He’s Copying the Business Model That Makes No Money

[00:00:00]We sell motocross training.

[00:00:01]>> Okay.

[00:00:02]>> So we hold 5-day camps is what I'm kind of realizing.

[00:00:05]>> Yes.

[00:00:06]>> Cool.

[00:00:06]>> Yeah. So this has been cool because I start to the gears are turning as far as how to run a good event. So thank you.

[00:00:11]>> Yeah.

[00:00:13]Um what we did to be able to get our projection to 26 to the 4 million is we scaled down our single day tour dates.

[00:00:23]We were we we did more in 24. We went all the way to we scaled from 70 single day tour dates in 23 to 140 of them in 2024 and it was just a ton of operational drag. I mean it was like we were like a rock band on tour.

[00:00:40]>> It was nuts.

[00:00:42]But what we realized in looking back on it is the bottom 20 of those were net negative. The the next 20 were net less than $1,000 so inconsequential. And then I started looking at in 2024 we did three of the 5-day camps kind of as a test run. Each of those net well over 100 grand each and I'm like, "Well, hang on a second. This is the answer."

[00:01:02]So this year I told the team at first I called them. I said, "Hey, I just had an epiphany. Here it is. We're going to do 10 camps." And I said, "Actually no, we're actually going to do 25." And they're like, "Wait, 25? What do you mean 25?"

[00:01:15]My question is do I continue to my >> Were you just able to charge more for the 3-day than the 1-day?

[00:01:23]>> Uh the 5-day >> some earth advice or >> So the 1-day is $300 which is probably not enough. The 5-day is $1,200 which is definitely not enough.

[00:01:33]Uh so that's what part of the question too.

[00:01:35]>> Cool.

[00:01:36]>> Um I want to continue to scale the 5-dayers and scale down the single days but my fear is we basically own the space.

[00:01:43]Nobody else does what I do. It's pretty large market. Um there is one copycat company and he's trying to hit all these single day tour dates in the regions that we're doing them. So I'm afraid if I scale them down too much we won't be able to >> copy the model that makes the money.

[00:01:56]>> Say that again.

[00:01:57]>> He's going to copy the model that makes no money, right?

[00:02:00]>> Say it one more time.

[00:02:01]>> He's going to copy the model that makes no money.

[00:02:04]>> That's a great point. Yeah.

[00:02:08]>> Love this for us, right?

[00:02:11]I hope he does.

[00:02:12]>> Okay, I could Honestly, I could go home right now and I'd be happy after that.

[00:02:19]>> Yeah, you're right. You're right and I feel more confident that I don't think he could do what we could do anyways, but he certainly can't do what we can do in a 5-day event. I mean, we we run those 5-day events like nobody else, so >> Okay.

[00:02:29]>> Um >> So, you kept pushing on price, so let's just handle that real quick.

[00:02:32]Um why can't you charge more?

[00:02:36]>> I definitely can. The reason I haven't is because I started riding dirt bikes when I was two. I turned pro when I was 16.

[00:02:43]>> I help people I want to build a park.

[00:02:44]>> had no money, so I didn't want to outprice the people that were me. Does that make sense?

[00:02:48]>> Yeah, do you make like content? Is that the primary way that you get customers?

[00:02:51]>> Yeah.

[00:02:52]>> Okay. So, you do that for free?

[00:02:54]>> Yep.

[00:02:54]>> And those people get that for free?

[00:02:56]>> Everything's free. Yeah.

[00:02:57]>> Right. And so I've we've 22 million subscribers.

[00:03:01]There's 100 people here.

[00:03:04]A lot of people get [ __ ] for free.

[00:03:06]I think that Let me say it differently. If you like you will never help in person even a tiny fraction of a percent of the people that you've helped for free.

[00:03:17]It's just not the world is not structured that way.

[00:03:19]You will be able to monetize 1% of the people, maybe, right? If you're lucky.

[00:03:25]That you've actually helped in the model that the way media exists today. It might change, but for now, that's how it works.

[00:03:30]And so I think you have some sort of guilt that you can't help somebody, but you won't be able to expand your footprint or the media without the cash flow to grow.

[00:03:41]And so, if you turn this into a billion-dollar company, which why couldn't you, right? I mean, the market's big. Right? If you were to turn this into a gigantic company, do you think you'd make a bigger impact than you do now?

[00:03:53]>> Yes.

[00:03:53]>> Right. And in order to do that, it takes money.

[00:03:55]>> Yeah.

[00:03:57]>> And so you can you can serve the person who can't afford it for free and then you serve the people who can't afford it for the the correct price.

[00:04:10]>> And we do have a crazy amount of free content. It's a based on not knowing anything about the industry, what would you change the price from from 1,200 bucks a week?

[00:04:17]>> I can't tell you what the actual number is, but I can say what's your closure right now?

[00:04:22]>> I don't know.

[00:04:23]>> Do you sell on the phone or do you check out?

[00:04:25]>> I want to begin selling on the phone. We have a a website landing page. We just began doing ClickFunnels because what made me sign up for this and like we have to do that.

[00:04:34]>> Yeah. Are you working with us after this?

[00:04:36]>> No, I think I should, but I'm afraid that I don't have enough I'm afraid I don't have enough data yet because like when I was filling this thing out >> have the data of like and I don't I promise I don't care. Like I mean I don't need the money. I I mean that.

[00:04:50]Um the like Uh the reason I bring it up is just because like you're going to build a sales motion.

[00:04:56]There's a lot of mistakes that you can make there and getting it right the first time is worth it.

[00:05:02]>> So now would be a >> And all of a sudden the pricing power might not be like 300 to like 400, might be 300 to 3,000. And you'll be like, I can't even do that. You for sure [ __ ] can.

[00:05:11]>> Would you give up on the single dayers completely and just only focus >> to look at the unit economics.

[00:05:16]>> Say it again.

[00:05:16]>> We have to look at Is my thing not loud?

[00:05:19]the unit economics.

[00:05:20]>> No, I'm just so stuffed up right here. I can't Oh god.

[00:05:22]>> Okay.

[00:05:22]>> Just reading your lips, [laughter] yeah.

[00:05:23]>> Yeah, you're good. Yeah, we just have to look at the unit economics. So we just have to, you know, open the open the hood, pop it, and just like look at both both different event days. Oh, we'll Sometimes sometimes the single like I we had a we had a business that had uh um a it was a brick and mortar service business, had two models, a micro model and like a bigger facility model. The bigger facilities uh obviously had more revenue and more absolute profit, but the return on capital and return on effort for the small ones was like 5x.

[00:05:49][snorts] And so even though like the founder was like, "Oh, the like I love having these, you know, these big whatevers." It was like, "We can expand so much faster and we can get to our 10-year goal in 3 years if we do the one day or the one the mini version." So we just have to look at it um and all we're really optimizing for is return on capital.

[00:06:07]Human capital and financial capital.

[00:06:09]That's all like if you think about if you were if you boil a business down to its most basic unit, it's an economic arbitrage between what it costs you to make more money. It's all this. And then the difficulty of of continuing to do that. And so that means that we spend a certain amount of money to get someone in, which for you is going to be the cost of your media team and your time.

[00:06:24]That's the cost, right?

[00:06:26]On the on the back end, it's what do we make from these people who come in the door and what stops us from doing more of that thing, right?

[00:06:33]>> [clears throat] >> And so if there's a model that right now we can can spin that wheel faster and it costs us less here, that's the better model. I just don't know which one it is. And in terms of pricing, we just continue to go up until willingness to pay stops.

[00:06:46]And then we just stay there. The nice thing Here's the I have a hunch that the conversion's very high.

[00:06:50]>> Yeah.

[00:06:51]>> Yeah.

[00:06:52]Obviously.

[00:06:52]>> You'll be able to afford it.

[00:06:53]>> [laughter] >> But but my but the the the the main point though um You said something I had my It was a good one. It was a good one. Um Yeah. Oh, um I'll remember it when I talk to somebody else.

[00:07:11]>> [laughter] >> But yes.

[00:07:12]>> the thing that you said that hit me like a in the face.

[00:07:16]>> Uh your competitor?

[00:07:17]>> to copy something >> He's going to copy a broken model, so you should hope he does that.

[00:07:20]>> Okay.

[00:07:21]That was my sell to the team, not that I need to sell the team on it.

[00:07:23]>> Yeah, and I'll land the plane on that for you, too, which is that you will never go out of business focusing on the customer.

[00:07:30]And I'll I'll tell you a quick story. So the biggest business mistake that I I've made the two most costly business mistakes I've made um one of them has nothing to do with this.

[00:07:40]This is the other one.

[00:07:41]>> [laughter] >> Which has everything to do with this.

[00:07:44]Um I had a competitor that ended up taking a bunch of my top testimonials that were that we kind of converted to semi employees because they were big evangelists back in the gym launch days.

[00:07:55]And as soon as they took them and they were they were big ads for me, all of a sudden they were running ads for this other guy. So it's kind of like when the Verizon guy went to the AT&T, remember that that that switch over that actor?

[00:08:05]It was kind of like that. And this guy was offering one-on-one coaching um to help people out. I never did that.

[00:08:13]And so and they were cheaper. So they were cheaper, they were doing one-on-one, and they had some of my top, you know, customers uh becoming advocates. And they said that the 10 of them had come together they partnered. He partnered with these 10 people or something like that.

[00:08:25]And when that happened, I got rough My feathers got all ruffled and I was like, "It's war time. We got to you know, we got to go to the mattresses. We got to really, you know, change the change the business up." And so I did this big kind of like relaunch internally to my existing customer base.

[00:08:40]And um I said, "We're And I did this big value stack." And then I said, "You're going to get all this extra stuff not for the same price you're paying me, but for less."

[00:08:51]And so I took my existing recurring base and I reduced my revenue by $500,000 top line per month.

[00:09:00]And so that translated cuz we take it off top line and and the cost went up.

[00:09:03]So I increased my costs and I took my top line down by 6 million.

[00:09:08]And I ended up losing in profit somewhere in the neighborhood of 6 to 7 million dollars a year for that business at the time.

[00:09:16]I then ended up selling that business, obviously, and the business never recovered that profit.

[00:09:22]It stayed there.

[00:09:23]And when I did make that move, the first comment in the chat after I dropped that it was less was a complaint that I had not done it earlier.

[00:09:34]So it was not, "Thank you so much for lowering the price and giving us more [ __ ] It was I can't believe I was paying more."

[00:09:41]And I was like, "I want to [ __ ] kill myself."

[00:09:44]>> [laughter] >> And And here was the best part of all.

[00:09:47]My churn changed zero.

[00:09:52]So, I just cut my top line by 20%. Churn remained the same. Because the willingness to pay change that I made, I basically reduced it from, call it $3,000 a month to $2,500 a month, it actually made no real difference in whether someone would cancel or not.

[00:10:05]It was past the threshold that this is a lot of money. And so, it changed nothing. I just made less money.

[00:10:11]>> [sighs] >> And then when I sold the company, that six got multiplied by a lot. And so, that probably cost me in the neighborhood of probably 50 million million dollars.

[00:10:21]And so, the big lesson that I learned there was that I shouldn't And that that competitor ended up killing that business.

[00:10:28]Because it wasn't [ __ ] profitable.

[00:10:31]And so, I I was the market leader. And someone came in to undercut me. And then I said, "Oh, I'll copy the moron."

[00:10:39]>> [laughter] >> It's easy to let happen.

[00:10:41]>> Yes.

[00:10:42]>> Yeah.

[00:10:42]>> And so, don't lose 50 million dollars.

[00:10:45]Let him Let him figure that out for himself.

[00:10:48]You just focus on the customer and you'll win.

[00:10:50]>> Yeah.

[00:10:51]Good answer.

[00:10:52]>> Appreciate you.

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