Wie ein 46-Millionen-Dollar-Unternehmen entstand

0:00Unternehmer/Gast I have come to accept that I love working, and I don't need to judge myself for that or or take in other people's judgment on how much I should quote do. Like this is my life, and this is what I like doing. Because I never heard of you before, and I was like, "Hey, this guy is popping up all over my YouTube all of a sudden.

0:24Alex What the hell is going on?" And B, he's saying that this gym I don't know I called it a course, which actually is incorrect. Yeah, it's like there's if there's like one thing that I could make just for the almost for the audience's sake cuz like we're we're much closer to what a franchise would be. Um and overall in the very beginning, that was what the big decision was like, "Am I going to go the franchise route?" Cuz I had six working locations. I was 26 years old. And they you know they worked, and that's when a mentor was like, "You should stop owning all these gyms. You need to license the model out." And so that was when I kind of transitioned from B2C to B2B.

0:57Alex Um what you might not know is that for 2 years I actually cuz I wasn't confident. I was like, "I know it works in my six markets." I was like, "But does it work in all of these markets?" So my wife and I actually did 32 gym turnarounds in the next 2 years. So we'd fly out in person, fix their pricing, change how they did their layout, change their sales process. >> a consultant. Like like a management consultant for a gym. >> 100 It's exactly that. And then um from there we you know we figured out we cleaned it up to just like completely dial it in. Um and then it I would love to say it was some stroke of brilliance of like, "And then in my master plan I decided to start licensing."

1:31Alex Um that was not what happened. Uh we ended up doing these launches, and the flaw of the business model was that I didn't control the fulfillment. So we would go in, we would charge nothing. It's pure performance. We'd fly in, and I would charge 100% of the upfront cash collected uh that we would do while we were there. So we averaged about $100,000 in cash collected in 21 days, and that's what we would average per gym that we'd come into.

1:55And so that means each gym is making an incremental 100 grand a month from your So if I were launching eight gyms in one month, we would make $800,000. We would, right? >> Oh, that's And this was when the model before you were like doing gym launches. And so what ended up happening though was like and it started scaling really quick. I was like, [ __ ] this is this is the game. Like this is what I need to be doing. This is awesome. And they didn't have to spend money on ads. They like they did literally nothing. They gave me a place to go market and sell is basically what happened. And so what happens we would dip out. And then all these customers that we sold would then be fulfilled by a facility that was struggling because that's why we they called us. So they typically had pretty poor product and I didn't have the bandwidth to stay there for six weeks on top of that and retrain trainers and show them how to set up like I didn't have the time to do it cuz we were marketing so much times we were there.

2:41Alex And so anyways, we would fly out and then what happened in an unfortunate percentage they basically were like, "Hey, you signed up and paid this guy $500. I would give you the same thing for $200. Refund with him and just sign up and I'll do everything through me." And so within a matter of months I had like $150,000 in refunds between like three facilities cuz they talked to each other. And then I was like, [ __ ] And I already incurred the cost of the marketing, the flight, the sales guy, the hotel, the rental car, everything.

3:12What was the name of this gym franch- this this It was gym launch. It was gym launch. Okay. But I'll tell you this, the original concept was gym rescue. Um it's like bar rescue, that was kind of the idea. But you said gym owners didn't want to be rescued. Bingo. So it's Who doesn't want to get launched though, right? So it's gym launch even though you're already open. Um and so nice branding switch. And so anyways, we were like, "Okay, this is not the model. Something's wrong here." So I had to keep basically keep selling more every month to cover the refunds from the month before. It was horrible. Very stressful.

3:42Um and so my wife had a little side training business that she had kept. She was doing like three or four thousand dollars a month. Um and I was like, "You know what? Screw the gym thing. We know how to sell weight loss, uh you know, direct to consumer. That's what we're good at. I was like, why don't you become the face? I'll go in the back and I'll just run the, you know, I'll run the acquisition side and and we'll sell like 16-week transformations just over the phone. And so, we started doing that. That's a that that that doesn't seem like a good idea, does it?

4:08Right? >> it it started working. 14 days we're doing a thousand bucks a day uh switching it. And um I I just would have thought it was so crowded. We're you know what I mean? We're We're good like we're good at that. You know what I mean? Like we That space we understand very well. Um and so, we were able to do that and I was like, all right, the eight sales guys can come in. We can do 8,000 a day selling these like the the the transformation programs. Great. And so, I had eight gyms I was supposed to launch the next month. Um and so, I called them up and I was like, "Hey, we're not doing the thing that we were doing before. You know, you didn't pay us anything, so best of luck." You know what I mean? Basically, that's kind of what it is. And then um the first guy was like, "Dude, I just refinanced my house. I just maxed out my credit cards.

4:44Like, I need this. My buddy like filled his gym up with you. Like, I know your thing works. Like, I just need please, like help me." And [snorts] so, um we heated and hotter and finally I was like, "All right, man. Listen, I'll show you what to do." I was like, "But I'm not flying out there to save your ass if you can't close." And he was like, "No, no, that's fine. That's fine." And he was like, "Well, how much?" And this that was like the magic moment where I was like, Uh and so, just to show you where I was at at the time, I picked the highest number I could think of with the intention of getting him to say no cuz I didn't want to do it.

5:12Alex And so, I said, "$6,000." And he was like, "Done." And I was like, I just remember looking at the phone and being like, "Holy shit." $6,000. And so, I hung up the phone and then I called the next guy who I was supposed to cancel on. Same spiel. And he was like, "How much?" And I was like, "$8,000." And he was like, And what what are you giving these guys? So, that you're giving them a playbook to sell in their market, which included what? What did they need to do? >> you you you probably actually didn't even know what you were going to give them. Well, so we had already had the entire The entire front-end process was super super uh lubricated. So, like, these are the ads, these are the pages, here's how you place them, here's the targeting. Once they come in, these are the five texts that you send, here's how the reminder sequence works. Once they walk in the door, here's how you set up your lobby, here's where you need to sit. This is That's the stuff that a gym owner would send to a client who wants to get trained.

6:00Alex >> So, it's not a course, it's also not like EOS, it's not like a back-end operations thing. It's It's like a marketing machine. You would You'd basically license it. >> I licensed the acquisition So, we were the ads. So, it was ads that I was in. Cuz I was like, these ones work. So, I would run these ads that I'd written to pages that I had built, and I would And so, what I was doing is But on on their URL, you basically were were You were a services business, right?

6:24>> Yes, 100% we're a services business, and the training component was like, okay, well, how do you sell? So, instead of getting one-on-one, I was like, one of the And so, what I did was I actually gave them my internal sales training. So, it was this thing that I put my guys through, and like a lot of It's kind of interesting because I I fell into this where I think a lot of the the e-learning space try and create stuff to have stuff.

6:48Rather than creating uh as as as short of a time commitment to get someone from point A to point B, which is I needed to get a guy in who used to be selling shake mix from MLM, and get him to close $500 deals day one with [clears throat] 2 hours of training. And so, that training is what I gave to them. So, I already had everything, I just didn't have the marketing part. So, all I did was I built the marketing part over the weekend, cuz I already had the ads. I didn't make a training for it, but the training for like how do you weigh them in? How do you do the food stuff? How do you Like, all that stuff I already made, cuz I had to do that during the the gym rescue side. So, I literally just added in how to run the ads, and then the whole product was there, and um we helped them implement it implement the acquisition system within the business, and the average gym collected $30,000 in additional cash in the first 30 days. So, we would do 100, but them not being as good as us still did $30,000 additional cash in the first 30 days. And so, the price point for the for the system was was 16 grand. So, they were stoked. And then at that point, we signed 3-year licensing agreements for 42,000 a year. Um so, they were like, "What else do you have?"

7:52And I was like, and what would happen is they'd make their gym because all of a sudden they go from 100 members to 250 in 2 months and be like, "How do I hire trainers? How do I scale a sales team? How do I You know, be like" and then all of the other problems emerge. And we already had done this cuz I had six gyms. So, I was like, "Here's my ads for trainers. Here's how I train them. Here's how we set up the classes to maximize square footage. Here's how we do the ascensions in the semi-privates. Here's" and so, we just we just did did the whole thing.

8:18What can I Google to see one of these gyms? I I want to see like like did you do the I know you use ClickFunnels, I think. I can tell by the favicon cuz I I like ClickFunnels, too. But, you what like can I Google something to see one of your clients one of your students I don't know what you call them. Yeah, you can Google them. They'll all look different cuz they're all they don't they don't take my brand. So, franchise is system, fee, name, right? So, we were just system and fee.

8:46Otherwise, I'd be operating as an illegal franchise. And so, let's zoom out for a second. So, you basically go from And for those who don't know the story, and I I only barely know the story, but the story is you open up a couple gyms yourself. So, you open up a gym I did six. and you get to six locations. Yeah. You're sleeping on the gym floor, which is always You know, any business I do, I'm just going to sleep in a garage with at least one night so I can say that. But, you know, you know, maybe maybe you did the real deal where you you actually had to sleep there. I don't know. Nine months.

9:15Nine months. All right. So, you're sleeping on the gym floor for 9 months. You end up getting six locations off of cash flow. So, you know, you're not like, you know, getting a bunch of investors come in or whatever. And somehow, someway, you stumble into this like I don't know, like a mastermind or a retreat by Russell Brunson that that I don't know if he hosted it or he was just there. He's the ClickFunnels guy. How did you even get to that event? And then I want to ask you a couple questions about it. Yeah, so for for avoidance of doubt, I had two partners that after I had my successful gym, uh one was the ex-COO of Broadcom.

9:47Number two at Broadcom, $10 billion company. Um and the other guy had 22 tanning salons. And so, the Broadcom guy brought in the tanning salon guy and was like, "Hey, let's scale this thing." And I was like, "Awesome." Long story short, the partnership didn't work out. Um and so, I ended up opening the next full three on my own. Um and I opened up two more with them. And then I ended up buying out uh both of them over time. So, just for

10:13>> Did you have a job before this? Cuz you're only 29, 30? >> Um I was a management consultant uh before that. So, I quit my management consulting job and then and then started this. Um the question that you asked though originally was So, how how did you end up at this thing where it's at this hangout or this mastermind or this meeting where you where you realize I'm in the wrong business. I shouldn't be running gyms. I should be teaching other people how to run run their gyms, right? Uh how did you even end up at that thing?

10:40It was it was and it was like Russell's idea, right? At least I saw the video. It was wonderful story. >> am So, the the long story compressed was 2 years before I went to that mastermind, I went to Traffic and Conversion Summit because I knew I needed to like learn more about marketing. And like my I'm a gym owner. Like I'm not an internet marketer. Like it was like not this is not my world. You know what I mean? I was like, "I got to learn more about marketing." So, I'm going to go to this marketing event. So, I go there and one of the side rooms was Russell. And he goes and pitches ClickFunnels. But he couldn't actually do the stack cuz there weren't a lot of sales. So, he did his entire sales presentation and then literally just stopped before the buy button. And I was like, I want whatever I was like, "Screw the gyms. I want to learn how to do this stuff." And then like most things, because I couldn't buy, there was nothing that I did. And I went back to my life for 2 years and that was it. And then when I was having some sort of existential crisis cuz I was now 26 or 27 at the time, um you know, all the gyms were you know, they were making money. And I remember like texting one of my managers and I was like, "Hey, do you need anything?" He was like, "Uh I think we're good. I need some ink, you know?" And I like ordered on Amazon, sent him ink, and then I was done for the day. And I was like

11:39>> Trying to be useful. Right, I needed to be useful. So, I Googled I was like, "You know what? That Russell thing was really cool." So, out of the blue, I Google his name, and the first link that comes up is, "Are you one of my dream clients?" or something, which was directly to his mastermind. So, I applied to the mastermind. I got sold on the mastermind, and transparently, I should never have been sold on this mastermind. It's for internet marketers, and I was the only And it's like 30 grand, right? And I was the only brick-and-mortar business owner there.

12:04And they're like, "Oh, yeah, tons of gym owners right here." And I've I've already told him we laugh about it now. But like, anyways, I show up, and I'm like, "All right, all the guys show their funnels and all this stuff." And I was like, "Yeah, I own a bunch of gyms. I'm trying to get to 10. I've got six, so that's kind of I'm just here to learn, you know?" >> That's where Yeah, that's where I'm at. Yeah. >> Yeah, and so I walk through my acquisition process because we were we were getting 30:1 on the front end. So, 30:1 LTV to CAC ratio in the first 30 days. Right? Not including my my recurring on the back end. And I walked through every single

12:31>> means which means you're making 30 30 X what you were spending to get a customer. >> on ads, you get $30 out. On cash. In the first month. >> Yeah. So, when you receive launches Which is which is like a good for a lot of brands like one to three over a year would be all right. >> insane. I mean, so it would cost us $3 to get a lead, and one out of five leads would give us $500. And the reason that it wasn't more than 30:1 is that that's me giving the average with the sales guys. But like, when we ran it, and I was selling, and we were working leads, like we could get 100:1. It was insane. So, anyways, he saw these numbers and was like, "What is going on?"

13:06Um and so, anyways, I walked through it, and he said the sentence that changed my life, which was, "Alex, um you shouldn't be running gyms. You should be showing gym owners exactly what you showed me. And right now, you're in a level two opportunity with a level 10 skill set." And that was those were the exact words that he said to me. And it honestly hit me like a ton of bricks cuz I was like, "This is my vision. United Fitness, we're going to be America's next gym. We're going to make America healthy, like we've got this. And um but, you know, I he he made more money than me at the time, and so I was like, "If I don't listen to someone's advice, then why am I paying for it?" Um and so

13:39>> an interview with you, and you said something that I've had this exact moment before, which is you meet people who are doing, you know, on whatever the scoreboard is, they're they're they're richer, their business is bigger, their valuation is higher, they're younger, whatever. So, they're more successful, quote unquote, and uh you meet them, and you're like, "All right, there's nothing more special about them than me." Okay, so that's the first realization. I want what they have, and they're not they don't have something I don't. All right, so then, you know, how do I do this? And it seems to me like that's what kind of shattered the glass of that whole like business plan that you had was that realization, is that right? Yeah, 100%.

14:16I mean, I didn't even know what an opportunity vehicle was. >> [laughter] >> I was like, "What do you mean?" He was like, you should like and I didn't I Same. What's that? Huh. Same. I don't know what that means. I don't know what that is, either. >> [laughter] >> Yeah, I remember I remember when I didn't know what that meant, either. >> Yeah. Well, I mean, I I I define that now as uh the number of potential units to be sold and the gross margin per unit possible. So, it's one times the other, and then the third multiplier would be uh supply-demand dynamics within the space.

14:46So, like, if I were to try to get into telecom, amazing TAM, amazing potential gross profit per unit sold, terrible supply-demand ratio for me to enter. Right. So, it's like, how do I measure the opportunity vehicle? So, those are the three that I use to measure that vehicle. And so, in this instance, uh he was like, "Okay, you have all these gyms that you can sell. Uh you have a huge amount" And the big one that he saw was like, the amount of potential gross margin per unit sold was enormous, right? And so, for context, our second year of business is in the licensing business, we did 26 million top line, 17 million in EBITDA.

15:18Amazing. It was Wait, can you say say say those numbers again? It was 25.9 million in top line and 17 million in EBITDA. For the license >> First I've got a bunch of questions about that. That was in year one you said? >> Okay, first of all, what made you you said that you were getting this 30 to one um uh LTV to CAC. What what were you doing that was so good? Just good copywriting or you just a good sales person on the phone? What was so good about you?

15:42>> off, Facebook was way cheaper in 20 13. You know what I mean? When when this whole thing started, right? So, I mean like just the cost per lead was insane. The percentage of people would convert on landing pages was higher. Everything was more responsive, etc. But from a from a from a like what we were doing is we were offering an irresistible offer. So, we had a free 6-week challenge is what we'd offer people. When they would come in, uh we'd walk them through, you know, what the program was, etc. And then the the stick and the reason it was so cool and compelling was that if they lost 20 lb uh in 6 weeks, we'd give them the entire amount of money back. And that's what made it so cool. And that's why we got crazy results. We had like 70 80% success rates, which for weight loss program is insane.

16:21Uh and it's because people were basically wagering money. Um and that's because I didn't know that like wagers are managed by lotteries and like I didn't I just knew [laughter] it was like you put 500 bucks down, you lose the weight, you get it back. But the the reason it worked so well is that someone come in, so I'd pay I'll walk you through the math. So, let's say at this point I'm probably paying 10 bucks, you know, CPM. So, like and you know, so I'm getting and probably like 4% 5% CTRs because it was like back then. So, I'm getting 50 clicks for 10 bucks. Right? And like okay, and now my landing page is converting half.

16:56Right? So, like it it was it was just, you know, like bonkers. Like and that's why some of these in some markets we're getting 25 cent leads. You know what I mean? In some markets where like the highest markets back then were like five bucks. Right? And so, you've got an average cost per lead of like $2, which was nice. >> And you're getting what? Their phone number? Was that Yeah, yeah. Name, phone number, email. Um And so, from there we'd schedule usually like 50 to 70% of those people, half of them would show, and then we'd close um and depend on you know, the skill of the sales guy. The average gym closes 35%, our team averaged about 50. When Leila and I sold, we averaged 80.

17:28Um and so, there's a big range there. But, we'd collect the cash up front for 500 bucks, and then 24 hours later, they'd come in for a nutrition consultation, which is complimentary. We'd average $200 a ticket in supplements, you know, creatine, pre-workout, etc. that we'd sell them right after that, so we get another $200 pop. 3 weeks later, what we'd do is say, "Hey, listen, you lost 12 lb, Sandy. Um is that your ultimate goal?" And then she'd be like, "Well, no, I want to like get in amazing shape and blah blah blah blah." And we're like, "All right. So, you understand that it's not about the 6 weeks, it's about 6 years from now, right?" And she would say yes. Then I'd be like, "Congratulations, you won the challenge. You got the point of this."

18:04And so, what I want to do is I'm aligned with your long-term goal, too. So, what I want to do is because you won the challenge, I'll take that $500, I'm going to spread it over the next year, so you get a discount for doing it, so we can align with your goal. Fair enough?" She says, "Sure." 3 weeks after that, she gets billed for her first billing. So, if you follow the money, 500, 200, and then she gets billed right for the EFT, even though she won the challenge. Right. Right. Yes. It's an amazing product. >> after that, we'd say, "Hey, wouldn't you like to like have a little bit more attention? Instead of being in this large group, we can put you into a one-on-four scenario. We can give you even more stuff. We can show you cooler, more advanced exercises. Blah blah blah."

18:37And so, that was that was how we did it. And would you just um But but then this parlayed into the actual product that you really crushed it on, right? So, which was when you were doing 27 million in year two or whatever, with 20-something million with like 17 million in EBITDA on year two, that product was the was Gym Launch, right? >> licensing, yeah. And what was that What did that look like? Was it What software were you using? And how did you package this?

19:06Like that's cuz I I want to get really nerdy on this stuff, because I think about that, I'm like, that's a great idea, but packaging a service is that's a challenge. That's interesting. And I want to So, I want to ask you what you did. And then I'm going to ask you um what other industries would you do it for? So, I mean, that's what acquisition.com is. So, it's like it's exactly that. Like, I know how to do this within a within a niche. So, like B2B services. If someone's like, I know how to help a a lawyer make more money with their law firm. I know how to help a bookkeeper make more money with their bookkeeping business. I know how to help hair salon, you know, people make more money with their salons. Like, that's what I'm looking for is niche uh e-learning / service companies um that we can invest in and Our our our good friend Jack Butcher has a phrase called um build once, sell twice. And that's basically what you were doing. Um you were like people who were selling one to one at They had to sell, then do, sell and do. You were like, "No, F that.

19:57We're going to build once, sell a bunch of times." And and that like process is what I'm asking about. That's interesting. >> Yeah. I mean, that was when I'm sure you're familiar with Naval cuz I know you're on Twitter. Um like I I I kind of fell into like it's like you realize why you start making money. Like, I'd love to say it was some master plan. Like, you realize later why something works so well. It was like I had zero incremental cost. I was selling cars over the phone. And I had no cost of goods. Like, it was insane.

20:22Alex Um and so, we basically would onboard people, you know, we had a concierge service back then. This is I mean, this is 5 years ago. You know, it's been a it's been a while. Um but we do an onboarding process. We kick their ads off. We basically check in with them. We had calls every single day. So, I would hop on a call with every new customer every day. Um I did it as a group call, but I was always available. And then we had a 35-person tech support team that would help them with like the pixels and setting the landing pages up and all that kind of stuff. And so, cuz that was the that was the issue they would get stuck with was the tech. So, they could understand the sales. They could understand the nutrition stuff. They got both of those things for the most part. The tech is where they struggled. So, we really ramped up like our implementation help.

21:01Alex Um and then on the strategy side, I would be there every day to take calls. And I took 400 calls over the first year. Um and so like that was kind of how we did the fulfillment. And then But it was like a set of videos? >> Yeah. There's a set of videos you watch and as long with like a file a folder of files? >> Yeah, yeah. It'd be like, here's how you set up the you know, I'd be like, here's why you set up the lobby this way. This is what they need to see when they walk in. You have them sit down here. Give them this iPad. Here's the download for the the swipe file of the presentation that they should be leafing through before they come into the office. When you come like when you're ready, say these things, make this joke, do this thing. When you come inside, like sit on the corner, don't sit across from them because it seems confrontational. Uh have them step on the scale. Make sure they step on it. Make sure they look at the weight. Then she cries and you're like, okay, sit down. Now listen, we're here to help you. Let's figure this out.

21:44What have you done so You know what I mean? Like it's it's very scripted. So it's like, here's the video explaining it. Here's the script that does it. And then here's six examples of guys in different gyms with different styles of selling. Cuz that's one of the things that like we started to learn early on is that I was attracting guys originally like in my team, I just had everybody sell my way, more or less, right? And then I realized that a lot of people over time as I learned about sales like, people have different styles of selling and they're just as effective. Some people are more, you know, very analytical in terms of like their approach like make basic make a logical argument. Some people are just very emotion-driven. Some people just do it off the floor. Like and so I showed different styles of selling but still following the same framework. And so we went away from a scripted process to more of a question-based framework, which is what we've pretty much stuck with since then. And if somebody wants to get good at selling, what uh like, you know, there's a go out there and you know, try to sell a thousand times is one way to get get better. Uh but if you wanted to improve your rate of learning, what books, courses, whatever, what are what YouTube videos uh like do you remember that like that really clicked for me and that was like kind of like a game-changing uh thing for me in getting better at selling? I have relatively stronger beliefs about the topic. Um so I think first off, a lot of people read books before they start selling and I've thought a lot about it and I don't think that's the right path.

23:00Because you don't know what they're talking about. Yeah. Like you only know like what the concept of building rapport is until you've not had rapport and you're like, "Oh, okay, now I understand how this works." But like until you like until you confront the reality, [clears throat] like you can't you can't bucket the knowledge into something that's actionable. So, I'm a proponent of doing first, realizing the deficiencies, and then going to find the information now to match the the the real-life scenarios that you have encountered. Um the second part of the question is like which books or things like made things click? So, um there's one moment that made things click, which was I said this in the book Sam, which is like "Make people offers so good they'd feel stupid saying no," which was the secret of selling, right?

23:42It's like if you just make it so good that they won't say no, then it makes your job 100 times easier. And so, I did work really hard on that side to make my job easier. Yeah, and I agree with that. My problem when I I'm a copywriter, former self-taught copywriter, and I I know all about that, but I'm like, "Ah, if people want a refund, this is going to be a pain in the butt." Like if they In order to make this like In order to make an offer irresistible, you could you could go a couple different routes, but one of them is you just do lots of stuff and when I think about that route, I'm like, "Oh my god, that's going to be a lot of work. I don't know if I can actually execute on that."

24:14Alex >> Yeah, what's an example of that? So, give an example of where you see people with a kind of substandard offer and how you would give me and how you would switch it to be a more irresistible offer. I mean a simple one we did within the agency space in the software company that we started um was we helped them transition from a retainer model to a pay-for-performance model. So, that was an implied guarantee and we just said, "Listen, pay us one time up front," which by the way for most of them was what their LTV was cuz most of them sucked. So, it's like if you're charging $1,500 a month, which would be probably the standard small business B2B, you know, I would say commoditized price point for generic lead gen. Um they're charging 1,500 bucks a month. We said, "Hey, charge your person $5,000 up front. They won't and say you'll never charge them again unless someone walks in the door." And so, they'll cover the ad spend after that and you don't get any percentage of it unless someone walks in the door. So, you generate the leads and work the leads, and when the person shows up, you charge X. And that was based on a pricing survey that we ran internally to our customers, where I said, "If we worked your leads for you, um what would you uh be willing to pay as a flat rate?" And so, there was a big pricing curve, and the the concentration of like 75% were willing to pay between $300 and $400 a month for that, just as a flat service. And I was like, "Okay."

25:23Now, I asked the exact same scenario, same result, same everything, later on in the survey, and I said, "If we just said, 'Hey, uh pay per show, what would you be willing to pay for somebody who walks in the door?'" For the same exact performance, they're willing to pay four times as much. And so, I said, "Well, I'll be, why don't we price it that way?" And so, we did it on a pay per show model. And so, that's what we transitioned, and it also makes it way easier to sell. We could cash flow the acquisition because we were making the LTV that we were not we, but like the agencies could make normally upfront day one in cash, and what's cooler is that the first 30 days, they had people show up. So, they get cash upfront, and then in the first 30 days, they're still getting cash that they can use to finance the acquisition of the customer. Right? And so, that's a much more irresistible offer from a chiropractor. It's like, "Well, how do I know it's going to work?" It's like, "You pay us one time to just get all the [ __ ] set up, and then from this point going forward, only when someone shows up, you have to pay."

26:15And so, people understand this. You said software company, and so, I look I I mean, I watched a lot of your videos, so I know this, but you basically had like three or four or five businesses. The first one was this main one, which was Gym Launch, and that was doing like 30, 40, 50 million. You can correct me in a second. >> 26. Uh year So, we did 6.8 million year one. That was the hybrid between me doing Gym Rescue and transitioning to the licensing model. >> [snorts]

26:40>> So, about halfway through year one, I was like, "This model's not working." And so, we flipped it, and then that's when we shot out like a gun. Like, the first month we did 120, the next month I think we did like two something, then it was 360, then 480, then 780, then a million, then million two, million five. Like that was literally the next like 6 months. And so that crossed us into the second year of business. And then that year we did uh 26 million.

27:08Um so we did 6.8 with 3 million in EBITDA year year one. Uh the second year we did 20 25.9 with 17 million. And then year three, and this is why I'm a big advocate and this is maybe just my own deficiency, but um we did 37 million top line, 13.4 million in EBITDA. So Alex made a big [ __ ] up um and was like, "Hey, I cuz at this point, even though it may sound like this was a short period of time, I was like I had heard that I could sell this for like a hundred million dollars. So I was like, "Fuck yeah, let's do that." Um Well, it was a three-year [ __ ] journey, but um anyways, and there was this flu that went around. People lost their minds. It It didn't affect the gym space at all.

27:49That was good. >> [laughter] >> Um I'm joking. Uh and so So anyways, uh we started the supplement company Prestige Labs in December of in December of 18. And you're basically selling supplements to your clients. >> Well, it's through the clients. So they never actually purchase from us directly. What we did was we created a drop shipping model because the number one issue that small business owners have is cash flow. So I said, "What we did was we sent out retail kits that had 130 bottles in them were empty. So the retail kit was like a hundred bucks. And they could stock their whole wall because all consumer research shows that like the more stock the wall is, the more likely they are to purchase. And they would only have one sampler of all of them out. And then we sent them a kiosk with a with an Amazon Fire on it, right? That was preloaded with their affiliate link. So someone would try it Oh my god.

28:40>> would make the purchase right there. And we'd say, "Hey, this is so much better cuz now it'll go straight to your doorstep. You don't need to take it home with you. And better yet, you won't miss a month because it'll automatically ship to you. So, we gave the gyms a second recurring revenue stream through the supplement. So, when someone walks in, when I was telling you earlier like sell them service and we sell them product, we'd sell two EFT, so that's the gym word for electronic funds transfer, so recurring revenue. So, we'd sell them a service recurring and then we'd sell them a product recurring so that we'd have two different streams that would come in. The nice thing with the product recurring is that there was no there's no operational drag for the gym. They don't have to do anything. They just have to make the one sale one time and they're going to make 80 bucks a month from that point going forward, pure profit for them. Like just straight to the bottom line. And so, what, you know, interestingly, uh a lot of gyms made more money selling the supplements than they did on their service cuz the service is low margin, but the the product was like almost all margin for them. And we paid really aggressively, so we paid 40% um commission to them because they were paying for the cost of acquisition and doing the sale. So, I said, you know, you guys should get disproportionately rewarded. In the first month we launched that, uh so, we beta launched in December and then January 20 19 is when it kind of officially launched. And the first month we did 1.7 million. And so, um cuz I figured I was like, okay, if we've got, you know, 800 active gyms, if each of those guys sells, and it was actually under my projections cuz I was like, we're going to be, you know, so wealthy. I was like, if all of these guys just sell $5,000 a month,

30:05>> [laughter] >> I was like, we'll do a million a week. Um it didn't work out that way, but uh we ended up doing that year 37, but my licensing business came down and I think it went to like 20 ish. And then the supplement company like 17. And part of the reason the oopsie that I did was two big oopsies. Number one was I started a second active company when I already had one, which to me [clears throat] I think was a mistake uh given the skills that I had at the time. And then the second uh oopsie was that because I thought a potential acquirer would want lower churn, which is true, um I lowered the price. And so, I thought that if I lowered the price, that would get more people to stick. And so I cut my top line price by 25%. And so absolutely no change and just lost 25 What what what was it and what did you reduce it to?

30:53It went from the It went from $800 a week, which is the licensing on the back end, to $600 a week. What's 800 a week times 52? I don't even Like what's the annual cost for >> 42. 42,000. So it costs 42 grand to be a part of your >> license. What what what what do you call it? A part of your [clears throat] not corp. Yeah, but what do you what's like the noun that you use to describe this?

31:16Like your The program was called Legacy. The people were called Gym Lords. And so we would sell launch as a front end program and then they would go into the continuity, which was Legacy. So if you're if you're if you're If you're following along from home for anybody in the podcast, I copied the exact same model. So I sold a six-week defined end program for a lot of money and then I down sold the continuity because 16,000 for 16 weeks is a thousand a week. And so I said, "Now you're going to get more for less for $800 a week. You're going to get what you had before plus all this other stuff for less money than you were currently paying." And they're like, "What a deal." At the gym, I'd said, "Hey, it's $100 a week, $600. And if you stay, we're going to drop you from 250 a month to $200 a month cuz we'll take your $600 and we'll spread it over 12 months. We'll go $50 a month in credit."

31:59And so then you get to 199 a month. And so it was front end to liquidate the cost of acquisition so that I wouldn't need outside capital to acquire customers. And then the back end I'd down sell the upsell so that we could keep the continuity and make it Which is all like the most classic internet marketing [ __ ] which like a lot of like tech startup stuff, they don't do this and they're fools for not doing it. >> tech startups we do the opposite typically. So we're say, "Hey, we want to get you in. We want to make You don't know us. We don't know you. Let's make the cost of of trying so low. So free free trial. Don't even put a credit card on file." And then try to go put the bar as low as possible. You did the exact opposite. You said, "Okay, I'm going to put actually more friction up front. I'm going to ask for $500, or $16,000, a huge number up front, and then over time I'm going to actually be selling you on more value for less cost. Why do you think that works, or why do you think that worked for you to to charge have such a big kind of commit up front when you know, that's usually when people are, you know, hesitant? I think there's a couple pieces. Um one is most software companies have funding. Not all, but a lot of them have funding. I did not have that. And so I could not afford to be in the negative and incur cost I didn't I couldn't have a burn rate. Burn rate was Alex's bank account. So, [snorts] that wasn't going to work for me. From a psychological and behavioral standpoint, it always made sense to me to sell someone when they're the most excited.

33:21So, you're the most excited day one, before you've gone to your first workout, because once you get your first workout, you're like, "Shit, this is going to be work. So, and I'm going to have to start dieting and not eating the stuff I want." Sell them when they're excited about the bikini and not about the TSA and the airplane they have to go through to get to Maui, right? And so, I followed that, and then the reason that we decrease cost over time is because it's my belief that information decreases in value over time. And so, the longer someone has it and exposure to it, the less valuable it is, you know, marginally. And so, we try to accommodate that with the pricing. And since our our gross margins were still basically 100%, it still made sense for us. Real quick, if you're a 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 roadmap, 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.

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