So straight up, you are about to meet one of my favorite people to follow online. And I actually started following Dan Martel before we became friends, and I followed him for like a year. I really loved his content because there’s certain people, and I, I follow less than a hundred people total online. And the people that I follow are people who I have deciphered are people who are achieving real results in real life, not just they have lots of followers, or they have a big personal brand, but I’m actually following people who are real life business owners. And I was able to, to, you know, sort that out quickly with Dan. So he is an angel investor. He’s a, he’s an influencer, YouTuber thought leader. He’s also the Wall Street Journal bestselling author of this book. It’s called Buy Back Your Time. And we’re gonna talk a little bit about that.
But before that, he founded Scaled and exited successfully three different technology companies within a 10 year period. So in two, in 2012, he was named as Canada’s top angel investor. He invested in companies like Intercom, Udemy, unbalanced all very, very successful companies. And now he runs a SaaS academy and is basically, he has one of the largest coaching companies in the world. He specializes in talking specifically to SaaS founders, which I am not, but we are a recurring revenue business because of coaching. And we also, you know, have a membership component of that, which is like the online version of ours. And so a lot of the principles that apply to SaaS companies apply very much to any recurring type of revenue model. And so I really, really love, love Dan. I believe in his stuff. And then I saw his book, came out, hit the Wall Street Journal, and then he was doing an event in Nashville, and I was like, man, I want to come over and meet you. And we met up. And so anyways, here he is the man, Dan Martel. Welcome to the show, buddy
Rory, it’s an honor man. I’ve I’ve been a huge fan of your work and you know, just congrats, man. Like watching all my friends that you work with, the support you, you give them and the, the results they’ve gotten. It just is a testament to the mastery that I know you focus on, you know, when you, when you deliver for people, and it means a lot. I think there’s a lot of folks out there, you know, selling stuff and not delivering, but you know, I could tell within our first conversation that that’s that’s not you. You’re somebody that over-delivers and it’s awesome.
Well, thanks brother. And I we really do my wife AJ says this all the time, she says, utilization equals retention, utilization equals retention. And she just is always about over-delivering and getting people using it. And even though, again, we don’t do SaaS, I know that like so much of what you teach is just around that same thing of providing a quality product, making sure people have a great experience using it, training the team to sell marketing. Like all, all, all in. And so I want to talk about buy back your time, okay. The book, but I wanna talk about it specifically to personal brands, which you’re uniquely equipped to talk about. And one of the things that you were sharing with me before we started was how you’ve been applying this principle to your new life as a YouTuber and a influencer. And you know, you’ve gone from being you’ve gone from being an entrepreneur to being an investor, to now also you’re, you, you said, you said something to me, you said, right now you’re really investing in media. So I’d love to hear about what that means and also why at this stage in your career, do you suddenly care about investing more into media?
Yeah, it’s an awesome question, Roy. I mean, my, my quick arc was, you know, I, I grew up in a really tough environment, got in trouble with the law at a young age, diagnosed with a D H D, you know, ended up in prison twice by the time I was 17. And in rehab, actually taught myself to code. And that, that literally became my new addiction at that point. It kind of filled the hole that a lot of the you know, the addiction I was, I was suffering with you know, left. And then I got into entrepreneurship, which is this like, beautiful forcing function for betterment, right? Like, if you think of like getting big, like growing a business, if you wanna be more successful in a business, you gotta go look in the mirror. So my, my, my message for a long time was about, you know, like growth and mindset and all these things.
And the problem was I struggled with disconnecting from the obsession of building, right? I had two failed companies right out of the gate, 17 again at 19. And it wasn’t until I was 24 that I hired a business coach that essentially showed me how to operate scale, begin with the end of mind, a lot of the principles that are fundamental that I just was lacking, right? I just thought we’d build a product, people buy it, you have a business. And it was through that experience in my third company that made me a multimillionaire that I essentially like crater my life because I was engaged with a woman that it turns out, you know, to have, to have a successful relationship, you actually gotta be present. And I just wasn’t, I, I didn’t know any better. I was so scared of failing because of the momentum I’d built that I I just kept working a hundred hour weeks and I wasn’t present.
And eventually I came home one day and I found her in tears in the kitchen, and she just took the ring off and walked away. And it was about seven weeks before the marriage. So that was my wake up call to all of this. And that’s really where the buyback principle, which I teach in my book, which is, you don’t hire people to grow your business. You hire people to buy back your time, because if you do the second, you get the first, but you don’t necessarily get the, you don’t, you know, most, most entrepreneurs build businesses. They grow to hate. So I, I started coaching companies I invested in 15 years ago, this core principle, right? Like I had to learn it for myself. I exited that company, sp and then I went to Silicon Valley and built two venture backed companies and really understood scale and leverage.
And I started tweeting and blogging. And that’s kind of the beginning of like the, if you want to call it influencer phase, but I did it as very much from a marketing point of view. You know, it’s like, oh, if you have an audience, you can hire easier, you can get customers, you know, inbound marketing started to pick up back then. What shifted for me recently was, honestly when the book came out a few months ago and it became a Wall Street Journal bestseller, I underestimated the value of a book by 10 x. Okay? Like, and, and Rory, you know, this better than most. It is one of the easiest way to build credibility. So like, I had all this business success, but I don’t know, there’s just something about a physical book that all of a sudden now people see me in a different light.
And then what happened as I was doing all this media stuff like Instagram, social media, I have about a million followers across all my platforms, but I was, I was doing just enough. Like I wasn’t, I wasn’t like thoughtful about it. I wasn’t, I would say investing in it. And there was just like perfect tsunami of some friends of mine that I watched essentially, like grow their audiences and see them get access to opportunities to impact people on a level I couldn’t even imagine. I was like, how did that happen? How did you get on national tv? How did you, you know, get a New York Time bestseller? How did you get these, you know, 50 k speaking opportunities, et cetera, or even access to deals, right? And it, it just occurred to me that the, if my goal is truly to, to have an impact to serve at risk youth, which is near and dear to my heart, then it’s, it’s irresponsible of me to not lean into it.
Like, it, it, it kind of doesn’t make sense if you tell me your goal is to help people and you intelligently look at how can you help people? Well, the, the, the trade of putting out content and serving literally millions of people and it costs you nothing huge leverage. I’m all about, you know, buy back my time. And then, and then from that opportunities tip of the spear for me to buy companies, which I do with one of my private equity companies I’m involved in, or like coach in SAS Academy or, you know, travel the world and speak, or, and it’s funny cuz you mentioned reoccurring revenue in coaches. That’s actually a big part of the people that have reached out recently because they’ve seen me scale not only SaaS Academy, but like helped other friends of mine in coaching industries just understand the dynamics that are present and just natural in software as a service SaaS, right? So that, that was what shifted is just this realization if I wanna help people investing, you know, dollars and cents into building a media team. And that’s, that’s the identity shift for me. It went from being a marketing function to a media team. So I look at myself as a media person, not as a talent in a marketing function.
So, so, so hash that out for me. And, and, and, and also this applies to how does the buyback principle apply to creating lots of pieces of content, which is something that, you know, I’m watching, I’m watching you do, and watching you uplevel sort of the, the quality of what you’re putting out. And so I’m really curious to hear what, what is representative of that mindset shift from marketing, you know, function to media company, and then also in addition to the mindset shift, what is the, what’s the tactical expression of that in terms of how many people are you hiring? And like, what does that mean you building out a whole studio and you’ve got like, tons of producers and like script writers or, or like what does it mean exactly?
Yeah, I mean, I, the other thing where I wanna be careful that I wanna scare people away, right? So I’ll give you the like, like low budget version and then I can share what I’m doing. Yeah. But I’m also not ignorant to the fact that, you know, I have dollars and cents to invest and some people may be trying to make more money, but even
Though you do have limited of money, you’ve still stepped into this. You, even though you’ve had money, you’ve stepped into this. Totally.
Yeah. Yeah. I, I think it’s, it is literally one of the best trades any person can do with their lives. And I think, you know, you’ve seen people like Gary V and many others been screaming at the mountaintop about this and it, and I’ve known Gary for 14 years and it took me this long to finally get, and again, the book was the catalyst, the book came out and I was like, whoa, how, how is this thing helping tens of thousands of people? And I’m not like, talk about leverage. So here’s, here’s the first thing is the whole idea of just capturing what you do, right? There’s this great book called Show Your Work by Austin Cleon. It’s for artists, but I, I really, I read this book and I leaned into it. So for example, I have two cameras on me right now, like on my desk, they’re, I don’t even know what kind they’re, but canon something, whatever.
And all my meetings from coaching calls to all hands to investor reviews to this podcast I just, I just click a button on my laptop and it records everything and then it saves it to a Dropbox that synchronizes, right? And it puts it up into the cloud. Now then I have a team that goes through all that footage and they decide like, oh, that was actually interesting. That was not right. So to me, the whole idea of just like start capturing stuff right, is just such a basic idea. A lot of people I know are doing audio podcasts, but they’re not recording video. So, and, and it’s fascinating to me. I’m like, well, you’re already talking to the person, just like, do it on a platform, do it on Zoom, and then just grab that video content and put that out, you know? So that, that was like the easiest thing to do.
And then what I started doing to level up the capturing side is now I just hire freelance videographers in different cities. I predominantly go like LA or Vegas or you know, in my own city when I’m doing speak engagements or, or coaching sessions and they’ll just come and, and video record just me. So just now asking for permission, so like when I have clients fly in for, for a v i p day the rule is, is like the videographer will be there, he’s recording me, but not you. And, and none of your stuff will be in the video. Well, all of a sudden I, I’ve take a, you know, a, a six hour day and produce 50 pieces of content that I didn’t have to like go into a studio and shoot right now. Some people are gonna have a hard time with that cuz I don’t think they actually know what they’re talking about.
So their content ain’t that interesting. I mean, Rory, that’s the truth, man. They don’t, they don’t know how to tell a story. They don’t know how to make a point. So some people will be like, I feel like I am not as good. But the truth is, is a good editor a good what’s called a times stamper or Clipper, they will find the nuggets, right? And you, and over time what’s cool is like I only see my social media content that gets put out there. Once it goes out, I literally have a creative director that takes care of deciding what he thinks is, is appropriate or not inappropriate and, and puts it out. So I get to consume it at the same time as my audience. But it acts as a feedback loop because I can see what they think is interesting. I can then see what works on social media and then I can go, oh, that message seems to resonate so I can think about that when I’m sharing or talking or doing other stuff. And you can be
Surprised by your own brilliance. Occasionally you’re like, wow, I can’t believe I said it. That was really freaking
Good. The editing skills, they literally, they’ll take 20 minutes of me rambling and just like punch it into a 35 second reel and I’m like, wow, it made me sound so smart. But that’s, that was good. Yeah, I think, I think the key is just start capturing and then, and and have essentially a videographer and an editor, ideally the same person, like on staff part-time. I think it’s, you know, as much as you have a bookkeeper and you have an assistant, you should probably start thinking about getting a full-time or a part-time videographer slash editor.
Yeah. So talk me through the specific like team members. So is that, is it really just, do you think it’s, it starts with one person who’s like a videographer and an editor on staff?
Yeah, I think, I think there’s, there could be two components to this. There’s the, the creating the, the reels, the video assets, and then there’s publishing. So there’s the copywriting and publishing side. So you know, at the easiest level following my own, you know, advice in the buyback principle, I would say your assistant can probably write first drafts of a lot of the marketing collateral, right? Like, especially if you have a body of work they can go look at and say, oh, this is how you wrote your newsletter, this is how you write a caption. I mean, truth is with chat g p t, you get a transcript of your video and you ask AI to do it, it’ll get it 90% good, right? Like better than you could write it. You can even say in the tone of somebody you admire like the Rock or Joe Rogan, you can literally ask it to write in a certain tonality that’s appropriate for you.
And then you can just come in for a couple hours once a week and just edit that stuff, right? But again, my process is do something till it becomes, you know, timely. So if you’re trying to produce at scale like I am then you start hiring people that are just a copywriter and somebody that manages your social media posting schedule. Because I mean we’re, we’re taking all that raw video and we’re producing LinkedIn posts, we’re producing email copy, we’re producing Facebook posts. We’re literally, all social media platforms are driven from that raw capturing of video for written format and, and email.
So, okay. And I’ve heard you mention a couple different terms here and what I hear you saying is version 1.0, it might be a part-time videographer slash editor and your assistant, and maybe your assistant is taking the transcription of the video and using chat G B T to help write the captions.
Totally. Yeah. And then scheduling it on social media for publishing the publishing
And like they have to go in and schedule it or log in and post it or whatever. So then what about, but then you, you have copywriter, you have like a social media scheduler person, video editor, and then creative director. So at this, at this point then, is that at my
Scale? Yeah, at my scale. Because again, the amount of content I’m putting out, I think three reels a day. We’re, you know, I’m spending probably 15 k a month, right? So like a major investment. And I’ve got my creative director, we’ve got one or two video editors. We have one person that just does timestamping. They literally go through because I’ll produce, you know, today I probably have about five hours of capture from all my different calls, podcast interviews. I just did a keynote. So, so somebody’s gotta go through that and just timestamp the clips of what’s interesting to cue it up, up for the editors. And then we have a copywriter, I’m assuming on retainer. Again, my creative direct today cuz I’m all about, and you know, people read my book, I’m all about delegating outcomes, not tasks. I’ve delegated the whole thing to my creative director.
They manage their team in budget and then they’re the conversation I have in regards to feedback on, hey, this worked really well. I remember my, my creative director the other day, his name Sam, he goes he goes, Hey man, he sent me a text message with two, two videos. He’s like, there’s this video and this video. And it’s like, this one was good but not great. This one went viral. He goes, you, you need to calm down. And I go, okay, well first he’d asked if I was open to feedback, which the answer’s always yes, but I love his approach
So he now is giving me feedback into topic content. Like things that are like, hey, talk more this way. Tell more stories use more feeling words. Like it’s just this beautiful feedback loop. And I think if anybody wants to just become better at communication in general, it’s kind of a life hack because it creates an audience that you can serve, costs you nothing. Especially if you just capture the work you’re doing already. And it is a forcing function and a feedback loop for you to become better at a skill that will transcend anything you could do. I mean, becoming a world-class communicator in the moment where you’re able to pull vocabulary and tell stories and just be on point. Like that’s, that’s the thing that is the X factor, right? When you look at your clients, you’re like, man, they’re really great at what they do.
It’s because they practice. They had, they had reps. And that’s what I, that’s the way I look at it is like, it’s just this beautiful kind of feedback structure that just keeps feeding every other project I’m working on in my life. It makes everything else I do easier. I mean now, I mean we we’re adding thousands of people per week on my Instagram account. N now I’m getting people I’ve wanted to connect with start following me cuz they’ve seen something I put out there. I mean that, just talk about speed. I I it’s just, it’s fascinating that it took me this long to figure it out.
So, and coming, so coming around, so you have a creative director, a video editor, a times stamper
Who, a copywriter and a copywriter. Yeah, and a
Copywriter. So four, so really four at, at your current level of scale, you got four. And those are all full-time people.
Copywriters part-time times stamper is per hour editor is per project. So yeah, they’re not full-time. I mean you can, again, there’s different levels of quality. You can do some people, you can get people to produce videos for you for like 25 bucks a video, right? Or 15. I mean I’ve seen people, I mean my DM and I’m sure yours are too, they’re just full of people offering to do edits. So you, you don’t have to spend that much, but you’ll also, you know, the results are in what you invest. So if you, if you wanna, you know, have a conversation with, and that’s why my creative director is the ultimate hire because I need somebody that’s really trying to understand the platforms and what’s popping now and gimme that feedback so that we can kind of iterate cuz it’s not just about kind of a set it and forget it. It’s a very creative process.
And that person’s full-time the creative director. A
Hundred percent. Yeah.
Gotcha. And then what about graphic design?
Yeah, it’s part of the editor stuff. I don’t even know
The video editor does the graphic. Yeah, I
Think we have, we have a really strong design template structure that my designer, so I have a part-time designer Rich, who does all my design work. But he’s given like kind of like an asset library to the, the video team so that they can pull from so they don’t have to ping ’em every time.
Yeah, I love that. That’s, that’s super helpful just to, to see. But yeah, that’s a big in, I mean, 15,000 a month is a big investment even with chat G B T and everything else that you can use like, and and yeah and doing video editing so you know, you’re, you’re in a couple hundred thousand bucks a year and so you gotta have a way to monetize that. And in your case you do that with coaching. So I’d love to hear how have you applied the buyback principle to scale the coaching business? Cuz obviously that’s the thing that’s gotta pay for this cuz you’re not making, you’re not making $200,000 a year on brand deals and stuff like that. You’re not messing around with that as much as you’re not yet.
I mean this is funny, right? It’s like what? Yeah, the amount of opportunities now, like, you know, speaking fees, I think if you can sell tickets to an event, I mean you, you’re in the 25 k plus level, right? 50 K speaking. It only takes a few opportunities to kind of justify those expenses. The brand deals I don’t do yet, although, you know, my videographer or my creative director keeps talking about it cuz like there are certain products that I do love and I just happen to share often because it’s in my world. So like anything you can do to subsidize a media production I think is an interesting thing to consider. Again, financially it’s a different game for me. But you know what’s interesting is I actually don’t monetize my personal brand directly for SaaS Academy SaaS Academy’s. Kind of like how, I mean the, I think there’s two parts of the question.
How have I applied the buyback principle to the coaching business? There’s a few ways I will, I will tell you this Rory cuz you know, I’ve, I’ve had a lot of friends that coach, right? It’s, it’s because it’s easy to do. It’s like real estate agent or a social media expert. Like there’s not, the barrier venture is pretty low except most people get stuck in one-on-one coaching, right? And they don’t have an audience, a lot of their customers are through referral. So there’s always this feast or family because a customer comes in, they help ’em get a bunch of results and then they feel like they run outta runway and they go some results. So what I’ve gotten really good at because of my software background, is understanding how to design programming for my coaching clients and, and essentially productizing the coaching in a way that would allow me to buy back my time.
So for example, I actually did a video the other day about this. Like I now have a instructional designer that creates all of my growth playbooks. You know, you came to my event at that event two day event, I’m only on stage for an hour and I’m teaching, right? And that even that training at my scale, cuz you know, we have over a thousand clients, it’s a very big organization. I’m not creating that training now I know people listen to that, that, that coach are like, so what somebody else can coach my clients. My answer is yes at scale. Like I just, I just think I wanna bust the belief that coaches think that your job is to be the emotional container for your clients. Your job is to create a framework that your client can see themselves in and then from within that framework understand where they’re starting and give them the sequences of success for them to execute, get feedback on and move forward, right?
And I’m just, I’ve always been somebody that like, you know, I read this great book called The Goal Eliah Gold Rat, I believe is his name if I’m pronouncing it right, but it talks about manufacturing and systems design and that’s just, that’s how my brain thinks. So it’s like I always go left to right, raw material, finished product, even if it’s in coaching. Okay, what part can I then get support on? So like in the early days of coaching, it might be having somebody else, you know, onboard the client right? And set the expectations and schedule them up and send the invoices and schedule the next call. So like just having an executive assistant or an account manager help you out, right? Buy back your time from doing 10, 15, 20 hours a week on that kind of stuff. And then over time you might say, well I’m gonna hire somebody to help me on the marketing stuff.
Well, we just talked about, and and eventually you might have somebody like, here’s, here’s a great example. My buddy Motown one day he called me up because he was just like really stressed out the amount of work he was doing for all his different coaching clients. He had just did this big launch and had like a hundred new clients. And in that offer he, he talked about like helping them set up and, and you know, work on their Facebook ads, right? It’s just like this amazing offer. He, him as a coach, he’s a business coach, but part of that was the Facebook ads and he was just like overwhelmed. And I asked him a simple question. I said, do you know anybody else that’s a consultant, a freelancer that’s better than you, than Facebook a on Facebook ads? And he goes, yeah. I said, how much would you have to pay that person for their time?
And he goes, I don’t know, like a hundred bucks an hour. I go, cool, you have a hundred clients that paid you tens of thousands of dollars a coach with you. You can just pay somebody else to do that part of it and you can still be involved, right? What I call the ten eighty ten rule. The first 10% on the ideation, the creativity side of like the position, the other 80% of setting up the ads and the landing pages and the lead capture and all that stuff. Give that to the, your buddy and then come in at the last 10% to do the review. And that’s the 10 80 10 rule. And I mean this is, this has been around forever. This is how Andy Warhol built the factory of how he painted so many paintings back in the day. He was notorious for it. It’s how you know Tom Clancy, even though he is passed on, still writes books like people, there’s ways to capture the magic and then create systems around having other people support you on different parts of it. And that’s, that’s for me, even in coaching I think is a missing art that would allow a lot more coaches to scale and support more people if they got themselves and their beliefs out of the way.
Can you just give, hit us with the buyback principle directly? Cuz we kind of skipped over it and jumped, jumped right into it. Just, just like, what’s the main premise of what does it mean to buy back your time? And cuz you, you’re touching on it in different ways, but I’d love to just kind of get it
Straight up. Yeah. The buyback principle states, we don’t hire people to grow our business. We hire people to build buy back our time. So that’s fundamental to everything I do. Okay, what does that mean? It means it’s a calendar, not a capacity problem. Most people hire folks to do work in their business, video editors, copywriters, et cetera. But they don’t start with the first principle, which is look at your time, look at your energy and, and buy back things that suck your energy that are low value to pay somebody else to do. So that’s why that’s the buyback principle. But the process is this thing called the buyback loop, which is, which is essentially anytime you feel like your calendar is at capacity, right? And that might be anybody listen to this? Then you do three steps. You go audit, transfer, fill. Okay, audit is doing a time and energy audit on our calendar over the last two weeks.
You look at it and there’s a whole process for doing this, but I wanna look at what things light you up. Cuz some things could have lit you up and now take your energy and things that light you up are not there, right? So like look at your calendar for like red or green. Is it red takes your energy green, it lights you up and then put a dollar sign to those tasks. Is it $1 sign? Meaning that, you know, you could pay somebody very little like $15 an hour to do for you? Or is it $4 signs, which is like hiring somebody to do your job, like a c e o type pay and there’s a gradient in between, right? Whatever that is. If you just then take everything that’s in a in the red, that’s a low dollar amount to pay somebody else to do.
Typically, if this is the first time you’re doing it’s an executive assistant and you bring all that off your pa your plate, that’s the audit side, then you transfer all those tasks to them. And I teach that in the book. I mean, we can dive in as nerdy as you want to. I love this stuff. And then, then we fill it with things that light us up that make us money. Like I really believe that if people just gave themselves permission, right? Some people feel so guilty asking somebody else to help them, right? Or they have anxiety around having somebody else do things on their behalf delegating, right? They, they in their, their soul, it’s just like they’re so scared somebody’s gonna embarrass them through their work or whatever it is. And, and these people get stuck usually around three, 400,000 a year. They’re, they’re really great at what they do, but they never grow a business.
And then the next level is about 2 million a year where they hit this, this ceiling of complexity that they can’t break out of usually about 13, 15 employees because they, they gotta fu you gotta fundamentally change, right? So once you audit your time and calendar and you do this as frequently as you get at capacity, transfer that to other people, then you fill it with things that are going to either one of three things. Either build your skills, like uplevel your skills. So some people are like, well I don’t know how to do that thing. I don’t know how to build a media team. Cool. That’s a skill. Google it, search the books, read the books, go to the seminars, find the experts, learn then it’s beliefs. What are my beliefs around the world and my scarcity mindset and my money beliefs and my people beliefs that are stopping me from expanding, right?
Because at the end of the day, the world doesn’t get easier, you get better. So we have to expand our mindset and our worldviews. Then there’s character traits, right? In regards to, you know mental toughness, consistency positivity, your communication skills. These are all character traits of who you are that maybe you just haven’t become the person who can get to that next level. So the whole point of buying back our time is not to go do a four hour work week. It’s to actually become more. And that’s why like for me, I want creators to create, I want people to build mini empires and an empire. My language is somebody that creates a life of unlimited creation. They never have to retire from. That’s, that’s what I want. For every person out there that feels like an artist or a creator or a visionary, I want you to do all of that to the highest level with no hand break on. But the only way you’re gonna get there is if you understand how to buy back your time.
Yeah, man, I love that. I, I think even just giving yourself permission to just, I mean, one, one of the one of the biggest epiphanies for me as an entrepreneur was realizing everything that I hate to do someone else loves doing. And they would, they would be happy to do it and just be paid to do it for me. And just like, once you have that, that epiphany, it’s like, man, you are providing jobs, you are transferring money, you’re making your life better. And I, I think it’s, it’s just it’s a, it’s a completely freeing breakthrough in realization to, to when you start doing this and you start really buying back your time. So I love this. I think this is, this is so fascinating, interesting. I don’t want to let you go without asking you a little bit about this is a little bit off topic related to the book, but or maybe it’s not, but I, I wanna talk about retention and, you know, your expertise around SaaS companies and their valuation and going, I have to think that what’s really driving a lot of these valuations is reducing churn, reducing the amount of lost customers every month, the people who are canceling.
And I know you’ve seen so many of these, and so I wanted to just ask you a couple, like, if we talk about how do we reduce churn in any type of subscription business. So whether it’s a SaaS company or obviously you obviously have a coaching business, it’s gotta be the same. Like you’ve gotta have some thoughts and some strategies for how to reduce churn. Yeah,
I, I really wanna encourage people like pause and go get a pen. Okay? Cause I’m gonna, I’m gonna share it, but
Okay? So, so if you collect that information over a dozen clients, then what’s beautiful about that is every product improvement shouldn’t be made unless it improves retention. Okay? First and foremost. So if, so, like, what’s cool is you don’t have to be that smart about how do I make my product better? You literally just have to say, well, the people that didn’t stick around, why did they leave? And use that to ideate around those opportunities. The other thing to understand is there’s this thing called the growth ceiling, okay? And the growth ceiling. If you have a subscription business, I can tell you to the day, Rory, this is what’s crazy cuz it’s math. I can tell you to the day when you’re gonna hit your gross ceiling, meaning that your ability to grow is gonna be capped because as a percent of customers that leave every month, your ability to add new customers to just replenish that pool decays.
Like you, you’re just not able to spend fine channels to replenish. So there’s this point, and I can tell you the day and I can tell you the dollar amount, your business will, will essentially hit the ceiling at at that point. And so essentially, based on your current numbers, I know what size of business you’re running, right? It doesn’t mean you can’t make it better, it’s just this is it, right? If I, if I know how many new customers you add, I know how many customers you lose every month, how many you have right now, what you charge per month on average, that gives me that data, right? And it’s a spreadsheet that we’ve created. So then what you do, once you understand why people are leaving, you need to understand what’s a normal churn number, okay? Because, because trying to get a hundred percent retention is impossible and it’s, it’s actually unrealistic and there’s a point of diminishing returns.
But in your industry, trying to understand based on the way your model works, what is normal. So if you sell to small to medium businesses, it’s different than mid-market or medium sized businesses or larger businesses, they’re all different. Larger businesses churn less, medium churn a little bit more than large and then small turns a lot higher. So once you understand what the norm is for your world, then you just try to fix it to get to normal. Okay? So that’s like step two. It’s like wire canceling. Let’s fix that to try to get to like kind of best practices baseline. Then there’s this thing, I don’t wanna lose everybody, but it’s a term called expansion revenue. Okay? Expansion revenue is the dollar amount that a, a group of people will end up spending with you. Either through their expansion into a high level program that counteracts what’s called contraction revenue, which is cancellation in downgrades in your world.
So if you think about it, you might have a hundred people in January, out those a hundred people, how many people left? How many people downsize, how many people expanded? So if you think of that group of people in January, by December, you know, you wanna get to a place where you are at least, I mean I wanna, I know our numbers, which are the best in the industry just cuz this is my world, but I mean, for most coaching organizations, they wanna be at about 70 to 80% revenue retention, right? Meaning that out of those a hundred customers in January, by the end, if they spent a hundred thousand a month, you’re at 80,000 a month for that group of people, right? So, so that’s where you gotta start thinking about what’s 12 months later. You talk about 12 months later. Yeah, 12 months later.
Yeah, yeah, yeah. Within an annual period. Cause cuz that’s gonna give you some insights into what we call the, the strategic P three s, the product positioning and packaging, right? So like, what are you selling? How are you delivering it? How are you positioning, who’s the customer? Cuz some people have high churn, they’re selling stuff to the wrong people. And then what’s your packaging in regards to like how your packages work, right? So pricing strategies and kind of like the plans you might put together and like, that’s the next area to focus on. So to give you a sense of like, what’s the gold standard in software, it’s 130%. Okay? So companies like Slack, Salesforce, HubSpot, et cetera, they’re in the 120 to 125% revenue retention. Meaning then that’s why software is so valuable in the market is because if you fix these problems and you really dial this stuff in, it does become an annuity, right? No different than insurance plan or whatever. It’s like it will continue to pay dividends based on a customer. You might have to pay a little bit of money to acquire them today, but your product expands with them and they, they spend more every year, which is a, a really cool thing to watch happen. But that’s, that’s the model.
And so you’re, you’re saying, so 130% would mean cuz you’re saying a hundred percent isn’t realistic, but that’s because if you lose 20% of the people in
Coaching, yeah, it’s very rare in coaching you’re gonna get that. I would say if you are at at least 80% revenue retention, you’re in the top 1%, 5%,
But you could through expansion revenue. So even though 20% of your customers leave the other 80% that stay, if some percentage of those are upgrading to something else, the net revenue number of those of that, like kind of
It could, I’ve never, I’ve never, I haven’t seen, yeah, I haven’t seen it yet. Usually what you’ll see is what’s called logo churn versus revenue churn. The logo churn for most coaching organizations, I would say the average is about 40% per year, if not 50% per year, right? That’s the average. Like most people are not good at retaining customers. If you can retain 70%, so you’re churning 30%, then revenue expansion will make up the rest of it. That’s where I get that 85, 80 85 revenue retention. Does that make sense? So I’m taking into consideration accounts leaving and expansion into higher level upward mo motion. But like when I look at most programs, the way they’re structured, you know, a third of the people in this program are gonna upsell into this next level, but that thing’s usually twice as more expensive. But again, there’s still cancellation contraction in that program.
So it’s actually an interesting thing like to, to figure out for your business is like as a coaching organization that focuses on subscriptions what is your growth ceiling? If you understand the calculation, like where do we essentially, what’s the, what’s the highest potential output of this engine that we’ve built? And do we wanna invest another four? Like, I mean, I see people all the time, they call me and they’re like, Dan, we’re thinking of spending like hundreds of thousand dollars building this thing. It’s like, for what? They’re like to improve this. And I go, what does that mean long-term? Is that realistic? Like, what’s your ROI on that? And they’re like, well, I don’t really know. That’s the whole point. It’s if you have decent numbers, then the plan is to operationalize that and don’t break anything, right? And maybe add more people. But if your numbers aren’t good, then fix that, then scale back up. But at a certain point, most organizations, especially coaching organizations, there’s gonna be this natural place where they, they end up, right. Some people that’s 60 million a year, some people that’s 6 million a year, right? That’s just the way it is,
Man. I love that. I knew you would have awesome thoughts there. We could do a whole nother episode sometime maybe on just coaching retention. But this has been awesome. Y’all, the book is called Buy Back Your Time, wall Street Journal, bestselling book. Dan, where do you want people to go if to connect with you and, and learn more about what you’re up to?
Yeah, Instagram’s my favorite. Dan Martell two ELs a Martel, find me on Instagram. That’s my favorite place. I’m on other socials. And then, you know, if you do get the book and it serves, please leave me a review. The team and I are creating a movement around buying back your time. It’s like my, as you know, it’s the topic I’m most passionate about. I don’t think there’ll ever be a day where I’m not excited about trying to teach people how to get their time back to go create more in the world. Cuz I think that’s, that’s what we’re here to do. We’re here to become better versions of ourselves and then share ourselves with the world through our business, through our community, through our church. And I really wanna see people kind of elevate that for themselves using this process.
I love it. I love it. Well, I can’t recommend you enough, my friend. Thank you so much for being here and we wish that you the best of luck and I’ll, I’ll, I’ll be following you and cheering you on.
Appreciate it, Rory. All the best.