The Exchanges

Q You bought them all at once or like one at a time? Like you bought a chain?

A All in one pot. So essentially there was, there was a kind of a patriarch of a family who had built up a portfolio about a 120. He passed away. And then, um, basically I think it was the trust or the estate, I don't know which, which, but he was, they were selling them off in blocks. Right. And they don't want to sell off like one at a time because it's a 120 because the kids, they had a tax bill coming up because the inheritance, yada, yada, yada. So, um, this actually is, is this started with Nick Huber and Mitchell, um, Ballbridge, um, of the cost seg world, because they started talking to me about, Oh, there's, there's some tax implications where if, if your partner, your wife or your husband is a real estate professional, your passive losses on like real estate become active losses and they offset active gains. So got a big pile of, you know, kind of gains from the sale of the company. And then all of a sudden I can offset those with depreciation of the gas stations. And I can do that with bonus depreciation in one year. So just to use some round numbers, like if I buy ten million dollars of gas stations, I basically can take eight million of depreciation essentially, and that can offset some of those particular gains. And so in October, September, um, Nick starts telling me about this. I start talking to Mitchell trying to figure it out. I start talking to tax lawyers. Al…

AI assessment note: “All in one pot. So essentially there was, there was a kind of a patriarch”

Q If you had to summarize your learnings with pricing, is there like two or three bullet points where you'd be like, just do these three things and you're 90% there?

A Sort of, um, but with, like, giving you a little bit more bulleting, um, you should be changing something about your price every three months. That does not mean raise your price every three months, but it means, like, changing up your packaging, going up market, down market, changing up an add-on, changing up your discounting strategy. It's this forgotten growth lever in most businesses. You acquire customers, you monetize them, retain them. We focus probably 60% of most budgets, more so in D to C, less so in B to B, on, like, basically acquiring customers. We spend a little bit of time on retention. We spend like no time on pricing. So change something every three months. Um, one of the biggest hacks that's easy to talk about on a podcast, add-ons, um, they're the most underrated, underutilized aspect of all pricing, consumer B to B enterprise. Um, they boost lifetime value by about 20 to 50%. So just to make sure this is clear, like, hey, they bought your core product, which is a fitness shirt. Well, add a white t-shirt for 10 dollars, like stuff like that. Those are like add-ons. Hey, they bought, Your SaaS app, add priority support for whatever, 10% of your list price is for the, the software. Um, most companies, like the most high growth companies, at least in the subscription space, they have 12 or more add-ons typically. Customer never sees them, all, all 12 of them, bu…

AI assessment note: “you should be changing something about your price every three months”

Q Is that the number? That's probably, is that like 80% of the issue? They're just scared?

A It's just scared. Yeah. And then, and we tried to fill this gap with our pricing products and we still do because it just gives them confidence. Cause we're like, all right, here's data that says you sat in a room when you founded the company and said, ah, Basecamp does 50 bucks. Let's just do 50 bucks too. And then you never revisited that. Like for years, we have this data that says you can actually charge this customer, 500, this customer a hundred, and we're going to like roll it out in like a nice way just for new customers first. And all of a sudden your conversion goes up. Like your revenue per customer goes up and you're really excited. Um, and then all of a sudden you're like confident enough to basically put that for your existing customers as well. Um, so yeah, I think that's, it's, it's just a lot of fear. You get all these, like I've been in so many, like so many exec teams with this product where it's like the smartest people I've ever met just sitting there. And like, if I give them any other problem in their business, they're like, okay, um, I'm not an engineer, but like, let's figure it out. What's a, what's a stack. What is this? Like they'll go like attack it. You give them pricing and they're all like, oh, what do you think? What do you think? Because it touches every area of the business and they just lack that, that confidence in looking at it. And so I, I…

AI assessment note: “It's just scared. Yeah. And then, and we tried to fill this gap”

Q or Christian or hunting and you have like Yeti coolers here. Um, yeah. Science backed. You have another one that's like, You align it with a, uh, an identity like a political party or LGBT, or you have here as the example, black rifle coffee. So does this first talk about this and then is this only for consumer products or does this work across the board in your opinion?

A So here, here's where this comes from. So we had 50,000 different, there were subscription companies, but 50,000 companies using our financial analytics, um, and we were helping them with pricing, their churn, and giving them this data. And they were from across the map. B to B SaaS, subscription nonprofits, D to C was one of our big segments. And I started to notice that, like, for just under 10,000 of these D to C brands, the playbook was almost the same over and over and over again. Right? Like it wasn't like there was some innovation in creating mattresses. It was literally like, we will be cheaper through better supply chain and we will help the environment and maybe we donate money to people who don't have beds. Right? Like it was just over and over and over again. So I wanted to create essentially a unified theory of like creating products. Right? And so I, I shared the consumer one cause that's probably the easiest one to talk about, but there's just, there's only 10 things that these brands differentiate on. And there are a number of the things that you talked about. And my point around innovation is that like, don't try to necessarily innovate. Maybe don't even try to like raise money for any of these types of like consumer ideas, because all you really need to do is take a particular product and then remix it with some of these differentiators, right? So for example,…

AI assessment note: “I shared the consumer one cause that's probably the easiest one to talk about”

Q hands and that's a deadly combo. Um, you sent, you sent us something. I want to start with this, uh, thing you texted us about the Bezos number and I don't know too much about it. So I want you to explain, you go, I've been, I've been working on, I've been searching for my Bezos number. I don't even know what that means. Explain what is the Bezos number?

A Yeah, totally. So here, here's the thing as this started from a premise. So sold the company basically, um, working a paddle and also thinking about like what the next thing looks like. And what I found in the ideation process, like I haven't come up with ideas in like 10 years. I've helped like companies come up with ideas, but it's just one of those interesting aspects of the entrepreneurship journey. And my big belief is your job as an operator is to basically know your customer and know your space better than anyone else. And you need to do this before you start building, because a lot of entrepreneurs fall into this trap where we're really good at willing stuff into existence because that's our job, except It's relatively easy to do that today. So this means that like basic ideas are cheap, mostly indefensible and worse, they waste a lot of our time. And so the first step I come in terms of an ideation process is using this Bezos number framework. And basically when Jeff Bezos started Amazon, he noticed this like crazy stat, you know, this new thing called the internet was growing 2700% per year. Um, so he knows he's got to build something on it. Um, he didn't know what it was, but he was starting from the trend because When you go where the water's flowing, as they say, and ride a wave, you don't need to be like a genius to figure out what a really cool business looks lik…

AI assessment note: “when Jeff Bezos started Amazon, he noticed this like crazy stat”

Q And you also said that there was like, you, you sell the company and you're like, uh, you go through this wandering phase for like a year. Uh, you said there's five phases. What are the five phases? Uh, I just sold my company for a bunch of money.

A Yeah. This is like the, the champagne problem cycle, I think. And it's, it, it's just this crazy rollercoaster. And I don't know, Sam, Sean, if you guys went through this, but for me, like I was pretty even keeled emotionally before the actual sale. What I mean by that is like something bad would happen to the business. I'd be like, oh, that sucks. Okay. Let's figure it out. Something good. I'd be like, oh, great. But we have all these other problems. Um, when the sale goes through, especially if it's like announced, like everyone kind of starts treating you like a God for like a hot second. And then that leads you to go like, Wait, am I a God?

AI assessment note: “This is like the, the champagne problem cycle, I think.”