Chris Cooper: 0:01
Every business scales through four distinct stages. And today I’m gonna tell you exactly what they are.
My name’s Chris Cooper. I’m the founder of Two-Brain Business. This is Two-Brain Radio. And if this episode is useful to you, please hit subscribe on your favorite podcast platform. So there are four stages that every business goes through. And if you’ve read my book, Founder, Farmer, Tinker, Thief, these will sound familiar to you, but I wanna portray them in a slightly different way to help you think about exactly what you need to do to get from the first stage all the way to the fourth. And this is true. If you run a micro gym, if you run a yoga studio, it’s true. If you run any service business of any kind.
So the first stage that you go through when you’re starting up, your business is systemizing. Most of us start a business to buy ourselves a job. And so we become these kind of solo entrepreneurs and we become really self-employed, it’s not really even a business yet. So we’re the ones who show up at 4:00 AM and bake the donuts. And we’re the ones who show up at 5:00 AM and open the gym.
Sometimes those are the same person and sometimes we’re there past midnight, closing down our bar, the first stage of business before we can really grow it is we have to get the entire business off our shoulders out of our head, out of our hands and make it possible for somebody else to do it exactly the way that we would do it. And this is called systemization.
And this means writing a playbook, writing in great detail here is exactly how you open up the gym in the morning. Here is where you park your car. Here is how you turn on the radio. Here is how you load up the workout and you get deeper and deeper and deeper leaving nothing to chance and ending with a document that has to pass what we call a hit by the bus test. And that means if you were hit by a bus today, could a stranger walk into your gym, open up this document and run your gym the same way you would. So the first age is systemization. Now here’s why this is important. If you don’t get these things out of your head and onto paper, number one, you will never be replaceable. But that really means is not like, oh, somebody can copy you and compete with you.
What it means is that you will never be able to take time off. That’s the first thing. Number two, no staff person will ever be able to make a decision without you. Number three, you will spend all of your time, micromanaging your staff, looking over your shoulder, checking the gym cameras, to make sure that the floor is cleaned properly. You will never have any piece and you will never have a real business until it is systemized. Now, of course, writing the playbook is step one.
And step two is giving your staff contracts and giving them checklists and templates to follow and evaluating their progress. But really in this phase, all you’re trying to do is make sure that the business doesn’t depend on your constant presence. The second phase is called optimization. So after you’ve systemized everything and written it down, now you can try different ways of doing things. So for example, you write down your marketing process and you draw maybe what your marketing funnel is. And if you don’t know what your marketing funnel is, if your marketing funnel has just opened the doors and hope for the best, then going through the systemization process makes you think about what is my plan for marketing.
There are really four marketing funnels that every gym needs. We talked about that at Summit this year, and it’s in our Growth Toolkit too, but basically no matter what you come up with for your marketing plan, you wanna make sure that it’s systemized so that in the next stage you can optimize it. So for example, maybe your marketing plan is we’re gonna do affinity marketing. And we are going to ask our clients for referrals in a tactful and helpful way at regularly occurring intervals. And once you’ve got that set up, you’re doing these yourself. And then in the optimization phase, you are going to try other marketing.
So maybe you’re gonna run some Facebook ads, or maybe you’re going to do more of a social media type funnel, or maybe you’re going to do something completely different. But in the optimization phase, this is where you play with the variables. The reason that you systemize one way of doing the marketing first is so that you’ve got a solid foundation that you can always fall back on just as if you are climbing a rock face, a rock climber.
When they’re climbing only moves one limb at a time, they, they do this thing. That’s called three points of contact. So as you’re going up scaling a rock face, you’ve got both of your feet set and your left arm is set before you move your right arm. You make sure that everything else is secure and then you change one thing. And then after your right arm has a good hold, then you move your left arm up like that. So optimization is really about slowly adopting the processes, finding the things that are going to help you grow marketing is part of that.
Optimizing your sales process is another. So let’s say that you make a system and your system is you’re going to do a free class trial and people come in for your class trial. And sometimes they sign up and sometimes they don’t, that’s a system. It’s not a great system, but it works maybe, you know, to get two to three new members a month. So you write that down. Here’s exactly how we do it. And then you get to the optimization phase and you say, oh, I’ve been reading about this, no sweat intro. And my mentor has just presented me with the script and the process and some role play to do for homework.
So now I’m upgrading my existing system to a No Sweat Intro. And I’m gonna try that. And oh boy, look at this, I’m closing higher value clients at a much higher rate. And then you learn about lead nurture and you learn what to do with people who are paying attention, but not paying you money yet. And so you upgrade your lead nurture process. Maybe you start using a CRM like kilo.
And so the optimization phase is really about improving the systems that you documented and built in the systemization phase. The third phase of business growth is what we call grow. And at this point you’re growing your primary business. So you’ve got your systems down, you’ve optimized. It, you’ve basically figured out what works and now you’re going all in on those strategies that you know, work.
So for example, if you tested out running ads on TikTok and you found that you’re getting a little bit of results and for every dollar that you put in, you wind up getting $2 back. Now it’s time to go all in on that strategy and just keep pumping into what works. If for example, you find that during the optimization phase, you found that the best group size for retention is seven to 12 people. Okay? Now we know that. And in the growth phase, we are going to build as many groups of seven to 12 people as we possibly can. And so the growth phase is really about growing your primary business on the systems that you’ve already built.
And that means , uh , more investment in these systems. It means more investment in marketing and sales. And really in this phase, we talk about marketing and sales a lot because operations should be settled, should be sided . They should be locked in. You should have a great , uh , staff. You should have good training processes. You should have a good operational handbook. You should have evaluations in place and now it’s time to grow. And so all of your attention as the CEO is basically into the growth of your company, which is marketing and sales. And the fourth phase of business is scale. So systemized optimized growth scale scale is when you’ve got one successful business, that’s paying you at least a hundred thousand dollars per year.
And you decide now what, what is the next level? And so you might duplicate that business, or you might say, okay, what’s it gonna take to get this business to pay me $250,000 a year. I need to add a management layer, for example, or , um , maybe I need to add a different business, a separate business beside this business. I need to add an ninja warrior gym. I need to build a separate kids program.
Maybe I need to add a franchise. Maybe I’m gonna take what I’ve earned. And I’m gonna reinvest that somewhere else entirely. I’m gonna buy a self storage business or I’m gonna invest in the stock market or real estate. But scaling is really about having one golden egg or one goose laying golden eggs so that you’re nice and stable. You’ve got a little bit more money, a little bit more time than you need. And you’re going to reinvest that to compound what you learned through the first three stages.
Why is it important to follow this process? It is super important because if you do these things out of order, you can break your business and you can even bankrupt yourself. For example, several years ago, maybe three or four, there was a big marketing company that ran a ton of Facebook ads for you. And they would come into your gym and they would set up a whole lead nurture sequence and they would get leads into your door. And then they would teach you how to sell those leads. Great. Right? But you’re jumping straight to the growth phase of gym ownership. And if you haven’t gone through systemization, you haven’t gone through optimization, you can break your gym. And here’s what happened.
So this Facebook marketing company was getting a ton of leads in the door. People were growing their gyms by like 50, 60 members even, and those 50 or 60 members were coming in and they would even pay more than the current clients, three or 400 bucks a month. And then after the first month, those people started washing out, they started disappearing and they started canceling their credit cards .
And they started becoming hard to collect from. And the retention rate was like 30% after one month because the gym did not have the systems required to scale. And so they’d bring these new people in the new people would join the classes. The older clients would be like, whoa, who are these 10 new people in the 6:00 AM class, getting all the attention who don’t know what they’re doing? You know what?
I’m gonna go find another coach somewhere else. And so the problem became that not just the low retention of these new clients, but also the existing clients, the good people were washing out with them. And so this created a massive churn problem in the gym. Now, if the gym had systemized, their processes had systemized, how to coach a class consistently well had systems for doing a better on-ramp process.
They would’ve kept a lot of these clients and they would’ve kept their existing clients too. If they had optimized their progress, maybe by hiring like a client success manager to oversee retention, maybe by mapping out the client journey, maybe by using an Ascension system like level method, they would’ve kept their existing clients too, but because they were not ready for the growth, it broke their business. I’ve done this too. And I’m guilty of this.
So sometimes when we partner with people, Two-Brain Business has so much trust and affinity that we’ve worked so hard to build that when we recommend a product, they quickly become overloaded. And overwhelmed years ago, we were working with a company and it was a solo operator. She was an amazing person. And when she had 20 or 30 clients, she ran an amazing business. But then when we stood up and recommended her at our summit, she suddenly went from 20 clients to a hundred. And she was a sole operator. She was doing all the work by herself.
And so she quickly tried to hire staff to accommodate all this growth, but it was kind of too late and she didn’t wanna leave any of these new clients hanging. And so she was wind up sometimes working literally around the clock, 24 hours straight, and her husband was ready to divorce her and her life just went to hell in a hand basket. This is really, really common. Before the last 10 years, businesses went through a few systems, right? A few stages. And so a lot of business owners would open up. They’d buy themselves a job.
They’d work that job for 30 or 40 years, they’d sell it to their kid and retire. That doesn’t happen anymore. So then what happened was people would open up, they would run their business and they’d reach, you know , the year 2010. And they’d look around for somebody to buy their business. And they’d realize that their kid went off and got a liberal arts degree at college. And there was nobody to buy it. And so they just eventually shut down or they worked until they were 80 and couldn’t stop working now, enlightened entrepreneurs understand that they need to build roles and tasks so that they can someday sell their business or pass it off to somebody or train their kids to run it or whatever. They must build a business that runs without them.
And so they get into the early stages. They systemize things, check, they optimize things, check, but then they don’t grow because they don’t, you know, find the one thing that’s going to grow them and stay focused on that. Instead what they do is they build one thing, they get a hundred customers and then it gets hard to grow. So they try 50 different advertising strategies. And each one works a little tiny bit, but they never go all in on one because they never measure which one is working. And so then what happens is they, they get two clients and they lose two clients.
And they’re never actually growing because they’re never finding the one thing they skip the optimization step. And so , um , they’re , they can’t break through the ceiling of like a hundred clients. And this is, this is super duper common. And really what has to happen is not the next marketing strategy. It’s not early adoption of TikTok . What needs to happen is they need to go back and say, which system is broke, which system is not optimized. When two brain was growing and we were hitting like the million dollar mark and just kind of sitting there for a few months.
What we realized we had to do was not just have the systems, but test which growth strategy was going to work best. So bullets before cannonballs, we went out and did Facebook ads. We did Instagram, we did YouTube. We did Google ads. We found the one that was working the best. And we went all in on that. We went from a $500 a month. Facebook ad spend to a $15,000 a month Facebook ad spend, because that was the thing that was working the best. And guess what? The return on that ad spend was something like seven to one in the early days. And then it went down, but it’s still like 3.5 to one. You put a dollar in, you get 3.5, three 50 back.
And we learned that in the optimization phase. And then we went into the growth phase. So what happens when you’ve grown your gym and you’ve got, you know, 150 clients or two 50 or 500, you’re making at least a hundred thousand dollars per year take home.
What next well, that’s really what scale is all about? And at that level you have to decide, do I want to duplicate this business? Do I want to add a management layer or do I want to go out and invest the profits in something more passive and keep running my gym myself. Any of those are viable. Now this maps to our client journey. So in the systemized portion of growth, we call you a Founder and your job at that role is to stop doing everything yourself. The next phase, which is optimized, we call Farmer. That’s where you’re growing your team. You’re finding the optimal systems and you’re doubling down on them. And then the next stage is Growth, which is also kind of Farmer phase. You’ve discovered the systems, and now you’re really reinvesting and growing your gym as much as you can using the systems that are optimized.
And then finally scale, which is Tinker, which is you have a little bit of free time. You have a little bit of extra money and you’re reinvesting that or adding a management layer or being a better leader. But anyway, the four systems that you need to grow any business are systemized optimize growth and scale. If you skip any one of these, you will collapse.
It’s like a house of cards, but if you build these in order, you can build a really solid foundation that really removes all limits above you. So I hope this helps you. If you need to figure out like where you are in the process, you can read Founder, Farmer, Tinker, Thief, I’ll post a link. In short, We created the gym owners , United Facebook group in 2020 to help entrepreneurs just like you. Now, it has more than 5,600 members and it’s growing daily. As gym owners, join us with tips, tactics, and community support. If you aren’t in that group, what are you waiting for? Get in there today so we can network and grow your business. That’s Gym Owners United on Facebook or gymownersunited.com – join today.