When Your Revenue Is A False Positive

I received a number of DMs yesterday after I responded to Justin Jackson's tweet on a business' false positives.

Here's how the revenue that led to profitability turned out to be a false positive.

First, a little context on the business...

Butlr Health is a two-sided consumer marketplace that matches people with highly vetted therapists. The business started with a subscription model, offering a monthly and annual sub for therapists to join the platform. There was no cost to consumers who were matched with a therapist.

The Sales Process

When we first launched, our sales process was fully manual. We manually searched for sales leads. Then entered them into a spreadsheet. I did all of the sales meetings. We manually followed up. You get the picture.

After a few weeks we had nailed our messaging creating a framework for building a stable supply of therapists.

Within 2 months we were profitable.

Over the next few months we focused on streamlining the process to create a mini machine. We developed a beautifully predictable flywheel for getting from a lead to a sales meeting to onboarding a new customer. Automation was used to perform 75% of the sales process.

Hiring Sales Reps To Take Over Sales

Our sales process was ready to be scaled. So I hired two new sales reps to focus only on closing deals, removing myself from the process completely.

Although the team closed sales, we started seeing drastic changes in our sales patterns on the third month.

Therapists were no longer buying annual subs. 100% of our sales were now monthly subs. Then, we saw a high amount of churn. If a therapist wasn’t matched within 2 weeks, we were seeing them cancel their account before the month was even up.

What was happening?

The first thing you might think is that it was the sales team's fault here. It wasn't. They were fantastic. But what they couldn't have solved for themselves was the lack of trust the market would have in a new business.

The CEO Is Not The Business

When I was directly selling to therapists, my personal credibility was enough to stand in for the lack of brand trust and name recognition of a new company. 100% of my sales were annual subscriptions with little to no churn.

This helped us achieve profitability quickly as well as sustained cash flow.

Transitioning sales to a new team member had the opposite effect. 100% of our sales were now monthly subscriptions, and therapists were canceling quickly if they did not get a new client within a couple of weeks. Our cashflow dropped significantly, too.

The problem was clearly brand trust of a new company. Therapists weren’t signing up for our product because they believed in its value, they were signing up because they believed and trusted that I would provide them value.

This is fine when you’re first trying to get the business on its feet, but a false positive for scaling. You can only scale a business that works.

And I'm not the business.

Had we stayed on this route, trying to force it to work, we would have had a long, unnecessarily hard road.

So we had to start all over again.

What's The Fastest Way to Build Brand Trust?

I looked at two options:

1. Step back in to do direct sales until we built brand trust

2. Change the business model

Building brand trust in an industry where therapists are allergic to marketing could take years as a consumer company. Since I wasn’t interested in VC funding for this business, I knew that without capital for large scale branding and marketing efforts our path would be harder.

I was interested in the simplest solution with the least amount of effort and highest return.

After two weeks of experiments, we switched to a transactional model. Without the friction of needing upfront costs to join our platform, therapists had little to lose with a lot of upside.

The therapists fear of signing up with a new company quickly changed into helping the company succeed. We saw an increase in referrals. Therapists reached out asking how they could help or get involved.

The New Sales Process: Email

It's hard to change something that appears to be working. We had revenue and profitability with our initial business model. We just didn't have a business that worked.

When I had first hired a sales team, we focused on them understanding "who" we were selling to and "why", before understanding our product. The information our sales team had nailed helped us get super specific in our email messaging.

Email was now driving sales, so we heavily focused on personalized painkiller messaging without fluff. If you're not familiar with this concept, Cole summarizes it here well.​

Our team slimmed down, too, as we no longer needed help with sales meetings. The end result was a new sales flywheel that could scale. It took us a couple of months to really nail it, but our revenue and profit was no longer a false positive.