⚡ Signal - Growth Consulting
How I'd build a scalable $630k per year business, using skills anyone can learn on the internet-for free.
|Aug 26, 2020||6|
Excited to be back with another edition of the Signal, where I deliver one trending business idea that we break down, discuss and develop a game plan for.
(Build a Business subscribers, there’s a super juicy post on the way on Friday - some super exciting progress there!)
Straight into it this week.
🚀 Startup Labs
// A business idea, explored
📖 Mom & Pop Growth Consulting
Mom and Pop businesses are your every-day, ordinary businesses: Hairdressers, laundromats, insurance brokers, garden services, the car dealership down the road.
If you had a peak into most of their books, you’ll probably find that most of them have plodded along for years and years at a very steady (maybe slightly growing) revenue level. They likely have a stable customer base that doesn’t change much. They also likely have very steady revenues, and take out a very normal income that they live off comfortably. The business plods along and all is good.
The thing is about those businesses, is that with an extra 20% effort, you could turn them into serious cash generators. But the owners will never do that, for a few reasons. Mostly because they’ve got their head buried in the business and they never take the time to look up, take notice of the opportunities and then act on them - they’ve got things to do.
And that’s where you come in.
⚡ The Opportunity
Growth consulting for Mom and Pop businesses.
Essentially, you will be going into a business, spending some time analyzing it and its operations, and then putting together a growth plan - and (maybe) actioning it.
This is inspired by a thread I read on Twitter (can’t for the life of me find it now) about a guy in the US who bought out a storage business from an old man who was retiring. They agreed on a fair price, and the new owner stepped in and modernized the business. In so doing, he added well over 100% of the amount in value that he bought the business for and essentially turned himself into a millionaire in the space of three months.
That model can be applied across the Mom and Pop industry, and there’s a heap of money to be made.
Choose A Niche
The first step is identifying a niche that you could be successful in. Look at your hobbies and skills and find one that aligns with one of these types of businesses. You’re looking for a way in. Anything that resonates with you. Maybe your dad owned an insurance brokerage going up? That would be a good start.
The trick is:
Finding an industry that has a decent amount of customers for you (10+), and
Also one that you know a bit about so you can investigate ways of growing.
If you don’t know how yet, learn a few growth marketing tactics. That what you are going to be applying. It is not difficult, and there are a ton of free resources online.
Here are some of my favourites:
Julian has a full free ‘Growth Marketing’ handbook. It covers these topics:
Facebook & Instagram
SEO = Neil Patel’s Free Guides
You need to build up a suite of modern day skills that will help you your goal of growing the business. They’re not essential, but they will help you scale this business infinitely better than just through manual power.
The next step is to investigate your niche.
When you’re doing this, here are a few things to look out for:
PPC Ad Difficulty - How expensive are the ads, and what businesses are running them.
Average life time value (LTV) of a customer in this niche? Is there a lot of churn? Or is it like a hairdresser where once you’ve acquired your customer, they’re with you (mostly) for life.
Trends. Look at Google Trends and look for growth/decline signals over the past 6 months, 1 year and 5 years.
Search volume. You can use a free tool like Google Ads planner (I use Mangools) to estimate how big the customer base for the industry is. Build a keyword list that has low search difficulty and decent volume (500+ monthly searches).
Who’s the biggest company in that niche…
What do they do well?
Why are they the biggest?
What do they do poorly?
What marketing tactics are they using?
Now, you have a good understanding for the niche, you need to craft your own value proposition.
What you are doing is essentially helping these businesses grow their revenue, and become bigger, better businesses. At first, the owner is probably going to be reluctant.
Here’s the model I’d use:
“You only pay for what I achieve.”
That means, if I don’t grow your revenue, you don’t pay me. Put in place a ratchet agreement that essentially means you earn a portion of the revenue that you grow for the business, as well as beyond when you leave.
This is going to be a very attractive proposition for the business owner. There will be no risk associated with taking you on.
This will be a great foot in the door. It will also mean you have to work hard to make your money. But once word gets out (these sort of business owners talk) that you deliver on your promises, you will have requests flooding in.
This will essentially be about using the exact tactics that you will be using for these businesses to get them as clients.
Getting new customers won’t be hard, and should be mostly free.
Here’s how I’d do it:
Create a list of all the businesses in my area that I want to target.
List them by perceived size (how many employee’s, business premises, vehicles etc.)
Build out a template for a value proposition. Include the following:
- What you intend to do (grow their revenue)
- How you intend to do it
- How the process works
- How much it will cost (nothing!)
Reach out to the business owners on that list, starting with largest potential for influence (i.e who can you make the most difference on). Phone them, email them. Be persistent. Don’t be scared to follow up 4, 5, or 6 times.
Explain your value proposition. Make sure they know that there are zero upfront fee’s, and you only get paid when you increase revenue. It’s a win-win.
Start off with one week of shadowing. You’ll need to ask the owner to commit to giving you a portion of his day for one week - only mention this once the contract is signed.
In that week, analyze the business and its operations. Look at it’s incomes and expenses mainly.
Where can you grow these? This where most of your energy should be focused: Finding new customers. This is how I’d approach it:
Speak to current customers, get feedback on the business from them.
Speak to competitor customers, find out why they use the competitor.
Craft a unique value proposition for that business based on the industry and the people behind it, and then align the company on that. Some things you could target would be:
The best customer service (this is my favourite one - people absolutely love being given attention, and it promotes word of mouth growth - the best type),
The fastest to your door,
An obligation free comprehensive quote/analysis etc.
The main thing is identifying your self from the crowd. When people in your niche need a service, your company’s name should pop into mind and they should think “Ah, my sink is broken, and I know Bob’s Plumbers guarantee’s a plumber at my door in 30 minutes. I’ll call them.”
Work that value proposition into every customer-facing interaction/brand image you can.
Now, take your learnings from the industry analysis step above and apply them here. What’s the cheapest way of finding new customers in this niche? SEO? PPC Ads? Manual outreach (flyers)? Cold calling? Implement it.
Iterate. After each week, see what is working. Ask your new customers why they joined, what part of your brand resonated with them. Use the feedback to improve your outreach. Build a flywheel.
This is a tough one. Some you will be able to change and some you won’t. A lot of ‘older’ type businesses will be running with so many overheads just because “that’s the way we’ve been doing it for years”.
Have a look at their day to day expenses. Where can the fat get trimmed?
Accounting services - online accounting works great.
You’ll be surprised how many businesses are being over-charged just because they don’t know better.
When you’re done, get feedback from the business owner. Specifically ask for it. Take it on board and see how you can improve, and then post the good bits into your outreach document above.
Let’s work out how much potential this idea has.
The model is to take a portion of the extra revenue that you generate for the business. You should have two options for this:
A smaller percentage (~10%), which lasts for a longer period.
A larger percentage (~40%), which lasts for a shorter period.
You should also sit down and calculate goals with the customer during the initial introductory week. There is no point in bringing them a bunch of new business if they’re not setup to handle the increase in volume. By setting out goals, you can also potentially implement a ‘ratchet’ system where you get a % of revenue up to a certain goal and then a larger % beyond that.
An example situation might look like this:
The local car-wash has on average 12 paying customers per day (or around 1.5 every hour). At $15 per customer, that’s $180 per day. So in a month, they’re maybe turning over $4000 to $5000. That’s roughly a $600k per year business.
Let’s say that at maximum capacity they can handle 3 customers per hour per bay. With 2 bays, that is 6 customers per hour = 48 customers per day. Let’s round down to 40. That’s $600 per day, and $25k per month. The difference is roughly $20k. If you take 10% of that, it’s roughly $2000 per month. But, because the idea is that you setup the business to keep doing that volume when you’re no longer involved, you will structure the deal to earn that amount for a certain period of time.
As mentioned above, the longer period might be 2 to 3 years, while the shorter period something like 6 months. Depending on each situation, their will be pro’s and con’s to each.
So if you are able to have a turn around time of one business per month (very slow), you’ll essentially be adding somewhere between $500 and $2000 to your income every month. After 12 months, your business should be bringing in $6000 per month easily. If you have mostly 2 year profit share structures, you’ll likely have 24 businesses on your profit share cycle at a time. At $500 per month per business, that’s $12 000 per month. At $2000 per month per business, that’s $48 000 per month (or $580k per year).
The next step is then automating and scaling that process so that you’re not the only one doing the work. The aim is to then get many more than 24 businesses on your payroll in a 12 month cycle.
Once you’ve got a proven model, you will get a very good sense of a ‘template’ that you can apply to different businesses.
Scaling that is about doing the following:
Teaching other people that template.
Expanding into other Mom and Pop niches.
Employing the people in 1. to do what you do for different niches. Have the same profit-share agreement with them. Operate them like franchises.
Grow slowly, so that you know the people you’re employing are actually making a difference for the businesses they’re entering. They should be doing as good - or better - job than you did when you started. If they don’t, cut ‘em.
To give you an idea for the opportunity, let’s take an example with the following assumptions:
Most businesses you’re serving choose a 1 year profit share cycle.
For this package, you take 15% of the revenue increase over that year as your fee.
You have 5 people working under-neath you.
Each of those 5 people is able to flip one business per month.
For each business you touch, you increase their revenue by 20%.
The average annual revenue of most businesses you’re dealing with is going to be roughly $350k*.
Here are the economics, with some variations (highlighted):
*The average income of a small business in the US with 1 to 4 employee’s is $387k (from Fundera).
Which of these ideas do you want to go through next week? Click the link to vote.
🛠️ Skill Builder
// A skill to add to your founder’s toolbox
🤐 Negotiation Techniques
Chris Voss is a former FBI negotiator. This is a summary of his book “Never Split the Difference”, which teaches negotiation techniques that you can use in the business world.
Here are 5 key takeaways:
Be an active listener. Make sure you’re concentrating on what the other person is saying, so that you can fully understand their position.
Mirror the other person. By repeating the three most important words that they’ve said, it shows they you’ve been listening, you empathize with them, and you understand.
Label their emotions. Use phrases like “It sounds like”, “It seems like” and “It looks like” to validate the other persons perspective. This validates their emotions and helps them feel comfortable in engaging further. Understand the underlying emotions behind what someone is saying, and then reinforce (positive), or diffuse (negative) them by labeling them.
Push for “That’s right”. Too many people push for a “Yes” too early. What you actually want is a “That’s right”. This creates breakthrough’s. It subconsciously reinforces the fact that you have listened, understood and have their interests at heart. You can get to “That’s right” by using mirroring, labeling and paraphrasing.
When negotiating monetary terms, let them go first. Also have a good sense of what your acceptable ‘fair’ range is, and have a justification for it. You need to convince the other person that your offer is fair, not just some arbitrary number you’ve come up with.
// The tweet of the week, from someone I follow over at @simon_blogs
Sam Parr (@thesamparr) on building a network:
// Valuable tidbits from around the interweb
📊 A super interesting visualization of how changes in child morbidity have had an effect on the number of children each women has, per country, over time.
✔️ 10 Steps to validating your next business idea, from yours truly.
🧐 The business case for developing an innate curiosity.
🛠️ Startup Resources - A weekly newsletter from Paul Metcalfe that sends out interesting tools and resources for your next startup.
👋 The End Notes
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