April 7, 2026 – Musk Direct Report Jon McNeill and Scalable Profit Jeremy Reeves

0:04 Intro 1 : Broadcasting from am and FM stations around the country. Welcome to the Small Business Administration award winning school for startups radio where we talk all things small business and entrepreneurship. Now here is your host, the guy that believes anyone can be a successful entrepreneur, because entrepreneurship is not about creativity, risk or passion. Jim Beach,

0:26 Jim Beach : Hello everyone. Welcome to another exciting edition of School for startups radio. I hope you’re having a great day out there riding the roller coaster life of being an entrepreneur, the ups, the downs, the twists, the turns, the loops and all of that before lunch, I just hope you’re having a good day that we can provide for you a little bit of stability and support and confidence and motivation and just get you going. You know, our job is to create a mosaic here. Not every show and every interview is going to be necessary and needed for you, but a whole bunch of them will be and so you need to pick the shows, the interviews that are relevant. That’s one of the reasons we spend extra time building our index and our search, trying to make it as easy as possible for you to find the shows that are useful to you. This is going to be one of those. First up today we have John McNeil. He is former president of Tesla and reported directly to Elon Musk. And so, you know, that’s going to be an interesting conversation. We have a billion things we all want to ask him. He was also the COO of Lyft and entrepreneur of the year with Ernst and Young you don’t get more impressive than that. So John is with us, and then after that, we have Jeremy Reeves. He has a book out on scaling and growing during all of these times of uncertainty. He is with a company called scale advisors, and so I’m excited to learn from him and figure out how to grow even though prices are doubling and all of that kind of thing. So great show. Thank you so much for being with us today, and as always, just keep sending your money. Just throw it in the air, and it will blow in our general direction to put envelope or money in a blank envelope, just drop them around. We will find them. I promise we’ll be right back to get started. Thanks for being with us.

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3:04 Jon McNeill : Don’t make me cry. We

3:06 Jim Beach : Are back and have a true superstar to welcome. John McNeil is with us. He is the former president of Tesla, reporting directly to Elon, and he was the COO of Lyft. Prior to that, he scaled and sold six companies on his own amazing numbers, he was rewarded the 2012 Ernst and Young Entrepreneur of the Year, which is sort of like winning the Academy Awards, in my opinion, for entrepreneurs. And in 2013 he was named the most admired CEO in Boston, and then he began his career at Tesla. So very, very cool. He’s also got a new book out talking about all of this. John, welcome to the show. How are you doing?

3:52 Jon McNeill : Good, Jim, good to be with you.

3:53 Jim Beach : Congratulations on your new book. Five star rated. The algorithm, the hyper growth formula, transform Tesla Lululemon, General Motors and Space X. And I didn’t point out that John was Entrepreneur of the Year by Ernst and Young we point out that’s like the Academy Awards times three for entrepreneurs. So congratulations on that. What business won you the Ernst and Young Entrepreneur of the Year out of Boston.

4:22 Jon McNeill : I think it was, it was this combination, like I was on my fourth company at that point. So I started in scaled and then sold the public companies four times in a row. And I think I was on my fourth or fifth company, and they kind of gave me a lifetime achievement award. It’s the way that that kind of came down. It wasn’t for a specific company, but I think it was for a body

4:44 Jim Beach : Of work. Well, excellent. That works just as well. Yeah, yeah. All right. Tell us about the book. Congratulations. Five star rated already, already. You said the sales were doing great. It was like number 10 and you. All business books. Book about

5:04 Jon McNeill : The books about how, how Elon drives innovation in his companies. There’s a there’s really an operating system inside of a must company. And when I got to know Walter Isaacson, when he was writing the Elon book, the biography of Elon. I asked Walter, like, why don’t you write about the operating system inside Tesla? Because you’re a former CEO, it’d be super valuable for people to learn. And Walter said, like, I don’t write business books. I write character books. You should write that book. And and I said, I’m not your guy, I’m not an author. And he said, No, no, you should write that book. You’d be the first insider to let to really pull back the curtains on how this innovation gets done at such a rapid rate across so many industries. So eventually I gave it, I guess, when Walter Isaacson asked you to write a book, you write a book.

5:55 Jim Beach : Yeah, don’t have much choice. All right, no, well, start breaking it down for us. What are the pieces that define the algorithm.

6:02 Jon McNeill : So basically, I’d say the overall first principle is simplification, and really, really, really focusing on the value you’re going to deliver to the customer, and then finding like ways to just awesomely blow away that customer and but it starts with simplification. So the algorithm is kind of a five step process, and this came out of a lot of the mistakes that we made, and we kept trying to build a framework that would keep us, keep us from from making huge mistakes over time. And so the framework starts with the first step of simplification, which is question every requirement that is being handed to you and and don’t treat requirements as gospel. Really question them, because most of the time, people just accept those requirements. And if you can delete those up front, you’ve got a much cleaner path to run on to start your business or start your product. I think,

6:59 Jim Beach : Yeah, go ahead, just a second, just thinking about the inside of the SpaceX capsule is a great example of that, you know, yeah, a rash of articles a week or so ago about how the capsule is so clean on the inside that it’s, you know, just the opposite of what an Apollo capsule looks like,

7:18 Jon McNeill : Yeah, because they looked at That instrumentation and said, What do you really need access to? And it turned out, when you question those requirements, you don’t the the astronauts don’t need a lot of dials in gages. They just need a few key metrics to know whether they’re they’re on course and on mission and and so we would question everything, goofy things like it, the average auto loan documents 12 pages long. And so we would question like, how many of those 12 pages are a requirement of law? Nobody in the industry asked a dumb question like that, but we were dumb enough to ask that question, and what we found out was that none of those 12 pages were required by law. They were just paragraph after paragraph of well meaning corporate attorneys trying to keep their banks out of trouble. And when you looked at what the law said, the law said you basically need four sentences. Here’s how much you’re paying for the car, here’s the interest rate, here’s the time period, and therefore, here’s the monthly payment sign here, and so we would question requirements and take a 12 page auto loan doc down to one paragraph. And what that enabled was we could have a one click loan release online and and that enabled digital car sales. And nobody got to do that for the industry, but we we were able to do that because we questioned the requirements of an auto loan doc, and so a lot of this time, it’s just questioning why these things exist. And if they you can’t justify them on the basis of law, physics or safety, then they’re a candidate to get deleted. So that’s the first step of the algorithm. The second step is, once you’ve simplified all the requirements, now simplify every step it takes for you to produce that product and relentlessly delete and now you’ve got a much after that step, you’ve got a much simpler process. So you you optimize it, and then you apply speed to it, because speed reveals all the warts, and you can’t have a fast process with a bunch of quality issues. You got to get rid of all the quality issues in the warts to get a fast process. And then this is going to sound counterintuitive, but our last step of our algorithm is automate last, and that is because we learned too many times, when you automate first, you’re automating a bad process, and all you do is get to the bad answer faster. And so we learned you got to optimize first and then automate last, when you really got your process or your product nailed. So that’s the algorithm, and then there’s. A couple of secret ingredients that I say, have to be in place in the company to make that work. And and the five steps to the algorithm, plus those three secret ingredients are the backbone of of this new book, the algorithm.

10:12 Jim Beach : Well, tell us the secret ingredients.

10:16 Jon McNeill : So the first one is, is eat your own dog food. And this is Tesla slang for use your own product. I was with a group of bank execs a few months ago, and I asked them to raise their hand if they use their bank’s app on a weekly basis. And no hands went up in the room. And I said, I knew that was going to be the answer, because I am the Customer of two of your banks, and your apps are absolutely terrible, like as a user, if you actually use these apps, you wouldn’t live another day without calling the head of engineering and say you got to fix this. This is embarrassing. And so the principle of Tesla is you, we use our own product daily, and practically what that means is is managers and engineers pull a car off the line every night, they drive it home, and then they drive it back to the factory the next day, and within a half hour of them getting to the factory, the engineers have notes on that car, and that provides a daily feedback loop of people who are designing and building these cars using them, and then we ought to catch stuff way before customers do and make the product perfect. So that’s a secret ingredient. Number one is, eat your own dog food, use your own product. And surprising to me, how many people don’t do that. Sam, go ahead, surgeon.

11:35 Jim Beach : The other day, and I was like, I think that surgeons should be required to have every surgery that they do, would you hold this one? And he looked at me kind of sheepishly and said, No, but you’re going to, it’s a good example, yes, especially when it involves, you know, we’re going to take out part of your bowels or something like that. Yeah, exactly. I thought God wanted me to have those So, right, that’s a good one. All right. Number two.

12:03 Jon McNeill : Number two is really expand your definition of the product to equal your customer’s definition of the product. So an example of that is like, historically, car manufacturers and the people that work at them consider their job to be designing and manufacturing cars, period. End of story. They don’t sell them. They give them to an independent distribution channel called a dealership, and they certainly don’t fuel them. That’s the job of Chevron and Exxon and Philip 66 and loves and pilot, etc. And we went to the Tesla engineers and said, Look, nobody’s really going to buy our cars unless they can fuel them, and so we’re going to have to develop the fueling infrastructure. And at the legacy manufacturers, their answer was, No way we’re doing that. We’re not going to develop a fuel infrastructure for our cars and charging networks. But Tesla did because we we expanded the definition of the product for our engineers to include what the customer needed, which was fueling on top of transportation. And if you as an entrepreneur or as a leader of a business, start to think that way, it requires you, first of all to go really get close to your customer and understand how do they define the product and it turns out that you’re going to learn something. And then we learned something when we got close to our customer and they said, the thing that scares us to death is not having charging. So we said, oh, we’ll take care of that. We’ll provide charging in a way that you gives you confidence to ride to drive across the country or the continent. And what happened your definition of the product equal to customers, you know,

13:44 Jim Beach : You expanded Tesla all the way to the infrastructure so my house will have solar, which will charge my car during the night. Yeah, and what happened to the Tesla solar? It seems like that piece got dropped.

13:59 Jon McNeill : That piece really turned into it turns out that the battery deployments on the grid were much more, much more of a fast growing business and and much more of a lucrative business. So the focus of the energy teams turned toward the electric grid battery storage versus the home battery storage. But to your point, General Motors has now stepped in with GM energy, and they bundle with the purchase of a car, home battery and solar if you want it. But your car also is a two way as two way capability, so it can, it can take over and be the backup power source for your house. So you essentially have a backup generator in your driveway, right? And so GM has taken that a step further and saying, here’s a whole bundle we’re going to now help you, help you generate the energy with solar panels, store it with batteries and in your car, and then provide the power, not only for your car, but your home. And. And to the extent you’ve got an emergency and you need a backup generator, you got batteries in your garage and you got one big battery in your driveway, John, and so it’s a full system.

15:09 Jim Beach : Word of advice on that one. We want to buy that from Tesla, not GM.

15:14 Jon McNeill : I just got it installed three months ago in my house from GM, and it’s a pretty stunning product.

15:24 Jim Beach : House, checking his Tesla app and telling me the car in the house and all how it all related and stuff. Yeah, if it’s good to that. But still, we don’t like GM anymore.

15:37 Jon McNeill : Yeah, we do like people love Cadillac and they love they love Chevy. So that’s changing big time, but that’s the second I do like, I drive a Chevy Silverado, Ev, it gives me 500 miles of range. So I love that car. It’s a full size

15:56 Jim Beach : Tesla truck. Ooh, let’s not go there. Let’s not talk about that.

16:01 Jon McNeill : Now, the Chevy trucks are out selling the Tesla cyber truck two to one. So I think the market is speaking on that. Yeah, well, let’s go ahead and

16:09 Jim Beach : Talk about the truck. How did such a disaster happen? I mean, it’s the ugliest thing I’ve ever seen. The insurance companies won’t insure it anymore. What are your thoughts? Yeah, I think that

16:23 Jon McNeill : We used to talk about that, and we successfully delayed that project there about five times, because we essentially said, the way that thing is designed, it’s an exotic and then exotics have, by definition, a really small market. And so we said, like, this isn’t going to be a mass market product. And it turns out, unfortunately, we were right, yes. And so then let me get you the third secret ingredient, because I think this is the most powerful one. I think is people study musk in the future, over the coming decades, they’re going to, they’re going to come to this third secret ingredient is the answer to why he is such an effective industrialist. All right, what is that? And that is, he drives a weekly cadence into his companies. And what I mean by that is, he determines the one or two key existential issues for a customer, for a company, and so at Tesla right now that is autonomous cars and robots, humanoid robots, and he only works on those two things, and what He requires of the teams working on those is that they report to him every week their forward progress, and they’re not making breakthroughs. Every week, they’re making incremental progress. But what he is doing is, from the top now introducing a weekly cadence of improvement into the company and and so in that process, they’re building compounding advantage, really, on a weekly basis versus competition. And because not many competitive leaders are doing that, certainly not in space and not typically in cars. And so you start to build capabilities way faster than your competition can. And speed, speed is a huge advantage. And so the third secret advantage is that, like as a CEO or as a leader, as a founder, drive a weekly cadence for improvement into your business, and you’ll start to compound your competitive advantage.

18:27 Jim Beach : All right, I love it. Some great advice there. Let’s go back and clean up some of the outstanding issues. John, first of all, is he crazy or not?

18:39 Jon McNeill : He is. He’s a combination of super funny, intellectually, maybe the fastest synapse I’ve ever seen, super broad intellectually, like you can float between atomic levels of chip design, AI architecture, battery cell chemistry, like he’s exceptionally broad, and he’s crazy enough not to accept everybody else’s constraints, and that’s, that’s the issue that I see, think you see at play. And so he’s a pretty unique combination of those things as a human. So when

19:21 Jim Beach : He got involved with Trump, what? What was he ignoring? Then the responsibility of being a CEO and getting involved in politics?

19:31 Jon McNeill : Yeah, I don’t really know, because I wasn’t, I wasn’t around for that chapter. I had, I had left before that whole chapter, and so I really can’t explain what was going on there, but it was pretty different than the person I knew when I when we worked together.

19:50 Jim Beach : That’s interesting thing to say. I’m not sure what that means. Give us an Elon story that we haven’t heard. Heard in the popular media, the sleeping on cots, or all of this, you know, give us a little of insight of one of your stories. With him, we

20:09 Jon McNeill : Would often travel together, and that meant we were picked up in a Model S at that time. And so we would pile back into the back of the Model S together and begin to catch up on our email. And he looked over at me once when I was catching up on email in Hong Kong, and he said, how fast can you type with your with your thumbs? I said, I have no idea. He said, Well, if you’re like the average person, that’s 18 words a minute. He said, how fast can you type on a keyboard? And I knew that answer because I took High School typing so I was like 80 words a minute. And he said, exactly. You can type 80 words a minute on a on a laptop keyboard, but you can only type 18 words a minute on a phone. That means we’ve actually slowed down the input into the compute, and everything slows down. And I had never thought about that before. I kind of correct my neck. I said, Wow, that’s pretty interesting. Yeah, I haven’t thought about that before, but a system can only go as fast as its slowest link. And if this, if we’ve slowed the input down by a factor of four, we’ve really slowed our ability to get answers out of the compute. And he said, exactly. And he said, What if you can think into the compute? I was like, wow, that’d be a lot faster. That would be amazing, but it would be lightning fast compared to thumbs and fingers. He said, exactly. I said, I just started thinking about this, but I was watching you type with your thumbs, and I it just, it started me really questioning, like, why are we doing this to the to the speed of the input to the computer? So he turns to his his chief of staff, named Sam at the time, and Sam was sitting in the front seat of this car. He said, Sam, find out who the top five neuro computer interface researchers are in the world. Get me their ground bank breaking research papers so we can read them this week while we’re in Asia, and then next week, when I’m back in the States, I want to meet with these guys. And from that whole conversation was born neuralink. He immediately got back the next week, started to think about brain computer interface. Could you think into the machine that became, that became neuralink? And so somebody asked me a little bit later, a few weeks later, Hey, how’s it? How’s it working with Elon? I said, you know, I thought I was going to go work with our generations. Edison, I think I might be working with our generations. Da Vincent, like his mind is so broad, and he’s so creative the way and unique The way he looks at the world. So that’s like one example of something you wouldn’t hear in the popular press, but I think it illustrates what a special mind he’s got.

22:45 Jim Beach : Yes, that is a great example. Edison, I think, was a crook and a bad man, and it’s a movie waiting to be made. We all should see an Edison movie, because there ain’t much good to say about him, other than his inventions, well, half of which he stole, I think. But as Da Vinci, there’s a whole nother level of mind there, obviously, right? So Right? Is he the top one, two or three potential real life James Bond villain in your world? Or Sam Altman and Zuckerberg. I think those are the top three candidates for real life, James Bond. I mean, Zuckerberg built himself that layer in Hawaii and underground tunnels and stuff. So, you know, there’s James Bond stuff there. But what do you think who should be our generation’s next? James Bond?

23:42 Jon McNeill : I think about, like our our generations, Tony Stark or, you know, you think about the great industrialists, Carnegie, Rockefeller, etc. I think, I think that’s the, that’s the category I’d put him in, and he’s different than all of his peers in Silicon Valley, and that he he is both software and hardware, and he’s, he’s across major sectors of hardware, cars, rockets, ships, etc. And then you’d say, well, yeah, Jensen Wong is probably, is probably a good analog there, because he’s both hardware and software, but only in one business, only in chips. And so that’s where I think he’s kind of hard to categorize, because he’s he’s prolific across a bunch of different categories of software and hardware, and our only other reference points are generally software people that that are in this day and he, but he’s a real kind of modern industrialist, in the sense that he’s working both hardware and software.

24:50 Jim Beach : But does he have the potential to be a villain like Sam Altman?

24:53 Jon McNeill : Does I, I think, like his motivation and the motivation that i. Heard from him, and the motivation I saw was he does want a better humanity, and that’s his that’s his goal, and and so I don’t think that in that, in its purest form, has a villain’s motivation. I think that’s a really positive motivation.

25:19 Jim Beach : So your contention then John McNeil is that Sam Altman is the biggest hero villain on earth?

25:25 Jon McNeill : No, I didn’t say that because I don’t know I don’t know him. I don’t know him, and I don’t know what his motivation is. But I bet if you talk to somebody that work close to him, they might have a different they might have a different or more accurate perspective.

25:36 Jim Beach : I saw him get interviewed where he, in my opinion, admitted to killing that engineer, that all that engineer story. I mean, I don’t know what he was thinking or what his publicity team was letting him do, but in the world I live in, he did what’s called confess so. But anyway, yeah, I didn’t hear that. Yeah, I know. I’m not putting those words in your mouth, John. I’m not trying to trick you that way. We have engineers who will do that after the tape is done, though. So Howard Stern is our next guest anyway. What are you working on? Now, I know you’re on just a board of amazing companies, and that would take up more than anyone’s time. Is there a rhyme and reason to the companies that you’re working with now. Why? Yeah, I tried it. For example, I’ve

26:27 Jon McNeill : Tried to design my life where I get at Duke scratch two itches that are really important to me. Every day I get to work in early stage companies. So I’m a venture firm where we literally invent and launch companies, scale them and and that’s the primary thing I do every day, is, is on the startup, I’m back to my roots as being a startup entrepreneur with a really talented team of people that has come from Tesla and Lyft and some of my other previous companies. And and then I also get to scratch my second niche, which is, which is really helping companies scale, or helping companies at scale. And so I get to, I get to work with GM and Lululemon, as you mentioned, and Asurion. The reason I’m involved in Lululemon was they wanted somebody on their board who is a vertical retailer, meaning that they produce the product and they own their own retail stores. And the only other company they could find in North America that that did that was Tesla. And so it turns out Tesla and Lulu have the same distribution model, which is, own, your own stores, own that store experience. And at the time, they were the only two. Now there’s people, a lot of more people, that are copying that model, but that’s why I ended up on the Lulu board. Was really to help, to help inform me, like, how we could be a better vertical retailer by learning from them and then taking some of the best stuff that we knew and teaching it to them.

27:46 Jim Beach : Doesn’t Apple do that

27:48 Jon McNeill : Apple does, and so Apple, you could say Apple Tesla Lulu. Now you could say maybe allovori have copied the Lulu model to certain extent, but it’s only a handful of companies that really exclusively distribute through their own stores and don’t have a wholesale model.

28:07 Jim Beach : Well, I have a daughter who spent a tuition at Lulu Lemon, so

28:14 Jon McNeill : I’m glad to hear that. Thank you.

28:17 Jim Beach : I will have a word with her. Yeah, right. Just loves that stuff, and she’s happy. I guess I’ll be happy that’s That’s enough, exactly, exactly, amazing stories. And thank you for sharing this book, the algorithm, how a hyper growth formula transformed Tesla Lou lemon, General Motors and Space X, fantastic. How do we find out more? Get in touch. Follow you online,

28:43 Jon McNeill : All right. So you can find the book on Amazon, it’s called the algorithm, or your local book retailer, and you can find me online. I’m probably most active on LinkedIn, so just look at John McNeil on LinkedIn and and we can connect there.

28:58 Jim Beach : Fantastic. Thank you so much for being with us, and we’d love to have you back. Thanks a lot.

29:03 Jon McNeill : Thanks, Jim, good to talk to you, and we

29:04 Jim Beach : Will be right back. You.

29:20 Intro 2 : Me. Well, that’s a, that’s a, that’s a wonderful question, actually, Jim, oh my gosh, I love the opportunity to do this. Thank you, Jim,

29:29 Intro 2 : Wow, that’s, that’s, that’s a great one. You know, that is a phenomenal question. That’s a great question. And, and I don’t have a great answer.

29:36 Intro 2 : That’s a great question. Oh, that is such a loaded question. And that’s actually a really good question. School for

29:42 Jim Beach : Startups radio, we are back and again. Thank you so much for being with us. Very excited to introduce another great entrepreneur. Please welcome Jeremy Reeves to the show. He is CEO of scale advisors. It is a growth strategy. Company, and he has built nearly $200 million in revenue across his own companies and the businesses that he has advised his goal is to take multiple businesses to eight figures, or he’s already done that, and he’s led teams of up to 100 people over the last 20 years. Pretty impressive. Jeremy, scale me up. Welcome to the show. How you doing?

30:25 Jeremy Reeves : Jen, hey, yeah, I appreciate you having me on. I’m doing fantastic. How about you?

30:29 Jim Beach : I am good. And congratulations on the book, the scalable profit model, how to grow faster, keep more profit and stress less, is five star rated on Amazon. But I want the stress. Jeremy, I love the stress.

30:45 Jeremy Reeves : Yeah, that’s, that’s something I don’t hear very often. It’s, it’s an interesting thing, you know, that entrepreneurs go through. We generally try to, I mean, most of the people that I know at least build their business to get freedom, generally, because they don’t, don’t like being told what to do is definitely one of the, you know, the commonalities between the, at least the ones that I know, and then, and then we build our businesses, and then it becomes too much, and then we end up working longer and being more stressed than if we had in place. So I try to, I try to take my clients through processes that help to reduce all that you know, and scale faster and you know, which is another thing that every entrepreneur wants, and have more profit and more cash flow, and pretty much all the things that that entrepreneurs want and think they’re going to get when they start a business. And then, of course, business happens, and things happen, and things are more complicated than we seem in the than we think of the beginning. And so I helped kind of bring everyone back to that, that original, you know, dream that we all have when we first become entrepreneurs.

31:49 Jim Beach : I had a business in my 20s and early 30s, and we had an 800 phone that rang, that I carried everywhere, and it was an 800 number, and if someone had an emergency, they called me, and I would deal with the emergency, kind of like the guy in the Tarantino movie and the fast car.

32:16 Jeremy Reeves : Yeah, that’s, yeah, that’s ringing a bell. But I can’t, I can’t think of I’m pretty bad with coming up with movie names, so

32:25 Jim Beach : Imagine the stress of that, of having an 800 number that just rang to you and you exclusively for products or disasters to deal with. So anyway, stress. I can relate to that. All right. Jeremy, I mean, you add it up, it seems like you’ve got the magic formula. All bad, down, all good, up. So how do you do that? What’s the key? How do you help people? Sounds magic,

32:49 Jeremy Reeves : Yeah, yeah. So it’s something that I’ve been working on for a really long time, and I’m, I’m, by nature, more of an intuitive guy. I like to, I like to combine data with intuition. I think that’s like the magic sauce for entrepreneurs, when you can do both. And so when I was like, over the years, I’ve gotten some amazing results, both for my own businesses and client businesses and everything in between. And I always kind of went like most of my career. I did it just based on what I thought was right in the moment, but I never had, like an actual framework behind it that said, you know, kind of do this. Here’s your here’s your guiding philosophy, sort of, so to speak. And so over the last couple of years, I’ve really been refining that into what I now call a scalable profit model, which is kind of just a good name to put on the framework behind it, right? And so the way that I do that, as I basically look at five levers, right? There’s a lot of different things that you can look at as an entrepreneur. And if you were standing above a chessboard looking down, most entrepreneurs, when you’re looking at your daily your daily life, there’s about 1000 different pieces that you could move in any given day. And that creates a lot of the stress and a lot of the overwhelm that people have. So I wanted to develop a system that made it so that you can just know what to do, and it was backed by actual math and data, and, you know, that sort of thing. And then then use your intuition for more of the the other things, like like products to come out with, or things like that. And so those, those five levers that kind of make up the framework are, you have to look at your contribution margin, which is essentially just what you’re keeping after each sale. It’s something that a lot of people miss, and they think in terms of gross revenue and not actually contribution margin, which is what you actually keep, right? So if you sell something for 100 bucks and all your variable costs they go into delivering that that product or service is 50 bucks, then your contribution margin would be 50% so then the second one is your acquisition economics. So that is, how much does it cost to for you to acquire a customer? How efficient is that process in terms of both conversion rates and average order values, like how much they’re spending each. For with each transaction, that sort of thing. So you’re always trying to improve that number so you can get your cash back faster. And then the third one is lifetime value. So how much, when you get a customer, how much is that customer worth over their lifetime, and more specifically, within each timeframe? So over in the first three months, how much are they worth? And then six months, and then nine then nine months, and then 12 months, and then, that way you can make decisions based on your cash flow, and, you know, and things like that. The fourth one would be operational efficiency, and that’s pretty much just measuring how efficient your operations are, as the name would imply. And that’s what I really look at operating leverage with that one. So it’s pretty much, how do you become more efficient so that you can grow revenue without adding extra fixed costs? Because I’m sure a lot of people listening to this have grown revenue, but also their their operational expenses went up in lockstep with that. So you get this situation where there’s more revenue, more stress, and less cash, and then, and then the fifth one, the final one, is capital return velocity, which is essentially, we all have expenses in our business, acquisition, overhead, all these things. And capital return velocities just simply measures when you get a customer, you spend that money to pay for the overhead. Pay for the customer. How long does that come? How long does that take to come back to you in terms of, in terms of cash, right, which is very different a lot of times than profit, because profit and cash are two very different things. So yeah, I know that was a little bit long winded, but that’s kind of the overall, you know, three minute version of the of the framework.

36:36 Jim Beach : Hopefully that makes sense. It does great stuff. Thank you. As you were doing that, I was kind of thinking of, you know, friends of mine who were going through that problem, and then you hit capital return velocity. And all I could think of was my, my poor, poor consultants who, you know, market heavily, bring in a bunch of clients, get busy producing results, forget to market, and then they crash and burn, crash and burn, you know, on this horrible cycle of not marketing consistently enough.

37:11 Jeremy Reeves : Anyway, I have, Yep, I’ve gone through that exact same scenario myself. I know exactly, yeah, I know exactly how that

37:18 Jim Beach : Piece you have to learn that marketing is a system that has to be repeated. You can’t just do it once. So anyway, yeah, a lot of value there. So when you meet your new clients, where are they usually having problems and which one of these five Levers is the most used to solve?

37:41 Jeremy Reeves : Yeah, that’s it. That’s a good question. So I would say the majority fall into one of two camps, generally both, and that’s profit, or and, or cash flow. So a lot of people, you know, they have the revenue, but they’re not, they’re not turning it into profit efficiently enough, right? And that, and that. And that’s just, very simply, your margins are too low. That’s, you know, that’s a simple one. And then, and then cash flow is one that a lot of people neglect, but it’s, it’s the thing that kills the most businesses out of anything else is lack of cash flow. And so I, actually, I recently built a calculator that actually walks you through and you can, like, plug in all your numbers, and it tells you what your what your tech capital return velocity is. And I work a lot. I’ve worked in pretty much every industry you could possibly imagine, but my specialty would be physical products. That’s I had a business for, like, a supplement business for five years. I’ve been in that industry for almost two decades, and actually just sold that supplement business last year. And so that’s kind of like my specialty. It’s also where you can, you can use these five levers and get the biggest bang for your buck. But it also applies all the other industries. And so a lot of people, if you factor in, maybe you’re spending inventory two months before you get the product. And then it takes you, let’s just say, a month to break even on your acquisition costs, and then it takes you another two months to break even on your overhead costs. Well, now you’re looking at five months, and most people would only look at the acquisition and say, Oh, I break even in 30 days. And it’s like, well, yeah, that’s acquisition, but you also paid for over or inventory two months ago, and you and you still haven’t paid off your overhead right? So it’s like, and then, and then people, they end up spending too much to acquire customers, they’re not getting it back fast enough. So that’s, you know, that’s where all that comes into play. And it’s just looking at this, at the different levers that you can pull to get that get more cash back faster, is pretty much the name of the game. And then for the second part of that question is, I forget if it was, if it was what, like the biggest problem people have. I would say questions like that in a row. Yeah, no worries. I would say either contribution margins, simply because, when you. Make. There’s so many cases with contribution margin where you can get a for every 1% improvement in contribution margin, it’ll add, generally somewhere between about four to 6% in net profit. So it’s a huge, huge, huge lever. And then the second one is probably lifetime value. That’s it’s something that’s neglected. I know, at least with the people that I’ve worked with, and, you know, everyone’s a little bit different, but the people that I’ve worked with, there’s a really, really big emphasis on acquisition. And everyone just wants more customers, more revenue, all that. And that’s great. You need you need customers. Obviously, you need revenue, right? But you can’t do that at the expense of everything else, because then you end up paying too much to acquire customers, and then you don’t get the cash back fast enough to be able to float it, you know, for as long as you need. And so I see, and that’s where you end up having the situation where either you hit a plateau and you can’t go any further because you physically can’t spend any more money because there’s none left, or you’re growing revenue, but your profit margin is just going down and down and down and down and down. I actually know people that their dream was to hit eight figures, and they hit eight figures and were out of business the next year because they hit the revenue number. But in doing that, their profit dropped so much that they literally ran out of cash and had to shut the sound, and it’s you see that all the time, because that’s why I always teach people, you have to look at this as a holistic unit. Your business is not just marketing or just operations or just sales or just finance, it’s a living, breathing being. You know that requires all of those things to function normally in order to continue going so hopefully that makes sense.

41:46 Jim Beach : It does. It does. Why do so many entrepreneurs charge too little? And it was one of the I asked you, what are entrepreneurs doing wrong? And you the number one thing you said was they’re charging too little, and then that’s finished up your diatribe that I prompted with 18 questions. I don’t know why I do that. I guess it’s because you talk. And here are the questions that build up anyway, why are we all charging too little?

42:16 Jeremy Reeves : Yeah, so that I could literally write a book about that. So I would say there’s, again, there’s two main things there. Number one is mindset. A lot of people are afraid to charge what they need to charge, and that we can go down a huge rabbit hole of that with with self esteem and with confidence and and all the things that that generally comes down to limiting beliefs that they have, like from childhood, and so I won’t go too far down that rabbit hole, because that’s a that’s a pretty big one, but that’s, that’s one is, is just the the mental side of it, being afraid to charge too much. The other one is they don’t think they can charge enough, because they they don’t think their customers will pay for it. And generally, when people say that to me, I say, Okay, well, I have a philosophy that if I want to do something and I don’t know if it can be done, all I do in my life, whether this, it’s losing weight or getting a certain revenue level or profit level, or marrying a wife or whatever the thing is, if I can find one other example of another human on Earth that has done that thing, then that belief gets canceled, right? That’s one of my guiding philosophies. And when it comes to pricing, so all when I’m talking to clients and they say that, I say, okay, in your market, is there someone charging that price? Yes or no. And they say, they generally say yes. And I say, Okay, well, then there’s something that they’re doing that you’re not, and then we just go and find out what that thing is, right? It’s actually really simple process. Like, it sounds complicated, but it’s super simple. And generally, all that really comes down to is the value to price equation, right? So if think about cars, there are cars that you can get for, I don’t even know what they cost now, 20,000 maybe, or 25,000 brand new right on the low end. And there are cars that really low end, right? Yeah, yeah. We’ll say 30,000 on the low end for a new car. And up to, I don’t know what the top is, probably 10 to 20 million on the top end, right? Same thing gets you from point A to point B. So what is it about those expensive cars that the cheap ones don’t have, but the expensive ones do, and that comes out, you know, again, that’s, that’s another big rabbit hole, but it generally comes down to the, you know, price to value equation. So what value are you delivering for that price, right? And so if you want to charge more, simply deliver more value. That’s it, you know. And that could be through actually delivering more value in the service, like going through and asking, asking your, your customers or clients, what they value. In your product or your service, and then just giving them more of that, it could be explaining sometimes they don’t want to pay enough because they don’t you’re not quite hitting them, and dimensionalizing the pain point that they have, and explaining how your solution is a better, faster, easier alternative to get a, you know, the same result as something else, right? So there’s a lot of there’s a lot of psychology that goes into it, but it really just comes down to, you know, there’s a price they’re going to pay, right? And how do you increase the value of what you sell? Can you add a guarantee? Do you need to add a little bit more urgency? Do you need to help them explain what their pain point is going to cost them if they don’t take action. Is there a way that you can get them better results? If it’s a financial thing, can you show them the ROI they’re going to get on right? So just a couple examples of how to do it. But yeah, there’s a Those are definitely the big two for that. How are

45:56 Jim Beach : You three or 4x ing output without hiring more people or burning them out, making them hate Yeah,

46:04 Jeremy Reeves : Right, yeah, yes. So that that definitely operational thing. So that is it really comes down to, if you just simplify all of the operations, and it’s operations is a very complex thing. There’s a you’re dealing with humans, right, with with employees so well now it’s starting to go now more AI, but we’ll say historically, you know, you’re and still at this point, you’re dealing with humans, and humans have emotions, and humans need to follow rules, and they need guidelines and principles to follow and that sort of thing. So the kind of guiding light that I have is you hire the right person, you put them in the right seat, you help them. You figure out what the right things to do are right so the right priorities, and then you do that efficiently. So if you do that, you can generally, and there’s a bunch I actually talk about this in the book, and I break down the actual math of how to like, double the the the quality of the output and double the quantity of the output. And so I break it all down in there. But there. But in short, it’s if you, if you’re actually working on the right priorities, that’s going to improve your quality right because you can work two hours a day on the right things, or you can work 15 hours a day on all the wrong things, and you’re probably going to get better results working two hours a day on the things that actually move the needle. Which brings us back to the five levers. Like all of those things, are the things that you should be working on, not all, you know, making button colors and, you know, tweaking little, tiny things all day, things like that. And so you nail down the priorities. And then, and then a lot of productivity, there’s, there’s a lot that goes into that a lot of productivity is just simply, when you bring someone on, giving them very, very clear your job is this, here’s how you’re going to be measured on it. And then each week or then you set like all the company rocks, or priorities or goals or whatever you want to call them, and then you break that down into monthly and weekly cadences, and then it’s and then it’s just simply, okay, I know that by the end of this quarter, I have to have X project done. And at the end of this month, these things need to happen. At the end this week, these things need to happen. And then based on that, you just set by day. And then it’s just simply, they sit down and they know exactly what they’re doing on a daily basis, on an hourly basis, and there’s no time to waste right? When you’re very clear on what you’re doing, you don’t want to waste time. And again, this comes back to hiring the right people, because that is going to depend if you’re high performer, you’re not going to want to waste to waste time. You’re going to want to hit that goal, and because that’s how a players think, right? So, yeah, so hopefully that that explains that it’s like everything else. It’s a much deeper dive into it, but that’s kind of the core essence of how all that works,

48:55 Jim Beach : And how are you able to scale your profitability when your acquisition costs are going up also, especially with all of this other fake inflation that we do or do not have. Buying seems to be inflating.

49:11 Jeremy Reeves : Oh yeah, it certainly is. I know my wife does the grocery shopping and she complains about the prices probably twice a week, I would say. And then has been doing that for, I don’t know, probably two years now, something like that. And so, yeah, so that is a very, very big thing. The cost to acquire customer is going up, especially if you’re, if you’re on the internet. I mean, really everywhere, but especially on the internet, that’s, that’s a whole thing about market maturation and platform maturing. Platforms maturing. So I was around in the days when Google clicks were like, 50 cents each, and now they’re, I mean, God, for that same thing, it’s probably, I don’t know, four bucks each, something like that. And that was

49:54 Jim Beach : About, what were you trying

49:56 Jeremy Reeves : To get? A link, yeah. Yeah. So that was, that was four. For the word copywriter. So that was, that was when I, when I just wrote copy for clients. I still do, but that was, like, all I did was write sales copy. This is going back to 15 years. Those clicks were well under $1 back then, and I don’t even know what they are now, because I don’t, I don’t you know that that’s not only what I do. I mean, I do again for clients, but it’s part of other services. But now I would guess that same click is probably somewhere in the range of three to $5 so the problem with that is that you still need enough customers to be able to hit all your goals, but those customers are really expensive. So the solution to that is, again, number one, make sure your profit model is all dialed in. Go through all the levers, make sure that you’re maximizing each one. They’re all super efficient, that sort of thing. And the bigger one with that is that’s where lifetime value comes into play. So if that’s kind of the metric, as as your cost to acquire customer goes up, your lifetime value also has to go up, right? Because otherwise you’re going to end up paying more for those customers, and you’re not going to get as much money back, and it’s and that’s what’s eats into your profit. That’s why you see that if customer costs are going up by 10% your profit is probably going down by around 10% and so you have to just continually get better and better and better and better at understanding what your customers want and giving them other solutions, particularly higher priced solutions, because it just tends to be easier once you have the customer you already have their trust. So then it’s going back to our conversation before, about pricing. Well, that’s a really good way to increase pricing is to get a customer on a lower end for something that’s like an impulse buy, give them a really good result on what they do, because if you promise you’re going to solve x pain point for them, and you never solve it, well, they’re not going to come back to you. Whereas if you if you promise to solve x pain point, and you do solve it Well, now you’ve gained their trust, and when you have their trust, they’re willing to give you to do business with you again. And generally, that price elasticity, if you go from, let’s just say, $100 service, and then the next one is, I don’t know, 2500 the barriers are down right? The red flags are down. They’re not thinking they’ve already gotten the results. So they trust you more. There’s confidence there. So it just that whole price to value equation goes up, right? And so that’s really the key there, is just knowing exactly when you get a new customer, how much does it cost? How much are you keeping? When do you break even on them, not just on an acquisition basis, but including inventory or for your physical products business, and also your overhead costs, which is the one that most people don’t, you know, don’t, don’t ever track, and then making sure you’re getting profit and cash back from them as quickly as you can, and just constantly increasing that number, which is going to kind of combat the rising acquisition costs.

53:08 Jim Beach : Excellent, Jeremy, we’ve run out of time, I’m afraid. How do we find out more? Follow online all of that. Please, sir.

53:15 Jeremy Reeves : Yep, the easy one is just to go to scalable or, sorry, I was, I was always trying to say my book name scale advisors.com which is our main website that’s going to have the services that we have. You can find a link to the book on there. We have free stuff on there, if you’re not ready to, like, get the book yet, and all that kind of stuff. There’s free tools. There’s all sorts of good stuff on there. So, yeah, if you like this conversation, I would just go to scale advisors.com and you’ll you’ll find what you need there.

53:42 Jim Beach : Fantastic. Thank you so much for being with us, and we’d love to have you back. Thanks a lot.

53:47 Jeremy Reeves : All right. Thank you appreciate it.

53:49 Jim Beach : We are out of time, but you know what that means. We’re back tomorrow with another great show. Thanks for being with us. Bye. Now you.