Building a $3,000,000 Business for a Stranger in 57 Mins | Cash Cows | Ep 867
On The Game with Alex Hormozi, hospitality consultant Ben Potts discusses challenges with his current bar and beverage consulting business model and low conversion rates. Hormozi identifies flaws in Potts' $30,000 service offering and proposes an alternative, lower-priced "front-end" service to increase customer acquisition and optimize pricing before up-selling the full consulting package.
Hormozi outlines a new sales funnel utilizing targeted ads, video presentations, and a streamlined one-call close process - aiming to improve conversions and build customer rapport through Potts' direct involvement with the lower-tier service. The episode explores strategies for sustainably growing Potts' consultancy by refining its offers and sales approach.
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1-Page Summary
Ben's Unfiltered Hospitality, Bar and Beverage Consultancy
Ben Potts co-founded Unfiltered Hospitality, a consultancy transforming bar and beverage programs across the hospitality industry. His company offers a 90-day "Better Cocktail Consulting" service and ongoing support to help launch and sustain excellent bar concepts. In 2024, Unfiltered hit $1.1M revenue, $123K profit, and a plan to triple revenue to $3M by late 2025.
Issues With Ben's Current Sales Model
Ben faces challenges with his $30K "Better Cocktail Consulting" offer, seeing only a 20% conversion rate from leads. Alex Hormozi notes that with a $12K customer acquisition cost (CAC) and low customer lifetime value (LTV) to CAC ratio of 1.7, this model is financially unsustainable. Ben also cites too many sales calls causing lost opportunities.
Alex's Recommendations for New Offer and Sales Funnel
Hormozi suggests a $5,800 "Pricing Booster" service as a front-end offer, allowing Ben to quickly optimize pricing before upselling his $30K consulting. For the new sales funnel, Hormozi advises using pain-point based ads, a video sales presentation, and a one-call close model to boost conversion rates.
He also recommends Ben personally sell the lower-priced service to build customer relationships and gather feedback to refine his offers. The goal: Have 50% of Pricing Booster customers upgrade to the full consulting service once seeing initial results.
1-Page Summary
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Counterarguments
- The projected revenue growth to $3M by late 2025 may be overly optimistic and not account for market changes or increased competition.
- A 20% conversion rate might not be as dire as it seems if the lifetime value of the acquired customers is high enough to offset the acquisition costs in the long term.
- A $12K customer acquisition cost could be justified for a high-ticket service like the $30K "Better Cocktail Consulting" if the service delivers exceptional value and results in high customer satisfaction and referrals.
- The low customer lifetime value (LTV) to CAC ratio of 1.7 might be improved by strategies other than changing the service offering, such as improving the efficiency of the sales process or enhancing customer retention.
- Too many sales calls causing lost opportunities could indicate a need for better qualification of leads rather than a problem with the sales model itself.
- Introducing a lower-priced "Pricing Booster" service could potentially dilute the brand or attract customers who are not the ideal fit for the higher-end consulting service.
- The recommendation to have Ben personally sell the lower-priced service might not be scalable and could divert his attention from more strategic aspects of the business.
- The goal of having 50% of Pricing Booster customers upgrade might be unrealistic and could lead to disappointment if not achieved; setting more conservative targets could be more prudent.
- Relying on a one-call close model might pressure clients into making decisions without fully understanding the value, which could lead to dissatisfaction or churn.
- Pain-point based ads could attract clients who are looking for quick fixes rather than those interested in a comprehensive consulting service, which might not align with Unfiltered Hospitality's brand and long-term goals.
Actionables
- You can analyze your own service offerings to identify a lower-priced, high-value entry point that addresses a specific need of your target audience. For instance, if you run a small marketing firm, consider introducing a budget-friendly social media audit service that helps clients understand their current online presence before committing to a full-scale marketing strategy.
- Experiment with a simplified sales process by creating a concise, engaging video that explains your service's benefits and addresses common pain points. This approach can be particularly effective if you're a freelance consultant or run a small business; use the video on your website and social media to attract potential clients and encourage them to book a discovery call with you.
- Track the journey of your customers from the initial contact to the final sale to identify patterns and areas for improvement. Use a simple spreadsheet to log interactions, noting what works well and where clients drop off. This can help you refine your sales funnel, whether you're a solo entrepreneur or part of a larger team, ensuring you're investing time and resources into the most effective strategies.
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Ben's Current Business Overview
Ben Potts, a co-founder of Unfiltered Hospitality, oversees a company with a sharp eye for elevating bar and beverage services in the hospitality industry.
Ben's Company Unfiltered Hospitality Offers Bar and Beverage Services For Operators
Unfiltered Hospitality specializes in developing and enhancing beverage programs across various establishments in the hospitality sector. They have extensive experience working with a diverse range of clients, including restaurants, hotels, bars, country clubs, cruise ships, and nightclubs. Ben’s team focuses on taking good bar programs and transforming them into excellent ones.
Unfiltered Hospitality provides a comprehensive Better Cocktail Consulting service over a 90-day phase which includes designing cocktail menus, training teams, and installing effective operating systems. This initial service is crucial for setting up clients for success. Following this phase, the Program Performance Retainer keeps the bar programs sharp and efficient, incorporating weekly KPI calls, the creation of seasonal cocktails, and quarterly training sessions.
2024: $1.1M Revenue, $123k Net Profit, 11.3% Margin
The company has shown significant progress as of 2024, with Unfiltered Hospitality generating $1.1 million in rev ...
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Ben's Current Business Overview
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Clarifications
- The Better Cocktail Consulting service offered by Unfiltered Hospitality involves a 90-day program focused on enhancing and optimizing cocktail menus, training staff, and implementing efficient operational systems for clients in the hospitality industry. This service is designed to elevate the quality and profitability of bar programs by providing tailored expertise and support to improve overall performance and customer experience. The consulting service aims to transform good bar programs into excellent ones through strategic planning, menu design, staff training, and operational enhancements. It plays a crucial role in setting up clients for success and ensuring long-term growth and sustainability in their beverage offerings.
- KPI calls stand for Key Performance Indicator calls. These are regular meetings or discussions where specific metrics and performance targets are reviewed and analyzed to track progress and make data-driven decisions. KPI calls help ensure that the business is on track to meet its goals and objectives by focusing on key areas of performance and improvement.
- A Program Performance Retainer is a service provided by Unfiltered Hospitality to maintain and enhance the performance of bar programs after the initial consulting phase. It includes activities like weekly KPI calls, creating seasonal cocktails, and conducting quarterly training sessions to ensure the continued success and efficiency of the bar programs. This retainer service aims to keep the bar ...
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Challenges With Ben's Current Sales and Offer Model
Ben Potts of Better Cocktail Consulting faces challenges with the current sales and offer model that affect the predictability of his revenue and the effectiveness of his sales process.
Ben's "Better Cocktail Consulting" Is $30,000 With Under 20% Lead Conversion
Ben Potts admits that selling a $30,000 service to cold customers is particularly difficult with less than 20% of leads converting. This conversion rate may suggest that the price point of $30,000 is inappropriately steep for the leads he's attracting. Additionally, with a customer acquisition cost (CAC) of $11,800 and a customer lifetime value (LTV) to CAC ratio of 1.7 to one, the overall tenability of continuing with this model appears fraught with financial inefficiency.
Ben's $12,000 CAC Is High With Low Customer Ltv
Expounding on the financial strain, Potts's CAC is noted to be at a high level, and the LTV provided by each customer does not sufficiently offset this cost, pointing to a mismatch between the investment in acquiring customers and the revenue they generate.
Ben's Sales Process Has too Many Calls, Causing Lost Opportunities
Alex Hormozi criticizes the current sales process for having too much friction and for involving numerous steps that do not necessarily guarantee a close. Ben Potts agrees with this critique.
Ben's Unpredictable Revenue Suggests Sales Process and Offer Issues
Ben points out that the unpredictable monthly revenue and times where no leads come through are due to disappointments regarding price upon conversion. The multi-stage calling pr ...
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Challenges With Ben's Current Sales and Offer Model
Additional Materials
Clarifications
- Customer acquisition cost (CAC) is the total cost a business incurs to acquire a new customer. It includes expenses like marketing, sales, and other costs associated with converting a lead into a paying customer. Understanding and managing CAC is crucial for businesses to ensure that the cost of acquiring customers does not exceed the revenue they generate. By comparing CAC to the customer lifetime value (CLV), a company can assess the efficiency of its marketing and sales efforts in acquiring and retaining customers.
- Customer Lifetime Value (LTV) is a metric that predicts the net profit a business can expect from a customer throughout their entire relationship. It helps businesses understand the long-term financial value of retaining customers. By focusing on LTV, companies can prioritize building lasting customer relationships over short-term gains. LTV is crucial for determining how much a company can invest in acquiring new customers and guides decisions on marketing strategies and customer retention efforts.
- Friction in the sales process typically refers to any obstacles or inefficiencies that hinder the smooth progression of converting leads into customers. This can include unnecessary steps, delays, or complexities that make it harder for potential clients to move through the sales funnel. Simplifying the process, reducing the number of required interactions, and ensuring clarity in communication can help minimize friction and improve the overall effectiveness of the sales process.
- A churn rate measures the percentage of customers or subscribers who stop using a service or product over a specific period. It is a crucial metric for businesses to understand customer retention and loyalty. A high churn rate indicates that a company is losing a significant number of customers, which can impact revenue and growth. By analyzing churn rate trends, businesses can identify areas for improvement in their products, services, or customer experience to reduce customer turnover.
- Lead qualification is the process of evaluating potential customers to determine their likelihood of making a purchase. It involves assessing factors like the prospect's needs, budget, authorit ...
Counterarguments
- The $30,000 price point might be justified by the quality and exclusivity of the service, and the issue may lie in targeting the wrong market segment.
- A CAC of $11,800 could be considered an investment in acquiring high-value clients who have the potential for significant long-term returns, beyond the immediate LTV to CAC ratio.
- A comprehensive sales process with multiple calls might be necessary to build trust and rapport with potential high-ticket clients, ensuring a better fit and long-term relationship.
- Unpredictable revenue could be a characteristic of a niche or luxury market, rather than a direct result of the sales process or offer issues.
- The churn after two quarters might not necessarily reflect a lack of continuing value but could be due to the nature of consulting services, where clients may only need intensive support for a limited period.
- Improving the close rate to 30% without adjusting the offer might not address the underlying issu ...
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Alex's Recommendations For Improving Sales Funnel and Offer
Alex Hormozi, in conversation with Ben Potts, offers crucial advice for revamping sales funnels and crafting offers that could dramatically improve customer acquisition and retention.
Alex Suggests a $5,800 "Pricing Booster" Service to Attract More Customers
Alex Hormozi recommends that Ben's business introduce a front-end product or service priced around $5,000 to $6,000, designed as a “one call close” solution. The aim is for this Pricing Booster service to solve a specific problem well, provide immediate value justifying a quick sale, and act as a stepping stone to upsell the comprehensive $30,000 "Better Cocktail Consulting" offer.
Lower-Priced Offer Quickly Optimizes Pricing, Stepping Stone to Upsell $30,000 "Better Cocktail Consulting" Offer
This $5,800 offer, according to Hormozi, should be presented as a precursor to the more extensive transformation that the $30,000 service would provide. Ben agrees that pricing is a major concern for his clients and recognizes that demonstrating immediate value through this service could make it easier for clients to engage with higher-priced offers. The goal is then to move clients from Potts’s lower-priced service to his premium consulting services by achieving quick wins.
Alex Advises Ben to Revamp His Sales Funnel By Adding a Lead Magnet, Optimizing Ad Copy and the Landing Page, and Streamlining the Sales Process
In terms of the sales funnel, Hormozi advises starting with the ads, using clear call-outs for the right target audience, such as addressing "$4 million-plus per year restaurant owners." Ads should be pain-based and relatable, using a "what, who, when" framework in the ad copy to articulate the aspirational outcomes and pain points, ensuring prospects feel understood and motivated to take the next step.
New Sales Funnel Enhances Efficiency With Video Presentation and One-call Close for $5,800 Offer, Boosting Conversion Rates
To enhance the sales funnel's efficiency, Hormozi suggests adding a valuable lead magnet to increase trust, thus increasing the likelihood of purchase after demonstrating value. Incorporating video presentations before booking calls can ...
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Alex's Recommendations For Improving Sales Funnel and Offer
Additional Materials
Counterarguments
- The $5,800 "Pricing Booster" service may not be affordable or appealing to all potential clients, which could limit the market reach and exclude smaller businesses that could benefit from Ben's expertise.
- Introducing a high-priced front-end offer might deter some customers who are not ready to make a significant investment without first experiencing the value of the service.
- Upselling a $30,000 offer after a $5,800 service could be perceived as too aggressive or pushy, potentially damaging customer trust and long-term relationships.
- The effectiveness of a lead magnet depends on its perceived value; if it does not resonate with the target audience, it may not contribute to increased trust or sales.
- Pain-based advertising might not align with the brand's values or could be off-putting to some prospects who prefer a more positive or solution-focused approach.
- Relying on video presentations might not cater to all learning styles or preferences; some clients may prefer reading or interactive content.
- Personal selling of the lower-priced offer by Ben could be time-consuming ...
Actionables
- You can create a customer feedback loop by offering a small discount or bonus service in exchange for detailed reviews of your initial service. This helps you understand what clients value and refine your upselling approach. For instance, after a client uses your service, send them a follow-up email offering a 10% discount on their next purchase in exchange for completing a survey about their experience.
- Develop a referral program that rewards existing customers for bringing in new clients who purchase your initial offer. This can be a simple point system where points can be redeemed for services or discounts, encouraging word-of-mouth marketing and potentially increasing the number of clients who might upgrade to your higher-priced offer.
- Experiment with a tiered service model where clients can choose from several leve ...
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