I Made $6 Million in 60 Days To Show It’s Not Luck
Video
Summary
- I increased a company's Enterprise Value by $6 million in 60 days by tackling three key issues using data.
- We boosted sales from 56 to 93 units per month, which created fulfillment challenges and reinforced the problem-solution cycle.
- Initially, the company didn't track important metrics like Lifetime Value (LTV), Time to First Value, customer satisfaction, and Ascension rates.
- I emphasize the importance of Time to First Value as a crucial indicator of customer retention and long-term commitment.
- Breaking down services into smaller chunks and showing progress can enhance the perception of value and reduce the time to the first value.
- For example, in my previous business, Gym Launch, we focused on getting a high ticket sale in the first 7 days to triple LTV.
- I outlined the poor initial state of the company: Time to First Value at 47 days, nonexistent customer satisfaction, and no backend or Ascension revenue.
- To tackle high churn, we aligned customer success (CS) with sales, being proactive and knowledgeable about common customer issues.
- By knowing the customer's next problem better than they do, we could plan our solutions and subsequent upsells effectively.
- Metrics, though often neglected, are crucial to improving a business. Without tracking, there is no incentive or measure for improvement.
- We overhauled customer onboarding, creating a tight and responsive process from sale to implementation, with clear steps and communication.
- Introduced a CRM to track crucial KPIs like Time to First Value and churn, and to automate customer satisfaction surveys.
- We commissioned the CS team based on performance metrics, incentivizing them to reach and exceed targets for customer success.
- I devised a backend offering, creating a new revenue stream where customers could pay to continue after their initial commitment.
- Improved the Time to First Value from 47 to 34 days, and increased customer satisfaction to 98% post-onboarding.
- Developed backend revenue from nothing to $140,000 in 60 days, which equates to close to $1 million annually or about $6 million in Enterprise Value with a 6x multiple.
- The key takeaway: even unexciting aspects like customer success can hugely impact a company's profitability and value when properly managed.
How To Take Action
I would suggest starting by breaking down your services into smaller chunks to showcase progress and enhance the perceived value for your customers. This reduces the 'Time to First Value' which is a critical factor for customer retention. In my experience, this can triple the Lifetime Value (LTV) if done right, like I did with my previous business. Here’s how to put this into action:
Track Your Key Metrics: Measure your Time to First Value, customer satisfaction, and Ascension rates. If you're not tracking these, start right away because what gets measured gets managed.
Improve Onboarding: Overhaul your customer onboarding process for a tight and responsive experience. Outline clear steps and communicate frequently right after the sale, to keep your promises and build trust fast.
Use a CRM: Implement a CRM system to automate tracking Time to First Value, churn, and to send out customer satisfaction surveys. This will also help track each customer service rep's performance for accountability.
Align Customer Success and Sales: Proactively guide your customers through their problems. Know their potential issues better than they do, and make suggestions based on common challenges at each stage of the customer journey.
Introduce Backend Offerings: If you don't have a backend, create one to provide additional value to the customers. This could be a new service or product that complements what they initially purchased from you.
Incentivize Your Customer Success Team: Tie their compensation to performance metrics that encourage them to exceed targets for customer success. This will drive them to work harder at improving your LTV and reducing churn.
By implementing these steps effectively, I've seen businesses transform dramatically. Take each step one at a time, don't rush, and remember, the goal is to make your customers happier while increasing your business's value.
Quotes by Alex Hormozi
"One of the never ending issues in business is that there's something called the problem solution cycle"
– Alex Hormozi
"You don't have to deliver the ultimate result immediately…what you want to do is break it into many small chunks and show leading indicators of success"
– Alex Hormozi
"People will make a lasting impression about your business within the first 24 hours after the transaction"
– Alex Hormozi
"If you don't measure it you can't improve it"
– Alex Hormozi
"We want to have that sting at the end that they know about, so that we can drive forward that time to Value"
– Alex Hormozi
Full Transcript
I own 13 portfolio companies and in one of them I unlocked $6 million of Enterprise Value in 60 days by solving three problems and I did it with data so this is actually a sequel video and you may remember our three wise men they came and they were sad because they had problems that they wanted to fix and they're already making twice as much money just from the fixes that we did from the sales so we went from 56 units per month sold to 93 units again in 60 days and so the problem that we encountered after we doubled the sales now they had twice as many people going to get fulfilled on whatever ever the thing is that they sold what was once shaky had completely been obliterated because it was already tough when they had the current amount but with double they were completely lost so one of the never ending issues in business is that there's something called the problem solution cycle it works like this you got problems you've got Solutions that's ugly as anyways so the problem is when you solve a problem with a solution you then create another problem so if I 10x your sales what's the next problem going to be and so we had to fix that problem now we wanted to track these three stats because they didn't even have LTV track the the first was time to First value the second was customer satisfaction and then we had our Ascension rates or the absolute amount of money that they were making on the back end which is after someone buys the first thing they buy the second thing right so let's start with where they were at and by the way this e is not something fancy it just should be there but y'all are cool so we we'll go with it all right time to First value is a really interesting statistic it's probably one of the one of the ones that I care the most about in any kind of service so in the world of content like watching TV there's different shows that you might watch so each show they calculate an actual retention point and so Breaking Bad for example is one of the best shows of all time they found that if someone made it to the third episode they had like an 87% likelihood of finishing the entire Five Seasons if they got to that point and so different shows have a different retention point that hooks the viewer for the Long Haul and so that's what we're ultimately driving towards you can call it a retention point you can call it activation you can call it whatever you want but there's a key moment that transforms the customer relationship into a long-term commitment with you and what your goal is to pull that as for far forward to the present as you possibly can you don't have to deliver the ultimate result immediately I mean the faster you can do that the better but what you want to do is break it into many small chunks and show leading indicators of success so in other words progress and the more times that you can break down an outcome into tinier chunks the more reinforced the customer will be for staying with you so for example if I was in a high touch agency so I did marketing services for someone and let's say we touch base once every two weeks right now I do a lot of things between those two weeks for the customer but if every two weeks I correspond with them then they're going to get reinforced every 2 weeks for me doing stuff now consider a different way of doing it I onboard them and then every day I send them what I did to work on their behalf at the end of that 2 weeks they would have had 14 different positive interactions with me versus one you can take what you're currently doing not change much about it and simply communicate it differently so that they can perceive a faster time to First value value that's the idea here for example in the gym launch world in the beginning it was if we can get someone to do a high ticket sale in the first 7 days it would triple the LTV for us so then instead of trying to think about churn or any of these metrics we said let's just try and make sure every single person gets that sale as fast as possible and so that's what we'd measure the way that we eventually would go to was how quickly they would launch an internal campaign for us and how much they generated from that so our goal then became how quickly can we get them to send the emails that we want them to send that's two different examples of different time to First values and without further Ado let us show you the before data so for the time to First value was 47 days got to improve that imagine you buy something and it takes you more than 6 weeks almost 7 weeks to hit that first real value the second way was the customer satisfaction score and survey says what was their customer satisfaction non-existent cuz they didn't even track the data I'm giving you the real stuff here ascension all right so what percentage of customers do they send or how much money were they making from ascensions on the back end survey says $0 because they didn't have a back end when I say backend I mean again the second thing or the thing after the first thing they were selling these are not pretty statistics that's okay though this means that again for us as investors huge opportunity for improvement and that's where I get great returns so product problem number one hi churn what's churn Alex great question it's the percentage of customers that leave from this month to next month so if I start the month with 100 customers those same 100 customers a month later how many of them choose to renew so if 95% of them choose to renew then I have 5% CH so this particular business was a 16we implementation so 16 weeks is how long people were committing to on the front end the problem was people weren't even making it through the first thing all the way the reason this is so important is that is one of the largest profit drivers in a business so let me give you an example if we had two ways to make X all right and X dollar from keeping a customer means they stay for three more months an xll from getting a new customer means we have to pay to get a your customer so we pay Mr YouTube or we pay Mr Facebook $11,000 to get X or we could pay $60 in staff or labor to get the same xll so let's say I had to pay for an hour of extra work per month for my team to reach out or hop on a phone call or two 30 minute phone calls with the customer per month so we got 30 minutes * 2 30 minutes * 2 30 minutes times 2 now you might be like man that's a whole lot of work well let's say I'm paying 20 bucks an hour and so this is $20 this is $20 this is $20 going be like wow again so much work but look at my return the $60 to get the X versus $1,000 to get the x is like 17 times more profitable and if I'm an investor which everyone who runs a business is just on a micro level that's a way better return and so I should be allocating as much effort into that bucket until I can't do any more in this bucket and then go to my less efficient ways of allocating Capital the biggest and easiest problem that that we identified was that their customer success team was arbitrarily checking in all right meaning they would just be like hey what's going on let me go take some of your time with No Agenda rather than being one proactive and two knowing what problem the person should already be experiencing at this point in their 16we implementation cuz after all for this particular product they were taking everyone through a choreographed experience except it wasn't a choreographed experience which is not the way to do business so if you know that everyone in week one or two is going to be suffering from one of these two problems then you'd start the call with saying hey most people this point are at Point a or point B where are you right now and they're automatically boom you're right into it and they're like this is value additive this is actually helping me whereas you're like what's going on John and it's just like uh everything sucks and you're like oh why does everything suck it's like you don't seem informed you don't seem on top of it you don't seem proactive and just by doing this it sets an entirely different tone for the customer relationship because they're like these guys know what they're doing and I feel better about paying them and this is why knowing that key Milestone that you're driving towards that activation point that time to First value is so key because what you do is now all of your communication and all of your efforts are going to be targeted and optimized to get this one single outcome right so if I know that I need to get somebody to get their first sale in 7 Days that's high ticket in order to Triple their lifetime value think about the resources that I can put there so if someone goes from $177,000 in LTV to $50,000 in LTV which is much more like the stats were for gym launch I have 20 $33,000 of resources that I have at my disposal of almost all profit to deploy to get that one thing to happen so how many resources do you think I should put towards that a ton and so when we get on the call we're like hey man let's send that email out together right now they like oh I don't know how to do it don't worry I've got my tech guy with me here we're going to connect the things that you were probably struggling with were you struggling with that oh my God this is great wow they're on top of this cool by the end of this call we're going to send that email and then the likelihood if they sent the email that they' make the sale extremely high and that's how you can drive towards this outcome if we haven't even even Define that we're like hey where are you at in the steps and they're like this and you're like okay cool well I haven't I haven't been able to get to it yet okay don't worry about it you know take your time I don't want to overwhelm you like waste of time waste of your time waste your staff's time and you're ultimately not going to extend the LTV and get them a good experience problem number two survey says no backend all right remember back end is the second thing you sell what these guys were doing and it's a it's a very common mistake is to say hey after the 16 weeks you can stay in the community participate in all the stuff that we have absolutely free and that's usually just an attempt to sell more people in the front end but it actually creates lots of problems because what you do is you create an endless liability for a onetime income right so if I say hey I'll personal train you for free after 6 months if you pay the first 6 months it's like well sure I got the first 6 months but now the rest of my life if I'm want to be a man of my word I have to train this person that's a terrible unending liability even though in the beginning it feels like it's a good idea the other issue is that it actually drives less client success so let me explain if I know that I'm going to have to to start paying more at a certain time in the future I'm going to be more likely to take action faster right if I know that I can do it whenever it means I do it never so the idea is we want to have that sting at the end that they know about so that we can drive forward that time to Value so you remember this little problem solution cycle I was talking about we got our problems we got our solution well the good news is is that you can actually use this to make more money because if you properly solve the first problem that they're presenting with with your solution then you should also introduce the next problem and here's the key point you should know what that problem is better than your customer does why cuz you've done this a zillion times and so they might think hey once I lose weight all my problems are going to be gone but that's not true there's a lot of other things that they're going to have to do as a result of that they're going to have lose skin they're going to have to change their wardrobe now they want a sixpack rather than losing weight you're just going to introduce new problems and so after you get someone down to their High School weight the next solution you might have for them would be our six-pack program right and so you lead them down to their ultimate goal but if you said hey when someone walks in the door let me get you a sixpack they're like dude I'm just trying to get my high school weight and so you have to meet them where they're currently at and so this is how great businesses continue to stay and profit from customers for years is by knowing well one effectively solving the first problem you promised that you were going to solve but then because you're so good at solving the first problem actually creating the second most businesses don't solve the first problem and then don't give themselves the opportunity to solve the next one and as a result don't make nearly as much money as they could problem number three no metric tracking seems like a common theme doesn't it and given the uh the sheet that I showed you earlier two out of the three were basically not tracked or non-existent right and honestly it's more common than You' think you know what I can absolutely promise you is that if you don't measure a metric you're not going to improve it and so one of the beautiful things about once you start tracking the metrics is that then you can tie incentives to achieving those metrics so both on an individual level and at A Team level because incentives is what's going to drive behavior and so if you want your clients to have this Milestone which we can now track with metrics then we can incentivize and put real resources behind making sure that they actually achieve them and people are willing to take the extra step go to the extra mod to make sure this happens because they get compensated for it but if we don't have this up front we can't do any of those things so we went over three problems on their back end right is that they weren't delivering on promises and we knew that because they had high turn they didn't even really have a backend and they had no metrics around success right you can predict how good someone is at whatever skill is based on the quality and the quantity of the data they track and these guys track none of it so we can kind of guess how good the back end was and mind you that's okay right like we still chose to invest in this company because we saw opportunity we saw the Spirit of the founders we saw the desire to get better and that's all I really need as long as someone has work ethic and they have desire to continue to improve cool we can hop this stuff like that's why we do what we do but if you're at like $100,000 a year $500,000 a million a year like it's normal to not have all these pieces that's why it takes time to build something great I don't want this video to be taken as like I need to stop what I'm doing and start doing this this might not be the constraint of your business but when you are there you'll know what to do all right all right so let's look at our handy danda data sheet and now you know what's going on you have some context you know what the problems are and you know what our current stats are with our weird before put in the comments below what you think you would do to fix these problems in this business I know you guys want to see the after numbers and I'm going to show them to you in a moment but before I do I'm going to show you step by- step which Solutions we did in what order so that we actually achieve those solution number one improve C customer onboarding what we did was they didn't have an onboarding process for getting customers to start they got sold and they got tossed into this big bucket of other customers it's obviously not good and so what we did was we created a choreographed onboarding process and that was from the moment the sale closes the moment they got off the phone all the way until they begin implementation so here's a fun stat for you people will make a lasting impression about your business within the first 24 hours after the transaction wild so many people maybe you watching this don't really have any good communication or process in the first 24 hours you might be like oh yeah Sandra's going to touch base with you in 4 days dude way too long from now so if we sell someone we want multiple points of communication multiple points of open and closed loops and what I mean by that is saying I'm going to make this promise and I'm going to keep this promise I'm going to make this promise I'm going to keep this promise I want to get like four five six promises opened and fulfilled within the first 24 hours cuz they're like man these guys are on it even if something that you would do all at once just take that one thing that has six checkpoints and make it six individual promises and fulfill all of them there'll be so much more impressed with you so we did a lot of things to fix the back end and I had my team actually write down the things that we did in this business so that I could have all the up-to-date details for you so we did four things just to improve this customer onboarding experience so number one is that we created a sales and CS team synchronicity meaning we just aligned both teams through the internal handoff process we actually created a handoff process so that it's like hey before we go I'm going to connect with Sandra Sandra is going to be your point of contact and as a way of life I'm going to give you this this thing that you can give to your team bam famam book a meeting from a meeting there should never be a who's in no man's land they should never be lost in the process they should always know when the next communication and the next correspondence in terms of meeting is going to be the next thing we did was we started tracking all client goals so on the sales call we would ask client what their goal is we could understand why they really wanted to buy this thing then what we did was we passed it on to the customer service team and when they would hop on with the customer they'd be like hey Johnny told me that you're trying to retire your wife or hey Johnny told me you wanted to clean your house or whatever it was because you have a wedding coming up and so you have this clear reason why that we reiterate to the customer and they're like wow I didn't even have to tell this person these guys are on it notice this recurring theme is that they're like wow these guys are airtight they go above and beyond the third thing we did was reset expectations with the customer so the sales team is going to set expectations obviously CU they're selling but now that they're on the other side of the pay wall you get to reset the expectations and this should be restating and reemphasizing exactly what the salesperson said if you're disconnect or to disjointed between sales and CS it creates a lot of dissonance and people like wait this isn't what I signed up for and that's what you don't want so right right now you get a lot of cold feet or back outs or people asking for refunds really early it's usually because there's a disconnect between first transaction or first conversation and second conversation then after resetting the Expeditions we would resell them on the purchase and this is important because especially if it's a big purchase or it's an involved purchase meaning a gym membership isn't a big purchase but it's a big commitment for the customer and so we want to resell them on their why and why it's going to be worth it tell them some stories of people just like them who were in the same position who saw the outcome they ultimately want and the fourth thing we did to improve the onboarding process is that we set the outline of steps to achieve the target this is really important as we're saying listen you want this thing let me tell you what the steps are going to look like and once you outline them we continue to engage the client throughout and so that whole process became standardized and that was the fourth process step that we used to improve the onboarding process so you're like wait a second we have one problem we have one fix but this fix had four pieces to it and the answer is yes is that you're not going to fix churn with one thing it's going to be many small things it's going to be many golden BB's no silver bullets product fix number two over here so we implemented a CRM and customer kpi tracking so if you don't measure it you can't improve it or rather you won't know even if you did we have a lot of pros at holdco for acquisition. comom and so when we take a company on we're like listen let's put all the systems in place and just install that stuff so we can prove all these metrics it's one of the easiest ways that we just provide tons of value and grow the Enterprise value of the business overall so that's exactly what we did and my team gave me some notes to make sure I can give you even more details on it so we started tracking time to value and we started tracking turn within the CRM automatically and so this allowed us to in real time see how many customers are hitting their activation points and how many customers are leaving there are two types of indicators in business youve got leading and lagging all lagging indicators are like churn is that you don't fix churn churn is a result so you have to do things before the bad result happens to fix it and so we know if someone doesn't show up to the gym for a month that becomes a leading indicator that they're going to cancel if someone doesn't log into Netflix for a long period of time the likely the cancel goes up compared to somebody who logs in and watches every day one of the biggest unlocks in a business especially in a recurring Revenue business is figuring out what are the leading indicators that get someone to leave or stay and then driving towards those leading indicators to make sure that they don't leave and with the CRM we were to automate customer satisfaction surveys to all customers in real time so we could see how we were doing and segment it by customer service representative and so we could see okay the teams X but Sandy ain't dragging her weight and she is sandbagging true to her name and so we have to give Sandy the boot or you know get Sandy up to Snuff so that she doesn't drag the whole team down but we wouldn't be able to do that unless we first were able to show Sandy hey Sandy here's a stat that says that you are worse than everyone else which means that you have to do something better or do something different than you currently are why don't you follow the process that everybody else is following you'll probably be able to win too which Segways almost perfectly into commissioning the team for customer success now a lot of people think that the only people who should get commissions are salese and I think that's silly cuz believe it or not a lot more of your profit is driven from customer success so we did was with the new CRM that we had implemented notice how these things kind of happen in sequence right like we had to hit the CRM once we had the CRM then we had the metrics now once we had the metrics we could say hey these are your metrics that you need to improve and this is the Target or range that we want your metric to be in and then we can commission them weighted against how far into that range they were so if you're at 100% you're going to get 2x if you're at 50% you're going to get X if you're at 0% you're going to get 0x that's the idea with this implementation program it was 16 weeks and if people are getting to 12 weeks then it would be weighted as 12 versus 16 so it's going to be weighted at 75% I'm giving this as a simple example but you can use this concept to commission anyone for any particular metric that you want to drive so the whole idea is that once we had the few metrics that we knew drove success we would get more people to become successful which got more people to stay and pay longer and then would naturally lead to the next problem which is that we now had all these customers who were finishing and had WIP or willingness to pay and be sold more stuff and so that's exactly what we did survey says no back end built back end and so what we did was we actually did Implement a wall at the end of the 16 weeks so rather than saying it's 16 weeks and then after that you just get this community we said you have to pay to stay but we had driven all the other metrics to make sure that people were succeeding prior to the end of that so we had people who were ready to move on and saying hey what's the next thing and so what we did was we rolled this out really slowly because we didn't want to shock the system and so right as soon as we rolled it out we got 10% of customers to ascend into the paying option which is great and then as we tracked it over the next 60 days we got it up to 27% of people ascending into the paid option this is pure created revenue on the back end for no real additional cost besides the cost of this commission that we had to add the customer customer service team and a onetime implementation of a CRM so think about this on returns on Capital you'd have this backend that would continue to stack and stack and stack over time and that then translates to how much more you can market and sell on the front end because if your cost to acquire stays the same but you double your LTV you can sometimes Market 10 times more not just twice as much so in this particular instance cuz I told you in the beginning that we added $6 million in Enterprise Value there's two elements that add that really drove EV one was when you add a recurring element into a business it decreases the risk that Revenue will disappear right so if there's recurring Revenue it will become more valuable and so this back end was a recurring backend the second way that it increase Enterprise Value is that not just changing the nature of the revenue but also changing the amount of profit that we were making because that added Revenue that we added to the back end per month ultimately became profit to the business on the bottom line and so we have profit which then gets multiplied by high multiple because it's recurring and so those two things together unlock even more Enterprise VI value which is why some of this incredibly boring stuff like customer success can make you a ton of money so let's talk data boom all right so I told you before we had our time to Value this should be time to value by the way but it's okay so we have time to Value we have our customer satisfaction and we have Ascension before we had 47 days non-existent and $0 so we did these things and our time to Value went from 47 days to survey says ugly ass hair 34 days our customer satisfaction went from non-existent cuz we weren't even tracking it to survey says and we were able to do this because we had implemented our CRM 98% so we actually had pretty happy customers overall which is pretty cool now if I were to piece me all this out 98 I'm like a little sus what I'm guessing is this is probably right after our really good choreographed onboarding is that we did the customer satisfaction surveys when you want to start parsing this out you can start tracking them at uh week zero week 2 week 4 week 8 week 12 now if you do that many surveys people will start resenting the fact you're asking surveys so it's really kind of a push pool of how able you are to collect the data and how you collect the data so for example if I already get on a call which I do have regularly scheduled and say hey by the way on a scale from 1 to 10 how likely would you be for a friend they might give us a score now that score might be different than if it was sent to them voluntarily the other part to add even more mud to the water the only people who choose to respond to a customer satisfaction survey are typically either very happy or very sad but you usually lose the metal so this is just all to say it is a metric that you can track it doesn't mean it's the end all Beall so I could try and like brag and say look 98% we totally crushed it I I would suspect that this is because we put it right after a choreographed process which is good all this tells me is that people enjoyed the onboarding which is better than not having one to begin with and the last one was ascension all right and if you're like wait where did these $6 million Enterprise Value come from gr roll please from $0 to $140,000 in backend that we're able to create so this is over 60 days so it's two months and this will continue to increase but if we just split this in half in it's $70,000 a month in profit that we were able to add to the business over the year that's just under a million bucks and if you multiply that by six which would probably be a standard Enterprise Value multiple for a company of this size then we added about $6 million in Enterprise Value to the business but we could not have done this one if we hadn't fixed all of these other things first we improved the customer onboarding we then implemented the CRM and created kpi tracking so that we could then commission the customer success team on the activation points and the leading indicators that would ultimately Drive success for the clients and we had the customer satisfaction surveys that we could also Implement to make sure that people and their reps in any ways even from a behavioral standpoint just them knowing that whenever they talk to somebody they're going to get surveyed afterwards and you can segment it by rep it just keeps people more honest so they're more on their game they're prepare for the calls they say hey I listened to your last call I have these steps I outlined how we're going to support you and how we're going to reverse engineer your success all of these things were only possible from these first three steps and then when we make the next ask because we fulfilled our first promises a certain percentage of those customers were willing to say yes in the beginning it was 10% and now it's 27% and it'll be even more in the future as we continue to get more and get better processes in place to win and if this stuff was interesting to you you might be wondering why I have the mosy Lisa in my hands this is a mega video that I just made of how to build a $100 million plus company and if that sounds just ah I'm showing you some hints there's way more where that came from just click on my face and you'll find out more