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AP 1033: My Profits Are Being Eaten! How Do I Scale but Stay Profitable?

AP 1033: My Profits Are Being Eaten! How Do I Scale but Stay Profitable?

By Pat Flynn on

About This Episode

This week’s coaching call is with Luis Diaz, who has a podcasting agency in the fitness entrepreneurship space. The business is scaling well, but Luis’s profit margins are dropping. How can he increase his revenue, continue to scale, and better manage his team and client communications?

We start the call by evaluating Luis’s business and identifying how he can raise profits. We talk about some of the resistance that his clients have exhibited towards raised prices, and I offer Luis some ideas for a higher-tier service package. We pivot to talk about how Luis is growing his company and structuring his team and how he’s creating SOPs (standard operating procedures). I then give Luis some ideas for productizing his business to keep operations standard from client to client. We discuss how Luis can capitalize on connecting his clients with interviewees, and we close with some ideas for keeping Luis out of the weeds with client work and getting him some time back. By the end of the call, Luis creates a plan for setting client communication standards and scaling his business.

What You’ll Learn:
Learn how to finesse your service-based business by restructuring your team, services, and client communications, while also increasing your profits.

AskPat 1033 Episode Transcript

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Pat Flynn: What’s up everybody? Pat Flynn here, and welcome to Episode 1033 of AskPat 2.0. This is a podcast where you get to listen in on a coaching call between myself and an entrepreneur like you. You can apply actually to be coached just like you’re about to listen to with Luis today. Luis Diaz, he has a podcast agency and it’s beginning to grow, which is awesome, but there are growing pains like scaling and losing profit and those kinds of things, so we’re going to get into that. But by the way, if you want to apply to be coached like Luis is today, all you have to do is go to and you can check out the application button there.

By the way, before we get to this call right now, I do want to thank today’s sponsor which is FreshBooks, because one of the biggest problems related to running your own business is actually paperwork. Right? There’s a ton of paperwork that has to happen. By paperwork I mean dealing with all the business admin stuff that comes with working for yourself, whether you’re a single person, solopreneur sort of situation, or you have employees. It doesn’t really matter. This includes your finances, your income expenses, especially invoicing—it could be just a massive headache if you don’t take care of it. Thankfully we have tools like FreshBooks to do that for us. Literally a stress reliever.

The folks over at FreshBooks make it ridiculously easy to use cloud accounting software designed specifically for people like you, doing freelancing or running your own coaching business. What’s really cool is their interface is so intuitive. They just know exactly what we need because they do. They have tons of conversations to make sure they give us the best kind of situation for managing our business finances and all the paperwork. They have this new proposal feature now which is really cool where you can outline your project, your scope of work, and timeline. So now, in addition to billing, what about using FreshBooks to get new jobs? You can use it for that now too. If you want to check out FreshBooks for thirty days for free, a complete free trial, all you have to do is go to, and just make sure you enter “Ask Pat” in the, “How did you hear about us?” section.

Awesome. Now, let’s get to today’s coaching call from Luis, who is also a freelancer and doing his own agency situation. It’s starting to grow, but there are growing pains. Let’s solve the problem. Here we go.

Luis, welcome to AskPat 2.0. Thank you for being here.

Luis Diaz: Pat, thanks so much for having me on. I’m excited to get started today.

Pat Flynn: Yeah. This’ll be great. Why don’t you introduce yourself to everybody listening in and like, who are you and what do you do?

Luis Diaz: Cool. I guess the short story is, my name is Luis, obviously. I run a podcasting agency. It’s mainly geared towards fitness entrepreneurs. Right now I work with around twelve to fifteen fitness entrepreneurs, and we do everything for their podcast: so it’s from audio production, editing, uploading posting, creating graphics for social media, email swipe files, everything. Been doing that since October, and it’s been going well, however as we’ve picked up clients and started to just get busier and busier, I’m starting to realize it’s getting harder and harder to scale the revenue without scaling the costs of providing the service.

I feel a bit stuck just from my perspective format, right now. However, that’s the short story. To give you some background, I had been podcasting since, I want to say, 2016. Had my own fitness podcasts. Really enjoyed it, and then started doing the backend for a much larger podcast for free for about ten months. I learned the ropes of how to run someone else’s show. Then I turned that into an idea, or turned that into the business in October with other people with similar needs in a similar industry. I felt like I could provide much more value because I understood the clientele and the content type. That’s my backstory about the business and where I’m at right now.

Pat Flynn: Okay. For you, how would you describe the biggest pain that you’re going through right now?

Luis Diaz: I’d say the biggest pain is organization. The people I work with are all contractors, so I have no employees, technically, even thought they feel like employees in a sense because I’m always communicating with them. The biggest pain point I’d say, goes into the organizational things. I’m starting to realize working with more people, there’s a lot more smaller details and hiccups and there’s things that—extra services that I’m realizing are starting to be more costly as far as overhead.

Few weeks ago I moved to ONTRAPORT for customer service software, just to upgrade that system, so that was a big expense. I’m starting to realize that a lot of the little things are starting to eat away at my profit margin, which obviously when I was a solopreneur doing this on my own with three or four clients, the money I was charging—which right now I charge $750 per month—back then when I had a few clients and I was only doing myself and there’s not very much overhead, the revenue seemed good. But now it’s starting to catch up and I’m starting to realize I have to A, raise my price. But I also want to be able to provide ten-x of value, or else it’s not easy to command a high price obviously if you’re not really, really overdelivering on value.

Pat Flynn: For sure. For sure. Pricing is where I wanted to start, which I’m glad you mentioned. I was going to question you on the pricing based on what I know about podcasting, and $750 is a good amount of money, but I think for what you’re offering and it sounds like this is justified. You’re not just raising the price to raise the price. You’re raising the price because this is how you’re going to continue to grow and better serve your audience. Is there any resistance to raising the price, or is that something you knew that you just needed to do?

Luis Diaz: No. Initially I charged $500. That was okay, obviously, when it was only me. No resistance. I’m trying to find a way, I guess to justify the price, because I’ll talk with prospects sometimes. A lot of times it’ll come up, Pat, they’ll be like, “there’s no guarantee in this that this will work.” This is obviously a long game, so setting expectations with the client and saying, “hey, this is going to take a year or so for you to grow this thing and actually . . . You know, podcasting. It’s not an overnight success thing.”

Pat Flynn: Of course.

Luis Diaz: It takes a while to get some traction. I think that’s a hard sell, initially. Even though, coming on the phone, they already know the value or else they wouldn’t be there.

Pat Flynn: Yeah, that’s interesting that they’re kind of . . . It almost seems when you’re having these conversations they’re like, “oh, the marketing of it and the success of it is based on you, Luis,” not them.

Luis Diaz: Exactly.

Pat Flynn: Even though the truth is, well okay, that’s their responsibility. Your product, the $750 or whatever the price is going to be, there’s a very specific outcome that comes out of that, and that’s what you’re providing.

Luis Diaz: Right.

Pat Flynn: Perhaps it’s actually a good opportunity. Like, okay, that’s the base price to get the podcast up and running and have it continue to run for you, again, so you don’t have to do those things. But, we also offer or partner with these other things, or we offer these other services that can help make it even more likely that it will get in front of more people. Those become other offerings. I think that for podcast services a lot of times it’s just simply the upkeep of the show. Everything else is the other person’s responsibility. It’s interesting that they’re bringing into the conversation the, “well I don’t know if this is going to workout,” or the marketing. That’s not your job.

Luis Diaz: Exactly. Yeah. That’s the hard thing. I do want to provide a great service and I definitely want to be able to get their show out there, because having a great audience and not having crickets essentially is what most podcasters . . . That’s like the biggest question I get from clients: How do I grow my audience? I do offer, actually, consulting calls to help give them strategies, help them plan content, one hour per month. Obviously not every entrepreneur or every one of my clients takes me up on it. But the ones that do, I find that they don’t implement, obviously because they’re busy, as well as they could. That’s another thing I’m really looking to figure out, what’s the higher tier package that I could offer and provide more value to them, while not scaling the expense at the same time. Just trying to create that separation between more overhead and profit.

Pat Flynn: Right. I don’t know if we can determine what that is today. That’s going to be a lot.

Luis Diaz: Of course.

Pat Flynn: Largely based off of your clientele and what you know they want and those kind of things, you could offer for people who have product and merch, a website that works in conjunction with their podcast page that includes Shopify. You could offer them those services as well. You’re creating a full-on—the podcast is just one part of it, but there’s other aspects to the podcast that can help them serve their business, like the merch and all those kinds of things, the marketing of it, and getting on stage, or booking guests, and other things that can go along with it. That would justify a much higher price point at a top tier package, which could then frame and anchor the lower price packages, which would allow you to charge more.

I think you should definitely raise the price for one, and that’ll help you obviously with your profit margins. But I think another part of it is like, how well are you feeling with the management of your team, your contractors? I know personally that when I was a solopreneur it was so nice because I didn’t have anybody else to worry about but myself, and so my results were reflected on me and me alone. So, if I wanted more stuff done, I would just work harder. But then eventually you break. And when you’re working with people, it’s tough. How are you feeling with managing all that? Where’s your head at with all that?

Luis Diaz: Great question. That’s my next biggest thing. Obviously, I have people in the Philippines, people in, you know, in Europe that work with me, so it’s the communication and trying to be a leader has been a huge challenge. Now I’ve worked with like five or six people. So, trying to be a leader in all this is also a big challenge coming from being a solo operation. So, my head, well, where that’s at right now is I need to feel . . . It’s, I need to get better structure as far as checking in with people. And I wanted to pick your brain on this a little bit, as far as setting up stringent times, I guess. How would you go about setting up that with contractors, so that you can check in and make sure, okay, this is getting done, that’s getting done, and things are kind of moving along as they should?

Pat Flynn: Yeah. Honestly, at this point in my business now, because I’ve been doing it for a while, I don’t worry about those things. Because I have a person that worries about those things for me, right? Like a project manager. That’s their responsibility. And that alleviates a lot of weight off of my shoulders. Because then I can focus on more of the relationship building or the big idea things, and I don’t have to worry about being in the weeds there.

Now, you’re not likely there yet. Maybe you are. Maybe one of the contractors, you can have them step up and kind of take that role as sort of lead production manager, and then all the other ones are kind of the smaller ones under them who report to that person. And that person is the only one that you talk to. It could be set up that way in the future. And maybe that’s something to strive for. But in the interim, I know that one thing that really helped me was being very clear with setting those expectations up front with how I wanted to feel comfortable knowing that things were getting done right. So for a while it was like a daily report that that person was responsible for sending to me on everything that they had gotten done and completed. That way I could make sure that things were moving.

And then a little bit over time after I got to know some of my contractors initially and realizing that yes, they were always doing good work, then I wanted to give them a little bit more freedom. So, as opposed to just, “Hey, tell me every single thing you want me to do.” I would go, “Well, here are our goals. You find ways to solve this problem.” And even better now—I know that in particular working with people in the Philippines, having contractors there myself before, and actually being part Filipino myself, it’s hard to get those people to step up into a role that isn’t in their job description. So, where you can really benefit from that is having the SOPs be really, really detailed and to the point, so that there is no room for questions. It’s like, “this is how we do it, and this is how it gets done. Report to me every day and make sure that these things get done.” And you would know what the output would be, and if they’re reaching those levels because they’re reporting back to you.

That was nice, because we would only have one on one conversations once a week, and only talk about things that were not going to plan, or things that could be done to improve the plan we already had. Everything else was already taken care of the way it was supposed to be. So, the standard operating procedures, the way . . . This is how you scale an agency-based businesses. You have a specific way that you do what you do that gets to be essentially cloned with every single person that you have come on. I don’t know where you’re at in that process. I mean, there’s many different ways to create SOPs. When you train somebody to come on board, there’s just a bullet point list of, “okay, when we edit a show, this is it. Here are all the steps you need to do. And it should take you about this amount of time. And if it’s not, we can find where we can improve it. And if you can do it faster, then great—we’ll find other things to do too.”

Are you at that level or . . . Where are you at with all that?

Luis Diaz: Yeah, so we have a Trello board. We have an onboarding Trello board, which basically goes through all the training for their specific role, whether they’re a show note writer, a podcast manager, or an audio engineer. We’ll take them and show them how to communicate with us in Slack, and then also all the checklists for every single step in the process. The pain that I’m having with that is that I have over a dozen or so clients and everyone’s show, obviously as you know, is a little bit different. Everyone’s website when we upload it there is a little bit different. And it’s like these little details, and making sure we keep track of all these little details, is a problem. It’s a challenge right now.
[Full Disclosure: As an affiliate, I receive compensation if you purchase through the link to Slack.]

So, I wanted to get an idea of, would you standardize the offer? Like, “this is what we offer, and then that’s it,” or would you allow some flexibility in there with clients?

Pat Flynn: Personally, I would keep it set and allow for flexibility only if they pay for it.

Luis Diaz: Okay.

Pat Flynn: Does that make sense?

Luis Diaz: Yeah.

Pat Flynn: We had a guy on the SPI podcast, I don’t know if you listen to it, but his name is Brian Casel. He owns a website called Productize, so he teaches people how to productize their service. Basically, taking their service-based businesses and saying, “Hey, client, instead of working with you to build a website and we sit down and we kind of jam on it together and we create this thing from scratch, here are the four different options you have to choose from. Which one do you want? Anything additional beyond this, you’re going to have to pay for.” That way, it’s very clear which product is working, which one is most popular.

And the products are based off of what he knows. For example, he was helping build websites for people, just all kinds of people. And then he went, “No, I’m going to narrow it down. I’m going to build websites for just people who own restaurants.” Which helped a little bit. But then still, you’d have those one-on-one client calls and every website was different and everybody’s needs were different, and the upkeep for his . . . It’s just insane, like what you’re going through. And then he said, “Okay, you know what? We’re just going to create like three different versions of websites. And it’s already going to be pre-done and very simple to manage and be done with. And when we get a client on board, we’re going to say, “Here are the three that we know will work best for you. And you can choose the one that you want, and then that’s it. And if you want it the super fancy menu, that will take some time to upkeep and requires my team to come in every single month and do it in a way that’s different than these three things. Well, then you’re going to have to pay a little bit more each month to kind of justify and offset those costs.”

It’s a different kind of business; it’s a productized service. But if you know that there are certain things that are just the same every time, then just make those the product. And anything additional is the add-on and would help with those additional non-normal costs.

Luis Diaz: Right. Yeah. That’s exactly what I need to do, because yeah, it’s been a headache.

Pat Flynn: Because I would imagine show notes are going to be different for everybody, right? And there are other elements too. So, you could say, “Here’s our standard operating procedure, and this is what it costs to do these things in this kind of way. Anything that’s different and off of this, it’s going to come with a price, because—” And it’s not just because you want to charge more, it’s because you have to charge more. Right?

Luis Diaz: Right, exactly.

Pat Flynn: You have to, or else your business is going to go underground.

Luis Diaz: Right. Yeah, simple as that.

Pat Flynn: Right. And what’s that person going to say to that? They’re going to say, “Okay. Well, then don’t do it that way. Fine I’ll do it the normal way.” Or, “I have to do it this way, so yeah, I’ll give you more money to do that.”

Luis Diaz: Got you. Yeah, I’ll get started on that tomorrow. Next, I’d say pain point . . . Not pain point. This is an opportunity that I’ve seen arise, but I don’t know really how to capture it. I’ve seen all these other companies that do this, that is, you know, guesting. So, finding other podcasts for people who may not have a podcast to get on. So, people started to know that I have my hand at a lot of shows, and I’m friends with a lot of podcast hosts, so they’re starting to, not intentional, but just reached out to me and asked me, “Hey, you think you can help me get on this person’s show?” Or, “How do I get on more shows?”

Pat Flynn: Yep.

Luis Diaz: I see a big opportunity there, especially if I’m very niche in my industry, the fitness industry.

Pat Flynn: Absolutely.

Luis Diaz: I’m trying to figure out, I don’t know how I can . . . Because obviously, I can’t guarantee from my perspective, and I can’t guarantee, essentially that they’ll get on the show. I can give them an email intro and I can write about them in a good light. But yeah, I just wanted to get your thoughts on that, if there’s a product there, or if there’s a way to make that into something that provides value for them and the podcast, or without.

Pat Flynn: Yeah. It can be a win all around, right? Because if you have somebody who wants to get on another show and they would provide value to that other interviewer, then you’re basically just the middleman who’s going to benefit from marrying the two together. It could work out both ways. It could work on, you know, a podcaster who’s looking for great guests, and you know great guests, and vice versa, right? So, you could become that hub. And there are services out there like Interview Valet and a number of others that do work, and those businesses have been around for a while. So I’m guessing that they’re working, but having it be very niche specific is a unique angle, and I’ve never heard of anything like that. I think it might be worth exploring.

The nice thing about a business model like that is you can just try it once and see if you like it and see if it makes sense. And if it’s great, then you can begin to productize it and systemize it, and if not, you can just be like, “All right, but that worked once and it was weird, and I’m not going to do that again.” So you can just try that out. That’s the beauty of that kind of business: You don’t have to build out a full infrastructure to make it happen. It’s just connections.

Luis Diaz: Right.

Pat Flynn: So you can just try it, and see. And you can even go to a buddy and go, “Hey you know what? I have these … I know you’re looking for podcasts and I’m helping provide a service to other fitness influencers out there to get on big shows, how much would you pay me to have … to make a connection?” And you would only pay me if you got on the show kind of thing.

Luis Diaz: I’ll start with—it’s an angle I never even thought of. Yeah, just like, yeah, if you don’t get on my show, you don’t have to get—you don’t have to pay anything.

Pat Flynn: Right.

Luis Diaz: So it’s risk free. Ah. Okay. Yeah, that’s a huge one.

Pat Flynn: And you might get pushback like, “What? You want me to pay you?” Right? In which case you would have to know how to answer that, right?

Luis Diaz: True.

Pat Flynn: So, just doing it is going to teach you, “okay, this is okay, this is what I need to know and how it’s going to work out,” and it would just tell you what to do next and allow you to validate that you would want to keep going or not.

Luis Diaz: Right. Got it. So this is funny, because this actually happened today. This . . . I spent around three hours or so just . . . I think this goes back to probably your project manager answer, and I think I have someone in that role already now. It’s just a matter of saying the right—formalizing the process. But, yeah, I spent three and a half hours just on minor details on a couple of clients, and that’s time I could be using towards marketing, producing content for my new show, all kinds of different things. Following up with leads. Connecting with people. So, trying to keep myself out of the weeds. Tweaks on audio and graphic . . . Little things about graphics. There was something about Google Play being down, so I had a client contact me about that. Simple things like that. My real question is setting communication standards with clients, how do you go about that?

Pat Flynn: Yeah, because obviously anybody could reach out to you as many times . . . And whenever they go, “Yeah, I just need this small change,” it’s never a small change. Right?

Luis Diaz: Yeah. Exactly.

Pat Flynn: I think that there’s a number of ways to go about it. Office hours: “Hey, you can only reach me at this time, but during that time you can ask me to do anything.” But, in one where it’s more personalized, help for people’s personal websites, it’s harder to do it that way, in which case you could have people have a certain number of requests that come with the package, and then anything more would cost. That’s one way to do it. You could have those inquiries come in and you don’t see them first, but your project manager does. In which case they would go, “Okay, I could fix this really quick or this person can fix it really quick, let’s not even let Luis see this, that this happened.” That’s just a part of what your team would do, is help put out fires before you even smell the smoke.

Luis Diaz: Yeah, that’s a big thing. Yeah.

Pat Flynn: That’s ideally what you want to shoot for. Have somebody be there to be the shot blocker for any of those things that come before they reach your way. That’s become something nice that you know is happening in the business, because . . . And it’s a service too, right? You’re at the point now where you can tell a client, “Hey, when you have an issue come in, my project manager sees it, and they assess whether or not they can take care of it or hand it off to somebody else, and we’ll work to get it done within X number of hours.” I think that’s another expectation that you want to set too. It’s like, “Okay, how long before I get responded to?” If you have a system in place like Help Scout or something like that to accept those tickets so that they’re managed a little bit better—because that can become a problem when you get a lot of people asking you a bunch of things, servicing them in the right order can matter too.

Keeping track of the turnaround time is important too. And then just setting the expectation like, “Okay, and you know what? If they can’t solve it, I’ll be there. I’ll be there for you. But we have a whole team that’s dedicated to helping make sure these problems are solved, but we’re going to work to make sure that you don’t have any . . . That you don’t have to do that very often.”

Luis Diaz: Right. Yeah, I think that’s where I’m slipping up, because I’ll have some clients text me, some clients contact me online.

Pat Flynn: No, no, no, no, no, no. You don’t want . . . You gotta have a very specific place where they go if they have questions.

Luis Diaz: Exactly.

Pat Flynn: And it’s likely happening because you’re helping your friends out, right? And they’re just texting you like, “Hey Luis, this thing on my website broke.”

Luis Diaz: Right, and I’m like, “Well . . .”

Pat Flynn: And then you can go, “Okay, we’ll get it taken care of, put the inquiry in and we’ll get it taken care of as soon as we can, thanks for letting me know. And then you just leave it at that. For those people, you kind of have to train them that there’s a new way to do it, and then for anybody in the future, don’t let them directly reach you.

Luis Diaz: Right. Yeah. So the thing about setting up some kind of welcome emails like, “Hey, here’s how we communicate, here is how—”

Pat Flynn: Perfect.

Luis Diaz: Yeah, things like that. So, even though they don’t read the dang thing, sometimes . . .

Pat Flynn: Yeah. That sounds right. That sounds organized to me, when you say it like that, yeah.

Luis Diaz: Yeah, welcome email, definitely when we bring on—we’ve onboarded new clients. Yeah, I think those are my main questions, yeah. Just setting standards with communication. I’ve had kind of a fear of setting . . . Having a certain time to batch my emails, because let’s just say if something happens on a show and something wasn’t supposed to go out, and it did, or something like that. It’s kind of an emergency. So, I guess that’s where my project manager would step in and take care of that, so I can batch my emails?

Pat Flynn: Absolutely. And text . . . And that person would be . . . I mean, maybe not, but maybe you give them permission to text you, and they’re the only ones that can text you, if and only if there is a . . . Like, everybody’s tried everything and it’s boiled up to you.

Luis Diaz: Right. Got it.

Pat Flynn: Cool, man. How you feeling?

Luis Diaz: I feel much, much . . . A lot more weight off my shoulders now, you know.

Pat Flynn: Good. What was the biggest takeaway for you?

Luis Diaz: I think the biggest takeaway is what we were just talking about, just setting the client expectations, the communication. Because I’ll have so many different conversations with people and clients going on. it’s overwhelming in my head. Especially in my inbox as well. So it just turned into a giant stress that leads into procrastination. So, I think that’s the biggest one, is trying to systematize that entire communication system.

Pat Flynn: Yeah, I love it. It sounds perfect.

Luis Diaz: Yep. Awesome.

Pat Flynn: Cool man, well thank you for being here. Where can people find out more about you, where do you offer your services at? And we’ll follow up with you in a later episode maybe.

Luis Diaz: Absolutely. Best place right now would be to go to the That’s the Fitness Podcasters’ Development Center. Or you could just Instagram @LuisRyanDiaz—probably the best way.

Pat Flynn: Cool.

Luis Diaz: And yeah, Pat, thank you so much for your help. I’m going to be at Podcast Movement too, so I’ll see you there.

Pat Flynn: I will see you there. Sweet.

Luis Diaz: Awesome.

Pat Flynn: Thanks man, take care. Good luck.

Luis Diaz: Yep. Enjoy your day. Thanks.

Pat Flynn: All right, I hope you enjoyed that call with Luis Diaz, and just super stoked for his business now that the systems are going to be put into place. And not only that, I think I just want to hone in on that very important point that we just talked about at the end there, and that’s client expectations. Setting those expectations up front keeps you in control, and that allows you to guide the conversation and to better run your business. That’s the difference between scrappy entrepreneur, which is how we all start, versus CEO and actually running your company, not having your company run you. Luis, great job, and thank you all for listening.

Again, if you want to apply to get coaching just like Luis did today, all you have to do to go to do that is go to . . . I said go like five times in that sentence. We’re just going to keep that in, because this is real life. Go to, hit the button to apply there, and I’ll ask you a few questions, you type them in, and if I reach out to you, we’re going to schedule a call. I cannot possibly take everybody, because there are hundreds of applicants every single month, but hey, if you don’t try, you don’t get, right? So, That’s where you go.

And all you have to do right now if you haven’t done so already is hit subscribe on that play button or that player of yours. iTunes, or Overcast, Castbox, wherever you’re listening, hit subscribe so you can get the next episodes coming your way automatically and obviously, for free. Do that now and we’ll all be happy. So, thanks again, I appreciate you and I look forward to serving you in the next episode of AskPat 2.0.

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