SFR 248: Kill The J Curve...

I'm going to throw rocks here a little bit. Ermmm, ‘NO,’ actually it's going to be mountains, boulders and things that are VERY heavy… 

 

I'm vehemently against this idea that we need to take on funding in order to start a company.

 

The J Curve is what's taught in most of our education and mainstream entrepreneurship today.

 

Case in point, the J Curve is the very model that Shark Tank operates under.

 

And while I love the show, I’m vehemently against the concept of the J Curve...

 

In fact…

 

It’s time to kill the J Curve.

 

If you don’t know what the J Curve is, all will become clear… but first, let me tell you a story of about how to make a million bucks…

 

THROWING A J CURVE…

 

I was working with Russell on a project for one of his personal clients…

 

For every dollar we put in an Ads, they were getting $1.30 back out. For every dollar they were putting in an Ad, they were getting $1.30 back out.

 

However, one day they called, us a bit ticked off, and said, "We're barely breaking even on this?"

 

I was like, "You're NOT breaking even. You're actually making 30 cents for every customer that comes in."

 

They weren’t happy with that answer, and they said, "Exactly, we're not going to make a ton of money on that."

 

We were like, "You guys are missing the entire point here. You now have a machine where you're acquiring customers for free."

 

We’d created a bottom of the value ladder offer that was expanding their current customer base.

 

They already had their middle of the value ladder product and they had an expensive club as well…

 

But what they needed was MORE blood in their value ladder to bring people in and ascend them to their more high-end offers.

 

We were putting a $1 in and they were getting $1.30 back out… but they were mad about that.

 

We asked, “What are you mad about? This is a success."

 

They were like, "It's NOT a success."

 

We were like, "Yeah, that's a HUGE screaming success."

 

BREAK-EVEN WINS

 

… we said, "Let's think about this for a moment…”

“You have a machine that’s giving you customers for FREE and you’re even gaining 30 cents …”

 

We told them:

 

“Anything you sell to those customers afterward is pure profit!”

 

Break-even is a million dollar scenario.

 

… AND now, these customers are also MORE likely to purchase anything you tell them to buy.

 

Still, they weren’t convinced… they were like, "What are you talking about?"

 

Here’s a FACT:

 

Second money is ALWAYS easier than first money.

 

A percentage of your list will ALWAYS purchase simply because they like you and they’ve had a good experience previously

 

We're not just tweaking:

 

• Your offer

 

• The way you position your messaging

 

But what's so incredible about the way this works is this...

 

STARTING A BUSINESS THE WRONG WAY?

 

In college, I was taught that the first things you do when starting a business are:

 

1. Write a business plan

 

1. Gather the who’s who and get people on your team

 

1. Think more about your idea and do some market research

 

1. Competitive and SWOT Analysis

 

1. Look into the probability of success and do lots of analytics.

 

Probably my least favorite class was Quantitative Marketing research.  

 

I HATED that class…

 

And that’s literally where the phrase ‘J Curve’ comes from...

 

When you start your business, since there's no revenue yet,  you are expected to go into debt in order to fund the business, the people, and the systems.

 

There are a series of systems in business...

 

For example:

 

There's a system for:

 

• Support

 

• Fulfillment

 

• Helping people actually have success.

 

All that stuff costs money.

 

At first, when I started my business, it was just me... but that's NOT the way I was taught in college.

 

SAY ‘HELLO’ TO THE J CURVE

 

In college, I was taught to get a loan and go into debt.  

 

#EyeRoll

 

I would expect to be in debt until a magic moment three to five years away when I finally become cash flow positive.

 

Meaning, I'm not losing money faster than I'm making it.

 

I’m NOT breaking even; I'm just finally going in a straight line.

 

I'm NOT making any money, but I'm NOT losing anymore.

 

Then you keep tweaking and tweaking until you reach the mark where... *hopefully*... you’ve made more money than you took on to fund the business.

 

And *this* is literally what I was taught in college…

 

When the curve moves upwards enough, then you're profitable.

 

The moment the curve starts to get to a certain zone (see below) you can take profit - which is great. You make a lot of cash...

 

But as soon as you start increasing at a decreasing rate, meaning the curve starts going level, you're taught to sell.

 

You go into the stock market with an IPO, and you sell off your company and you no longer own your baby.

 

That SUCKS!

 

You work your face off, but then most of your decisions will be made by a board…

 

Y...