0:00

If you could retain a client longer,

0:02

you were scaling your business faster. Welcome

0:07

to the Bedros Coolian Show. Hey

0:25

friends, welcome to the Bedros Coolian Show.

0:27

I'm Bedros Coolian and today's show is

0:29

for all my entrepreneur viewers and listeners

0:31

out there. So if you've got a

0:34

business, you're an entrepreneur and you're thinking

0:36

about scaling your business, this is the

0:38

episode that you want to pay close

0:40

attention to, you want to take notes

0:42

from because it is going to be

0:44

massively transformational in terms of money and

0:46

growth of your business. In fact, I

0:48

titled it, How to Scale Any

0:50

Business. And you can look at

0:52

it another way, which is how to dominate in

0:55

any industry. Doesn't matter the

0:57

industry that you're in, you do

0:59

these things that I'm going to talk to you

1:01

about. You were able to scale your business and

1:03

scaling your business is very important. And

1:06

people always go, well, why do I need to scale a

1:08

business? I'm making good money. Well, that's cool. You're

1:10

making good money. But imagine just three years ago, the

1:13

money that you were making was

1:16

serving you well, giving you a better

1:18

than average lifestyle. It was giving you

1:20

the kind of lifestyle that you could

1:22

buy some cool cars, maybe have a

1:24

nice place, go on some cool vacations

1:26

and stuff. And then Homie

1:28

Biden decided that he's going to

1:31

help increase inflation. Gas prices are

1:33

going to go up because that

1:35

pipeline out there and where

1:37

was that somewhere in Europe exploded. We

1:40

don't know how it exploded. It certainly

1:42

wasn't any of the NATO

1:44

countries that did that, but it just exploded. And

1:46

so gas prices went up, food prices went up,

1:48

inflation went up, interest rates on your credit card

1:50

went up and that money that you were making

1:53

quickly diminished and took you from a high

1:55

quality life to a average

1:57

quality of life. So if you're not always

1:59

scared, scaling your business, you're missing

2:01

out on two things, a crap ton of money and

2:04

the opportunity to one day exit,

2:07

sell your business and move on. So

2:09

let's start talking about how you can

2:11

scale any business. Now listen,

2:13

you have to understand something that the

2:17

formula, like if you just look at

2:19

scale, like what does scale mean? Well

2:21

customers in versus customers out is

2:24

basically the byproduct, right?

2:27

Staling is a byproduct of customers in versus

2:30

customers out. I want more customers in

2:33

my business than are leaving my business.

2:35

And anytime I can get more customers

2:37

into my business than

2:39

who are leaving my business, my business is

2:42

going to scale assuming that my payroll and

2:44

operational costs aren't eating up all the money

2:46

that I'm making. Because that then

2:48

is a whole different topic, a whole different

2:50

conversation, a whole different podcast about how to

2:53

price your products and

2:55

programs, right? So for

2:57

a hypothetical, let's use

2:59

a coaching business. Like for

3:01

our case study here, let's use a coaching

3:03

business. Maybe you're a mindset coach, maybe

3:06

you're a money coach, real estate

3:08

coach, nutrition and fitness coach. It

3:11

doesn't really matter what kind of, maybe you're a dating

3:13

coach, whatever kind of coach you are, as long as

3:15

you offer a service, this works for

3:17

you. And by the way, this is also what we

3:19

use for truing. So if you're like, hey, does it

3:21

also work for products? Yep. So

3:23

the systems that we talk about here, the

3:26

scale systems I'm going to share with

3:28

you here apply to truing supplements, right?

3:30

Which are supplements, apply to Fuel Hunt

3:32

apparel and apparel line. So don't think

3:34

it's only for services. It's just a

3:36

case study that I'm going to use

3:38

just for congruency throughout this episode is,

3:41

let's say it's going to be for a coaching business

3:43

of some kind, right? And let's

3:45

say this coaching business, oh, you

3:47

know, charges

3:49

$500 a month, right? For

3:53

the service. So you're charging $500 a month

3:55

for your service. So what

3:57

is the scale principle number one?

4:00

Well, it is retention rate. If

4:02

you could retain a client longer,

4:04

you are scaling your business faster.

4:08

Think about this. So, if you're getting $500 a

4:11

month from each client and

4:13

you are retaining a client for

4:15

an average of six months, well,

4:19

guess what? Your retention rate

4:21

then is six months. And

4:24

this is on average, right? Well, what does that

4:26

tell us? That tells us that if

4:29

we can retain a client longer or

4:31

if we can charge a client more, we're able

4:33

to scale our business. So, there's

4:35

never just one lever to pull when you're

4:37

trying to scale your business. Like, for example,

4:40

as we started growing Fit Body

4:42

Bootcamp, we realized that if we

4:44

sell an MOA multi-outlet agreement, when

4:47

someone comes to us and says, hey, man, I want

4:49

to open up a Fit Body Bootcamp location here in

4:51

my town, well, okay, if you want to open up

4:53

one Fit Body Bootcamp location, it's going to cost you

4:55

$55,000 buy-in fee, right? Now,

4:59

if you want to open up a second one, that's another $55,000 buy-in

5:01

fee. But

5:03

if you do three locations, you

5:05

buy a three-pack, an MOA multi-outlet

5:07

agreement with us, the first two are

5:10

$55,000 and then the third one is half off, right? So,

5:15

what did we just do?

5:17

We increased the average order

5:20

value, right? And you

5:22

could do that in your business as well. As

5:25

long as you can charge more and retain

5:27

clients longer, you are in the process of

5:29

creating scale in your business. And the more

5:31

you can scale, the more money you make

5:34

to be able to put your competition out

5:36

of business. And if you're like,

5:38

whoa, whoa, whoa, whoa, whoa, I'm not looking to put

5:40

my competition out of business. Yes, you are. I

5:43

know a lot of tree-hugging,

5:46

sound bowl-fucking-doing-woo-woo people tell you

5:48

that competition is good and

5:50

it's healthy, it's not. It's

5:53

not. Here's why. If

5:55

I've got a coaching service and I

5:57

know I'm the best at what I do. you,

6:00

then I don't want you as a customer

6:03

or potential client to go to

6:05

my competitor. I've done you

6:07

a disservice. What if my

6:10

competitor has an inferior coaching service

6:12

but a better marketing strategy and

6:14

therefore they take 100 grand

6:17

from you for a year of

6:19

coaching and they deliver mediocre coaching

6:22

to you which not only slows down

6:24

your progress but maybe sets you

6:26

on a very different trajectory to lose money in

6:28

the future, right? So if I'm

6:30

the best at what I do, I've got a

6:32

duty and an obligation to scale my business so

6:34

fast that I use some of that money to

6:37

outmarket you and to suffocate you

6:39

out of business. I know

6:41

it sounds harsh but this is the world that

6:43

I live in and this is the world that

6:45

you should want to live in. You don't think

6:47

McDonald's wants to put all the other fast food

6:50

locations out of business? Of course they

6:52

do. That way you could eat

6:54

more McDonald's and put more chicken nuggets down

6:56

your gullet and have those gelatinous titties that

6:58

you're going to shake around and get that

7:00

stretch mark around your belly button that feels

7:02

so good when you're sitting on your mom's

7:04

basement couch playing your call of duty. You

7:07

know what I'm saying? But

7:09

unless McDonald's can put all the

7:11

other fast food joints out of business, they're

7:14

not going to be able to have industry

7:16

dominance. And so I

7:18

want to talk to you about scaling a business

7:21

and creating industry dominance. Now you may not be

7:23

able to put everybody out of business but what

7:26

you can do is be the number one, right?

7:29

Possibly number two. Think about Coke and Pepsi

7:32

and then there's all the other sodas out

7:34

there, right? Think about, oh

7:37

I don't know, McDonald's and then

7:39

what's the other fast growing fast food? Subway

7:42

and then there's all the other fast

7:45

food joints, right? If

7:47

you can't at least put yourself in a position to be

7:49

one or two, now you're in

7:51

the bottom trying

7:53

to feed off what everyone else

7:55

is trying to feed off of and that is a hard

7:57

life to live man. That is a hard life to live.

8:00

So retention rate, how long you can

8:02

keep a client, is really,

8:04

really important. And if

8:06

you can increase retention, your business is scaling.

8:08

If you can increase what you're charging per

8:10

month, right? Your business

8:12

is scaling. Hey guys, quick interruption to

8:14

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8:16

you about the Trulien Wellness Shot. I

8:19

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8:21

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9:12

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9:14

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9:17

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9:19

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your recurring monthly orders after that. Back

9:40

to the show, what else? There's another factor and

9:42

that is lifetime value. So look at it this

9:44

way. If we have,

9:46

let's say, how do we factor lifetime value?

9:48

Well, pretty simple. We take a period

9:51

of time, let's say January 1st, 2024,

9:57

to December 31st, 2020. A

10:00

12 month window and

10:02

then we go, alright, in that 12 month

10:04

window, how many clients did we

10:07

have? Oh, well let's use a round number, 100

10:09

clients. Great. And if

10:11

these 100 clients are paying us $500

10:13

a month, we're going to see how

10:15

many of them pay what?

10:18

So let's say for the sake of simplicity, 50 of

10:21

these 100 clients paid $500

10:23

a month and stayed three months,

10:26

right? Let's say the other

10:28

50 paid $500 a month and stayed

10:30

nine months. Well,

10:33

what do we do then? We

10:36

realize then that if we do the math,

10:38

we now have a six month retention rate.

10:40

We keep the average client member, 50 of

10:42

them, of the 100 in that

10:44

window of time, stayed for three

10:46

months. The other 50 of the 100 stayed for

10:48

nine months. That averages out to six month retention

10:50

rate. Well, we got that math. At

10:54

$500 a month, what does that tell us? That we're

10:56

averaging $3,000 per client on average. Alright,

11:02

so you multiply that by 100 clients

11:05

and you know that year, you're

11:08

going to make But

11:13

the lifetime value of one client, LTV,

11:15

is $3,000. So

11:20

the question then becomes, can I increase lifetime

11:23

value? Well, we talked

11:25

about if you can increase retention, you increase

11:27

lifetime value, right? You scale your business. If

11:29

you can increase what you charge per

11:31

month, you can increase scale

11:35

and the amount of money that you make.

11:38

Now, you might be arguing with me

11:40

right now as you're watching this or listening to

11:42

this going, whoa, man, if

11:44

the industry average for a coaching business

11:46

is $500 a month, how can

11:49

I charge more? Wouldn't I be pricing myself out

11:51

of the market? My argument

11:53

to that is no. See, there's

11:55

other micro factors that influence scale.

11:58

Those micro factors. are your personal

12:01

brand because if you were to build

12:03

your personal brand and you take yourself

12:05

from a generalist, so I

12:07

want you to imagine like this pyramid.

12:10

I always draw this pyramid for my coaching clients

12:12

and I go in the very bottom of the

12:14

pyramid is where everybody is. They're competing. It is

12:16

like dog eat dog. Those are all the generalists,

12:19

right? Above that are

12:21

the specialists. Above that,

12:23

specialists are the experts. Above the

12:25

experts, you have authority and then

12:27

above the authority, you have celebrities,

12:30

industry celebrities. If you can elevate

12:32

yourself up that pyramid going from

12:34

generalist to specialist to expert

12:37

to authority celebrity, you

12:39

have now developed a bigger personal

12:42

brand. You were seen as a

12:44

authority and a celebrity in your

12:46

industry and if you're

12:48

seen as an authority and a celebrity in

12:50

your industry, you can now charge more for

12:52

the same service that your competitors are charging.

12:55

So don't think for a moment

12:57

that raising your prices automatically puts

13:01

you out of the industry

13:04

norm. It only does

13:06

that when you haven't raised yourself

13:08

to authority celebrity status. Now

13:10

again, there's a whole different episode we got to do

13:12

about building your personal brand and in fact, by the

13:15

way, if you're watching this and

13:17

you want to come out to the

13:19

scale day that Dan Fleischman and I

13:21

are holding on April 18th, then

13:24

you are going to want to click the link in

13:27

the description or in the bio

13:29

of these episodes and you

13:31

can come to scale day where we talk about building

13:33

your personal brand and all the different things that I'm

13:36

listing off here, right? But it's important

13:38

for you to understand that you can

13:40

charge more and you won't price yourself

13:42

out of the market if you are

13:44

able to raise

13:47

and elevate your personal brand and that's a

13:49

byproduct of the network that you're

13:51

connected to, the stages that you speak from, the

13:53

podcasts that you end up on, the podcasts that

13:55

you do, the YouTube

13:58

show that you do, the book. that

14:00

you're right. Like think about what do

14:02

industry experts do. There's like a list of things

14:04

that I just listed out there, right? Who they're

14:06

connected to, the stages they speak from, the podcast,

14:09

the shows that they're on, that they run, the

14:11

books that they've written. And all of a sudden

14:13

they're like, oh shoot, that guy or gal is

14:15

a industry authority or celebrity. Therefore,

14:18

I'm willing to pay more, right?

14:20

So now if we know that for those hundred

14:22

clients over that one year period, if they're paying

14:24

$500 a month, the average

14:26

client is staying six months, the lifetime

14:28

value LTV is $3,000. So

14:30

those hundred clients paying me an average of $3,000 each for

14:32

that 12 month period, I

14:36

can now estimate that my business is going to make $300,000 a year, right?

14:38

But there's also the third

14:42

factor and that is controlling your

14:45

exit rate, the rate at which people leave.

14:47

Remember in the beginning of this, I said

14:49

scaling is a byproduct of customers

14:51

in versus customers out, right?

14:54

If I have customers coming in

14:56

but zero customers leaving, my business

14:59

is going to continue to scale

15:01

indefinitely. Now there's no business out

15:03

there that doesn't have a certain

15:05

level of churn rate

15:07

and that's what that's called, right? Customers

15:09

leaving is called churn rate.

15:11

There's no business out there but what if you

15:13

can actually manage your churn rate?

15:15

So think about this, the number of clients

15:18

that you gain each month versus the number

15:20

of clients that you lose each month,

15:22

that is your churn rate. And so if

15:24

we have those hundred clients, right?

15:28

It's December 31st, 2024 and now let's say January of 2025, we gained

15:30

10 more clients. However, in the process of

15:39

gaining 10 clients, we lost three

15:41

clients, right? What does

15:43

that tell us? Well, that tells us that we have

15:45

a 2.7% churn

15:48

rate, right? Because we went from 100

15:51

to 110 clients but we lost three

15:54

new clients or not new clients but just three

15:56

clients that we've had and so we have a 2.7%

15:59

churn rate. Now remember that

16:01

2.7%, if that stays

16:03

static, consistent, the more

16:06

clients you get, the higher the number of

16:08

people that you lose, right? You're with me

16:10

on that. And that's important for you

16:12

to know. So if we know that

16:14

that's the fact, how do we control our

16:16

churn rate? Well churn rate can be fixed

16:19

or at least managed. We can't

16:22

eliminate churn rate but we can

16:24

manage churn rate by creating a

16:26

referral system. When your

16:28

clients and customers start

16:30

referring new business to you, there

16:33

is no additional cost of marketing. So

16:35

think about this. If let's say we

16:38

know that you're making $3,000 per client

16:41

that stays on board with you, right? In this coaching

16:43

program, this case study coaching program that we have. And

16:46

the average client stays six months and they're paying you $500 a month. Well

16:51

maybe as you're running ads and stuff,

16:53

you're willing to spend up to $500, $800 to

16:59

acquire a new customer. Well

17:01

alright cool. If you get a

17:03

referral, there is no cost of

17:05

acquisition for that referral, for that lead. And

17:08

that lead comes to you warm,

17:11

like pre indoctrinated to buy

17:13

because they come from an existing

17:15

client who's already working with you,

17:18

believes in you and is getting results

17:21

from you, right? And so

17:23

when I talk about referrals, referrals are

17:25

a byproduct of results and

17:28

also creating a condition of doing

17:30

business with, right? So

17:32

if you want to retain a client

17:35

so that you can get referrals from

17:37

them, then you better start generating results.

17:41

That's the formula. And if you're promising

17:43

a unicorn and delivering a donkey, then

17:46

you are not meeting their expectation and

17:48

therefore you're not going to have retention.

17:51

And any business that doesn't have retention usually

17:53

isn't able to deliver results to the clients,

17:56

which means those clients aren't going to give

17:58

you referrals. You see how it works? backwards

18:00

as well, right? And so knowing that,

18:02

if I want to scale my business

18:04

but I don't want any additional cost

18:07

of marketing so that I could negate

18:09

that churn rate, like what if

18:11

we can take that 2.7% churn rate and

18:13

bring it down to 1.34, 1.35, cut it

18:16

in half, right? 1.35%

18:21

churn rate because now we're getting referrals

18:23

from existing clients. Why are we getting

18:25

referrals? Well, we're giving them the results

18:27

that they expected. We're exceeding their expectations.

18:30

We're making sure they get results as

18:32

expected, number one. Number two, we've created

18:34

a condition of doing business with them.

18:36

We've said when the client came on

18:38

board, I said, hey, Mr. Jones, as

18:40

I'm able to help you achieve your

18:43

results through this coaching program, can I count

18:45

on you to help me achieve my personal

18:47

goals which is to impact the lives of

18:49

10,000 people over the next

18:51

two years through my coaching program? And they're going

18:54

to say, yes, great. So as

18:56

I help you make more monies, buy more

18:58

real estate, whatever, lose weight, get fit, find

19:01

the next Mrs. Right, then

19:03

can I count on you to refer a friend, family,

19:06

coworker to me? They're going to say, yes. Then guess

19:08

what you do next? You start

19:10

making sure that they get the results. And when

19:12

they do, you go, hey, look, you're making more

19:14

money. Or, hey, look, you lost weight. Hey,

19:16

look, you're more fit. Hey, look, you

19:19

got more dates. Remember when I

19:21

said as I help you get your goals, you'll

19:23

help me achieve my goals? Yes. So can you

19:26

make a text introduction to two, three, four people

19:28

who I can offer the same service

19:30

to? And now they're going to do some kind

19:32

of a text introduction. But if you don't set

19:34

the expectations on day one when they're buying your

19:36

service or product from you, then it's pretty difficult

19:38

to go back to them later and go, hey,

19:40

now that you're getting results, can I count on

19:42

you to refer people to me? They're going to

19:45

be like, yeah, I'll let you know if I

19:47

can think of anyone. But of course, they're not

19:49

going to think of anyone because you never made

19:51

it a condition of doing business

19:53

with. So how do

19:55

we increase customer retention?

19:58

Well, we make sure one We give them

20:01

the results that they want and then how

20:03

do we increase customer or client referrals? We

20:05

make sure that they get results and

20:08

we set a condition of doing business

20:10

with right? I hope this is starting

20:12

to make sense So we're managing our

20:14

churn because now we have existing clients

20:16

giving us referrals that don't cost us

20:18

any marketing dollars whatsoever and they come

20:20

predisposed to buy from us because They

20:23

are a lead who already

20:25

knows likes and trusts your client and

20:27

when your client refers you That

20:30

lead is a

20:32

warm lead. They are predisposed to buy

20:34

they come with less skepticism They're gonna

20:36

have less objections and likely they're gonna

20:38

stay just as long as your client

20:40

who referred them So you see

20:42

the beautiful beautiful thing about that, right? So let's move

20:45

on to the next thing MRR

20:48

monthly recurring revenue I Want

20:52

you guys to focus on building your

20:54

monthly recurring revenue if you are interested

20:56

in scaling your business Now

20:59

remember we talked about a client

21:01

that stays on board for six months and pays $500 a

21:03

month. That's cool, right? but

21:05

that means you have a Basically every

21:07

six months you're getting new clients on board.

21:10

And so what's the importance of creating?

21:13

MRR monthly recurring revenue. Well, I don't know

21:15

about you But I can tell you that

21:17

it feels good to come

21:19

up to the first of every

21:21

month and know that Across

21:23

all my businesses We've got millions of

21:26

dollars scheduled to come in that month

21:28

from clients who are paying us royalties

21:31

or they're on subscription Or they're

21:33

paying us a software fee or they

21:35

have a membership fee of the Legacy

21:37

Tribe, right? We have all these different

21:39

monthly recurring revenue streams that come into

21:41

HQ So you

21:43

might be starting the month off

21:45

at zero dollars I'm

21:47

starting the month off at millions of dollars

21:50

scheduled to come in which means

21:52

I sleep better because I don't start

21:54

every month At zero dollars and go. Oh

21:56

fuck. What do I do to get new

21:58

clients and customers? I've got MRR,

22:00

scheduled, monthly recurring revenue scheduled to come

22:02

in across all my businesses and brands,

22:05

most of my businesses and brands, right?

22:08

And if you're like, well, it doesn't work for some businesses,

22:10

yes it does. Yes it does. Because

22:14

even on the apparel side, Fuel Hunt, we

22:17

have a $29 a month

22:20

membership program for the

22:22

community who wants higher level

22:25

coaching, who wants access. Remember, Fuel Hunt

22:27

is an apparel company, right? However,

22:31

some people

22:33

also want to pay an additional $29 to get

22:35

a special discount code to get some a better

22:38

discount every month. They get

22:40

early notification when a new

22:42

gear drops. And

22:44

on top of that, they get

22:46

access to guest speakers via

22:49

Zoom, live guest speakers, some of

22:51

the best in the world. Thought leaders,

22:55

entrepreneurs, authors, pro

22:58

athletes. And so

23:00

this community that Fuel Hunt has

23:02

created at $29 a month creates

23:04

recurring income even for an apparel

23:07

company. We do this for

23:09

truly supplements. You know, if you buy

23:11

the truly supplements, right, the wellness shot

23:13

especially, what do we say? Well, look,

23:15

use the code BADEROS, get 50% off

23:19

your subscribe and save, and

23:22

use the product for 30 days. If

23:24

you don't like it, let us know. We'll give you

23:26

a full refund. If you do like it, stay on

23:28

board on the Trueling Club and

23:32

we will give you another 20% off each

23:35

month and free

23:37

shipping. And we've got clients,

23:39

our customers stay on board an average of

23:41

nine months on the Trueling Subscription

23:43

Club, right? So you could do this with

23:45

supplements. So don't for a moment think that

23:49

MRR, monthly recurring revenue, is only for some

23:52

kind of a membership site or a SaaS

23:54

program which is Software as a Service, right,

23:56

where it's like a fee that you pay.

23:59

It literally can... If you are

24:01

creative, you can come up with enough

24:03

value add and an irresistible offer to

24:06

influence your customers who are going

24:08

to want to do

24:10

business with you every month in some

24:12

fashion and therefore allow you to take

24:14

money from them in exchange for 5,

24:17

10, 15,

24:19

20X the value that you're going to deliver. So

24:22

let's talk about another thing. We

24:24

talked about well what if the average client stays for

24:26

six months and they're paying $500 a

24:29

month? Well, we know that

24:32

we're getting $3,000 from each client. Now

24:36

what if you can do a pith? What

24:38

is a pith? A paid in full? And

24:40

now you're going to be like B, this literally goes

24:42

against what you just taught, monthly recurring revenue. Yes, I

24:44

did. Sometimes you can

24:46

scale your business but

24:49

it's going to be at the cost of

24:51

diminishing your monthly recurring revenue.

24:54

And there's times that you want to do that. In

24:56

the beginning phases, if your retention rate is low like

24:59

let's say six months at $500 a

25:01

month from each client and you're like man, I

25:03

can't get it to increase to seven months or

25:06

eight months, then I might do something like alright,

25:08

what if I can say look, you could do

25:10

a month to month program at $500 a month

25:13

when you sign up for my coaching program or if

25:16

you pay for nine months upfront, it'll

25:20

cost you $4,050 which is $450 a month. So

25:26

you're saving $50 a month if you

25:28

commit for nine months paid in full,

25:30

Mr. and Mrs. Jones, right? So

25:33

what did we just do? We took the

25:35

lifetime value of $3,000 per

25:37

client and we stretched it

25:39

out to $4,050, right?

25:45

But we got a pith, paid in

25:47

full which means we now eroded our

25:49

recurring revenue. There's a time to

25:51

do that and it's usually in the beginning phases

25:54

when you need a lot of money upfront and

25:56

you want to increase average order value, you want

25:58

to increase how much money you're paying for. you

26:00

take in and you're gonna try and give

26:02

a discount if they do a paid in

26:04

full, a PIF. But

26:06

the benefit of ultimately going

26:08

to monthly recurring revenue and

26:11

by the way, you might have a hybrid of both. You

26:13

might say, look, you can pay $500 a month and at

26:15

that point, maybe you figured out all the different strategies to,

26:17

you know, have the average client stay 9, 10, 11, 12

26:19

months, right? So

26:21

you can pay, hey, $500 a month or if you pay $450 times

26:23

15 months, a paid in full, then

26:28

you save $50 per month times 15 months, right? But

26:32

there is a big benefit to building up

26:34

your monthly recurring revenue and that big benefit

26:36

is like I said, you start the month

26:38

with scheduled money ready to

26:40

come in and that's a damn good feeling. But number

26:42

two, you increase

26:44

your business's valuation. So

26:47

if you have intentions in the future to

26:49

sell your business, guess what? Creating

26:52

monthly recurring revenue means you can sell

26:54

your business for more. So

26:56

if a business brings in, let's say a million

26:59

dollars a year, right?

27:03

In gross revenue and let's say EBITDA is $300,000

27:05

is what you keep after paying taxes and employees

27:11

and overhead and operational costs and all that, right?

27:15

$300,000 of that million is yours. But

27:18

those are all off one off transactional

27:20

sales, no monthly recurring revenue, right? So

27:23

that million dollars of gross revenue or $300,000

27:25

of EBITDA, you might get a valuation from

27:30

a private equity that says, hey, we'll give you

27:32

3X your EBITDA or 5X your EBITDA for

27:36

this company, right? Now let's

27:39

say you bring in the same million dollars in revenue but

27:42

your monthly MRR, all that

27:45

revenue, the million dollars a year that's coming in

27:47

is all off of monthly recurring revenue and you

27:49

still have the same $300,000 in EBITDA. Guess

27:55

what? Private equity comes in, says, hey, we think we want

27:57

to buy your business. Oh, that

27:59

money is guaranteed. to come in every month

28:01

as long as we deliver the product or the service.

28:03

Yes, it is. Well, shit, we'll

28:05

pay you 789X

28:08

your EBITDA instead of just 345X. Does

28:10

that make sense? So the

28:13

same $300,000 a year EBITDA is

28:16

worth more in valuation when it's

28:19

reoccurring revenue versus one-off

28:21

transactional sales. That

28:23

is the beauty of MRR. And

28:26

so with that said, there's

28:29

other factors in scaling a

28:31

business. But when you just

28:33

take these five things that I shared with you,

28:35

like some of the other factors like I said

28:38

are building your personal brand. Some of the other

28:40

factors are when you start narrow and deep, you

28:42

eventually can get so good at what you do

28:44

that you can start going shallow

28:46

and wide covering

28:49

more industries,

28:51

more customers, getting your arms around more customers,

28:53

right? But it's always easiest to start narrow

28:56

and deep and then as you build your

28:58

brand, you build your reach, you get more

29:00

testimonials, you get more reviews, then you can

29:02

go shallow and wide and get your arms

29:04

around more people, a bigger market space, right?

29:06

So there's definitely other levers to pull when

29:08

you are trying to build your business, especially

29:12

scale. But understand that scale

29:14

must be a formula that

29:17

you install in your company. You can't just

29:19

be like, hey, every year we make a

29:21

million. If every year you make a million

29:23

dollars, believe it or not, every

29:25

year your take home is less because

29:28

life continues to get more expensive. Payroll

29:30

gets more expensive, software gets

29:32

more expensive, marketing gets more expensive,

29:34

sales people want higher commissions, inflation,

29:37

interest rates, the dollar is worth

29:39

less. So you have to

29:41

keep scaling your business. One,

29:43

to keep making more money. Two,

29:46

to keep crushing your competitors. And

29:48

three, to put yourself in a

29:50

position to ultimately sell one day.

29:53

Because think about this, and I'm going to leave you with this,

29:56

how important scaling of business is. If

29:59

you can't share... show a track record to

30:01

private equity who's trying to buy you that

30:03

yeah, year after year, we've been growing, we've

30:05

been experiencing growth, even if it's 10% growth,

30:08

15% growth year

30:10

after year, then they're going to go, dude, you've

30:13

just been stagnated the

30:15

last three years, which means

30:17

you've actually been losing money because the cost

30:19

of living continues to go up, cost

30:22

of operations go up. Therefore,

30:25

your valuation is going to be lower. But if

30:27

you can show a track record of

30:29

a constant growth because

30:31

you are focused on scaling your business, now

30:34

when the time is right for you to

30:36

sell, you can get more

30:39

money for your company. And that's

30:41

what it's really about is having

30:43

the control of how you

30:45

end up parting with your business and make

30:47

no mistake about it, guys and gals, when

30:49

I'm coaching up my domination, your coaching clients,

30:51

one of the first things I say during

30:53

their half day is, hey, what is the

30:55

10 year goal with your business? More

30:58

often than not, they go, I don't know. I go, do you think

31:00

you'll be running it 10 years from now? They go, I

31:02

don't know. Maybe my kids will. I go, have you

31:04

talked to your kids about running it? No, I haven't.

31:07

What if your kids don't want to run it? Well, shoot,

31:09

I don't know. I go, have you ever thought about selling it?

31:11

No, I haven't. So half of

31:13

my coaching clients in the beginning during

31:15

day one of their domination year have

31:18

no idea what their business is going to look like

31:20

10 years from now. You

31:22

should have the option of what you want to

31:24

do. Keep it, pass

31:27

it along to the next generation or

31:30

sell it for a

31:32

valuation that you want versus having to

31:34

be forced to take whatever they give

31:36

you because you didn't show a level

31:39

of scale, you didn't have monthly recurring

31:41

revenue and you didn't track these metrics

31:43

like retention, lifetime value, average order value,

31:45

churn rate, right? All these things matter.

31:48

You didn't create a condition of doing

31:50

business with them for referral generation and

31:52

all those things are levers that will

31:55

help you scale your business. So I

31:57

hope you got a lot of value from this

32:00

master. class on how to scale your business. If

32:02

you did, do me a favor and subscribe if

32:04

you're on YouTube and leave a comment like. If

32:06

you're on all the other platforms like Spotify and

32:08

iTunes, please do me a favor and leave me

32:10

a five-star review. Give me a thumbs up. Take

32:13

a screenshot. Share this on social media. Guys, it wouldn't

32:15

mean a lot to me if you did. That's the

32:17

reason this podcast, this show

32:19

grows is because of you and that's never

32:21

lost on me and I'm massively grateful and

32:24

appreciative for that. So with that

32:26

said, always remember this, that average is the

32:28

enemy, that success is your responsibility and

32:30

change will take place in an

32:33

instant if you are willing

32:35

to flip the switch. I'll see you next

32:37

time.