664 – How To Choose The Right Market Using The Five Market Must Haves With Ryan Levesque

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Ryan Levesque

In this episode:

01:45 – Moving on from the launch model
03:27 – More time for the kids
05:04 – About the new book
09:40 – What makes a good market?
10:57 – The Scrabble tile jewelry venture
12:59 – Going for evergreen
15:03 – Why education and expertise are good bets
18:52 – The enthusiast versus problem solution market
20:14 – We’ve got to solve this NOW
24:00 – Where a solution leads to other problems
25:00 – Where are the players with money?
30:59 – Next test: market size
33:09 – The In/Up/Max concept
39:35 – A brief book review

Learn the right moves for the right market with help from James

Transcription

James: James Schramko here. Welcome back to SuperFastBusiness.com. This is Episode 664. Chatting with a repeat guest, Ryan Levesque. Welcome.

Ryan: It’s awesome to be here. I’m actually so disappointed I couldn’t be guest number 666. Then we could make that the kind of twisted double episode here.

James: You know, most people express relief that they’re not Episode 666. So that’s a counterintuitive position to take. I’m not sure how to handle that. Maybe I’ll be like those elevators in some countries. In Asia, they don’t have elevator on level four or something like that.

Ryan: Yeah, no level four, no level 14. And funny, it’s China, because they adopt the western and eastern superstition, so there’s no level four, there’s no level 13, there’s no level 14. So you’re like, on the 15th floor, and you feel like you could just step off the balcony onto the ground.

James: It’d be great for realtors, they’re probably selling a penthouse at a premium. It’s not quite as tall as they thought. Reminds me of that John Malkovich movie, I think it was Becoming Malkovich, and there was like, a floor in the middle of everything. That’s funny.

Ryan: That’s funny. Well, 664, here we are, it’s great to be back. Man, I always love talking to you. It’s awesome. Awesome. And to be back, I’m really grateful.

Moving on from the launch model

James: I do keep an eye on you from afar, and I was most pleased to see you have made recurring revenue the center of your universe. And you’ve gone off the chase, the move, the instability of the launch-event-based model, and I must say, you took your time about it, buddy.

Ryan: You know, it’s challenging. The launch model is very alluring, right? And you get these, you know, very big revenue hits, which are incredibly addictive, because they can propel a lot of growth in your business. But they do come at a cost. They come at the cost of the instability of the event-based model. And I think there’s a place for it in business. That said, I think for us the stability of the recurring revenue model is something that we’ve made a focus strategically in our business to shift more and more of our income there over the coming years. So yes, your words did not fall on deaf ears, my friend, my sensei, my mentor.

James: Well, I put that whole chapter nine in my book, no compromise. And yeah, it’s like the strain on the staff. I do think launches have a place too, and you know, I launch. When I launch, I actually would rephrase it to release, right? I release things out into the wild. I think it’s good as a promotion. It’s not a good business model as the core, and that’s really the difference, unless you’re PlayStation or something with, you know, the gaming market or movies. Of course there’s a place for it, where it might be the model. It was really refreshing to see that, because I think it will fix a lot of the other things that I’ve observed that cause businesses to have carnage, which is a massive strain on the staff. It’s like a load on the customers, being deluged with a billion, trillion emails. And then, I don’t know, but the little greed gland starts to appear in people and they metamorphosize into an evil version of themselves sometimes.

More time for the kids

Maybe you’ll take up surfing and become super chilled one day. And the second thing, and I wanted to just highlight this, is I’ve seen you take a renewed focus on carving out time for your kids, which was nice to see. Because I remember not that many years ago, you showed me a picture of your schedule, and I was frightened by how blocked out it was. It’s good to see you seem to have softened up a bit there.

Ryan: Yeah. You know, I think if you saw my schedule this week, I think you would be quite frightened.

James: I did see it. I think you actually showed a schedule at some point a week or two ago. You know what, I had a little tear in my eye because it’s like, little Bradley’s soccer match, and daddy had a conference somewhere else or whatever. And I’m like, Oh, poor Bradley.

Ryan: I make time. You know, I have a different philosophy about it. I mean, I feel like, if something is important in my life, I block it off in my calendar, even if it means it’s time for my kids. And I actually show it to them – I say look, this is your time, you’re blocked off in the calendar, this is 100 percent for you. And they actually appreciate that.

James: That’s actually all they can relate to, really, is time with you. It might be one of the five languages of love, right?

Ryan: Quality time.

James: But for kids, I think it’s most definitely enhancing. Having just had my little baby and spending every single day of her life with her, which I wasn’t able to do with the first four, it’s been transformational, the freedom that our business can create if we choose to take advantage of it. And I say that, because some people just go into like, extra maniac mode when they have their own business, compared to having a job. At least when they had a job, they’d come home at five o’clock or six o’clock or seven o’clock. Sometimes with your own business, you’re fingers are glued to that keyboard, and we go into overdrive, you know? Like Gary Vee mode.

About the new book

And I think that’s nice to see. So I’m watching you make these changes in your business and in your life. And, of course, I’ve watched you publish a new book, which I think was a missing piece of the puzzle. And it’s the answer to a question that I get asked a lot, which is, how to choose your market, like where to go into. I get a lot of people coming at that sort of startup phase, or the entry-level point, before they’ve even got something in motion. And I haven’t had a great resource to send them to until now. So tell me about the book, Ryan.

Ryan: Yeah, you know, when I released my first book, Ask, you release a book like that, you know, it sold lots of copies around the world, it’s in all these different languages. And you get, like, your book – I’m sure you’ve gotten people reach out to you and say your book was transformational, which is great. It’s kind of one of the highs of writing a book like that. But you’ll also get letters from people, at least I got letters from people who said, Ryan, I tried what you teach in your book, and it didn’t work. And you get a letter like that, or emails or Facebook messages, and it’s kind of like a bit of a punch in the gut. You know, it kind of causes you to second-guess yourself and question yourself.

And I started kind of digging into why people were not succeeding with Ask. And you know, for every person like Jamal, who was making, you know, $17 an hour when he read the book and built a $600,000-a-year business, or guys like Charlie who, you know, was making a few thousand dollars a month and built a multimillion-dollar business on the back of what he learned from Ask, there are people who said it didn’t work. And so I started digging in, and all roads kept coming to the same place. It kept coming down to the fact that despite implementing the methodology step-by-step as I taught it, they were failing because they had made a critical mistake. They made the mistake of choosing a bad market. They’d chosen a bad market in the first place.

There’s a metaphor that I use in the book. It’s kind of like this – when you start a business, it’s like tossing a boat in the river. And you toss your boat in that river expecting the river to take you to your destination. And you can have the best boat in the world, you can hire the best crew, you can row 18 hours a day Gary Vee style. But if your boat isn’t pointed in the right direction, you’re never going to get to your destination. And that’s what I saw people doing, is they had their boat either pointed in the wrong direction, or even worse, they were putting their boat in a river that didn’t have any water in it, and they were never going to get to where they wanted to go. And I realized, what I didn’t do in Ask is, I shared the methodology I used to enter all these different niche businesses, all these different niche markets, 23 markets, but what I didn’t teach was how I chose those markets in the first place. Like, why those markets over the millions of other possibilities out there? And so, in Choose, it’s really a prequel to Ask; it’s the book you should read first. It’s how to choose the right market for the type of business you want to build. That’s what the book’s all about.

James: Yeah, I like that. I mean, whilst I do get a lot of people saying that my book helped them, and I don’t get people saying it didn’t work, because mine’s of a different type of topic, yours is very technical. And I applied your technical process to my business and the business of others, and it’s definitely helped to refine and to improve conversions and to increase relevance, and to help people find the right offer quickly. So it was very useful for that. I really liked this. This took me back to the beginning of my journey, actually. A lot of the topics in there are stuff I haven’t seen for over a decade, you know? Like the paradox of when you start to get expert at something, you forget how hard it was in the beginning. And I know that the frustration and the pain involved in not getting the offer that converts is just brutal. You know, people could have all the best intentions, they could definitely spend a lot of money on courses, and they can get hyped up into this frenzy of hope, but they may never succeed unless they choose the right product.

So if you could just go ahead and tell us the best products or markets, that would save a whole lot of effort of reading the book and going through the research phase. Because I get asked a fair bit. And amazingly, a lot of people think that the easiest thing to do is just to cut and paste what I’ve got, because I’ve already figured it out.

Ryan: Right. Right. Yeah, you know, it’s interesting, right? The reality is, there’s two sides to the process. And it’s one thing to build a business that is going to fill your bank account, that’s certainly important. But you also need to build a business that’s going to create satisfaction, right? You don’t want to build something that, you know, you find makes you money, and then you wake up one day 10 years later and say, why did I spend the last decade of my life doing this?

That’s kind of where I was coming from, from the job I was working in. And you obviously, you know, were super successful in your career. For me, I kind of had this quarter-life crisis where I said, you know, why am I doing this? Like, is this what I want to spend the rest of my life doing? And the answer was no. So in the book, I take you through, there’s two sides to the journey, there’s the introspective journey of self-discovery, to figure out what’s important to you, and what type of business is going to fuel your soul. But equally important is a business that’s actually going to make money, that’s going to be successful out of the gate.

What makes a good market?

And so, you know, for me – and I’ll talk a little bit about some of the factors that go into what makes a successful market versus a market that is setting yourself up to struggle – but I was very curious. Like, it’s easy for us to say, what’s a good market versus a bad market? But what does that actually mean? You know, so for me, I’ve always been a huge fan of the work of Jim Collins – Good to Great, Great by Choice, Built to Last. And Jim Collins’ work, if you’re familiar with it, is he has studied publicly-traded companies and looked at, what is it that separated those that were successful for decades, that have built businesses that have stood the test of time, versus those that maybe were successful for a season, but then kind of fell off a cliff or disappeared?

And I was similarly interested in this question of, what is it that makes a good market? And what we ended up doing is looking at our most successful businesses versus those that weren’t ever as successful. I did the same thing with my closest students or closest clients. And what I found was that there are seven factors, seven factors that separated the businesses that were most successful from those that never really kind of took off or never reached that same height of success, from a market perspective. And you know, I’ll talk about one of those right now, is what we’ve come to call the five market must-haves, five criteria that you want to look for in your market before you decide to pursue a business in that space.

The Scrabble tile jewelry venture

And so, one of the market must-haves is something I learned in my first business. It was a mistake I made. First business, and I know, James, you know the story. The first business that my wife and I went into was in the Scrabble tile jewelry space. Like, you know, teaching people how to make Scrabble tile jewelry. And every time I say that, everyone chuckles and laughs, like, what? Is that actually a thing? It’s a business that my wife found. I think she was sick and tired of the dinner conversations, of me throwing out some crazy harebrained business idea. And finally, one day she said, All right, how about this? How about we make the Scrabble tile jewelry? And she stumbled on this opportunity when she came across the website etsy.com, which at the time, in like 2007, 2008, was a startup at the time. It’s obviously a multibillion dollar company today, but it wasn’t back in the day. And she said, what about this jewelry? And at the time, we were living in China. And she said, there’s this jewelry that’s selling like crazy on Etsy, combining Scrabble tiles and origami paper. And, you know, she said, we’re in China, we have access to all the origami paper in the world. We have access to inexpensive labor, we could manufacture the jewelry and import it into America. What do you think?

And I said, Well, that’s kind of like, you know, the whole reason why we’re starting this business in the first place, it breaks all the rules – we want a location-independent business. We don’t want to be chained to like, a factory in China, we want to be able to travel and have freedom and all these things. So I closed the book on the idea. And then a few weeks later, she brought it up again. She said, you know, I want to revisit that Scrabble tile thing. And I said, I thought we closed the book on that. She said no, timeout. I want to show you this woman’s shop. And she showed me this woman’s shop on Etsy. And she said, take a look at this woman. She’s not making the jewelry. She’s teaching people how to make the jewelry. She’s selling tutorials on this new jewelry. And she said, take a look at what she’s doing. Now Etsy, you can see a person’s sales history. So she said, look, she’s selling like, 30 copies a day of this tutorial that she’s selling for 30 bucks each. She’s making like, 10 grand a month.

And so my wife bought the tutorial. And she said it wasn’t very good. And she said, I’m going to learn how to make this jewelry. So she learned how to make the jewelry, we created a tutorial, we started selling it. First month, we sold a couple of copies and a few hundred dollars, $1,000, eventually, something like $8,000 a month. And I remember I turned to Tylene, and I said, honey, we’re going to be rich. Like, we’re going to get rich on this idea, it’s crazy.

Going for evergreen

And then James, you know the story, but the next month, our sales basically went down to nothing, zero. And it was then that I learned that you want to avoid going into fad markets. Instead, what you want to look for are evergreen markets. Markets that are relevant, you know, they’re relevant 10 years ago, they’ll be relevant 10 years from now. And I learned that the hard way, that the Scrabble tile jewelry market, which I thought I was going to make a fortune in, was basically just a fad. It was like fidget spinners or, I don’t know, in Australia, it’s kind of made its way over there as well. But these fads that kind of lasted for, you know, a couple of months and then disappeared.

And so the next business we went into was the orchid business. And I’ve shared that story, I think, on a previous interview that you and I did. Nothing to $25,000 a month and half a million dollars a year. And it’s really the first kind of niche business that we had a lot of success in the market, caring for orchids, as in the flower, which, still to this day, 10 years later, basically pays for our living expenses. And it shows the importance of going into a market that’s not going to disappear in a few months or a few years.

James: Yeah. I started out in a market that was a lot more solid, that, you know, it was revolved around people having websites. But during the first few years, it changed from being software-on-a-PC-based to being cloud-based, open source software. So I switched from having the tool to providing the done-for-you product. So I went from the software people buy to a service that people could actually buy the finished product. And then I ended up building a couple of service businesses around website development and search engine optimization. And the whole time, and this is really interesting and topical for this, because I’ve been doing the podcast and my membership coaching and events, each of those three, for 10 years now. So they’ve proven the test of time, and I suspect there will be a future in helping people understand and improve the way they go about their business.

Ryan: I think it’s a safe bet. I bet on that horse, as well. I think as long as capitalism exists in its current form, I think that’s not going away anytime soon. And, you know, we’re wired to want more, so I think it’s a pretty safe bet. Of course, the technology is going to change, and, you know, there will be some changes, but I think it’s a safe bet.

James: You’re in the education market and in the software business these days, right?

Why education and expertise are good bets

Ryan: Yeah. And, you know, I’m partial to what I described as selling education and expertise for a few reasons. There are a million different ways you can make a million dollars, right? Let’s put it that way. For me, I believe that if you are a bootstrapped entrepreneur – so if you are building your business yourself, you’re not raising millions of dollars of outside funding, but you’re basically doing it on your savings or your credit cards or borrowing money from friends and family – that selling education and expertise is the model, the go-to model for so many reasons. It’s the lowest startup costs, high margins. It’s evergreen. If you look at the trends, people are spending more money on education online today than ever in history. The latest stat that I saw, which is even more recent than I think what I put in the book, is over $800 million a day is spent on education online. $800 million a day, and that number is growing at an increasing rate.

So you know, for every argument that there’s so much free information online, people are spending more money today on education online than ever, and all trends point toward that moving in that direction. So I think it’s a safe bet. And for anyone who doesn’t have expertise, or you don’t feel like you’ve got expertise, there are millions of people out there that you can hire that you can partner with, that you can work with, and all sorts of ways. You know, I wasn’t an expert in Scrabble jewelry, I wasn’t an expert in orchid care. I wasn’t an expert in virtually all the niches that we went into, but I found ways to work with experts in those spaces to sell products and services along the way.

James: Yeah, so let’s talk about some of the key components there. And by the way, as there’s so much more free information, I think there’ll be more value placed on people who can organize it and get people into a digest version of it, or to get them an outcome in a faster, more effective way than all the, you know, paralyzing, overwhelming options that someone has available to them.

Ryan: Well, that’s the interesting change, right? So the paradigm used to be, there was no information. So if you could be the one who provided that information, that’s where you’re creating the value. Now we’re drowning in a sea of information. You go to Google, you go to YouTube, you go to any place online to find an answer to something, and you’re wading through these 45-minute tutorials in broken English in some super low-quality thing. And you’re saying, I want just one piece of information; I have to wade through hours and hours of the garbage that’s out there. If you can be the person that gives people exactly what they need, exactly when they need it, just in time, I feel like there’s a huge, growing opportunity in virtually every industry, every niche, every market in the world.

James: So in the first stage of your process for choosing, you have a model brainstorm, market brainstorm, and a business idea brainstorm. And in fact, I remember when I read your draft copy, which is so draft, the endorsement on the opening cover, says, “This is an endorsement, simply replace this endorsement with…” you know, with one you have, so I’m super privileged to get such an early copy. And I appreciate that. I even had a suggestion for you, regarding your In/Up/Max framework, because I’m such a contrarian. And I think you made some slight adjustments, but I was really pleased to see it stepped out in such an easy fashion.

Ryan: Yeah, it was great. I mean, I appreciate that feedback. And yeah, we were able to make, you know, some tweaks based on that feedback and the feedback of a few other kind of advanced readers. So I appreciated that as well.

You know, so you brought this model market, business idea sort of framework. And if we look at the highest level, what are we doing here? Well, there’s a brainstorm test choose process, right? So first, you brainstorm your ideas, you test those ideas against specific criteria to see if they are a green light, yellow light or red light. And then at the end of the day, you choose which one you’re going to focus on.

Now, we started talking about one of those tests, which is that market, the market must-haves. And I talked about the first factor, the being in an evergreen market, that was the Scrabble-tile-versus-orchid dilemma. But I also learned along the way and through this research that it’s not enough to be in an evergreen market. Like, that’s a necessary but not sufficient condition for success.

The enthusiast versus problem solution market

The next factor is to be in what we call an enthusiast market. Now, an enthusiast market is in contrast to a problem solution market. Problem solution is like, something like wart removal, right? You’ve got a wart on your foot or your hand, you want to remove that thing, and you never want to talk about it ever again. Right? You’re not signing up for any SilverCircle membership around wart removal; you’re not signing up for any email newsletters; you’re not signing up for the SuperFastBusiness podcast equivalent for wart removal. You don’t want to deal with that. It’s like, you’ve moved on with your life, versus an enthusiast market, is a market that people will spend money in that market for years and often decades at a time.

So classic examples – orchids are a great example. Dogs are great example. If you own a dog, or you know someone who owns a dog, you bring a puppy into your house, and you’ve basically signed up for the next 10 to 15 years of your life to be a consumer in the dog market. The market that you’re in, James, right? Serving entrepreneurs, that’s a great example of an enthusiast market. These are markets where you can sell to the same customer over and over and over again, as opposed to having to constantly chase after and find a new customer.

James: Like the funeral market.

Ryan: Yeah, exactly. Or the flood removal market, you know, flooded basement. Basement’s flooded, you call up one of those companies, and you remove the flooding. That company then has to find another person with a flooded basement in order to make more money, as opposed to having a customer that they retain for life. So that’s the second.

We’ve got to solve this NOW

But it’s not enough, as we discovered, to be in an evergreen and enthusiast market. You have to focus on market must-have number three, which is solving an urgent problem in the context of that evergreen enthusiast market. Now, I describe this in the book as what we call a $10,000 problem. It’s a bleeding neck problem. It’s a problem that, you know, someone wakes up and says, We’ve got to solve this now. We’ve got to solve this today. Not a problem that is just inconsequential, that kind of just lingers in the background.

So in the dog market, classic example I use in the book is, you know, potty training a puppy. You bring a new puppy into your home, and the dog is making a mess on the carpet and the floor and the rug and the sofa and the bed and the clothing, the laundry. You know, it creates this situation where at some point you say enough is enough, we’ve got to solve this now. And when you’re solving an urgent problem, people have very little price sensitivity. They’re not going to shop around online to try to save 5 percent or 10 percent. They’re saying, I don’t care what it costs. We got to deal with this now. And that’s the type of problem you want to focus on solving for people in the context of that enthusiast market. In the orchid market, it’s the flowers falling off. If you’ve ever cared for orchids, if you’ve ever been gifted an orchid, then you know, at some point along the way, for many people, they have an orchid, it’s blooming, it’s beautiful; and they wake up in the morning, and all the blooms have fallen off. And their orchid was once flowering and beautiful, and it now suddenly looks like a dried-up stick.

James: That seems like a horrific metaphor, like, give an orchid to someone you don’t like that much.

Ryan: Yeah, exactly.

James: Because it’s going to destroy itself.

Ryan: Yeah, it’s a bit of a sick, twisted thing that can happen. But it leads people to go online, wondering, what did I do wrong? Like, did I give it too much water, not enough water, too much humidity, too much sunlight, not enough sunlight. People want to know what they’ve done wrong. And it gives you the opportunity to solve that problem for someone. Now, when you solve that problem, you can become that person’s trusted advisor for life, as I’m sure you have for many of your clients, right, James? Like, you’ve probably helped people who have come in with a bleeding neck problem in their business, you’ve helped them solve it, and that’s created customer loyalty, where they’ve been customers of yours for now, probably going on 10 years, since the beginning of when you started doing this.

James: You know, one thing that fascinates me about that is occasionally I’ll do like, open-heart surgery on someone that is just life-saving. Like, their business was absolutely going to die, they were on their last legs. We’d fix something, they’ve restored it, they’re back up and running. And then the very next minute, they’re out the door. And you’d think it creates loyalty. But then you realize maybe that was a problem-solving scenario and not an enthusiast scenario. So it is interesting to observe. It’s very occasional – I reckon one in 30 will come, get topped up and then disappear, when you would think they would be the most loyal person for the rest of eternity. So it’s interesting. It’s a human behavior trait I think, or it’s a lack of appreciation in some cases.

Ryan: And imagine if your entire business operated that way. Like, imagine if your business was, 30 out of 30 people came to you, you did the open-heart surgery equivalent in business, and then you had to find another 30.

James: Then you’d end up having a scenario where everyone’s just perpetually doing launches, jamming your inbox. As you know, that’s the far extreme of my business. Because I came into this business over a decade ago with a mindset of lifetime customer. So, so far on your filters I’m doing okay with most of that. I know my surf business doesn’t pass one of the filters, which you haven’t got to yet.

Ryan: We’ll get to that.

James: It’s a classic.

Ryan: But anyone listening to this (I’m glad you brought that up) I’d encourage you to be thinking about your niche, your market, whether it’s your existing business, or maybe something you’re thinking about starting, and see how many of these boxes it checks off. So evergreen, number one; enthusiast, number two; urgent problem, number three; and that sets you up for market must-have number four, which is what we call future problems.

Where a solution leads to other problems

So ideally, you’re looking for a market where the success of solving that first problem leads to another problem. Business is a classic example. The market you’re in, James, is perfect for this, right? Because once you help someone choose their market, the next step is to figure out what to sell in that market. Once you solve that problem, and you’re making money, the next problem is arguably, well, James, I’m doing all the work myself, how do I hire a team to take some of the work off my shoulders? And then it’s, how do I establish systems? And all of the steps that are required to build a sustainable business. And so every problem that you solve, that success leads to a problem that previously didn’t exist. And when you solve that initial problem for someone, you can become their trusted advisor for life.

The dog market classic example: you help someone potty train their puppy. And then when they want to know, well, how do I get my dog to stop barking or stop biting or to come when she’s called or walk on a leash or whatever it may be, you have this opportunity to be that advisor for life. So that’s the fourth one.

Where are the players with money?

Now the fifth one, and this one’s important. This is one that a lot of people forget about. And it’s this: you need to be in a market that’s filled with what Gary Halbert once called “PWMs” – players with money. And what that means is not necessarily a market filled with millionaires and billionaires. That’s not the point. You want to be in a market where people are willing to spend a disproportionate amount of their income in that area of their life.

So the dog market, great example, right? You’ve got people who spend money on doggy spas, doggy vacations, dog insurance, all the toys, all the treats, the million things that dog owners spend money on. I imagine surfers might have a concentration of PWMs, players with money. I know for a fact, for me, you know this about me, the one area of my life where I’m a total PWM is with LEGO. We have an entire room in our home that’s the LEGO room, I basically buy a new set, a LEGO set, pretty much every other week or so. It’s an area of my life where I basically have an unlimited budget. And that’s what you’re looking for.

James: I mean, it’s good. In 2019, an adult can actually say that. You know, in public. It’s nice.

In surfing, it’s an interesting one because I am the player with the money in that market. I do get a surfboard fairly frequently, and I absolutely love them. And I’m so glad I didn’t fall in love with Top Fuel dragster racing, or drift car railing, or jet boating or something that could be horrendously expensive. It’s a relatively cheap hobby. And even though surfers do spend a fair bit of their budget on surf travel and equipment, most of them are not big income earners. It’s only the old bald guys out during the middle of the day who are probably retired directors or whatever, or professionals having a bit of a retirement. But a lot of them are tradies, you know? Sorry, I don’t know what you call them. What do you call people who go and fix things? Tradespersons? Yeah? We call them tradies. That’s very Australian, isn’t it? All the tradies there. And office workers.

So I know they scrimpt, and there’s a huge market in second-hand equipment. So there’s not a very high capacity of spending, and it’s not a massive, massive market. However, I think with the Olympics, and I think with wave pools, which you’ve got several in your zone, so you got three ways to surf now – I think there’s two wave pools, and you can go tanker surfing in Texas.

Ryan: Yeah, I gotta get myself back out there. It’s a lot of fun.

James: You’re very competitive. I remember you and Ilana, it was a race to the shore.

Ryan: Yeah. I’m all about it, man. If I was by the coast right now, and I know I’ve talked about it with Tylene, just making more time to get out by the coast. We’re just landlocked here in Austin.

James: Go to Hawaii or something. I love Hawaii. That’s where I go after going to an event in the mainland, is I just stage my trip back home and spend a week there. And it’s the most chilled, best place to learn anyway.

Ryan: Well, you bring up a good point, though, about surfing, that I want to talk about. So, what are the indicators to know if your market is filled with PWMs? Well, one indicator, and you just brought it up, is the barrier of entry into that industry or hobby. So for example, if you take two extremes, let’s take chess and yachting, or sailing, right? So chess, what is the barrier of entry to enter that hobby? It’s a chessboard, right? You can get a used chess board for what, five bucks, 10 bucks?

James: You could go to a local park, it’s probably sitting there.

Ryan: Yes, it’s probably sitting there, for free, right? But the point is, for a few dollars, you have a lifetime investment, and you could use that set for the rest of your life. versus if you are a sailor, how much money do you have to invest to buy a nice sailboat, just to get into the game? And then the annual upkeep and maintenance and you know, the repairs and new sails and new equipment and dock fees, and you know, everything that’s involved with that hobby. Before you know it, as you mentioned, like some of the hobbies you talked about, you start ballooning that budget. Well, that’s a good indicator to lead you down the path of finding other players with money.

In business, I’ll give you a good example. So people are always wondering, so if there are any of your listeners who are trying to figure out, how do you determine if a client has a budget, like anybody who is a service provider in the marketing space. I’ll give you a pro tip that I share with my clients. You want to know what question to ask? A single question. Ask them, what marketing automation software are you using to run your business? If they’re using a tool like Salesforce, you know that that company’s got money, because a Salesforce implementation is most likely tens, if not hundreds of thousands of dollars. If they’re running their business on MailChimp, you can get a MailChimp account for free or a few bucks. That one question alone will tell you, is this company someone who has a budget for marketing in their business online. You don’t have to ask them how much money they’re making. You don’t have to ask them how much money they’ve spent on Facebook ads or anything like that. Just ask them, what tool do you use for marketing automation? That one data point will give you a clue. So the point is, you can find players with money. Use these techniques to find out if there are players with money in the market you’re pursuing or thinking about pursuing.

James: Yeah, I made a video about that, that the best place to find clients in our market is any conference run by a software provider for mail delivery services. Basically, my filter is, someone who’s spending $300 per month on email software is probably a good prospect for SuperFastBusiness or SilverCircle, because if you’re not making at least a couple of thousand dollars a year online, you’re not spending $300 a month on an email tool.

Ryan: Right.

James: Those events like Ontraport and so forth, I think they actually had one of the richest tapestries of fertile business prospects that one could possibly imagine of any event I’ve ever been to. So, great tip.

So where do we go from here? Are we into the market, brainstorm the business idea, brainstorm?

Ryan: Let’s talk about another one of the tests.

So, first thing you want to do is you brainstorm your business ideas. You’ve thought about possibilities, and you’ve done this first filter. Does the idea check off these five market must-haves? If the answer is yes, you can proceed to the next test. If the answer is no, you may want to go back. You may want to go back to one of your other ideas, or you may want to tweak or pivot or change directions.

Next test: market size

Now, the next test that you want to be looking at is market size. One of the biggest questions I get all the time is, am I in the right size market? Should I niche down? Should I go in a bigger market? Am I limited in opportunity? How do you decide what the right market size is? And I was really curious to answer this question as well. So again, in this kind of research project that we embarked on over the last few years, we started looking at every single one of our niche markets, looked at my clients’ markets, students’ markets, and we’re trying to figure out, is there any correlation between market size and success?

And what we found, very interestingly, is that there is what we call a market size sweet spot. Now, what I’m about to share with you applies to the type of business that I advocate for, which is focused on selling education and expertise. So this is everything from memberships, like you have; online courses; live events like you do; things like coaching, consulting, masterminds – anything that’s in the realm of selling education, knowledge and expertise. And what we found was that there’s this very narrow range in terms of market size, what we call the market size sweet spot, when you measure the keyword search volume using a free tool called Google Trends, which many of your listeners will already be familiar with.

And James, for months, my team and I, we debated. Like, are we going to reveal what these keywords are, or are we going to like, keep them a secret, and we kind of went back and forth. Do we reveal them? Do we only reveal them in our, you know, our big expensive online course? And in the end, what we decided to do is, in the book, we reveal what those keywords are so that anybody can compare your niche with these reference benchmark keywords to see, how does your niche compare? Is it inside that market size sweet spot? Is it the right size? Or is it way outside, way above, or way below, in which case you may want to niche up or niche down to get yourself into that sweet spot? So that’s the next test that you want to go through in this series of tests in the Choose process.

James: Yeah, and you get lots of little associated charts, line charts galore in that section, the market size sweet spot section. So yeah, those tools are very handy. It might save you a mistake, and that’s really the whole point of this, is to get back, go back to step one, and step two is not looking great. I want you to talk about your In/Up/Max as well, if you can.

The In/Up/Max concept

Ryan: Sure. You know, one of the other things that I talk about is really thinking through what your offerings might be before you kind of go into a new business. And it doesn’t mean that you have to sketch everything out perfectly and know exactly what you’re going to do, but have some kind of ideas around what that might look like.

And there’s this framework that I talk about in the book called In/Up/Max. And it’s not a requisite for every business. But what I’ve found, and I’ve seen this in market after market, is there’s this interesting math that plays out where you see this framework where you have an “In” offer, typically a low-priced entry-level offer that is applicable to 100 percent of your audience. And that might be priced at X. You know, in our orchid business, it’s our book. It might be a $10 book or $20 book. Then you have your “Up”, which is most often the next step that someone might take after they buy your entry level product, your In. And this is often priced at 10X, 10 times the price of your In, and roughly 10 percent of the market will buy that thing. And then at the top of this pyramid, you have what’s called a Max offer. Now the Max is often priced at 100X, 100 times that entry level offer. And roughly one percent of your market, of your buyers, will upgrade to that thing.

Now I know one of the objections that you have with this is that it forces people through this path, right? They have to buy the In first, then they have to buy the Up, then they have to buy the Max, which is not always the case, right? Some people may jump right to the Max, and I have stories of this in our business – people who never bought anything from me before, and they sign up for our high-level mastermind or coaching program. Not everybody’s going to ascend up from the In to the Up to the Max.

And not everybody, if you think about starting your business, you need to start with an In. Some people might start with their Max offer. In fact, in one of our businesses, that’s exactly what we did, we started with our highest-priced, most premium offer, and then kind of backed into the others from there.

But it’s a useful framework as you think about having an offering for every segment of your market. The people who are willing to spend a high amount of money in that area of their life can go right to your Max offer or upgrade into your Max, as well as something that can serve mass market. So as I look at your business, James, I would say you’ve got your In, which is your book, right? People can buy your book for a few dollars off of Amazon and get a taste of who you are and your thinking and your methodologies and your strategies. You’ve got your Up, which is your SilverCircle. Or sorry, is it the SuperFast? What’s the lower-priced membership I was going to reverse in my mind?

James: SuperFastBusiness.

Ryan: Yeah, so SuperFastBusiness is your Up. And then your highest level group, your SilverCircle group, is your Max, it’s your highest level. You know, you get to pray at the altar of James Schramko.

James: Well, that’s not true. It’s definitely not about me being the center of the universe. There’s an element of mentor, also coaching.

Ryan: It’s your highest level offering.

James: Yeah. I just don’t want people to get the wrong idea. Because there are people out there who do run a little worship clan. And it’s not how we roll. There are a couple of Ups and a couple of Max’s. There’s the Maldives mastermind, and there’s also the SuperFastBusiness Live event.

Ryan: Totally.

James: And that was really my feedback on the book, is I didn’t want people to think it has to be linear, because the fact that you can’t remember my middle program is a perfect example, because you came straight in at the top.

Ryan: Exactly.

James: You come straight into SilverCircle, don’t hold me back, I’m in a hurry here, you know, and that’s exactly my point. And some people only serve the Max market. I think your point though, is it’s good if there is a range in the market that could provide you some options to move around with it.

Ryan: And it gives you stability, right? If you have one point on a line, you don’t have a lot of…

James: Oh, I’m all for a catamaran rather than a mono, right?

Ryan: Yeah.

James: It’s good to have another hull out there, on the other side of the trampoline, could float me to shore if one sinks. They’re complementary businesses that support and nurture each other, which is why I talk about that chocolate wheel. It’s very true, someone will most likely listen to my audio book, read my book on Kindle, own my book physically, come to my live event, be a member of SuperFastBusiness and go to SuperFastBusiness Live. And then there’s a huge pool of people who would also have a Maldives in there. And then there’s a lot of SilverCircle members.

In fact, one third of SilverCircle members are also members of SuperFastBusiness. So it’s not true that they all come from SuperFastBusiness – two thirds didn’t. But it’s also true that that people will have multiple offices, certainly some of your clients, and that’s where your customer lifetime value sort of metrics come in. We’ll have a version of an In, Up and Max, and even the Supermax.

Ryan: Yeah. Out of curiosity — you may not know these numbers, you may not talk about these numbers publicly so I’m kind of throwing on the spot…

James: That’s alright, I’ll just make them up if I don’t know.

Ryan: I’m just kind of curious. Like, so SilverCircle, roughly how many members do you have?

James: I have 36 members in that group.

Ryan: And then how many in SuperFast?

James: About 450.

Ryan: Okay, and then how many people have, you know, gotten your book?

James: I don’t know how many people. It sells every single day. And same with the Audible. So you know, it’s a couple hundred a month.

Ryan: That’s the math right there.

James: Yeah.

Ryan: You’ve got 5,000 to 10,000 people checking out the book, maybe it’s more than 10,000. Five hundred people in the membership, and 50 people in your Max. So that’s the math right there.

James: Yeah, there’s 20 on the Maldives. And there’s 150 at the event. But I always say that 10 percent of your audience will pay 10 times more. And my numbers prove that quite accurately, actually, but they pay in fact quite a lot more. It’s more like 18 times more for 8 percent of my membership. So the numbers do work out.

This is the thing that blows me away the most, right? If I only had SuperFastBusiness, and it’s $2,000 or $3,000 a year, I would be thinking there’s no way someone will pay $36,000 a year for a similar product. But that is actually the case. If I only had SilverCircle, I’d be wondering, you know, I wonder if I could get hundreds and hundreds of people to pay a little bit less if I could offer some similar value, because I’m the same person. So the delivery method and the marketing positioning and a lot of the other factors that go into making it successful are what caused that to happen. But it’s worth thinking, if you only have an In – and that’s where most people want to start, by the way. I want to start with the cheap entry level product. And I say, look, if you’re going to start anywhere, at least start with your Max, because it’s a similar level of effort and it’s far more rewarding. And it’s easier to get low volume at higher ticket than it is to go for massive volume at low ticket.

Ryan: What’s really interesting about that is, I think about Ask and that’s really exactly the process that I followed.

A brief book review

James: You have. You’re just filling in the In now with your book Choose, which I recommend everyone get and read and go through the process. Because you know, we can’t cover every single step of it here. It goes through two main phases and there’s several steps within each, but you’re going to learn all about keyword selection, the market sweet spot, the filters you should use. And it’s a better book than the other one for me, too, because it wasn’t half story and half technical. It was a nice blend all the way through. Well done.

Ryan: Well, you know, I like to say you’re only a first-time author once, right? And you get a lot of feedback. Amazon reviews are brutal, but there’s a lot of truth. And we took that feedback on the things that people loved about the book and the things that people didn’t like about the first book, and we were sure to incorporate that into the second one. That’s what the Ask process is truly all about, asking people what they liked, what they didn’t like, and then taking that feedback into account.

James: I got my first one-star review, Ryan. Interesting. You could give your best and you’re still going to find one in a hundred people is not going to be satisfied with whatever that is.

Ryan: This is my favorite review that I’ve gotten, right? So, one-star review, just came in recently, “I ordered another hat that the picture matched, but I had washed. My original hat was silver gray, which matched my silver gray goatee. I was sent the blonde hat, which did not match what I wanted to replace. So I wrote a review stating that. I was sent this hat that is black.”

So I got a review.

James: On a hat.

Ryan: On a hat.

James: Man, you really can’t please some people. I mean.

Ryan: Yeah, exactly. Sorry, but this is a book, my friend. It’s not going to function very well as a hat. I feel terribly sorry that you were misinformed about this purchase.

James: Oh, dear. Well, maybe it was just future-pacing your paper mache creation.

Ryan: Yeah, the next niche to go into. But listen, we want to do something special for your audience. And that’s make a free copy of the book available for anyone who is listening who hasn’t already had a chance to get a copy of the book.

James: Give me the URL.

Ryan: Choosethebook.com/sfb for SuperFastBusiness.

James: Beautiful. Thank you, Ryan, for coming along and sharing so much about your journey and how to choose the right market and product and avoid terrible mistakes along the way. And that would make that journey along the river and your boat so much more rewarding. I appreciate it very much.

Ryan: Awesome. Thanks, man. Always a pleasure talking with you and look forward to chatting soon.

James: Thanks, buddy. See ya.

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