https://www.youtube.com/watch?v=MwhsM7qijy8

1 00:00:00.000 --\> 00:01:00.000 every week layla and i my wife talked
to five to ten new companies to potentially invest in that have already
passed a couple rounds of screening and i was on a conversation the
other day with a coaching business and the founder made a very
ridiculous statement and i thought i would make a video about it because
i think you'll get a lot of value from it they made the statement i just
don't think there's a way that we can make our customers more valuable
uh which as you can imagine if you've been following my channel for a
while you know drove me into a fit of rage not really but i i stopped
and i wish i had recorded it but the basic premise is that that's just
patently false and i'll show you six different ways you can increase
lifetime value in a coaching or service based business all right and so
if you don't know who i am my name is alex mosey i own acquisition.com
it's a portfolio of companies that right now does about 110 million
dollars a year and continuing to grow and so i have nothing to sell you
i just make these videos because i hope you get value from them okay so
there are there are two ways that you grow a business right number one
is you get more customers the second is you make them worth more that's
it that's chunked all the way up at the top of

2 00:01:00.000 --\> 00:02:00.000 this right like either get more
customers you make them worth more all right there's lots of sub buckets
underneath of that but those are the two fundamentals if you're
attacking a business in terms of like trying to figure out how you want
to grow your own business you can use these mental frameworks and so
these are kind of like my own checklist of what i'm thinking through or
someone's talking because we only have 15 to 20 minutes with these new
companies because we talk to a lot of them just to get a feel if we want
to invest time and money into them so that being said with this
particular company it was a coaching business now the nice thing is that
with coaching businesses it really applies to all types of businesses so
if you're a service-based business if you coach for weight loss that is
a service business if you you know a lot of businesses just don't like
the term coaching but it is more or less what you're doing you're
advising clients on some sort of outcome right and so um in this
particular business they said that they didn't have a way of you know
making the customer more valuable and so these are the six ways that you
can make a customer more valuable and i'll give the example that i
shared with them to try to drive it home alright so if you can think
about this within your own business you will make more money so the
first and obvious one is you can raise prices so you can sell the exact
same thing and add money

3 00:02:00.000 --\> 00:03:00.000 to it and make more money sounds wild
but that is something that a lot of people don't do and so getting the
pricing right is a way of making more money there are sub-pieces that we
could sell higher percentages of people by having different pricing
levels but just big picture number one is you can increase the price
number two is that you can lower the cost of goods right because we're
looking at how can we make a customer more valuable we can make that by
raising the price but we can also lower how much it costs to fulfill on
them and so there's two easy ways you can do this within a coaching
business one is that you could decrease the cost of the people
themselves so you keep the ratio that you have with your clients but
then you probably outsource a component of that uh you know to somebody
who might be abroad who'd be willing to work for less money all right
that would be a way of decreasing the cost of goods the other way of
decreasing the cost of goods is keeping the same number of coaches but
increasing the ratio between coaches to clients if one coach is managing
10 clients and then they go to managing 20 clients your cost of goods
cuts in half right and in so doing that your margin goes up hopefully
you're tracking with me so number one increase the price number two
decrease the cost of goods number three is increase the purchase

4 00:03:00.000 --\> 00:04:00.000 velocity or frequencies the number of
times people buy all right and so within the context of a recurring
revenue business that would be decreasing churn though getting people to
stick and stay and pay longer right so if somebody normally buys and
then stays for three months in your you know service-based business or
coaching business or whatever it is then if we can get them to stay just
an additional month it's a 25 increase in ltv so how much that person is
worth to us over the lifetime of them being with us right and so number
one price two cost of goods number three getting them to buy more times
the other whole next three buckets all kind of fall they're different
flavors of the same thing all right and so it's cross sells upsells and
down cells and so i'll give examples of each of those so cross sales is
when you have them buy something and then buy a different thing as in a
as an add-on all right so if you have a level of service uh let's say
you have a coaching business right because i'm using the example that we
were talking about if they if they have a core service but there's an
element of something that uh someone needs to do so let's say they're
doing some sort of business coaching right a lot of times they're going
to have some sort of model that they're

5 00:04:00.000 --\> 00:05:00.000 helping people execute within their
business or flip to and then there's sub components of the execution so
there might be creating ads that would be an add-on service that you
could add it could be drilling their their sales team right so helping
them train their sales or train themselves on sales because they need
that additional level of support and so just think about the different
bottlenecks that people are experiencing within the execution of the
core business that not necessarily everyone will use but some people
would get a tremendous amount of value from those are kind of perfect
scenarios for add-ons that you can add to the service levels that will
increase the lifetime value because let's say twenty percent of people
take uh an upsell you know of an extra thousand dollars a month and
they're paying a thousand dollars a month well just like that you took
your average monthly from a thousand to twelve hundred right so it's a
twenty percent increase because you got twenty percent of people to take
an additional uh level of service all right the second type of sell here
so i said there's six ways so we've covered four price cost of goods
increasing purchase frequency cross sells the next one is upsells all
right so i like to delineate this from cross sales cross sales is
selling a

6 00:05:00.000 --\> 00:06:00.000 different thing to the same customer
all right so in the mcdonald's version this is like would you like fries
with your coke right or whatever it is fries with your burger doesn't
matter but like it's the crossover selling something different that
still goes with the core thing an upsell is where you sell more of the
thing that they just bought so this is where in i'll use the mcdonald's
example to drive it home and then i'll give you a coaching example so in
the mcdonald's example it's would you like you want a burger do you want
a bigger burger right that would be an upsell right it's the same but
more of the same thing and it's good to think through these these
frameworks because this is how you can think of and iterate your own
service levels within the business so let's say that somebody in this
coaching business you know meets with their coach every whatever every
every two weeks we could increase that frequency and say okay well like
our higher level of service you can meet with the coach more times right
or you could have it's more access whatever the thing that we're selling
is it's just more of it and you'd be surprised a lot of people just want
more and this is

7 00:06:00.000 --\> 00:07:00.000 where this gets kind of interesting
from uh from a from a pricing and lifetime value perspective customers
are fractal and what that means is that it's 80 20. so one out of five
customers is typically willing to pay twice as much as the core offer
that continues to go up so if you know if you have 100 people 20 of them
are willing to pay five times you know as much as the the base adr which
then means that if you get 20 to take something that's five times as
expensive then you actually just double the lifetime value now if you
look at that 20 and look again and do another 80 20 split on that then
four of those 20 are going to be willing to pay another five times more
than the remaining 16 in that group right 80 20. and so it continues to
get fractal so it's like 80 20 95 5 9 1 all of those are fractal
distributions and with each of those increments you usually have people
who have significantly higher spending power and so simply offering a
significantly more expensive version to 20 of the customers is typically
a really good way of increasing ltv all right and so in

8 00:07:00.000 --\> 00:08:00.000 this coaching example if they had a
large group component and they wanted to do a semi-private component or
small group then that would be something that should reasonably be you
know probably four or five times as expensive given the fact that it's
now significantly more narrow and more attention is given to each
customer all right so increase the price increase uh decrease the cost
of goods get people to buy more times sell them more stuff that's
different sell them more of the same all right cross sells upsells and
the last one number six is downsells all right so this is when in in the
purpose of the down cell there's kind of two two key areas in the
business where this is helpful number one is on the front end number two
is on the back end all right so on the front end getting more down cells
it's i'll tell you where it backfires but if you have another offering
for people who get on the phone it's especially useful and this is how
you do it right for disqualified or under qualified leads all right
because you've already paid for the marketing to get this person on the
phone or into your kind of conversion event but if the person does not
qualify for your core offer because they don't meet certain

9 00:08:00.000 --\> 00:09:00.000 you know requirements that you've
already predefined of like what a perfect customer is for you then you
want to have something for them that can help them ascend into that
that's going to be significantly lower touch or ideally no touch at all
right and so in this instance i think this was a health coaching thing
they i was like just create a done for you at home or done do it
yourself at home program that people who can't afford to have the level
of service they get a little bit of a head start they get a little bit
of education to get them going so that they can then you know if they
succeed with that they show themselves they're motivated they show
themselves this is more valuable than then they can ascend up where it
gets sticky is where you have people who otherwise would have bought the
core offer but then the sales team starts down selling them that's the
no no that's what you don't want to have happen and that's why tracking
before you make it like implement a downsell into your sales process is
important because you can see the percentage of people who are buying
the core offer and so we should just simply be adding on more sales
without detracting from the amount of people who are buying the core
offer the second way that we protect against this is that when you have
the customer requirements if someone meets

10 00:09:00.000 --\> 00:10:00.000 the customer requirements for your
core offer they should never be presented the downsell that is in my
opinion that's how i prefer to do it because it also keeps it black and
white for the sales team so because you don't want to have gray in
making sales decisions in my opinion i think it's much easier to say
like if they are this sell this if they are not this sell this that way
we're just treating the customer for what was best for them rather than
trying to like go based on their budget this is me personally because i
just want to say like if i'm going to make this promise to you i'm going
to fulfill this promise to you period and if we need to find a way for
you to get the resources to do it then we will help you do that but like
we're not going to just give you a deluded version of what we had right
and so it's only like if you do not qualify then and only then will we
down sell the reason this is effective is that you have these people
you've already paid to get on the phone and so if you can liquidate a
certain percentage of that cost by having a down sell it will help you
offset cost of acquisition and ultimately make some more money and you
also get more customers because those people have potential in the
future which is a great thing now the other place where down cells help
is actually on the back end so information declines in value over time
right and a lot of

11 00:10:00.000 --\> 00:11:00.000 businesses that we work with are
e-learning service coaching et cetera types of businesses and so one of
the difficulties is how do they uh attack churn and so part of the way
of attacking churn is realizing how people are consuming value through
the services that they offer right and so if someone you know the day
before you learn something very important it's incredibly valuable the
day after it you don't need to learn it again because you already have
it so the value declines very very precipitously um in these types of
businesses which is what we've spent you know our life kind of fixing
and making them more valuable right but having a downsell component on
the back end when people are like you know what i've gotten a lot from
this you know i don't i don't need the training and all that kind of
stuff anymore what it is the question is what do they need or what would
they like to keep right and a lot of times community access is something
that people will continue to pay for even though they're not access to
the information anymore because like they don't need it because they
already they've already figured it out right um or certain levels of
troubleshooting and support whether it be technical support or
accountability level support those are things that are are consumable
right in terms of like you might need to be

12 00:11:00.000 --\> 00:12:00.000 held accountable last month and you
need to be held accountable this month um towards doing the actions and
so when we think about this and we're looking at a business and this was
the the coaching business that i'll give you as an example hopefully
those answers uh give you some light depending on what type of business
you have but there are always ways to make a customer more more valuable
over time and so those are the six um that i think through when i'm
looking at any kind of coaching info service type business that we're
looking to take on which is like where do we see opportunity that we can
increase the ltv per customer so that we can then turn around and spend
to get more customers on the front end right because if we're chunking
back up two ways to get more uh make more money get more customers make
them worth more and that is a wrap so uh thank you guys appreciate if
you're new to mozy nation welcome i appreciate you and i'll see you guys
in the next video bye
