The Game with Alex Hormozi - The Secrets to Scaling Internet-Based Businesses (with Ryan Pineda) Pt.1 - June ‘22 | Ep 527

Episode Date: April 22, 2023

"We wanted to build the machine that builds the machine." Today, join Alex (@AlexHormozi) and his wife Leila (@LeilaHormozi) as they guest on Ryan Pineda’s Show to explain their approach to investing in and partnering with businesses, as well as the challenges and strategies involved in taking a company from $3 million to $30 million in revenue. This is part 1 of the interview.Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.Check out the episode on Ryan Pineda’s YouTube Channel!Timestamps:(0:45) - What Acquisition does & bottlenecks for growth(4:27) - Needs for hiring & evaluating portfolio companies(15:36) - Thoughts on selling Acquisition & going public(18:53) - Full-force on social media & content creation time(25:10) - Advice for founders to improve business growth(27:07) - How to prevent churn in e-learning mastermindsFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

There were a number of assumptions that had to be true for us to kind of hit what we wanted to do. And so it was like, we have to be more popular in the future than we are today. We have to invest in businesses where the marketplace is growing faster than the S&P 500. We have to believe that we can meaningfully drive value to those particular companies. And we have to do business with people that we think are exemplary. Welcome to the game where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe.

What's going on, everybody? welcome to another episode of the Ryan Paneda show. Today, I actually have our most requested guest ever. Alex is pointing at Layla. I have none other than, I'll just say the Hormozies. What's up? Thanks for having us. Yeah, it's good to see. Yeah, it's good to see you guys. So explain to everyone like what Acquisition.com is. Yeah. So we work with internet businesses. Typically, I would say the majority of our businesses are e-learning and training companies as a whole. It's probably 80%. Then 20% are just, I would say generic service, service-based businesses. And that's at least the split that hasn't been purposeful, but that's been what has been up to this point. And, you know, we know those

spaces really well. And so minimum size is three million. I think the biggest company we have does, you know, about six million a month. And so there's a big range there in terms of size. So, you know, on the small side, it's 250 a month. And on the high side, it's 200,000 a day. Right. So it's a little bit different. But, you know, we just, we've done that, you know, three million to 30 million jump six times now. And so we just really know what that looks like. And so we look for businesses that are right at that range that have a good leadership team that have really deep expertise within some sort of thing that they're teaching because that's a big lever. Like how good you are at the thing matters a lot. Now, we know the businessing around that to really optimize and

scale it and drive profitability and ad acquisition channels, increase lifetime value, decreased turn, all that kind of stuff. But taking companies from 3 to 30 that are internet-based, founder-led businesses is kind of the bread and butter. And so that's what we do at acquisition. So, you know, your target is to get a, you know, business currently doing three million, maybe minimum, right? And, you know, obviously you get the biggest return taking them from three million to 30 million plus, right? So selfishly, I have a couple of companies like that in the Internet space.

So what are the biggest bottlenecks you see to go from three to 30? Yeah, yeah. You know, if I were looking at it, I think to go from 3 to 30, first off is they're typically missing. They don't even have the completed first layer of leadership. And then in order to get, you need that in order to get to usually 10 to 15. And then you're going to need that second layer of leadership in order to get to 30. And so it's typically building out, you know, to get to 10,

usually you need like one high level executive and then you need to fill out that like manager level leadership team. And then in order to get to 30, you need to have really, both of those levels. So that's the first thing in terms of people. In terms of like the other pieces of the business, their product, packaging and pricing is usually not optimized at all. So typically we have to redo the whole structure. So all their offer structure, all the product, all the pricing, all the packaging, it's just not optimized. They don't, typically they don't, they're undercharging or they're not charging for the right things. They don't know what's actually

valuable to the customer. And so we help them figure out what's the thing that's actually valuable to the customer and then who is your freaking customer, right? Because you can say who it is, but like who's actually buying and who's actually like in your Facebook group or in your CRM is a different story. And then I would say that the other two pieces to our data. So getting the data in place, it's really, really tough to scale without that. And so getting them into a system that actually can, that their team one wants to use because it's one to get you on a system. But the second thing is you have to get them on a system that their team can actually use easily and it has usually a good interface. So that's the third one. And then I would say that the last piece of that is just

scaling the talent at the top, which is the culture, which is the soft stuff that we go over with them. And honestly, I think helping that CEO and integrator is typically a duo that we work with just raise up in terms of their level of leadership and the kind of culture that they have, because I don't think that in the beginning they realize how important it is. And so we reinforce that on day one from working with them. And so we really hammer home like dialing with what the culture is, so as we scale, we don't lose that. Right. So it seems to me, and, I mean, it seems obvious just like talking about it,

but like people, like most people just, they don't have enough manpower yet. Totally. And what do you see as like the biggest needs for hiring? Like, is it on the marketing side? Is it on the sales side? It depends wildly on the company. Yeah. Like if you have a product-driven entrepreneur, they probably have, you know,

really good product and innovation, R&D, things like that. maybe decent customer success, probably the tracking is usually not in place. And they usually don't have a very clear customer journey. They're not, you know, measuring time to value. They're not, you know, actively measuring NPS or creating customer health scores, things like that, that we can have predictive metrics around how we're going to drive, you know, lifetime value. But they'll usually be better there than they are on like the sales and marketing front.

And so it's really just like where do we feel like the constraint of the system is and then just ruthlessly prioritizing and attacking that. And so on the flip side, if we have a very promotion-driven entrepreneur, then it's usually the back of the house that needs to clean. up. And so, you know, for us, because we deal with the whole of the company, we attack it end end. Right. Yeah, it's funny. Before this podcast, I had this guy's name's Keala. And, you know, we're talking about internet marketers, right? And most internet marketers are great marketers, they suck at ops and fulfillment. And then, you know, you get guys who are really passionate about

what they do and they just don't want to talk about it, right? We were talking about my, you know, my buddy Graham Stephan, who we partner with. You know, he's not the greatest promoter, you know, but great product, right? His product is his content and what he's doing. So I think it's cool to see that. So what would you say, at least on the marketing side, right? Because you got your book, $100 million offers, right? Which is all about marketing, which was a fantastic book for anyone who has not read it yet.

Go get it. It's 99 cents on Amazon. Like, you can't. You'd be dumb not to buy it, right? So, you know, quick plug there. But, you know, in that marketing book, something that really, hit home was all these ways to market that I currently don't market, right? Like, you know, I learned to market on the house flipping side by going direct to seller, right? We would run TV commercials, direct mail,

cold call, all that stuff. But when I went to the internet-based businesses, I was like, oh, social media, this will carry me. And it has to this point. And then I've pretty much abandoned, you know, affiliates, outbound, anything like that. Like, what do you see with all these companies you guys evaluate and look at as like, I guess the bread and butter with internet companies, like for their marketing strategies. Is there consistency or a theme? I would say, I mean, predominantly, most of them run paid ads and have some sort of strong organic or both. I would say, like, that's the majority of the companies that come to us. Not to say that that's what we need them to do or what we end up building with them,

but that's where they're at usually when they meet with us. Yeah, I mean, I would say that there's the companies we take on versus the companies that inquire. Most of the companies that inquire have figured out paid ads. Their product is usually not honestly like to the point yet where they figured out a really strong organic stream. We have some companies that we take when we find those ones. Those are usually some of the best because they very product. But a lot of the ones that inquire and are at that level usually don't have the organic because the product just isn't quite good enough yet. And so the organic really works against them.

And then most of them just don't have the operational form. to do outbound. And so they might say like outbound, like, oh, I run ads and then they DM me and messenger. Like, that's not, that's not outbound. And it takes, you know, eight months to get outbound working. So they tip, it's typically just something paid and it's usually not on brand. It's not aligned with their culture. You know, there's a lot of things. It's not calling out the right person. So there's a lot of room for optimization. Yeah. We get a lot of gains just from just filling in holes. Like the first year, we mostly just fill in holes and almost like by, accident will triple the profit of the company without even like really putting the big stuff in place

yet. Yeah, because it's interesting. We like, you know, we say between three and 10 because the thing is is that when you take on a business and we have that are bigger, it's very different. It's fixing. And fixing is taking something, having, you're basically negative. So it's like when you take on someone between three and 10, they're at zero and you just have to take them to 10. When you take on someone that's at 20 or 30 and they're stuck, you are starting from like a negative eight and you've got to take them to negative four, negative two, zero. And so it's just, it's a lot easier to start brush. To give more words around it, they have incurred debt, usually multiple types of debt. They've incurred cultural debt. They've incurred management debt. They've incurred technical debt in terms of their

systems that they're operating on. And so we have to basically pay down that debt before we can grow again. So like one of the companies we had, we pretty much almost like maintained for the first almost nine months, and then it tripled in the next six months. And it was just like, org struck, remove people around, get these people out, restructured this team, fix the compensation over here. You know what I mean? Just like all the stuff that no one wants to talk about, but like that's what builds sellable businesses that have true enterprise value.

So when you guys are looking at acquiring these companies, are you only looking for ones that people want to sell? No? Go for it. No, we align ourselves with whatever the founder wants. And so like the way that we get, you know, make money off of, you know, our investments, we align to make sure that whether they sell or not, that's one of the things that we didn't, why we're not like traditional P.E is traditional P.E. is usually incentivized to get someone to sell

to a specific buyer within a certain amount of time against whatever the founder wants. Usually they force them to and they usually have like a drag along right, which means that they can force them to sell. We just never want to do that because we're entrepreneur first. And so it's really aligning ourselves with whatever that that person wants, which we make sure that we figure out within the first two weeks of working together. Right, right. So what does a typical structure look like, right? You know, somebody comes in, they're like, hey, you know, take a look at my business and you guys do your due diligence on it.

Like, all right, this looks interesting. You know, you have a call. Like these deals being struck, I've heard you say in the past, you know, you only want minority stakes. Yep. Right? Because you want them to, you know, lead the charge. Yeah. So is a lot of this just you guys buying into the company or you just, they get?

giving you equity for your expertise. Like, how's all that playing out? It's a combination. You know, it's a case-by-case basis. We have some companies that we have put cash in. We have companies that we haven't put cash in. The big thing is, like, what problem are we solving? And so I would say the vast majority of the companies that we are working with are

internet-based companies. They are growing. They are profitable. They have cash flow. And so usually the founder is like, if we were to appropriately value the company, it's usually not actually valuable because no one would really buy it. Because the founder could never actually step away. So it's really just them with a thousand hands.

You know what I mean? And so the valuation. would be really low, and for most of them, they don't need the cash. They need the expertise. And so for the majority of the situations, it ends up just being cool. We'll take a meaningful enough stake that we care, but not so much so that you stop caring. You know what I mean? So it's really trying to strike that balance. And then, you know, we have incentives for us to try and like triple the company within five years. And that's like our big, you know, goal that we drive towards. But because we are minority partners, it's basically like everything kicks in after we triple. And so that's

kind of like what we drive towards with those companies. So we get a percentage of, cash flow and we have some profits interests or like equity like arrangements in the company so that if they you know if they choose to sell in that period of time you know we're we're incentivized there but because of the combination of cash flow and profit interests which is just a fancy word for equity like stuff for anyone who's listening we are balanced in our incentive between holding and selling whereas if we were like just equity then we would be over indexed on just trying to sell basically as fast as we can and get a big multiple on it yeah but most the founders that we're dealing with that that are approaching us are like I really want to take this thing the next level there are a

100% motivated to do it. And they just want more help to get their faster and make fewer mistakes. Got it. So what do you guys think about just the different options for having this exit event? You know, it seems like, you know, you guys obviously sold. Why not go public or something like that? For Acquisition.com or for those companies? For, say, gym launch.

Like, why not take gym launch public when you guys were doing it? I think, again, it's what problem you're solving for. Taking it public would have again, you would have been. the one taking, right? And we just knew, you know, for a lot of people, they're building something and it's the right foundation to build more upon. Like, I think you're doing that, right? It's like you built the one company that's now building other companies, right? When we looked at gym launch, we said, could this build what we want to build within Acquisition.com? And the answer was not eloquently. Like, it would actually be complicated because everything was geared towards fitness. And so we could

build a fitness version of Acquisition.com within Jim launch. And we could, you know, take companies public and do all those things there, but we were like, do we want to be, you know, isolated to fitness? And the answer was no. We already weren't isolated to fitness in the companies that we were working with. We didn't want to continue to go further into that niche because we have other businesses that we have expertise in. And so we didn't want to isolate ourselves to that. And so ultimately it was like we could take it public.

We could do all these things. We just felt like you're going further down a path. That wasn't the path we wanted to go down. Right. That makes sense. So, I mean, obviously while you guys were building gym launch, acquisition. dot com came up as this idea and vision. So like what gave you guys the motivation to want to go about that route? Well, we had one guy who somehow like found his way on my calendar is,

that's kind of funny. And, you know, in the first five seconds, he was like, okay, I'm really sorry. I lied to get on your calendar. And normally I'd be like, all right, that's not, you know, but he's like, I promise it'll be worth your time. I'm like, all right. And so you gave me his pitch and you'd take in, you know, a brick and mortar facility from, you know, a few hundred thousand a year, like $1.6 million a year just using all the free content that we had put out just for the gym space. So he'd been like super following stuff for a long time and he'd been doing that for a few years.

And he's like, I really want to take this thing and do what you do with gym launch in my niche. And it just ended up working out so well with that particular founder and his wife that I was like, I loved doing it so much. And I really enjoyed being able to just like solve so many problems ahead of time that we had, you know, struggle to figure out. And so the line of growth on that company is faster, bigger, more profitable than gym launch was.

You know what I mean? And so it's like, man, let's do, like, and that's where I think the fire kind of lit within both of us were like, this is what I really want to do. And we, you know, we've been in fitness for 10 years. We knew we could build a fitness conglomerate and just do M&A and start, you know, buying franchises and buying chains of gyms and buying marketing agencies and things like that within that space, buying fitness coaching companies, whatever. And that would have 100% been a great path to wealth or more wealth.

It just wasn't the path that we felt like doing. And, you know, I think I talk about this from my worldviews a lot, but like, you know, the marginal utility of money beyond a certain point, you know, decreases. And so we wanted to do different things. Hey guys, real quick, if you're new to the podcast, I have a book on Amazon. It's called $100 million offers that over 8,000 five-star reviews and it has almost a perfect score. You can get it for 99 cents on Kindle. The reason I bring it up is that I put over 1,000 hours into writing that book. And it's my biggest gift to our community. So it's my very shameless way of trying to get you to like me more and ultimately make more dollars so that later on in your business career, I can potentially partner with you. So that's my give. Go check it out, Amazon, and back to the show.

Yeah, no, that makes 100% sense. So, you know, you guys plan to do Acquisition.com for a long time. Is there any plans to sell it at one point? No. You know, obviously any good business could be sold at any point in time is kind of the way we look at it. But we set it from day one. We don't want to sell Acquisition.com.

We want it to be the foundation that we can build other things upon. So what we're doing right now with it, you know, like we're talking about the types of businesses that we're taking on right now, that's for the first pot of, you know, say, I don't know anywhere between 15 to 25 businesses and we'll cap it. And then we might say that we're going to open a pod that's for SaaS or e-commerce or you what I'm saying? And so there's variety there.

There's different routes that we can take in terms of maybe we decide to buy companies outright one day. I mean, there's a lot of different stuff we can do. And it feels like it would be a shame to then get rid of the machine that builds the machine, right? Which is really what we wanted to build. So I could see us spinning up other things under Acquisition.com and selling those off for

sure. I just don't think that we want to sell acquisition.com. Yeah, so we don't want to sell the goose. We want to sell the eggs if we're ever, you know, going to do the exit path. But now for us, there were a number of assumptions that had to be true for us to kind of hit what we wanted to do. And so it was like, we have to be more popular in the future than we are today. We have to invest in businesses where the marketplace is growing faster than the S&P 500. We have to believe that we can meaningfully drive value to those particular companies. And we have to do business with people that we think are exemplary. And that's both internal and external with the company.

So if those four things are true, then we will be able to, you know, realize this. And so that's more or less been kind of the assumptions that that everything acquisition.com was built off of. Yeah. So the way I look at it is like you guys are creating kind of like a blackstone where you're going to have all these companies that you guys own. So do you plan to maybe take Acquisition.com public to get the funding needed to buy all these companies like down the road as you scale or what's the plan for that? We've had plenty of discussions about it. I mean, I like there's things that I do like about the going public part, which is just, you know, all of a sudden your equity is liquid. and you can issue shares and you can have access to debt markets and things like that, which I think are cool.

But there's also a lot of headaches associated with being public. And so I think we lean more towards just keeping it private this whole time. And if we want to do something we can in the future, but like because of the audience size that we have, you know, if you look at like we were talking about Graham, Stefan earlier, if we were to do something, I'd rather just raise funds from the audience and allow them to participate in the stuff that we do because I feel like that would be like way cooler. Yeah, I think something.

more what we would like to do is like, you know, eventually with say not, maybe not the companies we have right now, but a specified pod, we say, we're going to grow this pod with the intention that one day we can say, all right, we have now five years of returns that we can say this is our return for the last five years and they're fantastic. Now I feel like ethically I could take someone else's money and say, hey, what if we bought the other X percent of all these companies in this pod, which we've already grown from day one. So like what's the likelihood that we're going to continue to succeed with these companies? So it's like stack in the deck, you know, the stack in the deck in our favor. So, you know, from a diligence perspective, it's not like,

okay, we've got this company. It looks really interesting. We already know. Right. It's like, we've been doing this for five years. We've already, you know, five X, the profit of this business. And we know what the next, you know, five X looks like. And so, yeah, so we might take this piece. And then the fund takes this piece. And then we still have majority now in the company so we can, you know, drive the direction even more. Yeah. No, I freaking, I love that idea. That's super smart. So let's talk about how you even get these businesses to come to you. So, you know, social media has been something that's drastically changed, you know, the world, period, and business owners as a whole, right? Like, it's like, dude, if you're not on social media, you know, it's like, does anyone

know about your business, right? Like, that's just what it seems like. And you both recently came on the scene, like, you know, going full force. What was the catalyst behind that? Yeah, we can. Yeah. So I figured with this company, you know, in contrast to some of the other companies we've had in the past, it had to be something that was in. And so, like true inbound. Like I would like I would say paid ads is like in between, you know, inbound and outbound. But like I didn't want to build a company where we're soliciting people saying, hey, we're going to help you grow your business. You don't know who we are. And by the way, you know, we're going to buy in for a minor. It's just like, you know,

there wouldn't be trust. There's just a lot of things that would be missing. So I figured that this company would make the most sense to build off of an organic inbound, you know, following. And I didn't have one. And so I was like, okay, well, you know, real estate's not my game. But, you know, I feel pretty confident that, you know, high cash flow, digital businesses are our game. And so if that's what we're going to do in 10 years, then start today. You know, that was kind of the thought process a year and a half ago. Yeah. And honestly, looking at like, because we both, you know, we're IDing about this business, how you bring in customers affects the entire business. And so even like looking at the kind of talent that you can

acquire when you have like a very volatile acquisition strategy, you're not going to acquire the same kind of talent you can if you have a very stable, reliable acquisition strategy. And And so we know that if we can build this boat, which maybe it takes a lot longer to build, that's okay. It's still worth building because of the kind of business that we can build underneath of that. Yeah. And I agree. Like most of my customers have been all organic inbound. And so like even when things aren't necessarily going well, like if, you know, they don't get the service that they were hoping for or something happens, they're not immediately like, oh, you know, bad review scam.

They're like, hey, like, I get it. they're much just more easygoing than somebody that you had to do a hard sell on to buy your product. Yeah. And I think by the nature of what we do, you know, it's investing and be partnering with people. It's not even like, I mean, we talked to founders of the company every day, pretty much, all of them. And so I think it's just a very different, it sets the relationship up for success this way, rather than if it were paid or outbound. I just don't think that we'd be set up for success. And I don't think we'd be able to have as much influence in those companies as we do now. and so I think it would be

disadvantageous for them and us. And because our relationship is a minority's sake, it's much more based on trust and influence because we don't have majority. So we can't force someone to do something. And so we have to have people who share our values and trust us.

And if we're like, hey, we really think you should make this move and it might seem scary. They're like, all right, I trust these people. I'm going to do it. And that happens honestly all the time. Yeah, because of just

all of the content and value you've put out there. It's like, yeah, if you tell me to do this, I already believe you. You don't need to sell me on doing it. Yeah. Yeah. Trust is a lubricant for doing business. Things happen a lot faster.

Yeah. There you go. So, I mean, obviously you guys are putting out amazing content. Like, how much of your time do you think you spend on the content side versus like the meat or the business side? It's different between both of us. So you can answer for yourself first. I would say, I mean, the vast majority of our time is on the business and the businesses that we have in the portfolio. we've been pretty good.

Caleb's here behind the camera. We've been pretty good about capturing way more of the stuff we've been doing. And so I think that's dramatically cut down. We were talking about this earlier on the actual amount of like direct to camera type stuff. But like for me, the YouTube channel, I make, you know, two to three videos a week, which ends up being me usually like one day every two weeks. I'll just knock out, you know, four to six videos. And beyond that, I use Twitter a lot.

And that's kind of like where I test my short. It's really just like stream of consciousness. And then that's based on what people, you know, find interesting there, that's usually what seeds the short form video content. And we can, you know, we knock those out pretty quickly because those are easy for me to do because I've made ads for so long. They have similar, like, pace, you know, to like an advertisement. And so we enjoy doing that. But besides that, it's really just we have the long-form videos, with the short-form videos, and we've got tweets, and that's the majority of what we do. And, you know, tweets get repurposed as, as Instagram

posts as well. And that's, I mean, that's the, that's it. That's all, that's everything. Sounds so simple. What about you? Yeah. I mean, same stuff, but I think I know what, you know, with Acquisition.com being new, it's not, it would be irresponsible for me to prioritize making content over getting the infrastructure in place. Like, we're heavily investing in talent and hiring and getting the, you know, structure in place to scale. And so that, because that's my role in the company, like, I actually realized today, I was like, oh, shit. Like, I haven't made a YouTube video in like three weeks. And so I told our YouTube guy, because in the beginning, he's like, you're going to do what Alex does. He does three times a week. And I was like, I'm done doing three times a week. I was like, I'll do like,

maybe one a week. And then he'll be like, dude, we don't have one this week. I'm like, yeah, I don't care. Because it's irresponsible. You know what I mean? Because I'm just always going to be more internal facing. And so actually, that's when, you know, when I said, I really do want to make the content because I think it'll help the companies and help them be more well rounded, if they have both of our perspectives. But I was like, I cannot do direct to camera. It's not scalable. So I was listening to Gary V. And he had this one line where he just said, dude, I'm an operator. He's like, you don't get it. I spend 99% my time on my businesses. And I was like, I'm an operator. And I was like, I need someone to capture rather than me creating. And that was

when we really had the conversations of like, because I kind of came to out. I was like, dude, I can't. How are you doing this? He was like, I don't think I can either anymore. And so we're like, I've come to that conclusion too. You know, for the last two years, I've been like, all right, I'm focused on building this media business and, you know, it is a business, right? So like, making this content and everything. And now I've come to the conclusion. I'm like, yep, you know what? I'm just filming, like, me doing business, and that's the content now. That's just way easier. Like, you don't have to, like, dedicate time to go film live videos. Yeah, and it's real. People are like, I really wish I knew what, like, your day looks like.

It's like, well, this is what it looks like now. Yeah. So we're putting more and more of that kind of stuff out there, which is cool. It's like either you're telling them what you just did or you're just doing it in front of the camera. So what's your advice to these founders, like, who want to get better at organic, right? You were talking about how most of them already got paid media figured out and they're like, oh, we want to get organic. And they're like, that's why they're coming to you because they're like, you know, you guys, you know, came out of nowhere and now your organic is so strong. What do you give them as advice? Yeah, I would say first, nobody comes

to us and says we want to do organic like you guys. And they actually all know that's not typically a priority for where they're at in business. It's really not for most of them. So that's the first thing I'll say. And the second thing that I will say, or that she will say that I will say after her is that a lot of things is sequence in the business. And so usually zero to three million-ish, you know, is product market fit. So the whole objective of that phase in the business is just, do people want to buy what you are selling, right? And so it's like, okay, you have made some sales. And the mistake that most people make is they think, okay, well, marketing got me here, I should market more. And that's usually not the case. Usually now it's like, okay, we have proven

product market fit, but we are not getting any referrals. We're not getting a lot of word of mouth. And unless we clean up all the back end and increase customer lifetime value, put all the infrastructure in place so that we can get more ascensions, build a back, all the other things that are required to really create an exceptional customer experience, you become a only marketing company, and then it becomes very difficult to scale past maybe 10-ish million because you have so many people falling out the back that you just like every month you have to sell twice as many as you did the month before just to stay the same. And so, you know, for us, it's like, okay, zero to three, you got your product market fit. You know, three to ten,

we have to clean up the back end. And usually just by cleaning up the back end without even increasing the sales velocity or a number of units sold per month, we can still still, triple the business just by massively increasing how much each customer is worth to us and how many customers those customers bring to us. And then at that point, now that we've expanded LTV, expanded gross profit margins, et cetera, and the infrastructure to scale, then we have these new metrics we can go and attack new acquisition channels and be inefficient at scale because we have so much margin that we can work with. Right. So talking about churn, you know, and in a lot of e-learning, many people buy, say, a mastermind, right, or something. And they go into it,

knowing that like, oh, you know what, I'll do it for a year and then I'll try a different mastermind after that, right? Like typical somebody's attitude if they want to go learn something. How do you keep that from happening? You mean leave? Yeah. Or stop it from leaving. So it depends on because there's levels, there's courses, there's coaching programs, there's masterminds, things like that. We have to separate out the consumables from the one-time purchase. So like education, for example, is a one-time purchase and information decreases in value precipitously over time. The day before you learn something, it's much more valuable than the day after you learn it, right? And so that's where having information only becomes very difficult from a continuity perspective. The things that are consumable

that people can use month in, month out are accountability. They can use tech support. They can use a community. So those are all things that people can consume on a consistent basis. Increasing the stick, if we increase the quality of the community overall, and if we can appropriately adjust the price to match the value or be less than the value that they're receiving over time. So it's not uncommon to see a year one price be higher than a year two price because the value diminishes once you have access to the network. And then the new value that's being consistently delivered is the new people who enter the network and the new information that comes, you know, that gets put into the programs and the trainings and things like that. And so, but that might be less than the learning of the initial scale. And so it's really finding that sweet spot where we can keep the customers and make sure that we're pricing based on the consumable, not on the one-time thing.