race of business is always the lifetime gross profit per customer, and that is how you can go into new markets and dominate because you have a way that makes way more. Now, I would say that that is the that is the best long-term competitive advantage is having something that a lot of people need that you make a lot of money from. Now, the short-term competitive advantages, which is where I think real disruptors actually happen in the business world, is where you actually find a way to have different or cheaper distribution. So, for example, Jim Shark has come in and, you know, taken a shot at Nike and some of these larger brands because they had unique unique and new and cheaper distribution.

2:21And this is almost always the the case because old players don't learn the new tricks fast enough and then the emergent players, if they're smart, can capitalize and disrupt. Um Look at First Form for supplements. They were one of the first people. Look at Quest, also for supplements. I'm obviously I'm from the fitness space, so I saw those ones firsthand. Um and Jim Shark as well, right? And so, each of these are examples of people who were who were bootstrapped, started early on a new trend where they had cheaper CPMs. So, in the event where you feel like it is very difficult for you to expand your lifetime gross profit um in comparison to a larger entrenched competitor, then you'll have to beat them on CAC. So, you have to get lower way sorry, a cheaper way of getting customers.

3:04So, fundamentally, spend more money than you currently are. Um and if you can't spend more money, those are the different things that I just walked through in terms of solutions. And I think actually the the the chat had good look. More ads. What's stopping you from doubling your revenue, right? Oh, here we go. Sales agents do manual manual sales, takes time to convert. It's travel agency. More spend more Okay, so you need more sales people. Okay, so if that's actually the limitation, then what we need to do is go get another sales person. So, let's see if he answered that one. But, this is actually a great exercise though actually seeing this because like that is the game. That is the process. Well, I would, but I can't because. And whatever the because is, then should be the thing that takes your full attention in terms of your resources to go solve.

3:42And so, whenever you're spending time, this is very real. The reason that some people like every bootstrapped billionaire that you've ever met, if they started with zero and you have zero, you have no more advantages than they have. And it has to be very real. And so fundamentally the only thing they were able to do is allocate the very limited resources they had compared to you in a superior way. Meaning they got better returns for their time, their effort, and their money than you are. And so most of the time you are spending your days working on things that are not the constraint of the business. Elon in a in a recent interview talked about what do you what are you thinking about when you're trying to you know, how are you growing these businesses so fast? He says, "I exclusively focus on the limiter, the rate limiter." And so every business has rate limiters. There's something that's stopping you from scaling. And so all of your effort as an entrepreneur should be directed towards solving the most complex problem, which is typically the rate limiter, the bottleneck, the constraint. All different ways of saying the same thing, which is there's something that's that's stopping you from making more. And any resource that is not deployed towards that is increasing the potential of the system, not the throughput of the system.

4:40And so we need to increase the throughput, and the only way to do that is to address the constraint. If you're business owner and you're not growing as fast as you'd like, I'd like to give you a free gift. So my team and I put together the $100 million scaling road map, which is basically 200 hours of us looking over all the portfolio companies we've had and what stages of growth they went through, and more importantly where they got stuck and how they got past it. And so we broke it into these 10 stages, and we made this little kind of quiz thing where if you put in your business information, it'll tell you where you're at. And the most important part for you, what to do for each of functions of the business across product, marketing, sales, customer success, recruiting, IT, human resources, and finance. And so no matter what you're struggling with, someone else has already struggled with it and solved it. And so I'd like to give you this thing absolutely free. You can go to acquisition.com/roadmap, plug in your business information, and if you want us to actually help you de-constrain the business and you're trying to scale, we'd love to help you out. On the thank you page you can book a call with my team and we will look at the business, see if we can help, and if we can we'll invite you out to Vegas and we'll do this in person live.