SMBs Are the Worst Clients You Can Have

0:00What's up? So I run a done for you cold email lead generation agency. We work with B2B businesses. All SMBs. The issue that I feel like I have in my business is just like LTV is not big enough. Turn is too high. And I think What's up? >> why? >> I feel like it's cuz consistency of results. It's like the >> Okay.

0:21>> Consistency of results or avatar or Yeah, it's pricing niche product. >> Avatar. >> Avatar. >> SMBs suck. >> Yeah. >> Well, because you probably get into it and then you're like, "Oh, you don't have a sales process. Oh, you would have higher LTV, but you mispriced." And then you start becoming a business consultant because you're feeding them leads, but they don't know what they're doing. >> You read my mind. >> Yeah, well, it's just you're the only SMB agency I've ever met in my entire life.

0:50Um so, if you think about this think about the natural extreme, right? So look at public this is for everybody. If you're like, "Man, how do I grow my business, etc." Look at the hypothetical options that already exist. So what publicly traded marketing agencies are there that are massive marketing agencies? Who are their customers? Is there one massively big marketing agency company that sells to SMBs?

1:16>> Not that I'm aware of. >> There's a reason. They suck as customers. And so, fundamentally, if you want to sell to the masses, you have to typically win on cost. Which means that you basically build your business around having massive efficiencies at scale. So that you can be like 1/10 And then that's how you win in the bottom of the the bottom part of the market. Everyone is in kind of this like mediocre muck of the middle, which is like, "Well, I kind of need this, but they're not consistent." Like I have turn because they go out of business, right? And so like you have what's called structural turn. Like they literally aren't good business owners and so because they have bad businesses, they can't pay you. Even if you deliver the same 50 leads every month, right?

1:59So, if you can deliver a consistent result in terms of your inputs and outputs, and then someone else turns regardless of that, then you usually have an avatar problem. Now, likely, this is what I would do if I bought your company tomorrow, I would look at all the customers you have, and I'd be like, which of these customers are amazing? And then I'd say, okay, these 20% are amazing customers. These 80 suck. So, now all of our messaging is going to be, hey, if you're one of these people that has these three or four characteristics, we're for you. If you're one of these people that has all these other things, we're not for you.

2:29Go away. Find somebody else to bother. And when you do that, you'll actually get more of these people, and these people will still opt in cuz they're crazy. Uh but but you can push those away, and that will over time, you can basically continue that 80/20 process and keep moving your way up market. Does that make sense? >> Got you. So, the end goal sounds like serving enterprise, like traveling up market, or just making my thing like stupid cheap, and then just >> Yeah, you have you basically you can't like you just you're in the middle. You just got to pick a side from a strategy perspective.

2:59So, like there are companies that do that are not publicly traded, but there are agencies that I've seen that crushed, but they were at like $299 a month, mm, $199 a month, and they built around how can I service customers for $50 or less. And then they convert like crazy, they sell awesome on the front end. They can have huge numbers of customers, and oftentimes their LTV is close like they do have 5% churn. And so, if you have 5%, you still have a 4K LTV, but your cost to acquire a customer will be like 100 bucks. And so, you have a huge LTV to CAC discrepancy, but it's because you built the business with that strategy in mind.

3:31Right? Now, if you have a more costly delivery process, then you have to go up market to a customer where you can charge, where you still have that great gross profit because you have your special sauce that delivers value to them. And they, because they get more value from the same inputs from you, you benefit from that. It's the same story of like I have a CRO agency, conversion rate optimization, and I'm really good at doing this and I work with e-commerce stores doing a million dollars a year. That sucks, right? That's a horrible like super tough. Those guys turn over all the time. Their ad accounts get shut down.

4:04You go to a company that's doing a hundred million dollars a year and you help them grow by 10% in their CRO and you make 10% of the spread. It's like you make a million dollars a year just from that one client and they're not going anywhere. And that same work. And so the leverage comes from either your delivery needs to have more leverage or the avatar that you're serving. You get more for what you put in. Because it is worth more to them. >> And is there is there a dichotomy of which way is is there a better or worse way if like I cut costs, I do everything overseas, and I just like get all the assets just get the all the small fishes or slowly travel up market?

4:40>> I would say whichever one So Okay, so this is a great frame that Leila has, which is what problem are you trying to solve? >> Did you have a problem you were trying >> So I said >> Mhm. >> So the problem with enterprise businesses is going to be it's going to be more expensive to acquire. It's going to be a longer sales process, uh more consultative, more custom. That's going to be the nature of the work. If you go more, you know, low low-tier, it's going to be more operational efficiency, more checklists, more productization around what you do.

5:08And you're not going to have a problem acquiring customers. It's going to be just ops. So if you have one preference between those two things, then solve the problem that you prefer to solve and then build that business. >> Got you. >> Makes sense. >> Makes sense. Appreciate it. >> Yeah, you bet. >> If you're a business owner and you are 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 hundred million dollar 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/roadmap, 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 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.