I mean, $100,000 in cash in 21 days.
The first question to you asked is, is this legal?
Then I wake up on morning and all the cash the bank counts on and I was like, what the fuck?
I just got all my money stolen.
And I was like, I wouldn't stay with me if I were you.
I am a sinking ship right now.
So from that brink of failure to, what was it at the end of the year?
It's been 48 hours to get ton of Adderall.
And wrote the best sales under my life and then the full next calendar year.
We did 26 million and 16 million in EBITDA.
Did that's insane. So why do a sass deal or why do the school deal?
In my opinion, it was the best deal I've ever done.
How much cash did you put up at front?
I feel like almost done.
What's a company you would want to go buy right now?
I feel like I could rule the world.
I know I could be what I want to.
I put my all in it like no days.
I'll put on a boat list. Sam, I don't know if you've heard this about the story with your wife, Leyla.
Yeah. Being on the brink of failure.
Yeah, waiting in the swamp of failure.
Yeah, can you take us back there?
What was going on? Yeah, so Leyla and I had, so we started dating in April of 16.
I immediately was like, I've got this idea for this thing called gym launch.
I want to go fly out to gyms and do turnarounds because I can like fill my gyms up faster than I can build up.
By the way, context is at the time you owned a couple of gyms.
I had five gyms when I met her.
And the bank balance looked like what at the time?
I was making like 20 grand a month.
I know that. So I don't remember what my savings were.
But I was making like 20 grand a month in cash flow.
And you're like, wait, five gyms.
It's like, yeah, some of them work good.
Some of them were tied to corporate locations.
They're a little smaller.
Anyways, but I was like 25, 26.
So like, I always hoodwitch, you know, as far as I'm concerned.
I go buy whatever I wanted.
I go live where I wanted.
You know, I could go out to eat whatever.
And so I started the turn around business.
And I mean, $100,000 in cash in 21 days.
And I was like, holy shit.
That's like, this is awesome.
And so I came back and she picked me up from the airport and I had this big stack of contracts.
And I was like, hey, we can go on that date because I hadn't taken on a date in three weeks and we'd seen each other every day.
So it'd been like 21 days of hanging out and not one date.
And so you said, you promised you'd take me on a date after you did this launch.
And I was like, okay, I was like, how many processes?
So you processed the contracts.
And 45 minutes she saw as 100 grand.
She was like, holy shit.
The first question she asked is this legal?
And I was like, yeah, it's legal.
And she was like, all right, I'm in.
And so she decided to join me.
So we went out to the next launch together.
A few more launches. And then one of the launch guys that I did, that I did really well, the one that I came back with the 100 grand for, was like, hey, let's partner.
Like instead of, you know, you're just doing these gyms and then walking away, let's just open new gyms.
I'm a really good operator.
I'll just open them behind you and run it.
And then if you open up one or two gyms a month, the thing you own 24 gyms instead of just like doing the service.
And me being me, I was like, of course, money on the table.
Why would I not do that? And the fact that he had been indicted for fraud of like, it was a misunderstanding, whatever.
And he was like, hey, you know, you should sign all the leases for these new locations because I had a little run in, like no big deal, you should do it.
And so I personally guarantee the lease and I put all the capital up because, you know, I'm 25 and don't know what I'm doing.
And so of course, we know how this story goes.
I launched a crush, launched a 300, 7, 6, you know, new members, which were like a CrossFit slash micro gym is massive to open up with.
Then I wake up on morning and all the cash and bank accounts go on and I was like, what the fuck?
And I, you know, hit him up and I was like, dude, what's going on?
He's like, oh, that was my half.
And I was like, what do you mean your half?
I was like, you just to call the money up.
He's like, I know you've been skimming.
And I was like, what? I was like, I'm here, what?
I'm here every time. What do we do?
So I came to him with all the bank accounts, like every transaction highlighted and I was like, hey, let's go through this.
Like I just want to make sure we're good and he threw it off the table.
He's like, I don't need to see that shit.
And I was like, oh, you, okay, got I now understand what happened.
Like, okay, so I just got all my money stolen.
Hey, real quick, you know, one of the cool parts about what we're doing is that people have reached out and told me that they've built actual million dollar businesses, made their first million, often idea they heard on the show.
That is crazy. That's why we want to do the show.
And we want to see more of that.
One of the questions we get asked over and over again is, is there some kind of idea, database, or spreadsheet where we list out all the different business ideas that we've talked about?
Well, the answer is finally yes.
The fine folks at HubSpot have dug through the archive and pulled out 50 plus business ideas and put them into a business idea database.
It's totally free. You go to click hubspot.com slash MFF and get the database for you.
All right, now back to the show.
And right when that had happened, I had decided to go all in on that business.
So I sold my gyms and I put all that cash in that account.
So the cash that I used to open the gym and the subs of King Cash that came, all of that was pooled into one place, but that was what I had sold all my gyms for.
And so when he emptied that, I had basically the five years I had built my gyms, I had nothing.
And so that sucked. And so Layla was like, you know, dust it off, forget the whole like build and whatever, like let's just go back to the turnaround model.
Like you made money doing that.
Like let's do that. And I was like, all right, we'll do that.
And so the next launch that's supposed to happen is in California, there's a guy who hits me up randomly on Instagram says, hey, do you have work for me?
I've got to kill him the way and I've got a one year old, I need the money.
And it just so happened, he lived 10 minutes away from the one gym that we were going to launch in the world.
And so I was like, dude, do this launch for me.
So he does 100, he does 100 grand in sales in 28 days.
And all of a sudden though, as I'm like normally, I know my deposits always hit on Tuesdays over the weekends.
And so Tuesday hits and I'm like, there's no deposit.
I'm like, we're processing the contracts that was going on.
That I call up Mind Body, which is the, you know, Heartland was the processor they integrated with at the time and they put, you know, they give me the run around and they're like, oh, it's a standard annual review.
And I was like, okay. And no, no Wednesday, no Thursday, no Friday, no Saturday, then it's the weekend again.
And then Tuesday comes back and no deposit.
And I was like, dude, what the fuck?
So they said, no, you're still in the annual review.
So I did it one more week and now it's Christmas Eve.
And I had about 23 grand left after all the money was, there's basically my checking was what was left from all that other stuff.
And so they got on the phone.
I said, I'm not getting off.
It's Christmas Eve, I need to pay my guys like, what the hell?
And they said, we're gonna hold on to this for six months because it's a regular activity.
Because I was processing these turnaround gyms through my brick and mortar location.
I did not process it work.
So I was like, you know, flying into Calgary, Canada, doing a turnaround, running it through Huntington Beach, California for an in-person transaction.
Like I didn't know how it worked.
And so they were like, this is weird.
We're gonna hold on to the funds.
And so I owed $22,000 in commissions for sales that I hadn't gotten paid for for this guy who had, you know, the kids and the babies or whatever.
And so I didn't want to like, give myself the idea that I could not pay him.
And so I sent him the money and so I had $1,000 left.
It's Christmas where at Layla's Family's house, I'm stressed the fuck out because I just lost all my money in the last two.
Like I got the money stolen.
And then my Hail Mary to Save the Day was the 100 grand new launch.
I didn't get paid for that.
I ended up just having empty the small 20 grand that I had and had $1,000 left.
She told six of her friends to quit their jobs to start that month on the 26th of December because that's going into New Year.
So I could tell it's like, let's do six gyms because that's Losh Google from one to six immediately.
Since we're gonna go all in.
And so after I found out that I didn't have any money and I had $1,000 left.
And the ads were supposed to launch on the 26th.
And I was gonna be spending 3,300 a day in advertising hotels, rental car, per diems for the six sales guys that were her friends.
And I had $1,000 in total.
And so we're sitting at like, the compare parents are downstairs.
We're in like the spare bedroom where the grandkids are.
So there's like this little mini furniture everywhere.
They like I'm sitting in a tiny chair.
And I was like, hey, this could go horribly wrong.
And if you, I said, I wouldn't stay with me if I were you.
I am a sinking ship right now.
And so in that moment, she grabbed my chin and she was like, I would sleep with you under her bridge if we came to that.
And so I was like, all right.
And honestly, I just kind of felt relief at the time.
I kind of, I can appreciate it more later.
But you know, she quit her job to join me doing these turnarounds.
And all she got to see besides the one that she did in the beginning was me just getting kicked in the nuts for like eight straight months.
And so the next day I said, okay, well, I still had a $100,000 limit on my credit card from all my five gyms.
Like, Amix had an updated the fact that I was broke.
And so I put $3,300 a day on the credit card.
Mind you, with no way to process money.
And so spending $3,300 a day of money I don't have no way to process new money.
And so I got like porn, casino, and like gambling processing that had like 10% reserves and like 6% 7% processing fees.
They were taking like 17% off the top.
But I needed the cash. And so I got one turned on with a 50K limit.
And I needed, I mean, I had a hundred K in cost.
I needed, it was, we were gonna do 200, I needed 200 grand.
And there's like, well, if you do well, you know, you get 50.
And I got it only turned on three days before the end of January.
So this whole time I'm running $3,300 a day and we're collecting these contracts with credit cards.
And I'm not processing anything.
And people were calling me like, hey, I haven't seen the money come out.
Hey, like what's going on?
Are you guys gonna run the card?
And we're like, yeah, yeah, we're getting to it.
And so three days before the end of January, the first 50K processor hits.
And so I've run that in a day, you know, because I had so much backlog.
But he's like, the good news is it's per month.
So on the first of February, you can run another 50.
So I ran 50, 50. And that covered my hundred that went out to $3,300 a day.
And then I got two more processors turned on at 50, 50.
And then, and then I was able to get out of it.
There's also another crash that happens after that.
Where I lost it all again three months later.
But that was because all of the launches that we were doing, I had a new hole in my model, which is that I was selling and other people were delivering.
And then they would tell the customers to refund and then sign up with them for half the price after we'd leave.
So we'd sell like, you know, we'd sell a $500 challenge or whatever.
And then we'd put a hundred people in the location and they would just tell them all like, hey, refund with them, sign up with me for 200 bucks.
And we'd already fronted the cost for the hotel, the ad spend, the commission, the sales guy, like all that jazz.
And so that's when I lost everything again.
And that was, that was probably the hardest of all of them because this was the only model I knew.
And so the more I sold, the more refund risk I exposed my stuff to.
And so it was just like, I had to sell more to cover the first month's refunds.
And then the next month was bigger.
And then I had to sell more more to cover that month's refund.
And so then I had to make a switch in 30 days to got more the 150 grade of profit in profit in 30 days.
And I was like, I don't know what I'm gonna do.
The first two were out of your control, you know, business partner screws you, the payment process turns you off.
This one, your model was broken.
Yeah, we were like, oh shit.
Because Sam, I don't know if you know how this business worked.
It was basically like, he would go, my understanding is you'd go turn around the gym, which means just you'd sell a bunch of memberships.
And the deal was like, I keep the upfront cash and then you keep the members.
And so they were just like, well, he took all the upfront.
He made a hundred grand in like whatever, a month or something.
A few of them were like, well, you know what?
Why don't I just cut them out and just do the deal directly with my customers, who I'm gonna serve going forward.
And so that one was your fault.
And then in your control basically your model.
But then you fixed the model, right?
And it worked. Well, it's sort of.
So what ended up happening is I told Layla, I was like, hey, she still had her fitness clients, because she was a personal trainer.
She had a book of business.
Here she converted like half of them into like online training or online training was the thing.
And so she was making like four grand a month and one day we're sitting at the kitchen table and I was like, hey, how would you make on that?
And she was like defensive.
She was like, hey, this piece for our food.
And I was like, no, no, no, no, I'm not saying it's a bad thing.
And she's like, I don't know, like four grand a month.
Why? And I was like, how many hours a week to take you?
And she's like, I don't know, four hours.
And I was like, that's not a bad business.
I was like, well, I already know how to sell fitness.
Why don't let's cut the gym one around.
Like let's just sell straight to consumer.
So it's been 48 hours to a ton of adder all.
And the best sales letter in my life, God adds live in 48 hours to a sales letter.
And we started doing 500 bucks a day, 500 to a thousand days.
But this is like a women's weight loss product.
It was called queen transformation.
And so it told Layla's, because Layla's.
Signed me out. Yeah, let's go.
No, she lost 100 pounds and then did a fitness competitor.
So she had a great, a four-year-old for a great transformation story.
I was like, I didn't. As though I, yeah, Layla, as though I were her.
So I'm like, my thighs were shaking together and I couldn't go out of the side.
Like it was, it was just me, right?
My thighs are shaking. Yeah.
So this is working. A thousand bucks a day.
I get that now. I need to sign up for this clean transformation.
So we do the thousand bucks a day.
And I saw, I got eight sales guys now.
And I was like, wait, if I got eight guys, I can do eight grand a day.
With, with covering costs, I could make 150 on this.
Like this could work. And so I call up the gyms that are supposed to launch the next month and I said, hey, we're not flying out.
And they're like, what the hell?
What the hell? And then what guys like, dude, I need this.
You turn around on my buddy's gyms and like, because for the other model not work, only like one out of five gyms had to fuck me.
So it wasn't like they all did it.
Like some of them were fine, but like my profit was like 20%.
You know what I mean? And so I called the first guy up and he's like, I need this.
And so I said, he said he was poor.
So I just said the highest number I could think if at the time, which was $6,000.
I was like, fine, I'm not flying out there to save your ass if you can't close, but I'll show you how I did it for six grand.
And he was like, six grand, he was like, done.
And I remember just like looking at the phone, being like, whole, I mean, I was selling $500, $300, $400 at a time, like six grand.
I was like, what the fuck just happened?
And so I still had seven more calls that day.
So I called the next guy, same conversation, he was like, how much?
I was like, eight grand, he was like, done.
And so next call, same thing, how much 10 grand?
And by the end of the day, I did $60,000 in cash collected.
And I was like, holy shit.
Now your thighs are really shaping.
Yeah. And so I call it, so Leila comes in after a full day of sales.
And I was like, I think we're still in the gym business.
And she was like, what? You just sold me on like, this is the new direction.
We're going to be online, queen transformation.
And I was like, no, I think we were just doing it wrong.
I think we just need to show them how we fill gyms rather than flying out and filling it for them, let them take the risk on the ad spend and they don't have to do a hotel.
They don't have to hire a salesman.
Like they can just do it themselves, if you know if I teach them how to do it.
And so we did that. And then I called the 30 plus gyms we turned around and I was like, hey, remember that thing I did?
I'm going to show you how I did it.
And a lot of them saw me pool 500 grand out.
And one out of five was like, I'm going to super fuck this guy.
But four out of five are probably like, this guy made more out of my gym than I did.
Like, and so when I called him back, almost all of them said yes.
And so I did like 240 grand in sales in that next 30 days.
That was almost all profit.
And I was able to pay off all the refunds that were going to be due from all the other gyms.
So I paid the 150 down and I was like in the clear.
And then that was what became, that's what became Jamal.
Did that's insane. Have you ever felt richer than that first relief of being like out of the mess?
Not to be mad. No, I say in my book, in the offers book, the last chapters, the first 100,000.
When we had our first 100,000, which was like four or six weeks after that, I showed it to Layla on the phone and I was like, we did it and she was like, what do you mean?
And I was like, look, and I like pulled it up.
And it wasn't like in the business account because I'd had that in business.
But it was like, but that's like operating expensive and earmarked for other stuff.
But like this was like in the personal account.
And I was like, we can screw up for like three years and we're gonna be fine.
Like we could do, we could just, we could take off for three years and be fine.
And to this day is, it is 100% the richest I've ever felt.
And I think it's because of relative change in wealth.
So I have thought about it.
Because it's like, if you go from a thousand dollars to a hundred thousand dollars, it's a hundred X increase in wealth in a month.
By the way, the end of that story is like, within the first 12 months, there's some like ridiculous venture that you guys hit, right?
So from that brink of failure to, what was it at the end of the year?
Yeah, so we did that. So December 26th of 2016, processor shuts me down and I make the big bed and Layla says, I'll go through you under a bridge and it's 3,300 a day.
It takes four or five months for me to realize the new model where I fly out to gyms has this big refund problem.
And so now we're in the May of 17.
I flip during that kind of like April May-ish, the model.
And we start doing the licensing model and it goes like 400, 700, a million, one, two, one, five, like into the end of the year.
So we ended up with like 6.8 million top line.
And I think we did 3 million in profit and then the full next calendar year, we did 26 million and 16 million in EBITDA.
That's insane. Yeah, that was wild.
It was just this wild for me, for anyone who's listening.
Like I actually think it took me like three years to acclimate to the wealth that we were making.
It was like, it was probably like 2019-ish, like end of 2019, 2020 is when I started to like realize how much money that we were making because I didn't adjust my living.
Like we did buy a house. It's like three years later one day you just woke up and you were like, holy shit, I feel good.
Wait a minute, what is this?
Yeah, it's like, because we took out 42 million in distributions prior to selling it.
And so that's why the sale was not like, I mean, we got a ton of notoriety from the sale but in terms of material change in the living, like it wasn't a massive step up.
Sam, if you actually read his offer's book, the purple one, I read the purple one.
Yeah, no, I read it, yeah, I read it.
No, it was leads, I thought.
Bro, leads the lead one, the purple one.
And then say, bro, I read.
Sorry, leads. Well, they're all like the same cover, just different.
But they're like the same thing.
No, I read the, oh, well, they're like the same color.
I don't even know why it makes you look like they're working with me.
I read the leads one. All right, so the compliment is, Alex, you have a very useful thing on offers that I read a bit of the books.
I read like the first 20% of the book, I was like, sweet, got it, ready to act.
Don't need the rest of this book right now.
New exactly what I needed to do.
And it really wasn't actually something super specific in the book.
It was just implanting the idea.
You sparked an idea of my head of, how do you make somebody an offer so good that they would be stupid to turn you down?
And that stuck with me. It was like that one line stuck with me.
And then immediately I went into this one business that we had started.
And we had this business that I was like, what this business needs is a killer offer.
And we were going to do nothing until we craft a killer offer.
And we've crafted a killer offer in that first year of this business.
We haven't announced on the podcast.
It'll probably do four million in revenue, 50% margins.
It's a really great business.
And it needed a killer offer.
And I would not have had that idea, had I not heard you kind of plant that seed of like why that matters.
Can you give us the like couple minute version for anybody else that's listening?
Because if it was that useful for me, I know it's going to be useful for a few hundred thousand other people that are going to listen to this.
Also I'll say because of what you said, I wrote a summary and workbook of offers so that they can finish it in one sitting.
Does it come with crayons?
My kind of guy, yeah. Exactly.
Yeah, crayons are upside.
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So fundamentally, you know, you think about like, are there supply to make, are there supply-contribusinesses or demand-contribusinesses?
And I like going into band-contribusinesses because that's what I'm good at.
So the core, if there is one framework in the book that it relates to, it's the value equation, which is that you have to understand how to create value so that you can charge as much as possible, right?
And obviously also convert as many people as humanly possible.
And so there's four elements to that.
One is the dream outcome.
The second is the perceived likelihood of achievement.
And then below that, so it's a fraction.
So dream outcome times perceived likelihood of achievement.
Below that, you have time to lay and then effort and sacrifice.
And so the dream outcome is what I would say separates whether someone's even interested in your category of offer or not.
So it's, you know, men in general probably want to make more money, women in general, in general usually want to look better because both of those are more associated with status.
So, okay, why is it that B2B offers tend to be more expensive than B2C offers because it's more closely tied to ROI.
Great, so that's the category one.
But within, let's say weight loss given the example we're talking about.
If you're B2C, how is it that you can have a $5 PDF and a $50,000 liposuction thing?
But they both fundamentally solve the same problem, which is that they don't like the way their stomach works.
What's the other three variables?
And so the next is perceived likelihood of achievement.
So taking the liposuction example, if you're a surgeon or you're a girl or you're thinking about getting liposuction, and there's one surgeon that's just fresh out of medical school hasn't done a surgery yet.
And there's another physician who's got 10,000, you know, five stars or surgeries under his belt, who do you go to?
The guy with 10,000, why?
And the crazy thing is is that it's the same procedure, but the perceived likelihood of achievement that you're gonna get what you want is significantly higher.
And so you pay for that premium.
Because the equal opposite of this is risk, right?
And so how do we decrease risk?
So you have this dream outcome and you want it to be absolutely certain that you're going to achieve it.
And so it's the category, and then there's things you do in the offer, like that's where guarantee is coming to play is how can I further decrease their risk associated with that.
And then we have the bottoms out of the equation, which is time delay.
So how far between when they buy and when they get, and so to use the example of personal training versus the liposuction, personal training you got to arm wrestle somebody for an hour to get them to buy a $2,000 package of personal training.
And the reason for that is because they might get their six pack, you know, 12 to 18 months later.
Whereas if you do liposuction, you know, you're gonna go to sleep and then you're gonna wake up and you're gonna be significantly thinner.
So the time delay is so much shorter.
And so because of that, it increases the value of raw.
And then finally you have effort and sacrifice, which effort are things that you have to begin doing that you don't wanna do as a result of a purchase.
So in the personal training example, you gotta wake up early, you gotta be sore.
That's the effort side.
You have to stop, you know, well, sacrifice is the things you have to stop doing that you wanna keep doing.
So it's like you gotta stop tock a Tuesday.
You gotta stop sleeping in because you gotta do it in the morning.
So it's both sides of the same coin, effort and sacrifice.
And when you itemize all the things that a customer has to do as a result of a purchase, what are all the things that they, what are the things that increase their risk, what are the things that make it take longer, what are the things that make them start doing things they hate and what are the things that we have them stop doing that they love.
And then you create solutions for each of those categories, then you create an incredibly valuable offer.
And so from the weight loss perspective, many people think, oh, I'm gonna help them lose weight.
But it's like, well, they're gonna have to go grocery shopping differently.
They're gonna have to learn how to prep food.
And so it's really getting granular about all the little steps that has to occur in order for someone to get a result.
And so looking at what happens immediately before and immediately post purchase, all the little steps, and then trying to deconstruct each of those steps for them, and then including those things in the offer, ultimately creates a much more valuable a offer and be a higher converting offer.
And this is where you get these massive step wise increases in terms of company value, because all of a sudden we can double the price or triple the price for offer and close at a higher percentage.
And so that's when these crazy kind of like lot of polluza effects occur in the business where they go from 2 million to 10 in a year, changing nothing, but what the core offer of what they said was.
And then we do these little enhancers that I'll add on, which is like you've got scarcity, which is limiting number of units.
You've got urgency, which is limit number of time.
You have guarantees, which is things that we do to reverse risk, if there's four types of guarantees, you can do unconditional, conditional, zero guarantee, and then performance.
So performance what I call un-plied guarantee, like if you don't make money out of make money.
Anti-garentes, you lean into the fact that you don't have a guarantee.
For the person who needs a guarantee, this isn't for you.
Conditionals, like I'll guarantee it if you do X, Y, and Z, and then unconditional, it's unconditional.
I'll give you your money back to the ask for it.
Then you have bonuses, which are things that drive action in the short term buying decisions.
And so a lot of those things that you can make and ears as a offer or a grand slam offer from the book is by looking at each of those problems and creating kind of a bonus stack that solves each of them.
And so from a selling perspective hand to hand, the salesman doesn't need to sell all seven of the things that you have.
And so the idea is that you make the ask on the initial offer, if they say no, you figure out what the constraint is, and then you plug that bonus in.
And then maybe you need to put three bonuses in in order to get them over the edge.
This also allows the sales team to stop doing discounts in order to close people.
We just add value rather than taking away price.
And then post purchase in order to make sure that ops is all the same, you then give them a surprise and delay with the remaining four.
And you say, by the way, since you did buy, I want to give you these other things.
And so if you get the fast buyer that doesn't need the bonuses, you just give them the bonuses and they love you.
And if you got the somebody who needs all seven, then you give them the seven bonuses on the sales calls.
And that's kind of how you can just get increased close rates without giving away discounts.
God damn highly useful.
I feel pumped up brother.
I need to go read the blue end of purple one.
Like this is the stuff that I enjoy.
And that's the stuff that we do to like really grow the business in the portfolio is we're in it.
We're re-scripting the sales.
Like we're changing the process overall.
Like we bought a chain of 32 teeth whitening studios.
Is there anyone at acquisition.com who's better than you at this or you still the best?
When it comes to like offer reimagining mixed with sales process, that's probably my strongest.
It's probably the thing I invest at.
And it just drives so much profit in a business since pricing is the strongest level of profit.
There's a great example of the offer by the way.
I've been knee deep in like a I do these two week learning sprints, but I just pick whatever the topic I'm most interested in.
I just go fucking ham on it like every minute that I'm not on this podcast or not on like a required meeting.
I'm just like going down on one topic.
In this case, it'd been doing like the old school marketers.
And there's a great story.
I think it's Ogovy who when he launched his agency, he's like, how do I get people to do this?
And he basically made a killer offer.
He was like, take your top performing ad that you've said, years iterating on, you got this to be your top performing ad, I guarantee that I will beat it in an A B test head to head within a month.
And I will fund my portion of the A B test.
So I'll make the ad, I guarantee you that I'll beat it.
And I'll fund the ad cost of the, I'm so confident, I will fund the ad cost if I don't beat it.
Or even I think even not if I don't beat it, I will fund the ad cost in order to win your business.
And what he said was this was like the response rate on this ad was through the roof because, he's like, but the best part was of the 100% of people that responded.
He's like, we didn't even end up having to do it because the top 20%, the most expensive clients were like, okay, cool, forget the A B test and the mechanics and the contract for that.
Like the fact that you were willing to do that, we looked into your track record, we are big believers in this.
We'd like to just move forward and go ahead and entertain you.
I, we know that our agency would never be that confident to pull that up, so we're willing to work with you.
And he's like, he was incredible because I was a, I used this killer offer to fill up the funnel and then I just picked the top 20% of clients in that funnel and that kick started Ogovie, which became, you know, one of the big ad agencies.
That's in the game and like we bought that, the teeth wedding chain.
And so I sat down with our director of sales and we re-scripted the sales process and basically re-imagined how the offers were gonna happen and we five X Dell TV per sale.
And so I was like, okay, here's the plan, just roll it out.
To fundamentally, it's like, a lot of times people think there's a lot more that it takes to grow their company but sometimes just a handful of levers just make a huge difference.
Does every business and product offering have a killer offer inside of them?
I do think so. I think that sometimes you have to, like the big part with the offer is you have to operationalize it.
And so if you're Ogovie, it's like, okay, well, how can I write all these split-tests?
Like it's like, if I'm gonna have all these bonuses that I have to add in in order to make the thing more valuable, I have to operationalize that part.
And so yes, I do think so.
It's just like, usually you might sometimes have to put like terms around that.
Like if I was an accounting firm, something boring, it's like, I can guarantee that I will get you more than you pay me by just auditing your back taxes and saving that money today, right?
But you have to provide all the back taxes and like, you have to, and then I have to have a separate team that I now have to create just for our front end conversion to shrink time to value using that little nugget.
And the big thing with most of the businesses I try and shrink time to value, like really aggressively, like even that publishing business, it takes a very long time for that business for our customer to get a result.
And so we looked at it, we're like, can we peel some element of what we do and drop it in the beginning?
And it turns out we could do something in like seven days that gave people a very positive outcome really quickly.
And then they like get bought in emotionally that you know what you're doing.
And to further on the point, I think that probably a major difference between like the tiny slash Wilkinson model and how we do it is that we are operators.
And so the investment strategy has slowly, you know, continues to, you know, move over time, but it's been fewer bigger deals that we have larger percentages of that we do more for.
And it's just like basically the more we work on the business the more money we make.
And so if we're gonna work on it that it might as well be back.
You did that school deal, right?
We had Sam on the pod, interesting guy.
Samovans we're talking about school.com, is it school.com?
He, one of the oddest people you'll ever have a conversation with, but odd in the best possible way.
So one time I was with him, it was my wife, me, and Samovans.
We're sitting at a party or something.
And him and my wife get along great because my wife and I both love like quirky people.
He's extreme quirky. It gets to a low in the conversation where there's probably a five second silence where we're thinking about what we're gonna say next.
And he looks at my wife and he goes, I delivered my baby.
And we both look at each other and like, what?
He goes, I delivered my baby.
And I'm like, with what?
He goes, my hands. And then he goes on to tell the story about how his wife gave birth at home because it couldn't make it to the hospital.
But like, he didn't laugh when he was telling any of that stuff and I thought it was so funny.
And he's one of the quirkiest people I've ever met.
But he's the type of people who I love where he's so logical that it's painful a little bit.
But also he's the type of guy who I think has read a book on how like normal people interact.
So and you could tell he's like, I do care about you, but I kind of have to learn a little bit how to adapt to fit your, and you could tell that.
And it's endearing. It makes me look more.
He was listening to you.
He's like, I am active listening.
Yeah. Okay. Thank you. Like, and when I love because he wants to show you, he cares about you.
And I like that. And it's like a really, he's got a really interesting personality.
Yeah. No, the school deal is going exceptionally well.
We've, you know, five or six X the business in the last eight months.
Well, we'll break it down.
Why do that deal? It seems like you made a much bigger bet.
And I'm saying that because you started wearing the hat around whereas your other deals you don't promote.
So I'm like, okay, he definitely like ponied up for this one and made a big bet on this.
So why do a SaaS deal or, you know, why do the school deal?
How, how do you figure out the bet size and, and was it like a but but clenching number?
And then, you know, what, what's the plan?
Well, I'll say this. So breaking out of the into the deal components, any brand endorsement for me is by far the but clenching component of it.
Not the cash. Because you only have three, four brand bullets that you can use where you're going to throw it without becoming a shell, right?
And so if I looked at my audience, I think about the people who best monetize an audience, do percentage conversion times LTV.
That's it. So what percentage of your audience you convert and what's the lifetime risk profit for customer?
And that's, that's it. That's the math the person who makes the most money wins.
The big thing that's so with my audience is that obviously we have a very skewed, you know, monetization structure because we have portfolio companies where we just make a tremendous amount on like a handful and then everything else like kind of doesn't matter.
And do you even promote, you don't even promote those others?
Right. No, I don't know the other, no, not at all.
That's just, but they come inbound though.
So that's, it still comes from content often, but a huge percentage of my audience or people who want to start a business.
And that's probably some of the people who listen to your stuff.
They're people who are employees, they're high up, they're executives, things like that.
Or and they are, they want to start a business with their own, whatever.
And so I was like, okay, so there's this entire huge part of my audience that wants to start a business and I want to have something for them.
And so I also don't want it to cannibalize acquisition.com in terms of how we generate deals or things like that.
And so it had to be something that would help people start a business, which in my opinion was going to be the closest match, you know, like audience match.
So a high percentage conversion, it had to be a scalable thing.
So I didn't think a service would work given the amount of volume that we have.
And so it's like, okay, it has to be something that's a demand constraint, not some hot constraint.
It's just like, okay, and ideally if there's something that we can create some sort of network effect, then some sort of compounding, you know, machine within it.
And it has to be at the right point in the life cycle of the business, right?
If you're, you know, day, day, you know, day a thousand at Facebook is probably too late.
You didn't mean to get in on Facebook at any appreciable percentage, right?
And also where I would have less leverage and less value to add to a company in that size.
And so school was a big company in terms of its value and the rounds that they had done already.
But I also have a really big brand.
And so it took, you know, Sam and I call it nine months to work out kind of every component of the deal.
There's, in my opinion, it was the best deal I've ever done, not in terms of like winning over anything like that.
It was just, it's a really elegant deal, the way that it works, which I'm not eligible to explain all the pieces of it.
But basically like, we both gave a lot and we both are happy with how it's going.
And so we both made commitments to the other person of what we can and can't do.
Like, if someone's going to come on and, you know, be in an ad from school, like, I have to be okay with it because I have a strong association with that.
And things like that. This is like, there's, how can I mitigate this risk?
How can you mitigate that?
And so to circle back to the original question, why did I do the school deal?
I felt like I had 70% of the audience that I have because there's always way more people want to start a business than have a business, especially if you make business content.
And so I wanted to have something for that audience that I met all those other requirements.
And I knew Sam. And Sam told me about school two weeks into him starting school.
And so I was kind of like, well, it's, I mean, I'm not going to try and bet on it.
I'm not going to plan for my day one.
That's why that's where Sam has just massive balls.
I think on our, on our podcast, I think he said he, I think he said he spent $10 million of his own money to fund the business.
And I think he also said that was the bulk of all his money.
Yeah, it was. I mean, I think he's been public about it.
And then he, and then he still raised another five to still keep continuing reinvesting the business.
And when I saw the metrics of school, it has everything that you want.
It had viral organic growth, who was compounding, you know, 20% every single month, month over a month and I was like, this thing's a fucking monster.
And it was right at that point where he's like, we need to grow up.
And I was like, okay, I need a product.
And so it was a perfect match.
And it's worked really well.
All right. So let's send to how ridiculous this is.
So I remember in the 90s when I used to go to dinner with my family, I was just a kid and you get to the host's stand and she would say something like, do you want to be in the smoking or not smoking section?
And we look back at that now.
We think that is ridiculous.
I cannot believe that existed.
Well, I often ask myself that question now, which is in 20 years, what am I going to look back?
And it's going to be sort of like the smoking versus non-smoking sectioning question.
And that my friends is why I love the A16Z podcast.
They look at how technology is changing so quickly and how you can stay on top of it.
The podcast is put on by VC firm and Jason Horowitz is one of the best firms out there in the world.
And so they're able to see all this amazing information that people like you and I, we don't normally get access to.
And I love hearing steps opinion on it.
So they look at topics like autonomous vehicles, the science behind drugs like ozempic and things like that and the security behind LLNs and how it's on all of our devices and whether we should be freaked out or not.
So check it out. It's called the A16Z podcast.
It's hosted by Steph Smith, one of my favorite people on earth.
Again, the A16Z podcast.
You can find it wherever you get your podcast.
That's great. Last time you were on, you were talking about how like you started doing minority deals and then you sort of realized like, damn, we're creating on the deals that win.
We create so much value.
You basically wish you own more on anything that works and you're like, maybe we'll switch to doing majority, like where'd you land on that?
Like what's the evolved thinking on that?
And I don't know if that relates to how you did the school deal, but just in general also.
Yeah, it's almost all majority.
It's almost all majority.
Like if we're going to do a minority, it's got to be a massive company, you know, like for us to do that.
I basically have, and one of the unfortunate things with content is like my deal line has continued to move up.
And so like, you were like, I finally hit a million dollars in profit.
And I was like, I like, we're kind of looking at like five or 10 million to profit now.
Like, let me look at it. Because right now like the portfolio is 250 million a year.
We do 70 million a year, but we have consolidated like the smallest percentage ownership we have is 20% the largest is 100.
I think our aggregate is somewhere that is like 42% or something percent.
If you blend all the percentages together.
So we have meaningful chunks of the companies.
You like our friends, we have a couple of friends that are doing this and they were talking about, I was talking about metrics and they were saying, you know, with the hold co like this, there's a couple of different things you can go for.
One is just free cash flow.
So how much cash are these businesses spinning out and they buy cash flow businesses?
That's their way. They don't care as much about the equity appreciation.
Obviously they care. But first and foremost, they're looking for cash flow generation.
So they picked free cash flow.
And then I know other people in private equity that are, you know, they're looking for or basically ultimately like a return on capital invested or you know, a multiple on capital invested.
So what's the main metric for you with acquisitions?
How do you measure if you're doing a good job deploying capital or not?
I have thought about it as deal by deal.
Like school is obviously a appreciation play.
You know, like that will realize all of the gains from that years into the future.
Right? Yes, there's some companies that will buy that are pure cash flow deals.
And so it really just depends on, I mean, deal by deal.
So we don't have like a mandate, which is one of the reasons, you know, I haven't had LPs because I just look because the nature of having inbound deal flows like we get weird deals.
And so if some of them are very interesting, like I have to buy out a partner and it's like this weird, terrible situation, but no one else wants to get into it.
But like we're operators.
And so we're happy to get into it.
So we can get really good valuations.
And maybe we get both in terms of cash flow.
Like I'd say like for us in cash flow, we're probably on pace to do 40 in cash flow, just like our slice for the year.
That's incredible. And how much capital did it take to get to that?
Right? Because that's the that's the skill.
That's the finesse. If it takes a billion dollars to generate.
Yeah. Yeah. You're that's one thing.
If it took 50 million to generate 40, that's incredible, right?
Not a lot. And it's been mostly because what Layla and I have realized in this process is that we're better at building better at building than buying.
Yeah. So like I so we did 20.
I did like a deal a month for like two years.
And of those I've gotten rid of like I basically just like user equity I don't even care to like 80% of them.
And then we just we just basically did an 80 20 because it wasn't worth the time.
I was like you can keep the cash and I will give you the equity back.
I don't like this. It's just not worth the time anymore.
So like the largest two companies in the portfolio together will do 150 million.
And we own very large chunks of those companies with probably consolidated some like 60 like a lot of EBITDA.
When you say build you don't mean incubate like from scratch you're saying once we get in there we just do a shitton of work and we kind of run the business.
Yeah. So like the company that's doing 110 right now which is the largest in the portfolio.
Can you say which one? No.
I just don't do I don't do any news besides school.
It's a it's a B2C business business consumer business.
But it started it did two million in 12 months when we got it.
And so we own 29% of the business.
And this year it'll do on its own between 35 and 40 million EBITDA.
Wow. What was the unlock for that one?
Well what would you guys do that cranked it up so much because that's that's I'll tell you I'll tell you all the stuff we did.
So. And by the way you still only have 30% of it.
Yeah. So in the beginning it was just basically a handful of founders that were together and they'd figured out a way to generate positive ROI on the front end in terms of getting customers.
But they had no back it. Can you say category like Ecom licensing like just like a general architect publishing.
Yeah. Yeah. It's publishing business.
And so they were they were getting like three to one upfront LTV to CAC.
And so I was like, Hey man wouldn't it be cool if we sold our customers something else.
And this is actually really funny story if you guys want to hear it.
So we're negotiating the deal and we're like right near the end.
And we all agreed we need to have some sort of second up sell some sort of backend that's going to build some sort of continuity whatever.
And so they were like we've already got it.
We've already built it all out.
We're super passionate about it.
We want to show people how to build a business like this.
And I was like. That's not is it was B to C business.
It's it's like a published like it helps publish book like things like that right.
And I was like. This has nothing to do with what we what we do.
And they're like no we're passionate about it.
We know our customers are going to be passionate about it too if we're passionate about it.
And so I was like this is kind of a deal breaker for me like I don't want to do that.
And they're like well it's done.
So I said okay. And we're pretty much at the point where we're going to walk away.
I said crazy idea. Why don't you just survey the audience and put your offer next to my offer and just see which one they want.
And I was like and if they want your offer more I was like I'll kill myself and we won't do this deal.
And I was like and if they do want it we do the deal.
And they were like fine.
If you're and so we ran it and 85% of people wanted my offer.
And my offer was more of that thing you just bought.
And so it was a great it was a great moment.
Everybody came together as we did the deal.
And then we built out that back end which 1.9 X Dell TV which now now with actually increases to 2.2 X Dell TV.
And so we kept the same 3 to 1 but we were able to 5 X advertising in terms of how much we could advertise and spend so we could be profitable.
Which is basically I mean this is just like any digital marketer who's been in the game for 10 years or you know like this is like this is the game.
This is pretty standard shit.
But every business owner has blind spots right.
Yeah of course. I saw many business I look at it's like oh yeah we have 5 X row as it's like cool why aren't you spending more.
Yeah. They don't have an answer it's not like they have some complicated reason that they don't.
They're saying I don't know.
I haven't really thought about it.
Yeah or they get romantic about it and they're like well we don't want to we don't want to like market it too much.
It will be annoying. I read this thing that said we need to have this margin.
It's like no no dude you do this for 2 years you get 10 X bigger right like you are either there's a story they tell themselves or a blind spot or hey how do you get all these customers like 6 months ago it's like oh I used to go to these events like you go to those events anymore.
No I got tired of it. Okay.
You want this to grow or what's going on here.
So it went from 2 million to did 16 million to 50 then 70 then this year we'll do 110 and so we hired 40 sales guys so that we could do we could add that back ended we added a CMO we added a CPO and a whole product team to help the chief product officer out we added in a controller and so one of the things that was not common what we do is that we recruit.
And so because we have a lot of inbound we have a lot of talent that is in my audience and so I might not endorse the company publicly but from a private perspective we'll endorse we'll recruit at hold co get usually higher quality talent than a portfolio can get place the high quality talent and then they just grow way fast.
Well why wouldn't you recruit that promote that company?
Why wouldn't I? It's because I don't want to keep well one I don't like promoting lots of things so that's a big thing for me because I don't want to promote lots of stuff.
It's one that I am considering to be fair but like it couldn't handle the amount of volume that I can send now and now it's probably close because we actually built a SaaS component of that business and now the software is doing more about 50% of the revenue of that business and so that's going to be a monster deal.
But the point there is that like we took the team from like a handful of dudes with like some VAs right into now the company's got you know 100 employees and like a whole leadership suite, a whole executive suite, it's a company you know what I mean and that just took a lot of work in 4 and a half years and so our first kind of batch of deals that we did we have our handful of winners
that have come from that.
What did you pay for that by the way?
The 30% how much cash did you put up at front?
Like almost nothing. I was to say like a negligible amount relative to what we do.
So you made tens of millions of dollars in value potentially more in 4 years and you made it for everyone it sounds like.
Dude I want to normalize this because I think this is really cool.
So I just did this I just ran our stats this last weekend.
Our average founder return on equity so post deal how much more is their slice worth?
Like every PE buyer says listen and you could make more on the second bite right?
Everyone's like the same pitch right?
So our average founder return on equity net of the chunk that we now own is 13x.
Yeah that's silly. That's silly.
That's crazy. Right. So it's like that was like you should pay me.
Well dude so I did a deal that was similar.
I can talk about it now because the numbers have come out a little bit which was this deal that at the time was called shepherd and now it's called somewhere so somewhere calm and space.
Yeah. A way you can hire like top talent overseas.
So in the US that same role for a developer might be 150 grand, 180 grand.
A lot of businesses owners don't want to do that.
They're trying to be more profitable.
You were in it. Yeah. So Nick was in the business and then I wanted to join a I like that blueprint.
So I was like okay that's a business I'm either going to start I'm going to buy into it but do something.
I tested all the services out and I was like okay I like this one.
So I approached Marshall and cut a deal that I thought was so good for me which is my objective when I do a deal is it has to be good for me.
I'm not going to do a deal that's bad for me.
But I want to be good for both sides.
But if I'm being honest in my heart of hearts I was like I think this is a good deal for him and a great deal for me.
Turns out I had it like totally flipped.
So what ended up happening was we put in a small amount of money and then actually you know but the business was already making millions of dollars a year of profit and so I was like I can't value you this low but I'm bringing value that's not cash.
So how are we going to do this and they're like look how about we do this this is Nick's idea actually Nick was like the business will loan you the money to buy your shares and I was like sick okay you're going to give me the money to buy my buy you all right sign me up you know say say no more and so and that's what that's when I was like okay this is an incredible deal for me and it's
you know a really good deal for them because I know I was going to grow the business I didn't know exactly by how much and by how long it would take and all that.
And what ended up happening was at the time I think Marshall had an opportunity to sell the business something in the range of let's call it like 15 million bucks.
So that's what he's looking at he didn't want to sell he believed in the business so he decided not to sell but he had gone out looked at option offers and that was like kind of where we're a realistic deal might have got done a year later now the numbers came out so it basically they you know the buyout happened at a $52 million valuation so in less than a year so basically
like I don't know nine months of time the business went from being worth 15 million to 52 million and so I thought I was getting this incredible deal on my equity actually Marshall got like by far like the most value out of the deal in less than a year and the only thing that changed was beginning in and you know being able to help the business in different ways and so that way
then I realized oh shit that's the metric that matters because like of course I'm always going to protect my bottom line to try to make this work but the only way that this model works long term is if the founders get a stupid return on equity after my split and YC does the same thing YC which they used to get a lot of shit because they would give you 20 the original deals
like $18,000 like 6K per founder in a company and they would take six or seven percent and people used to be like well YC is getting in an effective like a million dollar valuation into these like future drop box Airbnb like those were YC companies and Paul Graham came out he's like there's a very simple equation you do one divided by the equity you gave me so basically
it's like if you gave me seven percent but I make the company worth 10 percent like because you gave me because I'm now involved in the company the companies worth 10 percent more it was a good trade you would do that all the time and obviously they add a lot more than 10 percent so it became kind of a no brainer it was a different lens to look at than just total valuation which I
think is where most founders get you know stuck on either due to shark tank or just whatever that's the general parlancis just is this the right value am I getting a fair valuation or not versus if I gave you 10 percent of equity but I knew you tripled the but the value of my business of course I would take every 100 percent of the time right right and then the risk that's
associated is what if you don't do anything and so then you covenant around that I think I'm a big I'm a big personally I love performance stuff because I know I'll hit it and so people tend to be like well if we hit that I'm like cool like if you're good with that right I'm good with that Sam you were smirking am I high on my own supplier what what what were you laughing at you're
not high on your own supply no I like I think that um so we're we're glamorizing this this the buying of businesses because Alex you're doing it wonderfully and Sean you told the story of doing it wonderfully whenever I hear these stories I'm like this sounds awesome and then I get into the nitty gritty and I'm like I hate this I love starting stuff from scratch like
I get so much more joy like crafting the brand and putting my personality into it and like calling customers on the phone early on and like hearing like it's like you're committing I'm practicing my bits to hear what like what works well I love that so much more uh then having to buy things um because I just think it's it makes my soul feel better and now we could debate
all day if the numbers make sense for you and both those examples that you guys gave the numbers like make so much more sense and and it's it's hard to create that much value in four years starting something from scratch and so what I want to know do you feel that way I mean you're you're you started something for like do you ever like get a little bit of that vibe when you're
studying something from scratch so the artist regret the artist regret yeah you're like dude I'm producing all these artists I'm not actually writing songs you know I'm saying well like I miss that art that is actually more like the analogy would be like a label you're a label sure whatever and you get to go be in the in the studio I get that I would say first of I do consider
myself a businessman so if I were to like give myself a time I feel like that's probably most appropriate that being said I do get a lot of the stuff that I like a lot which is the big picture decisions which is like what big bets are we gonna make like I love that stuff like okay we have we are like what's our one big bet for the year and then spending a tremendous amount of time
doing research and be like okay this is where we're gonna go and this is how we're what's an example of bet you made a year and a half or two to solve for a component for the publishing business so we was not that it was basically a consumer service business fundamentally it's like education and service whatever and it was I think the revenue is 50 50 split between the two
and so as like we have to put some sort of software thing in here that we can facilitate so either we get a tech enabled service multiple or we just get a pure SaaS multiple and so it was a year and a half ago and we started putting a few million dollars into developing the software that now is just had a tremendous uptake rate is improved conversion rates improve client
success scores all of these things and that was a bet you know I mean to be fair for a company of that size even when we made the bet I think we were doing somewhere like 20 million a day but I want to made the bet something like that so you know betting 10% or 15% of net free cash is not like a massive bet but from a resources perspective of the attention of the leadership team
that was where the big bet was and so kind of like the point with the brand versus the cash like if I'm gonna do a deal and I promoted the biggest the biggest slice that I'm giving is is the audience and the attention not the cash what's a company you would want to go buy right now let's say you had the money today what type of company would you go buy I probably want to buy big
professional services business what's that mean business plumbing so payroll financial services business like counting tax like the things that every business has to have I like those businesses I love I mean I love service businesses even the 40% of our portfolio software I still like service tech and able to serve it like and I still see software as software as
a service like I just I feel like I get those types of businesses because there's so many things were my skill set of like tweaking pricing and figuring out sales process and demand and like that's where I'm pretty good and so there's the businesses that I can make a huge impact on I got one more question for you which is what are you trying to figure out because one trap
you could fall into is like you're the advice guy it's like here's the guy who turned on the camera and gives everybody advice all the fucking time which is like inherently somewhat of a know what all position which is dangerous on the audience side of like eventually people start to resist that but also more importantly for yourself you're like you got where you
got because you were the student and now you're getting good benefits of being the teacher but you still want to be the student and so I'm curious where are you still the student right now like what are you trying to figure out what are your unanswered questions that you're you're new to laying on that maybe maybe even we could help you out or kind of you talk through
this I would say the big things that I'm still like green on are the fund world raising capital like LPs like I don't have any experience with LPs I've always done my own my own money I don't use debt I will probably use more debt in the future I just haven't um so those are all things that I am kind of more spending time on debt being said like to be very candid with you I feel
like in salmon I talk other Sam uh Sam partner of mine uh and I talk about this which is like there's periods of figure it out and then there's periods of due like I'm in a period of due right now uh and then when I get to a constraint because right now the plan of like grow more media grow the companies has been working and so I want to do more better not new and so I'm going to
continue to do more better until more better stops working and then I will look at something new so like in terms of where I see my deficiencies from the private equity perspective uh LPs and debt are things that I would say that are our weaknesses of mine in terms of understanding just because I've used my own capital but in terms of limits for the business right now
um I think the biggest threat is always focus until that's why I try and say no to everything except coming on this podcast because we're your boys dude do the man you guys are the man I'm happy you're feeling healthy you're looking good as always we appreciate you is that the pod song that's it
