This Video Will Make You Unstoppable

two out of three businesses fail and so that means within 10 years if we were to look back at these business owners two out of three are out of the game every business that I've started since 2016 still continues to make money to this day so here's how to make your business Unstoppable there's three steps it starts with stop selling small customers your business May Fail not because you are a failure but maybe because the customers you serve are failures let me tell you a story to explain this so there was a small M CRM

back in the day that approached me about investing I asked them what their turn was so what percentage of customers were leaving between last month and this month and their answer surprised me it was a much higher percentage than I expected because I thought a CRM they're processing their payments through here they have all their memberships in there like this should be a very sticky product and I said so where is the churn coming from and they said oh well about a third of the gyms go out of business every year and I was like

Wow wait a second so this has nothing to do with how good your product or service was these businesses in and of themselves just stopped being in business the formal language for that is called structural turn it means it's like it's based it's baked into the structure of the market that you serve now the question is is that your choice to pursue that market and the answer is yes a lot of business owners struggle in the business and they look at everything except for the most important thing which is they they messed up the pick

Chick-fil-A's head of people gives a great example of this when they talk about actually Talent selection but I think the parallel holds they said most people lose in the NBA in the Championships and wonder what they did wrong in the game when in reality they lost in the draft as and they didn't have the right people on the team and so if you think about your business as an ecosystem the right people in the team has to be all the stakeholders including the customers and so if you're thinking about your own business there are many

business models that simply aren't fit for smaller customers and so I'll give you a different example in the agency world where you do some sort of advertising for any type of business if you look at some of the biggest ad agencies in the world you'll notice a common theme they all serve the biggest customers in the world whereas if it were true that agencies would be best served serving small customers then some of the biggest agencies would serve some of the smallest customers but that's not reality in looking at this it means that just like

the CRM business and that's arguably one of the stickiest businesses you could possibly imagine the agencies could not keep churn down with small business owners because small business owners in of themselves are volatile let me give you a visual so let's imagine this is kind of representing the the es and flows of the revenue of a small business now let's say they decide to work with you here they say you know what we're going to sign up with you and you get paid now maybe you start advertising the business and then the next month they

make a little bit more money hooray everyone's happy now the next month the normal volatility occurs or maybe because you sent them more customers than they could handle they say hey maybe we need to ease off a little bit and all of a sudden they think to themselves wait a second I'm back in the same position I was before but now I've got still more customers than I had before that and now you know what I'm actually making less money the next month and so what happens here they they become one of these for you

they cancel right this is the point of cancellation and so what happens is that there's many businesses like small agencies that do lead generation for small customers and continue to wonder what do I need to do in order to make my business sticky and they kill themselves trying to figure it out when the problem is inherent to who they serve is that they are volatile and as a result your business will be volatile too it reflects on to you now to give you an absolute hypothetical extreme here to give you an example Shopify is what

most would consider world class or best-in-class for customer retention but they serve by and large prosumers meaning consumers who want to start a business and let me give you a stat that might blow you away 60% of their customer stay year but 40% leave and that's the best in the world and so in thinking about this you'll typically need to have a business that has almost a zero cost of servicing the smallest business owners if that's the game you want to play if you want to be Walmart then you have to orient your entire strategy

on basically a zeroc cost basis for providing value which works in softare Ware companies or like Walmart where the entire model is structured such that it creates the smallest cost to them so their alternative is really not having it at all right now there was one agency that did really well with this Mutual acquaintance of mine what he did was that he basically provided marketing services but for about $299 per month now what he realized was this vola and this was a guy who used to charge a lot more than that what he realized is

that with this volatility he had to price to their worst month and so it's like okay what's the lowest part of this this volatile range this wave of Revenue that these small businesses are going to encounter okay well then I'll just put my price here and that way I'm so cheap that they'll never cancel and the cost of them doing the services that he rendered which was actually far less than the guys who were charging call it $1,500 a month which is probably like the industry standard for a small business or local local business lead

genen all of a sudden he's one fifth the price but he just provided still more value than the $300 and so it still felt like a good deal here because all you would do is you would optimize their Google stuff get them a few leads a few phone calls a month and for them they're like okay if I get a couple customers it's worth it this it's so expensive relative to what they made that if you weren't saving the day every single month the question they'll always ask is what have you done for me lately

this is one of the big misconceptions that business owners have and I've made this myself we which is you see this right you see this Delta that you created you're like look you went from $1 sign to $2 signs all of this extra money was because of me right but the thing is is that if you make someone $10,000 right in the first month you work with them and let's say you charge them a th000 in your mind you say oh well this 9k is because of me which means I just bought another nine months

of service with you right because I made you $9,000 I charge 1,000 bucks a month so I could basically just break even for the next N9 months but try actually having that conversation in reality it doesn't work that way what happens in reality is this they pay $11,000 they make 10 they make the extra nine and they say oh that $11,000 was worth it this month and guess what happens next month you start at zero actually you start at negative 1,000 because they've already paid you a th000 and they haven't made any money yet and

so again it's always going to be relative to when they pay and what they get relative to that and so this is where this volatility ends up becoming a trap for most business owners and when you're starting a business or even when you're a few years into the business you'll often sell the people that you relate to and so you'll sell out of your own wallet to solve your own problems but the problem there is that those people will never become reliable it's like building your business on a foundation of sand it doesn't matter how

beautiful of a castle you can imagine in your mind one bad storm on on a foundation of sand and it's going to topple over and so you end up just getting in this endless cycle of trying to iterate your products create different offers and all this stuff but the fundamental issue is you're serving somebody who's never going to who's never going to stay in pay because of them not you so for example if you have a supplement business it's unlikely that you're going to get very high stick if you're super expensive and your product Suite

is only geared towards beginners and beginners turn out as in they go to the gym they stop going to the gym they go to the gym they stop going to the gym now if you had a business that was geared around the regular user or somebody who already let's say takes protein every day and you truly have a Superior product and then that entire base of people who takes protein shakes every day is willing to take yours instead of someone else's then you have a customer that is already a qualified customer who's going to continue

to take the product over and over again but when you target beginners whether it's b2c or B2B obviously the price differences are significant between businesses and consumers but they are still beginners within that Continuum and so you will have the churn in relation to how much of a beginner they are and so my preferred way to think about this is if you think about this pyramid as representation of the marketplace based on their spending power right if you know at the base you're always going to have the most people that have the least amount of

money to spend and so whether it's B2B or B Toc like b2c it's going to be base beginners for whatever it is that you sell if it's B2B it's going to be the smallest business owners so it could be you know consumers becoming prosumers or prosumers becoming vnbs which is a very small business and then vmbs becoming smbs which is small business owners and then and then you have low midm market midmarket and then you all you go all the way up to uh you know Fortune 100 companies right my preferred way to structure a

business model is to actually start at the top and the reason for this is that because there's little operational drag because you have fewer customers you need to take care of they're able to spend significantly more they are going to be around a while and they know their numbers and they can stick with their commitment so if you have a contract for example and they say they'll pay you a million dollars a year the likely they pay you is significantly higher then a beginner saying he's going to pay you $10,000 over 10 months very unlikely

I would make that bet so much so that corporate debt is an entire investable asset class based on the promises that business make to repay things the cool part about this from a branding perspective is that you learn how to service SE much higher end customers and with that reputation then there are customers who are going to be underneath who are then going to say you know what I would love to be able to work with somebody who works with the 400 I can't afford that you say you know what I can make it a

little bit more affordable for you but you're going to get a little bit less service for that and you can work your way down now here's where it gets really clever is that as you work your way down you're consistently making more money and at this point when you go further and further down this this Rabbit Hole you're going to be able to spend the money it takes to create the automated solution or the software based or technological based Solution that's going to have a a near zero cost basis for you as a business owner

so that you can profitably serve this itty bitty these itty bitty dollar signs here without the headache associated with beginners fundamentally if you sell to beginners you're going to have to either sell a really big ticket one time that's based on an emot emotional purchase and you're doing what I would consider a smash and grab business solar for example is kind of what I would consider a smash and and grab business people go in they sell the they sell solar and then it's on the roof and then that's kind of it and so it's really

just massively just trying to sell every single person that exists and that's all there is to it or you have to create something that's the price to Value discrepancy is so absurd because what's crazy about this is that the price to value for poor people actually has to be higher than it is for the people at the top because here's the part here's the part that people Miss think about this there are people who cancel the $12 per month Netflix charge like what else could Netflix offer they give you like every movie you could imagine

every new shows they do everything and still some people are like you know I'm not really sure if it's worth it for me right and so if you take that as hypothetical cream you can take the same thing for for Spotify how how about I give you every song that is possible in in the universe you have access to it whenever you want on your phone in your pocket eight bucks is a lot eight bucks is a lot for that right I don't know Mr Spotify right and so this the thing is is like I

know many of you have these businesses and are wondering looking at yourself and like what more can I offer it's not about you you have the wrong model serving the wrong customer and so you have to have a cost basis as low as possible with a crazy high price to Value discrepancy so so you know values up here prices down here this huge Delta so that even on their bad months they're like you know what even though I lost my job structural turn I'm still willing to pay the 12 bucks for Netflix and so I

talk about this at length in the $100 million offers book and and I have this really good visual that I want to show you this is how crazy it is the thing you sell doesn't even need to materially change in order to make it ready and available for the highest end customers all right so let's say that you sell time management all right and you sell to all these people well you're going to have to have a probably a $19 price point see very Mass Market 19 bucks maybe the next level is like okay well

I want to do time management for sales professionals well for sales people maybe You' be able to charge $99 okay more because sales people were like all right well you know one sale might pay for this now what if you then go up to time management for outbound B2B sales so this isn't just people selling memberships or car washes or cleaning services this is now people selling let's say enterprise software where they're making $2,000 a sale in commissions or whatever so for them to pay $500 basically it's a quarter of one sale so they're willing

to do that now let's go all the way up now we've got time management for outbound B2B Power Tools and Gardening sales reps so super specific and high ticket you get super niched down and you could sell it for $2,000 but fundamentally time management is time management and so the likelihood that the product that you're selling is really materially different between these these these different avatars is is is unlikely but we're choosing to purposefully narrow down who we sell to so that we can make more money and have less operational drag and have less structural

churn as in people canceling for reasons outside of what we've delivered and as a result have a much more stable business that can compound year-over-year by the way I do have an entire extra chapter on this that I wrote between my offers book in my leads book called uh your first Avatar and it was kind of like a single that I produced between the books uh I think you get it for free at acquisition. comom Avatar I think that's what it is um and if not you probably Google it and you'll probably find it but

it's free just pop in your email we'll tell you and we'll send it over to you so step two is to ask not tell your customers now what do I mean by ask so I'll tell you a quick story so Paul Graham said this and I remember hearing it and it just like got singed into my brain he said you can solve every business Problem by simply talking to your customers and I thought that was such an elegant answer and also true it's easy to make a py response it's hard to make it useful and

valuable all the time and this is one of those rare instances where it's both and so I'll tell you a story so when I had Allen which was our software company which is the third company that I started after 2016 I originally made in my mind to serve gym owners once we spent a million plus dollars on developing this thing and actually rolled it out to gym owners we had this big obvious problem that came up which is they said oh this is so great this will work all my leads by the way can you

help me get more leads and I was like oh no we completely missed the mark and so what ended up happening is that in my mind I could see that they had this problem that they weren't working their leads but what I didn't realize is that there was only a very specific amount of Custer customers that had that problem and so then I had to think oh gosh okay so I have two possible scenarios I can either only go after gym owners who already know how to generate leads consistently which we're talking like a tiny

tiny tiny Marketplace and and here's the caveat that Marketplace still can't pay that much so bad Market to go after small and has not a lot of money and shrinking ye right not a good market so I thought to myself okay well what businesses always have lead G well the solution came to me when an agency owner actually reached out to me and said hey could I use this for my business to work the leads that I'm generating for my small business owner customers and I was like oh wait a second small business owners will

turn in and out of the agency services but the agency will stay because they will bring new customers in use our software and even if they turn out with them the agency will stay with me and so the agencies had much more reliable Revenue than their base customers did because they could reliably sell you know 10 new customers a month to to offset the 10 customers they lose or whatever and so many of them were still stable businesses even though they had lots of churn which the fact that they couldn't necessarily have the skill set

to grow their business wasn't necessarily a problem for me so to the same degree with the CRM there are some crms that are very successful even that serve small business owners but they have to match the pricing to the spending power of that small business and Shopify for example probably makes more than almost any e-commerce company on the platform we'd have to fact check it but is probably pretty close and so the platform itself actually makes more than the opportunity Secrets it enables so this is definitely one of those situations of selling the shovels rather

than panning for gold and so once I realized that gym owners were not the customer and agencies were the customer I was able to start asking agencies for the correct feedback and that is when we were able to continue to iterate the product in a way that actually served the right customer so fundamentally when it comes to product or service based businesses there's I would say two schools of thought around product iteration one is kind of the rank and build model which is basically you ask your customers to just vote up vote and downvote the

potential things that all of them have asked for and then the one that gets to the top that month you then say this is the one that we're going to build and then you do the build cycle and then you ask it again and this is not a bad way to do it it's a different way to do it and what ends up happening when you have a business like this is that you keep building more and more things and so this can result in kind of these Frankenstein type businesses but some customers are okay

and want to have all the features and so this is kind of like a PC versus MAC kind of product strategy difference so the PCS is like you have all the customization all the different add-ons all the features that has all these different ways you can use it but can sometimes be more arduous in terms of uxx or user experience user design than a Mac now if you're like how does this apply for a service business it's literally the same it's just that the features that you're building are going to be around the services that

you provide rather than the actual physical product or software that you're building but it works the same way the Mac style of this is trying to take every single thing that people want right up and down up and down and then trying to go from the ultimate experience at the end and then reverse engineer it into a elegant solution that purposely removes some things because it interferes with the other experiences and so when you do the kind of rank and build model there's lots of kind of conflicting contingencies like different customers want different things and

some of the things that you build for One customer might actually impact negatively another customer and so when you do that all of a sudden you can lose now here the downside is you're not going to be able to serve all the needs of every customer because some of those specific if you're really specific about stuff then you might want to have one of these Solutions and so basically the customer base that buys Mac stuff is unsurprisingly different than the customer base that buys PC stuff and so for example at school our product strategy is

much more based on this which is how do we create the most elegant simplest solution so that we can help people who are starting out build a business online and so if we have all of this customization and things like that you might serve somebody who's like I want a white label I want to whatever right now to be clear these businesses can obviously still get wildly big and successful apple is a $3.8 trillion company Amazon which also kind of follows this model is a you know also trillion doll plus business and so there are

different strategies that you need to decide which one you want to pursue but both of them work you just can't do both so there's two questions that I fundamentally like to ask when I'm trying to go through this product iteration cycle so the first one is if there was only one thing that was left after I deleted every other component of my service product what one thing would you want me to keep the second version of that question is the equal opposite if I kept everything except for one thing what thing would you not care

at all about and then you delete that thing and you see who complains and to be clear you don't announce that you delete it you just delete it and then see what happens and then if you get complaints you ask yourself the question are these the types of customers that I want to keep because sometimes the people who complain are the ones that you don't want in which case win-win for more info on this I cover this at length in the referral section of $100 million leads and so in the referral section I talk about

how do you get more people better results so this is fundamentally product iteration and so the idea here is how do we increase the perceived likelihood of achievement the process that I like to follow here so I have our action steps right so you survey customers to find the ones who get the best results step one step two is you interview them to find out what they did differently all right so this is a behavior thing so on one level you want to look at demographics do they look different the second is do they have

a different user path do they come in a different way do they have a different promise number three and this is the one that we're referencing here is did they take actions that not everyone necessarily took we look at those actions that only those people had in common and then what we do is we take those actions and we force new customers to repeat those actions on purpose that the best customers did by accident and then we measure the Improvement of the average customer based on those new behaviors that we're incentivizing them towards or at

least pushing them towards and then what we do if you want to get really fancy with it is you can match the conditions of your guarantee to the actions that get the best results to get more people to do them said differently if you realize that the best customers for example import all of their contacts into your CRM when you're starting the CRM you would then try and create the onboarding experience and a guarantee says hey we will guarantee that you'll have some improvement using our software service product as long as you export and import

all of your contacts into our CRM within the first 30 days and so now we have shown our hand to say this is very valuable to us and it will be valuable to you this app process can fix any Department that's customer facing obviously it can't fix it but it can fix marketing so if all of a sudden your ads aren't doing well show your ads to customers and ask them what's missing or what's what's not working why would they not respond to this what ads did you find that resonated the most with you because

I want more people like you product you're say okay what's wrong with this picture what show me what's difficult watch users actually interface with your product or services so that you can understand the friction points before during and after and so I like to use the three term contingency of before during after to think through any kind of change that I have for a customer what's going to happen immediately before they buy my product what's going to happen immediately before they use my product what's going to happen during the time that they use the product

like what are the interactions they have and then what happens immediately after right and those are the places that we are have the closest and strongest leverage over the ultimate customer results and the value that we provide and same thing with sales like if people are getting on the sales calls and they're not buying then you ask customers what about my offer what about the way that we're presenting it is not compelling to you and just as valuable sometimes more if you can get them is interviewing the people who said no and say why not

one of the best things you can do is just pay them like I'll pay $100 to hop on a phone call with me and just tell me what we could have done better and you know what's crazy is that a lot of times you just even doing that does give you a second shot at the sale which is by no means the uh objective you just want to get the information because that information is so much more valuable than the $100 and maybe the hour that you'd give so number one once we've picked the right

customers who aren't going to have structural turn based the business model that we have two we have the the thing that that type of customer wants well we need to keep improving that product so we don't get outcompeted in the marketplace by new entrance or new businesses who are trying to take our slice of the pie the third thing that we have to do to make your business Unstoppable is don't pretend to be something you're not and you're like what does that even mean so let me tell you this quote that I love and then

I'll get in the story this is by Shane Parish success comes down to doing the obvious thing for an extraordinary period of time without convincing yourself that you're smarter than you actually are and I love this quote for a number of reasons first off because it's so true here's my easiest visual for you actually I'm going see if I can get the right right colors for the markers so this is going to be a tough one let's see if I can do draw this I've never drawn this before so forgive me if this sucks oops

that up looks like a dog with a cly Q so this is a pig not a dog and so and so here's the saying that I love about this oh it's cuz I put a dog nose on it I should have put I should have put little little little front snout okay well whatever you get the idea so if you put lipstick on a pig it's still a pig and so if you put a little bit you sprinkle a little bit of software into your service business it's still a service business right and so if

like 90% of your Revenue comes from service and here's the here's the tricky part if 90% of the value comes from the service they will still determine that it's a service-based business and arguably the likelihood that you will get the economics that a software company has with the service business is low let me tell you a story to illustrate the point so there was a Solar Company that I was talking to that had 400 sales guys so a big Solar Company that did very well and the founders uh were young enterprising guys super ambitious they

came to me and said hey we want to have a monstrous valuation for my for our company and I said I think you already do have a monstrous valuation for your company they said well we know that software companies get valued significantly higher than kind of the transactional sales nature of solar and I said you're right and so what and so they were like well we have this software that we have that we use to recruit salespeople and make them more productive and that's why we have such a big and productive sales team and so

we were thinking about was taking that software and then licensing it to other solar companies and I told them that I thought that was a terrible idea now why would I say something like that well in theory if you had a software company that had the same Revenue metrics as your solar sales company then you would have a significantly more valuable company but number one is for you to get those same economics you're not selling $30,000 things the likelihood that you'd be able to get even close to the amount of Revenue per customer would be

significantly lower number two is the amount of people that can buy solar roofs versus the amount of solar companies is way smaller third neither of these Founders were software people and so what they wanted to do was kind of like pretend to be software and just say like oh we'll just sell some people into this thing and then we're going to get a software multiple on the entirety of our Revenue that's not how it works you have to remember that the person who's writing a 100 200 500 billion dollar check is smart enough to have

a 1002 200 or a billion dollars to spend they know the difference between a Solar Company and a software company software companies and companies that get extraordinarily High multiples don't get high multiples because of the name or the label that's associated with them they get those extraordinarily High multiples because of the nature of the revenue and the quality of the revenue that they have and the potential for gross profit in the future and so if you have a service based business that has the exact same economics as a software company you will get software like

multiples and Enterprise Value you want to solve for the things that matter which is you want to solve for Revenue retention you want to solve for incremental margin you want to solve for logo retention over meaning number of businesses that are staying on on your platform or on your inside of your business you want to solve for being able to onboard low value people to be able to provide high value Services right so this is where like a tech enabled service can be more valuable than a traditional service because a tech enabled service might be

able to take one person and have them serve 50 customers rather than one person and have them serve five but it's not because it's Tech enabled it's because you have now 10x the value that any individual employee can provide and lower the skill barrier for somebody to provide that value and so that translates into higher gross margins lower cost of acquiring talent and higher percentage of customers that stay every year which means that the business will compound year over year every year and so you can wash away all of the labels that people ascribe to

business and simply boil it down to the metrics and the unit economics of the business to then ascertain fancy word figure out what the Enterprise value multiple of the businesses because it's only going to be a discount off of how big and How likely that bigness is to occur in the future for an investor a lot of small business owners entrepreneurs want to get the maximum amount of money for their business in the future and that makes sense you should do that but the way you do that is not by trying to pretend to be

a different type of business it's not by taking your you know lawn care business and trying to say actually we're a s we're a software business is not trying to take your e-commerce business and saying actually we're a platform it doesn't work that way it all boils down to the actual math and so the easiest analogy is if you think about your business as a pig and this is the world's ugliest pig if you put lipstick on the pig it's still a pig and so if you put lipstick or you sprinkle some software on your

lawn care business or your local service business it's still a local service business and one of the mistakes that I honestly see all the time is where people will take their service say I'll give you the service for free if you use the software but here's the problem the revenue will look just like service Revenue and so just because you Bill through a software system if you still have the same churn as a service business and the same margins as a service business then they will still value you like a service business you'll get valued

based on a multiple of bottom line which is fine it's just not going to be a Top Line multiple or some big number on top of that because that's not the nature of the business you're in and that's okay so I think just leaning into who you are and what your business really is rather than wasting a tremendous amount of time trying to be something you're not not would serve a huge percentage of business owners they think because the grass is greener on the software side man they're getting 10x value multiples well do you know

how hard it is to get 80% of people to stick on a software and do it in a way where you're making that kind of money but it's but it's at $50 a month instead of $5,000 a month well they kind in some ways it's like they kind of deserve it right like all of a sudden it's like it's really hard to get 5,000 customers to pay $1,000 a month for B2B software really tough but is it is it is it nearly as hard to do some sort of service at that level probably not and

so when we think about it from that perspective the differences between valuations actually equalize I'll tell you one more story on this so I recently invested in a treatment center and we were talking about uh the business model and so basically there's two there's more permutations but this said simply there's two kind of models in the treatment world so model one is you stick with primarily insurance and you get people to you know the insurance companies send you people who need to you know come off addictions detox Etc and you get paid a fix kind

of rate per day based on the insurance that the person comes in with the second type of company is more you know private insurance and cash pay where people are just paying out of pocket or they're paying with you know I would say premium insurances where they could pay somewhere in the neighborhood of like $3,000 a day so way more money per day than maybe the uh insurance-based uh detox business for example now which business do you think gets higher multiples the insurance-based one because the likel that the insurance pays is high and the likel

that you're going to keep getting customers from those insurance or Medicare companies things like that is high and so it becomes a reliable business but the margins are lower and you have to deal with more volume now on the alternative side on the cash Bas side you might have call it half the Enterprise multiple value so instead of getting a 10x maybe get a five or 6X on the value of the business in terms of bottom line but if you can charge two or three times more return on effort might actually be the same or

even better in the cash pay I make this point to say you don't want to try and build for some label that you think someone's going to ascribe to you you just want to build for the ultimate Enterprise Value which may just be doing better with the thing you have which is mo more times than not the right move which is why I'll resay this quote that I said at the beginning which is Success comes down to doing the obvious thing continuing to build your business for an extraordinary period of time much longer than you

think without convincing yourself that you're smarter than you are without actually changing the label of your business trying to pretend to be a software company trying to pretend to be a platform trying to pretend tend to be Tech enabled just do what you do and do it well and do it for a long time and it always takes longer costs more and it's harder than you expected to be but it's the expectation that was the problem not your plan so now that we have the base we have the right customers for the model that we're

in we have a way to iterate our products that we stay ahead of the market and we have the discipline to continue to double down on the model we have rather than try and ascribe some crazy label make some reinvestments into things that aren't going to actually serve us once we have that base then you can watch this next video how to make so much money it should feel legal