[Transcript starts at 1:17]
Hello, hello, hello my podcast people and thank you for joining me for yet another episode of my favorite podcast. Today we are getting in the weeds and we are talking about how to scale an online business. I hear people throwing this around. I wanna scale. I wanna scale. And I'm like, do you actually? I think most people just wanna work less and make more money, which is kind of like not a real thing.
So we're gonna break it all down today. We're gonna jump into the episode with a definition. Y'all know I love me a good definition. I go online as I'm outlining these episodes, and I'm like, what does this actually mean? Not how is it colloquially understood and used? So the difference, uh, the difference, wow, the definition of scale or scaling. Scaling is when revenue increases without a substantial increase in costs, meaning you can support further growth. You could look at it as a more sustainable way of growing. Colloquial definition, or let me say translation here, making more money without a proportional increase in how much money and time that you're spending. People tend to think of, I just want more money, but if you're working harder, you're working more, that is not scaling, right? And that's also not sustainable because you're gonna hit a limit there. You're like gonna die here.
Similarly, just hiring more people is not scaling. Staff will be your biggest business or your biggest operating expense as an online business owner.
So if you're just hiring more people and your revenue is just growing at the same rate, that's actually not scaling. You're growing the business. Yes. But what we need here is you're going to get an increase in revenue without a proportional increase in expenditures or increase in costs, right? So same, same if you know you double your revenue, but you're working twice as hard.
I think you understand and you have not scaled, you have grown the business perhaps, but you have not scaled. We are ultimately here looking at profit. Profit reigns supreme. Revenue is 100% a vanity metric. I hear it thrown around in the space like, you know, people making a million dollars, but then they spent $999,000 for that launch.
They made, you know, no monies then. All right. It's like 9, 9, 9, 9, 9, 9. They made $1, but they, you know, the revenue there was a million. I wanna know how much you're keeping. I wanna know that you're turning a profit. That is what we're looking at. We're looking to continue to increase this profit margin. Otherwise, we are just growing the business.
There's plenty of people that have huge businesses, but they're taking home what people with smaller businesses have. So you gotta look at what business model you want and what you like, and what we are concerned with here is making more money, right? Having more profit without a proportional, excuse me, without a proportional increase in how much money and time you are spending. Within this, and this is how, kind of like the time part works, right? Because I, the definition just talks about money that you don't wanna have more costs, but time is a cost as well. You have to think about, if I am working harder, technically I should be paying myself for that time, which then becomes that monetary expense.
So it's like, yeah, if I brought in more money, but I worked harder, if I didn't pay myself for that time, I can't say, oh, I turned more of a profit. No. Did not. We gotta be honest with ourselves and we gotta look at these numbers.
I oftentimes hear people say, you know, I wanna scale the business. How do I scale the business? And what they actually mean is they want to work less and make more money. Number one, this is impossible within the first few years of your business. Usually, like, you know, the first year up to year five. You're gonna work. You gotta put in the work. You don't have a, you know, profit generating asset yet.
This is the value of doing things yourself. Folks will come in and be like, oh, you know, I'm gonna outsource the copywriting, and outsource the emails, and outsource the sales pages. Oops, kicked the thing under the desk. I'm gonna outsource everything. I'm like, you have no money. What are you doing? You're already in the red.
You're already in the red. So you're gonna have that sweat equity in the beginning where you are putting in the work, and you cannot expect to work less and make more money. Not in the first few years. After that, and especially if we are looking at something that is scalable or even just in terms of growth, you will typically just work differently.
You're gonna work on different things. So more of like the executive tasks and decision making and running and managing a team, but you will still be working. And I, I'm very passionate about this as I'm saying it because I just did a, uh, talk to my Mafia, did a, you know, lecture, whatever you wanna call it, we call 'em Mafia Dinners.
And I went over, uh, time management and organizing your schedule. And one of the things I hear from people is like, ah, I wanna be working less. Okay, well then be cool making less money. When you run a business, you're running a business. For those that, you know, if you're listening to this and you're an Alex Hormozi fan, he just, he talked about it recently, or at least it was a recent Instagram post.
He's like, I work all the time. Yes. And this is what you should expect. If you're like, I don't wanna work that much, then be okay with making less. Okay. Because you're just gonna start working on things differently, or you will hire out and then the revenue goes there. So you're still, you're not gonna make us the same amount of money, so understand that, right?
All right so back to specifically scaling an online business. In order to scale an online business, four things need to be true. Four things need to be in place. You have to do four things. Number one, you need to have a profitable bus- number one, start from the beginning. Number one, you need to have a profitable business. Period.
All right. You have to have something that people actually want to buy, have services, offers that people actually wanna buy, and they are actually buying, and you are turning a profit. One of my best resources or favorite resources for this is the concept of the profit first accounting model. I have not read the book, I've said this a million times, but I do use that system or perhaps a bastardized version of that system to keep me profitable.
Alright. Um, the whole concept with this, lemme go into it real quickly. The whole concept with Profit first is that you're gonna allocate funds. All the money you get that you make, you are gonna allocate to different, um, accounts. And one of those accounts is gonna be specifically for a profit.
You put a percentage of all the money that you bring in, all the revenue, you put a percentage of that into the profit account. It could be 1%, it could be a penny. Doesn't matter. Either way, yes, there is profit. And then you must run the business with the remaining remainder. Yes, with the remainder of the money.
Okay, so this way we make sure that you are turning a profit. Danny Matta first introduced me to the system and I've spoken about it, you know, a bunch of times on this podcast. It is a game changer for me. So, number one thing you need in place, you gotta have a profitable business.
Number two, you have to know your numbers. You cannot scale like just by guessing. I know that there is a feeling of overwhelm that comes when we think about numbers, but that is the price of admission in terms of you gotta know your stuff. And you can work with people. You can take time to learn more, but you have to know your numbers. Are you actually turning a profit?
This is different than making money. You can have something that's bringing in money, but if you're spending just as much, you're not actually turning a profit. If you're bringing in money, but you're not actually paying yourself, that's not a profitable business. How much are your operating expenses? How much does it cost to acquire a customer? And how much money does each customer bring in?
You have to know these things because that's the only way you'll ever be able to know if the things that you're trying out and implementing are actually scaling. Right. We said earlier that scaling is about bringing in more money without a proportional increase in how much expenses you have. You can only know this if you know your initial expenses. You can only know this if you know how much you're actually bringing in, so you can compare and contrast. Um, so number two, you gotta know your numbers.
Number three, you must systematize your operations. All of them. So you're gonna have to create standard operating procedures for the day-to-day things and also the delivery of the services. And we're gonna get into this later because at some point, if you truly wanna scale, you're gonna have to sell and monetize the methodology, not just you. You need to create systems that can be replicated by other people, that can be performed by other people. That's one way that you can remove yourself from the business. So number three, systematize all of the operations.
And then number four, you have to decide where you're gonna spend the money and in invest the resources and then track to see what the return on investment is. Again, you will only know and understand your ROI, your return on investment, if you know your original numbers.
Where you spend this money, where you allocate these resources is gonna be up to you in terms of, you know, when you're thinking about scaling. For some it will be in terms of customer acquisition. For others it may be marketing, right? So it's content creation, inbound marketing. Customer acquisition may be, you know, ads. For some, and when I say some, I kind of mean most, we, they will look to scale via the delivery of the service. Meaning they're gonna look to bring in more money without a proportionate increased in expenses by manipulating the delivery of the actual service or product or offer- offer. This, I think, can come in two ways. One would be a leveraged model, meaning one to many. This is a group offer. Right from the online business space this is when you're running a group program. The second thing would be hiring a team.
We're gonna get into into both of those now. So if we're looking at scaling via the delivery of the service. Remember, scaling is making more money without a proportional increase in how much money and time you are spending. That's gonna allow for more profit. We see this done via creating a group model.
What we're gonna go into now. For a group model or a group offer, and I've said this a zillion times, you have to have the volume. If you got two people in your audience, don't create a group offer, not a good idea.
You will also typically only start to see that ROI in subsequent rounds or iterations of this group offer because the first time you run it, there's gonna be a lot of sweat equity, meaning you are going to spend a lot of time building the thing, recording the modules, uploading the things, running the thing maybe before you turn it into a DIY.
So you're not gonna actually see that increased revenue and proportionately, uh, and or you will rather, you will see an increase in revenue, but you're gonna see a proportionate meaning an equal increase in the expenses. And in this case, the expense is going to be the time, right, that you have put into this.
When you run it again and again and again, suddenly there's less time that you need to invest on the front end, cuz you've already put the thing together. You just gotta show up now. You just gotta run the thing. Or maybe it's a DIY, do it yourself offer, and you don't have to show up at all. People just do it on their own.
Okay? So again, for this leveraged model, you really have to have the volume for this. When you continue to run the same offer, especially when it becomes, um, DIY, scaling from that point will oftentimes be more focused on customer acquisition. Can I get more eyes on this thing and through this thing for less, right? How do I get these people in here?
Scaling via customer acquisition does have a ceiling, cuz at some point you may need more people in order to deliver the offer if it's like a, not a truly DIY offer. But that will allow for a lot of scaling before you hit that, that ceiling. The second option that we have within this umbrella of kind of leveraging things is going to be hiring. I put this second because this is where we're gonna see if you have an online business, this is where, where we are going to see the greatest operating expenses. When you have a brick and mortar or a physical business, your greatest, highest operating expenses is typically your overhead, your rent, especially if you're like in New York City or something like that, or any kind of metropolitan areas.
When you're in the online space, your greatest um, operating expenses are gonna be your staff, including yourself, right? You have to pay yourself. So this is why I typically look at this second, but it really just depends on what your model is. Within this hiring, we have two options. You can hire for direct delivery of the services, which is what we see a lot of the time, where, you know, if you're in the nutrition fitness space, you may be hiring other coaches to actually coach the people. Or you can hire the operation sides of things, which we also see. Um, but people usually don't think of this in terms of scaling. We think of this oftentimes of growing the business, and this is where maybe you're, hi hiring someone to help you with social media or copywriter or the tech side of things, or you know, you're hiring a VA.
This stuff, this isn't directly revenue generating. It can buy you back your time, but again, initially you're not gonna see any kind of increase in revenue because they're not selling anything. They're not delivering a, a service or an offer. You still have to do that, but now you have more time to do that.
Um, so that typically, that initial hiring, that hiring for kinda operations side can be more so to help grow the business as opposed to scale the business. And I, I know maybe it feels like semantics, but it's not semantics. Like these are actually different things. Growth versus, versus scaling, right? Big thing here is, again, knowing your numbers.
Do I need more eyes? Do I need help with delivering the service? That's going to dictate what you know you're hiring for. And where am I at with my business? Again, most people from the, in the, they're gonna hire a VA oftentimes first, virtual assistant first, and then we can look at hiring for direct delivery of the actual service and and hiring for coaches.
This, again, is going to be made easier when you systematize things so that you can tell someone like, Hey, here's the things that you gotta do, right? So if we're looking at hiring for direct delivery of the actual service, you're looking to hire a coach to work for you, right, to work with the clients.
This is going to tie into step three that I said earlier, the four components of what you need in order to scale a business. You're going to have to have, have, have half- there's a lot of halves in there. You will have needed to systematized your operations, including your methodology. Systematizing the operations is very important in terms of like, here's how we communicate with people.
Here's how you, the actual logistics of things. But from a growth perspective and removing yourself from the business, you need to systematize your methodology. How are people actually getting coached? What's the process that you know you're taking people through and that the coaches are gonna take people through?
Right. What's your proprietary framework? Things like that. This is again, going to allow you to actually step outside and step back from the business. This will 100% require ego checking cuz we all go into this, like no one can do it like I can do it. And if you wanna hold onto that belief, which I am of, I'm all for, then you will not be able to remove yourself from this. You have to be able to check that and be like, other people can do this, and perhaps they can do it better than I can. Here's the methodology. Here's the approach. And now that other person can go and deliver that to the customers, right? You have to have a willingness to not be at the center of this thing. If you wanna be at the center of this thing, you can't scale it, but so much.
Uh, the hybrid model for this, if you're like, but I kind of like wanna be involved. I don't wanna actually like remove myself fully ever. This would be something like what Ramit does. And also LCK, Lori Christine King. I brought, I have not brought Ramit on.
I almost said I brought both of them on. I have not brought Ramit on, um, but obviously I brought on LCK, if you wanna listen to that episode. Thank you, Courtney. So the reason I say that this is a hybridized kind of approach is that Ramit is still at the heart of this. We buy things because it's Ramit's brand, but he's not delivering the actual service.
And I talked about this, um, in a past episode I talked about minimized direct delivery. When we talk about, um, passive revenue, like it doesn't really exist in the online business space, but we can have minimized direct delivery. If you could live, if you could link that episode, Courtney. Thank you. Um, where you've removed yourself.
So a lot of his programs are DIY. He doesn't need to be there. He's like signed off on it and it's his brand and you're like, this is gonna be good and high quality and I'm gonna learn something. And I, and I, and you know, values will align because it's Ramit's, but he's not actually delivering it. Same thing with LCK.
With this model, you'll always likely need to be a part of this thing. So it'd be very difficult to sell this thing because then you've sold yourself like you can't, excuse me, because you cannot sell, like the thing without you, right? So he can't be like, oh, some company's gonna come buy this. Well, they have to still have you otherwise it, it kind of loses that credibility, right?
If you want to work yourself out of this so that it's like ultimately or infinitely scalable and can be franchised and things like that, that's gonna be what @KneesOverToesGuy has done, right? Ben Patrick. Where he really leaned on the methodology, the ATG system. Alright. ATG is Athletic Truth Group. So we have @KneesOverToesGuy, he really was at the heart of this, and then he removed himself and created this whole other brand of ATG and the ATG methodology. That allows for franchising. That allows for creating, you know, coaching, um, what are they called? Cert certifications and things like that. Because you're teaching the methodology.
It's not about him, it's about the process. Okay. So they're, they have, um, systematized, he has, systematized and then monetized the actual methodology.
As you can see, there is way more to it than just saying, I wanna scale, and then just doing more of what you're currently doing. That is a way to grow, but not ultimately a way to scale.
Remember, when we're talking about scaling, scaling is a way to make more money without a proportional increase in your expenses.. Four requirements for this. You gotta have a profitable business. You gotta know your numbers. That's the scary part. You gotta systematize all the operations and then you gotta decide where you're gonna spend the money, invest the resources, and then track to see what that actual ROI is, right?
Most folks, you're gonna start out by actually growing the business, getting, that swek, sweat equity, doing more, and then you can look to scale typically by group offerings or hiring, oftentimes hiring someone for that direct delivery of the service.
The best piece of advice that I can give you if you're thinking about this, thinking about growing, thinking about scaling, wait until you are busting at the seams before you look to hire and really incur those additional expenses. Because like I said, in the online business space, your greatest expense is going to be staff, including paying yourself. Right. Know your numbers. Please do not take this whole, I'll grow into it approach and you go hire a bunch of coaches and things like that.
If we liken this to clothes, right, I'll grow, I will grow into this. You're gonna end up with a bunch of oversized and very expensive pajama shirts that don't fit, and you're gonna have no money. Right. Wait until you are bursting at the seams and then we can look at hiring and growing, right, and incurring these additional expenses. And then from there we go through those four steps, look at those four things, and we can start thinking about scaling.
All right, I'm looking at the, the outline here. I really enjoyed this episode. I know, I don't necessarily always, I, I shouldn't say this. Let me back it up. The past however many episodes I've, I've really tried to focus on kind of more action items, tangible, tactical things. I do love talking about the kind of theoretical things and zooming out and building trust and things like that but, I also like nerding out on this side of things. So hopefully this wasn't too in the weeds for you. If it was, well just ignore it. Thank you for listening.
If you got questions, you can always hit me up. You know that. DM me at @themovementmaestro. You wanna shoot me a text? 3 1 0 7 3 7 2 3 4 5. I will respond. It will be me. The texts will be green. Why? Because it's my sideline. Uh, I will respond and I love hearing from you. Answering the questions. If you got requests for episodes, by all means, use those same avenues and hit me up.
I love, love, love hearing from you. Alright, that's all I got for you for today. Until next time, friends, Maestro out.
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