From: myfirstmillionpod
Scaling a business through acquisition and partnerships involves strategically leveraging existing successful models and expanding their reach, rather than solely focusing on organic growth of individual units. This approach emphasizes identifying and acquiring businesses that can benefit from proven systems, or forming partnerships to deploy those systems into new markets and industries.
Early Business Ventures: Gym Ownership and Consulting
The entrepreneur initially owned six working gym locations by the age of 26 [00:00:45]. A mentor suggested transitioning from owning gyms to licensing the model out, shifting the business from business-to-consumer (B2C) to business-to-business (B2B) [00:00:50]. To validate the model’s effectiveness across various markets, the entrepreneur and his wife personally conducted 32 gym turnarounds over two years, acting as management consultants to fix pricing, layout, and sales processes [00:01:06].
The original concept was “Gym Rescue,” similar to “Bar Rescue,” but the name was changed to “Gym Launch” because owners didn’t want to be “rescued” but rather “launched” [00:03:17].
Evolution to a Licensing Model: Gym Launch
Initially, the “Gym Launch” model operated on a pure performance basis, charging 100% of upfront cash collected during a 21-day launch period, averaging about 800,000 in a single month by launching eight gyms [00:02:00]. However, a critical flaw emerged: the lack of control over fulfillment by the struggling gyms, which led to significant refund issues as owners would undercut the new sales [00:02:35].
The Irresistible Offer
Faced with a problematic business model and substantial refunds, the entrepreneur decided to pivot. A key turning point was when a gym owner, desperate for help, asked how much it would cost for the model to be licensed. The entrepreneur, intending to deter him, quoted $6,000, which the owner immediately accepted [00:05:01]. This led to the refinement of the Gym Launch licensing model.
The “irresistible offer” concept was central to the success of Gym Launch [00:05:57]:
- Front-end system: Comprehensive playbook for lead acquisition, including ads, landing pages, targeting, text sequences, and sales processes [00:05:40].
- Performance-based pricing (later iteration): Transitioned to a pay-per-show model for agencies, where an upfront fee was charged, and then a flat rate per person who showed up, rather than a monthly retainer [00:24:28]. This made the offer more compelling for clients [00:25:35].
- Value-driven pricing: The initial Gym Launch system was priced at 30,000 in cash within the first 30 days [00:30:30].
- Long-term contracts: Gyms signed three-year licensing agreements for 800/week) [00:31:06].
- Upselling and continuity: After the initial launch, clients were offered a “Legacy” continuity program at a lower weekly rate, providing more value for less money. This strategy helped maximize customer lifetime value (LTV) and reduce churn [00:32:06]. The best time to sell is when the client is most excited [00:33:19].
Financial Success of Gym Launch
The licensing model saw rapid growth:
- Year 1 (hybrid model): 3 million EBITDA [00:26:31].
- Year 2: 17 million EBITDA [00:15:13].
- Year 3: 13.4 million EBITDA (a decline in EBITDA due to starting a second company and lowering prices) [00:27:22].
Expanding into New Markets and Industries: Prestige Labs
The entrepreneur also launched Prestige Labs, a supplement company, in December 2018 [00:27:54]. This business utilized a drop-shipping model through the existing gym clients, addressing their cash flow issues [00:28:11]. Gyms would display empty bottles or samplers and use a pre-loaded Amazon Fire kiosk with their affiliate link for direct customer purchases [00:28:31]. This provided a second recurring revenue stream for gyms with no operational drag for them, offering 40% commissions [00:29:10]. In its official launch month (January 2019), Prestige Labs generated $1.7 million [00:29:47].
Making Strategic Acquisitions for Growth: Acquisition.com
The entrepreneur’s current venture, Acquisition.com, focuses on business acquisition strategies by taking majority interests in companies and deploying their proven models [00:36:17]. This represents a continued strategy of scaling and optimizing businesses through applying successful frameworks to new contexts.
Investment Strategy
Acquisition.com targets businesses with the following characteristics [00:37:21]:
- Niche e-learning businesses: Service companies that operate within a specific niche [00:37:26].
- Brick-and-mortar chains: Businesses with multiple successful locations looking to expand nationally [00:37:28].
- Tech-enabled services: Companies that may have a software component but are primarily service-based [00:37:54].
The core principle is to leverage expertise in high-cash-flow service businesses, which are considered malleable and easy to generate high margins from [00:37:07].
Case Study: Children’s Photography Business
An example of an acquisition is a children’s photography business that initially had one location and a hybrid agency/coaching model [00:39:41]. Recognizing the high profitability of the photography studios compared to the coaching model, the entrepreneur decided to invest in opening and owning more locations directly, expanding from one to 13 locations in a year [00:40:11]. This business offers a “magical storybook experience” for children and focuses on the high margins available in the photography studio model [00:39:17].
Lessons on Business Growth and Investment
The “Opportunity Vehicle”
The entrepreneur defines an “opportunity vehicle” by three factors [00:14:34]:
- Number of potential units to be sold.
- Gross margin per unit possible.
- Supply and demand dynamics within the space.
This framework allows for the assessment of whether a business or industry is a “level two opportunity with a level 10 skill set” [00:13:16].
Work-Life Philosophy
The entrepreneur emphasizes a personal acceptance of loving work and not judging oneself for the amount of effort put in [00:00:00]. Having experienced a period of being “bored out of my mind” after selling companies and being passive, he realized that “passive income is overrated” and true desire is for “options for engaging activities” [00:34:21]. The shift is from seeking “freedom” to desiring “optionality” in work [00:35:55].
Transparency and Deal Flow
The entrepreneur maintains a high level of transparency about his business financials and processes, which he believes is the “right thing to do” [00:41:31]. This openness, especially through free content, helps create deal flow for Acquisition.com, as entrepreneurs who learn from his methods may later seek partnerships [00:42:40]. His mission is to “document and share the best practices of building wonderful businesses” [00:43:40], providing real stories and fundamental truths.
Sales Philosophy
The entrepreneur’s sales philosophy is rooted in:
- Conviction and Trust: The number one predictor of good sales is conviction in the product or service, transferred through trust [00:58:51].
- Reframing Selling: Instead of “selling,” the mindset should be “helping someone make a decision that’s going to help themselves” [00:58:44].
- Childlike Curiosity: To avoid confrontation and build rapport, a salesperson should approach objections with curiosity, asking “why wouldn’t he?” or “tell me more about that” [01:01:56].
- Structured Conversation: Sales conversations should follow a framework where the salesperson, as the expert, guides the prospect to their own conclusion [01:00:27].
Strategic Simplicity
Despite operating complex businesses, the entrepreneur prefers a straightforward approach. For example, Gym Launch did not have a website until after its second year, having already generated $40 million in sales [01:10:34]. This illustrates a focus on core revenue-generating activities over non-essential polish.