SFR 226: The 4 Kinds Of Cost - Stephen Larsen

SFR 226: The 4 Kinds Of Cost

Mar 19th, 2019 anchorwave

Not all resources are created equal. What I’ll teach today will show you why I don’t do certain roles in my business…

When I left my job at ClickFunnels on January 1st, 2018, my goal was a million dollars.

On February 1st, 2019 I hit a million. It took me 13 months straight outta the gate, and I’m really psyched about it.

My goal this year is four million. Holy Crap!

Steve Larsen building a business

I haven’t actively been selling on some of my core products during this past little bit… but the systems I’ve built have enough pressure in them that we’re still doing just about six figures a month.

Right now, you may be thinking, “Steve, you’re crazy, man… why haven’t you been selling?”

However, there’s method in my madness… and it’s because of what I’m gonna talk about now.

LIGHTING A FIRE

I wanna walk through the 4 different costs and the benefits and cons of each of them. There are some costs that I’m willing to pay and ones that I’m not.

When I first started this game, and this is an epic failure… I couldn’t feed my wife, (a lot of you guys know the story), so I asked my Dad for cash and thankfully, he said, NO.

I’m glad he said, no… because it put a fire in me to provide. I started running and trying tons of different kinds of businesses, (and trying is the wrong word).

I was actively selling but it wasn’t working for me.

Looking back, I’m thankful because otherwise I’d be stuck in businesses that I didn’t love you know. This might sound bit weird, but sometimes you’re meant to fail.

Failing at building a business

Hindsight’s 20 20, but it’s hard to feel that way in the middle of it though.

I BORROWED $15,000

One of my first businesses was trading stocks and auctions. I studied the financial markets. I had a ton of fun learning about it…

BUT…

About five-six months in, we found out that the guy teaching us knew that he was teaching was old, outdated strategies.

In my mind, that’s very unethical, and so I was like, “Crap! Is this gonna work? Are you serious?”

I borrowed 15 grand I didn’t have at the time to join the course.

One of the major strategies we were taught was OPM … or how to leverage other people’s money.

OPM business funding

That’s very sexy as a sales message, but it’s also incredibly stressful.

Using other people’s money comes with handcuffs… and you need to be aware of that!

OPM was the BIG thing I was taught in college too.

At college, we were taught that when you get into business it’s all about how to write a business plan so that you can get VC funding aka OPM.

The emphasis was on how to actually acquire funding MORE than how to actually make a product that sells… or how to make a sales message that sells.

Building a business without VC funding

It’s mind-blowing to me. I don’t understand why that message is there!

There are several ways to acquire the firepower you need without OPM, and I wanna walk you through the four of them so you can see what your options really are.

You don’t have to borrow. You don’t have to do a lot of the stuff that’s taught out there.

If you don’t wanna be handcuffed my friends, this is how you do it!

THE FOUR COSTS

The four costs to building a business

In the funnel game, there are two specific metrics that matter a lot.

  • Average Cart Value
  • Cost To Acquire

Average Cart Value = Meaning how much money comes in with each new customer… (Because of upsells it’s usually higher than the price that you’re selling your first product at).

Cost To Acquire = When we say average cart value, cost to acquire, or cost per acquisition, we’re specifically talking about ad or dollar cost, i.e., “How much money can I spend in orders to go acquire a customer?”

As I’ve done more of this game, I’ve realized that on a macro level, there’s MORE cost to acquire than just money.

There are actually multiple costs and multiple ways I can spend resources to get what I want.

COST #1: YOUR OWN MONEY

Start up costs #1

The huge benefit of your own money is speed. Lots and lots of speed. Money is faster than time.

Money is faster than time and I wanna spend money rather than time… so the benefit here is SPEED.

Speed of building a business

COST #2: OTHER PEOPLE’S MONEY

This is what I was taught in a lot of these early courses and stuff that I did: “Use and leverage other people’s cash.” i.e, OPM

That’s a sexy sales message, but it comes with the most ridiculously insane handcuffs. I hate using other people’s money.

I can use other people’s money if it’s the money that comes from my customers. I can make sales and create a self-liquidating offer that allows my customers to pay for my ads…

But I’m not gonna go borrow money.

Don't borrow money for business funding

The benefit of this of OPM is….

I actually can’t think of what the benefit of using other people’s money is.

There are very few scenarios, in my mind, where you actually truly need VC funding.

If I’m going to build a stadium or a factory, that makes sense… that kind of stuff, something that has to do with infrastructure, but even then…

I hate using OPM for business funding

I’m gonna buy an office soon, (which I’m really excited about), but I’d rather create the cash flow than use OPM.

I’m sure there are other scenarios out there… but in internet direct response marketing (which is what I’m in and what you do, I’m assuming, if you’re reading this)…

I can’t think of many scenarios where you even need OPM.

COST #3: YOUR TIME

Time is what most people spend when they don’t have any cash flow for a while… and that’s okay.

In fact, I was just talking to my wife about this last night.

Building a business with your time

When I first got hired at ClickFunnels, I wore so many hats.

We didn’t have a full-time designer, copywriter, photographer or email writer; there was none of that. It just was Russell and I.

Occasionally, we’d outsource to a few design guys once in a while, but that was it.

It’s one of the reasons I got so good.

We did the whole shebang:

  • Copy
  • Design
  • Funnel building
  • Sales message writing

A lot of the time, we’d just take our phone out and make the sales videos.

Sales video start up costs

We’d run all the email sequences, create the launch campaign, and the evergreen campaign…

It was a huge amount of work.

Then I’d go and work with the fulfillment houses to set up fulfillment and make that link happen.

Next, I’d work with the person who sourced the physical product. It was insane.

We worked like this for the first year, and then we started bringing on other people and learning how to outsource.
The benefit of spending your time is that you learn like crazy. You kinda become a jack of all trades = A JOAT.

JOAT building a business

The problem is that jack of all trades don’t scale. You just can’t.

Right now, there’s a lot of people who are building funnels for me so that I can scale my business. Which leads me to the next (and my favorite) kind of cost…

COST #4: YOUR DUPLICATABLE TIME

I don’t know of another word to say this other than… OUTSOURCING!

I’m NOT the one building a lot of things for my funnels anymore. It’s still my time… but let’s think about it in terms of sales…

For Example:

When I was doing door to door sales, the cost was my time. I was the cost.

I’d walk around, and every single door, I’d say the same script… but one on one. You can’t scale that!

It was a fantastic learning environment. I learned a ton of stuff that catapulted me, that I wouldn’t have learned anywhere else..

I really appreciate my door to door and telemarketing experience a lot. BUT I was using my time as the cost.

Building a business to scale

There’s no way to make it bigger.

When I did door to door, I started seeing all these ads on billboards as we drove to our area.

I was going through a bad phase. I was in the back seat of the car on beautiful blue sky day with a few clouds… but I was in a bad mood.

I was looking at these all these billboards, and I remember thinking to myself:

“Man, I going to try to sell people things who are NOT planning on spending money… BUT the people calling these billboards are asking to be sold.”

…that was the first time I ever put an ad on the internet.

I went back to our apartment that day, made an ad and put it on all these free classified ad platforms.

I didn’t know it at the time, but I was totally breaking all these laws because with pesticides you have to display your certificate.

I didn’t know this, so within a month all these government places are calling, “You gotta turn that off!”

Building a business with ads

But in the meantime, I made a ton of sales! My phone blew up. People were calling begging to buy:

  • I got ants in my walls
  • I can hear the bugs in the floor

I’m like, “Well, you should probably get our top package.” They’re like, “Okay just come.”

It was very very interesting. I flipped the game, and it was part of me learning how to pitch one to many through ads on the internet. It’s why I stopped doing door to door.

I created duplicatable time where I was pitching multiple people… but I wasn’t the one doing it.

Duplicate start up costs

MY FAVORITE COSTS

My main role in my business it is NOT to be a type 3 cost individual who swaps their time for money.

Which is why I focus on:

  • Podcasting
  • Creating Content like crazy
  • Building lots of sales funnels

That’s why I’m NOT a closer on the phone. I’m NEVER gonna do that because my times MORE valuable.

I’m not down putting anyone who is in sales, I think it’s awesome. You make just a crap ton of money.

Sales are the one area where there’s not really much of a ceiling in a company, but no risk either because you’re not the entrepreneur.

Sales is the most prestigious thing on the planet in my opinion…

BUT…

As far as being the CEO, it doesn’t make sense for me to be the closer at my own company.

It makes more sense for me to do activities that are duplicate to my time.

Duplicate your time when building a business

So I’m gonna make content because I make it once, and guess what:

  • It gets downloaded thousands of times for the rest of my life
  • All those calls to action at the end are sending traffic to my funnels that will be there and live forever
  • I’m building systems and building teams that duplicate and expand me beyond what I could ever do on my own.

A lot more work hours are being put into my projects than I have hours in the week.

I expanded my time, my creative systems, created content and things that are evergreen.

You’ll notice that, in a lot of ways, I live my life is that way too.

If I wanna spend time, just shooting the breeze and blowing time just a little bit, I wanna do that outta pure relaxation… NOT on a business task.

GOING EVERGREEN

Building a business evergreen

I love Facebook ads… but it’s NOT my role to go learn them because, when I put a Facebook ad up, and after a while, it dies.

I don’t like to learn strategies that are NOT a little bit more evergreen in style… meaning they’ll stick around forever.

I’m not willing to spend my time on one-off things.

I don’t do SEO stuff. I know a lot of that stuff stays on the internet long term, but man, in a Thanos’ snap… whatever his name is, (that guy off the Avengers)…

BOOM!

The algorithms could change, and all that work I did for SEO has gone.

Here’s the main point though…

When I combine duplicatable time with my own money, that’s where the magic happens.

Building a business magic

My money and Duplicatable Time are the two costs I’m willing to accept in my business. I’m never gonna take on VC funding.

COST #1 + COST #4 = FREEDOM

I’ve got an idea for a sick show that I’m really excited about. We’re gonna try and build the studio, but first, I’m gonna do projects that raise the cash.

I’m NOT gonna borrow money, that would be stupid in my opinion…

Borrow money for business funding

…because it comes with the MOST insane handcuffs.

My favorite costs are:

My Money + Duplicatable Time

  1. My money increases speed, (cos money is faster than time… and it’s how you buy your time eventually).
  2. I go as fast as possible to paid advertising (cos it’s something I can control more than the other kinds of costs).
  3. Then as far as time goes, I ONLY do stuff that lets me replicate me.

Business funding that lasts forever

i.e., Systems, content, and things that live on the internet forever.

I repurpose my content to so many platforms so that if one goes down, there are 21 other platforms with my content is on all over the place.

…that’s why I’ve run the way I have.

Steve Larsen business funding

UNTIL NEXT TIME – CAPITALIST PIG, BABY!

I left my job in January 2018 to build my million dollar business completely from scratch without any funding or any help… AND I HIT IT, right on February 1, 2019…

Just 13 months later, we actually grossed a million dollars, which is pretty awesome.

Better yet, I got to keep a lot of the cash, just ’cause my costs are honestly NOT very high.

That said, there are several tools, though, I use to automate vital pieces of my business and ClickFunnels is one of them.

ClickFunnels lets me build automated sales machines all over the internet that are non-stop pitching people for me. It’s ONLY $97 a month.

Better yet, I don’t need to be a coder.

If you’re asking yourself, “Stephen, are you giving me a blatant pitch for ClickFunnels right now?” YES, 100%!

I think it’s dumb when people don’t use ClickFunnels. It makes you MORE and saves you MORE.

Basically, I have the power of an entire tech team in my hand and I want you to have it.

Steve Larsen ClickFunnels FREE trial

Go grab a free trial of ClickFunnels by going to freecftrial.com.

I want EVERYONE to experience the power of ClickFunnels in their business, so they’re letting me hook you up at freecftrial.com.

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