E-Commerce: Lohnt sich der Sprung zur Software?

0:00I run a hair extension company in Australia. >> Amazing. >> I have a salon and an e-commerce business. >> Oh, what an e-commerce? >> Sorry. Sorry. I wholesale. >> Wholesale and e-commerce. So, direct to consumer and wholesale. >> Yeah. >> Okay. Got it. >> Um Sorry. I'm like so nervous. I have a terrible fear of public speaking. >> Have a panic attack and then just ask the question. You're good. >> [laughter] >> I forgot what my question was. >> It's fine. >> Um

0:27>> We can pick another one. >> wrote down, if that's okay. >> [laughter] >> Okay. So, to make either business truly sellable at high valuation, it would take me years of operational restructuring, recruitment, reducing owner dependence, and building systems. And even then, the multiple would be low because service-based product businesses don't scale without heavy ongoing input.

0:52I want to move into SaaS. >> Oh. You think You think this is hard? And so, you're like, "You know what I could do? Something harder." >> Yeah. >> [snorts] >> And so, I guess that was the point of me coming to this seminar, cuz I know you talk a lot about like the woman in the red dress. >> Yeah. >> And >> Or men in the tuxedo, you know, whatever works. >> [laughter] >> Um obviously, I'm fearful, cuz it's not my niche, and it's not what I specialize in, but I obviously, being in the industry, I definitely see a lack in the market and educating

1:28>> is the SaaS that you're trying to build, or that you would want to? >> an online booking system for Well, the niche is for salons, but it can be used for service-based businesses. >> There's so many of those. >> It's got AI built into it, and the difference between mine and say everybody else's is it's essentially bridging the gap between revenue and profit. So, giving like more of like a pull data rather than push. Um having the AI built in as more of like a motivational business coach which will give you the real time analytics on your team, on your services, on your numbers, on your margins, like everything like that. Like for me personally, I spend every week calculating every single team members revenue, cost of product.

2:12>> too? >> Yeah. >> Okay. >> But the salon So the salon and the wholesale run without me. >> Okay. >> The salon does about So the salon does about say 900,000 with a 50% margin. >> Great. >> I'm happy with like what Like I don't really want to scale the salon. The wholesale year or this year has grown 100% but it's about 30% month-on-month. >> What was the revenue of the wholesale? >> Um I think I'm just at 2.6 >> Okay.

2:38>> so far. >> And you have 30% margins on that? >> Yep. >> Great. >> So the financial overview for this SAS, it's $500,000 build, 120 grand a year to maintain, but it's serving my same audience, right? The The stockists are already salon owners, they already buy from me, they already trust me, it's something that they want, use, have already subscribed to like the founders. Don't look at me like that.

3:07Believe in me. >> I do. I do. I'm just trying to figure out which you believe in. >> [snorts] >> I'd only [laughter] need 150 subscribers to maintain costs, which I've already got. So if I had 2,000 of my weekly stockists that already buy from me, subscribers, 2 million a year. It's fine, right? Tell me it's a good idea, please. >> [laughter]

3:39>> So much pain. >> You sound like Ed. >> [laughter] >> I'm just talking all day. >> [laughter] >> So one of the difficulties that I have to this is a this is a perfect scenario of telling someone what they want to hear versus telling them what I think. And I always this is very fine line because I like I always want everyone to leave happy. But I also feel like I have integrity. Tough, right? And so um I what I will do is I will give you a sorting question. You can pick what side you want.

4:12I can assume your position and then tell you what I would do although I disagree with it. Or I can tell you what I think you should do. >> Okay. >> Which one would you like? >> Tell me what I should do. >> Okay, great. I think that >> I'm going. >> [laughter] >> I think you getting into SAS as somebody who has never built a software product and doing it where you're going to self-fund it. Um and just because you have a distribution base does not mean that you should sell every single thing that that distribution distribution base can buy.

4:44>> What if I've already paid for it? >> That's called sunk cost fallacy. True. >> So I just give up. I don't try. It's okay. >> Some of the best money you ever spend is deciding to stop spending bad money. >> Okay. >> Um and I say this only having done it myself. Um So I'm going to I'm going to I'm going to hit from a couple angles. So the first one is who here is organic as their primary method of getting customers? Like making content etc. >> Man, it gets bigger and bigger every time. It's just the way it's it's the way the world's working. Um

5:14>> So one of the big mistakes that people who have organic audiences make is that you grow an audience and then you sell a product and then people buy the product and you make money and that's a very reinforcing event. And so then but they already bought the product so then you think well I should make another product and so you make another product and then within two or three years all of a sudden you have four mini businesses that serve the same pool of customers when the real constraint of the business is you needed to grow your audience. And so the invisible be- or sorry sorry, it's not the extensions whatever it is that you sell, right?

5:41The hair extensions that you sell uh you're doing you know, 2.6 and what's the what's the e-commerce side doing? In revenue? >> Yes, like 900. >> 900? That's what it's doing in total? >> Sorry, the the salon is 900. The online is 2.6. >> So, okay. So, there is no You said e-commerce at some point. >> Yes, sorry. E-commerce I'm selling products online. >> the wholesaling? Okay, got it. It's B2B on that side.

6:06>> sell to retail, wholesale, and retail. So, anyone can buy, but I do have stockists that >> The vast majority is other stylists buying. >> Yeah. >> Right? >> So, Layla can buy from me, but also hair extension salon owners can register for a trade account. >> And how many of the sales are trade accounts? >> It's about 50% at the moment. >> Interesting. Okay. So, um anyways, back to this point, which is that that business is not not sellable. I shouldn't be like you you said like when you started you're like it's not sellable. It's operational. It's like that's I mean, not necessarily true kind of at all.

6:37>> Yeah. >> Um you just need to get more customers. And extensions are a reoccurring product. Like people buy them every eight, 16, whatever the weeks are. You know, whatever the You know it better than I do. But I know I've seen the bill, so >> Yes. >> [laughter] >> it's not one time. >> I think >> I'm sure about that. So, so all that to say like all we have to do is just like we You have now encountered the big hairy problem that I talked about at the beginning of today, which is that you encountered something that you didn't know how to solve and then are thinking, "Okay, well, there's greener pasture over here. There's a girl in a redder dress. And if I go here, surely this grass will not be fertilized with shit."

7:13Um but it is indeed full of and significantly more than what your current business is. The current business is actually way more chill than the business that you're trying to get into. And the business you currently have is way more cash flow positive than the one you want to get into. >> Okay. >> The business that you want to get into, you will not make money from for many years if you ever make money from it. So, if you want to win at software, you have to commit to making no money for basically 7 years. Zero. And the people you're competing against don't have two other businesses.

7:38>> Mhm. I guess like my limiting belief around like I've got a very lean business. So I built a property couple of years ago. I ended up moving out and I run the wholesale and the salon from that house and my expense for the salon and the wholesale is 500 bucks a week. So it's very lean. >> Yeah. >> So I think for me the idea >> at running that business. >> Yeah. But like the idea for me to scale and like I'd need to increase my pricing and I'd need to obviously move into

8:06>> extension side you mean? >> Yeah. Like my margins are too small for me to be able to scale at the margins that >> So why don't we just do that? >> Cuz I'm like if I can >> Because you thought starting a software company was easy? >> Well I thought that having like a risk sorry a reoccurring >> You do have a reoccurring business. >> product that I would use as well. >> So reoccurring and recurring, right, have the same value.

8:33What we need to demonstrate is revenue retention. >> I would just like to make money online while I sleep and I don't want to work anymore. >> That's fine. Software companies is certainly not the way to do it. >> God damn it. [laughter] >> Probably the worst way to try to do that. >> Okay. >> Um like we just need to confront the business that you have right now. You need to improve the margins and you need to go get more acquisition. So that probably means like making more content, running ads to attract uh stylists, having some sort of offset funding to get them integrated. How can you run some sort of play within their, you know, salons? All right. Um just trying to use your, you know, vernacular. [snorts] Um to, you know, basically make them more money using your extensions. And then by doing that then they get converted because they make more money selling extensions than cutting color. And so it's very likely they'll keep selling it. And then you have basically you have a hunter and a farmer. The hunter is the one that basically closes the deal and gets them to kind of activate their base of of um ladies, I guess. I don't Maybe there's hot guy.

9:27>> It's just like the constraint of the wholesale is the production time and the capital. >> Uh-huh. >> Um and again like my logic was well if I was to invest the same $500,000 into the wholesale, that's a $150,000 margin. Whereas I thought, well, if I invested it into subscription, >> You would just lose all of it. >> Maybe that's your limiting belief. >> [laughter]

9:52>> I've built more software companies to a billion than you have. >> [laughter] >> Fair. Okay. >> Right. Two can play that game. >> Okay. >> Do you want my help? >> Yes. >> Take my advice. >> Okay. I should do it. >> [snorts] >> Hey there, if you're a business owner and you are not growing as fast as you 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 in 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 {slash} road map, plug in your business information and if you want us to actually help you deconstruct 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 your business, see if we can help. And if we can, we'll fly you out to Vegas and we'll do this in person live.