How to Maximize Your Profit & Exit as an Entrepreneur (with Jason Phillips)
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So much of the business advice that's talked about in the online space speaks to companies that are, they don't really have a brand. So how are you maximizing profit? Yeah, so obviously you built this company to millions and millions and millions and a team and everything and now you're prepping for exit. What were some of the lessons?

growing this kind of business rule of that. - Have a really clean books from day one. I think a lot of entrepreneurs, especially the digital space, overlook the importance of record keeping. I also think finding the right staff

is really important in the right leadership. Some leaders are great people, great motivators, but they're terrible at operations systems, frameworks and data. And I've been through a couple of exits. I think my first one was 28 and it took me six months to clean up my books and records to get ready for an exit. And I'm glad it happened at 28, right? Still pretty young. And I think with entrepreneurs, as many podcasters we listen to and hear this from people like us,

Probably still won't do it until we get an IRS audit or we try and exit. We're stubborn, right? We like to learn the hard way for some reason. My name's Rudy Moore, host of Living the Red Life podcast, and I'm here to change the way you see your life in your earpiece every single week. If you're ready to start living the red life, ditch the blue pill, take the red pill, join me in Wonderland.

and change your life. Guys, welcome back to another episode of Living the Red Life. We've got a great session today talking about profit and how to maximize your profit. And that is with my good friend, Jason. Buddy, what's up? Welcome to the podcast.

I appreciate you having me on, man. Thanks for making this happen. Of course. And if you're watching on video, we have opposing colors. He's got his blue background. I got my red. And we actually are going to have some opposing views today, which is going to make for a fun episode where we're talking about different outcomes and ways to run your business around profit, gross revenue, and scalability. So I'm super excited for this because, you know, like most things in life,

We came from a nutrition fitness background and there's never one right answer. There's many ways to meet and achieve an end goal. So I'm excited to talk about this today. But Jason, before we get too far into it, maybe it'd be good just a minute overview of your growth and everything and how you got to this point and why now you are focused more on the profit side.

Yeah, dude. So super good background. 2014. I was as broke as they come. Um, I was your typical meathead that was like bouncing around job to job aimlessly, probably the most on the hireable person in the world. And so, uh, I quickly realized I should do something with my life. Um, it was that year. It's actually Thanksgiving that year. I was overdrawn on my bank account when I couldn't afford coffee. Uh,

And I was like, all right, I'm going to figure it out in the next 12 months, made a million dollars. Um, I, I quickly grew my online coaching business to multiple seven figures. I think I was one of the first at that time, um, to take online health and fitness to multiple seven figures. Um, you

you know 2017 realized there was probably a bigger purpose introduced the nutritional coaching institute to certify coaches teach them what i was doing and um you know build that up to where i actually have an offer for exit in 2022 um and

You know, really, man, 23 was an interesting year for me because I was, I actually ended up backing out of diligence in December of 42 with the goal of building bigger and bigger. And I realized that it wasn't getting happier and happier despite, um, you know, how large it was getting. And I really had to take a step back, man. And it was like, what, what am I doing? Why am I doing it? What is the end outcome I truly desire for this? And I realized I hadn't

I've asked myself that in years. So as we sit here, 2044, I'm preparing to sell one of the companies and the other is really built purely on cash flow. I talked about profits and happiness. Those are the two that I'm allowing to run my life right now. And if it's not profitable, if it doesn't make me happy, I'm probably not doing it.

Yeah, it's great. It's a great concept that I think a lot of people are transitioning to the last couple of years, right, in our space or mutual friends of ours. And it's something that I think sometimes gets lost in transition, maybe for you during that journey. I know for me, it's always a thing I question, right? It's all about growth, growth, growth, scale, scale, scale. And I try and always realign every three months, and that's when I cut stuff out and pivot and...

You know, I've definitely ended up in times and situations where I'm like, hey, I'm not enjoying this as much now. And I think I've done a good job of when that happens.

you know, I dropped partnerships or I changed the structure of the meetings or the team or bring in new execs to help. So I think it's so important as an entrepreneur because I think when we start, the goal is just revenue. And then obviously we switch and realize, hey, we can maybe have less revenue, but more profit. And I just think, you know, we often forget that. So what led you to decide that and how are you now running the company differently? Yeah, so, you know, I mean,

It's interesting because I think so much of the business advice that's talked about in, you know, in the online space speaks to companies that are largely being built with like enterprise value in mind. And so like, I say that and I primarily think of like the odds for Moses in the world, right? Like when I, when I lost a lot of his stuff and it's like reinvest and grow and reinvest and scale and reinvest. And it's like, yeah, like dude, that can build massive enterprise value in your company. But most companies,

Most companies, especially in B2C services, they don't really have a brand. They don't really have intellectual property. They have an individual. And that's never going to be sellable from an enterprise value level. And so I have an entity, a nutritional coaching institute. Clearly, it can have enterprise value. But I come from the coaching space. And so for me to get that company to where I want to go would require probably a lot more

I'm going to say this is going to come out really bad. Um, probably sacrifice then really I won't, right? Like, um, I'm building business with a few pigs of bud. I come from absolutely nothing. Um, I have a family, you know, I have a daughter and I,

I want to make sure that the relationships I have and my child are set up for quite some time. And so for me, that is a function of cash flow. There's risk when you're playing the enterprise value game. And I'm chosen to hedge my risks quite a bit. So I was hitting a level of burnout. And I realized that the level of burnout for me was I was no longer living on the side of things that I wanted to be living on.

I was spending time managing people, managing systems, managing processes, and that's what a CEO should do. Like 100%. - Sounds like my life. - Exactly. And like I realized, and I always say this tongue in cheek, but a little bit of seriousness,

I'm like the dumbest entrepreneur to ever make millions of dollars because like, I'm just the guy that's really good at coaching. Like I was good at like good advice now I'm good at like business vision, but like I don't love running the business.

day-to-day structural integration type things like not by jam. I'm visionary through and through. I'm connection to customers through and through. And so I've been removed from the things that I truly enjoy. And so...

I could either hire a big staff, which is going to kill my margin and continue building enterprise value. Totally fine. Or I could just choose to be happy. Dude, I'm 39. I turned 40 in August. I want to be happy, man. Good, good. Well, look, I mean, that's the most important thing about an entrepreneur is do what you love, right? And that's why we become entrepreneurs. And yeah, I mean, it's...

an ego goal for a lot of people is just to grow gross revenue and even for me like I have goals of being a billionaire and I want I actually thoroughly enjoy as stressful as it can be at times

It's kind of like running. It sucks when you're doing it, but you feel good about it after, right? And that's how it is with my business. Like, you know, sometimes when stuff happens in the day, it sucks for an hour or two, but I thoroughly enjoy building the big teams and the systems and the KPIs and the infrastructure and frameworks and the mass expansion idea. And I've always said, look, if I make four or 500K a year profit,

Like any more than that, I'm just going to put it in investment stuff that's boring to me that I'm never going to see. That doesn't excite me. What excites me is what most people hate, which is growing, you know, going through all those growth pains and you just have to tailor it to you. So, I mean, I would love to talk now about. So how do how are you maximizing profit? Yeah, so I've actually sold.

kind of spoke of evolution, right? In the sense that in the very beginning, we were purely an artificial certification company. Um, you know, we recognize that we were putting a lot of really qualified individuals out into the space. Uh,

And by putting them out into the space, we were doing so very unprepared. Because just because you know how to coach somebody in nutrition doesn't mean you don't want to acquire clients. It doesn't mean you know how to handle a business. And so we actually started doing business consulting. And so what we recognized about the majority of like the staffing and the infrastructure was all like the certification side, right? It goes on.

um all of our ads were running to that all of our full velvet was on that and that like the majority of the consulting that's kind of my bread and butter that's what you know i kind of came up in as a coach and so

I actually separated the two companies into two completely different LLCs. And so I'm allowing one to operate and that's the one I'm in the process of selling. And so I'm still running that very same, you know, higher gross profits, bigger teams. And I've really removed myself a lot of the operations. I've got fantastic teams inserted over there.

I really don't touch very much over there outside of just some advice here and there. I've almost 100% put myself into just the consulting side where, you know, now we do, you know,

in the next three to four months we should hit almost 100k a month there uh and i've got one employee yeah and so you know obviously profit margins are upwards of 90 percent there and i can take home significant amount so um it really was just identifying the things of the business i loved finding a new vehicle to kind of wrap them up in and almost creating its own business um you know i wanted to get something out of all the work i put in i mean obviously we've been running the business since 2017 so seven years uh we've in

18,000, uh, customers. So I don't even know the ones that are inactive. Um, and so it's like, obviously I want to make sure that the impact can not come, but it still is seen through. I mean, I still very much believe in the product and what it does for people and really the ripple effect that has it to the world. So I wanted to make sure that it was, you know, kind of put into, uh,

into a place that was going to be good at all cost yeah i love that what what was some other kind of you know obviously you built this company it's millions and millions and millions and and a team and everything and now you're prepping for exit what was some of the the lessons growing this kind of business rule of that for you oh man where do i start yeah uh

have a really clean books from day one okay i think a lot of entrepreneurs especially the digital space overlook the importance of record keeping yeah i wanted um i know the first time i went through diligence they requested a lot of numbers of they just frankly didn't have yeah there's you know there's a little bit of embarrassment when you're like sorry i don't have that um but it also you know i think they were pretty understanding and at the same time but it's like

that's a lesson learned. And I think you want to be making data-driven decisions. I think that now more than ever, I look at the growth of that company through the lens of long numbers, not just emotions, based on marketing and sales objectives. And so that was a big one. I also think finding the right staff is really important and the right leadership. And so I've always said that

I don't categorize myself as a very good leader. I think that I am very much like, I just kind of in my own world. Like I'm not really, I'm not the guy that's ever going to be like the rah-rah cheerleader. And so like, I'm also very bad at like,

going in connecting with the team and just like wanting to like check in with people that's not how i operate i'm very like reclusive in my own personal life so um in the business life that's not great you know your team needs to be able to afford they need to be recognized seen understood and i had to recognize that about myself so you know there's some level of

that you have to think of as a CEO of understanding, you know, who am I? Yeah, we, I mean, a couple of things there. Like for us, we, same thing, like I know my strengths and weaknesses as a leader and because I'm like so driven towards this goal of all these big companies and stuff, I don't stop and smell the roses, right, as we speak, which for me is fine because that's, I think that's if you look at Michael Jordan, Kobe Bryant, all the best people in the world,

They win a championship and they start training the next day to win the next season. Right. So I think that's a trade of a lot of high performers. But I realize a lot of my staff and people around me don't function that way. So like I have a COO and a C-suite and a head of people that kind of come up behind me and fill in a lot of those gaps.

And I mean, it's so important to know as a leader, like some leaders are great people, great motivators, but they're terrible at operations, systems, frameworks, and data. And I'm pretty good at all those things.

Whereas, you know, I have people around me to fill in those gaps. I think that's great. And I've been through a couple of exits and a few audits and all those things. So I think my first one was 28 and it took me six months to clean up my books and records to get ready for an exit. And I'm glad it happened at 28, right? It's still pretty young. So like for the rest of my life, I'm like, well, I'm not doing that again. So now I'm going to get everything right going forward.

And I think with entrepreneurs, as many podcasters we listen to and hear this from people like us, probably still won't do it until we get an IRS audit or we try and exit. You know, we're stubborn, right? We like to learn the hard way for some reason. I completely agree. I mean, I think that like your CFO is one of the most important people.

members, I think a lot of, like you said, they're going to hear this and they're immediately going to tune it out. And just don't say we didn't tell you to. Yeah. Yeah. You learn the hard way. Like that's the stubborn part of an entrepreneur, but also the part that keeps us going when we've been punched in the face a hundred times. Right. So, so, and then what about, you know, like,

let's, you know, obviously you've built this great company and it's not without being good at marketing and sales and all of those things. So how did you, you know, I don't know if you want to share the revenues you've built it to, but how did you get it there in terms of more, you know, the actual acquisition models? Yeah. You know, so,

We started very organic, though. I learned a really good lesson in marketing. In 2017, our first fiscal year, we did $1.2 million. And that was just off the back of me having a really good reputation of being a great nutrition coach. 2018, our second fiscal year, we only did $700,000. And so we lost $500,000. And that's when I realized that marketing...

Um, and so, you know, that's when I started like learning the game of marketing. And so, you know, 2018, we were able to get to 3.3, uh, 2019. I think we did a little more than seven, uh, you know, 2020 and 2021. I think we were upwards of 12. Uh, I think the highest, like our biggest month for like 1.8. Uh, so yeah, like we had, uh, we have some pretty good numbers for the size of company that we were, uh,

You know, the acquisition model for us has always been very community driven. So it's always been very connection based. There's a gift and a curse in the sense that like when we went through diligence the first time, I think it was something like 90% of purchases were made relative or in some way connected to my liking. Yes, yes. We call that a keybid problem. Yeah, it's a pretty keybid problem.

We've since gotten that down significantly. We've had to really diversify what NCI truly is. It's not just Jason Phillips nutritional strategies. But it's, yeah, I mean, I think that that was the first thing. And I think that no matter how far away we get from me being the key man, connection is still at the core of what we do.

Uh, we teach the connection based model. And so, you know, even our ads are going to get you to a conversation as fast as possible with one of our team members, not necessarily the sale, um, but some level of conversation, some level of understanding of where you're at. And I think that, uh,

Yeah, we've always been really simple, man. I think we've always tried to keep it as basic as possible. How do we keep our lead costs low? How many of those leads are tackling into conversations? How many of those conversations are turning into sales opportunities? And then how many do we close? And then once we close, what is our ascension model? And so

Those are the numbers that we live and die by. We can look at them every month. We can look at the trends and we can make reasonable predictions. Then it's just figuring out different ways. I think that my real genius in marketing has always been to reverse engineer decision making. So when I look at why would somebody buy NCI? We're not the cheapest nutritional certification in the world.

There's PN that I think you can get for like $50 a month. There's DASM and I have to say they have much bigger names than us. People keep coming to us.

And so the whole reason we came to the space was we recognized that everybody's selling the same thing. And if I went and built a certification on the same knowledge, we would just blend in and we probably would get a little. And so we had to figure out the gap. We had to figure out the missing link. And the missing link was initially nobody had ever taught application. And so, you know, in our marketing, it's like, all right, well, why would everybody be frustrated? Well, they're frustrated because they still don't know how to create a result for a client. So everything has leaned into that, like that missing link. We don't,

say the same things as other certifications. And then it was like, okay, well, what's the next logical reason somebody would make a purchase? Well, they wanted to know something more about a specific topic or they wanted to know how to build a business. And so,

We've just really been good at that. I think that's always been my piece and I've always been able to stay relevant when it comes to the hooks. I've always kept up to date with what's happening in the industry. And I think that my genuine passion for what we do, I'm a former inter-exit. So whether I like it or not, I'm always going to be mildly obsessive about health and fitness. Yeah, definitely.

I reined in who I am. And so the fact that I actually know the industry is probably helpful. Yeah, I think it's interesting because like we teach a lot about creating separation. I call separation in the marketplace, right? Everyone else is doing this. How do you take a step and sidestep to the right or left?

and create that separation. And I started in the health space too. I remember I did my PNSA about 12 years ago or something back in England. And they had at the time some decent separation from all the typical things. And I mean, they did very well and had a big exit or something like that.

you know, many years ago. And it sounds like you kind of did the same of like, how do you revolutionize an industry a little, right? Because, you know, the health space is so much educational based. Oh, here's all the science. Here's all the macros and things. But that missing link is how do you apply that to clients? And it sounds so simple when you say it, but it helps you, you know, generate tens of millions of dollars.

by just taking that and that slight pivot. So I mean, anyone listening, that's so important in marketing. I always say you don't have to reinvent the wheel. You just have to edit the wheel a tiny bit and create distinction. And I think that's a great example. So I would love to know just now, you know, we've talked a lot about prepping for exit and knowing your books and stuff, but

What are some of the other lessons for an entrepreneur like me or you? We didn't come out of, you know, San Francisco. We don't understand necessarily the whole exit thing. We both mean you started in the health space, right? And we've been exited now, exited out of companies and stuff or prep for them. So what would you teach an entrepreneur that's looking to build for exit or about to go through one? Man, that's a really good question. Um, I probably see someone follow you before they follow me. Uh, uh,

I think that the reality is if you're building a company Brexit, you have to understand why you should be acquired and where you could fit into the marketplace. I think that one of the most valuable conversations I ever had pre-diligence, right before I got my LOI was like, where do you see NCI going and why do you feel like that's important to the marketplace? I was able to understand

very quickly the role of private equity, what they do and how they operate. And so in my explanation, I was able to explain where this linked up to other companies, how it added value to other companies and really what role it would play in a fund that would inevitably get exit.

I also think you really have to have vision for your industry. I think a lot of us get so caught up in the day-to-day and yet your product has to be good. You have to execute. You need to be able to fulfill, but you also need to understand where you're going. I mean, as you said, we both started in health and fitness. Health and fitness today, 2024, is far different than when you started it.

I mean, in 2014, internet coaching was sent to you by an email once a week. You know, 24 internet coaching is now like full access. Yeah, yeah, crazy. All these apps and this stuff. Yeah. Like it's a, it's a different game. And so I think you have to be, you have to understand where it's going and you have to make sure, you know, where you're safe against those things. And then,

A lot of companies that are prepping for exit, I remember Gary White once talked about the middle ground being the most competitive space. When you're a new company, you have nobody chasing you. You have nothing to lose them. So you're kind of nipping at the heels of the middle ground. And you're at the top.

know you have nobody really above you so you're just guarding against the people coming up but like when you're in the middle you've got people dipping at your heels and you're trying to get to the top this is cause a battle like do i grow do i protect like what are what are the things i'm doing and i think that you really really have to understand what makes you who you are and i think you need to lean into those things and then you have to have vision about growth and so i'm

If you don't have those things in play, you're just another company. And I promise everybody, there's probably a company out there with more money and that can replicate your service and your marketing capabilities very quickly and capture your market share very quickly. And if you don't know what makes you unique, it's probably going to end. Yeah, I think...

I think the interesting that's happened over the last five or 10 years is the interplay with all of that and then the social personal brand side, right? Which can be a devil and a blessing for building a brand and then trying to sell it. But...

I think it's a fascinating complexity now that a lot of us are so enticed about building personal brands and leveraging that to grow and grow the business. And then how do we handle that at Exit? And that's something I had to learn the first time I went to Exit.

I laughed when you said 90% of your customers had some connection to you because I think mine was like 80% when we ran that analysis. And I was going to, you know, stay on for a year and all that jazz. And then, but now we're building, you know, entities that can be

You know, exited without me. Right. And we are very obsessed with these, you know, self-fulfilling acquisition models where I'm not the main driver. But in one of my businesses, my own brand, I still am. And it's so powerful. So I think understanding the interplay of personal brands, because I'm sure you've done still well because of your personal brand, but you've had to figure out how to sell without it at the same time.

100%. Yeah, I mean, and in the current, you know, I'm getting rid of the, well, I guess I'm under LOI now, so I'm getting rid of the enteric ligands again. But, you know, it's, yeah, I mean, I'm going to have to stay on for at least a year, probably two, you know, transition appropriately. And that's having done the work, you know, with this last analysis. So, it's definitely something you have to consider. I think that obviously,

personal branding is sexy i think there's a lot of people out there that want you to understand or want you to think that if you got personal brand you can monetize it that i mean you and i could probably talk about 100 people you know that have large personal brands that are broke and it's uh you know it's still the skill of being able to monetize something that people need and and you know

sure, visibility is a massive asset. I definitely think that it's a huge attribute to a business. But if you sell the visibility that's linked to a personal brand and you can't orally that and you can't

find other means of that same visibility acquisition or you know effectively you're just going to increase cost of acquisition yeah and if a company comes in and buys you it has to increase cost of acquisition and can't uh also at the same time increase ltv well then now they have a less profitable business which doesn't make a lot of sense for acquisition yeah i mean can the data probably to finish here is the last thing that we've not talked about but we kind of both talked about you know

subconsciously through this conversation is the numbers, right? Knowing, you know, all private equity looks at, I worked with PE to look at over 200 companies to acquire. And, you know, they just look at spreadsheets, right? Really. And even as an entrepreneur, you know, I really got obsessed with lifetime value and spreadsheets and numbers and projections and CPAs and acquisition costs.

Um, and you know, how long it takes to break even and blah, blah, blah during that process, you know, over the last five or six years, but it's really helped the way I've grown companies. Once you understand it from like a CFOP perspective, it actually changed. I mean, that's when it allows you one thing that allows you to start growing a big company because you

Before that, as an entrepreneur, you just look at like, well, how much profit am I making? What's my bank account show right now? Right. And how many staff and ad costs do I have on a little spreadsheet? That's how most of us do it. So just knowing the numbers. Right. So important because you make so many decisions from them.

Yeah. And I think it's like the tedious part that no one wants to do. I think inherently, like we all have ideas around sales and marketing. I think that, you know, we're all like every human, right? Like them, they're both like how to make friends, influence people. You realize that people like to talk about themselves. Right. And so,

we all love to talk about ourselves. We all love to talk about our products. We all like to talk about how good it is. We all have the naivete to think that our product was going to change the world. And so what we don't have possessed for is like diving into the spreadsheets. And so it takes a really mature entrepreneur to care about the spreadsheets as much as they care about everything else. And I think that's just a learned behavior.

I don't know any entrepreneur, and I'm sure you've met way more than I have. I don't know any that on day one, they were like, oh my God, I'm so excited about the spreadsheets. I think that you learn the behavior. And then there are people that absolutely love it. They're like, I see the value in this and I see what it can do for a company. And they learn to love that at a very high level. But

um i think that the faster you can mature into wanting to have that be an integral part of your decision making and your growth strategy i think the better off you'll be yeah i mean the spreadsheet levers are generally like psychologically wise like most entrepreneurs aren't that person because we can take risks and all these things and step into the unknown and

the spreadsheet guys are the scientists or the, the CFOs coming out of Harvard and stuff. Right. So, um, and, but it's, it's, it's not hard to learn. Like, I mean, you know, and this is where it's always comes back to hiring for your weaknesses. Like I was really good at maths and science and spreadsheets. So through my sports science, so I,

I took to it pretty quickly when I understood it. And I have other entrepreneurs and lots of clients that suck and they have no chance of ever reading a spreadsheet. And it's just like they hire a great team around them to start like, you know, breaking it down at a third grade level, like a picture book, right? And they're like, if we spend more air and spend less air, we'll make more money. And that's like, okay, got it. So you just got to...

Yeah, you just got to hire around your weaknesses. So just to finish, how do you know what's next for you? And after this exit and stuff, I know you focus on profit. Anything else cool coming up? And how do people connect with you on socials if they if they have more questions or want to follow your journey?

yeah man um i think what's next is really just growing the consulting side keeping it where i want it to be um and and really staying committed to like the core of just being happy and profitable uh you know i'm totally fine cash flowing one to ten million a year leaving the money that they exit invested and putting down to work for me um you know personally i'll just play lots of golf obviously uh yeah i mean it did though the to follow uh

I'd love to give you an Instagram, but it was banned apparently because Instagram sucks and I constantly get banned. So the best way is just Facebook, man. I'm pretty responsive over there and I put the majority of my content there. We got a YouTube channel launching pretty soon. Nice. Yeah, dude, I'm pretty excited. I think it's an honor, obviously, to be here, dude. I love what you're doing. Thanks.

your your crush on it did so it's it's fun to watch and honor to play your friend cool good well i appreciate that and it's been yeah it's been great to see your journey and i'm also i'm very excited for the next part of your journey like this this leaner consulting side and

And I definitely, you know, kind of admire from afar while I'm building this cruise ship that I have to manage. And it's frozen funds. So, you know, you look up. When you exit it, we'll all be admiring. Yes, that's the thing. Yeah. But sometimes it's a lot of fun watching the jet ski zip around. That's how I describe my business versus most people. But thank you for coming on. And guys, I hope you had a lot of value out of talking about profitability and building for exit and entrepreneurial lessons like this.

I really love this episode because we both started talking about deadlift squats and macros, and now we're doing a little more than that. And if we can do it, anyone can do it, right? Guys, until next time, keep living the red life. Jason and Hank Kuhn, I'll see you guys soon. Take care.