Bedros Keuilian Podcast Show - How to Build Your Business With Recurring Revenue - 034

Episode Date: February 14, 2018

Don’t you want to generate monthly, predictable revenue for your business that will scale your empire to its full potential? In today’s episode, Craig Ballantyne and Bedros Keuilian talk about the financial benefits of having systems in place that warrant recurring income. And when it’s time to sell your business, the valuation will skyrocket because you were able to 10X your earnings. Here’s what you’ll discover: 3:37 - Why recurring income will increase the valuation of your business to a potential buyer. 6:20 - How Bedros used recurring revenue to revolutionize the personal training and boot camp world. 9:00 - Why recurring revenue can work for any and every industry. 12:05 - How to break up your online information product into modules and charge on a monthly basis. 17:54 - How you can have a recurring model based on demand for your product or service.  

When you are ready to sell that business and all businesses, all empires should be built to sell, now the determining factor is, is the valuation just 3x the earnings? Or is it 5 and 10x the earnings because you've been able to build recurring revenue in it? Hey friends, Craig Balentine here. We're going to talk about one of the secret ingredients to building your empire. I am here with... Beidros Kulian. All right, Pedro's, my friend.

We are going to talk about something called recurring revenue and how this is so important. And I like to say that if you're waking up without... the guaranteed money of recurring revenue in your business, then your business is at risk of disappearing, right? Sure, absolutely. And in fact, that was that guy that was waking up, you know, every day without having reoccurring income scheduled to come in. Yeah. And when you put that in place, you have that security, that cushion. It's not necessarily always guaranteed to be there, but it is that foundation that allows you to go and invest some of that income into building the empire greater and greater, right? Exactly right. So I'll tell you,

funny story about this. When I first started out as a personal trainer, I was selling personal training, you know, three sessions, five session, ten session blocks at a time. And so if I had 10, 15 clients at any given time, they were on a block of sessions. And when those sessions would run out, I would have to come back to you and sell you another block of sessions again. Hey, Craig, listening to your, that was our 10th workout together. Did you want to buy another block of sessions? And sometimes you might say yes. Other times you might say, well, I need to think about it. Other times you might say no. And if you went home to think about it, you it now I'm hand-wringing wondering how long you're going to think two days three days five weeks right and oftentimes when someone says I need to think about it they're really saying I don't want to and so thankfully I had a personal training client as

name was Jim Franco and Jim Franco said hey you know I wonder if there's any way you can you can do with the gym here because I was training people inside of a gym that was charging people on a monthly basis for their membership and he said I wonder if you can build a business very similar to what the gym is doing and I said well what do you mean he goes look they take a little bit bit of money from a lot of people to give them access to all this gym equipment. And he goes, I don't know how to work out properly, so access to all this gym equipment means nothing to me. So I had to hire you as a personal trainer, but you sold me 10 sessions at a time. And I wonder if you could maybe sell me on a program that's on ongoing basis. I said, well, a gym only charges $34 a month. You know, I'd have to charge you $6, $800 a month.

And he shrugged his shoulders, and he goes, I can afford it. And he goes, I bet a lot of your clients can afford it. And that would keep you from having to have those uncomfortable conversations. when they run out of sessions, do want to buy more sessions? And I later realized, obviously, as I built my companies, that, gosh, you know, this, this works for so many different service and product-based companies. I mean, so much so that you have, like, boxed products showing up, like wine of the month or whatever. Well, you got peanut butter in the month, right? Peanut Butter of the Month. And what was your favorite? CB's Nuts?

C.B.'s Nuts was my favorite. And believe it or not, C.B.'s Nuts is an actual brand of peanut butter. But I later ended up building five personal training studios throughout San Diego County, all based on 12-month contracts with our clients. And the reason, and which we'll go deeper into this, the reason I was able to sell my five gyms was because I had those clients on recurring monthly income, predictable income scheduled to come in every month. And the company that came through and bought me out literally just bought me out because I had that scheduled income to come in. Awesome, awesome. And recently we were at a Joe Polish event where our friend Roland Fraser from digital marketing was talking.

And he was saying that most businesses in a private sale are going to sell for about three times earnings. But then he talked about businesses with recurring revenue built in selling for eight to ten times earnings. Do you remember why he explained that? Well, from what I remember correctly and from what I've experienced personally is when you have recurring income scheduled to come in and you have a membership base and not just a customer base, but people paying you membership, a buyer looks at that as predictability.

Right? So that immediately increases the valuation of your business. That's a predictable business because they could say, hey, look, no one's scheduled to pay next month. So if you leave and I buy this business from you, I may literally not have customers tomorrow. But if there's a service or a product of the month that you're sending, you're going to leave. I'm going to plug myself in. That's fine. The business still continues. So that's reason number one, predictability. Number two is when a buyer comes in, odds are they're bringing a list with them or they're bringing another source of traffic with them. And the way they see it, is gosh you just grew this business to 5,000 people paying $69 a month great I've got another 100,000 people I can expose this to you've already got a reoccurring model that works I don't have to test it out split test it see which price point works and so they can plug in their audience into your business model and literally double and triple the membership base that's interesting and here's another interesting way that you can use recurring revenue I actually used it as insurance and you probably wondering, well, what the heck does that mean? How do you use recurring revenue as insurance? Well,

I started out in the fitness industry, as you know, as everybody knows, as people have watched my YouTube videos millions of times, no. And we built up a great product that sold 100,000 copies. And of those people, they all joined a recurring business, a recurring revenue part of our business, where we delivered more great value every month. Now, then I decided to retire from the fitness industry. Now, when you retire from a fitness industry and you go and build a brand new business almost from scratch, you need a little bit of insurance income. So we had that recurring revenue that allowed me to go and do some daring stuff that most people wouldn't have been able to do if they were just starting complete from scratch. I didn't have to go into debt.

I had something that allowed me to fuel this new business because of the systems we had built, the reliability we had built in the income before. That's a brilliant way to position that, is that you gave yourself insurance, allowing you to go into a new industry, building a new business, knowing that the fitness industry is still giving you ongoing, reoccurring monthly income. Yeah, absolutely. So how did you then go and take this idea from the personal training stuff and revolutionize the entire boot camp world and even a franchise model? Yeah, well, so even before that, when I sold my personal training gyms, I went online and I created an online platform, an online personal training platform called high-tech trainer.

And the whole thing behind high-tech trainer was really simple. If you're a personal trainer, you pay us $49 a month, and you can drag and drop workouts and email them to clients worldwide, right? Today, of course, people do online coaching, online personal training left and right. But high-tech trainer in early 2002 was one of the first platforms out there. And so because of Jim Franco telling me take a little bit of money from a lot of people, I said, gosh, I bet I can charge $49 a month to thousands of personal training. who can use my software to help more people reach more clients worldwide so they'll make more

money, they'll make a bigger impact in the people they want to help and serve, and of course I'll make $49 a month from thousands of personal trainers. And sure enough, that happened and that grew my reoccurring revenue to about $42,000 a month. And I had never had that kind of revenue from software. Well, right around that time... That's stability. Yes. Stability and reliability. Oh my gosh, just stability and reliability. Now here's what happened. Because we had high-tech trainer, as it turns out, there was a personal trainer in the Midwest working with a Sprint executive. They were emailing the Sprint executive workouts.

Now, most people think that apps were something that iPhone, that Apple created. Well, I'm here to tell you back in 2003, 2004, 2005, Sprint had something called a jukebox. Interesting. And High Tech Trainer was sold at $2.95 on Sprint phones worldwide. And we had over 26,000 subscribers on the Sprint jukebox for $2.95. Now, Sprint got 50% of that revenue. I got 50% of that revenue. But you can imagine the massive checks that I was getting in from the Sprint Network,

right, before Apple created the iPhone and the App Store. And so I realized very quickly that reoccurring revenue could happen at the $6 to $800 a month, which is what I was charging for personal training. And people who wanted personal training on an ongoing basis didn't have to then go in, renegotiate with me and buy another package, they could just pay six to $800 a month, and I'm there to serve them. It can happen at the $49 a month for my high-tech trainer software. It could happen at the $2.95 a month for the jukebox app that we had, the high-tech trainer workouts that people could just literally download and follow along workouts on their phones.

But it can also happen at the $2,500 a month. And it can happen at the $2,500 a month, which is the coaching and mastermind programs that you and I have. Right? So in reality, when people think that, you know, there's a limit to what I can do with recurring revenue, there really isn't a limit. You can deliver wines, a wine of the month, the peanut butter of the month, the meat of the month. My wife gets clothing. She gets boxes of clothing that show up and she'll pick out what she likes, whatever she doesn't like. She sends right back, and they apply the money towards the next month. And don't you have a children's game one? Yeah, we have, it's called a tinker crate,

and my son gets one, my daughter gets one. I don't even know how much we paid, $20, $40, $40 a month. But it doesn't matter because they look forward to get. getting that every month and they open that little crate, they put the little thing together and it becomes a little puzzle or art piece or whatever. But there's so many amazing ways to build reoccurring revenue. Whether it's a tinker crate or the wine of the month or the mastermind or the software, when you are ready to sell that business and all businesses, all empires, should be built to sell, now the determining factor is, is the valuation just 3x the earnings or is it 5 and 10x

the earnings because you've been able to build reoccurring revenue in it. Yeah, yeah. And, you know, one of my favorite, shout out to John Romano, here. One of my favorite reoccurring products is he's on Butcher Box, which is like this giant box of meat that he gets every month. And he always Instagrams it. So it looks really great. So that's another one that is out there. Now, when somebody's thinking of starting this, where do they start?

How do they break down their business? You know, if they're selling, you know, if they're in a restaurant industry or if they're in, you know, selling physical products, how the heck do they figure out, well, what's the recurring aspect? Sure, sure. Well, I'll give you an idea. Well, let's talk about apparel. Would you ever think that apparel would be reoccurring? No, I do not. I don't shop very much, so I wouldn't have thought that. Right. So we're going to go even deeper on this. Who would have thought that apparel could be put on reoccurring, let alone dive bar apparel?

Because most people, if you go out to a dive bar, let's say, in the middle of Oregon somewhere, and you like this dive bar and they have trucker hats and maybe a T-shirt, you might buy the T-shirt or the trucker hat and off you go. Well, a company that I hear advertised right now on Howard Stern's radio show decided that they're going to send out, they're going to partner up with one dive bar a month. Right? I don't know how they pick the dive bars, but they partner up with one dive bar a month, and they take their most popular t-shirt from that dive bar, replicate a few thousand of them,

and then send it out to their dive bar t-shirt club of the month. And for something like $29 a month, you get a t-shirt from a legitimate real dive bar. They've certified this in a real dive bar, whatever their checklist is, or how they quantify it. And every month you get a really cool t-shirt, and they position it as, and now you can wear your dive bar shirt, and the shirt comes with a little piece of paper that tells you where the dive bar is, why it's a dive bar, what their best food item is. So you get a little history about the business. And now they say, hey, this shirt, when you wear it, it becomes a conversation piece.

Oh, wow, look, gosh, is that from Butte, Montana, a dive bar? Where is it? What's it all about? And you start telling the story. So you're really selling cocktail stories. Yeah. I mean, you are. You're really selling cocktail stories here, right?

And so you've got things like that, or let's look at my product, closed clients. I've got a information product. So someone might say, right, well, that was T-shirts. I have a digital information product. I've got a product called Closed Clients. And Closed Clients really teaches you how to take a prospect and convert them into a personal training client who pays, stays, and refers. Now, that product that I have sells for $99 straight up, one-time fee. At any given time, I just haven't had the chance to do this yet because our franchise and all my other stuff is growing.

so quickly, I can take closed clients and make it a $19 or $29 a month program where I can give them all of closed clients that I have right now, up front for $29. And then for an additional $29 a month, I can put people in a membership site or in a Facebook private group and do a weekly sales training on a Facebook Live for $29, overcome the objections. Hey, what are the most recent objections you guys were getting? Here's how to use social media to do social selling, right? And so you can take whatever product or service you have and break it down into modules that you can serve up on a weekly or monthly basis, justifying a reoccurring payment.

Oh, beautiful, beautiful. And tell us about how your wife does recurring revenue. Yes, so people think that, you know, she writes recipe books. Like, what do you do with the recipe book? Like, is it a recipe of the month or what does she do? Well, she has a cookbook, and we give the cookbook away for free in exchange for she. shipping and handling, right? So just pay $7.95 shipping and handling. We'll send you the cookbook in the mail. However, there's a radio button that's already checked off for them, and they're

welcome to uncheck it, where they get 30 days access to her RHR club, real healthy recipe club, where it takes all the recipes from her cookbook and builds it out into a fat loss meal plan. And every week, it builds you out a new fat loss meal plan and gives you the grocery list of what you need to go shopping. And every week, or every month, I'm sorry, she's adding new recipes to the RHR Club. So now for $14 a month, you can buy her, you can pay $7.95 to get the cookbook to show up, have the radio button checked off where you get your first 30 days of the RHR Club for free. After 30 days, if you decide to stay on board, she charges you $14.95 a month, and now she gives you done for you meal plans using those recipes that you like, the grocery

list, and of course is always adding new content and recipes and articles into the community that she's built, and she's got hundreds of members now that's going to grow up to thousands of members. Amazing. Amazing. So last thing before we wrap this one up, is it ever worth it to get cash up front, to sacrifice the monthly in order to get, hey, maybe a discount on the payments. You know, if it's $10 a month for a year, hey, give me, you know, $77 and just pay up front.

The only time I found it's valuable to get the cash up front is if you know the lifetime value of your product. Right. For example, let's say that we'll use Diana again for her real healthy recipe club. Let's say that she knows the average person stays on board at $14.95 for 10 months, right? So that's $140 or $150 that she would get over a 10-month period. Yep. So if she's going to get, let's see, $150 over a 10-month period, she can say, hey, you know what?

You can get a three-year membership for $195. Yeah. Right? So now she increased the amount of money she's going to get. an upfront money, but she's selling a three-year membership, knowing that whether she has a thousand members or 20,000 members, it's not going to cost her anymore. Yeah. But she's extracting more money from the customer and giving additional value on top of that.

So anytime you can increase the dollar amount that you get by knowing what your lifetime customer value is, then it's worth getting a big chunk of money up front. Awesome. Awesome. So before we go, what are some of the recurring products that you buy? What do you build every month for that you would love to share? that just to give some more examples to people out there. Sure.

So I've got coffee of the month. Okay. Peanut butter of the month. We get wine at the month. Wow. And I didn't want to tell you this earlier, but I'll tell you this. I also get a box of clothes that show up. Oh, very nice.

Why go shopping, right? You literally get on the phone with the stylist. Yeah. And, you know, they're showing you on your computer. Here's the type of pants. Do you know, I don't wear skinny jeans. Don't get me skinny jeans. Well, okay, here's a type of shirt, whatever.

You pick and select, and literally every month I get a box of clothes to show up. and what I like I keep, what I don't like, we just ship back, which saves me a lot of time, money, and really effort to go to a store and buy. Yeah, absolutely. What about you? What kind of re-claring programs are you on? Vet insurance for the dog. Boingo Wireless, which I don't ever use anymore, but I'm still on it just in case.

I'm ever at an airport, and they don't have free Wi-Fi, but every airport has free Wi-Fi, so I'm on that. And I'm on some charity ones. It's like there's a hospital that I'm on like $20 or $40 a month to it and then, you know, like, you know, feed the children sort of thing. Just those things. And so it just shows you that, you know, if they didn't have those, I just would have done a one-time payment, one-time donation. But now they're like, hey, why don't you, you know, sign up for $20 a month? You're like, ah, it's $20 a month.

That's, you know, that's no big deal. And I know that you do a lot of charity work that way as well with the compassion kids so that you're paying on a monthly basis as well. We've got 52 kids that we were paying on a monthly basis, like $38 a month per kid for 52 kids. And if they said, hey, give us $1,000, I would have. But I don't know, for now we're going on five or six years now that we're paying $38, $39 per kid. I'm sure I've surpassed that $1,000. And so it's in their best interest. It's in my best interest.

Yeah, absolutely. So it just goes to show you that recurring revenue options exist in every industry, every single industry, memberships, opportunities to put people into your world for a long, long time, serve them add value and grow your... Now, to that point, let me just bring up something else. A lot of people go, well, I don't know if my product can lend itself to reoccurring, and so I just want to reassure everyone. Some things are almost a forced continuity.

For example, if you're a guy and you shave, and most guys do, even if you have a beard, you have to adjust your beard, well, guess what? The Razor Companies, right? The Dollar Shave Club had people on recurring revenue. had people on recurring revenue. But even if they don't, even if it's Gillette or Schick and you're going to go buy razors from the store, sooner or later those razors are designed to break down

so that you can go buy more. And so you can have a reoccurring model based on demand because hair continues to grow, razors continue to break down, or the shaving cream continues to run out, and so you have to go buy more. So you can force people into continuity by buying more your product by virtue of grooming, right?

But even with supplements, you know, if someone takes supplements, And we just saw Amazon do this. In the last 24 months, 12 months, actually, Amazon did this. You used to be able to buy supplements as many bottles of fish oil as you want. Now they've got the reoccurring feature. Hey, do you want this fish oil to show up every 30 days, every 45 days, every 60 days? I see that with a lot of protein bars too.

Right. Because I sometimes buy protein bars. Sometimes. I'm sure you don't need a lot of protein bars eight a day. But reoccurring can be either forced upon people based on consumption or you can force it upon them by way of giving them the option of convenience. But when you build a business with recurring income and recurring revenue, you're literally multiplying the valuation of your business

if you ever plan on selling it, which is a big thing to do. Yeah, absolutely. Well, also giving yourself insurance and reliability and just making sure that you have that foundation for the giant empire you're going to build. So any last words, B, about people rating and loving our show here? Yeah, the last words are, enjoyed this show, please do us a favor, leave comments down below if you're watching this on YouTube, or if you're listening to this as a podcast, we would love for you to share this and

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